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Investments in Rural America: Impact Investors and Rural Readiness


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A webinar from NARP
Amy Domini (Domini Social Investments), David R. Dangler (National Alliance for Rural Policy Network)

This webinar discusses how impact investors view investments, innovative and supportive investments, and community development banks and funds.

Published in: Economy & Finance, Business
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Investments in Rural America: Impact Investors and Rural Readiness

  1. 1. Investments in Rural America: ImpactInvestors and Rural ReadinessAmy Domini, Founder and CEO of Domini SocialInvestmentsDavid R. Dangler, National Alliance forRural Policy NetworkJessica HiemenzNational Consumer Law CenterMay 21, 2012
  2. 2. Presenter – David R. Dangler• A member of the National Alliance for Rural Policy network.The National Alliance was founded in 2008 with fundingfrom the W. K. Kellogg Foundation and acts as a resourcenetwork, not only for its members but for other rural policynetworks and individuals interested in all aspects of ruralpolicy.• In addition to being a member of the National Alliance,David is the national director of the NeighborWorks RuralInitiative for NeighborWorks America. Today the RuralInitiative supports 91 community-based organizationsactive in rural communities in 45 states plus Puerto Rico. In2011 the 91 rural NeighborWorks organizations madedirect investments in excess of $1.6 billion to supportaffordable housing, job creation and broad-basedcommunity economic development.
  3. 3. Presenter – Amy Domini• Founder and CEO Domini Social Investments. Amy iswidely recognized as the leading voice for sociallyresponsible investing. In 2005, Time magazinenamed her to the Time 100 list of the world’s mostinfluential people, and in 2009 Time listed her as oneof 25 “Responsibility Pioneers” who are changing theworld.• Among many accomplishments, Amy wrote thegroundbreaking book, Ethical Investing. When it waspublished in 1984, it quickly became recognized asoffering special insights to investors, giving themboth a reason and a means to invest with theirvalues.
  4. 4. Working together to promote a vibrant rural America.Experience Works · First Nations Development Institute · Housing Assistance Council · Indian Country Conservancy ·National Association of Community Health Centers · National Association of Development Organizations Research Foundation·National Consumer Law Center · National Trust for Historic Preservation · National Rural Health Association ·National Youth Leadership Network · NeighborWorks America · Save the Children · United Farm Workers FoundationContact: Emily Blejwas, Network
  5. 5. IMPACT INVESTORSAND RURAL READINESSMay 21, 2012National Alliance for Rural Policy
  6. 6. |6AMY DOMINIAmy Domini is an advocate and portfolio manager. She is also the authorof SOCIALLY RESPONSIBLE INVESTING, MAKING A DIFFERENCEAND MAKING MONEY. Amy is the founder of Domini Social Investments,LLC and is a member of the Sustainability Group.
  8. 8. |8IMPACT INVESTORSTIMELINE OF EVENTS THAT SHAPED IMPACT INVESTING1960s 1968 1979 1984 2000 2009Urban riots ledto propertycasualtyinsurancecompanies tobegin SocialInvestmentprograms.The same ledto the GhettoSeed LoanFund at theEpiscopalChurchThe Institute forCommunityEconomicDevelopmentwas founded asa non-profitlenderMy book, EthicalInvesting, raisedthe question ofbanking locallyas a means ofbeing aresponsibleinvestor.Domini BondFund waslaunched tomainstreamaccess tocommunityinvestingGlobal ImpactInvestingNetwork (GIIN)formed,leading toincreasedinterest in thefield, but re-defining thefield asoverseas. Thiscreates achallenge forcommunitydevelopmentimpactinvestments todifferentiate.
  9. 9. |99IMPACT INVESTORS (as defined by US-SIF)MOST IMPORTANT FEATURES:•There are many sources for funds(depositors, lenders•There are many borrowers, (not justone food cooperative)•Backed by the intermediary, not theprojectThe impact investor recognizes Community Development Banks, Community Development Credit UnionsAnd Community Development Loan Funds.
  10. 10. |10• The Forum encourages 1% for communities• US-SIF provides members with tools to assess and invest in CDFIs• Many CDFIs are members in the Forum, using its conferences asnetworking and servicing opportunities.• US-SIF defines the field for its membershipUS SIF (The Forum for Sustainable and ResponsibleInvestment)
  11. 11. |11Impact Investors see the worldSLOWLY changingSlow Money – Invest 1% within 100 miles (or closer) tohomeCrowd Funding – by neighbors in Saranac Lake or byKickstarter
  12. 12. |12LOCAL HAS BECOME FUN!
  13. 13. |13DOMINI SOCIAL BOND FUND OFFERS UNIQUE ACCESSMost people invest only through mutual funds, yet most mutual fundshave not sought ways to seed grassroots initiatives in rural areas.The Domini Social Bond Fund has a number of Investments withinstitutions that build healthy communities through the work they do.These include RURAL PARTNERS like:BANK2100% owned by the Chickasaw NationCommunity Capital Bank of VirginiaFormed with an initial investment from the State of Virginia, the bank opened for business in 2008 to serve the needs ofdisinvested communities across the CommonwealthHope Federal Credit UnionHelping communities to build assets and improve lives in economically distressed areas of the Mid SouthSelf-Help Federal Credit UnionCreating and protecting ownership and economic opportunity for all, especially people of color, women, rural residents andlow-wealth families and communitiesSouthern BancorpTo reduce the gap between the county and national employment, poverty, and educational attainment by 50% over the next20 yearsCommunity Reinvestment FundWorks to transform the community development finance system by accessing capital markets on behalf of local developmentlenders to enable them to increase their impact on the lives of people and their communities
