BEYOND IMPACT INVESTING

Impact investing is a term that has been used to describe a wide variety of approaches to investing in low income communities. It is a term used to shield from view the fact that many “impact” projects are actually causing gentrification and displacement, with all the benefits going to the very wealthy–to investors for whom achieving the highest rate of return outweighs pursuing the greatest good. The approach for most OZ funds is based on a commercial real estate model of high returns and tax deferrals, and other techniques to increase value and returns.

What kind of impact is an investment designed to have? What is its primary purpose? Our investors are primarily invested in the improvement of people’s lives.

At CIF, being a true impact investor means being a conscious investor. It means deeply considering the impact being made within a community. We select projects that are centered on essential and foundational human needs such as permanent affordable housing, cultural preservation and financial equality. Conscious investors, guided by principles of community and cultural good, are not attempting to make the highest returns possible. They want their money to make a difference.

What exactly is meant by the term impact investing and who benefits from it is unclear. Current OZ legislation does not define “benefit” beyond tax benefits and there is no measurement reporting required so that the results from these investments and projects might be better understood.

The investment world is filled with these kinds of terms–community investment, community development, impact investing and economically-targeted investment. While necessary, these words ring empty when they are not backed by properly informed intention and action–with measurable results. While efforts are being made to introduce measurement and monitoring standards in the OZ investment community, they are unevenly used, if they are indeed used at all.

It is for these reasons that many OZ investment funds become vehicles for gentrification and displacement, imposing outside investment and development interests that, simply put, do not necessarily benefit the communities themselves, often destroying or stressing the inherent local culture. Targeted building of new properties and major renovations can dramatically increase property values to the extent that long term residents can no longer afford to remain in the communities that they have built. In many cases, this effect is intended.

The Cultural Impact Fund addresses these issues by focusing on preserving housing that is permanently affordable–particularly for artists and cultural workers–and preserving existing small businesses which retain cultural significance and are owned locally.

Our goal is to create and encourage regenerative development practices and projects that benefit communities in ways which are truly relevant to the communities that will be affected.

It is possible that one day OZ legislation will be amended to include requirements for measuring the actual impact of OZ impact investments so that gentrification and displacement can be avoided. In the meantime, however, it is up to us to take on this critical responsibility ourselves.