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Debra Schwartz, Managing Director, Impact Investments, discusses how long-lasting solutions require flexible, tailored, and durable investment approaches.
How should the fields of philanthropy and impact investing think about scale?
Scaled solutions, which can refer to the depth, breadth, scope, or size of an effort and the impact it produces, are essential given the challenges our world faces. Yet, the topic of scale can be both buzzy and fuzzy within strategic grantmaking and impact investing.
For over 40 years, MacArthur has worked to fuel positive social, environmental, and economic change by harnessing the power of financial capital. Based on this experience, we see three interrelated factors that help drive meaningful impact at scale: relevance, resilience, and resolve.
In different ways, these factors are present in the programs, institutions, innovations, markets, and fields that deliver results and lasting progress. In challenging or uncertain times, these same factors can help safeguard past gains and bolster future progress.
Relevance
When aiming for scale, it is important to recognize that one size does not fit all. For example, a program, institution, or network with the potential for significant impact in a rural region, like Invest Appalachia, will have a different approach, size, and composition than an urban-based effort, like the GroundBreak Coalition in the Twin Cities. Both are ambitious, collaborative, and place-based, but each is sized and tailored to their goals and location.
Sometimes scale happens through a network, partnership, or collaboration, rather than a single organization. Press Forward, for example, is a collaboration of more than 70 donors to help reinvent and revitalize local news, a bedrock of democracy. The Catalytic Capital Consortium (C3) is a growing community of practice supported by a new cohort of new funding partners committed to catalytic capital field-building across impact sectors and goals in both developed and emerging markets globally.
Sometimes scale happens through a network, partnership, or collaboration, rather than a single organization.
Even the largest organizations, collaborations, or initiatives may be unable to directly solve a major, complex problem completely. But effective, tailored solutions can generate wider, positive change by being big enough to matter. Such efforts can test new approaches, generate insights, inspire replication, spark partnership and collaboration, inform policy, and encourage further innovation as well as funding.
Resilience
Increasing the scale of philanthropic initiatives is rarely linear, easy, or neat. This is not surprising: complex problems are hard to solve. Cultivating expansive, durable solutions takes iteration, flexibility, and problem solving.
The $25 million guarantee that MacArthur provided in 2023 to help catalyze the $1.1 billion SDG Loan Fund is a case in point. The fund required several years of design and close collaboration among philanthropic, development finance, and private sector partners.
The fund demonstrates how strategically deployed catalytic capital can unlock large-scale institutional investment for lending to emerging market countries. It is already sparking related efforts that could mobilize billions of dollars of additional investment.
Resolve
Reaching scale almost always takes longer than we might imagine. Organizations need time to build, grow, innovate, address setbacks, and evolve their business models, leadership, and relationships. Programs that work well in one time or place may not translate neatly to other contexts. New research, knowledge, and technologies arise, opening new possibilities while disrupting old ways of working. And the political, social, and economic world is continually shifting at the local, regional, national, and international levels.
Resolve, like resilience, enables organizations to push through tough times and to operate successfully over the long-term. Sometimes, an organization’s growth over time can pave the way for even greater growth and impact in the future.
Resolve, like resilience, enables organizations to push through tough times and to operate successfully over the long-term.
Community Development Financial Institutions (CDFIs) are a prime example. More than four decades ago, loan funds, banks, and credit unions dedicated to serving historically marginalized people and places started to emerge. Long-term, low-cost, flexible loans from the MacArthur Foundation, the Ford Foundation, and other early impact investors delivered important support for many of these organizations, which would later become known as CDFIs. During the 1980s and early 1990s, the assets of even the largest CDFIs rarely topped $5 or $10 million, so a MacArthur loan of $1 million was truly large-scale and meaningful.
Today’s CDFI field is a different story. Fueled by solid financial and impact performance, as well as by favorable policy developments such as the creation of the U.S. CDFI Fund in the late 1990s, many CDFIs now manage sizable balance sheets, including some totaling billions of dollars. Over the past several years, CDFIs have benefited greatly from new supporters, with corporations, government programs, and philanthropists awarding investments and grants totaling tens of millions of dollars each. While these and other developments promise to drive even greater impact, we must ensure that adequate support also reaches smaller CDFIs and communities.
Cultivation, Not Magic
Whether working to protect our planet, empower historically marginalized communities, or build a more inclusive, equitable economy, impact investors and philanthropists need to remember that investing at scale is not a magic trick. It does not happen in the blink of an eye, nor does one size fit all. Scale builds on years of successes and setbacks, growing from the work of visionaries over many years. Fortunately, by paying attention to relevance, resilience, and resolve, we improve our chances of cultivating lasting impact at a scale that truly matters.
