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northerntrust.com | Northern Trust 2017 northerntrust.com | Northern Trust 2017
northerntrust.com | Northern Trust 2017 northerntrust.com | Northern Trust 2017
Impact Investing Setting the Table
NORTHERN TRUST SOCIAL IMPACT ADVISORS
Deborah Kasemeyer Senior Vice President Director Community Development & Investments
May 18, 2016
Indiana Philanthropy Association
northerntrust.com | Northern Trust 2017
IMPACT INVESTING DEFINED
Interest in Impact and Mission Investing continues to grow but there is often confusion on definitions
Investment which creates an intentional social impact with a financial return May or may not include risk adjusted return
concessions Meets the But For Test
Impact Investing
Rated market investments which align with the investors stated mission or negative/positive screens Does not include any risk adjusted rate concession Does not meet the But For Test
Mission Investing and ESG/SRI
northerntrust.com | Northern Trust 2017
IMPACT INVESTING & TRANSPARENCY
Rush to deliver impact products has created a lack of transparency, confusion of terms, higher costs, recycled impacts and loose standards with no accountability
northerntrust.com | Northern Trust 2017
IMPACT INVESTMENTS
Impact investing can be further defined as place based community development investments, direct equity or marketable securities
Community Development Grants, PRI,
Portfolio
Direct Equity Funds
Marketable Securities Bonds
northerntrust.com | Northern Trust 2017
COMMUNITY DEVELOPMENT IMPACT INVESTMENTS
Overview of Northern Trust Impact Investments by Type
CDFI
Grants
Program Related Investments
Loan Pools
Guarantees
Bonds
Direct Nonprofit
Grants
Program Related Investments
Social Impact Bonds
Front Funding of a Social Intervention
Program Related Investments
Grants
Tax Advantaged
Low Income Housing Tax Credits
New Market Tax Credits
SBIC/Equity Funds
Venture Capital Funds
Equity Funds
.
northerntrust.com | Northern Trust 2017
BUILDING ON GRANT IMPACTS
What are the steps to increasing impacts and creating sustainable change through investment?
Capital Deployment Community Scans Impact Tracking
northerntrust.com | Northern Trust 2017
Presented by Maria Fruth, CEO/President Healthcare Foundation of La Porte May 2017
A Partnership to Craft Impact
The New Foundation
Created from the sales proceeds of IU Health La Porte Hospital
March 1, 2016 Located: La Porte, IN $150 million in assets La Porte Hospital Foundation blended into HFL
La Porte Hospital 1972
We are going to build a hospital Ben Bortz
Community members create the La Porte Hospital Foundation
1978
The first Foundation gift
1998 La Porte Hospital becomes a Clarian hospital
Celebrating the signing with Clarian
2011 Indiana University Health La Porte Hospital
La Porte Hospital
A BRIEF HISTORY:
IUHLP sells to CHS 80% CHS / 20% IUH
2016
TOD
AY
Hired CEO
Operational Structure
Office & Furniture/ Equipm.
Strategic Planning
2016-2018
Board
Legal Structure Organizational & Operational
Documents
Stage 1 Activities
Selected Investment Company
(OCIO)
VISION
To be among Indianas top 10 healthiest communities by 2030.
MISSION
Empowering our residents to live healthy and well in and around La Porte, Indiana.
VALUES
Excellence: Show exceptional stewardship of our communitys investment by acting with honesty and integrity.
1
Innovative & Visionary Thought Leadership: Have the courage to think big and discover ways to optimize our health and empower our residents to be well.
2
Collaboration: Work hand-in-hand with donors, communities, not-for-profit partners and healthcare and wellness providers.
3
Commitment: Dedicate ourselves to optimizing resources to create pathways so that those in and around La Porte are empowered to live healthy and well.
4
Compassion: Be sensitive to the health and wellness issues and the needs of the communities we serve.
