Socially Responsible Investing: Community Investing

By Siri Yellamraju, Spring 2016 Student Intern

Community investing involves investing money in underserved communities in order to provide resources they do not have access to otherwise. There many community investment opportunities available. Examples include community development banks, credit unions, fixed income and private equity products. Community investing involves improving communities by offering banking services and small loans to fund businesses, non profit groups and housing initiatives to help bolster an underserved community. Investors can purchase CDs from community development banks or but offerings through community development loan funds and venture funds.

In 2005 community investment efforts accounted for only 1% of SRI funds. These efforts helped Native Americans buy back ancestral lands, start businesses, restore salmon and trout to Chinook watershed in Washington state, improve housing and access to high schools in Boston, provided microfinancing in Bangladesh, and many many more. As of 2012, money managers and community investing institutions held $1.41 trillion in ESG assets under management. This reflects significant growth in popularity of community investing.

Investing in communities is extremely rewarding, but can present many risks. Community investing is literally investing in the world. The funds provide individuals with the means to improve their quality of life and sustain their families. It’s a way to ensure the health of our economy on a large scale, and feel the satisfaction of touching a life. Retail investors or individual investors are less tolerant to financial losses but can still participate in community investing. Individual investors can place capital directly with a local community development bank, credit unit, loan fund or affordable housing developer. Individual investors may not be able to manage the money through a firm itself. Fixed-income or bonds are the most likely course of investment for individual investors.

Investors should visit http://www.ussif.org/communityinvesting to learn more about investing in underserved communities.