Impact investing: Innovative philanthropy in the COVID era

If COVID-19 has taught us anything, it’s that we must work together and find creative solutions to our biggest issues. This year, we’ve observed the philanthropic sector quickly and decisively respond to the urgent needs of Texans and Americans faced with health and economic hardships not felt in recent memory. But we must seek more impactful funding mechanisms to ensure recovery and a brighter future.

The pandemic has exacerbated many of the systemic inequalities in our communities and it’s brought more attention to the gap in services that many Texans face every day. This has led philanthropy to embrace change and collaboration in order to provide nimble, flexible funding to communities disproportionately impacted by COVID-19.

Among the funding sources being disbursed for COVID-19 relief, one in particular stands out as a promising tool that can sustain and scale the results of traditional grantmaking. Impact investments are made with the intention to generate positive, measurable social and environmental impact, alongside a financial return. Impact investing has been in use since the late 1960s to increase access to opportunity and accelerate solutions to social problems, yet it’s not a widely used tool in Texas.

In 2019, the Episcopal Health Foundation (EHF) began implementing an impact investing strategy and researching innovative ways that loans and investments can help improve health across the state. EHF has allocated $20 million for this new program. That enables it to use other financial tools like debt and equity investments in for-profit and non-profit organizations, advancing the same strategies the foundation seeks to achieve through traditional grantmaking.

Meanwhile, Austin Community Foundation (ACF) has been making impact investments for several years. ACF began making investments first through intermediaries and then directly to nonprofits. After a few years gaining experience, ACF shifted the focus of its impact investments to support economic security and affordable housing through local intermediaries. ACF’s impact investment program, known as FundATX, has a pool of $2.8 million in assets, and projects are structured as Program Related Investments (PRIs). FundATX investments have primarily been directed to community development financial institutions (CDFIs) and other intermediaries that play an important role in the place-based impact investing network in Central Texas.

When coronavirus cases were rampant this summer, safety-net clinics across Texas were facing potentially devastating financial struggles caused by COVID-19. This led Episcopal Health Foundation, in partnership with Austin Community Foundation, to create a new emergency loan program to help clinics remain open to serve more Texans who were at risk of going without medical care during the pandemic.

The $5 million Texas Clinic Emergency Loan Fund offers selected federally qualified health centers and other charity clinics low-interest loans between $500,000 and $1 million, to help offset reduced revenues from fewer routine patient visits, shifts to telemedicine, increase in uninsured patients and other additional expenses caused by COVID-19.

Six health centers and clinics that each have multiple sites have secured loans through the Texas Clinic Emergency Loan Fund. These clinics service communities in greater Houston, Austin and 20 Texas counties. The loans range from $250,000 to $1 million, require no payment in the first year and have a three-year repayment term.

Episcopal Health Foundation developed the Texas Clinic Emergency Loan Fund and provided the initial funding for the program. Austin Community Foundation serves as the fiscal sponsor and distributes the loans. Avivar Capital serves as the fund’s program administrator, implementing the fund in partnership with national leaders in impact investing, clinic financing and loan administration. Due to the experience and infrastructure already in place, Episcopal Health Foundation and Austin Community Foundation were able to establish the fund and disburse the loans with relative ease and speed.

The Texas Clinic Emergency Loan Fund is a prime example of how collaboration and innovation can provide new avenues to make our communities stronger and better equipped to address our most pressing needs.

We encourage more philanthropists, foundations and other charitable organizations to go beyond the boundaries of traditional grantmaking and seek opportunities to join the impact investing ecosystem in Texas.