Many place-focused foundations become local impact investors to have more impact than their grant budgets allow. Foundations seeking to promote affordable housing, wealth creation, or entrepreneurship become impact investors because investments might be a better tool for creating the impact they seek. Investments can also leverage other investments from banks and public entities. Finally, some foundation stakeholders such as board members, donors, and even grantees are expecting foundations to offer local impact investments. 

Is local impact investing needed in my community?

Probably, yes. Most investing favors simple and large transactions. Typical investors do not consider the community benefits as part of the return of their investment. Local impact investing can help catalyze transactions that produce workforce housing, childcare centers, food access, clean energy, and other needed community assets.   

What money do foundations use to make local impact investments?

The Community Investment Project supports foundations in making mission-aligned local impact investments by exceeding their grant distributions and using portions of their investable assets or endowments. Many foundations create a new “local impact investment” asset class in their portfolio. Occasionally, foundations may blend in small portions of their grant making dollars to make exceptionally risky investments. 

Is local impact investing risky?

All investing comes with risk. Investing for social impact in your community as opposed to global markets comes with different and potentially greater risks. Foundations should anticipate over their lifetime that some investments will go bad and that the foundation might lose some capital. To control for this risk, foundations establish clear guidelines to help assess and balance risk against the foundation's overall goals. 

How is local impact investing different from other forms of impact investing?

Most impact investing doesn’t serve communities. Divesting from tobacco, investing in diverse managers, and supporting solar energy funds can make a difference, but these impact investment strategies don’t directly help advance community goals like creating living wage jobs, addressing neighborhood segregation, or building grocery stores in a food desert. Local impact investing aims to serve a community and its residents and is most frequently practiced by foundations with a mission to serve a specific geographic area. 

How does my foundation get started?