Appalachian Impact Fund

Interview with Lora E. Smith, Executive Director of the Appalachian Impact Fund

Lora Smith filled the room with joy and focus at the inaugural cohort of the Just Economy Institute (formerly known as the Integrated Capital Institute) in 2017. Unlike many of us in the cohort who were discovering our path, Lora knew where and what she wanted to accomplish. From Appalachia, Kentucky, she had a laser focus on how a social impact fund could make a huge difference for her community and she has worked toward that goal ever since. It’s been a pleasure to follow her journey.

Jen: How was the Appalachian Impact Fund created?

Lora: I co-founded the Appalachian Impact Fund (AIF) with our anchor investor Brook Smith in 2017. Appalachian Kentucky is the poorest subregion in Appalachia with 37 of the Appalachian Regional Commission’s 83 most distressed counties located within its borders. Issues of poverty in Appalachian Kentucky stretch back to the turn of the last century and the dawn of extractive industries and a history of dispossession coupled with a critical lack of philanthropic and private investment that continues today.

Children at New Beginnings Day Care in Hazard, KY.

Recognizing the immense needs and challenges alongside the region’s promises and opportunities, Brook, his wife Pam and I, established the Appalachian Impact Fund at the Foundation for Appalachian Kentucky with strategies informed by the Foundation, local leaders, and a mission to support equitable economic transition in the region. Brook has a longtime relationship with Eastern Kentucky through several decades of providing surety bonds on behalf of the construction and mining industries across the region. Recognizing that his personal wealth is deeply tied to mountain people, land and communities, the Smith family felt a personal and social responsibility to reinvest in the region. AIF was founded with a multi-million dollar commitment to the region from the Smith family to establish and grow a place-based fund that is deploying catalytic capital to community-led solutions in a way that is accountable to- and directed by- local people and place.

Jen: How are your investment funds catalytic in a way that is different from other funds?

Lora: The Appalachian Impact Fund (AIF) is a social impact investment fund at the Foundation for Appalachian Kentucky supporting economic transition and community investment in Eastern Kentucky through venture philanthropy and investments. We are the first social impact investment to be established in Central Appalachia. We are a purely philanthropic fund anchored at a community foundation and therefore can take risks, be “the first in” on catalytic projects, and provide capital through grantmaking and patient lending and equity investments. This is catalytic for our region as Eastern Kentucky has historically been under-capitalized and our entrepreneurs, social enterprises, nonprofit partners and community initiatives have different capital needs that often require a fair bit of subsidy before they are able to take on more traditional forms of capital from more traditional lenders and investors. Likewise, we are community run, located and controlled which is transformative for a region marked by extraction and a historic lack of control over resources including capital resources.

SouthDown Farm in Letcher County, KY.

Jen: How do you describe the kind of non-financial returns the fund offers?

Lora: Being that we are a high-risk philanthropic fund, we focus mostly on non-financial social returns for our foundation and donor partners. We envision a day when Eastern Kentucky is a place of unique thriving local economies that enhance the existing natural and cultural assets of the region and offer economic opportunity for all people while keeping ownership, assets, and wealth rooted in local communities. In order to determine if we are meeting our long-term goal and vision, we measure quantifiable outcomes that serve as benchmarks for our staff, board and investors including new and retained jobs, new businesses and social enterprises, historic properties and square footage revitalized, new houses built, new dollars leveraged for the region, and other data points. We also share qualitative human impact stories that show the less tangible, but just as important and powerful outcomes of our work.

Jen: Can you describe how you use integrated capital to do your work?

Lora: We provide general operating support alongside our impact investment in recognition that both private businesses and nonprofits often need subsidy along with patient and fair capital. An example of this is our commitment to affordable and energy efficient housing. Through an impact investment made in the Housing Development Alliance (HDA) we have supported the construction of critical housing infrastructure in the region and workforce training programs for men and women in recovery. When we make a low-interest loan to HDA to support their construction programs, we also make a grant to HDA to support their general operation so that the organization is able to sustain their important work.

Jen: What is transformational about the businesses that you invest in?

Lora: We work with rural entrepreneurs, businesses, and social enterprises that are taking a systems approach to solving multiple challenges at the same time. One of the things we find is that rural entrepreneurs are naturally systems thinkers and because they have to overcome multiple challenges and barriers to even enter the marketplace, their strategies, solutions and outcomes are often holistic and multifaceted. For example, we fund a social enterprise called CANE Kitchen in Whitesburg, KY. The kitchen is addressing health inequities, economic inequality, food scarcity and hunger, access to entrepreneurial infrastructure, and tourism, creative placemaking, and economic development opportunities all at once through local food and farming.

Housing Development Alliance in Perry County, KY.

Jen: How do you address racial justice, income inequality, and/or gender justice through your products and services?

Lora: The Appalachian Impact Fund has a commitment to addressing racial, income and gender inequities in our investment strategy. Because we work in the most economically distressed counties of Central Appalachia, our commitment to addressing income inequality and systemic and generational poverty is implied. Our commitment to racial and gender justice is more targeted and intentional and consists of a priority in funding given to support BIPOC-led organizations and initiatives, leadership development for Black leaders, and prioritized funding for female entrepreneurs.

Jen: What does a foundation or investor need to understand in order to invest in transformational businesses?

Lora: Many transformational businesses need consistent and patient capital and a mix of both grant support and lending or equity investments. This is especially true in rural areas and when working with historically underfunded entrepreneurs who have not had access to traditional capital infrastructure.

A square dance with the Hindman Settlement School in Knott County, KY.

Jen: What do you tell people who think your fund is risky?

Lora: We now have a five-year track record of investing for transformative impact. What sets our fund apart from other foundations and funders investing in the Central Appalachian region is that we are based in the coalfields and take a place-based approach. For a region that has experienced over one hundred years of natural resource and capital extraction, a Fund being held and managed within the region by and for Appalachian people that creates new pathways for capital to flow into the hardest to work in places of Central Appalachia is transformational in and of itself.







The Appalachian Impact Fund

Investment Thesis/What is your rationale for your approach to investing?  The Appalachian Impact Fund blends capacity building grantmaking with creative investment capital to advance opportunity in Eastern Kentucky’s coalfield region to support an equitable and just economic transition. We offer general operating support grants, creative capital solutions including patient capital and below-market rate loans, and technical assistance to community-led organizations, social enterprises, and projects that accelerate economic transition and support building community capacity. We think about the overall community economic development ecosystem in the region and layer our grants and social impact investments accordingly while engaging other funding and investing partners for greater collective impact.

Geography: Eastern Kentucky coalfields.

Year Founded: 2017

# of Investments: 10 social impact investments; 1,988 grants made to nonprofits, individuals and small businesses

# of Investors: 6

Funds Raised: $8,600,000


What’s on Lora’s Minds?

Book: Perfect Black, Crystal Wilkinson (2021). Crystal Wilkinson is Kentucky’s poet laureate with roots in Eastern Kentucky.

Song: Love is for Always, Sun Ra

Podcast: Black In Appalachia podcast Black in Appalachia is an incredible regional documentary project and community archive exploring and sustaining Black lived and cultural experiences in Central Appalachia.