Helping Millennials Succeed WIth Homewise

Editor’s Note: This article originally appeared in “The Millennials Perspective” issue of Green Money Journal. Click here to view more posts in this series.

By Cece Derringer

A new survey published in May 2014 by the Global Impact Investing Network and JPMorgan Chase offers clear evidence of the impressive growth of impact investing.

The survey, the authors’ fourth annual report on the state of impact investing, queried leading fund managers, foundations and development finance institutions in the United States and Europe. It found that the amount of capital they had committed to impact investing increased by 10 percent between 2012 and 2013, and the number of investments increased by 20 percent. The groups surveyed also reported that they committed $10.6 billion to impact investments in 2013 and intended to invest $12.7 billion in 2014 — an increase of 19 percent.

While the popularity of impact investing is reaching unprecedented heights, the practice itself is anything but new. Community investing has long been considered one of the three main strategies that form the foundation of socially responsible investing. What sets it apart from the other two strategies -- social screening and shareholder advocacy -- is that it offers a way for investors to make a tangible, even visible, difference in the communities where they invest. Indeed, community investing has the power to transform communities and the lives of the people who live in them.

Nevertheless, community investing has never been as widely practiced as social screening and shareholder advocacy. A variety of issues — including the limited number of investment options and a general lack of public awareness of the practice — have checked its growth.

But that is beginning to change. As impact investing is gaining new popularity, the menu of investment options is growing. Investors today can choose from a variety of market rate and below market rate impact investment options, including cash deposits in community development banks and credit unions, loans to community development loan funds, equity investments in small businesses, microenterprises, community projects, and innovative new products such as social impact bonds and Calvert Foundation Community Investment Notes.

One form of impact investing that is drawing the attention of social investors is Community Development Financial Institutions (CDFIs). CDFIs are specialized financial institutions dedicated to serving the underserved. There are four basic types — loan funds, banks, credit unions and venture capital funds — but all four have the same basic mission of serving low-income communities that lack access to credit, capital and financial services from mainstream financial institutions.

Like community investing itself, the CDFI industry in the United States has a low profile but very deep roots. In 1865, for example, the Freedman’s Savings and Trust Co. was established to serve recently emancipated African-Americans and eventually maintained 37 offices in 17 states. And in the first decades of the 20th century, other banks were established to serve a variety of minority communities, including members of the Cherokee tribe in Oklahoma, the Chinese community in San Francisco, and women in Cleveland, Ohio. These institutions were among the forerunners of what we now call community development banks.

The modern CDFI industry received a major boost in 1994, with the passage of the Reigle Community Development and Regulatory Improvement Act, which authorized the creation of the Community Development Financial Institutions Fund, a new federal agency dedicated to advancing the work of CDFIs.

Today, there are 884 federally certified CDFIs in the United States that serve their communities in a variety of ways. They provide loans to build small businesses and microenterprises, affordable housing and social service organizations; they provide mortgages for low-income homebuyers and retail banking services for the unbanked; and they also provide credit counseling, homebuyer education, and business development services to enable their borrowers to use credit wisely.

What most CDFIs typically have not provided is a way for investors to invest in their work, but that, too, is beginning to change. One CDFI that offers its own investment program is Homewise, a nonprofit that focuses on affordable homeownership in Santa Fe, New Mexico, and introduced the Homewise Community Investment Fund in 2010.

Homewise is backed by decades of experience in community development. The organization was established in 1986 to finance home rehabilitation projects in Santa Fe’s poorer neighborhoods. As home prices in the city began to rise, however, Homewise saw that many of its customers were concerned that their children and grandchildren would never be able to buy homes in Santa Fe, so it added a home purchase program while continuing to expand its home improvement lending.

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As the Director of Resource Development and Communications at Homewise since 2005, Cece Derringer has been an active public leader of her non-profit team with a commitment to social and economic justice and community development. She brings over 30 years’ experience in marketing and development in variety of media, non-profit and educational settings including ABC-TV. She has studied at the Fund Raising School at The Center on Philanthropy at IUPUI and recently completed an executive education program in Community Development at the Harvard Kennedy School of Government with an emphasis on impact investing.