Keeping the Faith

By Patrick Davis, Calvert Foundation Senior Associate.

In November, after returning from the Resource Center for Religious Institutes (RCRI) Conference in St. Louis, I was moved to write about my experience for the UnSectored blog. Now, a few weeks later, I wanted to share a version of that post with readers of Calvert Foundation’s blog.

RCRI is primarily a conference for religious treasurers to learn about developments in financial management that relate to their ministry. Not surprisingly, topics in Socially Responsible Investing are particularly prominent, and so I attended on behalf of Calvert Foundation. There I was joined by many impact investing (or community investing) organizations including Oikocredit, Partners for the Common Good, Leviticus Fund, Hope Enterprise Corporation, Urban Partnership Bank, and Mercy Loan Fund, among others.

I was fortunate enough to spend some time with many great people, but I especially appreciated the chance to reconnect with two nuns that I’ve worked with previously. Sister Pam Buganski of the Sisters of Notre Dame and Sister Corinne Florek of the Religious Communities Investment Fund are each forces of nature in their own right – inspiring, compassionate, tireless advocates for social justice...and new thinking in finance. Sister Corinne has been featured in this blog before, for her work using impact investing principles to care for retired nuns while supporting people in underserved communities

My conversations with the sisters reminded me of the faith community’s special and often unrecognized place in the development of what we now call impact investing. More than 30 years ago, faith-based investors began to point to scripture as a basis for moving real assets into the community development space. In fact, the faith community provided critical seed funding that jump-started countless community loan funds and microfinance institutions that we know well today. For more background, check out the Community Investing Toolkit for the Faith Community report from the Social Investment Forum Foundation.

Congregations and religious retirement funds continue to be some of the most significant contributors to impact investing institutions, and this commitment to social justice through investment was established decades prior to the current excitement about impact investing. As an industry, impact investing cannot realize its vision without understanding its roots. Faith communities have continued to support the industry when it’s been difficult, unpopular, or in glaring contradiction to the prevailing financial philosophies of the day.

Flying home from RCRI, I found myself reflecting on the recent buzz around impact investing. The industry has attracted interest from a wide range of institutions - some are drawn to impact investing because they believe in the potential for market-beating returns in the long run, others because it allows for the integration of social or environmental values in investment portfolios. Perhaps the most fascinating aspect of the impact investing movement is that serves such a wide spectrum of beliefs and values, and as such, transcends common political, religious, and social boundaries.

In the melting pot of all those beliefs and values, though, there have been only a handful of steadfast supporters. In our culture, we approach hot new things with both enthusiasm and trepidation. As it was described to me recently, everyone wants to be the “first second” adopter of a new behavior. When it comes to impact investing, the faith community has been quite the opposite – jumping in with both feet. With values systems firmly rooted in concepts of equity and social justice, faith-based institutions have contributed enormously to the development of the impact investing industry. Personally, I’m deeply grateful to Sister Pam, Sister Corrine, and the countless other supporters of our work that I get to see each year at RCRI. In years to come, I hope that our supporters in the faith community earn as much benefit from their investment as we have from their involvement.

A Warm Welcome to the Newest Additions to the Calvert Foundation Team

As if having the chance to change the world by providing opportunity to the underserved weren’t enough, we at Calvert Foundation also have the great privilege of working with a team of dedicated and talented professionals. Working hard each day, it’s easy to get caught up in our to-do lists and hectic schedules. But when we have a new hire in our midst, it helps to remind us why we’re here, the pride we feel in our mission and our work.

And so it is with great pleasure that we extend a warm welcome to these new additions to the Calvert Foundation team.

Catherine Godschalk
Prior to joining Calvert Foundation in July, as the new leader of the domestic lending team, Catherine was the Washington, D.C., Regional Office Director at Self-Help Ventures Fund, where she led the organization’s efforts to provide more than $33 million in financing to support commercial real estate, affordable housing, charter schools, and other community facilities in underserved areas around the Washington, D.C., metropolitan area. Catherine also led Self-Help’s national Foreclosure Recovery Initiative, developing loan products and lending capital designed to support the redevelopment single family and multifamily foreclosed properties.

Michael Grossman
Our new Manager of International Lending, Michael was previously a Senior Advisor to McKinsey & Company’s Social Sector Office where he worked on economic development assignments with a focus on the financial sector and inclusive agriculture development. In addition, Michael led the creation of the African Development Bank’s $1 billion trade finance initiative and developed small enterprise financing strategies for two African governments.

John Ducey
John Ducey brings 23 years of community development experience to Community Investment Partners, a subsidiary of the Calvert Foundation. As Vice President, John is responsible for CIP's $120+ million asset management business, in addition to direct client portfolio management duties. For the previous five years, John worked at Enterprise Community Investment Inc. (Enterprise). As a Vice President there, he was responsible for the company's placement of equity for workforce housing and New Markets Tax Credit (NMTC) investments targeted at mixed-use and commercial developments.

Richard Tran
Richard brings more a decade of experience in telecommunications networking technologies for both non-profit and corporate sector organizations to his role as Manager of Information Technology. Prior to joining Calvert Foundation in 2011, Richard served as a Network and Telecommunication Administrator at Calvert Investments, where he managed multiple projects from development to implementation. In addition to his great people skills, Richard brings a wealth of experience in technology and strategic solution analysis to Calvert Foundation.

Celebrating Communities, the Holidays, and You

Dear Friend,

Every day, we at Calvert Foundation hear stories that give us hope for a brighter future. Every day, people use capital from our investors and donors to start new businesses, build affordable homes and make their communities better. Every day, new investors buy the Community Investment Note and align their investments with their values, earning social returns along with financial returns.

We also see the issues of economic disparity and uncertainty on the front page every day. Since 1995, Calvert Foundation has been working to create opportunities for hard-working people in the U.S. and around the world so they can create better lives for themselves, their families, and their communities. As we count our blessings this year, we ask you to make a donation to Calvert Foundation. As a nonprofit, we rely on donations to leverage investor capital and transform lives.

We’re proud of our impact:

• $104 million to help create jobs and grow businesses
• $65 million to ensure that families have decent affordable homes
• $30 million for community facilities, like charter schools, health care centers and arts facilities
• $4 million for fair trade and sustainable agriculture

A few highlights from 2011:

• Completed the first phase of an intensive strategic visioning process to position Calvert Foundation to better serve investors, donors, and communities in need (stay tuned!)
• Worked with partners to launch the $200 million FreshWorks Fund, supporting the availability of healthy food and jobs in California
• Participated in the first-ever White House event on “Building an Impact Economy”
• Earned media coverage from Forbes, the Huffington Post, and the Washington Post
• Added phenomenal new staff including John Ducey, Catherine Godschalk, Michael Grossman, and Richard Tran

As we look forward to 2012 and all of the opportunities a new year represents, we wanted to take a moment to thank you. It is your engagement, compassion and interest that make our work possible. This holiday season, we at Calvert Foundation send our best wishes to you, your families, and friends.

