ImpactPHL Perspectives, Volume 6: Partnership – The Key to Future Regional Prosperity
About ImpactPHL Perspectives:
If you are curious about pursuing financial returns while influencing the positive growth of Greater Philadelphia and the world at large, then welcome to the conversation. ImpactPHL Perspectives is a multi-part series which explores the many facets of the impact economy in Greater Philadelphia from the perspectives of its doers, movers, shakers, and agents of change. Each volume is written directly by a leader in this space, to discuss best practices and share lessons learned, while challenging our assumptions about the returns - financial and societal - on engagement in the impact economy. For more of ImpactPHL Perspectives, check out the ImpactPHL Blog.
Pedro Ramos
By Pedro Ramos, President and CEO, The Philadelphia Foundation and Don Hinkle-Brown, President and CEO, Reinvestment Fund
Don Hinkle-Brown
It’s easy to get energized about Philadelphia right now. The entire region is experiencing a surge in Philly pride, and for good reason. We hosted the Pope in 2015, the Democratic National Convention in 2016 and the NFL draft in 2017. This year, the Eagles won their first Super Bowl championship ever. The city is on Amazon’s shortlist for its second headquarters. Exciting things are happening here and throughout our region.
"Improving our region means ensuring that the opportunity gaps that exist within our communities get smaller, not larger.
What’s been missing from the picture to date is a safe, smart direct investment opportunity tailored specifically to the Greater Philadelphia region."
What’s more, new residents are steadily flowing into the city, and new jobs are being created. Neighborhoods are growing. Housing prices are on the rise, and more homes are being sold. In 2016, Pew Charitable Trusts found that more Philadelphians said the city was heading in the right direction than ever before.
At the same time, there is still much work to be done. The challenge facing the Greater Philadelphia region is to build on the momentum we’ve achieved and expand its impact. Improving our region means ensuring that the opportunity gaps that exist within our communities get smaller, not larger. Every resident should have the chance to thrive through opportunities born from the region’s vibrancy.
Making it happen requires smart strategies and capital. What’s been missing from the picture to date is a safe, smart direct investment opportunity tailored specifically to the Greater Philadelphia region. The new PhilaImpact Fund, a place-based impact investing opportunity, is designed to address that gap. The model supplements the traditional impact investing offered by Reinvestment Fund with a tax-deductible Donor Advised Fund through The Philadelphia Foundation, providing two paths to invest directly in community development in the region.
This hybrid model is consistent with Reinvestment Fund’s continued re-imagining of how to finance community assets since its founding in Philadelphia 33 years ago and with The Philadelphia Foundation’s nearly 100 year-long support for a thriving region. With investments across the country and with growing need across low-income communities to connect to economic vibrancy, such teamwork is essential to scale capital for impact and to maximize the impact of capital.
We’re sharing the rationale behind this approach as a means to spur a larger dialogue in Philadelphia and elsewhere about creative approaches to creating impact investment models.
Matching demand with opportunity
Identifying and closing opportunity gaps is at the heart of impact investing, and we’re seeing more and more investors eager to drive positive change through asset allocation. Sustainable, responsible impact investing has grown in assets by 33 percent since 2014, according to the Forum for Sustainable and Responsible Investment Foundation.
"PhilaImpact Fund’s initiatives will support Philadelphia and the surrounding counties....Investors will see and feel the impact of their dollars at work throughout the region."
Yet investors who are eager to put money into vehicles that match their values often struggle to find the right opportunities. The Global Impact Investing Network’s 2017 Annual Impact Investor Survey notes several persistent challenges identified by impact investors. These challenges include appropriate capital across the risk/return spectrum, suitable exit options, high-quality investment opportunities, sophistication of impact measurements and innovative structures to accommodate different kinds of investors’ needs.
Finding solutions to these challenges is key to harnessing the tremendous power impact investing has to drive social improvement and transform the values that move our economy forward.
Building On Impact Investing Best Practices
Here in the Greater Philadelphia region, both The Philadelphia Foundation and Reinvestment Fund know there has been growing demand for a formalized approach to impact investing that provides clarity, vision and results for investors and donors seeking to build regional social impact. We listened carefully and planned thoughtfully to address what we have heard in the community.
The PhilaImpact Fund formula is built on five best practices that could be instructive to others exploring new approaches.
