In Depth: Impact Investing (Part 2 of 5)
You’ve probably already heard that at GTCF we have a big mission: to build a vibrant, compassionate, and engaged Pierce County. To achieve this goal, we look to partner with individuals, families, community leaders, nonprofit organizations, businesses, and anyone else who is interested in joining us. And, just as we are looking for more people to engage, we are also looking for the most effective tools to do our work.
Grants and Scholarships: Time-tested Tools
Our go-to tools for the last 30+ years have been grants and scholarships. This model of support is familiar: we give funds to a nonprofit or individual in need. We understand that while there will be no financial return on the dollars we invest, there will be a meaningful social return. Examples include Spark Grants, Strengthening Pierce County grants, and scholarships. In each of these cases, there is a social benefit – new programming, improved social services, access to education – to the recipient and, in turn, to our community at large.
In my last article I told you about our newest tool for affecting change:
New Tool in the Tool Box: Impact Investing
Impact investing allows us to expand our reach in the community and confront issues that grants and scholarships alone cannot address. Most of our traditional grant making targets health and human services, arts and culture, and education, but impact investments are frequently directed at strengthening the community through economic development. These unique investments are intended to have a positive impact on the health of Pierce County – as measured by the number of new businesses launched, jobs created, products and services developed – and also provide a financial return.
Here are a few examples of impact investments:
No interest loans: yes, no interest loans! Community Sourced Capital (CSC), a new technology platform headquartered in Seattle, enables communities around the country to crowdfund their local businesses with zero-interest loans.
Low interest rate loans: there are many opportunities to make loans to businesses that pay below-market interest rates, either directly to a company, typically a social enterprise or business located in an underserved community, or through an intermediary such as our partner, Craft3.
Community loans: there are many forms of community loans, a local example is available to customers of Tacoma Power who have the opportunity to bring solar power to the community by investing in $100 increments; customers will be paid back in full and will also receive incentives and payments for the energy produced during the term of the loan.
The Power of Impact Investing
For GTCF, the power of impact investing stems from being able to use our entire toolbox in concert to bring about change. We have spent decades becoming intimate with the needs of Pierce County and have seen our grant making have tremendous impact, but have also seen its limitations. We see impact investing as a valuable complement to the work we are already doing – in other words, impact investments have the opportunity to amplify GTCF’s work already underway.
Consider, for example, grants to organizations that focus on workforce development, such as Workforce Central. If we invest in nascent local businesses that will create new jobs, we are creating more opportunities for individuals who enroll in those programs to find employment. Furthermore, where it is appropriate, we might make introductions between grantees and investees to help create new networks and mutually beneficial relationships that have the potential to ignite even more change.
New Opportunity to Strengthen Pierce County
In this emerging ecosystem, GTCF has the opportunity to play a pivotal role, drawing upon both a deep understanding of our community’s social needs and a willingness to use a variety of adaptable tools in a coordinated effort to strengthen Pierce County.
The possibilities are endless and exciting, and to this field we also bring caution, as we do with all our community investments. Impact investments require diligence on their social aims and financial objectives, and come with the same fiduciary responsibility as all of the investments in GTCF’s portfolio. We will take advantage of our long history vetting social investments – our grants – and will apply that same rigor to the social aims of our impact investments. We will apply equally high standards to the financial objectives of these investments; initially we will work closely with intermediaries, experts in the field, to assist us in evaluating these new financial tools as we grow our own internal knowledge base.
Modern Day Endowment
When managed well, impact investments have the potential to become the modern day endowment: Investments that strengthen our community and at the same time generate a financial return; the financial return, when “recycled” back into the investment pool, allow that pool to become self-funding.
We enter this sector committed to learning and collaborating with members of our community, including our donors, with our sights set on producing bold outcomes for Pierce County.
Look for my next article, where we will provide an update on our current impact investments and initiatives. In the meantime, please do not hesitate to contact me if you’d like to discuss impact investing in more detail.
Gina Anstey, VP of Grants & Initiatives