Impact Investing 101: The Butterfly Effect


Butterfly Image

In this installment of Tracks to Success, our focus shifts from traditional and established revenue streams (grants, donor cultivation, capital campaigns, etc.) to the realm of emerging forms of capital becoming known to nonprofits, specifically funds through Impact Investing - which in the last few years has gone from a fringe revenue stream for nonprofits and into the revenue “mainstream.”  

Mechanisms such as Impact Investing can provide a path to funding your mission and creating long-term organizational sustainability, and yes, they even have a Return On Investment (ROI) for stakeholder parties.

Impact Investing just has a good ring to it, doesn’t it? But where to start your approach? A simple online search for “Impact Investing” brings up literally thousands of results from a myriad of organizations, institutions, and content experts – both here and internationally.

To cut through some of the clutter, we reached out to one of the foremost authorities of the Impact Investing movement, Cathy Clark. As a professor at Duke University’s Fuqua School of Business and the Director of the CASE i3 Initiative on Impact Investing, Cathy’s perspective is invaluable. She serves as a conduit and advocate for not just the sources of capital that drive impact investments, but for the organizations and professionals that do the hard work through direct service and mission execution from these funds (aka YOU!). 

We distilled our conversation into a few sections that we hope you find informative and fun as you explore impact investments as a revenue stream for your organization. Read on!

What exactly is Impact Investing?

Simply put, Cathy defines it as an investment that has a financial return AND positively impacts a problem that its investors care about. This covers not only the return and impact, but the process in which the investment achieves these goals as well. Put in more official terms, as defined by the International Finance Corporation (an organization vetted by Cathy), Impact Investing is: 

Investments made into companies, organizations, vehicles, and funds with the intent to contribute to measurable positive social, economic, and environmental impact alongside financial returns.

The Butterfly Effect 

Cathy and her team at CASEi3 have used the wings and body of a butterfly to illustrate how the impact capital moves from the sources of impact investments to the entities that utilize them to execute on their mission. 

As you’ll see in the video below, the demand and supply “wings” of the Impact Investing butterfly flutter together to create a successful and sustainable impact. Much like the wings of a butterfly, the movement is dynamic and can take you in a number of directions, though not always in a straight line. This video gives an introductory explanation, and note the topic timestamps. 

Demand / Supply Graphic


1:00 – Introduction to Impact Capital and Impact Investments 

1:30 –Agreeing on the Terms of Investment: Risk, Return, Impact 

2:25 – The Butterfly Metaphor (Supply/Demand Side)

8:00 - An Example of Impact Investment 

As you watch this video, it should be clear that as a fundraising and nonprofit professional, your skillset can be utilized in a number of places on the butterfly. However, regardless of where you land on the butterfly, Cathy says that her institute’s research has found that there are three key factors to being successful: 

Trisector Leadership:

  • A background in philanthropy
  • Experience in financial management and revenue acquisition
  • A firm grasp of policy experience

These three factors are already integral to your work. Everything from donor engagement to grantwriting and compliance, and keeping up-to-date with policy trends on the local, state, and national level all define a strong fundraiser. So now you know you can show up to the table, but what about finding common ground with investors to support your mission?

The Alignment of Expectations  

Cathy stresses that the Impact Investment market is composed of diverse relationships between demand supply and vehicles. This means funds that come to a nonprofit from the supply “wing” are coming with specific expectations from its diverse stakeholders.  

While this may look similar to requirements set forth by grantmakers we are familiar with (such as foundations or government entities), capital from impact investors will have their own stipulations and metrics for success, which will involve a Return on Investment (ROI) metric.  

Aligning the expectations of all stakeholders before the investment is made is a key to your success. Conversely, if not aligned, this may lead to a loss of funding and to your work being viewed as an unstable investment by future potential investors. Having a conversation early in the process about expectations will be the best way to prevent this.

Learning to Fly… or Flutter?

We conclude this primer on Impact Investing by inviting you to actively research how impact investment opportunities can best work for your organization. You can find objective information on Impact Investing in the links throughout this post, and specifically at Here you can find reading materials, expert insights, and roadmaps to creating your own impact investment strategy. Cathy also has an informative newsletter reporting on developments in the sector called On Impact and you can sign up for it here.

And of course, a Membership to GrantStation provides a number of resources and guides to navigating these new and established capital streams. As you explore Impact Investing as a revenue opportunity, keep these resources in mind so you can “flutter” your wings to the heights of sustainable funding and meaningful impact!