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The Bottom Line Investing for Impact on Economic Mobility in the U.S

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The Bottom Line Investing for Impact on Economic Mobility in the U.S THE BOTTOM LINE INVESTING FOR IMPACT ON ECONOMIC MOBILITY IN THE U.S. THE BOTTOM LINE: INVESTING FOR IMPACT ON ECONOMIC MOBILITY IN THE U.S. 1 This project was made possible with the generous support of the W.K. Kellogg Foundation. ASCEND AT THE ASPEN INSTITUTE Ascend at the Aspen Institute is the national hub for breakthrough ideas and collaborations that move children and their parents toward educational success and economic security. Ascend takes a two-generation approach to its work — focusing on children and their parents together — and it brings a gender and racial equity lens to its analysis. Ascend believes that early childhood and postsecondary education, economic assets, social capital, and health and well-being are the core elements that create an intergenerational cycle of opportunity. As a new model of social innovation, Ascend at the Aspen Institute is engaged in three strategies: Elevating and investing in two-generation programs, policies, and community solutions; Building a network of diverse leaders through a national fellowship program and a learning network; and Engaging the perspectives, strengths, and resilience of low-income families to inform programs and policies. http://ascend.aspeninstitute.org @aspenascend PROGRAM ON PHILANTHROPY AND SOCIAL INNOVATION AND THE IMPACT ECONOMY INITIATIVE The Aspen Institute’s Program on Philanthropy and Social Innovation (PSI) seeks to inform and maximize the impact of philanthropists, social investors, and the organizations they support. The program’s theory of change rests on the premise that if leaders have clarity about their values, are collaborative in their approach to problem-solving, and are aware of the strategies and potential partnerships available to them, they are more likely to succeed in advancing the social good. PSI’s Impact Economy Initiative, which was launched in 2010, seeks to build and assess models for investments and enterprises that generate both financial profit and positive social or environmental returns. Learn more at www.aspeninstitute.org/psi PARTNER: GEORGETOWN UNIVERSITY MCDONOUGH SCHOOL OF BUSINESS GLOBAL SOCIAL ENTERPRISE INITIATIVE The Global Social Enterprise Initiative at Georgetown’s McDonough School of Business aims to prepare current and future leaders to make responsible management decisions that yield both economic and social value. Through practical training for global business leaders, the initiative promotes transformative solutions to and impactful investments in the world’s significant challenges in health and well-being, economic growth, the environment and international development. Learn more at http://socialenterprise.georgetown.edu 2 WWW.ASPENINSTITUTE.ORG FOREWORD There is no greater challenge in the United States today than income inequality. It has been 50 years since the War on Poverty began. We have made progress but not enough. More than 32 million children live in low-income families, and racial and gender gaps persist. For the first time, Americans do not believe life will be better for the next generation. We have both a moral and an economic imperative to fuel social and economic mobility in this country. The Aspen Institute was founded in 1950 as a place to address the critical issues of our time. Today, ensuring that the American dream can be a possibility for all and be passed from one generation to the next is that issue. This commitment is at the heart of the work of many policy programs at the Aspen Institute. Ending the cycle of poverty requires leadership and hard work across all sectors, from nonprofit organizations, philanthropies, and academia to the government and private sector. The Bottom Line: Investing for Impact on Economic Mobility in the U.S. recognizes the importance of learning from all sectors in tackling any challenge. Specifically, it builds on opportunities in the growing impact investment field. The report draws on the lessons from market-based approaches to identify tools and strategies that can help move the needle on family economic security. In this report, you will find the following: Case studies – An opportunity to go under the hood on deals with the Bank of America, W.K. Kellogg Foundation, Acelero Learning, and others; Point of view essays – Insights and lessons from leaders in the field; Deals at a glance – Snapshots of impact investors and what they have learned, including the Kresge Foundation, Living Cities, and the MacArthur Foundation; and Survey results and lessons learned – Trends among active and emerging players in the U.S. impact investment field and the lessons that can be applied to economic mobility in the U.S. We are pleased to offer this