Impact Investing – Making a Difference in the Community

Investing in sustainable companies does not sacrifice returns 
by Greg Wait

More jobs. Affordable housing. Sustainability. These are among the many areas in which impact investing has been put to use, not only in Arizona but also around the country and world.

There has been a growing demand for this type of investment, as more people are looking for ways to not only earn a return on investment, but also to put their money toward making the world a better place. Impact investing has fulfilled this desire, as it allows people to make investments into companies and funds with the intent to create social and environmental impact. According to the 2016 annual survey conducted by Global Impact Investing Network, respondents reported they were managing $77.4 billion in impact investing assets. This number is expected to grow over the next several years.

From an economic development perspective, a rising tide raises all boats. While impact investing has allowed investors to get involved in positive changes and movements, it has also impacted the business population. As shown in the examples below, funds have been used to spur economic growth, improve communities and increase jobs, benefiting both small and large businesses. What seems clear is, investing in sustainable companies does not sacrifice returns. In fact, in some cases, investment returns are improved with equal or less risk. According to a 20-year study by Harvard Business School, companies that have adopted positive environmental, social or corporate governance policies have shown better or improved financial performance than those that did not. The take-away for any business is, there is mounting evidence that doing the right thing can potentially serve to make a business more profitable. This holds both for companies doing good and for investing in companies doing good.

Investments that Are Making a Difference

Impact investing is about proactively searching out opportunities to make a positive impact on society or the environment. However, it isn’t just about big projects. Sometimes, it is about ensuring a family has a roof over their heads or the disabled have the care they need. It is even about helping spur the local economy by creating new jobs. Today, people are able to invest in funds or organizations that benefit their home communities or put money into beneficial developments across the globe. Impact investments aim for real solutions while helping investors earn financial returns as well.

Impact investing has changed the notion that social and environmental issues can be addressed only by philanthropy and that investments should focus solely on financial returns. People can now align their investments with their values. The following is a small glimpse into how these investments are making a difference.

Affordable Housing

Impact investing has aided in the creation of affordable housing and has kept communities physically and fiscally healthy. Previously blighted neighborhoods are being revitalized in order to foster new opportunities and growth, and rural areas are getting the attention they need to thrive. In addition, impact investing has provided housing for senior citizens and disabled populations, where those individuals can get their physical, psychological and social needs met.

The impact can be seen in Arizona. CPLC (Chicanos Por La Causa, Inc.) Elderly Services and Programs is located in the Casa de Primavera Senior Center, which is part of the Casa de Primavera Senior Housing Community in Phoenix. The organization’s mission is to provide for the social and nutritional needs of the elderly, which incorporates everything from daily activities to meals to case management services. Casa de Primavera is comprised of 162 units in a low-income census tract designed for the elderly and mobility-impaired. These seniors are living below the Area Median Income by 30 percent or more. Casa de Primavera offers them spacious and well-landscaped grounds, an outdoor walk area, meditation garden and senior center. Impact investing has helped this organization.

On the other side of the country, Horizon Development Properties, part of the Charlotte Housing Authority in Charlotte, North Carolina, received a loan through impact investing that aided in affordable housing and neighborhood revitalization. The organization finished the Lofts at Seigle Point, which was the final part of the Seigle Point HOPE VI redevelopment of what used to be Piedmont Courts. Serving residents below 80 percent of the Area Median Income, the 190 units made a difference to those in the community. The Lofts is situated near Charlotte’s business district and greatly benefits those who participate in the Charlotte Housing Authority’s Moving Forward Program.

Employment Growth

In terms of employment growth, impact investing has been helping in multiple ways. For instance, small businesses have been provided with loans that, in turn, have led to more jobs. From a macro perspective, impact investing has gone a long way in job training and generating employment opportunities in low- and moderate-income communities. It has also focused on distressed or underserved communities that needed help pushing toward empowerment, and has provided opportunities and other resources to assist people in moving forward in their lives.

Just west of Arizona, an organization within San Diego has benefited from impact investing. VetPowered Industries, formally known as WFW, was founded in 2009 by owner and president Hernán Luis Prado. His mission was threefold: As a veteran himself, he wanted to ensure that a stronger future was possible for veterans and their families, help veterans transition into the civilian workforce after serving, and meet the United States’ demand for skilled manufacturers. The business is both Certified Minority-Owned, as well as Service-Disabled Veteran-Owned (SDVSB). The products that VetPowered Industries make and service go to support Workshops for Warriors, a 501(c)(3) nonprofit organization dedicated to helping veterans, wounded warriors and other service members move into advanced manufacturing careers by providing training, certification opportunities and job placements.

Twin Cities Magic & Costume in St. Paul, Minnesota, is yet another example of how impact investments are making a difference in local communities. This small business has been around for 30 years and is one of the major providers of costumes and accessories in the Upper Midwest, but its products have been used globally. In 2010, it had an annual revenue of $530,000 and employed 10 workers from a moderate-income census tract. Because of impact investing, Twin Cities Magic & Costume received a loan authorized under the Small Business Administration’s 7(a) program, which is designed for small businesses that otherwise could not obtain financing from the private sector under suitable terms and conditions.

Sustainable Food & Healthy Meals

Impact investment funds have helped companies dedicated to providing healthy meals, including Revolution Foods. This organization strives to create lifelong healthy eating habits by making kid-inspired food accessible to all. It provides affordable healthy meals to students and families — in fact, it has now provided more than 200 million meals across the country. Revolution Foods owners knew they needed help to grow the social impact and were able to obtain a credit line from an impact investment fund that enabled them to further their mission.

There’s an increasing demand for food companies to be cautious about what they produce and how it’s done. Impact investing has resulted in changes in how food is produced, which has led to renewable energy developments, less waste, a phasing out of antibiotics in meat, and more interest in plant-based proteins.

Opportunities Continue to Expand

As impact investing continues to grow in popularity, advocates are traveling and seeing new places to expand their outreach on not just a local scale but a global one, too. Affected areas are getting the attention they deserve, and policies are being tailored to benefit them. Impact investing funds are being put to great use to encourage sustainable agriculture; energy efficiency; community development; conservation; and affordable basic services, such as housing, education and healthcare. A brighter future is on the horizon for individuals and businesses, as investors continue to impact the world for the good.

Greg Wait is the president and founder of Prophecy Impact Investments. He has more than 30 years of experience working with individual and institutional investors to develop appropriate investment strategies for their unique situations. He is also president and founding member of Falcon’s Rock Investment Council, an independent, fee-only investment planning and consulting service. 

Prophecy Impact Investments is an exclusive online investment model that offers well-diversified, sustainable investment portfolios. These portfolios generate the double bottom-line of excellent risk-adjusted returns and positive social and environmental impact around the world.

 

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