Submitted by Rabbi Arthur Waskow on
Move Our Money: Action Handbook & Resource List
Compiled by Miriam Joffe-Block, MBA June 8, 2014
[In order to take action in support of "Move Our Money/ Protect Our Planet," it is necessary to understand the kinds of money holdings that households, congregations, seminaries, denominations, and communal institutions may have and can move. This extraordinary review of a broad range of ways of holding & moving money is intended only as a description of the field, not as investment advice. It covers a range of possible places into which we might move our money that are socially and environmentally responsible. It was compiled by Miriam Joffe-Block at the request of The Shalom Center. She holds an MBA from Georgetown University and is Program Manager of One PacificCoast Foundation. She worked for many years as Director of Internal Organizing and Training with a local labor union representing hotel and restaurant workers.]
Contents:
- Banking Services
- Credit Cards
- Investments
- Additional Resource, Further Reading and Guides
- Banking Services
A. Credit Unions
Credit Unions are non-profit financial cooperatives, owned by their members. Because they redistribute operating surplus back to members in the form of better rates and terms, they are often financially advantageous for members (account holders). While most credit unions are small and have only a few branches, the CO-OP ATM network and shared branch services networks allow members access to tens of thousands of surcharge-free ATMs and to conduct transactions at thousands of branches of networked credit unions.
Most credit unions offer online and mobile banking platforms; many are moving to remote deposit capture to allow members to deposit checks with their cell phones. As the FDIC insures bank balances up to $250,000, credit union accounts are insured up to $250,000 by the National Credit Union Administration (NCUA). Most credit unions offer checking and savings accounts, CDs, home mortgages and auto loans. Some offer business loans and specialty savings and checking accounts.
Most credit unions have restricted fields of membership allowing them to provide services to those working, living or worshipping in certain geographic areas. However, most individuals qualify for membership in at least one credit union. http://www.asmarterchoice.org is a good place to search for credit unions near you.
The Federation of Community Development Credit Unions consists of CUs specifically dedicated to serving low and moderate income communities.
Self-Help Federal Credit Union has been a pioneer in creating wealth and ownership in low income communities for decades and can accept membership applications from residents in any state once they make a donation to a related non-profit.
B. Community Banks
Local, community banks are critical community assets and play an important role in supporting local business. In fact, even though they only hold 10% of deposits, community banks make 1/3 of all very small business loans (loans up to $250,000).[1] The Community Development Bankers Association is a membership organization comprised of about 40 banks with community development missions.
In this era of banking consolidation, there is a risk, however, that a community bank will be bought by a larger, regional bank and cease to be the community-based institution that you were excited to support. There are several community banks in the US that have unique corporate structures and are certified B Corps, which make it less likely that they would lose their mission focus. Most of these banks offer features like online platforms, membership in robust ATM networks, and remote deposit capture making it quite possible to rely on these banks even if one does not live near a branch.
- Capital Pacific Bank, based in Portland, Oregon, is a B Corp and specializes in services for businesses and non-profits.
- City First Bank, a CDFI is based in Washington DC and provides services for businesses, non-profits and individuals. Profits from the bank are re-invested into the community development mission.
- Community Capital Bank of Virginia is a B Corp and is owned by a non-profit holding company. CCB offers savings accounts and loans.
- First Green Bank, based in Florida, is a member of the Global Alliance for Banking on Values and offers service for individuals and businesses.
- Green Choice Bank, based in Illinois, is a B Corp and provides services for businesses, non-profits and individuals.
- New Resource Bank, based in San Francisco, is a B corp, a member of the Global Alliance for Banking on Values, and offers services for non-profits, businesses and individuals.
- One PacificCoast Bank, a B Corp, a member of the Global Alliance for Banking on Values, and a CDFI is headquartered in Oakland, California with branches in Portland, Seattle and Ilwaco, WA. The Bank is wholly-owned by One PacificCoast Foundation, a non-profit 501(c)(3). All dividends, when paid, must be distributed to the Foundation. OPCB offers services for non-profits, businesses and individuals.
