Tool 02 - Financial Compass
A financial compass, like this example from BD Giving, is useful for communities to find where their democratic money is pointing. In this case, it’s a tool that is more useful for investing democratic money than spending it. The idea is for each investment to be scored against the four dimensions of impact (which, on this compass is true north), liquidity, risk, and return.
Which, to de-code the jargon means, respectively: what will the money create in terms of impact whilst it’s invested; how quickly can we get it back if we need it; what are the chances we’ll lose the money; and how much money will we make on the money we’ve invested?
A financial compass helps communities have better conversations about the democratic money they’re in control of.
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Snowball uses the points on a financial compass to assess the investments they make on behalf of their community of investors. Snowball explains this as part of their approach on their website here. You might notice that liquidity isn’t mentioned, but that doesn’t mean it isn’t there. Liquidity is ever-present in an impact investment management company like Snowball because investors always want to know when they can get their money back.