The neighborhood investment trust creators who participated in the Neighborhood Economics conference lab want to raise a $100 million fund to replicate their model across the country.
Neighborhood Investment Trusts help neighbors invest in Black Wall Streets and their neighborhood businesses to keep them safe from the hedge funds. These hedge funds have raised billions of dollars and are preying on locally owned businesses to move them out.
The people who worked together in the lab called Community Equity Investing came together to try to solve a problem. They asked themselves what the one thing was that, if it happened, could change the system. They decided it was replicating their model of neighbors investing in neighbors–people investing in and then owning the real estate under the local stores they buy from and businesses they work with. That’s proving to be transformative. When people think of themselves as owners, rather than renters, they find they care about their community in a new way, and they think of themselves in a new way that they like.
The neighborhood investment model has a lot of varieties; the lab members building them in Crenshaw, LA, Seattle, Chicago, Baltimore, Kansas City, and Atlanta are using a variety of financial tools. Some use tax credits, some use crowdfunding as a focus, etc. But they ultimately all have the same goal.
All of them rely on catalytic venture philanthropy. These are investments that accommodate the cost of doing good. Knowing that there will be lower financial return, this capital funds the soft things that are the hardest to raise money for, giving the organization the capacity to do the work and execute the business model that will pay off, but needs some runway to get going.
This capital goes in early, is patient, and can handle risk. If its practitioners are lucky, they have a nose for when something could be big. This model form of capital–the one that fills the crucial mission gaps–is what the church endowment lab two doors down was also thinking about. These capital providers have to be innovative themselves, understanding that innovative new financial platforms like neighborhood investment trusts have to be able to live in a fluid and responsive mode; they have to be flexible because this is new territory where the processes are just being built.
Interestingly, the group that piloted what’s now called catalytic capital (a phrase a group of leading foundations are using) were Catholic women’s religious orders. They did it half-a-century ago, and most of the major economic justice groups that have made a big impact got the start-up money from the nuns. From Calvert, to Root Capital–which essentially created Fair Trade, to your local community development finance institution, the lenders who have funds set up to reach marginalized business owners got their start-up money from nuns.
As it happened, just down the hall from the community investment trust lab were representatives of some of those nuns. They were part of another lab looking at aligning church endowments with their mission. The old, and in some places, still extant policy was to grow the endowment so there would be more to give away. The newer thinking looks at the economic and social impact of the money in the endowment today and asks what more can it do in its community and still make money.
The mostly Episcopal endowed churches in the lab really liked the approach that nuns have used for years. This lab’s participants have decided that they want to form a community of practice as “Nuncopalians” engaging with their local economies following the historic and cultural practice of the nuns. The nuns, though they are aging, are still deploying large, collective funds themselves, doing the kind of work that churches with endowments are thinking about. This partnership would not work far into the future when there are likely going to be fewer nuns with decades of investing experience. The timing of this intersection is amazing right here and now.
Church endowments almost always have a local focus; they were given in the estate of a wealthy parishioner to churches in their town. There has been an awakening, particularly after the death of George Floyd and also as Covid exposed serious economic disparities, among a growing group of boards for church endowments. They are beginning to see that their assets need to be used now to respond to the crises around us. Many have also seen the connection between racial and economic justice, and they want to be active in local economic justice causes. Following and learning from the practice established by the nuns who’ve been investing their pension in economic justice for 50 years is appealing to a denomination that likes ritual and tradition. Several of the endowment leaders are also members of a cohort of asset holders learning together to follow that model. That cohort includes even more representatives of the investment funds of scores of orders of nuns.
In short: The nuns have a model that Episcopal endowment leaders want to learn from and emulate.
Lab members also realized that they need their asset managers to get the new focus on investing locally, and they want to work together to recruit people who can help them move their money in the way they are learning. When you have a lot of assets to move in various investment categories, this work can be complicated and take more time than it does for an individual.
The asset managers are not used to carving out a part of allocated capital for local, mission- focused investments that make around five percent a year over three years. That’s about what neighborhood investment trusts are returning to investors; it’s a lower than market rate financial return on real estate, so to invest in it you have to actually value the social value created. That’s where remembering Jesus’ teachings on caring for your neighbor helps us all, especially those managing church endowments, to accept the smaller fiscal report.
As one endowment leader said; “I can sell my board on four percent (return) if there are jobs created. If it’s a five to even six percent return that brings community ownership of commercial real estate and Black Wall Streets are expanded to people in those neighborhoods, in my city, that’s something we are very interested in.”
Our slogan for the convening was, the innovation is at the intersections. Those two labs were unknowingly on a collision course, meeting at exactly the right time for both sides.
In the community investment trust lab, the neighborhood trust practitioners had realized their model could be broadly replicable in many places around the country because it could thrive in a relatively wide variety of financial models. All of the models delivered the goal of neighbors investing in neighbors to preserve and expand Black and brown businesses. Since they would not all have to adopt one approach, they could raise a fund provide start-up funds for all kinds of businesses.
Realizing they had a solution, the Community Investment lab members came into the endowment lab and said, “Hey, please listen to us. You say you want to move your money to be in line with your mission. We have a place to invest your money and make a significant positive change in your cities. Why don’t you give us the money?”
The endowment lab participants, having been talking about responding with their capital to the needs of the community the way the nuns have historically done, were remarkably receptive. And relationships and meetings that could eventually lead to the creation of a fund to replicate and expand neighborhood investment trusts around the country, through a growing network of endowed churches of several denominations, is emerging as a possibility.
Elise Douglass, of BBF-Co., an innovative financial professional whose company has helped several of the investment trusts in the lab, and who is an expert on marketing and messaging, is one of those knitting the effort together. We at Neighborhood Economics want to keep working with the emerging coalition and partnerships, to act as market scouts and to connect the dots.
We will stay engaged with these two labs, and we will keep you updated as the conversation continues. The goal, believe it or not, is to create the $100 million dollar fund the lab members dreamed of.
This is but one story from Neighborhood Economics, Indianapolis. For the next eight weeks, we will be highlighting a different lab each week and telling stories about work that is continuing from each lab. An interview with Lyneir Richardson, leader of the Community Investment Trust lab, can be accessed via our newsletter.