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By CNote, Impact Investing, Impact Metrics

CNote’s 2022 Annual Impact Report

CNote is excited to share our 2022 Annual Impact Report! Check it out here.

This report features a look back at some milestones we reached last year, explores CNote’s offerings and their impact, and highlights some of the mission-driven financial institutions we are honored to work with.

In this report you will see:

  • A timeline of big wins from last year, like our B Corp recertification and Series A funding round.
  • An update on Impact Cash and CNote’s fixed income solutions, as well as a look at some of our custom loans.
  • Insight on the diligence process CNote uses before onboarding new financial institution partners.
  • A look into the work the Wisdom Fund Collaborative is doing to create capital access for women of color entrepreneurs.
  • And a note of gratitude from CNote’s cofounders, Yuliya Tarasava and Catherine Berman.

Check it out:

By CNote

Bank on Change: Diversifying Deposits for Financial Stability and Social Impact

In an ever-changing financial landscape, managing assets effectively is a priority for treasury professionals. Balancing risk and reward is crucial, and diversification has become an essential tool for risk mitigation. At the same time, treasurers are increasingly recognized as change agents driving corporate social responsibility. With cutting-edge technology at their fingertips, treasurers can now easily diversify deposits while also increasing their impact on local communities and improving financial performance.

Team members from DREAM, a network of public charter schools and community youth development programs in Harlem, that works closely with MDI Carver Federal Savings Bank.

Make a Difference with Minority Depository Institutions

Diversifying deposits across community banks and credit unions not only offers financial advantages, but also strengthens local economies. These institutions are vital for small business loans and community development initiatives. By investing in minority depository institutions (MDIs), treasurers can support under-resourced communities and contribute to economic growth. According to the FDIC, MDIs have historically served communities in which a higher share of the population lives in low- to moderate-income (LMI) census tracts and in which higher shares of residents are minorities compared to non-MDI banks, demonstrating their crucial role in fostering inclusive economic development and providing access to credit for underserved populations.

Boost Your Financial Returns with Sweep Accounts

Community banks and credit unions can provide higher interest rates on deposits compared to larger banks. Sweep accounts automatically transfer surplus funds into these institutions, allowing treasurers to capitalize on favorable interest rates while reducing risk. According to a study by the FDIC, community banks’ net interest margins were 14 basis points higher than those of larger banks in 2020. This difference in interest rates can lead to substantial savings and increased returns for organizations that choose to diversify their deposits. By adopting this strategy, treasurers can improve their organization’s financial performance, promote social impact, and ensure a stable cash flow.

Leverage State and Private Insurance Programs

To further enhance deposit diversification, treasurers can explore reciprocal coverage programs and extended insurance options provided by state and private programs. These additional layers of protection can offer added security and peace of mind for organizations seeking to optimize their risk management strategies. Programs such as the Certificate of Deposit Account Registry Service (CDARS) and Insured Cash Sweep (ICS) enable organizations to access multimillion-dollar FDIC insurance coverage by spreading deposits across a network of participating banks.

The team at New Covenant Dominion Credit Union, a certified CDFI and MDI.

Experience the Power of Impact Cash®

Impact Cash is a groundbreaking technology solution that simplifies deposit diversification, allowing treasurers to open numerous FDIC and NCUA-insured accounts with ease. By spreading funds across multiple institutions, this approach minimizes risk and maximizes insurance coverage for deposits. Impact Cash offers the added benefit of investing in a socially responsible and impact-first manner, empowering treasury professionals to align their investment strategies with their organization’s values and commitment to social responsibility.

As treasurers navigate the complexities of risk management and impact investing, diversifying deposits through sweep accounts and innovative solutions like Impact Cash becomes an invaluable strategy. By supporting community banks, credit unions, and minority depository institutions, treasurers can drive positive change while securing financial stability. Embrace the future of treasury management and harness the power of deposit diversification for a brighter, more impactful tomorrow.

Diversify Deeper with CNote

By CNote, Equality

Celebrating Women’s History Month: 3 women-led firms changing the financial industry for good

Authored by CNote’s VP of Business Development, Danielle Burns.

As we celebrate Women’s History Month here at CNote, it’s important to recognize the vital role that women have played in the financial industry. 

The financial industry has long been dominated by men, leading to significant gender disparities in pay and leadership positions. A 2020 report by the National Women’s Law Center found that women in finance earn 71 cents for every dollar earned by men. Additionally, women make up only 22% of executives in the finance and insurance industries, according to a 2021 report by Catalyst.

Despite this, women in finance have been at the forefront of making financial resources and opportunities more inclusive and accessible. According to a report by Boston Consulting Group, women-led companies are more likely to invest in women and other underrepresented groups. In fact, the report found that women-led companies invested 2.3 times more in businesses founded by women than male-led companies. Equally, they are often committed to advancing financial literacy and education, particularly in underserved communities, and are more likely to invest in companies that have a positive social and environmental impact. 

Women working together in finance

Image by Freepik

Today, there are a growing number of women-led asset managers, impact investing firms, financial planners and VC funds that are pushing finance forward to better support women, BIPOC communities, and low-income groups with products and services to match their needs. Supporting these companies as we approach a potential economic downturn and continue to grapple with the economic fallout of Covid-19 is an important step towards financial inclusion and opportunity when it could matter most. 

Here are a few examples of women-led firms you should consider supporting this Women’s History Month.

Adasina Social Capital

Adasina Social Capital is a registered investment advisory firm that is led by Rachel Robasciotti. The firm specializes in impact investing and social justice, with a focus on investing in companies that promote social change. Adasina is committed to closing the wealth gap by investing in underrepresented communities and providing tailored financial services to clients.

Zevin Asset Management

Zevin Asset Management is an independent, employee-owned investment advisory firm that is led by Sonia Kowal. The company specializes in sustainable investing and social responsibility, and manages assets with the goal of creating positive social and environmental impact. Zevin Asset Management is committed to promoting diversity and inclusion, both within the company and in its investments.

2050 Wealth Partners

2050 Wealth Partners is a financial planning and investment advisory firm that is led by Rianka Dorsainvil and Lazetta Rainey Braxton. The firm focuses on serving underrepresented communities, including women and people of color, and is committed to closing the gender and racial wealth gaps. 2050 Wealth Partners provides customized financial planning services and investment advice to help clients achieve their financial goals.

Some of the women-led team at Kaua'i Federal Credit Union

Some of the team at Kaua’i Federal Credit Union

Empowering women in finance, and working with financial companies led by women, is an opportunity for all of us to promote a more equitable financial industry. By investing in companies that are committed to social responsibility, sustainability, and diversity, we can help to close the wealth gap. This Women’s History Month, let’s celebrate the important role that women have played in finance and support the women-led financial companies that are making an impact today.

By CDFIs, CNote, Wisdom

Innovating pathways to wealth creation for women of color entrepreneurs: a Wisdom Fund update

Co-authored by CNote’s VP of Business Development, Danielle Burns and CNote’s Director of Impact Evaluation, Tamra Thetford.

Women of color (WOC) entrepreneurs continue to face intersectional and systemic barriers — such as discrimination, bias, and a lack of networks — that limit their access to capital. Business ownership is a powerful wealth-building tool, and supporting WOC in entrepreneurship is a move towards closing the wealth gap. 

The CNote Wisdom Fund (WF) is a fixed income vehicle that increases capital access and lending for WOC small business owners. It was co-created with community development financial institutions (CDFIs) to bring new thinking, experimentation, and sustainable solutions to drive wealth creation. The Wisdom Fund aims to provide or support three key areas:

  1. Economic Empowerment: WOC are often left out of the traditional financial system, limiting their ability to start and grow small businesses that have the potential to boost local economies.
  2. Driving Innovation and Growth: WOC are a rapidly growing segment of entrepreneurs, and research has shown that the businesses they own have the potential to drive innovation and job growth. 
  3. Bridging the Wealth Gap: WOC are more likely than white women to live in poverty, and face significant wealth disparities. By increasing access to capital, WOC are able to build wealth and achieve financial stability.
Read Terri-Nichelle Bradley's entrepreneurial story

Terri-Nichelle Bradley is the entrepreneur behind Brown Toy Box, an educational play-kit company introducing BIPOC kids to STEAM subjects

Bridging the wealth gap through access to capital for women of color

As of September 30th, 2022 the Wisdom Fund has provided extensive capital and business development services to help grow and sustain businesses :

  • More than $16M originated in loans to WOC through the WF
  • 100% of loans have been originated to WOC
  • 70% of loans have been originated to low- to moderate-income women
  • 71% of borrowers received business development services in addition to loan capital
  • 1,299 jobs were created or retained in businesses supported by WF loans

Improving lending through the Wisdom Fund

Despite being the fastest growing group or demographic of business owners, WOC  continue to face significant barriers to success including discrimination, lack of funding, and lack of supportive business networks. Because of this, small business owners are frequently undercapitalized. In 2021, CNote partnered with Impact Experience on a Human Centered Design (HCD) research effort to better understand the institutional and personal barriers that women of color borrowers face. 

The 3 key HCD findings were:

  • Access to Varied Capital Structures: WOC entrepreneurs shared a clear need for more options for financing including lines of credit to support cash flow, lower interest rates, reduced collateral requirements, and higher loan limits. 
  • Rethinking how we assess creditworthiness: Alternative underwriting criteria allow lenders to evaluate creditworthiness beyond the traditional credit scoring system using rent and utility payments, lack of delinquencies, time in business and credit payment performance. Rethinking how creditworthiness is assessed opens the door to capital access to women that may have less of a financial history.
  • Time and Efficiency: Lending applications tend to lack full transparency and are often not easily accessible. The research identified a need for common format loan applications, greater transparency of documentation needed to apply at the onset of a loan application process, and shared portals across CDFIs and intermediaries. 
Read about the women of color entrepreneurs that started a group home serving marginalized patients in Minnesota

The women founders of OurPlace Residential Services, a group home serving marginalized patients in Minnesota

Wisdom Fund CDFIs get busy innovating

CNote shared the HCD research findings with Wisdom Fund CDFIs that quickly got to work identifying how they could improve their products and services for women of color borrowers going forward. In 2021, with support from the Tarsadia Foundation, CNote provided grants and peer learning opportunities to support the CDFIs’ resulting efforts to strengthen their lending to women of color and reduce bias in the lending process overall. Together, Wisdom Fund members achieved great things! 

In an initial survey, WF members indicated that 78% were already offering at least one of the critical products or features identified in the HCD research as supportive of lending. A year later, 100% of members had added an additional product, feature, or service.

  • 77% adjusted their product features by raising loan limits, lowering interest rates or reducing collateral requirements.
  • 69% added a new product such as a line of credit, a credit building loan, or real estate acquisition financing products. 
  • 46% adjusted their process by shortening the loan application or making the document requirements more transparent
  • 46% added business development services such as leadership development, financial management services, and mergers and acquisitions assistance. 
Read about Toni Hopkins, the woman of color entrepreneur that started a successful retail business during the pandemic

Cool J’s Apparel, a retail business started despite the pandemic and one that is still flourishing today, was started by Toni Hopkins, a first-time entrepreneur

Looking ahead and taking action! 

As 2022 came to a close, the economic climate of low-income communities continued to see a drastic increase in needs. More than 93% of Wisdom Fund CDFIs indicated a need for additional capital to support the growing demand of WOC entrepreneurs– in total WF CDFIs have reported more than $70M in demonstrated and unmet need. 

Investing in WOC is not only a moral imperative, it’s also a smart investment strategy. WOC are often underrepresented in the business world, despite being a growing demographic with immense potential. By investing in WOC, you not only support the growth of diverse, innovative businesses, but you also contribute to a more equitable and just society.

If you are looking for ways to support women of color

Educate yourself: Take the time to learn about the experiences and challenges faced by women of color in the business world. Read up on successful businesses led by women of color, attend events and conferences, and seek out mentorship opportunities. Understanding the unique strengths and perspectives that women of color bring to the table is the first step in investing in them. Check out CNotes impactful and inspirational borrower stories

Look for diverse opportunities: When searching for investment opportunities, actively seek out businesses led by women of color. Look beyond your usual networks and search for diverse communities and organizations to find potential investments. The CNote Wisdom Fund is a fixed income vehicle that increases capital access and lending for women of color borrowers. 100% of all investor dollars in the Wisdom Fund support women of color borrowers. 

Advocate for diversity: Use your position as an investor or consumer to advocate for more diversity in your professional and personal communities. Encourage the companies you invest in or buy from to prioritize diversity and inclusion, and push for policies that promote equity and inclusion.

To learn more about the CNote Wisdom Fund, click here! 

Read about Cortegia Collins, the women of color entrepreneur that identified a need for good childcare in her community and responded by founding the Good Shepherd Preschool

Cortegia Collins (right) founded the Good Shepherd Preschool and the Foundation for Strengthening Families in St. Louis when she identified a need for better care

By CDFIs, Community Partners, Equality, Impact Investing

Revolutionizing sustainable growth: Black-led financial institutions unleash potential with capital access and financial resources

Authored by CNote’s Director of Due Diligence, Julia Phipps

In the U.S. much of how we define success can only be achieved with access to sufficient capital. Pursuing an education, providing security and food for your family, and even employment mobility is often limited by an individual’s capital. Inadequate access to capital continues to be a particularly important constraint limiting the growth of small businesses and the development of generational wealth. 

Historical programs such as redlining and persistent racial discrimination have meant access to capital is largely racially biased. This weighs heavily on BIPOC communities and has contributed to the wide racial wealth gap. According to recent economic reports, the median net worth for white households is currently almost 8 times the median net worth of Black households. Unfortunately, the disparity in these numbers has remained consistent for over two decades.

On the frontline of this effort to fund and support communities of color across the U.S. is a network of Black-led, impact-driven financial institutions. For years, these institutions have played a vital role in generating economic growth and opportunity in some of our nation’s most distressed communities. Black-led institutions, which are often located in predominantly BIPOC neighborhoods, work within communities of color and are important for their cultural competence. These institutions maintain close ties with the communities they serve, and can better advocate for the challenges they face – like limited access to capital. 

Image by Freepik

This work is needed most in times of economic or natural disaster, when BIPOC communities are often the hardest hit and slowest to reach recovery. For example, during the housing crisis between 2007 and 2013, Black-owned lenders increased mortgage lending to Black borrowers while other institutions retreated. Similarly, CDFIs, often considered financial first responders in a crisis, stepped up to support Black-owned businesses during the worst of the pandemic. Overwhelming evidence has pointed to community-based businesses as one of the most effective tools to close the racial wealth gap.

At CNote we are poised to work with an array of inspiring, Black-led banks and loan funds with either a community development financial institution (CDFI) designation, a minority depository institution (MDI) designation, or at times both a CDFI and MDI designation. We have seen firsthand the unique ways they are able to show up and support Black communities. 

Baltimore Community Lending (BCL) is a Black-led CDFI serving the greater Baltimore Metro area with innovative and flexible financial resources to promote community development. They are dedicated to delivering these resources to low-wealth, low-income, and other disadvantaged populations to help them join the economic mainstream via loans to small real estate developers and small business owners committed to developing under-resourced neighborhoods

Image by Freepik

In 2021, BCL deployed $7.5 million to real estate developers and small business owners in Baltimore City who had no relationship with or were unable to get a loan from mainstream financial institutions. They supported the creation of 43 affordable housing units, community facilities, and mixed-use developments in Baltimore neighborhoods. 

In addition to their lending impact, BCL is involved in numerous efforts to uplift the CDFI industry as a whole to better serve entrepreneurs of color. Watchen Harris Bruce, the CDFI’s CEO, is also a board member of the African American Alliance of CDFI CEOs (AAA), a nonprofit coalition with the purpose of strengthening AAA members and empowering their organizations to scale efforts to sustainably support low-and moderate-income Black populations and communities across the U.S. As well as working with CNote to deliver investor capital to communities across Baltimore, BCL is a member of the Wisdom Fund Collaborative, a cohort of lenders from across the nation that share loan data and peer learnings to make the lending process more inclusive for women of color entrepreneurs.

Staff from Virginia Community Capital, a CDFI bank CNote deposits investor capital with through Impact Cash

Citizens Trust Bank (CTB), is an impact-driven financial institution that was established in 1921 and is headquartered in Atlanta, GA. Led by a Black, woman CEO and as a designated CDFI and MDI, CTB is committed to closing the racial wealth gap and uplifting Black and Brown communities through financial education and inclusion. CTB has focused on bringing financial services and products to people of color since its inception, with a deepened focus on providing access to unbanked and underbanked individuals. A critical component of this is both assisting community members in establishing a banking relationship and providing access to lending products. One additional area of focus for CTB that has a resounding impact through BIPOC communities is homeownership assistance. 

Homeownership has been the most effective way that Americans build wealth, which can be passed down from generation to generation. CTB-hosted homeownership workshops reach over 4,000 people annually. With over 90% of its assisted home mortgages located in the communities the Bank serves, and more specifically to people of color, this has broad implications for creating sustainable wealth in BIPOC households and communities beyond.

These are two of the institutions innovating supportive financial resources for Black communities across the U.S. We urge you to consider how you can in turn support these financial institutions in their mission and in doing so, further diversity, equity, and inclusion in our financial system and communities at large. 

Here are resources to explore during Black History Month and beyond:

 

By CNote, Impact Investing, Impact Metrics

CNote’s Q4 2022 Impact Report

CNote is excited to share our Q4 2022 Impact Report.

Our Q4 report features CNote’s exciting firm growth, the impact our mission-driven partners have had in communities, and a deeper look at the Wisdom Fund. Additionally, CNote shares details around some of the events our Director of Impact Evaluation, Tamra Thetford, and our Community Development Director, Stacy Zielinski, attended this quarter.

In this report you will see:

  • More information on CNote’s oversubscribed $7 million Series A Preferred Stock investment round that closed in September.
  • An update on Impact Cash, CNote’s fixed income solutions, and our customizable promissory loans.
  • An update on the Wisdom Fund collaborative and the support collaborative members provide to women of color entrepreneurs in addition to capital.
  • A look at some of the innovative loan fund and depository institutions putting CNote capital to work in under-served communities.
  • Insight into CNote’s belief that all investors should have the opportunity to invest for impact.

By CNote

CNote attends the National Bankers Association’s 95 Anniversary Conference

CNote attends the National Bankers Association’s 95 Anniversary Conference in D.C.

The National Bankers Association’s 95th Anniversary Conference: Honoring the Past, Shaping the Future: MDIs and the Road to Wealth Creation was held on October 13th and 14th in Washington D.C. The conference featured two days of programs and events focused on strengthening minority depository institutions (MDIs). CNote’s Barāta A Bey, director of community finance, was in attendance. 

