Recent research from MacArthur and The Chicago Community Trust found the early-stage impact investing world to be highly fragmented and inefficient, with a more than $100 million funding gap facing social sector organizations in the area. What’s more, that shortfall could increase to as much as $400 million in the next five years. “As anyone who’s tried to raise money from the impact investing world knows, it’s a very scattered and diverse marketplace,” says Margot Kane, Calvert’s vice president, strategy.
Plus the study revealed a growing interest in more efficient ways to make local investments with the potential to deliver meaningful social, economic and environmental impact, more evidence that local investing increasingly is viewed as a form of impact investing.
The Benefit Chicago program was designed to address these issues. It’s open to investors, including individuals, businesses and institutions, who can buy Chicago-targeted Community Investment Notes from Calvert. That organization has committed to issue up to $50 million of these fixed-income securities, which offer principal maturities from one-to-15 years and are available in $1,000 increments through brokerage accounts and Calvert, as well as eligible donor advised funds at The Chicago Community Trust. The latter group will invest $15 million in a 15-year Chicago-targeted note, using a portion of donor-advised funds that it manages.
As for MacArthur, it will invest $50 million into a new intermediary, which also will receive all of Calvert’s loan proceeds. The combined pool of money will make low-cost loans and other investments into social enterprises.
And what about those social enterprises? How can they get in on the act? Applications for financing will be considered on an ongoing basis starting in July. For for-profit-ventures, the team will look for evidence of a strong social impact, of course. But it also needs to see proof the enterprise can’t find financing from, say, a bank or more traditional source of funding. “We want our capital to fill the gap, not take the place of other institutions,” says Debra Schwartz, MacArthur’s managing director of impact investing.
According to Schwartz, they’re looking for ways to introduce the Benefit Chicago model, or something inspired by it, elsewhere. “We may be able to help people think about creative ways to look at assets in their community and then we can see how to help facilitate that,” she says. “We’re not just doing a one-shot deal in our community.”
“We want to change the market, not just make transactions,” she says.
This article was written by Anne Field from Forbes and was legally licensed through the NewsCred publisher network.
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