Criteria for the Transformative 25
The fund must meet at least three of the following four criteria:
- Employ integrated capital
- Use creative finance
- Focus on social, relational, and ecological returns
- Engage with ownership and governance for equity
In the words and work of RSF Social Finance, “integrated capital is the coordinated use of different forms of financial capital and non-financial resources to support strategies and enterprises working to solve complex social and environmental problems.” Many of the funds are structured as social purpose funds for community benefit and can receive grant support as well as investments. Others organize themselves with multiple entities.
A creative finance structure is “when a loan or investment is put together in a different, unusual or innovative way to create a circumstance where a person with a nontraditional credit history or a lack of collateral can access those resources.” By providing diverse finance strategies: fixed low interest rates, royalty payments, repayment moratoriums, recoverable grants and promissory notes, they are reshaping both investor and borrower understandings.
Social, Relational and Ecological Returns
Social, relational and ecological returns are built into the purpose of the funds alongside targeted financial returns. These funds consider return in holistic ways. This stands in contrast to funds where the emphasis is on the return on investment (ROI) or the financial gain or loss generated on an investment relative to the amount of money invested.
Ownership and Governance
Many funds focus on redefining ownership and governance, including questions around who owns the assets, who makes decisions about the assets, and how decision-making processes work. They support cooperative conversions and employee shareholder ownership plans (ESOPs). Others are led and managed by people within their communities. These shifts contribute to wealth redistribution.
All the funds have a return profile that they articulate in their prospectus and terms. They range in structure and approach and solicit a range of types of capital from grants to recoverable grants, to investments and equity evergreen funds. Some offer dividends or royalty payments, while others financial returns of 0-8%. Importantly, they are diverse in their approach and tailor their funds to the communities and financial opportunities they understand. Some of the funds are seeking investment and grants now while others are currently closed with plans to open for funding in the next 3-18 months. All funds on the list expect to grow and have plans for the future.