Local Impact Investing, the Next Frontier for Community Foundation Leadership

January 30, 2025 | Sydney England

On January 28, 2025, GSIC hosted an educational webinar, “Local Impact Investing, the Next Frontier of Community Foundation Leadership,” to help Georgia’s community foundations to understand how peers across the country are embracing local impact investing as a powerful new tool to drive impact. I want to thank Marsha Pope, President of the Topeka Community Foundation, and Katrina Rolle, President of the Community Foundation of North Florida, for bringing their insights to Georgia. This webinar would not have been possible without their contributions. Sydney Hulebak, from the Community Foundation for Greater Atlanta (CFGA), provided an important call-to-action for community foundation peers across the state. CFGA’s leadership in the local investing space cannot be overstated, and their staff continue to be incredible resources for peer community foundations in Georgia. Finally, I would be remiss if I didn’t take a moment to acknowledge the work of my friends and former colleagues Deb Markley, Travis Green, and Lisa O’Mara. The basis of this webinar as well as my understanding of community foundations and local impact investing was formed by the work that we did together at Locus. This is the product of our collective thinking and efforts, and I share attribution with you all.

Clarifying Impact Investing Definitions

Impact investing is a broad and growing field, with over $1.5 trillion in assets under management globally (Global Impact Investing Network, 2024). Impact investing is an umbrella term that encompasses different approaches and strategies, but not all impact investing looks the same. This vocabulary matters. When foundation leaders, boards, and investment committees lack shared language, they end up talking past each other entirely or choosing an impact investing path that doesn’t align with their intentions or impact goals.

Impact Investing Definitions - Iframe Version
Key Movements in Community Philanthropy

It might be easy to write off the growth of local impact investing by community foundations as the “new shining object” – philanthropy’s current flavor of the month. However, this is not a passing fad, and those steeped in the history of community philanthropy can see local investing for what it is – an organic outgrowth of important movements and inflection points in the field. Community foundations have been practicing local impact investing for decades, dating back to the 1970s, but in recent years, we’ve seen a more rapid adoption across the country. Today, the United States is home to ~900 community foundations, but while there isn’t a single, comprehensive database, there are ongoing efforts by the Community Investment Project, FEG Investment Advisors, and others to accurately account for the number of community foundation local investors. Based on these surveying efforts, we can comfortably say that at least 1 in 10 community foundations has established local impact investing commitments.

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Factors Motivating This Growth

This historical backdrop has influenced many community foundations to adopt the tool of local impact investing, but there are other, more current factors accelerating this practice.

  • Addressing Growing Community Need: Economic inequality is growing. Communities across the country are grappling with housing & food insecurity, constrained economic & employment opportunities, limited childcare services, aging community infrastructure, increasing climate & disaster issues, and more. The cost of addressing these social challenges far exceeds available grant funding. Looking beyond grants to the investment portfolio offers community foundations another pool of capital resources to address community need.
  • Working with New Partners & Solutions: Tackling any of these community challenges may require different partners like CDFIs, housing developers, government agencies, and for-profit enterprises. Grantmaking is still a vital form of capital for communities, but the addition of local impact investments brings another flexible tool to use when partnering with these different stakeholders (even for-profits).
  • Responding to Changing Donor Expectations: A 2020 national survey conducted by the University of New Hampshire’s Carsey School of Public Policy revealed that, if given the option, DAFs would allocate 18.5% of their investments for mission investing. This data suggests that it is both the next generation and current generation of donors expect to maximize the impact of their charitable giving.
  • Leveraging Public & Private Capital: Important as it is, philanthropic capital will never supplant the need for additional public and private capital. There are billions of public and private dollars that can move into communities, but not all communities are drawing in these resources. Often, local impact investing by foundations helps other sources of capital “fall into place” and catalyzes more investment locally.

Factors Motivating This Growth

These factors and more are driving community foundations across the country to act. Importantly, community foundation local impact investors are as diverse as the communities they serve. This is true regardless of asset size, rural/urban geography, availability of discretionary assets, and service area/footprint. Local impact investing is possible within every community foundation’s financial structure. Community foundations use one or a combination of three mechanisms to designate assets for local investing.

