Just as a new generation wants more tangible results from its charitable giving, some investors are looking for a return on investment that’s less concrete than money. This confluence of interests created fertile ground for a conference last week on impact investing, a shift toward investing in community development that the Harvard Business Review has called “the new venture capital.”
Last week, attendees across business and nonprofit sectors made up the packed audience at that South Carolina Community Capital Alliance’s (SCCCA) conference on impact investing at the Hyatt Regency Hotel in Greenville. Several nationally recognized speakers shared experiences and introduced new ideas some people hope will take hold in South Carolina.
“These are conversations we don’t typically have in the South. These are pretty sophisticated ideas,” said Deborah McKetty, executive director of CommunityWorks Carolina. The six-year-old nonprofit is one of the most active facilitators of impact investing in the Upstate. As a federally certified Community Development Financial Institution (CDFI), CommunityWorks can aggregate equity and capital and reinvest them into community development. So far, every $9,000 of loan capital has created one job, McKetty said.
“Haves and have-nots have always existed, but as a result of the recession here in our community, those disparities are just huge now,” McKetty said. Impact investing can help remedy that imbalance, she said. A stagnant economy and cautious banks have deeply impacted microenterprises, one group CommunityWorks serves. The organization is also working with the City of Greenville to create a revolving loan fund that would spur infill development for affordable housing alongside the high-priced developments slated for the downtown area.
McKetty said CommunityWorks receives program-related investments or low-interest loans from banks, netting a 1 to 3 percent return.
“The work we do is not attractive to those investors who are looking for those high returns,” McKetty said. “It’s really for those investors who are getting less than 1 percent on their money sitting in banks, or high-wealth folks who really care about social issues and want to see their money working beyond just getting a high return.” She said the return on investment comes in the way of jobs, and the additional spending that comes with new home ownership.
SCCCA Chairman Michelle Mapp said a broad range of areas including affordable housing, healthy food and small business could benefit from impact investing. “This [conference] was really just the first conversation, so one of the things we’d like to do from here is gauge where these investments are being made,” she said. Next steps include more intimate one-on-one conversations around the state.
Mapp said the Upstate has proved through its use of New Market Tax Credits that it can make creative use of public-private tools. However, she said there is no way to measure the total level of impact investing in South Carolina.
Part of the challenge to making that assessment is an inconsistency in the ways nonprofits, governments, community developers and investors discuss impact investing, said William Burckart, managing director of Impact Economy North America. Social investing, social innovation and social enterprise are terms used in different circles, and they might or might not mean the same thing to everyone. Burckart said South Carolina could look to Illinois as an example of moving from talk to action. That state created a task force on social innovation and entrepreneurship, a platform for multiple stakeholders to discuss new ideas that ultimately created an agenda of action items.
Gage Weekes, senior vice president of strategic initiatives with Hollingsworth Funds, said the concept of impact investing is just emerging in the world of private foundations. He said the Upstate community is developing an appetite for impact investing as people recognize that traditional models alone are not doing enough to solve complex problems. At the same time, proponents must continue to educate fund managers who often have little or no information about the concept.
“It’s imperative that the theory become practice. We’re not talking about taking everybody’s assets [for impact investing], but 1 to 3 percent of assets would be a good start,” Weekes said. He said he expects impact investing to eventually parallel traditional grant making, but the progress toward that goal will be “slow and steady.”
