Mission investing, or impact investing, enables foundations and other mission-driven organizations to invest in for-profit and nonprofit organizations whose work has a positive social impact. We asked leaders from the field of philanthropy to talk about how this work got started at their organizations.
Pablo Bravo is director of community grants and investments at Dignity Health. He oversees the organization’s community investment program, which provides loans at below-market rates to nonprofits working to improve the health of their communities.
Q: How did mission investing get started at your organization?
A: The Catholic sisters who were the original sponsors of Dignity Health, formerly known as Catholic Healthcare West, had been doing community investing out of their retirement funds since the early 1980s. When they formed Catholic Healthcare West, they approached the treasurer about setting up a community investment program, which started in 1994. The program started with $20 million and has grown to $90 million.
The community investment program is under the organization’s community health umbrella. We truly believe that you can’t have a healthy community unless you have access to quality and affordable housing, fresh food, health care, and other much-needed services.
Q: Do you invest through intermediaries, or do you make direct investments?
A: We do both. Dignity Health provides direct loans to organizations, and we also provide investment capital to intermediaries to leverage our money and to extend our reach.
Q: What are your focus areas?
A: Our first strategy is to invest in community clinics, both directly and through partnerships. Our goal is to provide low-income individuals with access to medical homes. These clinics can reduce hospital readmissions and the inappropriate use of emergency departments, situations that drive up the cost of care.
Elica Health Centers in Sacramento is one example of our direct investment in a community clinic. Elica received a $1 million working-capital loan to cover the start-up costs and prequalification work associated with becoming certified as a Federally Qualified Health Center (FQHC). Today Elica is one of a handful of FQHCs in Sacramento serving as medical homes for low-income and uninsured individuals.
Our second strategy is to invest in upstream community development activities that impact the community’s health. For example, we make investments in the development of quality, affordable housing and homeless shelters, programs that ensure access to healthy foods, and microenterprise activities that help develop new businesses and create jobs for low-income communities.
One example of this upstream approach is the Children’s Museum of Phoenix. Originally a mobile museum, they came to us after the city donated a high school building to establish a standalone museum in a neighborhood overtaken by urban blight. Dignity Health gave the museum a $1.5 million loan to rehabilitate the building. The area is now completely transformed — there is redevelopment activity, including new businesses, light rail, and housing. In the summer, when it’s extremely hot, low-income kids now have free access to a place where they can participate in interactive, educational classes.
Q: Besides money, what do you contribute to investees?
A: For some organizations, we do our best to provide technical assistance either through referrals or our internal resources. For marketing and other expertise, we leave that up to the organization.
Q: Describe how your work differs from and complements traditional investors.
A: The difference is that we are a patient lender, and we are a lender of last resort. We can take on riskier loans than a traditional lender. When we give an investment to an organization that has not been able to get a traditional loan, our loan sometimes helps the organization build a credit history needed to access a traditional loan.
Q: Do you allow for partnering in investments?
A: We co-invest with foundations and community development financial institutions on different kinds of projects. We will partner on a one-deal basis and also participate in pooled funds, such as The California Endowment’s California FreshWorks Fund and The Kresge Foundation’s Healthy Futures Fund.
Dignity Health also participates as a leverage lender on New Markets Tax Credit (NMTC) transactions. We partnered with the Northern California Community Loan Fund on an NMTC transaction to help the Mission Economic Development Agency in San Francisco purchase a building.
Q: How do you measure impact?
A: I’m always working on this. If we provide a predevelopment loan for a housing development to construct 100 units, then the impact is 100 units and the number of families housed. Another way to measure impact is to ask how much money the predevelopment loan leveraged. If we can, we try to count the number of jobs created. Measuring the impact of investment into services can be more difficult.