Investors have a number of ways to support community investing and emerging sources of capital, according to a report released Thursday by the U.S. Impact Investing Alliance.
The report, Impact in Place: Emerging Sources of Community Investment Capital and Strategies to Direct it at Scale, was commissioned by the community development team at the Federal Reserve Bank of New York.
The report covers emerging sources and strategies for community investing and offers recommendations to investors interested in directing capital to underserved communities.
Community investing is broadly defined as investment capital that flows to underserved communities for economic development, affordable housing and growing small business ecosystems.
The report identifies structural barriers and challenges preventing more capital from flowing to underserved communities. These include a lack of investor education and awareness, poorly defined market segmentation, misperceptions or concerns about fiduciary duty, difficulty of integrating community investments into traditional portfolios and the need for more qualified investment professionals that understand the sector.
Many major corporations announced "new and sizable" community investing commitments, the report said, including commitments by PayPal, Netflix, Twitter and Alphabet Inc.'s small business fund and sustainability bond, while some private investors including family offices collaborated on supporting networks of community lenders.
The 2020 federal coronavirus relief included a record $12 billion for financial intermediaries such as community development financial institutions and minority depository institutions.
"This report seeks to spark discussion —and ultimately — direct capital to powerful projects and approaches that help advance economic resilience and mobility," said David Erickson, New York Fed senior vice president and head of outreach and education, in the release.