January 27, 2005
Calvert Foundation Community Investment Notes Go Electronic
by William Baue
For the first time, individual and institutional investors will be able to support community
investment in the same way they transact most other investments--via computer.
Yesterday, the Calvert Social
Investment Foundation announced the "wiring" of Calvert Community Investment (CCI) Notes, the
first time that such community investment instruments have been available electronically for both
individual and institutional investors. CCI Notes have a solid ten-year track record of supporting
community investment, directly financing socially or economically beneficial projects in
disadvantaged communities that are underserved by conventional financial institutions. However,
electronic investment has supplanted paper-based transactions over the past decade, and the
availability of CCI Notes only in the latter form acted as a barrier to entry.
"This is not some technical upgrade, this is truly a red-letter day for community
investing," said Wayne Silby, co-chair of the Calvert Foundation, who stressed the potential of the
new platform to drive increasing interest in community investment. "We have seen a jump of well
over 25 percent in community investment assets annually overall, and that has been surging up
closer to 36 percent in the last two years--and all that growth has been for an unwired
"By 'wiring' its Community Investment Notes, the Calvert Foundation is
providing ready access for a wide group of investors that may have looked at community investing
but have been deterred by the difficulties in entering the marketplace," Mr. Silby continued.
Individual investors can purchase CCI Notes electronically through 24 brokers listed in the CCI
including Legg Mason, Piper Jaffray, and Progressive Asset Management, with Calvert Foundation
covering commissions and fees instead of the investor. A collaboration with the Bank of New York allows the CCI Notes to be sold through an
electronic (or "book entry") platform via the Depository Trust Corporation (DTC) similar to how stocks and bonds transact electronically.
"Making this DTC removes the barrier both for the investor to make the choice and the
consultant to offer it as an opportunity--it makes our lives a lot easier," said Tom Van Dyck,
senior vice president of investments at PiperJaffray. "The ability to track all their investments
in one statement will help individuals who have been looking to make community investments, because
While electronic availability removes significant practical
barriers, it also removes the perception that community investment is a lesser form of investment,
which created an additional obstacle, particularly for institutional investors with fiduciary
"The fact that the note will transact in a seamless way, as with any other
financial security, is really a psychological benefit," said Shari Berenbach, executive director of
the Calvert Foundation. "It lends a level of institutional comfort that community investment is
moving from the fringe to the mainstream, even though the underlying risk is still the same."
While institutional investors may have shied away from community investment in the past out of
concern over risk, there is a strong fiduciary case that community investment minimizes risk while
also providing the added benefit of a "social return."
"The fiduciary case for community
investment really lies with the track record that organizations like the Calvert Foundation--in
over ten years, our loss rate for our total portfolio is less than two tenths of a percent," Ms.
Berenbach told SocialFunds.com. "The fact that we have loss reserves of nearly $2 million as well
as credit enhancement of $10 million really shows that the risk in these kinds of instruments can
be effectively managed."
CCI Notes also offer flexibility. For a minimum outlay of
$1,000, investors can choose a return rate of up to three percent in simple interest compounded
annually for a term of one, three, five, seven, or ten years. While the rate of return may change
with interest rates, the Calvert Foundation remains committed to securing the social benefits
associated with community investment.
"In the current interest rate environment, we're
paying about two percent on the shorter term notes, which meets the risk/reward requirements of
most fiduciaries," Mr. Silby told SocialFunds.com. "If interest rates go up, we want to keep the
cost affordable for the recipient community development financial institutions, so we do not
anticipate raising rates substantially from this level."
The Calvert Foundation directs
funds from CCI Notes to more than 170 community development financial institutions (CDFIs) listed
in its prospectus, including ACCION
International, the Cooperative Fund
of New England, Fonkoze, Self Help Enterprises, and University Bank. Investors can
geographically target where they want to make a social impact.
"We have regional
distribution available to every investor from $1,000 on up, so if you live in New England, you
could direct it to the New England zone," Elizabeth Glenshaw, the Calvert Foundation's director of
Community Investment Industry and Markets, told SocialFunds.com. "For investments of $25,000 and
up, you can target specific institutions."