5
VALUES
THE ENVIRONMENT Opportunities & Threats
Community Scan N.Trust
CHNA LP Hospital
County Health Rankings
Getting to Know
EXTERNAL
INTERNAL
VALUES MISSION
STRA
TEG
IC P
LAN
NIN
G R
OAD
MAP
THE ORGANIZATION Strengths & Weaknesses
Scope of Activities
Governance
Management
OB
JEC
TIV
ES
VISION
2
3
1
4
Community Scan La Porte, IN A survey of demographic, social and economic data for the City of La Porte and La Porte County, Indiana.
Prepared by the Community Development and Investment Group, The Northern Trust Co.
Demographics - 1 Sources of Income - 5 Economy - 7 Crime Statistics - 10 Community Health - 11 Child Welfare - 12 Education - 14 Housing Stock - 17 Housing Mobility and Neighborhood Stability - 18 Banking Activity - 21 Residential Lending - 23 Small Business Lending - 31
Determinants of Robert Wood Johnson Foundation County Rankings 31 Anchor Institutions - 42
IDENTIFY COMMUNITY ASSETS
EMPTY
FULL
INCREASE CAPACITY
ASSETS
NEED
Getting to Know Sessions
The Glass Half-Full What organizations attend health and wellness needs in
the community? How do we celebrate health and wellness services already
in the community? How do we determine their capacity?
GTK Meetings
Introduce HFL and build relationships with key organizations
Clear communication through face-to-face meeting HFL and community organizations shared mission, vision,
goals and plans
Get to Know Meetings Research
Identified all not-for-profit organizations in La Porte County
Snapshot
Created a detailed profile for each organization
Invitation
Used emails, news releases, and the web to invite organizations to meet with us
Get to Know Meeting Summary Agenda
HFL Presentation (10 min) Q & A (5 min) Organizations Presentation (20 min) Q & A (10 min)
HFL has met with 40 local organizations: 24 area not-for-profits 5 government agencies 4 emergency services 5 school corporations 5 departments of LP Hospital
Get to Know Findings Positives
Engaged & Passionate Leaders Demonstrated Interest in Collaboration Leaders Know they Need to Adapt to Serve the Community
Challenges Obstacles for Clients of Many Organizations:
Opioid Addiction Lack of Access to Mental Health Treatment Transportation
Obstacles for Organizations: Lack of Funding and Staffing Board recruitment Leadership/management training Access and funding for professional marketing/web site/technical assistance/ fundraising best practices, etc...
THE ENVIRONMENT Opportunities & Threats
Community Scan N.Trust
CHNA LP Hospital
County Health Rankings
Getting to Know
EXTERNAL
INTERNAL
VALUES MISSION
STRA
TEG
IC P
LAN
NIN
G R
OAD
MAP
THE ORGANIZATION Strengths & Weaknesses
Scope of Activities
Governance
Management
OB
JEC
TIV
ES
VISION
2 GRANTMAKING
3 CHANGE MAKER/INNOVATOR
1 FINANCIAL HEALTH
4 ORGANIZATIONAL HEALTH
THE ENVIRONMENT Opportunities & Threats
Community Scan N.Trust
CHNA LP Hospital
County Health Rankings
Getting to Know
EXTERNAL
INTERNAL
VALUES MISSION
STRA
TEG
IC P
LAN
NIN
G R
OAD
MAP
THE ORGANIZATION Strengths & Weaknesses
Scope of Activities
Governance
Management
OB
JEC
TIV
ES
VISION
GRANTMAKING
CHANGE MAKER
1 FINANCIAL HEALTH
Provide for portfolio growth, net of distributions and related investment management that exceeds the average annual rate of inflation
Continue to involve community through fundraising
ENDOWMENT GROWTH
5% DISTRIBUTION
FOUNDATION SUSTAINABILITY
FINANCIAL HEALTH To provide effective stewardship of the foundations resources, manage risks and promote the foundations sustainability.
