Place-based Investing

Creating Sustainable Returns and Strong Communities

Place-based Investing Impacts

Place-based investing creates healthy and thriving communities by increasing available capital for positive social, economic, or environmental impact across a wide range of areas, including:

  • Affordable and supportive housing
  • Minority-, women-, and employee-owned business creation, growth, and retention
  • Community and childcare facilities
  • Healthy food production and access
  • Stable, well-paying jobs
  • Transit-oriented development
  • Economic development around arts and culture
  • Renewable energy and energy efficiency
  • Federally Qualified Healthcare Centers

Nationally, health systems have an estimated $400 billion in investment assets.1Estimate calculated from Democracy Collaborative research. Redirecting even a small portion of these resources to place-based investments would shift billions of dollars toward addressing economic and environmental disparities in local communities. It would allow institutions to more effectively improve community health and well-being, even as they continue to earn a healthy rate of return. This toolkit outlines a range of strategies for how health systems are using their investment assets to help address the resource gaps that keep communities from achieving better health and well-being.

As we learn more about what families and children need to lead healthy lives, it is clear that adverse social, economic, and environmental factors, coupled with racial disparities, prevent communities from building a culture of health. The good news is that hospitals and health systems are recognizing that they have significant, untapped assets at their disposal to help address these challenges: their investment portfolios. Through place-based investing, institutions can leverage these resources to improve their communities’ overall health and well-being.

Place-based Investing Across Asset Classes

Cash and cash equivalents

Deposits in local community development banks and credit unions.

Leverage sizable balance sheets as a leading local employer to expand access to capital in local and underserved communities through deposits that finance loans to community members and help local businesses expand.

Fixed income

Geographically targeted private and public debt investments.

Provide capital to financial intermediaries that invest responsibly in local and underserved communities and offer debt capital to borrowers that address social, economic, and environmental needs.

Private equity and venture capital

Equity investments in local private enterprises with positive community benefits.

Seed, scale, and retain locally owned businesses through private equity and venture capital investments. Help convert businesses to employee ownership.

Real assets

Investments in local infrastructure, real estate, and commodities with positive social and environmental impacts.

Help maintain affordability of residential and commercial properties to create a more equitable local economy that supports health and well-being. Support the local economy through market-rate investments in community renewable energy projects and sustainably managed forests and farmland.

As the nation shifts toward prioritizing community health improvement, healthcare leaders are confronting new questions about their role in addressing non-clinical factors that impact health outcomes, such as how to improve access to basic needs like affordable housing and healthy food. At the same time, the long-term sustainability of health systems depends upon the lasting vitality of the communities they serve. As health systems seek new investments to ensure the long-term sustainability of core operations, place-based investing offers an opportunity to grow assets while strengthening local communities.

This toolkit offers strategies that allow health systems to earn a financial return on their investments while producing a positive social, economic, or environmental impact within their geographical service areas. This approach is referred to herein as “place-based investing,” while the terms “community investment,” “impact investing,” or “mission-related investing” are used interchangeably throughout the text and in other contexts.

In seeking to leverage investment portfolios to benefit local communities, health systems face a range of high-impact opportunities across asset classes, themes, sectors, and risk/return profiles. ­They can begin with something as simple as shifting deposits of cash and cash equivalents to local community banks and credit unions. Or by investing in low-risk fixed income products offered by community development financial intermediaries that provide key financial services and resources to underserved communities.

The Widening Gap

Economic and racial divides are driving health disparities across the country:

