Funders are increasingly committed to affecting positive change for the causes that are important to them from an innovative finance and/or strategic philanthropy perspective – and one of the most important tools these funders use is the impact thesis.

An impact thesis is a living, breathing document that outlines a funder’s motivations and investment philosophy, alongside past and current funding activities, impact results and learnings. The preparation and ongoing management of a comprehensive impact thesis encourages funders to understand the full range of issues raised by the problems they are trying to help solve and acknowledges that when you take a strategic approach to philanthropy the journey between desired change and necessary action is often not obvious at first.

Take, for example, the case of a philanthropist interested in donating $1 million to the emerging market for indigenous art to improve the quality of life in indigenous communities. While a few organizations presented as strong possible candidates, it was not immediately clear which would generate the most impact in line with the philanthropist’s impact thesis and financial goals. The organizations included:

• A non-indigenous owned and operated for-profit social enterprise concerned with uplifting indigenous artists by creating income-earning opportunities that can lead to financial independence.
• A non-profit producer cooperative that was founded by 10 indigenous artists and craftspeople.
• A trading non-profit community organization belonging to the local indigenous community.

The donor was a self-described restorative and regenerative philanthropist (https://justicefunders.org/resonance/spectrum-of-extractive-to-restorative-to-regenerativephilanthropy/) with the following overarching goals:

• To support and empower marginalized communities most impacted by economic inequality.
• To invest directly in what these communities need to create positive social impact.
• To leverage the collective capacity of these communities to work towards providing for themselves and retaining the returns generated from these investments.

When presented with research, the donor also voiced alignment with J.C. Altman’s (2007) hybrid model of indigenous economies. The non-paternalistic model emphasizes the crucially important role that culture plays in indigenous communities and recognizes the emergence of complex hybrid economies (composed of public, private and cultural sectors) in these communities as a result.  

Together we determined that, in addition to operating in the emerging market for indigenous arts and crafts, the beneficiary organization must:

• Contribute to alleviating material poverty in indigenous communities.
• Retain returns generated from the market in indigenous communities.
• Overcome the harms of colonization by avoiding top-down strategies and recognizing the importance of community control and empowerment.
• Honour the important role culture and community play in indigenous life and contribute to their protection and development.
• Embrace the natural complexity and hybridity of indigenous economies.

With the impact and financial goals related to the donation more fully articulated, it was quickly determined that the non-indigenous owned and operated for-profit social enterprise would not be awarded because ownership and control did not sit within the indigenous community and profits would be for the benefit of non-indigenous owners. Furthermore, the organization’s activities involved working with indigenous artists to create works for various art markets rather than artists drawing from their own rich cultural heritage to create work that derives its value in the art world from this authenticity, where this authenticity is the key to unlocking social value creation in indigenous art and culture communities.

The non-profit producer cooperative was not awarded because while it is indigenous owned and controlled all surplus from the organization is reinvested back into the co-op, therefore, self-interest for a limited group of members is the primary motivation, which may weaken bonds in indigenous societies that place a high value on community. The absence of a wider community benefit is also notable because of the established potential for art centers to deliver on a range of social, commercial and cultural functions in indigenous communities.

The trading non-profit community organization belonging to the local indigenous community was awarded because the aims of the organization were: 1) to maintain the artistic culture of its people, 2) to help others develop a deeper understanding of their culture and 3) to provide income to indigenous artists by selling their work. Approximately half of the organization’s funding came from the sale of artwork, 40% came from the government and the remaining 10% came from donations. In this case, ownership and control of the hybrid organization sat squarely within the indigenous community, and as a non-profit, any surplus was reinvested back into the organization and community, which is critical when operating in a market built on the culture of a vulnerable population. Its non-profit status also signaled that it understands and upholds the central role the non-market elements of culture and community play in creating social, commercial and cultural value in the context of the indigenous art market.

It was through the strategic development of an impact thesis and the necessary supporting research that the philanthropist was able to confidently award the $1 million to an organization that would effectively deliver against the desired impact goals. Through extensive collaborative dialogue with the organization’s board and employees, as well as by tapping into community-based relationships with leaders in the wider community, several social impact goals and supporting actions were earmarked to be funded by the $1 million grant.

Strategic philanthropy is an intentional and results-oriented approach to giving that moves beyond donating to contributing to sustainable and meaningful impact. Through the alignment of philanthropic effort with the goals of impact organizations, funding can be used to drive real and lasting change, and the development of a comprehensive impact thesis is a critical first step for funders interested in taking a strategic approach to their philanthropy. 

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