ESG Investing

Impact Investing on Whose Terms?: Hearing the Voice of the Beneficiary


Much of the impact investing conversation focuses on the vehicles for capital: funds, measurement or screening tools, decisions made by the asset owners and managers. What often receives less attention—both in the process and in the media—is beneficiary feedback.

Who are the people and organizations benefiting from impact investments? Even the most well-intentioned impact investors can exclude these voices from the process of determining how an investment will be used. Ideally, the voice of the intended beneficiary of an impact investment is included at the beginning of the investment process and continually involved throughout. Otherwise, a significant disconnect can arise between what the investor and the beneficiary perceive as the problem in need of a solution, and what that solution is.

In his bestselling book Winners Take All, Anand Giridharadas argues that good intentions cannot change the fact that people with money make decisions that directly affect people without it—often without their input. Therefore, investors are generally more likely to endorse or fund solutions that do not address structural issues or require them to relinquish their own power, thus reinforcing the status quo.

Iterative Beneficiary Feedback

Engagement with and participation from intended beneficiaries is not just a one-time exercise. According to the Stanford Social Innovation Review, it provides an iterative feedback loop throughout the life cycle of an investment. Without beneficiary feedback, the risks are either investing in solutions to the wrong problem or investing in the wrong solution to the right problem. This situation not only leaves critical challenges unsolved, but it also dissolves or disrupts any trust the community might have in the actors involved, making future investments an uphill battle.

Due Diligence

In the initial feasibility and due diligence processes, beneficiary input is critical to the design. The Boston Ujima Project is a powerful example of democratic investing in action: funders who want to invest in Boston’s economically underserved areas, along with residents and business owners in those areas, pool their capital into a single fund. All of the investors, no matter the size of their contribution, have an equal say in how the money is invested in the community.


Beneficiary engagement remains crucial during the investment capital’s implementation. For example, the Stanford Social Innovation Review describes a program where the Cleveland Clinic began asking nurses to check in with patients hourly to develop a qualitative baseline of trust in order to improve patients’ experience. Additional questions specific to a hypothetical investment could then be included to further develop a medical baseline of patient health.

Impact Measurement and Management

Impact measurement and management must also include this kind of feedback, both in the evaluation’s design and how beneficiary voices are included in it. This can include pairing a process evaluation with the standard monitoring and evaluation of impact metrics. A process evaluation includes interviews with beneficiaries where they can elaborate on their experience with the solution funded by the investment. Often, these process evaluations offer insights that researchers may have otherwise missed with an impact evaluation approach limited to hard data.

Obstacles to Participation

IIX founder and CEO Durreen Shahnaz suggests that part of the problem is that the “gold rush” rise of sustainable investing has set the stage for impact washing, where marketing positive impact is more important than actually delivering it. Actors seeking to benefit from the “‘do good’ halo around impact investing” may be less likely to demonstrate diverse representation among leadership or have adequate processes in place for measuring impact and incorporating beneficiary voices, Shahnaz notes. Likewise, researchers at the Institute of Development Studies (IDS) make the case that beneficiary participation may be more effective at combating impact washing than other commonly discussed approaches, such as voluntary codes or third-party certifications.

That said, even earnest impact investors face various challenges in ensuring full and holistic participation. For instance, it is expensive to facilitate ongoing and intensive engagement, there may be a low response rate from beneficiaries, and it may be uncomfortable—especially if the beneficiary balks at the investor’s opening thesis. To these, IDS adds the complexities of navigating community power dynamics themselves.

These challenges are not insurmountable, but committing to resolving them builds trust with beneficiaries and lays the groundwork for a successful project. That trust can lead to future investment opportunities with new challenges and solutions to explore. If this participatory type of engagement becomes the norm for impact investing, the industry can offer a compelling alternative to traditional investment structures, making communities more likely to seek these investments and de-risk their design and implementation.


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