Investing in Both Main Street and Wall Street

Welcome to the new era of impact investing with opportunities to invest in Main Street as well as Wall Street and significantly amplify funder’s mission attainment.

In 2017, the U.S. Impact Investing Alliance was launched to create a network of leaders focused on advancing the use of philanthropic capital for social good. Soon after, in 2018, the Ford Foundation announced it would be allocating $1 billion to mission-related investments (MRIs).

MRIs are a powerful tool to help foundations utilize more of their philanthropic capital to achieve mission-focused impact. Foundations traditionally invest their capital on Wall Street and annually deploy about 5 percent of their assets in furtherance of their missions. This means that 95 percent of available funds are sitting on the sidelines, not directly working towards the mission.

For place-focused funders, MRIs can be a powerful way to invest a portion of that 95 percent in their own communities, betting on their town, city, or state to yield both a market-rate return and community benefit. Yet a 2019 report from The Foundation Center stated that while there are 86,000 foundations in the U.S., just 15 percent of them were actively engaged in MRIs.

Why is the industry slow to adopt place-based investments? Do they see mission related investments as a risk or outside their philanthropic comfort zone?

At Pikes Peak Community Foundation (PPCF), we are using MRIs as a tool for social good. In Colorado, PPCF and other regional foundations have come together to collectively leverage impact investing as a tool to advance our missions and strengthen our local economy. This spring, we launched The Philanthropy Collective in the city of Colorado Springs’ downtown center. It is a first of its kind consortium that brings regional foundations, philanthropists, and the charitably minded together to create a collective vision and pool resources for greater impact.

For this group of funders, mission-related investing took the form of the 315 Collective, LLC and the purchase and restoration of a building to house the Collective. The joint investment was an opportunity to bring “funders together under one roof to inspire creativity, spark both intentional partnership and fruitful water cooler moments,” as Phil Lane, chairman of The John and Margo Lane Foundation, one of the funders in the Collective, put it.

At its core, The Philanthropy Collective represents a community of philanthropic organizations and individuals dedicated to working collaboratively to address the Pikes Peak Region’s most significant challenges and actualize its potential. The group convenes, facilitates, and supports the funding community in achieving its goals. At launch, 10 foundations and philanthropic enterprises co-office at the Philanthropy Collective and a score of additional foundations and philanthropists regularly participate in sharing information.

Resident foundations are finding that “water cooler moments” and immediate access to other funders increases mind share and accelerates timelines. Most recently, a funder approached other funders to launch Pikes Peak Connect, a capacity building, virtual tool linking more than 100 regional nonprofits to skills-based volunteers. What would have taken countless onsite meetings and endless phone calls boiled down to easy access and decision-making to get 14 funders on board.

In addition to The Philanthropy Collective, the building houses The Well, a central café, bar, food hall and gathering space. Profit from this business adds to the return on investment to the foundations, and in turn goes back out to the community through grant dollars. While The Well was not originally planned as part of the initiative, we found food is a great convener of conversation, inspiration, and togetherness.

Through the investment in this building and creation of this shared space, Pikes Peak region funders moved beyond a focus solely on the financial return on investment to include a focus on changing places and spaces in our community. We understood the dynamics of our growing city and recognized the value of creating this space. That’s key when undertaking MRIs.

With any groundbreaking project, there are learnings. Here’s what we’ve found:

• Direct real estate investments can be complex. While the market was sure to deliver a return, the sector comes with its unique challenges including construction management, building and operational management, and, specifically on this project, the sustaining impacts of a worldwide pandemic. Seek out partners with experience in the various complexities to project manage and implement so you can stay focused on the overall impact and your own mission.
• Working as a collective of investors, it is important to start with a clear understanding of purpose and vision for the project, how decisions will be made, and how unforeseen challenges will be handled. Navigating each foundations’ unique organizational, governance, and investment policy dynamics requires transparent communication, clear agreements, and a commitment to finding common ground. The LLC meets regularly and created a manifesto that celebrates the group’s common ground and core beliefs. It is referenced regularly to ground the group when we feel like a concept, thought, or idea is off purpose.
• In March 2020, when COVID-19 was shutting down the public, private, and nonprofit sectors, PPCF launched the COVID-19 Emergency Relief Fund, which convened regional funders, corporate donors, and the community to support the nonprofit sector. The Fund raised nearly $2M for the region. Because of PPCF’s quick response to the crisis and systems approach to getting dollars to those in need, trust was a key outcome of the initiative. This proved important to the collaborative undertaking of the Collective, too, as convincing funders that MRIs are a unique way to invest that delivers a one-two punch in return and social impact took credibility and equity.

Our mission-related investment in 315 Collective has given us the opportunity to invest locally in our community, grow our connections and relationships to other impact funders in our region, and create space for future conversations and co-funding opportunities. We think that’s a winning investment — and are excited to look for more.

David Dahlin is vice president of philanthropy at Pikes Peak Community Foundation. Leslie Sabin, CPA, is vice president of Finance and operations at Pikes Peak Community Foundation. Pikes Peak Community Foundation has been building community since 1928. We inspire generosity, serve fundholders, and mobilize resources to effectively and equitably address the Pikes Peak Region’s critical issues and transformational opportunities, now and for generations to come. For nearly a century, PPCF donors have invested more than $100 million in nonprofit organizations throughout the Pikes Peak Region.