Philanthropic organizations typically invest their endowment funds in traditional vehicles — stocks, bonds, hedge funds, real estate — that offer high returns with as little risk as possible, and they use the earnings from those investments to make grants. But in recent years, foundations have begun exploring what’s known as “impact investing,” where endowment funds are invested in entities that align more closely with the causes the foundation supports.  It can be hard to do. Only 5% of foundations’ assets are currently devoted to this kind of investing, according to a recent study by the consultancy Bridgespan Social Impact. “In the world of philanthropy, you have a lot of foundations talking about it. Few are doing it,” said Sheena Strawter-Anthony, director of impact investment strategy at the William Caspar Graustein Memorial Fund in Hamden. The Graustein Fund is working to make 100% of its investments “mission-aligned,” she said. Earlier this year, the foundation took an important step toward that goal by providing $10 million in financing to a community redevelopment project in New Haven known as ConnCAT Place at Dixwell. The $200 million master-planned development includes 180 units of affordable housing, a child care facility, health care center, spaces for workforce training and education programs, retail and restaurants, a public plaza, performing arts center, greenhouses, offices and more.  Connecticut Community Outreach Revitalization Program (ConnCORP), the economic development organization leading the project, has spent the last several years seeking community input, acquiring adjacent parcels of land and clearing blighted structures to make way for ConnCAT Place. It is slated to break ground on the development early next month.  Strawter-Anthony said the loan was structured “with intentionality,” designed to be paid back over a longer term and with a lower interest rate than a typical real estate investment deal. She said she had to force herself to look at the terms in a new and different way, taking into account the broader impact of the investment rather than just the financial returns for her organization.  “ConnCORP is helping to build wealth in the Dixwell and Newhallville communities,” she said. “The loan was structured in a way to support the community impact of the project.” Dixwell and Newhallville are historically Black neighborhoods that have experienced high rates of poverty over the past 70 years, and much of the block that will house the new development had fallen into disrepair. In community meetings, residents told ConnCORP leaders they wanted to revitalize the neighborhood, have a place that felt safe, with high-quality early childhood care and education, where they could buy fresh food and gather for events.  Erik Clemons, chief executive of ConnCORP and ConnCAT — the education and workforce training organization around which the development was designed — said he sees the project as an extension of the work ConnCAT has already done, training hundreds of local residents for jobs in New Haven and the surrounding area.   “I was thinking about what is the next iteration of impact, given that these folks are now walking in the world differently, with a job, with pride, with dignity,” Clemons said. “What can we do next to create a world where they wouldn’t be working poor?” ConnCORP CEO Erik Clemons tours the construction site of the future ConnCAT Place at Dixwell in February 2024 with staff members Jahkeeva Morgan, Elaine Roper and Jeneave Dacres. Credit: Courtesy of / ConnCORP Clemons said he hadn’t aspired to run an economic development project, “but it was natural calling, given the work I had already done.” ConnCORP launched in 2018, and soon the plans for ConnCAT Place began to take shape. “It was really about: How do we create economic infrastructure, capital formation and wealth generation in a community that quite frankly has been forgotten?” Strawter-Anthony said she hopes the foundation’s deal with ConnCORP can offer an example to other foundations that want to do more impact investing.  The financial returns on such deals may not be as strong, but the overall effect is far more powerful, she said. That’s because not only do these investments generate value for the loan recipients, they also redirect philanthropic dollars away from the kinds of for-profit investment vehicles that often extract resources from communities like Dixwell and Newhallville, she said.  “Most foundations don’t invest their endowments in line with their mission. They can invest in things that are counter to their mission,” Strawter-Anthony said. For example, a foundation with a mission to end poverty might be invested in for-profit companies that don’t paying living wages or offer benefits, she said. “A lot of the harm in the world has been created through investments,” she said. “When I look at the foundation, I look at us becoming conscious of the harm in our actions and changing the way we behave and our impact on the world overall.”