  14. 14. |14the SUSTAINABILITY GROUP at Loring Wolcott & CoolidgeHigh net worth individuals seek us out to make more innovative andsupportive investments. Our RURAL INVESTMENTS include:Organic ValleyPreferred stock to create and operate a marketing cooperative that promotes regional farm diversity and economicstability by the means of organic agricultural methods and the sale of certified organic productsOpportunities Credit UnionTo Support Socially Responsible, Community Development throughout VermontAppalachian Federal Credit UnionServing over 12,000 members throughout Northeast Tennessee and Southwest VirginiaCoastal EnterprisesProvides financing and support for job-creating small businesses, natural resources industries, community facilities,and affordable housingFORGEFinancing Ozarks rural growth and economy founded in 1989 by a group of organic farmers from throughout theOzarks bio-region of Arkansas, Missouri and OklahomaNew Hampshire Community Development Loan FundProvide the financing and support that people with low and moderate incomes need to have affordable housing,quality jobs child care and early education for their children.
  15. 15. |15WHAT DOES IT TAKE TO GO MAINSTREAM?Bundling into CDOs with a credible partner would make adebt-like instrument possible.Legislation allowing equity investments into the non-profitparent. Could be based on REIT model or an expansion ofequity to include floating rate preferred stock with secondarymarketConcerted efforts to address the barriers investors I servecurrently face (paperwork, due diligence, slow payments,sloppy reporting)Credible marketplace for investors to rely upon
  16. 16. |16COMMUNITY DEVELOPMENT BANKS & CREDIT UNIONSProductsAvailableDescription Rate of Return Investment Term Security ServicesProvided toCommunitiesChecking and/orSavings AccountAccounts in banksor credit unions.Market-rate No minimum term.All depositorsfederally insuredup to $250,000.Basic financialservices and loanproducts tounderservedindividuals andcommunitydevelopmentprojects.Certificate ofDeposit (CD)Deposit made to abank or creditunion.Market-rate;below market ratealso available.One month to 120months.All depositorsfederally insuredup to $250,000,with banks in theCDARS programinsured up to $20million.IndividualRetirementAccount (IRA)Tax-deferredretirementaccount. Permitsdepositors of up to$4,000 per year,for withdrawalafter retirement.Varies with IRAtype andinvestment term.Varies with IRAtype; often one-year minimum. All depositorsfederally insuredup to $250,000.SOURCE: US-SIF (The Forum for Responsible and Sustainable Investing)
  17. 17. |17COMMUNITY DEVELOPMENT LOAN FUNDSProductsAvailableDescription Rate of Return Investment Term Security ServicesProvided toCommunitiesSenior Debt Individual orinstitutionalinvestor lendingmoney to a fundfinancingcommunitydevelopmentprojects.Varies withinvestment termand size, typicallybetween 0% and4%.Term set byinvestor; oftenone-yearminimum.Not insured;protected bycollateral, loanloss reserves andnet worth.Funds financehigh-impactcommunitydevelopmentprojects and smallbusinesses in theU.S., as well asprovide technicalassistance andmarketdevelopment toborrowers.SubordinatedDebtInstitutionalinvestor providinga loan that issubordinate tosenior loans andhelps build thebalance sheet.Term set byinvestor; oftenone-yearminimumEquityEquivalentDeeplysubordinatedobligation by aninstitutionalinvestor to helpbuild a CIIsbalance sheet.Can provide bankinvestors withenhanced CRAcredit.Terms vary, butmust be fairly longterm or have arolling termSOURCE: US-SIF (The Forum for Responsible and Sustainable Investing)
  18. 18. |18INTERNATIONAL COMMUNITY DEVELOPMENT FUNDSProducts Available Description Rate of Return Investment Term Security Services Provided toCommunitiesSenior Debt Individual orinstitutional investorlending money to afund financingcommunitydevelopment funds.Varies by institution,usually between 0%and 4% depending oninvestment term andsize.Term set by investor;often a one-yearminimumNot insured; oftenprotected bycollateral, loan lossreserves and a fund’snet worth.Investments in fundsthat work withmicrofinanceinstitutions,cooperatives andlocal banks aroundthe world to providefinancing and jobtraining tounderserved peopleand communities.Guarantee Funds Investment in a fundthat guarantees theloans of localinstitutions in a certaincountry.Small & MediumEnterprise FundsInvestment in a fundthat finances small tomid-size enterprises.Varies by institution,usually between 0%and 4%.Fund of Funds Pools of internationalfunds that providediversification.Commercial Bond Debt and/or equityinvestment in a poolof top tiermicrofinanceinstitutions.Varies, but oftenbetween 5% and10%, depending onmanagement fees.Varies based onoffering.Private EquityFundsInvestment in acapital raise for a poolof microfinanceinstitutions.SOURCE: US-SIF (The Forum for Responsible and Sustainable Investing)
  19. 19. |19COMMUNITY DEVELOPMENT VENTURE CAPITAL FUNDSProducts Available Description Rate of Return Investment Term Security Services Providedto CommunitiesVenture CapitalProductsEquity investmentsin new businessesand low-incomeareas in the U.S.and abroad.No establishedreturn. Potential forhigher returns whencompany profits andlower returns whenprofit is low.Term varies.Not insured; oftenprotected bycollateral.Equity investmentsand debt with equitycharacteristics tobusinesses;extensivemanagerial andentrepreneurialassistance. Createsnew jobs in low-income areas.New MarketsVenture CapitalCompaniesFor-profit companiesthat invest equity insmall enterpriseslocated in lower-income areas.Rural BusinessInvestmentStrategiesFor-profit companiesthat invest equity insmall enterprises inrural, underservedareas.SOURCE: US-SIF (The Forum for Responsible and Sustainable Investing)
  21. 21. Choosing an Approach