Minimum 5% annual distribution requirement as mandated by IRS Code
IMPACT INVESTING
Educate board and administrative staff on impact investing practices and strategies (program-related investments, mission-related investments, socially responsible investments and social impact bonds)
VALUES MISSION
VISION
4
Provide for portfolio growth, net of distributions and related investment management that exceeds the average annual rate of inflation
Continue to involve community through fundraising
5% DISTRIBUTION
ENDOWMENT GROWTH
FOUNDATION SUSTAINABILITY
FINANCIAL HEALTH
Minimum 5% annual distribution requirement as mandated by IRS Code
STRATEGIES
Engage Northern Trust (OCIO) to determine best practices and appropriate investment strategies
Risk management
Monitor the changing landscape of tax and policy
Review Investment Policy yearly
ACTION PLANS Engage Northern Trust (OCIO)
Provide effective stewardship of the foundations resources
Prudent use of operational expenses
Solid budget
Continue and grow special events: Tour de La Porte / Holiday at the Pops
Continue and promote Annual Giving, Corporate Sponsorships and Planned Giving
Educate board and administrative staff on impact investing practices and strategies (program-related investments, mission-related investments, socially responsible investments and social impact bonds)
IMPACT INVESTING
Engage Northern Trust (OCIO) in education efforts
Identify opportunities to bring PRIs and other strategies to the community
Survey of Board Members after Debby Kasemeyer's presentation "This topic is key to our mission" "The conversation with Debby was most interesting
and I hope we are scheduling more of those with more detail."
"Should have allocated more time for the Impact Investing topic."
"We need more information in Impact Investing."
Impact Investing So... What is next? Schedule educational sessions with Debby
Kasemeyer - Northern Trust Identify viable Impact Investing practices and
strategies Develop plan
323 Pine Lake Avenue | PO Box 517 | La Porte, Indiana 46352
219.326.2471
hflaporte.org
IFF Overview The Midwests Leading Community Development Financial Institution (CDFI) Prepared for: Northern Trust IPA Meeting May 18, 2017
What is a CDFI
Community Development Financial Institution
Certified by the US Department of the Treasury
Mission driven lenders and investors that primarily serve low-income and low-wealth people and places
Capital and development services
Create opportunities and provide support
Jobs and business growth Affordable housing Community services/community facilities Responsible consumer financial services
for the underbanked
What is a CDFI?
CDFI Economic Model
Sources of
Capital
Users of Capital
Borrowers and Customers
Community Development Financial Institutions
Regulatory Motivated Investors
Mission Motivated Investors
Policy Motivated Investors
Small businesses, microenterprise, housing developers, commercial real estate developers, and individual consumers
$
$
IFFs borrowers and customers are primarily nonprofit corporations. Other CDFIs serve individual consumers and small businesses.
$ $ $
In 1994, the Riegle Community Development and Regulatory Improvement Act established the CDFI Fund
To promote economic revitalization and community development
Through investment in and assistance to community development financial institutions
To become a certified CDFI, the financing entity must:
Have a primary mission of promoting community development
Must direct at least 60% of all its Financial Product activitiesin both number and amountto eligible Target Markets
CDFI Fund and certification
Community Development Institution
Community Development Banks
Community Development Credit Unions
Community Development Loan Funds
Community Development Venture Capital Funds
Structure For-profit, depository institutions
Nonprofit, cooperative depository
Primarily nonprofit; some for-profit
Typically for-profit
Regulation FDIC, Federal Reserve, OCC, OTS, and state banking agencies
National Credit Union Administration
Unregulated Unregulated
Capitalization Structure (sources)
Insured deposits and equity
Insured deposits, secondary capital, and equity
Unsecured and secured debt, subordinated debt, and grants
Equity and equity-like debt
Sectors Served Loans and retail financial services for individual and commercial customers
