People in the impact investment community have long debated whether there is a necessary trade-off between social impact and financial return. Our experience at Omidyar Network over the past decade has led us to a different answer: “It depends.” In some cases—perhaps even most—a strong positive correlation does exist between financial return and social impact. In other cases, a company can generate significant social impact even if its financial return is modest.
In this whitepaper, we present a framework for investing across the returns continuum—a continuum that extends from fully commercial investments at one end to philanthropic grants at the other. But in certain circumstances, we believe, impact-oriented investors should adjust their return expectations in order to support companies that have the potential to catalyze new markets that will drive social change.