Strong anchors. Impact investment products must be anchored by trusted organizations that have the necessary expertise and network to connect committed investors to the right opportunities. Especially with a new venture, those arriving in the impact investing arena need to have confidence that their dollars will be managed by proven and reliable entities, that investments will be efficiently deployed to high impact projects and that the option exists for continued community commitment once the investment matures. The combined track record of our two organizations creates a solid base for investors on all these fronts. Our model parallels impact-investing partnerships between community foundations and other entities in Chicago and Atlanta, to name a couple recent examples.
A flexible product. Investors should be able to access products that match their risk appetites and offer appropriate investment levels. Our partnership has found that the fixed income category offers flexibility while maintaining defined returns and a clear exit strategy. Our dual access paths (through Reinvestment Fund’s promissory note offering or through TPF’s tax-deductible Donor Advised Funds) create clear options for different types of investors as they seek to optimize portfolio, tax management and ongoing community support strategies. These parameters are designed both to bring new participants to the opportunity and to offer innovative approaches for those already committed to investing for regional impact.
A connection investors can feel. Increasingly, those interested in impact investing are eager to tie investments and their contributions to a specific issue, cause or place. In fact, interest in “place-based investing” has grown substantially in recent years as investors have realized opportunities to create positive cycles of economic development in their own backyards. And as all Philadelphians know, local connections run deep. PhilaImpact Fund’s initiatives will support Philadelphia and the surrounding counties – Chester, Montgomery, Bucks, Delaware, Camden and Burlington – a footprint that takes into account the broader identity of Greater Philadelphians. Investors will see and feel the impact of their dollars at work throughout the region.
Targeted Asset Classes. Investors should be able to envision the types of projects that will be brought to life through their investment. The intended results need to feel tangible and within reach -- neighborhood development projects that support real, visible initiatives in the communities that need them the most. Planned PhilaImpact Fund projects in specific asset classes include development of affordable housing, health care, education, and fresh food access facilities.
Meaningful metrics. The rise of impact investing has increased investors’ interest in metrics for social outcomes. Clear financial returns are important, but no longer enough. Investors in the PhilaImpact Fund will receive detailed annual reports that go beyond the balance sheet to illuminate impact with metrics like patient visits, jobs created, square feet of property rehabilitated and school seats created.
Building Social Impact Together
"Our organizations have already committed $5 million each toward PhilaImpact Fund’s overall goal of $30 million."
Through this partnership, we hope to close the opportunity gaps that persist in our region in ways that build on the advances we’ve made. The PhilaImpact Fund can connect investors, philanthropists and engaged citizens with the projects, initiatives and big ideas that generate results. We hope it also serves as a model for other impact initiatives and as a springboard to further collaborations to benefit communities beyond our own.
We are excited about the positive change this partnership can bring. Our organizations have already committed $5 million each toward PhilaImpact Fund’s overall goal of $30 million. We’re eager for others to join us in building social impact together and to be inspired to adapt the model to serve their own communities.
Learn more about the PhilaImpact Fund
Contact Reinvestment Fund (215-574-5819 or invest@reinvestment.com) for information about its promissory note offering. Contact The Philadelphia Foundation (215-563-6417 or donorrelations@philafound.org) to participate in its Donor Advised Funds, which provide tax deductions for contributors and the ability to provide additional community support through grants when the investment matures.
Pedro A. Ramos, President and CEO of The Philadelphia Foundation, has a long history of service in law, business, government, and nonprofit organizations in the region. He practiced law in Philadelphia-based national law firms for more than two decades, was Vice President and Chief of Staff to Penn’s former president, and has been Managing Director, City Solicitor, and Chair of the School Board and School Reform Commission in Philadelphia. Throughout his career, he has been active in a variety of boards and governance matters including the Executive Committee of the Greater Philadelphia Chamber of Commerce, CFLeads, the Philadelphia Zoo, The Philadelphia Award, and Independence Blue Cross.
Donald Hinkle-Brown, President and CEO, leads a staff of 80 highly skilled financial experts, research analysts, and other professionals at Reinvestment Fund, a catalyst for change in low-income communities. He is widely recognized as an expert in mission investing and capacity building. He currently serves on the Community Advisory Council for the Federal Reserve Board. Closer to home, he also serves as board member to Reinvestment Fund affiliate PolicyMap.