Impact Investing for the New Economy

By Atlee McFellin

With?350.org?s Do the Math Tour?to get universities and other institutional investors to divest their holdings in the fossil fuels industry, there?s reason to be optimistic.? With?Unity College and Hampshire College divesting from fossil fuel, students at another 100 campuses pushing their universities to do the same and the passionate intent of the Mayor of Seattle to have the?city employees? pension fund divest as well, there?s certainly reason to hope that 2013 will see a considerable rise in investment in the transition to a more sustainable economy.

In a?recent Grist article by Asher Miller, Executive Director of the Post-Carbon Institute, he argued that we must figure out ways to not only get institutional investors to divest from fossil fuel, but to also drive capital to solutions that help us transition to a clean energy economy while simultaneously creating opportunities for local communities. With seemingly countless examples of communities catalyzing clean energy solutions for themselves, the time is ripe to promote?divestment from?fossil fuels and?investment into?marginalized communities, supporting their transition to a?new economy?that fosters economic prosperity at the same time as environmental sustainability and positive social impact.

This so-called?new economy?is distinct from the green economy movement because the transition to a clean energy economy doesn?t necessarily entail or focus on the well-being of communities and workers.? The new economy movement shares concerns for clean energy and that the economy must be environmentally sustainable, but also prioritizes a positive impact for local communities and workers to the same extent.?

Within the new economy movement, there is a push to transform the role and nature of money, a focus on transforming the nature of ownership over businesses and other productive assets, a commitment to eliminating the power of the financial system in favor of more localized economy where the people, the planet, and economic prosperity are intimately connected, concerns with changing the nature of power in the political system, and more.? Concurrently, though largely separate from the new economy movement, over the last few years a new investment discipline has emerged that?s focused on?maximizing social or environmental impact?with a considerable potential to harness capital for local development inline with the broader goals of the movement to build a new economy.

As the?Global Impact Investing Network?defines it:

?Impact investments aim to solve social or environmental challenges while generating financial profit.? ??

With the U.S. economy in a state of prolonged stagnation (since the near collapse of the capital markets in September 2008), it?s never been more important to drive investment into communities for a more sustainable economy where it?s needed the most. ?Impact investing stresses that investing to maximize social or environmental impact doesn?t necessarily have to mean sacrificing financial returns.

There are a growing number of funds and other investment products in the U.S. with goals to have a positive economic, social, and environmental impact on local communities. As the new economy movement grows in communities around the country, it?s imperative that it finds direct ways to integrate its activities with impact investors to best assist in expanding solutions at the local level, especially in historically marginalized communities that may otherwise get passed over just like we saw with the rise of the dot.com industry.

Impact investing for the new economy entails not just maximizing social?or?environmental impact, but maximizing social?and?environmental impact. An increasing set of funds and other products seek to provide loan capital to help small businesses and micro-enterprises grow, as well as help them transition to more socially and environmentally sustainable products, processes, or services. A number of equity or venture capital funds are focused on helping these triple bottom line businesses achieve scale without compromising their mission. ?An entirely different set of loan and equity sources of capital address the lack of commercial and residential property that is affordable, energy efficient, and free of hazardous materials in the declining urban cores of many of America?s cities, large and small.

The legacy of a toxic economy has left contaminated land in or near marginalized communities all over the country, from Detroit to Dallas, Philadelphia to Oakland. ?Though there is more to be done, there are a number of loan and equity funds working to clean the land and revitalize brownfields into thriving centers for a sustainable and socially responsible economy. ??Other funds are transforming vacant properties into solutions for marginalized communities whether it be residential, commercial, or mixed-use development. ?Some focus on conserving natural resources and business development at the same time, so called ?ecosystem services.?

As interest grows in rebuilding our urban cores, places now home to brownfields, funding-starved public schools, and a continually dwindling tax base, some impact investors have made the move towards smart growth and development oriented towards expanding solutions for marginalized communities around public transportation hubs. By harnessing the power of impact investors, the new economy movement can drive capital to communities to build the new economy from the ground up with those passionately striving to transform their lives and the lives of those around them.

