Our Region’s Journey
Phase 3: Collaborating for Scale and Impact (2016-present)
Increased grant capital from philanthropy and the federal POWER initiative supported community capacity building and collaboration to accelerate the development of priority sectors. However, regional partners recognized that the influx of grant dollars was not a sufficient or sustainable solution and anticipated the need to develop the ecosystem to absorb large-scale investment capital. The Appalachia Funders Network convened partners in 2016 to reimagine a regional system to meet the capital needs of communities and accelerate the transition to a more just, resilient, diversified, and inclusive economy. A broad swath of community investment partners agreed to engage in a collaborative process to strengthen and add value to existing assets in the ecosystem.
Increased Capital Adds Capacity for Aligned Priorities
Federal and philanthropic dollars helped fuel innovative projects and new collaborations, allowing CDFIs and other CED groups to add staff and technical capacity. Guided by an ethos of peer learning and support, experienced organizations shared expertise with others to grow the pipeline for priority sectors. For example, Appalachian Sustainable Development and ACEnet anchored the region’s food system with expertise on food hubs and value-added processing, while Mountain Association developed an on-bill financing mechanism, which they shared with other CDFIs, to boost the clean energy sector by increasing energy efficiency upgrades for homeowners and businesses. Within AFN, the Mary Reynolds Babcock Foundation shared expertise around impact investing and network development, while the Foundation for Appalachian Kentucky provided leadership for a new approach to rural development philanthropy.
Solar on AML | Courtesy of Invest Appalachia
StoryBuilding Community Capacity Through Philanthropy
Foundation for Appalachian Kentucky is a community foundation that does philanthropy differently. With a stated intention to “shift control back into the hands of local leaders,” the Foundation serves as a rural development hub that meets communities where they are, develops local leaders, and works with them to develop ideas and resources.
An influx of national capital always comes with the risk of pushing top-down solutions, but Central Appalachia’s robust CED and philanthropic networks ensured that community partners stayed in the driver’s seat. As the federal POWER initiative came online, AFN members, including the national Just Transition Fund and large regional funders like the Benedum Foundation, provided capacity-building grants to help innovative community-based transition projects submit competitive proposals. Small but promising initiatives used start-up support from regional foundations to build track records and win larger grants. For instance, CAN member Coalfield Development and then expanded an innovative social enterprise approach to workforce development, becoming a nationally renowned organization. Rooted and aligned philanthropic partners made the region approachable and attractive for national investment while also tempering the sometimes-fickle nature of national philanthropy. Several national foundations joined AFN and benefited from connecting with its established analysis, strong relationships, and ongoing efforts. Still, national philanthropy has had an inconsistent grantmaking presence in the region, underscoring the importance of self-determined strategies in low-resource regions that need long-term, committed support.
Ecosystem Development
When AFN convened community investment partners in Charleston, West Virginia, at the September 2016 meeting described at the opening of this story, the first step was to identify strengths and gaps in the regional investment ecosystem. An external consultant report documented significant pent-up demand for impact capital, and partners representing capital supply, capital demand, and intermediary roles contributed their analyses. Collectively, the process identified the existing system’s assets as well as critical gaps in both capital and capacity. Participants in the meeting also outlined a set of values (transparency, democracy, equity, self-determination, collaboration) to guide the development of new system functions. Just as the Appalachian Transition framework emerged from grassroots engagement, development of the community investment ecosystem was led by practitioners and in-region experts steeped in the context and culture of Central Appalachia. Several of these leaders participated in national learning cohorts, such as the Center for Community Investment’s Connect Capital, the BALLE (now Common Future) Local Economy Fellowship, and RSF Social Finance’s Just Economy Institute, which helped them build and share knowledge about capital absorption and developing community investment ecosystems.
Courtesy of West Virginia Community Development Hub
StoryInvesting in Community Capacity to Grow the Ecosystem
The West Virginia Community Development Hub has played a central role in building statewide community development capacity, first by increasing the competitiveness of community-led projects for federal Partnerships for Opportunity and Workforce and Economic Revitalization (POWER) initiative grants and, more recently, as a key partner in developing the community investment ecosystem.
Priorities for ecosystem development included strengthening the pipeline of investable deals in priority sectors, building capacity and coordination among ecosystem actors, and creating new capital tools to accelerate the flow of investment. These three priorities were interconnected, and relied upon a variety of actors (CDFIs, foundations, CED organizations, agencies) to provide key functions in the system. Ecosystem partners also identified a new role or function that was needed in the system: a regional community investment fund that could integrate social, philanthropic, and investment capital in alignment with ongoing efforts and assets. The new organization that emerged from this years-long collaborative design process, Invest Appalachia, was tailored to fill investment gaps with a partnership-first approach.
Invest Appalachia is designed to provide blended catalytic capital to plug common gaps between community development grantmaking by regional funders and community lending by CDFIs and loan funds. It complements existing capital offerings with a combination of flexible investment products and credit enhancements while also supporting critical ecosystem-level work to build capacity and grow the pipeline of inclusive opportunities. As Invest Appalachia formed to focus on capital gaps in the system, a group of AFN members attracted funding from a national foundation to launch an effort focused on capacity gaps in the system, the Appalachian Investment Ecosystem Initiative (AIEI).
Capital Absorption Capacity Framework
The Center for Community Investment (CCI) developed the capital absorption framework as a way to approach community investment at a systems level. The framework helps guide collaborative efforts and new capital interventions in a given region or community and provides language and tools that empower non-traditional actors in the system. The Center for Community Investment has since provided training, convened stakeholders, and published papers on building capital absorption capacity in communities. An Appalachian team that evolved into Invest Appalachia participated in Connect Capital, their national cohort of six cities and regions working to increase equitable community investment. Several ecosystem partners in Central Appalachia have participated in CCI’s Field Catalyst and Fulcrum Fellowship cohorts. As we have developed our community investment ecosystem, we have focused on the key functions of the capital absorption framework:
Shared Priorities: Partners are guided by a common vision, economic transition framework, and key industry sector analysis based on broad consensus from CAN, AFN, ARC, and CDFIs in the region.
Investable Pipeline: CCI pushed us to look beyond individual deals or lender portfolios to build a strong collective pipeline of investments that is visible and can be tracked to understand gaps and opportunities in given sectors and industries across the region.
Enabling Ecosystem: Many factors can promote or impede a community’s success, and CCI helped us identify which aspects were working well for us and where we had gaps. The gap analysis led to the creation of Invest Appalachia and other capacity building efforts, including an inaugural training cohort for community development actors who want to build skills for identifying and framing local investment opportunities.