Financial Resources to Catalyze New Economy Solutions

moneyBy Atlee McFellin

In a previous article, I argued for a growing alliance between the new economy and impact investment movements in order to drive capital to innovative development strategies that create solutions for even the most marginalized of communities.

Shortly after that article came out in 3p, Living Cities CEO Ben Hecht issued a call in Forbes for impact investors to direct their attention to investment opportunities in the U.S, not just abroad.  One of our biggest barriers to directing capital to communities and driving innovation is that existing funds aren’t widely known by those building local solutions and vice versa. 

This article is the first in a series that seeks to identify existing funds generating positive social and environmental impact along with a traditional bottom line; codifying existing financing strategies for the new economy.

The funds described in this series no doubt occupy but a portion of the overall fund landscape – add your additions in the comments! We start by looking at community development financial institutions and “eco-banks,” loan funds for worker cooperatives and other forms of employee ownership to go on to sources of loan capital for microenterprises, social enterprises, and triple bottom line businesses generally.  Existing financing strategies for local new economy solutions is certainly not limited to debt/loan capital, and other forms of equity financing, in addition to debt/loan financing for other things like smart growth, will be discussed in the subsequent articles. Lastly, before proceeding with the list, it’s worth saying that this doesn’t amount to a financial endorsement or recommendation to invest, just an explanation of the state of this growing impact investment movement for a thriving new economy.

CDFIs & “Eco-Banks”

The community development financial institution (CDFI) industry was launched after Congress passed the Community Reinvestment Act (CRA) of 1977. CDFI is a general term that refers to a range of financial institutions certified as supporting community development including some banks, credit unions, loan funds, venture capital funds, and microenterprise loan funds all across the nation. CDFIs aim to fill capital needs that are not served by conventional sources of finance. “Redlining” – when banks won’t lend or have branches in certain communities before they are poorer – was banned more than forty years ago, but the practice is still rampant. Today, an increasing number of CDFIs are providing financing for the development of green or triple-bottom-line businesses. Community development financial institutions now manage assets of over $41.7 billion, drastically up from $25 billion in 2007.

A growing number of CDFIs and so-called ‘eco-banks’ have developed their own capacity to generate positive social and environmental transformation as an integral part of their business.  In many cases like New Resource Bank, these banks are directly supporting an expanding movement of non-profit organizations, triple bottom line businesses, and vast communities of individuals wanting to avoid mainstream finance.  CDFIs are required by law to have community residents on their board and serve the needs of low-income census tracts. They finance brownfield redevelopment, affordable housing, transit oriented development, business and personal lending, and more.  Additionally, community development credit unions are credit unions certified as CDFIs and are owned cooperatively by their members who are those in low-income communities.  These credit unions in the U.S. have even federated together to build a more cohesive movement.

Organizations like the Opportunity Finance Network, the CDFI Coalition, and others are bringing together community development financial institutions (CDFIs) to create new financial systems dramatically different from the mainstream, ones that serve the interests of people, the planet, and profit. And those banks that are building their businesses around a triple bottom line have created the Global Alliance for Banking on Values. An even larger global set of banks recently issued a “Natural Capital Declaration” supporting the need to integrate environmental considerations into all of their financial activities as part of their commitment to the Rio+20 Summit. The larger socially responsible and sustainable investing movement grew to $3.07 Trillion by the end of 2010.


Loans for Co-ops & ESOPs

Cooperative businesses and housing have a set of loan funds across the country including the Cooperative Fund of New England, Northcountry Cooperative Development Fund, a National Cooperative Bank, and a host of additional loan funds. Most of them have their own specific geographical area, while focusing on the wide range coops take from worker cooperatives to consumer cooperatives like food coops to housing cooperatives, farmer and other forms of producer cooperatives, etc.  An organization called The Working World set up shop in the U.S. a couple years ago and has been providing loans to cooperatives with the most notable example being the New Era Windows Cooperative in Chicago, the product of a long struggle since the Republic Windows and Doors factory occupation back in December of 2008.

The Ohio Employee Ownership Center has a loan fund set up that lends money to cooperative businesses, while also financing the transition of regular corporate entities to employee shared ownership plan companies (ESOPs). In order for workers to collectively buy a percentage of a company or the whole thing, they need capital to financing the transition, which OEOC can provide.

TBL microenterprise lending

Accion USA has a loan fund that includes two types of ‘triple bottom line lending.’ The first aspect is providing loans to small businesses with a focus on making their buildings more energy efficient. It provides extremely small loans and up to $50,000 to cover building retrofits that will help businesses save money by reducing the amount of money they have to pay for energy. Their second focus provides loans to small businesses that want financial assistance in transforming their product lines or services. The loan specifically goes to either help small businesses who already focus on environmentally and socially beneficial products with financing to help their business to grow, but they also assist in financing the transition to socially and environmentally beneficial goods and services.

