1. Socially Responsible Investing and CDFIs
Maximizing Your Investment
October 14, 2009
Annie E. Casey Foundation

2. Annie E. Casey Foundation
Established in 1948 by the founder of UPS
Mission is to build better futures for vulnerable children and their families
Geographic and programmatic initiatives
Center for Promoting Family Economic Success
Family centered community change
Center for Effective Family Services and Systems
System reform
Direct services

3. AECF Approach and Philosophy
Social investments complement grantmaking and provide an additional philanthropic tool
Seek double bottom line—financial and social return
Seek to fill a financing gap
$100 million (~3%) allocation of endowment
Different risk profile from other foundations
Place based and thematic investments
Flexible terms but always invest through financial intermediaries
Leverage/co-investment requirement
Influence other investors and share risk
Systems in place to track financial and social returns

4. Example: Coastal Enterprises, Inc.
AECF Rural and CFS family economic success strategy
“earn it, keep it, grow it”
CEI successful community development financial institution (CDFI) and community development corporation (CDC)
Finance and develop business enterprises and affordable housing
Provide related support services such as counseling and technical assistance
$2M loan at 3% for 10 years
$10M Northern Heritage Development Fund targeted to Maine’s rim counties
Investment goals for NHDF
Create 1,275 jobs
Finance 160 businesses
Develop 150 affordable housing units
Leverage additional $30M
Why it’s a good deal:
Experienced intermediary and strong program fit
CEI active participant in RuFES and partner with CFS to strengthen EITC campaign

5. Foundation Perspective: Investment Tools
Program Related Investments
Endowment Investments
Grants
Programmatic Returns
Financial Returns

6. PRI vs. Grant Use a grant when Use a PRI when
Affordability gap vs. financing gap
Extremely high risk level
Smaller $ amounts
No repayment source/repayment relies on fundraising
Inexperienced management/leadership team
Use a PRI when
True financing gap
Reasonable risk level
Larger $ amount
Obvious and reliable repayment source
Stable competent management and board leadership

7. Social Investment Continuum
Program Related Investments
(Below-Market Rate)
Fixed Income / Bonds
Public Equity / Stocks
Cash / Deposits
Private Equity
Guarantees
Equity
Subordinated Loans
Senior Loans
Cash / Deposits
Mission Related Investments
(Market-Rate)
Source: New Frontiers in Mission-Related Investing, F.B. Heron Foundation, 2004

8. Example: ACCION Texas
AECF focus on improving family economic success in San Antonio
Interest in creating/sustaining micro and small business
ACCION Texas, an established intermediary that makes micro and small business loans
Why it’s a good deal:
Investment goals fit tightly with program goals and strengths of intermediary
Initial $500,000 loan at 3% for 5 years with follow-on investment of $500,000 in year 3
Geographic targeting to AECF neighborhoods of interest
Grant support for staffing/operations
Financial and programmatic requirements
Financial covenants
# of loans and average loan size
Job creation
Demographic information

9. AECF SI Results to Date Financial results Leverage/co-investment
Expected annual return of 3.3% for entire portfolio (currently mostly PRIs)
All investments current with no capital losses
Leverage/co-investment
$320 million in direct co-investment
$113 million leverage from guarantees
Project financing generates significant additional indirect public and private leverage
Influence
PRI Makers Network
More for Mission Campaign
Individual investments and program/topic areas

10. SI Impact Results as of 12/31/08
AECF SI Results to Date
SI Impact Results as of 12/31/08
Total Projected
Actual to date (12/31/08)
Charter school slots
6,300
2,065
Child care slots
175
329
Commercial space developed (sq ft)
2,174,082
472,982
Jobs created
3,909
2,914
Housing units developed
11,470
1,712
Affordable housing units developed
6,596
2,505
Small businesses financed
301 79

11. The Benefits For Foundations For CDFIs Flexible Feasibility Size
Recyclable
Leverage
Pay-out
For CDFIs
Capacity building
Self-sufficiency
Strength
Credibility
Relationship

12. The Downside Can be complex and time consuming
Requires programmatic and financial skills
Legal fees and other transaction costs
Negotiations and structuring potentially adversarial
Social impact difficult to measure/ quantify
Long-term reporting and monitoring
Not a grant = repayment obligation

13. SI Lessons Every investor has a different entry point
Every investor has different definition of mission-related
Education and capacity building for AECF staff, partners
Link to program/mission critical
Not every idea/organization appropriate for an investment
Deals can take time to develop
Grant support sometimes necessary to do deal
Leverage takes time and money
Ongoing management needed to maintain relationship (financial and programmatic)