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Impact Investing and Nonprofits: $1.5 Trillion and Neither Side Is Listening

  • claudiotancawk
  • 19 hours ago
  • 7 min read

In 2007, a group of foundations and financial institutions gathered at the Rockefeller Foundation's Bellagio Center and asked a simple question: what if investors could put money into organizations doing social good, get their money back, and reinvest it again? Philanthropy alone would never be large enough to solve the world's biggest problems. Capital markets could.[1] They called the idea "impact investing."

 

The industry that grew from that room now manages $1.571 trillion in assets across 3,907 organizations worldwide.[2] For most traditional nonprofits, none of that capital has arrived. It is a measurable failure, and the responsibility belongs to both sides.



A Trillion Dollars That Never Checked

The Global Impact Investing Network (GIIN), the industry's own trade body, publishes an annual survey tracking where impact capital goes. Its 2025 report classifies recipients by company growth stage: mature, growth, venture, seed.[3] Every category is a company. There is no nonprofit category. Not because the data was inconvenient, but because the question was never asked.

 

The industry has never measured whether its capital reaches nonprofits, so it cannot say it has failed them as it has never checked.

 

The data it does report tells the story by omission. Forty-one percent of impact assets under management sit in private equity, investors buying ownership stakes in companies.[4] A nonprofit cannot sell ownership stakes as it is a core feature of the nonprofit legal form.[5] The typical impact deal is $3.5 million, but more than half of US nonprofits hold less than $1 million in total assets, so the standard impact investors' check is larger than most nonprofits are worth. [6] [7].



Eighty-Nine Percent of the Capital Was Never Coming

Eighty-nine percent of impact capital targets the same financial returns an investor would expect from any conventional investment. Only 2% is willing to accept simply getting its money back.[8] The fund managers and institutional investors who control most of this capital overwhelmingly demand market-rate returns, and only 16% of fund managers and 13% of institutional asset owners will accept anything less.[9]

 

That means the vast majority of this trillion-dollar industry was never available to organizations that cannot promise investors a conventional profit on an ownership stake. The instruments are wrong, the return expectations are wrong, and the deal sizes are wrong. A January 2026 study of institutional investors found that intermediaries – the firms that connect capital to opportunities – actively constrain rather than enable investment in smaller, riskier, mission-driven deals.[10]

 

Even the person who coined the term "impact investing" at that 2007 Bellagio convening concedes the gap. Antony Bugg-Levine, in a Rockefeller Foundation retrospective, admits the movement has not yet delivered the social impact it promised.[11] Meanwhile, the industry's own definition has widened to include investments targeting “above”-market returns.[12] When outperformance sits inside the definition of impact, the word has lost its original meaning.



But Nonprofits Have Not Built for Capital Either

The barriers on the investor side are real. But nonprofits have a structural problem of their own.

 

The standard critique is that nonprofits are not "investment ready" because they lack the financial systems, the governance, or the sophistication to absorb repayable capital. In May, I wrote about what organizations need to do to prepare.[13] That is true as far as it goes. But it does not go far enough.

 

The deeper problem is how nonprofits design their projects. Most nonprofit projects are built on grant logic: secure funding, deliver outcomes – children immunized, girls educated, communities connected – and report back to the donor. The project ends when the grant ends. There is no surplus creation (profit, return on the investment) after the grant. There is nothing for an investor to invest in, because the project was never designed to generate economic value beyond the outcome itself, the one agreed upon in a grant.

 

That is not a limitation of the nonprofit form, but a habit of the nonprofit mind. Nonprofits create enormous economic value such as healthier populations, educated workforces, functioning infrastructure, connected communities. The question most organizations never ask is: who benefits economically from those outcomes, and can that economic value be structured to sustain the work and repay capital?

 

Until nonprofits start designing projects with that question built in – not just outcomes, but outcomes plus surplus generation – the best-designed financial instruments in the world will have to consider funding.



