Impact investing, with a focus on marginalized communities
By Julie Eades
The upcoming Invest in New Hampshire forums will focus on some excellent opportunities and options to invest locally.
What's the difference between impact investing and community investing, and why are they worth knowing about?
We asked Michael Swack, who helped launch the Community Loan Fund decades ago and remains connected as a board member emeritus, to sort out the terms in advance of the Invest in NH forum series. The forums begin next Feb. 17 in Durham and continue in March in Hanover.
By Michael Swack
Several decades ago, when I was still an undergraduate in college, I became a director of an organization that developed cooperative housing. My job, in part, was to attract financing for the buildings we wanted to buy and convert to cooperative housing.
I was terribly unsophisticated, and nearly got in a lot of trouble for “securities fraud” when I tried to raise funds from local people for local projects. I was surprised it was so difficult and even potentially illegal (well, I thought it would be a good idea to sell “bonds” without understanding the laws.)
That was my start in community investing. “Community Investing” means investing in ways that seek to deliver social benefits to low-income or marginalized communities while also generating a financial return for the investor.
Today in the United States, a wide variety of community investors—including banks, foundations, insurance companies, individual investors, and others—are supporting the development of small businesses, health care facilities, affordable housing, schools, and other projects and programs serving these communities. Typically, although not always, these investments flow through intermediary organizations such as loan funds, community development banks and credit unions, and private equity funds.
United States Community Investing (USCI) is part of the growing field of impact investing—investing with an eye to both financial return and positive social and/or environmental impact. A recent GIIN-JP Morgan study indicates that globally, impact investors committed the equivalent of $10.6 billion in 2014 and intend to invest 16 percent more—$12.2 billion–in 2015.
USCI is also growing as investor awareness and engagement in this space increases, and as the intermediary organizations in which they invest grow in size and sophistication. At the Carsey School, we recently completed a study that looked at the opportunities and impediments to community impact investing.
Our report focused on two key recommendations. The first centers around the need to implement broad-based marketing efforts to better engage investors. With a small, relatively well-connected group of early adopters engaged in the space, there is an increased focus on building awareness among and educating additional members of the investor community to invest in communities.
The second recommendation describes the need to develop efficient investment products and platforms to more-seamlessly enable capital to flow between investors and investees.
In New Hampshire we have some excellent opportunities and options to invest locally. The upcoming Invest in New Hampshire forums will focus on some of these options. Local impact investing does matter. As finance continues to become increasingly global, local opportunities are often overlooked and/or underfunded. This lack of access to appropriate forms of capital constrains the local economy.
Michael Swack is a Professor at the University of New Hampshire’s Carsey School of Public Policy.
Juliana Eades is President of the New Hampshire Community Loan Fund.