- Sunrise Banks, three banks with multiple branches based in Minnesota, is a CDFI, certified B Corp and a member of the Global Alliance for Banking on Values.
2. Credit Cards
Fee income from credit cards (not related to financing charges for the customer, but comprised of a small percentage of each transaction that is paid by the merchant) is a large source of income for banks. Even if you pay off your balance in full each month, you still may be helping to support Big Oil and Big Coal, if your credit card is issued by a Mega-Bank. Even some community banks and credit unions rely on the Mega-Banks to issue their credit cards. Green America’s Take Charge of your Card website has great information about mega-bank financing of the Keystone Pipeline, mountain top removal projects and a scorecard showing financing of coal. The Take Charge of your Card site lists 10 credit cards from responsible banks and credit unions. Some of the cards do not require another account with the bank, meaning that you can switch your credit card without moving your checking or savings accounts.
3. Investments
Please remember that the investment examples listed below are NOT FDIC insured products meaning that you could potentially lose the entirety of your investment. The examples below only represent a sample of available investments and are provided to inspire thinking about a shift to more sustainable investments.
Nothing in this guide is meant to serve as investing advice and we encourage you to do thorough due diligence on the performance, risks and fees associated with any investment you or your organization considers. Please also conduct your own due diligence to make sure that the environmental and social commitments and performance of these investments are in line with your values and standards.
Many proponents of impact investing will argue that one does not have to sacrifice financial returns in order to invest in line with one’s values. It is worth noting, however, that many of the investments listed here forego some financial return in order to provide capital for non-extractive community development and environmental outcomes.
A. Screened funds are one of the simplest and oldest socially responsible investing methods. A portfolio manager packages together a fund that includes stock in publicly traded companies or packages of bonds. The packages have been chosen either to include companies that have particular environmental or social performance, or exclude companies due to poor environmental or social record. Each will have its own criteria for what sorts of investments it includes or excludes and some will have stricter criteria than others. With screened funds, even passively managed, please pay attention to fees.
- US SIF (The Forum for Sustainable and Responsible Investment) maintains a list of sustainable mutual funds.
- Green America’s socially responsible investing guide lists many of these funds.
- Calvert Investments offers numerous SRI Funds for individual investors and for institutional investors.
- Paxworld offers mutual funds for individual investors and for institutional investors.
B. Municipal Bonds
Some socially-responsible investors wish to avoid US Treasury bonds because the bonds support the debt of the US Government which includes spending on the military and corporate welfare. Municipal bonds, however, often support public transit systems, public schools and local community infrastructure. (Municipal bonds can, of course be issued to construct prisons or be backed by revenue from lotteries or gaming, so please do your due diligence.) Interest from municipal bonds is federally tax-exempt and often exempt from state taxes. Munis tend to appeal to investors who are in a high-tax bracket or who live in states with high taxes. (Of course, it’s important to consult a tax advisor on specific investing strategies and taxation.) Fidelity’s website has a good overview of municipal bonds as well as a search tool to find and identify thousands of individual municipal bonds as well as bond funds. You can purchase municipal bonds through a broker or dealer or invest in a mutual fund of bonds.
C. Investments in Pooled Loan Funds
One of the easiest ways for individuals or institutions to move their money beyond large, publicly traded companies is to invest in pooled loan funds. Many non-profits are making community development loans to affordable housing developers, community healthcare clinics, small social enterprises and other community revitalization projects. Through buying the notes issued by the fund, the investor is able to access the diversified underlying portfolio of the fund, rather than having all of his or her capital tied to a single loan. Many of these loan funds seek capital from mission-oriented investors. They loan this capital out at reasonable interest rates in the community and provide modest returns to their investors.
It is important to remember that usually the notes are unsecured and are illiquid investments as there is no real secondary market for these products. Some pooled funds do issue notes that correspond with a single loan, so please always read the prospectus carefully and ask detailed questions about any potential investment.
