Impact Investing for the New Economy: People

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.  Universities including Unity College and Hampshire College are divested from fossil fuel, students at another 100 campuses pushing their universities to do the same and the Mayor of Seattle even intends to divest the city employees’ pension fund. There’s certainly reason to hope that 2013 will see a considerable rise in investment in the transition to a more sustainable economy.

Yet, to truly make a difference, impact investors should be looking for initiatives that do more than support the environment. In a recent Grist article, Asher Miller Executive Director of the Post-Carbon Institute argued that we must not only get institutional investors to divest from fossil fuel, but also drive capital to solutions that help us transition to a clean energy economy and boost local job growth. 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.

the New Economy

This so-called new economy is distinct from the green economy movement because the transition to a clean energy economy doesn’t necessarily focus on the well-being of communities and workers.  The new economy movement promotes clean energy environmental sustainability, but also prioritizes a positive impact for local communities and workers. 

Within the new economy movement, there is a push to transform the role and nature of money - to focus eliminating the power of the financial system in favor of more localized economy where the people, the planet, and economic prosperity are intimately connected.

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.  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. which use investment capital 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.

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.

Funds for brownfield revitalization

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 align their activities with impact investors to address the biggest social and environmental challenges we face today.  Two impact investors recently discussed this issue on CSRwire, recommending 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 and 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.

Engaging local communities

The expansion of local economic opportunities will not happen with impact investor support alone. Local residents need to get involved with small investments of their own - a personal investment strengthens accountability. Impact investors can then help local communities to scale their efforts. 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.

This local engagement doesn't have to be individual donations. Small businesses could team up to promote "buy local" or local currency initiatives. Groups could come together to support products and services that boost the triple bottom line. Local anchor institutions like hospitals, universities, municipalities can launch initiatives to support their local small businesses. An expansive new economy movement that directly catalyzes local solutions 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 expand immediate opportunities rather than limit the opportunities available to our nation's poorest residents.

***

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.