Recovering from the LA Wildfires: The Long-Term Role of Impact Investing
We have all witnessed the devastating impact of wildfires that have recently ravaged the Los Angeles region. Entire neighborhoods have been destroyed, generational wealth has been lost, and the identities of longstanding communities have been deeply shaken.
In response to this disaster, we’ve seen a remarkable outpouring of support. Much of the immediate relief has been focused on providing urgent assistance to displaced residents: cash aid, temporary housing, and other critical support. These efforts are essential, but to truly rebuild, we must think long-term.
At Cal Wellness, we are breaking silos and leveraging every tool at our disposal to advance our mission of protecting and improving the health and wellness of the people of California. Whether through grants, program-related investments (PRIs), or mission-related investments (MRIs), we strategically select the most effective approach for each challenge. [1]
With this mindset, we believe PRIs can play a critical role in the wildfire recovery process. Whether structured as debt or equity, PRIs provide patient, long-term capital that can catalyze large-scale rebuilding projects, attract additional investors, and fill critical gaps left by traditional capital providers, including the public sector. This form of impact investing is particularly important in the later stages of disaster recovery, when the media spotlight has dimmed and philanthropic dollars are redirected to other crises. Equally important is the ability for PRIs to support rebuilding that is community-led and that is centered on wealth creation and economic opportunity as crucial drivers of health.
We’ve seen the power of PRIs before. During the COVID-19 pandemic, Cal Wellness partnered with peer foundations and intermediary organizations to strengthen California’s small business ecosystem through Rural Community Assistance Corporation’s (RCAC) emergency Paycheck Protection Program (PPP) lending (almost $8 million deployed to over 200 largely rural small businesses and nonprofit organizations) and the California Rebuilding Fund (with over $80 million deployed across 1,380 small businesses). We also deployed PRIs to support the California Primary Care Association Ventures Fund, a $25 million fund that provided critical financing to federally qualified health centers in California so they could better navigate the pandemic.
Now, as our region faces the aftermath of catastrophic wildfires, we are ready to deploy new PRIs to foster resilience and help communities rebuild. As a first step in this effort, we’re engaging with fellow PRI investors, lenders, and other partner organizations (including California Coalition for Community Investment and Avivar Capital) to better understand the scale of the damage and the capital needed for rebuilding.
Here’s what we’re hearing:
- Rebuilding will take money and time, but uncertainty remains. It is still too early to accurately determine how much money will be needed to rebuild, considering the need to restore both homeownership and rental housing, as well as small business, nonprofit, and faith-based organizations. Additionally, reconstruction efforts may not begin for another one to two years, with the goal of making structures more disaster-resilient going forward. Given the scale and complexity of the effort, we think it is crucial to begin assembling the necessary loan funds today so we can move quickly tomorrow. We believe PRIs (along with grants) will become an important piece in the capital stack of many recovery projects blending private and public capital.
- There is a deep desire for community-led, community-centered approaches. As Rudy Espinoza, CEO of Inclusive Action for the City and a Cal Wellness grantee, recently wrote in an OpEd, communities can best advise institutions on how to invest and support a neighborhood. Engaging deeply with affected communities (particularly those who have historically been shut out of decision-making processes) will ensure that rebuilding efforts are equitable, resilient, and resistant to gentrification that often displaces long-time residents. [2] PRIs are an excellent tool to test new models of community-led decision making and ownership, as we learned from our PRI investments in Seed Commons, East Bay Permanent Real Estate Cooperative, and REAL People’s Fund.
- We should leverage established community institutions. California’s robust network of Community Development Financial Institutions (CDFIs), credit unions, community foundations, and affordable housing developers can lead recovery efforts. These institutions bring scale, deep expertise and a genuine commitment to supporting local communities, making them invaluable partners in this process. Deposits, guarantees, PRI loans, and other impact investments can help strengthen CDFIs by boosting balance sheets and providing the necessary lending capital so they are well-equipped to do this work.
The collective loss of community identity and sense of belonging is immeasurable. Yet, we believe this moment presents an opportunity to rebuild in a way that is health-centered, inclusive, equitable, and forward-thinking. By placing affected communities at the center of decision-making and leveraging the full spectrum of financial resources beyond grantmaking, we can create a more resilient future for California. Together, by pooling capital and expertise, we can provide actionable and meaningful resources toward a just and equitable recovery — one that honors the resilience of those most affected and ensures a brighter future for all.
If you’re interested in partnership and collaboration, staying informed about ongoing discussions with partners around wildfire recovery in California, or learning more about how Cal Wellness has used PRIs in the past to invest in recovery, please reach out. You may also wish to join fellow members for the Mission Investors Exchange Health Investors Gathering: Opportunities for Local Investing after Disasters on March 26.
Javier Hernandez is the Director of Investments at California Wellness Foundation. He can be reached at [email protected].
[1] PRIs are defined by the IRS as investments made by private foundations to advance their charitable mission, typically in the form of loans, equity investments, or guarantees. While PRIs are a specific legal designation for private foundations, other impact investors, including community foundations, nonprofits, and socially driven funds, may also make similar mission-aligned investments without the same regulatory requirements.
[2] The Eaton fire, which alone burned 14,000 acres and destroyed or damaged over 10,000 structures, had a disproportionate impact on the city Altadena, a predominantly Black community and a hub of Black homeownership and cultural vibrancy. Quickly after the fires, Altadena residents launched a petition to preserve the character of their city and protect its residents.
