ESG Investing

Impact Investing in the US: Which Cities Are on the Map?


While it’s often lauded for helping solve global problems, impact investing in the US is making a positive mark on cities and regions around the country. Sometimes referred to as place-based investing, this type of impact investing seeks to channel private capital, public resources, and philanthropic donations to improve and strengthen a specific local area or region of the US.

According to Sherryl Kuhlman and Nick Ashburn of the Wharton Social Impact Initiative at the University of Pennsylvania, place-based investing involves “diverse, coordinated sources of capital, which inherently also require multistakeholder engagement and collaboration.” The coordinated approach also facilitates a focus on industry clusters—closely related businesses in a specific geographic area.

Kuhlman and Ashburn note that Congress passed the Community Reinvestment Act (CRA) in 1977 to encourage banks to invest in low- and moderate-income areas of the country. This was followed by the development of Community Development Financial Institutions (CDFIs), which give banks tools to help them comply with the CRA. Now, these funds are diversifying their investor base to include impact investors, who benefit from the fund’s decades of experience in financing organizations that help with social issues.

Here are four US cities and regions that have brought place-based impact investing into their plans for bettering their communities.

1. Broadening the Investor Base in Chicago

In 2016, community leaders in Chicago launched Benefit Chicago to foster development in the city. Winner of the 2017 Chicago Innovation Award for Collaboration, Benefit Chicago represents a partnership among the Chicago Community Trust, the John D. and Catherine T. MacArthur Foundation, and the Calvert Foundation.

Investors who want to participate buy Calvert’s fixed-income Community Investment Notes. The fund’s pooled capital is used to make accessible loans to local impact projects.

The initiative has raised $95 million and deployed $15 million to fund eight enterprises. These include NowPow, which uses a digital platform to connect patients in underserved neighborhoods to local health and social services, and the Garfield Produce Company, which creates sustainable jobs in East Garfield Park by producing and selling fresh, hydroponically grown produce.

2. Buying Sustainability a Ticket to Ride in Boston

Sustainable impact bonds are another way impact investors are entering the market for impact investing in the US. In September 2017, the Massachusetts Bay Transportation Authority (MBTA), which operates public transit in the Boston area, issued $370 million in sustainable bonds to fund capital projects with a social or environmental focus—the first time tax-exempt, sustainable bonds have been sold in the country.

The bond issue includes $271 million in shorter-term Bond Anticipation Notes for a project to make trains safer for passengers and crews using GPS technology, along with an additional $99 million in longer-term issuance for over 70 varied sustainability projects.

Impact investing in the US is making a positive mark on cities and regions around the country.

3. Putting Poverty to Rest in Philadelphia

In Pennsylvania, the Patricia Kind Family Foundation is furthering initiatives to alleviate poverty in the greater Philadelphia area. Beginning in 2000, the foundation took concrete steps toward achieving this goal, dedicating part of its endowment to projects that bring social change. For example, the organization made a private equity investment in software testing firm ULTRA Testing, which employs people on the autism spectrum.

At the same time, impact investing collaborative ImpactPHL has attracted 22 regional organizations to its ImpactPHL Leaders program. Together, they jump-start initiatives to spur economic development. With a quarterly roundtable on real estate impact investing and a working group to help social entrepreneurs, the organization combines the capital, resources, and connections of its members to make Philadelphia an impact investing hub.

4. Taking Renewable Energy to New Heights in San Francisco

In San Francisco, impact intermediary firm Greenstart is helping to fund companies that make positive contributions to the environment. For example, it recently partnered with Simple Energy, a Colorado-based software startup that helps bring utlities and customers together around sustainable energy.

In another noteworthy Bay Area project, the San Francisco Airport’s (SFO) revitalized sustainability program could make environmental history—the facility is set to become the first airport in the world to achieve net-zero energy, net-zero waste, and carbon neutrality by 2021. SFO monitored the building’s equipment and used that data to make energy-efficient investments toward upgrades. In the past three years, the airport has cut water use by 52%, energy use by 25%, and saved $650,000 in annual utility costs.

Place-based impact investments could grow with the inception of Opportunity Zones—areas identified by local governments for economic development. The program, part of the Tax Cuts and Jobs Act of 2017, offers impact investors substantial reductions in capital gains taxes in exchange for their support of undeveloped areas. All 50 states have designated Opportunity Zones, and funds are now being enrolled to help bring their impacts to the local level.

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