November 8, 2018 | The Beeck Center

The Beeck Center recently convened 40 leading real estate investors and developers to Georgetown for a dialogue on Opportunity Zones, established under the Tax Cuts and Jobs Act of 2017 to drive private capital into 8,700 designated low-income census tracts. Some analysts are predicting that more than $6 trillion in capital is eligible for investment in underserved communities. Annie Donovan, Director of the Community Development Financial Institutions Fund at the U.S. Department of Treasury, shared remarks at the event.

The 2017 Act offers investors deferrals on capital gains invested in the nation’s most distressed areas — with the potential for full tax forgiveness on additional gains realized through Qualified Opportunity Funds. These funds must hold 90% of their assets in Opportunity Zones, including stock, partnership interests, and business property, encouraging investors to deploy capital strategically while also creating robust social infrastructure in capital-starved, under-resourced communities. With a median household income of $33,345, a poverty rate of 31.75%, and unemployment rate of 13.41%, opportunity zones stand to benefit immensely from newly mobilized equity.

Despite these provisions, however, many of the policy’s elements remained in flux until October 19, when the U.S. Department of Treasury issued its first round of regulatory guidelines and announced a 60–day comment period for stakeholder input. Attendees shared their perspectives on the guidelines, opening up a productive cross-sector exchange on vital matters of policy, regulation, and compliance.

With its sustained focus on innovative and scalable approaches to complex social challenges, the Beeck Center has long anticipated the need for a cross-sector approach to investing in underserved areas, seeking to ensure that this new legislation is used as a tool for community development and not solely for financial gain. The Center, with initial support from the Kresge Foundation, regularly convenes an expert group of community development practitioners to explore how Opportunity Zones can serve a double bottom line. This working group has grown to include over 40 organizations from across the country.

More recently, in partnership with the Rockefeller Foundation, The Center and the Kresge Foundation reviewed nearly 150 letters of inquiry submitted by Opportunity Fund managers. And together with the U.S. Impact Investing Alliance and the New York Federal Reserve, the Center convened a roundtable of community development investors, researchers, and practitioners in July to discuss the future of Opportunity Zones and the importance of inclusive economic policies.

The real estate convening, supported by the Ford Foundation, furthered that conversation, providing a platform for discussions about potential shared frameworks for meaningful impact and leading-edge policies and practices that can keep people and communities at the heart of place-based investment strategies. This work builds upon the efforts of CDFIs, trusted partners with a record of proven impact in underserved communities.

Significantly, while the 2017 Act allows investors to benefit from Opportunity Zones through tax breaks and competitive returns, it in no way protects community stakeholders from gentrification, displacement, and other consequences that can accompany place-based investment.

The Beeck Center, in collaboration with the working group it leads, has drafted a list of guiding principles for Opportunity Fund investments:

Investors should request that fund managers integrate the needs of local communities into the formation and implementation of the Opportunity Funds.

Opportunity Fund investments should seek to be additive and generate equitable community benefits.

Investors should monitor, measure and track progress against impact objectives, allowing for continuous improvement.

Opportunity Funds should be transparent and held accountable, with processes and practices that remain fair and clear.

Fund managers and developers at this convening offered their own insights into these principles, emphasizing the need to balance support for community-centered investment strategies with fiduciary responsibility to maximize the value of their assets and returns to investors.

Here at the Beeck Center, we believe that economies that are truly inclusive can create sustainable growth across society, affording equitable opportunities through financial innovation. And as protectionist policies at home and abroad destabilize markets and perpetuate injustices that have marginalized historically underserved communities, inclusive practices can help us change course decisively — driving down inequality and ensuring widespread economic and financial well-being.

We believe that the best policies put people first, and that putting people first begins with bringing people together— especially folks who might not cross paths very often, like the investors, developers, and government representatives we welcomed to campus for this dialogue. It’s why a centerpiece of our work is investing in leaders from the public, private, and the social sectors; convening them to explore the most wicked problems we face today; and creating the multi-sector infrastructure we need to deliver positive outcomes across society, particularly for our most vulnerable populations.

We drive impact, rather than implementation, at scale because we see the change around us as a reminder — that well-intentioned initiatives out of touch with everyday life are inevitably out of reach for the people they’re meant to serve. And we challenge ourselves and our partners to rethink the fundamental assumptions that introduce and perpetuate structural injustice, leveraging our work across policy innovation and impact investing to move our thinking forward and more meaningfully serve our communities.

