Calvert Giving Fund
Relevant Times
November/December 2007
The Giving Investment
By Gary Matthews
Progressive business people who are successful accumulate excess capital like all capitalists – they just do it, hopefully, in a just and sustainable way. They then face the question – how to make use of their excess capital in a just and sustainable way? Some will feel a philanthropic urge and want to donate to worthy charitable causes. Others will want to invest their excess in a way that reflects their values – often called socially responsible, or social investing. Still others will ask – can I do both?
Community investing enables people to socially invest and charitably give at the same time. Through community investing, individuals have the opportunity to create jobs, housing, social services and local entrepreneurial development while earning returns on their investments. Community investments are offered by a group of forprofit and not-for-profit financial institutions collectively called community development finance institutions (CDFI’s).
One such CDFI is the Calvert Foundation (calvertfoundation.org). It offers community investment notes* that finance a wide variety of economic projects around the world.
Here’s one example:
Nearing the age of 50, Agathe Dada Zinsou had spent almost half of her life in Africa struggling to keep her local soap-making business afloat. She would operate for several months, then run out of money to purchase materials and have to close down. She and her children suffered. Eventually, she heard about a micro-finance NGO named PADME (financed indirectly through the Calvert Foundation). Knowing that a little capital was just what she needed to steady her income, she applied and received her first loan, using it to buy raw materials for the business. Today she employs six people and has started a second business selling plastic goods. With the increased profits from soap sales, Agathe has not only paid off her first loan, she has also bought land and is renting out houses as another source of income.
Individuals wishing to participate in stories like these often start by finding a community development bank or credit union for their basic banking needs. In addition to strengthening lower-income communities, these institutions offer checking and savings accounts, CDs, IRAs, mortgages and other loans. Community development banks or credit unions can often be found locally, but it is also relatively easy to bank with a CDFI in another neighborhood or state using online banking, ATMs, and the mail.
In addition to the social goods they make possible, community investments have another philanthropic component. They are typically offered at below-market interest rates. Community investment notes at the Calvert Foundation, for example, are currently offered in increments of $1,000 for 1, 3, 5, 7 or 10-year time periods at interest rates of 1-3%.* Such investments are very powerful charitable giving tools, allowing people to leverage their charitable giving dollars for greater benefit.
Consider this – if you donate $100 to a charity, $100 is available for the worthy cause you wish to support. On the other hand, you could elect to take $5,000 of your current investments and purchase a community note or CD paying 3%. If you did this instead of purchasing a US Treasury note paying 5%, you would forego $100 in your first year. In this case, the $100 you are out of pocket releases $5,000 to benefit others in local communities on a global scale.
Community investing can be fully integrated into your overall investment strategy. For example, two mainstays of the social investing community, the Social Investment Forum Foundation and Co-op America, have launched a campaign to encourage people and institutions across the country to put their banking and investment dollars to work strengthening communities that have been left behind – called the 1% or More in Community Campaign. The idea is simple – each investor allocates 1% of his/her total investment portfolio to community investments.
The campaign’s immediate goal is to help grow the community investing industry to more than $25 billion in assets in 2007. This would help continue the momentum that occurred between 2000 and 2005, when the industry grew from $5.4 billion in 2000 to $20 billion in 2006.
You can also make community investing an integral part of your charitable giving strategy. One way is to set up a donor advised fund. Donor advised funds are offered by a variety of CDFI’s – they allow you to place your donation dollars aside and invest them in various community and social investment vehicles while they await your decisions about which charitable organizations to grant to. Periodically, you recommend grants to public charities in the U.S. or abroad and the CDFI helps you make them.
Want more information? Check out the Community Investing Center at communityinvest. org. You’ll find here a large database of CDFI’s and community investment opportunities that will enable you to find and purchase your giving investment.
*Mention of specific securities should not be considered an offer to buy or sell that security. For information on the suitability of any investment for your portfolio please contact your investment adviser.
Gary R. Matthews, PhD CPA/PFS AIF® is an investment advisor representative and personal financial specialist with 25+ years of experience. Specializing in socially conscious and environmentally sustainable investment, tax and financial consulting (SRIinvesting.com) he enjoys working with individuals, non-profit organizations and progressive small businesses.