Lisa Hall
President and CEO, Calvert Foundation

Building Trust Through Information

This post, by Christina Conrad Cuenca, Manager, Lending and Advisory Services, was originally published on November 2, 2011, in the Microplace blog. 

Impact investing has been getting a lot of great publicity lately, but that doesn't necessarily translate into comfort for investors. Knowledge and information, on the other hand, do. Which is one of many reasons we are so glad to be a part of the Global Impact Investing Rating System, or GIIRS, an independent third party that assesses the social and environmental impact of companies and investment funds.

GIIRS is a project of B Lab, one of our borrowers, and was announced officially in September at the Clinton Global Initiative meeting in New York.

Calvert Foundation is one of the “15 Pioneer Investors” who have declared a preference for GIIRS-rated funds and companies in their impact investing decision process. Furthermore, our participation in this is a signal to more mainstream institutions and investors that credible metrics on impact are necessary for impact investing to succeed.

As the head of Calvert Foundation's risk management team, I take a special interest in encouraging efforts such as GIIRS. One of the great challenges we face in evaluating investment opportunities is a lack of standard metrics across sectors (such as affordable housing and microfinance) and organizational models (such as social enterprises and co-operatives). While we have been successful at navigating our way through these challenges - often by creating our own metrics and screens - the industry as a whole has a better chance to grow and thrive if there is a third-party rating system that investors can turn to for information and comparison.

GIIRS, which has an aggressive five-year plan to provide ratings for more than 2,500 companies and over 350 funds, typically rates venture capital and private equity funds and for-profit companies. Because of this, most of the organizations we invest in wouldn't qualify yet - and neither (as a 501c3) would we. Because of Calvert Foundation's complex model, we often don't quite fit into a defined model, but we are working with GIIRS and the industry at large to change this, one step at a time.

CDFIs: Americans Investing in Americans

By Noelle St. Clair, Investor Relations Associate

Noelle St. Clair

I recently traveled to Minneapolis for the 2011 Opportunity Finance Network conference with Calvert Foundation Marketing Manager, Carrie Hutchison. Since Carrie and I have traveled together quite a bit lately, I know never to get between her and her Starbucks! To someone whose knowledge of caffeinated beverages is pretty much limited to plain coffee or tea, trying to decipher the intricate orders at Starbucks feels like a quasi-foreign experience for me. I did, however, stop into my local Starbucks before the trip to pick up my Create Jobs for USA wristband.

The proceeds from the sale of these wristbands will be donated to Opportunity Finance Network (OFN). Calvert Foundation is a proud member of OFN, the national network of Community Development Financial Institutions or “CDFIs.” Starbucks recognized the good work CDFIs have been doing, delivering affordable capital to low-income and disadvantaged communities around the country, but also realized that the average person has no idea what a CDFI is or what it does. Through the Create Jobs for USA campaign, Starbucks is not only providing funding to OFN and CDFIs, but also helping the industry to receive national recognition. By “buying” and wearing these wristbands, people across the nation are creating jobs for Americans, while simultaneously raising awareness of CDFIs.

Americans, including me, are often quick to complain about the problems in our country. When a solution to a problem becomes apparent, it is empowering to become part of that solution. This is one of the reasons I enjoy working at Calvert Foundation so much. Calvert Foundation is lending to more than 60 CDFIs that are creating jobs in America. More importantly, Calvert Foundation is funded by individual investors looking to become part of the solution to some of our country’s most pressing problems. Americans helping Americans, people investing in people – this is what Calvert Foundation does and this is what OFN and Starbucks are doing with the Create Jobs for USA campaign.

There was definitely a buzz at the OFN conference about the campaign and the partnership with Starbucks. Adam Brotman, VP of Digital Ventures for Starbucks, spoke at the conference, specifically about Starbucks’ commitment to communities and their efforts outside of the new campaign. Adam had an impressive list, including the fact that Starbucks has been an investor in the Calvert Foundation Community Investment Note for almost 10 years. We are appreciative of the support that Starbucks has given and continues to provide for organizations doing the type of work that we do. Personally, I was very impressed by Starbucks and although I don’t think I’ll ever have a VIP Gold discount card like my caffeinated friend Carrie, I just might have to stop in a bit more frequently for a Tall Soy Sugar Free Cinnamon Dolce Latte!

Learn more about CDFIs by watching this great video created by Citi Foundation and OFN!

Water and Sanitation: A Quadruple Bottom Line Investment

By Anthony Randazzo, CFA, Senior Investment Officer

Something ironic happened to me the day before I spoke on a Water and Sanitation panel at the Impact Investing Summit in Washington, D.C.

I entered the kitchen at 6:30 in the morning to make my first dose of coffee, but when I reached for the faucet to fill up the kettle, no water came out - just an annoying hissing sound. A water main had burst in the middle of the night, knocking out the water supply in our entire neighborhood.

If you are like me, then you believe things happen to you for a reason. So, it occurred to me as I stood in my kitchen wondering how I was going to get ready for work that perhaps I was meant to feel solidarity that morning with the 884 million people in the developing world who live without clean water every day. We take clean water for granted, so what better way to prepare a heartfelt presentation on water than to live without it for a day?

Personal water deprivations aside, the Impact Investing Summit provided me an opportunity to interact with commercial and institutional investors from across the financial spectrum to discuss how to use investment to alleviate poverty and address environmental issues. The panel discussion on Water and Sanitation was well received and I, along with co-panelists Rich Thorsten from Water.org and D. Paul Sathianathan, of Guardian, fielded questions about what we do, how our organizations tackle the water and sanitation scarcity issue and why we have chosen to work in this space.

To date, the Calvert Foundation has invested approximately $4 million in social impact investments for improved water and sanitation. Most of this has been indirect, through loans to financial intermediaries that have invested in water and sanitation, but we also have a direct investment in E-Healthpoint, a social enterprise that provides clean water and affordable healthcare in rural India. Why is Calvert Foundation interested in this sector? There are two main reasons.

A woman selling drinking water on the 

streets of Mumbai in India. Proof that water can

 generate income for the working poor. 

Photo by Anthony Randazzo

A “quadruple bottom line”

For one, if done right, investing in water and sanitation can be a rewarding proposition. We have all heard of companies that generate a “double bottom line” i.e. that generate both financial returns and a “social” return (i.e. reduce poverty). However, water can achieve at least four types of impact, producing what I like to call a “quadruple bottom line.”

