Executive Director, Intermountain Impact Investments
Place-based impact investing is about partnerships, best implemented
when regional funders work together to solve complex challenges in the place
they call home. Some of the most valuable stakeholders in this work are
community foundations. As organizations that work every day to create positive
outcomes for their region, these “community fairy godmothers” as Locavesting calls them, are the backbone of community development partnerships.
There are more than 750
community foundations across the U.S.; each year, the number
committing a portion of their endowments to mission-aligned investing
increases. This follows an upward trend as the industry builds understanding of
what impact investing looks like across asset classes, as various partners share lessons learned and as industry leaders continue to clarify
the role philanthropic dollars play in the impact
investing capital stack.
One such leader is the Humboldt Area Foundation (HAF) which has
demonstrated the possibilities of place-based impact investing for over 10
years.
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The Carson Block Building Renovation: In partnership with Arcata Economic Development and other funders, HAF participated that allowed the Northern California Indian Development Council to renovate this historic building in the heart of Old Town Eureka.
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HAF’s journey began in 2009 with a request from the Open Door
Community Health Centers, a local healthcare
provider that serves nearly 40% of the residents in HAF’s service area. The
Center had a $10MM shovel-ready grant to consolidate locations and bring in
forty-five additional physicians. However, the land they had targeted was
purchased before they were able to secure the grant. Starting over, they worked
with the City of Eureka to find a new location and were in search of a $2MM
bridge loan to purchase land.
When HAF staff discussed the investment opportunity with their board,
they realized they did not have an investment policy that included this kind of
investing. “I remember thinking, ‘This is a no brainer. It’s a safe loan.’ So
we went back and created an investment policy,” says Chief Financial Officer, Deborah Downs. Together with the Arcata Community Development Center (AEDC),
HAF put together funding for half of the necessary land acquisition capital
which was then matched by Humboldt County Headwaters Fund. The construction was completed in 18 months to meet the grant deadline
and the benefit to the community was immediate.
Another innovative place-strengthening investment for HAF was the Redwood Acres Kitchen a partnership between the Redwood Economic Development Commission and Friends of the Redwood Acres Fairgrounds. The partnership allowed
the nonprofit that manages the fairgrounds to utilize a combined grant and loan
program to remodel several building spaces into commercial kitchens. The
Redwood Acres Fairgrounds, like others in the state, has experienced funding
cuts in recent years. The nonprofit managers are using the kitchen program,
which maintains the organization’s commitment to food and agriculture, to
support small businesses that generate rental income, sustaining the
fairgrounds’ other important community operations.
With over 5% of HAF’s portfolio, currently $1.8MM, committed to regional
community development investments, the foundation has a goal of increasing
their allocation three-fold in the coming years. Currently, five of the loans
in their place-based impact investing portfolio are managed by AEDC, and the
foundation manages the remaining smaller loans on their own. “As a community
foundation, you don’t necessarily have [the] expertise [to manage a large loan]
and you worry about that fiduciary responsibility,” says Downs. CDFIs are
looking for money and ways to partner in their communities. “It really becomes
a perfect partnership.”
This strategy to partner for reduced transaction costs is common in the
place-based impact investing world. “Delegating the due diligence and
management of the funds to a central intermediary and collaborating with other
investors for collective impact reduces the costs of managing and monitoring
these impact and location-specific portfolios and compounds the impact,” says Lauryn Agnew of Bay Area Impact Investing Initiative. Another
reason to partner with CDFIs is they are limited in where they can lend. CDFIs
are operating under specific lending criteria from sources like USDA and SBA,
explains Downs. One of the things “we are providing, is the funding that they
can use for a nonprofit.”
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Pictured: McKinleyville Fire Station, another one of the
noteworthy projects HAF has collaborated on.
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Other projects Humboldt Area Foundation and their partnering
CDFI, AEDC, have collaborated on include the McKinleyville Fire Station, Carson Block
Building Renovation and Arcata Bay Crossing Supportive Housing. Ross Welch, Executive Director of AEDC, is working with the California
County Consortium to find more ways to bring local funders together. He
sees a lot of potential for this kind of work, especially with commercial
lending. “A community building isn’t much different than [another commercial
building]. What’s neat [is] if you can combine a grant with some low-cost
interest and some deferred,” says Welch. “We can do it. If I can get the money
from a foundation or a local investor, I’m ready to do it again.”
The Humboldt Area Foundation has recently encouraged growth in their Opportunity Funds, designed as: Flexible
money available for changing community needs including program work,
initiatives, and responsive grants. The foundation envisions Opportunity
Funds providing support for the program work needed to initiate more community
lending. “We are working toward program outcomes that pair with lending
activities. Programs put us into contact with the needs. Then we can integrate
the opportunity funds if needed. Particularly if things are a little riskier,”
says Downs. “Instead of outright granting, we will lend at a reduced rate and
then some of it will be returned and we can re-lend.” This strategy has been
well received by donors says Patrick Cleary, Executive Director of HAF. “They
like knowing their funds are being invested locally rather than all on Wall
Street.”
The strategy of pairing grants with place-focused investments is
becoming more recognized as a tested blueprint to catalyze meaningful change.
As more and more foundations provide leadership around community and economic
development challenges, the opportunity for local investing grows. This is the
opportunity that LOCUS continues to explore, providing tools and support to
empower foundations to begin their own place-based impact investing journey.
“We can see the future...a combination of work on the ground, granting
when we can and also providing loan funds,” concludes Deborah Downs. The key is
to start small. Start somewhere. And partner for success.
- Amber is the Executive Director of Intermountain Impact Investments. She is currently working with LOCUS to evaluate the potential for place-based impact funds in the rural western United States.
