Impact Adjusted Returns - Is there room in your portfolio for deeper impact?

Over the past several years, much research, time, and discussion has gone into busting the myth that investors must sacrifice return for impact. It is not hard to find such an article from most firms in the impact investing industry. It is safe to say that there are many opportunities to receive market rate returns while creating a positive impact. However, I think it is worth asking:

Shouldn't we be willing to accept lower returns to generate greater impact?

We can hope that there may someday be no tension between financial returns and positive impacts, but we must admit that this tension exists in numerous industries and asset classes. So, perhaps we should make some room in our portfolios for investments that deliver lower returns but deeper impact. 

For many, choosing impact over return may feel like no sacrifice at all, even if there is a significant financial opportunity cost from making that choice. Helping to house families struggling to find affordable housing has a value that is not measurable in a brokerage account statement. Seeing employees thriving and building wealth won't appear on a company's balance sheet. You won't find assurance that an energy company isn't poisoning the water flowing into nearby communities by looking at their cash flow statement.

Investors commonly accept lower rates of return when there is lower risk. Accepting a lower rate of return when there is a deeper impact may be necessary to make some deals work.

At Impact Charitable, we are seeking, analyzing, and creating investment opportunities that offer what I call “Impact Adjusted Returns” (“IAR”). We believe that donor advised funds offer a unique opportunity to target impactful opportunities within a portion of our investment portfolio that are not able to deliver market rate returns. With no set timeline or future event driving liquidity requirements; all funds set aside for charity have an opportunity to analyze investments with a stronger impact lens.

There is a large area of opportunity where an IAR approach can yield investments opportunities that would not otherwise be funded by the capital markets. Instead of holding all investments to the same risk/return standards demanded of traditional investments, an impact investment can be analyzed based on the positive impact created relative to the forgone financial return or increased risk.

In comparing a traditional market rate investment with an IAR investment, we can seek to determine what the financial return differential is between the competing opportunities. In some cases, this differential may be quite large, but in other cases, it may be only a few basis points. If we can define what the forgone expected financial return would be, we can then determine if the impact created by the investment is worth that tradeoff. The same can be done with a risk comparison between opportunities, though perceived risk can vary significantly.

Most fundamentally, an Impact Adjusted Return approach asks:

Is the expected impact worth the financial return that I will be foregoing?


Is the additional risk worth the expected impact of this investment?

Many individual impact investors and a small number of foundations are already effectively taking this kind of approach, though they may not articulate it this way. I take this approach in my own personal angel investments, and I know of many others who, in practice, do the same. For many, the potential impact of an investment opportunity can far outweigh concerns around return, risk or liquidity. However, that notion may not survive traditional credit committees or financial advisors.  We hope to see that begin to change, especially for dollars set aside for charity.



This is the beginning of a series of blog posts to further explore the idea of Impact Adjusted Returns and apply it to different asset classes. We will also analyze how IAR investments can be included in a reasonable investment portfolio, especially with dollars set aside for charity or when the portfolio value exceeds the expected needs of the investor.



Social harm without consequence - Social benefit without compensation

NPR’s Planet Money podcast first shared the story of Fredrick Hutson in March 2015 and recently updated his progress in their “The Prisoner’s Solution” episode. Hutson’s story illustrates the heart and foundation of social enterprise and impact investing. 

During Hutson’s 5 years in prison, he faced an unexpected yet common struggle for those incarcerated and their families – paying to talk to each other over the phone.  After leaving prison, Hutson decided to start a business that would meet this need more fairly. He is also likely saving all of us tax payers a lot of money and our communities a lot of harm. 

Numerous studies over more than 40 years have consistently shown that prisoners who maintain close contact with their support network while incarcerated have better post-release outcomes and lower recidivism rates. Nevertheless, our prison system often moves inmates far from their support networks.  Prisoner communication services are often provided by sometimes predatory private companies who pay millions of dollars in commissions to correctional facilities for the opportunity to do the business.  

Communication between prisoners and their support networks are a public benefit, reducing future costs of incarceration and the numerous monetary and social harms done when released prisoners return to crime. However, both correctional facilities and phone service providers treat phone calls as purely a profit making opportunity. Financial benefits are being privatized while lower income families are financially burdened and deep social costs are being externalized to communities and tax payers.  

Enter: Fredrick Hutson. 

The podcast ( tells the story best, but I will highlight what was most striking to me. Pigeonly has launched two products addressing communication barriers between inmates and their support network of family and friends. As Hutson was in prison, he saw the financial burden born by his family and girlfriend just to talk to him, which often led to frustration and reduced connection. He personally knew and saw what both mail and phone calls meant to him and other prisoners, especially on their path back to their communities. Despite the numerous resource and networking limitations that all former felons face, Hutson has shown the grit to build his vision. 

