Living Cities is thrilled that, for the fifth year in a row, our impact investing fund, the Catalyst Fund, has been selected for the ImpactAssets 50 (IA 50). The IA 50 is the only free, public, searchable database of outstanding impact investing fund managers. This honor is important to us because we believe that to get dramatically better results for low-income people, we need diverse leaders to work together to build a new urban practice that advances the most promising practices, including creatively blending private capital with public and philanthropic resources. We are deeply committed to experimenting in this area and to sharing what we are learning. We call this work ‘capital innovation.’
Specifically, our capital innovation portfolio is aimed at catalyzing the domestic impact investing industry and increasing the money flowing into low-income communities at a scale commensurate with the problems we face as a nation. In order to achieve these goals, we are testing new approaches in the following key areas:
1. Blending and deploying different types of capital to create new and deeper ways for institutions to collaborate and to bring private capital to address issues that are important to us. For example, we have financed innovative initiatives in areas including community development, transit-oriented development, small business financing and fresh foods access.
2. Incenting other investors to seek social as well as financial returns to their investments. Despite growing interest and rising awareness, foundations and private investors have been slow to adopt impact investing as a central part of their business models, especially domestically. In order for this to change, we need to prove that it is possible to make money while doing good. And, we need to expand what is possible through private investment. For example, Pay for Success (PFS) enables investors to not just invest in real estate and other physical infrastructure, but also in people. Today, because of PFS, we can drive private capital to improve outcomes in areas such as education, health, and recidivism. Living Cities is proud to have been an early investor in PFS.
3. Ensuring that capital can land in the places that need it most. In the course of developing The Integration Initiative, the Living Cities team was repeatedly struck by gaps in what we have begun to refer to as “capital absorption capacity”—the ability of communities to make effective use of different forms of capital to support the needs of undeserved communities. As a result of this experience, we developed a research agenda meant to illuminate the political, social, cultural and financial elements that allow for the effective use of investment capital in low-income communities.
4. Accelerating and sharing learning about innovation with capital so that others can learn with us in real time. For example, our early investments in the emergent Pay for Success movement and our willingness to share what we are learning in real time is enabling others to bypass the time-consuming and difficult work of figuring out how to underwrite and structure these deals.
We are excited to see the diversity of funds represented in the IA 50, and we look forward to learning from them and to sharing what we are seeing in our own work. This is what it will take for impact investing to become the truly transformational force that we firmly believe that it can be.