• It can have a direct impact on health. Waterborne diseases are a major cause of diarrhea and other illnesses that kill poor people in developing countries. It is estimated that 1.5 million children under the age of five die every year as a result of water and sanitation-related diseases.
• It can have a gender impact. Women and girls shoulder 72% of the burden for collecting water for the household. By freeing up their time, women can live more productive lives and girls can spend more time in school. 
• It can have a positive economic impact. Clean water can generate revenue for the family if it is sold or used to maintain a small business. It can also translate into increased savings if better health means higher productivity or less money spent on healthcare. 
• Finally, water can have a conflict resolution impact. We live in a world where countries enter into conflict over scarce resources. It is not inconceivable that countries will one day fight over water. By investing in clean water today, we can reduce the likelihood that conflicts over water will happen tomorrow. Better water resource management can also improve food security. 

Social and Environmental Impact

The other reason why Calvert Foundation is interested in water and sanitation is because our investors are increasingly interested in achieving both a social return on their investment as well as an environmental impact. However, finding investments that reduce poverty, solve environmental problems, and produce a stable return can be challenging.

We need to keep in mind that there are 2.6 billion people without access to improved sanitation in addition to the 880 million without clean water. Those are large numbers, so you need to harness the private sector to find a solution to these problems. The failure of governments to provide these public services in the developing world has meant that the private sector has had to step in to try to fill the void with “off-grid” solutions. In fact, there are many simple, affordable off-grid solutions available to provide clean water and improved sanitation at the base of the economic pyramid. These range from household water purification systems, to rainwater harvesters, to simple pit latrines.

However, finding the right business model that can deliver such products and services at scale and at an affordable price can be a challenge. There are many organizations out there focused on addressing the water and sanitation issue, but in my experience, most are donor-dependent and few are set up to harness the private sector in a sustainable, scalable manner. The carbon-offset market might provide an answer, since off-grid water purification provides an alternative to boiling, but it remains to be seen if this additional revenue can be tapped as successfully by the water sector as it has by the renewable energy sector. It may be that social enterprises in the water and sanitation sector are today where microfinance institutions were 15 years ago, i.e. still reliant on donor funding to absorb start-up costs and stimulate private investment.

In September of 2010, the Human Rights Council recognized the right to water and sanitation as legally binding under international law. This will help to underscore the responsibility of governments to deliver water and sanitation to their citizens, but it will take time and resources for the public sector to bridge the gap. For this reason, we have to continue to find market-led solutions to the problem since charity alone will not get us there.

Moreover, we all need to be reminded that water is a scarce resource, and not having it for a day will make you realize (as I did) that you can get ready for work with very small quantities of water (from my tea kettle and Brita water filter).

Grateful Reflections on the Big Easy

By Art Stevens, Vice President, Sales and Marketing

I usually start looking forward to the next SRI in the Rockies conference about three days after the last one ends, and I’ve caught up on some sleep. I had to add a little extra recovery time after this year’s event in New Orleans, but my anticipation for 2012 is already building.  SRI in the Rockies may have strayed geographically from its mountain roots, but even after 22 years, its soul is firmly grounded.

Each year this event brings together hundreds of friends to celebrate our shared commitment to an economic system that balances the needs of the one with the needs of the many, creating opportunity while pursuing justice. And each year I am thrilled to meet dozens of people new to the conference (and sometime to the industry) who bring with them new energy and fresh perspectives. Most of all I get to spend time with our amazing team.

In one moment SRI in the Rockies provides a great view of the amazing progress we have made in the past two decades, a perspective easily lost in our day-to-day work. The next moment it challenges us to take an unblinking look at where we are - even to get a little ticked off - before sending us back into the arena. Like a true friend, the conference is a forum for asking the tough questions that challenge us to be better, and also a place to share a dance and remember that we are all in this together.

This year, Noelle St. Clair (Investor Relations Associate at Calvert Foundation and an SRI-R first-timer) and I had the further privilege of seeing the real-life results of our investors’ efforts. We visited the Treme neighborhood and met Mr. Brumfeld, a 63-year-old wheelchair-bound man. He spent the night Katrina hit on a bridge with hundreds of others, then five days in the Convention Center, before being relocated to another state for more than three years. My first reaction to stories like his is still disbelief that this can happen in America.

Thanks to the support of our advisors and investors, and the great work of Enterprise, our partner in the field, Mr.Brumfeld is now back in his familiar neighborhood, in a healthy, secure, and fully accessible apartment. His smile tells the story more effectively than any words I can compose, which is why we are excited to be producing a video to share his story along with other great successes from our partners in New Orleans like Hope Enterprise Corporation.

Let’s “Travel Down this Road Together”

By Lisa Hall, President & CEO of Calvert Foundation

I was honored to participate last week as a speaker on a panel about the racial wealth gap in this country at the Congressional Black Caucus Foundation’s annual conference. The energy was amazing, and I was so glad to bring the message of impact investing to such a diverse and dynamic audience.

The highlight of the conference was, of course, President Barack Obama’s remarks at the event’s Annual Phoenix Awards Dinner. In his address to “the conscience of the Congress,” President Obama spoke about the importance of faith in our collective quest to move economic and social justice forward.

One of the reasons I’m so excited to be leading Calvert Foundation is because I believe so deeply and personally in this work that we do, connecting investors to social causes. I feel in many ways that I have always been sitting at this intersection of finance and doing good. My father was a social worker and activist in the civil rights movement, my mother a life-long school teacher and public servant. My personal story is one of a little girl from Baltimore whose parents and extended family put no limits on how much I could accomplish in this lifetime. And I believe there is no limit on what we can accomplish as a country if we collectively put our minds and our hearts to it.

During the past few years, our economy has suffered greatly and yet the wealth is building at the top. The statistics are staggering. According to a recent Pew Research study, the median wealth of white households at $113,149 is 20 times that of black households at $5,677 and 18 times that of Hispanic households at $6,325. This staggering gap requires immediate action.

Through impact investment, we create a virtuous circle of empowerment, opportunity, and respect by connecting investors to underserved individuals and communities. I’d like to point out here that making opportunity available to all Americans doesn’t have to be a divisive issue. It’s a fact that some of the most successful community development tools, such as the Low-Income Housing Tax Credit and the New Markets Tax Credit, have been bi-partisan efforts supported by both Republicans and Democrats in the past.

