I’ve been speaking a lot about impact investing lately — in panels, conversations with colleagues, and in my own reflections. So I wanted to take a moment to write a clear, accessible overview for those in the humanitarian and development space who are curious, skeptical, or just trying to understand what this shift actually means.
For decades, we’ve relied on a familiar cycle: identify a need, write a proposal, secure a grant, implement under tight restrictions, and repeat. But something is changing — quietly, globally, and irreversibly.
A new financial logic is entering the space where humanitarians once stood alone, and it’s arriving fast. In 2024 & 2025 the sector has witnessed a wave of institutional donor cuts, shrinking humanitarian budgets, and an unmistakable pivot toward “value for money” narratives. Major international NGOs are undergoing significant restructuring, consolidating teams, and even exiting countries they once called strategic priorities.
Among the many ideas reshaping how we think about aid, one speaks a different language : return on investment, measurable impact, and sustainable growth. It’s called impact investing, and it isn’t just a trend. It’s a structural shift.
What is Impact Investment — Really?
Impact investing refers to capital deployed into companies, organizations, or funds with the explicit intention of generating positive, measurable social and environmental outcomes — alongside a financial return.
It is not philanthropy. It is not traditional aid. And it is certainly not profit-at-all-cost.
Think of it as solidarity backed by capital — with clear expectations around both the impact created and the money returned.
Impact investments sit on a spectrum: from concessionary capital (willing to accept lower returns for deeper impact) to market-rate funds (seeking strong financial performance from purpose-driven ventures).
If that still sounds abstract, think of it like this:
Imagine someone puts money into building a clean water pump in a village. But instead of donating it and walking away, they invest in a local business that installs and maintains the pump. The business earns money by providing clean, affordable water. The community benefits, the environment is protected, and the investor gets their money back — maybe even with a small return.
That’s impact investing: a win-win model where change is built to last — not just funded to start. Especially in development settings, it offers a path to sustain progress in infrastructure, health, education, and beyond.
Why Should Humanitarians Care?
Because the way the world finances change is evolving — and our toolbox needs to evolve with it.
In fragile and crisis-affected settings, traditional donor funding is often short-term and volatile, limited to narrow humanitarian silos, and highly susceptible to political shifts — especially those driven by the foreign policy priorities of donor governments. In many cases, where and how aid is delivered is shaped less by local need and more by geopolitical agendas, making long-term planning and local ownership difficult.
Impact investment offers an alternative approach — particularly for post-crisis recovery, refugee-led businesses, climate adaptation initiatives, and locally owned enterprises.
This isn’t about replacing grants or abandoning humanitarian aid. It’s about expanding the financing toolbox — especially in long-term recovery and development settings, where communities need more than short-term interventions. Imagine:
- A refugee-led community center receives early-stage equity investment — allowing it to expand beyond a temporary gathering space into a local gym, a shared co-working area, and a hub for vocational training. The center creates jobs, builds social cohesion, and becomes self-sustaining through modest membership fees and service-based revenue.
- A clean energy cooperative installs solar panels near a rural airstrip, ensuring stable power not only for flights and essential logistics but also for nearby health clinics and cold-chain storage — supported by climate-focused impact bonds.
- A neighborhood barbershop, launched by displaced youth, is supported by micro-investment and grows into a small grooming and wellness business. It’s not just a haircut — it’s a source of dignity, livelihood, and belonging.
- A local second-hand clothing shop, started by refugee women, transitions into a social enterprise. It blends impact investment with donor grants, supporting circular economy principles, income generation, and community reintegration.
- A small refugee-run learning space — initially built from tarps and wood — becomes a registered micro-enterprise, offering after-school tutoring and digital literacy classes. With investment, it hires local teachers, integrates tech, and reinvests profits to expand access for underserved children.
These aren’t hypothetical examples. I’ve seen them. Not in pitch decks, but in real places. Real people. Real work. They weren’t funded through impact investment strategies. They survived — barely — through microloans, informal savings groups, and local hustle.
I’m not saying impact investing is the answer. I’m saying it might be part of the answer — something worth experimenting with and exploring, alongside other emerging approaches. Models like the hybrid NGO model, my personal favorite — joint country programs — or even the idea of collective lobbying power among INGOs and local actors. We need to give ourselves permission to test, adapt, and thrive, not just within projects, but in how we finance and structure our missions.
Key Principles of Impact Investing
Based on my research and direct engagement with investors — particularly across the GCC, Europe, and financial experts — four principles consistently define what makes impact investing distinct, credible, and scalable:
- Intentionality Impact is not a side effect, it’s built into the DNA of the investment. The intention to generate social or environmental benefit must be clear, deliberate, and core to the business model from the start.
- Measurable Impact Impact investing demands data. Outcomes must be tracked, not assumed — using rigorous frameworks such as IRIS+ (Impact Reporting and Investment Standards Plus) , Theory of Change, and alignment with the Sustainable Development Goals.
