Mission investing and lessons learned

Many community foundations are recognizing that impact investing can be a powerful tool in our philanthropic toolbox. Mission investments are investments made by foundations to further their philanthropic goals. Since 2009, the Seattle Foundation has committed $4 million of its unrestricted endowment assets to extend access to capital and expand economic opportunities for low income communities in our county. Through our partnerships with the National Development Council, Enterprise Cascadia, Enterprise Community Partners and MacDonald- Miller Energy Capital Solutions, we are supporting a wide range of lending to revive struggling neighborhoods and create jobs.

Over the years, we have learned some things that we thought would serve as lessons for those considering implementing a mission investment program.

Be clear about what you want to achieve

Why do mission investing? What it is that you are trying to achieve? How does it become an effective tool in your philanthropic toolkit? These were questions we asked ourselves before initiating our first mission investment. We talked to many colleagues and did a lot of research to really understand mission investing. While we funded broadly, we did not want that to be our approach with mission investing. The goal was to hone in on an issue and start with a toe in the water. The issue we landed on was to increase economic opportunity for low income individuals and families in our county, particularly access to capital for small businesses and efforts that created or retained jobs.

Partner with experts

Once we knew what we aimed to achieve, we sought out partnerships with local community development intermediaries (CDFIs). CDFIs finance community businesses, including small businesses, microenterprises, nonprofit organizations, commercial real estate, and affordable housing. Working in partnership with CDFIs is a smart approach, because they bring financial, technical and monitoring expertise, knowledge of the issue and communities, and the ability to leverage philanthropic investment with public and private resources. The greater Seattle area is fortunate to have a number of very strong CDFIs in the region. Establishing partnerships with them was a great way for the Foundation to support our goals without building our own internal capacity to do direct investing.

Understand your fundholders’ interest

The Seattle Foundation offered mission investing as service in its quest to be responsive to fundholders who wanted to make more meaningful, immediate and lasting impacts with their money – and be more socially responsible with how their money is invested. While we had fundholders initiate investments on their own, we weren’t successful connecting them to the Foundation directed mission investments.

We hit the sweet spot on our most recent mission investment focused on energy efficient retrofits of downtown Seattle commercial buildings. What made this investment different is that we knew some of our fundholders were interested in environmental sustainability, so we marketed the investment differently. Rather than leading with the goal of encouraging job growth in the region by incubating green industries and training local workers in highly marketable, skilled trades, we spoke directly to our fundholders are energy savings that would come as a result of building retrofits and how that would encourage job growth. As a result, we were able to add $275,000 from 6 fundholders interested in a greener King County to upsize the original $1 million investment to pay for building energy upgrades. To date, three different commercial buildings in Seattle have been retrofitted.

Where do we go from here?

The lessons we have learned have helped us refine our mission investing tool. Based on the successful engagement with fundholders, in the next iteration of our mission investing program, the Foundation will continue to explore future joint investment opportunities with fundholders that address priorities outlined within the our Healthy Community framework, such as protecting the environment, strengthening the local food economy, improving education and growing small businesses.

In this ever evolving field, we are all learning lessons about mission investing. Fortunately, we have great resources like Mission Investors Exchange to help us share lessons and learn from each other. We are excited to see where the possibilities of mission investing will take us and look forward to continuing to be a part of the conversation.

Michael Brown is Vice President of Community Programs at the Seattle Foundation.