Impact investing, the practice of leveraging private capital for social and environmental gains by making investments that produce social and environmental returns in addition to financial returns, has gained significant steam in recent years. As in, over $200 billion in assets. It has also begun to make inroads into the investment and mission strategies of faith-based institutions and investors. The Vatican has already hosted three impact investing conferences, and new faith-based investor networks have emerged, such as JLens for Jewish investors and the Catholic Impact Investing Collaborative.
At this past weekend’s annual conference of the Christian Community Development Association, two sessions touched on the potential of this trend, which has implications for both faith-based investors looking to do better with their money and faith-based social enterprises trying to transform their communities but unable to access traditional financing. The MacArthur Foundation and Calvert Impact Capital shared about their initiative, Benefit Chicago, which is investing $100 million into impact enterprises in Chicago that create jobs, enhance job readiness, and build wealth in low-income communities (also in collaboration with the Chicago Community Trust). As Will Towns, the Executive Director of Benefit Chicago, explained, they see undervalued assets in communities and are able to invest the patient, flexible, risk-tolerant capital needed to turn those assets into economic drivers for the community.
The potential of impact investing lies in how it can put the market to work for social good and make capital available for enterprises seeking to transform social problems that couldn’t otherwise access financing. It means, for example, that faith communities seeking to support job creation may not be limited to charity-based solutions that can drain resources and limit scale and impact. One of the investments Benefit Chicago has made is in Sweet Beginnings, a company founded by Brenda Barber, that supports returning citizens (people who were formerly incarcerated) to transition into the job market by employing them to make honey and honey based skincare products under the label Bee Love Buzz. Sweet Beginnings has already created jobs for some 500 returning citizens, and the employees are returning to prison at a rate over 10 times lower than the national average. Barber says Sweet Beginnings is now on a trajectory to be a million dollar company employing many more returning citizens.
Of course, not every social problem has a market-based solution, and impact investing is not a substitute for philanthropy. Furthermore, there is some concern that as impact investing has grown in popularity, the capital increasingly favors financial over social and environmental returns, meaning investors are flocking to opportunities that provide returns that are closest to market rate, rather than prioritizing the impact part, which in many cases would be maximized with below-market-rate financing. This is where faith-based investors can play a role, by leading on the types of impact investment that truly favor impact. In addition to the Vatican making moves here, at last month’s Global Islamic Economy Summit, one of the themes was “leveraging the Islamic economy to boost social integration, create opportunities in international markets and overcome socioeconomic challenges,” which included discussions of social impact entrepreneurship in Islamic economies. And Calvert Impact Capital is convening a religiously diverse community of faith-based investors to increase impact investing, which includes the Jewish Tzedek Alliance, among others.
All the buzz, alliances, and conferences aside, though, anyone and any institution can be an impact investor. Calvert is making the investment side inclusive by enabling anyone to invest with as little as $20 through Calvert’s Community Investment Note product. And before the Vatican was hosting impact investing conferences, at least one order of women religious was already deep in the game. In this Knowledge @ Wharton podcast and article, John O’Shaughnessy, who works with the Franciscan Sisters of Mary, explains how the sisters use impact investing to live out their values. “This is capitalism at its best,” he says.
Are you a faith-based investor or a faith-based organization that has received impact investment financing? Let us know what you’re seeing as the benefits and challenges.