Opportunity Zones offer a great deal of promise to that end, and it’s up to all of us to ensure that everyone stands to gain.

This post is part of our Student Summer Series, which highlights the perspectives of students working at the Beeck Center as they engage and explore ways to scale social impact.

August 15, 2018 | By Eunice Jeong, Student Analyst, Georgetown University Class of 2020 

As educational centers serving students as well as larger communities and cities, universities hold great potential for advancing important discussions on modern social problems and the potential for strategies such as socially-conscious investing to help address these issues. Large schools around the world, often with endowments upwards of $1 billion, hold a unique position in the eyes of communities and the media. These schools are developing the next generation of social impact leaders – government officials, educators, and social entrepreneurs – and they have a significant opportunity to shape the future of socially-conscious investing. Through their own investment of endowment funds and the courses they offer to students and executives, universities can lead by example to promote impact investing and build the capacity of the next generation of leaders to do the same.

This summer, Cambridge University confirmed its divestment from companies in the fossil fuel sector as part of its new commitment to using part of its £3 billion endowment to address climate change. The Cambridge University Endowment Fund (CUEF) investment plan includes a comprehensive review of environmental impact funds, education for university leaders on the topic, the creation of a university Centre for a Carbon Neutral Future as a center for sustainable energy research and related policy discussions, and a commitment to complete carbon neutrality on campus by 2050.

Closer to home, Georgetown University’s board of directors announced in June 2015 that the university will no longer invest its endowment in companies whose principal business is mining coal for energy production. They came to the decision after mounting pressure from student and community groups such as GU Fossil Free, which set up pickets on campus demanding accountability from the Georgetown board and presented its proposal in multiple meetings with the board of directors and President DeGioia. In addition to this divestment, the university is committed to evaluating topics related to socially responsible investments and endowment management. While Georgetown’s financial disaffiliation from coal companies is not yet as extensive as Cambridge’s commitment to actively investing in sustainable energy options, divestment itself is an important first step in impact investing on a campus scale.

Socially-conscious investing is starting to catch on in similar ways in other schools as well. Many consider socially responsible decisions to be part of a university’s obligation to its students and larger community. As students and staff demand that school directors and advisory boards tackle relevant social issues, university commitments to impact investing are starting to become more common. Efforts in campus impact investing can be seen in the boards of other large universities across the country, such as Harvard, Brown, and Boston University. For Georgetown, addressing fossil fuel companies’ effect on climate change problems can be considered to be part of the Jesuit mission of the school – in an official statement, DeGioia remarked, “As a Catholic and Jesuit university, we are called to powerfully engage the world, human culture, and the environment – bringing to bear the intellectual and spiritual resources that our community is built upon…The work of understanding and responding to the demands of climate change is urgent and complex. It requires our most serious attention.”

In addition to promoting impact investing with their own endowments, schools can also provide opportunities for their students to learn about impact investing and tools to apply in their careers. This year, the University of Cape Town will launch its first course on impact investment for lawyers through its Graduate School of Business. The course will be convened by the Bertha Centre for Social Innovation and Entrepreneurship. Program convener Susan de Witt remarked, “Impact investment is growing at a rapid pace, both globally and in [South Africa], and as more international funding becomes available with demands for better social and environmental as well as financial returns, there will be a need for legal expertise to craft the kind of agreements and deals that will ensure these outcomes are realised.” Other universities should consider implementing similar programs so that students can learn to implement social impact investing practices in their future careers. This program is similar to other established programs such as the Social Impact MBA program at Boston University aimed to teach business management with a social impact mindset, aimed toward students interested in the nonprofit and social sector.

How else can schools promote impact investing for students outside the classroom? Socially conscious investing efforts can come directly from the student body in the form of student organizations like the Wharton Social Venture Fund – similar projects exist at the University of Michigan, Columbia University, and the University of California, Berkeley. Students interested in learning about the subject can create or join clubs like Net Impact, a student organization based off the national nonprofit which aims to support business-minded students in pursuing social and environmental impact causes. The organization has chapters in universities across the country. Schools can also host conferences and speaker events featuring impact investing experts and give students the opportunity to learn and network with leaders in the field.

