Centering community voices and power in investment processes

Guest Author

Andrea Armeni

Guest Author

Shante Little

Guest Author

Curt Lyon

The increased investor attention to racism and the inequality laid bare by the ongoing COVID-19 crisis has intersected, at long last, with the push for philanthropy and impact investors to consider issues of voice and power. 

From emerging participatory grantmaking efforts, to calls to decolonize philanthropy from Edgar Villanueva and so many others, to Darren Walker’s entreaty to “reimagine who has a seat at the table – and ultimately, a voice in the room,” there is a clear move across the impact investing space toward centering communities. 

Process matters

Mission-aligned investors doing place-based investments have long been aware of one very practical reason for engaging communities: it taps into their knowledge, it creates buy-in, and generally contributes to the success of the project. These benefits, however, focus on the project itself and accrue to the project developers; they are not focused on whether the community itself is made better off by it. Too often, community engagement takes the form of a consultative, performative, “check-the-box” measure, rather than a meaningful way of centering the needs of those most excluded from decisions around capital. As the Movement Strategy Center notes in its Spectrum of Community Engagement to Ownership report, low-level engagement functions as placation or tokenization, not empowerment.

This distinction – between consultative measures of gathering input from a community and centering them as decision makers – is critical for any investor seeking to invest in alignment with a mission. Besides being more aligned with the values of inclusion that mission-driven investors currently espouse (advancing the notion of “nothing about us, without us” from the disability rights movement), agency over decision-making builds long-term power for the communities who participate. It forges new relationships between grassroots actors and powerful institutions, builds knowledge around capital within the community, and directs dollars towards projects that align with existing organizing work on the ground. These elements of power building are the key to long lasting, transformative change.

In other words, process matters. Process in itself, regardless of the specific outcomes of an investment, can create power where the affected stakeholders are meaningfully engaged. The lack of meaningful engagement, conversely, can further disenfranchise a community, even when the project leads to other positive outcomes like jobs or new housing units. That is to say, who initiates an investment project, who designs it, and who gets to decide are fundamental aspects of investments that seek to center communities.    

Yet, even though more capital providers are making commitments to communities, the majority of this capital is still shy of affording a meaningful voice, let alone agency and power, to the communities it seeks to reach.

Investors who desire to center community voices through the deployment of assets first need to know: what exactly does it mean to center communities in investments, and what do such investments look like?

Community-engaged investment

From a review of dozens of projects across the country, we teased out a set of practices that fall under the umbrella of Grassroots Community Engaged Investment (GCEI)the process and practice of investing with meaningful input, decision-making power, and/or ownership from grassroots stakeholders. In degrees, they all move beyond mere consultation and grapple with issues of agency and governance.

The practices of GCEI vary, with decision-making embodied in community-wide assemblies, governing boards, community representatives on investment committees, and “community tables” that shape the course of a project. The specific form of grassroots governance that emerges for a given project is the product of many factors: its location, the goals of early leaders, the balance in planning between community and institutional partners, geography, sector, and scale, among others.

Just as the practices vary, so do the actual form and output of GCEI projects. They include enterprise investment funds, housing developers, commercial real estate projects, intermediary funds, and multi-purpose investment vehicles.

The examples below give a sense of the richness of this practice and show how a GCEI lens can be overlaid on virtually any capital deployment.

Real estate developments approved and controlled by the community. While some interventions, such as many community land trusts, focus on local ownership but limit governance to residents, other efforts are explicitly sharing decision-making power over the investments in real estate with the community more broadly. Philadelphia’s Kensington Corridor Trust is a mission-driven real estate development organization that seeks to decommodify properties in the neighborhood’s central commercial corridor by acquiring vacant properties, developing them with and for the benefit of the community, and holding them long-term through a trust vehicle that leverages patient, flexible capital. Decision-making rests with local business and cultural leaders, as well as the main community development finance institutions and nonprofit partners that helped establish the trust, with resident engagement to help decide property usage. 

The East Bay Permanent Real Estate Cooperative (EB PREC) is a pooled capital vehicle that helps Black, Indigenous and people of color, or BIPOC, and allied communities gain ownership and control of housing in the East Bay region of California. EB PREC allows residents of California to invest in the project at a low minimum, which comes with a voting stake in most project decisions. All members of the cooperative – community investors, staff, community members, and residents of their properties – are given voting power over major decisions, with residents’ votes prioritized.

Community-governed enterprise investment funds. While capital is attracted from both local residents and outside investors, decisions over investment criteria (and indeed over investments) are made by residents and grassroots community groups. The $10 million REAL People’s Fund in the East Bay, for example, was designed primarily by the founding grassroots organizations, which designed and decided funding priorities, mission principles, governance structure, partnership development, and fundraising. RPF relies on a CDFI partner, Community Vision, for underwriting larger loans. 

Similarly, the Boston Ujima Fund, born out of organizing efforts to build a more democratic economy, has community members choose funding priorities and vote on investments, as well as invest themselves at affordable minimums. Outside investors take on higher risk and defer to community members for investment decisions.  

Boston Ujima Project is rebalancing risk, returns and power in local impact investing

National intermediary funds. At a larger scale, investors may seek to deploy capital into intermediaries, such as CDFIs, while still retaining an element of governance for those affected by the investments. Candide Group’s Olamina Fund provides loans to women- and BIPOC-led lenders, such as CDFIs and non-profit loan funds that invest in small business development, worker cooperatives, and low-income housing. These investments bolster economic opportunities in communities that have historically lacked access to capital. The fund has a community advisory board of five members who reflect the broad constituency served by the fund and who participate in the investment committee with veto power over investments.

Where to start

The moment is ripe for investors and funders concerned with racial equity and maximizing their capital’s impact to support these pioneering projects and the launch of new ones. Ceding power is a big step; investors can get acquainted with the practice through the following smaller steps:

  • Think about how you can start more conversations with the communities you serve. What relationships do you have? What grassroots organizations are leading efforts for change within those communities? Be wary that not any single body can speak for an entire community, and that residents provide valuable input too.
  • Add community governance mechanisms to existing funds and allocation processes. A community advisory body with teeth such as a veto power, as seen with the Olamina Fund, is something that can be added to existing funds. Convening grassroots stakeholders to develop standards or prerequisites for investment is another.
  • Identify core partners that can facilitate the process of decentralizing decisions from one investor to several community actors. For example, the Solidago Foundation helped to convene the grassroots organizations that became the founding board for the REAL People’s Fund, and put them in control over the fund design process.
  • Rethink your risk-return profile for community investments. Projects with Grassroots Community Engaged Investments develop buy-in from the community to support a project, such as shopping at funded businesses or using community spaces developed through real estate investments. This serves as a form of risk mitigation for the investor over the long term – and furthermore, the risk of failure is much more harmful to BIPOC and working class communities than to the investor.
  • Consider accompanying investments with grant capital to support the governance and institution-building component of GCEI projects. Organizations and residents doing the planning, management, and governance work should not do so for free, and oftentimes dedicated staff requires grant capital before a project is fully self-sustaining.
  • Prioritize investments into community-owned or democratic entities, such as cooperatives and community land trusts. These democratic models represent a clear pattern for communities who decide where capital is invested.
  • Support one of the existing projects highlighted in our report. Many are open to fundraising at different levels.

Andrea Armeni is executive director, Shante Little is research and content lead and Curt Lyon is associate director of programs at Transform Finance.