Investing Endowment Funds to Increase Job Skills in Underserved Communities

A $3 mil­lion impact invest­ment by the Annie E. Casey Foun­da­tion is help­ing a ven­ture cap­i­tal firm cre­ate qual­i­ty jobs in under­served com­mu­ni­ties in the Unit­ed States. The Los Ange­les-based firm, The 22 Fund, invests in small- and medi­um-sized, tech-based man­u­fac­tur­ing com­pa­nies that have the poten­tial for inter­na­tion­al growth. The fund inten­tion­al­ly invests in com­pa­nies led by women and peo­ple of col­or, and its founder, Tra­cy Gray, has worked with man­u­fac­tur­ers and export com­pa­nies for more than two decades.

“The 22 Fund works with its port­fo­lio com­pa­nies to cre­ate jobs with liv­ing wages and strong ben­e­fits and to increase the skills of work­ers in low- to mod­er­ate-income com­mu­ni­ties,” said Tra­cy Kar­tye, the Casey Foundation’s direc­tor of Impact Invest­ments. ​“This approach strength­ens job resilien­cy and eco­nom­ic mobil­i­ty for work­ers, fills a tal­ent short­age for man­u­fac­tur­ing com­pa­nies and increas­es work­er pro­duc­tiv­i­ty and reten­tion. This posi­tions the fund to deliv­er a mar­ket-rate finan­cial return for the Foun­da­tion, while simul­ta­ne­ous­ly pro­duc­ing a social impact aligned with our mission.”

The 22 Fund’s Invest­ment Strategy

Although based in Cal­i­for­nia, The 22 Fund invests nation­al­ly, includ­ing in the Casey Foundation’s Bal­ti­more and Atlanta civic sites and in south­ern and south­west­ern states, where fam­i­lies have some of the nation’s low­est house­hold income levels.

The 22 Fund’s invest­ment strat­e­gy is based on four relat­ed insights:

• Man­u­fac­tur­ing can improve the qual­i­ty of life in low- and mod­er­ate-income com­mu­ni­ties, where most of the sec­tor is locat­ed. Man­u­fac­tur­ing has a high mul­ti­pli­er effect, with every 100 new jobs cre­at­ing more than 600 indi­rect jobs from the local recir­cu­la­tion of money.
• Exports increase man­u­fac­tur­ing com­pa­nies’ rev­enues and reduce mar­ket risks through geo­graph­ic diver­si­ty. Man­u­fac­tur­ing com­pa­nies that export their prod­ucts enjoyed high­er rates of sur­vival and greater resilien­cy dur­ing the Great Reces­sion (2008–2009).
• Clean man­u­fac­tur­ing that is sus­tain­able and envi­ron­men­tal­ly friend­ly will replace the smoke-stack man­u­fac­tur­ing of the past. Man­u­fac­tur­ing com­pa­nies that are inno­vat­ing new, sus­tain­able mate­ri­als and tech­nolo­gies will real­ize long-term returns.
• Diver­si­ty in com­pa­ny founders and lead­ers leads to high­er returns. Dur­ing the Great Reces­sion, com­pa­nies owned by peo­ple of col­or were respon­si­ble for more than two-thirds of the total jobs cre­at­ed. Com­pa­nies with women in lead­er­ship posi­tions out­per­form those with only male leaders.

Empow­er­ing Busi­ness­es, Cre­at­ing Jobs

To enhance its approach to cre­at­ing qual­i­ty jobs, The 22 Fund has devel­oped a strong net­work of part­ners. These col­lab­o­ra­tors include the Qual­i­ty Jobs Fund of the New World Foun­da­tion, the Kres­ge Foun­da­tion and the Dis­ney Foun­da­tion as well as finan­cial insti­tu­tions, such as Mass­Mu­tu­al, Bank of Amer­i­ca and Ally Bank. The 22 Fund also works with the U.S. Depart­ment of Com­merce and oth­er pub­lic-sec­tor orga­ni­za­tions seek­ing to expand qual­i­ty jobs and sup­port busi­ness growth in under­served communities.

A typ­i­cal com­pa­ny in The 22 Fund’s port­fo­lio is OpCon­nect. It estab­lish­es and oper­ates elec­tric vehi­cle charg­ing sys­tems for apart­ments, con­do­mini­ums, fleet oper­a­tors and prop­er­ty man­agers. The com­pa­ny hires low-skill work­ers and trains them for more eco­nom­i­cal­ly secure posi­tions as man­agers of its charg­ing plat­forms. Approx­i­mate­ly one-half of OpConnect’s charg­ing sta­tions are in low- and mod­er­ate-income com­mu­ni­ties, cre­at­ing qual­i­ty, high-tech man­u­fac­tur­ing jobs and con­tribut­ing to a mul­ti­pli­er effect.

In addi­tion to pro­vid­ing much-need­ed cap­i­tal, the fund helps its port­fo­lio com­pa­nies scale their oper­a­tions by shar­ing the com­ple­men­tary exper­tise of its three part­ners in the areas of tech­nol­o­gy, inter­na­tion­al trade and more. For exam­ple: Sien­na Nat­u­rals is a man­u­fac­tur­er of clean nat­ur­al hair prod­ucts for tex­tured hair. The com­pa­ny, which focus­es on black women, has been work­ing with the fund to devel­op export strate­gies to grow its inter­na­tion­al sales.

“The U.S. man­u­fac­tur­ing sec­tor is expe­ri­enc­ing an excit­ing peri­od of boost­ed resources from fed­er­al invest­ments and the adop­tion of new tech­nolo­gies,” said Rani­ta Jain, a senior asso­ciate with the Foundation’s Employ­ment, Edu­ca­tion and Train­ing team. ​“This invest­ment with The 22 Fund will help to ensure that own­ers of clean ener­gy and advanced man­u­fac­tur­ing busi­ness­es are posi­tioned to suc­cess­ful­ly grow and con­nect com­mu­ni­ties to well-pay­ing jobs.”

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