Posted on October 29, 2012

Michigan Foundations Look to 'Impact Investing' to Boost Results

Michigan foundations have demonstrated a growing interest in impact investing and other new forms of giving as a way to leverage their resources and accelerate social change initiatives, Crain's Detroit Business (subscribers only) reports.

Such investments offer "more flexibility in how we move money out the door and meet nonprofit organizations at their particular point of need," Kresge Foundation president Rip Rapson told Crain's. Troy-based Kresge, which began making program-related investments (PRIs) four years ago, recently made a ten-year, $10 million loan at 1 percent interest to the Opportunity Finance Network to provide loans to small businesses and nonprofits in low-income communities. Rapson added that Kresge is looking at how it might use PRIs to boost Detroit's economy by, among other things, providing gap financing for real estate transactions or investing in small businesses through community development lenders.

While a number of foundations like Kresge have gotten comfortable with the idea of impact investing, others are moving more cautiously. The Detroit-based Skillman Foundation, for example, hired Chris Uhl, a program director from PNC Financial Services Group, to help lay the groundwork for its first program-related investment while educating the board about new business models in the social entrepreneurship field. Similarly, the W.K. Kellogg Foundation in Battle Creek has been investing a percentage of its corpus in activities that align with its mission and produce a market rate of return. And the Max M. and Marjorie S. Fisher Family Foundation in Southfield has set aside 1.8 percent of its assets, more than $4 million, for "mission investing" work. In March, the foundation awarded its first PRI — $200,000 over seven years — to Detroit-based Hebrew Free Loan to provide short-term loans to families who urgently need them.

"Our shared estimation is the $200,000 will be recycled a minimum of two times during the seven years," said the foundation's executive director, Douglas Bitonti Stewart, "so the final impact of the PRI may be $400,000-plus in loans before being returned to the foundation."