Impact Investing in Your Own Community

Impact Investing in Your Own Community

Exploring new opportunities to invest for impact in your own community

Multimedia from this Release

Cece Derringer of Homewise

Thursday, October 2, 2014 - 11:00am

CONTENT: Article

Why Not in Your Backyard ? Exploring new opportunities to invest for impact in your own community
By Cece Derringer, Director of Resource Development and Communications, Homewise
A new survey published in May by the Global Impact Investing Network and J.P. Morgan offers clear evidence of the impressive growth of impact investing. The survey, the authors’ fourth annual report on the state of impact investing, queried leading fund managers, foundations, and development finance institutions in the United States and Europe, and found that the amount of capital they had committed to impact investing increased by 10 percent between 2012 and 2013, and the number of investments increased by 20 percent. The groups surveyed also reported that it committed $10.6 billion to impact investments in 2013 and intended to invest $12.7 billion in 2014 — an increase of 19 percent.
While the popularity of impact investing is reaching unprecedented heights, the practice itself is anything but new. Community investing has long been considered one of the three main strategies that form the foundation of socially responsible investing. What sets it apart from the other two strategies, social screening and shareholder advocacy, is that it offers a way for investors to make a tangible, even visible, difference in the communities where they invest. Indeed, community investing has the power to transform communities and the lives of the people who live in them.
Nevertheless, community investing has never been as widely practiced as social screening and shareholder advocacy. A variety of issues — including the limited number of investment options and a general lack of public awareness of the practice — have checked its growth.
But that is beginning to change. As impact investing is gaining new popularity, the menu of investment options is growing. Investors today can choose from a variety of market rate and below market rate impact investment options, including cash deposits in community development banks and credit unions, loans to community development loan funds, equity investments in small businesses, microenterprises, community projects, and innovative new products such as social impact bonds and Calvert Foundation Community Investment Notes.
One form of impact investing that is drawing the attention of social investors is Community Development Financial Institutions (CDFIs). CDFIs are specialized financial institutions dedicated to serving the underserved. There are four basic types — loan funds, banks, credit unions, and venture capital funds — but all four have the same basic mission of serving low-income communities that lack access to credit, capital, and financial services from mainstream financial institutions. 
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