CNote Expands Access to Capital for Community Financial Institutions With $25 Million From Apple to Support Communities of Color
March 5, 2022 // Oakland, CA // Today, CNote, an Oakland-based fintech, announced that Apple will use the CNote platform to deploy $25 million into underserved communities across the country.
Apple’s $25 million commitment is part of its broader Racial Equity and Justice Initiative, an effort to address systemic racism in America and expand opportunities for communities of color. The new funding builds on Apple’s previously announced commitments to expand economic empowerment and support entrepreneurs of color.
“We’re committed to helping ensure that everyone has access to the opportunity to pursue their dreams and create our shared future,” said Lisa Jackson, Apple’s vice president of Environment, Policy and Social Initiatives. “By working with CNote to get funds directly to historically under-resourced communities through their local financial institutions, we can support equity, entrepreneurship and access.”
“Corporations have an enormous opportunity to help communities across the U.S. thrive by changing the way they manage their cash reserves, and we’re excited to see Apple at the forefront of this emerging trend,” said Catherine Berman, CEO of CNote. “Through our platform, we have already started moving Apple deposits into low-income communities and communities of color.”
Initial deposits are already at work in communities
CNote has deployed an initial round of Apple deposits to mission-driven financial institutions, including ANECA Federal Credit Union in Louisiana; Bank of Cherokee County in Oklahoma; Carver State Bank in Georgia; Education Credit Union in Texas; First Southwest Bank in Colorado; Hope Credit Union, which serves Alabama, Arkansas, Louisiana, Mississippi and Tennessee; Kaua‘i Federal Credit Union in Hawai‘i; Latino Community Credit Union in North Carolina; Legacy Bank in Missouri; Optus Bank in South Carolina; Self-Help Federal Credit Union, with locations in California, Illinois, Washington and Wisconsin; and VCC Bank in Virginia.
“Partnerships like the one we have with CNote and Apple are essential to our efforts to expand access to capital, as well as to financial products and services, in a historically underserved market,” said Susannah Plumb Scott, executive vice president at Bank of Cherokee County. The bank, formed in 1907 by a group of prominent Cherokee Nation members, invests 95% of deposits back into Cherokee County.
Eric Jenkins, president and CEO of Education Credit Union, founded by Amarillo schoolteachers in 1935, said deposits like Apple’s “allow ECU to serve more consumers and meet a broader range of needs.”
CNote’s platform provides insured deposits across a network of vetted mission-driven financial institutions
CNote’s platform fills a gap for corporate and other institutional investors that want to support financially underserved communities across the country while generating returns on cash allocations. CNote moves client deposits into FDIC- and NCUA-insured accounts across a wide network of mission-driven deposit institutions, including community development financial institutions (CDFIs), low-income designated (LID) credit unions, and minority depository institutions (MDIs).
Funds committed through the CNote platform increase the deposit base of mission-driven banks and credit unions that serve low- to moderate-income people as well as BIPOC (Black, Indigenous, and people of color) communities. These types of deposits help fuel affordable housing and small business loans, and provide a just alternative to predatory lending. Apple and other CNote clients—including Mastercard, Patagonia, PayPal and Netflix—receive quarterly impact reports that provide details on which institutions have received deposits and the populations benefiting from those investments.
Find out more about the CNote platform and see illustrative beneficiaries here.
CNote is a women-led impact platform on a mission to close the wealth gap through financial innovation. Using the power of technology and a community-first framework, CNote enables corporations and individuals to efficiently invest at scale in fixed income and time deposit products that advance economic equality, racial justice, gender equity and climate change initiatives. As part of its offering, CNote delivers regular reporting on the social impact of deposits and investments made through its platform. A Certified B Corporation, CNote was a B Lab “Best for the World” honoree in 2019 and was named “Best Women-Owned Business” by the U.N. Women’s Empowerment Principles program in 2020.
There is a staggering disparity between the wealth of Black communities and their white counterparts in the United States where wealth is the difference between financial and social mobility and terminal economic insecurity. In 2019, Black households, on average, had 14.5 percent of the wealth of the average white household. This disparity is reflected throughout racial inequities in financial access, educational attainment, and health outcomes for people of color.
Entrepreneurship and business ownership are crucial and proven ways to develop community wealth that benefits business owners and the people they employ. Black business owners have historically had unequal access to the benefits of business ownership and dealt with disproportionate barriers to accessing capital. Investing in the success of these enterprises owned and led by Black entrepreneurs is a critical component to closing the wealth gap and improving Black equity in America.
All of us can participate in supporting Black-owned small businesses. Here are a few ways to make a difference.
Ethel Brooks (right) is the cancer survivor and entrepreneur behind Bennett Construction
1. Shop and support Black-owned small businesses directly
In 2020 consumer spending accounted for 70% of economic growth. By taking the time to divert some of that purchasing power, buyers can contribute to strengthening Black businesses as a direct line to supporting Black communities and their economy with job growth and wealth generation. Black-owned businesses tend to be smaller, local establishments and multiple studies have shown that these small businesses reinvest in the local economy at a higher rate than chains do.
By shopping at Black-owned businesses, we can create more opportunities for meaningful savings, property ownership, credit building, and generational wealth. And luckily, this can be easy to do! Below we have compiled a list of resources to find Black-owned enterprises in your area.
Support Black Owned: This website and mobile app helps you find Black-owned businesses from all over the country.
EatOkra: The EatOkra app is great for specifically finding Black-owned restaurants and food services.
The Tackett Firm is a Black woman-owned and led law firm that received a PPP loan to stay open during the pandemic
2. Encourage Your Company to Participate in Racial Justice Pledges
In the aftermath of 2020’s racial justice protests, large corporations pledged billions of dollars to either support or directly spend money at Black-owned businesses.
Sephora, for example, announced last year that they will increase their shelf space for Black-owned businesses from 3% to 15% and Target pledged to increase the number of Black employees by 20%. Not only is there a strong business case for companies to follow through on these promises, but supporting Black-owned businesses has far-reaching positive implications for Black communities and the economy overall.
