Klik her for at læse artiklen på dansk
The impact foundations create with their donations is too small. And small, efficient NGOs are drowning in the competition with large international aid organisations.
What if you could solve both problems at the same time? What if the philanthropic players could buy impact from small and large high-performing organizations in a marketplace with guaranteed impact?
This is exactly what the world’s first marketplace for social impact, OutcomesX, offers.
“We offer verified outcomes from nonprofit organizations in our marketplace and sell them to buyers who are interested in impact,” says Phyllis Costanza, co-founder of OutcomesX.
At present, there are 3,900 impact-verified programs for sale on the marketplace. And this is causing a stir among analysts with expertise in philanthropy and impact.
“There is a massive need for money to solve social problems in the world, and at the same time there is enough money available in the world to address such needs. But the capital and the needs cannot find each other. So there are colossal opportunities if you can make a market like this work,” says Alex Alvarez von Gustedt, vice president of the European division of Rockefeller Philanthropy Advisors.
In a Danish context, managing partner in the evaluation company Pluss Stefan Brendstrup declares himself “infatuated”, but at the same time skeptical.
“I’m basically intrigued by the way of thinking, but a little worried about the match with the Danish social sector,” he says and continues:
“We have many developing initiatives, and not very many initiatives that are as well developed and well tested as it requires to be in a market like this.”
Economic inequality and poor results
For 11 years, Phyllis Constanza worked at the multinational investmentbank UBS as responsible for social impact and director of the bank’s foundation, the UBS Optimus Foundation. Two insights from that time have stuck with her:
One is about economic inequality in the social sector.
“Small, local NGOs rarely get the funding they need. The majority of the money goes to the large, international NGOs,” she says and exemplifies:
“When the war in Ukraine began, 99 percent of aid went to international organizations that worked from the outside to help refugees. Only very small amounts found their way to the local organizations in the country.”
There is no correlation between how much money we spend on social impact and the results we create.
Phyllis Costanza, Co-founder, OutcomesX
The second insight concerns an astronomical discrepancy between the amounts of money that go to philanthropy and the impact that comes out of the money.
“95 percent of our large clients at UBS gave to charity, but when we asked them, only 20 percent declared themselves satisfied with the impact they got,” says Phyllis Costanza.
This is an unsustainable situation, she states.
“It is estimated that it will take more than 5 trillion dollars annually to meet the Sustainable Development Goals. When we reach 2030, we will have spent more. And yet we will have met only 12 percent of the goals,” says Phyllis Costanza:
“There is no correlation between how much money we spend on social impact and the results we create.”
A shared vision of a market
It is not because no attempt has been made to solve the problem. Various mechanisms have been brought into play to create a better link between investments and results.
One example is social impact bonds, which UBS have used to great effect. But the panacea never manifested.
“We thought, ‘Wow, this is it. This is going to get us better outcomes for the money,” says Phyllis Costanza:
“But the challenge with these mechanisms is that they are very complicated. They take years to structure and they are extremely expensive to implement.”
Through her work, she became aware of the Impact Genome Registry, which was started by her old student friend from Harvard, Jason Saul.
“For years I had dreamed of creating a marketplace where you could connect creators of social outcomes with buyers. But to build a market, standardization is needed. And standardized definitions of social impact are exactly what Impact Genome creates,” says Phyllis Costanza.
So she called Jason Saul.
“And he had exactly the same vision as me. So we decided to team up,” she says.
A registry of 2.2 million social programs
The Impact Genome Registry is an essential component of OutcomesX. The Chicago-based register verifies the impact of the efforts that foundations and philanthropists can invest in.
In Impact Insider we’ve previously written about the Impact Genome Registry, which contains 2.2 million social programs.
Of these, 3,900 deliver such strong and well-documented results that they have been verified and found worthy of inclusion in the OutcomesX assortment.
One example is Erudit – an effort to increase the well-being of children with autism in Kiev.
“They have an efficiency rate of 84 percent. This means that they have created improved well-being for 134 of the 160 children involved in the program,” explains Phyllis Costanza.
From the scorecard available on OutcomesX, investors can see a price for the impact the program delivers. It stands at 405 dollars (almost DKK 2,800) per outcome, which is on the low end for that type of program.
Credibility lies in the verification
The verification of the impact that OutcomesX provides is absolutely crucial. Because without that, the product has no credibility.
To be verified, an organization must provide documentation for the effect of its efforts. It costs 1,000 dollars (almost DKK 7,000) for each project that the Impact Genome Project reviews.
