Impact Investing: A Wealth of Opportunity for Community Foundations

Impact Investing: A Wealth of Opportunity for Community Foundations

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Gina Anstey, The Greater Tacoma Community Foundation

Three years ago, The Greater Tacoma Community Foundation entered the field of impact investing. While some community foundations begin their impact investing journey by making small program-related investments (PRIs), we decided to begin through our endowment.

Our board felt most comfortable starting with a plan to invest up to 3% of our endowment (about $3 million) in projects that help support healthy communities in Pierce County. We have spent decades working here, seeing the tremendous impact of our grantmaking — but also seeing its limitations. Impact investing can amplify and complement our work.

After 18 months of careful research and strategic conversations, we determined it was best for us to invest through intermediaries rather than directly in projects. We don't have the bandwidth to properly source, evaluate, structure, administer and collect on small business loans to higher-risk borrowers, and we also learned that intermediaries can provide a significant amount of technical assistance to get the borrowers primed and eligible for a loan and they offer continuing business consultation support. We didn’t have the time, structure or expertise to provide this high level of customer service after a loan goes out the door — and we didn't want to set ourselves or our investees up for failure.

Once we made this intermediary decision, we requested proposals from six regional organizations. To date, we have partnered with two intermediaries, deploying $750,000 with each organization — about half of our total budgeted allocations for impact investing.

Getting Started

The first organization we chose to work with is the National Development Council (NDC), a nonprofit organization deeply involved in community development around the country since 1969. NDC’s mission is “increasing the flow of capital to underserved urban and rural areas for job creation and community development.” Last year, the Greater Tacoma Community Foundation (GTCF) allocated $750,000 to NDC to launch the Grow Pierce County Fund, intended to fuel small business lending activity in the region beyond Tacoma.

The fund’s first investment was to Curbside Motors, in partnership with the City of Lakewood. Curbside exemplifies the reasons GTCF has chosen to become an impact investor: our funds target communities historically overlooked in economic development schemes. With these investments we seek to empower small business owners, create new jobs, and care for neglected spaces and our neighbors who inhabit them.

The other $750,000 investment we’ve made is with an intermediary by the name of Craft3, which is a Community Development Financial Institution (CDFI), founded in Ilwaco, Washington in 1994. Craft3’s mission is strongly aligned with our own: “to strengthen economic, ecological and family resilience in Pacific Northwest communities.” The organization pursues its mission by providing loans to entrepreneurs, nonprofits, individuals and others who don’t normally have access to financing. This progressive approach to our shared objectives makes Craft3 a natural partner for our impact investment activities. When these borrowers complete their loan payments to Craft3, their credit will be restored and their growth possibilities significantly expanded. They will be able to access lower-cost financial services, and just as important, their self-image and confidence as entrepreneurs will be strengthened.

Using Our New Tools

At GTCF, we consider our ability to convene and collaborate to be among our most important functions in the community. This is true in the impact investing arena as well. In 2016, we intend to concentrate our impact efforts around field building using these tools. We plan to continue growing our impact investing portfolio, as our investment committee finds more opportunities in our region. We are excited about partnerships with collaborations like Canopy and Cascadia Foodshed Financing Project which are also working to produce research and get our region’s nonprofits and social enterprises deal-ready.

Gina Anstey (top left) meeting with advisors to discuss impact investing strategies.

We recognize that this is a new field and that investments made in this arena are typically more risky and more often provide a lower rate of return when compared to a traditional portfolio; however, the social rewards and impacts in our local community are significant and meaningful. What’s also important to note is that as the field matures and becomes more knowledgeable with time and experience, we believe the risks will slowly diminish and the returns will increase. This shift will also create more opportunities for the business sector and nonprofit community to collaborate in un-imagined ways.

We know there are many people in our community with the resources, passion and will to create greater social good in our region. Impact investing helps us engage them in a new way. We can’t even conceive the full range of opportunities the future will hold. But we are committed to playing a leadership role with the intention of expanding opportunities for investment, including opportunities for our donors and bringing new resources to strengthen our community. 

Gina Anstey is The Greater Tacoma Community Foundation's vice president of grants and initiatives. She can be reached at gina@gtcf.org.

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