Foundation’s new impact investments yield financial, social returns

| Susan Klemond | February 21, 2018 | 0 Comments

As the Catholic Community Foundation of Minnesota enters the new field of impact investing this year, its leaders expect not only a financial return on two new investments, but also measurable evidence of these investments’ impact on people and the environment.

The St. Paul-based foundation has long screened investments by their alignment with Catholic values while seeking the best financial return for hundreds of Catholic individuals, families, parishes and institutions whose financial resources it stewards.

With $3.5 million in impact investments — another form of socially responsible investing — CCF believes it can do even more to further the Church’s social teaching locally — in CommonBond’s Housing Opportunity Fund for affordable housing; and globally, in a long-term private equity impact fund.

CCF leaders introduced the new investments to donors at its Feb. 15 annual conference.

“What we’re doing in the impact space is leveraging our ability as an investor to advance the common good,” said CCF President Anne Cullen Miller, adding that the foundation is still meeting donor expectations for strong financial returns.

The impact investments make up 1 percent of the $350 million CCF manages for donors and institutional partners. Unlike grants, which are one-time gifts, the investments will help CommonBond and other enterprises grow by helping them attract more capital. The assets will be returned with interest or a dividend and could be reinvested.

The Catholic Community Foundation of Minnesota was founded in 1992 to financially support the spiritual, educational and social needs of the Minnesota Catholic community. As the largest Catholic foundation of its kind in the United States, it manages assets in 1,100 funds for its donors and institutional partners.

Private family foundations first used impact investing more than 10 years ago to further extend their grant-making, said Mike Ricci, director of professional outreach and investments. While impact investments represent a small percentage of total investments, which are mostly focused on financial returns, institutional and individual investors continue to show interest in them. In 2016, $114 billion was managed in impact investments worldwide, according to the Global Impact Investing Network, which promotes impact investing.

Impact investing has been less accessible to individual investors because it often requires investing large amounts for longer periods of time, and enterprises need the time to develop. But opportunities for smaller investors are growing. Many millennials — those born between 1980 and 2000 — are interested in using their assets for social and environmental good, said Ricci, a parishioner of St. Jude of the Lake in Mahtomedi.

While impact investments often yield market-rate returns, investors sometimes accept lower financial returns for a stronger “social return.” Impact funds pool many investors’ assets and provide capital, often for enterprises in developing countries. Impact investors also invest directly in organizations and enterprises.

CCF invested in CommonBond after research showed an urgent need for affordable housing, said Miller, a parishioner of St. Joseph in West St. Paul.

“If you can’t provide stable housing, you can’t really educate kids, you can’t really provide mental health services, [and] you can’t get job stability, unless people have a place to sleep at night,” she said.

CommonBond was founded in 1971 in partnership with the Archdiocese of St. Paul and Minneapolis, and it currently manages more than 6,000 affordable rental apartments and townhomes across Minnesota, Wisconsin and Iowa.

The $1 million investment from CCF’s cash reserve helps enable CommonBond to generate $20 million of real estate purchasing power through financing. The nonprofit will pay back the principal with interest in five years, Ricci said.

As a social return, “They’ll be able to say, for example, that this type of investment allowed us to keep a specific number of families in an apartment that they wouldn’t otherwise be able to stay in,” he added.

CCF’s other $2.5 million impact investment is in a private equity impact fund offered by St. Louis-based Ascension Investment Management Group, which includes investments in emerging markets in Africa, China and India. With the long-term investment (typically more than seven years) from CCF’s special allocation reserve, leaders are seeking market-like returns.

Donors have been positive about the new investments, although most are still learning about them, Ricci said. Donors who are traditional investors often focus on financial returns to maximize their grant-making capabilities, but they’re recognizing that they can get results both ways, he said.

“If we can identify those companies that actually do good, then why wouldn’t we consider looking at that as a possible way to generate results for our partners?” Ricci said.

A CCF donor for 12 years, George Lang, 76, supports both of its impact investments. As a member of CommonBond’s housing board, he especially favors enabling the organization to provide affordable housing.

Lang, a parishioner of St. Odilia in Shoreview, said the CommonBond investment is “just an acorn now, but it soon will be growing much larger, and we’ll be part of it.”

Lang is also on CCF’s board of directors.

Depending on results, CCF might make more impact investments or reinvest in the current ones while keeping enough of its assets liquid for grants, Ricci said.

With a little more research, donors can align their money with their mission, he said.

“It’s not perfectly clear what the investments will be, but it will get more obvious as more arrive,” Ricci said. “You have to take time to find more partnerships. We’re just dipping our toe in the water.”

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