Impact investing fits as a tool for economic growth that has no color – neither Red nor Blue. And I’m so glad our industry is finally getting some traction in the political sphere. I was excited to hear that Jonathan Greenblatt, a long time social entrepreneur and impact investing leader, was recently appointed to work with Melody Barnes, the head of Obama’s Domestic Policy Council. Jonathan will head the White House’s Office of Social Innovation and Civic Engagement where he will lead the Administration’s efforts to grow the Impact Economy.

I want more people – from all communities – to be involved in the Impact Economy. Every investor can be part of the solution to closing the wealth gap. We need to act. I believe as President Obama said in his speech last Saturday and as I would like to reiterate on behalf of Calvert Foundation and the impact investing industry:

“We have to do more to put people to work right now. We’ve got to make that everyone in this country gets a fair shake, and a fair shot, and a chance to get ahead. And I know we won’t get where we need to go if we don’t travel down this road together.”

Fortune Favors the Bold

By Lisa Hall, Calvert Foundation's President & CEO

Last month I was honored to participate in the inaugural Rockefeller Foundation Innovation Forum in the Chelsea Arts District of Manhattan along with one hundred other leaders in the social and private sector. It was a thought provoking event in a unique setting – Center 548 – an industrial warehouse space transformed into a conference center. The main entrance features a massive freight elevator that transported attendees to the second floor, where a large video screen showed an African women making her journey to bring water from a distant source to her home. It was a striking juxtaposition to the short distance we travelled from the elevator to a table overflowing with bottled water. 

The Forum focused on water security, food security, and economic security in American cities, and encouraged revolutionary thinking on solutions to these problems. The forum began with an extraordinary panel moderated by Dr. Judith Rodin, the President of Rockefeller Foundation, who previously made history at my alma mater, the University of Pennsylvania, as the first permanent female president of an Ivy League university. Distinguished panelists included Dr. Paul Farmer of Harvard University and founder of the world renowned international development organization, Partners in Health (PIH), and Nobel Prize winner Muhammad Yunus, who was an early advocate for – and some would say the inventor of – microfinance and founder of Grameen Bank.

Their legendary accomplishments inspired me to think about the next chapter for Calvert Foundation and what innovation means in impact investment. We are currently engaged in a major strategic planning effort with the assistance of Monitor Institute to envision and plan for the future and ensure success in our next 15 years. As I think about new ideas for Calvert Foundation, I wonder what would be possible if we could build out options to popularize the use of self-directed IRAs for impact investments. Or if we could create an investment product that allowed non-profits with earned revenue models to raise money from individuals, something similar to equity that would provide these non-profits with sorely needed growth capital. Another possibility? What about syndicating Low Income Housing Tax Credits or New Markets Tax Credits for individual investors?

With enough grant support, these could become more than just ideas. I’ve heard from many sources that workers are investing less in their 401k accounts – not only because they are they getting lower returns than they did historically, but also because they have no connection to their investments. Products like Calvert Foundation’s Community Investment Note and RSF’s Social Investment Fund allow investors to be connected to communities through programs like the California FreshWorks Fund, which is financing distribution of fresh, healthy food to “food deserts” in low-income neighborhoods. Calvert Foundation has also helped other non-profits – such as affordable housing group Enterprise Community Partners and international microfinance organization Oikocredit – offer investment notes to their respective stakeholders. We are proud of our past innovations at Calvert Social Investment Foundation and we are poised to do more and take bigger risks in collaboration with others. 

One of my favorite lines originates from the ancient Roman play Aneid by Virgil. It is often quoted and was recently referenced by Cheryl Sandberg, COO of Facebook, in her commencement address to the 2011 class of Barnard. In her speech Sandberg challenged the graduating women to take more chances personally and professionally – to do those things they would do “if they were not afraid.” After reading the transcript of Sandberg’s speech a few weeks ago, I haven’t been able to get the words out of my head: “Fortune favors the bold.” This quote resonated with me as I sat last month in the audience at the Innovation Forum and listened throughout the day.

I think funders should be putting larger, longer-term dollars toward mountain-moving efforts, not just the new start-up idea. In other words, I think they should be making bigger bets. “Bet” might seem like a bad word in the philanthropic/nonprofit sector since “betting” implies risk. But that is exactly why I’m using it. You might lose, sure. But you also might win big and watch a grant leveraged over and over to help thousands of people. For example, the $50 million in net assets that the Ford Foundation gave to Self-Help in the late 90's has been truly transformative.

This is not to say that smaller, shorter-term grants don’t have their place. They certainly do – Calvert Foundation could never have gotten off the ground if the great staff at the MacArthur Foundation didn’t bet on us years ago. But as government retracts and underserved communities are more in need than ever, there is a real opportunity to broaden impact. This is about more than the money – it’s about leadership and sending a signal to the larger philanthropic world about the importance of investing in big ideas and influential players.

Aiming high, taking risk and being innovative is also about more than the money – it’s about leadership and encouraging the larger philanthropic and impact investing community, to invest in big ideas and influential leaders. When thinking about risk, I believe we should be asking ourselves, “What is the risk of NOT taking risk?”

Launching the California FreshWorks Fund in Los Angeles

Calvert Foundation Relationship Manager Justin Conway traveled to Los Angeles, CA this week for the official launch of the FreshWorks Fund, California's new healthy foods financing initiative, which brings together a large and diverse group of partners to improve access to healthy food in the state's many food deserts.

Justin Conway

I’m on the road quite a bit, especially on the West Coast, but somehow I’ve always managed to avoid Los Angeles, CA. It is by far one of the only big cities in North America where I haven’t spent some time. I’ve circled Southern California from just north of LA in Ventura, out off LA’s coast in the Channel Islands, to south around San Diego, but I’ve never been to LA. Never even flown through LAX. How can this be?

Then comes the California FreshWorks Fund, spearheaded by The California Endowment that is based in LA. This new $200 million fund is designed to spur healthy food access and economic development in low-income communities throughout California. It is a partnership with The California Endowment, NCB Capital Impact, and many other great partners. While the FreshWorks Fund was first announced by Michelle Obama on Wednesday at the White House, the official launch took place in LA on Thursday. 

Justin with Flavia Romero of Microplace 

So off to LA I go for the FreshWorks Fund launch…but of course, first for a taco. I mean that’s what I’m supposed to do, right? I don’t have time to find actors’ stars on Hollywood Boulevard or drive by their homes, or the many other more cultural and beachy things I’d like to do. In my very limited time in LA, I’m just hoping to squeeze in a food cart taco. Then I see Homeboy Industries – a social enterprise I’ve known of for years that helps former gang members turn their lives around by, among other things, employing them in the food service industry. – and the accompanying Homegirl Café. I honestly have no idea what food they’re going to serve, but lucky for me they have tacos. Not tacos like I was originally expecting from LA (there was hibiscus flower and carmelized onions in one of mine), but amazingly good. It was also great to see that in addition to their social mission, they have a strong commitment to sourcing from local, organic urban farms…which is what I’m in LA to support. 