CDFI stands for Community Development Financial Institutions, a special certification from the US Treasury that recognizes particular financial institutions as dedicated to revitalizing economically distressed areas and as serving low and moderate income communities that are underserved by mainstream financial institutions. Of the 800 CDFIs in the US, most are non-profit loan funds, though some are banks and credit unions.
Religious groups, particularly Catholic organizations, have been important sources of capital for many CDFIs. Below are some examples of CDFIs that work nationally or regionally and that are seeking investments. For a list of all CDFI loan funds including funds operating specifically in your region, follow the link at the bottom of the CDFI Fund’s “What we do” page. About 200 CDFIs have joined together to form the Opportunity Finance Network, a national network of CDFIs committed to standards of excellence in the field and “aligning capital with social, economic, and political justice.” For a list of Opportunity Finance Network (OFN) member CDFIs, please click here.
CDFIs rely on the interest rate spread (the difference between what they pay investors for capital and the rates that they charge borrowers for loans) to cover many of their operating costs. At the same time, in order to keep interest rates affordable, many of them still need to fundraise every year to cover their costs or to create sources of permanent capital available for loans. Some investors in CDFIs also choose to make donations with their charitable dollars in order to help support the CDFI’s work.
a. Isaiah Fund
Isaiah Fund is an interfaith collaborative initiative between Bend the Arc, A Jewish Partnership for Justice; American Baptist Home Mission Societies; CHRISTUS Health; Highland Good Steward Management, and Everence Community Investments. Isaiah Fund focuses on rebuilding community wealth after disasters and, “To date, Isaiah has made more than $3.5 million in community development deposits and loans throughout the Gulf Coast, focusing on low-income neighborhoods in New Orleans.”
Isaiah Fund accepts investments of $25,000 or more from accredited investors or institutions, like synagogues. Terms are 3, 5 or 7 years with interest rates of 0 to 3%.
b. RSF Social Finance’s Social Investment Fund
A thought leader and pioneer in social finance, RSF is a non-profit providing grants and loans to high impact non-profits and for-profit organizations focused on issues in Food & Agriculture, Education & the Arts, and Ecological Stewardship. “Since 1984, RSF has made over $275 million in loans and over $100 million in grants, placing us in the top tier of social finance organizations worldwide.”
Minimum investment is $1,000 with interest paid quarterly. Investments are available to residents of 47 states. Rates of return are similar to a bank CD. Click here to read the prospectus and SIF info sheet.
c. The Reinvestment Fund notes
In their own words, “TRF is a national leader in the financing of neighborhood revitalization. What began in 1985 as a small community development organization working in Greater Philadelphia, has evolved into a progressive, results-oriented, socially responsible community investment group that today works across the mid-Atlantic region. TRF’s mission is to build wealth and opportunity for low-wealth people and places through the promotion of socially and environmentally responsible development.” TRF is also a CDFI (see above).
Minimum investment is $1,000 for at least 3 years. Rates vary with the length of the investment. Links to the prospectus and contacts can be found here. Larger investment denominations may be available for institutional investors.
d. Calvert Community Notes
http://www.calvertfoundation.org/ 800.248.0337
Calvert Foundation has been on the forefront of allowing regular, retail investors to channel their capital toward community development projects. Through the notes, investors channel capital to social enterprises, CDFIs and non-profits addressing environmental issues, education, affordable housing, financial inclusion and more.
Minimum investments are $1,000, terms are from 1 to 10 years and rates vary from .5%-3%. Individuals can purchase notes directly or through a brokerage. Links to the prospectus and application can be found here.
e. Cooperative Fund of New England (CFNE)
http://www.cooperativefund.org/ 800.818.7833
In their own words, “The Cooperative Fund of New England (CFNE) is a community development loan fund that facilitates socially responsible investing in cooperatives, community-oriented non-profits, and worker-owned businesses in New England and adjacent communities in New York. Since CFNE's founding in 1975, we have made over 600 loans, totaling over $26 million, which have resulted in the creation or retention of over 7,600 jobs and 4,400 housing units across the region.”
