Trends in Impact Investing and Financial Advisory

This post was originally published by Community Credit Lab, which is now part of Common Future.

From our experience, the future is built together at the nodes where ideas, conversations, and trends converge and diverge simultaneously. This future demands engagement and participation at these intersectional crossings—in order to build together, we must be together first.

As we continue our work building relationships with our Lending Partners, we also aim to be in relationship with the wider ecosystem of individuals that seek to build an equitable financial system. Based on these touchpoints, we are sharing below a few of the trends we’re observing with the hope to continue sparking conversation and connected progress. These anecdotes inspire us to continue our work knowing that others are also building towards change—please feel free to share additional examples or feedback on the below observations with us!

In order to build together, we must be together first.

Trends in Impact Investment & Financial Advisory:

There are several trends that we’re witnessing that will continue to enable the shared vision of CCL, our network of Lending Partners, and the larger movement building towards an equitable financial system – these trends decrease the cost of capital to borrowers, increase the “patience of capital” and loan term lengths, and seek to begin integrating historical economic extraction into investment evaluations and approaches.

Specifically, we’ve seen the following examples lately:

• Financial advisors waiving advisory fees to facilitate resources to BIPOC led funds and businesses—this type of action helps to facilitate resources to lower return strategies that may otherwise not be deemed feasible for accredited investors due to pre-established return thresholds;
• Financial advisors carving out specific allocations and strategies to focus more on catalytic investment opportunities that may not otherwise match centralized firm investment criteria—this type of action creates new opportunities for first-time fund managers and, especially, BIPOC managers that face barriers to building investment track records
• Conference topics and articles centered around equitable community investment, racial equity, and shifting power in investment decision making—these discussions help to create discussion and dialogue and increase awareness of the nuance and barriers in community and impact-first investing;
• Recoverable Grants as an increasingly feasible tool to resource community investment structures and strategies without a pre-determined risk / return profile – this leads to more expansive conversations around the use of funds and goals of impact investment; and
• Across the financial sector, there is a shift towards providing patient and longer-dated capital to ensure that we are building in together with investors in ways that support the longevity of our communities and planet. Community Investment Funds like Ujima Project and Real People’s Fund are issuing longer term notes beyond the 5-year term out to 7- and 10-years in order to provide patient capital. Even Venture Capital funds with a “finance first” approach like Sequoia Capital recently announced that it is abandoning its 10-year fund cycle to invest in companies across longer periods.

Reimagining a financial system that prioritizes humanity and distributes power requires us to think beyond traditional structures in different contexts. At CCL, we continue recognizing that our work and the leadership of our Lending Partners are part of a much larger movement within the financial system that is looking to build new economic models where everyone can thrive. This movement requires action at every intersection, interrogation across every institution, and stewardship at every organization. We continue to derive energy from the people who work in between to bridge and create expansive opportunities for all.

Reimagining a financial system that prioritizes humanity and distributes power requires us to think beyond traditional structures in different contexts.

2022 Opportunities to Learn More About Enable & Resource CCL’s Affordable Lending:

As we grow the Lending Programs that CCL supports, we have designed an integrated capital structure (using a combination of capital tools to achieve a shared goal) that enables us to collectively eliminate the poverty premium for borrowers and support our Lending Partners by facilitating capital to individual and small business borrowers that are eligible for their Lending Programs.

• Kinship Notes: community investment notes that support CCL’s Lending Programs to scale. Funds from Kinship Notes are used to resource CCL’s Lending Programs at the direction of our existing Lending Partners.
• Recoverable Grants: recoverable grants that support and enable CCL’s Lending Programs. Funds from Recoverable Grants are primarily used to resource CCL’s Lending Programs at the direction of our new Lending Partners.
• Unrestricted Grants: in addition to revenues from donations and service revenues that we receive from Lending Partners that are able to pay for CCL’s services, we continue to seek unrestricted funding that enables CCL’s work over the long term. CCL’s FY 2022 Target in unrestricted grant funding is $750,000 (of which, we have confirmed over $400,000 in commitments already).