Foundations as Impact Investors - Chicago Impact Investing Showcase Recap

By Ander Iruretagoyena

On Tuesday, April 19th Jessica Droste Yagan moderated the third session of Impact Engine’s 10th annual Chicago Impact Investing Showcase. Throughout this four part series we explored the different types of impact investors (Governments, Individuals, Foundations, and Private Funds); but in this session we highlighted the role of foundations as impact investors, through both endowment and grant or donor advised fund pools of capital.

Following opening remarks by Jessica, the session opened with Debra Schwarz of the MacArthur Foundation. Debra explained how the Foundation defines impact investing and introduced one of the Foundation’s investees, Leon Walker from DL3 Realty Advisors, to talk about his work using responsible real estate development as an engine for economic opportunity (a theme very close to home for IE and most directly advanced by our investment into PadSplit). Laura Kernaghan shared how the Chicago Community Trust (CCT) engages in impact investing, and introduced Leah Missbach Day to talk about her experience in impact investing through her donor advised fund at the CCT, World Bicycle Relief. Lastly the conversation was concluded by Robert Tucker who spoke about the inspiring work of the Chicago Community Loan Fund (CCLF) which can also be invested in via the various donor advised funds of the CCT. All the speakers are real life examples of the good that is created when foundations reach investees through impact investing.

Debra noted that MacArthur Foundation, as an organization that has been around since 1983, manages $8B+ in AUM, and has made over 200+ investments throughout Chicago and the globe, they know there is a spectrum to impact investing. On one side of the spectrum falls conventional investing, and as one moves to the other side they encounter Responsible Investing (Screening), Sustainable Investing (Prioritizing ESG Factors), before finally arriving at Impact Investing which they divide into Finance 1st and Impact 1st. (At IE we think slightly differently and see us having financial returns because we lead with impact but regardless the overall point is valid.) Although not all of MacArthur’s assets are invested with an impact first mindset (~$400M are distributed across Benefit Chicago, Catalytic Capital Consortium, CDFIs, Housing, Chicago, and Climate Solutions), they are making strides throughout the whole portfolio and making sure that everything they do ties back to 3 pillars: providing mission driven innovation, being equitable and inclusive, and lastly being sustainable.

As an investee of the Foundation, Leon said DL3 Advisors has helped create over 3,000 jobs in the Chicago area by doing things that no one was willing to do like building a WholeFoods complex in Englewood. Despite being one of the most heavily trafficked parts of the city, Engelwood was continuously overlooked by developers and fell victim to the wide disparities evident in the city which extend beyond economic terms and even demonstrate up to a 15 year gap in life expectancy vs. some other areas in the North of the city. By working closely with the community, DL3 avoided unchecked proliferation and understood that “revitalization” does not have to mean gentrification. They follow a SEED framework: Shape needs into actionable projects, Empower local developers/ contractors, Expand with non-profit partners, and Direct contracts and opportunities. DL3 also adds special emphasis to the last letter by partnering with efforts like CEMDI. DL3 is just getting started and is currently raising $50M in impact equity to pursue large scale placemaking strategies in Jackson Park, Englewood, South Shore, and Grand Boulevard.

Laura noted that CCT is a public charity with the mission of facilitating philanthropy by pooling donations to local nonprofits. They have over $4B AUM and manage ~100 different portfolios that prioritize impact above all else. To help in this mission, CCT has pioneered a platform for various different impact investing opportunities in order to help donors align their charitable assets with their personal values and amplify the charitable assets and philanthropy of the trust. The platform has worked to ensure that several of the available options focus on disrupting the structural issues with the allocation of capital to individuals and communities. As a user of the platform, Leah reminded us of the powerful words of Rev Dr Martin Luther King Jr:

“Philanthropy is commendable, but it must not cause the philanthropist to overlook the circumstances of economic injustice which make philanthropy necessary.”

Lastly we heard from Robert about the offerings of the CCLF. This CDFI has had as its mission the economic development of the Chicagoland community since its founding back in 1991. Originally established with a $200K investment now worth ~$140M, this CDFI has helped dozens of projects and institutions all while maintaining an AA-*** & Policy Plus rating from AERIS. Some of its recent fundings include the XS tennis center, Ignite Technology, and the Chicago Neighborhood Rebuild program.