Investment terms: $1,000-$1,000,000 unsecured promissory notes; investments must be deployed for at least one year. Investors choose interest rates between 0 and 2%. Interested individuals or institutions can call CFNE and get a password to their prospectus, which is available on their website. 20% of CFNE’s investors are faith based organizations.
f. Partners for the Common Good
http://www.pcgloanfund.org 202.689.8935
In their own words, “Community development investing asks investors to dedicate a modest portion of their investment portfolios to activities that pay a below-market return but generate significant community benefits. Since 1989, PCG has made nearly $20 million in loans and deposits in low income communities. In 2003, PCG became a non-profit membership corporation comprised of faith-based institutions committed to promoting economic justice through community investing. We are reaching out to faith-based institutions that have a strong commitment to economic justice and community economic development to identify others interested in working with us. We are asking religious communities to engage in a discussion about adopting PCG as a ministry.”
Faith-based members include Sisters of St. Francis of Philadelphia, Christian Brothers Investment Services, Inc., and Dominican Collaborative.
Contact PCG for more information about investing.
g. North Country Cooperative Development Fund
http://www.ncdf.coop (612).767.2100
In their own words, “Northcountry Cooperative Development Fund (NCDF) is a cooperatively owned community-development loan fund committed to fostering economic democracy by investing in cooperative enterprises. Based in Minneapolis, Minnesota, NCDF currently serves more than 175 co-op members in 30 states, including natural food, consumer, producer, housing and worker-owned cooperatives.”
A CDFI, NCDF creates opportunities for cooperatives and social investors to invest in the national cooperative movement with an emphasis on community development within economically challenged and underserved communities.
Investors include Episcopal Diocese of Iowa Alternative Investment Fund and Franciscan Sisters of Little Falls. NCDF offers one to seven year notes for members and institutions. The fund itself is structured as a cooperative.
h. National Housing Trust and Institute for Community Economics
In their own words, “ICE is the originator of the community land trust (CLT), a housing model that develops equity for homeowners while preserving public subsidy and affordability in perpetuity. ICE’s revolving loan fund has been providing financing for over 30 years. Since its creation in 1979, ICE has loaned $44 million, representing more than 445 loans to community organizations in 30 states and facilitating the development of more than 4,500 housing units.”
ICE offers an investor note, available to individuals and institutions who reside in one of 21 states. Minimum investments are $2,000 and terms are from 1 to 10 years with interest rates from .5% to 3%. You can access the list of states and the prospectus here.
D. Direct investments in socially responsible companies or their projects
- Cutting EdgeX lists Direct Public Offerings from smaller companies or non-profits that have enlisted the help of Cutting Edge Capital to offer securities. These companies have usually gone through a state-wide regulatory filing process to issue securities, usually offering them to residents of just one or a few states in order to avoid the very costly federal SEC registration process.
- Solar Mosaic has pioneered a way for non-accredited investors (those without a net worth of $1MM or income of $250K per year) to invest in solar installation projects across the country. Solar Mosaic investments are not crowdfunding (as legislated by the 2012 jobs act); the company has gone through regulatory filing processes and certain offers are available to residents of certain states. Each project has a prospectus and each investment made is represented by a “Mosaic Note.”
3. Mission Markets is a capital market for impact investors and socially responsible companies. Companies must file disclosures and offering documents and have a 3rd party sustainability certification. Mission Markets also offers community portals to help those seeking capital find local investors. Currently, most or all of the offerings on the platform are only available to institutional or accredited investors.
5. Slow Money
Growing out of the Slow Food movement, the recently-launched Slow Money Alliance has as one of its core principles: “We must learn to invest as if food, farms and fertility mattered. We must connect investors to the places where they live, creating vital relationships and new sources of capital for small food enterprises.” They are “acting on the visceral sense that there is such a thing as money that is too fast, securities that are too abstract and complex, and companies that are too big.” The movement has brought together individuals in 19 cities to invest $35MM in sustainable local food systems. Most examples of direct investments involve individuals connecting with entrepreneurs through their local chapters or by forming investment clubs where they are actively making decisions on direct loans and investments. Slow Money has also compiled a list of professionally managed funds that support food systems. Some are open to everyone; others to only accredited investors.