You can advocate for greater diversity, equity, and inclusion within your own organization by pushing for similar commitments. Consider taking The 15 Percent Pledge, which is a call to action for major retailers and corporations to join their peers creating supportive ecosystems for Black-owned businesses to succeed.
Otherwise, explore racial equity pledges that work for your firm. Check out Just Capital’s Corporate Racial Equity Tracker to get inspired by other corporations’ approaches to racial justice.
Tanesha Sims-Summers is the female entrepreneur of color behind Naughty But Nice Kettle Corn Co.
Intentional about helping the Black community, Black-led financial institutions tend to serve African Americans more than other banks do. Growing the deposit base for these organizations directly expands their capacity to increase financial access and wealth generation within the communities they serve.
Consider transitioning your banking relationships to include Black-owned or led financial institutions. Investopedia, Mighty Deposits, and Business Insider all offer comprehensive guides to Black-led financial institutions available by state, and equally share further background on the history and merits of Black banking.
The Harlem Entrepreneurial Fund is one such Black-led financial institution.
4. Explore CNote’s Wisdom Fund
A report found that Black-owned businesses decreased by more than 40% in April 2020, which was more than other racial and ethnic groups. Today, the number of Black-owned businesses has since recovered, and currently, there are 30% more Black-owned businesses than there were pre-pandemic. Much of this growth is being driven by women of color.
Historically women of color entrepreneurs have faced the compounded barriers of racist and sexist lending practices endemic to the financial system. Black women entrepreneurs have a median net worth 10 times greater than that of their nonbusiness-owning peers. Investing in the success of Women of Color entrepreneurs, therefore, has an outsized effect on the development of Black economies.
CNote launched the Wisdom Fund product to directly address the disparity in small business lending and further investigate the barriers to capital that burden Women of Color entrepreneurs. Capital invested in the Wisdom Fund is deployed with mission-driven lenders across the US as affordably-priced loan capital targeting female small business owners.
You can learn more about the Wisdom Fund and the work we’re doing to dismantle capital barriers for Women of Color here or inquire about investing directly via firstname.lastname@example.org.
Ebony Harris and her staff at In Good Hands Learning Center in Jackson, Tennessee
Supporting Black-owned businesses is a direct line to supporting Black communities and advancing racial equity. Above we’ve listed just a few avenues to explore, but the truth of it is today there is a myriad of options to authentically advance inclusive economies and shrink the persistent racial wealth gap year-round.
CNote is a women-led investment platform that empowers individuals and institutions to invest locally to further economic equality, racial justice, gender equity, and address climate change.
On January 26th, 2022 CNote hosted a webinar alongside Inclusiv and CUNA Strategic Services where they discussed key resources to help mission driven community financial institutions grow in 2022 and deepen their community impact.
Deepening Community Impact: A Discussion on Key Resources to Help Your Organization Grow in 2022
Credit unions and other mission driven depository organizations that focus on financial inclusion and community development outperform their peers. “Mission is now the opportunity for greater margin,” as Cathie Mahon of Inclusiv puts it. In this webinar, you will learn about the supports which exist to help credit unions and depository organizations transition to a financial inclusion mission and the benefits that kind of transition has on the growth of an organization. You will also learn about the importance of using data based measurement systems to capture the impact and mission fulfillment financial institutions achieve as a way to build the industry and reach new communities. Lastly you will learn about the visibility, partnership, and capital opportunities mission-driven organizations gain through capital intermediaries like CUNA, Inclusiv, and CNote.
How to access new sources of growth capital
How to tap into non-brokered, low-cost deposits
How to tell your story better to drive increased membership
How to access government programs that may support your growth or TA efforts
Mike Schenk, Deputy Chief Advocacy Officer for Policy Analysis and Chief Economist, CUNA
Black Equity at Work Certification Program and CNote Partner to Unleash the Corporate Balance Sheet for Racial Equity
Management Leadership for Tomorrow joins with women-led impact investing platform to activate every aspect of corporate operations for racial equity, starting with the Fortune 500
November 2, 2021 // Oakland, CA // Management Leadership for Tomorrow and CNote today announced a new partnership that will help industry-leading employers deliver on their social justice commitments.
MLT’s Black Equity at Work Certification, co-developed with Boston Consulting Group, requires employers to pursue Black equity with the same rigor and results orientation they apply to other core business priorities. The certification, tied to a comprehensive three-year plan, focuses on three areas—people, purchasing and philanthropy. Participating employers receive benchmarks, best practices and insights on how to achieve racial equity in the workplace across five pillars:
Partnership with CNote Puts the Corporate Balance Sheet to Work for Racial Equity
Oakland-based CNote, a women-led Certified B Corporation, deploys corporate deposits and investments to its national network of community development financial institutions, low-income designated credit unions and minority deposit institutions. The company has helped corporations including PayPal and Mastercard move millions into underserved communities to advance economic inclusion and start to close the racial wealth gap.
Together, CNote and MLT will give corporations a comprehensive pathway to combining workforce action with Black-equity–focused corporate deposits and investments—at a time when corporations are looking for solutions and expertise to meet the commitments they’ve made to racial equity. The two organizations will collaborate on educating corporate partners, and investments and deposits made through CNote’s platform can earn points toward Black Equity at Work Certification.
“Our partnership with CNote is a natural complement to the Black Equity at Work Certification Program, allowing us to help committed corporations use their balance sheets to contribute to racial justice,” said Indy Adenaw, managing director of the MLT Black Equity at Work Certification Program.
Catherine Berman, CEO of CNote, commented, “MLT’s Black Equity at Work Certification is one of the most effective actions corporations seeking to drive greater racial justice can take. CNote’s ability to use the power of the corporate balance sheet to align around greater Black equity—while staying true to a corporation’s risk and return needs—creates an actionable and integral road map that complements MLT’s dynamic work.”
Peloton’s senior vice president of Diversity, Equity and Inclusion, Dr. Christal Morris, explained the value of the certification in an earlier announcement: “Partnering with MLT to achieve the Black Equity at Work Certification is our latest step to make sure all of our team members can bring their true, authentic selves to work. We’re excited to raise the bar and be part of a larger movement investing in Black equity.”
