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CDFIs and the Capital Markets: Tapping into Impact Investors

In this research paper, LISC provides an analysis of the CDFI industry’s initial forays into the capital markets on a rated basis, and examines how CDFIs can expand their role as trusted intermediaries for capital investment in people and places where disparities in health, employment, wealth and financial security, and overall quality of life have stemmed from a lack of capital access.

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Executive Summary

A new paradigm is emerging – one in which mainstream investors increasingly want to invest in the social, economic and environmental well-being of communities. LISC’s research paper, CDFIs and the Capital Markets: Tapping into Impact Investors, lays the foundation for the CDFI industry to seize on the opportunities stemming from this paradigm shift. It provides an analysis of the CDFI industry’s initial forays into the capital markets on a rated basis, and examines how CDFIs can expand their role as trusted intermediaries for capital investment in people and places where disparities in health, employment, wealth and financial security, and overall quality of life have stemmed from a lack of capital access.

Covid-19 and the ongoing fight for racial justice have put on display the stark disparities in health and economic opportunity for low-income communities and communities of color and reinforced the need for CDFIs to create ongoing capitalization strategies that channel new, flexible sources of capital into the communities in which we work. Increasing CDFI access to the capital markets via rated bond and note offerings, and alignment with broader impact and environmental, social and governance principles, are lighting the path forward to expand and vary our funding toolkit, while bringing new partners along for the journey.

As Americans, we all share in the dream of economic and social prosperity. By working with residents and partners, CDFIs continue to create new paths to democratize access to products that align investment dollars with values, driving inclusive, resilient economic growth and opportunity for all.

This paper is successor to LISC’s December 2017 CDFIs & Impact Investing: An Industry Review. LISC engaged in additional research in response to the 2020 CDFI Symposium’s Call for Papers. The Symposium was jointly sponsored by the CDFI Fund, the Federal Reserve Banks of Atlanta, Minneapolis, Richmond, San Francisco and St Louis, and the Federal Reserve Board of Governors. The authors note that the paper does not include analysis of Century Housing Corporation’s recent $85 million Sustainability Bond issuance dated June 25, 2020, the first to obtain a dual rating from Fitch Ratings and Standard & Poor's Global Ratings. ​

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Related Research

CDFIs & Impact Investing: An Industry Review

This white paper offers an overview and analysis of the CDFI industry and its trajectory of social impact investing. The field of community development financing is changing radically, and as pools of funding shift and contract, it is more important than ever that CDFIs diversify their resources and develop new tools to carry on their important work. 

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