Investmient Policy

Investment Policy

Effective as of November 18, 2021

Section One – General Overview

A. The Entity

Abundance Capital is a nonprofit, charitable-giving intermediary (donor-advised fund) platform specializing in philanthropic impact investing, education and granting to advance sustainable and equitable community economic development in the southeast.

B. The Purpose

Abundance Capital’s mission is to provide new and established philanthropists opportunities to develop sustainable communities in the Southeast and allow equitable growth by investing in all members of a community, with a particular focus on impoverished people, women, people of color, and indigenous people. By investing in changemakers who are building a more abundant community, Abundance Capital views its work as regenerative.

C. Donor-Advised Funding for Impact-Investing, Granting and Education

Abundance Capital uses donor-directed funds called “Abundance Accounts” to advance its mission of building sustainable, equitable and abundant community development. Abundance Capital will own, operate and maintain each Abundance Account as a donor-directed fund, as defined by the Internal Revenue Code, and will comply with all applicable federal and state regulations. Each Abundance Account will be named, numbered and represented in Abundance Capital’s accounting records, and will be held or invested according to this investment policy statement and the terms and conditions governing the relationship between Abundance Capital and its donors.

Section Two – How Abundance Capital Accomplishes its Purpose

 A. Abundance Capital uses impact investing, granting and education to advance its mission.

1. Impact Investing:

Abundance Capital will typically invest using debt, convertible debt, private equity, and public equity in the southeast. Impact investments will be evaluated on meeting the social criteria outlined in our impact metrics below and on the risk-based return.

2. Granting:

As a sponsoring organization for donor-advised funds, a core component of Abundance Capital’s activities is granting funds for charitable purposes. Grants will support changemakers in building their social enterprises, nonprofits, and collaboratives to create a beneficial ecosystem. An example of a typical grant will be funding an incubator focused on supporting underserved business owners. Like most sponsoring organizations, Abundance Capital will consider nonbinding recommendations of donors for any grants from an Abundance Account.

3. Education:

To complement the provision of capital to build sustainable solutions, Abundance Capital offers ACE (Abundance Capital Education) programming to support organizations and people. ACE assists mission-driven entrepreneurs build the necessary skills and networks to improve their communities.

B. Risk and Return Parameters

Consistent with other leading foundations, impact funds, and donor-advised funds, we will measure our investments on how our capital contributes to our mission of regenerative community development and the risk-based financial returns. Because of the class of entrepreneurs and the types of communities with which we will be working, our projects will be inherently high risk (risk equals the “probability of non-performance on both financial and social outcomes”). Our due diligence process is designed to understand the social, environmental, and financial risk (and potential return) of each investment, as well as to clearly communicate these parameters to each donor. We will utilize a simple “low / medium / high” rating system that communicates the expected risk and impact profile to donors of each investment. While we are investing “impact first,” we recognize that poor financial performance hinders the ability of a project or business to achieve its social mission. Therefore, we take into consideration financial outcomes, in addition to the social impact of an investment.

When assessing return scenarios as well as risk, we will keep apprised of industry benchmarks in the impact investing, granting, and mission-driven community development fields regionally, nationally, and globally. We will continually compare our metrics against industry standards.

It is our intent to have a reasonable blended rate of return across all portfolio investments. We recognize that some of our donors may lose all or part of their Abundance Accounts, and we cannot promise any specific return scenario for Abundance Accounts.

C. Portfolio Construction

As a primarily donor-directed fundholder, our blended portfolio will be driven by donor interests in Abundance Capital’s regional, regenerative community development investments.

