How To: Measure Capital Flows in Communities

At CCI, we believe that a community’s context—the ecosystem of actors, policies, resource flows, relationships, skills, behaviors, etc.—shapes how community investment functions in that community. Understanding and strengthening that context, or as we call it, the enabling environment, is a key first step to making places investment ready.

One way to approach understanding community context is by looking at recently completed, in progress, or planned investment opportunities. By analyzing a set of deals together, stakeholders can identify patterns in funding flows, policy barriers, gaps, or actors that play outsized or undersized roles.

There are alternative methods for understanding community investment context in a place. A new guide for practitioners by Theodos, Hangen, Hedman, and Meixell (2018), Measuring Community Needs, Capital Flows, and Capital Gaps offers techniques for analyzing capital flows in communities and eleven methods for estimating capital gaps. These approaches are illustrated in the guide through application to St. Paul and Minneapolis, MN, as well as descriptions of other studies.

Theodos et. al.’s approach to analyzing capital flows—starting with broad scale transaction data from government agencies or trade associations and data from capital providers—can give a broad sense for the size and scale of investment activity in a place and can be particularly helpful for tracking changes over time. This information can complement the deeper-dive analysis of individual deals that we encourage, which can include in progress or proposed deals and get to a greater level of detail on type of investment, scope, location, and who is involved.

The guide also explores some ways to estimate capital gaps, including asking borrowers and capital providers, which we used in our study of the impact investing market in Chicago. The range of approaches offer flexibility depending on the size and scale of the community in question and the scope and capacity of researchers.

Testing out these approaches to data collection and analysis can yield useful information to improve a community’s pipeline of investments and enabling environment. However, data collection and analysis must be fit for purpose. To avoid having data collection and analysis become a sinkhole of time and effort, we encourage communities to be clear on what questions they’re trying to answer with data and concentrate on data that will make a difference in their work.

Transforming investment in communities

The Center for Community Investment at the Lincoln Institute of Land Policy is supported by the Robert Wood Johnson Foundation, The Kresge Foundation, the John D. and Catherine T. MacArthur Foundation, and the Surdna Foundation.

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