In this session we heard both from a large private foundation and a large public foundation (as well as some of their investees and donor advisors), however the topics discussed here are not exclusive to these behemoth organizations. Jessica concluded the session by sharing a personal story of her experience as a trustee of a small family foundation and provided some examples of how they have been able to embed impact into the allocation strategy of the endowment without sacrificing any financial returns, as well as amplifying impact in their program-oriented investments. If you find yourself in a similar situation we urge you to question your DAF fiduciary or foundation advisors and to please count on Impact Engine as a resource to help advance you in your impact journey.

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Find more sessions on the 2022 Chicago Impact Investing Showcase page.

Information presented in this document is intended solely for informational purposes and should not be interpreted as a recommendation or offer of securities or any other financial instrument. Unless otherwise indicated, the information contained herein is current as of the date of publication of this document and is believed to be reliable and has been obtained from sources believed to be reliable, but no representation or warranty is made, expressed or implied, with respect to the fairness, correctness, accuracy, reasonableness or completeness of the information and opinions.

Individuals as Impact Investors - Chicago Impact Investing Showcase Recap

By Chris Wu

The second event in our Chicago Impact Investing Showcase series took place on Tuesday, April 12th. The focus of this session was the role of individuals as impact investors. Jessica Droste Yagan served as the moderator and made some opening remarks to help frame the discussion. She began by defining some commonly used terms such as socially responsible investing, ESG, and impact investing. Jessica also gave a primer on the 5P Framework, which is a helpful framework for understanding the impact in impact investing.

After the opening remarks each of the panelists made some introductory remarks, beginning with Noelle Laing, the CIO of Impact Investing at Builders Asset Management. Builders Asset Management is part of Builders Vision, the impact platform for Lukas Walton. The goal of Builders Vision is to build a more humane and healthy planet through four impact focus areas: Oceans, Climate & Energy, Food/Ag, and Community. The organization takes an integrated approach to driving system-level change; they use a combination of grants, impact-first investments, market-rate investments, advocacy, and coalition building as a means to achieve that goal. The Builders platform is organized into three strategies:

• Builders Asset Management - The asset management team invests strategic, patient capital responsibly across an ambitious, diverse portfolio. The team generates returns that are reinvested to drive long-term impact.

• Builders Private Capital - The direct investing team provides capital, mentorship, and value-added resources to entrepreneurs innovating to build a better future. S2G Ventures is part of the direct investment team, they back entrepreneurs across the supply chain from soil to shelf.

• Builders Initiative - The philanthropic team seeks to accelerate and catalyze change through grant-making and impact investing in people and organizations on the frontlines of change. They have a special focus on Chicago and the Midwest.

Noelle explained that you need multiple tools at your disposal in order to solve the complex challenges facing our planet. Their platform allows them to take an “Issue First - Tool Second” approach. Builders Vision starts first with the issue that needs to be solved, then sets out to go find the best tool in their toolkit that they have to help solve it. Noelle gave some examples of some of the endowment investments they have made recently. They had invested in an access fund focused on low-to-moderate income (LMI) communities. Chicago place-based bonds is another specific focus area. They have funded an affordable housing unit in Englewood, and also invested in intergenerational housing for seniors that take care of you and for youth that are aging out of foster care. These investments are particularly meaningful to them because those closest to the problem are best equipped to solve it. Some of these opportunities are offered through mutual funds, so folks have access to it even if they’re not a high net worth individual (HNWI).