A snapshot of our portfolio:

  • Support ESG/SDG-focused small businesses, social enterprises, real estate projects, and community development funds

  • Seek blended returns on ventures that meet our social impact requirements

  • Target impact returns based on industry standard ESG/SDG criteria, with emphasis on community economic mobility and related community economic development metrics Target financial returns for charitable reinvestment ranging from below-market to market, with emphasis on risk tolerance

  • Deploy capital through loans, convertible debt, private and public equity, and grants Invest alone and alongside local partners, including non-profits, accelerators/incubators, and other investment funds

 Section Three – How Abundance Capital Accomplishes its Purpose

A. How Abundance Capital Stewards Donor Contributions

1. Active Regeneration:

Abundance Capital’s goal is to keep most of its assets actively deployed, and thus, will deploy more than the usual foundation with 5% annual capital deployment. We aim to “flip the script” on traditional philanthropic funding by seeking to deploy more than half of our assets under management. The goal will be to reinvest returns within 180 days so that Abundance funds continuously support our charitable mission.

Typical forms of reinvestment (or regeneration) would include credits to Abundance Accounts for reinvesting/re-granting; support for educational programming led by Abundance Capital (our ACE programming); and grants from Abundance Capital to key mission-aligned nonprofit partners.

2. Careful Stewardship and Liquidity:

Abundance Capital is an active donor-advised fund intermediary. Our liquidity management is intended to fund investments/grant commitments and support our operations. It is not our intention to hold funds beyond a few months or years or to grow a large endowment. However, the optimal timing and amount of capital deployment for investments or grants is occasionally dependent upon factors outside of Abundance Capital’s control. In addition, due to donor client investment minimums, we may hold funds until the donor’s Abundance Account reaches the minimum distribution level. This means that we must steward donor contributions carefully until the funds can be directed to an appropriate investment or grant. During the holding period, we will invest these funds in conservative, mostly liquid accounts. Because we view the use of our capital across all our operations as part of our mission, we will utilize mission-aligned regional banks, community banks, investment funds, and CDFIs for our holdings. The savings and investment vehicles will include certificates of deposit, money market accounts and other similar vehicles, with the intention of and preference for investments that can be liquidated relatively quickly.

3. Non-Cash Contributions:

Abundance Capital may, at its board and investment committee’s discretion, accept non-cash contributions. These will be considered and handled on a case-by-case basis and evaluated considering the organization’s best interests and mission.

Section Four – Abundance Capital Principles

We invest for “Impact First.”

Abundance Capital seeks to build a blended return portfolio of investments that meet the following criteria related to ESG and impact investing.

The field of impact measurement is maturing quickly but still consists of a wide range of principles and metrics. Therefore, we reserve the right to use the most appropriate metrics for building sustainable, equitable communities of opportunity in the Southeast.

As of the date of this policy, we have identified those metrics as industry-standard ESG (Environmental, Social and Governance) criteria; the seventeen SDG metrics (United Nations Sustainable Development Goals Impact Metrics); and our own “Abundance Effect” (the existence of a variety of positive localized outcomes or “positive externalities” that result from the operation of the entity to be funded). The Abundance Effect can include both financial and social outcomes.

Caveat: No single company or project will pass every test in these three categories. In each case, Abundance Capital and its investment advisory committee will provide a simplified impact and financial return rating (“low / medium / high”), together with any diligence documents, to donors. Abundance Account holders will review and make the final recommendation directing their investment to the entity.

2. We build the ecosystem by investing with nontraditional partners.

One of Abundance Capital’s unique value adds is our ability to recognize and integrate beneficial partnerships among nontraditional investors. We look outside the traditional avenues to bring mission-aligned public, private, for profit, and not for profit partners together to improve the community.

Potential sources for investments or grants include, but are not limited to:

a) Donors may identify and recommend projects for Abundance Capital’s consideration. Recommendations can be made through the donor portal or directly to Abundance Capital staff.

b) Philanthropic institutions, such as foundations, may submit projects for co-funding or support to Abundance Capital.

c) Angel groups, crowdfunding platforms, and investment clubs that actively identify mission-aligned projects for direct or pooled investment by their investor audiences may identify projects for Abundance Capital.

d) Accelerators, incubators & coworking spaces providing strictly educational or launch programming and related resources for mission-driven start-up companies and other projects may identify projects.

e) Community banks, credit unions, and community development finance institutions (CDFIs) seeking partner funding for key social impact initiatives or direct investments that align with Abundance Capital’s philanthropic mission.

f) Private and corporate venture funds and private equity groups that are placing investment opportunities that meet Abundance Capital’s mission and impact criteria may be considered.

g) Projects that come directly to Abundance for screening, including from individual entrepreneurs, real estate developers, nonprofit projects or funds, and others that fit the mission of Abundance Capital. Note: Abundance Capital does not have a pool of funds to invest, which means that all investments and grants must be driven by donor recommendations.

