Revisiting Rush’s CDFI-Centered Impact Investment Model

Rush’s current strategy of impact investing through Community Development Financial Institutions (CDFIs) has proven to be a low-risk and low-touch way to provide capital for community projects and help local CDFIs to expand their lending portfolios, particularly in high need geographies. CDFIs are mission-driven institutions that provide essential financial services in communities that are underserved by the traditional banking sector.

Investing in CDFIs is an efficient approach to impact investing because it involves underwriting one CDFI, which in turn makes multiple investments, rather than Rush underwriting and managing individual investments internally. However, this approach does limit Rush’s ability as an investor to influence the selection criteria and decisions about which projects are funded. Further, each CDFI has an area of specialty (e.g., affordable housing, small business lending), so as an investor, Rush is beholden to the focus areas of the CDFIs where it makes investments.

Rush has been successful in quantifying the impact on the West Side by assessing loan data and qualitative impact information from loan disbursements across the entire portfolios of each CDFI partner. Overall, investing through CDFI partners allows the impact investment portfolio to grow in alignment with an institution’s balance sheet and provides a low-touch way to make impact investments that do not require Rush to manage its own portfolio. The only caveat of this strategy is that quantifying impact requires close relationships with CDFI partners and reliance on the loan data they already collect.

Organizational Alignment

Rush’s impact investing strategy has grown and evolved in the five years since its inception. The focus for impact investing has turned to organizational optimization and increased engagement with the CDFIs that disburse loans as a result of Rush’s investment. For Rush, organizational optimization for impact investing involves four components:

Qualitative Markers and Benchmarks for Impact

Due to the structure of CDFI-centered impact investments, it is more efficient to devote time to supporting CDFIs and developing new ways of assessing impact investments rather than setting goals for the quantity and amount of loan disbursements made each year. It has proven more efficient to collaborate on a reporting system that works for all investors rather than requiring them to report into a preset structure that does not consider their individual data capacity and needs. Rush has helped to clarify its impact investing strategy by developing a framework to track outputs in terms of loan disbursements, and a framework to track collective outcomes for the entire impact investment portfolio (which includes other hospitals) that is still in development in partnership with West Side United. 

Quarterly, Rush reports to leadership total capital disbursements to CDFIs and loans made in the anchor mission geography. This qualitative data is complemented by qualitative markers and benchmarks for what the future of impact investing can look like as an organizational initiative. Scheduling quarterly check-ins with Rush’s collective of CDFI partners and hosting annual reporting discussions with each of them has aligned the goals of the collective and shaped the trajectory of how Rush assesses outcomes of its impact investments beyond financial gain. The impact investment collective’s top loan-supported project sectors have included community development, healthy foods, housing, commercial retail, and facilities. From this data, it is possible to infer that many of these projects contribute to neighborhood development, and it is Rush’s goal to continue to support that growth.

Impact Assessment Framework

When executing a CDFI-centered impact investing strategy, deriving impact indicators from the quantitative data that CDFIs typically collect is not always possible. At most, investors can feasibly only rely on anecdotal success stories from individual loan recipients that CDFIs can readily share. Because of this lack of access to data that could inform the impact of loan disbursement on the development of neighborhoods, Rush partnered with West Side United (WSU) and its investors to create a new way of assessing impact from capital deployed through impact investments. This engagement addressed data collection limitations by developing a framework that reflects the impact of CDFI loans in community development.

The decision to undertake this engagement was due in part to the publication of WSU’s The Journey to Impact Investing, which was a report that detailed the progress of the impact investment collective’s efforts. The report was launched in December 2022 to provide stakeholders with an overview of how WSU’s impact investments have served as a catalyst of economic growth over time. The findings helped to catalyze the WSU impact investing committee’s efforts to prioritize communications with CDFIs about collective data reporting tools and opportunities for demonstrating impact.

Rather than burdening CDFI partners with additional requests for metrics, the impact investing committee took a collective approach in identifying a real need to align on neighborhood and community level indicators for community investment. After participating in an engagement with CLF Ventures as part of their Community Investment HealthScore™ training in 2022 and identifying success indicators for community investment as an opportunity for growth, WSU and CLF Ventures began a new engagement in September 2023. These efforts informed an impact measurement framework for investors in the WSU impact investing committee.

Rush, alongside other WSU investors, is helping to shape efforts to measure the community impacts of impact investing, which is still a relatively new field on a national level. According to the aforementioned study (The Journey to Impact Investing), “SROI [Social Return on Investment] is an emergent principles-based field in the United States. Given the relative newness of SROI analysis in the US, the ability to scope, carry out and implement SROI analysis has been limited.” Due to the dearth of public reporting on social impact initiatives, West Side United’s efforts to align investor hospitals in quantifying impact through a consistent framework will be among the first of its kind. With that in mind, Rush recognizes that this is still a developing framework and it is worthwhile to continue to explore the ways in which impact can be tracked over time.