What It Looks Like When Both Sides Move

Brian Vo runs Connect Humanity, a nonprofit impact fund that finances community broadband – getting high-speed internet to rural and low-income communities that commercial providers will not serve. His pilot fund put in $3 million of what the industry calls catalytic capital – money willing to take the first risk so that other investors feel safe enough to follow. That $3 million unlocked $47 million more from other sources. The fund connected over 100,000 low-income residents to broadband and is generating a 12% annual return.[14]

 

Vo used loans, not ownership stakes; this was done deliberately because the broadband infrastructure should be owned by the community, not sold off to outside investors. He wrote protections for the community directly into the loan agreements: pricing caps, service quality requirements, affordable access commitments. He calls these digital equity covenants.[15]

 

Before Connect Humanity, Vo led social investment at Pact, one of the largest international development NGOs (non-governmental organizations), where he built Pact Ventures and proved that a single impact investment inside a traditional aid organization could generate three separate layers of return.[15]

 

His framework – what he calls the "three capital stacks" – captures what both sides need to change. Most organizations start by asking: where is the money coming from? Vo says that is the wrong first question. Start with uses: what are you actually spending money on? Then ask about repayments: who benefits economically from the outcomes you create? Only then do you work back into sources: who should provide the capital, and in what form?[15]

 

When you run that exercise, the grant often does not need to cover the full cost. In some cases it drops from 100 cents on the dollar to 20. In some cases, to zero. That is because the project architecture changed. Both sides moved.

 

Vo is not alone. The Nonprofit Finance Fund (NFF), a community development financial institution (CDFI) that lends exclusively to nonprofits, closed $127 million in loans to 38 organizations in 2025 – its best year on record – bundled with 25,700 hours of hands-on technical support.[16] The MacArthur Foundation's Catalytic Capital Consortium put in roughly $128.5 million and attracted $3.1 billion from other investors, a 24-to-1 ratio. A January 2026 evaluation found that the deciding factor was not accepting lower returns; it was a willingness to take on more risk.[17]

 

Successful models follow a consistent pattern: an early party takes on the initial losses to reassure later investors, repayment schedules are tailored to the borrower's actual earnings, and hands-on support is provided along with capital. While this structure is proven, it remains largely unimplemented by the mainstream industry.



Where This Leaves You

In July, I argued that grant dependency is a power problem, that the relationship between funders and nonprofits has been distorted by decades of structural imbalance.[18] This post names the other half of the equation. Impact investing promised to solve that problem. It has not, because neither side has done its part.

 

Investors built a trillion-dollar industry around instruments, return expectations, and deal sizes that structurally exclude nonprofits. That has to change. Catalytic capital – money willing to take disproportionate risk to make other investment possible[19] – is already proving that different architecture works. MacArthur's $25 million guarantee on the SDG Loan Fund unlocked $1.1 billion.[20] Rockefeller's $30 million Zero Gap Fund mobilized $1.05 billion.[21] The UK government has recommended treating grants and investment as a single continuum.[22] The tools exist.

 

But the tools only work if nonprofits give them something to fund. That means designing projects differently, not with a grant mindset that ends at outcomes, but with an investment architecture that asks: what surplus does this work generate, who captures it, and how does it flow back to sustain the mission?

 

I am okay with grants. I am not okay with grant dependency. The organizations that understand the difference will design their next project the way Brian Vo designed his, and the investors who show up for that project will find something they can actually invest in.



Endnotes

[1]: Rockefeller Foundation, "Many Paths to One Mountaintop — Antony Bugg-Levine on Building Movements That Shift Systems," Bellagio Breakthroughs series, Oct. 23, 2024. https://www.rockefellerfoundation.org/bellagio-breakthroughs/many-paths-to-one-mountaintop-antony-bugg-levine-on-building-movements-that-shift-systems/ 

[2]: Hand, D., Ulanow, M., Pan, H. & Xiao, K., Sizing the Impact Investing Market 2024, Global Impact Investing Network (GIIN), Oct. 2024. https://s3.amazonaws.com/giin-web-assets/giin/assets/publication/giin-sizingtheimpactinvestingmarket-2024.pdf 

[3]: Hand, D. et al., State of the Market 2025: Trends, Performance and Allocations, GIIN, Oct. 8, 2025. https://s3.amazonaws.com/giin-web-assets/giin/assets/publication/giin-stateofthemarket2025.pdf 

[4]: GIIN, State of the Market 2025. Same URL as note 3.