Just a couple minutes away from Homeboy Industries, is The California Endowment’s beautiful headquarters outside LA’s Chinatown, where all of the partners have come together to launch the FreshWorks Fund. There were inspiring speeches, amazing food from local chefs, fresh produce all around, lots of networking among the hundreds gathered, and an overall buzz. I was there to speak about Calvert Foundation’s unique role in the FreshWorks Fund – to provide a way for the public to invest in increasing healthy food access. Calvert Foundation is a pioneer in helping all types of investors, big and small, institutions and individuals, get involved in community and impact investing. Through our partnership with Microplace, people can invest in the FreshWorks Fund Initiative at investment levels of $20 or more. As one person at the event said to me “I think it is great that I can be like the institutions (and invest)…this is my favorite part…and thanks for making that happen.”

Having worked closely with community and impact investors for the past 10 years, I’ve heard many similar stories from individuals appreciating the opportunity to invest in a way that historically only institutions have been able to do. It’s not a surprise that I’d hear it in LA too, but it makes me realize that we haven’t been as active with the investor and financial advisor community around here. We have several great partners based in LA including Century Housing and Clearinghouse CDFI, and many more like NCB Capital Impact that are very active in the area. Now, through the FreshWorks Fund, we have many more partners in LA. All in all, having only spent 12 hours in the city, I fly away convinced that Calvert Foundation has an opportunity to get more folks involved in what is a huge, but largely untapped market. I hope my colleagues and I, as well as other impact investing partners, are able to spend many more days helping investors in Los Angeles understand how they can invest in their communities…and finding great tacos.

I get by with a little help from my (impact investing) friends

Last week, Carrie Hutchison, Marketing and Communications Manager at Calvert Foundation, hosted the first-ever Meeting of Impact Investment Marketing Professionals.

Carrie Hutchison

I love invitations. Love receiving them. Love sending them. When sending, I love the whole RSVP process. I would get married again just for the invitations.

So I was especially excited a few weeks ago when I had a 100% positive RSVP from everyone I had invited to be a part of the first meeting of Impact Investment Marketing Professionals. The genesis for this group was a series of informal conversations I’d had a few months earlier at a Net Impact happy hour organized by my superstar colleague Patrick Davis. At this event I found myself talking to people who – like me – are tasked with promoting the impact investment products at their respective organizations. Through these – and subsequent – conversations I found common themes: it’s hard to explain what we do, we’re the only (or one of the only) ones at our organizations doing marketing – and often all facets of it (including PR and communications), we work at nonprofits with lean budgets, we love what we do.

Encouraged by Institute for Community Economics Director Andy Slettebak, who graciously offered to host at his offices in Georgetown, I put together a loose agenda – and the promise of food and drink – and sent out the invitation. Not only did 100% say they’d come, all but one did! (And he had a very good excuse.)

You know that Blind Melon video where the girl dressed up as a bumblebee struggles to fit in until the end when she finds all the other bees? That’s what it was like! I’ve often told family and friends that I finally found “my people” when I joined Calvert Foundation and the impact investment industry. And what I found that night with my fellow marketers was that I really really found my people.

We have a lot of work to do. We need to communicate a complex and important concept effectively and simply. We have to juggle multiple roles and tasks. We have to prioritize.  But in one night we in many ways expanded our small staffs, since we now have each other to draw upon for ideas and advice. And that is what is so great about this industry. We’re so new and the work we do is so critical to helping low-income communities that we aren’t competitive. All boats float if we succeed. And that’s a nice feeling too.

If you are playing this role at your organization, contact me!

White House Provides Visibility to Impact Investing

Lisa Hall, the President and CEO of Calvert Foundation, was recently invited to speak on policy and regulatory implications for the Impact Investing industry at a convening hosted by the White House, along with Rob Wexler of Adler Colvin and Cathy Clark of the Center for Advancement of Social Entrepreneurship at Duke’s Fuqua School of Business.

Lisa Hall

As I walked through the entrance to the White House grounds a few weeks ago for a first-time convening on the "Building an Impact Economy in America," it took me back to more than a decade ago, when I worked as a staffer for Gene Sperling in the Clinton Administration. Back in 1999, I had the opportunity to travel with the President on Air Force One for what the press dubbed "The Poverty Tour," which the administration used to launch the New Markets Initiative, eventually resulting in legislation to spur investment in impoverished communities across the nation. 

We visited distressed communities in urban areas such as Watts in Los Angeles and low-income neighborhoods in rural areas such as the Mississippi Delta. As we drove into Appalachia on the first day of the four-day trip, I was struck by how many people had come out to see the President and Jesse Jackson, who gave a kick-off speech. The number of people who lined the streets was awe-inspiring and impressed upon me how hungry citizens were for support from the government, and how much they wanted tools in place that would help them get jobs, start businesses, and repair their communities.

This kind of visit wasn't typical of a U.S. President at the time. In fact, Clinton's visit to Appalachia was the first by a President since Lyndon Johnson declared his "War on Poverty" in 1965. The Poverty Tour was an attempt to make underserved communities visible - and it worked. The trip drew unprecedented media attention to low-income communities, receiving five consecutive days of coverage on the nightly news.

One of the many bright spots on that trip was a visit to a factory financed by Kentucky Highlands Investment Corporation, a certified Community Development Finance Institution that drives investor capital to social causes, creating jobs, funding education, and financing small businesses. Little did I know that a dozen years later I would be leading an innovative organization driving investment dollars from thousands of socially conscious individuals to hundreds of organizations like Kentucky Highlands around the country and the world. Kentucky Highlands is now a borrower of the Communities at Work Fund, a $200 million Citibank fund managed by Calvert Foundation’s wholly owned subsidiary Community Investment Partners. (I’m honored to serve as the Board Chair of Community Investment Partners.)

The visibility of the Poverty Tour has long faded into the background. Bill Shore, Executive Director of Share Our Strength, recently Tweeted about an article in last Sunday's New York Times titled "Somehow, the Unemployed Became Invisible." A recent nationwide survey conducted by HBS professor Michael I. Norton and Dan Ariely found that Americans “drastically underestimated the level of wealth inequality in the United States.” It's time to bring the spotlight back where it belongs. Norton is exploring whether educating Americans about this inequality will increase their support for better economic policies. There are many others who want to bring more attention to the needs of underserved communities and create avenues of opportunities for the people who live there. I have the privilege of working with them every day.

