Building an interdependent economy: Shared ownership is focus for foundations

Foundations have often been observed to move in something resembling rugby scrums: many of them focused on the same issue. Shared ownership of businesses is the hot topic this year for many of them. And last week I went to Rockefeller Center to what was a major gathering of the leading catalytic foundations, funds focused on the various forms of employee ownership, as well as some big financial service firms.

Impact investing is increasingly focused on companies that can grow fast enough and that do good but also aim for market rate returns. That’s fine, and that’s increasingly the focus of SOCAP, which is a global conference we started and led for a decade before selling. And it has always been the focus of the Global Impact Investing Initiative, or the GIIN.

We at Neighborhood Economics have taken another route, focusing on the people who typically don’t get investments from investors who need a lot of money fast. We focus on investments where philanthropy is often needed to reach economic sustainability. Those investments go to Black and brown people much more than the impact deals focused on scalability. 

We focus on asset creation in the zip codes where the social determinants of health research says people die ten years younger than in more affluent neighborhoods.

That money is provided more and more by what are called catalytic foundations. We believe Kellogg, MacArthur (who now supports our work), Heron, Surdna, Irvine, Gary Community Ventures, Ballmers, and more are coming to San Antonio.

In these deals, there is a cost to doing good. To become truly investable, there needs to be a layer of program related investments, or PRI’s, from the side of the foundation that is mandated to give at least five percent of its assets toward its mission.

These foundations go in early, ask for returns typically below five percent, and are flexible. Our conferences shine a light on some of their successes; we and they like to point to models that are replicable, that people can adapt and bring to their hometowns.

When a cluster of foundations focuses on a single area, like shared ownership, it means money will flow to employee buyouts more quickly, but it also makes that part of the emerging good economy smarter faster, and justifies the emergence of the essential intermediaries who provide both increasing expertise and the loss guarantees that reduce the cost of failure.

My goal in going to New York was to recruit both shared ownership funds and some of the foundations who are moving into that field to our conference in February. Stay tuned to see how well I reached my goal!