![]() Although "social enterprise" was not yet a familiar term to business school students, I was eager to learn how social-purpose organizations earned, raised and managed their money. When I came to Kellogg, I had already worked in the nonprofit sector for several years, mostly in the human services field. That's the power of our particular brand of impact investing. We're essentially the shock absorber in the middle, the missing piece that we call the "but for" money - meaning, but for our piece, they couldn't bring in the rest of the money. We can give these institutions a cushion so that when an insurance company or a pension fund wants to invest, that investor can get a market rate of return and have enough risk mitigation. Since we're not allowed to get a market rate of return on these types of investments, that allows us to be more flexible. It's also cheaper - our loans are usually 1 to 3 percent. At MacArthur, we invest in these intermediaries, but we put money in that is patient, so we plan an exit of 10 years instead of five or fewer. and they control about $30 billion in assets. There are about 800 of these institutions in the U.S. They also support affordable housing, which has been the biggest area of my own personal work for the past 16 years. Some of them focus on small businesses, helping bring credit to businesses in low-income neighborhoods or businesses owned by minorities and women. Some of them focus on individuals and provide things like alternatives to payday lending, bank accounts and remittance accounts for immigrants that are not abusive in their fee structures. In the U.S., it's mostly thought of as community development financial institutions, or CDFIs. Overseas, development finance is generally thought of as microcredit. In the U.S., there is a giant need for development finance. I also co-lead a $150-million national initiative, Window of Opportunity: Preserving Affordable Rental Housing. In fact, it's not allowed under the IRS tax code definition of a program-related investment, or PRI.Īt the MacArthur Foundation, I oversee a $300-million PRI portfolio of below-market loans and investments that support economic development and affordable housing organizations in the U.S. But if you do the kind of impact investing that I do, you can't seek a market rate of return. It doesn't have to be a market rate of return, although for many people that's what's important. That's what distinguishes it from other areas of "social investing."Īn impact investment is intended to create a positive social impact in addition to a positive financial return. But we're talking about a financial instrument where the social return is intentional. There has to be some expectation of financial return, whether it's through a loan, equity investment or guarantee. Debra also discusses how the Foundation works as a catalytic investor to bridge capital gaps with patient, risk-tolerant and flexible money that activates and “crowds in” other funds.Kellogg World > Features > Investing in Solutions > Debra Schwartz '88 Debra Schwartz '88 Director of Program-Related Investments, John D. She explains how the Foundation’s impact investment activities are integrated with its programmatic work as well as its commitment to help build the impact investment ecosystem. In this podcast, Debra talks about the Foundation’s impact investment work with a particular focus on preserving affordable housing across the US, and, more recently, climate change mitigation. MacArthur has dedicated $500 million of its assets to impact investing, to be used as Mission or Program- Related Investments. Debra is a frequent speaker and guest lecturer and has also served on the United States Treasury Department Community Development Advisory Board and the founding board for the Mission Investors Exchange. A former investment banker, she joined MacArthur in 1995, having also previously been the Chief Financial Officer for a Chicago-based child welfare agency. It has an endowment of $6.3 billion and provides almost $300 million annually in grants and impact investments it has awarded more than US $6 billion since its first grants in 1978.ĭebra Schwartz is the Managing Director of Impact Investments at the Foundation and is part of the Executive Leadership Team. Based in Chicago, the Foundation makes grants and impact investments to support non-profit organizations in Chicago, across the U.S., and in approximately 50 countries. ![]() MacArthur Foundation is one of the largest private foundations in the United States. ![]()
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