April 14, 2011
Trends Point Toward a Growing Surge in Community Investing
by Robert Kropp
The Social Investment Forum identifies a tenfold increase in community investing over ten years, to
which continued government funding and frustration with the abusive practices of big banks have
One of the noteworthy findings of the 2010 Trends Report
published last November by the Social
Investment Forum (SIF) documents the substantial growth in community investing, which increased
by more than 60% from $25.0 billion in 2007 to $41.7 billion in 2010.
the Trends Report as "the capital investors direct to communities that are underserved by
traditional financial services," community investing is most often accomplished through community
development financial institutions (CDFIs), which include banks, credit unions, loan funds, and
venture capital funds. The investments are typically directed toward housing and small businesses
in low-income and other underserved communities.
The efforts of CDFIs have been assisted
by monetary awards and the allocation of tax credits from the Community Development Financial Institutions Fund (CDFI Fund)
of the US Department of the Treasury. In March of this year, for instance, the CDFI Fund awarded
$3.5 billion in New Markets Tax
Credits (NMTCs), providing investors with a credit against federal income taxes for investing
in Community Development Entities (CDEs).
Given the slash-and-burn approach to
budget-cutting thus far demonstrated in the US Congress this year, it was heartening to hear from
Fran Teplitz, director of social investing and strategic outreach at Green America, that "Fortunately, the federal government
has largely preserved funding for CDFIs in 2011."
As of April 12, it was anticipated that
funding for the CDFI Fund would be $227 million in 2011, a $20 million decrease from 2010.
Teplitz spoke yesterday at a news conference in which she and other speakers argued that the
trends identified by SIF could lead to a "surge in community investing assets in 2011," according
to a press release.
In the news conference, Teplitz identified three trends that could
lead to such a surge.
"First, there is an increasing frustration with big banks due to
their abusive practices," she said. "The second trend is the increase in the number of institutions
now getting involved. According to the Sustainable Endowments Institute, colleges and
universities are playing a key role."
In its recently published College Sustainability Report Card, the
Institute noted an increase in the number of colleges and universities receiving a grade of A- or
better for their endowment activities, to 23 from 12 the previous year.
"The third trend
driving community investing is the increase in public awareness of the many benefits of community
investing and banking," Teplitz continued. "CDFIs serve clients that big banks often either ignore
or exploit, such as lower-income families, nonprofit organizations, mission-motivated
entrepreneurs, and inner city and rural small businesses that are committed to their communities
In its Community Investing Guide,
Green America stated, "The global economic crisis has focused public scrutiny on the predatory
practices, gross mismanagement, and outright greed of some of the biggest conventional banks and
financial institutions. The housing crisis has clearly shown what happens when lenders treat
borrowers as a means for leveraging greater corporate profits, providing deceptive and unsound
terms and inappropriate products and services."
Meg Voorhes, deputy director and research
director of SIF, also spoke at the news conference, and said, "The assets of the four sectors of
community investing grew about tenfold in ten years. Major factors in the growth have been the
capital they received from the US government, as well as from foundations and other institutional
"In addition, the asset growth of community development banks and credit
unions has been fueled in large part by consumer demand," Voorhes continued. "Members of
communities previously underserved by traditional banks have been eager to open accounts with these
Also speaking at the news conference was Cliff Rosenthal,
president and CEO of the National Federation of
Community Development Credit Unions. According to the Federation, "CDCUs offer an economic
lifeline to low-income communities that have been abandoned by commercial banks and targeted by
high-priced check cashers and predatory lenders."
"These have been difficult times in many
communities," Rosenthal said. "However, we've seen resilience and growth in a majority of our
credit unions, even those that are serving low-income and distressed communities. We've seen both
internal growth and an increase in the number of institutions flocking to our mission."
"Social investors have provided very important support to CDCUs and other CDFIs," he continued.
"They've done this by making direct deposits, at times at market rates and at other times at below
Kat Taylor, the founding director of One PacificCoast Bank, a California-based CDFI,
said, "Providing fair and transparent transactional and savings services and loan capital for
business and job growth in all communities is what all banks should deliver for the privilege of
federal deposit insurance."
"Banking that supports people and the planet will be critical
in serving the nation as a whole, as well as marginalized communities, in order to move toward
reliable prosperity for all," she continued. "We understand that a bank cannot measure success and
sustainability by focusing on profits alone, which is why community development financial
institutions are so important."