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Place-based Investing

Place-based Investing (PBI) is an impact investment approach that generates positive social and economic impacts in historically disinvested communities and geographies, while achieving a modest financial return, or at least preserving the principal of the investment. A place-based investing strategy in partnership with community brings affordable and flexible capital to high-impact projects that improve community conditions. It begins to address racial and economic inequities around affordable housing, job opportunities, economic mobility, and opportunities for wealth building.

Shifting a sliver of an anchor institution’s total investment portfolio to place-based investments will not have a material impact on the organization's bottom line, and such investments allow anchor institutions and collaboratives to create positive social and economic impacts in their communities while still producing a positive financial return.

Note: Place-based Investing is used interchangeably with “community investment,” geographically targeted “impact investing,” or “local investing” by some anchor institutions or collaboratives.

What is Place-based Investing?

Figure 2. Impact Investing Spectrum

Positive Measurable Impact
Values Aligned / No Harm
Impact Investments
Responsible Investing
Traditional Investing
Market Rate Return
Below Market Rate Return
Negative Financial Return
Adapted from graphic by © Cogent Consulting

Place-based Investing is geographically-targeted impact investing, which is often understood on a scale that extends from traditional philanthropy (e.g., grants with no expectation of repayment, or forgivable loans) to traditional investments (whose primary objective is to maximize return and are agnostic of social impact).

In the center of the spectrum, impact investing and responsible investing both consider social and/or environmental factors in investment decisions. Responsible investing refers to directing or diverting funds to or from companies or sectors based on environmental, social, or governance factors—factors which are not considered in traditional investing. Impact investing, especially when taking a place-based approach, allows investors to directly finance projects or organizations in specific communities, with a level of direct impact that responsible investments are not designed to accomplish.

Grants and impact investments both allow for positive measurable impact in communities. Creating healthy communities cannot be done with grants alone or accomplished by a single impact investor. By partnering on a collaborative, Place-based Investing strategy and identifying the right community partners, anchor institutions can create a sustainable source of financing to advance community development priorities. As funds are paid back with modest interest, capital can be recycled back into the community to finance new projects.

Such investments can help improve the underlying factors affecting health and wealth outcomes in communities, including access to safe and affordable housing, economic opportunity, childcare, healthy food, and transportation. The most common type of place-based investments for anchor institutions are fixed-income debt investments: providing debt capital to borrowers that address social, economic, and environmental needs. For example, flexible, low-interest loans to entrepreneurs of color, who have faced a long history of discrimination in traditional banking, can provide the necessary resources to grow their businesses and generate wealth. Furthermore, below market-rate loans to nonprofit housing developers can help increase the supply of affordable housing—a notoriously complex sector to finance, often drawing on several funding sources including traditional banks, government subsidies, and mission-driven investors.

There are distinct benefits of collaboration on a Place-based Investing strategy. Anchor institutions working together, alongside strong community partners who have a solid understanding of capital needs and the community investment ecosystem, produce economies of scale that in turn can maximize efficiency and impact. A collaborative approach that includes community partners—such as local housing authorities, city governments, community development experts, mission-driven banks, and community foundations—can reduce the burden on an individual anchor institution to identify investment opportunities in the community.

When members of the collaborative pool their resources, their individual financial contributions can be stretched farther than what could be accomplished while operating individually. The increased capital that a group of investors brings to an investment deal can be a turning point for attracting additional lenders who may not have contributed otherwise. In addition to the benefits of efficiency, a collaborative approach allows institutional investors with different levels of experience, expertise, and risk profiles to finance at a level that is comfortable for them.

Collaboration [on Place-based Investing] holds a lot of promise in terms of reducing barriers to entry, reducing the cost of legal and due diligence, and [improving] the scalability of bringing capital sources together, [by] bringing multiple partners to the table with different areas of expertise.

Place-based Investing strategies are made possible by educating and engaging leadership, building a pipeline of investable projects, and embedding institutional commitments.

Educating and engaging leadership

Anchor collaboratives tend to gravitate toward Impact Workforce and Impact Purchasing strategies because they are conceptually more familiar than Place-based Investing. Place-based Investing strategies yield significant benefit to the community for relatively less organizational effort. This strategy does require community buy-in, and there are often political factors at play. However, the most common initial barrier to getting started on a Place-based Investing strategy is comfort with the concept.

Additional time may be required to socialize the Place-based Investing strategy among key leaders across the organization, and with community partners who may be accustomed to a philanthropic relationship to the anchor institutions. Collaboratives will need to devote ample time to learning the local investment ecosystem, its key players, and investment needs in the community in order to understand the benefits that can accrue from the affordable and flexible capital that they bring.