They are but one of just a handful of investment funds providing microloans within the United States and are currently pioneering microloans for the triple bottom line within the U.S. Additionally, the national microenterprise organization, Association for Enterprise Opportunity, is working with Green America and EcoVentures International to identify innovation and barriers for triple bottom line microenterprises in the new economy, so we’ll likely see a lot more lending like Accion USA in the future.

Georgia Green Loans provides microloans similar to Accion USA, except only for a small area of the U.S. specifically Northern Georgia and Metro Atlanta. They, like Accion USA, are pioneering triple bottom line microlending within the United States. What is most interesting about Georgia Green Loans is their ability to partner with additional organizations to create a network of green microlenders throughout Georgia. The U.S. Small Business Administration provided the initial funding for Georgia Green Loans. Since then, they have expanded their reach across Georgia through a series of lending partnerships with the Small Business Assistance Corporation and other lending institutions across the state. These partnerships allow Georgia Green Loans to centralize the process of funding their triple bottom line lending, while being able to work with existing lenders to expand the reach of their innovative green loans.

Broader TBL business lending

Natural Capital Investment Fund provides different financing mechanisms to triple bottom line businesses. As a fund whose focus is primarily in the rural parts of the Southern United States, it offers a triple bottom line approach to a section of the country often left out in the transition to the new economy. Not only do they operate in places most other triple bottom line impact investors don’t go, but they’ve also developed a series of lending priorities including energy efficiency, sustainable logging, subordinated debt to access greater amounts of capital, and even a separate microlending fund to invest in microenterprises around the country as a whole. They’ve also got two separate partnerships for providing equity financing to triple bottom line initiatives.

Credit: Carlos Omar Garcia Pascual
Another two community development financial institution providing loan capital for triple bottom line businesses of all sorts are Coastal Enterprises, Inc. and Self-Help Credit Union. They’ve been pioneering triple bottom line investing for decades and have an elaborate set of metrics they use as part of their lending criteria. They were also the first of a series of financial institutions that got together in 2008/2009 to jointly develop a set of metrics they all could use together. As will be discussed in a subsequent article, they also have a long history of equity financing options too.

The Self-Help Credit Union is yet another CDFI leading the path of triple bottom line lending with a base focus on underserved and otherwise marginalized communities, loans to help businesses become more energy efficient or expand products/services, and even set up specialty loan funds to further build the new economy.

The Community Reinvestment Fund, USA utilized New Markets Tax Credit (NMTC) funding to focus on energy efficiency retrofits for small businesses in low-income census tracts. Working with the underwriting standards developed by the Capital Markets Partnership coupled with the requirements of the NMTC to invest in historically excluded census tracts, CRF created a loan product for cities/municipalities as well as other CDFIs to provide funding for EE projects. CRFUSA was also the first CDFI to develop the ability to securitize their loans in order to provide fixed-income investment opportunities to investors as well. Broader, national work to catalyze a secondary market for energy efficiency retrofit securities has stalled in the wake of a continuous stream of setbacks. Still, CRFUSA is a model and could play a pivotal role in helping other CDFIs engage in energy efficiency retrofit lending, which can further support small triple bottom line businesses in local communities.

Leading TBL foundation lenders

The Calvert Foundation has been pioneering impact investing through their Calvert Community Investment Note, which they use to provides low-cost loans to non-profit organizations and CDFIs around the world with a variety of different foci. Over the last few years they have been growing a multifaceted platform of investing in the new economy beyond most of the rest of the industry, especially in terms of serving extremely vulnerable communities. They have invested in non-profits and through CDFIs to fund sustainable forestry initiatives and businesses, land conservation, water/waste system development, energy efficiency retrofits, green affordable housing, and other types of triple bottom line business and sustainable community development projects and products through CDFIs. RSF Social Finance provides funding to triple bottom line businesses in the form of long-term patient loans. They are one of the oldest impact investors in the U.S. much like the Calvert Foundation. Investors can put money into their social notes and they use that funding across a wide range of lending priorities including: “food & agriculture, education & the arts, ecological stewardship.”  Both these foundations are part of a growing movement of foundations to leverage their invest-able assets towards financing local solutions through mission related investment too.


These are only a small segment of a growing impact investment movement funding a new economy based on the triple bottom line. Each has their own way of determining the social and environmental impact of their investments. This article only focused on funds providing debt capital to businesses as well, so there’s an even larger swath of funds providing equity in one form or another. As the impact investment movement continues to grow in the U.S. and the new economy movement finds increasing alliance with them, local new economy funds can provide a central strategy and set of vehicles to democratize capital, build more resilient local economies, and create immediate opportunity for those in need. The next article will detail sources of equity capital for businesses in the new economy, while further articles will detail with debt and equity capital for other economic entities and development strategies like mixed-use, brownfield development, and smart growth.

[Image credit: Tax Credits, Flickr]

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