Markets For Good aims to raise the bar in efficient philanthropy
An initiative by Liquidnet, the global institutional trading network, aims to increase the flow of philanthropic funds to efficient charities by promoting standardised performance measures.
Liquidnet CEO, Seth Merrin working in concert with the Gates
Foundation, the Kauffman Foundation and others has established
Markets For Good, an initiative that aims to draw on the example of
the mutual fund industry in producing metrics that can be used by
donors and social investors to assess the effectiveness of
"Markets For Good is an aspirational goal, but it is something
that is absolutely necessary," says Merrin. Pointing out that the
aggregate philanthropic flows are "massive", Merrin decries the
lack of reporting on performance. "There's little accountability
and few checks for efficacy," he says. "Take our experience in the
financial markets. Can you imagine what the financial markets would
be like, if every public company reported their earnings however
they decided they wanted to measure them? How could you compare one
against the other to see which are run better? That's exactly the
state of the not-for-profit world."
"Can you imagine what the financial markets would be like, if
every public company reported their earnings however they decided
they wanted to measure them? …That's exactly the state of the
Seth Merrin, Liquidnet
The solution, says Merrin, is to develop the means to measure
efficacy. "Metrics may differ; in the financial markets, you don't
measure insurance companies in the same way you measure retail
companies. But there are maybe eight or so different big lines of
philanthropy and each one of those has to have its own metrics and
a method for capturing the efficacy for the end consumer."
Lack of transparency leaves a large number of inefficient
non-profits in business, says Merrin. "What this is ultimately
going to do is funnel more money to the more efficient and
effective organisations at the expense of the inefficient."
He argues that publishing these metrics should lead to an
overall increase in philanthropic flows. "The mutual fund companies
in the 1990s, established and started reporting on the same
performance metrics, the AMR standard. Everyone could now
understand and compare one against the other and assets ballooned."
The same could happen in philanthropy, he says.
The initiative is in the early stages. "We've created a small
working group where we are the lead in mapping out what we have to
do and in what order. We'll then aim to sign up other foundations
to the project," he says.