Every investor is an impact investor. Whether they’re creating more affordable housing or better-paying jobs in urban communities — or they’re perpetuating gender inequality with startup capital or using slave labor in the manufacturing supply chain — all investors have an impact on the world, intended and unintended, good and, often, bad. So if you want to do more good with your investment dollars, where do you turn?
Among this year’s Impact Assets 50 Showcase of Impact Investment fund managers, announced last week, there are a few stalwarts from the strong but mostly under-the-radar movement of investors who turn to marginalized communities for ideas worthy of investment.
The Impact Assets 50 (IA 50) claims to be “the only free, public, searchable database of outstanding impact investing fund managers.” Listed fund managers are based in United States, Africa, Europe and Latin America.
The Calvert Foundation (which has ties to Impact Assets), Community Reinvestment Fund (CRF), Craft3, Enterprise Community Loan Fund, The Reinvestment Fund and the Local Initiatives Support Corporation (LISC) are all in this year’s IA 50, and all are federally certified community development financial institutions (CDFIs). (Five of them are also independently rated)
Calvert Foundation, CRF and Craft3 have become perennial members of the list. Compare that to 2011, when only one organization named in the IA 50 claimed status as a federally certified CDFI (The Nonprofit Finance Fund).
CDFIs like these have a long history, going back to at least the 1970s, of responding directly to the financing needs of underserved communities across the United States. Their responsiveness can come from having community members as board members and staff, or from having to attract clients and customers from communities that have been historically marginalized from the mainstream financial system. There are 950 federally certified CDFIs today (compared with 808 in 2013). Most are not-for-profit organizations, but can earn profits from investments that get churned back into the community for more investment.
LISC is new to this year’s IA 50. Established in 1980, LISC provides financial and technical assistance to community-based organizations, public agencies and private nonprofit and for-profit entities focused on the redevelopment of urban neighborhoods (and rural communities) in the United States. It has around $200 million in assets, and has offices in 30 cities.
Through their investments, LISC takes credit for helping finance 313,400 affordable homes and apartments, 51 million square feet of retail and community space, 193 schools serving 77,200 students, 55 healthcare facilities and 273 playing fields reaching 480,000 young athletes. LISC’s CEO will be serving on the Federal Reserve’s new Community Advisory Council, which I wrote about last week..
“Housing is still the foundation for most of our work, but now the conversation is really about raising overall standards of living. How do we make low-income communities good places to live, work, do business and raise families?” said LISC Executive VP for Programs Denise Scott, in a June 2015 speech about gentrification. “For us, that required a different way of thinking about our work, and we built a range of new partnerships to support this expanding landscape.”
The IA 50 selection committee, chaired by Impact Assets CEO Jed Emerson, makes its selections with the intention of illustrating the breadth of impact by investment fund managers operating today, across geographies, sectors and asset classes. To be eligible, fund managers need to have at least $10 million in assets under management, more than three years of experience as a firm with impact investing, and documented social and/or environmental impact.
Browsing through the IA 50 list, it can be easy to get lost amid the glitz and glamour of “sexier” impact investors who are investing in companies globally that are doing things like developing clean and renewable energy or advancing new technologies in global health or water and sanitation. Innovation, however, can be about more than the end product. It can also be about the process — such as whose voices get to be part of investment decision-making in the first place.
“Our mission has always been about increasing the scale of impact investing by acting as a bridge between Main Street and Wall Street,” said Frank Altman, CRF President and CEO, in a statement about this year’s IA 50.