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April 23, 2004
Community Foundations and Community Investment: An Obvious But Underused Link
by William Baue
The Vermont Community Foundation recently broke new ground by launching a first-of-its-kind
community investment program with the support of the Calvert Foundation.
SocialFunds.com --
Community foundations typically work to benefit their regions through philanthropic grants that are
financed by endowment assets. However, community foundations tend to manage their endowments
according to traditional investment objectives that do not necessarily utilize community
investment, creating a disconnect with their missions.
 "The time has come to break down the
'firewall' between granting mission and investment decisions," said Shari Berenbach, executive
director of the Calvert Foundation,
the nonprofit arm of the Calvert Group,
a socially responsible investing (SRI) firm.
The Calvert Foundation is currently providing
support for just such an initiative, which connects mission to investment. Recently, the Vermont
Community Foundation (VCF), a charitable
fund established in 1987 to increase private philanthropic resources in the state, launched the
"Five Percent for Vermont Communities" campaign.
"Combining both investment and granting
power increases the impact you have to make change in those communities that need it most," said
Brian Byrnes, president and CEO of VCF.
The VCF board called for this asset allocation to
invest in Vermont companies, agencies, or intermediaries that support Vermont communities.
"The aim of these investments is to maximize overall social impact in Vermont communities most
in need while maintaining a moderate risk profile," said Faith Brown, VCF's vice president for
finance and operations. "The underlying intent is to minimize loss and preserve capital."
"Our mandate from the board allocates five percent of our pooled assets," Ms. Brown told
SocialFunds.com. "Pooled assets as of December 31, 2003 were about $66 million--we expect to have
invested a total of $3.3 million through the campaign by the end of 2004."
The Calvert
Foundation is providing VCF assistance in the form of investment recommendations, due diligence,
and portfolio administration. VCF is dividing its Vermont investments in three categories: 46
percent in community development financial institutions (CDFIs) or like institutions, 40 percent in
a community directed bond portfolio, and 14 percent in community-based venture capital.
For example, VCF is providing loans and taking out certificates of deposit with CDFIs such as
the Vermont Community Loan Fund (VCLF) and the
Vermont Development Credit Union (VDCU). The
benchmark for the CDFI portfolio is the Citigroup One Year Treasury Index. The investment horizon
for this portfolio is a three-year term, on average.
The community directed bond portfolio
invests in the Access
Capital Strategies Community Investment Fund, which supports revolving loan funds, community
development corporations, and community reinvestment act programs. The benchmark for this
portfolio is divided, with 80 percent tracking the Merrill Lynch Mortgage Master and 20 percent
tracking the US Treasury 1-10 Year Index.
The venture capital portfolio invests in venture
funds such as CEI Community Ventures (CCVI). Although the firm is located in Portland,
Maine, it supports projects in Vermont. For example, CCVI invests in Juno Rising, a Burlington, Vermont-based company founded by
women that markets Isis women's outdoor apparel. The benchmark for this portfolio is the Venture
Economics Private Equity Performance Database.
According to Tim Freundlich, director of
strategic development at the Calvert Foundation, some other community foundations, such as those in
Boulder, San Francisco, and Marin County, have experimented in limited ways with community
investment.
"The VCF breakthrough is that they have really created a defined program and
committed to a disciplined growing portfolio over time with a significant allocation of five
percent," Mr. Freundlich told SocialFunds.com.
©
SRI World Group, Inc. All Rights Reserved.
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