CMF members have invested their assets through a variety of tools and channels with the intention of creating both a financial return and social impact.
Below we’ve outlined just some of the ways members can take action in impact investing:
- (1) Invest in publicly traded fixed income securities.
- (2) Make a loan to a CDFI.
- (3) Provide a guarantee.
Impact investing can also be more involved and direct:
- Using your balance sheet to help de-risk a loan through a guarantee (or deposit account).
- Directly making loans.
- Operating revolving loan funds.
- Funding pay for success programs.
- Making direct equity investments.
You can further support impact investing through grants for technical assistance or supporting intermediaries that assist social entrepreneurs or educate investors. We’ll explore more examples in depth in later blogs.
Disclaimer: This information is not an offer to sell or a solicitation to purchase any securities. CMF has no financial interests in the firms and organizations outlined on this page. We are excited to work alongside various partners to advance social impact reporting of impact investments, but are doing so without compensation, monetary or otherwise. Please also note that CMF is not an investment advisor and may not, and does not, recommend any investment or investment product. Any investment will be based upon such investor's own judgment.
If you’d like to learn more about taking action in impact investing, reach out to our Expert in Residence!
(1) Invest in publicly traded fixed income securities that will be deployed in the impact theme or zip code you designate.
The Michigan Collaborative is an example of this type of impact investing tool, one that is used by a number of CMF members.
The Michigan Collaborative is an initiative managed by Community Capital Management (CCM) that invests in targeted fixed income investments in affordable housing, small business lending and civic infrastructure - all targeted toward the investor's individual respective desired geographies or areas of impact within Michigan through CCM’s publicly traded mutual fund, the CRA Qualified Investment Institutional Shares (CRANX) fund.
What makes it a collaborative? While the CRA Qualified Investment Institutional Shares fund is a publicly available fund and investors act individually, through CMF's collaboration with members, we've championed the development of additional benefits to CMF members not available to other investors through the publicly traded fund.
Through the Michigan Collaborative an additional $55 million has been targeted for investment in Michigan, adding to the $145 million already invested through the fund in Michigan.1
- Letter to CMF Members Announcing the Collaborative (August 7, 2017)
- Weekly Download Story (October 23, 2017)
- Weekly Download Story (January 29, 2018)
- Weekly Download Story (May 14, 2018)
- Weekly Download Story (October 29, 2018)
- Community Capital Management Website
A number of CMF members have invested in the Michigan Good Food Fund, a $30 million public-private partnership loan fund that provides financing to good food enterprises working to increase access to affordable, healthy food in low-income and underserved communities in Michigan. This includes the range of businesses that grow, process, distribute and sell healthy food that reaches those who need it most. The fund provides flexible, patient capital to good food enterprises often overlooked by traditional banks. Lending is bolstered by business assistance to help entrepreneurs grow their ventures and prepare for financing.
According to fund leaders, since its June 2013 launch, the Michigan fund has invested more than $11 million in good food enterprises, supported 47 businesses with financing and business assistance and created/retained 390 jobs across the state food value chain.
(2) Make a loan to a CDFI.
Community Development Financial Institutions (CDFIs) are private-sector, financial intermediaries with community development as their primary mission. While CDFIs share a common mission, they have a variety of structures and development lending goals. There are six basic types of CDFIs: community development banks, community development loan funds, community development credit unions, microenterprise funds, community development corporation-based lenders and investors and community development venture funds. All are market-driven, locally-controlled private-sector organizations. CDFIs measure success by focusing on the “double bottom line” - economic gains and the contributions they make to the local community. CDFIs rebuild businesses, housing, voluntary organizations and services central to revitalizing neighborhoods.2
(3) Provide a guarantee.
Through a guarantee, a social good investor – like a foundation – can promise repayment through a pledge of its balance sheet, offering protection for another investor's returns. Essentially, a guarantor is saying, "If this project doesn't generate the returns we expect, we guarantee you will be repaid " up to a set amount and under certain agreed upon conditions.3
As defined in “Scaling the Use of Guarantees in U.S. Community Investing from The Global Impact Investing Network (GIIN),” supported by The Kresge Foundation, a guarantee is defined as one of the following two instruments:
Unfunded guarantee: A legal agreement in which a third party to a financial transaction promises to pay the investor (or lender) in the event that the investee (or borrower) is unable to do so. The contract specifies the conditions that trigger a payment and the amount to be paid. No funding is provided up front. A fee may be charged, though in the context studied here most guarantors charged a nominal fee or no fee for unfunded guarantees.
Funded guarantee: Capital set aside by a third party for the benefit of a financial transaction, to be used in the event that the investee (or borrower) is unable to repay the investor (or lender), depending on specified conditions or triggers. These funds can be provided in several ways, including grants, loans, and deposit accounts. The capital may be reserved on the balance sheet of the guarantor, the investor, the investee, or an intermediary, such as a fund manager.