Loans and retail financial services for individuals/ members
Loans for housing, microenterprise, small business, community facilities, nonprofits, and commercial real estate
Equity and debt with equity features to businesses with high growth potential and social impact
CDFI Institution Types
IFF Overview
At IFF, we believe that every person has the right to a good education, fresh food, health care, and affordable housing, and to grow up in a safe environment, regardless of income level. And we are here to provide you and your organization with the tools and resources to help your community thrive for years to come. Joe Neri, IFF CEO
708 $597.7MM $1.9
billion 62,630 1,305
Jobs created/ maintained
Project costs Loan volume Real estate
projects Number of
closed loans
IFF overall performance
A focus on low-income communities & special needs populations throughout the Midwest
Leading comprehensive community development
Public Policy
Lending and Finance
Real Estate Development and
Consulting
Research
Community Strategies
Transactions
Madison County Community Health Center Anderson, IN
Pogues Run Grocers Indianapolis, IN
Opportunities to Partner Investing Grants capacity building, research, real estate solutions,
complementary components Participations, co-lending Convening
Questions
Contact Information Nate Lichti Director of Real Estate Services, Indiana 317 860 6904 [email protected]
Kirby Burkholder VP and Executive Director, Eastern Region 313 309 7820 [email protected]
northerntrust.com | Northern Trust 2017 northerntrust.com | Northern Trust 2017
Impact Investing Capital Deployment Strategies
NORTHERN TRUST SOCIAL IMPACT ADVISORS
Deborah Kasemeyer Senior Vice President Director Community Development & Investments
May 18, 2016
Indiana Philanthropy Association
northerntrust.com | Northern Trust 2017
IMPACT INVESTING: COMMUNITY DEVELOPMENT INVESTING
Community Development Investing can be further defined as an intentional subset of Impact Investing
Community Development Investments
Place Based or Issue Area
Intentional impact creation
Focused on capital deployment tools
Focused on underserved communities or populations
Filling an identified capital gap
northerntrust.com | Northern Trust 2017
IMPACT THROUGH COMMUNITY DEVELOPMENT INVESTING
Place based or issue area investments to support sustainable positive change over time
Grants Important source of capital
Program support Capital Campaigns
Guarantees, Subordination
Attraction and leverage tool Debt Equity
Program Related
Investments
Sustainable Grant Debt Equity
Portfolio Direct Impact
Debt Equity
Foundation Community Development Investing
northerntrust.com | Northern Trust 2017
COMMUNITY DEVELOPMENT IMPACT INVESTMENTS
Overview of Northern Trust Impact Investments by Type
CDFI
Grants
Program Related Investments
Loan Pools
Guarantees
Bonds
Direct Nonprofit
Grants
Program Related Investments
Social Impact Bonds
Front Funding of a Social Intervention
Program Related Investments
Grants
Tax Advantaged
Low Income Housing Tax Credits
New Market Tax Credits
SBIC/Equity Funds
Venture Capital Funds
Equity Funds
.
northerntrust.com | Northern Trust 2017
COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS
northerntrust.com | Northern Trust 2017
COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS
Community Development Financial Institutions have a long track record of delivering measurable, sustainable positive change in underserved community through increased access to capital
Grants
Loan Funds
Direct Debt
Equity
Loan Loss Reserves Special Projects
Aggregate Capital Repayment & Rate
Pass through
Structured Possible Restrictions
Funds Stock
Types of Investments in CDFIs
northerntrust.com | Northern Trust 2017
EXAMPLES OF INVESTMENTS IN CDFI
Grants
Northern provided a $250,000 grant to Northside Federal Credit Union, a CDFI and Low Income Credit Union to be used as a loan loss reserve for an Alternative Payday Loan Product
Loan Funds
We have a $15 million commitment into IFFs most recent loan pool which allows IFF to have its funding source match its loan terms
Direct Debt
Provided a $1 million general obligation debt investment to Atlanta Neighborhood Development Partners for loan capital it used to originate affordable housing loans
Equity
$10 million stock purchase in Urban Partnership Bank, a start up CDFI bank in Chicago which purchased the assets of ShoreBank