Noelle then invited Kate Danaher, Managing Director of S2G Ventures Ocean and Seafood to talk about the work they’re doing to make our oceans more sustainable. Kate has spent her career in impact investing. She is also passionate about giving unaccredited investors a chance to become impact investors. Kate joined S2G because the Builders Vision is an incredibly powerful tool for change. Kate gave an example of one of their impact investments, profiling a company called Aquatic Protein based in Beardstown, Illinois. The company is addressing two critical issues: 1) the proliferation of invasive asian river carp in the river basin there, and 2) the need for low cost fish meal for pet food and other land animals. There is a big need to replace wild catch with a sustainable low cost solution. The government spends millions of dollars to try and get rid of the invasive carp. Aquatic Protein creates a business case for the restoration work by actively fishing the carp. Aquatic Protein holds a proprietary zero waste process for producing the fish meal. They focus on remediation and partner with local fishers and give incentives, and have been removing more carp than anyone else in the area. The company’s technology is highly scalable, and can be applied to other invasive species outbreaks in waterways and other regions beyond the midwest. It has been a strong investment for S2G’s venture capital arm because the impact that is enabled by the growth of the business (similar to product-based impact as described in the 5P Framework). If this company is successful, the core of its business could have a meaningful impact on the health of the IL river basin.

Next, Jane Direnzo Pigott, Managing Director of R3 Group, spoke about her personal journey as an impact investor. At R3, Jane specializes in providing leadership, change, and talent consulting to organizations. Prior to R3, Jane practiced law for over 20 years, most recently at Winston & Strawn where she served as chair of the global Environmental Law practice group. Jane became an impact investor because it allows her to align her investments with her personal values. Jane actively invests both directly in companies as well as in funds, with a focus on opportunities where she can utilize her expertise and resources to support enterprises with women and BIPOC founders and leaders. While her personal impact investment thesis centers on improving equity and access, she utilizes the 5P Framework to identify where there might be compelling opportunities. Jane believes that equity has an impact on every single investment, whether it’s a climate change or health investment, and that diverse teams outperform. When assessing opportunities, she looks to define the impact, quantify the level of risk, set a minimum ROI, and to back disruptive technologies. Jane initially looked towards traditional institutions to source investment opportunities and measure impact, but learned that she had to take a more active, hands-on approach. She works with a group of others to help source and diligence deals, and she takes more personal responsibility for looking at exactly what she will measure for impact and be willing to walk away from opportunities that don’t fit her criteria. If she is presented with a strong investment opportunity that does not have diverse teams or at least have a strong plan for addressing DEI, it would not meet her criteria.

Jane highlighted First Women’s Bank as one of her impact investments and introduced Melissa Widen, the bank’s CAO and General Counsel. Melissa discussed how the women’s economy lacks access to capital they need to grow. Women own 42% of all businesses in the US. 50% of those are owned by women of color. This represents 13 million businesses, it’s an intersectional issue. The women’s economy (women-owned and women-led) together needs capital to grow and thrive. Gender disparity is holding women back. Only 16% of all commercial loans go to the women’s economy, that represents just 4% of the total dollars lent. The First Women’s Bank addresses this, it aims to level the playing field to promote financial inclusion across the board, empower women economically. The path to forming First Women’s Bank was challenging, they were viewed as a group of women with no track record, fundraising in the middle of a pandemic within a highly regulated industry. Despite all those challenges, they were successfully able to raise $32.6M in capital.They received their charter from the state of IL last year, arranged FDIC insurance, and had a grand opening in the fall of 2021. Their unique banking practices are now disrupting traditional banking. First Women’s Bank offers a different way to think about your banking relationship. Banking clients are increasingly asking questions like: How diverse is this bank’s board? What are they using my money for? What does the bank stand for, what are their values? Does it align with mine, what is their stance on DEI? In terms of approach, First Women’s Bank leans heavily into SBA lending, which is ideally suited for the small business economy and a great fit for the women’s economy, which tends to be service related businesses.

The session wrapped up with a Q&A session discussing how to balance due diligence between impact and financial return. The panelists also shared resources on how people can begin to dip their toe into the water of impact investing. The list of resources include: 

• CNote

• Honeycomb Credit

• RSF Social Finance

• Calvert Impact Capital

• Invest for Better

• Toniic

• The ImPact

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Find more sessions on the 2022 Chicago Impact Investing Showcase page.

Information presented in this document is intended solely for informational purposes and should not be interpreted as a recommendation or offer of securities or any other financial instrument. Unless otherwise indicated, the information contained herein is current as of the date of publication of this document and is believed to be reliable and has been obtained from sources believed to be reliable, but no representation or warranty is made, expressed or implied, with respect to the fairness, correctness, accuracy, reasonableness or completeness of the information and opinions.

