The rise of impact investing has transformed the theory that investment and philanthropy exist as separate disciplines. For many donors it’s no longer enough to know their donor advised funds (DAFs) are simply invested for growth – they want to engage with the process and fully understand how their investments are supporting a specific vision for change.
Despite rising interest in impact investing, donors may not have the capacity or knowledge to seek out and evaluate opportunities independently. Community foundations are uniquely positioned to leverage their investment expertise and resources in connecting donors to vetted, impactful opportunities that can be targeted to meet community needs.
In 2020, The Chicago Community Trust partnered with CapShift, a technology platform, to launch an impact investing pilot to empower donors to become even more active in their philanthropy. In talking with donors who were interested in joining the pilot, it was clear that a “one size fits all” approach would not achieve the desired impact. They wanted to learn more about impact investing options and select from a menu of opportunities to recommend capital investments through their donor advised funds. Rather than establish a set portfolio or pool of impact investments, the Trust’s flexible approach enables us to focus offerings on geographies and areas of interest to our donors and layer in additional options as they become available. Evaluation of the pilot and donor feedback has affirmed this menu approach.
The Trust also recognized this platform as an opportunity to engage donors in advancing the organization’s strategic focus on closing the racial and ethnic wealth gap in the communities we serve. In the near future, we envision offering investment options in the following categories to donors:
- Opportunities for Chicago– Provide flexible financing for affordable housing, community developments, and social entrepreneurs benefitting the Chicago region’s lower-income neighborhoods.
- Equity Investments for Minority Entrepreneurs – Provide startup, patient capital to address the capital funding gap for minority entrepreneurs or new ventures serving low-income communities.
By enabling donors to indicate interest in selected impact investment opportunities at lower minimums than can be accessed outside of their DAFs, the program reduces many of the entry barriers to impact investing and gives participants greater agency in allocating their DAF dollars for positive social impact prior to recommending grants.
The panel will explore: 1.) How donor engagement is helping shape the Trust’s approach to impact investing with a greater focus on geography and social impact aligned with our strategic focus to advance equity and close the racial and ethnic wealth gap. 2.) The value of collaboration with a technology partner to provide accessible, donor and community-focused impact investing options. 3.) What we’ve learned in the first year of our pilot as a model of how community foundations can implement strategic impact investment programs.