  • Some community foundations create a Local Impact Investing Asset Class within their main investment pools – reallocating a portion of the investment portfolio to accommodate a new local impact investing asset class.
  • Some community foundations create a separate Local Impact Investing Pool – offering fundholders the opportunity to designate a portion (or all) investable assets to the Pool for a set term. This aggregates capital from multiple funds to create a dedicated pool for community investments.
  • Other community foundations create Local Impact Investing Funds, which are functionally field of interest funds – using grant contributions to then make local impact investments. Importantly, this does not activate donor investment dollars.

These mechanisms are not mutually exclusive, and many community foundations develop multiple approaches to harness more capital for local investing – allowing for maximum impact and driving more sustainable community development.

  • The Capital Region Community Foundation (Lansing, MI) designated a small percentage (up to 1% annually and 5% total) for local impact investments. This capital allows CRCF to make loans to nonprofits, for-profits, and intermediary partners. CRCF is initially focusing investments on affordable, attainable workforce housing and childcare developments along the Michigan Avenue corridor. Investment opportunities within these focus areas are identified by members of the community and evaluated against criteria identified by the Board of Trustees and Impact Investment Committee.
  • The Community Foundation of Northeast Florida (Jacksonville, FL) created the Local Capital Pool to allow donors to allocate portions of their investable assets for local investing. The Pool offers donors a pathway to use their philanthropic investment dollars to make loans and equity investments in small businesses and affordable housing. CFNEFL Pool participants receive routine impact reports and treasury-like financial returns.
  • The DeKalb County Community Foundation (Sycamore, IL) seeded the Invest DeKalb County Fund with a carve-out of investable assets from undesignated, Board-directed Community Impact Funds. The Fund does not participate in the Foundation’s investment portfolio but maintains its independent investment strategy. DCCF intends to grow the Fund by encouraging interested donors to make gifts or grants to increase investible assets and potentially provide revenue for program and administrative-related expenses associated with the Foundation’s impact investing work.
Lessons from the Field

As community foundations continue to evolve, local impact investing presents an opportunity to deepen their role as community leaders. By aligning financial resources with mission-driven objectives, they can unlock new pathways to economic and social prosperity. In practice, community foundations face challenges in adopting local impact investing, including concerns about financial risk, regulatory compliance, and aligning investment strategies with mission-driven goals. However, leading practitioners emphasize that the long-term benefits – economic growth, community resilience, and expanded philanthropic influence – far outweigh the initial hurdles. Marsha Pope, President of the Topeka Community Foundation, and Katrina Rolle, President of the Community Foundation of North Florida, shared insights on overcoming these challenges. Marsha and Katrina underscored the importance of board education, strategic partnerships, and incremental implementation. They offered practical advice for Georgia’s community foundations.

  • Start a Small Group Conversation:

    Grounding education is the first step towards local impact investing. Community foundations can ask staff leaders to start reading. Shared education offers key internal leaders the opportunity to ask, “Do we understand this? What questions do we have? Who can we connect with to understand this better?”

  • Engage the Whole Board:

    Once staff have a foundational understanding, the next step might be to bring those resources and learnings to the board. This might look like a staff report-out detailing lessons learned or insights. It could also involve bringing in professional subject-matter experts, facilitators, or even peer community foundation leaders. Regardless of the approach, it’s critical that staff and board members develop shared understanding early. At this point, it’s not important for the board or staff to be completely committed to local impact investing in practice, but it is important to have a shared willingness to continue exploring the topic together.

  • Identify a Working Group:

    Both Marsha and Katrina shared that their local impact investing exploration involved a “working group” model. Both foundations tasked a smaller group of leaders to dive deeper into how local impact investing might work in their foundations. Both Marsha and Katrina involved key board and committee members, and the Topeka Community Foundation even included non-board members to participate – selecting several local economic development professionals to bring the perspective of capital partners. Both foundation leaders deliberately included individuals that were “champions” and “skeptics” to ensure that their foundation was seeing problems from all sides.

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