In addition to connecting in person with banks and vendors in the community and impact-driven finance space, Barāta sat in on talks featuring federal regulators, the U.S. Department of Treasury, and spokespeople from the Federal Reserve on topics including future MDI funding opportunities, advancing financial inclusion, and today’s economy. 

Barāta also attended a session, “Closing the Racial Wealth Gap: How Impact Investing and Reporting is Critical for MDIs,” which was a conversation around the key role investors can play in scaling the impactful work MDIs achieve. National Bankers Association (NBA) is a trade association focused on the priorities and needs of MDIs. NBA works to support and strengthen America’s minority-owned and operated banks through federal advocacy, policy, and programs. NBA’s members include Black, Hispanic, Asian, Pacific Islander, Indigenous, and women-owned and operated banks across the country, all working to help low- and moderate-income communities.Through NBA these members gain more opportunities to participate in national conversations about closing the racial wealth gap.

Dominik Mjartan (far left), CEO of CNote partner Optus Bank, and Nicole Elam (center left), president and CEO of NBA together with other conference speakers.

Major conference themes included the trends, challenges, and opportunities that uniquely impact MDIs. Barāta shared that the conference was “an inspiring showcase of innovative solutions coming out of the industry and the organizations and associations around MDIs that are similarly on a mission to eliminate the racial wealth gap in America.” At CNote we’re excited to fold his key learnings into the work we do with MDIs across the country and the communities they serve. 

To learn more about NBA and their annual conference, visit: https://www.nationalbankers.org/

By CNote, Impact Investing, Impact Metrics

CNote’s Q3 2022 Impact Report

CNote is excited to share our Q3 2022 Impact Report.

Our Q3 report features the impact our mission-driven partners have had in communities and the innovative work other industry associations are pioneering alongside us. Additionally, CNote is excited to announce two new hires on our engineering team, and that we have expanded the suppliers we work with to include a women-led and -founded IT and security support company.

In this report you will see:

  • An update on CNote’s growing and diverse team and network.
  • An update on Impact Cash, CNote’s fixed income solutions, and our customizable promissory loans.
  • A look at some of inspiring industry associations CNote works with that are pioneering innovative programs of their own.
  • CNote borrower spotlights that highlight the impactful work mission-driven lenders have done this quarter.

By CNote

CNote Closes Series A Investment, Cementing the Women-Led Impact Platform’s Leadership in Closing the U.S. Wealth Gap Through Financial Innovation

CNote Closes Series A Investment, Cementing the WomenLed Impact Platform’s Leadership
in Closing the U.S. Wealth Gap Through Financial Innovation

September 19, 2022 // Oakland, CA // Building on the momentum of its impact platform—already adopted by corporate leaders including Apple, Mastercard, Netflix and PayPal as a scalable way to address wealth inequality in the U.S.—CNote announced today that it raised $7.25 million in an oversubscribed Series A investment round.

American Family Insurance Institute for Corporate and Social Impact led the round, joined by Astia Fund, BankTech Ventures, Commerce Ventures, CityRock Venture Partners and other investors.

CNote gives corporate treasurers a powerful ESG tool, driving high growth

“We’re addressing a massive systemic problem with a market-friendly platform that has already been adopted by forward-thinking corporations and other institutions,” said Catherine Berman, CEO and co-founder of CNote, which deploys investor funds into community financial institutions that advance economic equality, racial justice, gender equity and climate change adaptation. “By pumping hundreds of millions of dollars into undercapitalized communities, CNote is activating corporate dollars for systemic change while minimizing risk.”

CNote’s technology platform gives corporations a simple, safe way to deploy ESG cash and fixed income in underserved communities at scale. CNote places investor funds into deposit and loan products through a network of over 2,000 impact-driven community financial institutions that serve low- to moderate-income communities, support women and people of color entrepreneurs, fund affordable housing and provide other forms of economic inclusion.

CNote is deploying about $300 million in cash and fixed-income investments via its platform—reflecting over 370% growth since 2020. The platform has 1,900 corporate, foundation and individual investors, including AMD, Patagonia and Xylem, as well as the companies listed above.

Noted Berman, “For CEOs, CFOs and large institutional investors, CNote has the network, the community finance expertise and the technology to provide unparalleled access to ESG cash and fixed-income opportunities at scale alongside trackable impact. We’ve reduced the friction points so they can activate their balance sheets quickly and with minimal effort.”

The Series A investment will enable CNote to advance its technology, expand its sales team and deepen its network of community financial institutions.

Mission-aligned investors aim to advance equality and build strong communities

The Series A round reflects the women-led fintech’s insight that assembling a diverse stakeholder group is key to multiplying its successes. “We’re co-creating the future we want to see, and that requires bringing key stakeholders to the table, including these investors,” Berman said.

“CNote is leading the way in providing capital for CDFIs [community development financial institutions] and minority depository institutions, capitalizing on the exploding ESG market,” said Rob Kornblum, principal and portfolio manager for the American Family Insurance Institute for Corporate and Social Impact. “We know that capital access is one of the keys to producing generational wealth for underserved communities. We are thrilled to partner with Catherine and Yuliya [Tarasava, CNote co-founder] in leading the Series A round for CNote.”

H/L Ventures, a longtime advisor to CNote and a prior investor, manages a family of companies and funds that comprises a holistic company-building system.

“CNote is breaking new ground in impact investment, enabling some of the largest organizations in the world to make a difference with their treasury dollars,” said Oliver Libby, co-founding Managing Partner of leading New York venture firm CityRock Venture Partners, H/L Ventures’ opportunity fund. “Our firm seeks startups with high growth potential, positive impact and diverse leadership teams; under Catherine and Yuliya’s inspired management, CNote exemplifies the extraordinary, scalable business potential of investment for impact.”

Other investors in the round include return participants The Artemis Fund, BLD Ventures, Golden Seeds, Lateral Capital V LP, ManchesterStory Venture Fund, Oxford Angel Fund and Rebalance Capital.

About CNote
CNote, co-founded by Catherine Berman and Yuliya Tarasava, 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, institutions 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 adaptation. 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.

About The American Family Institute for Corporate and Social Impact
The American Family Insurance Institute for Corporate and Social Impact is a venture capital firm and partner of choice for exceptional entrepreneurs who are building scalable, sustainable businesses in a long-term effort to close equity gaps in America. It also recognizes that capacity building and supporting organizations and experts who have been working toward social causes are equally important in making a positive impact within our communities around the country.

Media Contacts

Thinkshift Communications for CNote

Sarah Grolnic-McClurg, sarah@thinkshiftcom.com

510-898-1837 (primary), 415-828-3143 (cell)

By CNote

CNote attends 24th Annual AACUC Conference

CNote attends the 24th Annual AACUC Conference in St. Pete Beach, Florida to connect with our credit union community

CNote was honored to attend The African American Credit Union Coalition’s (AACUC) 24th Annual AACUC Conference held in St. Pete Beach, FL in August. The conference was a weeklong event offering training, networking, and educational opportunities for current and future credit union professionals and was a celebration of Black excellence in the credit union industry.

This year’s theme was “Reunite and Reignite” and the event featured an array of panels and speakers covering topics like technology and DEI, helping credit union managers recognize best practices to help engage and retain talent, and how to navigate today’s complex financial and economic environment; the inaugural Small Credit Union Summit; and the African American Credit Union Hall of Fame Induction Ceremony. The conference concluded with a gala-style Pete Crear Lifetime Achievement Award ceremony, dinner and after party.

AACUC is a non-profit organization made up of diverse and multicultural credit union industry professionals and volunteers. The organization was created to increase the strength of the global credit union community and is recognized for shaping diversity, equity, and inclusion in the credit union movement. AACUC supports programs that offer benefits for African American credit union professionals and volunteers, credit unions, and credit union vendor partners. Their goals and objectives include

  • expanding the interest and increasing the number of minorities in the credit union movement
  • increasing outreach of the credit union movement in African countries and in the United States through credit union mentoring
  • providing scholarship programs and educational opportunities to credit union professionals and volunteers toward professional development and advancement
  • enhancing internship and scholarship programs for African American college students in pursuit of financial services careers to introduce them to and encourage them to seek employment within the credit union movement.

Barāta Bey, CNote’s Director of Community Finance, speaking to a room full of credit union professionals at the AACUC conference

At the conference, CNote participated with more than 30 other industry partners, and presented on the work we do to support credit unions and minority deposit institutions by streamlining their process of accepting outside deposits, providing tools and resources to better share and highlight their community impact, and by bridging long-term relationships between corporate investors and credit unions for sustainable funding relationships. Additionally, CNote’s booth at AACUC’s vendor fair provided a  chance to connect personally with diverse credit unions from across the country on their needs and how we might partner to address them.

Barāta Bey, one of the CNote team members to attend the in-person event said, “We’re taking away from this event a lot of great conversations, a lot of great new relationships, and new tactics for supporting these financial institutions at the front lines of supporting under-resourced communities. I’m really excited to see where these new connections take us when it comes to innovating smarter for credit unions and serving more communities in the US overall.”

To learn more about AACUC and their annual conference, visit: https://www.aacuc.org/

By CNote, Impact Investing, Impact Metrics

CNote’s Q2 2022 Impact Report

CNote is excited to share our Q2 2022 Impact Report.

As of June 30th, 2022 CNote achieved $303M assets on platform. Additionally, we welcomed a new Community Finance Director to the team. As we grow and reach more under-resourced communities throughout the US, we’re excited to share this progress.

In this report you will see:

  • An update on CNote and some of our new enterprise investors.
  • An impact investing trend highlight.
  • An update on CNote’s Impact Cash and fixed income solutions.
  • Partner spotlights highlighting the work mission-driven lenders have done this quarter.

By CNote, Impact Investing, Impact Metrics

CNote’s 2021 Annual Impact Report

CNote is thrilled to release our 2021 CNote Annual Report.

Throughout 2021, CNote investors have helped us expand our nationwide work and impact to reach more low-income and underserved communities than ever before.

In this report you will see:

  • A firm update on key accomplishments in 2021
  • CNote’s 2021 impact metrics
  • Recognition of our corporate investors
  • Several partner spotlights highlighting the work mission-driven lenders are doing
  • A message from our co-founders

By CNote

CNote’s Community Investment Platform Nears $300M, a Sign of Balance Sheet Activism Rising Across Business Sectors

CNote’s Community Investment Platform Nears $300M, a Sign of Balance Sheet Activism Rising Across Business Sectors

Apple, Netflix, Xylem and others put corporate cash to work in financially underserved communities by moving money to CDFIs, LID credit unions and MDIs throughout the U.S.

June 2nd, 2022 // Oakland, CA // Recent commitments from Apple, Netflix and Xylem have pushed the total funding being deployed to communities via CNote’s investment platform to nearly $300 million. The milestone reflects accelerated momentum for the women-led fintech firm’s work to unleash corporate balance sheets for racial and gender equity.

“We’re seeing continued interest from large corporations in balance sheet activism. It’s a movement, not a moment,” said Catherine Berman, CEO of CNote, adding that “this interest runs across industries, as our newest clients illustrate. They’re looking at the corporate treasury as a tool to deepen their DEI, ESG and racial justice goals.”

CNote enables finance leaders to advance corporate goals while minimizing risk

Apple’s $25 million commitment to CNote, announced on May 5, 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. According to 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.”

Diversity, equity and inclusion are critical elements of Xylem’s sustainability strategy, the global water technology company said in announcing its initial $5 million commitment, noting that CNote’s platform “provides an easy-to-use and measurable tool for streamlining Xylem’s investment with one interface while maximizing the impact created for underserved communities of color across the U.S.”

CNote’s platform enables corporations and other institutional investors to contribute to racial and gender equity while generating returns on fixed income and cash allocations. It places money in CDFI loan funds and in depository products, such as money market accounts and CDs, from vetted FDIC- and NCUA-insured community development financial institutions (CDFIs), low-income designation (LID) credit unions and minority depository institutions (MDIs).

Funds deployed through CNote’s platform grow the deposit base of mission-driven banks and credit unions that serve low- and moderate-income people as well as Black, Indigenous, and people of color (BIPOC) communities, allowing those institutions to improve their reach and service. CDFIs fund women- and minority-led small businesses, affordable housing and economic development. LID credit unions serve communities where most people have household incomes well below the national median. And MDIs are financial lifelines for communities of color.

CNote’s impact reporting highlights ESG’s social dimension

Apple, Netflix, Xylem and others  using CNote’s platform—including Mastercard and PayPal—receive quarterly impact reports showing how their dollars were deployed and how communities benefited. That is a significant advantage given the heightened attention to ESG reporting, Berman noted: “When companies activate their balance sheet to expand access and opportunities for communities of color and other underserved communities, they are authentically addressing the social dimension of ESG.”

Find out more about CNote’s platform and see illustrative beneficiaries here.

About CNote

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. Platform users can track their impact via CNote’s quarterly reporting on the social benefits of their deposits and investments. 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.

Media Contact

Thinkshift Communications

Sarah Grolnic-McClurg | sarah@thinkshiftcom.com | Primary: 510-898-1837 | Mobile: 415-828-3143

By CNote, Community Partners

Authentic and Shareable Impact: Best Practices for Credit Unions

On May 24th, 2022 CNote hosted a webinar alongside CUNA Strategic Services where they discussed best practices for credit unions to follow when measuring impact and sharing their impact stories.

Title:

Authentic and Shareable Impact | Best Practices for Credit Unions

Brief Summary:

Credit unions and other mission-driven depository organizations create financial inclusion and further sustainable community development. Today, the organizations that get the impact piece right and showcase that community impact effectively, gain more opportunities for growth, visibility, and deeper partnerships with mission-aligned investors. “Mission is now the opportunity for greater margin,” as Cathie Mahon of Inclusiv puts it.

In this webinar, you will learn about the business case for sharing the difference you’re making in communities and how that can contribute to short-term and long-term success.  You will also learn best practices for impact measurement and reporting and resources to help credit unions in this effort.

Topics include:

  • What impact investors are looking for and where your impact story fits
  • 5 keys to sharing your impact story
  • Storytelling and impact measurement in practice
  • Impactrelated resources

Speakers include:

  •  Tamra Thetford, Director of Impact Evaluation, CNote
  •  Catherine Berman, Co-founder, and CEO, CNote
  •  Hank Hubbard, President, and CEO, One Detroit Credit Union
  • Jenny Jackson, Alliance Manager, CUNA Strategic Services
  • Michelle Christie, Senior Manager, Financial Inclusion and Impact, National Credit Union Foundation
By CNote

CNote Expands Access to Capital for Community Financial Institutions With $25 Million From Apple to Support Communities of Color

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.

About CNote

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.

Media Contact

Thinkshift Communications

Sarah Grolnic-McClurg | sarah@thinkshiftcom.com | Primary: 510-898-1837 | Mobile: 415-828-3143

By Equality, Small Businesses

Investing In Black-owned Small Businesses To Close the Racial Wealth Gap

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.
  • African American Literature Book Club: This database is dedicated to the many Black-owned bookstores across America.
  • 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.

3. Bank with Black-led Financial Institutions 

A 2017 study by the National Community Reinvestment Coalition found that traditional banks were twice as likely to provide business loans to white applicants than Black ones. This is reflected in the finding that 30 percent of black families are underserved by banks and 17 percent are disconnected from banking opportunities.

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 support@mycnote.com.

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.

Learn More

  • 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.
By CNote, Community Partners

Free Resources for Growth in 2022

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.

Title:

Deepening Community Impact: A Discussion on Key Resources to Help Your Organization Grow in 2022

Brief Summary:

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.

Topics include:

  • 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

Speakers include:

  •  Mike Schenk, Deputy Chief Advocacy Officer for Policy Analysis and Chief Economist, CUNA
  •  Cathie Mahon, President, and CEO, Inclusiv
  •  Catherine Berman, Co-founder, and CEO, CNote
By CNote

Black Equity at Work Certification Program and CNote Partner to Unleash the Corporate Balance Sheet for Racial Equity

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:

  1. Black representation at every level
  2. Compensation equity
  3. Inclusive, anti-racist work environment
  4. Racially just business practices
  5. Racial justice contributions and investments

Forty-five industry-leading employers have committed to the certification, including BlackRock, Cargill, and ViacomCBS.

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 equitywhile staying true to a corporation’s risk and return needscreates 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.”

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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.

About CNote

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.

Media contacts

CNote:

Sarah Grolnic-McClurg, Thinkshift Communications | sarah@thinkshiftcom.com | office:  510-898-1837 mobile: 415-828-3143

Management Leadership for Tomorrow:

Simone Manee, Marketing & Communications Director | smanee@mlt.org | mobile: 434-327-7359

By CNote

New CNote Research Delivers Insights from Entrepreneurs on Improving Access to Capital for Underserved Women of Color

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. 

Redesigning Lending: Improving Access to Capital for Women of Color Entrepreneurs reports on research conducted by Impact Experience and funded by the Tarsadia Foundation under the umbrella of CNote’s Wisdom Fund. The fund funnels accredited investor capital into small business loans for women of color and aims to help lenders modernize lending programs using a human-centered design approach. 

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.”

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About CNote

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.

Media contacts

Thinkshift Communications 

Sarah Grolnic-McClurgsarah@thinkshiftcom.com | (office) 510-898-1837 (mobile) 415-828-3143

By CNote, Impact Investing

CNote Impact Investment Themes

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.

Financial Inclusion

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.

Racial Equity

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. 

Poverty Reduction

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.

Addressing Homelessness

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.

Gender Equality

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.

Affordable Housing

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. 

Mental Health

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.

Job Creation

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.

Resilient Communities

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.

Financial Education

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

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.

Community Revitalization

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.

Sustainable Agriculture

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.

By CDFIs

CDFIs: America’s First Responders to Economic Crisis

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.     

Superstorm Sandy

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.    

For example, the NAACP has reported to Congress that minority-led CDFIs are well-positioned to respond to the economic inequities exacerbated by COVID-19. Meanwhile, native CDFIs are creating new loan products to better serve native businesses and communities like the Navajo Nation that have experienced high levels of coronavirus cases while lacking the resources to sufficiently mitigate the dire situation.  

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.    

Final thoughts

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.

By Impact Investing

What’s Behind the Growth of Impact Investing

The Rockefeller Foundation coined the term “impact investing” at a 2007 meeting of investors, entrepreneurs, and philanthropists in Bellagio, Italy. Fast forward two decades and we’ve seen demand for sustainable impact investments grow exponentially

Impact investing refers to investments that generate a measurable social or environmental impact along with a financial return. Over the years, there’s been a movement from “negative screening” of investments (avoiding investments in industries related to alcohol, guns, oil, gas, etc.) to investing based on environmental, sustainable, and governance objectives (ESG) to even more direct impact investing. 

