The Central New York Community Foundation began its journey into impact investing in 2016, when its board approved a policy governing the practice. The foundation can now allocate up to 5% of its general funds towards loans, loan guarantees, nonprofit equity investments and other impact investment strategies and engage donors in these opportunities through their donor-advised funds.
The first opportunity was a secondary capital investment in the local community development credit union, which serves a customer base in our area which is notably ‘under-banked,’ a higher credit risk, composed primarily of people of color, and generally overlooked by mainstream financial institutions. This investment functions like an unsecured bond, paying below-market interest but generating significant local impact through loans by the credit union to its customers.
Over the 10-year term of the investment, the credit union will be able make loans for people to purchase cars, buy and renovate homes, and start businesses, loaning out the CNYCF investment on a 35:1 basis. Since making this investment, CNYCF has engaged a number of its larger donor-advised fund holders to join this strategy – with the result being an increase in the initial investment by 150%. To date, three of its larger funds have joined the investment in the credit union, with the investment being held as an asset in their funds.
CNYCF donors were impressed by the opportunity to use creative financial means to leverage significant local impact in a target population over time – something that they would likely have never done on their own. At a time when the issue of poverty and economic equity is a topic of concern in the Syracuse region, CNYCF was able to use an impact investment as a means to engage donors in a new way that amplified its ability to address these issues. CNYCF intends to replicate this strategy with other donors and with other impact investments that it makes in future years.