3. We conduct appropriate mission-aligned due diligence on all investments and grants.

Abundance Capital’s diligence process includes review of financial, operational, and impact/social metrics. The burden of final diligence and assessment is placed upon the donor (also known as the Abundance Account holder) directing the investment or grant. Abundance Capital will provide a high-level integrated, social and financial risk rating (Low to High). All investments will be screened by the donor, appropriate staff members, and the Abundance Capital investment advisory committee. Although Abundance Capital will always conduct a complete diligence on the community impact of any of its investments and grants, Abundance Capital’s ability to conduct business or financial diligence may be limited based on the amount of the investment. Donors recognize that due diligence may be limited by the nature of the entities being funded. In some cases, Abundance Capital will rely on the diligence of trusted partners. Diligence documents will be made available to the interested Abundance Account holders for review.

4. We work collaboratively and with representative partners.

a) Where appropriate, Abundance Capital will work with mission aligned partners, including investors and grantors, to participate in shared investment vehicles.

b) Abundance Capital staff, board and investment committee will hold themselves accountable to seek out partners that represent and advance our mission. We will seek to partner with women, indigenous people, and people of color from the communities in which we seek to have a positive impact.

5. We commit to transparent reporting and investment/grant oversight.

Abundance Capital’s investments and grants are governed by the due diligence and investment process set by the board and investment advisory committee and in alignment with the impact and financial metrics as set forth in this investment policy. Abundance Capital will require that all entities receiving funds (of any type) commit to sharing transparent financial and impact metrics with Abundance Capital upon request. Abundance Capital also recognizes that some of this information may be confidential to an entity and commits to hold it in confidence, as appropriate, and in compliance with Abundance Capital’s legal and operational requirements.

6. We reinvest returns in the charitable mission. We recognize that even when social returns are achieved, there may be financial losses.

 a) Financial returns, including transactions and annual account fees, will be reinvested into Abundance Capital as follows:

i. Credits to Abundance Accounts for reinvesting/re-granting (investment returns only)

ii. Grants to fund Abundance Capital’s operations, investment sourcing and preparation, and educational programming (ACE programming)

iii. Technical Assistance Grants from Abundance Capital to key mission- aligned nonprofit partners

b) Financial losses are expected, given the nature of Abundance Capital’s investment and granting focus. Losses will be reported to each donor along with a team assessment of the reason and “lessons learned.” Even where there may be an unavoidable financial loss, we will endeavor to design our investment engagement process (and educational support) such that social returns are achieved. Despite a financial loss to the donor, the recipient of funds will have the opportunity to build skills and improve the community.

7. We view education programming (ACE) as a key ingredient in our impact model.

To ensure that Abundance Capital makes significant and long-lasting impacts on the community, Abundance Capital and its leadership invest in, partner with, and conduct education and training. Abundance Capital Education programming supports peer learning among donors, provides financial/tax/legal support, and educates entities receiving investment and grants. The ACE program is supported by foundation grants and reinvestment income from returns.

8. We commit to reporting.

As a charitable intermediary dedicated to active place-based impact investing, granting, and education, Abundance Capital will communicate regularly with the public and its fundholders through its external and internal online platforms. Abundance Capital publishes annual reporting as per the IRS requirements (Form 990) on its website.

Abundance Capital tracks and monitors the outcomes and financial performance of investees and grantees annually. Abundance Capital also provides individual fund statements to each donor-advised fund holder. The quality of information on investment and grant outcomes is dependent upon what is received from the organizations. Any investee or grantee that cannot comply in a timely fashion with reporting requirements to Abundance Capital will be disinvested.