Governments as Impact Investors - Chicago Impact Investing Showcase Recap

By Sophia Friedman

2022 is an exciting year as this marks Impact Engine’s 10th annual Chicago Impact Investing Showcase! This year’s showcase explores the roles of four key impact investor types: government, individuals, foundations and private funds. Our first event on April 5th focused on on government. Jessica Droste Yagan moderated a discussion with Melissa Conyears-Ervin (Treasurer, City of Chicago), Michael Frerichs (Treasurer, State of Illinois), Bryan Echols (Director of Impact Investments, Illinois State Treasurer), and Brad McConnell (CEO, Allies for Community Business).

The event kicked off with opening remarks from Jessica around how we think of terminology around impact. She explained the various types of investing: socially responsible investing (SRI), environmental, social and governance (ESG) investing, and Impact Investing. As Jessica explained, SRI includes screening investments in or out based on whether or not they align with a specific mission or set of values; ESG includes investing in companies based on performance in three areas: environment, social, and governance (particularly in terms of how a company is run); and impact investing as intentionally investing to create a specific social or environmental impact. Impact Engine follows the impact investment approach and Jessica walked through the five main ways that investors can intentionally create impact via the 5P Framework. The 5Ps include: Product, Place, People, Process and Paradigm, and investors can invest with one or more of these in mind at any time.

Following the introductory remarks, the four speakers provided real world examples of the role the government plays in investing for impact.  Brian Echols, the Director of Impact Investments for the Illinois State Treasurer, brought up key questions that his team is focused on addressing: How do we create opportunities in low to moderate income communities? What role does the banking sector play in how we address systemic racism? He touched on these questions and more throughout his remarks.

City Treasurer Conyears-Erving explained that as Treasurer, she does not believe that it is enough to simply earn money for taxpayers. Instead, her team plays an active role in making people’s lives better. She explained that the government has to hold itself to a higher standard and aim for better outcomes beyond only focusing on the greatest possible financial return. Treasurer Conyears-Ervin explained that in 2020, she joined together with Illinois State Treasurer Michael Frerichs to create the Advancing Equity and Banking Commission (AEBC), a network of prominent banking institutions anchored in Illinois and committed to advancing equity and eliminating systemic racism in the banking industry though equitable hiring and lending and investment in Black neighborhoods.

State Treasurer Frerichs also explained that in his view, the key to growing our economy is to support local innovation and to do so equitably. He explained that his team has a job to invest while also having a responsibility to maintain the long term fiscal health of the state, while tending to the wellbeing of communities he represents, which includes economic security of millions of workers in the state of Illinois. Treasurer Frerichs explained that his team is laser-focused on innovating and adapting programs to meet the needs of local constituents while fulfilling their fiduciary responsibilities. He explained that his office integrates material ESG factors across all investment processes, from evaluation of individual issuers to the selection of fund managers. Both State Treasurer Frerichs and City Treasurer Conyears-Ervin stressed that they are focused on growing and investing in underserved communities as they believe there are great investment opportunities and opportunities to create jobs, grow businesses, and foster long term economic prosperity.

Brad McConnell, CEO of Allies for Community Business (A4CB), explained how his organization supports small businesses and thereby strengthens communities.  A4CB’s mission is to provide the capital, coaching, and connections that entrepreneurs need to grow great businesses, create jobs, and wealth in their communities. He explained that their team believes that investing in small businesses and working with entrepreneurs who are already embedded in their own communities is the most consistent and efficient way to create jobs and therefore opportunity and wealth in underserved communities.

Brian Echols explained that when his team thinks about the 5P framework, they invest in people, place and programs. Ultimately, their focus on these areas can often lead to a paradigm shift. Brian explained that in serving the various diverse metropolitan areas within Illinois, he recognizes that there are communities in each that lack investment. When thinking about place within the 5P Framework, it is important to recognize that resources flow differently in different parts of the state and his team must listen to what each individual community needs. Then, it is important for the government to leverage state resources to bring equity in how they invest, and to make investments that will improve individuals’ quality of life. Brian feels that his team’s responsibility as a governmental entity is to be the first to step out and support these communities in the hopes that private sector and philanthropy will follow suit and add to the investment into these communities.

