Three Ways to Give More Effectively

Why Funders Should Consider Impact Investments to Help Communities During COVID-19

Giving Compass' Take: • Laura Tomasko explains that impact investments could help fill funding gaps for small businesses and nonprofit organizations that do not have access to loan assistance or stimulus resources from the government.  • Impact investing practices have come a long way since the last economic crisis. How can donors take advantage of this practice to give equitably?  • Here are three ways for impact investors to respond to coronavirus. Communities all across the country are trying to access the new government response and recovery programs recently signed into law. Some will be successful, but others will struggle to determine eligibility or won’t have the resources to apply. This gives foundations and donors an opportunity to support the vulnerable communities most affected by COVID-19 by making impact investments from their institutional or individual assets, including donor-advised funds. These impact investments could bridge the funding gap until public funds arrive, or they could target nonprofits and small businesses that won’t be able to access these stimulus resources. More than a decade after the last major economic crisis and with these policy measures, foundations and donors should have more clarity and experience using impact investing tools to meet today’s challenges. And it’s essential they do so equitably. After all, there couldn’t be a more critical moment to support the most vulnerable small businesses and nonprofits by using impact investments to bridge the gap until government grant and loan resources arrive or to finance those that won’t receive funds. Recognizing the challenges associated with accessing public dollars, foundations and donors could make place-based impact investments to institutions like daycare centers and expect social returns, in the form of addressing the needs of marginalized communities who are disproportionately suffering during this crisis, and financial returns when government dollars come in or when these centers reopen. Recoverable grants, credit enhancement tools (like guarantees), and loans could help bridge the gap until government funding arrives, or they could provide essential capital to institutions that can’t access public dollars. Foundations and donors have an opportunity to step up and protect the vulnerable communities they serve until government funds arrive or social distancing measures are loosened. Making impact investments alongside grants and donations will increase the amount and diversify the type of private financial capital available to help struggling nonprofits, businesses, and neighbors through this crisis. Read the full article about impact investments by Laura Tomasko at Urban Institute.