About Management Leadership for Tomorrow
Management Leadership for Tomorrow (MLT) is a national nonprofit working to transform our country’s leadership pipelines and increase access to the American Dream. MLT, founded by John Rice, provides Black, Latinx, and Native American talent with the coaching, playbook and networks they need to excel in high-trajectory careers, secure economic mobility for their families and become high-impact senior leaders equipped to advocate for vulnerable communities. MLT also provides a comprehensive solution for institutions, which combines best-in-class recruitment, retention and diversity strategy offerings. Learn more at www.mlt.org.
CNote is a women-led social enterprise on a mission to close the wealth gap through financial innovation. Using the power of technology and a community-first framework, CNote’s platform enables corporations, institutions and individuals to efficiently invest and deposit cash at scale in community financial institutions. CNote is a Certified B Corporation that has earned “Best for the World” honors from B Lab and was named “Best Women-Owned Business” by the United Nations’ Women’s Empowerment Principles program.
New CNote Research Delivers Insights from Entrepreneurs on Improving Access to Capital for Underserved Women of Color
By reimagining the lending process through an equity lens, lenders can make decisions that yield economic returns and have a significant social impact, says report.
October 20, 2021 // Oakland, CA // CNote, a women-led community investment platform with a mission of closing the wealth gap, today released new research conducted to fix a persistent problem: Women of color start businesses at a faster rate than anyone yet remain underserved by lenders.
The research findings reflect insights from BIPOC women entrepreneurs collected through survey responses from over 75 women, more than 40 hours of individual interviews, and a two-day convening of 20 women.
Women identify major barriers to capital access
These racially diverse women business owners—66% Black, 28% Latina and 5% Asian or Pacific Islander—identified widespread barriers to capital access, including these key issues:
87.5% of respondents felt that race or gender bias contributed to how they were treated during the lending process.
69% of respondents needed working capital but were not able to find this type of loan product.
A majority found the lending process convoluted and labor-intensive, and experienced drastic differences between lenders, significant application processing delays and high denial rates with no explanations.
The way forward: how lenders can better serve this growing market
The researchers’ in-depth discussions with women about their lending experiences yielded recommendations in four areas for improving the process and enabling women entrepreneurs of color to build their businesses:
Offer larger loans and more flexible loan terms, including credit lines for working capital.
Revamp credit scoring to more accurately reflect creditworthiness—by considering rent and utility payments, lack of delinquencies and revenue under contract, for example.
Standardize loan applications across lenders to reduce the time and administrative burden of applying.
Provide transparency in decision-making as well as post-lending resources, such as financial and leadership coaching, to increase the likelihood of business success.
“This research highlights lenders’ opportunity to better meet the needs of these potential customers and contribute to thriving communities,” said Danielle Burns, vice president and head of Business Development at CNote. “If we can fund businesses led by women of color with the type of loans they actually need, that will jump-start wealth creation in places where it’s most needed.”
Research partners center women’s experiences
CNote’s Wisdom Fund is a collaboration with community lenders that includes cataloging and leveraging research findings to improve the lending experience of BIPOC women business owners.
“We invested in the Wisdom Fund because of its community-driven approach to improving access to capital,” said Priya Bery, CEO of Tarsadia Foundation. “This study empowered women of color to tell us how small business lending programs are serving them, and we hope these findings will serve as a blueprint to address barriers to wealth creation that BIPOC women face.”
Burns observed that the Wisdom Fund is attracting growing interest from corporations and other institutional investors, such as PayPal, that are focused on furthering racial and gender equity. “These investors are looking for measurable impact, and while we are delivering that now, we know that a lending process that better serves BIPOC women from start to finish is essential to closing the wealth gap.”
CNote is a women-led social enterprise on a mission to close the wealth gap through financial innovation. Using the power of technology and a community-first framework, CNote’s platform enables corporations, institutions and individuals to efficiently invest and deposit cash at scale in community financial institutions. CNote is a Certified B Corporation that has earned “Best for the World” honors from B Lab and was named “Best Women-Owned Business” by the United Nations’ Women’s Empowerment Principles program.
CNote is an investment platform on a mission to close the wealth gap. Led by the belief that everyone deserves a shot at financial freedom and that each of us can play a part in building a more equal world, CNote uses financial technology to unlock investments in Community Development Financial Institutions (CDFIs). CDFIs are community lenders that create new and sustainable capital access in low income and low resource communities. By driving new dollars into high-impact, high-performing CDFIs with an emphasis on serving communities of color and female entrepreneurs, CNote has facilitated investments which are deeply impactful, drive positive social change, and generate competitive financial returns.
In early 20202, CNote crossed the milestone of helping to create over 3,000 jobs in America. This sort of impact is deeply rooted in our commitment to empowering individuals and communities with access to the tools they need to succeed as well as the commitment investors make to generating positive outcomes. CNote technology lowers the operational burden of investing across multiple geographies or themes to enable place-based targeting and make it easier for both funders and CDFIs to drive capital into the communities most in need.
In order to better communicate, report, and target impact, this year CNote has gone beyond the UN Sustainable Development Goals and created CNote’s 26 Impact Themes. This new list of impact themes allows CNote to better target social outcomes while empowering investors with greater control of their funds. To substantiate the claim of impact, CNote will increase data reporting and transparency of impact goals and benchmarks to stakeholders while upholding the industry standard of impact measurement and quarterly reporting.
Despite the US being one of the most developed financial ecosystems in the world, a quarter of households in the country make little or no use of mainstream banking products. Several barriers have especially excluded underserved populations from mainstream financial tools.
Inclusive finance bridges this gap. We aim to support the organizations that increase access to financial services, delivered in a responsible and sustainable way, which will allow low‐income households and those previously underbanked to enhance their welfare, grasp opportunities, and escape poverty.
Median white American households are projected to own 86 times more wealth than African-American households and 68 times more than Latinx households. Significant racial disparities also exist in employment, educational attainment, access to healthcare, incarceration rates, and many other aspects of American life.