Which is why I was absolutely thrilled to be invited to the White House last month for a convening on "Building an Impact Economy in America” (watch the video clip here). The Aspen Institute, which co-sponsored the convening, defines the Impact Economy as the supply of capital and those firms demanding the capital in pursuit of both profit and social impact. The Administration wants to build a policy agenda that will drive investment in American businesses and also generate financial and social returns. This event brought together many of the people I am privileged to work with, such as: Ron Phillips of Coastal Enterprises, a long-time Calvert Foundation borrower; Debra Schwartz of the MacArthur Foundation, one of our earliest grant supporters and a true believer in the vision; and Bob Annibale of Citi, who has used his influence within a large corporation to drive investment dollars and attention to both domestic work like the Communities at Work Fund and microfinance initiatives internationally. My former boss Gene Sperling, now President Obama’s top economic adviser, was also at the event and spoke eloquently about the administration’s efforts to rebuild the economy and create jobs for Americans. 

The White House has recognized the power and efficacy of investing for both financial and social return. Those attending the convening were there to advise the government about how to “remove barriers, streamline regulations and target existing government resources to support the building of an impact economy.” At its core, the event was about creating prosperity and alleviating economic suffering throughout the country. I believe that just as Johnson did in 1965 with his Great Society and Clinton did in 1999 with his New Markets Initiative, President Obama has the opportunity to use the power and influence of his office to bring more attention to underserved and low-income communities which have been disproportionately affected by our current economic challenges. 

Jonathan Greenblatt of the Aspen Institute described the meeting as "historic"; he believes the "Impact Economy" will soon be a term “that is as well-known as microfinance or charter schools, a trend that overturns an old order, shakes loose ossified ideas and spawns social benefit scale as a result.” The meeting was an important first step toward establishing a national strategy for the impact economy. It is our hope that we can build on the momentum of this gathering and translate the conversations into tangible results for the impact investing industry, and the country, as a whole. 

Calvert Foundation’s vision of a world with "5% for impact" - where 5% of every investor’s portfolio is dedicated to impact investing – appears to be within reach. I look forward to continuing to engage with officials in the Administration about ideas for the future to help build an impact economy which can fuel an overall economic recovery that benefits all members of our society. Let’s all encourage the White House to host more convenings and continue bringing more attention to these issues, ultimately creating more government policies and programs that enable private, social impact investments in the most vulnerable communities in our nation. 

Microfinance in Eastern Europe?

Anthony Randazzo is a Senior Investment Officer with Calvert Foundation's Lending & Services Team. He focuses on loan origination efforts for international investments in microfinance, water and sanitation, and renewable energy. Last month, Anthony met with microfinance industry leaders at the 14th Annual Microfinance Center Conference in Prague, CZ, the city where he kicked off his professional career nearly two decades ago.

Anthony Randazzo

I once told my Czech friends that their language – with its mind-bending grammar, and tongue-twisting pronunciation – is a paradox: the more I studied it, the less I understood. Though I did eventually master it while living in Prague from 1992 to 1993, my recent exchange with a waiter at the 14th Annual Microfinance Center Conference in Prague showed how quickly language skills atrophy. In my best Czech, I asked to order a coffee. The waiter stared back at me, smiling. I thought maybe he didn’t understand, so I persisted, “Prosim, mohu nabidnout kavu?” He eventually responded, politely holding back his amusement, “Well, I would gladly accept, but perhaps you wish to order a coffee instead, sir?” Embarrassingly, I had confused nabidnout (to offer) with objednat (to order). “Yes please,” I humbly conceded, in English. 

Despite my embarrassing exchanges with the wait staff, I was delighted to attend the MFC conference this year. With several hundred participants from 45 countries, it is arguably the most important annual microfinance industry event in Eastern Europe. Past MFC conferences have been held in Sofia, Ulaanbaatar, Belgrade, and Astana. Naturally I was thrilled to learn it would be held in Prague this year, providing an opportunity to return to a place where I lived and worked in the early days of my career.  

Prague was a different city back then. Only a trickle of tourists, but an estimated 5,000 American ex-pats (mostly college graduates escaping the ‘92 recession) were the only foreigners in the city. Czechoslovakia was still a unified country. The transition from totalitarianism to free market democracy was in full gear. I remember when the first McDonald’s restaurant opened. Instead of shunning fast food, Czechs welcomed this icon of American culture. I think for them it symbolized a newfound freedom, and they lined up for several blocks to get their first taste. Today, the center of Prague is awash in tourists, and fast-food restaurants abound. But Prague has refused to lose its magic, and in my opinion, is still one of the most magnificent cities in Europe. 

While most casual observers associate microfinance with the regions where it first emerged (South America, India, and South Asia), there has been a thriving microfinance market across most of Eastern Europe, and many microfinance networks (ProCredit, FINCA) have some of their largest operations there. In fact, about one third of Calvert Foundation’s microfinance portfolio is invested in Eastern Europe and two of our five largest investment exposures are in former Soviet countries (Azerbaijan and Georgia). That microfinance took off in Eastern Europe should come as no surprise. Forty-five years of state-controlled economic policy left the region in stagnation. However, the end of the Cold War created opportunities for individuals to start their own businesses, both formal and informal, and microfinance has played a key role in empowering those individuals to manage their own affairs. The wave of private entrepreneurship has revitalized Eastern Europe since the end of state-sponsored socialism.   

This entrepreneurial spirit was in the air at the MFC Conference. With the senior management of nearly every major East European microfinance institution (MFI) in attendance, it is a convenient venue to get business done. With Prague chosen as the location this year, the number of attendees was particularly high. While the conference always lines up interesting debates and discussions, a lot of serious negotiating is done on the side lines of the event. In the course of 3 days, I met with the CEOs of six microfinance institutions in which Calvert Foundation is invested, and interviewed an additional 5-6 prospects, often alongside staff from partner organizations Triple Jump and MicroVest.

There were also some thought-provoking roundtable discussions on the MFC agenda, which was entitled Reorienting Microfinance towards Balanced Growth. Interesting debates were held on the future of microfinance. One spirited panel discussion featured the contrarian views of Milford Bateman, author of Why Microfinance Doesn’t Work, who was invited to speak alongside the president of FINCA International, Rupert Scofield, and other microfinance heavyweights on the subject of Reorienting Microfinance: Generating New or Repairing the Old?   