The speakers brought to life the role that cities and governments play in investing in our communities. They explained the various different ways that impact investing can work but all stressed the importance of following through on our commitments, tracking the capital to understand where it ends up, measuring impact and ultimately being able to communicate that impact outcomes back to the community. 

In the Q&A, viewers asked what ordinary citizens can do to get involved in the government’s actions around impact investing. The panel’s recommendations included visiting 350.org which facilitates opportunities for residents to be involved with community organizations that are making a difference, or visiting Allies for Community Business at A4CB.org which offers various opportunities for individuals to support small business owners via coaching, skills development or providing grants or loans. Lastly, the Treasurers suggest reaching out to your elected officials with any ideas or recommendations to be more involved in this space.

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Find more sessions on the 2022 Chicago Impact Investing Showcase page.

Information presented in this document is intended solely for informational purposes and should not be interpreted as a recommendation or offer of securities or any other financial instrument. Unless otherwise indicated, the information contained herein is current as of the date of publication of this document and is believed to be reliable and has been obtained from sources believed to be reliable, but no representation or warranty is made, expressed or implied, with respect to the fairness, correctness, accuracy, reasonableness or completeness of the information and opinions.

Stellic: Why We Invested

By Tasha Seitz

Even before the pandemic, 1 in 3 students that started college in the US did not end up finishing their degree. As colleges and universities face decreasing enrollment, they are experiencing more financial pressure that is pushing them towards more cost-effective advising and a more student-centric approach. At most colleges and universities, advisors have a very high case load of students and have to rely on incumbent technology solutions that are often decades old with unfriendly and outdated user interfaces. As a result, advisors tend to focus on the students most proactive in reaching out to them and the students that have been flagged as most at-risk, leaving advisors without the time/capacity to serve the vast majority of students in the “silent middle.”

Solution

Stellic is an integrated planning and advising platform for college students to plan their courses to align with their degree requirements and career aspirations. The current product offers five modules: Pathways, Schedule, Audit, Advise and Report. Colleges and universities do not need to replace their existing systems, rather Stellic will integrate with existing student information systems and learning management systems while providing a more modern interface that connects existing data to students’ goals and degree requirements. Stellic’s “play-list” interface provides a significantly improved student experience.

In addition to providing much better tools for students, Stellic enables advisors to identify and assist students at risk of dropping out or graduating late and provide appropriate support and interventions to keep those students on track. For the large population of students in the “silent middle” that are not highly motivated, Stellic can ensure they have chosen a degree pathway and flag for both students and advisors any near term decisions regarding adding/dropping classes that might put their pathway at risk. By decreasing the administrative work that advisors need to do, Stellic enables advisors to be more effective and more efficient, lowering the overall cost of advising.

Because Stellic allows students to plan their future course load and encourages every student to commit to a pathway, universities can predict course demand and ensure that courses are offered when students need them in order to graduate.

Why We Invested

Stellic’s founder, Sabih Bin Wasi, is an impressive entrepreneur who was inspired to found the company based on his own frustrations in navigating the course planning process in higher ed. Sabih is deeply committed to solving this problem for students while providing value to colleges and universities. The company has impressive early traction with a diverse set of customers, including University of Chicago, Duke, Columbia, University of Minnesota, University of Oklahoma, Colorado College, and Cal State Northridge. Stellic has also seen inbound interest from international higher end institutions and successfully closed several international customers. The company has a very strong technical team through the founders’ relationship with the top technical university in Pakistan, and the product is built in a modular fashion to enable a “land and expand” sales strategy which is already showing success.

We really appreciate that Stellic can address both the needs of the sophisticated student that wants to do their own “what if” analysis as well as the needs of students that may not be as motivated to plan for the future and just need focus/direction to ensure they are on an efficient path towards graduation. We also believe there is a significant opportunity to reduce friction for students that have stopped out and are re-enrolling in a degree program to understand their most efficient and cost-effective path to achieve their personal and educational goals.

