This Investor Spotlight features Community Vision investor, The Sustainability Group at Loring, Wolcott & Coolidge. Our Q&A with Eli Dalven, Impact Investing Associate at Loring, Wolcott & Coolidge highlights why the Boston-based firm is a longtime investor in CDFIs, their decision to invest in Community Vision, advice they have for other impact investors, and more.
1. Loring, Wolcott & Coolidge’s (LWC) Sustainability Group has invested more than $70 million into Community Development Financial Institutions (CDFIs) across the country. Can you speak to why LWC sees CDFIs as an important mechanism for investments and social impact?
We recognize that CDFIs have the power to positively impact people and the planet by providing critical access to capital where it is most needed. Since the origin of the Sustainability Group over three decades ago, community development investments have enabled our clients to directly support some of the strongest grassroots advocates for environmental, social, and economic justice, with demonstrable impact. While most of our clients’ portfolios are heavily weighted towards public equities, clients understand the impact of their investments in CDFIs through metrics like jobs saved and created, units of affordable housing constructed, number of childcare spaces created, and acres of farmland preserved.
Importantly, CDFIs have a mission to lend in areas historically denied access to capital and financial services, and to borrowers who would otherwise not qualify for conventional loans. Our clients appreciate that many CDFI loan funds and some depository institutions accept investments from members of their community as well as social investors—which together form essential, lasting relationships and serve as a source of patient capital.
Clients of the Sustainability Group may choose to direct a portion of their portfolios as fixed income investments in CDFIs that meet our due diligence criteria and that offer exposure to the geographic region, theme, lending type, borrower type, or other impact criteria they wish to incorporate. For those seeking to activate their entire portfolio, loans to CDFIs are a compelling addition, since in a representative community loan fund’s portfolio, money invested for a five year term may be re-loaned (or re-deployed) several times before the investment reaches maturity. The principal can then be redeemed or, as is often the case, extended and re-loaned once again. In this way, even a small dollar investment or a modest allocation can catalyze a far greater effect on “Main Street” which might make it possible for a nonprofit to own the space it inhabits, or unlock access to start-up capital for a small business.
2. Given the current influx of federal resources into the CDFI industry, what potential does LWC see for greater impact in community development?
We are encouraged both by the volume of federal resources being allocated to CDFIs and the intent behind these public and other institutional investments. The current administration appears to recognize the interconnections between climate change and racial inequity, for example, and identify community finance as an effective channel to address inequalities across multiple sectors of the economy.
“We face multiple crises at once, and CDFIs so often play a key supporting role at the grassroots level because they are community leaders themselves. By rejuvenating local economies to provide what we all need—affordable housing and healthcare, quality jobs, fresh, healthy food, an accessible built environment, and opportunities for artists and entrepreneurs of all kinds—they deliver real impact. It’s in their DNA.”
The pandemic has also underscored the urgent challenges facing underserved and disinvested communities. In response, the community finance movement and its grassroots allies have achieved unprecedented traction with policymakers. Public investments like the CDFI Fund’s Rapid Response Program, and subsequent rounds of payroll protection funds which included CDFIs kicked into gear to the tune of billions. Those awards, as well notable sources of public funding including USDA, SBA, HUD, and BIA programs, as well as state- and local-level initiatives, are already providing crucial funding to help communities respond to the economic hardships exacerbated over the last year-plus.
Banks, foundations, and governmental agencies alike are seeing the value in providing a flexible, ‘integrated’ capital base through grants, guarantees, and credit facilities for CDFIs to leverage and deploy with far greater reach than before. Collaboration between loan funds, community development corporations, depository institutions, and providers of technical assistance has strengthened the offerings available, expanded eligibility, and generated innovative deals that are achieving improved performance. This demonstrable interest in CDFIs among a wider constituency and buy-in at the federal level will, we believe, signal their value to more mainstream investors and the general public. After all, CDFIs are overwhelmingly popular among those familiar with what they do.
Part of our role as early adopters and allies has been to share these stories in our work, and with our peers. For instance, our experience before, during, and after the global financial crisis has provided concrete evidence and a proven track record of how CDFIs respond to volatile economic circumstances, while our longstanding support has helped them weather major disruptions and quickly pivot to aid the recovery. This conviction appears to be growing across more regions and sectors as a result.
3. Loring, Wolcott & Coolidge’s Sustainability Group has been investing in Community Vision, a CDFI that centers building community power through community ownership of community assets, for approximately 10 years. Can you share how this aligns with LWC’s values and the values of the Sustainability Group’s clients? What initially brought LWC to Community Vision?
We first began working with Community Vision when it operated as the Northern California Community Loan Fund. At the time, it was the only federal- and state-certified CDFI devoted exclusively to serving Northern California’s nonprofit sector, specializing in loans for affordable housing development, community facilities projects, and basic human services. Community Vision’s loans often were, and many remain to this day, the only source of debt capital available for its borrowers, since conventional financing sources and even some larger CDFIs lacked the flexibility, expertise and risk-management experience to administer them. Because capital is only one key part of the community development equation, we found that Community Vision had a sophisticated consulting approach to help nonprofits become creditworthy, working cooperatively with its clients to mitigate challenges early and, for those projects where debt financing from the loan fund would be additive, structuring sound financial arrangements alongside other lenders. Since then, the partnership between our clients and Community Vision has only grown.
“One defining attribute that resonated with clients of the Sustainability Group in particular is the anti-racist framework by which Community Vision has committed to measuring not only its products and services, but its own internal operations and strategy.”
Reflecting on the history of inequality in America, CDFIs emerged out of necessity, as community-driven grassroots alternatives to a financial system that neglected its most vulnerable people. They did so to serve the needs of those disenfranchised by mainstream financial services, including entire communities who had been denied any opportunity to participate. Community Vision and the Sustainability Group share an understanding: as the scope and scale of our work grows, we must honor the legacy of community finance by centering disadvantaged voices, and endeavoring always to develop and expand systems and practices free of racial bias. The motto of the Sustainability Group has long been to ‘Shape your world.’ This is just one way that we work in partnership to help clients make a difference.
4. What advice do you have for organizations that are interested in community-based social impact investing?
There’s never been a better time to get involved. Across the nearly 80 high-impact organizations in our active universe, we have seen tremendous enthusiasm among clients old and new: outstanding loans and deposits at CDFIs have roughly doubled in four years.
We view our leadership role within the field of socially responsible and impact investing as a twofold responsibility: first, to continue offering high-quality, high-impact investment opportunities to serve the needs of clients; and second, to support organizations throughout the community finance space in ways beyond capital—whether they are CDFIs themselves, or other high impact organizations or social enterprises who want to engage more deeply with social investors and their advisors. We welcome opportunities to share our views with organizations interested in our experience.
The Sustainability Group at Loring, Wolcott & Coolidge can be contacted at sustainabilitygroup@lwcotrust.com. If you’re interested in learning more about social impact investment opportunities with Community Vision visit the investing page on our website or contact Eddy Lopez, Jr., Investor Relations Associate, at elopez@communityvisionca.org.