Impact investing is attracting new investors and stakeholders, improving and standardizing data and measurement, all while achieving market-rate financial returns. According to the most recent US SIF Foundation Report on U.S. Sustainable, Responsible, and Impact Investing Trends, sustainable, responsible, and impact investing (SRI) assets now account for one in four dollars in total assets under professional management in the United States.

Why impact investments are on the rise

Before 2019, asset flows into sustainable funds had never risen above $2 billion in a single quarter. Morningstar reported that sustainable funds attracted an estimated $8 billion in net flows in the first half of 2019, vastly surpassing the $5.5 billion for all of 2018.

The impact investing market is rapidly growing because it is:  

  • Attracting individual and institutional investors 

Nearly 80 percent of respondents to a recent ESG Investor Sentiment Study from Allianz Life Insurance Company of North America said that they “love the idea of investing in companies that care about the same issues” as them. 

More individual investors are interested in impact investments, especially millennials and women. According to Accenture and the Internal Finance Corporation (IFC), in the next three decades, $40 trillion in wealth will transfer to women and millennials, populations that have shown strong interest in aligning their investments with their values. 

The Global Impact Investing Network (GIIN) has reported that over one-third of organizations that manage conventional investments, such as Morgan Stanley and private equity firms, are now making impact investments. Several foundations are also making significant impact investments, including the Ford Foundation and the Michael and Susan Dell Foundation. 

  • Standardizing impact measurement and management (IMM)

Although no single impact measurement has achieved mass adoption, the expanding availability of frameworks has given investors more reliable ways to gauge impact. Among the latest methodologies is the Rise Fund’s impact multiple of money that is built around calculating impact in dollars and managed by TPG Capital, one of the largest private equity giants. 

IRIS (Impact Reporting and Investment Standards) from The GIIN serves as the impact industry’s set of terms with standardized definitions that govern the way companies, investors, and others define their social and environmental performance.

Investor reviewing investments on iPad

Technology has also allowed greater ties between investment management and social and environmental impact. Technology platforms such as CNote are making it easier for individual investors to get started investing in funds that used to exclusively be accessible by  institutional investors, like Community Development Financial Institutions (CDFIs). 

  • Achieving comparable returns to traditional investments 

Impact investing has performed well when compared to traditional strategies. A study by Morgan Stanley found that sustainable investments achieve comparable returns with less volatility in contrast to traditional investment products.

A meta-analysis of more than 2,000 studies compared the relationship between ESG and corporate financial performance (CFP) since the 1970s. It determined that “roughly 90 percent of studies find a nonnegative ESG–CFP relation,” with the large majority reporting positive findings.

A 2017 GIIN study that reviewed over 200 impact investors who committed billions to impact investing in 2016, found that about 91% reported that their impact investments were meeting or exceeding their financial expectations. About 66% stated that they were making market-rate returns on their impact investments. 

3 trends supercharging the growth of impact investing

Three emerging trends in the impact investing industry have tremendous disruptive potential according to Antony Bugg-Levine, the previous managing director at the Rockefeller Foundation:

  1. The current urgent need to address social issues;
  2. an increased interest in impact investing, especially among young people, and; 
  3. structural changes within the investment industry. 

All these trends represent important paradigm shifts that are driving the growth of impact investing. 

Barriers are being broken down in public and private capital markets, promoting collaboration and engaging new investors. Meanwhile, there are more advocates for a policy environment that enables the impact investing industry to mature and grow.

How the growth of impact investing benefits us all 

The concept of impact investing as we know it now emerged in the early 2000s as investors saw the potential to receive market-rate financial returns in the global capital markets, while doing good for society. 

Investors began to consider not just investing to avoid certain negative social or environmental factors (negative screening,) but instead to purposefully choose investments that could create more social or environmental benefits. 

Today, with the global challenges facing our planet, such as climate change, inequality and social division, there’s an urgent need for impact investing to become a fundamental part of all investment decisions. Traditional sources of capital, like government aid and philanthropy aren’t enough to effect change, given the scale of the problems the world faces.

Impact investing supports a more inclusive and sustainable financial system that balances the needs of shareholders with those of stakeholders. Impact investments can also help drive the transition to clean energy, improve education, and foster innovative technology solutions to alleviate poverty and inequality.    

Why the future of investing is impact investing

Over the last twenty years, the impact investing industry has achieved incredible growth and captured the interest of mainstream investors. In the future, it will become increasingly impractical to make investment decisions without regard for the impact on society and the planet. 

As impact investing continues to gain momentum among many types of investors, better tools are being developed to help investment professionals understand their clients’ impact goals, and measure and report on the actual impact achieved. The demand for impact investing products is also increasing as fund managers, wealth advisors see the value in providing them. 

There are also groups who have evaluated and compiled impact investments into databases so investors can easily find companies and funds that match their values, including T100, ImpactAssets50, and US SIF Sustainable, Responsible and Impact Mutual Fund and ETF Chart.  

According to the GIIN’s 2019 Annual Impact Investor Survey, the responses from organizations forecast strong future growth. In 2018, these organizations invested over 33 billion into more than 13,000 impact investments. These same organizations planned to invest over 37 billion into more than 15,000 investments during 2019. This indicates 13% project growth in the volume of capital invested and 14% growth in the number of investments.  

Impact investors are also committed to further developing the industry. Most view the impact industry as having a key role in supporting important changes in investment practice, including integrating impact considerations into all investing decisions.   

Conclusion

Not only impact investors, but many across the public and private sectors are striving towards a world where investor mindsets and conventional financial markets are fundamentally reshaped by impact investing. The progress the world needs on intense global challenges like climate change and ever-widening inequality is demanding it.    

By Impact Investing

Does Impact Investing Equate to Lower Returns?

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.

A comprehensive review by the Royal Bank of Canada looked into over 40 major studies and found that there was no evidence that socially responsible investing resulted in lower investment returns. This sentiment was echoed by the GIIN’s (Global Impact Investing Network) 2017 Annual Impact Investor Survey, which found that the majority of respondents achieved market-rate returns, with 91% claiming their returns met or exceeded their professional expectations. But in order to understand the full picture, we first need to explore both sides of the argument.

Concerns about impact investing

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. 

Implementation

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. 

Investor expectations

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.

Exploring criticisms of impact investing

At the end of the day, the notion that there is a tradeoff between financial performance and sustainability is an outdated myth. While concerns about impact investing are valid, critics suggesting that it has lower returns neglect to mention how poor implementation and profit-seeking behavior can negatively affect financial outcomes. Socially responsible investments and principles should prioritize the underlying cause, not the potential for financial returns.

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. 

Case studies

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:

  1. Index comparisons
  2. Mutual fund comparisons
  3. 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.

Bottom line

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.

 

Restricted access to wealth in a wallet
By Equality

Wealth Inequality: The Secret Cost of Unequal Access to Credit

America, “the land of equal opportunity”, isn’t delivering on its promise for the 90 percent that find themselves on the wrong side of the ever-widening wealth gap. In fact, the United States has a level of wealth inequality between the rich and poor that is larger than any other major developed country. According to the National Bureau of Economic Research, the richest 5 percent of Americans own two-thirds of the wealth in the nation

While there are many reasons for this divide, one of the key contributors is unequal access to credit and other mainstream financial products and services. Unlike the top one percent who invest their wealth in stocks and mutual funds, homeownership is the main source of wealth for 90 percent of Americans. This is also the asset type that suffered the biggest setback during the Great Recession of 2008. 

Financing for homeownership

Financing for homeownership.

For those who find themselves locked out of being able to access credit, getting a mortgage to buy a home seems like an impossible feat. This most often hits low-income communities the hardest, as many have historically been discriminated against through unfair practices like redlining, which despite efforts to halt still exists in some form today

The lack of access to credit also negatively affects Main Street America because, without business loans, many small business owners struggle to grow their companies. For minority- and women-owned businesses (MWBEs or WMBEs) this can be catastrophic because investment in MWBEs is 80 percent lower than the average investment in businesses overall.        

Not only are working and middle-class American households severely impacted by unequal access to credit, but these negative effects trickle down into their communities and the country as a whole by stifling productivity and innovation while continuing to increase wealth inequality.    

The challenge of accessing credit for lower-income households  

In a 2017 survey by the Federal Deposit Insurance Corporation, over 8 million households were found to be unbanked. And 80.2 percent of unbanked households had no access to mainstream credit. The survey also found that lower-income, less educated, black and Hispanic, working-age, disabled, and foreign-born, noncitizen households were more likely to not have access to mainstream credit. Differences in credit access by income, education, race, and ethnicity were the most striking, with the youngest households (aged 15 to 24 years) following close behind.   

Without access to traditional banking products like savings accounts, many of these households are one paycheck away from financial ruin. Seemingly minor financial rules about fees, fines, interest rates, and minimum balances made in the boardrooms of banks and other companies make life much more difficult for low-income families. These practices often force families to rely on alternative financial services such as payday lenders, check cashing services, pawnshop loans, and auto title loans that charge extremely high-interest rates. This exacerbates the wealth gap by keeping borrowers stuck in a cycle of crushing debt.   

While some may argue that the deregulation of these alternative financial industries is the solution, in reality reducing barriers to economic inclusion is the only way forward for households unable to access mainstream credit products and services. According to a recent article by the Brookings Institute, “Economies that extend opportunity widely not only maximize their productive potential but also minimize the fiscal and social costs of exclusion. These costs are significant.” 

The author, Joseph Parilla states that “Childhood poverty—one outcome of insufficiently inclusive growth—costs the U.S. economy an estimated $500 billion a year, or four percent of GDP, due to lost productivity, higher crime and incarceration, and larger health expenditures. Cities end up bearing these costs, at the expense of other important investments in growth and opportunity. The final cost of unequal opportunity gets beyond the numbers. Inequality of opportunity provokes hostilities that fray social and political cohesion and good governance, which affects economic growth.” 

Why lack of credit access curbs small business and community development

Small businesses rely on access to credit as much as American households. In fact, access to credit is so essential to businesses that a government agency called the U.S. Small Business Association is dedicated to “connecting entrepreneurs with lenders and funding to help them plan, start and grow their business.”    

Coastal Enterprises, Inc. (CEI), an SBA 7(a) lender has financed 2,555 businesses for over $1 billion in Maine and other rural areas across the nation. Betsy Biemann, CEO says, “These are businesses that often would have trouble accessing traditional capital from traditional lenders.”

Many small businesses depend on credit access for startup costs, capital improvements, and to meet everyday expenses like payroll. While it’s easier for larger companies to attract lenders, for small businesses, lack of credit can cause them to close their doors forever. 

Howard Schultz, Starbucks CEO who is credited with transforming the coffee giant from a regional company into a top global brand has stated that “the lifeblood of job creation in America is small business, but they can’t get access to credit.”

With a less stable job market, many more millennials are also becoming entrepreneurs than previous generations. According to a recent study by America’s SBDC, 62 percent of millennials have a dream business they would love to start while nearly half reported that access to capital is the biggest barrier to starting a business.    

How unequal access to credit threatens the US economy 

Despite the expansion of the United States’ economic power throughout the past century, the growth in household wealth outside of high earners has not been inclusive. In 2016, white households had more than ten times the wealth of black families according to economic research by McKinsey.  

The racial wealth gap alone constrains the entire U.S. economy. McKinsey estimates that “its dampening effect on consumption and investment will cost the US economy between $1 trillion and $1.5 trillion between 2019 and 2028—4 to 6 percent of the projected GDP in 2028.” 

Black families still must contend with systemic discrimination, poverty, and a lack of social connections in the effort to build wealth. The National Fair Housing Alliance (NFHA) is a trade association that works to eliminate housing discrimination and to address the lack of access to credit that severely limits the accumulation of wealth for people of color.  

In tandem with practices like redlining, housing policies were established from the inception of this nation that “were expressly designed to assist whites in gaining land and homeownership rights while simultaneously denying people of color the same opportunities” states the NFHA.

The shocking millennial wealth gap

Millennials have the undesirable distinction of being the first generation to accumulate less wealth than previous generations. The Federal Reserve report, “Are Millennials Different?,” disclosed that Millennials have “lower earnings, fewer assets and less wealth” than previous generations at the same age. The Federal Reserve’s Survey of Consumer Finances also reported that despite making up about a quarter of the population, millennials own only 3% of the country’s wealth. 

This is due in part to coming of age in the job market during the financial crisis of the Great Recession. During this time, the labor market was at historically weak levels and credit conditions were unusually tight. Also, increased higher education and health costs contributed to millennials carrying greater levels of debt and having far less money to spend. And even when working full-time hours, millennials can’t afford to buy homes according to a 2017 National Housing Survey by Fannie Mae. 

Restricted access to wealth in a walletThe impact of restricted credit access and lack of economic inclusion among racial and generational lines is having a ripple down effect on the U.S. economy that is maintaining a persistent and widening wealth gap for the majority of Americans. And when the gender pay gap, education level, immigration status, disability, and other factors are added to this as well, addressing wealth inequality and credit access is even more critical.   

What’s the way forward to improving access to credit? 

The Consumer Financial Protection Bureau (CFPB) estimates that “26 million Americans can be classified as credit invisible and 19 million have a credit history that is insufficient to produce a credit score.” CFPB is urging lenders to deploy innovative ways of increasing access to credit. Upstart Network is a nonbank lender that deployed a machine learning model to improve access to credit that abides by fair lending practices. 

Community Reinvestment Act (CRA) reforms that include the expansion of CRA credit to banks that work with Community Development Financial Institutions (CDFIs) have also been proposed. This would modernize the current rules to require banks to lend and invest in all regions where they receive significant deposits, also taking into account internet banks that have only one physical branch. Although, some community groups and low-income advocacy associations have voiced concerns about these changes placing an emphasis on the dollar amount of CRA projects that would lead to receiving less capital from bank partners.

Using alternative credit data to support those who are underbanked and have limited access to credit is another possible solution. Alternative credit scoring models take into account a broader range of criteria than current models that require an individual to have at least one active credit account that displays activity for over six months. The latest FICO 9 score model excludes paid and unpaid medical debt from credit scores and a new credit scoring model from VantageScore ignores accounts referred to collection agencies that have been paid off.   

Fintech startups are also innovating financial services and banking as millennials adopt new investment vehicles like cryptocurrency, point-of-sale lending alternatives, digital-first banks like Simple and Chime, AI-based budgeting and expense monitoring, robo advisors, micro-investing apps like Acorn and Stash, and virtual credit cards. Impact investing is also increasingly popular among millennials who have a strong interest in investing in small business.

Smartphone apps allow people to invest from their fingertips.

Smartphone apps allow people to invest and manage accounts from their fingertips.

SBA and first-time home buyer loans along with other government programs can assist in paving the way for opening up opportunities to grow wealth for more Americans. Ultimately, many essential reforms are needed within the financial, housing, employment, healthcare and many other sectors of America’s infrastructure to achieve lasting change. 

Six essential policy solutions have been pinpointed by the HAAS Institute for a Fair and Inclusive Society for reversing inequality, closing the wealth gap and expanding economic inclusion. Access to fair, low-cost financial services and increasing homeownership is listed as crucial for building American households’ wealth. 

Conclusion

An important part of financial health is building assets to generate wealth. Historically, the working and middle class in the U.S. have grown wealth through homeownership and creating small businesses. The wealth gap grows when only some populations in the U.S. are able to access credit and the mainstream financial products that are oftentimes necessary to do so.

The Federal Reserve Bank of New York developed The Credit Insecurity Index to collect various Community Credit indicators to understand the impact of credit constraints on U.S. communities. Through their research, they found that communities with more access to credit are better off than communities with less access, as they are able to strive for upward economic mobility and weather unexpected financial hardships such as the subprime mortgage crisis that happened during the Great Recession.     

Woman holding a protest sign for change.

Woman holding a protest sign for change.

Without far-reaching, structural reforms to our society, the deep and persistent wealth gap in America cannot be bridged. Public policies such as redlining and housing and wage discrimination have suppressed the wealth of many generations of women and people of color. To ensure subsequent generations have a better chance of building wealth, expanding economic inclusion is imperative. This, in turn, supports the closing of the wealth gap, and the growth and stability of all communities, the country, and even our planet. 

Looking to support increased access to financial resources in underserved communities? CNote recently launched The Promise Account for foundations and other institutional investors that provides capital to financially vulnerable communities and is optimized for returns, insurance, and impact. Every dollar invested in our platform goes towards funding MWBEs, affordable housing, and economic development. 

By Impact Investing

List of 2020 Institutional Impact Investing Conferences

We’ve rounded up some of the largest Impact Investing events around the United States for institutions and those in financial services that are interested in learning more about effecting change with their dollars. These events afford great opportunities to learn from and collaborate with like-minded investors in an inspiring setting. We hope to see you there!

January

Join the Impact Finance Center and TechSoup for an evening of conversation and networking and learn how impact investing can help corporate social responsibility leaders better support their communities through innovative finance models.

 

February

Investing for Impact ‘2020 vision’ will explore how after years of advocacy to become mainstream, the impact investment community now faces a different challenge: as more institutions and actors pile in, there is a growing fog and confusion about what impact investing really means, and how it intersects and overlaps with other linked domains like sustainable finance. Network with more than 200 leading financiers, institutional investors, policymakers, academics, impact investors and philanthropists.

As we look toward a climate-impacted future and the social, political, and financial challenges we face over this next decade, we must move beyond dialogue to tangible action. The 2020 Gathering will be pivotal. For this special Gathering, we will host day-long field trips and a track of outdoor sessions to indulge in deeper strategic engagement. The Gathering will be organized in a retreat-style format to foster more connection and real outcomes.

The Summit is an exclusive gathering of 450+ leading next-gen philanthropists, impact investors, and social innovators that will convene to discuss key issues facing our country including opportunity zones, climate solutions, blockchain, immigration, impact investing, family prosperity, smart cities, public-private partnerships, philanthropy & natural disasters, wellness/bio-hacking, future of work, film & media for change, gender equity, conscious parenting, justice & equality, sports for good, education, human trafficking, refugees, music & arts for impact, indigenous rights and more.

 

March

Attendees can expect to gain perspective on how leading institutional investors view alternatives, hear from industry experts about the regions and investment sectors to watch in 2020, take away insights on successful strategies for fundraising, deal sourcing, portfolio management, firm management, exits, and more. Participants will have the opportunity to engage in forward-thinking discussions focused on issues of intellectual business interest. In short, Summit participants are successful women from across the spectrum who want to see other women succeed, who have profound industry experience and information to share, unique stories to tell and lessons to teach.

At “Building What’s Missing” the 24th annual Berkeley Haas Women in Leadership Conference, we are highlighting stories of people and organizations that have identified gaps when it comes to gender equity and are doing the hard work to build what is missing. We will hear and share stories about how women and allies can create impact at any level, starting with ourselves, to our organizations, to our broader society.

