Connecting Faith Institutions to Capital

Investor meetings and economic policy symposia often take place in wealthy vacation resorts of the rich-and-famous such as Jackson Hole, WY. Far fewer such gatherings take place in Jackson, MS. But a conference, hosted by Neighborhood Economics this past April, which brought over two hundred people to Jackson, MS—ranging from impact investors to foundation, nonprofit, and church leaders—purposefully sought to break the mold. 

Neighborhood Economics was created by a subgroup of people who helped found SOCAP, or Social Capital, an organization that hosts annual impact investor conferences in San Francisco. But Neighborhood Economics is a much smaller group of people who want to go “deep and local and long-term.” 

As Paula Garrett of Neighborhood Economics writes, “Jackson, with its 80-percent Black population, in the poorest state in the nation, provides a clear example of the racial wealth gap . . . Jackson is not for the faint of heart. It is a place where all of these issues are on display.”

The Value of Faith Institutions

Several church leaders—both from Jackson and beyond—spoke at a plenary session about the challenges and opportunities facing faith institutions. Faith institutions were a focus of the event for a couple of reasons: first, they are often the leading institutions in low-income communities; second, they often possess land, connections, and other assets that can play a critical role in community wealth building. Dr. Glake Hill, the senior pastor of Greater Bethel Church, said his diocese was formed in 1896 “in the heart of Jim Crow segregation.” He indicated that the church’s history fuels much of its mission work, including supporting a homelessness ministry and operating a voting precinct at the church to make sure that local West Jackson residents are not disenfranchised. 

“Faith institutions . . . are often the only game in town. They provide social services, healthcare screening, workforce development, and education.”

New Horizons Church in South Jackson, where Bishop Ronnie Crudup is based, similarly operates a homelessness ministry, with the church focusing on renovating vacant homes to provide housing for homeless families. At the conference, though, Crudup emphasized that Black business development needed to be a bigger focus. “Less than five percent of contracts go to Black businesses,” Crudup said. He added that there was a major “need to build a stronger business class.”

It was Pastor Jimmie Edwards of Rosemont M.B. Church who laid out the most comprehensive vision. During the pandemic, the Rosemont church stepped up to provide healthy meals; Edwards estimated that it was serving 700 meals a day, four days a week, at the pandemic’s height. Through the church’s “Revitalize Rosemont” initiative, the church and its allies have also developed a longer term, four-part strategy in West Jackson that seeks to 1) clean up vacant property; 2) preserve and expand social infrastructure—such as parks, gardens, a nature trail, and community centers; 3) strengthen neighborhood organizations and connections among neighbors; and 4) create a community land trust to ensure long-term housing stability and affordability. To date, Edwards said, the land trust had acquired over 100 lots. 

Edwards said the community clean-up efforts were effective. In the first annual clean up, he said 11 tons of trash were removed. In year two, that fell to eight tons. Last year, only one dumpster was needed. This, Edwards indicated, was a sign that residents were taking better care of the neighborhood on their own. “People have taken hold of the vision,” Edwards said.

Scott Hackenberg, who is chief lending officer for the United Church of Christ’s national Cornerstone Fund, introduced himself as a “reformed banker.” Hackenberg indicated that he only came to social impact investing later in his career. But from an impact investing standpoint, Hackenberg emphasized the key role of churches. Faith institutions, he noted, in many communities are often “the only game in town. They provide social services, healthcare screening, workforce development, and education. They are the only ones in that community providing those services.” 

Confronting Structural Racism in the Economy

At an introductory plenary session at the conference, a group of panelists highlighted some of the many ways that structural racism is routinely reinforced in our economy. Aisha Benson, CEO of the Nonprofit Finance Fund, emphasized the long-term impact of redlining, a policy of legalized housing lending discrimination backed by the federal government from the 1930s until the passage of the Fair Housing Act of 1968. The ripple effects, Benson noted, are “cyclical and generational.” It doesn’t help that the appraisal industry is overwhelmingly White, with a 2018 Appraisal Institute study finding only eight percent of respondents identifying as people of color. In making this point, Benson cited the work of Brookings Institution researcher Andre Perry, who has estimated that the cost of undervaluation of Black-owned property in the United States carries a price tag of $48,000 per home or $156 billion nationally.

Rhea Williams-Bishop of the Kellogg Foundation focused on disparities in education. Stephanie Swepson-Twitty of Eagle Market Streets Development Corp. in North Carolina illustrated how Black homeowners suffer financially at both ends—they have both depressed real estate values and excessive property tax bills.  

