Investing Playbook

The Impact Investing Industry: How the Reinvestment Fund Is Changing the Game

When Reinvestment Fund was named Global Impact Asset Manager of the Year by the Global Social Impact Investment Steering Group (GSG) in July 2017, the award came after decades of achievement in the impact investing industry. Reinvestment Fund’s work has built affordable housing and important amenities like grocery stores within communities in need. We sat down with President and CEO Donald Hinkle-Brown and Amanda High, chief of strategic initiatives, to talk about the fund’s philosophy, successes, and future.

A History of Success

Reinvestment Fund was founded in 1985. At that time, divestment from apartheid-era South Africa was a prominent goal of social justice activists. Hinkle-Brown explained that divestment campaigns fostered growth in the impact investing industry. “It was natural for these people who were organizing around divesting from things that they morally could not support to think about how some portion of their money could explicitly support things that they had a lot of alignment with,” he said.

Since its founding, Reinvestment Fund has implemented many successful initiatives to empower low-income communities. For example, the fund coordinated and financed the development of the Nehemiah Homes in West Philadelphia, the first affordable home ownership development in Philadelphia with more than 50 units.

Another of Reinvestment Fund’s successes was the Pennsylvania Fresh Food Financing Initiative, which brought grocery stores to underserved areas. That initiative “has since become a national model, with about $200 million of federal money going to our peers across the country to finance fresh food,” Hinkle-Brown said.

Connecting People to Data

In addition to supporting disadvantaged communities, Hinkle-Brown emphasized that Reinvestment Fund empowers people by increasing access to quality data. “We’re not just connecting money to [people] disconnected from financial marketplaces,” he said. “We are connecting data to people disconnected from wise and intelligent data.”

High said that community development decisions must be based on reliable data, especially when they drive the use of public funds. “We feel that it’s very important for those decisions, particularly when subsidies are involved, to be informed richly and completely by objective data.”

Early childcare is one field that’s benefited from Reinvestment Fund’s data-centered approach. Oftentimes, Hinkle-Brown explained, there are “dense clusters of high-quality early childcare that people have to migrate to. And it is inconvenient for them, it is not optimizing parents’ commutes, nor is it optimizing access for those with fewer transit options.” That was the case in Philadelphia, where Reinvestment Fund found that only 17% of early childhood education seats with licensed providers were rated as high-quality by the state. To make it worse, those high-quality providers were not accepting new enrollments.

To address this disparity, in 2014 Reinvestment Fund partnered with the William Penn Foundation and the Public Health Management Corporation and launched the Fund for Quality, which provides low-income families with access to high-quality early childcare.

Reinvestment Fund built an analytic tool that explores the geography of Philadelphia’s early childcare market and pinpoints where high-quality seats are needed. “We map the supply and demand of early childcare, and also map the quality of the childcare. And then, as a result, we can find regions of the city where there is a dearth of supply for early childcare resources,” Hinkle-Brown said.

The data was available to childcare providers for use in planning expansions, and they were able to apply for planning grants from the Fund for Quality to launch their developments. Providers could also receive capital grants or loan funds to finance new high-quality early childcare seats. By the spring of 2016, the fund’s efforts led to 630 new early childcare seats across 17 centers. 90% of seats went to children from low-income families.

Reinvestment Fund and the Impact Investing Industry

High said she’s optimistic that public attention directed at the impact investing industry will inspire other organizations to find new ways to help low-income communities. “We’re certainly hopeful that the groundswell of interest and curiosity around impact investing will prompt innovation, which is very much needed if we’re going to solve the really challenging problems in these communities.”

Hinkle-Brown argued that impact investors should prioritize activities that have real-world benefits for disadvantaged people, rather than just trading existing securities. “When you invest money in mortgage securities, and you move them from preexisting mortgage securities that aren’t impacting low-income people, and then you buy the securities that are impacting low-income people, you haven’t changed anything if the securities were already on the marketplace,” he said. “You change things by creating new securities or new financial instruments, when fresh money reaches the ground.”

Hinkle-Brown said that he and his colleagues were “thrilled” with the recognition Reinvestment Fund received. Being designated Global Impact Asset Manager of the Year is especially significant to him because this was the first time GSG, an international organization, recognized a debt provider in this way. “Internationally, impact investing has been heavily focused on microfinance and private equity finance,” he added. “To win that award as a debt provider and as a nonprofit loan fund in the United States, that was the first time that our sector had been acknowledged in that way.”

The award sends a clear message to other debt providers that there is strong demand for investments that help disadvantaged communities. “If you have the ambition to reach towards the capital market, they will not only respond well to you as a general capital provider, but they will respond well to you because of the mission of your organization,” Hinkle-Brown said.

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