expanded perspective on impact investing in the U.S. and the lessons for investors, philanthropists, and non-profits working to build strong and prosperous families and communities. Sincerely, Walter Isaacson Elliot Gerson CEO, the Aspen Institute Executive Vice President, the Aspen Institute Anne Mosle Jane Wales Vice President, the Aspen Institute Vice President, the Aspen Institute THE BOTTOM LINE: INVESTING FOR IMPACT ON ECONOMIC MOBILITY IN THE U.S. 3 CONTENTS Foreword by Walter Isaacson, Elliot Gerson, Anne Mosle, and Jane Wales 3 Acknowledgements 6 Executive Summary 9 Introduction 11 Aspen Institute - Georgetown University McDonough School of Business Impact Investing Survey 15 Beyond the Survey: Trends in the Field 18 Essay: All In: Reinventing What a Foundation Can Be in the 21st Century by Clara Miller, F.B. Heron Foundation 22 Essay: The McKnight Foundation’s Secret Sauce by Kate Wolford, The McKnight Foundation 26 Essay: Aligning Disciplined Traditional Investing Principles With Catalytic Social Change by Audrey Choi, Morgan Stanley Institute for Sustainable Investing 30 Education: An in-depth look 34 Early Childhood Education 35 K-12 Education 36 Literacy 37 Case study: Acelero Learning: For-Profit Head Start Program Pays Off for Children, but Investors Must Wait 40 Essay: First Book: Creating Disruptive Innovation with Cross-Sector Collaborations by Kyle Zimmer and Jane Robinson, First Book 44 Essay: Investing to Scale Early-Stage Social Enterprises by Jim Bildner, Draper Richards Kaplan Foundation 49 Essay: Talent for Impact: Lessons Learned from Impact Investing by Monisha Kapila, ProInspire 52 Early Childhood Education and Pay for Success: From Theory to Practice In partnership with the Institute for Child Success 56 Economic Assets: An in-depth look 60 Recidivism 61 Affordable Housing 62 Place-Based Investing 63 Microenterprise 65 4 WWW.ASPENINSTITUTE.ORG Case study: Rebuilding Lives, Reducing Costs: A New Financial Model for Employment versus Incarceration 68 Deals at a Glance: Calvert Foundation 74 Deals at a Glance: The John D. and Catherine T. MacArthur Foundation 77 Deals at a Glance: Living Cities 81 Essay: Want Impact? Build Market-Relevant Microlenders by Joyce Klein, the Aspen Institute Microenterprise Fund for Innovation, Effectiveness, Learning and Dissemination 84 Essay: Closing the Microbusiness Gap with Targeted Investments in Social Capital by Peter Roberts, Emory University, Social Enterprise @ Goizueta, and Ross Baird, Village Capital 89 Essay: Trends in Seed-Stage Social Entrepreneurship: The Importance of Investing in Emerging Social Entrepreneurs to Build Family Economic Security by Cheryl Dorsey and Min Pease, Echoing Green 94 Health and Well-Being: An in-depth look 98 Case study: CarePayment: Financing Out-of-Pocket Medical Debt While Keeping Bill Collectors at Bay 102 Deals at a Glance: The Kresge Foundation 106 Essay: Bridging That Critical Space Between Heart and Head by Ron Cordes, Cordes Foundation 110 Essay: Insights from Abroad: Impact Investing in Emerging Markets by Randall Kempner and Alexander Pan, Aspen Network of Development Entrepreneurs 114 Essay: Making Sure the Juice is Worth the Squeeze by John Goldstein, Imprint Capital 118 The Role of U.S. Policy in Impact Investing 122 Conclusion 128 Endnotes 129 Appendix A: List of investors responding to survey 131 Appendix B: Definitions of key terms 132 Appendix C: Investor and sample investment profiles from survey 138 THE BOTTOM LINE: INVESTING FOR IMPACT ON ECONOMIC MOBILITY IN THE U.S. 5 ACKNOWLEDGEMENTS We extend our appreciation to our essay, deal, and case study contributors: Hanna Azemati, New York State Tracy Barba, Social Finance Ross Baird, Village Capital Tony Berkley, W.K. Kellogg Foundation Paul Bernstein, Pershing Square Foundation Jim Bildner, Draper Richards Kaplan Foundation Dash Boyer-Olson, Bank of America Merrill Lynch Matt Burkhard, Morgan Stanley Institute for Sustainable Investing Audrey Choi, Morgan Stanley Institute for Sustainable Investing Justin Conway, Calvert Foundation Ron Cordes, Cordes Foundation Kimberlee Cornett, The Kresge Foundation Cheryl Dorsey, Echoing Green John Duong, W.K. Kellogg Foundation Lois Erwin, Southern Bancorp David Fukuzawa, The Kresge Foundation Craig Froude, Aequitas Capital Chris Gabrieli, Ironwood Capital Management Ann Garnier, CarePayment Brian Goebel, Social Enterprise @ Goizueta, Emory University Goizueta Business School John Goldstein, Imprint Capital Ben Hecht, Living Cities Nancy Haung, Draper Richards Kaplan Foundation Robert Jesenik, Aequitas Capital Margot Kane, Calvert Foundation Monisha Kapila, ProInspire Benjamin Kaufman, Southern Bancorp Randall Kemper, Aspen Network of Development Entrepreneurs Joyce Klein, Aspen Institute Microenterprise Surya Kolluri, Bank of America Merrill Lynch Najada Kumbuli, Calvert Foundation Aaron Lieberman,
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