- Financial Return This is not charity. Investors expect a return on their capital, sometimes below-market if the impact is deep and long-term, but increasingly at market-competitive rates, especially in sectors like climate tech, education, and digital inclusion.
- Accountability Investors will demand proof, not posture. That means robust governance structures, transparent reporting, and community-informed metrics.
Challenging the Myths
Let’s confront the uncomfortable myths circulating in our sector:
- “Profit has no place in humanitarian work.” Not all profit is extractive. When capital is structured ethically, it can scale solutions we believe in.
- “Impact investing will replace aid.” It won’t — and shouldn’t. Emergency response, protection, and displacement crises still require grants and solidarity. But for recovery, development, and local innovation? Investment can be an option to complement and sustain.
- “It’s all greenwashing or buzzwords.” Yes, impact-washing exists. But so does genuine capital that’s aligned with values. The answer isn’t withdrawal — it’s engagement with discernment.
- “This is just for international NGOs.” Absolutely not. In fact, local organizations, social enterprises, and refugee-led initiatives are often better positioned to engage with impact capital — because they have the proximity, trust, and entrepreneurial models that many investors now actively seek.
Where Humanitarians Fit In
We often see ourselves narrowly as implementers — delivering projects, managing grants, responding to crises. But in reality, humanitarians are also advisors, innovators, and storytellers. Within the impact investment ecosystem, our role could be far more expansive. We can act as bridge builders, connecting capital with grounded realities and ensuring investments are directed where they are most needed. We can serve as designers of investable models, reimagining programs not as short-term interventions but as community-owned enterprises with long-term revenue potential. We must also step into the role of watchdogs, holding capital accountable to the impact it claims to generate, demanding rigor, transparency, and equity. And perhaps most crucially, we can be translators — helping local actors navigate the language of investment, without forcing them to compromise their values or mission. This isn’t about turning humanitarian work into finance. It’s about ensuring that capital follows community priorities, not the other way around.
What Could Go Wrong?
We must remain cautious — because the risks are real, and they’re already showing. Impact-washing is on the rise, with capital using humanitarian language and branding without delivering meaningful change. There’s a growing risk of power imbalances, where investors — often far removed from the communities in question — begin to shape priorities and marginalize local voices. And we can’t ignore the equity gap, where funding flows to the most polished pitches rather than the most urgent needs. This is exactly why humanitarian literacy in finance is no longer optional. It’s not just a technical skill — it’s a form of protection. It’s a strategic necessity.
If we want to influence how capital enters our sector, we need to understand it well enough to shape it — not just react to it.
What Comes Next?
Before we jump to conclusions or throw assumptions at impact investing — or any financial innovation in our sector — we need to pause. The starting point is not judgment; it’s curiosity. Read. Listen. Ask questions. Engage with those who have experimented, who are currently exploring, or who are courageously trying to find new models that serve communities better. I’m happy to be part of that conversation — to learn with you, or to share what I’ve seen up close.
If we want to remain relevant and shape the future of humanitarian financing, we must do four things at early stage:
- Learn the Financial Grammar Understand how risk, return, and capital structuring work. Know the terms. Push for better ones. The more fluently we speak this language, the more effectively we can shape how capital flows — and to whom.
- Build Alliances Partner with ethical investors, social finance platforms, community enterprises, and local governments. Co-create models that prioritize real impact over optics, and relationships over transactions.
- Fund the Future Differently Not everything needs to be grant-funded. Some ideas thrive on loans. Others require equity or blended finance. The task is not to pick sides, but to pick the right tool for the right mission — and to do so with integrity.
- Engage Outside the Sector I’ve learned more than I expected by spending time with companies, private investors, and visionary leaders in the for-profit world who are rethinking what value and impact mean. We can — and should — learn from other sectors, not to mimic them, but to adapt what works and discard what doesn’t. I highly recommend having these conversations, they open up new mental models and often shift what we think is possible.
This is not about turning humanitarians into financiers. It’s about ensuring that we don’t get left behind in the rooms where decisions about our future — and the future of the people we serve — are being made.
Of course, stepping into this space means rethinking parts of our organizational architecture including governance, legal frameworks, and risk management .
My Closing Thought: From Grants to Growth
We will always need grants. They remain essential for emergency response, protection, and human dignity in its rawest moments. But we also need something more: growth — the kind that doesn’t collapse when the grant ends.
Impact investment isn’t a threat; it’s a signal. A signal that the world is waking up to what we’ve always known on the frontlines: real change costs money — and it’s time we stopped just chasing that money and started shaping its flow, with purpose and integrity.
And to be clear, this is not a call for blind adoption or financial evangelism. It’s a call to diversify how we enable resilience and build dignity, especially in places where traditional funding models are no longer holding the line.
This isn’t the end of humanitarianism. It’s the start of its next chapter — one with new tools, new allies, and a long-overdue seat at the capital table.
Ali Al Mokdad