  • Twenty-two percent of children are living in poverty, a percentage that has not changed since 1960.2“Kids Count Data Book: State Trends in Child Well-Being” (Baltimore: Annie E. Casey Foundation, 2016), 6, www.aecf.org/m/databook/2016KCDB_FINAL-embargoed.pdf.
  • Unaddressed racial health inequalities may cost the country $2.1 trillion annually.3Thomas A. LaVeist, Darrell Gaskin, and Patrick Richard, “Estimating the Economic Burden of Racial Health Inequalities in the United States,” International Journal of Health Services vol. 41, Issue 2 (2011).
  • The number of people living in concentrated poverty has doubled from seven to fourteen million since 2000.4Elizabeth Kneebone and Natalie Holmes, “U.S. Concentrated Poverty in the Wake of the Great Recession” (Washington DC: Brookings Institution, 2016), accessed July 2016, www.brookings.edu/research/reports2/2016/03/31-concentrated-poverty-recession-kneebone-holmes.
  • White net wealth is thirteen times greater than African American net wealth and ten times greater than Latino net wealth.5Rakesh Kochhar and Richard Fry, “Wealth Inequality has Widened along Racial, Ethnic Lines Since end of Great Recession” (Washington, DC: Pew Research Center, December 12, 2014), accessed May, 2016, www.pewresearch.org/fact-tank/2014/12/12/racial-wealth-gaps-great-recession.
  • Differences in lifespan after age fifty between the richest and the poorest have more than doubled—to fourteen years—since the 1970s.6Sabrina Tavernise, “Disparity in Life Spans of the Rich and the Poor Is Growing,” New York Times, February 12, 2016, accessed May, 2016, www.nytimes.com/2016/02/13/health/disparity-in-life-spans-of-the-rich-and-the-poor-is-growing.html.

Other asset classes, such as private equity, venture capital, private debt, real assets, and public fixed income, offer compelling opportunities to invest in local community health and well-being as well. These options enable health systems to take a total portfolio approach to aligning investments with community impact.

The need is significant and the opportunity is great. Even a two percent shift in health system investment portfolios to community development financial institutions (CDFIs) would represent an infusion of approximately the same amount of resources that are allocated in one year by the US government for the CDFI Fund and New Market Tax Credits—the primary federal funding mechanisms for community development finance loans in the United States.7Estimate calculated from Democracy Collaborative research.

Over the past decade, health systems have become increasingly aware of their role as significant economic engines and anchor institutions in their communities; and as such, they have realized their power to shape the economic, social, and environmental forces that impact community health outcomes. As health systems seek to manage not only the health of their patients inside their walls, but also promote community well-being outside of them, this power to drive change remains largely underutilized.

This understanding has sparked a movement toward intentionally aligning and activating a fuller range of an institution’s economic and intellectual resources—including its long-term investment portfolio—to benefit the total health of the community. This realignment is not only mission aligned but a prudent organizational strategy, as health systems grapple with limited resources yet greater responsibility for patient and community outcomes. Health systems have a unique opportunity to adopt a more holistic approach that links high-road business practices with a commitment to delivering on the promise of health to local communities.

How to use this toolkit

This toolkit series is designed to provide hospital and health system leadership and department managers with the steps to begin to harness their everyday business practices to drive community health and well-being.

Key Terms

The critical terms needed to build community wealth with place-based investment.

References   [ + ]

1, 7. Estimate calculated from Democracy Collaborative research.
2. “Kids Count Data Book: State Trends in Child Well-Being” (Baltimore: Annie E. Casey Foundation, 2016), 6, www.aecf.org/m/databook/2016KCDB_FINAL-embargoed.pdf.
3. Thomas A. LaVeist, Darrell Gaskin, and Patrick Richard, “Estimating the Economic Burden of Racial Health Inequalities in the United States,” International Journal of Health Services vol. 41, Issue 2 (2011).
4. Elizabeth Kneebone and Natalie Holmes, “U.S. Concentrated Poverty in the Wake of the Great Recession” (Washington DC: Brookings Institution, 2016), accessed July 2016, www.brookings.edu/research/reports2/2016/03/31-concentrated-poverty-recession-kneebone-holmes.
5. Rakesh Kochhar and Richard Fry, “Wealth Inequality has Widened along Racial, Ethnic Lines Since end of Great Recession” (Washington, DC: Pew Research Center, December 12, 2014), accessed May, 2016, www.pewresearch.org/fact-tank/2014/12/12/racial-wealth-gaps-great-recession.
6. Sabrina Tavernise, “Disparity in Life Spans of the Rich and the Poor Is Growing,” New York Times, February 12, 2016, accessed May, 2016, www.nytimes.com/2016/02/13/health/disparity-in-life-spans-of-the-rich-and-the-poor-is-growing.html.