Supporting communities of color is essential to building a system where everyone truly has the opportunity to thrive and these disparities no longer exist. With the understanding that the investment industry is responsible for wealth creation and accumulation in societies, we aim to support and strengthen small business owners of color by partnering with community minded CDFIs to increase economic opportunity in communities of color, building family and community wealth, and increase economic inclusion overall.
The official US poverty rate in 2018 was 11.8 percent, which represents 38.1 million people in poverty
We aim to support partners that make financial products and services accessible and affordable for low-income individuals and businesses which serve those populations to help reduce persistent poverty, promote inclusive growth and economic self sufficiency, and build community resilience.
Some 567,715 people in the United States were experiencing homelessness on a single night in January 2019 during HUD’s Annual Point-in-Time Count. This homelessness epidemic is economically costly but more importantly costly to human life, mobility, and productivity especially so for people of color.
We are committed to mitigating the immense financial and health burdens of homelessness that weigh disproportionately on low income and underserved communities by partnering with those that lend and work in that arena. We aim to increase access to essential services and financial opportunity, and help fund homelessness reducing programs, permanent assistive housing, and new access to affordable healthcare and education.
Economic Development and Mobility
More than 32 million children live in low-income families, and racial and gender wealth gaps persist. Social and economic mobility has stagnated and inequality, a recognized hazard for national economic growth, is rising.
We aim to support job and workforce development through our support of small businesses, fund sustainable and resilient infrastructure, and equip communities with financial technical assistance and education to achieve inclusive economic growth and create pathways out of poverty in communities across the United States with our CDFI partners.
Women and girls represent half of the nation’s population and therefore also half of its potential, but women remain underrepresented. In the workforce they continue to be a minority on company boards and in the C-suite, and a US Census Bureau study found that compensation for women in the United States averages 21% less than for men holding comparable roles.
Gender equality is not only a fundamental human right and moral imperative but improving the lives of women and girls is important to achieving economic growth. We aim to provide women and girls with equal access to education, health care, decent work, increase lending for women-owned and led businesses, and representation in the economy to nurture sustainable communities by supporting the lenders that advocate for and advance gender equity.
In 2018 data showed that nearly 38 million households nationwide are paying more than 30% of their incomes on housing. Cost-burdened renters and homeowners in the bottom income quartile are forced to spend significantly less on food, health care, transportation and retirement savings than other families in their income bracket whose housing is affordable.The consequence of this affordability gap is costly for individuals, families, communities, and the economy.
Through our partners, we aim to fund affordable homeownership for low- and moderate-income borrowers and renters, invest in opportunities that promote affordable homeownership and access to rental assistance, and increase the financial resources available to underserved communities.
Access to Education
The most recent Census figures show that 47 percent of white Americans hold at least an associate degree. Degree attainment rates are far lower among communities of color. We know that college degrees, industry certificates, and other high-quality credentials create economic opportunity and increase social mobility.
Education creates opportunities. Investing in education is among the most powerful ways to foster economic growth and development, higher productivity, employment and innovation. We aim to ensure that communities have inclusive access to quality education by partnering with CDFIs to provide school and educational financing, supporting companies involved in teaching, and increasing the number of educational facilities in communities.
In the United States, about 11 million adults and 3.2 million adolescents were affected by major depression in 2017. Living with a severe mental health condition can reduce life expectancy by 10 to 25 years. It also costs the global economy about $2.5 trillion per year in reduced economic productivity and cost of care. Despite this, more adequate infrastructure and services for mental health are needed to provide care for those with mental disorders and to protect and promote mental health.
Our aim is to help expand access to mental health services, increase access to medical facilities in low and middle income communities, and fund projects that service those dealing with mental health diagnoses through CDFI investment.
Empowering People with Disabilities
Twenty percent of the U.S. population– approximately 60 million Americans–identify as people with mental or physical disabilities, making it the single largest minority group in the country. People with disabilities have limited access to high quality medical care, experience higher rates of poverty, have additional personal costs associated with everyday life, and face barriers to education and employment that limit their earning potential and financial mobility.
We aim to improve and expand the system for addressing a historically underserved population by providing access to financing and services for people with disabilities through community lenders. Our goal is to pursue solutions that promote independence for those with disabilities.
Today, workers of color are overrepresented in the lowest-paid agricultural, domestic, and service vocations and have the least job security. Workers of color, especially women of color, also receive lower wages and have less access to paid sick leave and paid leave for child care than white workers. For communities of color, the labor market is unsteady when the economy is strong and extremely hazardous when it is not. Additionally as the job market is increasingly automated low to middle income jobs are in greatest jeopardy.
We aim to spur growth by investing in the CDFIs that support small businesses with the potential to create good jobs which provide income above the minimum wage, health benefits, and training opportunities for workers.
Refugee Crisis and Immigration Issues
There are currently more than 65 million displaced people in the world, the highest number on record since the UN Refugee Agency (UNHCR) began collecting statistics – surpassing even post-World War Two numbers. More than 44.7 million immigrants lived in the United States in 2018. That’s 14.4% of the U.S. population.
Economic Inclusion is assisting and supporting the process of bringing targeted groups, individuals, and communities, including immigrants and refugees, closer to the economic mainstream and capital markets. We aim to facilitate a more diverse and sustainable skilled jobs market, housing, and essential services for refugees and immigrant communities in America by streamlining investments with CDFIs that share our same goal.
Natural Disaster Recovery
In 2020 (as of July 8), there have been 10 weather/climate disaster events with losses exceeding $1 billion each to affect the United States. Research findings reflect a world in which people of low socio economic status are the most vulnerable in the face of these disasters and are more likely to suffer more serious consequences during impact, from property damage to homelessness to physical and financial impacts. CDFIs have traditionally been the first responders to these crises for these populations.
Our aim is to enable more communities to recover from the physical and financial damages associated with natural disasters quicker as well as build resilience in the face of natural disasters down the line with increased access to financial services and education, funding for the creation of climate-resilient communities, and post-disaster lending. We hope to do this by supporting CDFIs so they can fulfill their role as first responders.
