Amid Crisis, Collaborative Impact Investing Offers a Path to Systemic Change

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By now, it almost goes without saying that COVID-19 has catalyzed what may very well turn out to be a fundamental shift in the way we think about the relationship between business, profit and community.

We’ve seen it in the corporations donating millions in grants and relief to those in need; in the heightened shareholder pressure around ESG initiatives; in numerous new public-private partnerships geared toward positive social impact; in proposed industry regulations; and in the continued growth of the impact investing market.

The general idea behind these trends—that you should not only do good, but that you can do well by doing good—is nothing new. It is the founding principle behind what we, as experienced participants in the impact investing space, do every day. But as the compounded impacts of COVID-19 wreak havoc on our social systems and the very issues impact investors have striven to positively affect reach tipping points not seen in this generation, a distinct shift is emerging. To meet the scale of these problems, and the surge of new capital being raised to help solve them, we must work together in new and expansive ways.

Across the U.S., we are seeing new waves of impact investing collaborations at local and regional levels—what we are calling collaborative, place-based impact investing ecosystems—and not a moment too soon. This is especially important in light of COVID-19, which is a global crisis and a distinctly local one, given the range of responses needed at the national, state, city and community levels.

Collaborative place-based impact investing ecosystems emerge from community cohesion. Typically, this is a gradual process during which connections form, momentum gathers, and common goals align. New collaborations among investors and foundations, nonprofits and financial institutions, grantmakers, government bodies, corporations and more, begin to form ecosystems.

The nature of these ecosystems can also evolve over time, from networks that simply exchange information and connections into more substantive alliances that coordinate investments and resources, pool and deploy capital, or connect impact investors with social ventures and funds. The crises of 2020 have fast-tracked this process for many.

A New Collaborative in the Nation’s Most Populous State

The recent convergence of the global pandemic with demands for racial justice has pushed collaborations to reach for even greater heights, faster. For instance, this spring, leading voices at San Diego Grantmakers, Northern California Grantmakers, Southern California Grantmakers and RBC Global Asset Management recognized the urgency of the need and accelerated conversations around large-scale collaboratives. The initiative that sprung from those renewed discussions may be a sign of what’s to come.

Launched on September 30, Investing for Impact: A Philanthropy California Investment Collaborative (PCIC) aims to bring together foundations, public funds, individual investors and, eventually, corporations to invest in California’s underserved communities. Together, these like-minded investors can achieve impact at scale by aligning existing investment portfolios with grants and loans that support affordable housing, healthcare, small business, and environmental justice in local communities—without sacrificing market returns.

Combining financial returns with social goals in investment portfolios is the only way to achieve scale. And in collaboratives like PCIC, it is scale that can drive real change in communities that have long grappled with the issues associated with limited economic development. Scale not only produces larger amounts of capital, but can maximize effectiveness by directing it toward more targeted areas through a trusted network of local partners. Scale provides the foundational infrastructure needed to streamline a growing ecosystem’s proposals, due diligence, term sheets, measurement and reporting. Scale also attracts and educates more investors and can draw in more partners across various sectors.

The intended outcome is that PCIC and other collaborative place-based impact investing ecosystems can begin to enact the systemic change we all seek. For example, we can purchase enough single-family mortgages that a tipping point occurs and new origination dollars begin to flow into historically underserved communities. Or by putting investors at the center of deal flow, we can link one actor in the ecosystem to another in a way that multiplies the social impact of a given project.

Aligning with grant dollars to address affordable housing, healthcare, small business and the environment in support of underserved communities is critical and it needs local players to maximize its effectiveness. And bringing tangible impact to life for investors reinforces the investment: When you can drive by a building your investment helped finance that provides safe and secure housing to families in your community, you experience more than any impact report can bring to life.

The tremendous challenges of 2020 demand new and different ways to partner and leverage capital to ensure our communities thrive. Collaborative place-based impact investing ecosystems like PCIC are sprouting across America, and they’ve arrived just when we need them the most. We are optimistic that this moment can help to shape a collaborative impact investing movement and drive regional, place-based impact coast to coast.

Catherine Banat is director of US Responsible Investment, RBC Global Asset Management, and Debbie McKeon is president and CEO of San Diego Grantmakers.