The Arch Community Fund uses a non-extractive investment strategy that starts with a commitment to invest all of the Foundation’s assets outside of the stock market. The stock market operates on longstanding assumptions about the primacy of growth of capital and values profits over people and the planet. Instead of investing in the stock market, we put our money in a mix of assets that ensure liquidity and maximize impact. Our complete Investment Policy Statement can be found here.

Our Journey

The process of developing a mission-aligned investment philosophy has not been without challenges. For starters, we had to grapple with the gravitational pull of the foundation world to a rationale that the returns afforded by the market allows funders to have more money available for grant-making. While undeniable that investing in the stock market would likely increase long term capital for grantmaking, doing so props up a system that breeds concentration of wealth and extreme inequality. Ultimately, we do not believe that an ends-justifies-the-means approach can ever lead to transformative change. To use Audre Lorde’s well known adage, “the master’s tools will never dismantle the master’s house.”

Then there is the reality of needing liquidity and stability to meet foundation expenses and grant-making obligations, and how that can present a challenge for making higher social impact investments, which are usually longer term and “riskier.” Arch makes a combination of one-year and three-year grants and must ensure that it has the capital and liquidity to fulfill its commitments to grantees.

Last, there are the issues related to longevity and perpetuity. In forgoing stock market-based returns, while giving away well over 5% per year, we are effectively cementing our status as a “limited life” foundation. We launched Arch in a state of urgency shortly after the election of Donald Trump. That urgency is no less acute today, given the political landscape and threat to our democracy. For us, the urgency of the present moment is a greater priority to us than our own life as a Foundation. Foundations committed to a longer term time horizon may not be able to completely divest from the market; however, they can certainly divest a portion of those assets to make investments in projects that have a greater social impact.

Arch’s Asset Allocation

Our asset allocation is a balancing act between stable investments that ensure liquidity for grantmaking and foundation expenses and higher social investments that offer the promise of more transformational change. Since many of the highest impact investments are higher risk and longer term, we have invested close to half of our assets in low-risk and highly liquid assets, like money markets and treasuries and federal agency securities.

The majority of our assets are invested in alignment with our mission. Some of these assets are invested in fixed income funds that fund low-income communities, such as Calvert Notes and Capital Impact Notes. We refer to this category of assets as “Public Purpose” investments. These investments, along with our cash equivalents and federal agencies, are managed by Harrington Investments, a socially responsible wealth advisory firm that actively challenges corporate management through stakeholder engagement.

Our most exciting investments are directly into community-controlled projects that build local power. We refer to this category of assets as “High Social Impact”. We execute High Social Impact investments through our partnership with Chordata Capital, an anti-capitalist wealth management firm (described later in greater detail.)

High Social Impact Investments

Arch’s first exposure to direct community investments occurred during its participation in the Maestra Program run by Justice Funders http://justicefunders.org/maestra/.

As part of Maestra, we were introduced to two exciting projects that are working on creating a more democratic and sustainable new economy.

Boston Ujima Project (https://www.ujimaboston.com/) is creating a new economic model in Boston: a democratically governed multi-stakeholder organization that is building a community-controlled economy led by working class people of color. Members of the governing body pool resources and make decisions collectively about the businesses and services they want as part of their communal ecosystem. They also make decisions on which businesses to invest in.

Seed Commons (www.seedcommons.org), is a national network of locally-rooted, non-extractive loan funds that brings the power of big finance under community control. We were drawn by Seed Commons’ approach to non-extractive finance, which it defines as as the returns to the lender not ever exceeding the wealth created by the borrower using the capital. With its 25+ community-controlled member loan funds, Seed Commons is creating a national non-extractive finance infrastructure.

As it turned out, Boston Ujima Project and Seed Commons were both part of Chordata Capital’s model portfolio.

Partnership with Chordata Capital

Through Chordata Capital (www.chordatacapital.com), we now invest about 20% of our assets into high social impact projects. Chordata facilitates direct investments into local economies that focus on racial, economic and gender justice. It invests in CDFIs, democratically-controlled loan funds and emergent solidarity economy projects that are higher risk and require a longer term investment.

Most of our investments in Chordata’s portfolio range from $50-$150,000, are no or low interest (0-4%) and have terms of 3-7 years. Below are a few examples of projects in Chordata’s portfolio that we are particularly excited about.

East Bay Permanent Real Estate Cooperative https://ebprec.org/ This black-led multi racial organization is buying and preserving real estate in the East Bay to create community controlled assets in BIPOC communities. They are truly creating transformative change by removing land and housing from the speculative market to create permanently affordable, community controlled homes. Their vision includes empowering communities to cooperatively lead a transition from an extractive capitalist system into one where communities are ecologically, emotionally, spiritually, culturally and economically restorative and regenerative.

Oweesta (www.oweesta.org) Oweesta is the only existing Native Community Development Financial Institution (CDFI) Intermediary that provides lending capital and development services exclusively to Native CDFIs and Native communities. Oweesta provides opportunities for Native people to develop financial assets and create wealth by assisting in the establishment of strong, permanent institutions and programs contributing to economic independence and strengthening sovereignty for all Native communities.

Obran Cooperative **https://obran.org/ **is a Black-founded worker-owned conglomerate that acquires small-to-medium-sized businesses and converts them to cooperatives. Obran is on a mission to change the system of employment in this country and build community wealth in the process. Started in Baltimore, the fund has expanded to a national focus. One of its arms, Obran Health, is currently converting a 550 worker home healthcare aide business in the Pacific NW into a cooperative.

We are very much on a learning journey and committed to reviewing our Investment Philosophy every year. As we learn from our experiences, we hope that we will be able to invest more and more resources into projects that are mission-aligned, while still ensuring that we can meet the need for stability and liquidity.

It is both uncomfortable and exciting to be a foundation that is striving to think and operate outside a traditional paradigm in its investment philosophy. We are taking the risk of investing in a holistic vision where are impact is not only about our grantmaking, but the way we invest the totality of our assets. We hope more and more foundations will do the same.