6. Peer to Peer Lending
P2P Lending is a relatively new phenomenon in which individual investors can fund loans to borrowers and receive interest. Several companies offer websites with platforms similar to Kiva, in that investors can read borrower profiles and put together portfolios of small investments in numerous loans. (Kiva is a non-profit lending sight and lenders/investors do not receive interest on loans. Loans function more like a revolving donation. The new P2P platforms differ in that the loans to borrowers are securities and do pay interest.) The platforms have underwriting processes through which they figure an interest rate based on the borrower’s risk profile.
The yield (or interest rate) to the investor is higher for riskier loans and lower for loans that the platform has assessed as less-risky. In general, interest rates from P2P consumer-lending sites will be much higher for investors than the very safe loans made by many of the pooled loan funds above. Please be aware that unlike the pooled loan funds mentioned above in which your investment is diversified across a portfolio, with P2P platforms you must construct your own portfolio by making many small investments across numerous loans in order to get the benefits of diversification. There are very limited secondary markets for P2P notes.
Proponents of P2P lending argue that the platforms make credit available to borrowers (many of whom are trying to consolidate debt or pay for school) at much more affordable rates than at which they’d otherwise have access and breakup outdated monopolies on supplying credit. Others are concerned about the rush of investors into the for-profit platforms themselves and whether that will bring pressure to make the platforms more profitable for shareholders at the expense of borrowers. Non-accredited investors who make loans to borrowers hold notes corresponding to specific loans; they are not invested in the equity of the company. In the meantime, millions of dollars are being loaned and repaid between “peers” on these platforms.
- Lending Club and Prosper are the leading P2P lending platforms and allow unaccredited investors.
- SoFi allows connects students needing educational loans to accredited investors, reducing the cost of student debt.
- Common Bond pools loans to MBA students and offers them to accredited investors, while adding in an investor-borrower mentorship component as well as donations to fund students in developing countries.
7. Crowdfunding
In the 1930s and 40s, securities laws were put in place to regulate how businesses can solicit investments from individuals and to prevent the public from being defrauded. Unless a business completes a registration with the Securities and Exchange Commission, it is severely limited in terms of how it can solicit and raise capital. Because SEC registration requires significant legal and accounting fees, raising debt and equity from the public has been limited to a small subset of large companies or small companies with initial access to significant capital. In an era of constrained bank credit and a shrinking number of community banks that make small business loans, advocates (some supporting small businesses and local economies, others supporting entrepreneurship in general) began to push for the rules to be updated and eased.
The 2012 JOBS act paved the way for businesses to raise a limited amount of funds of up to $1million from non-accredited investors without undertaking a costly Securities and Exchange Commission registration process. (Accredited investors have net worth of over $1million excluding their homes or income of at least $200,000 per year.) This type of fundraising is referred to as “crowdfunding,” though the term also applies to businesses that solicit investments from accredited investors through the internet and sometimes to businesses and non-profits raising donations.
In October of 2013, the SEC released proposed regulatory guidance to implement crowdfunding but the rules have yet to be finalized. Once the rules are in place, we can expect to see an explosion in solicitation for investments by many businesses and start-ups and thousands of opportunities to invest in smaller and more local businesses. The SEC’s proposed rules require businesses to provide certified and audited financial statements when raising over certain thresholds, limit the amount individuals can invest to 5% of their annual income or net worth and require listings to be done through licensed intermediaries.
Michael Shuman, author of Local Dollars, Local Sense, presents a very compelling case for crowdfunding. Proponents argue that many worthy businesses cannot afford the costly fees to undergo a securities registration and they are therefore cut off from raising capital from “ordinary” individuals, meaning the 99% of the population that are not accredited investors. We are restricted from making investments in most businesses and are forced to channel their investments to very large companies that can afford SEC filing fees and are big enough to list on stock exchanges. Wealth therefore continues to be consolidated amongst big entities. Why are ordinary individuals permitted (and even encouraged) to blow their savings on lottery tickets and gambling but not allowed to make an investment in a neighborhood business that they want to support?
