Tactical Philanthropy is currently covering the Grantmakers for Effective Organizations conference with the help of a blog team. This is a guest post by Laura Callanan of McKinsey & Company.
By Laura Callanan
The "prudent man rule" (circa 1830) originally called on fiduciaries to apply judgment in picking each investment. The "prudent investor rule" (circa 1992) applied modern portfolio theory and called on fiduciaries not to pick individual investments wisely but to apply their judgment to the selection of the portfolio as a whole. (This required consideration of correlation between individual investments and the affects of diversification). Now sustainable capitalism is starting to suggest that fiduciaries should consider the environmental, social and governance implications of investment choices.
Basically, investors have increasingly been asked to thinker bigger, more holistically and to hold great complexity while making good decisions.
Social impact assessment started with outputs, moved to outcomes and impact, and now weighs cluster level assessment. Social impact assessment today balances questions of contribution vs attribution, with real assessment of results, and real measures of what works. The question is getting bigger and messier – rather than more focused and more clear.
Is that simply what happens as we understand more? We realize we understand less?