The Future Role of Philanthropy: Mission-Aligned Investing

By Guest Blogger, Robert Thalhimer bobby@themonumentgroup.net

With customary optimism, Warren Buffett recently waxed enthusiastic about our nation’s future. He noted that for centuries we have grown with half our workforce—women—on the sidelines. Similarly, we might think optimistically about the future role for philanthropy, which typically budgets based on 5% or less of its assets for accomplishing its goals. What if we were to unleash the power of the capital itself?

Innovative foundations such as Ford, Heron, Kresge, Gates and Rockefeller are leading the way, investing a percentage of their assets in affordable housing, enterprises that create employment in low-income communities and other revenue-producing ventures that serve a philanthropic purpose. What lofty purposes might we accomplish, should this nascent trend catch fire with charitable foundations more broadly? How would communities be transformed if place-focused foundations starting using more of their assets to invest locally to build vibrant, prosperous places?

Nationally, groups such as Mission Investors Exchange and Confluence Philanthropy are focused precisely on fueling the flames of direct impact investment. Yet, most charitable foundations don’t have the staffing resources or the “banking” financial expertise to implement impact investing strategies to the satisfaction of their boards of trustees.

Enter LOCUS Impact Investing, a social enterprise owned by a nonprofit CDFI financial institution. LOCUS works with charitable foundations that wish to engage in the rapidly evolving field of place-focused direct investments — those foundations wanting to make a difference in their communities while earning a return on their funds. LOCUS is experienced at assessing the landscape for deals, conducting due diligence, and servicing and monitoring the investments. LOCUS’ charitable foundation clients benefit from outsourcing this specialized financial back office work without having to expand their own staff. 

Think about the magnitude of foundations’ impact once they unleash the power of their assets beyond just 5%. Local mission-aligned investing can provide more than just a financial return; it can also unleash new possibilities to transform communities with new jobs, revitalized main streets, and access to safe and affordable housing.

LOCUS is helping to unlock this philanthropic capital for local investing for impact one foundation at a time. What hurdles do you face in making impact investments? You might think about calling LOCUS to see if their team of consultants and experts can help.

Join the LOCUS mailing list to stay informed.

Bobby Thalhimer is senior consultant at The Monument Group, www.themonumentgroup.net, located in Richmond, Virginia, which provides strategic advice to the philanthropic sector. 

 

Recipe for Prosperity = One Foundation + One CDFI + Entrepreneurial Opportunity

By Deb Markley

It is clear from our work on the ground that creating a more prosperous, vibrant community is a team sport! It takes many players whose visions converge to create businesses, jobs and wealth that make our communities more sustainable over time. Increasingly, those interests converge around impact investing – “investments made into companies, organizations, and funds with the intention to generate measurable social and environmental impact alongside a financial return”¹. Impact investing has received much attention over the past years, especially with the Ford Foundation’s announced plan to commit $1 billion from its endowment to mission-related investments and the Kresge Foundation’s $350 million commitment to social investments. For the place-focused foundation partners we work with, local impact investing presents new opportunities but also some challenges. What exactly is it? How might community foundations get involved? What does impact investing look like?

To contribute to this conversation, here’s a story about impact investing with three central actors – the Jessie Ball duPont Fund, a philanthropy established to invest in places and organizations important to the late Mrs. duPont; Virginia Community Capital, a community development financial institution (CDFI) working to make a difference in underserved communities in the state; and the Haynie Family Farm in Reedville, VA, a multi-generational family farm established shortly after the Civil War by the Rev. Robert Haynie, a freed slave and first African-American landowner in his Northern Neck (Virginia) county. 

The Haynie Family Farm has grown far beyond the acreage and vision of its founder. Three generations of the Haynie family now farm thousands of acres of farmland scattered across several counties. They also operate several small businesses. However, agriculture is a challenging business. In some ways, the story of the Haynie Family Farm is not unlike that of other farm families who make a living in an unpredictable and sometimes harsh industry. But, there’s more to the Haynie story.

As African-American farmers in the south, the Haynie family experienced challenges that white farmers did not. The story of Ricky Haynie, who now farms the land with his son, and the discrimination he faced trying to access capital and other support through the USDA was chronicled in 2004 in the Washington Post. The financial ruin inflicted upon the family by an institution charged with helping farmers is difficult to accept. But, the family survived. In 2014, the family knew they needed financial assistance and they needed a partner who would help them keep the family farm vibrant for the next generation.

Enter the other two actors in our story. First, the Jessie Ball duPont Fund who cared about the Northern Neck of Virginia, the site of Mrs. duPont’s childhood home. After the 2008 recession, the Fund leadership began to think about how they might deploy investment assets along with grant dollars to help communities that were suffering economically. As Sherry Magill, CEO & President, was quoted in a recent Fund report, “Could we invest a portion of our portfolio in local places and receive a social as opposed to a market return?” In 2011, trustees agreed to set aside $10 million from the funds endowment for Program Related Investments. PRIs are made by foundations to support their charitable activities – in this case, to expand access and create opportunities in communities that Mrs. duPont cared about. The key difference between a PRI and an outright grant is that the foundation expects the investment to be returned at some point. As foundations move into the local mission-aligned investing space, they are looking for the right partners who can use investments to further the foundation’s mission.

That’s where Virginia Community Capital enters the story. VCC works throughout the state to provide both capital and advisory services to businesses, housing developments and other investments that have a positive impact on communities. As a CDFI, they are particularly focused on bringing their capital and services to people and places that have struggled to gain access to capital. In VCC, the Jessie Ball duPont Fund found the right partner. In 2011, VCC received a $1.5 million PRI from the Fund to support economic development efforts in low- or moderate-income communities, including the Northern Neck.

In 2014, VCC made a loan to the Haynie Family Farm, drawing on resources provided through the PRI, enabling the family to take the next steps toward a more stable and sustainable future. They found the right financial partner in VCC, who through a PRI from an enlightened philanthropic fund, was committed to the Northern Neck area. The impact of the loan is measured beyond the financial return on investment. It helps to strengthen a multi-generational family farm and increase the odds that it will be around for the next generation. It helped to create or retain 35 jobs directly associated with the farm and its operations. It maintains a vital business in the region. And, its helps to restore some faith that capital access decisions can be based solely on merit and not race.

This is a story about a series of value-added relationships where the right mix of ingredients (aka partners) resulted in a recipe for successful community prosperity. VCC helps the Jessie Ball duPont Fund achieve its impact investing objectives and put endowment dollars to use helping communities. The Fund provides needed capital that helps VCC strengthen its commitment in the Northern Neck region. And, ultimately, VCC deploys the Fund’s investment to help the Haynie family strengthen their farming operation and their place and impact in the community.

This story illustrates one path that foundations may choose as they consider a role in local impact investing – finding a trusted, mission-aligned CDFI partner to help deploy investment dollars. Did you follow a similar path or blaze another? How are you engaged in impact investing? I’d like to hear your stories!

¹ A Short Guide to Impact Investing, Case Foundation.

 

Deb Markley is Co-Founder and Managing Director of the Center for Rural Entrepreneurship and Senior Vice President of LOCUS Impact Investing. Join the LOCUS mailing list to learn more about local investing for impact.

Our next blog will feature a foundation story of local investing for impact.