Investment vehicles targeted at community development in the United States are poised to attract new sources of capital -- especially from high net worth individuals, family offices, donor-advised funds, community foundations and pension funds -- if some important changes are made in the way these products are structured and marketed.
While the financial crisis and recession reduced investment opportunities and created a heightened perception of risk for potential investors, managers of community investment vehicles could benefit from a countervailing trend: the growing interest in social "impact" and place-based investing.
Community investments focus on marginalized areas or communities that conventional market activity does not reach and aim to deliver social benefits such as affordable housing or healthier communities. The financial products range from concessionary loans and equity investments in nonprofit community groups to market-rate investments in for-profit real estate development.
This report is intended both as a practical guide for those who develop and manage community development vehicles and as a primer and list of resources for potential investors. It draws on interviews and conversations with representatives of more than a dozen community development investment vehicles and more than 30 current and potential community investors, including foundations, pension funds, wealth management firms and asset managers. Also included is an appendix of resources for community investing, including links to relevant research, potential partners and investment opportunities.
The US SIF Foundation led the project in collaboration with the Initiative for Responsible Investment at the Hauser Institute for Civil Society at Harvard University and the Milken Institute.