By Marc Wancer, Senior Vice President, Financial Institutions Analyst
Amid the excitement, momentum, and dialogue around the myriad new approaches to impact investing at last week’s Mission Investors Exchange (MIE) 2016 National Conference in Baltimore, there was also frequent mention of the long-standing role of CDFIs as a reliable, fixed-income investment with a track record of local impacts. While there were only a handful of CDFIs in attendance, one can imagine that CDFI turnout at future MIE conferences will increase, as the banks, foundations, funds, and wealth managers that attend increasingly seek high-impact, fixed-income investment opportunities.
While at the conference, I had the opportunity to sit on a panel (“Mission Investing Fundamentals”), led by an amazing group of practitioners. We endeavored to cover the basics of mission investing by blending theory, practice, and case studies. The audience, largely composed of foundations, proved to be a highly-engaged group with an exceptional level of knowledge, and, as it turns out, also appreciated the mention of CDFIs as an investment class.
One of the case studies we presented was the Mary Reynolds Babcock Foundation’s partnership with West Virginia-based CDFI Natural Capital Investment Fund. We focused on the Foundation’s program related investment, which is structured as a ten-year general recourse note with quarterly interest payments. As detailed in Essentials of Impact Investing: A Guide for Small-staffed Foundations, the Mary Reynolds Babcock Foundation uses Aeris® Rating Reports to support its underwriting and monitoring of this and its other CDFI investments.
Although many foundations are not new to CDFI investing, there seems to be growing interest among a broader swath of investors, including a number of family, regional, and community foundations. Especially noteworthy is the commitment of many foundations to investing more than 5% of their endowments in impact investments and, in some cases, to deploy 100% of assets in investments with a mission focus. From the numerous conversations I had with conference attendees, the idea of Aeris-rated CDFIs as a fixed-income, low-risk, and high-impact investment has great appeal.
This is one reason why Aeris is working to ensure that our due diligence and information services are relevant and accessible to investors who are interested in the CDFI sector. With this in mind, we are planning some major product improvements in 2017. If you are an Aeris client, please be on the lookout for more information about these changes this summer.
Watch a plenary session with Jean Case, The Case Foundation; Rip Rapson, The Kresge Foundation; Julia Stasch, MacArthur Foundation; Darren Walker, Ford Foundation; David Gergen, Harvard Kennedy School (moderator).