Measuring the Impact Rate of Return of Community Investments Advanced

In the last decades, the US experienced a decline in economic mobility and an increase in inequality, particularly affecting Black and Latinx communities. Consequently, the Community Development Unit at the NY Fed has developed a five-year strategic plan with two main goals: to elevate three groundbreaking ideas or approaches to target the drivers of, or barriers to, economic mobility for low- and moderate-income communities, especially those facing poverty and/or structural disparities related to race or ethnicity; and to educate, influence, and catalyze capital providers to invest in creating more opportunities for those groups. They decided to focus on three key themes, including household financial stability and economic resilience; the economic drivers of health and wellbeing; and climate-related risk and mitigation. T

he Unit requested the Capstone team to identify groundbreaking ideas that have the greatest potential for positive impact and develop a framework to assess that impact, with a specific focus on racial equity. To accomplish this, the team identified high-level outcomes of interest to the unit by conducting interviews with the relevant teams, conducted a landscape scan of the literature and national and international experiences to identify possible groundbreaking ideas that address those outcomes, and mapped those ideas to the outcomes of interest with measurable metrics based on research. Finally,  the Capstone team customized a framework to assess their impact based on the impact rate of return (iRR) methodology that allows to compare with projects aiming at similar goals, thus facilitating decision-making processes on selecting the most impactful projects and partnerships.