Place-Based Funds and How They Are Changing Cities | Net Impact

Place-Based Funds and How They Are Changing Cities

By Sofie Alabaster

Impact investing has the potential to deliver positive impact around the world—including your neighborhood.

One type of impact investing is directing money into cities and communities to address missions ranging from job creation to providing year-round farm produce. Deviating from the common practice of geographically diverse investment strategies, regional investment funds are breaking the barriers to impact investing by aligning corporate, philanthropic, and residential efforts.

Mission-driven foundations are leading the way, and they’re making impact investing more public and accessible to investors at all levels, from individuals to institutions. Benefit Chicago is a great example of how these efforts are taking hold in cities. Seed funded with money from the MacArthur Foundation, and with the involvement of Chicago Community Trust and the Calvert Foundation, Benefit Chicago allows a diverse range of investors to purchase Community Investment Notes with the goal of improving neighborhoods throughout Chicago. These fixed-income securities require a minimum investment of $1,000 through a brokerage account, or just $20 online.

The issues these investments will tackle include workforce development, revitalizing Southside and Westside neighborhoods, and financing community projects such as child care centers and youth sports facilities. Last month Benefit Chicago announced its first round of impact investments to finance six borrowers and their proposed projects. Since the announcement, the Calvert Foundation has issued 169 individual community investment notes, raising $77 million of its $100 million goal.

Other initiatives are creating similar regional investment funds. The Bay Area Impact Investing Initiative spearheaded a Bay Area fund with diversified investments across the region. The Calvert Foundation directs Ours to Own, a program where anyone can invest as little as $20 into local funds in Baltimore, Denver, or Minneapolis. 

City leaders can catalyze investment by setting up city-based portfolio intermediaries or online portals to connect local capital with local projects. Cities can also offer tax breaks for investing stocks in local businesses or regional funds. As impact investing continues to grow—with annual cash flow expected to jump another 17% to around $26 billion next year—so will the opportunities to revive communities and cities across the country.