Mr. Bateman was most likely invited to inject some critical thought into the discussions. Since the conference typically attracts only ardent believers in microfinance, I admired his courage. Bateman contends that microfinance inhibits the growth of a balanced economy by fostering the proliferation of self-employed micro entrepreneurs, all of whom compete in the same markets. This drives down profits and prevents the development of a modern, diversified economy. He also argues that there is little independent evidence demonstrating that microfinance creates jobs or alleviates poverty since studies produced by industry insiders are naturally biased. Mr. Scofield (and others) fired back, arguing that microloans had had a transformative impact on the lives of poor individuals. Scofield gave examples of $50 loans he helped make in the highlands of Guatemala that allowed farmers to buy fertilizer. He witnessed first-hand the dramatic improvement this had on crop yields and family nutrition. It also eliminated the market for loan sharks, who ruthlessly charged 5-10% interest per day for credit.   

As I watched the debate unfold, I felt that this kind of criticism is quite healthy. The microfinance industry can and should improve its ability to tell its story. Industry-wide efforts are underway, such as the SMART Campaign (a global effort to achieve common principles for protecting clients such as transparent pricing and ethical collection practices) and the Social Performance Taskforce (a platform for disseminating best practice for microfinance institutions to achieve their social mission). Still, measuring impact in a more scientific way would generate convincing evidence of the transformative benefits that many of us have witnessed in our work but which are not readily quantifiable. At Calvert Foundation, we rely on commonly used metrics to quantify impact (such as the number of female borrowers served by the microfinance institutions we support) but often these benchmarks fall short. One good example we have is an MFI in India that measures the poverty levels of clients that enter and exit their microloan programs. Nearly all of the borrowers that they take in live below the poverty line, but after five loan cycles the majority of these same clients are no longer poor. Metrics like these tell a great story, but are not easily obtained. They demonstrate that microfinance enables individuals to manage their finances more effectively, smooth out their consumption and build up assets. Still, microfinance is not the poverty alleviation equivalent of a silver bullet. It is just one of many tools in the poverty alleviation toolbox.  

So I say, bring on the criticism. It will only help the microfinance industry to realize its weak points and look for ways to improve. Complacency leaves us vulnerable to reputational risks. Like making embarrassing mistakes in Czech to a waiter in Prague, we should avoid being overly confident, and strive to continuously improve.

Honoring Wayne Silby at the 41st Joseph Wharton Award Dinner

Lydia Cutrer is a Jr. Investment Officer with Calvert Foundation's Risk Management Team, focusing on the Domestic Lending Portfolio. As a Graduate of the Wharton School and active member of the Wharton Alumni Club of DC, she was one of several Calvert Foundation representatives in attendance to celebrate the recognition of Calvert Investments and Calvert Foundation Founder Wayne Silby at the 41st Annual Joseph Wharton Award Dinner.

 

Lydia Cutrer

Last week, D. Wayne Silby – founder of both Calvert Foundation and Calvert Investments – was among four Wharton University alumni honored at the 41^st Annual Joseph Wharton Award Dinner, sponsored by the Wharton Alumni Club of DC. The honorees were recognized for their substantial career success and leadership, strong ties to the Wharton School and University of Pennsylvania, and a solid commitment to public service. While they varied in age and experience, the “fabulous four” all embodied the spirit of the award as each shared with the audience a tangible passion for their life’s work through moving remarks about their personal journeys.
  

Wayne Silby commented that, although he and Calvert Investments co-founder John Guffey endeavored to make a lot of money out of college, he realized the potential of channeling capital in a way that would be productive to society and became committed to this pursuit. Wayne talked of his continued efforts in underserved communities, particularly in China, through the Calvert Social Investment Fund and other personal ventures. The Club’s President and the dinner’s emcee, Alan Schlaifer, quoted from Calvert Foundation CEO Lisa Hall: “Wayne is not only a visionary, he has also been able to bring to fruition what others cannot even envision." 



Of the nearly 125 guests in attendance, the Calvert name was well represented in celebration of Silby’s achievements. Along with Lisa Hall, the Calvert contingent also included fellow Wharton alumni Reggie Stanley (Calvert Foundation Board Member and Calvert Investments’ Chief Marketing Officer), Lydia Cutrer (Calvert Foundation Jr. Investment Officer), and Daryn Dodson (Associate with Calvert Investments).

The youngest honoree, Alison Malmon, described the tragedy of losing her older brother in her sophomore year at Penn as the result of his depression leading to suicide. Though she could not initially understand how her smart and active brother took his own life, she began to learn the drastic need for mental health support for students and young adults. She founded Active Minds, Inc. on Penn’s campus and over the past eight years, the organization has grown to nearly 340 college chapters. Another honoree, His Excellency Jose L. Cuisia, Jr., Ambassador of the Philippines to the United States, credited his education at Wharton, long career in banking, and supportive wife and five daughters with helping him build a foundation to serve his people. Joyce Hunter, CEO of Vulcan Enterprises LLC, is a fearless advocate and sought-after advisor for Health and Human Services. She spoke of her impassioned focus on health information technology after her father became sicker because the hospital where he was admitted did not have access to his medical records.

The night was a heartfelt testament to the power of leadership, innovation, integrity, passion, and commitment to others representative of both the Wharton and Calvert names.

Greening Education

Margot Kane is an Investment Officer working on Calvert Foundation’s domestic portfolio, particularly in the areas of small business, social enterprise, and our Green Strategies to Fight Poverty initiative. This is her account of the 1st Annual Green Schools National Conference in Minneapolis she attended in the fall, and what it means for our future as investors and citizens.

Margot Kane

The conference audience was rapt listening to the young leaders of the Youth Summit – “students for green and sustainable schools” on the stage. They were the last plenary speakers that morning (after other impressive and experienced speakers, such as Philippe Cousteau – Jacques’ grandson) and they got a standing ovation to thunderous applause - which is remarkable on the second day of a packed conference at 9 in the morning. Along with the rest of the audience, I was so impressed with how aware these teenagers were of the world around them and their impact upon it, and how excited they were to reach out to other youth across the country and spark what seems almost like a social movement, focusing on people and values, rather than something that lives in the dry realm of carbon emissions and kilowatt hours. 

It seemed to me that these youth, who were addressing nearly 1,000 in the audience at the first Annual Green School National Conference, felt a very immediate need to address climate change and environmental destruction. I wondered if it’s because those dire projections that scientists predict for years not far away – 2020, 2030 – are about ultimately them and their livelihoods. Those are years when they will be graduating from school, building careers, “growing up,” raising families, and more – likely all in the face of rising sea levels, dying species, increasingly violent weather, and battles over resource depletion. This is a very scary future. It reminds me a little bit of growing up with the Cold War/nuclear holocaust bogeyman, except this one is more likely to happen.