Join influential stakeholders from Federations and private foundations—representing collectively over $80 billion in Jewish communal philanthropic assets—for informative presentations by top industry professionals, informal peer-to-peer learning, and networking. Enhance your ability to make prudent investment decisions and position your Jewish Federation, community or private foundation as the preeminent steward of endowed funds.

Opal Group is happy to announce its 5th annual Impact Investing Forum. Today, we see an increase in companies proving that mission-driven and communication-based strategy, can attract value-based workforce, investor base, and like-minded consumer. Impact investing strategies are also proving to be able to generate returns in line with their traditional counterparts. Themes of defining impact investing, portfolio construction, asset class opportunities, and the role of the investor are just a few of the stimulating topics to be covered at this event.

Impact Capitalism Summits offer a curated, thought-provoking, and actionable agenda designed to facilitate peer-to-peer learning and encourage collaboration in a unique environment that captures the imagination and inspires participation. Participants hear from prominent family offices, institutional investors, and influential foundations about what is driving their impact investment decision-making

 

April

The Women in the World Summit, presents powerful new female role models whose personal stories illuminate the most pressing international issues. They range from CEOs and world leaders to artists, activists, peacemakers, and firebrand dissidents. The Summit’s vivid journalistic narratives, high-impact video, and fast-paced staging have made it the premier platform to showcase women of impact. Increasingly, Women in the World also includes the participation, onstage and in the audience, of men who champion women. The 2020 Summit is generously supported by leadership sponsors Boston Consulting Group, Mastercard, P&G, The Rockefeller Foundation and UBS; supporting sponsors AARPFord Foundation, Thomson Reuters, Walton Family Foundation.

 

Designed as an immersive experience for all professionals within the community foundation field, the CFUnited 2020 conference creates the space to dig into the unique role you and your organization play in harnessing the power of place. The goal of the conference is to provide an experience for community foundation professionals where we are both encouraging and facilitating dialogue amongst peers that enables you to innovate, lead, collaborate and engage. The conference will address a myriad of topics within the theme of power of place, all of which will provide practical support for you and your foundation to drive operational excellence within today’s rapidly evolving community.

 

Invest In Women 2020 is the leading forum nationwide to explore, discuss and learn about issues that are meaningful for women financial advisors and female clients. Both male and female advisors are invited to this event that promises insight and networking to help practices grow. Take the opportunity to be inspired — and have fun — at a conference you won’t want to miss.

 

May

The Inclusiv Annual Conference is the largest gathering of credit unions with a mission of financial inclusion in the country, with plenaries and sessions that focus on innovative products and services for empowering low-income consumers.

 

When EMERGE launched 15 years ago, improving financial health for all was the dream of a few bold thinkers. Fast forward to today, and leaders across industries and sectors are embracing financial health as a new opportunity to better serve their customers, employees, and communities. As we reflect on the organizations and innovators who have helped develop best practices for financial health, we also look ahead to the trends and tools that will move us closer to financial security for all.

 

Foundations are making unprecedented commitments to impact investing, putting more of their capital to work to challenge inequity, stem climate change, and drive other social and environmental impact. As the field continues to rapidly grow, what will it take to ensure that the impact investing movement remains laser-focused on impact? We look forward to tackling these issues with you at our upcoming National Conference — Amplifying Impact. As a Conference led by and for foundations and their partners, Amplifying Impact will explore the unique leadership role of philanthropy, focusing on our four Conference themes:

 

The Global Private Equity Conference (GPEC) is the world’s leading event dedicated to exploring private investment opportunities across emerging and frontier markets, convening over 900 industry professionals from more than 70 countries annually. The conference brings together practitioners from a broad array of institutions—from family offices, endowments, pensions, sovereign wealth funds, experienced fund managers and new investment teams to private equity consultants and advisors, academia, multilateral organizations and governments—for thought-provoking discussions, debates and networking opportunities organized around topics and themes that are top-of-mind for today’s finance and industry leaders.

 

True long-term investing, like the type of institutional asset allocators, requires many different value considerations when it comes to risk and return. ESG investing has been positioning itself as a way for investors to mitigate risks and still generate returns that meet fiduciary obligations in the long term. The conversation around ESG has reached the “how-to” phase as strategies abound, and many allocators are starting to approach this space for the first time or refine their existing practice. Join your institutional peers to discuss how to best utilize an ESG strategy to attain investment goals.

 

In its third year, Total Impact Philadelphia will convene investment advisors, and investors who want to gain actionable and executable information on impact investment across asset classes. In addition, in partnership with key Philadelphia stakeholders, we will highlight place-based opportunities and the impact success stories of the greater Philadelphia area.

 

June

This annual conference brings together leading minds to explore new legal and policy developments in the fields of social entrepreneurship and impact investing and to discuss how lawyers and the law can most effectively serve social entrepreneurs and impact investors. The conference is attended by over 400 participants from across the globe (including lawyers, academics, policymakers and other professionals working in the fields of social entrepreneurship and impact investing) for a series of panels, plenaries, discussions and workshops geared toward sharing knowledge and building a legal community of practice in these fields.

 

The Social Innovation Summit is an annual event that represents a global convening of black swans and wayward thinkers. Where most bring together luminaries to explore the next big idea, we bring together those hungry not just to talk about the next big thing, but to build it.

 

US SIF: The Forum for Sustainable and Responsible Investment is the leading voice advancing sustainable, responsible and impact investing across all asset classes. Its mission is to rapidly shift investment practices toward sustainability, focusing on long-term investment and the generation of positive social and environmental impacts.

 

The 2020 Forbes Women’s Summit brings together a community of inspiring and innovative visionaries whose ambitious actions are changing the world with unprecedented scale. Across industries and generations, the gathering spotlights how leading women are navigating monumental change to rearchitect industries, spark major movements and unlock opportunities for others. Featuring keynote conversations and dynamic panel discussions, the Forbes Women’s Summit will convene a diverse range of female luminaries from the worlds of business, media, entertainment and politics.

 

July

#ForumCon20 will bring together the leadership and staff of all PSOs working to advance, inform and support the nation’s philanthropic sector. It’s the only conference where we can delve into our unique role as CEOs and staff of regional and national PSOs, connect with others in similar roles, and explore how we can work together to increase philanthropy’s impact. The conference will be a unique opportunity to reach key decision-makers with direct access and connections to the largest and broadest range of philanthropic organizations across the country.

 

August

The CIF Leadership Summit brings together investment and financial thought-leaders to learn more about Christian Faith Driven Investing, engaging with one another in an inspiring mountain retreat setting. A collaborative experience, the Summit provides a unique platform to learn from Christian investing experts and truly grasp the available benefits for organizations, investors and their advisors.

 

September

The Philanthropy Innovation Summit is a biennial event that convenes individual and family philanthropists to discuss strategic and impactful giving in a non-solicitation environment. The 2019 event was the fourth Philanthropy Innovation Summit hosted by Stanford PACS, and included panel discussions, armchair interviews and intimate philanthropy salons.

 

October

Join 250 leading women investors in alternative debt, including direct lenders, mezzanine investors, institutional investors, company executives, private equity investors, and finance, legal, and consulting advisors for two days of networking, dealmaking, and professional development.

 

SOCAP is the largest and most diverse impact investing community in the world. We convene a global ecosystem and marketplace – social entrepreneurs, investors, foundation and nonprofit leaders, government and policy leaders, creators, corporations, academics and beyond –  through live and digital content experiences that educate, spur conversation, and inspire investment in positive impact. Our mission is to unlock the potential of markets to accelerate impact and, in pursuit of that goal, we have convened more than 20,000 people since our first event in 2008.

 

Philanthropy Southwest’s Annual Conference consistently draws several hundred trustees and staff attendees from grantmaking organizations of all types and sizes. Registration is open to trustees and staff of grantmaking organizations and provides the opportunity to connect with fellow philanthropists located or making investments in the Southwestern United States.

 

Money20/20 has always given audiences the clearest, sharpest view of the disruption agenda – it’s what’s made us the world’s most potent blend of people, tech, money and ideas. We stimulate new connections, new insight and new growth – at speed. From our starting point of payments, we bring together the money ecosystem. From in-depth analytics to inspirational speakers, our world class insight and networking opportunities help our customers stay ahead – powering strategies and relationships and switching mindsets.

 

The VERGE 20 conference and expo is the largest platform for accelerating the clean economy. Join more than 4,000 leaders — from the private and public sectors, utilities, solution providers, investors, and startups — advancing systemic solutions to address the climate crisis through five key markets: clean energy, electrified transportation, the circular economy, carbon removal and sustainable food systems.

 

November

OFN (Opportunity Finance Network) Conference brings together CDFIs and thought leaders from across the country together for one of the largest impact-centric events of the year. With more than 1,000 CDFI practitioners, funders, investors, policy makers, and other supporters in attendance, the learning, networking, and business opportunities will be incredible.

 

A conference to enhance networking, fundraising, and deal-making opportunities for senior-level women across the broad spectrum of alternative investments. Join us for informative sessions and essential networking with senior-level women in private equity and alternative investments. The highly interactive conference features moderated panel discussions, facilitated roundtable conversations, and keynote dialogues followed by discussion. The Women’s Alternative Investment Summit is unique in its commitment to helping women build networks and to promoting the advancement of women in private equity, venture capital, and alternative investing in general. 

 

Fall 2020

For 30 years, The SRI Conference has been the most important annual gathering for investors, asset owners, asset managers, financial advisors, researchers, academics, mission-driven organizations, and enterprises who share the common goal of deploying private capital to address some of our most pressing environmental, social, and economic challenges.

By Quick Tips

Impact Investing Glossary

Core Financial Terms

At times, personal finance can seem like a whirl of unfamiliar jargon. What are the distinctions between terms like ‘Impact Investing’ and ‘SRI’?

We put together this glossary of terms as a reference point for anyone who is interested in learning more about the ins and outs of finance and impact investing terms.

You can skim or jump to a specific grouping of words using the table of contents below.

Impact Investing Terms

Blended Value – This refers to the integration of social and financial returns gained through impact investments.
Clean Revenue The measure of a company’s revenue from all goods and services which have clear environmental and social benefits.

Collective Impact – Different entities coming together to help to solve a social problem through carefully considered and planned collaboration.

Community Development – The United Nations defines community development as “a process where community members come together to take collective action and generate solutions to common problems.”

Community Development Financial Institution (CDFI) – Nonprofit private financial institutions that are solely dedicated to delivering responsible, affordable lending to help low-income, low-wealth, and other disadvantaged people and communities join the economic mainstream. These are regulated and considered tax-exempt under section 510(c)(3) of the U.S. Internal Revenue Code.

Community Investment – A subcategory of SRI or impact investing aimed at the improvement of economically disadvantaged communities.

Corporate Social Responsibility (CSR) – A form of corporate self-regulation integrated into a business model. CSR policy functions as a built-in, self-regulating mechanism that governs and serves as a guide as to how a business holds itself socially responsible.

Credit Union – A nonprofit money cooperative whose members can borrow from pooled deposits at low interest rates.

Donor-Advised Fund (DAF) – A vehicle that gives donors the opportunity to contribute to a charitable organization on a tax-deductible basis, enjoy philanthropic rewards in an advisory capacity, while limiting personal administrative responsibility.

Economic Empowerment – The ability of an individual, group, or entity to make and act on decisions that involve the control over and allocation of financial resources.

Environmental, Social and Governance (ESG) – Environmental, Social and Governance refers to three central factors by which a business’s positive impact can be analyzed – both internally and their affect on society.

Green Bonds – Bonds that are used to fund environmentally sustainable and beneficial projects.

Impact Investing – The Global Impact Investing Network defines impact investing as investments made into companies, organizations and funds with the intention to generate measurable social and environmental impact alongside a financial return. Impact investors actively seek to place capital in businesses and funds that can harness the positive power of enterprise.

Impact Report – A report communicating the difference made to an issue a person or group of people are trying to solve or people they are trying to help. It typically takes the form of an annual report and can be shared with investors and shareholders to illustrate the impact of investments.

Investment Thesis – This is typically used as the basis on which to analyze a potential investment. It is based upon decided criteria that is used as a guide as to whether a potential investment could obtain the desired outcomes of financial returns and targeted impact outcomes.

Low-to-Moderate Income Community (LMI) – Often used to refer to targeted investment space in impact investing that is oftentimes overlooked by traditional banks. For example, CNote and our CDFI partners look to support borrowers in LMI communities.

Microlending – A form of financing that provides small loans to typically emerging entrepreneurs to encourage self-sufficiency and economic empowerment.

Mission Related Investment (MRI) – An investment that furthers an investor’s organizational mission.

Native CDFI – Community Development Financial Institutions that work to support Native American communities throughout the United States. These communities have historically been severely underserved by traditional financial institutions. Native CDFIs are able to understand the unique issues of the communities they work in and serve.

Place-based Investing – Often associated with impact investing, place-based investing entails investing in targeted geographic locales, oftentimes looking to support those that have been underserved by traditional financial institutions.

Social Entrepreneurship – An approach by entrepreneurs (individual) or startups (group) in which they develop and execute solutions to social, cultural and/or environmental issues.

Social Finance – An approach to managing money that delivers both a social dividend and an economic return.
Social Impact Broadly speaking, social impact is the net effect of an individual’s or organization’s actions or practices on the social well-being of a community, nation, or even the planet.

Social Impact Bond (SIB) – Financing mechanism in which a government agency enters into agreements with social service providers, such as social enterprises or non-profit organizations, and investors to pay for the delivery of pre-defined social outcomes. In financial terms, SIBs are not real bonds but rather future contracts on social outcomes. They are also known as Payment-for-Success bonds in the United States.

Socially Responsible Investing (SRI Investing) – Sometimes referred to as Sustainable, Responsible, Impact Investing, SRI Investing involves investing in companies that are engaged in ethical and socially conscious fields.

Sustainable Development Goals (SDG) – A collection of 17 global goals designed to be a “blueprint to achieve a better and more sustainable future for all”. The SDGs, set forth in 2015 by the United Nations General Assembly and intended to be achieved by the year 2030, are part of UN Resolution 70/1, the 2030 Agenda.

 

General Finance Terms

Accredited Investor – An investor with special status under financial regulation laws. This varies by country, but in the United States, this qualifies as (but is not limited to) an individual that has earned income exceeding $200,000, or $300,000 when combined with a spouse, during each of the previous two full calendar years, and a reasonable expectation of the same for the current year. The individual must have a net worth greater than $1 million (either alone or combined with a spouse), excluding the person’s primary residence.

Asset Class – A group of financial instruments that exhibit similar characteristics and are subject to the same laws and regulations. Within a class, assets often behave similarly to one another in the marketplace

Assets – The property and resources owned by a person or company, regarded as having value and available to meet debts or commitments.

Automated Clearing House (ACH) – An electronic funds transfer system. The computerized system is designed to accept payment batches so that large numbers of payments can be made at once.

Bond – A debt instrument or loan purchased by an investor from a company or government with an agreement to be paid back their principal with interest.

Cash and Cash Equivalents – The most liquid current assets. They are typically used for short-term investments.

Certificate of Deposit (CD) – A certificate issued by a bank to a person depositing money for a specified length of time. A CD typically offers an interest rate that can be earned with the agreement that the money is left for a specified amount of time.

Crowdfunding – A form of alternative financing where small amounts of money are raised from a large group of people. Crowdsourced funds have become more popular than ever in recent years, partially due to the rise of social media.

Current Assets – Cash, accounts receivable, and other assets that are likely to be converted into cash or expensed in the normal course of business, typically within a year.

Current Liabilities – Debt or other obligations due to be paid to creditors within the current period, which is typically a year.

Current Ratio – Current assets divided by current liabilities. The firm’s ability to use its available resources (assets) to cover its current obligations (liabilities).

Debt – An amount owed for funds borrowed. It is a deferred payment or series of payments to be paid in the future, oftentimes with interest.

Debt Instruments – A documented, binding obligation that provides funds to an entity in return for a promise from the entity to repay a lender or investor in accordance with terms of a contract. This can include a bond or a deposit.

Debt Service – The amount of payment due at regular intervals (usually monthly, quarterly, or annually) to meet a debt.

Default – Failure to fulfill an obligation. Often times used in reference to the failure to meet a loan’s terms.

Deposit – A sum of money placed in a bank or other financial institution.

Deposit Agreement – An agreement outlining the terms of a transaction that transfers funds (deposit) to another party, typically a financial institution, as collateral.

Dividend – A payment made by a corporation to its shareholders (typically quarterly), usually as a distribution of profits for their investment in the company.

Due Diligence – The process of evaluating the opportunities and risks of a particular investment. This includes verifying sources of income, the accuracy of financial statements, the value of assets that will serve as collateral, the tax status of the borrower, and all other relevant legal and financial information.

Equity – The value of shares issued by a company to stockholders or ownership of assets that may have liabilities attached to them. Equity can be measured by subtracting the liabilities from the value of the asset.

Exchange-Traded Fund (ETF) – An investment fund traded on stock exchanges continuously throughout the day, much like stocks. This is typically held close to its net asset value, although deviations can occasionally occur.

Federal Deposit Insurance Corporation (FDIC) – An independent agency created by Congress to maintain stability and public confidence in the nation’s financial system by insuring deposits, examining and supervising financial institutions for safety and soundness and consumer protection, and managing receiverships.

Fiduciary Duty – A fundamental obligation to provide investment advice that always acts in the clients’ best interests. A person acting in a fiduciary capacity is held to a high standard of honesty and full disclosure in regard to the client and must not obtain a personal benefit at the expense of the client.

Fiduciary Responsibility – A relationship in which one person owes a fiduciary duty to another, most often a client.

Fixed Assets – Long-term assets that cannot be quickly converted into cash, such as property.

Fixed Income – Income from an investment that is fixed at a particular figure and does not vary or rise with the rate of inflation. The return is typically paid on a set schedule.

Grant – Money that is gifted by a government or other organization for a particular purpose. It is not expected to be repaid.

Guarantee – A formal pledge to pay another person’s debt or to perform another person’s obligation in the case that they default or are not able to.

Interest – As a borrower, it is a charge for borrowed money which is typically set a percentage of the amount borrowed. Alternatively, as a lender, it is the profit in goods or money that is made on invested capital.

Investment Intermediary – The middleman between two parties in a financial transaction, such as a commercial bank, investment banks, mutual funds, and pension funds.

Liability – Financial debts or obligations.

Limited Liability Company (LLC) – A business form that combines the characteristics of a corporation with the pass-through tax treatment of a partnership. In an LLC, the members of the company cannot be held personally liable for the debts or liabilities of the company.

Liquidity – Measures a company’s ability to meet short term obligations. It can be assessed by evaluating a company’s current ratio and working capital.

Loan – Funds provided to an organization with a commitment to repay the principal.

