Lisa Hall

Calvert Foundation’s Theory of Change

You can resist an invading army; you cannot resist an idea whose time has come.” – Victor Hugo

Sixteen years ago, Calvert Foundation was born of a seemingly improbable idea: using investment dollars to help end poverty.

Today, investment banks describe impact investing as an “emerging asset class”;[1] the impact investing market is estimated to raise at least $500 billion in the next decade[2]; and according to Calvert Foundation’s recent research survey, 72 percent of financial advisors are interested in offering impact investing products to clients[3].

Impact investing is undoubtedly an idea whose time has come. As budgets of philanthropies and governments have shrunk, investment capital has come to be recognized as a tool that can address some of the world’s most pressing problems. An independent 501(c)3 nonprofit, Calvert Foundation has been a quiet but constant presence in the impact investing sector for the past 16 years, helping to lay the groundwork for this field and creating opportunities for others to explore and grow.

Our Theory of Change: The Democratization of Investment Capital

Calvert Foundation’s objective is to “democratize” social investment capital—enabling underserved communities to gain access to financial products and services, and making it easier for individual investors to participate in financing community development. Put another way, we are empowering investors to empower communities.

We believe that we are at the forefront of a movement to harmonize investors’ money with their values. Calvert Foundation raises capital through the sale of our Community Investment Note, and then invests that capital in organizations around the world that create positive social, economic and environmental impact. The Community Investment Note, starting at 20 dollars, is available in various terms and rates up to 2 percent, and is the only impact investing product that can be purchased through a brokerage account by retail investors. We have provided more than $400 million in loans to help low-income communities around the world, while maintaining a 98.8 percent repayment rate from our borrowers, and a 100 percent repayment rate to all investors.

Theory of Change in Action: Investing in Women

For many years, Calvert Foundation heard from financial advisors, investors, donors and others in the impact investing realm about the need for an investment vehicle for women’s empowerment. In 2012, we launched the “Women Investing in Women Initiative” or, WIN-WIN, which was designed to raise $20 million to invest in high-impact organizations worldwide that create economic opportunity for women. This initiative not only aims to ensure greater access to capital for women, but also to engage women as investors. WIN-WIN is the first and currently the only retail investment product with a gender focus; to date, we’ve invested over $9 million raised from more than 700 investors, and this investor base continues to grow steadily. In addition to affirming our theory of change, WIN-WIN’s gender focus has also pushed us to take risks and reach new organizations.

The Paradigm Project is one such organization. Paradigm works primarily in rural Kenya, providing women with clean cookstoves that reduce wood consumption and toxic smoke, saving long and often treacherous journeys to collect wood and preventing the development of pneumonia and other respiratory illnesses.

For organizations like Paradigm, many factors make accessing capital a difficult endeavor; a fledgling technology, an unproven market for carbon finance, and the uncertainty of investing in rural Africa. Additionally, at the time of our loan, Paradigm had less than two years of an operating track record, which would normally preclude a Calvert Foundation investment. But in spending time on the ground and seeing the potential for high impact on women’s lives, we were able to gain comfort with Paradigm’s business model and management team and move forward with a $300,000 investment.

In addition to reminding us that measured risk-taking should always be a part of our organizational culture, these women-focused, high-impact opportunities have created new access to impact investing for people who care deeply about women’s issues, and who might not have considered impact investing before.

The Future of Impact Investing: Innovation, Demonstration and Democratization

It has been two years since I stepped into my role as Calvert Foundation’s CEO, and in that time I have learned that the most powerful thing we do is to connect individuals with the communities they care about. And while we have spent years building a successful track record, we must not rest on it. The impact investing community has grown up around us, and we must respond to this changing landscape by introducing new innovations in order to continuously move the field forward.

In 2011, Calvert Foundation underwent a strategic visioning exercise to examine the future evolution of the impact investing marketplace and to determine how we must position ourselves to respond to these coming changes. After this reflective phase, we have restructured to be a more dynamic organization, focused on creating new forms of financing and demonstrating the ability to invest for impact, sustainably and at scale.

Our internal structure now includes two connected, but distinct teams:

(1) A Strategic Initiatives team to create, test, build and deliver new products and services for our business and for the impact investing field as a whole.

(2) A self-sustaining portfolio of investments that continues to demonstrate scale, achieve impact and results for our investors and borrowers and provide “proof of concept” for the broader industry.

As some of our traditional sources of business mature and access mainstream sources of capital, including Microfinance Institutions (MFIs) and Community Development Financial Institutions (CDFIs), this new focus on innovation will be crucial to continue growing the breadth and depth of opportunities to invest for impact.

Looking Ahead

Through our new “Innovation Lab,” a key component of our Strategic Initiatives team, Calvert Foundation is expanding upon the theme reinforced by WIN-WIN’s success—that by using our Community Investment Note as a tool to connect investors to issues they care about, we can continue to bring new investors into the impact investing field and reach new types of organizations with our capital. Calvert Foundation is currently exploring several new initiatives in a variety of focus areas; they range from supporting place-based revitalization efforts in the U.S. by raising longer-term capital crucial for urban redevelopment efforts to engaging U.S.-based Diaspora communities to invest in their countries of origin through a dedicated fund.

Each of these initiatives will ensure that we are continuing to provide capital to communities that need it most while engaging new investors and expanding the impact investing universe.

Lisa Hall is the president and CEO of Calvert Foundation.

Editor’s note: This post was intially published on the Skoll World Forum.

[1] Impact Investments: An Emerging Asset Class, J.P. Morgan and the. Rockefeller Foundation, Nov 2010

[2] Investing for Social and Environmental Impact, Monitor Institute, January 2009.

[3]Gateways to Impact Press Release, Calvert Foundation June 2012.

impact investing