What’s new in the discussions on impact between CDFIs and their investors?
Aeris invited 145 CDFIs which are rated by or reporting to Aeris to participate in our 2021 CDFI Survey, and to share their recent experience discussing impact with investors.
As socially-minded investors, policymakers, and others have increasingly discovered CDFIs as experienced and effective channels for addressing economic and racial inequities, and interest in the field reached an unprecedented level in the past 18 months, what impact topics are of most interest to investors? And has the focus changed? We share some highlights here.
Impact topics most frequently raised by investors in 2021
According to the survey, the two impact topics most frequently discussed are: (1) who are the beneficiaries of the CDFI’s impact; and (2) the degree of diversity, equity, and inclusion (DEI) of the CDFI and/or its borrowers.
- 82% reported that they had discussed Topic 1 with investors; 77% reported that they had discussed Topic 2 with investors
- 88% of respondents from Aeris-rated CDFIs (61) reported that they discussed Topic 1 with investors, and 84% reported that they had discussed Topic 2
We note an exception for CDFIs with $100MM-$200MM in total assets, who reported that the most frequently discussed topic with investors (94%) is about impact data that is relevant to the CDFI’s lending type.
Fig. 1. In recent conversations, are investors discussing the following with you? (Select all that apply)
Investors introduced new areas of interest in impact measurement and management
- Negative unintended impacts: 18% of respondents reported that investors had begun asking how they are thinking about and mitigating negative unintended impacts of their lending. About half of those CDFIs say that this is a new area of interest for investors.
- Third-party verification of impact: 14% of respondents reported that investors had begun discussing third-party verification of impact. The percentage is higher (21%) among CDFIs with $50MM-$100MM in total assets.
- Incorporation of impact due diligence and monitoring into lending policies and processes: 15% of respondents reported that investors had begun discussing this impact topic. The percentage is higher (29%) among CDFIs with $100MM-$200MM in total assets.
Investing in communities of color is a leading motivation of CDFIs’ newest investors
- 41% of all respondents identified that by far the leading motivation of new investors is investing in communities of color.
- The second highest motivation (19%) of new investors is geographically focused or place-based impact.
- Community Reinvestment Act considerations continue to be a significant motivator for CDFI investors. (17%)
(The many conversations that Aeris has conducted since Spring 2020 with corporations, high-net worth individuals, investment advisors, and other organizations newly interested in the CDFI field corroborate these themes.)
Fig. 2. What seems to be the leading motivation of new investors that are interested in your CDFI? (Choose one.)
These are a few high-level findings from Aeris’ 2021 CDFI Survey regarding the impact interests of CDFI investors. A full report will be published later in 2021.