Foundation invests in community development financial institutions
Although an all-time high of $14 trillion in deposits is sitting in U.S. banks, estimates suggest that less than 1% of those funds are in socially impactful options. As part of our continued efforts to align all our practices with our values to improve environmental quality and advance social equity, we are pleased to share that the Switzer Foundation made our first investments in community development financial institutions (CDFIs) in 2021.
While the foundation’s assets are already invested in alignment with our environmental values, CDFIs provide an exciting opportunity to support specific impact goals around social equity and communities that are underserved by business-as-usual investment practices.
What are CDFIs?
CDFIs are private financial institutions that are 100% dedicated to delivering responsible, affordable lending to low-income, low-wealth and other disadvantaged people and communities. They include mission-driven banks, credit unions, loan funds, and venture capital providers.
By financing community businesses — including small businesses, microenterprises, nonprofit organizations, commercial real estate, and affordable housing — CDFIs spark job growth and retention in hard-to-serve markets across the nation.
CDFIs are profitable but not profit-maximizing. They put the community first, not the shareholder. For more than 30 years, CDFIs have had a proven track record of making an impact in those areas of the U.S. that need it most. Investments in community development financial institutions (CDFIs) have grown over time, but deposits in CDFIs still represent a fraction of total cash assets.
We worked with our investment advisors, Pathstone, to identify CDFIs that would be a good fit for the foundation. Our initial investments were made in the following institutions:
Enterprise Community Loan Fund: a BIPOC and women-led organization that provides early-stage loans for affordable housing properties, healthy food retail in food deserts, health care and schools.
Capital Impact Partners: a women-led nonprofit corporation that lends and provides assistance to low- and moderate- income communities around affordable housing, community health centers, food deserts and education.
Calvert Impact Capital: a women-led nonprofit investment firm that supports under-resourced communities to address climate change, affordable housing, healthcare, education, income and wealth building and other critical services.
MCE Social Capital: a women-led organization focused on lending across the developing world through microfinance institutions and direct microloans on issues such as gender equity, access to financial services, and agriculture and economic opportunity.
Investing in CDFIs is another step in the foundation’s long-term work to ensure all of our financial assets are managed to support our mission to improve environmental quality and advance social equity. We pledged to fully divest from fossil fuels in 2014, committed to engage in shareholder resolutions that encourage companies to improve environmental quality in 2019, and also moved our checking and credit card accounts to a new environmentally- and socially-responsible bank in 2021.
As always, we welcome your feedback as we continue this work, and hope that our example helps chart a path for individuals and institutions affiliated with the Switzer Network to make similar changes in their own spheres of influence.
Opportunity Finance Network, 2022. What is a CDFI? https://ofn.org/what-cdfi
Pathstone, 2021. Pathstone Impact Cash. Presentation to the Switzer Foundation
Pease, 2021. Investing Cash for Impact: A Guide for Asset Owners. https://www.pathstone.com/investing-cash-for-impact-a-guide-for-asset-owners/