As America prepares to celebrate its 235^th year of independence from Great Britain on July 4^th, there’s one growing phenomenon which continues to inspire philanthropists on both sides of the pond.

Social investors in the UK, United States, and indeed around the world are eager to leverage new vehicles, new capital, and new partnerships to solve our most difficult social issues -- poverty, education, human rights and environmental concerns.

In the process this new breed of investors is redefining what it means to be a philanthropist and an NGO by blurring the boundaries between the business and not for profit sectors, and in many cases pushing back on the traditional rules that have guided philanthropy for years.

 This is not your just-make-a-grant-to-a-charity-and-hope-for-the-best kind of donor. This investor brings to the table a sophisticated toolkit jam packed with a range of strategies and investment tools including a willingness to make outright loans or underwrite loan guarantees, earmarking capital for equity investment in a for-profit social enterprise or certified Beneficial ( “B”) Corporation; actively owning and managing securities positions through proxy voting; as well as investing in a host of below-market and market-rate investments. These donors want to be engaged, want impact, and increasingly are demanding and getting a bottom line return on their impact investments.

 Some of the most recent developments fueling this movement include:

• Return on Investment: Bottom line conscious investors no longer have to choose between doing good and ROI.  There is now a track record of individual and institutional donors which have demonstrated you can have both. At the prodding of investors looking to align both their personal and philanthropic assets with their social goals, wealth managers are taking notice and are now incorporating socially innovative investment strategies in the products offered to their clients.

• Social entrepreneurship: Innovation is being driven by a new group of savvy global leaders who are exploring a variety of social enterprise vehicles which provide them more flexibility in addressing social needs while attracting much needed investment capital. B Corporations and LLC entities are gaining a foothold throughout the US as vehicles of choice for social entrepreneurs.

• Government’s role:  The UK’s leadership in testing social impact bonds has not gone unnoticed in the US as an innovative tool for social investors to support outcomes-based public sector initiatives. The government issues the bonds to address a critical need, but pays out financial returns only if outcomes are met (e.g. school dropout prevention targets are met). It’s a creative way to fund prevention and early intervention services which can have significant government savings in future years. U.S. social investors were thrilled that President Obama included a small ($100m) allocation to pilot social impact bonds in his 2012 budget request   Modest in comparison to the UK commitment, but an important gesture in highlighting the critical role government can play in attracting investors to this space. This vehicle is also generating interest at the state level with Massachusetts recently issuing a request for information to explore how to leverage the ‘social impact’ bond approach.

Blended philanthropy, social investing, impact investing, and venture philanthropy are just a few labels attached to this new breed of social change agents. We see this space only growing as both individual and institutional donors embrace the notion that as the world and its problems become more complex, the pressure is on to leverage all available assets for meaningful social change.  

Melissa A. Berman is president and CEO of Rockefeller Philanthropy Advisors