What Do Eggs Have to Do With Impact Investing?
I love to cook. In fact, as I write this, I’m roasting some asparagus, salmon, and fingerling potatoes in the oven, which I’ll be drizzling with lemon garlic butter sauce before serving alongside gruyere and chive popovers. For dessert — fresh strawberries and cream. Decadent. I find the act of browsing my local farmers market each week inspiring and searching out new recipes and ways to improve my skills in the kitchen is now one of the highlights of my week.
But when I first started out, I didn’t start with lavishly prepared dinners with multiple sides and complex sauces. I started out with eggs. Eggs are easy to find, affordable, and you can prepare them in a variety of ways. They’re also an essential building block for a variety of more complex dishes, allowing me to learn progressively more difficult techniques as I went. They were the perfect starter ingredient.
So, what does my cooking story have to do with impact investing?
When I talk to people interested in getting started with impact investing, they’re often overwhelmed by the amount of information and variety of options to choose from. My advice? Start with the eggs of the impact investing world — Community Development Finance Institutions (CDFIs).
CDFIs are easy to find
CDFIs are financial services organizations — banks, credit unions, venture capital firms, and loan funds that are “profitable but not profit-maximizing” and “put community first.” Every state, and most major cities, has at least one CDFI working to support small businesses, entrepreneurs, and marginalized communities in your local area. This funding shows up in the form of small business lending, microlending, capital for affordable housing development or renovations, capital for community facilities that may provide healthcare or childcare, and much more. These organizations have been investing in communities for more than 40 years, and they have a long track record of adding value to the communities they serve.
CDFIs are an affordable first impact investment
One of the things new impact investors find as they begin to evaluate impact focused opportunities is that the investment minimums for impact products can be substantial. Many private investments have minimums starting at $50,000 or $100,000 — which can be out of reach for some investors. CDFIs on the other hand offer notes which are frequently available to retail investors, and some have minimums which start between $1,000 — $10,000.
CDFIs offer a variety of investing options
CDFIs tend to offer easy to understand products like depository accounts backed by FDIC insurance, Certificates of Deposit, Notes, or balance sheet lending options — and the interest rates they offer range from market rate to slightly below to allow for their mission. They also vary in size, complexity, and focus, allowing investors to choose from smaller, more locally focused organizations to larger national organizations with S&P ratings and strong balance sheets.
CDFIs are an essential building block for more complex investments
Investing in CDFIs gives you insight and information about how to effectively use capital to drive change in your community — which is a crucial step in your learning journey as an impact investor. CDFIs are great teachers, they have annual impact reports to better understand their work and regularly host learning events for the community. With a wide range of focus areas, they have a little something for everyone and are a great way to amplify your impact and build confidence as an investor. And pretty soon, you’ll be confident using those skills to make a great sustainable agriculture, equitable healthcare or affordable housing investment.
About the Author:
Liz Sessler is the Chief Operating Officer at CapShift. She is a founding member of the CapShift Executive Team and oversees multiple parts of the team, including Technology & Product, Client Experience, and Marketing.
To read more articles on the intersection of impact investing and philanthropy, visit CapShift’s Medium page.
