By Rob Riley, Center President
“Local” is more important to us than ever before, as we hunker down to stem the spread of the coronavirus. As people, we’re good at adapting. Doesn’t mean we like it, but we can shift to support local restaurants through take-out or watch events on-line.
But is this enough to sustain community through this crisis? Of course not. We need to think about not only how to make it through, but how to come back better. This time of disruption begs bold responses. Top of my list would be ensuring that we can align our investments (literally, our retirement account or investment portfolio) with what’s happening in our own towns and communities.
If you’re in the stock market, things look relatively good right now; if you’re not, things look quite uncertain. Likewise, some communities’ budgets are challenged by pressures from the pandemic, while others benefit from high property values based on second homes. Communities left behind in transitioning economies —where Covid-related budget crises lead to fewer basic services, limited investments in infrastructure, and lost potential — need investment and present unique opportunities.
It’s time to drive deep, meaningful community change.
But local investing is considered a niche – and perhaps foreign – concept. A potentially inspiring article in the New York Times and another in the Wall Street Journal regarding impact investments and social investing instead left me flat with the tired “don’t sacrifice returns for mission” message and “you can find it in an index fund.” These articles reinforce a one-dimensional message that impact investing is a distant, stock market-driven opportunity. We’re being told that the best way to do good is to send our money elsewhere.
We hear less about true impact capital – where investments yield community revitalization and environmental stewardship returns. Why? Because they’re different and outside the mainstream notion of investment, especially for investment advisors who perceive that impact investing is too risky compared to the S&P 500. Or that the funds don’t adequately reward risk.
Wait a moment. Let’s consider this assumption: Investors should earn a greater return for greater risk. Should they? Not in impact investing. A higher return compounds the financial pressures on a community-based project, making it more difficult to meet its objectives. It’s time we adjust our expected rate of return in order to support success.
It’s time we start factoring in other gains. There are projects that produce valuable, tangible results and build community equity, leave financial return in the project to position it for success, and still provide modest returns to investors. They aren’t high financial flyers, but they outperform based on societal returns, and investors can actually see money being put to work in their own community!
Need evidence of how impact investments can make you feel good and earn a return? Try 100 Katahdin Avenue, a recently renovated 3-unit building in Millinocket, Maine. This formerly abandoned building, acquired by the town for back taxes, stood in evidence of the downward economic shifts of this former paper mill town. Through the Center’s impact investment fund and work, it now stands proudly on the town square, embodying the revival of this community. It is providing quality, affordable housing for people seeking to create community and providing investors up to 2% returns.
Many partners are rewriting Millinocket’s storyline from decline to optimism and growth. You can see it in the renovated library, expanded recreation trails, new employers, downtown redevelopment, and 100 Katahdin Avenue. Millinocket isn’t out of the woods yet, but it is certainly creating a new relationship with it. The traditional forest economy is active and the adjacent Baxter State Park, Katahdin Woods and Waters National Monument, and millions of acres of forest land provide a breathtaking landscape for Millinocket’s resurgence.
All investments produce "impact.” The question is, what impact do you want your investments to generate? 100 Katahdin Avenue reminds us that it’s time we talked about impact investments that benefit community and what the future might look like if that started really catching on.