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October 08, 2011
SRI in the Rockies: CDFI Fund Director Donna Gambrell Delivers Keynote Address
    by Robert Kropp

Gambrell challenges sustainable investors to help "realize the tremendous potential that exists for a partnership" with the CDFI industry.


Community investment is central to the mission of sustainable investors, and many if not most find that investing in community financial development institutions (CDFIs) accomplishes that mission while allowing them to realize reasonable returns on investment.

CDFIs provide credit and capital, as well as financial services, to underserved populations and communities. With mainstream banks holding $2 trillion in reserve instead of investing it, while closing branches in low- and moderate-income communities, the role of CDFIs in supporting an equitable economic recovery becomes ever more important.

CDFIs receive funding as well as New Markets Tax Credit allocations from the US Treasury through its CDFI Fund, which has awarded more than $1.4 billion to banks, credit unions, and loan funds that provide financial services to underserved communities. This year, for the first time in the 22-year existence of the SRI in the Rockies conference, a representative of the CDFI Fund spoke.

Donna Gambrell, Director of the Fund, told the 500 or so attendees that gathered to hear her deliver the conference's keynote address, "This is the perfect time for the SRI community and the CDFI industry to begin a discussion about the future of community development finance." A new era for the industry, she said, is "producing many new opportunities for CDFIs to increase their impact, and many new opportunities for you, the SRI community, to expand your reach and to increase your impact."

Gambrell told the conferees that as of August 31st, 962 institutions had been certified by the fund as CDFIs. The institutions are located throughout the 50 states, as well as in the District of Columbia, Guam, Puerto Rico, and the US Virgin Islands.

"In 2010 alone, CDFI awardees reported originating loans or investments totaling more than $1 billion," she said. "CDFIs financed almost 18,000 affordable housing units, and more than 5,200 business and microenterprise loans. CDFI Program awardees in 2010 helped provide financing that created or maintained over 25,000 jobs and leveraged $1.5 billion in private investment."

The new era to which Gambrell referred earlier in her speech, of course, began with the financial crisis and continued with a prolonged recession that affected low-income communities much more severely. As "too big to fail" recipients of TARP funds repaid the largesse of US taxpayers by curtailing their lending and closing branches in already underserved communities, the role of CDFIs has become much more critically important. CDFIs have become, as the National Community Investment Fund (NCIF) recently stated, "too important to fail."

"The safety net for the communities we serve is shrinking," Gambrell said. "These communities—and the people in these communities—depend on the services CDFIs provide, and we must always be there for them."

However, she continued, "In the current economic climate, the supply of low-cost, long-term funding for CDFIs from government, foundations, and commercial banks has been flat or has even decreased. The CDFI Fund in particular is a limited source of funding and by itself cannot meet the industry's need for capital."

It has been anticipated that funding for the CDFI Fund will be $227 million in 2011, a $20 million decrease from 2010.

"The CDFI industry must increase and diversify its support, and seek new sources of capital," Gambrell said, "Which is where I believe the SRI community can play an important role in shaping the future of the CDFI industry."

Gambrel acknowledged that sustainable investors have increased their community investment in recent years. The 2010 Trends Report of US SIF: The Forum for Sustainable and Responsible Investment, for instance, documented a substantial increase in community investing, by more than 60% from $25.0 billion in 2007 to $41.7 billion in 2010.

Meg Voorhes, deputy director and research director of US SIF, said in a news conference in April, "The assets of the four sectors of community investing grew about tenfold in ten years." However, she added, "Major factors in the growth have been the capital they received from the US government, as well as from foundations and other institutional investors."

Gambrill pointed out in her address, "Although community investing is considered one of the three pillars of SRI, data shows that in the past the SRI community has focused more on the other two pillars, social screening and shareholder advocacy. That $41.7 billion that SRI investors directed to community investing represents just 1.35 percent of the $3.07 trillion in total SRI assets in 2010."

Furthermore, she continued, "68% of all SRI funds placed in CDFIs in 2010 went to depositories," which, she said, comprise just over 30% of all CDFIs. "The largest segment is community development loan funds," she said. "There are currently 593 certified community development loan funds in the United States."

"So I do hope that more SRI investors will begin exploring all opportunities to invest in CDFIs," she added.

Gambrell acknowledged also that investment in CDFIs may be limited by barriers such as below-market returns and higher perceived risk. But, she said, "Our industry is aware of them, and we are working hard to address them."

"For example," she continued, "More CDFIs are reaching out to investors and raising awareness of the opportunities to invest. Many are offering investments with terms that are more familiar and more standardized. And some are offering more competitive rates."

"So let us hear from you," Gambrell told sustainable investors. "Tell us what you need. Tell us what we can do better. Let us work together to build a sustainable partnership that will benefit all of our stakeholders."

"Ultimately, it is not about us at all," she concluded. "It is about the communities we serve. It is about the lives of the people who live there. It is about opportunity and hope."

 

 
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