Impact4ed is committed to bridging the capital gap in public education by driving more impact investments into public charter schools.
Impact4Ed is a new initiative launched in 2020 by a group of impact investing experts and charter school advocates. Recognizing that public charter schools are looking for more ways to access private capital and that impact investors are looking for more ways to allocate capital in socially and environmentally companies and projects, the founders of Impact4Ed saw a natural opportunity to bring the two fields together.
Impact4Ed is primarily focused on driving more impact investment into U.S. public schools. While traditional district schools are completely funded by federal and local governments, charter schools typically rely on a combination of public and private capital. There is a large and growing opportunity for impact investors that want to support schools and education while earning a market-rate return.
What is impact investing?
Impact investing is defined by the Global Impact Investing Network (GIIN) as "investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return." According to the GIIN, there are currently more than $715 billion in "impact" assets under management, a figure that continues to grow exponentially. Of this total, only about 3% (or $21.5 billion) is specifically focused on the education sector.
Why do charter schools need impact investors?
Historically, state and local governments provided most of the funding for public schools. This is also true for the construction of school buildings, with school districts raising capital through the municipal bond market. Public charter schools, meanwhile, do not receive comparable funding for facilities. Instead, they need to finance their school buildings with low-cost debt. Socially motivated investors, such as foundations, family offices and high-net-worth investors, can play an important role in providing the financing that these charter schools need to continue their operations and improve the educational experience for students. Based on recent trends in the municipal bond market for charter schools, I4E estimates that more than $5 billion will be required to meet the needs of charter schools in the next 5 years.
How does an impact investment in education work?
Impact investments in the education sector generally fall into two categories:
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Investments made directly into schools, or
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Investments made into intermediaries such as nonprofit funds.
Specifically, these focus on debt such as loans, notes, or fixed income investments where the impact investor is paid interest based on the risk level of the school and the social impact goals of the school. Many of the impact investments are one-off transactions to individual schools. Recently, several financial intermediaries have created funds or pools to allow investors to spread their capital across multiple charter schools.
“Socially motivated investors can use their capital to generate a fair return and a significant impact in the lives of children, especially those that don't have an option for a quality education.”
What are the current impact investment opportunities in education?
There are currently a limited number of structured opportunities for investors. Below are some of the existing investing opportunities that have supported charter schools. They represent a very small fraction of the total capital available for charter schools. The market may be poised for more structured investment opportunities. These are listed for academic research purposes only and are not solicitations for investments. Please see disclaimer for more information.
There is one trading platform for some of these investment opportunities:
In 2020, Equitable Facilities Fund (EFF) announced the first verified Social Bonds for primary and secondary education in the U.S. Proceeds from the $204 million in Social Bonds, issued by the Equitable School Revolving Fund (ESRF), will help finance public charter schools that are providing transformative educational opportunities for students, especially in low-income and under-resourced communities. Social Bonds are a new mechanism to help attract impact investments into primary education.
How are the proceeds from these investments used to help schools and improve education?
Each investment is structured differently, but in general the capital from impact investments is used to reduce borrowing costs and to redirect the savings to improve the educational experience and help drive improved educational outcomes. Examples include financing for construction projects and financing technology and broadband, especially in low-income communities.
Where to learn more about impact investing in charter schools
Check out our Learn More page for additional resources, and to access some real world examples and case studies.
This is not an offer to sell or a solicitation of an offer to buy any securities. Such an offer is made only by means of a current Prospectus (including any applicable Pricing Supplement) for each of the respective notes. Such offers may be directed only to investors in jurisdictions in which the notes are eligible for sale. Investors are urged to review the current Prospectus before making any investment decision. No state or federal securities regulators have passed on or endorsed the merits of the offering of notes. Any representation to the contrary is unlawful. The notes will not be insured or guaranteed by the FDIC, SIPC or other governmental agency.