[5]Roth, B. N., "Impact Investing: A Theory of Financing Social Enterprises," Harvard Business School Working Paper 20-078, rev. June 25, 2021. https://www.hbs.edu/ris/Publication%20Files/20-078rev6-25-21_fe526a07-6ddc-4522-bbf3-2b3d6055cc1e.pdf 

[6]: GIIN, State of the Market 2025. Same URL as note 3.

[7]: Internal Revenue Service (IRS), Statistics of Income, Table 1, Form 990 Returns of 501(c)(3) Organizations, by Size of Total Assets, Tax Year 2022. https://www.irs.gov/pub/irs-soi/22eo01.xlsx 

[8]: GIIN, State of the Market 2025 (assets under management-weighted return targets). Confirmed via Alonso Ortiz Galan, "Impact investing is big business," GIIN, Jan. 21, 2026. https://thegiin.org/publication/opinion/impact-investing-is-big-business-a-look-at-recent-trends-in-corporate-impact-investing/ 

[9]: GIIN, State of the Market 2024: Trends, Performance and Allocations, Sept. 30, 2024. https://s3.amazonaws.com/giin-web-assets/giin/assets/publication/giin-stateofthemarket2024-report-2024.pdf 

[10]: Tideline, ILPA (Institutional Limited Partners Association) & Campbell Lutyens, Impact Investing: The State of Market Institutionalization, Jan. 2026. https://www.top1000funds.com/wp-content/uploads/2026/05/Impact-Investing-The-State-of-Market-Institutionalization-ILPA.pdf 

[11]: Rockefeller Foundation, Bellagio Breakthroughs series. Same URL as note 1.

[12]: GIIN, Core Characteristics of Impact Investing (https://thegiin.org/assets/Core%20Characteristics_webfile.pdf) and GIIN, "What you need to know about impact investing," updated Jan. 24, 2025 (https://thegiin.org/publication/post/about-impact-investing/).

[13]: [Impact Investing Is Not Your Rescue Plan — But It Might Be Part of Your Future](https://www.claudiotanca.info/post/impact-investing-is-not-your-rescue-plan-but-it-might-be-part-of-your-future)

[14]: Vo, B. & Miller, C., "Financing Broadband in Hard-to-Reach Communities," Stanford Social Innovation Review (SSIR), April 16, 2025. https://ssir.org/articles/entry/financing-broadband-digital-divide 

[15]: Brian Vo, interview on the Beyond Grants Podcast, recorded July 31, 2026. Digital equity covenants, three capital stacks framework, Pact Ventures background, and grant-reduction figures confirmed directly in the episode.

[16]: Nonprofit Finance Fund (NFF), Our Impact. https://nff.org/our-mission/our-impact/; NFF, 2024 Annual Report (technical assistance hours). https://nff.org/wp-content/uploads/NFF-Annual-Report-2024.pdf 

[17]: MacArthur Foundation, Measuring the Impact of MacArthur's C3 Investments, Jan. 2026. https://www.macfound.org/media/article_pdfs/c3-imm-report-2025-v6.pdf 

[18]: [The Foundation Power Problem: Why Well-Capitalized NGOs Are Good for the Sector](https://www.claudiotanca.info/post/the-foundation-power-problem-why-well-capitalized-ngos-are-good-for-the-sector)

[19]: Catalytic Capital Consortium, Why Catalytic Capital. https://catalyticcapitalconsortium.org/why-catalytic-capital/ 

[22]: Social Impact Investment Advisory Group, Final Report, HM Government (United Kingdom), Nov. 5, 2025. https://www.gov.uk/government/publications/social-impact-investment-advisory-group/final-report-of-the-social-impact-investment-advisory-group

 
 
 

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