COVID-19 is a global crisis, but we shouldn’t forget that it’s also a distinctly local one, given the range of responses needed at the national, state, city, and community levels.
This is especially true in California, a state whose vastness and diversity — economic, demographic, geographic — makes addressing pandemic-related challenges an even more significant challenge. The number of COVID cases, for instance, has led to varying responses at the state, city, and county levels, compounding the stress felt by small businesses (many of which were permanently closed in California), working parents, and the state’s most under-resourced communities.
In California, one size does not fit all. Neither does one solution. But one thing is certain: to address some of the state’s most pressing issues we need to work together — at scale — from the ground up.
Impact investing is one way to pursue such a collaboration. Over the past year, leading voices at Catalyst of San Diego & Imperial Counties, Northern California Grantmakers, Southern California Grantmakers, and RBC Global Asset Management began laying plans for a collaborative, statewide, place-based impact investing initiative.
The result, the recently-launched Philanthropy California Investment Collaborative, aims to bring together foundations, public funds, individual investors, and, eventually, corporations to bring capital to under-invested communities in California. In a nutshell, this provides investors with an opportunity to align their existing investment portfolios with grants and loans that support affordable housing, healthcare, small business, and environmental justice in targeted communities.
Such impact investments in the San Diego area have helped secure small business loans for an Oceanside-based café as well as a cleaning company in El Cajon, both of which have led to job growth in the surrounding communities. In the San Francisco area, such impact investing has created capital for affordable housing amongst the city’s most vulnerable populations — with a goal of constructing and renovating 30,000 apartment units over the next four years. In Los Angeles, impact investments have helped create a loan to create newly renovated affordable multifamily rental housing in Jefferson Park.
These are just a few of many examples — and we can say “many” because the collaborative is operating at scale. Impact investing, which can combine competitive financial returns with social goals in investment portfolios, is a meaningful way to achieve this scale. What we mean by scale is not only producing large amounts of capital, but maximizing its effectiveness by directing it towards areas in need through a trusted network of local partners. This is scale that can provide foundational infrastructure to streamline an ecosystem’s proposals, due diligence, term sheets, measurement and reporting; and scale that can attract and educate more investors and draw in more partners across various sectors.
We believe that the scale embodied by this California collaborative can be a model for other collaborative, place-based impact investing ecosystems — which are sprouting up nationwide — and that these ecosystems can begin to enact systemic change. But to keep the momentum going, we need even more investors, more organizations, and more foundations to get involved.
To that end, we must make it known to potential investors that impact investing is accessible, and that it’s easy; that there are initiatives, like the new collaborative, that are willing to work with you — and your financial advisor — to make it happen and put dollars to efficient use.
Second, we must create widespread awareness that it is possible to achieve market-rate returns and positive social outcomes. The Global Impact Investing Network’s 2020 survey, for instance, found that nearly 90% of investments met or exceeded expectations for financial performance. Most respondents sought market returns.
Third, we need to do a better job of attracting first-time investors. We know the enthusiasm for impact investing at scale is here in California. We saw it back in November 2019, when over 115 people — government officials, philanthropists, investors, local mission-based lending leaders, community members — showed up for a day-long event to explore deepening San Diego’s impact investing ecosystem. It was that enthusiasm that helped inspire this California collaboration that aims to drive impact to communities.
As the pandemic continues to take its toll and community needs continue to increase, we’ll only see that interest grow and deepen. To meet today’s most pressing challenges, we’ll have to keep the ball rolling — together.
Mindy Frye is institutional portfolio manager for impact investing at RBC Global Asset Management in Minneapolis. Megan Thomas is the interim president of Catalyst of San Diego & Imperial Counties.