The Calvert Foundation is best known for its Community Investment Note, a workhorse fixed-income product that in the last two decades has raised more than $1.4 billion for community development, renewable energy, sustainable agriculture and more.
It’s saying to institutional and accredited investors, ‘This is opportunity to move into a less artisanal, deeper impact opportunity.'Jennifer Pryce, Calvert Foundation
Now, the Bethesda, Md., financial services firm is adding a new line of business, Capital Aggregation, to syndicate fixed-income opportunities to institutional and accredited investors. By using its expertise and infrastructure to source and manage such deals, the thinking goes, Calvert can bring new investors and aggregate new capital for impact investing.
“We’re scaling the infrastructure for moving additional capital into communities,” Jennifer Pryce, Calvert’s CEO, told ImpactAlpha. For investors, she said, Capital Aggregation is meant to be “a one-stop shop to build out the fixed-income portion of their impact investing portfolio.”
In the past year, Calvert has aggregated capital for five such private-debt deals, including an asset-backed credit facility for an off-grid solar provider in Africa and a mezzanine debt fund that leverages federal New Markets Tax Credits to finance small businesses in low-income areas of the U.S. Of the total $70 million raised, Calvert itself provided about $27 million.
Calvert has identified 50 investors interested in placing capital and expects this year to close three to five more deals in the range of $10 million to $50 million. “We’re starting to see new names,” Pryce said. “That’s really exciting — additional capital.”
Calvert’s new line of business is part of a broader effort among impact investing pioneers to establish effective “intermediaries” to smooth the investment process for both investors and enterprises. In addition to syndication, initiatives are underway to provide liquidity, risk-mitigation, credit-rating and securitization — all elements of a mature and well-functioning market.
Fixed-income syndication is common in legacy financial markets, but is so far rare in impact investing (Symbiotics, based in Geneva, offers similar services). Instead, mission-driven financial institutions or projects seeking debt capital typically court investors separately, a time-consuming process that often results in a welter of requirements, geographies, deal terms and even interest rates.
Calvert is aiming to move impact investing away from its artisanal roots and provide more products that fit into the portfolios of a broader array of investors. Each deal has a different interest rate and a different place on the spectrum of return and impact, but within a given deal, terms will be the same for all investors. To get portfolio diversification, investors can buy into several deals.
In return for such standardization, investors will give up the ability to specify, say, a specific school in a particular town at a certain interest rate with impact metrics customized especially for them.
“It’s saying to institutional and accredited investors, ‘This is opportunity to move into a less artisanal, deeper impact opportunity,’” Pryce said. “This is a big part of the next three years for us, to grow and scale this work.”