Support from executive leaders at the outset, especially from champions within the finance department, can accelerate adoption of a Place-based Investing strategy. Executive champions should secure support and necessary resources (financing, staff, and time) for place-based investments from key departments within their institution—including treasury, finance, community engagement, and others. In practice, board members are often more supportive than the organization’s leaders might expect, and it is helpful to identify key supporters on the board’s finance committee. When presenting place-based investment opportunities to finance leaders, it is important to note what risk they can expect to assume and how much of a financial and personnel commitment is required, in addition to the social impact returns they can expect to see.

Building a pipeline of investment opportunities

The Center for Community Investment’s Capital Absorption Framework emphasizes a pipeline approach to Place-based Investing. Recognizing that a single project alone will not transform a community, anchor institutions must work with community partners, city officials, local housing agencies, local banks, and community development finance experts to surface projects and facilitate joint action in lockstep with community priorities for investment. Working collectively with partners reduces the staff time required of each institution to source investment opportunities, and creates efficiency and alignment between financial intermediaries, community partners, and impact investors looking to address financing gaps for community projects.

In developing a Place-based Investing strategy, anchor institutions and collaboratives have the option of financing local businesses and nonprofits directly, or indirectly through intermediaries. Community development financial institutions (CDFIs) are mission-driven institutions that provide essential financial services and debt capital in underserved communities. Risk tolerance often informs whether the collaborative pursues a CDFI loan model for their place-based investment portfolio. The benefits of partnering with CDFIs as intermediaries include reduced risk, and ability to leverage their impact investment expertise and existing relationships with community borrowers. This approach shifts risk to the CDFIs, and the collaborative avoids having to hire a portfolio manager, which can be a deciding factor when pursuing a place-based investment strategy.

Partnering with CDFIs does require collaboratives to give up some control over individual investment decisions, and a collaborative who wants to maintain autonomy in this regard may prefer to hire a portfolio manager and operate their own fund. For many, the benefits of working with a CDFI is a worthwhile trade-off, and the scale generated from multiple anchor institutions working together may offset some of the loss of control that comes from individual anchor institutions operating on their own.

Community-based organizations, local housing authorities, and experts within the collaborative’s focus areas (e.g., partners in affordable housing, economic development, food access) are the most knowledgeable about opportunities for investment in the community. Building awareness in the community about the place-based investment objectives of the anchor collaborative can elicit new partnerships, leading to new investments that might not have surfaced otherwise. Furthermore, the most successful investment programs integrate community groups, leaders, and residents into decision-making about which investments to pursue—holding the collaborative accountable for their alignment with community needs.

Anchor institutions who make direct investments (i.e., without a CDFI) should be sure to have a process that includes input from community groups, leaders, and residents. For those working with CDFIs, consider CDFIs that have strong community relationships, a local presence, experience financing areas of interest (e.g., affordable housing, small businesses), and a history of serving the communities that the organization or collaborative wishes to reach.

Embedding institutional commitments

Embedding institutional commitments involves anchor collaboratives and their member institutions defining objectives, governance, and dedicated staff necessary to sustain the place-based investment strategy. Healthcare Anchor Network (HAN) has defined best practice in this area as allocating at least 1 percent of an anchor institution’s long-term reserves to place-based investing. These allocations can be pooled into a fund and managed by the collaborative, or anchor institutions can choose to partner on individual investments.

Immediate actions: High-impact banking As collaboratives build their place-based investing programs, they can also take immediate actions to put their other financial assets to work. Depositing cash into community-based banks, while not considered a place-based investment, requires relatively little effort and can immediately increase the lending capacity in low-income communities. For example, through its community health improvement initiative, BJC HealthCare moved a portion of its savings to two community-based financial institutions—St. Louis Community Credit Union and Midwest BankCentre—who in turn were able to increase lending with local businesses in St. Louis. Hear more from one beneficiary of such a loan, Freddie Lee’s Gourmet Sauces.

The anchor collaborative can adopt a shared investment policy which guides investment activity, outlining key principles and criteria such as: priority geographies and population, desired rate of return, and duration of investments. Impact measurements, such as the number of housing units or jobs created as a result of investments, should also be clarified. An effective governance structure—within each organization or overseen by the backbone—can guide program direction, source investment opportunities, review prospective loans, and make investment decisions. Success in place-based investing programs occurs when relevant departments within each anchor institution—including treasury, finance, community engagement—stay involved and accountable.

Anchor institutions may also align their grantmaking with community development priorities, for example, offering grants that lay the groundwork for later investments in affordable housing or small business development. Such actions are in alignment with the anchor mission, and can help organizations and collaboratives better leverage and align their financial resources in support of equitable economic development and community wealth building.

Below are some steps to get started on a collaborative Place-based Investing strategy:

  • Consult with community investment experts to better understand the capital investment needs in the community. Identify CDFIs, CDCs, housing authorities, housing coalitions, community development groups, or networks of community investment experts, and find ways to engage with them.

  • Host an educational session or workshop on place-based investing for executive champions within the collaborative to ground the group in key terms, concepts, and the role that anchor institutions can play in the place-based investment ecosystem.

