The Roots of Impact Are Local
A CDFI Leader's Perspective Leveraging Dynamic Partnerships for Positive Change
Impact Investing, especially at the local level, is an evolving field that thrives off of innovative partnerships in pursuit of systemic change. Amir Kirkwood, President and CEO of Virginia Community Capital (VCC), has spent his entire career at the nexus of these kinds of collaborations, from his early days in the banking sector, to his tenure at Opportunity Finance Network (OFN), to his current role as leader of a CDFI. This month, we talk to Amir about his perspective on impact investing and how various stakeholders can come together to allocate capital more effectively.
An Interview with Amir Kirkwood,
President, Virginia Community Capital
Can you talk about your social finance journey? What brought you to VCC and LOCUS?
I was bit by the social finance and impact investing bug early in my career. I began exploring the ways finance could be used as a tool for positive community change through my first job out of college with a Chicago-based nonprofit community development corporation. From there, I entered the banking sector with both large institutions like Citigroup on down to smaller regional banks like Amalgamated Bank. Those experiences led me to rediscovering CDFIs and the positive impact they were having on the people they served.
Impact investing through CDFIs became the defining statement of my career in many ways. I have been involved in the field in one way or another for the better part of 14 years, including providing a loan to VCC way back in 2010. But it wasn’t until my relocation to Virginia and post at Opportunity Finance Network (OFN) that I was in close enough proximity to translate my experience into practical CDFI operation and management. Here I am today at VCC, and I’m grateful the board considered me for the role of Chief Executive Officer.
As an innovative VCC program, how does LOCUS enhance the impact the organization is trying to have in the world?
What CDFIs- particularly CDFI loan funds and banks -excel at is extending capital with the kind of rates and flexibility the formal financial sector just won’t provide. However, you learn quickly in this line of work that the needs of communities are more complex than a simple dearth of loans. Willing investors require advisement on where capital can be channeled; these transactions require a deep commitment to ongoing management and engagement; and finally, there’s a need to measure and actually quantify impact. This is where LOCUS enters the picture. Through its local investment strategy and advisory practices, LOCUS answers the questions lending alone can’t solve for.
Impact investing is a diverse, evolving field. How do you see the practice of specifically local impact investing growing over the next few years?
I think the practice will grow dramatically. So much of what has defined impact investing up to this point has been these broad themes. It’s difficult to really address climate, fair finance, social responsibility, and more when they’re confined to abstract concepts. We need to bring these things to a more meaningful, grounded place, and that’s thankfully starting to change. The work the LOCUS and VCC teams do will become much more relevant as investors realize that impact starts at the community level. It starts by bringing in partners. It starts by actually applying broad themes at the local level.
Here’s an example. Well-meaning impact investors can talk about the need for general climate solutions, but what they really want to address are the local stories of land erosion, the problems associated with industrial plants, or the need to decarbonize a specific industry in a specific place. Finding workable alternatives demands a series of answers to a set of practical questions. How will community members be placed into new jobs? How will workers be retrained? Where will people meet their healthcare needs? Whether investors are aware of it or not, one way or another, these broad themes have local roots. Tracing these connections is ultimately going to require a lot of time, energy, and innovative programs on the part of actors in this space.
There are a lot of ongoing conversations about diversity and equity in investments. How do diversity equity and inclusion fit into the work of LOCUS and VCC?
The way we currently address the topic is still at an early stage. The LOCUS team, I know, has started building equity into the way they look at due diligence while CIGP is taking stock of its impact on underserved communities to date; however, it’s still an important piece of our work in general. The communities we serve deserve to know that the folks who come to them with capital solutions have empathy for the people in these places and understand, really understand, where the needs are. The people we raise capital from also see the importance of centering diversity, equity, and inclusion. Most everyone in this space, our staff included, cares about equity in their own way, and we must be conscious of that fact at an organizational level. That awareness impacts how we speak to stakeholders and advocate to our elected officials. It’s imperative they recognize that solutions need to match up with values whether that’s from a policy or an investor perspective.
What kind of advocacy role do organizations like LOCUS and VCC have to play?
Our focus starts with listening to communities, and we are in a somewhat privileged position to take what we hear from the people we serve back to investors, policy makers, and other institutional actors. This way, we can bring some sorely needed boldness to the table that wouldn’t happen otherwise.
For example, again, CDFIs are lenders, good ones. That fact might be part of what makes us special, but nobody ever grew their wealth just by getting a well-placed loan. A loan by itself only represents debt. Meanwhile, building the foundation for equity is what ensures that people walk away from a transaction empowered. A portion of that is financial empowerment, but just as important is the sense of control than an equity stake offers. Equity imparts the knowledge that the impact in the community reflects one’s values.
Capital solutions, then, need to enhance assets instead of just injecting dollars into a place. That latter kind of transaction can be extractive even though the intended purpose is community development. Through our platforms, organizations like us can head off that extractive potential before it creates problems by advocating for a better path forward.
What do you see as LOCUS’ unique contribution to the impact investing space?
LOCUS is well-positioned to facilitate capital using new ideas while maintaining close ties with communities- the places where the people affected are. From personal experience, you can be in a room with a group of wealth managers representing collective assets in the trillions of dollars, but for all that wealth they can’t identify how to strategically deploy $1 million. Groups like LOCUS, though, make it possible for those on the investor side to act. LOCUS provides the infrastructure impact investors need to reach the outcomes they want. That’s where LOCUS has a unique opportunity.
CDFIs like VCC are impact investors themselves in many ways. They’ve also done a lot of granular work building innovative local investing partnerships. VCC, for example, partners with philanthropy as part of its Economic Equity Fund. What opportunities do you see for CDFIs to deepen the work they do with philanthropies and other impact investors?
Let’s start with philanthropies. CDFIs have proven over the last 25 years that they are credible partners for institutions that lack the infrastructure to understand, underwrite, or process risk holistically. This is something CDFIs bring to bear whether we’re working with government, philanthropy, or others. We can take this further by helping philanthropies leverage their assets in innovative ways to invest in place. I like to point to LOCUS and CIGP as examples of mitigating risk while also developing ways for the investors to go deeper.
We saw in the beginning of the pandemic a number of foundations recognizing the severity of the moment for the first time, going to the bond market and borrowing from it to increase the capital they could deploy quickly in communities, above and beyond what they were allowed to do with grant capital. IRS limitations meant that CDFIs were some of the first recipients of these funds. A group of foundations led by the Ford Foundation, for example, launched a pandemic capital response program in New York City. Those funds were vital in meeting the needs of nonprofit organizations who were the first line of the city’s crisis defense, and CDFIs were the go-to resource for rapid, efficient capital deployment. Partners like LOCUS who work closely with CDFIs can provide the onramps investors need to channel capital through their infrastructure.
Going into 2022, what are you most excited for from VCC and LOCUS?
I always say that the whole is much stronger than the individual parts: our bank, loan fund, and LOCUS. This includes, too, our customers, partner constituencies, and stakeholders. The field we’re in is a big one with a lot of players in it, and on the heels of the last two hectic years, we’ll need to go much deeper in our commitments to impact through partnership. That’s an exciting prospect, though. We’ll have the opportunity in 2022 to live and express our values of diversity, equity, and inclusion internally and with our partners. So, I’m more than anything excited to see the changes we can all make together in the year ahead.