Sidney Williams is the founder of both the Oikos Institute for Social Impact and Crossing Capital Group, an impact investing fund that focuses on working with faith institutions;  he is also senior pastor of Bethel Church of Morristown, NJ. Williams noted that while today he seeks to link capital and faith institutions, he had worked earlier for several years at Goldman Sachs, where he earned a high six-figure salary, “willingly participating in an oppressive system.” Williams said he realized that his “vocation needed to change,” and noted that he was not unique in having the illusion that inequity could be solved without challenging inequitable structures, pointing out that many community development financial institutions use risk criteria that are not dissimilar to banks. Williams added that presidents of historically Black colleges and universities ought to recruit students but pointed out that “if those students acquire debt,” then HBCUs are also participating in the oppressive college financing system.

Benson concurred with Williams on CDFIs, noting that CDFI leaders “have to understand that CDFIs are basing their credit rubric on the banking system. We need to change that.” She shared the CDFI she leads is seeking to change its underwriting criteria, as the organization detailed in a recently published report. 

Finding Solutions to Advance Racial Justice

At a breakout session on how impact investment capital might support community-based solutions, Benson and Williams were joined by two other panelists—Leslie Payne of the James Irvine Foundation in California and Christina Hollenback, founder and CEO of Justice Capital. Tim Freundlich, president of Impact Assets, a firm that seeks to channel donor-advised fund capital into impact investing, moderated the session.

An initial question from Freundlich sought to get at what investors that wanted to support wealth building in Black communities could do to advance that goal. Some of the steps suggested were pretty standard. Benson said for impact investing capital to actually merit its name, investments “must be concessionary.” This means providing low-interest-rate funding with flexible, often longer terms. More broadly, meaningful impact investment requires investors to be more tolerant of risk (that is, be more willing to accept the possibility of losses) than has typically been the case.

“What we have kept hearing from organizers is community ownership is the endgame.”

Hollenback went further and argued for a more strategic investment approach. “Rich people make money,” she noted, “by controlling the supply chain,” meaning they can extract monopoly rents because suppliers have limited options of where they can sell what they produce. Examples of businesses that engage in this practice include Amazon and Walmart. Hollenback argued there is a need to “take the same approach, but for community.” This would mean, for example, not just buying one house on a block but rather putting “the whole neighborhood in trust and ownership and governance by community.” In that way, rents that are earned would accrue to community owners, not outside corporate interests.

To illustrate this approach, Hollenback highlighted a fully Native-owned effort by the Standing Rock Sioux known as the Sage Development Authority, which is building a Native-owned utility-scale windfarm. Rather than leasing the land to a private company, as usually happens, the Standing Rock Sioux in this project retain direct ownership. The windfarm will not only generate renewable power for the Standing Rock Sioux but the tribal nation is poised to generate $280 million in revenue over 25 years for its $15 million investment. The structure of the deal, Hollenback said, ensures that $5 will go to the Standing Rock Sioux for every $1 that goes back to the investor.

Payne from the Irvine Foundation noted that “what we have kept hearing from organizers is community ownership is the endgame.” The Irvine Foundation has therefore supported community land trusts, including helping CDFIs develop underwriting approaches that will ensure the CLTs get the financing they need, as well as supporting a cooperative unionized healthcare staffing agency known as Allied Up.

The potential structure and uses of concessionary capital are clear. But where is this capital going to come from?

Payne said, “I personally believe it should be unacceptable for foundations to not serve their mission with the 95 percent of their endowment that is not spent on grants.” She added that foundations that just seek the highest possible return for their endowment assets ought to be taxed on endowment earnings. 

Freundlich argued for empowering communities that are being invested in to make their own choices regarding where foundation capital is allocated rather than having those decisions made by a board or a consultant. Freundlich added that the Heron Foundation and a few family offices were beginning to move in this direction.

Williams said that he saw churches and HBCUs as potentially large non-philanthropic sources of concessionary, low-cost capital. Both types of institutions, he noted, are “asset rich, cash poor.” While they might not have a lot of cash in the bank, they have considerable land holdings that could be monetized and help propel community-controlled economic development that would advance churches’ missions, while at the same time freeing up a new source of capital to invest in building community wealth.

For Williams, a key task ahead for linking faith and capital involves unlocking “the capital that generations have given their lives for,” by which he means borrowing against the land values that congregations have built up over many decades to finance development that support community building goals.

In this way, Williams added, even as churches retain land ownership, their existing holdings, many of which are owned free and clear since their mortgages were paid off long ago, can be leveraged (borrowed against) to free up capital to finance development to build community wealth and expand community ownership today.