When I worked for Prudential Financial Impact Investments, we could only invest in projects that met the “but for us, this project won’t happen” test. For example, but for Prudential, the first grocery store built in Newark since the 1960s would not have been built.

Of course that was back in 1990, long before the term impact investing was coined at the Rockefeller Foundation in 2007. Few foundations were doing impact investing and even fewer corporations were. Yet insurance companies and banks were quietly making such investments, the latter due to the Community Reinvestment Act which requires banks to make local loans in low and moderate income neighborhoods.

Is the but for us test still relevant now that impact investing is becoming the new normal, exploding in popularity across social impact themes, geographies and asset classes?

To examine this question, let’s examine two impact investments that do meet the but for us test.

But for the Minneapolis Foundation and its donors, fewer women and minorities would have helped build the new Minnesota Vikings Stadium. Thanks to their long experience in impact investing, the foundation organized a Working Capital Loan Fund to increase access to working capital for these women- and minority-owned businesses.

Due to shorter business histories, smaller assets and limited access to bank financing, the only working capital sources for women- and minority-owned businesses are expensive. Providing loans at a reasonable cost leveraged the stadium’s benefit across the entire community.

The fund was a three-year $1 million loan to MEDA, a Minneapolis based nonprofit lender that makes cash-flow loans to minority-owned businesses. As loans were repaid, the funds were redeployed to assist other businesses.

Without these loans, it’s possible the stadium project would not have exceeded—or even met—their diversity hiring goals. They had aimed for a workforce composed of 6% women and 32% minorities, and they achieved 9% women and 36% minorities.

“Without the $200,000 working capital loan, we wouldn’t have been able to do the job,” said Dave Bice, owner of Bald Eagle Erectors and a member of the White Earth Band of Ojibwe. “I had a big job that wasn’t paying me on time, and I wasn’t making enough profit for the bank to make a conventional working-capital loan on this project,” he told the Star Tribune newspaper.

Another example that meets the but for us test is the new Minnesota Impact Investing Collaborative fund announced by the Minnesota Council on Foundations in April 2017.

But for the Bush Foundation, The McKnight Foundation, Otto Bremer Trust and other Minnesota foundations, philanthropic investors wouldn’t have many options to put endowment dollars to work in their home state. Already, there is more than $18.3 million committed to this impact investing collaborative, and the commitment is expected to exceed $20 million.

Professionally managed by RBC Access Capital, the Minnesota Impact Investing Collaborative fund demonstrates that there is dedicated demand for securities funding low-income housing, small businesses in underserved areas and municipal projects targeting those neighborhoods. Currently, all three security types are only purchased on the margin or when specifically requested by investors. These markets are quite deep, with multi-billion-dollar issuance annually, but specified impact securities struggle for investors’ attention.

Investors in the Minnesota fund aim to make a statement to the broader investing community that investing in underserved markets is important and viable, paving the way for other communities to do the same. Replicating this program in communities across the U.S. will demonstrate dedicated demand for impact-oriented mortgage- and loan-backed securities, which should ultimately lower the cost and increase the availability of capital in these communities.

By committing publicly to the fund, the three anchor investors are enabling foundations of all sizes to invest in the counties they care about the most. With almost $1 billion in assets under management, John Otterlei, Bush Foundation chief investment officer, said, “This was an excellent opportunity for us to maintain our balanced asset allocation and do something good for our communities.”

But for this fund, these fixed income dollars would remain invested in broadly diversified fixed income portfolios. Now they’re performing the same financial purpose within each investor’s portfolio AND they’re also achieving local and measurable impact.

These two examples meet the but for us test. Yet perhaps it’s time to ask a different question: If there are market rate impact investment opportunities, why not?

I’d love to hear your thoughts on the but for us test. Do you ask but for us in your approach to impact investing? Do you apply it to your screened (meaning negative and positive or ESG Environmental Social Governance) investing program as well? What about in your philanthropic giving?

Tweet me @susan_hammel or [email protected].