Aligning Grants with Impact Investments Can Help Catalyze the Growing Impact Investing Field

Posted by Amy Chung, Jed Emerson on

Impact investing—the deployment of capital with the intent of not only generating financial return, but also producing measurable social and environmental impacts—is not new. Living Cities has engaged in impact investment for more than two decades and it continues to be a core part of work. Our capital has been leveraged nearly 30 times over, resulting in over $16 billion of financing that has helped build schools, affordable housing, clinics, childcare and job training facilities in cities across the United States.

But there’s more to be done. Living Cities and ImpactAssets have released a paper about aligning grants with impact investments. It has been my pleasure to partner on this paper with Jed Emerson of ImpactAssets, a widely recognized international thought leader on impact investing.


We argue that grants can be used both to prepare transactions for impact investment and to decrease the risk of such transactions. By using their dollars in this way, foundations, family offices and government have the opportunity to develop and support socially driven financing models that can attract impact investors to use their resources to achieve the social and environmental goals we care about.

For example, the $50MM Bay Area Transit Oriented Affordable Housing Fund (“TOAH”), was made possible by the public sector providing $10 million of subsidy (essentially through a grant). As these funds accepted the most risk, they were able to attract $40 million in capital from three other types of impact investors, each of which accepted a different but lower level of risk. The end result of the public sector subsidy and the layering of impact investor capital was the creation of a pool of capital dedicated to affordable housing near transit that was larger than the amount that the public sector alone could have provided.


Although recent writing about grants as a catalyst for impact investing has tended to focus on international investments, our paper describes examples of domestic activity. Much less attention has been paid to the U.S. market, which is both varied and significant in size. We hope that this paper will stimulate a dialogue on coordinating grants with impact investments, particularly in the U.S. market. We invite you to read our paper and to join in the discussion.

Resources