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Ideas on Impact Investing and Purpose
July 21, 2017 | Cara Lee

3 Reasons Why Impact Investors Should Prioritize Purpose

In recent years, the notion of prioritizing purpose and passion, and incorporating the two within a career path, has circulated among the social innovation field and has gained steam in the corporate and investment sectors. Echoing Green launched our Work on Purpose program after working to understand how and why social entrepreneurs' passion and purpose aligns with their careers. Through these learnings, we developed a curriculum and trainings to help emerging and established professionals surface their purpose and integrate it into their work.

According to a 2016 global study on purpose in the workplace released by LinkedIn and Imperative, a purpose consulting firm, there is clear, growing interest in incorporating purpose in the corporate sector and within finance-related job functions. Not only is purpose being integrated for employees, but it is also informing business and investment decisions. By providing programs focused on corporate social responsibility and aligning returns on investment with philanthropic initiatives, companies like Warby Parker, Toms, and KIND have seen impact and revenue generation.

Across the social impact sector and beyond, we have learned that investing in purpose pays off. Now, more than ever, we need more investors to get on board with investing with purpose. Here are three reasons why it pays to keep purpose aligned with impact investments and profits:

 

1. The Purpose Movement is Growing

More social entrepreneurs are realizing the possibilities of making a profit while maintaining their social enterprise's purpose. We have seen that trend firsthand with nearly half of our 2017 applicant pool proposing organizational models with for-profit elements, and more than half of our 2017 Fellowship class representing the same. Maintaining focus on social impact and purpose makes good business sense. But in order for these social impact startups to thrive, they need supporters to back these mission-focused organizations, provide startup funding, and make social impact investments that are both good for business and good for the world.

 

2. There are Returns on Social Impact Investments

As noted in our white paper Why Purpose Matters: It May be the Ticket to Social Impact, employees want more opportunities to incorporate purpose in the workplace. Meanwhile, research shows that companies can benefit from providing these opportunities. During a time in which workplace engagement in the United States is low, research found that companies driven by purpose have employees that are three times more likely to stay with the company. This also aligns with the rising demand of consumers calling for more socially conscious companies. Purpose-driven companies outperformed the S&P 500 by 10 times between the years 1996 and 2011. Impact investments and social enterprise funding toward values, mission, and purpose leads to satisfied consumers, entrepreneurs, and partners.

 

3. Purpose is a Win-Win for the Social Impact Ecosystem

Case studies included in our white paper Accelerating Capital to For-profit and Hybrid Enterprises show that entrepreneurs most desired an expanded investor network and increased funder engagement. We know that in order for investors to truly engage with social impact work, they must immerse themselves in the purpose, vision, and mission behind it. To work toward bringing entrepreneurs and investors together, Echoing Green will explore an investor cohort program, which will both provide Fellows with more frequent interactions with potential investors and also increase investors’ knowledge base and help them better understand the purpose behind these social entrepreneurs' work. By utilizing our global community, we hope to help investors understand the underlying values of the entrepreneurs and organizations in which they invest, and contribute to diversifying the broader early-stage investor ecosystem. In return, the organizations these social impact leaders are running will be more impactful and will garner deeper returns for investors. Social entrepreneurs are bettering the world everyday, but they cannot do it alone. To create long-term sustainable change, we all must do our part and take on social impact together.

 

2016 Echoing Green Fellow Tony Weaver, Jr., founder of Weird Enough Productions
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“I think that each of us is uniquely suited to do something special and particular that is aligned with our gifts, passion, and purpose.” - Cheryl L. Dorsey '92