Risk is the likelihood of an undesirable outcome. Every action includes an element of risk.
Philanthropy is no exception to this rule. In fact, charitable donations—because they seek to solve seemingly intractable problems—are often referred to as society’s ultimate “risk capital.”
Risk and return analyses are important considerations when making any investment decision. In the context of philanthropy, this includes grants as well as impact-investing decisions that seek social and financial returns.
“Philanthropy should be taking much bigger risks than business,” said philanthropist Bill Gates. “If these are easy problems, business and government can come in and solve them.”