As impact investing gains in popularity, there seems to be a greater and more widespread understanding of it’s meaning and definition. That said, confusion between the concepts of impact investing and venture philanthropy is still prevalent and the difference in the concepts is subtle. This is not much of a surprise, considering impact investing has it’s origins in philanthropy. Investopedia has clearly defined the relatively subtle difference between the two concepts, which essentially entails a difference in priority:
“With impact investing, the investor is looking to make a profit while also having a positive impact on the world in a social or environmental sense. With venture philanthropy, the goal is usually (but not always) to make a profit while having a positive social impact on the world. Impact investing is on the rise while venture philanthropy seems to have passed its peak.”
So, the difference between impact investing and venture philanthropy is mainly a distinction in priorities. Both aim to make a profit and have a positive impact on the world, yet, each prioritises this differently.
Update 25th of May 2019:
This video was recently released by Put Your Money Where Your Meaning Is Community (PYMWYMIC). The video explanation covers the spectrum all the way from traditional investing to traditional philanthropy, and everything in between.