How Banking Foundations can combine philanthropy and impact investing to mobilise capital for social enterprises.
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What if grants were not only a source of funding, but also a way to mobilise more capital for social impact?
As public resources become increasingly constrained and demand for social investment grows, philanthropic institutions are exploring how grants and investment can work together rather than as separate tools.
Banking Foundations are particularly well positioned to experiment with this approach. Their institutional role, knowledge of local needs and Third Sector organisations, experience working with public institutions, and access to patient capital give them the potential to bridge the space between traditional philanthropy and impact investing.
This is the perspective of Marco Gerevini, Managing Director of Fondazione Social Venture Giordano Dell’Amore (FSVGDA, an ADALTIM partner, who recently reflected on the role Banking Foundations can play in developing social impact finance.
Where philanthropy meets investment
Over the past decade, a growing space has emerged between traditional philanthropy and conventional finance. Social enterprises, cooperatives and other purpose driven businesses increasingly need financial instruments that recognise both their economic sustainability and their capacity to generate social, environmental and cultural value.
Since 2017, FSVGDA has been operating in this space in Italy through an integrated combination of capacity building, investment and advisory services.
Its work complements the traditional philanthropic activity of Fondazione Cariplo, one of Italy’s leading Banking Foundations, and explores how philanthropic resources can be used alongside investment capital to support the long term development of social purpose organisations.
Programmes such as Impact4Art and Impact4Coop, for example, use philanthropic resources to support impact investment initiatives aimed at strengthening the capital base of cultural enterprises and social cooperatives.
But one instrument in particular illustrates how the relationship between grants and investment can be rethought: the Impact Grant.
From grants to impact multipliers
The Impact Grant is a mechanism that connects philanthropic resources, in the form of grants, with investment resources, in the form of equity. A portion of an equity investment can be converted into a non repayable grant when previously agreed social impact targets are achieved.
Those targets are monitored and assessed by FSVGDA’s Evaluation LAB:, an operational unit bringing together expertise in strategic planning and social impact assessment and providing advisory and capacity building services to enterprises, funds and Third Sector organisations.
The model creates incentives for impact generation while responding to the needs of different actors.
For philanthropic institutions, it can broaden the range of financial instruments available to beneficiaries and allow grants to be deployed more selectively. For investors, it creates a direct incentive linked to the generation of impact. For cooperatives, it can strengthen their capital base and potentially improve their ability to attract additional investors and access new sources of finance.
To date, FSVGDA has made 10 investments using the Impact Grant structure, totalling €1.9 million, of which more than €0.9 million consisted of self extinguishing shares.
The underlying idea is straightforward. When an organisation has a viable and sustainable business model, investment can sometimes complement or replace traditional grant making. If that investment is repaid, the resources can subsequently be deployed to support new initiatives.
As Marco Gerevini puts it:
“This is not about saving money for its own sake. It is about multiplying impact.”
Grants and investment do not have to be alternatives
This does not mean that investment should replace philanthropy. Grants remain an essential resource, particularly during the earliest and riskiest stages of an initiative or when an organisation cannot sustain repayable capital.
The opportunity lies in understanding when different forms of capital can work together.
In some cases, grants can support the initial development of a project before impact investment intervenes at a later stage. In others, hybrid mechanisms such as the Impact Grant can combine both approaches within the same financial structure.
This complementarity may become increasingly important as public funding becomes more constrained and the availability of non repayable resources struggles to keep pace with growing social needs.
Banking Foundations can play an important role in this evolution, not only because of the capital they can mobilise, but also because of their knowledge of local ecosystems, relationships with Third Sector organisations and ability to work alongside public institutions and investors.
What is needed to grow social impact finance?
Looking ahead, Gerevini identifies three areas where Banking Foundations and impact investors can work together.
First, strengthen demand. Capacity building can help organisations develop the entrepreneurial and managerial capabilities they need to become investment ready and grow sustainably.
Second, reduce investment risk. Banking Foundations, philanthropic organisations and public institutions can contribute through revolving guarantees and hybrid financial instruments capable of absorbing part of the risk associated with impact investments.
Third, strengthen impact measurement. Impact measurement is already well established within the philanthropic activities of many Banking Foundations, but it becomes particularly important when financial mechanisms are directly linked to the achievement of social outcomes.
When financial incentives depend on impact performance, it becomes essential to understand what is being measured, which targets are relevant, how progress is monitored and how impact claims are assessed.
Better impact information is therefore not only about reporting. It can also influence how capital is allocated, how financial instruments are designed and how investors and social purpose organisations build trust around expected outcomes.
This is one of the areas ADALTIM is exploring through its work on impact measurement, monitoring and rating.
Building the bridge between capital and impact
The experience of FSVGDA illustrates a broader evolution in impact finance.
The question is increasingly not whether philanthropy or investment is the better instrument, but how different forms of capital can be combined according to the needs, maturity and impact potential of an organisation.
Making these models work requires more than financial innovation. It requires capable organisations, investors willing to experiment, mechanisms for sharing risk and robust approaches to understanding and assessing impact.
Bringing these elements together can help turn grants from a finite source of support into part of a broader system capable of mobilising capital and multiplying impact.
