I like chocolate chocolate chip and I like peanut butter and chocolate but I’ll take a stand and say that twice as much of one great thing—chocolate—is more awesome than two great things that taste great together. My case in point is the announcement at the 2012 National Conference: Investing for Impact held in Seattle in May that the PRI Makers Network and More for Mission had merged to form Mission Investors Exchange. From their new Web site:
Mission Investors Exchange is where philanthropic innovators exchange ideas, tools, and experiences to increase the impact of their capital. Mission Investors Exchange was launched in May 2012 as the culmination of the integration of PRI Makers Network and More For Mission. Mission Investors Exchange members include more than 200 foundations and mission investing organizations. Our full members are U.S. and Canadian foundations of all sizes and mission areas who use or are learning to use program-related and mission-related investing as a strategy to accomplish their philanthropic goals. Our affiliate members work in partnership with foundations to aggregate and deploy capital to communities in order to achieve social or environmental goals and/or are supporting efforts to do so.
A program-related investment (PRI) is a type of mission or social investment that foundations make in order to achieve their philanthropic goals. PRIs are vehicles for making inexpensive capital available to organizations that are addressing social or environmental concerns, but unlike grants, in the form of loans or notes that are expected to be repaid, often with at least a modest rate of return. PRIs are a subset of mission investing that ranges from below-market PRIs to market-rate MRIs (mission-related investments). The More for Mission website explains:
Mission investing seeks opportunities to align a foundation’s financial investments with the mission of the organization, while maintaining long-term targeted financial returns. At its core, mission investing is driven by investor intent, and focuses on the dual objectives of furthering programmatic goals and earning financial returns. The term Mission Investing covers two distinct categories of investments: market rate mission-related investments (MRIs) that support program goals; and Program Related Investments (PRIs) structured to create specific program benefits while earning a below-market return.
I thought it particularly worthwhile to highlight the nuance of the name selected for the merged organization, Mission Investor Exchange, because it speaks volumes. It is a signpost that points to where I see philanthropy and other social impact investors needing to move, namely away from investing in specific programs and projects and towards investing in organizations that can deliver specific impact at the intersection and/or alignment of the missions of the organization and the investor.
We’ve already seen that mission investors have an appetite for doing so, as we have seen in the rise of community development finance institutions (CDFIs) and the private dollars they’ve been able to attract to match public funds. There is no doubt that CDFIs have become an important actor in the ecology of the community development field. They have helped deliver necessary capital much more closely to the need than the nation’s largest banks have been able to. But along the way, CDFIs have inserted themselves between public and private capital and high performing community development corporations (CDCs) all in the name of scale and efficiency, and all for the sake of the interests of capital.
In the meantime, high performing CDCs continue to struggle for enough working capital to efficiently and effectively identify, cultivate and develop affordable housing, commercial and mixed-use projects; these CDC projects close the “last mile” to the on-the-ground impact sought after by all the actors in the ecology of community development, including CDFIs.
So here’s the tension: From the perspective of the CDFIs, they’re the ones providing local and subject expertise that the capital markets can’t otherwise easily or efficiently access; from the perspective of the CDCs, they’re the ones putting together the deals that get the fundamental work done. I urge CDCs to recognize that deal flow is the constraining factor in the this tension.
In the dynamic marketplace the need for community development to be faster, more flexible, and strategic is more important. Well-capitalized CDCs are critical to achieving “last mile” impact and the ensuring the adaptability of the community development movement to respond in these times. So this is a call for mission investors to invest directly in high performing CDCs to capitalize the entities on-the-ground, not just the ones on the step ladders.
Photo by jpellgen. CC BY-NC-ND.