northerntrust.com | Northern Trust 2017
DIRECT NONPROFIT INVESTMENT
northerntrust.com | Northern Trust 2017
DIRECT INVESTMENT IN A NONPROFIT
Investments can also be made directly into nonprofits which have an identified repayment source and can start to generate or increase impacts with patient low cost capital
Colorado Coalition for the Homeless Land Control
The Resurrection Project/Loyola Medical School DCCA Students
YWCA of Miami Capital Project
Habitat for Humanity
Akola Social Enterprise Business
Examples
northerntrust.com | Northern Trust 2017
SOCIAL IMPACT BOND
northerntrust.com | Northern Trust 2017
SOCIAL IMPACT BONDS
Government and Charity are typically focused on safety nets rather than prevention through intervention
northerntrust.com | Northern Trust 2017
SOCIAL IMPACT BONDS CLOSED TO DATE IN THE US New York City Recidivism reduction at Rikers Island Prison (08/12)
Salt Lake County Special education avoidance (06/13)
New York State Recidivism reduction and labor force reentry (12/13)
Massachusetts Prison avoidance and employment support (01/14)
Chicago Special education avoidance (10/14)
Massachusetts Supportive housing for the homeless (12/14)
Cuyahoga County Foster care avoidance (12/14)
Santa Clara County Supportive housing for the homeless (07/15)
Denver Supportive housing for the homeless (02/16)
South Carolina Home visiting for low-income mothers (02/16)
Connecticut Family-based substance abuse treatment (02/16)
Utah Recidivism and homeless reduction (11/16)
Utah- Recidivism and substance abuse (11/16)
Santa Clara County Treatment for the severely mentally ill (02/17)
northerntrust.com | Northern Trust 2017
SOCIAL IMPACT BONDS Also known as Pay for Success is finance transactions which focus on the financing of a social intervention which generates contracted impacts that are paid for by an end payer
northerntrust.com | Northern Trust 2017
CHICAGO PRE K SOCIAL IMPACT BOND
Total investment of $16.8 million adding 2,620 additional Pre- K slots in high quality program
northerntrust.com | Northern Trust 2017
DENVER SOCIAL IMPACT BOND
Total investment of $8.6 million providing housing and wrap around services for 250 homeless individuals who are high utilizers of safety net services
Housing Stability
City only pays if a participant spends at least one year in housing City pays $15.12 for each day spent in housing minus the number of days that a participant spends in jail (both for the 1st year in housing and days thereafter) If participant does not meet one year threshold, providers can replace that unit with a new participant
Jail Reduction
Payments made based upon the percentage reduction seen between participants and non-participants over at least three years No payments made below a 20% reduction in jail bed days Maximum payment at a 65% reduction in jail bed days
SIB CONTRACT OUTCOMES:
Housing Stability Lenders
Northern Trust Company The Ben and Lucy Ana Fund at the Walton Family Foundation The Piton Foundation
$3,000,000 $1,000,000
$500,000 Jail Bed Day Reduction Lenders
Laura and John Arnold Foundation $1,700,000 The Colorado Health Foundation $1,000,000 The Denver Foundation Living Cities Blended Catalyst Fund
$500,000 $500,000
Nonprofit Finance Fund $434,696
Investors
Housing Stability Lenders
Northern Trust Company
The Ben and Lucy Ana Fund at the Walton Family Foundation The Piton Foundation
$3,000,000
$1,000,000
$500,000
Jail Bed Day Reduction Lenders
Laura and John Arnold Foundation
$1,700,000
The Colorado Health Foundation
$1,000,000
The Denver Foundation
Living Cities Blended Catalyst Fund
$500,000
$500,000
Nonprofit Finance Fund
$434,696
VISION | ECONOMICS | STRATEGY | FINANCE | IMPLEMENTATION
NEW MARKETS TAX CREDITS: A TOOL TO STRETCH AND SUPPLEMENT MISSION-DRIVEN
CAPITAL Tony Smith, SB Friedman Development Advisors
northerntrust.com | Northern Trust 2017
NEW MARKETS TAX CREDIT PROGRAM
Administered by U.S. Department of the Treasury
Flexible federal tax credit program that generates below-market capital for community and economic development projects
Primarily supports industrial, community facility, and commercial development in qualifying Low Income Census tracts
Funds can be spent on any legitimate business purpose associated with the project/business, including construction, equipment, working capital, etc.
