Urban Institute
Digital Communications Manager

Four opportunities for place-based impact investing

August 7, 2018 - 12:25pm

Over the last decade, place-based impact investing—an investment strategy that brings private capital, public resources, and philanthropic assets to a particular geographic region—has become an increasingly appealing option for a range of stakeholders striving to solve local challenges.  Recently, Wharton Social Impact Initiative highlighted the following four opportunities for investors and intermediaries to use local dollars to support their own communities.

  1. In recent years, community development financial institutions (CDFIs)—mission-driven organizations that strive to foster economic opportunity and revitalize low- and moderate-income communities—have diversified their investor base, creating new partners for impact investors and bringing with them the knowledge and tools to tackle niche regional and social issues.
  2. The Low-Income Housing Tax Credit (LIHTC) gives private investors a federal income tax credit as an incentive to make equity investments in affordable rental housing. This provides an opportunity to get involved locally while also fighting the nation’s affordable housing crisis.
  3. Though research shows traditional venture capital is largely inaccessible to entrepreneurs and small businesses in economically distressed US communities, place-based impact investors could consider pooling their resources through local angel investor groups or other private equity fund management.
  4. In pay for success, or social impact bond contracts, a local government entity agrees to pay back a service provider if specific, mutually agreed upon outcomes are met. This structure requires early buy-in and involvement of local government throughout the life of a project and aims to affect local social change.

As the world of place-based impact investing expands and innovates, new investors may find more opportunities to take a seat at the table. Learn more here.

Have a Pay for Success question? Ask our experts here!

As an organization, the Urban Institute does not take positions on issues. Scholars are independent and empowered to share their evidence-based views and recommendations shaped by research. Photo via Shutterstock.