Our Neighborhood Economics conference in Jackson, Mississippi, this past spring had a surprising degree of success attracting the leading national catalytic foundations that invest in economic justice.
The Jackson conference was just our second in-person event since the pandemic, and we attracted the MacArthur, Surdna, Heron, and Kellogg foundations, and we are in conversation with Robert Wood Johnson.
These foundations have joined the faith-based foundations that have been the base of our support as we try to create a conference platform for the practitioners and funders working to repair local economies. Our conference is welcoming to people of faith, but it also includes everyone and focuses on the broader community. The MacArthur Foundation has now become the first of the national catalytic foundations to support our bridge-building initiatives at Neighborhood Economics.
As impact investing has gone increasingly mainstream, focusing on investments that create a positive impact while also aiming at a market rate return, the catalytic foundations have come to play a larger role. They know you can’t address historic, systemic injustice and expect to get market rate returns; there is a cost to doing real good. Those foundations have increasingly stepped in, providing the below market, patient capital in the form of program related investments (PRIs) that are needed to catalyze transformation in a place. Their capital is designed to be the interim step beyond grants that will eventually lead to investable projects that can offer a reasonable return.
Those two groups, faith-based institutional investors and the catalytic foundations, do not have a history of doing deals together, of co-investing in projects together, or even being aware of each other’s impact. A recent Bridgespan study said that faith communities in most cities account for about 40% of the social safety net, but only get 12% of safety net funding put out by the 15 largest foundations. That’s because of a belief by the foundations that faith groups are slow and divisive.
Devin Murphy, a Bridgespan partner and coauthor of this study, said, “Large institutional philanthropy’s discomfort with faith-inspired nonprofits is often grounded in both searing personal experiences and a complicated historical relationship between faith traditions and many aspects of social justice. Though many faith traditions share a common concern with fighting poverty, some have also been a source of harm, trauma, and hardship. This complex history can make it hard for funders to discern which faith communities’ organizations are aligned with their equity values and impact objectives.”
The study notes that the role of faith is more important in communities that have been marginalized by, and left without access to, public institutions. This includes Black and Latino communities as well as low-income people and rural America.
Those communities are the focus of our work at Neighborhood Economics, so the catalytic foundations, seeing the outsize role of the Black church, for example, in solving the housing crisis in Jackson, was especially significant. And we were able to bring in four faith-based institutional funders to the conference: Trinity Church Wall Street, Crossing Capital, Cornerstone, and the United Church of Christ’s Building and Loan fund. These funders have a history of working with grassroots, church-based initiatives.
Because between 50,000 to 100,000 churches are likely to close in the next five years, according to research reports, those funds, formerly positioned as church building funds, have morphed into something closer to community revitalization funds with a goal of preserving a worship space while creating affordable housing or even renovating church-owned real estate to enable neighborhood-scale business and job creation, as in this example in Louisville, KY by the UCC fund.
Yet few of those faith-based funds have combined to invest in projects with the catalytic foundations that came to Jackson. Also attending was the Texas Methodist Foundation, one of the key supporters of the convening in San Antonio, along with the H. E. Butt foundation, a secular foundation with a focus on Texas. They are our local anchor supporter for the February conference.
Because we were surprised and delighted with their presence at Neighborhood Economics and wanted to know more, new Neighborhood Economics staffer Jeremiah Robinson, who has joined us to lead strategic partnerships after a stellar career launching a start-up funding for under-represented entrepreneurs at Mountain BizWorks, an Asheville-based CDFI, and I interviewed the foundations who came. We wanted to find out what attracted them and what they found different about the conference. We want to be strategic to build bridges between these two funding groups and help them become unlikely allies.
“What I thought was so interesting about it was hearing from folks that I just don’t hear from in the regular course of our work,” said Adam Connaker of the Surdna Foundation. “The presentation on the taxation, housing tax policies, and the bias and discrimination and inequities embedded in those policies was fascinating to me. It’s not part of what (foundations) get in their regular course of work.
“What made the conference so interesting was these examples of very hyper-localized impact and understanding their intersection with institutional finance. The example from the churches was fascinating. Some of the examples are just intersecting with the church’s own work. That makes me think about how foundations use their endowment toward their beneficiaries with our focus on social justice. We enact that primarily focused on racial equity, racial justice,” Connaker said.
Connaker said Surdna is among the large group of foundations exploring how to do more in employee ownership, and we plan to have more sessions focused on that in San Antonio, in response to that movement.
Lesley Payne of the regionally-focused Irvine Foundation is also looking at employee ownership as a growing focus area. Payne said that having the conference in Jackson, a place almost none of the foundation executives had been to, enabled them to see things they haven’t seen before. She mentioned that, like Connaker, the linking of existing grassroots initiatives with faith-based institutional funding was new to her and to other foundations. “The involvement of the Black church was amazing,” she said. “That was really strong.”
Alison Clark of the MacArthur Foundation, when asked why she attended Neighborhood Economics, said, “I was intrigued by this conference and a couple of different people had mentioned to me that I should take a look at it. Several of our grantees were there. Lyneir Richardson, in particular, and other organizations that we were looking at, including Partners in Equity. And then there were just lots of other people that I knew from various sectors who were going to be there. And I think that the focus was interesting, really focusing on place-based investing. I think it’s something that certainly resonates with the work that I’m responsible for working on in Chicago.” For Clark, too, the location was a draw. “I go to Atlanta and Dallas, and it was actually kind of fun to go to a new place and be able to see it in depth.”
A new area MacArthur is focusing on is the intersection of housing and citizens returning from incarceration. “Housing instability and jail involvement is growing. The chances of being housing-unstable once you are jailed goes up nine times,” Clark said. MacArthur is funding a promising model to address that problem in four cities, and we hope to have a session on that work in February. “Trying to create opportunities for those individuals is critical.” The initial cohort trying the new method is working in San Francisco, Sioux Falls, South Dakota, and Charleston, South Carolina. But Clark is looking at St. Louis, Quincy, Massachusetts, Aurora, Colorado, and Toledo and Columbus, Ohio. “In small cities, they have very visible homeless populations and don’t have the same kind of infrastructure of organizations to be able to address it as larger cities,” Clark said.
Clark also connected us to Collette English Dixon at Roosevelt University. Dixon is training a group of Black property developers, including Richardson, and working to forge them into a coherent peer group and helping address their common fundraising problems.
It’s harder for Black-led projects to raise the kind of money that projects led by white developers can, partly due to a dearth of relationships with investors or investors’ habit of putting less money into Black-led projects. Dixon will be leading a session in San Antonio and introducing us to some female developers of color to be part of that session.
We are going to continue to highlight the promising initiatives funded by the groundbreaking catalytic foundations that resonate with our approach of focusing on place-based investing to heal local economies and involving faith-based investors with all the constituencies focused on economic justice.