First Russian Translation Released of Lester Salamon’s Book on Philanthropy’s Big Bang

On September 21, the first Russian translation was released of the book Leverage for Good: An Introduction to the New Frontiers of Philanthropy and Social Investment by HSE professor and the head of the Laboratory for Non-profit Sector Studies, Lester Salamon.

Professor Salamon is the founder and Director of the Centre for Civil Society Studies at The Johns Hopkins Institute for Health and Social Policy Studies, and since 2014 he has headed the international laboratory at HSE. His new book, which was published in Russian with support from the Our Future Foundation, is a short summary of the research described in more detail in the fundamental work New Frontiers of Philanthropy, published two years prior. In this book, Professor Salamon explores the innovative mechanisms and new possibilities for financing projects in the philanthropic and social entrepreneurial sphere, that is, aside from normal grants and charity projects. In particular, the watershed for traditional philanthropy and new approaches to financing for social projects was the concept of social impact investment, which helps bridge the gap between social (or environmental) results and financial benefit.

Socially motivated investors are ready to accept greater risk and below-market returns if a project can demonstrate it will have an obvious impact on the poorer members of society

Analysing the international experience of applying a diverse set of financing tools for socially significant activities, Lester Salamon concludes that philanthropy is currently undergoing a real revolution comparable to the Big Bang. In his research on this ‘bang,’ Professor Salamon notes that in many countries, traditional grants for social projects are being replaced by instruments from the financial market – loans, loan guarantees, bonds, insurance, and others. Such financial instruments allow investors to achieve a social benefit while simultaneously receiving a return on their investments, which is a completely understandable objective.

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Professor Salamon believes that the point of using new financing instruments in the social sphere is to allow for additional private capital to be brought into this field through lending and equity financing. These terms are mostly beneficial for charity foundations and other organizations that receive funding. This happens because investors in many countries are now starting to show an interest not only in receiving a profit, but also in the social results that can only be achieved through the money that they invest. As a result, socially motivated investors are ready to accept greater risk and below-market returns if a project can demonstrate it will have an obvious impact on the poorer members of society. This is particularly important as we are now seeing a drop in government spending on social needs and charitable resources.

A new ecosystem is therefore forming on the social services market, and this system includes new sources of capital – social investment funds, social investment banks, pension funds, and social and environmental exchanges. In addition, this market has a new set of participants – socially motivated investors, intermediary brokers and organisations that help find investments for social projects, and organisations that develop the business competencies of the charities that receive social investments. New financing instruments are emerging as well. It is not only non-profit organisations that are receiving social investments, but also social entrepreneurs who are able to offer a socially significant project that can also provide a return.

There are still obstacles that stand in the way of spreading new financing tools, and these mostly concern the serious difficulties with assessing a project’s social impact, in addition to the lack of high-quality investment projects in the social sphere. Professor Salamon adds that these difficulties can, however, be overcome with time. To do this, information must be consistently disseminated to make people aware of how the new financing tools work and what kind of social and economic impact these instruments have had.

You can read an excerpt of Lester Salamon’s new book on Slon.ru.

Natalia Ivanova, HSE News Service