Raising workers’ living standards and increasing their economic mobility can lower the cost of capital for the companies that employ them – and for the asset-management firms that lend to such businesses.
That’s the shared-prosperity equation driving Lafayette Square, the investment platform launched by Damien Dwin in 2020. The Washington, DC-based lender to companies employing “working-class people in working class places” discounts borrowing costs for companies that deploy a package of “worker solutions.” The services aim to help low- and moderate-income workers save for retirement, access health benefits, reduce their families’ financial insecurity and increase their economic mobility.
In turn, Lafayette Square itself gets more favorable terms from its own capital providers based on adoption of such worker solutions by the middle-market companies in its loan portfolio.
“We have a massive economic incentive to drive this economic mobility for working-class people and working-class places, because our cost of capital is based on the progress we make against our goals,” Dwin said last week at the Federal Reserve Bank of Philadelphia’s “Economic Mobility Summit” in Philadelphia.
Dwin is a featured speaker on this week’s Agents of Impact Call, which will showcase some of the strategies in ImpactAlpha’s “Playbook for Shared Prosperity” (RSVP now).
Also on the Call, the Miami-based startup, Keepingly, led by Daniel Smith, is helping first-time and low-income homeowners manage the upkeep of their properties to grow home equity wealth. InnSure’s Charlie Sidoti will explain how “community-embedded insurance” can improve access to and affordability of insurance in the face of climate change. And longtime social innovator Andrea Levere of Capitalize Good will detail how “enterprise capital” – unrestricted, upfront, multiyear balance-sheet funding – can make nonprofit organizations more effective in delivering prosperity for all, especially in the face of federal funding freezes.
The playbook is ImpactAlpha’s growing roster of what is working in making less wealthy people more wealthy. The goal: Share the wealth. Add a page to the playbook.
Lafayette Square itself has a 2030 goal to create 100,000 working class jobs, out of 150,000 total, and to invest half of its capital in working class areas. Increasing health care coverage, retirement benefits, promotion opportunities, “to us, that is the essence of economic mobility,” Dwin said.
“The key is alignment, transparency and market-rate profit incentives,” Dwin said. “All of this fits with the needs and the good the working class people do in this society.”
Typically, if a business goes to the bank, if it can even get a loan, “it’s just a transaction,” he said. “Our vision at Lafayette squares is that transaction becomes a mechanism to provide better benefits to workers.”
“If we can change how other organizations invest their money to center working class people working class places, that is the real victory.”
Preserving home ownership to build generational wealth
Home values have surged in the US over the past five years, but so have maintenance costs, property taxes and insurance premiums. Homeowners are leaving housing wealth on the table due to property mismanagement. Neglected repairs can grow into more costly emergency expenses, ultimately lowering property values, and missed mortgage and property taxes payments can lead to foreclosure.
Keepingly is raising $2 million in pre-seed financing to build an AI-powered online platform that helps first-time homeowners digitalize the journey of homeownership and grow and preserve housing wealth to be passed down throughout generations. Features include a maintenance checklist, home equity wealth calculator, uploading and storing documents and a contact list of service providers, from home insurance providers to mortgage brokers.
“Keepingly was built off of the framework of providing homeowners with the tools to manage, maintain and grow the value of their home,” says Daniel Smith, the Miami-based tech startup’s founder and CEO. Smith, who immigrated from Trinidad and Tobago, based the platform on the tools he would have liked to have as a homeowner to manage his own home’s maintenance and financing.
“For most of us, this is our most important asset and represents our largest purchase in our lifetime,” he told ImpactAlpha. “It represents what a lot of us hope we will pass on to our kids in the form of generational wealth, but there’s no model for helping homeowners think about that.”
Keepingly has onboarded close to 500 homeowners, most of whom are first-time and low- and moderate-income homeowners. “Those persons were taught the value of homeownership,” says Smith, “but don’t necessarily have the tools to make the right decisions.”
Keepingly has a waitlist of over 10,000 people. By creating a one-stop digital hub for home ownership appreciation and preservation, it aims to empower homeowners in growing and managing their housing wealth more efficiently and cost-effectively.
Community embedded insurance to lower costs and increase coverage
In addition to maintenance costs, rising insurance premiums increasingly pose a threat to home ownership.
As ImpactAlpha reported in the wake of the Los Angeles fires early this year, insurance rate hikes are starting to have an impact on mortgage foreclosures across the country, as premiums become unaffordable, particularly for low-income homeowners. In California, Florida and elsewhere, many insurance companies are selectively cancelling coverage or have withdrawn from the marketplace altogether.
The inability to get insurance at all would have a dramatic impact on the housing market, as homeowner’s insurance is required for nearly all mortgages.
Lack of coverage, or undercoverage, can also undermine family wealth, as happened in Asheville, North Carolina, when Hurricane Helene caused massive flooding in an area that had been considered a climate haven rather than a frontline community. When homeowners don’t understand flood risks, they might forego insurance, especially if premiums are high.
“Community-embedded insurance” makes such coverage a group, rather than an individual insurance. It can be procured through a local government or homeowner association, providing additional clout in negotiating coverage and premiums.
“With a community-embedded insurance model for flood insurance, instead of each home in a community being individually insured, an insurance policy is sold to an entire community, and the risk and financial burden are collectively spread over more homes, resulting in a lower cost per home,” InnSure’s Charlie Sidoti explains.
An example is the $2.5 million in wildfire coverage recently underwritten by The Nature Conservancy in partnership with the global insurer Willis and UC Berkeley’s Center for Law, Energy and the Environment for more than 1,300 acres of forest and recreational land managed by the Tahoe Donner Association in Truckee, Calif.
In exchange for the wildfire mitigation efforts, the homeowners association will pay nearly 40% less on its premium and nearly 90% less on its deductible than it would for other available insurance options.
“While community-embedded insurance is typically customized to meet the unique needs of the insured group, the outcome is the same: it improves access and affordability of insurance,” Sidoti says.
Enterprise capital to build effective nonprofit businesses
Nonprofit organizations are businesses, too. With federal funding increasingly vulnerable to pauses, freezes and cutbacks, many of these businesses are being forced to scale back services for disabled individuals, immigrant communities, vulnerable children and other people in need.
Foundations typically provide project-specific and time-limited grants.
“This short-term approach forces nonprofit leaders to divert attention from their core missions, spending precious time and resources chasing restricted funding streams rather than pursuing long-term systemic change,” argue Alexandra Sing and Andrea Levere of Capitalize Good, which was launched in 2023 to advocate for a different approach.
Unrestricted net assets, or “enterprise capital,” gives organizations the financial resilience “to build the organizational infrastructure to engage in long-term, high-impact, systems-change work,” they wrote in Nonprofit Quarterly this month. “Enterprise capital is committed in a single lump sum, up front, injecting immediate liquidity that enables game-changing investments in systems, staff, and new revenue streams.”
“By shifting from short-term, restricted funding to long-term enterprise capital, funders can help scale financial resilience and sustainability across the sector—and unleash nonprofit power and potential to create a more just, equitable, and sustainable future for all.”
