A collaborative $100 million fund to finance education and child care, healthy food and affordable housing, and energy conservation and jobs in Chicago, may become a national model for a new way to harness the interest of impact investors in local social enterprises.
The MacArthur Foundation, the Chicago Community Trust and Calvert Foundation launched Benefit Chicago this week to bridge the gap between the needs of Chicago’s nonprofits and social enterprises for low-cost, patient, and flexible capital and the growing willingness to supply such capital in the form of impact investments.
The new fund makes it simple and easy for potential impact investors looking for simpler ways to deploy their capital locally. It’s the first example of the MacArthur Foundation’s broader push to harness the growth of impact investing by building platforms and products that match investor interest and the kinds of capital needed by high-impact enterprises.
“Our goal is to provide a simple yet powerful way for everyone to make investments which, ultimately, benefit the dynamic, diverse city we love – making it a better place for all,” Julia Stasch, MacArthur’s president, said in a statement.
MacArthur looks forward to sharing Benefit Chicago’s fresh approach with those who may want to replicate it elsewhere.Julia Stasch, The MacArthur Foundation
The financing will help expand operations like Inspiration Kitchens, the social-enterprise restaurant of Chicago-based Inspiration Corporation. The kitchens and café have trained more than 500 homeless and low-income men and women in the food and catering business.
“Looking back at my record, who was ever going to trust me? I just had so many strikes against me,” said Arnold Smith, who was homeless and jobless after six terms in prison before graduating from the program. “Inspiration Kitchens did.”
Supply and Demand
The capital will be raised from individuals, businesses, and institutions through the sale of Chicago-targeted Community Investment Notes. The funds will be deployed through a MacArthur Foundation-managed fund in the form of low-cost, long-term loans and equity investments.
The MacArthur Foundation will invest $50 million of its own assets in the fund. The Calvert Foundation, which issues the notes, has committed to issue up to $50 million of the fixed income securities with terms up to 15 years and interest rates up to 4 percent. Calvert will lend the proceeds of the notes to the MacArthur fund to deploy throughout Chicago.
The Chicago Community Trust, a century-old community foundation that raises and deploys donor funds in Chicago, has committed to purchase $15 million of the 15-year notes.
A new report, also released today, cited an unmet need for capital in the range of $100 to $400 million over the next five years from organizations addressing access to healthy food, energy conservation, job creation and other issues in the Chicago area. The potential supply of capital from a growing list of community-minded investors is more than enough to meet that need, says the report.
These potential impact investors are looking for simpler ways to deploy their capital locally, the report found. “Mobilizing new capital will require an efficient marketplace that helps aggregate supply and demand, vet readiness for investment, and deploy capital in various forms.”
The MacArthur Foundation has been making impact investments to advance its goals in affordable housing, community development and energy efficiency for more than 30 years. With $500 million allocated to program- and mission-related investments, it has no plans to slow down.
The new fund will require the foundation to support issues beyond those close to its own program areas. The new fund will be advised by a community advisory council comprised of civic and community leaders with diverse interests. The council will set the fund’s priorities by identifying pressing needs and guide the fund to deploy capital to the solutions that can make the greatest difference.
Benefit Chicago will also help harness interest in impact investing by making it easy. Individuals and institutions can participate in Benefit Chicago through three avenues: purchasing the notes directly from Calvert at Vested.org with a mimum $20 investment, through 100 brokerage firms nationwide with a $1000 minimum, or by setting up and allocating capital through a donor advised fund at the Chicago Community Trust.
On a conference call with reporters, Calvert Foundation’s Margot Kane cited the growing appetite for place-based investing. In 2014, Calvert launched the “Ours to Own” initiative to issue notes for social good investments in the Twin Cities, Denver and Baltimore.
Benefit Chicago takes such efforts to a higher level. Bringing together MacArthur, a seasoned impact investor, with the Chicago Community Trust, a local institution able to mobilize the community, and Calvert, a retail investment product specialist, the new model can efficiently mobilize enough capital to make a dent in the region’s unmet demand.
The three major partners hope the “Chicago Model” will be replicated in other cities.
“We view this as an idea with universal appeal,” says Stasch. “MacArthur looks forward to sharing Benefit Chicago’s fresh approach with those who may want to replicate it elsewhere, and to applying it in other ways so that the social sector benefits more fully from rising interest in impact investing around the world.”
ImpactAlpha has provided consulting services to the MacArthur Foundation.
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