For most of Philadelphia’s philanthropic history, there has been a clean separation between grantmaking and investing. Grants go out. The endowment sits in a portfolio managed by an advisor whose primary job is to make sure the money grows enough to support next year’s grants.

That separation made sense when the tools for doing something different did not exist. It makes less sense now.

A growing number of Philadelphia foundations are asking a harder question: what if the endowment, not just the grants program, could be part of the answer? The practice even has a name, mission-related investing, and national funders like the Ford and Kresge foundations have spent the last decade proving it can be done at scale. [1]

The Opportunity in Front of Philadelphia Right Now

Philadelphia is a city of genuine contradiction. It has one of the most robust nonprofit and philanthropic ecosystems in the country. It also has some of the highest concentrated poverty rates among the ten largest U.S. cities, persistent disparities in health outcomes, a shortage of affordable housing, and a small business ecosystem, especially among BIPOC entrepreneurs, that has historically been starved of capital. [2]

Those gaps represent both a community need and an investment opportunity. CDFIs are lending to small businesses in Kensington, North Philadelphia, and West Philadelphia. Philadelphia is, in fact, home to some of the country’s largest and most established mission-driven lenders like PIDC and the UnTours Foundation, which makes the local sourcing problem more about access than about supply. [3] Community land trusts like Kensington Corridor Trust are developing permanently affordable homeownership in neighborhoods facing displacement. Health anchor institutions finance capital improvements that reduce long-term costs. Minority-owned real estate developers are building in corridors that private capital has avoided for decades.

These are not charity projects. They are investments, with real return profiles, structured terms, and measurable community impact. And Philadelphia foundations are beginning to access them.

What This Looks Like in Practice

The approach varies by foundation size, mandate, and risk tolerance. But several models are emerging across Philadelphia’s philanthropic community.

The CDFI Partnership Model

Some foundations are making direct deposits or program-related investments (PRIs) into CDFIs that lend specifically in Philadelphia. PRIs are a long-established tool, recognized in the federal tax code, that let a foundation count certain below-market investments toward its annual distribution requirement. [4] These instruments offer below-market but real financial returns, full capital preservation in most cases, and direct traceability to the small businesses, homeowners, and community organizations receiving the loans. For a foundation whose grantmaking focuses on economic mobility, a $1M PRI to a Philadelphia CDFI is capital working in the same direction as the grants program, with a return.

Collaboration on Local Investment Opportunities

Place-based investing is often performed in isolation, with individual investors like family offices and foundations sourcing and underwriting deals independently. However, the Philadelphia philanthropic community is shifting toward a more collaborative, ecosystem-wide model. Funders are increasingly recognizing that the most efficient way to source, structure, and deploy capital is to work together, pooling expertise and due diligence capacity rather than repeating the same labor-intensive efforts in silos.

Through initiatives supported by regional leaders like the Barra Foundation, Philanthropy Network, and ImpactPHL, funders are beginning to co-work and co-underwrite opportunities. This collaborative shift is essential for building a robust investment ecosystem:

• Moving from isolated deals to shared infrastructure
• Co-underwriting and capacity
• Standardization and Efficiency
• Lowering Barriers to Entry

This is not a theoretical shift; it is a structural one. By leveraging institutional expertise to bridge the gap between capital and community, funders are moving from passive grantmaking to active, mission-aligned investment in the communities they serve.

The Carve-Out Model

A structure many larger foundations use is the carve-out: a discrete allocation, typically between  5% and 15% of the total endowment, set aside for place-based investments and managed separately from the core portfolio. [5] This allows the foundation to pursue local impact opportunities without disrupting the investment strategy that supports their annual grantmaking.

What the Evidence Shows

The concern that place-based investing requires sacrificing returns has not been borne out in practice at the program-related investment and CDFI level. The picture is more nuanced than an either/or framing suggests. Program-related investments intentionally accept a below-market return in exchange for capital that recycles back to the foundation rather than being spent once, so the trade is not “return versus no return”; it is “a lower return that comes back versus a grant that does not.” CDFI debt, for its part, has a long track record of capital preservation and low loss rates, including through economic downturns. [6] For equity investments in local funds, the track record is shorter and more variable, which is why governance, due diligence, and realistic return expectations are essential before entering the space.

The evidence shows that well-structured place-based investments, made with appropriate due diligence, clear governance, and realistic time horizons, can deliver both financial returns and community impact that grants alone cannot. A grant is spent once. An investment returns capital that can be reinvested.

The Honest Prerequisite

Place-based investing is not for every foundation. It requires a board that is willing to engage seriously with a longer liquidity timeline, a higher due diligence burden, and the governance infrastructure to evaluate local opportunities with institutional rigor.

It also requires an advisor with actual deal access in Philadelphia, not a national platform that happens to include some community development exposure. The quality of the deal flow is the quality of the impact.

For foundations that are ready for that, the opportunity in Philadelphia right now is real. The city needs capital, and your endowment has it. The question is whether those two things ever meet.

Jason Ray | Zenith Wealth Partners

Sources and further reading

1. Ford Foundation and Kresge Foundation on mission-related investing. National proof that the practice is mainstream, not fringe.
2. The Pew Charitable Trusts (“Philadelphia: State of the City,” its annual data report) and the Federal Reserve Bank of Philadelphia for poverty, housing, and small-business capital-gap data. Pew is the most-cited authority on Philadelphia civic data.
3. Reinvestment Fund and Local Initiatives Support Corporation (LISC) Philadelphia as established local mission-driven lenders. 
4. Internal Revenue Service (program-related investment definition and the qualifying-distribution treatment) and Mission Investors Exchange for the foundation-practitioner framing. 
5. Mission Investors Exchange and Urban Institute for carve-out and allocation practice.
6. Opportunity Finance Network (CDFI loan-performance and loss-rate data) and the CDFI Fund, U.S. Treasury.

All written content is for information purposes only. Opinions expressed herein are solely those of Zenith, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made by our firm as to another parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation.