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MSU Community Investing Feasibility Study
For years, many Michigan families have struggled to send their children to college, and as 2020 approached, the COVID-19 pandemic intensified problems such as racism, social injustice, and the inequities of affording higher education. Many of these communities and families are still struggling to economically rebound from these financial stressors. In addition, access to capital is a major impediment to new businesses forming and community revitalization in many distressed urban and rural communities in Michigan. Providing capital support through responsible investing of MSU’s Endowment and that of the MSU Foundation can be an important part of supporting community investing in affordable housing, entrepreneurial development, income growth and job creation in targeted Michigan Communities.
This is the report of a working group at Michigan State University’s Center for Community and Economic Development (CCED) that has worked over winter 2023 to conduct a feasibility study to explore the opportunity for MSU to help pioneer higher education endowment investment practices through community development financial institutions (CDFIs) to strengthen historically disadvantaged communities. Specifically, the team is seeking to determine the feasibility of MSU strategically investing its financial resources in the creation of a Community Development Investment Fund (CDIF) within its investment portfolio. As a growing number of universities and institutions look to invest in underserved communities through CDFIs, it is important for MSU to take on a national leadership role in the coming years.
Community Development Financial Institutions (CDFIs) are federally certified lender institutions that target underserved populations and socially and economically distressed investment areas to promote community development through capital flows. Investment in these CDFIs offers a direct way for MSU to address its goals stated in the Diversity, Equity & Inclusion: Report and Plan, such as having a more diverse campus, including those historically underrepresented and disadvantaged groups in the broader community, and strengthening external partnerships (2021, August). As a Land-Grant University, MSU has an opportunity to embody these values through its investment practices, improve local economies around the State of Michigan, and allow young adults in underbanked areas to access higher education. With a diverse array of services, CDFIs offer a long-term, stable rate of return with little lending risk, while also providing secondary social and economic returns that are realized through community revitalization. These returns are also expanded through local multiplier effects from investment and increased leveraging power with the influx of capital. Numerous university-community partnerships already exist among universities with both large and small endowment sizes. The case studies and literature explored throughout the report support the notion that MSU has the power to create a more inclusive, diverse, and equitable campus by supporting community revitalization efforts through investing in CDFIs operating across the state of Michigan.
In their findings, the working group has decided on the following recommendations: 1.) Create a diverse advisory committee to guide the creation and implementation of MSU’s community investing model. Include representatives from key stakeholders such as the MSU Board of Trustees, the Board Budget and Finance Committee, the MSU Treasurer, representatives of the state government such as the MEDC, representatives of CDFIs, MSU faculty, staff, and students, and select investment consultants. 2.) Engage with the Coalition of Michigan CDFIs to learn about and gather input regarding CDFIs operating in Michigan and their impact on local communities and diverse populations. 3.) Invest a portion of MSU’s endowment funds in the identified CDFIs as per the Advisory Committee’s deliberation. 4.) Monitor and evaluate the social impacts and financial returns of the investments, with specific attention to impacts on the quality of life for people living in the communities in which CDFI investments were made.