A group of Minnesota foundations are the latest to announce a commitment to impact investing with their charitable assets.
Led by the Minnesota Council on Foundation (MCF), a consortium of at least a dozen foundations has committed more than $17 million to a fixed income bond fund focused on affordable housing and small lending in the Great Lake State.
The collaborative is expected to exceed $20 million. MCF chose RBC Global Asset Management’s (RBC GAM) Access Capital Community Investment Fund through a competitive process.
The lead institutions are the McKnight Foundation, Bush Foundation and the Otto Bremer Trust. There are at least eight other first-mover foundations bringing the opportunity through their internal review processes, including the Initiative Foundation, PFund Foundation, The Minneapolis Foundation, Mortenson Family Foundation, Schnieders Family Foundation, Sundance Family Foundation and other community foundations, small family foundations and rural-based foundations. MCF also has invested a portion of its investment assets.
Foundations are required to pay out at least 5 percent of the annual value of their investment assets for charitable tax purposes. Traditionally, the other 95 percent of a foundation’s assets are invested to grow its endowment for future grantmaking but in recent years impact investing has taken hold among some foundations, investing in initiatives that generate both financial and mission-aligned social returns.
The Ford Foundation recently announced plans to commit up to $1 billion of its $12-billion endowment over the next decade to mission-related investments (MRIs) focused on inequality, affordable housing, and access to financial services for low-income and underserved communities. The New York, N.Y.-based foundation, which spins off more than $500 million in annual grantmaking, joins a number of other foundations already involved in MRIs, including the Bill & Melinda Gates Foundation, F.B. Heron Foundation, Rockefeller Foundation, and John D. and Catherine T. MacArthur Foundation.
“This money strengthens Minnesota’s market for affordable housing and small business securities and grows the number of Minnesota-based foundations involved in impact investing,” said Susan Hammel, CFA, and impact investing executive in residence at MCF. “The fund will have impact locally but because it reaps nationally diversified returns, it will not have overly localized risk,” she said.
The Access Capital Community Investment Fund works with governments and institutional investors to invest in customized U.S. agency-guaranteed mortgage-backed securities and government-backed loans and municipal securities that support affordable rental housing, small businesses, healthcare, education, and job creation targeted to low- and moderate-income residents and communities. The Access Capital Community Investment Strategy had more than $1 billion in assets under management through 2016.
For more information bout the impact investing collaborative, visit www.mcf.org/impact-investing