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Corporate Social Responsibility (CSR) is an idea that corporations have to consider the interests of customers, employees, shareholders, communities, and ecological considerations in all
Socially responsible investing (SRI) describes an investment strategy which combines the intentions to maximize both financial return and social good.

green@work : Magazine : Back Issues : Summer 2005 : Socially Responsible Investing : Investing in Communities

Special Section: Socially Responsible Investing

Investing in Communities
A growing number of investors are discovering that their money can work to build communities worldwide.

by Todd Larsen

In 1992, Peggy Soucy started the Kids R Special Child Care Center in rural Maine, and it initially served just a handful of children. In time, because of the great services she provides and her strong business sense, the center grew and needed a new building. Peggy turned to Coastal Enterprises Inc. (CEI), a local nonprofit community-investing institution, to secure a loan for $40,000. She also received assistance from CEI's Women Business Center, which is helping her develop a Web site to advertise her services to new families and communicate with parents. Kids R Special is now serving 37 children, half of them low-income, and is ready for further growth. This is just one example of how community-investing institutions are making a real difference in the lives of people and their communities across the country and around the world.

Are your investments working to build housing, create jobs and otherwise help low-income communities worldwide? Most investors, professional and individual alike, have no idea where their money ultimately goes and what it's supporting, but more and more investors are seeking high-impact community investing so they can be sure their money is creating positive change. These investors are putting money into community-development banks, credit unions, loan funds and venture capital funds that in turn are investing in people like Peggy Soucy.

"Community investing is unique in providing investors with the means to improve people's lives worldwide while earning a fair return on their investments," says Jean Pogge, senior vice president of Mission-Based Deposits for ShoreBank, and chairperson of the Community Investing Program of the Social Investment Forum Foundation and Co-op America. "It's not charity, but a powerful means to create long-term improvements in the lives of low-income people in a way that complements the work of charities. As each borrower pays back his or her loan, it enables the lender to provide much-needed financing to another borrower."

Community investing has been actively improving people's lives for almost 40 years, but remained a small industry for most of that time because the field needed more investors to grow. In 2000, the Community Investing Program of the Social Investment Forum Foundation and Co-op America created the "1% in Community" campaign to involve more investors with a goal of tripling the assets directed to community investing from $5 billion to $15 billion by 2005.

The "1% in Community" campaign has the simple goal of encouraging all investors—individual, professional and institutional—to direct at least one percent of their investments to community investing. One percent of invested assets may not seem significant, but even if just one percent of the assets currently invested in socially responsible portfolios were directed to community investing, it would mean more than $20 billion in community investing.

Since 2000, the campaign and the community-investing field have experienced great success. The campaign reached thousands of individual investors and hundreds of professional and institutional investors. Socially responsible investors alone increased their investments in community investing by $1 billion. As of 2003, the field overall grew to more than $14 billion in assets, and with an ever-increasing range of products and a growing pool of interested investors, community investing is poised for continued rapid growth.

What makes community investing an exciting option for all investors is the impact that the field has on people's lives. In the United States, community investors are helping families buy their first homes; allowing women and minorities to open businesses; providing farmers with the capital to make their family farms profitable; building daycare, healthcare and educational facilities; and financing clean energy and other environmental companies. Internationally, microloans and other products have an incredible impact on the lives of borrowers. For example, in South Africa, loans for as little as $16 can enable entrepreneurs to launch their own businesses.

Many of these borrowers tried to secure loans first through traditional financial institutions, but were turned down—they may have been requesting loans that were too small or lacked the necessary credit history. Community-investing institutions are experts in understanding the communities in which they lend and their potential borrowers, and are able to make successful loans. This expertise, along with financial innovations, makes these loans safe. For example, recent data from the National Community Capital Association shows that loans made by more than 100 U.S. community investing institutions were as safe as loans from conventional banks.

There is a growing range of community-investing options available to all investors—from market rate CDs, money markets and savings accounts, to innovative loan funds and venture capital products. In March, the "1% in Community" campaign launched a new Web site,, with an extensive database of more than 400 community-investing institutions and information to help investors get started. "The Web site (serves) as a one-stop resource for any investor interested in placing money into community-investing institutions," says Justin Conway, Coordinator of the Community Investing Program of the Social Investment Forum Foundation and Co-op America. "Investors (are) able to find institutions that invest where their interests lie—from financing entrepreneurs, to creating social services, to developing affordable housing—and find products that meet their financial objectives."

There are literally millions of hard-working people like Peggy Soucy who simply need a loan to enable them to make major improvements in their lives. While community investing is growing, it is only meeting a fraction of this need. With the new Community Investing Center Web site and the increasing number of community-investing products available, it's never been easier for investors to put money to work in low-income communities worldwide. Over the next year, the campaign will be working to reach new investors and interest them in the field. As more and more investors meet or exceed the "1% in Community" goal, a growing number of borrowers around the world will be able to finance better lives for themselves, their families and their communities.

Todd Larsen serves as the managing director of Co-op America and is a co-director of the Community Investing Program of Co-op America and the Social Investment Forum Foundation.

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