Impact in Place: Emerging Sources of Community Investment Capital and Strategies to Direct it at Scale

"The economic downturn has not fallen evenly on all Americans, and those least able to bear the burden have been the hardest hit." – Federal Reserve Chair Jerome H. Powell

The past year brought lightning-fast change to the community investment landscape. The urgency of driving capital at scale to underserved communities was made starkly apparent by the pandemic and economic crises, as well as the nation's ongoing reckoning with systemic racism. As these changes unfolded, the Federal Reserve Bank of New York asked the U.S. Impact Investing Alliance to write a report detailing innovative investment strategies that promote broadly shared prosperity, prioritize racial equity, and seek to combat wealth inequalities. This report solely reflects the Alliance's findings, views, and recommendations.

The goal of this report is to spark discussion—and ultimately, direct capital—to bold projects and approaches that help advance economic resilience and mobility.

Impact investments are made with the intention of generating positive–and measurable–social, economic and environmental outcomes, alongside a financial return. Potential sources for such investments expanded, seemingly weekly, over the last year.

For instance, many major corporations announced new and sizable community investing commitments. Some private investors, including family offices, banded together to initiate support vital to networks of community lenders. The federal coronavirus relief that passed in late 2020 included a historic $12 billion to support financial intermediaries such as community development financial institutions and minority depository institutions, $9 billion of which was directed to expand small business lending.

As community investment efforts expand, some are particularly notable, and can serve as models. This report will present case studies detailing some of these important approaches. Among them:  

  • The city of Chicago partnered with the Goldman Sachs Urban Investment Group, Fifth Third Bank and other private sector funders in March to launch the $100 million Chicago Small Business Resiliency Loan Fund. The fund made emergency low-interest loans of up to $50,000 to struggling small and micro-businesses through a centralized network of Community Development Financial Institutions.
  • Ceniarth, a family office, worked with a group of peers to mobilize over $14 million in zero-interest loans from philanthropies for the Rural Community Assistance Corporation, a rural Community Development Financial Institution, allowing them to deploy Paycheck Protection Program loans to rural businesses and nonprofits that initially were unable to access the program.
  • Major corporations have invested in the $175 million Black Economic Development Fund run by Local Initiatives Support Corporation, a national Community Development Financial Institution. The fund is designed to provide deposits and other financing to Black-led lenders and businesses.
  • Groups like ImpactAssets and CapShift are working to creatively and efficiently leverage donor advised fund capital to support community development and racial equity.
  • Uniquely structured participatory efforts may serve as a model for the future of community investing as the field continues to expand. The Boston Ujima Fund, launched in 2018, is democratically managed and empowers residents, businesses, and other stakeholders to invest in building the wealth of their own community.

As new sources of capital for communities grow, it's important to acknowledge, address, and resolve barriers and future challenges. Challenges, as well as potential solutions and recommendations to the field, are also detailed in the report.

Report

Impact in Place: Emerging Sources of Community Investment Capital and Strategies to Direct it at Scale


Case Studies

Leveraging Community Investing Ecosystems for Small Business Relief: Local Collaborations to Support Main Streets in Chicago, California, New York and Beyond


Corporate Support for Local Economic Development in Response to the Racial Justice Crisis: New Commitments by PayPal, Netflix, Twitter and Others


A Multi-Faceted Approach to Community Investing: Opportunity Finance Network’s Grow with Google Small Business Fund and the Sustainability Bond


Flowing Donor Advised Fund Capital to Communities: Innovative Strategies from ImpactAssets and CapShift


A Participatory Model for Restorative Community Wealth Building: A Look into the Ujima Fund

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