Tools & Resources

Cedar Tree Foundation's First PRI

This case example appeared originally in Essentials of Impact Investing: A Guide for Small-Staffed Foundations
Investor: Cedar Tree Foundation
Investee: Maine Farmland Trust (MFT)
Asset Class: Private Debt
Investment Amount: $500,000
Impact Sector(s): Agriculture & Food; Community & Economic Development; Environmental Conservation & Protection
Date of Investment: 2013
Projected Exit: 2016
Financial Return Goal: Below Market Rate
 
Cedar Tree Foundation focuses its grant-making efforts on sustainable agriculture and environmental health and education across the United States, and it wanted to achieve greater synergy between its endowment investments and the grant dollars it deployed. In 2005, through a board-driven process, the foundation’s treasurer created an impact investing policy that included a rating system for potential investments on spectrum of “greenness”’ with the ultimate goal to have 80 to 90 percent of all investments in some shade of green. The foundation is run by four staff members and governed by six board members who oversee $98 million in assets. The full board approved the proposed policy and supported the creation of a detailed RFP sent out to a number of investment advisors with expertise in impact investing for small-staffed foundations. The foundation ultimately hired the socially responsible investing team at RBC Wealth Management. Cedar Tree benefited from organization-wide enthusiasm and support for a mission-driven investment approach, noting that the foundation “has been of one mind” with strong advocates on the part of both the board and staff.
 
This PRI investment funds MFT’s Buy/Protect/Sell program, through which MFT purchases vulnerable farmland, permanently protects the land with agricultural restrictions or easements, and then resells it to farmers at the land’s affordable “farmland value” rather than its pre-easement “development value.”
 
Process
The MFT investment was Cedar Tree’s first PRI investment and first time entering into a debt contract. The foundation had a lawyer review the contract, to ensure that the arrangement met the IRS definition of a PRI and that it was drafted with adequate legal protection. The foundation was at the same time cognizant to avoid putting unreasonable demands on MFT since it is a small organization with limited resources.
 
Partners Involved in Investment
None
 
Projected Impact
This PRI investment earns the foundation 2 percent interest. Adding to MFT’s loanfund gives the nonprofit more resources to deploy at a lower cost of financing, allowing it to protect additional farmland and support new farmers.
 
Additional Insights
Be open to a range of investment opportunities. Developing an impact investing strategy with a set investment structure in mind can lead to a frustrating search, as it is not always possible to find an investment in each asset class that meets specific social and financial impact goals. While knowing what you want to get out of an investment is important, being flexible and adaptive with your impact investingprogram is key. Cedar Tree is keenly interested in investment opportunities that further its grant-making mission in measurable, impactful ways.
 
Network with like-minded funders. In the future, the foundation plans to more actively reach out to and network with other funders with similar interests in sustainable agriculture in the hopes of more quickly discovering future investment opportunities that are mission-aligned.

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