Investing for Impact: How to Maximize, and Measure, the Impact of Your Charitable Dollars

In 2020, the Trust launched our Impact Investing Program to help donors generate greater impact through their donor advised funds (DAFs). Impact investments mobilize capital with a goal of advancing equity and opportunity alongside financial return. Participants in the Trust’s program can recommend investments from their DAFs, increasing the impact of charitable dollars even before grants are made.

But what does it mean for your investments to have an impact? While many of our fund-holders express interest in impact investing, they want to know how to measure the positive change their dollars are making, and how their investments compare to those focused solely on financial returns. 

The Trust currently offers 10 impact investment opportunities ranging from financing affordable housing and community development in Chicago neighborhoods to supporting socially conscious companies and addressing global climate change. The Trust partners with CapShift, a leading impact investing platform, to provide insights on the ways our donors have had an impact in alignment with the U.N. Sustainable Development Goals.  

Here are some ways to think about impact when it comes to investing:

Strategy 1: Engage Locally

When building our program, the Trust set out to mobilize our impact investing dollars to improve access to capital in Chicago’s communities of color. To do so, we turned to trusted Community Development Finance Institutions advancing solutions for individuals and businesses in the local Chicago community. These investments bring much-needed funding to individuals and businesses of color, support economic and community development, and encourage affordable housing and homeownership in some of Chicago’s most underserved communities. For example:

CCLF: Chicago Community Loan Fund (CCLF) is an early-stage lender in communities that struggle with abandoned properties, poverty, crime, unemployment, and limited access to quality goods and services. The Fund invests in community developers, affordable housing cooperatives, and social enterprises to promote sustainable and inclusive development in metropolitan Chicago. As an example, CCLF supports Little Angels Family Daycare II, Inc., which broke ground on its new state-of-the-art early learning facility in Englewood thanks to a $4.7 million construction loan from CCLF. The new facility will accommodate 115-120 students, an increase from its pre-COVID capacity of 40 students. Little Angels has been a staple of excellence in the Englewood community for over 19 years with 90 percent of its graduates placed in gifted and selective enrollment Chicago public schools.

IFF: Another one of the Trust’s investees, IFF, offers special financing, consulting, and development support to nonprofits in the Chicago region that benefit local communities. IFF has supported over $125.7 million in loans to local nonprofits, creating more than 2,000 housing units and preserving over 1,000 local jobs in the community.

IFF has stepped up to support local nonprofits in Chicago when they — and the communities they serve — most need it. For example, IFF supported RefugeeOne, Illinois’s largest refugee resettlement agency that helps refugees fleeing war, terror, and persecution reestablish their lives.  Despite serving more than 1,500 refugees annually, RefugeeOne’s operations were spread across four sites, limiting its potential. IFF stepped in to help facilitate the acquisition of a property in Chicago’s West Rogers Park for RefugeeOne’s new headquarters. The facility opened last summer, bringing RefugeeOne’s operations under one roof in an area accessible to Chicago’s refugee communities and ensuring RefugeeOne greater financial stability.[1] 

Strategy 2: Evaluate the Data & Engage for Action

Aside from investing directly in local change, choosing funds that intentionally avoid harmful practices can be a great way to get started. For example, the Trust offers donor advised fund-holders the option to invest in Calvert Equity Fund (CEYIX), whose impact objectives are to promote 1.) environmental sustainability and resource efficiency, 2.) equitable societies and respect for human rights, and 3.) accountable governance and transparent operations. Impact reporting helps evaluate a fund’s relative performance through the lens of key indicators and brings these impact objectives to life. As of year-end 2022, Calvert Equity Fund showed favorable impact performance, with 81% less than its benchmark of other large, publicly traded companies in toxic water pollution[2], 100% less than benchmark in forced arbitration for sexual harassment[3], and 81% less than benchmark in ratio of CEO pay relative to median worker pay[4].

Fund managers can compound their impact by engaging directly with companies to hold them accountable to social and environmental objectives and values. Examples of how a fund manager can engage for action include evaluating and voting proxies in a way that is consistent with the fund’s outcome goals, partnering with upper-level management at portfolio companies to influence decision making, and, if needed, proposing shareholder resolutions and running activist campaigns to try to align company practices with ESG goals. Calvert, Parnassus, and PIMCO are all funds the Trust offers that actively engage with their portfolio companies.

Strategy 3: Invest in Solutions

The Trust also wanted to mobilize our impact investment dollars for global solutions. One way to do so is to actively invest in one of the world’s most pressing issues: climate change. While the ESG-focused funds look to minimize climate risk and avoid contributing to global warming, we also sought opportunities that actively identify solutions for climate change.  We selected two climate-focused funds for our impact investing platform, each of which seeks to proactively invest in companies that provide mitigation or adaptation solutions for a warming planet. By investing in these funds, the Trust is helping to fund companies that are developing and commercializing solutions in clean energy, energy efficiency, and climate resilient infrastructure.

Next Steps

Be it global, national, or deeply local, learn more about how you can make a difference with The Chicago Community Trust’s impact investing solutions here. The next deadline to recommend an investment is June 15, 2023, for a July 1 transaction date. To get started, speak with your philanthropic advisor or Kristin Carlson Vogen, Interim Vice President of Philanthropic Services, kvogen@cct.org.

---

[1] Issuer provided data as of December 2021.

[2] Source: Source YourStake Data as of 12/31/22 compared to Russell 1000 Growth Index. Toxic water pollution from facilities as reported to the U.S. and E.U. Pollutant Release and Transfer Registers.

[3] Source YourStake Data as of 12/31/22 compared to Russell 1000 Growth Index. Companies that force arbitration for sexual harassment in employee contracts either as a required measure, or as a default with an opt-out option, receive a score of 100%.

[4] Source YourStake Data as of 12/31/22 compared to Russell 1000 Growth Index. Ratio of CEO pay to median worker pay based on salary, bonus, stock options, and other compensation.