THE BLOG
10/22/2012 07:08 pm ET Updated Dec 22, 2012

Impact Investing Grows in Popularity, Importance in the U.S.

Investing in one's community has been part of the culture in the U.S. since our country was founded. Early on, it was as simple as sharing an abundant crop with a neighbor or extending a hand to a stranger in need. It made sense to support your neighbor and your community, and prior to modern markets, there were few alternatives. It is this belief in helping your neighbor for the common good that compelled Enterprise Community Partners' (Enterprise) founder, Jim Rouse, to create a means of investing in affordable housing and communities. Never before has this belief had more meaning. And never before has Enterprise's mission been more critical to America's future.

This belief also explains why so many people are excited about what is today called impact investing, a concept that has evolved dramatically in recent years. Individuals and companies across the world are now thinking more carefully about how, where and why they spend and invest their money. Prior to the global economic downturn, it seems that the global community briefly forgot how every purchase and investment impacted others. That quickly changed during the financial crisis. It served as the global "a-ha" moment, opening people's eyes to what was left in its wake and the suffering in our communities.

At Enterprise, we have deep roots across the country that go back 30 years, and we have witnessed the consequences of investment and disinvestment in our communities. Whether community are thriving or struggling, they all have people who can't access affordable housing, jobs, quality education and health care. These are the basics that our society needs for everyone to prosper. They are what determine whether or not the American dream of hard work and determination leading to success is a reality or a myth.

Enterprise has been a financial innovator helping to shape an impact investing industry worth billions of dollars. We've been exploring ways to build out pay-for-performance models through the use of social impact bonds and other financial tools. We have other sophisticated financial capabilities that we can leverage using much-needed resources derived from impact investing. We can galvanize and reconfigure these pioneering innovations to provide better outcomes for people and the overall economy. Enterprise has also recognized that we need cross-sector partnerships to truly address the challenges our communities face. This isn't easy but a collaborative, rather than siloed, approach is the way to go.

Ultimately, we all need to be a part of the solution to drive capital markets in innovative ways. That's why impact investing products that offer a financial return as well as social return, like the Enterprise Community Impact Note, have emerged. Historically, an infusion of capital into our communities has come from nonprofits and community groups like Enterprise. However, to keep pace with a rapidly evolving world, that must change.

There are three realities that will need to be addressed through new solutions and ideas in the coming years:

  • An aging population: We have a tsunami of seniors in this country who deserve to age in place and have good outcomes at a personal level, and we know this is possible with an intervention of services. Given the state of Medicare, we need more innovative solutions serving this population. We are not currently building enough affordable apartments to meet future demand, nor do our cities have the infrastructure or policies in place to accommodate more of it.
  • Concentration of wealth: It is a recognized truth that a parents' education and wealth affects the long-term success of their children. Today, one of the best predictors of whether a child will grow up to make20,000 or200,000 a year is his or her zip code. Again, this is a country with a core value of social mobility. As Annie Lowery outlined in her recent article in the New York Times, the growing income gap in the U.S. could slow economic growth and have dire consequences for everyone living here.
  • Reduced Role of Government: All levels of government are being squeezed and scaling back on services in which communities depend. Communities will need forward-thinking people to leverage scarce government dollars in more creative ways. Companies like Enterprise and our partners do this with both public and private dollars, but more needs to be done.

Our work has never been more urgent. As we face a fiscal cliff and budget constraints at all levels of government, we're going to be increasingly reliant on impact investing to bring critically needed resources for shared prosperity. There is no silver bullet for these challenges, yet impact investing is one promising solution among many that will be needed to improve access to opportunity. We'll continue to find models that we can expand upon, and innovation will be at the core of better outcomes for people. We remain committed to building on a 30-year record of developing investment opportunities so that our country's public and private capital supports our human capital, and ultimately the places we call home. Our country's future depends on it. Will you join us?