Christina Travers and Anna Smukowski reflect on the experience of LISC's innovative Impact Notes program and what it says about how CDFIs can communicate opportunity and impact to attract capital to high-impact work.
Over the past two years, we’ve lost count of how many times we’ve heard statements like “it has never been more important to invest in equity and opportunity than it is right now.” At LISC, we’ve even said it ourselves a few times as we deepened our focus on pandemic relief, racial justice and the overall well-being of urban and rural communities.
But the truth is that this work has always been important. The real difference now is how many more people have come to recognize that fact and are looking for ways to deploy capital in ways that directly respond.
LISC’s Impact Notes program, which recently reached the milestone of $100 million in sales, is a good example of this evolution. We say that not just because the Notes expand the amount of flexible capital LISC has raised to finance affordable housing, economic development, health, education and jobs, but also because the program helps illustrate what it takes to diversify the funding base for the field of community development.
Even before the crises of recent years, we felt strongly that there was an increasingly broad range of investors looking to pursue social impact alongside financial return. But, because of high minimums, net worth requirements and other securities offering complexities, many retail investors did not have a pathway to invest in community development funds and initiatives.
A 2019 report from the Rockefeller Foundation echoed that sentiment. Noting that impact investing has grown “across age groups, wealth brackets and asset classes,” it also said there are not enough ready-made investment opportunities to meet that growing retail demand for impact. “There is a clear need to develop innovative, scalable products to cater to the growing base of retail investors,” according to The Individual Imperative: Retail Impact Investing Uncovered.
From LISC’s perspective, we couldn’t agree more. When we announced our Impact Notes offering in late-2020, we specifically designed the program to be accessible to retail investors through InspereX’s LegacyTM Platform. The Notes are available on the third Monday of the month through individual brokerage accounts for a week-long offering period. They are offered in increments as low as $1,000, increasing accessibility to a broader base of investors. And they are sold at various maturities that offer investors options.
In other words, the program aims to both raise capital and help democratize investing in community development finance.
We took other steps as well to validate the social and financial aspects of the offering. That includes a ‘AA-’ credit-quality rating from S&P, as well as a second party opinion from Moody’s Vigeo Eiris, an international ESG research firm that reviews financial instruments for alignment with the International Capital Markets Association Social Bond Principles (SBPs) and the UN Sustainable Development Goals (SDGs).
The result is $100 million in new community development capital—much of it from investors we might not otherwise have been able to reach. Commitments range from just a few thousand dollars to more than $1 million, with most flowing from mainstream retail brokerage accounts. Of course, we continue to value our relationships with institutional lenders and investors; they are critical to our efforts. But our outreach to retail investors opens up a host of new opportunities—not just for increased financing, but for increased understanding of and commitment to community development initiatives.
The experience offers a few takeaways for LISC and for the CDFI sector as a whole.
The first seems painfully obvious: easy is better. If investors can tap into community development issuers through existing investment channels, they can connect their capital to their values. This is no small task in community development, which is so highly tailored to particular programs, projects and locales. Still, if we can make investment opportunities less bespoke, if some of financial instruments offer relatively low-cost entry points and familiar language about risk and return, we will be better able communicate with retail investors.
Second, a move toward standardized impact measurement tools is critical. Already, most CDFIs closely evaluate programs to see what works and what doesn’t. But those individualized metrics may not translate well when talking to new investors. In fact, the Rockefeller report notes that eight in 10 retail investors find it difficult to measure impact. By moving toward recognized standards like the SBPs and SDGs, we can offer yardsticks by which investors can better judge whether CDFI investment opportunities line up with their goals.
Finally, we can all do a better job connecting the compelling narrative of community development to the impact storylines that investors are already following. Whether it is global progress on the SDGs or local efforts to dismantle systemic racism, we can help investors understand that community development is synonymous with social impact.
Not all CDFIs are large enough to support public note offerings like the LISC Impact Notes. But most of us reach out to funders and investors on a regular basis, and therein lies the opportunity. Investors are telling us they want to support a more broadly shared prosperity; it’s up to us to offer impactful ways for them to do so.
About the Authors
Christina Travers, Executive Vice President & CFO, LISC
Prior to joining LISC, Christina was the CFO of Working Solutions CDFI, a San Francisco Bay Area microlender. During her time at Working Solutions, she focused on the migration to a single treasury management platform, financial management report creation, debt consolidation, financial forecasting and the implementation of a risk assessment based asset management function. Christina also spent over two years at the Low Income Investment Fund (LIIF) as Vice President for Finance & Capital Strategies. In this role, she served as a liaison and resource for LIIF’s banking and other lending relationships. She also oversaw the corporate budget process, financial forecasting, investment portfolio management, treasury services, and cash management. Before LIIF, she spent ten years at LISC as Senior Vice President for Finance & Capital Strategies.
Anna Smukowski, Senior Director of Capital Programs, Enterprise Community Loan Fund
Anna Smukowski serves as ECLF’s senior director of capital programs, assisting ECLF’s capital and lending teams with capital raising and fund structuring. Prior to this position, she led LISC’s $200 million retail note offering, coordinated LISC investor relations and positioned LISC’s capital raising within ESG, impact and social bond frameworks. Anna also managed $50 million in LISC’s Paycheck Protection Program deployment and has structured and managed affordable-housing and economic-development funds as well as pay-for-success work through a Social Innovation Fund grant award. Anna is passionate about values-aligned investing from the individual to the institutional level and has worked on updating and implementing missionaligned investment policy statements at LISC and ECLF. Anna started her career as a strategy and operations consultant at Deloitte. Anna holds a bachelor of science degree from New York University Stern School of Business and an MBA from Columbia Business School.
Disclaimer: This is not an offer to sell or a solicitation of an offer to buy any securities. Such an offer is made only by means of a current Prospectus (including any applicable Pricing Supplement) for each of the respective notes. Such offers may be directed only to investors in jurisdictions in which the notes are eligible for sale. Investors are urged to review the current Prospectus before making any investment decision. No state or federal securities regulators have passed on or endorsed the merits of the offering of notes. Any representation to the contrary is unlawful. The notes will not be insured or guaranteed by the FDIC, SIPC or other governmental agency
Impact Notes currently are not offered to residents of Tennessee and Washington.
Ratings current as of 4/19/2022. An S&P credit rating is not a recommendation to buy, sell or hold Notes and may be subject to suspension, reduction or withdrawal at any time by S&P. Please check the current Pricing Supplement at the link below for the S&P credit rating assigned to Notes currently being offered for sale.
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LISC Reaches $100M Milestone for Social Bond Program
For more information on LISC’s Impact Notes, visit lisc.org/invest.