Hutson created Pigeonly whose first product was Fotopigeon, which allows users to send printed photos to their incarcerated loved one directly from their cell phone, tablet or computer. Telepigeon, a VoIP phone service, provides inmates a cost effective alternative to otherwise expensive prison phone calls. The company is currently sending approximately 5,000 photos a day and facilitating 2 million minutes of phone calls a month. 

I suspect Pigeonly may be doing more to reduce recidivism and prevent future crime than any other for-profit company in the country. Hutson is likely saving our country millions of dollars in future incarceration costs. Unfortunately, we do not operate in an economy that would shows such values on their income statement. So, he will continue to compete against deeper pockets, high paid lobbyists, and established industry networks, but I would be willing to bet on him and his team as others have. 


1. According to Crunchbase, Pigeonly has raised over $5 million since 2012, with close to $2.5 million closing in June of 2016. Y Combinator was the lead in their 2014 funding round.

2. The primary providers of prison phone call services in the U.S. are Securus Technologies, Global Tel Link, and CenturyLink. See if they are in your portfolios; then review their practices and decide if you want to continue to profit from their work. 

3. In 2015, the FCC moved to place caps on phone service fees as some rates approached $1.50 per minute. As the Trump administration began, the FCC dropped its defense of these new rules against the legal challenges brought by the industry. In June of 2017, the D.C. Circuit Court of Appeals said in 2-1 decision that the FCC overstepped its authority by trying to set limits on intrastate phone call rates. The court, though, found that an FCC rule capping interstate rates is permissible.

Activating Impact Investment through Donor-Advised Funds*

Roughly $80 billion is currently held in donor-advised funds in the US.  We believe those funds should be aligned with the donor’s values and targeted impacts until they are ultimately given to their favorite charities.  Unlocking the donor-advised funds held by families in Colorado for impact investing will create a pool of capital that can address the most pressing needs in our communities while generating a reasonable rate of return.

At Impact Charitable, we operate according to a strongly held belief that the investment strategy for foundations and donor-advised funds should not solely target a rate of return or future value, but should be aligned with the philanthropic goals of the donors.  Dollars set aside for charity today should not wait until they are granted away before they create the impact donors want to have.  For that reason, our donor-advised funds are 100% invested in impact.

Impact Charitable takes a broad portfolio view in how we invest our funds.  Within a diverse portfolio, we can accept lower rates of return, take risks to create greater impact, and make longer-term investments that the market might not typically accept. Alongside impact-oriented investments in the public markets and cash accounts, up to 25% of Impact Charitable’s funds are committed to funding highly impactful projects and organizations in Colorado.  While maintaining the liquidity needed to fund our donors’ grant-making, investment dollars will create impacts aligned with the values and goals of our donors.

What is a Donor-Advised Fund (DAF)?

A donor-advised fund, or DAF, is a philanthropic vehicle established at a public charity. It allows donors to make a charitable contribution, receive an immediate tax benefit and then recommend grants from the fund over time. An easy way to think about a donor-advised fund is like a charitable savings account: a donor contributes to the fund as frequently as they like and then recommends grants to their favorite charity when they are ready.

Local Investment Solutions

Donor-advised fund or foundation assets are not needed to cover expected future retirement, educational or other expenses.  They do not have a cost of capital or required rate of return limiting how they can be invested. Impact Charitable uses this flexibility to develop investment approaches focused on the needs of Colorado communities.

We cannot rely solely on the traditional investment market to make the kinds of investments that our communities need.  The affordable housing crisis facing our state is a prime example of this.  The Denver metro area is facing a shortage of tens of thousands of affordable housing units.  Nevertheless, the market is not investing in the development or preservation of such housing.  Investor money continues to fuel construction of luxury apartments while often displacing families from existing affordable homes.

Outside of heavy government subsidies, investor returns are unfortunately inherently tied to the rental rates of housing, which makes targeting market rates of return in affordable housing exceptionally difficult.  Impact Charitable is supporting several efforts to create vehicles for investing in affordable housing with reasonable (though perhaps not “market”) rates of return.

For-profit early stage social enterprises often struggle to raise capital.  They may have business models that hinder future exit opportunities or have expected profit margins and scalability that are not as attractive as other investment opportunities.  A social enterprise may put the impact they create at risk if they accept an exit opportunity based solely on shareholder value.  Social enterprises are often entering a market or working with technology that is less proven than other companies.  Impact Charitable is pursuing two ways to address these hurdles that social enterprises may face.