Opponents worry that crowdfunding will open up new channels for banks, intermediaries and other companies to defraud individuals. The intermediaries will be licensed but through a self-regulating entity, CFIRA. They also worry that crowdfunding investments are highly illiquid and that individuals could lose too much of their savings in bad investments. The AFL-CIO’s comments to the SEC on the proposed rules reflect some of these concerns.
There are numerous intermediaries right now vying to be the choice platforms for crowdfunding investments. Until the SEC gives the greenlight to go ahead, it is hard to recommend a site. If you are interested in direct investments in businesses, I urge you to read up on the intermediaries: are they being fair to the entrepreneurs in terms of fees? How thorough is their due diligence in terms of the responsibilities for fact checking delegated to them by the SEC rules? One woman has put together a directory that allows for platforms to be reviewed and here is another listing of sites.
8. Investment Portfolio Managers and Advisors
a. US SIF (The Forum for Sustainable and Responsible Investment), a membership association of advisors, funds and firms engaged in responsible investment, maintains a list of member advisors and financial planners. It is likely that members are each defining “responsible investment” according to their own principles which might not match yours, so please keep that in mind. Please also do your due diligence on the fees charged by financial advisors.
b. Natural Investments is a B Corp that works with individuals and donates 1% of profits to charitable causes. They publish newsletters describing their corporate engagement, private equity and “regenerative investing” strategies. Recently they launched a fossil-free fund.
c. Community Investing Partners is a subsidiary of Calvert Community Foundation and a registered Investment Advisor. “CIP Services offers a comprehensive range of services to help its clients participate in the impact investing industry by either designing their own investment product to help raise capital or structuring and managing portfolios of high-impact assets.”
d. Sonen Capital serves foundations, family trusts and high net worth individuals. “Sonen Capital is a specialized investment management firm dedicated to investors seeking financial returns with lasting social and environmental impact.”
D. Additional Resources, Further Reading and Guides
- Co-op ATM Network locations (members of Credit Unions that participate in the Co-op ATM network can use these ATMs surcharge-free.) Note that many CUs are part of additional networks.
- Business Alliance for Local Living Economy’s Community Capital toolkit
- Green America’s Take Charge of Your Card guide on Mega-Bank versus Responsible Credit Cards; GA’s guide to Socially Responsible Investing which covers many socially-responsible screened funds (Requires being a member of this very worthwhile organization or costs $11.95); GA’s free Community Investing Guide which covers choosing a community bank or credit union.
- Examples of Slow Money investments, made by groups of individuals associated with the Slow Money movement, directly into food enterprises or food systems.
- Slow Money’s list of professionally managed funds. Note, many are already listed in this document above.
- Local Dollars, Local Sense: How to Shift Your Money from Wall Street to Main Street and Achieve Real Prosperity . Michael Shuman, 2012 by Chelsea Green Publishing. Shuman’s book has numerous examples of ways that individuals are investing locally. He also covers securities laws and the ways in which the regulations restrict local investment pretty thoroughly.
- Locavesting: the Revolution in Local Investing. Amy Cortese, 2011 by John Wiley and Sons.
- Cutting Edge Capital is assisting numerous small businesses with creative capital raising and maintains an active blog and resource page on securities laws, the New Economy, and capital markets.
- The Institute for Self Reliance’s Banking Page has good information about the behavior of the Mega-Banks, what sort of banking system we need and numerous charts and stats on Community Banks. Some information has not been updated in a year, but is still relevant and useful.
- Socialfunds.com maintains detailed information on thousands of socially responsible funds and shareholder actions. In exchange for contact information, they have free guides including how to work with different types of investment professionals.
- The Local Investing Resource Center will launch online in summer of 2014
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TO: The Shalom Center, 6711 Lincoln Dr., Philadelphia PA 19119
__ I want to work for Move Our Money/Protect Our Planet (MOM/POP) in my __ household;
___ congregation; ___ denomination or institution.
Name_________________________________________________________
Address _______________________________________________________
Email __________________________________Phone ________________
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