Within Our Reach – Equitable Local Economies through Action and Investment
The intersection of a global pandemic and reinvigorated demands for racial equity and social justice has created a gut-check moment for communities across the country, one that calls for a “new model” of place-based philanthropy. Now is the time to re-imagine a community and economy that work for all and re-invest to make them happen. What would our communities look like if our local economic organizing principles were people and prosperity-centered? How would that shift impact the work of grantmakers and philanthropy? Would the work be more joyful and less pressured by resource scarcity?
In my mind, there are three distinct actions that will define this new approach for place-based foundations:
1) unlocking endowment assets to root wealth in place, 2) embracing community-determined solutions and 3) investing in the work and capacity of organizations advancing equitable economies. Doing the work of philanthropy in this manner – where equity is the visible driver of investment – will involve new structures and result in new outcomes. What should our foundations be willing to disrupt to better address economic inequality – financial return, investment security, control or ownership of local agenda-setting efforts?
Recent conversations with leaders across the country leave me inspired and encouraged by early signs of the bold action that will be the staple of “new philanthropy.”
• Unlocking endowment assets to root wealth in place. By our estimates, roughly 25 percent of a community foundation’s assets are derived from local sources – dollars that were gifted to the foundation that were previously held in homes and local businesses. Holding that to be true, the traditional community foundation model – taking gifts from local donors, investing those funds or endowment resources in traditional capital markets and distributing four to six percent in annual grants – actually results in a net divestment from the local community.
Our current economic climate – where small businesses struggle to stay afloat, and economists fret that our country is on a raft waiting for the next great wave of evictions and foreclosures – calls for additional capital in our communities. The Hutchinson Community Foundation is answering this call by investing in the broadband infrastructure needed in rural communities in their county to enable equitable access to virtual learning this fall and better equip remote workers to stay employed. When asked about assuming this leadership role, HCF President Aubrey Abbott Patterson said, “One thing the pandemic has made clear is that we’re going to have to leverage our own resources to address many of the challenges we face because help isn’t coming from anywhere else. To that end, we’ve been exploring for a while now how Hutchinson Community Foundation might invest a portion of its assets locally to better serve our community. We’ve long known about the gap in internet access in our rural areas, so when the pandemic forced all of us to rely more heavily on the internet, it made sense to seize this opportunity to level an inequity. We have committed to make a loan to a locally owned broadband company that has a plan to expand access to those underserved areas, and in doing so, we will help a local business address a community problem in a timely manner instead of waiting for government funding.”
- Embracing community-determined solutions. Marian Kaanon, President and CEO of the Stanislaus Community Foundation, describes SCF’s commitment to making the local economy work for all as “leading from the middle.” She acknowledges that the Foundation has access to local power and a moral obligation to lift-up resident voices as the collective community defines strategies that move residents from the economic margins toward greater economic prosperity. In addition to advancing community-determined solutions, the Foundation is investing in the capacity of local organizations to become Community Development Corporations and Community Development Financial Institutions. These actions ensure Stanislaus County has dedicated community actors that will continue to address economic inequality. For inspiration, check out SCF’s “Building Shared Prosperity” work plan here.
- Investing in the work and capacity of organizations advancing equitable economies. The Community Foundation of Louisville (CFL) has layered racial equity assessment into its due diligence process with the goal of providing more resources to businesses and organizations serving communities of color, women, immigrants and refugees – particularly those employing wealth-building strategies in the community. For CFL, this goal of advancing a more equitable economy means investing in organizations like LHOME – a CDFI on the frontline of community-based investing in historically red-lined neighborhoods of South and West Louisville. Recently, CFL was able to fully realize the benefit of its early investment in a well-networked, front-line organization like LHOME. When COVID-19 halted the local economy LHOME quickly pivoted to response mode – raising $1.5 million of new capital to deploy in small business assistance loans and life-line assistance loans for low-income residents. CFL Senior Program Officer Mary Grissom shared the following insights on the shift in CFL Impact Capital’s investment strategy. “2020 is the year that we dedicate our entire Impact Capital fund to equitable economic development – investing in affordable housing, Black- and Brown-owned small businesses and entrepreneurship, and community facilities in underinvested neighborhoods. We are kicking off that commitment with [a second] loan to LHOME – Louisville’s intentionally inclusive lender. Lending a portion of your tax-deductible philanthropic funds in a way that increases ownership and opportunity for neighbors while earning a social and financial return, is something you can only do locally with the Community Foundation of Louisville. Local impact investing is a tool that allows our foundation and donors to directly confront persistent racial wealth and capital gaps.”
For the purpose of visioning this new way forward, I believe a place to start for place-focused foundations is to answer these questions:
- If half of the seats on our investment committees were held by leaders of minority business councils, urban leagues, local community development corporations, credit unions or community development financial institutions, would we be allocating more of our portfolio to local impact investing?
- If our impact investing committees and task forces were led by residents, would our neighborhood-level investments look different?
- If we value equity, has our foundation designed grantmaking and local investing systems that are transparent and accessible to everyone in the community?
- If our foundation is interested in investing in entrepreneurship, should we prioritize investment opportunities with entrepreneurs of color by offering creative financing that builds ownership assets, e.g. revenue-sharing agreements vs. equity investments?
- If our foundation’s portfolio includes significant local real estate holdings, would we consider structuring those investments with a profit-sharing mechanism so that as markets improve, community organizations can benefit from the increased value?
While this is a gut-check moment for our foundation partners and LOCUS, we recognize that this is more than a moment – it is a long-term commitment. Transformative and equitable change for communities requires defining a new way of doing and investing for place-based philanthropy. LOCUS is committed to being a partner in defining this new way forward. Is place-focused philanthropy ready to join us?
Article by Sydney England, Solutions Consultant, LOCUS Impact Investing. Sydney joined the LOCUS team in 2017 after working for several years at a $300 million private foundation in Florida. While at the foundation, Sydney oversaw a $5.5 million place-based PRI portfolio, a $300,000 small grants program, and New Markets Tax Credit relationships with four CDE lenders. Previously, Sydney worked in communities across Arkansas and Virginia to mobilize grassroots coalitions aimed at civic participation. Sydney’s migration from coalitions to philanthropy to place-based capital systems is a reflection of her evolving understanding of what it takes to advance a more equitable, just society. At LOCUS, Sydney works to match interested philanthropic parties with the right place-based impact investing solutions and on-ramps
Sydney graduated summa cum laude with a BA from a small liberal arts college in southwest Virginia.