September 25, 2019

Faith-based institutions fit local investments into global portfolios

Where politicians squabble, Bon Secours Mercy Health Systems sees investment opportunities. The Catholic health provider has…



Where politicians squabble, Bon Secours Mercy Health Systems sees investment opportunities.

The Catholic health provider has been a pillar of West Baltimore pillar since its hospital doors opened a century ago. The neighborhood is far from the “disgusting, rat and rodent infested mess” of presidential tweets. Bons Secours operates 800 affordable housing units, a health and social services center for women, mobile food markets, and a Community Works center that offers career, youth employment and entrepreneurship support.

This year, Bons Secours went even further, joining a community investing program called Accelerating Investments for Healthy Communities to channel more funding and resources to Baltimore, as well as to Cincinnati, where it also runs a large health system. The healthy communities initiative is a collaboration with the Lincoln Institute of Land Policy and six healthcare providers to invest in social issues that influence health, like housing stability.

The programs fit with Bons Secours’ commitment to invest 5% of its total long-term investment portfolio of more than $1 billion in affordable housing, economic development and community finance in the communities it serves. Bons Secours has invested more than $34 million in local communities over the past decade.

People and places

The faith-based turn toward place-based impact investing is an extension of the kinds of congregation-based activities churches, synagogues and mosques have been engaged in for centuries. What is new, especially in the U.S., are an expanded range of structures and vehicles for driving improved outcomes in education, health and livelihoods in local communities.

New financing facilities in cities like Chicago, Philadelphia and Baltimore are important for ecosystems of local entrepreneurs and other community service providers. Many lenders don’t credit the extra efforts that supermarkets, childcare centers and health clinics go to to provide job opportunities, source locally and ensure inclusion across race and gender. Projects and businesses that take five to seven years to develop now have more options for local, mission-oriented financing.

“In many ways, faith-based investors are the original impact investors, especially in social justice and poverty alleviation,” says Justin Conway of Calvert Impact Capital, which worked with Bons Secours to launch its community impact investing program. Catholic women religious orders, for example, played a critical role in seeding many of the Community Development Finance Institutions in the U.S. Faith-based investors are “very interested in how to help communities rebuild,” Conway says.

Conway, who leads Calvert’s faith-based work, says faith-based investors are increasingly using the U.N. Sustainable Development Goals as a global framework for their investment approaches. But incorporation of these broader themes often lead to very targeted and localized investment decisions. Investing “close to home,” of course, can cover a wide geographic scope for faith-based organizations, many of which operate national and global programs. Catholic Relief Services, for example, is building its impact investing strategy around the work its field teams are doing in communities in Latin America, Africa and Asia.

“Some of the themes that are spanning across faiths are the environment, disaster recovery, climate resilience, and refugees,” Conway says. Within that alignment, “most faith-based investors want specific examples.”

Sticking close to home lets faith-based institutions overcome skepticism about impact investing – both from investment committees that question the risks and returns, and social advocates skeptical of the impact. The faith-based community has demonstrated “a lot of skepticism with the growth of the impact investing market,” Conway says. “Faith-based investors are not check-the-box impact investors—they do some of the deeper dives in due diligence. You really have to prove the social and environmental piece.”

Invest where you know

In Baltimore, Bon Secours partnered with another healthcare provider, Kaiser Permanente, to launch the Future Baltimore initiative to address socio-economic security, access to health and social services, and community safety in West Baltimore. The partnership has secured $3 million for a local community center and recently launched a community agriculture program and mobile grocery markets to address the neighborhood’s food deserts. It also runs a business incubator alongside the Latino Economic Development Center called Incubator Without Walls, which provides advising and small loans to local entrepreneurs.

“Bon Secours’ partnership with Kaiser Permanente is definitely leading to change,” Bon Secours’ Talib Horne said in a statement about the program. “It’s changing the narrative of the city’s perception of West Baltimore. A community that is often forgotten is now getting renewed interest from leaders in Baltimore and around the country.”

In Detroit, The Max M. & Marjorie S. Fisher Foundation is investing $10 million in initiatives delivering early childhood education, homelessness support and access to the arts and healthy food in underserved communities. The Jewish philanthropic organization, which has earmarked 3.6% of its assets for impact investing, has forged partnerships with other investors across its impact portfolio, including the Kresge and Kellogg Foundations, Northern Trust and Capital Impact Partners on the Michigan Good Food Fund, a $30 million healthy food initiative.

Social impact bonds have emerged as a way for faith-based and other mission-driven investors to invest in the outcomes of local, community services. The “bonds” let private investors provide upfront financing for social services and get repaid, usually by government agencies, if outcomes goals are met (see, “Is the social impact bond market half-billion full or empty?).

Investors in Boston-based Combined Jewish Philanthropies’ donor advised funds were among the first to back the Pathways to Economic Advancement social impact bond, which is financing local non-profit Jewish Vocational Services’ English instruction and skills training for 2,000 immigrants in the greater metro area. Forty investors in total backed the $15 million initiative.

The local trend is also global. In Australia, Australia’s Christian pension fund Christian Super allocates 10% of its portfolio to impact investing (and is accelerating its direct ownership in investment firm ResponsAbility). Christian Super has backed several social impact bonds addressing workforce training and at-risk youth in Queensland and family unification and mental health in New South Wales.

First published by Impact Alpha on September 25, 2019.

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