Disasters have strongly increased in both frequency and impact, with climate change as one of the main contributors to more extreme, frequent, and unpredictable weather. Of the most recent five years on record — from 2014 to 2018 — the United States has seen an average of 13 billion-dollar disasters every year. Typically communities hardest hit by financial and natural crises are also those previously underserved and low income
Resilience is the ability of a system to absorb disturbance and still retain basic function and structure. We aim to keep communities resilient by fortifying CDFIs that spur growth through the creation of jobs, quality affordable housing, schools, transportation and sustainable infrastructure.
In a 2017 survey conducted by the Federal Reserve, 40 percent of adults reported they would be unable to cover an unexpected $400 expense without selling something or borrowing money. In a recent survey from EVERFI, 53 percent of college students reported they felt less prepared to manage their money than to face any other challenge associated with college. Providing equitable access to personal finance education is perhaps more important to equip communities with the tools to navigate unemployment, financial and natural crises, and wealth generation.
Our aim is to support increased access to a variety of technical assistance programs by financing our community partners that offer programs that including credit, financial, and homeownership counseling, that will help anyone to navigate their financial needs.
Workforce Development and Retraining
At the start of 2019, 7 million U.S. jobs remained unfilled, and American employers consistently cite trouble finding qualified workers. This “skills gap” represents a massive pool of untapped talent, and it has dire consequences for economic growth and generational inequity.
Our economy is only as strong as its workforce. High-quality workforce development and training can help workers get good jobs, improve the efficiency of businesses, and boost productivity in the economy. Our aim is to support the growth of America’s workforce by partnering with lenders that fund small business development, job training programs, and investing in the development of qualified workers by providing resources for education and financial wellness.
Climate change is accelerating. The tell-tale signs and impacts of climate change – such as sea level rise, ice loss and extreme weather – increased during 2015-2019, which is the warmest five-year period on record. Climate change is one of the most serious and threatening issues facing the world today and will continue to present food and water security concerns, it will destabilize agricultural economies and communities, and will reverse decades of progress out of poverty for millions of people.
Low income and neglected communities are the most vulnerable to these events and typically have few tools to manage risk, lack sufficient support systems, and lack savings to fall back on in times of crisis. Our aim is to support the creation of climate resilient communities, and help prepare communities and businesses with the financial resources needed to ensure food, housing, and economic security in the face of climate change by supporting CDFIs in underserved regions.
Social and Economic Justice
Systemic inequity has perpetuated disparities across racial, ethnic, and socio-economic lines in our education, health, human service, economic, and criminal justice systems. For us, justice means expanding opportunity and correcting the imbalances we have seen throughout history by giving communities to control their financial achievements.
New access to financial services unleashes the potential of entrepreneurs and helps to break cycles of poverty and oppression, empowering individuals, families and communities. Our aim is to expand access to economic resources and empower individuals and communities historically neglected with the financial access needed to grow and thrive.
Closing the Gap Between Rural and Urban
Compared with urban areas, rural populations have lower median household incomes, a higher percentage of children living in poverty, fewer adults with postsecondary educations, more uninsured residents under age 65, and higher rates of mortality, as reported in 2017.
Expanding inclusive economic opportunities for rural Americans is vital to the livelihood of these communities and the future of our economy as a whole. Our aim is to focus on the untapped potential of rural areas and assist the CDFIs there working to expand healthcare and education access, ensure financial services are available to rural communities, and fund the growth of new businesses which in turn will fuel job creation.
Clean Water and Sanitation
More than 30 million Americans lived in areas where water systems violated safety rules at the beginning of 2019, according to data from the Environmental Protection Agency. Others simply cannot afford to keep water flowing. As with all environmental and climate issues, low income people and communities of color are hit hardest.
Beyond negative health outcomes, unsafe drinking water can pollute the environment, negatively impact local economies, and exacerbate the burden of poverty. We aim to help support communities by partnering with lenders that are expanding access to clean drinking water nationally and by funding sustainable improvements to the currently aging water infrastructure in many communities throughout the US.
Access to Healthcare
Widening economic inequality in the United States has been accompanied by increasing disparities in health outcomes and healthcare access. The life expectancy of the wealthiest Americans now exceeds that of the poorest by 10–15 years. Access to quality, affordable healthcare is a universally acknowledged human right. A lack of access prevents individuals from being healthy, productive members of society and thwarts community development.
We aim to partner with those that increase quality healthcare accessibility and affordability for low income and under-served communities, fund the creation and maintenance of healthcare facilities, and support innovations in the healthcare space that increase access to health services and products.
Improving the Lives of Underprivileged Children/Families
Without a full-time parent caretaker, families with children under the age of 5 typically spend an average of 10.1 percent of their household budget on child care. The burden on low-income families is especially heavy—families making less than $1,500 a month who pay for child care for children under the age of 5 spend on average 52.7 percent of their income on these expenses. Additionally, early childhood care and education have far reaching implications for educational achievement and socioeconomic status later in life.
Early childhood investments have the potential to address a growing economic inequality and the diminishing rate of upward mobility in the US. Our aim is to invest in the lenders that help expand access to preschool and early learning to support pathways through the educational system, improve access to essential services for children like healthy foods and medical care, and fund childcare support for low income and working families.
Much of the recent economic revival seen in some of the nation’s largest urban centers has not been seen across the board: many communities remain unchanged. In every major American metropolitan area, including many of those that have prospered most since the 2008 financial crash, huge gaps still separate white people, people of color, and the low income—not only in terms of average hourly wages, but in terms of educational attainment, health outcomes, employment, accessibility, and affordable housing.
Community Revitalization is the implementation of intentional efforts that are likely to lead to community development and reduce these gaps. The result is increased access to employment, living wage jobs, healthcare, supportive services, community amenities, transportation, and quality and affordable housing.
Our aim is to support CDFIs making efforts to build stronger neighborhoods, business districts and anchor communities by funding America’s small businesses, investing in resilient infrastructure, and building out community facilities, community health, and community education with the intent of closing these gaps for good.
Global agriculture commodity prices have been on the rise since major innovations in the farming industry has lead to substantial gains in food production. The rising prices of food and agriculture has since exacerbated the social inequities in food access and environmental impact of unsustainable and polluting growing practices. As the world population continues to grow at an alarming rate, a projected 9.7 billion by 2050, and as we continue to fight to raise people out of poverty its paramount to invest in smarter solutions.