I remember walking out of one session of this conference really envious of the integrated curriculum described by a charter school where every section is taught through the lens of caring for the planet, which seems so sane in hindsight (have you seen the South Park “Captain Hindsight” episode? I highly recommend it), and yet so revolutionary, and such a relevant way to connect kids to the point of it all. Instead of making math a line of numbers on a page and formulas to memorize, separate from the beauty of trees and music and ocean waves, it’s all part of the same planet and patterns and purpose, including humans.

The take-away I had for my role at Calvert Foundation was an inspiration to finance green schools! Also, this conference and other experiences have taught me that “green” is not a discrete topic or asset class. It’s part of the form and function of something. Things like building a school with natural light, using non-toxic materials, providing healthy air and water and physical activity for students, are all things that will improve and serve the true purpose of a school, which is above all else the education of the youth attending it. Every school built otherwise has diminished its potential returns vis-à-vis this function at the outset. There is some data emerging from the green schools movement around attendance rates and teacher retention in green schools and other interesting outcomes that measure the health and professional and education success of all those who spend their daylight hours in a school building. I also learned that green building works best when it is part of the comprehensive vision of an institution, after a few baselines (like recycling, turning off machines, energy efficient appliances, using compact fluorescents, etc).

At Calvert Foundation, we are exploring ways we can weave environmental considerations into all of our investing activities but also into our day-to-day office lives (like reminding each other to turn off computer monitors at night and instituting better recycling practices).

On the investment side, I think there is strong support among our investors and our staff that long-term reduction of poverty among communities requires increased environmental efficiency, resource conservation, reduction of our reliance on petroleum, ecosystem and biodiversity protection, water safety, etc. This is because environmental degradation and resource scarcity often have the greatest immediate impact upon impoverished communities, and it can create, exacerbate, and prolong poverty, displacement, and conflict. All those working towards community development and well being can’t afford to ignore the environmental threats and realities facing communities worldwide.

Lastly, I walked away from this conference with the sense that the potential for individual action is huge. If students can start a recycling program, or build a PV panel on the roof of their school, then we can each do little things to set the bar higher. I’m setting up a compost bin this spring, for starters using vermiculture - with worms! It’s one of the best options for a small urban household. I’m just hoping I can handle all that up-close-and-personal worm time.

Industry-wide efforts work to protect investors and microentrepreneurs

Eliza Erikson is the Chief Lending Officer at Calvert Foundation.

Eliza Erikson

I have spent almost 15 years working in emerging markets and inclusive finance, starting right after college when I worked with two microfinance institutions in Guatemala. How the industry has changed from those days when sustainability, much less profitability, was just a glimmer in our eyes! Funding for microfinance increased exponentially after the United Nations deemed 2005 the International Year of Microcredit and Dr. Muhammad Yunus and his Grameen Bank won the Nobel Peace Prize in 2006. With additional funding came exponential growth – and additional challenges.


Industry Leadership in Driving Ethical Microfinance Practices

Impact investors like Calvert Foundation face specific challenges when deciding which microfinance institutions meet our social criteria for investment. With an emphasis on ensuring that borrowers in our portfolio are practicing responsible microfinance, we must rely on various sources of information including our own data collection. In recent years funders and borrowers alike have joined to set out common principles for what constitutes ethical and responsible operations in the microfinance sector. The United Nations Principles for Responsible Investment (UNPRI) initiative has more directly targeted the microfinance sector with its recent unveiling of the Principles for Investors in Inclusive Finance (PIIF) initiative. Calvert Foundation is thrilled to announce that we are one of the 40 initial signatories to the PIIF initiative. We encourage you to review the principles more closely, which can be found here.

In addition, Calvert Foundation had an early role in supporting the principles behind the SMART Campaign, another funder coalition which aims to keep clients first in microfinance. By focusing on key issues like overindebtedness of clients, transparency in pricing, and appropriate collection practices, the SMART Campaign has laid the foundation for defining ethical business practices among microfinance institutions. We are honored to have had the opportunity to work alongside our partners on these various initiatives in responsible investment.

Going the Extra Mile – Local Currency Lending

We are also working hard to protect micro-entrepreneurs against currency risk. Until fairly recently, investors were only providing hard currency, in the form of dollars or Euros, to microfinance institutions. The majority of MFIs were turning around and lending that capital either in U.S. dollars or local currency, and absorbing the devaluation risk themselves or pushing it down to the weakest link in the chain, to the microentrepreneurs who were responsible for paying much more in local currency terms when the currency devalued. Not only was this a serious credit risk for investors, but also seemed to me a moral dilemma that social investors should help resolve. Indeed, some of us deemed it microfinance's “original sin.”

Last November, Calvert Foundation closed its first deal with Microfinance FX Solutions, or MFX Solutions, to provide a loan in Kenyan shillings to Kenyan Women’s Finance Trust (KWFT). The loan was fully hedged to the U.S. Dollar, protecting Calvert Foundation and its more than 7,500 investors from the risk that the Kenyan shilling would devalue against the dollar and KWFT would be unable to repay the loan. The loan was denominated in local currency, so that neither KWFT nor its clients would assume that same devaluation risk. It was the quintessential win-win.

In the more developed currency markets of the U.S. and Western Europe, hedging foreign exchange risk is common, widely available, and relatively cheap. Many banks are in the business. The same is not true of less liquid, developing country markets where hedging is prohibitively expensive or just plain unavailable. A group of us came together to try and help address the problem – Calvert Foundation, Calmeadow, ACCION International, Microrate, and Global Partnerships. It didn't stop us that we had little background in traditional foreign exchange derivatives. We did some research, consulted with experts, and wrote a business plan for MFX Solutions, a new social enterprise that would offer modern currency risk management to the microfinance industry. We knocked on a lot of investor doors, most of whom were challenged by the novelty of our model. Omidyar Network was brave enough to step up as a generous anchor investor, along with Triodos Bank and Incofin, two leading impact investors that were interested in using MFX's services for to hedge their own investments. I am thrilled that MFX Solutions is now a reality and has closed more than $50 million in business, helping to fund more entrepreneurs more safely in developing countries around the world.

Looking Ahead to Finance Future Innovation

As an investor, there is often a tension in wanting to support an organization that has an executing business model and is making an important impact, but that has not yet reached a sustainable financial stage; often, in support of those emerging innovators, we will invest a small amount at an earlier stage to catalyze growth and encourage additional investment. Through our Mission Plus portfolio we ensure that up to 3 percent goes to organizations like this. We think it’s our responsibility to finance not just the organizations that are the current leaders of the inclusive finance movement but the future sources of innovation that will push the industry to greater heights.