Opinion: Impact investing can help underserved California communities emerge from COVID


El Cajon city center
El Cajon is an underserved community which is a target for impact investing. Photo by Chris Stone

COVID-19 is a global crisis, but we must not forget that it is also a distinctly local crisis, given the range of responses needed at the national, state, municipal and community levels.

This is especially true in California, a state whose vastness and diversity – economic, demographic, geographic – make solving the problems associated with the pandemic an even greater challenge. The number of COVID cases, for example, has led to varying responses at the state, city and county levels, compounding the stress on small businesses (many of which have been closed permanently in California), working parents and the most resourced sub-communities.

In California, one size does not fit all. No solution either. But one thing is certain: To solve some of the state’s most pressing problems, we must work together – on a large scale – from A to Z.

Impact investing is one way to continue such collaboration. Over the past year, key voices from Catalyst of San Diego & Imperial Counties, Northern California Grantmakers, Southern California Grantmakers, and RBC Global Asset Management have begun to develop plans for an impact investing initiative. location-based and statewide.

The result, the recently launched Philanthropy California Investment Collaborative, aims to bring together foundations, public funds, individual investors, and possibly businesses to bring capital to underinvested communities in California. In a nutshell, it offers investors the opportunity to align their existing investment portfolios with grants and loans that support affordable housing, healthcare, small business and environmental justice in targeted communities.

Such impact investments in the San Diego area have helped secure small business loans for an Oceanside-based cafe as well as a cleaning business in El Cajon, both of which have resulted in job growth in the provinces. surrounding communities. In the San Francisco area, such an impact investment has created capital for affordable housing among the city’s most vulnerable populations – with the goal of building and renovating 30,000 apartments over the next four years. In Los Angeles, Impact Investments helped create a loan to create newly renovated affordable multi-family rental housing in Jefferson Park.

These are just a few of the many examples – and we can say “many” because collaborative works at scale. Impact investing, which can combine competitive financial returns and social goals in investment portfolios, is an effective way to achieve this scale. What we mean by scale is not just producing large amounts of capital, but maximizing its efficiency by directing it to areas in need through a trusted network of local partners. This is a scale that can provide a basic infrastructure to streamline ecosystem proposals, due diligence, term sheets, metrics, and reporting; and a scale that can attract and educate more investors and attract more partners in various sectors.

We believe that the scale embodied by this California collaboration can be a model for other collaborative and place-based impact investing ecosystems – which are growing nationwide – and that these ecosystems can begin to operate. systemic change. But to keep the momentum going, we need even more investors, more organizations and more foundations to get involved.

To this end, we need to let potential investors know that impact investing is accessible, and that it is easy; that there are initiatives, like the new collaboration, that are ready to work with you – and your financial advisor – to get there and use your money efficiently.

Second, we need to make everyone aware that it is possible to get returns at market rates. and positive social outcomes. The Global Impact Investing Network’s 2020 survey, for example, found that almost 90% of investments met or exceeded expectations for financial performance. Most respondents were looking for market returns.

Third, we need to do a better job of attracting new investors. We know the enthusiasm for large-scale impact investing is here in California. We saw it in November 2019, when more than 115 people – government officials, philanthropists, investors, local mission loan leaders, community members – showed up at a one-stop event. day to explore the deepening of San Diego’s impact investing ecosystem. It is this enthusiasm that inspired this Californian collaboration which aims to have an impact on communities.

As the pandemic continues to wreak havoc and the needs of the community continue to increase, we will only see this interest grow and deepen. To meet today’s most pressing challenges, we will need to keep getting things done – together.

Mindy Frye is Institutional Portfolio Manager for Impact Investing at RBC Global Asset Management in Minneapolis. Megan Thomas is the Acting President of Catalyst of San Diego & Imperial Counties.

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