We aim to fund the CDFIs supporting innovation to safely and sustainably produce more agricultural output to feed the nation and protect our environment. This includes helping small farmers align their agribusinesses with sustainable standards, support water conservation, and spreading increased awareness of alternatives that improve the extended supply chains of commodities which have negative social and environmental impacts.
Responsible Consumption and Production
As increased wealth has coincided with dramatic improvements in the standard of living, the system of consumption and production to satisfy the growing population has strained the planet’s finite supply of resources. In 2015, almost 12 tonnes of natural resources were extracted per person. The transition to sustainable consumption and production of goods and services is necessary to reduce the negative impact on the climate, the environment, and people’s health the current rate of consumption and disregard for its planetary effect is having. Achieving this sustainable development and maintaining economic growth requires that we urgently reduce our ecological footprint by changing the way goods and resources are produced and consumed.
We aim to reduce our environmental impact, promote the use of renewable sources of energy and encourage responsible purchasing decisions by providing capital to community lenders that can instill these values in their communities.
Affordable and Clean Energy
Despite its necessity, Americans in low-income households, communities of color, small towns, and many rural areas do not have equal or affordable access to reliable energy. What’s more, the environmental cost of producing and delivering energy — the pollution of our air, water, and ground — tend to be concentrated in some of those same places.
Inclusive growth in America is a benefit for all, and reducing environmental pollution is an international imperative. Our aim is to mitigate the negative emissions of the energy sector by supporting the CDFIs leading green energy innovation, expanding access to affordable, reliable, and sustainable energy, and enhancing national cooperation to facilitate more open access to clean energy technology.
CDFIs: America’s First Responders to Economic Crisis
Community development financial institutions (CDFIs) have consistently operated on the front lines of economic disasters such as 9/11, Hurricane Katrina, Superstorm Sandy, Hurricane Harvey, and the 2008 financial crisis, providing economic relief to American communities when they need it most. As “first financial responders” CDFIs have demonstrated their expertise in helping communities survive and rebuild. The Federal Reserve has recognized CDFIs as “economic shock absorbers” that continue to effectively serve their communities even amidst the most catastrophic economic conditions.
The consensus view is that the real economy is in desperate need of support. The question is who is best positioned to support these communities?
Currently, the COVID-19 health crisis is having a traumatic and far-reaching impact on American communities, especially low-income communities of color that were already facing structural inequities before the coronavirus pandemic. In these communities, small businesses play an essential role in sustaining economic growth. As more than 100,000 of these businesses close their doors forever across the nation, an economic cataclysm even worse than the Great Depression looms threateningly on the horizon.
Women and minority-owned businesses are the hardest hit as emergency funding such as the Paycheck Protection loan program (PPP) has not adequately met their financial needs. According to the Center for Responsible Lending, “based on how the program is structured . . . upwards of 90 percent of businesses owned by people of color have been, or will likely be, shut out of the PPP.”
CDFIs are scaling up to bridge the economic gap by injecting significant capital into nonprofits and small businesses by leveraging their existing close partnerships with community organizations, borrowers, and even traditional lenders. Senator Van Hollen and others are also urging the leaders of the U.S. Senate to quickly deploy funding to CDFIs as they “have the organizational tools and resources needed to immediately provide debt relief, working capital, and consumer loans to their borrowers.”
The critical role of CDFIs in reducing economic turmoil
Every disaster impacts vulnerable communities the most, and many CDFIs have led the way for decades in supporting recovery efforts. As mission-driven lenders with long-standing ties to their affected communities, they’re able to provide the financial and technical assistance that can jump-start economic activity. Whether helping communities rebound after the 2008 financial crisis or natural disasters like hurricanes, tornadoes, earthquakes, wildfires, and floods, CDFIs have consistently shown their ability to provide flexible financial products that effectively address the post-disaster needs of their communities.
The Great Recession
After the economic shock of the Great Recession, CDFIs were able to quickly deploy funding to low-wealth communities from coast to coast with the aid of Congressional funding through the American Recovery and Reinvestment Act. The CDFI Fund reported that during the seven years after the financial crisis of 2008, all of the 500 CDFI loan funds certified by the U.S. Treasury didn’t just survive but thrived with loan origination outperforming pre-recession amounts while more than 500 banks collapsed.
In a 2009 industry assessment, the Federal Reserve Bank of San Francisco noted that the mutual support within the strong network among CDFIs furthers their continued survival and success — an asset that private-sector entities don’t have.
In the aftermath of Superstorm Sandy, CDFIs proved to be a crucial contributor to disaster recovery efforts. According to an assessment by the CDFI Fund at the time, despite experiencing their share of physical damage, the majority of CDFIs remained operational and directly provided recovery assistance services and disaster loan recovery funds.
With fast and flexible financing, CDFIs provided families and business owners with essential relief for rebuilding their communities. New Jersey Community Capital (NJCC) joined forces with the American Red Cross and the Hurricane Sandy New Jersey Relief Fund (HSNJRF) to award CDFI grants to homeowners through the Gap Funding Initiative (GFI) to help them get back on their feet.
Hurricanes Katrina, Ike, Harvey, Irma, and Maria
Liftfund, a Texas-based CDFI, came to the aid of small businesses and communities during Hurricanes Katrina, Ike, and Sandy. The organization also supported Florida and Texas Gulf Coast communities in rebuilding after Hurricanes Harvey and Irma. After Harvey, Liftfund developed the Hurricane Relief Small Business Fund for small businesses and communities in the impact zone.
Based in New Orleans, AMCREF Community Capital administered almost $13 million of New Markets Tax Credit financing to construct affordable housing with environmentally safe materials that produced a 75 percent reduction in energy costs. The homes were also constructed to withstand the floods and hurricane-force winds of future storms.
In the post-disaster environment of Hurricane Maria that devastated Puerto Rico, for the first time ever, the CDFI Fund granted $674,000 in financial support to a local financial cooperative to assist the economic recovery of vulnerable communities that were severely suffering from the lack of response by the U.S. Federal Emergency Management Agency (FEMA).
