3 Considerations when Choosing Impact Investing

By Jennifer L. Danic, President and CEO, Steuben County Community Foundation

There is growing interest about impact investing by community foundations—and there should be! Investing assets into a project that provides a mission return to your community and a financial return back to your foundation can be an excellent idea.

As CEO of the Steuben County Community Foundation, I am also the CEO of a 140-mile broadband fiber network. This started through an impact investment by the community foundation, even though the term wasn’t expressly used back then. Every resident in our county is impacted, the network has boosted the foundation’s asset size by 15%, and all profits are given back to the community foundation for grantmaking.

But it hasn’t been easy. It has taken 15 years, 40 different board members, 3 CEOs, $4.5 million dollars in donations (public and private), and overcoming some tense community politics to make it work. And we know tomorrow will bring new, unknown challenges.

Some things for you to recognize before considering an impact investment:

1. There is a reason no one else is doing it. If you really want to make an impact, remember you will be investing in a new project that others have not—for one reason or another. No one else was going to build a fiber network in a rural community in northeast Indiana. The upfront capital costs were enormous compared to the potential return on investment from a small rural population.
2. You are now an expert in the field. If your foundation invests in an unmet community need, by default, you are now the expert on meeting that need. I was not previously trained to be the CEO of a fiber network. But today, I use the terms demarc, IRU, and POP when conversing with others in the industry. (Those words aren’t found in textbooks at the Lilly Family School of Philanthropy!)
3. The mission is more important than the margin. Impact investing blends mission and profit metrics, but only one can be the top focus. Our mission was to get the community access to a broadband fiber network. Our foundation accepted from the onset a financial profit was secondary and uncertain.

A successful impact investment requires deep knowledge of a community need and flexible leadership willing to be creative in meeting that need. With the expanding role of community foundations, impact investing can be a win-win for your community and foundation!

Jennifer L. Danic
Steuben County Community Foundation

Editor’s note: Indiana Philanthropy Alliance has promoted impact investing through a variety of educational programs available to our members. If you are interested in additional information on this topic, including resources, past webinars, and professional advisors, please contact Terri Johnson. One of the most comprehensive resources for impact investing is Mission Investors Exchange. This nonprofit organization is where philanthropic innovators share ideas, tools, and experiences to increase the impact of their capital. One of the most valuable resources they provide is the “Community Foundation Field Guide to Impact Investing.” You can find this on their website under tools.