Event Name: Emerging Impact Investing Strategies for Rural Communities
Sponsor: Mission Investors Exchange
Cogent Attendee: Eric White
- Rural economic development lending and investment ecosystems are much less developed than their urban counterparts in California – this is likely true of much of the US.
- Investing in less developed ecosystems requires more creativity and patience, particularly through engaging a broader range of partners because each rural organizations’ capacity is less, and projects take longer (3-4 yr projects for Real Estate, for instance).
- On the positive side, rural projects can have a substantial impact in turning a community around because communities and the number of community assets are smaller, so revitalizing one has a larger community-wide effect than in populated, urban areas.
- Moderator: Lisa Richter, Principal at Avivar (impact investing consultant)
- Patrick Cleary, Humboldt Area Foundation
- Brendan Maher, Director Capital Markets, FB Heron Foundation
- Terry Supahan, Director, True North Organizing Network
- Ross Welch, Exec Director, Arcata Economic Development Center
- Moderator: Overview of Rural Economy in California
- Urban economic development lending and investment ecosystem is much more developed and well funded
- Rural Challenges
- Lack of earned income and philanthropic capital available
- Decentralized, atomized initiatives and infrastructure
- Limited number organizations investing repeatedly – most activity is one-off
- Rural Opportunities
- Novel, high performing CDFI and other lenders as examples
- Increasing number of regional, rural-focused players
- Increasing collaboration and infrastructure building activity
- Opportunity Finance Network has national map of CDFIs on their website
- Humboldt Area Foundation (HAF)
- Impact investing started with a purchase of a local pool from Goodwill Easter Seals through forgivable debt
- Next was a project too large for regional CDFIs to handle on their own, so got Arcata Econ Dev Center involved
- This progressed to HAF using local loans (illiquid, direct to debtor lending in partnership with CDFIs) as part of fixed income allocation in their corpus, representing 3% of $100mm portfolio. Those loans were best performing portion of the bond portfolio in 2013 (taper tantrum in broad bond market led to negative returns for the yr for listed fixed income)
- Arcata Economic Development Center
- Job creation through rural small to micro lending, particularly to entities too small or immature for banks
- 30 yr history, became 501c3 10-15 yrs ago, became a CDFI more recently, qualified under a number of small business lending govt programs, and expanded to cover 6 counties in northern California, partnering with local technical assistance firms for sourcing
- Walked through a real estate revitalization project that required a complex capital structure with 9 entities and 11 forms of capital, coordinated over 4 yr process
- 30 yr history of granting and investing nationally, across both rural and urban areas
- Lend and invest most often through intermediaries (funds and CDFIs), moving away from asset-based lending
- Greenline Ventures (one of the funds they work with) does small business lending and technical assistance, working with banks and CDFIs for sourcing; staffed by the New Markets Tax Credit team out of GMAC. They are raising a $20mm fund doing 5-7 yr loans of $250k-$1mm to rural and urban small businesses nationally
- True North Organizing Network
- They do not gather broad data, focusing instead on individual stories.
- Rural investments often require cheap (low financial return expectation, in exchange for social return) equity to be viable, but that is the hardest form of capital to find.