Community Development Financial Institutions have not been well served by the capital markets. This, despite the fact that they have performed exceptionally well in managing risk over the past twenty years. The gap, however, is not due to the perceived credit risk of extending credit to low income communities and constituencies. It is due to two major factors: (1) the size of the transactions—i.e., scale; and (2) the differences between the methods and the metrics that CDFIs use to fulfill their mission and the methods and metrics that the conventional marketplace uses. These differences persist and are not likely to change.
- To provide unimpeded access to the stream of unrestricted long term equity funding for participating CDFIs.
- To familiarize the conventional preferred stock investor with the CDFI industry, and thereby lower the cost of market rate on preferred stock funding for CDFIs over time.
- To establish an avenue for common equity investment at low market rates into the CDFI sector.
Designers: This blueprint is being assembled by the Center for Impact Finance at the Carsey School of Public Policy at the University of New Hampshire.
Recipients of the Equity: Participating CDFIs will be able to obtain equity from the CDFI Equity Fund, to help finance their origination of new loans and recapitalization of old ones. This equity, the “CDFI Preferred,” will be a specialized form of preferred stock designed to suit the needs of CDFIs. There will be a minimum of 7 and a maximum of 15 CDFI participants in the project. At present, there are 12 participants including OFN, Chicago CLF, ROC USA, LIIF, Capital Impact Partners, Florida Community Loan Fund, Community Housing Capital, LISC, Capital for Change, New Hampshire Community Loan Fund, Pacific Community Ventures and Craft3.
Solar is a powerful tool for economic development, community resiliency, and energy affordability and reliability for communities. But that is not all: solar projects provide a strong business opportunity for investors. Solar finance is an investment in proven technology, with decreasing costs and improving project economics in most markets.
In many respects, solar finance is a mature market, with a wide ecosystem of investors providing a mix of debt, equity, and tax-credit equity in the market. However, community-based lenders (CBLs) – such as Credit Unions, Community Development Financial Institutions, and Community Banks – have a unique role to play within this market. Not all households are participating equally in the move to clean energy, and there is a real risk that many populations will be left behind, including low-income families and people of color. CBLs have the combination of deep community relationships and underwriting experience that can help democratize access to solar power, if they can be supported with the right relationships, the right policy supports, and training and knowledge transfer.
This project seeks to engage community-based financial institutions in solar finance, and ultimately to help lenders invest “deeper into their community,” through three pillars:
- Training & Support, including accessible online trainings, synchronous peer support workshops, coaching and knowledge sharing.
- Collaborative Infrastructure Development, which may range from simply encouraging partnerships and collaborations between lenders, to developing and growing investment vehicles or funds, operating platforms, or secondary markets that make it easier for community-based lenders to engage in solar finance.
- Movement-Building, including an industry analysis of current CBL involvement in solar finance, a series of cross-sectoral convenings, and identification and collaborative efforts to drive policy change and resource development.
The project is funded through a three-year $1.29M U.S. Department of Energy cooperative agreement with the University of New Hampshire and a $400,000 Hewlett Foundation grant to Inclusiv to launch its new Center for Resilience and Renewable Energy. Major project partners are Coastal Enterprise, Inc. (through its subsidiary, Bright Community Capital) and Inclusive Prosperity Capital. Learn more