How impact security is changing the NFP sector

A US company is reinventing the way the Not-for-Profit sector is financed with the launch of a donor fund that ensures impact for every dollar donated.

The US company, NPX, created the new fund to deploy capital in the US using Impact Security, a proprietary financial product developed by NPX and Anna Pinedo, Partner and Co-Leader of Global Capital Markets at Mayer Brown. This platform brings together donors and investors to fund Not-for-Profits based on its impact.

The new impact model allows donors to select the impact area and Not-for-Profit organisation, allocate a percentage of their philanthropic capital, and determine their preferred level of involvement. Donations are only invested when pre-determined impact measures are achieved and verified.

Richard Branson, Founder of Virgin Unite and an Impact Security donor, said the innovation of donating was crucial to keep industries moving forward.

“Companies are continuously evolving and innovating, the same should be true for Non-Profits and the communities they serve,” Branson said. “The NPX team has taken this approach to philanthropic giving and its innovative solution will help Non-Profits to raise more funds and their profiles at the same time.”

Based on experience of US Non-Profit executives, investors and donors, NPX has designed the model to maximise impact, catalyse investor capital and unlock impact data. Investors can also choose to invest in a Non-Profit through a financial product that explicitly links financial returns on impact.

Not-for-Profit organisations can then access more money from new sources at a lower cost and over a longer timeline with a greater focus on the impact.

By linking donations to the impact, NPX has created a valuable feedback loop that is missing in today’s Not-Profit funding sector. They predict the ripple effect to be profound and that the new model should generate more money, data, and impact.

Lindsay Beck and Catarina Schwab, Co-Founders and Co-CEOs of NPX, said: “The social and environmental issues we face today are massive and Non-Profits can’t scale to solve them without access to more capital over longer timelines tied to performance.

“Financial engineering isn’t a silver bullet, but finance matters and the status quo is broken. We believe that unlocking the true potential of the Non-Profit sector is possible with one simple change: linking capital with performance.”