The Impact Genome Project then examines the documentation and assesses it on three parameters:
- The quality of the measurement method
- The relevance of the specific measurements
- The quality of the measuring instruments used
Each of the three parameters is rated on a scale of 1-5. And only the programs that score highly in all categories are offered for sale on OutcomesX.
This approach makes sense, according to Stefan Brendstrup from the evaluation company Pluss.
“It seems super sensible, because the three parameters tell whether the evaluation that may exist is credible,” he says.
Can social impact be standardized?
But can outcomes be standardized so that they are comparable? Does it make sense to pit a program for vulnerable children in Ukraine against a similar effort in Denmark, asks Alex Alvarez von Gustedt from Rockefeller Philanthropy Advisors.
“I’m really glad that someone has ventured into that discipline. But the devil is in the implementation. There are many important questions that need to be sorted out,” he says:
“How do you standardize social impact so that it functions as a commodity? It is not easy to do. Just see how difficult it has been to create a carbon market. And this is easier to measure and standardize than social outcomes, which are far more complex.”
However, it is possible to compare the programs, says Phyllis Costanza. As long as you take the necessary precautions.
“An assessment of the target group for an effort is part of the analysis carried out by the Impact Genome Project,” she says.
In this way, it will be taken into account whether the target group is, for example, in an economically well-off area or comes from an economically disadvantaged community.
“The results for a well-off target group in a New York suburb will be different than the results for a target group in a poor area. And so will the costs. You can compare that and see that one effort is more expensive than the other because it targets people with more difficult conditions,” says Phyllis Costanza.
The Danish challenges
In Denmark, we are quite good at developing social programs, Stefan Brendstrup from Pluss assesses. Not least because these are the programs the government and the foundations prefer to finance.
If you run a tool like OutcomesX over the Danish landscape, the result will be very meager.
Stefan Brendstrup, Managing partner, Pluss Leadership
On the other hand, we are not very good at taking what we develop to a stage where it can be scaled and distributed. And that could become a challenge for a market like OutcomesX, he believes.
“In developing initiatives, we try our best – both when it comes to our measures and the participants in the programme. And we change the program as we go along. That completely destroys any evaluation design. So we have many programs and evaluations that are not suitable for this. So if you run a tool like OutcomesX over the Danish landscape, the result will be very meager,” predicts Stefan Brendstrup.
At the same time, we have foundations whose philanthropic approach is based on being involved in the development of initiatives.
“Are the donors willing to let go of the opportunity to influence what they finance? Do they want to just buy an impact?” asks Stefan Brendstrup.
Value for new and international funds
However, this does not mean that Denmark is a closed country for OutcomesX, he points out.
Foundations that work internationally could well be in the market for the purchase of concrete impact within their focus areas. The same applies to a number of the family offices and newly founded foundations that have a strong focus on impact.
“There are really high transaction costs associated with funders and projects having to find each other. So for a subset of the foundation sector, I can see that this can create value,” says Stefan Brendstrup.
Are Danish programs competitive?
And on the NGO side, he spots highly developed, specialized programs that could benefit from being present at OutcomesX.
“Someone like the association Fisken, which over several years has built up a really good program to get young people into small jobs, would benefit from getting out on a bigger platform. The same applies to Børn, Unge & Sorg, which works super scientifically. In such cases, a platform like this could do away with all this development noise and instead help to shift the focus to financing programs that actually have an impact,” says Stefan Brendstrup.
In that case, his concern would be whether the Danish programs would be competitive on a global platform.
“Who would care about bad well-being among Danish youth if you could make a bigger difference in Kenya for the same money?”
Plans for global expansion
Whether OutcomesX will come to Denmark is still an open question. Phyllis Costanza says with a hearty laugh that she would love to have an office in Copenhagen.
And it’s not completely skewed in relation to the strategic goals for the platform either.
“We are experiencing a lot of interest in Canada at the moment, so this is high on our priority list, but we are looking to make OutcomesX a global platform, and we hope to be able to expand to Europe and Asia this year,” says Phyllis Costanza.
At Rockefeller Philanthropy Advisors, Alex Alvarez von Gustedt wishes the likes of OutcomesX the best of luck in their endeavors.
“There are so many good organizations that need money to scale up and spread their programs. And this could really make a difference and unlock money for really worthy solutions,” he says and adds:
“If you ask me, I want OutcomesX to succeed. It would be great for the sector.”
