What is Impact Investing?
Impact investing refers to investments made into companies, organizations, and funds with the intention of generating a measurable, beneficial social impact as well as a financial return.
BCF’s Decision to Engage in Impact Investing
BCF is adding impact investing to our toolkit of grantmaking, initiatives, and advocacy because it will -
- Align more of our capital with our mission
- Further our commitment to racial equity
- Generate benefit to the community as well as financial returns
- Provide an opportunity for donors to Invest in Baltimore in a new way
BCF’s Plan for Impact Investing
We propose to partner with community development financial institutions (CDFIs) to lend our money locally to projects that benefit the Baltimore community, particularly communities of color. We are developing a portfolio of such investments that align with our mission and core priorities.
We aim to achieve a blended return of approximately 3.0%. We will ladder the terms of loans and notes, with a term length not to exceed 10 years.
Initially we will move up to $4,000,000 from the fixed income asset class of the BCF Pool into the new Impact Pool.
We will offer the Impact Pool as a third investment option for fundholders, joining the BCF Pool and the Money Market Pool. And we will invite anyone who cares about Baltimore to make a gift of any size to a fund fully invested in the Impact Pool.
BCF Board of Trustees appointed members to an Impact Investment Subcommittee which will oversee the impact investment portfolio.
Subcommittee has first meeting
By December 31, 2017
First impact investments made from fixed income asset class of the BCF Pool.
Impact Pool added to investment pool selections for BCF fundholders.
General fund opened for contributions of any size for the Impact Pool.
will provide quarterly reports on the financial return of the Impact Pool.
BCF will provide annual reports on the social return of the Impact Pool.
Will investment returns be affected?
There will be little or no effect on investment returns in the BCF Pool. BCF will commit up to 4% of assets in the BCF Pool to the new Impact Pool, and anticipates returns that are competitive with fixed income investments. Our financial goal for the Impact Pool is a blended return of 3%.
What kind of social return does BCF expect to see?
We will identify investments where the social return focuses on Baltimore City and County. Investments may include, for instance, small business lending, affordable housing, healthy food access, or education. Wherever possible, investments will be aligned with BCF’s priorities in neighborhoods and education.
Who is choosing the investments?
The Impact Investing Subcommittee of the Investment Committee will explore impact investing options and make recommendations to the Investment Committee, which will make final decisions on investments. BCF staff and consultants will assist with performing due diligence on the investment opportunities.
What kind of oversight will there be on the Impact Pool?
BCF intends to invest in Community Development Financial Institution (CDFI) intermediaries who have a strong track record of working with borrowers. Therefore, there will be two layers of oversight of the Impact Pool. Individual investments will receive oversight from the CDFI intermediaries who make the investments. BCF’s Investment Committee will regularly review performance data from those intermediaries.
Who else is using impact investing, and what have the results been like?
Impact investing is becoming common both for community foundations across the U.S. and for private foundations in Baltimore and elsewhere. According to the Global Impact Investing Network (GIIN), impact investments are growing rapidly and represented $114 billion in capital last year. Community Development Financial Institutions, BCF’s likely partners, have a successful 30-year history of doing this work—during that time, they have created more than one million jobs, more than 1.5 million housing units, and 192,000 businesses. In 2015, CDFIs provided at least $5 billion in capital to low income individuals and communities. Their financial results were on par with mainstream financial institutions.
What is the role of the Subcommittee?
The Subcommittee will recommend and implement the Impact Investment Policy Statement, set asset allocation, select consultants, monitor the overall liquidity of the investments with respect to BCF’s needs and provide overall direction to the administrative staff in the execution of the investment policy. The Subcommittee is responsible for evaluating and recommending impact investments to the Investment Committee. The Investment Committee will be the decision-making body.
The Subcommittee shall include no fewer than five members appointed by the Committee on Trustees and Governance.
Impact Investing Subcommittee
Patricia Baum, Chair
RBC Wealth Management, Baum Jackson Investment Group
Latino Economic Development Center
Johns Hopkins Technology Ventures
Amy Perez Jackson
Brown Capital Management
K. Brigid Peterson
T. Rowe Price
Development Innovation Venture
Annie E. Casey Foundation