What should social finance invest in and with whom?
What should social finance invest in and with whom?
This chapter focuses on the relationship between social finance and the not-for-profit sector considering the issues from the perspective of nonprofit economics. The question ‘what should social finance invest in’ discusses the difference between societal needs that can be addressed through ordinary financial investments from those that require social investment. The ‘with whom’ question concerns the organizations that use social investments to create social impact. After setting out the conventional rationales for social finance in terms of creating collective goods and addressing market failures, the chapter goes on to explore the specifics of social investment in not-for-profit organizations. The next section of the chapter considers the evolution of hybrid organizations that combine social and financial objectives—specifically it evaluates several key features such as their efficiency, sustainability, and access to capital. Conclusions summarize the various arguments and acknowledge limitations.
Keywords: nonprofit finance, investment focus, impact thesis, market failure, public goods
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