CDFIs looking to connect with impact investors will have a powerful new platform this year. A conversation that began between 12 CDFIs about how to access mainstream financial markets has evolved into a full-scale platform that aims to create a marketplace where investors can browse by impact area or geography and connect with a CDFI, or CDFI-funded project. ImpactUs promises to simplify and increase the efficiency of the impact investment process.
CDFI Connected interviewed ImpactUs’ Liz Sessler, client advocate, to learn more about what CDFIs can do now and what they can expect from the platform when it launches in this summer.
What is at the heart of this marketplace and why is the timing so important?
The ImpactUs Marketplace has been a long time in the making and has the potential to transform the CDFI industry. There is a common narrative that investors are only profit-driven, but my experience is that people are looking for both financial and community-based returns—and are willing to make compromises in pursuit of those returns—if the impact story resonates with them. We know CDFIs are great at creating real impact in their communities; the Marketplace lets them get those stories out there in front of more potential investors. The stories are the game changers for impact investors when they see what their dollars can do.
What are the problems solved by this online marketplace?
The chief problem the Marketplace solves is access. For CDFIs that means access to marketing and distribution support and access to more investors. For investors, it means that they can now readily identify investment products that reflect their impact and financial goals, choosing among impact sectors, geography, liquidity, risk tolerance, and/or industry. For financial advisors, it means access to a large database of impact investments so they can better serve their purpose-driven clients.
Another problem the Marketplace solves surrounds administration and operational burdens. By bringing stakeholders together online, through a shared technologically-advanced infrastructure, we make it easier for CDFIs to market and service their products—I like to say: “More purpose, less paperwork,” and all while reducing costs.
Let’s talk about the Marketplace solution: What are the three game changing elements that this marketplace brings?
The connectivity is a huge game changer. Without a marketplace, every CDFI has to raise capital largely on their own. Now a CDFI can potentially raise more capital, more readily, because the Marketplace seamlessly connects them to a wide base of potential investors and financial professionals.
Second is product development. This is a platform customized to private impact investments. As such, it opens up the potential for a new wave of impact product development, serving as a kind of incubator. For instance, what would an index of CDFIs look like, or an alternative energy fund that incorporates CDFIs greening multi-family homes and the latest solar panel technology. We wouldn’t see this as an industry without the Marketplace.
When we launch we hope to have impact investments that run the spectrum of investment opportunities including debt funds, equity funds, project-based debt, and project-based equity.
How are CDFIs getting on the platform?
Right now we are in beta and CDFIs can join us on a contract-basis for beta testing. We provide enhanced consulting services, such as templated scripts and marketing feedback on their Marketplace profile. The profile is where each organization can tell their unique CDFI story.
Once we’re live, towards the end of June, for CDFIs that are Aeris-rated 3 or better, there is a due diligence fast track and we should be able to get them listed on the Marketplace in just a few weeks.
What is your target profile of an investor?
We have four groups of investors we’re looking to attract. One is the retail investor, and we think social media will be a key to reaching this audience. The second will be friends-and-family advisors and family offices that are already engaged with CDFIs, but want to do more. After that we’re focused on accredited and institutional investors. Finally, smaller foundations that are beginning to explore program-related investments/mission-related investment as an area of growth or expanded impact.
What are your goals for the marketplace in the first five years?
We are looking to move $3 billion through the platform, with a significant amount of new money going into the community development sector. The Marketplace will put metrics and impact stories front and center, create transparency, and ultimately eliminate the barriers CDFIs face when trying to access the mainstream financial markets.
We are working on partnerships with key investors and industry organization and helping foundations think about how to use the platform as they make PRIs and MRIs. Finally, there is the retail investor component where the storytelling element is so essential: we want to make sure that individuals know that they can invest in their own communities.