Loan Loss Reserve – Funds retained by a firm as risk mitigation towards loan default.

Market Rate – A generally agreed upon “going rate” that is charged for a financial instrument, good, service, etc. in a free market.

Net Worth – The value of all financial and non-financial assets minus the value of all liabilities.

Principal – The amount of an initial investment, deposit, loan, etc.

Private Debt – An asset class that includes any debt held by or extended to private companies, such as in the case of the sale of equity shares.

Promissory Note – A legal document in which one party promises to pay a determinate sum of money to the other, either at a fixed or determinable future time or on demand of the payee, under specific terms.

Quick Ratio – Also known as an Acid Test, it is the sum of the firm’s cash, marketable securities, and accounts receivable, divided by its current liabilities. This illustrates the ability of a firm to meet its current liabilities.

Registered Investment Advisor (RIA) – A person or firm who advises individuals on investments and manages their portfolios. RIAs have a fiduciary duty, or obligation to act in their best interest, to their clients.

Return on Investment (ROI) – Earnings before interest and taxes (or profit) divided by the amount invested. (EBIT / Investment = ROI)

Security and Exchange Commission (SEC) A U.S. government agency that oversees securities transactions, activities of financial professionals and mutual fund trading to prevent fraud and intentional deception.

Term – The length of time until a loan or other obligation is due.

Venture Capital – Growth equity capital or loan capital provided by private investors (the venture capitalists) or specialized financial institutions (development finance houses or venture capital firms) for new or growing businesses. Also called risk capital. The venture capital firm or individual investor gives funding to the startup company in exchange for equity in the startup.

Other Finance Terms

B Corporation – A business that has been certified by the nonprofit, B Lab, to meet rigorous standards of social and environmental performance, accountability, and transparency.

Entrepreneur – A person who organizes and manages any enterprise, especially a business, usually with considerable initiative, responsibility, and risk.

Philanthropy – The desire to promote the welfare of others, often expressed through financial gifts or acts of kindness.

Small Business Administration (SBA) – The SBA is a U.S. government agency established in 1953 to promote the economy in general by providing assistance to small businesses. One of the largest functions of the SBA is the provision of counseling to aid individuals in trying to start and grow businesses.

By Impact Investing

Positive and Negative Investment Screening Explained

If you have explored socially responsible investing (SRI), then you might also be familiar with the concept of investment screening.

Socially responsible investing, a form of impact investing, is a strategy used to align investments with social goals.

Investors understand that their money can produce positive outcomes in more than just a financial sense by achieving both financial growth and positive social change. Investment screening is used to filter out companies or organizations that do not meet investors’ standards, and instead allocate capital to those that do.

Positive and negative investment screening is used to distinguish between different organizations based on how restrictive investors would like their investments to be. Positive screening identifies and focuses investments into companies that are considered top performers based upon chosen criteria. Alternatively, negative screening looks to exclude companies that perform poorly on environmental, social, and corporate governance (ESG) criteria and removes them from investment portfolios. Understanding some of the different approaches to socially responsible investments can help you to learn how your portfolio is managed, and which investment strategies best fit your objectives.

What is Impact Investing?

Impact investing is a way to invest your money with the intent to bring about some socially desirable outcome with the expectation of a financial return. 

CNote specifically defines impact investing as deploying capital with the aim of creating some measurable positive social outcomes with the expectation of financial returns. Like your vote, your dollar is powerful. Whenever you give money to an institution, whether in the form of an investment or a transaction, you are supporting their mission – whether you morally agree with it or not. It’s that simple.

Of course, there is some subjectivity when it comes to what it means to do good. Something that one investor believes to be a good cause may not be important to another investor. Overall, the goals of impact investing generally reflect popular social and political opinions of the time. In the mid-twentieth century, this included a focus on civil rights, women’s suffrage, and anti-war efforts. Nowadays, common causes people look to support through the power of their investments are environmentally sustainable initiatives, increasing economic opportunity for minority or underrepresented communities and ending world hunger.

There are three key components to impact investing: investment with the intention to do good and the expectation of financial return all while creating measurable impact. Measuring the impact of one’s investment is a central tenet of impact investing. If you are investing to make a difference, you should utilize measures to understand the true impact your investment is having.

What is Socially Responsible Investing?

Socially responsible investing (SRI) is a strategy that considers specific investor values when choosing organizations to invest in.  Sometimes referred to as Sustainable, Responsible, Impact Investing, SRI Investing involves investing in companies that are engaged in ethical and socially conscious fields. Also known as ‘green investing’ or ‘ethical investing,’ SRI has become a popular way for investors to support causes they believe in while earning positive financial returns.

Much like impact investing, there is a level of subjectivity when it comes to socially responsible investments. In general, SRI indexes or mutual funds look to invest in organizations that support environmental and social causes. They typically avoid companies that deal with alcohol, gambling, tobacco, and weapons.

Why Engage in Socially Responsible Investing Practices?

People invest in SRI indexes and funds for a variety of reasons. An investor may be driven by strong personal values that guide their investment decisions. If investors are dedicated to green living, they may want to invest in companies that pass ESG criteria for green companies. A company or investor may pride themselves in supporting organizations that celebrate diversity. They may pursue investments in companies that champion these initiatives as a way of improving their own ESG profile.

We are seeing more often than ever before that clients and shareholders are demanding that companies take action to improve their own ESG standing, like through investing in SRI opportunities. Shareholder activism has forced organizations to reevaluate their own practices and invest in causes that their shareholders value.

Does SRI Result In Lower Financial Returns?

You may have heard that committing to socially responsible investing may result in lower returns. However, that is often not the case.

Consider the Domini 400 Social Index, which is essentially the S&P 500 for socially responsible investing. In a study from Morningstar and MSCI that compared the index total returns from the year 1990 to 2008, it was determined that the return and risk characteristics were nearly identical for both indices. In fact, the Domini 400 Social Index slightly outperformed the S&P 500.

As the tide changes towards more socially responsible investing, companies are learning that raising their ESG standards can earn them more investors and a stronger client base. Consumers are looking for companies that reflect their values now more than ever. Socially responsible investing has built a bridge between enacting positive change and growing wealth.

The Difference Between SRI and Impact Investing

While SRI and impact investing both seek to enact social change and produce wealth, they differ in their need for measurable change.SRI is concerned with deploying investment dollars in a way that is responsible and positive. Impact investing requires that the change be, as the name implies, impactful. A good way to understand the difference between SRI and impact investing is that SRI can simply stop at “do no harm” while impact investing seeks to proactively “do good” with investments.

Screening and Socially Responsible Investing

While impact investors seek to do measurable good, socially responsible investors seek to support causes that align with their views and avoid causes that they find undesirable. This is done through a process called screening.

Investment screening is the process of determining whether an organization’s values align with that of the investors. In today’s market, screens help identify firms based on environmental, social and corporate governance (ESG) criteria.

When evaluating companies based on environmental factors, a screen may take into account the amount of waste they produce, greenhouse gas and carbon outputs, raw materials used in production and how materials are sourced.

Companies evaluated based on social standards will typically look at the health and safety of workers, gender equality within the company, and diversity within the workplace. However, sometimes the assessment of socially responsible practices does not stop at the company themselves; Some fund managers will even evaluate the workplace practices of suppliers to ensure that they pass the screens as well.

Governance standards refer to how the business conducts itself. These screens will typically test for corruption, instances of retaliation, scandals, or even the compensation differences between executive members and entry-level workers.

There are two forms of investment screening: positive screening and negative screening. Screens are essentially filters that define what is an acceptable investment. They help to identify companies that may have risks that are not recognized by traditional fiscal standards. For example, if an analyst would like to screen for companies that are cruelty-free, this would set a clear screen parameter for investment opportunities.

The History of Screening

Investment screening was originally used by religious investors who were concerned about investing in industries that they found sinful. This was meant to exclude companies that were involved in industries like weapons manufacturing, alcohol and tobacco companies, and gambling operations.

Eventually, this shifted from just being utilized by religious investors to also being used investors who were interested in using their money to advance their social beliefs. This especially included women’s right to vote and civil rights in the early 20th century.

Investors also used screening to divert funds from companies that they found did not represent their values. In the 70’s and 80’s, investors used divestment as a way to negatively screen companies that benefitted from South Africa’s Apartheid policy. If a company benefitted from apartheid, investors pulled all of their investments out of the company. The lack of economic support helped to aid in the breakdown of apartheid.

What is Negative Screening?

Negative screening, or exclusionary screening, is one of the most basic methods of separating socially responsible investments from those that are likely to have a negative effect on society.

Negative screening is much less restrictive than positive screening. It simply excludes investments in companies that actively work against the investor’s values, such as organizations with a history of international bribery or corruption. Effectively, this process works to remove investments in entities that are deemed as having a negative impact on society or the environment from the investor’s portfolio. For this reason, negative screens help to embody the “do no harm” initiative of impact investing.

Early socially responsible investors used negative screens to weed out companies in ‘sin industries’, such as alcohol or gambling. The negative screening process has evolved to also exclude companies that do not meet diversity standards, emit large amounts of greenhouse gases, or engage in corrupt business practices.

Advantages

Negative screening is the most widely used process of identifying targeted investments for a reason; it’s incredibly inclusive.

Investors hesitant to adopt SRI may consider negative screening as it does not require companies to go above and beyond to be included in an investment portfolio. It weeds out the worst of the worst based on the particular screening criteria used and determines the rest of the companies to be acceptable. This can be beneficial to investors who are worried that SRI may be too exclusive.

Negative screens can also prevent investments into specific countries. Many exclusionary funds will exclude government bonds from countries that are known as human rights abusers. This not only prevents you from supporting practices that you find unacceptable, but it can also prevent you from investing in governments that are particularly egregious.

Drawbacks

One of the largest criticisms of negative screening is that it doesn’t work to support investments that align with an investor’s values. Negative screens work solely on eliminating investments that go against investor values. They do not place companies that support investor values at any particular advantage. By simply avoiding companies who actively work against investor values, negative screens do little to elevate the companies that actively do good. It is widely thought to have no tangible impact, as another investor (that is not focused on SRI) will likely invest in those stocks.

Examples

The most basic form of a negative screen is to avoid investments in ‘sin’ industries. This is also one of the earliest forms of negative screening. In the 1700’s, religious investors in the U.S. refused to place investments in tobacco, alcohol or gambling ventures. Even today, there are funds that screen based on specific religious doctrines.

Another example of a negative screen would be to screen for companies that have had any sexual harassment allegations in the past six years. Assuming that the fund is regularly rebalanced, any company that has not had a sexual harassment allegation in the past six years would be included or remain in the fund. A company that has had a sexual harassment allegation would be eliminated from the fund entirely.

What is Positive Screening?

Sometimes a fund manager may find that negative screening tactics may leave quite a few investments to choose from. This is where positive screening can be helpful.

Positive screening, or as it is sometimes referred to, ‘best-in-class screening’, is a process that identifies companies that are actively making contributions to social or environmental change. This enables investors to screen for and support practices that they find impactful.

Positive screening techniques work to identify and highlight organizations that are actively functioning to further environmentally sustainable and positive social practices, rather than simply avoiding bad behavior. Companies shown to have a positive impact are supported, while those who simply meet the status quo may fail the screen.

Advantages

Positive screening often looks to include only the best companies in a given impact category in the fund or portfolio. 

Best-in-class screening also encourages companies to compete with each other for investment dollars. When investment funds are based on the environmental, social or governance performance of companies, this incentivizes companies to compete with one another to create more impactful change. Positive screening not only rewards companies that do well, but it encourages industry peers to further advance their positively impactful corporate practices as well.

Drawbacks

The one major downside of positive screening is that it can be too exclusive. Investors interested in diversifying their portfolio may have trouble doing so through a positive screen. Depending on how rigorous their screening process is, it can sometimes lead to just a few companies making the cut. However, if the screen is too lenient, it can allow for companies that aren’t necessarily committed to the given cause squeaking through. This can make the positive screen feel like a moot point altogether.

Examples

Many investors are indicating that it is not enough to simply avoid harmful investments. They are interested in investing in companies that actively support their values. A common positive investment screen is for companies that create a certain amount of clean revenue. For a screen that required at least 75% clean revenue production, then only companies that met that hurdle would make the cut.

How Does a Fund Manager Screen Investments?

Because screening is subjective to the investor’s values, finding a fund or portfolio that closely matches your values is essential. But how does a fund manager actually screen its investments?

The screening process is usually implemented in one of two ways: a third-party investment manager or the use of standard restriction screens from a third-party data vendor. In essence, a firm will either outsource the screening process or they will do it themselves based on third-party data.

A firm will audit funds or portfolios at specific intervals, often quarterly or annually. Investments that do not meet the screening criteria at the time of the audit are removed from the fund or portfolio altogether.

Investors must be careful to review the screening criteria closely. A fund may say that they use environmental, social or corporate governance screens, but they may not be as rigorous as an investor would like. Understanding which causes are important to the investor and how restrictive the investments should be is important when considering a firm’s screening methods.

Is One Form of Screening Better Than the Other?

There is no one form of screening that is inherently better than the other. Because positive and negative screening works in two different ways, it is widely agreed that a combination of both methods will lend itself to the most well-rounded screening process.

It is important that the investor has a clear idea of their SRI goals and personal delineations for success to be sure that the chosen investments align well with those ideals.

When Screens Get It Wrong

Just because a company passes a screen doesn’t mean they are perfect.

Screens are merely tools that are used to help a fund manager or research department quantify what it means to be a socially responsible investment. This does not always mean that the screens are particularly rigorous, or that the company being screened is entirely ethical. A company could pass on one screen but fail another.

For example, consider a fund manager that is tasked with identifying companies that are considered low waste by environmental criteria. A company may meet the low waste requirement but also be in the midst of a sexual harassment scandal. This company would pass the positive screen. If the fund manager also had a negative screen to exclude companies based on sexual harassment claims, this company would fail. It all depends on what the investment opportunities are being screened for.

Final Thoughts

Socially responsible investing attracts investors that are not only interested in turning a profit; They are also looking to support their community, the environment, and causes that they are passionate about to thrive. Investment screens help analysts identify which companies will gain investor’s support. They offer a standard by which investors can judge companies and hold companies accountable for their values and actions. Understanding screens can help you identify investments and help you feel confident that you are supporting a good cause.

By Impact Investing

Impact Investing and the United Nations Sustainable Development Goals

Impact Investors are increasingly adopting the United Nations Sustainable Development Goals (SDGs) as their own. This can involve mapping investments to specific SDGs or even more thorough strategic alignment through the design of financial products specifically for their achievement. However, there is still a lack of awareness across the financial sector, particularly in the United States, as to what the SDGs are and how Impact Investors should interact with them.

Generic Logo for Sustainable Development Goals

One thing for sure is that financing the United Nations Sustainable Development Goals (SDGs) will involve considerable investment across sectors. Uniquely, the Impact Investing industry has the potential to play a pivotal role in the process of achieving these ambitious goals. The following article seeks to clarify some of the key points about the SDGs and raise awareness in the field.

UN Sustainable Development Goals

The 17 Sustainable Development Goals (SDGs) were adopted by all 193 UN Member States in 2015 as part of the 2030 Agenda for Sustainable Development. These goals were intended as an urgent call for action to solve the world’s greatest development challenges. Ranging from an end to poverty and reduced inequality to tackling climate change and preserving the world’s oceans and forests. Each goal has individual targets and indicators as a means to benchmark progress. To illustrate, Goal 1, No Poverty has five numbered targets. The first of those targets is that “By 2030, eradicate extreme poverty for all people everywhere, currently measured as people living on less than $1.25 a day.” These ambitious goals are aimed at driving sustained change that will dramatically improve the living conditions not just for humans, but many forms of life on the planet. 

Financing the SDGs

To realize the SDGs will take partnerships not just government, civil society, and business but also the financial industry. It is estimated that achieving the SDGs will take between US$5 to $7 trillion with a $2.5 trillion investment gap in developing countries. Private funding and impact investing hold significant potential to close this gap as investors can leverage large amounts of investment capital.

Mapping: The process of matching investment goals or outcomes to corresponding UN Sustainable Development Goals. For example, an investment project in a developing country that increases access to clean water for both domestic and commercial applications might be mapped to goals 3, 6, 9 and 10.

Many of the world’s most prominent financial institutions have begun to explore Impact Investing strategies, including Dutch pension fund PGGM and Swiss bank UBS. The Impact Investing industry is rapidly mapping their investment goals with the SDGs, aligning their strategic goals and shaping investment products designed to achieve them.

 

‘Investability’ of the SDGs

The ‘investability’ of the SDGs is a hotly debated topic, as they are widely thought to be designed primarily for use by governments. However, a 2016 report by ShareAction, UNPRI and the Baring Foundation found that 60 percent of institutional investors surveyed felt that “taking action to support the SDGs aligned with their fiduciary duties” and could “create opportunities for greater returns.” The top four SDGs identified by C-Change with the greatest potential to do this were Infrastructure (Goal 9), Economic Growth (Goal 8), Climate Change (Goal 13) and Sustainable Energy (Goal 7)

A report by UBS, In Challenge Lies Opportunity, links long term investment themes with corresponding SDGs calling out particularly investable areas such as waste management and recycling. Additionally, some Impact Investment firms, such as Dutch pension funds PGGM and APG, have rated the ‘investability’ of the SDGs and identified investment opportunities accordingly. Despite this, it is widely agreed upon that each SDG has varying levels of ‘investability’ and not all make for clearly competitive investment cases.

 

Drivers of Impact Investing for SDG Achievement

Impact Investing has the benefit of being targeted towards regions and sectors where traditional foreign direct investment has typically had difficulty reaching, for instance, frontier markets such as Africa or underserved communities in the United States. Additionally, these investments often target sectors that have experienced difficulties garnering investment historically, such as health and rural development. The SDGs are very focused on the improvement of these regions and sectors and so Impact Investment better aligns with the goals than traditional investment approaches.

The Dutch SDG Investing (SDGI) Agenda Report, argued that the SDGs offer a “simple and attractive entry point” for those investors not yet involved with SDG or Impact Investing from which they can build out their portfolios. Whilst the Global Impact Investing Network stated that  Impact Investors can use the SDGs to “refocus and re-energize their existing activity.”    

 

Barriers of Impact Investing for SDG Achievement 

Conversely, a Center for Global Development Report found that the Impact Investing marketplace is highly fragmented which makes coordination difficult and increases transaction costs. The speed of development and evolution of the field creates issues that inhibit co-financing and the sharing of due diligence, this reduces the attractiveness of investment. Additionally, the lack of market infrastructure and favorable regulation in a majority of the Impact Investing marketplace is a hindrance to its development and also the ability to support the achievement of the SDGs.

