Tips for Funders Beginning Their Participatory Investing Journey

What we’ve learned from building our Action Lab: Participatory Investing, and how these insights can support institutions interested in exploring participatory investing themselves.

This piece is co-authored by Katheryn Witt and Smitha Das and is the result of a partnership between Common Future and the World Educations Services (WES) Mariam Assefa Fund.

March 2022, Common Future launched the Action Lab: Participatory Investing — a partnership with the World Educations Services (WES) Mariam Assefa Fund. The Action Lab is a 12-month initiative in which funders are learning about, experimenting with, and co-creating new models and strategies for participatory investing within their own institutions and through a collaborative fund.

Over the last six months, we’ve been learning from others that have integrated participatory practices. We’ve heard from leaders like Shari Davis of the Participatory Budgeting Project, Curt Lyon from Transform Finance, Nwamaka Agbo and Lynne Hoey from the Kataly Foundation, Joanna Cea of the Thousand Currents Buen Vivir Fund and co-author of Beloved Economies, and Leslie Lindo from the Olamina Fund. We’ve been learning from their experiences and building a framework for the nascent field of participatory investing within institutions.

WHERE SHOULD FUNDERS START?

The cumulative insights below are foundational pieces to starting participatory investing work within an institution. We have identified these common threads from participatory strategies.

1. Institutions must have the culture and values necessary for this work. Integrating participatory practices and strategies into investments takes time, intention, flexibility, and ultimately a mindset shift. A culture that centers equity and recognizes the importance of experimentation is necessary for this work. Kataly’s Restorative Economies Fund offers critical cultural elements funders should explore to take on participatory work, including:

• Engaging in ongoing learning opportunities to better understand philanthropy’s role in worsening wealth inequality
• Understanding the importance of community ownership and governance as a critical strategy to addressing wealth inequality.
• Creating a culture of feedback and accountability with deep input from community leaders.

For institutions that understand the inextricable link between equity and power, have done the work to center equity in their culture, and are already shifting their investments into alignment with their mission, shifting ownership and power over investment decisions is a natural next step.

2. Once there is cultural buy-in, it is critical to develop a shared language and understanding of participatory investing. Early on, cohort members went through an intentional exercise to define both ‘participatory’ and ‘investing’ in the context of their institutions. This helped organizations identify and name the power dynamics they seek to shift, community stakeholders they seek to engage, and types of capital they seek to activate (e.g., endowment capital, catalytic capital) through participatory investing. “This exercise sparked important conversations helping us identify which power structures we seek to dismantle through this work, and create a culture of honesty, understanding, and a space for change.” Once developed, this shared definition can be a helpful tool for orientation and onboarding new participants and transforming institutional practices.

To facilitate and advance these conversations in the field, our cohort collectively developed a definition for participatory investing: “An investing approach that ensures communities who have been historically excluded and harmed by existing investment structures hold power and ownership over capital strategy, design, implementation, and outcomes.” We hope others can build on this definition and customize it to the context of their community and institution.

3. For participatory investing to work, it must be participatory in establishing roles, responsibilities, and power. That means understanding what capacity exists on the community side and the foundation side. Trust takes time to build and work to maintain, but is a critical piece to ensuring a participatory process is equitable. Community members don’t always want to be in the weeds on a particular project or initiative, especially when those weeds are ones that the funder has the capacity to address. Funders must shift decision-making power to the community, but that doesn’t mean relinquishing responsibility for the types of power — structural, financial, social, etc. — that they possess. Rather, it means working with the community to discern where they would like to participate, and where they would prefer the funder doing the work.

This can look like community members setting the overarching goals or priorities of a particular pool of investment capital, but not reviewing balance sheets for potential investments.

It’s the responsibility of the funder to understand where and how the community wants to be involved — and to compensate them for the time and energy asked of them.

4. Funders don’t have to make everything participatory all at once. A step in the right direction is better than doing nothing at all. Funders should choose a meaningful, non-trivial process where they’d like to incorporate participatory practices and shift power to the community. These pilots can look like a community advisory council for Mission Related Investments (MRIs) or Program Related Investments (PRIs) or the restructuring of an investment committee to include community leaders.

These provide great opportunities to experiment, test the effectiveness of strategies, and see what can be improved — with the end goal of learning, iterating, integrating, and expanding. Furthermore, pilots can serve as proof points for additional shifts to skeptical stakeholders. The best way to convince a skeptic is with an example of something that’s working.

What’s next for us?

Participatory investing is a new and emerging field, and there’s much to learn. We’re asking questions like: how does an institution select a community that will participate in decision-making processes? And how can institutions provide the necessary resources and capacity building tools for communities to be able to fully participate in investment decision-making processes? Here’s what’s next for the Action Lab:

1. The Projects: Each participating institution is developing action-projects that integrate participatory investing strategies and practices into their organization. Thus far, they include variations of community advisory committees and redesigns of investment policy statements. Institutions will make meaningful progress before the end of the initiative in spring 2023, and will continue moving their projects forward with support from the connections, learnings, and resources from the cohort.
2. The Fund: The $175,000 experimental fund will allow us to co-create new participatory investment governance and capital allocation structures, models, and practices. This work will be led by four practitioners working at the intersection of health equity and economic equity: Jen Lewis-Walden of Shift Health Accelerator & Building Healthy Places Network, Jessyca Dudley of Bold Ventures LLC, Lisa Richardson of Shift Health Accelerator, and Sean Campbell of Capital for Communities. The decision-making structures will be developed before the end of 2022, with capital allocation decisions coming in the beginning of 2023. The capital will be distributed by mid 2023.
3. The Framework: The Action Lab has been collaboratively building a framework for participatory investing within institutions. We’ll be hosting a call for interested funders to support us in workshopping this framework in December, and plan to publicly release the framework in 2023. If you are interested, please reach out to Katheryn Witt at katheryn@commonfuture.co.

As we continue learning and experimenting, we invite you to join and learn alongside us by following our updates on Common Future’s Medium page and WES’ Insights blog. We’re excited to share our journey with you.