Mission-Aligned Investments

MISSION-ALIGNED INVESTMENTS

Loans, Lines of Credit, Equity Equivalent Investments

National, regional and community banks, federal, state, and local governments, and other institutional investors lend money to Craft3. We have a demonstrated ability to deploy capital to underserved markets and communities, and, in some instances, we are able to target investment proceeds by geography, demographics, or sectors, depending on market demand and other factors. Banks that invest in Craft3 through such lending may be eligible for Community Reinvestment Act credit.
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Craft3 uses the funds from these loans, lines of credit, and equity equivalent investments to capitalize financial products and achieve shared mission outcomes. Craft3 seeks near or below-market rates from its lenders to make it possible for Craft3 to offer accessible terms and affordable rates to our borrowers and to expand economic opportunity.

MISSION-ALIGNED INVESTMENTS

Program-Related Investments

Foundations invest in Craft3 through Program-Related Investments (PRIs). The primary purpose of PRIs is to support the foundation’s charitable and exempt purpose(s) and to achieve better outcomes over time, while still offering the opportunity for return of capital within an established term.

PRIs offer foundations an opportunity to generate interest earnings, though this is not the primary driver for making the investment. PRIs can include loans, loan guarantees, linked deposits and equity investments in charitable organizations or commercial ventures for charitable purposes. These investments are commonly made in concert with grant programs. PRIs are designed to achieve specific program objectives but may earn a below-market financial return. PRIs are eligible to count against the 5% payout that private foundations are required to make annually to maintain their tax-exempt status. Craft3 can target investment proceeds by geography, demographics, and sectors in alignment with programmatic objectives, depending on market demand and other factors.

MISSION-ALIGNED INVESTMENTS

Mission-Related Investments

Foundations invest in Craft3 through Mission-Related Investments (MRIs), which are investments made through their investment corpus or endowment. Such investments must meet prudent investor standards like any traditional financial investment. However, they support the mission of a foundation by generating a positive social or environmental impact. These are sometimes referred to as “socially responsible investments” or “impact investments” and are available across all asset classes, including cash, guarantees, fixed income, public and private equity, venture capital and real estate.

In late 2015, the IRS issued new guidance* clarifying that tax-exempt foundations may pursue MRIs without facing a tax penalty so long as their investment managers “exercise ordinary business care and prudence in providing for the long-term and short-term financial needs of the foundation.” This removed the prior requirement that managers only select investments that offer the highest rates of return, lowest risks, and greatest liquidity, so long as MRIs “support and do not jeopardize the furtherance of the private foundation’s charitable purpose.”

MISSION-ALIGNED INVESTMENTS

Donor Advised Fund Investments

Craft3’s Community Impact Investment Note may be an option for Donor Advised Fund (DAF)* impact investing. As a 501(c)(3), Craft3 can also accept donations through DAFs.

DAFs are separately managed funds or accounts sponsored by public charities comprised of contributions from individual donors. Once contributed, the sponsoring organization has legal control over these funds, but the donor retains advisory privileges with respect to the distribution of funds and the investment of assets in the account.

DAFs are a tool for donors seeking a cost-effective and efficient way to make charitable contributions while maximizing tax benefits and if desired, protecting their anonymity. DAFs are not subject to a minimum payout requirement, which means the timeline for deploying these resources is flexible. To manage these resources and maximize the outcomes they may achieve before they are granted, some DAFs support impact investments of contributions, which may contribute to growth of the corpus for future philanthropic giving.