The new economy movement is poised to increasingly align their activities with impact investors to address the biggest social and environmental challenges we are faced with today. ?As discussed in a?recent article in CSRwire, two impact investors address this very issue and recommend the creation of local and low-cost loan funds to provide capital to communities in a way that?s meaningful, equitable, and drives capital to places most investors regard as too risky.? They suggest leveraging the growing interest in crowdfunding to create funds that aggregate small investments by local community residents, while simultaneously providing an opportunity for impact investors to invest larger sums of money. As Living Cities and the Initiative on Responsible Investment at Harvard University noted in a?recent report, one of the issues impact investors are faced with is a lack of local funds and investment opportunities.??Local new economy funds?could help drive capital to marginalized communities, while providing much needed investment opportunities for impact investors looking to align their money with their mission or values.

These funds could be created in communities across the country, as the new economy movement champions?support for?and?expansion of?solutions?with?low-income communities and communities of color in an equitable fashion. Between the establishment of these local new economy funds while increasingly bridging the gap between marginalized communities, new economy solutions, and sources of impact investment more broadly, the new economy movement can help catalyze a stronger national mass movement to fundamentally transform the economy.

By supporting the expansion of local economic opportunities firstly by aggregating small amounts of capital from local residents, the new economy movement can strengthen the accountability of new economy solutions to the needs of marginalized communities. Attracting larger impact investors to fund local new economy solutions and help them achieve a degree of scale they might otherwise not be able to achieve without patient, low-cost capital.? The new economy movement can support the ability of local communities to fight for social, economic, and environmental justice by supporting economic opportunity and security.

The new economy movement can leverage its growing network of local organizations to support the businesses and other solutions receiving capital from local new economy funds. This could take the form of local organizations promoting the products or services of a given company to a broader consumer market via buy local initiatives or complementary currency, for example.? It could take the form of promoting the products or services to a local triple bottom line business community. It could take the form of working with local anchor institutions (hospitals, universities, municipalities, etc.) to help those businesses and other solutions get larger contracts from institutional community anchors. Through the growth of an expansive new economy movement that directly catalyzes local solutions, it can create a support system that actually reduces the risk traditionally associated with investing in underserved communities.

With a stagnating economy and a gridlocked Congress, the time has come for a new concerted effort to drive investments into the most marginalized of communities to ensure an equitable and sustainable future for everyone. Growing interest in divesting from the fossil fuel industry holds promise. The likely growth of the impact investment movement over the next 20 years, as noted by Calvert Foundation CEO Lisa Hall in a?recent edition of the Greenmoney Journal, also holds promise.

It?s imperative that the new economy movement drives capital to underserved communities to build a new economy together with those who, far too often, get left behind when opportunities arise. And if the new economy movement can coordinate its activities to drive solutions and capital for?equitable development?in local communities, it can help expand immediate opportunities rather than what is far too common; promises, rhetoric, and theory amidst unemployment, foreclosures, poverty, food insecurity, utility shut-offs, and other manifestations of our current economic system.

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Atlee McFellin is a Co-Founder & Principal of The Symbiosis Center LLC where he specializes in the creation of innovative economic development strategies and programs. ?He is also the founder and President of Inge?s Place: The Space for Innovation; a 6,000sqft co-working space in his hometown of Battle Creek, MI fostering entrepreneurship and collaboration amongst small non-profits, microenterprises, and the creative community.? Inge?s Place, named after his grandmother, is also the home of the BC New Economy Initiative, a loose network of organization working together to create economic opportunity for the local community.? He is also on the Board of Directors of the New Economics Institute (soon to be New Economy Coalition), a national network of diverse organizations building a new economy from the ground up.? His writings can be found on his company website at blog.symcenter.org. ?

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Source: http://www.triplepundit.com/2013/02/impact-investing-new-economy/

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