SVX

Five must read resources on place-based impact investing

In order to support the community for our annual All-in Impact Gathering, SVX has prepared a three -part blog series to build engagement and understanding amongst active and interested impact investors in Canada, particularly individuals, families, foundations, and faith-based organizations. This post includes five must read resources on place-based impact investing. Please note that these are not the only resources available, and we cannot categorize them as the top resources, as there are so many individuals and organizations writing and thinking on this topic. But they are excellent sources of information that will give you a great overview of thinking on place-based investing from recognized and respected sources.

This article presents concepts, best practices, and lessons learned from three key elements of place-based impact investing: building strong ecosystems, mapping opportunities and capacities, and deploying capital on the ground together through collaborations.

Key takeaways from this resource include:

  • Together, ecosystem actors can create a better understanding of community needs, capital flows, and capital gaps. Their collaboration enables them to increase sector collaboration trust, facilitate cross-sector conversations, and attract more capital as a group. Funds like the Michigan Collaborative and the Baltimore Collaborative were indeed able to create more capital available to meet their community needs.
  • There are four approaches to mapping and assessing gaps and opportunities: 1. needs assessment (uncovers unmet local needs for a service); 2. capital flows and gaps (flows explain why communities are shaped in a certain way); 3. ecosystem mapping (identify the agents that can be considered as part of the ecosystem, their roles, and so where investment would make sense); and 4. impact investor mapping (interview them to learn what are the critical gaps they see).
  • There are four primary models of collaboration that can support and enhance place-based impact investing: building networks, consortia, alliances, and platforms. You can choose your most appropriate collaboration model depending on the goals you have. For instance, the Western New York Impact Investment Fund is an alliance that brings together philanthropic investors, corporations, and private individuals into a single pooled fund. The purpose of the alliance is to pool their resources for direct investments.

This article presents the views and experience of Eoin who is an Executive Director of both place-based funds focused on the Prince Edward County, the Upper Canada Equity Fund and the Upper Canada Social Impact Fund.

Key takeaways from this resource include:

  • Place-based funds reach deep into communities to have a significant social and environmental impact. A number of partners and stakeholders engage in the process to magnify their impact by contributing additional resources to accelerate the desired impact.
  • The funds have transformed the local landscape in Prince Edward County (PEC). It started with very deliberate efforts to kick start innovation and then the movement carried the momentum on its own.
  • The impact of place-based impact investing in PEC had a contagion effect on neighboring communities to create a local innovation ecosystem of their own with similar practices.

This article presents relevant forms of stakeholder finance from individuals, to financial advisers, community development financial institutions (CDFIs), impact investment firms and institutional investment consultants, philanthropic foundations, and faith-based investors. Our key takeaways will reflect on CDFIs, financial advisers, and impact investment firms.

Key takeaways from this resource include:

  • There are four primary types of CDFIs (banks, credit unions, loan funds, and venture capital) which are each similar to their non-community development counterparts, but have a commitment to invest in underserved communities. For instance, community development banks and credit unions both offer traditional banking services and tend to higher-risk individuals and businesses.
  • 30% of CDFIs are situated in rural geographies in the US and they represent a very unique role to play in sourcing capital for value chain enterprises. For rural entrepreneurs seeking to tap capital from CDFIs, a good way to start is by developing banking relationships with CDFI banks and credit unions within their value chain’s geography.
  • Impact investors and financial advisers working with individual investors, set the highest expectations for benchmarked, risk-adjusted returns and have a much lower tolerance for high-transaction costs. If a compelling impact story can be told, often some concession on financial return is made in exchange for more tangible social and environmental performance.

This panel-based format report uncovers the success factors that require some consideration to accelerate place-based investing and support the social enterprises that create both social and commercial value.

Key takeaways from this resource include:

  • There is more to place-based impact investing than just financial investment. Local place-based investment can invest in communities, develop social capital, partner with public service to emphasize social value, and promote social cohesion.
  • There are several considerations to make for a successful area-based regeneration program when working with communities: to address the upstream causes of deprivation and inequality, to ensure community ownership and long-term sustainability of the outcomes of regeneration, or to ensure that the programs were accountable to communities or offered the means for communities to engage in their governance.
  • There is a need to gather available best practices on growing social enterprises and investing with social capital and codify the knowledge to widely disseminate the expertise and skills within the ecosystem.
  • Raising awareness and understanding of social finance and its key role in enabling the “recycling” of funds and reinvestment into the target communities is critical for continuous impact.

This case study provides an overview of the investment process including, key investment objectives, ways to build a customizable solution that had both financial and social objectives, and, associated measurement and performance.

Key takeaways from this resource include:

  • The Sierra Club Foundation began pursuing impact investing as a natural complement to their core mission and values they were particularly interested in figuring out how this initiative would support their existing portfolio in advancing social justice and achieving core environmental objectives.
  • In an effort to rally with existing campaigns the foundation created one campaign that would bring together multiple investment objectives under its own campaign. After launching their call to action the next steps were to find investment capital to meet the goals and deepen the relationship with the decision makers to allocate resources in a way to achieve initiative targets.
  • Thanks to CNote’s nationwide network of CDFIs, the foundation was able to collaborate with specific areas to deploy its investment capital at a national scale in the US.
  • The Sierra Club foundation now provides pre-grant dollars to 122 cities and have structured the investment to pay 2.5% with a search month term a quarterly liquidity. The partnership allowed to use flexible terms by mitigating risk through extensive CDFI due diligence.

There are other honorary “must read” resources you can also check out, including:

  • BC case study on Farm Works. The report explains the data behind the substantial and positive impact that the FarmWorks have had in Nova Scotia. These FarmWorks have invested back into rural and urban economies through job creation and the economic spinoffs from purchasing the majority of the business goods, services and ingredients from other local businesses.
  • Place-Based Impact Investing, The Good Economy. This article explains what is PBII, why it is important, and what are its objectives for the collaborative market-building initiative led by The Good Economy, the Impact Investing Institute and Pensions for Purpose in the UK.
  • Place-Based Impact Investing: The Case of Social Impact Fund Rotterdam by Willem Schramade. This article explores the origins of PBII, how it works, and how it answers the challenges of impact investing in implementing effectiveness, attention to beneficiaries, measurement, scale, the balance between financial and impact returns. The article highlights as well the importance of exploring and implementing public-private and cross-sector partnerships.
  • How to Ensure Opportunity Zone Investments Strengthen Local Communities (SSIR). This article outlines four steps to ensure area-based investments to strengthen local communities. These steps require connecting and learning from the foundations that have developed community-oriented funds, seeking government involvement, working with grassroots movements to understand neighborhood needs, and, finally, promise commitment.

It’s important that we also understand the places we are seeking to impact, including the people, landscape, and local organizations, businesses, and projects. In recognition of one of our key community partners, here are a few resources to provide a deep dive on Prince Edward County beyond the realm of impact investing:

Do you have any questions or comments? Did we miss any resources? Please let us know by sharing questions and comments below.

SVX is financial services firm & impact investing platform connecting ventures, funds, and investors to catalyze investment capital for impact. #ImpInv #SocEnt