I just read this great report from the Alliance for Effective Social Investing. They discuss how to determine the level of risk associated with a social investment. They call a low-risk, guaranteed-return non-profit a "blue-chip" investment and a high-risk non-profit a "social venture" investment. These types of investments are evaluated based on three "domains": technical data use, strategic data use and program value. Each of these procedural domains includes a matrix to determine the degree of risk involved in each non-profit.
Needless to say, it's technical, but also accessible. I would strongly recommend it if you are interested in pursuing social investments. At the end of the report, they lay out a five step guide to social investment which is, needless to say, much more in-depth and detailed than my own. I'll summarize it here:
1. Select the domain(s) in which a given investment is intended to produce social value
Also known as "choose a cause."
2. Decide whether to make a “blue chip” or “social venture” investment.
They don't discourage either. You just need to consider how much risk you are comfortable with, the time you want to put into the process and the amount of money you have to invest. They have a rigorous 26 question survey that helps you determine what type of non-profit ("blue-chip" or "social venture") you are dealing with once you start your analysis.
3. Perform rigorous due diligence.
This includes their survey, but also an assessment of the non-profit's financials, leadership and stakeholders.
4. Invest with high intentionality.
If you are making a "social venture" investment, make sure you want to put in the time to be assured your donation is getting a high return. If you don't want to, it's better to go for a sure thing. (They mention that health-related organizations "lend themselves rather well to 'blue chip' investments.") Even with a "blue chip" investment, you need to keep tabs to make sure your organization is reporting results you are comfortable with.
5. Share investment performance data.
"Social investing should not be secretive and competitive." This goes without saying.