The primary issue in the marketplace is a lack of data to measure progress. Traditional investments rely on the ability to benchmark opportunities against industry standards. Without this data, it is difficult to attract traditional investors. As well as this, there is an inconsistency of metrics between funders, creating additional issues. The Dutch SDGI Report found that there has been a growing movement in the last few years of standard setting and data aggregation, including the adoption of big data methodologies, in the hopes of mainstreaming SDG investing.

 

Overcoming these Barriers

Despite the numerous barriers to Impact Investing and the achievement of the SDGs there are many ways to overcome them. ShareAction recommended a number of these methods in their report, “Transforming the World” including; “making the goals relevant to investors, regulatory action, better company reporting and transparency, increased capacity for action amongst investors, demand from clients, support from other actors and tackling short-termism.”

Increased availability of evidence, data, metrics and benchmarks were also flagged as essential to overcoming these key barriers to SDG achievement. The EMPEA has suggested a step-by-step question approach to helping investors consider how they can more fully engage with the SDGs and conquer these barriers.

Source: EMPEA SDG Working Group EMPEA SDG Working Group. 2018. “Private Equity’s Role in Delivering the SDGs: Current Approaches and Good Practice.”, 11.

SDGs as a Common Language or Framework

The most important addition that the SDGs can bring to the Impact Investing industry is in the process of standardization. The United Nations Principles for Responsible Investment (UNPRI) considers the SDGs as, “the globally agreed sustainability framework”.  It is now general consensus in the industry that the SDGs are a good common framework or language through which to communicate the world’s greatest challenges. The SDGs can assist investors to understand, “the sustainability trends relevant to investment activity and their fiduciary duties.”

The prevalent question in the industry now is not whether to consider the SDGs but how to do so appropriately and meaningfully. There is increasing research into this process. Impact Management and Measurement organizations, such as the Impact Management Project and GIIN IRIS+, are working on this. However, this is a constantly evolving space with no “silver bullet” defined as of yet.

 

SDGs Looking Forward

With such ambitious goals come challenges in achieving them and taking the extra step of linking them to investments and finding a clear way to measure success. Nonetheless, there has already been significant progress for individual goals and targets. Take for example the progress in regards to global poverty:

In 2016, just under 10 percent of the world’s workers were living with their families on less than $1.90 per person per day, down from 28 per cent in 2000. In the least developed countries, nearly 38 per cent of workers in 2016 were living below the poverty line.

As more and more resources get behind these goals from investors, public entities and private donors, the hope is that this framework can drive massive change to improve the lives of billions of people across the globe. How investors allocate resources in support of these goals has the potential to massively accelerate global progress.

By Impact Investing

Retail Impact Investing Options

What impact investing options are currently available to retail investors?

What is impact investing and how can I participate? These are questions we often hear from individual investors looking to connect their money with meaning.

 

According to the Global Impact Investing Networking (GIIN), impact investing refers to investments that  are “…made into companies, organizations, and funds with the intention to generate social and environmental impact alongside a financial return.” The term was first coined in 2007 at the Rockefeller Foundation’s Bellagio Center, in recognition of the rapid growth of impact investing among retail investors over the years-to-come.

Given that there is a growing demand for readily accessible impact investment options, we’ve decided to compile a list of these that are available to regular investors. We’ll work to regularly update this compilation to cover the most popular and accessible options.

Although some of these companies could be classified as “competitors” of CNote, we are avid supporters of the impact investing movement. We believe that every new dollar committed to companies focused on moving impact investing forward is a win for both CNote and society-at-large. To that end, we hope you will find this guide helpful.

Methodology and Definitions

Since impact investing is a relatively new concept for most, the standards for what is and is not an impact investment can vary. We have compiled a list of companies that we feel have been generally accepted as offering impact investment products that are accessible to investors of all sizes. We believe that these companies fairly represent the current landscape of established retail offerings accessible to investors of any net worth. As a result, products and opportunities that may only be available to foundations, trusts, and high-net-worth investors did not make our list.

We recognize that some equity-focused platforms focus on divestment, wherein companies that do not align with a specific impact approach are excluded from their portfolio of investments.  Classic examples include companies that produce weapons, tobacco, and other so-called “sin” stocks. While we acknowledge this kind of socially-conscious investing, we are excited to see many platforms taking a more active approach by allocating capital directly to companies driving a beneficial social impact. After all, we believe impact investing can be so much more than a decision not to invest in a certain class of companies.

For simplicity, we’ve also tried to separate impact investing options into various categories: robo-advisors, fixed income investments, exchange-traded funds (ETFs) and other offerings. Some of these offerings have their own platforms where you can invest directly, like CNote, whilst others are available through brokers, or via direct offerings like Calvert.

 

Impact Investing Options

 

Aspiration

Category: Robo-advisor

Doing business in an industry that has traditionally served the wealthiest, Aspiration has made it their mission to “bring the best financial solutions services to everyone.” Aspiration offers a mix of banking and retirement services, links to charitable giving and investment products.

Unlike other platforms, Aspiration allows customers to decide how much to pay towards their monthly fee, “what you think is fair – even if it is zero.” They also incorporate the Aspiration Impact Measurement (AIM) system into their banking which allows you to track your personal ‘People and Planet’ impact as you shop.

  • Minimums: $0- 10
  • Fee Types: “Pay What is Fair”
  • Products: Banking Services, Retirement Services, Professionally Managed Funds
  • Returns: Market

Summary: Aspiration largely falls in line with other impact investment options like Swell or OpenInvest. They see themselves as being “radically accessible” and serve a relatively young consumer base. Such accessibility is apparent in the variety of banking services they offer in addition to a dedicated fund.

However, the products they offer, while wide ranging, are ultimately limited. For example, they only offer the option of two investment funds, with only one, their “Redwood Fund,” impact-focused. They do however offer seven charitable causes one can donate to for a tax deduction, but these are not investment products.

Conclusion: Aspiration is a platform that caters to those seeking accessibility and those new to impact investing who may be intimidated by traditional financial products or turned-off by the modus operandi of most large financial institutions. One of Aspiration’s main selling points is their “pay what is fair” fee structure. This flexible fee structure and lack of minimum investment makes it a good option for a potential investor simply looking to get a feel for the investment landscape.

 

Betterment

Category: Robo-advisor

Betterment, an investment platform founded in 2008, has recently added elements of impact investing to their lineup of products. In 2017 they introduced their “Betterment SRI” (Socially Responsible Investing) portfolio strategy. They seek to blend their SRI approach with the features of their general investing strategy, stating, “We allow socially conscious investors to express that preference in their portfolios without sacrificing the aspects of Betterment’s advice that protect their returns the most: proper diversification, tax optimization, and cost control.”

  • Minimum: $0 for their Digital Plan; $100 000 for their Premium Plan
  • Fee Types: 0.25% for Digital; 0.4% for Premium
  • Products: US Large- Capitalization Stock
  • Returns: Market

Summary: Betterment offers tax-loss harvesting and great account minimums, catering to millennials and those with an eye towards retirement. Betterments is still attempting to cohesively integrate their main investment platform with their impact investment platform. One of the main limits to their approach is that, “The ESG scoring approach to SRI does not fully eliminate companies that investors interested in SRI may consider undesirable.”

As an example they do not exclude ETFs, SUSA and DSI, whose stock offerings include investments in, “some energy companies that engage in oil and natural gas exploration, like Hess.” Betterment is not alone in this as most successful ESG investment methods often target large ETFs. Positively, Betterment is honest about its shortcomings, and  its options are still relatively conservative.

Conclusion: Betterment is a serviceable investment platform, offering low minimums, great value for retirement accounts, and clear utility for people without a large disposable income. As an impact investment platform, they have an approach that is safe but relatively unambitious.

 

Capital Impact Partners

Category: CDFI

Capital Impact Partners is a nonprofit CDFI that seeks to leverage its thirty-plus year relationship with traditional financial institutions and other funding sources to support the equitable development of local communities. They achieve this by arranging loans tailored to the needs of their low and middle-income borrowers.

Capital Impact Partners is focused on services like; healthcare, education, affordable housing, and healthy foods for those in underserved communities. Their operating vision is to help create, “a nation of communities of opportunity built on a foundation of equity, inclusiveness, and cooperation.”

  • Minimum: $1000
  • Fee Types: None
  • Products: Fixed Income Notes
  • Returns: Fixed Interest Rates according to 1 to 10-year terms

Summary: Capital Impact Partners maintains an on-balance sheet loan portfolio of $311.3 million, over a third of which has been allocated towards education. From there, housing, healthcare, and community development round out their portfolio. They tout that they have served over five million people and have created more than 37,000 jobs.

Those interested in investing through Capital Impact Partners must purchase “Capital Impact Investment Notes” through their brokerage account. This makes the process simple but limits your ability to have any real say in where your money will go. Therefore, investing in Capital Impact Investment Notes for social impact purposes requires that you largely agree with their core values and trust that your money is being put towards a meaningful cause.

Conclusion: Capital Impact Partners maintains a relatively strong AA- S&P credit rating. Coupled with their thirty-five years of business, this makes them a serviceable investment vehicle for those who share the same impact investing priorities and wish to direct funds towards the development of underserved communities.

 

CNote

Category: Platform & CDFI

CNote is an award-winning, first-of-its-kind financial platform that allows anyone to make money investing in causes and communities they care about. With the mission of closing the wealth gap, CNote directs every dollar invested toward funding female- and minority-led small businesses, affordable housing and economic development in financially underserved communities across America.

  • Minimum: $1
  • Fee Types: No fees for retail investors. Other services like underwriting, customized investments, and specialized impact reporting for institutional investors likely have fees. 
  • Products: Fixed Income Investments
  • Returns: 2.00% product with quarterly liquidity

Summary: CNote seeks to fulfill its mission of closing the wealth gap, “by providing a new and sustainable capital source for our community-lender partners, generating better returns for our members, and by increasing capital access and economic activity in communities that need it most.”  

CNote is a strong option for investors who want to support community development across America and see the tangible impact their money is having. CNote produces regular borrower stories and impact metrics to highlight just how investors dollars are driving change.

CNote supports a variety of account types and customers including personal, trust and business accounts. Additionally, CNote provides robust support for financial advisors who want to invest and manage their clients’ funds. Finally, CNote supports institutional investors and works with foundations, large banks, and other traditional financial institutions to deliver impact at scale.

CNote has no minimums or fees.

Conclusion: If you want your money to make a tangible impact on individuals and communities across America, CNote provides competitive returns and flexible liquidity. 

 

Calvert

Category: Community Investment Note

Calvert was one of the first family foundations to trade mutual funds to avoid doing business during apartheid South Africa. They officially launched their portfolio and Community Investment Note in 1995. In their own words, Calvert has made it their goal, “to serve sectors and regions that are often overlooked or underserved by the traditional capital markets.”  

  • Minimums: $20 for direct and Online Plan; $1000 for Brokerage Account
  • Fee Types: Brokering fee for the Brokerage Account
  • Products: Fixed Income Investments
  • Returns: Market

Summary:  Calvert has a separate mutual fund and foundation.  Their foundation offers three main loan products; balance sheet loans, structured debt loans, and asset-backed facilities.

The non-profit places special emphasis on nine social impact sectors, “shaped and ever-evolving by a maturing impact investing industry and macroeconomic shifts that affect these markets.” Those impact sectors include; Affordable Housing, Community Development, Education, Environmental Sustainability, Health, Microfinance, Renewable Energy, Small Business, and Sustainable Agriculture. Calvert has a strong industry reputation, boasting a note balance of $390,870,019. They offer a return on investment in the range of 0-4%.

Conclusion: Due to its long history, Calvert has earned its place as a trusted impact investment platform. The vast majority of their loans are funded through a combination of balance sheet and structured debt loans. Overall, Calvert offers both lower and higher cost options for potential investors.

 

Earthfolio

Category: Robo-advisor  

Earthfolio does not only bear the distinction of being the first online investment service to focus primarily on sustainable investing, but in 2015 they also launched their app. Earthfolio screens its investments against 10 ESG criteria. These stated ESG criteria include; Environment, Animal Welfare, Equality and Diversity, Non-Violence, Healthy Living, Corporate Governance, and Community Development.

  • Minimums: $25 000
  • Fee Types: 0.5% annual fee
  • Product: ETFs, Stocks, Bonds, Mutual Funds
  • Returns: Market

Summary: “Sustainability is not a niche for us,” Earthfolio states on their site, “it’s the DNA of how we’ve invested for over fifteen years. Every portfolio we build invests exclusively in a broad spectrum of sustainable mutual funds that screen on up to ten environmental, social, and governance, criteria.”

Earthfolio is a good choice for those looking for a more established platform, given that it is one of the oldest options on this list. Earthfolio caters to customers with $25,000 or more available to invest in any of their range of product offerings. Given this high minimum, Earthfolio may seem out of reach for young people looking to make an impact investment.

Conclusion: For an investor that has $25,000 or more to get started and wants a platform with a long track-record, Earthfolio offers a good set of products that is likely to fit most investors’ needs.

 

Hedgable

Category: Robo-advisor 

Hedgeable is similar to the other relatively new impact investment platforms on the list. Their mission, “to democratize the market!” seems to be exemplified by their very low minimums and the unique range of SRI themes they offer. Hedgeable focuses on eight different themes for its SRI platform; U.S. Social Responsibility, International Social Responsibility, LGBTQ Equality, Low Carbon Footprint, Alternative Energy, Female Leadership, Social Fixed Income, and Water Purification and Conservation.

  • Minimums: $1
  • Fee Types: 0.3%- 0.75%
  • Products: ETF, Mutual Funds, Equities, Commodities, etc
  • Returns: Market

Summary: With the motto “Private Wealth for Everyone,” Hedgeable offers a $1 minimum for opening an account and a range of personal, retirement, and corporate accounts. To fulfill their mission statement, Hedgeable allows individuals access to portfolios with, “customized asset allocation that can include access to asset classes typically reserved for only the wealthiest investors.”

Hedgeable is considered one of the better robo-advisors in the market right now because of the services and options it provides, according to Business Insider, but Hedgeable is not great for those starting out. As Conroy demonstrates in magnifymoney.com, those with accounts under fifty thousand dollars will be charged a 0.75% fee, while those with assets under management between one to ten million dollars face a 0.3% fee.

Conclusion: Hedgeable has a lot to offer as an impact investment platform. However, if you are a potential investor just getting started, there are other platforms out there that do not charge these fees. If you are an investor with a relatively large account, Hedgeable caters to you.

 

iShares

Category: Sustainable Investment Funds – ETFs

Summary: iShares is a family of exchange-traded funds managed by BlackRock. As implied by Larry Fink’s Letter to CEOs, BlackRock’s iShares platform has increasingly been placing an emphasis on its more sustainable investment offerings. The firm breaks down sustainable investing into four key categories: ESG investing, Thematic Investing, Impact Investing, and Screened Investing. iShares offers separate ETFs for each category.

Rates will vary across investment offerings and level of management.

Note: To invest in ETFs issued by iShares, you’ll need to have a brokerage account that allows you to buy and sell public equities and ETFs. There may be fees and other transaction costs associated with individual brokerage accounts.

You can learn more about iShares suite of SRI product offerings here on their website. Currently, they have around 14 unique offerings.

Motif

Category: Robo-advisor

Motif is a thematic investing app, meaning that they have compiled a group of stocks related based on a theme that one can invest in, as opposed to allowing investors to select individual companies or stocks. Describing thematic investing in their own words, Motif states, “We analyze data to uncover important trends driving the economy. Then we create dynamic portfolios of companies with exposure to these trends so that you can easily invest in them.” The three main investment themes in which Motif places primary focus are; Fair Labor, Sustainable Planet, and Good Corporate Behavior.

  • Minimum: Depends on the package/service you choose
  • Fee Types: None for Next Wave Portfolio; 0.25% annual fee for Motif Impact Portfolios; 0.5% annual fee for Motif Thematic Portfolios
  • Products: Stocks, ETFs, etc
  • Returns: Market

Summary: They define Motif as a, “basket of up to 30 stocks or ETFs intelligently weighted to reflect an investment theme, market insight or innovative trend.” One problem that some investors may have with Motif is the fact that dividends are not automatically reinvested. This slows down the investing process and, since it usually costs $4.95 per trade, makes the overall investing experience more expensive. Their management fee is also a cause of concern, as it is just an approximation and not the sum total of what it costs to do business with them.

Conclusion: Motif sells the idea of thematic investing because it is more comprehensive for investors who want to invest in causes rather than in single stocks. Motif has the issue of not reinvesting dividends automatically, which makes reinvesting feel cumbersome. With that said, it still gives investors the opportunity to make long term investments for issues they want to see change or transform with their investment.

 

Newday

Category: Robo-advisor

Newday, launched mid 2018, is a financial technology and institutional asset management company with the mission to, “spread the power of investing with your conscience”. Their portfolio is a “custom-made, proprietary, and targeted investment strategy” where customers can benefit their choice of 6 impact areas; Gender Equality, Fresh Water, Ocean Health, Global Impact, Climate Action and Animal Welfare. Investment is possible through their mobile app. 

  • Minimums: $5 
  • Fee Types: 1% annual fee
  • Products: Stocks, Custom Portfolios
  • Returns: Market 

Summary: Newday’s target demographic appears to be millennials as investment is strictly available via their mobile apps for IOS and Android phones, with plans to introduce a web-based platform in the near future. Customers can choose their impact, risk level and schedule recurring investments, via the app. They focus heavily on financial education with the “Learn” tab on their webpage as a key focus, regularly spotlighting companies they invest in and explaining their reasoning for said investment. 

They currently offer six equity portfolios consisting of approximately 20 to 40 individual stocks, with the aim of also introducing socially responsible checking and savings accounts later this year. All of their portfolios, except Animal Welfare, were built to reflect the 17 United Nations Sustainable Development Goals. Newday also donates 5% of their revenue from asset management fees to their NGO partners who include; Conservation International, Lonely Whale Foundation, Global Fund for Women and Water.Org. 

Conclusion: A Robo-advisor for millennials new to impact investing who want to learn as well as invest. The Newday platform is easy to use, transparent and affordable, allowing users to personally tailor their account according to their investment preferences and recommendations from Newday. However, Newday is still in its infancy with just over $1 million under management and is by no means a tried and tested method of investment.

 

OpenInvest

Category: Robo-advisor

Created in 2015, OpenInvest has a mixed approach, allowing you to compile a portfolio based on 12 different issue options. Of these, six are divestment strategies and six are investment strategies. Openinvest states that it is, “dedicated to using technology to bring honesty and transparency to financial services, while making socially responsible investing easy and more accessible.”

