Funders who have long provided grants to seed social change efforts are becoming interested in fundamental shifts in traditional corporate accountability and disinvestment strategies to consider developing strategies for more values aligned and socially impactful investment alongside grantmaking. These strategies have the potential to help the philanthropic sector invest at scale to change the economy regionally and contribute towards community renewal, power building, and seeding systemic change.
NFG's Project Phoenix and Funders for a Just Economy co-hosted a webinar to discuss the current landscape of impact investing and highlight examples of how philanthropic institutions are supporting social movements through impact investing strategies.
To kick the webinar off, Dr. David Wood, Director of the Initiative for Responsible Investment, offered a primer on impact investing. A simplified definition of impact investments from the GIIN (Global Impact Investing Network) describes them as “investments made with the intention to generate social and environmental impact alongside financial return.” Dr. Wood shared that, in practice, impactful investments should be investments that engage investees; targets a specific social value like a place, sector, or business; and has input and engagement from the community.
When philanthropic institutions do use impact investing as part of their financial strategy, they often have challenges in finding and tending to potential investors, and ensuring that their investments are actually "doing good" in the world in order to be valuable to communities and helpful in attracting investors. Above all, Dr. Wood recommended that in order for foundations to expand their portfolios to include aligned impact investing opportunities, they must be willing to support engagement on important social issues, bear risk, build capacity to attract useful investment, channel a broader set of resources to the issue, and call attention to socially pernicious investment.
Continuing the discussion, Alison Tate of the International Trade Union Confederation (ITUC) then presented a set of values from the workers’ rights perspective on how foundations can engage in impact investing strategies that keep job quality and workers at the center. She shared how a responsible investment agenda can shift assets, bring economic and social value to workers and communities, contribute to a cleaner environment, and generate quality jobs. Such investments can influence a global conversation with workers and investors about what is needed for a systemic shift in our global economy.
With these goals in mind, ITUC has established a set of principles meant to identify opportunities for investors to shift away from extractive economies to a renewable, sustainable and just economy. These principles are aimed at ensuring job security for workers, increasing transparency around how pension funds are invested, creating corporate plans for the consequences of climate change consistent with the Paris Climate Agreement, making transparent corporate procedures for due diligence (under the UN Guiding Principles on Business and Human Rights), and boosting corporate responsibility across the supply chain for environmental risks to communities.
During the webinar’s break out sessions, examples of impact investment strategies were shared by NFG Members Alison Corwin of the Surdna Foundation and Jeff Rosen of the Solidago Foundation. Surdna Foundation views impact investing as part of a larger spectrum of capital at the foundation to achieve their social justice goals. The spectrum of financial tools includes grants to mission focused organizations (like CBOs), program related investments (PRI) in market disrupting business models and funds, mission related investments (MRI) into proven business models and funds, and endowment capital to maintain the viability of the foundation.
Solidago Foundation helped launch an impact investing fund called Pioneer Valley Grows (PV Grows). The investor network connects end users to impact investors to enhance the ecological and economic sustainability of a community food system by providing $1,000-$250,000 investments to small businesses and farmers. The network deploys these funds and documents information about the process as it works to democratize capital by including non-accredited investors into the fund. As an alternative to traditional banking and financing mechanisms, PV Grows provides competitive interest rates, flexible terms, and loans for many types of local farm and farm businesses, including restaurants, food retailers, processors, wholesalers, and others.
Attendees of the webinar also learned about tools and strategies for foundations who may be thinking about expanding their strategies to include impact investing to meet their mission. They learned how impact investing can prove to be useful to build new place-based economic and business models while impacting the community by promoting quality jobs, and redistributing community assets and wealth.
Project Phoenix was a year-long cohort collective learning program aimed at breaking down the silos in philanthropy among environmental, economic, and democracy funders and exploring questions about the role of social change philanthropy in the transition towards a just economy. Learn more about Project Phoenix here.