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April 23, 2004
Community Foundations and Community Investment: An Obvious But Underused Link
    by William Baue

The Vermont Community Foundation recently broke new ground by launching a first-of-its-kind community investment program with the support of the Calvert Foundation.

Community foundations typically work to benefit their regions through philanthropic grants that are financed by endowment assets. However, community foundations tend to manage their endowments according to traditional investment objectives that do not necessarily utilize community investment, creating a disconnect with their missions.

"The time has come to break down the 'firewall' between granting mission and investment decisions," said Shari Berenbach, executive director of the Calvert Foundation, the nonprofit arm of the Calvert Group, a socially responsible investing (SRI) firm.

The Calvert Foundation is currently providing support for just such an initiative, which connects mission to investment. Recently, the Vermont Community Foundation (VCF), a charitable fund established in 1987 to increase private philanthropic resources in the state, launched the "Five Percent for Vermont Communities" campaign.

"Combining both investment and granting power increases the impact you have to make change in those communities that need it most," said Brian Byrnes, president and CEO of VCF.

The VCF board called for this asset allocation to invest in Vermont companies, agencies, or intermediaries that support Vermont communities.

"The aim of these investments is to maximize overall social impact in Vermont communities most in need while maintaining a moderate risk profile," said Faith Brown, VCF's vice president for finance and operations. "The underlying intent is to minimize loss and preserve capital."

"Our mandate from the board allocates five percent of our pooled assets," Ms. Brown told "Pooled assets as of December 31, 2003 were about $66 million--we expect to have invested a total of $3.3 million through the campaign by the end of 2004."

The Calvert Foundation is providing VCF assistance in the form of investment recommendations, due diligence, and portfolio administration. VCF is dividing its Vermont investments in three categories: 46 percent in community development financial institutions (CDFIs) or like institutions, 40 percent in a community directed bond portfolio, and 14 percent in community-based venture capital.

For example, VCF is providing loans and taking out certificates of deposit with CDFIs such as the Vermont Community Loan Fund (VCLF) and the Vermont Development Credit Union (VDCU). The benchmark for the CDFI portfolio is the Citigroup One Year Treasury Index. The investment horizon for this portfolio is a three-year term, on average.

The community directed bond portfolio invests in the Access Capital Strategies Community Investment Fund, which supports revolving loan funds, community development corporations, and community reinvestment act programs. The benchmark for this portfolio is divided, with 80 percent tracking the Merrill Lynch Mortgage Master and 20 percent tracking the US Treasury 1-10 Year Index.

The venture capital portfolio invests in venture funds such as CEI Community Ventures (CCVI). Although the firm is located in Portland, Maine, it supports projects in Vermont. For example, CCVI invests in Juno Rising, a Burlington, Vermont-based company founded by women that markets Isis women's outdoor apparel. The benchmark for this portfolio is the Venture Economics Private Equity Performance Database.

According to Tim Freundlich, director of strategic development at the Calvert Foundation, some other community foundations, such as those in Boulder, San Francisco, and Marin County, have experimented in limited ways with community investment.

"The VCF breakthrough is that they have really created a defined program and committed to a disciplined growing portfolio over time with a significant allocation of five percent," Mr. Freundlich told


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