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The Continued Advancement of our Impact-Risk-Profitability (IRP) Framework and Toolkit

Our efforts continue to repair the long history of inequitable systems and financial institutions excluding Black, Latino, and other people and communities of color. I am pleased to share with you the progress we’ve made over the past year in redefining LIIF’s role in the community development ecosystem. In 2020, we set a goal to drive $5 billion in investments over the next decade to advance racial equity. Two years in, or 20% of the way, we are 26% there, having deployed approximately $1.3 billion.    

When we launched our current strategic plan, we named lending as our greatest vehicle for impact. In 2022, we redefined that by naming capital more broadly, including grants, equity capital like low-income housing tax credits (LIHTC), and other investments, as our greatest vehicle for impact.

What has most set LIIF apart this year has been the continued advancement of our Impact-Risk-Profitability (IRP) Framework, as well as the exponential growth of our early child care and education (ECE) work.  

Through the IRP, we have defined our highest-impact goal as building power and agency particularly for Black, Latino, and other people and communities of color. The IRP defines Racial Equity Standouts (RESO) loans based on sponsors and projects, ranging from capital solely controlled by developers of color to community-led developments that actively combat displacement. Our work on the IRP has challenged us to redefine traditional constructs around risk 

Traditional approaches to credit are rooted in systemic racism, relying heavily on intergenerational wealth to determine credit worthiness. As we expand how we perceive risks, we have to ask ourselves, is there an actual risk presenting a barrier or are we perceiving a risk because of the traditional notion tied to a measuring stick which favors wealth and privilege? 

For example, this past year LIIF launched our Black Developer Capital Initiative (BDCI), a special purpose credit program that offers a below market, unsecured loan product supporting for profit Black developers with catalytic capital. This was accompanied by the BDCI LIHTC Fund offered by the National Affordable Housing Trust (NAHT), our nonprofit tax credit syndication affiliate. We replaced traditional, fundamentally biased measures of capacity, including balance sheet strength, and met developers where they were, instead relying on their track record of experience in affordable housing development. Performance to date has been strong, with the entire $20 million capital pool deployed. Our goal is to expand this initiative to support more Black developers across our key regions. We recognize while we can point to success through BDCI, the industry needs proof of our theory, which is why we are launching a learning and evaluation project to help us disprove the biases built into our systems  

We must continue to challenge how we think as lenders if we hope to significantly shift the way capital flows and fosters progress toward racial equity. This innovative framework is institutionalizing this perspective across our portfolio, moving us beyond individual products and initiatives. We will continue to push ourselves until we are past the barriers set up and guarded by historic hierarchies. If we are not uncomfortable, we have not pushed hard enough. 

Just as the IRP has redefined how we lend, our growing ECE work has redefined LIIF’s identity primarily as a lender. LIIF has a decades long history of work within the ECE field, providing grant capital, primarily via government contracts, and technical assistance (TA) to operators, both center and home based. The pandemic brought the importance of childcare to the forefront of the national consciousness. The “triple halo” effect of ECE has long been understood by LIIF and others in the field. That is: childcare provides children with a strong start in life, leading to better outcomes decades later, it allows caregivers to participate in the workforce, and it supports the entrepreneurs who provide childcare, most often women of color. Indeed, of the providers with whom we work, over 91% identify as women, and over 86% identify as people of color. LIIF is now administering over $350 million in grants for early care and education facilities, supporting both center and home-based providers.   

The need for high quality, affordable childcare across the country is immense and much of the recent funding was driven by the America Rescue Plan Act, which is ending. In response, LIIF is launching a capacity building effort for CDFI’s and other stakeholders who are best positioned to deliver grants and TA to their local markets but may lack ECE sector knowledge. We have built unique expertise we want to leverage as we support local and state governments seeking to increase the supply of high quality and affordable childcare through our soon-to-be launched government advisory business. We also continue to advocate for increased and more-equitable ECE resources, including the incentivization of ECE co-location with affordable housing and other community assets. We thank our public, nonprofit and philanthropic partners, including, but not limited to, City and County of San Francisco, City of Los Angeles, State of California’s Department of Social Services, DC Office of the State Superintendent of Education and New York City Mayor’s Office of Child Care and Early Childhood Education for their vision and leadership. Mayor’s Office for Child Care and Early Childhood Education.   

Our goals are ambitious. So are we. We are capitalizing on our strengths to redefine our business. This strategic plan defined what our impact priorities are, and this past year you’ve seen us further define how we’ll get there. Your continued partnership is key to this coming to fruition. We urge our investors and funders to continue to support us with the low-cost, flexible capital needed to innovate, and to continue to drive toward racial equity — a state where everyone has access to communities of opportunity, equity and well-being. I look forward to sharing more results of our advancements.  

In partnership,
Kimberly Latimer-Nelligan

Impact-Risk-Profitability (IRP)