  • Minimums: $100
  • Fee Types: 0.5% annual fee
  • Product: Equities, some ETFs, Bonds, Mutual Funds, Custom Portfolios
  • Returns: Market

Summary: While OpenInvest offers a similar package to other new impact investment platforms on the market with regard to price, they, on the whole, take stronger political and moral stances than the other platforms on this list. They strongly value a commitment to the political stances they take and have admitted to, “frequently turning away customers who are not ready to invest or whose needs are met elsewhere.” They offer a new technology that allows members to proxy vote via their app, which may be appealing to some investors.

If your political beliefs align with OpenInvest, then you will probably love the platform. If they don’t, however, you might want to look elsewhere. They’ve recently received venture funding from a large group of respected investors, which may mean they’ll expand their product offerings in the near future.

Conclusion: For an impact investor who truly identifies with their message and political stances, OpenInvest is a good option. If you want to ease your entry into impact investing, there are other options that don’t require such a minimum investment or the support of their strong political positions.

 

Personal Capital

Category: Robo-advisor, Account Aggregator 

Personal Capital is a personal wealth management system that is focused on making investing simple even for a wide range of investor risk profiles. Within its portfolio of services, Socially Responsible Investing (SRI) is a key part of the firm’s offerings. By partnering with Sustainalytics, a global leader in ESG research and ratings, Personal Capital is able to help users curate stock portfolios that meet their individual impact preferences. 

Summary: Personal Capital encourages companies to connect all their financial accounts to get a “complete financial picture.” They then encourage customers to connect with an in-house financial advisor to create a retirement plan. Taking a hybrid approach, Personal Capital claims to “combine award-winning technology and financial tools with experienced people to create the smart, easy way to transform your financial future.”

Fee structures as of November 2019 are:

  • First $1 million: 0.89%
  • First $3 million: 0.79%
  • Next $2 million: 0.69%
  • Next $5 million: 0.59%
  • Over $10 million: 0.49%

Conclusion: If you’re looking to streamline the management of your finances and want help from a professional advisor managing your money Personal Capital may provide the right mix of human and technological touches. Their fees are competitive and they offer a suite of free tools to help educate and convert clients.

 

RSF Social Finance

Category: Social Investment & Donor Advised Funds

RSF Social Finance offers a diverse range of funds and makes a point to promote transparency as a key feature of their investment model, “We believe that inquiry and dialogue are essential to transforming people’s relationship with money and moving the economy toward greater equity.” RSF Social Finance organizes quarterly “community price gatherings,” where investors and borrowers have a chance to meet and where quarterly interest rates are decided, in addition to “Shared Gifting Circles,” which “give participants distribution and allocation authority over grant funds.”

  • Minimums: $1000 for Social Investment Fund; $100 000 for Regenerative Economy and Food System Transformation Funds
  • Fee Types: N/A for Social Investment Fund; 0.6% annualized Investment Fee in addition to a 0.75% – 1.25% annualized “Community Contribution” for Donor Advised Funds
  • Product: Various Specialty Funds
  • Returns: 1.25% (decided quarterly) for the Social Investment Fund; 1% annualized for the Regenerative Economy and Food System Transformation Funds

Summary: RSF Social Finance offers various fund options. The Social Investment Fund provides direct investment into social enterprises in the fields of climate & the environment, education & the arts, and food & agriculture. Meanwhile, the assets held in the Donor Advised Funds are kept in a, “mission-aligned investment portfolio, which seeks safe and liquid cash opportunities that achieve deep impact.”

RSF Social Finance have claimed a 100% repayment rate of principal plus interest to investors in every year since its 1984 inception. With that said, the 1.25% return for the Social Investment Fund has only begun for the 2019 calendar year, previously hovering between 0.75% to 1.00%. The relatively high minimums for the funds are offset by minimum-free gifting options like Money to Transform, Shared Gifting and their Seed Fund.

Conclusion:  Their giving options are all designed to give individuals who believe in the same mission the chance to put their own money towards the value-driven organizations and entrepreneurs identified by RSF. Overall, their diverse product offering, long track-record, and above-average transparency makes it a worthy option on this list.

 

Stash

Category: Robo-advisor

Stash explains that their core mission is making financial opportunity and literacy available to everyone. Their focus is on making investing as simple as possible, with younger investors serving as their target clientele. They encourage their users to, “Think big, start small” and offer custodial investment accounts for those under 18 years of age. The main investment themes on their platform are; Clean Energy, Reduction of Carbon Footprint, LGBTQ Rights, Gender Equality, Water Conservation, and other ESG focused companies.

  • Minimum: $5 upfront for Investment Account; $15 minimum for Retirement Account
  • Fee Types: $1 per month for under $5000, 0.25% fee annually for over $5000 for Investment Account; $2 per month fee for Retirement Account
  • Products: ETFs, Bonds, Commodities, Banking, etc
  • Returns: Market

Summary: Stash offers packages like “The Activist” or “The Techie.” It is similar to peers in the space, offering a variety of ways to make investing, especially with regard to SRIs, accessible. They are a thematic investment option that allows investors to invest in theme-based ETFs. There are 33 ETFs options on the app. Stash also allows you to buy fractional shares, usually reinvesting in individual stocks or in one of their other themed ETFs.

Stash works well for beginners because it offers guidance and teaches basic terminology, but it may come at a cost. According to both College Investor and Nerdwallet, investing in Stash is more expensive because of the $1 per month fee which eats into your return as opposed to just investing directly in an ETF.

Conclusion: Stash sought a way to make investing easier and less intimidating. In the end, it faces similar issues that other ESG platforms encounter. If you are an experienced investor looking for an app to use for a long time, it might be better to look elsewhere. With that said, Stash is still a decent option for novice investors who are just starting out and want to make a difference with their money.

 

Street Shares

Category: Peer-to-peer Lending Service

Streetshares is a peer to peer lending service that offers business loans to small businesses and those owned by veterans and current members of the United States Armed Forces. Their mission is to, “Bring trusted digital finance to America’s heroes.” While their website prominently features their commitment to supporting the military and veterans, one doesn’t have to be a military member to apply for a loan from Streetshares or invest in the loans they offer.

  • Minimum: $25
  • Fee Types: N/A
  • Products: Veteran Business Bonds
  • Returns: Up to 5% interest

Summary: Streetshares offers 3- 36 month terms for financing and lines of credit as low as $2000. As opposed to other funding and lending services, Streetshares offers relaxed borrowing qualifications as well as forgoing an application fee which is different from other community lending services. The most anyone can invest on Streetshares is $500,000, and the minimum is $25 for their Veteran Business Bonds. People start receiving interest within 2-5 days as well as receiving funds within 3-7 days.

Conclusion: For those interested in peer-to-peer lending and supporting former service members, Streetshares is a solid choice. It is a dynamic platform for those wanting to invest in a place supporting veterans with a broad yet set list of investing options.

 

Wealthsimple

Category: Robo-advisor

Wealthsimple, Canada’s largest robo advisor, gives customers the option of, “investing on autopilot” through a variety of asset classes, tax loss harvesting, and even offers to manage your first $5000 for free. It also offers a halal investing option for investors who follow and practice Islamic law. It puts a lot of its ESG investing focus on investing in low cost ETFs.

  • Minimums: None
  • Fee Types: 0.4%- 0.5%
  • Product: ETFs
  • Returns: Market

Summary: “Put your money on autopilot!” is an easy slogan to get behind but can often become a dangerous notion to apply, as many critics have noted regarding Wealthsimple’s investment strategy and product offerings. Fees depend upon the amount of money you store in your account, as accounts lower than $100,000 incur an annual fee of 0.5% as compared to the 0.4% fee that accounts with more than $100,000 face.

The main criticism lobbed at Wealthsimple, however, is that it has a conflict of interest in investing in PDF and PHR, which are owned by Som Seif, a board member of Wealthsimple. Both these ETFs don’t trade at the same volume and are not near the price range as the other ETFs on the list, which raises questions as to why they are included in its investment offerings.

Conclusion: How they use their platform to please their customers will always be a question that lingers for Wealthsimple. Beyond acting as an impact investment platform, they have one billion dollars under their tutelage and are invested in ETFs committed towards low carbon emissions, clean technology, gender diversity, affordable housing, and sustainable growth. At the very least, Wealthsimple serves as an example as to how ESG investing can be a complicated enterprise for everyone involved.

 

Wunder

Category: Specialized Solar Project Investments

The Wunder Group is a fintech company founded in 2013 in Boulder, Colorado. Its parent company, the Wunder Group, uses venture capital to help fund the solar projects that WunderCapital promotes. Its motto is to, “Do well and do good,” presumably by investing in solar projects through their curated solar energy portfolios.

  • Minimums: $1000
  • Fees: 0.25%
  • Product: Solar Energy Funds
  • Returns: Depending on the fund, between 6%- 7.5%

Summary: WunderCapital manages solar energy investments and construction for solar energy projects. WunderCapital has a singular goal in mind in prompting solar energy projects and because of this, WunderCapital lacks diversity, leaving it subject to a precarious sector of environmental investing. On top of that, one must be an accredited investor in order to invest in WunderCapital.

Conclusion: WunderCapital has a relatively high minimum compared to other options on this list, but a 0.25% annual fee is hardly unreasonable when all is said and done. If you are an accredited investor and are specifically interested in investing in the solar energy space, WunderCapital could be the right option for you.

 

Conclusion

We hope that this list provides you with a better idea of the various retail impact investment options available today. Before pursuing this line of investing, it is important to note that pooled equities or ETFs may contain stocks that contradict your overarching investment goals. For example, the gender diversity ETF, SHE, holds shares in ConocoPhillips and Occidental Petroleum Corporation, among others, which might be at odds with an overall portfolio strategy targeting renewable energy sources. Be sure you do your own research before you commit to any of the platforms on this list. It’s often useful to dig a bit to find out the true level of impact and rigor around portfolio construction associated with any investment option you choose. 

As the industry matures, impact investing space will need to address these kinds of issues, but there is hope for socially conscious investors. The diversity of impact investing options on this list speaks to the market demand of investors that value social and financial returns. According to Christopher Skroupa in the Forbes article In ESG We Trust — The Risk And Rewards Of ESG Investing, “… impact investing has grown 97% in the past decade.” We believe that this trend will only continue in the years to come, and we hope that you too will soon be part of it

Given the negative impressions people typically have of the financial services industry, a lot of these platforms are making a concerted effort to make themselves accessible, including CNote. As this space continues to grow, one can only hope to see the clear impact that these businesses and platforms provide to society as a whole. We hope this list helps you find solutions that allow you to align your investments with your values. 

By Borrower Stories

Food-Lish-Us – Cyndy & Dennis Scott and their family-run food…bus

Food-Lish-Us: A food…bus?

At any one of the community events around Denver, Colorado, there is bound to be a collection of food trucks. Nothing adds to the festivity quite like a dozen boxy vehicles, each emitting a steady stream of delicious food and mouthwatering aromas into the air. 

In any given congregation of food trucks, however, Cyndy’s truck stands out. And that’s because it’s not exactly a truck…

“My husband sent me out looking for a food truck. And I came back with a bus,” she recounted when we interviewed her about Food-Lish-Us, the business the couple started together. “My whole thing is I wanted to stand out…I wanted to be different…And so, you have to learn, ‘Okay, what’s the hook.’”

Indeed, her bus-turned-truck is twice as long as an ordinary food truck, cardinal red with a pink accented “Cyndy’s” displayed in large, looping letters. The background is painted to resemble an 80s cafe, complete with records and a checkerboard floor.

In terms of standing out and hooking customers, it does the trick. The unique bus is reflective of its owners, Cyndy and Dennis Scott, a couple united in pursuing their passions, helped along by a small business loan program for veterans like Dennis. 

“We wanted to do something for us. Something that we can control, versus somebody telling us we have to punch a clock.”

Their story is captivating, but what really draws a crowd is the food they create together.

Irresistible food that connects a community

Good food has a unique power to bring a crowd together. And the beauty of food trucks is that they congregate first, and the people come after.

“I get the biggest thrill out of watching people enjoy the food and loving it…”

Cyndy’s truck serves homestyle meals “just like Grandma’s,” meant to evoke a feeling of warmth and security. She dishes up burgers, fries, and most notably, Cubanos: a salute to Chef, the movie from which Cyndy and her husband originally got the idea for a food truck.

Indeed, her customers eat it up. Cyndy remembers with particular fondness the Parker Days, an event she served at which had over 300,000 attendees.

“We never had not-a-line in front of us,” Cyndy told us proudly. Throughout the 3-day event, she regularly left the truck to restock on ingredients, navigating through the crowds in a golf cart to reach her car and drive to the nearest grocery. Their truck spontaneously ended up being part of a parade at the end; and afterwards, people wanted to tour the inside.

Of course, there were stressful days, too.

At Brighton’s Tiny House Festival, she and her husband Dennis found themselves frantically trying to put out a grease fire that had combusted on the stove. Remarkably, their customers stayed in line; and once the fire was out, they proceeded to order food as if nothing had happened.

Either way, it seems that customers love Cyndy’s food. And that, for her, is the greatest reward. 

“I get the biggest thrill out of watching people enjoy the food and loving it. It brings comfort to me…and it brings comfort to them,” she told us earnestly.

Customers waiting to order from Cyndy

A lifetime of cooking and adventure

Self-described as a jack of all trades, Cyndy has enjoyed a diverse professional background. At age 15 she began her first job as a cook on a guest ranch in Wyoming. After that, she would become a nurse for 25 years, then a bus driver, a beautician, a tour guide, and a saleswoman in the auto industry. 

“My life has been one adventure after another. And this is the next chapter of my book.” — Cyndy, states on her website

Eventually, however, she and her husband Dennis decided they wanted to stop working for corporations and start doing what they loved.

“Our kids thought we were out of our ever-loved minds,” Cyndy laughed. “But we wanted to do something for us. Something that we can control, versus somebody telling us we have to punch a clock.”

Dennis Scott, a veteran who also had experience cooking in the military

She and Dennis began to look into the idea of starting a restaurant. The couple was disappointed to find that a brick-and-mortar restaurant was beyond their means. New inspiration came, however, when they watched Chef, a movie about a talented chef who quits his job in a restaurant to start a food truck, where he can enjoy the freedom of cooking his own recipes — a story not unlike their own.

So when they sold their house, they used the proceeds to buy the bus, taking the opportunity to make their dream into a reality.

Inching along

Cyndy and Dennis looking over a menu sign

Running a food truck is never a cake walk, and it was especially difficult in the beginning.  In their first year with the truck, 2017, Cyndy and Dennis relied on the volunteer efforts of their family and friends to staff their business — something which Cyndy greatly appreciated, but laughingly recommended not to do.

“Everyone that knows us, they can’t believe that we have yet to give up…”

To meet various expenses, the couple applied for a loan with a regional bank but were turned away. However, their banker referred them to the Valor program, an extension of Colorado Enterprise Fund (a CDFI that CNote partners with) which offers loans to veterans.

Dennis, who had served in the military and even cooked for the officers, qualified for the loan. After a simple application process, they received an approval within the week.

Cyndy looks on from the window of her truck

The loan provided just the financial cushion they needed to meet maintenance fees, buy inventory, and pay for unexpected expenses — like towing bills of up to $1,400 a pop for that oversized bus. In addition to the money, they also received invaluable financial consulting, such as training in Quickbooks. Cyndy recognizes the difference the loan has made in the smooth running of her business, and she is grateful. 

“Thanks to the Valor program, we’ve been able to inch our way along without too much of a headache.”

The adventure continues

Today, in addition to Cyndy and Dennis, Food-Lish-Us employs two professional chefs and two general hands. The goal is that Cyndy will spend less time on the truck, focusing instead on background work such as marketing.

Cyndy Scott and her husband Dennis (left) with their team (right) standing proudly outside their food truck

As for more long term goals, Cyndy and Dennis are thinking about adding another truck to meet the demand of their food at local events. And they have not quite let go of their dream to start a brick-and-mortar restaurant.

The adventure of the food bus continues — and who knows where it will stop next.

For now, the two are just happy to be along for the ride, doing what they love, on their own terms and bringing a smile to the world one Cubano at a time.

Learn More:

The Colorado Enterprise Fund, was founded in 1976 and is a non-profit lending institution that offers loans to entrepreneurs and small businesses unable to get traditional bank financing. For over 40 years, Colorado Enterprise Fund has been helping people realize their dreams of starting and growing their own businesses.

Food-Lish-Us – Visit their website to find out where they’re going to be serving up food next.

CNote – Interested in helping create another success story? CNote makes it easy to invest in great CDFIs like the CEF The Colorado Enterprise Fund, helping you earn more while having a positive impact on businesses and communities across America.

By Impact Investing

What is Impact Investing?

A Beginner’s Guide To Impact Investing

What is the definition of Impact Investing?

At its core, impact investing is about deploying capital with the intent to bring about some socially desirable outcome with the expectation of a financial return. 

There are two key elements:

  1. An Investment with the Intention to Do Good
  2. An expectation of Financial Returns

Baked into this definition is some subjectivity. Specifically, what may be a socially desirable outcome for one person may not be the same for another.

Nonetheless, generally, the social outcomes investors seek are unlikely to face much dispute even from the most critical investors. Some of the causes impact investments often support include; lowering greenhouse gasses, eradicating poverty, increasing economic opportunity for underrepresented communities and feeding the hungry. The expectation of financial returns is significant because it is what separates impact investing from philanthropy.

The core components of impact investing

What else should I factor into the definition?

In addition to the two basic elements, an intention to do good and expectation of financial returns, some institutions add a third factor, impact measurement.

The thought is if you intend to do good, you should measure how much good you’re doing. We explore measurement in more detail later.

Within these 3 elements, there’s a lot of wiggle room, often guided by individual investor’s goals and personal interests, their priority on returns vs social outcomes, and the methodology they apply to outcome measurement.

The Fluidity of the Definition of Impact Investing

Given that impact investing is a relatively new concept, its definition can vary based upon who you ask. McKinsey explains this well:

“‘Impact investing’ means different things to different people. Some see it as a strategy for beating financial benchmarks, because businesses that target unmet social or environmental needs can be profitable but easy for investors to overlook. Others are happy to accept lower financial returns for the sake of backing enterprises whose main interest is creating social benefits.”

As suggested above, impact investing can be associated with an acceptance of below-market returns. While this is certainly true for some products, many impact vehicles now work to meet or beat market returns.

How Do Industry Participants Define Impact Investing

One of the leading voices in impact investing, The Global Impact Investing Network (GIIN) defines impact investing as “Investments made into companies, organizations, and funds with the intention to generate social and environmental impact alongside a financial return.”

Michael Drexler and Abigail Noble of the World Economic Forum define impact investing as “an investment approach intentionally seeking to create both financial return and positive social impact that is actively measured.”

The Financial Times also includes measurability in its definition, “Impact investing is generally accepted to describe investing that intentionally seeks measurable social and environmental benefits.”

