- Foster working relationships between community outreach and investment staff
- Move cash and cash equivalent assets into local banks and credit unions
- Engage key nonprofit partners on their long-term plans and investment needs
- Join impact investment networks and engage in collaborative community investment initiatives
Foster working relationships between community outreach and investment staff
One approach is to hire a staff person to serve as a connector and align the health system’s community health and investment priorities. Cathy Rowan, director of socially responsible investments for Trinity Health based in Livonia, Michigan, sees this role as crucial to implementing a place-based investing program: “There are many people with incredible capacity in both sustainable finance and community development. Having someone on staff with sustainable and impact investment expertise who also understands the mission of the organization is key.”1Cathy Rowan, interview by David Zuckerman and Katie Parker, Bronx, NY, January 29, 2016.
Additionally, collaboration among relevant departments within a health system is a powerful way to leverage internal expertise and expand the scope of knowledge and capacity needed for successful place-based investing. Community health and outreach staff have highly relevant knowledge around community needs and maintain important local relationships—these assets can inform the investment decision-making process and maximize place-based impact. In order to set impact goals, identify, screen, and analyze place-based investment opportunities, and report progress to senior leadership, health systems can form community investment committees or working groups with representation from departments focused on community health and investment priorities.
Pablo Bravo, who oversees a $100 million community investment portfolio as vice president of community health at Dignity Health, based in San Francisco, California, explained: “A successful community investment program really benefits from having a staff member who understands financial analysis, impact investment, community or public health, and partnership and trust building. Ideally, this person should also be adept at building relationships across many different internal teams and garnering support from senior leadership so the program has the backing it needs. If you can’t find one person to fill all these roles, then you can leverage cross-system expertise and capacity to successfully carry out community investment.”2Pablo Bravo, phone interview by David Zuckerman and Katie Parker, March 18, 2016.
Move cash and cash equivalent assets into local banks and credit unions,
including US Treasury Department-certified Community Development Financial Institutions (CDFIs), using money market accounts, business checking and savings accounts, and certificates of deposit.
Access to capital in low-income communities is a key driver of economic health, which in turn is closely tied to mental and physical health. Neighborhoods suffering long-term disinvestment tend to experience lower life expectancies than more affluent areas, for example. Health systems can shift operating or investment portfolio dollars into credit unions and community banks that lend more frequently and responsibly within underserved communities. This simple strategy can increase lending capacity in the community at no additional risk to the institution. Interest rates at community banks and credit unions are comparable to traditional banks, and deposits are federally insured up to $250,000. Certificate of Deposit Account Registry Service (CDARS) is a national program that enables an organization to place funds in excess of $250,000 with smaller, local financial institutions while maintaining protection of the original deposits through Federal Deposit Insurance Corporation (FDIC) insurance.3CDARS, www.cdars.com.
ProMedica, based in Toledo and located throughout twenty-seven counties in northwest Ohio and southeast Michigan, also serves its local communities by leveraging its sizable balance sheet and its leadership position as one of the largest employers within the region. Historically, ProMedica supported local and regional banks, investing in sixteen regional banks and diversified treasury management services. This effort is unique as most healthcare systems bank with only one or two institutions. The banking strategy has helped ProMedica build local relationships in the counties it serves, maintain credit in those communities, and better manage risk during economic downturns like the Great Recession.
In 2015, ProMedica launched a pilot project to position additional deposits of $250,000 to $3 million with smaller community banks, using certificates of deposit through the CDARS program noted above. ProMedica’s directive to the banks is to redeploy the deposits to create loans in those communities, with an emphasis on job creation, new and/or expanded businesses, and new community services or programs.
The banks report key metrics quarterly, including how the funds were utilized. Matching services to banks’ capabilities avoids duplication of services and ensures the strategy remains efficient for ProMedica. ProMedica sees this strategy as a powerful way to use its resources to benefit the communities it serves, all the while meeting its fiduciary responsibilities with no additional staffing.4Kate Sommerfeld, interview with David Zuckerman and Katie Parker, April 4, 2016.
Engage key nonprofit partners on their long-term plans and investment needs
Health systems across the country are evaluating how they can strengthen their partnerships with community organizations to better serve local health needs. An initial step toward place-based investing is to initiate conversations with existing and potential nonprofit partners on their growth needs, their ability to access capital, and ways in which the health system can address capital gaps through investments, not only grants. In the process, the health system can help map the capital and growth needs of the nonprofit and community development sector that serve communities in their service areas. This knowledge helps inform cross-sector strategies, as healthcare, public health, social services, and community economic development seek to collaborate more effectively.
According to Bravo at Dignity Health, the community investment program aims not to displace existing capital providers but to fill gaps in financing that stall essential local projects: “When organizations come to us, they come to us because they have a project that requires gap-financing that we may be able to fill. We also engage organizations to let them know if they take on certain projects, we are willing to provide capital.”5Pablo Bravo, phone interview by David Zuckerman and Katie Parker, March 18, 2016.
Join impact investment networks and engage in collaborative place-based investment initiatives
An easy step toward place-based investing is joining investor networks dedicated to sustainable, responsible, or impact investment. Examples include the Global Impact Investing Network (GIIN); the UN-backed Principles for Responsible Investment (PRI); US SIF: The Forum for Sustainable and Responsible Investment; and, for faith-based health systems, the Interfaith Center on Corporate Responsibility (ICCR). These networks guide members in pursuing sustainable, responsible or impact investment, and they also organize collaborative initiatives that help grow the space. Investor members can also develop new initiatives together.
- Build a relationship with a CDFI
- Allocate assets from investment portfolio for place-based investments
- Connect capacity building with direct lending
- Switch to an impact investment advisor
|↑1||Cathy Rowan, interview by David Zuckerman and Katie Parker, Bronx, NY, January 29, 2016.|
|↑2, ↑5||Pablo Bravo, phone interview by David Zuckerman and Katie Parker, March 18, 2016.|
|↑4||Kate Sommerfeld, interview with David Zuckerman and Katie Parker, April 4, 2016.|