NMTC capital must be deployed in qualifying Census tracts
Indiana is now a high needs state
northerntrust.com | Northern Trust 2017
Jessie Ball DuPont Fund, a Jacksonville-based foundation, stepped in with a vision.
The Strategy:
Renovate the Haydon Burns building into a 120,000sf hub and incubator for nonprofits
Reducing nonprofits cost structures via: Below-market rents State-of-the-art shared IT systems Shared purchasing
Increasing nonprofits effectiveness and raising
their profile via: Multiple conference and event spaces Shared training facilities on-site Increased opportunities for partnerships
and collaborations between organizations
JESSIE BALL DUPONT CENTER: STRENGTHENING AND INTERCONNECTING JACKSONVILLES NONPROFITS
northerntrust.com | Northern Trust 2017
NORTHERN TRUST NEW MARKET ALLOCATION
Northern received a $60 million allocation in late 2016
Focus Areas:
Comprehensive Community Development Place Based
Innovative Structures such as Operating Businesses
Smaller deal size
Greater inclusion in transactions
Transactions:
Purpose Built Schools
Tacoma Park District
Hope Works
Student U
Denver Housing Authority
Bridges to Work
northerntrust.com | Northern Trust 2017
SMALL BUSINESS INVESTMENT CORPORATIONS
northerntrust.com | Northern Trust 2017
SMALL BUSINESS INVESTMENT CORPORATIONS
Small Business Investment Corporations (SBIC) are venture capital funds with an SBA debenture focused on smaller size companies
SBIC investments can create significant job growth
Tie to underserved communities can be difficult to determine
Venture capital investments can create negative community impacts
Portfolio approach needed to mitigate risks
Same venture model can be used to create impact investment funds around specific issue areas with significant potential for impacts and financial return but also same risks
northerntrust.com | Northern Trust 2017
CONTACT INFORMATION Deborah Kasemeyer
Senior Vice President, Director Community Development & Investments
50 South La Salle Street, Chicago, Illinois 60603 USA
+1 312-444-4031 [email protected]
mailto:[email protected]
northerntrust.com | Northern Trust 2017
Slide Number 1Impact InvestingSetting the TableImpact Investing definedImpact Investing & TransparencyImpact InvestmentsCommunity Development impact InvestmentsBuilding on Grant ImpactsSlide Number 8Slide Number 9The New FoundationSlide Number 11Slide Number 12Slide Number 13Slide Number 14Slide Number 15Slide Number 16Slide Number 17Slide Number 18Slide Number 19Slide Number 20The Glass Half-Full Get to Know MeetingsSlide Number 23Get to Know Meeting SummarySlide Number 25Slide Number 26Slide Number 27Slide Number 28Slide Number 29Slide Number 30Slide Number 31IFF OverviewWhat is a CDFISlide Number 34Slide Number 35Slide Number 36Slide Number 37IFF OverviewSlide Number 39Slide Number 40Slide Number 41Slide Number 42TransactionsSlide Number 44Slide Number 45Slide Number 46QuestionsContact InformationSlide Number 49Impact InvestingCapital Deployment StrategiesImpact Investing: Community Development InvestingImpact through community Development InvestingCommunity Development impact InvestmentsCommunity Development Financial institutionsCommunity Development Financial InstitutionsExamples of Investments in CDFIDirect Nonprofit InvestmentDirect Investment in a NonprofitSocial Impact bondSocial Impact BondsSocial Impact Bonds Closed to Date in the USSocial Impact BondsChicago Pre K Social Impact BondDenver Social Impact BondNew Markets Tax Credits:A Tool to Stretch and Supplement Mission-Driven CapitalNew Markets Tax Credit ProgramJessie Ball DuPont Center: Strengthening and Interconnecting Jacksonvilles NonprofitsNorthern Trust New Market AllocationSmall business investment corporationsSmall Business Investment CorporationsContact InformationSlide Number 72