This tool, developed by Living Cities and the Initiative for Responsible Investment at the Harvard Kennedy School, supports communities in understanding what actions they might take to successfully take investment capital and apply it to community development purposes.

We believe that understanding the overall ecosystem (the interplay of the actors and functions that produces an environment for community investment) in a particular community is just as important as identifying the specific actors that are present or absent in that community.

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 provide needed goods and services to underserved communities. As a result of this experience, Living Cities is sponsoring research meant to illuminate the political, social, cultural, and financial elements that create capital absorption capacity. Our focus is not on the supply of capital, although an adequate supply of capital is clearly fundamental. Nor are we focused specifically on the nature of, and ways to build, investment intermediaries that meet certain criteria of scale and sectoral reach. Instead, we are looking at how communities themselves deploy investment and create an environment that puts dollars to work on behalf of low income people.

How do communities successfully take investment capital and apply it to community development purposes? Add your thoughts 

Our goal is to build a new framework for understanding capital absorption capacity. The framework assumes that many stakeholders – from intermediaries to community groups to public agencies to the mainstream investment community – are required to make community investment possible. These stakeholders interact with each other and with the policy and regulatory environment in places to create an ecosystem for capital absorption. We believe that understanding the overall ecosystem (the interplay of the actors and functions that produces an environment for community investment) in a particular community is just as important as identifying the specific actors that are present or absent in that community.

What follows is our current draft framework for analyzing the capital absorption capacity of specific places. Think about how this framework applies in your community, and what actions you might take to make the functions and the ecosystem more robust.

For the purpose of analyzing capital absorption capacity, we define community investment (CI) as the application of public and private capital to achieve targeted outcomes for underserved communities, giving all citizens the chance to lead healthy, productive and fulfilling lives. In the words of former Federal Reserve Bank governor Elizabeth Duke, CI “is based on attention to both the physical infrastructure, whether housing or commercial spaces, and the health and welfare of the residents therein.” It brings together real estate, business development and social service investments in ways that make each more effective.

We need to answer the question: How do communities successfully take investment capital and apply it to community development purposes?

Resource Document: The Capital Absorption Capacity of Places: A Research Agenda and Framework
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Resource Document: Capital Absorption Worksheet
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