Bridging the Divide Between Impact Investing and Native America
Above image courtesy iStock/InkkStudios
Indigenous intermediaries are crucial to overcoming asymmetries between impact investors and Native America through the building of relationships of trust, creation of an ecosystem for impact investing in Indigenous communities, and performance of the due diligence investors need to manage risk.
In 2018, Morgan Stanley released The Trillion Dollar Blindspot, spotlighting how skewed investment practices are towards white male entrepreneurs, and how entrepreneurs of color lack the access to the social networks that white-owned businesses take for granted. This is particularly true for Native America, which represents billions of dollars in missed opportunities. In a survey of its investor members, US SIF: The Forum for Sustainable and Responsible Investment found that while 75 percent include “Indigenous Peoples issues” in their social investment practices, less than 20 percent had actually developed specific criteria for them. Saying that it’s important to include Indigenous Peoples in decision-making practices is one thing, but if the majority lack capital screens founded on Indigenous principles and practices, how can it translate into action?
This disconnect between philosophy and practice is emblematic of broader power and relational asymmetries between Indigenous Peoples and the private investment world. Because Indigenous Peoples tend to lack relationships within the philanthropic and the investment community, Indigenous entrepreneurs often find themselves at a great disadvantage when they enter these spaces, which can lead to accepting deals on terms that do not fit their needs (or even worse, that are extractive).
Bridging the Gap
These gaps are not new, of course. But as the pandemic demonstrates, we need more investments focused on the most vulnerable pockets of the world and nation, and investing in local governments and institutions is the best way to secure their future sustainability and growth. Since federal government stimulus can never address the complexity and depth of a crisis like COVID-19—while the recently enacted CARES Act only demonstrates how tribes and Indigenous small businesses get left behind—the impact investing community must prioritize organizations and institutions closest to the impacted communities.
However, Indigenous intermediaries are crucial to overcoming asymmetries between impact investors and Native America. At the moment, NDN Collective’s NDN Fund and Oweesta Corporation are the only national funds that fulfill this intermediary function. NDN Fund provides millions of dollars in flexible and patient capital directly to Native Nations, businesses, and organizations across Native America, while Oweesta lends to and resources other Native Community Development Financial Institutions (CDFIs) to meet the microenterprise needs within their local communities. Since these organizations can deploy tens of millions of dollars each year, foundations, impact investors, and even commercial banks can support large-scale and far-reaching impact through grantmaking and concessionary investments into these intermediaries.
As a part of a movement to “Defend, Develop, and Decolonize” our planet—and achieve true equity through large-scale economic development—NDN’s three principles align well with the integrated standards of just transition for the impact investment community. But for Indigenous communities and Native Nations to ensure just, equitable, and regenerative development for future generations, equitable development requires more than just capital flow: it requires a dramatic shift in power.
To facilitate this shift, NDN Collective established NDN Fund, Inc., a national emerging Native Community Development Financial Institution (CDFI) to increase the capital access and capacity that Indigenous changemakers, community developers, and Native Nations will need to defend, develop, and decolonize our people and planet. As part of the larger NDN Collective ecosystem, NDN Fund will move over $100 million through unique and flexible capital structures to projects in renewable energy, infrastructure, community development, housing, social enterprise, and regenerative agriculture. Currently, NDN Fund is actively capitalizing $15 million for three development projects and a COVID-19 Relief & Resilience Loan Fund. NDN Collective will also move roughly $2 million in COVID-19 grants funds directly to Indigenous businesses and to 25 Native CDFIs (the latter in partnership with Oweesta).
Oweesta supports the entire Native Community Development Financial Institution (CDFI) industry of nearly 70 US Treasury certified institutions, with a 20+ year history of building local Indigenous economies through financial education, entrepreneurship and homeownership capacity building, and lending initiatives. Oweesta also acts as a conduit for social investments to flow directly to Native CDFIs on a national scope and has a proven track record of delivering consistent returns to investors. Born out of the belief that—when armed with the appropriate resources—Indigenous people hold the capacity and integrity to ensure the sustainable economic, spiritual and cultural wellbeing of their communities, Oweesta honors the fact that our ancestors and Native Nations acted with wholly self-sustaining economies. For this reason, Oweesta has built the platform for the creation, development, and capitalization of the Native CDFI industry. Through its history, this organization has revolved $70 million in direct investments, assisting in the creation of private-sector economies, homeownership creation, and individual asset-building across Native America.
Oweesta’s efforts have already changed the landscape of tribal communities across the nation. Yet in 2020 alone, Oweesta still has an unmet capital demand of $50 million to satisfy current market demand within our respective tribal communities, and a requested $5 million of immediate demand to capitalize tribal COVID-19 emergency relief funds.
This is a place to start.
The Current State of Impact Investing in Native America
Most of the investors surveyed by the US SIF were interested in renewable energy and advances in food systems, but Native CDFIs, Indigenous businesses, and national intermediaries like ours do more than just address those goals and tenets: we embed them into everything we do. Yet Native America is not seeing an influx of social and impact investment dollars. It is difficult to accurately estimate the level of impact investments directed to Indigenous institutions, but since less than 0.5 percent of all philanthropy goes directly to Native America—and an even smaller proportion of total commercial capital—we can assume that the proportion is even less in the relatively-unexplored impact investing space. According to Oweesta’s data, our Native CDFIs estimate a $3 billion investment gap that would take their institutions over 40 years to meet in the current capital landscape.
Read the full article published by Stanford Social Innovation Review (SSIR)