The Sandtown community of West Baltimore gained renewed national attention in light of the April 2015 death of Mr. Freddie Gray at the hands of police. The tragedy unleashed, yet again, the great tensions that exist between law enforcement and under-resourced communities of color in the United States and shed light on the range of challenges that continue to plague Sandtown and similar communities, such as high rates of poverty and unemployment, violent crime and incarceration.
A 2011 report on Sandtown and nearby Harlem Park compared social indicators of these communities with those of Baltimore as a whole, revealing rates of homicides and shootings that roughly double the city’s rates. Three percent of the Sandtown community is incarcerated according to a New York Times article, with more people incarcerated in Sandtown than in any other Baltimore neighborhood. A study by the Justice Policy Institute and the Prison Policy Initiative indicated that Maryland taxpayers spend as much as $17 million annually incarcerating people from the Sandtown and Harlem Park communities.
Amidst this bleak picture, opportunities for a vibrant and safe Sandtown are immense and diverse stakeholders are engaged in efforts…
Amidst this bleak picture, opportunities for a vibrant and safe Sandtown are immense and diverse stakeholders are engaged in efforts, particularly pertaining to supporting people impacted by the justice system. For example, Johns Hopkins University—a Living Cities Integration Initiative partner—runs a job training and hiring program for formerly incarcerated individuals. The Open Society Institute-Baltimore recently launched the Baltimore Justice Fund, awarding grants to a diverse pool of organizations including those working to reduce police brutality and increase accountability of the Baltimore police force, and others offering arts and advocacy programs for youth. To date, it’s unclear whether Open Society Institute-Baltimore will sustain the Fund. In addition, supported by the Citi Foundation and Living Cities, Baltimore’s City Accelerator Initiative is underway—an effort to engage formerly incarcerated residents of Baltimore in developing strategies around strengthening services and supports for residents returning home following incarceration.
The nation is also at a more hopeful juncture with regard to justice reform. According to a report produced by the Opportunity Agenda, public opinion research indicates that Americans believe it is critical to address the underlying social and economic causes of crime and that although retribution is still important, equally important is rehabilitation, treatment and education for individuals making contact with the justice system. A unique bipartisan consensus exists that justice reforms are long overdue. More recently, sentencing reform bills have been introduced in the Senate and House of Representatives—the SAFE Justice Act and the Smarter Sentencing Act, respectively—designed to limit the application of federal mandatory minimum drug sentences. President Obama also announced a set of efforts aimed at reducing the challenges and barriers confronted by individuals transitioning home post-incarceration.
Innovative financial tools, such as impact investments, can provide more patient capital to fund efforts supporting people impacted by the justice system.
Amidst these encouraging efforts and developments, more opportunities for innovation remain. More specifically, innovative financial tools, such as impact investments, can provide more patient capital to fund efforts supporting people impacted by the justice system. The Global Impact Investing Network defines impact investments as investments made into companies, organizations, and funds with the intention to generate social and environmental impact alongside a financial return. The field of impact investing has gained traction in recent years, with stakeholders recognizing the scope and scale of today’s social challenges require private capital to work alongside public resources and traditional philanthropy.
A diverse set of investors exist in the impact investment ecosystem, including banks, pension funds, institutional and family foundations, and government entities. Social impact bonds (SIBs) are a popular impact investment vehicle, providing funding for social programs through state and local government coordination, private investment and nonprofit implementation. Recent efforts present important lessons and challenges in the SIB space, but another impact investment vehicle—Community Investment Notes—may offer opportunities for engaging concerned people of modest means intending to leverage their financial resources for positive impact.
Organizations such as the Calvert Foundation offer Community Investment Notes—debt securities designed to deploy capital to community development initiatives. Individuals can purchase Notes for as little as $20 online with financial returns of 2-3% at terms of one to 10 years.
Given Sandtown’s high rates of incarceration and violent crime, some impact investors may have interest in investing in people impacted by the criminal and juvenile justice systems; more specifically, financing efforts centered around pathways for education, employment and permanent housing for currently or formerly incarcerated people—critical components of a successful return to the community post-incarceration and that also contribute toward reducing future contact with the justice system. This particular pool of impact investors could purchase Community Investment Notes through the Calvert Foundation. Proceeds from the Community Investment Notes could provide below-market loans to nonprofit organizations and social enterprises offering programs and opportunities comparable to:
Defy Ventures, an entrepreneurship and employment program for people with criminal histories;
Made in Brownsville, providing employment-based education to youth in design thinking, art and multimedia. Made in Brownsville programming extends to justice-involved youth through partnerships with the Center for Court Innovation’s Brownsville Community Justice Center—which builds alternative pathways for youth who come into contact with the justice system;
Prison-to-College Pipeline at the Prisoner Reentry Institute at the John Jay College of Criminal Justice, aiming to increase the number of incarcerated and formerly incarcerated people who go to college and succeed there; and
RisingFoundations, creating access to housing, employment, and financial services for formerly incarcerated people.
Social returns for impact investors would include increased educational credentials, employability and earnings for individuals participating in the types of programs and opportunities described above, which are critical to healthy and financially stable families, and in turn, contribute to a safer and more economically vibrant Sandtown community. Impact investors would receive financial returns on their investments through interest payments and loan repayments from investment recipients. Loans would be repaid in a variety of forms, not limited to, but would include:
Income earned from business activities. For example, Made in Brownsville profits generated from products sold, such as apparel, and web design or print-making services provided to clients. Also, profits generated from successful businesses established by graduates of Defy Ventures;
A portion of former program participant salaries once graduates of the Prison-to-College Pipeline gain stable employment opportunities; and
A portion of mortgage payments on homes once graduates of programs like RisingFoundations become homeowners.
Impact investors can expect financial returns of 2-3%, consistent with returns provided by Calvert Foundation Community Investment Notes. Some Community Investment Notes also offer investors the opportunity to reinvest returns once the Notes reach maturity.
To ensure investments have impact on the targeted population, there is opportunity for collaboration with members of the Baltimore City Accelerator Initiative. Members of the Initiative could contribute to important decisions, such as appropriate recipients of Community Investment Note loans and the development of social impact metrics.
Impact investment vehicles like Community Investment Notes hold much promise…
Impact investment vehicles like Community Investment Notes hold much promise; there is opportunity for the allocation of more patient capital to organizations addressing social challenges—beyond the limited government and foundation funding available—and in the process, engagement of people directly impacted by the investments. Unlike Social Impact Bonds, in which a government entity is typically defining outcomes and metrics of success, Community Investment Notes can allow for a more community-driven approach to capital deployment.
There is opportunity for great social impact in Sandtown, which will disrupt cycles of poverty and unemployment, and high rates of violent crime and incarceration. The next attention drawn to Sandtown can be about the strength, resiliency and prosperity of its residents, particularly those impacted by the justice system.