Allocating Assets

How will assets be allocated from the investment portfolio for place-based investments?

To create a sustainable place-based investment program that addresses social determinants of health, an institution should allocate a portion of assets within its investment portfolio accordingly. This decision will determine the sustainability and scale, and ultimately the impact, of this strategy.

Hospitals and health systems have structured these allocations differently. Here are a few examples:

Designate a percentage of assets within investment portfolio for place-based investments

The most commonly used strategy identified through interviews is to allocate 1 to 5 percent of assets within an investment portfolio for place-based or community investments.

Health System Asset Allocation Percentage
Dignity Health 5 percent
Bon Secours Health System 5 percent
Gundersen Health System 5 percent
St. Joseph Health 2 percent
Catholic Health Initiatives 1 percent
Trinity Health 1 percent

For example, Dignity Health based in San Francisco, California has an investment policy statement outlining that up to 5 percent of its investment portfolio will be allocated for loans to nonprofits that are supporting community health and well-being. Currently, it has deployed slightly less than 1 percent, or nearly $90 million, for these investments.1Pablo Bravo, phone interview by David Zuckerman and Katie Parker, March 18, 2016.

Increase the asset allocation incrementally:

The Board of Directors at Bon Secours Health System, based in Marriottsville, Maryland has authorized the institution to invest up to 5 percent of its Long-term Reserve Fund (LRF) with community development financial institutions (CDFIs) that serve low- and moderate-income communities. Bon Secours has worked toward achieving this target by annually increasing its asset allocation by approximately $3 million. Since instituting this policy in 2008, Bon Secours has shifted $26 million, or about 2 percent of its $1.1 billion LRF (to date) to support affordable housing, economic development, community facilities, and other projects that benefit the health and well-being of the community members it serves.2Ed Gerardo and Ross Darrow, interview by David Zuckerman and Katie Parker, Marriottsville, MD, December 16, 2015.

Create a place-based investment asset allocation specifically to complement community benefit strategies:

Trinity Health, based in Livonia, Michigan, approximates 1 percent of its total operating investment portfolio for community investing through CDFIs. As part of that effort, Trinity Health launched its Transforming Communities Initiative in 2016, through which six community, multi-sector partnerships will receive a combination of grants, loans, and technical assistance. Through that initiative specifically, Trinity Health has made available $40 million from its community investment allocation to support projects that may be developed from those partnerships.3Cathy Rowan, interview by David Zuckerman and Katie Parker, Bronx, NY, January 29, 2016.

Fund place-based investment with surplus returns from investment portfolio:

Dartmouth-Hitchcock Health, based in Lebanon, New Hampshire, created the Population Health Innovation Fund in 2014 to “support the advancement of population health across Dartmouth-Hitchcock Health practice sites and communities.”4Dartmouth-Hitchcock Health Population Health Innovation Project Proposal application. It is resourced with 30 percent of investment portfolio returns that exceed budget targets. This fund, which has grown to more than $14.5 million from its inception, currently provides community grants for activities that align with the system’s community benefit priorities.5Laura Landy, “Using Systems Change to Create a New Health Ecosystem,” ReThink Health, July 11, 2016, www.rethinkhealth.org/the-rethinkers-blog/using-systems-change-to-create-a-new-health-ecosystem/ A similar strategy could support seeding a place-based investment fund, which would continue to grow and be self-sustaining over the long term.

Contribute fixed amount annually from investment portfolio

In lieu of an active place-based investment strategy, Mercy Health, based in Cincinnati, Ohio, contributes $5 million annually from its portfolio returns to its foundation. The foundation then determines how to grant those dollars within the community. A similar strategy could support seeding a place-based investment fund, which would continue to grow and be self-sustaining over the long term.6Molly Murphy, interview by David Zuckerman and Katie Parker, Cincinnati, OH, January 14, 2016.

Ensure a minimum available amount

St. Joseph Health, based in Irvine, California, has a Community Investment Fund that provides capital in the form of loans, deposits, or other support to nonprofit entities to promote social good and the development of healthier communities. The fund makes available whichever is greater, 2 percent of St. Joseph’s long-term reserves sub account or $50 million.7Lisa Laird, interview by David Zuckerman and Katie Parker, May 9, 2016.

Create a place-based investment asset allocation to achieve a specific objective

Gundersen Health System, based in La Crosse, Wisconsin, set a goal to produce more power than it consumes from fossil fuel sources by 2014. Recognizing that this objective would require an extraordinary level of investment, it allocated 5 percent of its investment portfolio, or $30 million, to invest in local renewable energy projects. These real assets allowed Gundersen to meet renewable energy targets, create jobs in the communities it serves, and realize above-market returns on its investments.8Mark Platt, Jeff Rich and Jeff Thompson, interview by David Zuckerman and Katie Parker, La Crosse, WI, March 16-17, 2016.

The advantage of this approach is that it can help an institution take on and achieve bold goals. A potential disadvantage is that without a formal, ongoing place-based investment program dedicated to supporting community health and well-being, approval from senior leadership would be required for each proposed project. This may result in challenges and limitations if leadership changes lead to less support for the initiative.

Tracking Dollars

Often the best place for a health system to begin the process of building a place-based investment program is by assessing its current asset allocation and investment choices.

Deciding Your Approach

What is your purpose or mission as a place-based, community investor?

Managing your Place-based Investment Portfolio

Designing your team and governance structure

Creating Forms and Templates

Hospitals and health systems have developed a variety of resources and materials to implement their place-based and community investment programs.

Moving to Impact

Communicating wins, building relationships, monitoring borrowers, and scaling impact

References   [ + ]

1. Pablo Bravo, phone interview by David Zuckerman and Katie Parker, March 18, 2016.
2. Ed Gerardo and Ross Darrow, interview by David Zuckerman and Katie Parker, Marriottsville, MD, December 16, 2015.
3. Cathy Rowan, interview by David Zuckerman and Katie Parker, Bronx, NY, January 29, 2016.
4. Dartmouth-Hitchcock Health Population Health Innovation Project Proposal application.
5. Laura Landy, “Using Systems Change to Create a New Health Ecosystem,” ReThink Health, July 11, 2016, www.rethinkhealth.org/the-rethinkers-blog/using-systems-change-to-create-a-new-health-ecosystem/
6. Molly Murphy, interview by David Zuckerman and Katie Parker, Cincinnati, OH, January 14, 2016.
7. Lisa Laird, interview by David Zuckerman and Katie Parker, May 9, 2016.
8. Mark Platt, Jeff Rich and Jeff Thompson, interview by David Zuckerman and Katie Parker, La Crosse, WI, March 16-17, 2016.