How CDFIs are relieving the economic devastation of COVID-19
The Coronavirus pandemic has decimated communities throughout the country as businesses, schools, and most services have been required to shut down. Senator Elizabeth Warren has stated that “a half step behind the COVID-19 health crisis is an economy that is falling apart. There is no better way to strengthen this economy than to do it from the grassroots up. If you want to see an economy that does better for everyone, then you have to make those investments going forward.”
In their role as “financial first responders” CDFIs are perfectly suited to provide a rapid response to the pandemic. CDFIs have a long track record of absorbing economic turmoil and thriving during downturns while investing in underserved communities to help them weather unforeseen financial emergencies.
Small businesses are the backbone of our economy and industry estimates suggest that there’s an $87 billion annual market gap in loans below $100,000 for small businesses. CDFIs are providing $2,000 to $10,000 business loans — amounts below the average loan size of approximately $239,000 from the PPP loan program.
As the entire country seeks to rebuild after the pandemic, CDFIs are poised to support a more just and stable post-COVID economy to help save small businesses and communities that might otherwise be left behind. By funneling resources to CDFIs and their close community partnerships the country has a better chance of moving towards an inclusive economic recovery that works for everyone.
If you’re interested in being part of that solution we encourage you to look into supporting a CDFI in your neighborhood. Additionally, CNote’s nationwide network of CDFIs makes it easier for individual and institutional investors to support community development in their backyard regardless of investment size. There’s no better time than now to make a real impact by investing in CDFIs and getting sorely-needed investment dollars into communities across America that otherwise may not be able to return from the brink of economic disaster.
While it may seem like a new trend, impact investing has roots that trace back centuries and it’s here to stay. But like any alternative investment strategy, public endorsement of the approach has varied. Throughout the years, hesitation stemmed from concerns about financial returns, the ability to measure social impact and stability of the markets.
Challenging skeptics’ concerns, socially responsible investments have ballooned to account for over 25%of assets under management in 2018. As today’s investors aim to align their portfolios with their morals, the resurgence of SRI revives the age-old question: Does impact investing have lower returns?
Does impact investing have lower returns?
In short, most studies report that socially responsible investments do not have lower returns than traditional investments. In fact, there is evidence of the opposite; most conclusions point to SRI having higher returns, especially when social impact is taken into account.
Much of the doubt surrounding returns on impact investments boils down to three major issues: the implementation of socially responsible principles, investor motivation and social impact.
According to a study by Morgan Stanley, 75% said that their firm practices sustainable investing. However, 66% felt that there wasn’t enough data to prove that SRI offers a solid financial opportunity. While most investors agreed that a focus on sustainability provides clear competitive advantages to a business, they didn’t believe that socially responsible behavior reliably translated into financial gains. These investors believe there is obvious potential for increased financial returns through SRI, but a lack of framework or guidelines to realize them.
Another section of the report revealed that 70% of respondents agreed that there was no industry standard definition of sustainable investments. Driven by the rapidly-growing interest in SRI, some asset managers are using the ambiguity as a marketing opportunity. Rather than selecting investments based on principles and screenings, they offer products that barely qualify as socially responsible, hoping to attract capital from bright-eyed investors. This leads to the inefficient implementation of SRI principles, which reduces the potential for financial returns.
Looking past the implementation of socially responsible principles and creation of sustainable investment products, investor expectations drive some of the concerns about impact investment performance. Some investors are not motivated by financial returns, instead choosing investments based on values or long-term goals. Critics often forget that some people intentionally invest for below-market-rate returns to align with their strategic objectives, a factor that could reduce the perceived performance of impact investments. Generally, impact investors pursue one of three scenarios:
Risk-adjusted market rate returns. These investors want to maximize financial returns while pursuing investments that have a positive social impact.
Below-market rate returns (closer to market rate). This group aims to achieve steady returns by investing in companies that prioritize social responsibility.
Below market rate (closer to capital preservation). Financial returns are not as important to these investors, who are willing to sacrifice earnings to support their beliefs.
Measuring social impact
Many people choose impact investments because they want their money to be used for good causes. While it’s inspiring to witness the shift towards sustainable investing, critics are rightfully concerned about the difficulty of measuring the social effects of impact investments. According to Morgan Stanley’s study, 70% of respondents agreed that there were no metrics to measure non-financial performance. While this factor doesn’t directly affect the financial returns of impact investments, it makes comparing overall performance to traditional markets more difficult.
Morgan Stanley’s study highlighted that most investors understood that SRI provides competitive advantages but didn’t think it translated into financial gains. However, research from Harvard revealed that the relationship between ESG and corporate performance is shaped by willingness to address sustainability issues that are relevant to company operations; when comparing financial returns, it found a difference of nearly 9% between companies that focused on sustainability factors that were fundamental to their industry and those who didn’t. Understanding and implementing ESG and socially responsible principles are key to financial performance.
Asset managers who use ESG principles as a marketing tactic (greenwashing) often miss the point of socially responsible investing. Their use of exclusionary screens to create sustainable investments loosely qualifies as impact investing, as there is little economic rationale behind the decisions. For example, an exclusionary screen in the car manufacturing industry would exclude all companies, while a proper ESG integration approach would consider firms that are investing in increasing fuel efficiency, electric vehicles, and extending life cycles. This mindset can lead to inefficient investment decisions and jeopardize returns in the process.
The main point of the above examples is that advisors and investors can make a larger impact when they understand how to properly implement investment screens. A 2016 study by Statman and Glushov found that screening methodology can directly impact performance. This finding implies that SRI reduces performance when investors use negative screens to exclude companies, but improves performance when investors use positive screens to select companies with high ratings on ESG indicators.
How do impact investments perform financially?
There have been plenty of attempts to prove that socially responsible investments have lower returns, but most of them come up inconclusive. This study, for example, found that socially responsible investments slightly underperformed, but admitted that there was uncertainty that may have influenced the outcome. The vast majority of evidence we’ve come across suggests that impact investments perform as well – or better – than traditional investments.