For early stage companies that are not seen as investable yet, we can provide fiscal sponsorships to fund portions of the business that align with our charitable purposes.  For example, Future Pointe is utilizing emerging anaerobic digester and biomass energy technologies to address food waste in Colorado.  They have reached several milestones since their launch, but have struggled to attract angel investors thus far.   This non-dilutive capital can help carry companies through the riskiest stages of their growth, not consume cash flow, and help prepare them for funding from impact investors.

For companies where a large exit is either not desired by the management team or questionable to investors, Impact Charitable plans to utilize structured exit investments. Structured exit investments provide payment holidays until a company begins to scale up, and ties investor payouts to revenues.  Investors receive payments from the company until they recoup their investment plus a negotiated return.  Companies such as Knotty Tie Co., which employs resettled refugees with above-average wages and benefits, may thus be able to ensure their mission remains intact as the company grows.

Impact Charitable also supports new and innovative investment tools.  We recently provided a recoverable grant to support a prototype social impact bond with a local municipality.  Our funds are supporting early childhood education programs for children who would otherwise not have access to early childhood educational opportunities. The municipality will monitor the educational expenses that are saved in later years attributable to the children’s participation in these programs.  Based on these savings, Impact Charitable’s funds may be returned.

Impact Charitable structures our local investments to best meet the financial needs of a business or project, give them their best opportunity to succeed, and create the impact needed in our communities.  We believe that donor-advised funds provide a unique opportunity to activate capital that can make investments focused on maximizing impact rather than maximizing financial returns.

Impact Charitable’s mission is to activate charitable dollars for impact through investment, education and strategic philanthropy.

*Originally prepared for the Colorado Impact Report with Cornerstone Capital.  

Ed Briscoe is the President of Impact Charitable. He is also the Founder and Managing Partner of Weave Social Finance, a provider of consulting and investment banking services to social enterprises and businesses based in low-income communities.

Our Top 10 Ideas for Colorado Gives Day

Colorado Gives Day is Tuesday December 6th!

In case you're in need of some inspiration, the Impact Charitable team is sharing our Top 10 Giving Ideas.  These are all Colorado-based organizations driving positive impact within our favorite passion areas.  

Click on the logos to learn more and donate.  Happy Giving!

Rocky Mountain Microfinance Institute (RMMFI) provides capital, training, mentors, and support for lower income entrepreneurs seeking to subsidize low wage job income and move towards owning their own businesses. They connect entrepreneurs to a community of professionals in numerous industries to give them their best chance at success. 

Groundwork Denver partners with lower-income communities to improve the physical environment and promote health and well-being.  Groundwork Denver plants trees, improves parks, cleans up rivers, insulates homes, promotes biking, and grows food with their large network of volunteers. 

350 Colorado works locally to help build the global grassroots movement to solve the climate crisis and transition to a sustainable future. They do this through Movement Building and Promoting Local Solutions.  350 Colorado is a great resource to learn about Divesting from fossil fuels and Investing in climate solutions.   

Work Options for Women helps impoverished women gain the skills and confidence they need to work their way out of poverty and become gainfully and permanently employed in the food service industry.  Support them too by visiting their two cafes or hiring the organization for catering as well.

Project PAVE empowers youth to end the generational cycle of relationship violence.  They assist 4,000 clients annually through intervention, therapy, advocacy, education, and leadership development programs for young people who have experienced violence.  

Mile High Early Learning provides a quality educational experience for Denver's most vulnerable children.  The organization is Denver's oldest and largest provider of subsidized quality early childhood care and education - serving thousands of Denver's most vulnerable children every year since 1970.

Invest In Kids provides infrastructure & support to ensure success for the highest quality programs benefiting low income children and their families in Colorado.  Their programs include Nurse Family Partnership - home visitation for low income moms, and The Incredible Years - for early childhood social & emotional health.  

The GrowHaus is an urban farm and fresh food market in the Elryia-Swansea neighborhood of Denver. Residents of this neighborhood do not have access to traditional grocery stores, and the median income is about half that of the rest of Denver. The GrowHaus operates a market where residents may purchase fresh, healthy food at cost, and also participate in an array of programs advancing skills and education around nutrition and healthy lifestyle.

Re: Vision works with people in economically marginalized neighborhoods to develop resident leaders, cultivate community food systems, and create an economy owned by the community. Their programs include Backyard Gardens, Urban Farms, and Food Access Initiatives.

Mile High Workshop partners with local entrepreneurs to manufacture and distribute their products while training and employing people facing significant barriers to employment.  MHW currently offers cut & sew, woodworking, laser engraving, assembly, and packaging & fulfillment services.

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Impact Charitable does not provide legal or tax advice. All information is intended to be educational in nature, and is not intended to be, and should not be construed as, legal or tax advice. Tax benefits and consequences differ from person to person, and vary depending on the federal or state laws applicable to each person.