Swift Foundation Invests in RSF Food & Agriculture PRI Fund

Investor: Swift Foundation
Investee: RSF Social Investment Fund
Asset Class: Public Debt - Fund
Investment Amount: $800,000
Impact Sector(s): Agriculture & Food
Date of Investment: 2010 and 2011
Projected Exit: Still active (5-year term)
Financial Return Goal: Below Market Rate
Mission Investment Database Record: Swift Foundation - RSF Social Investment Fund - RSF Food & Agriculture PRI Fund

 

Swift Foundation was incorporated in 1999. Its mission is to support Santa Barbara-area stewards and their allies who are dedicated to protecting biological and cultural diversity; it primarily funds projects internationally. The Swift Foundation had made a handful of mission-related investments over the years and hired Amplifier Strategies in January 2013 to help create a new investment policy, which redesigned and formalized its impact investing strategy. Its new approach is to use core endowment funds(approximately $50 million initially) to generate returns for grant making, and it initially devoted approximately $10 million to below-market impact investments. Within the core endowment, Swift aims to create a portfolio entirely screened for mission alignment and that meets a series of “No Buy Guidelines” that address negative environmental and social impacts. The $10 million below-market impact investment fund is divided into three pools with varying risk profiles: investment fund managers (least risk), direct investments (moderate risk), and angel investments (highest risk).

 

RSF shared a prospectus and one-pager about the fund, followed up with examples of projects that had received loans, and drafted the investment agreement. The Swift Foundation conducted due diligence on RSF’s team and track record and reviewed the pipeline of underlying borrowers to ensure their businesses were aligned with the foundation’s mission and values. After agreeing to terms, the Swift Foundation transferred funds to RSF. The lending team at RSF acts as the steward of the PRI investment, providing due diligence, servicing the loan, and selecting organizations with the best mission and fit for the fund—all things it is well equipped to do given its staff size and expertise. RSF sends investors quarterly reports about the fund activity.

 

RSF Social Finance

 

The foundation earns 1 percent interest, which is paid quarterly. The return of principal will happen at the note’s maturity. The funds provide loans of $50,000 or more to nonprofit and for-profit social enterprises that address key issues in food production, food access, value-added processing, distribution, retail, and waste management. Ten organizations have received loans totaling $1.8 million with 12 more organizations in the pipeline. RSF PRI Fund borrowers positively contribute to healthy ecological systems, urban and rural economic development, safe and equitable labor conditions, and increased access to healthy food in underserved areas.

 

• Form partnerships. Foundations with no or limited staff can achieve impact investing goals by working with firms like RSF Social Finance, which has in-house expertise and a well-articulated mission to source, underwrite, service, and monitor loans that support mission-driven organizations that would not otherwise be able to access credit at these low rates.
• Consider opportunities to deploy capital in ways uniquely suited to private foundations. Many of the organizations receiving loans through the RSF PRI fund are early stage and not yet able to receive traditional bank loans. PRI funds like this one allow foundations to provide much-needed capital while making recoverable investments from their 5 percent annual payout distributions.
• Consider the benefits of combining investment and grant funding. Swift made a matching grant of $50,000 to RSF in order to support its Local Initiatives Fund, a pooled philanthropic fund, to provide loanguarantees and other credit enhancements as well as strategic grants to support technical assistance, capacity building, land preservation, and other resources necessary to create and sustain regional food systems. The fund aims to educate donors on how to use an array of investment vehicles to strengthen the investment-readiness of emerging food and agriculture enterprises.