Impact investing gives Santa Fe Community Foundation a vital tool

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Posted: Tuesday, May 13, 2014 6:00 am

By Bruce Krasnow

For Brian Byrnes and the board of the Santa Fe Community Foundation, it’s really quite simple: They are here to grow the communities in Northern New Mexico, not up the profits on Wall Street.

As a result, a concept known as impact investing, with assets invested locally, is a logical move forward for the foundation, which works to strengthen nonprofits and expand services through collaboration, education, training and giving.

Impact investing gives the foundation a vital tool as it works to make a difference, said Byrnes, the organization’s president and CEO. “We see this as a beginning, a first step into this area; we want to signal there are ways to have an impact besides grant making,” he said. As the program evolves, Byrnes said it can bring a significant amount of new money into Santa Fe—especially if other foundations embrace the idea.

The impact investment movement started in community foundations a decade ago. One of the first to move forward with it was the Vermont Community Foundation, where Byrnes worked before coming to Santa Fe. The philosophy is to take investment money and loan it out locally with low interest for a set time period, and to get a predictable return much like a bond or a fixed-income mutual fund.

SFCF is one of the smallest to embrace the concept, said Jon Quinn, the foundation’s donor services and initiatives manager, who has researched the topic. “We are paving the way for small community foundations to do this,” Quinn said.

The foundation’s plan is to start small by placing 5 percent of its pooled assets into local impact projects—some $2 million initially. The first loan of $250,000 was made in February to Homewise, so that the nonprofit housing organization could expand the dollars going to families needing home improvement loans.

Like other community foundations, SFCF is a compendium of hundreds of small donor-supported initiatives, many rooted in specific educational or cultural areas that individuals or families want to sustain over generations. For example, there is a fund to help professional artists pay for their emergency medical care. Another, according to the Foundation website, exists to help “individuals of low or moderate income with veterinarian expenses related to cancer care for their pet including chemotherapy, radiation treatment, pain management and supportive care.”

To fund these efforts, Santa Fe Community Foundation invests its donated dollars carefully. The earnings are spent, but the core principal is retained. Many small donors who want to establish a philanthropic legacy turn to the foundation, not only for its expertise in managing programs, but for its investment expertise as well, and its pursuit of due diligence and financial surety. “Donors put their money with us because they trust us, so we have to do this very well,” Byrnes said.

Quinn said $61 billion is managed by community foundations nationwide. Some notable impact projects include:

• The Cleveland Foundation is investing $3 million in an initiative to develop worker-owned cooperative businesses.

• The Denver Foundation is investing $7.5 million for energy-efficient upgrades in a tenant-owned building.

• The Napa Valley Foundation is allocating $500,000 for the purchase of a power plant at a local hospital.

In Santa Fe, the Homewise loan program assists low- and middle-income families so they can hire contractors for needed repairs such as stucco, roofing, heating and ventilation. It serves all qualified homeowners, not just those who purchased through Homewise. The program has advantages, as closing costs and interest rates may be lower than through a traditional bank or credit union, and the loan proceeds go directly to the project contractor.

Homewise has 120 outstanding loans so far, and the Santa Fe Community Foundation investment could mean another 16 families receiving loan money. That money will then ripple through the economy with construction jobs and gross receipts tax spending.

“This is a big deal for us (and) it’s the first time a foundation in New Mexico has done it,” said Mike Loftin, executive director of Homewise. “Our big challenge is raising capital to meet needs. We’ve raised a lot of money from banks, and banks have been good. But this gives another way for philanthropic people to invest in these programs and invest for a return.”

Joohee Rand, a Harvard-educated MBA who directs strategic initiatives at SFCF, is the point person for making sure results meet certain benchmarks. In the Homewise program, for instance, she wants not only to guarantee the money is loaned to families of modest means at reasonable terms and then repaid, but that it helps build financial security by boosting home equity and perhaps credit scores.

Kenneth Romero, a vice president of New Mexico Bank and Trust in Santa Fe who sits on the foundation board, said nonprofits can borrow from a bank, but the foundation is in a position to be more flexible with loan terms and fees, and more creative in its approach. Plus, impact investing brings more capital into Santa Fe at a time when banks might be limited.

“We have another $1.5 million to deploy, we’ve set that aside, and it’s open to investors,” Romero said. He hopes some of that can be used to leverage capital from other sources so the foundation can collaborate with the private sector or a nonprofit. “It creates synergy,” he said.

Byrnes calls philanthropy the research and development wing of social change. “There’s a lot of experimentation going on in the world of philanthropy, there are many things emerging all the time. There’s enormous need and enormous potential for creativity.”

Bruce Krasnow is assistant city and features editor of The Santa Fe New Mexican. Contact him at brucek@sfnewmexican.com.


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