Impact

We expect Stellic to improve retention and college completion rates, reduce the total cost of getting a degree by ensuring all credit-hours help students achieve their graduation requirements, and reduce friction for transfer students and students that have stopped out and are re-enrolling in a degree program. In the longer term, the company’s vision is to enable students to plan effectively for their post-college career and track career outcomes.

The Helper Bees: Why We Invested

By Sophia Friedman

There are over 46M adults over age 65 living in the US today, and that number is expected to grow to almost 90M by 2050. The global population is aging at unprecedented rates -- older people make up an increasing share of the world’s population. This phenomenon is more pronounced in the United States than anywhere else in the world. The U.S. Census Bureau projects that older adults (people over 65) are expected to outnumber children under the age of 18 by 2034. Given the speed with which the US population is aging, compounded by the COVID-19 pandemic which has highlighted health risks associated with institutionalization, there are increasing pressures to enable adults to age in place and keep older adults out of senior living facilities. 

Solution

The Helper Bees (THB) partners with Long-Term Care Insurance carriers and Medicare Advantage health plans to provide quality care and appropriate tools to keep older adults independent, healthy and living at home longer. The Helper Bees strives to help older adults age in place successfully and does so by addressing the ‘social determinants of aging’: the conditions in the environments where people age that affect a wide range of health outcomes. The Helper Bees has developed a complete regulatory and administrative platform that blends claims processing, provider recruitment, and provider credentialing with the member-facing aging-in-place marketplace, aggregating all in-home care and support services into one platform. The platform’s direct impact is increased member satisfaction, improved health outcomes, and reduced claims costs and institutionalization rates.

Why We Invested

By 2040, 80 million Americans will be over the age of 65. 40 million individuals will need long-term care, and 90% of these will want to remain at home as they age. Today’s demographic shifts are changing consumer demands and placing unique pressures on the payors of long-term care. These payors, including Medicare Advantage and Long-Term Care Insurers, will need to focus on improving the social determinants of aging in order to improve care delivery to older adults. The Helper Bees addresses this market opportunity by providing a comprehensive aging-in-place platform to allow payors to tap into provider networks that enable older adults to age at home more seamlessly and successfully, thus resulting in better health outcomes at lower costs.

The Helper Bees aggregates various solutions related to the aging process into one to provide a single point of entry through which patients or caregivers can manage their own care. While point solutions exist to address various fragmented portions of the aging process, The Helper Bees is unique in that it consolidates these solutions into one platform that manages both the services themselves as well as claims processing, thus removing friction from the aging process. The Helper Bees’ team has proven themselves to be a strong leaders and well versed in understanding the unique payor environment related to Long-Term Care Insurance and Medicare Advantage. The team has a clear focus on improving the aging process for older adults and understands the importance of making healthcare more equitable and accessible to improve healthcare for all older adults regardless of socioeconomic class or demographics.

Impact

We believe The Helper Bees has the ability to make a positive impact by providing a solution that improves the aging process for older adults by focusing on the social determinants of aging. The Helper Bees has already demonstrated a meaningful reduction in the institutionalization of seniors – its Care Concierge product has resulted in a significant reduction in institutionalization to date. Further, The Helper Bees improves the process of aging in older adults in two ways:

1. By enabling individuals to more easily understand and take advantage of their supplemental benefits

2. By managing payment and reimbursement for these services, which individuals might not have the cash flow to support, therefore making these services more accessible to aging individuals

The Helper Bees reaches customers in all 50 US states of varying socioeconomic classes, races and ethnicities. The Helper Bees is in the process of expanding into Medicare Advantage, launching with its first customer in 2022. Medicare Advantage plans are often focused on chronically ill populations, which includes patients that are also eligible for Medicaid coverage – these patients are dual eligible, meaning the beneficiaries quality for both Medicare and Medicaid benefits. We anticipate dual eligible members will be a critical area of focus for The Helper Bees as the Company expands to partner with more Medicare Advantage customers. As the company continues to scale and expand into Medicare Advantage, we are excited by The Helper Bee’s opportunity to expand access to underserved populations and to improve the aging process for all.