Looking forward, university-sponsored impact investing, whether it’s directly through endowment investments, or indirectly through student education, has significant potential to make a difference in communities and in the next generation of leaders. Schools looking to follow in the footsteps of Cambridge, Georgetown, Wharton, and Cape Town must carefully analyze their priorities and the needs of the surrounding community so that the investments that they produce lead to real returns and social impact. In this way, universities today are in a position to leverage their significant power to create lasting social finance solutions and build the capacity of future leaders.

This post is part of our Student Summer Series, which highlights the perspectives of students working at the Beeck Center as they engage and explore ways to scale social impact.

July 30, 2018 | By Caprice Catalano, Student Analyst, Georgetown University Class of 2020 

Impact investing is a hot and trending topic. In fact, during the past year, the estimated value of the impact investing sector has doubled, with assets under management rising to $228 billion. So, what exactly is impact investing? 

Before joining the Beeck Center as a summer student analyst, I was asking myself the same question. I was surprised to discover how little I knew about impact investing, given the massive amount of assets held in this sector and my undergraduate studies in finance in the business school. Over the past two years, I have been immersed in learning about stocks, bonds, and other financial investments. I learned to seek investments that provide the most “bang for your buck,” but I failed to consider the fact that an investment can do a whole lot more than generate profit. 

In addition to profit, financial investments have the power to achieve positive social and environmental impact. Impact investments are investments made in companies, organizations, and funds with this multi-faceted intention in mind. The Beeck Center has helped me realize the full potential of investments by providing me opportunities to participate in conversations on impact investing, such as at Alley’s Impact Investing Panel Discussion and Demo Night.

At this event, I engaged with individuals who live and breathe impact investing. The panel discussion consisted of venture capitalists who invest money into startups that produce positive social and environmental impact, along with strong financial returns. I also had the chance to speak with multiple social entrepreneurs. Unlike most business executives who use social impact to gain good publicity, social entrepreneurs consider catalyzing social change from the outset.

In the panel discussion, the venture capitalists provided great insights into the impact investing field. They commented on the upsurge in impact investing funds and the motivation behind it. Several panelists attributed the rise in funds to consumers’ desire for businesses to become more accountable, transparent, and action-oriented towards social problems.

The panelists moved on to challenge one of the major criticisms facing the impact investing field, which is the concern that impact funds do not generate robust returns. Hallie Noble, the head of Village Capital’s U.S. FinTech Practice, contested this criticism with the fact that 50 percent of venture funds do not even make their investment back. How can we disparage impact funds for not providing robust returns when essentially no venture capital makes a robust return?

An interesting conversation on identifying and measuring impact also emerged among panelists. One way that Village Capital strives to generate impact is by eliminating the bias present in venture capital funding access. The firm invests in entrepreneurs who might otherwise be overlooked by traditional early-stage investors. Venture capital cannot be restricted to white, male entrepreneurs from the Bay Area. These funds must be accessible to all entrepreneurs – with no prejudice against gender, race, socioeconomic status, or any other factor.

I had the pleasure of meeting a social entrepreneur who is directly challenging this funding bias. In 2015, Fonta Gilliam founded Sou Sou, a financial technology company, with the goal of helping female borrowers build their credit score, cash collateral, and financial acumen. The app is open to all users, but it was specifically designed with women and minorities in mind due to the harsh realities they face in obtaining finances. Women are two times more likely to be denied a loan at a bank and are four times less likely to receive venture capital funds. In 2017, only 2% of venture capital funds were given to women, with women of color receiving less than 1%. Gilliam, a woman of color herself, is defying these statistics and her app is working to inspire more women to break through this tough barrier.

Not only was Gilliam’s technology designed for women, but it was inspired by women. Sou Sou, both the name and the company itself, stems from the word, “susu.” Susu refers to an informal savings and loan tradition pioneered by women in West Africa. In this tradition, families and friends lent money to each other when receiving money from a bank was infeasible. Although this tradition began in West Africa, it is used all over the world under a variety of names.

Fonta Gilliam is just one of many individuals utilizing business to tackle social problems. Her work and pursuits demonstrate the importance in companies, investors, and consumers coming together to find investments that can unleash social change. Together, we must push businesses to shift from operating under a single bottom line to operating under a triple bottom line – one that considers the planet and people in addition to profit.  

In the short span of two months at the Beeck Center, my knowledge on impact investing has risen exponentially. I greatly encourage other finance-driven students or financial service professionals to seek out opportunities to learn about and engage in this fast-growing and important sector. Learn a way to get an even better and more meaningful bang for your buck.