Cleveland Foundation Commits to $150 in Million Social Impact Investing by 2022

The Cleveland Foundation will allocate $150 million for social impact investing by the end of 2022 -- focusing that capital on investments that align social good with financial return.

This commitment positions the Cleveland Foundation as one of the largest social impact investors in the country among community foundations, and comes in addition to its traditional grantmaking efforts. In 2018, the foundation granted more than $100 million to nonprofit organizations.

The foundation’s social impact investing program consists of four primary funding vehicles:

Recoverable grants are forgivable grants given to nonprofit organizations and paid back without interest over a period of time – usually less than five years. They can provide fast and flexible capital, while encouraging an organization to consider multi-year planning.

Program Related Investments (PRIs) are below market-rate loans, equity investments, and bank deposits or debt guarantees that are used to fill capital gaps and address community issues.  PRIs are regulated by the IRS and must be made for the primary purpose of accomplishing a charitable outcome and not primarily for financial gain.

Mission Related Investments (MRIs) The Cleveland Foundation’s MRIs focus on job creation, economic development, research, and technology advancements for the community. MRIs provide a vehicle to support early-stage private equity and venture capital, and public or private companies that fit with the mission. Additionally, the foundation also looks for environmental and sustainable impact investments, housing development investments, and financing for entrepreneur start-up capital.

Socially Responsible Investment (SRI) Pool is designed for Cleveland Foundation donor advised and organization funds. The SRI Pool consists of fossil fuel-free public equities screened for social and environmental responsibility and gender diversity and has a place-based emphasis on Cleveland corporations. The foundation’s SRI Pool has grown from just $500,000 in 2017 to $44 million at the end of the first quarter of this year. It has been the best performing pool at the foundation for the past two fiscal years.

“Today represents a significant moment in our organization’s history and a proud point in time for community philanthropy to demonstrate fiscal leadership while taking innovative steps to meet the growing needs in our local community,” said Cleveland Foundation Senior Vice President and Chief Financial Officer Rosanne Potter.

The foundation has been at the forefront of social impact investing for nearly 40 years – becoming the first community foundation to use a PRI when it advanced nearly $4 million to help save Cleveland’s Playhouse Square in 1982. Today, Playhouse Square is the country’s second-largest performing arts center, second only to New York City.

Potter said that it was also critical that the foundation look at the racial and gender diversity “of both the company boards and investment managers that are partners in the stewardship of our philanthropy.”

In order to be included in the SRI Pool’s diversity allocation, the company board and executive team must include female and minority representation. In addition, the foundation actively seeks investment managers that are at least 50% women and/or minority owned.

The Cleveland Foundation allocated $83.5 million for social impact investing in 2018, with 85% of that coming in the form of PRIs and the SRI Pool. The foundation also hopes to more than double the amount it invests in MRIs and recoverable grants by 2022.

“When combined with our traditional grantmaking efforts, the social impact investing program amplifies our place-based impact in Greater Cleveland and invites new partners to join us in creating an environment for success for everyone we collectively serve,” Potter adds.

The Cleveland Foundation’s social impact investing helped make Playhouse Square one of the premier performing arts centers in the United States. Photo credit: The Cleveland Foundation

The Cleveland Foundation’s social impact investing helped make Playhouse Square one of the premier performing arts centers in the United States. Photo credit: The Cleveland Foundation

Amanda Palleschi