As you can see there are some common threads within the definition. As the industry matures, it is likely a standard definition will be accepted by all stakeholders.

How does CNote define Impact Investing?

At CNote we agree with the generally recognized definition that impact investing involves deploying capital with the aim of creating some measurable positive social outcome with the expectation of financial returns.

Where we diverge is our belief that every investment is actually “impact investment.”

Why?

Because whether or not you are targeting a social outcome when investing, your investment decisions will have consequences on society. This is because the flow of capital will incentivize or disincentivize actions by entrepreneurs and businesses on the aggregate–intentional or not, your money has an impact.

 

Ultimately, the important question we should ask before we make any investment is: What social outcomes does this investment support, and are those outcomes aligned with my goals and values?

The question then is one of intentionality; are you being conscious about what your money is doing and are you aligned with the outcomes it is supporting? This is extremely important knowing that even small investments in the aggregate can drastically shape industries, corporate behavior, and societal outcomes.

In recognition of the notion that every investment choice has a consequence, our hope is that in the long term, impact investing as a standalone term becomes redundant and will just be called “investing.”  As impact investing matures and becomes more standardized and measurable, many of the “niche” metrics we use now to measure impact may become as essential as metrics like the Price/Earnings ratio.

Why does the definition of Impact Investing matter?

How and where you invest is important. Understanding how the industry and individual participants approach impact investing can help you ask more informed questions and ultimately make better choices for where you want to put your money to work.

Impact investing, as a movement, is still evolving and seeking standardization. It is important to understand how various industry leaders define the term and how it affects their approaches and methodologies–which can vary widely.

At CNote, we want you to make the most informed investment choices. Hopefully, this article leaves you with a better understanding of how to approach impact investing as an investment strategy.

 

Impact Investing Metrics and Themes

The GIIN (Global Impact Investing Network) has created Impact Reporting and Investing Standards (IRIS) metrics to provide a standardized way to compare different investment options. While the GIIN is highly regarded, there are over 500 metrics and applying and making sense of these metrics can be challenging for the unfamiliar and can be cumbersome for even experienced impact investment practitioners.

Another route towards standardization is by aligning investments with the United Nations Sustainable Development Goals (SDGs). The 17 SDGs were adopted by all 193 UN Member States as part of the 2030 Agenda for Sustainable Development. These goals are an urgent call for action to solve the world’s greatest development challenges, ranging from an end to poverty and reduced inequality to tackling climate change.

Many impact investors are now aligning their goals and investments with the SDGs. The general consensus is that they are a useful framework and common language through which we can all communicate broader sustainability efforts. It is also generally appreciated that alignment is an ongoing process with most still trying to figure out how to get it right.

As a result, there are movements by impact investors and measurement institutions to incorporate the SDGs into their impact measurement frameworks. Toniic institute has developed the SDG Impact Theme Framework and the IRIS metrics have been aligned with SDG indicators that they deemed appropriate for investment. Moreover, IRIS is launching, IRIS+, which should include a more comprehensive look at the SDGs.

Another group working on this is the Impact Management Project, a forum of 2000+ impact investing practitioners. Having just completed Phase 2 of the development process they are looking to build consensus on ‘how to measure, report, compare and improve performance.’

The complexity of these metrics highlights another issue, the approach to impact investing depends on who the investor is.

To illustrate, large institutional investors may specifically require; risk models, impact measurement audits and put in place other restrictions that a retail investor may not. Moreover, a retail investor may want to see tangible short-term outcomes; homes built or jobs created, among other metrics, whereas an institutional investor may have a longer time horizon or seek outcomes that are harder to quantify. Understanding the audience and their expectations will radically shape how one views a given impact investment.

History of Impact Investing

The term ‘Impact Investing’ was created in 2008 at meetings convened by the Rockefeller Foundation in Italy. Although the definition is relatively new, the tradition of Socially Responsible Investing (SRI) is not. Religious communities have been practicing SRI for thousands of years and it can be traced to biblical times, as outlined in Jewish and Sharia law. This SRI involved making no investment in alcohol or tobacco, which is today regarded as negative screening. United-States-based SRI can be traced back to the 18th Century to the Methodists who also employed negative screening, extending it to include gambling as well, and to the Quakers who banned investment in slavery and war.

The modern roots lie in the Vietnam and Civil Rights Movements notably with South African Apartheid and divestment from the country. In the 1990s and 2000s, this shifted from negative screens to positive screens. The term broadened and in the preceding decades impact investing as it is today was born.  

Today, impact investors can be, but are not limited to; fund managers, development finance institutions, foundations, government agencies, NGOs, pension funds and insurance companies, religious institutions, and individuals. Recently there has also been a rise in the number of online impact investing platforms, like CNote, which have made impact investing widely accessible to all individuals.

Impact Investing Approaches

The existence of impact investing highlights the current paradigm shift in how the business and investment community is thinking about; place, planet, product, and processes. This shift materialized as the double bottom line approach, which is measuring performance in terms of not just financial considerations but also social impact, and triple bottom line which adds environmental impact into that discussion. This evolved into SRI, and the introduction of negative screening, and ESG which incorporates Environment, Social and Governance factors into the investment process.

Socially Responsible Investing (SRI) vs. Impact Investing

Socially responsible investing is focused on deploying investment dollars in a responsible and positive way. Typically SRI involves the use of negative screens or filters when selecting investments. Often these screens ensure that a fund avoids investing in certain things the fund manager deems undesirable like companies that produce weapons, tobacco, and oil.

In contrast, impact investing actively seeks out investments that will create a positive economic, social, or environmental impact. Another way to think about this is as “do no harm” for SRI versus “do good” for impact investing.

What about Environmental, Social and Governance (ESG) Investing?

ESG investing is about critically viewing an investment target’s environmental, social, and governance practices in the due diligence phase of investment. The key difference between ESG and impact investing is that ESG typically serves as a screen to weed out companies with unacceptable practices, whilst still prioritizing the maximization of financial returns.

For example, let’s say an institutional investor was evaluating investments in multinational clothing companies, they may view supply chain practices as a key ESG metric because they want to make sure any target companies avoid the use of child labor and ethically source their raw materials.

ESG is most commonly used in the context of public market investing, where one is evaluating the environmental, social and governance structures of a given company and evaluating whether that entity is taking sufficient steps to meet or exceed specific areas of corporate responsibility.

Some research suggests these ESG-focused investments can actually lower the riskiness of an investment. To illustrate, if you know a target company maintains an ethical supply chain, the risk of damaging headlines about child labor practices (and an associated drop in stock price) are greatly reduced.

Impact Investing Across Asset Classes

Impact Investing occurs across asset classes and with a broad range of financial instruments. The main asset classes include; fixed income, real assets, public and private equity and private debt. The majority of impact investments are currently in private equity and private debt. There are ongoing discussions by many in the field about whether impact investing could emerge as its own asset class because it drives development and uses specialized metrics and benchmarks, but this is yet to be seen.

What can I expect in terms of Financial Returns?

 

Graphic showing asset classes related to impact investing

Image Credit: The GINN

Returns will vary greatly based on the type of investment and the market size related to the social issue. While the market for improving crop yields in developing countries is likely large, both in terms of potential financial and social rewards, the same may not be true for addressing something like increasing societal interest in the arts.

What to expect for financial returns depends solely on the strategy and philosophy of the investor. Anyone considering an impact investment, or any investment would be well served to ask the fund manager or company, about what their priorities are, how they measure success, risk, and other non-investment outcomes.

 

How popular is Impact Investing?

What many don’t realize is that impact investing has grown to become a serious force in the investment world which dictates the flow of billions of dollars in capital each year. In 2017, according to GIIN’s Annual Impact Investor Survey of 225 companies, the total amount invested in impact funds was at least $114 billion. This is up from 2015 and 2016 when the impact investing market totaled $7.1 billion and $15.2 billion, respectively.

Financial giants like Goldman Sachs and Zurich Insurance are now earmarking $13.7 billion toward impact investing. BlackRock, the world’s biggest asset manager, has created a division solely devoted to impact investments. There is also attention from international organizations like the UN which has gathered over $62 trillion USD from more than 1,500 asset managers to fund the Principles for Responsible Investment.

While the chart above only reflects those surveyed by the GIIN, the chart below from the US SIF: The Forum for Sustainable and Responsible Investment, shows that over $12 trillion in assets have been deployed across ESG, SRI and other impact-focused strategies as of 2018.

Established institutions aren’t the only ones interested in impact investing. Since 2008, Google search reports for “impact investing” have increased significantly. The trend does not show any likelihood of tapering.

In a recent survey of over 1,300 financial advisors and analysts, the CFA Institute found over 50% considered ESG integration a major priority and were taking steps to include it in their analysis. 

Moreover, the world is about to see a massive transfer of wealth from baby boomers to millennials.  By 2020, millennials will have an estimated cumulative wealth of $24 trillion, and surveys show a whopping 76% of them believe how they invest can have an impact on responsible investing. Further studies show that millennials are 2x more likely than the average investor to invest in companies with social or environmental goals. Explore more statistics indicating the rising trend at Morgan Stanley.

Why Impact Investing?

Here are just a few reasons to impact invest. This list is not exhaustive, and what moves one investor may ring hollow for another.

  1. Align your investments and your values – because impact investing does good and generates financial returns, investors can support the causes they care about whilst putting their capital to work.
  2. Increase Portfolio Stability – A Morgan Stanley study, of over 10,000 equity mutual funds over 7 years, found that, on average, impact investing funds had lower volatility than comparable non-impact funds.
  3. Expand your network – The impact investing community includes ppolicymakers entrepreneurs, human rights activists, and development experts, all dedicated to utilizing capital in pursuit of tackling important societal issues.

Critiques of Impact Investing

The world of impact investing is not without faults. Like any booming industry, there are those who would co-opt the concept for profit. Impact investing is having a golden moment of rapid growth and popular support and, according to Business Wire, is expected to grow to $307 billion by 2020 (2x what it was in 2017). As a result, some investment vehicles ostensibly use the “impact investing” label without actually committing to the underlying strategy, in an effort to attract investors.

Sometimes this is referred to as ‘greenwashing’. In the impact investing industry, there are many that are concerned that mainstream asset managers are increasingly promoting and marketing ‘impact strategies’ without sufficient evidence that they are following through with these claims, measuring and reporting towards them. Unfortunately, this means that impact investors must carefully review investment documents and scrutinize impact measurement practices to assure that the product they are investing in accomplishes what it claims to do.

Another potential pitfall of impact investing is a lack of understanding or analytical rigor around quantifying the effect an investment has on a specific issue (like affordable housing). For example, with microloans, lenders track number of borrowers, repayment rate, and business growth. However, knowing this information doesn’t necessarily capture the true impact, or what that community would look like without its microloans. In some instances, measurement may be too difficult given a myriad of variables, in other cases, it may simply be impossible to fairly measure a given investment’s impact.

Another popular critique is that impact investing is skewed towards the wealthy and, by allowing for positive social impact and market-rate returns, keeps the concentration of wealth with the already well-off.

Conclusion

Whether you actively seek to align your dollars with your values, it’s clear that impact investment is rapidly growing and is changing the status quo of capital allocation. Traditionally, funding and loans were only available to people with great credit or leverageable assets. Impact investing changes this dynamic by looking beyond financials and seeing whether your investment will generate positive social returns, not just financial ones. Ultimately, impact investing breaks down the perceived wall that exists between capitalism and social good. We can have our cake and eat it, too.

Let us know what you think about this piece! What information do you wish we included or what questions do you still have? Email hello@mycnote.com

Additional Reading

There is an ever-growing library of resources for learning more about impact investing on the web. Here are some good resources if you’re looking to dive deeper on impact investing

 

By Borrower Stories

Jeremy Priest – Knotty Ties – Made In The USA, With Purpose

Ties that fit all

A tie can say a lot about its wearer. The first ties marked out the court members of Louis XIII, a French king who had admired the neck accessories of the Croatian mercenaries and adapted them as mandatory attire for royal gatherings.1

In the following 300 years, ties evolved into the more simple and streamlined form we know of today, but through subtleties in color and pattern they continue to provide distinction to their wearer. A red tie, for instance, can signal charisma or authority, while a tie covered with hotdogs might send a different message altogether.

Product offerings at Knotty Tie Co. in Denver, CO

That said, a tie is an accessory you want to get just right. Knotty Tie Co. makes it easy to do just that.

From its chic and accessible e-commerce site, customers can select and order ties from the comfort of their own homes. With over 350 patterns and 560 color options, they can design just the right tie, bowtie, or scarf for any occasion: from themed wedding attire to workplace swag, to a thoughtful gift for a loved one. They can even customize from scratch, entering their ideas on the website, which the company’s graphic designers will then mock up for them.

It’s a unique company that creates unique ties. But even more distinctive is the story behind it.

A unique business model derived from an altruistic mission

When we asked what he did to make his customers happy, President and CEO Jeremy Priest mentioned the phrase Made in America.

“For us, Made in America isn’t just a reason to buy…”

What this means is that his company produces every tie in their facilities in Denver, Colorado. With equipment they bought and painstakingly learned how to operate, they print the patterns customers select onto quality fabric. Then they sew the fabric into ties — completely by hand.

Employee operating textile cutting machine at Knotty Tie

This allows them to produce small batches of customized ties in a relatively short amount of time, something their competitors, many of whom manufacture overseas, cannot deliver on.

For us, Made in America isn’t just a reason to buy, it legitimately gives us a competitive advantage,” said Jeremy. Later he added, “It’s incredible how the mission [of the company] weaves into that.”

And it’s the mission of Knotty Tie Co. that truly makes it stand out. Surprisingly, it has less to do with customized ties, and more to do with the people who make them. The employees who sew the final product by hand are all refugees who fled various conflict countries to start a new life in the US.

Refugee employees at Knotty Tie

And CEO Jeremy Priest’s mission is to provide them, and other refugees, with meaningful employment opportunities.

The birth of a mission

“The mission of the company is to create meaningful employment opportunities for refugees…”

Like most people, Jeremy didn’t initially enter adult life with enough belief in a cause to build an entire company around it. Instead, his convictions grew gradually through life experiences.

The first of these was a military career of six years, four of which were overseas. “One of the things I witnessed in my military duties…was that people were yearning for economic inclusion and economic opportunities.”

Inside the store of Knotty Tie Co.

This inspired him to study economics and get an MBA in entrepreneurship. At the same time he was pursuing his studies, he saw that there was a population with economic need in his very own community: the 2,000 refugees who set roots down in Colorado each year.

“I really recognized that there were enormous barriers to employment and that society generically wasn’t really recognizing the barriers, and wasn’t recognizing the dignity of the arriving population and the contributions they could make,” Jeremy said.

One of Knotty Tie’s employees intent upon his work

Instead, many refugees had to take random jobs with odd hours as they struggled to transition to their new lives.

Thankfully, there were non-profit programs that helped refugees transition, providing English classes and developing their job skills. Jeremy volunteered for one of those programs. But a key interaction in 2011 convinced him his clients needed something more.

“To me it seemed like there was just something missing…”

He was training two refugees in janitorial skills when they told him they had 20 years’ experience in sewing and a lifetime of experience in farming. In “a crisis of his conscience,” he realized he was training them in the wrong skills.

“I appreciated the resettlement agencies…But to me it seemed like there was just something missing — and that was the connection between [the refugees’] existing skills and the employment pathways we should be putting them in touch with.” And that made it less meaningful for them.

Employee cutting tie

Thus began an effort to convince the non-profit to not only train the refugees in basics, but employ them in their existing skills, namely sewing. But when Jeremy realized this was outside the scope of the program, he began to take matters into his own hands.

Scrapping it

Raising up his own enterprise to employ refugees in meaningful work was no easy task. In the beginning, it was just Jeremy and his undergrad classmate and co-founder Mark — and they had to scrap it.

Knotty Tie co-founders Mark Johnson and Jeremy Priest

“Truth be told Mark and I were just so broke that we didn’t have cars,” Jeremy told us when talking about the early days of his company.

“Our first office was in an artist collective and we had to be able to walk there.” During their Kickstarter campaign in 2013, the two frantically produced ties, Mark in the afternoon after his shift at a cafe, and Jeremy all day before his night classes.

As the company took shape, they sought investors who would fund them despite them not having a high credit score. Thankfully an impact investor gave them seed funding of $40,000, and with it the valuable affirmation that their idea was worth all those long hours. This enabled them to hire two refugees with sewing experience and purchase some equipment to scale their efforts. It also qualified them to receive a loan of $10,000 from Colorado Enterprise Fund, a CDFI in CNote’s network.

“CEF was really an angel at the time in which nobody one else was willing to consider us on paper…”

With the money, Jeremy and Mark were able to meet payroll and purchase more equipment.

Later, when Jeremy showed CEF they could cut costs by two-thirds by manufacturing in-house, they provided a second loan of $100,000 to buy their own textile machinery. It was through CEF that Knotty Tie was able to fully implement its Made in America business model.

Knotty Tie’s textile printing machine

“CEF was really an angel at the time in which nobody one else was willing to consider us on paper,” Jeremy reflected. “They were willing to altruistically evaluate why we’re doing what we’re doing and what we were able to accomplish to date.”

Meanwhile, Mark, who was talented in technology, had taught himself graphic design and e-commerce and taken classes in full-stack web development, all of which equipped him to make the beautiful storefront website we see today.

Future plans for Knotty Tie

Mark and Jeremy in front of their storefront

With his signature eloquence, Jeremy told us of his future plans. His vision–both lofty and inspiring–includes developing business models to employ refugees even in camps overseas.

“These are refugees, but they are self-sufficient.”

In general, he wants to spread his mission of refugee employment to other for-profit enterprises, changing the global narrative from refugees who are helpless, to “These are refugees, but they are self-sufficient.”

But for now, he is focusing on the tie company, which he hopes to make a shining example of refugee resettlement enterprises to the world.

Marc Munyakabuga, production manager

We think he’s doing a good job of it. To date, Knotty Tie has a formal board of manufacturers consisting of seven members. Additionally, it employs six sewing refugees, two of whom have started college courses to pursue careers in fashion design.

One Congolese refugee named Marc currently serves on the board as production manager. In the future, he wants to start his own small business.

Learn More:

The Colorado Enterprise Fund, was founded in 1976 and is a non-profit lending institution that offers loans to entrepreneurs and small businesses unable to get traditional bank financing. For over 40 years, Colorado Enterprise Fund has been helping people realize their dreams of starting and growing their own businesses.

Knotty Ties – Visit their e-commerce store and buy custom ties for any occasion here.

CNote – Interested in helping create another success story? CNote makes it easy to invest in great CDFIs like the CEF The Colorado Enterprise Fund, helping you earn more while having a positive impact on businesses and communities across America.