A small group of foundations have been early movers in small segments of the impact investing market. But we have a long way to go before we can claim victory, or even substantial progress. The problems we aspire to solve are, if anything, growing larger and more urgent daily. We need to up our game.

Deadly Peril No. 1: Our outmoded business model encumbers our effectiveness. The cherished conviction that investing and giving (money and mission) exist (and belong) in separate spheres is false. This is reinforced by the foundation business model, which is primarily an instrument of tax compliance expediency, not philanthropic effectiveness. It undermines our potential for real impact.

Deadly Peril No. 2: We will lose our claim to the moral high ground. Our rhetoric  —  words and phrases such as “urgency,” ”interconnection,” “systemic,” ”beneficiary voice,” ”the risk capital for society,” ”innovation engines”  —  is hollow if the bulk of our assets are invested in organizations that contribute to the problems we address with grants on the other side of the house. Are we fully recognizing beneficiary and mission risk in our asset deployment choices? If we are not, we are on a fool’s errand on the grant side.

Deadly Peril No. 3: We will become increasingly irrelevant. The philanthropic business model is already diversifying and changing: Omidyar, Skoll, Emerson Collective, and Chan Zuckerberg (to mention just a few) are hybrid models. Assets flowing to Donor-Advised Funds are on track for another record year. With these as peers, legacy and emerging conventional foundations must innovate to continue to be fit to purpose.

We foundations have a choice. We can talk about our intentions. Or we can push our performance, live our rhetoric and lead by example.

If we are to succeed, we will need to impart the real urgency that is pushing us today. We must “be the change” in our operations and actions. Philanthropy is a way of life, not an afterthought or a “nice to have,” but an imperative, built into our investments, our businesses and our daily lives.

Read the full article about the deadly perils of foundations and their saving graces by Clara Miller at ImpactAlpha.