Picture this: You invest money in a decidedly good, practical cause: intensive job training for recently released, high-risk offenders. Society profits. And so do you.
Sound too good to be true? In fact, monetary returns on good deeds have become a reality for savvy, social justice-oriented investors.
The practice is called impact investing. The goal is to have a measurable impact on an important social, economic or environmental issue while generating a financial payoff for the individual or institutional investor.
United Church of Christ Church Building & Loan Fund puts more than 25 percent of its invested funds into impact investments. These investments include an array of projects that combat inequality, protect the earth and enhance neighborhood economies.
CB&LF uses earnings from its investments to finance creative church real estate projects across the United States.
The Rev. Dr. Patrick Duggan, executive director of the fund, says that a financial portfolio that includes impact investments is not only beneficial but also critical for mission-minded organizations.
Most churches are already committed to avoiding harm when it comes to their investment policies, Duggan says. So they decline to invest in countries with poor human rights records and withdraw investments in corporations that engage in unsustainable environmental practices.
However, Duggan says, it is not enough to simply eschew investments that do damage.
“Our aim should not be to avoid doing bad things but to proactively do good with our money,” he says.
For example, CB&LF has invested $125,000 in a project that provides job training for 2,000 people who have been incarcerated. The New York State Workforce Re-Entry Program engages private investors. Its aim is to increase employment and reduce recidivism among people who are at high risk of being repeat offenders.
Whether the investment pays off financially for CB&LF and other investors depends on the program’s “pay for success” model, says Linda Li, an associate at the firm managing the investment fund. If the program achieves predetermined outcomes, then the government repays the original investment.
Those outcomes include whether offenders go back to jail or prison. Because the average high-risk offender cycles in and out of jail 10 times, Li says, deeming a single instance of recidivism to mean failure is too severe. Instead, the project will track “bed days,” or the days a participant is re-incarcerated during a period after their release.
The program will also evaluate employment a year after release. Recidivism and employment among participants will be compared with that of a control group of non-participating offenders, Li says.
The public and private partnership aspect is key, she says. The state has agreed to pay back investors only if a positive outcome is achieved. And because the state runs prisons, its public officials have incentive to reward a program that makes a dent in recidivism, and with it, New York’s prison tab.
However, even if the program doesn’t meet the strict metrics for a financial payout to investors, they can rest assured that their money went to a positive cause.
“Of the capital that is raised from investors, 100 percent goes to service delivery costs,” Li says. “So regardless of what those outcomes are, you have 2,000 people who received services and who have been helped in some way.”
Impact investing represents a model for churches interested in making sustainable change, Duggan says. Participation is in the self-interest of churches as well, he stresses.
“Impact investment is essential for the integrity of the church, especially during these times of hardship,” he says. “Churches must put their money where their mouth is. Investments are a reflection of your mission.”
A surge in investment that advances social good couldn’t come at a better time for those crushed by historic levels of wealth inequality, Duggan says.
“The election exposed a lot of economic anxiety, but the pain didn’t just appear on Nov. 8,” he says. "The economy has been recovering, but there’s still tremendous pain all over the country. The election has made it clear that what we’re trying to do is even more critical.”