In Chicago: Impact Investing for the People, Not Just the Privileged

Who said that big legacy foundations can't do cool stuff? 

While conventional wisdom holds that it's do-gooders from the tech world who are disrupting yesterday's philanthropic models, making traditional grantmaking look quaint, you'll also find some legacy foundations operating on the new frontiers of philanthropy. Indeed, some of these funders were exploring different ways to deploy capital to improve society long before the recent social investing craze got underway. 

MacArthur is a case in point. It's been involved in impact investing since the mid-1980s, well before the phrase was widely used. Most notably, the foundation's been a major supporter of community development financial institutions, making tens of millions of dollars of what everyone once called program-related investments. (Impact investing does sound better, doesn't it?) In just the past decade, the foundation has made PRIs totaling more than $100 million to boost Chicago neighborhoods and advance its programs. 

Given this history, it makes sense that the foundation might concoct some big, bold impact investing scheme as part of its larger rebooting under Julia Stasch. Last year, when the foundation announced its reorganization, it said it would also roll out something new in the impact space down the line.

Now that moment has arrived. In partnership with the Chicago Community Trust (CCT) and the Calvert Foundation, MacArthur has created something called Benefit Chicago, which is a $100 million effort to mobilize nonprofit impact investments in the city.

This initiative is kind of complicated, with a lot of moving parts. Check out Mac'spress release to get all the details of how Benefit Chicago will operate. 

The point we want to emphasize, here, is that this is a neat, innovative project—and puts the institutions involved right at the cutting edge of the impact investing movement. Why? Because Benefit Chicago allows pretty much anyone with some spare cash to get involved in financing impact investments that make the city a better place. 

How low is the barrier to entry? Low. Investors at all levels—individuals and institutions—can purchase Community Investment Notes issued by the Calvert Foundation that are targeted at improving Chicago communities. As Benefit Chicago explains, these "are fixed-income securities with principal maturities ranging from one to 15 years and interest payable annually. They are available through a brokerage account with a minimum investment of $1,000 or online starting at $20."

You can also get involved through a donor-advised fund at the Chicago Community Trust, and "designate some or all fund assets for investment in a Chicago-targeted Note."

Benefit Chicago isn't just offering a way for anyone to engage in impact investing, it's also connecting up such investing with donor-advised funds, which are a popular mechanism for donors these days, especially those operating at a lower level. 

The upshot of all this is a democratization of impact investing, which can be awfully intimidating to smaller-scale investors or donors. While other initiatives and organizations are advancing impact investing, this is the first major effort focused on a particular city that we've seen—and you can see how that geographic angle could really get people jazzed, giving them an easy way to invest in their own community. 

The other notable thing here is how well the different collaborators fit together to make Benefit Chicago happen. You have MacArthur bringing the deep pockets and experience in impact investing; CCT bringing the donor-advised funds as well as its vast knowledge of Chicago nonprofits; and the Calvert Foundation, which is creating the financing tool. Very clever. 

Switching gears, what does this mean for Chicago nonprofits? Very good things, potentially. 

CCT and MacArthur recently commissioned a report that found a significant number of unmet needs for financial capital in the social sector of Chicago. The report also pointed out that there are a lot of individual and institutional donors in this area that want to make a meaningful impact but aren’t necessarily living up to their potential.

The new funds will provide capital to the local social sector via low-interest loans and other investments to further key priorities that nonprofits are working on in the city. These include access to healthy food, affordable housing, education, child care, energy conservation, and job creation and training.

While $100 million is the goal for getting this effort off the ground, the partners involved say this commitment could reach up to $400 million over the next five years. That's real money.