Minnesota Philanthropists Align Mission and Investment January 19, - - PowerPoint PPT Presentation

Minnesota Philanthropists Align Mission and Investment

January 19, 2017 For Minnesota Council on Foundations Susan Hammel, CFA

Aligning investments with values

Dutch Quakers

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“ ….in the long run economic morality pays”

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Find “It’s a Wonderful Life” bank

Photo courtesy IFC Center

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Cupcakes are on the rise with the help of Sunrise Bank

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Socially Responsible Investing

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Prudential Social Investment

$2 billion since 1976

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Amy Domini

SRI Indexes

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Mission Investors Exchange

Baltimore, May 2016

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What’s Shifting: Impact Investing

Continuum Source: JBJ Consulting via the National Center for Family Philanthropy

Community Capital Management Fixed Income

CCM to Invest $100 Million in Bonds Financing Rural Community Development

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Impact Investing Market

• Asset owners: banks, financial institutions, foundations
• Foundations: private, family and community
• International scale
• Housing, microfinance, financial services

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2014 2015 2016 Assets Under Management $60 billion $77.4 billion — Capital Committed $10.6 billion $15.2 billion $17.7 billion (planned)

Impact Investing Trends

• Increasing capital investment and deals
• Increased investment in energy, food/ag, health care,

education

• ESG becoming mainstream
• Blended Capital Focus on the other 95%
• Corporations entering market
• Challenges:
• Deal flow
• Capital/risk

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Twin Cities Impact Investing Ecosystem

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Social Network Map

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HIERARCHY MAP

Sources of Capital Individual Investors Accredited Investors High Net Worth Individuals Unaccredited Investors Foundations Community Foundations Foundation G Foundation H Foundation I Foundation J Private Foundations Family Foundations Foundation A Foundation B Foundation C Corporate Foundations Foundation D Foundation E Foundation F www.cogentconsulting.net

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Definition

An Impact Investment is an investment that seeks to create both positive financial return as well as positive social or environmental impact that is actively measured

• World Economic Forum

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Investment Types

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18 Investment Type Recipient Type Recipient Subtype Debt Equity Not-for-profit For Profit Government Public Benefit Corporation End User Intermediary Debt to Not-For-Profit End User Debt to For Profit End User Debt to Government End User Debt to PBC End User Debt to Not-For-Profit Intermediary Debt to For Profit Intermediary Debt to Government Intermediary Debt to PBC Intermediary Equity in For Profit End User Equity in PBC End User Equity in For Profit Intermediary Equity in PBC Intermediary 12 Types of Impact Investments

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19 Foundation A Debt to a Not- For-Profit Intermediary

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20 Debt to a Not- For-Profit Intermediary Intermediary A

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21 Debt to a Not-For- Profit Intermediary Intermediary A Foundation B Debt to a Not- For-Profit Intermediary

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22 Foundation B Debt to a For Profit Intermediary Foundation A Intermediary A Intermediary B

Twin Cities Ecosystem Map

Sources of Capital, End Users, Intermediaries

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Twin Cities Ecosystem Map

Sources of Capital

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The Saint Paul Foundation

• East Metro Job Creation Loan Fund

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Noribachi

Northwest Area Foundation and HCAP Partners

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Partnership for a Carbon Efficiency Strategy

BNY Mellon and the McKnight Foundation

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SOCIAL PURPOSE INVESTMENTS

A Mission Investment Made By Foundations

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Program Related Investments

• Program-related investments (PRIs) are those in which:

1. The primary purpose is to accomplish one or more of the foundation's exempt purposes, 2. Production of income or appreciation of property is not a significant purpose, and 3. Influencing legislation or taking part in political campaigns on behalf of candidates is not a purpose.

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SPI: Fact or Fiction

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30 Fact Fiction SPI’s have to be debt SPI’s must be made to not-for-profits SPI’s are financially riskier than a grant Potential for high return disqualifies an SPI When returned an SPI counts against payout SPI’s are legally risky SPI’s require more compliance work SPI’s have to be used for economic development ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔

Contraceptive Implants Volume Guarantee

Bill and Melinda Gates Foundation

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Happy Family Organics

W.K. Kellogg Foundation

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Advantages of an SPI vs a Grant

• Overcome market failures
• Send a signal to commercial investors
• Require financial discipline on both ends
• Provide rights of an investor to foundations
• Encourage collaboration between program and investment

teams

• Create ongoing impact
• Provide accountability

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Best Practices

• When in doubt, document
• Engage both the program and investment teams
• Pair with grants to maximize impact

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Compatibility Exercise

• Fill out worksheet (5 mins)
• Partner 1 (10 mins)
• Partner 2 (10 mins)

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Ways to Get Involved

1. Where does your cash sleep? 2. Look at your fixed income 3. Make a program related investment 4. Collaborate with other foundations

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PRI Options

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“Your PRI Partner”

www.vennfoundation.org

Overview of Meda’s Loan Fund: Meda operates a $13 million loan fund dedicated to supporting Minnesota’s minority

• businesses. Currently Meda’s loan fund is:
• Invested in 127 minority businesses in 23 Minnesota counties
• 92% deployed and 97% performing in a higher risk customer base
• Demand for Meda’s loan capital is high. Meda has 41 minority business projects in the

pipeline totaling $17.3 million it does not have the capital to support. Impact of Meda’s Loan Fund: In 2015, Meda’s loan fund:

• Secured a total of $20.7 million in financing for 59 minority business projects

leveraging Meda’s capital at the rate of 6.3:1

• Created 232 jobs paying an average of more than $23 per hour. Customers surveys show

46% of jobs created by Meda are filled by person of color Highlighted Investment in Meda’s Loan Fund: The Otto Bremer Trust has invested $2 million in Meda’s loan fund. These funds are:

• Leveraged at a rate of 4.2:1 with outside financing for a total of $7.3 million
• Invested in 40 minority businesses
• These businesses are 58% African American, 28% Asian, 9% Native American and 5%

Hispanic

• Supporting 667 jobs averaging $17.08 per hour

Mission Investing is the Future

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