By Rob Riley
Impact Investment – is that what we mean by “doing well by doing good?” In a recent On Point radio segment produced by a Boston public radio station, the host and varied guests discussed impact investments — investments in publicly trading companies or exchange-traded funds — and spent a significant amount of time debating how to measure the return on investment. Does the investment by a foundation into a screened ‘impact investment fund’ make a difference that otherwise wouldn’t have been made by another investor? Does the investor not compromise its desired rate of return by seeking out impact investments?
The conversation spun at a level nearly irrelevant in the Northern Forest. While we applaud foundations and investors looking for social and economic return on their investments, the conversation completely missed what impact investment means in regions where decades of economic decline have pitted Main Street against Wall Street. It missed that investments in local communities can make a radical, immediate impact when applied to dynamic on-the-ground projects.
Over ten years ago, the Center convened regional community and private foundations, loan funds and others to discuss the challenges and opportunities of bringing more capital to community economic development across the Northern Forest. Since that time, foundations have flirted with impact investing — under the names of Program-Related Investments, Mission-Related Investments, Mission Investing, and now Impact Investing — but few are fully aligning their capital with their mission. Why?
I believe that we on the non-profit “deal-development” side of the equation have not done a good enough job articulating what true capital needs look like, not specified the rates and terms that will actually help to address the issue we’re trying to solve, nor paired it with the necessary technical assistance that will help the project or investment fulfill its promise (and financial return). Instead, we tend to take what’s offered even though it doesn’t fit the need. It’s community development’s self-defeating secret… we’ll do it for less and still promise the world. And it’s not working.
We need a change and it needs to start with the non-profit community. The Center started implementing its first impact investment project less than two years ago and we are grateful to early investors who saw what we were offering – an opportunity to share in the reward of revitalizing Northern Forest communities such as Millinocket, Maine, and Lancaster, New Hampshire. Both of our investment funds focus on real estate redevelopment as part of comprehensive community revitalization strategies that seek to attract and retain young people to those places. Impact investments into these projects aren’t deployed in isolation; they accompany public grants, private philanthropy and private investment that support a suite of projects.
We need to look beyond individual projects and pull community-identified projects together as an integrated package and reposition these initiatives as opportunities for integrated capital returns. It’s less about financing one project than about financing a comprehensive strategy that uses a full suite of tools: grant dollars, impact investments, New Markets Tax Credits, Opportunity Zones, and individual philanthropy.
We’ve begun deep partnerships in communities across the Northern Forest, leveraging that elusive whole that is greater than the sum of its parts, testing this concept of integrated capital and stating more clearly what the community needs for investment and what the returns will be.
In Millinocket, Maine, for example, we’re working with core partners to raise integrated capital for mill site redevelopment, outdoor recreation infrastructure, and downtown redevelopment, while also delivering technical assistance to businesses and building local capacity. On the impact investment side, we recently reached our first $1 million capital goal for our Millinocket Housing Initiative. We’re bringing all these resources together to achieve a central goal of boosting people, place and economy so that communities can be places of pride, purpose and vitality.
Now that’s impact investing I can see and feel good about!