According to the GIIN’s 2017 study, “Evidence on the Financial Performance of Impact Investments,” socially responsible funds generated aggregate net returns of 5.8%. Based on a study of 71 market-rate-seeking private equity impact funds, it found that the top 5% achieved annual rates of return of 22.1% and above and the bottom 5% achieved -15.4% or lower. The report states that this range is similar to that of conventional investing, insisting that fund managers are key to strong performance.
Performance of impact investments holds stable even in smaller or volatile markets. The GIIN report found that funds investing in emerging markets generated a pooled return of 6.7%, compared to 4.8% for funds with a developed market focus. Bouncing back to Morgan Stanley’s report, evidence suggests that sustainable funds may also offer lower market risk. Of over 10,000 funds analyzed, sustainable funds experienced a 20% smaller downside deviation than traditional funds, even in turbulent markets. Data from 2008, 2009, 2015 and 2018 reveals that the downside deviation of sustainable funds was significantly smaller than that of traditional funds.
Now that we’ve established that impact investments do not have to equal lower returns than traditional investments, we wanted to analyze a few situations to get a better look at how the two compare. To do this, we’re going to consider three case studies:
Mutual fund comparisons
ESG and credit portfolio performance
Case study #1: Index comparisons (MSCI KLD 400 vs. S&P 500)
Going beyond individual funds, indices can provide a more general look at stock performance over time. The MSCI KLD 400 (formerly the Domini Social Index) (USA) and the Jantzi Social Index (Canada) are two major indices that track performance of socially responsible companies. We can analyze their performance by comparing them to traditional stocks as found on the S&P 500 and the TSX 60 indices.
The MSCI KLD 400, which was founded as the Domini Social Index, was established in 1990 and consists of 400 companies that meet rigorous standards for environmental excellence and social responsibility. Over the past 30 years, it has tracked performance of these companies against the S&P 500. As you can see, the social index has consistently outperformed traditional stocks for the past 25 years. With socially responsible investing gaining more momentum every year, the gap between the MSCI KLD 400 and the S&P 500 continues to grow.
The Jantzi Social Index was founded in 2000 in partnership with Dow Jones Indexes. Like the MSCI KLD 400, it’s a socially-screened, market capitalization-weighted common stock index. It consists of 50 Canadian companies that meet ESG criteria such as community involvement, corporate governance, the environment and human rights. While this index hasn’t been around as long as the MSCI KLD 400, it implies a similar outcome. Companies on this index have generally outperformed traditional stocks, especially after 2012.
In conclusion, the analysis of these two indices suggests that socially responsible investments outperform traditional investments, with a growing disparity in the late 2010s.
Case study #2: Mutual fund comparisons
From an investor perspective, mutual funds are one of the easiest ways to get involved in socially responsible investing. In order to determine whether SRI results in lower returns for retail investors, we are going to refer to a 2019 report by RBC.
The report analyzes 36 SRI fund studies from over 10 countries to compare SRI and non-SRI mutual fund performance. While evidence was mixed, a number of those studies support the conclusion that positive screens can be used to improve portfolio performance; after a certain number of screens have been applied, the companies remaining in the portfolio are lower risk and higher performance than non-sri counterparts. Another major finding was that the aggregate performance of SRI funds could be affected by the labeling (or lack thereof) of SRI funds, since the definition for SRI is so vague.
Overall, there is limited evidence to suggest that SRI funds systematically underperform traditional mutual funds. And while there is considerably more evidence that suggests that SRI mutual funds outperform traditional mutual funds, the results are not unanimous.
Case study #3: Barclay’s impact of ESG on credit portfolio performance
The final case study we want to explore measures the impact of ESG on credit portfolio performance, which is largely dominated by institutional investors. Based on a study done by Barclay’s in 2016, we aim to answer the following question: Does the incorporation of environmental, social and governance criteria in the investment process improve the financial performance of a bond portfolio or hurt it? A finding of that study was that, “a positive ESG tilt resulted in a small but steady performance advantage.”
Like many other forms of socially responsible investing, it can be difficult to measure the relationship due to the many aspects of ESG criteria. Results vary depending on geography, industry and market, but a survey in the Journal of Sustainable Finance & Investment draws a firm conclusion: Aggregating results from over 2,200 primary studies, the report states that roughly half of the published studies show a positive link between corporate social responsibility and corporate financial performance, while less than 10% report a negative link.
Based on the report from Barclay’s and the summary from the Journal of Sustainable Finance & Investment, we are confident that ESG can improve the performance of a bond portfolio.
In conclusion, there is overwhelming evidence to support the idea that socially responsible investments do not have lower returns than traditional investments, and very little evidence to support the opposing view. However, the guidelines for what makes a company or investment socially responsible are vague, making it tough to draw a fair comparison between SRI and non-SRI investments. However, many studies make it clear that it is possible to invest sustainably without sacrificing financial returns.
Our securities consist of various promissory notes (“Notes”) that are offered to eligible investors pursuant to Regulation A+ and Regulation D under the Securities Act of 1933, as amended. We direct the capital invested through the issuance of our Notes to partner Community Development Financial Institutions and Low-Income-Designated Credit Unions, who use that capital to offer financial products and resources to the communities they serve, funding small business owners, affordable housing development, other community-centered projects.
For more information on risks related to investing in our Notes, please see our latest filings with the Securities and Exchange Commission and the terms of the applicable offering documents. Neither the SEC nor any state securities regulator has passed upon or endorsed the merits of any investment decision into CNote’s offerings.
CNote is not a bank, and investments in our Notes are not bank deposits. Unless otherwise specified in the offering documents of a CNote product, CNote investments are not insured by the FDIC or by any other governmental agency.
Investing in our Notes involves risk of loss, including the principal invested. We encourage you to consult with a financial adviser or investment professional to determine whether or not an investment in our Notes makes sense for you.
CNote is not an investment adviser or a broker-dealer, and does not provide investment, legal, or tax advice. Information provided herein is for educational purposes only and is not tailored for any individual investor. It should not be relied upon as financial or investment advice. Any projected returns are based on the current interest rate offered on our Notes, which may be subject to change, and is not guaranteed. Past performance is no guarantee of future results.