  • Ask that each anchor institution assemble a discovery team that includes leaders from treasury and finance, community engagement or community health, and social impact departments. Together with community partners, discovery teams from each anchor institution can work collaboratively to shape a place-based investment strategy.

Sample metrics for Place-based Investing strategies

It is beneficial for anchor collaboratives to establish a starting point and targets for monitoring Place-based Investing strategies (see section 3.6 Quality Data and Impact Measurement). Below, we provide examples of specific and measurable indicators that anchor collaboratives can consider when tracking their place-based investments.

Example baseline metrics: Submitted by each anchor institution and reported in the aggregate for the collaborative. 1) Total investable assets or long-term reserves; 2) percent or dollar amount allocated and deployed as place-based investments.

Sample goal:

Each member of the anchor collaborative will allocate one percent of their total investable assets to place-based investments, and agree to deploy investments in under-resourced communities within five years for projects that improve community conditions in areas such as: affordable housing, community and economic development, food access, childcare, transportation, and arts and culture.


  • Investable assets: The institutions’ total long-term reserves or unrestricted investment funds/pools. Pensions and other restricted assets should be excluded from this total.

  • Place-based investments are defined as geographically-targeted impact investments with a social and financial return. Grants do not count as place-based investments, as there is no expectation of repayment.

Core metrics for any place-based investment program also measure where dollars are going and to whom. Anchor collaboratives are encouraged to track dollars invested within a defined geography and by project type in key community development areas: affordable housing, community economic development (e.g., small business loans), nutrition and food access, climate resilience, transportation, child/youth development, and arts and culture. The collaborative should also aim to collect socio-demographic information of borrowers within the portfolio. These metrics can keep the collaborative on track toward its goal of increasing the flow of capital to underinvested communities, and to projects that help meet that community’s specific demand for essential infrastructure and services.

Finally, anchor institutions, collaboratives, and financial intermediates should regularly track specific investment project details, including stories from community borrowers. Such details elevate the capital needs in the community and communicate the benefit of the Place-based Investing strategy to civic leaders, elected officials, anchor institution employees and leadership, and other key stakeholders.

Example of collaborative Place-based Investing

West Side United (WSU) is a collaborative between four hospitals in Chicago, and is a pioneering collaborative for place-based investing. WSU anchor institutions, along with Illinois Medical District (IMD), Northern Trust Bank, and the American Medical Association (AMA), collectively invest across four community development financial institutions (CDFIs) who in turn finance community-based projects on Chicago’s West Side. Since 2018, WSU has collectively invested $16.28 million, including “recycled capital,” in community-supported West Side projects through more than 625 loans. Recycled capital is capital generated as proceeds or profit from a prior round of financing for a CDFI, which is then used to reinvest into the same CDFI for the disbursement of more loans into the community.

These investments have contributed to the creation and preservation of 901 housing units; the creation of fifty-two supportive housing beds; the construction and preservation of more than 772,404 square feet of nonprofit, residential, and commercial real estate projects; and have supported 505 construction jobs, preserved 566 local jobs, and created 125 community employment opportunities.

To develop the program, WSU built off of Rush University Medical Center’s initial impact investing commitment in 2017. WSU coordinated collective investment opportunities with its founding hospital partners and other local anchor institutions. Then, Lurie Children’s Hospital and the American Medical Association each made significant financial committmments to the impact investing initiative. Being a WSU anchor mission partner also involves additional support including grants, ongoing collaboration, and subject matter expert contributions from the anchor institutions.

Members from WSU’s Community Advisory Council provided valuable insight into how the area’s history has shaped current economic and social conditions and produced the current need for impact investment on the West Side, and they helped define what success of an impact investing program would look like in the short, intermediate, and long term. Another advantage of this collaborative is that the collective investments of the anchor institution partners allow for flexibility in investment amounts. While some members of the collaborative cannot invest millions of dollars, they are still engaged in the process of disbursing the collective amount to the CDFI partners and informing the collaborative of their specific goals and outcomes.

WSU’s partnership with community development financial institutions is key to their success. Anchor partners are able to invest capital by leveraging the existing infrastructure and expertise of CDFI community lenders who underwrite and disburse a high volume of loans. CDFIs bring experience in community-borrower relationships, regulatory compliance, and data collection and reporting on impact investments. Further, the four CDFIs working with WSU bring complementary skill sets and portfolios, allowing investments to span projects in affordable housing, small business supports, and other community assets, areas that together address several drivers of WSU’s community wealth and health indicators.

While partnering with CDFIs optimizes expertise and efficiency, challenges remain around measuring direct impacts of capital infusions on community-level changes to health equity.

WSU, with the help of a consultant, recently developed an impact framework that combines CDFI data and public datasets to convey a richer portrait of the neighborhood-level outcomes of the investments. Read more about West Side United’s Journey to Impact Investing.

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