For years, community investment notes have existed at the edges of impact investing conversations — familiar to practitioners and committed investors, but rarely at the heart of broader capital allocation strategies. That positioning understates their significance and value: roughly 85% of CDFI noteholders renew at maturity.
Investment note offerings connect investors to local economic activity through intermediaries with the expertise to identify businesses and projects able to repay a loan. On one side of the intermediary is the borrower — a business owner or project developer who must demonstrate the ability to repay capital with interest. On the other side is the investor, who lends capital to an intermediary and relies on that organization’s ability to manage risk and return capital.
Risk in this system is shared and explicit through a continuum of checks and balances: borrower agreements, loan portfolio management, offering documents, financial auditing and reporting, and principal and interest payments. For an entrepreneur, access to capital often transforms stagnation into momentum, facilitating innovation and resilience.
Community Development Financial Institutions issue investment notes to pool capital for affordable housing, small businesses, community facilities, and other locally rooted economic activity in places long underserved and overlooked by mainstream markets. Structured as fixed-income investments, notes offer modest, yet predictable, reliable returns with clear community impact.
I first learned the power of community investment notes in 2014, when I began managing a private-placement investment note offering designed to help capitalize a CDFI loan fund. These investments provided an increasing amount of flexible, patient support within a broader mix of funding. However, the capital stack, with its diverse sources benefiting both the CDFI and its borrowers, was only part of the story. Equally important were conversations with investment advisors and individual and institutional investors. Their motivations, expectations and evolving definitions of risk, return and impact continue to shape how I think about this market opportunity.
From place-based to place-led investing
Before focusing on scale, let’s distinguish between place-based and place-led investing.
Place-based capital targets the context and realities of specific geographies. Place-led capital is governed, deployed and held accountable within a given area, strengthening institutions for the long term, even after individual investments and community loans are repaid.
Community investment notes operate within place-led systems. CDFIs are not passive conduits of capital. Typically, they are community based, continuously managing risk, supporting borrowers and recycling capital over time. Their role extends beyond underwriting loans to building the conditions that make lending possible — technical assistance, borrower support, long-term relationships and links to the larger economic development ecosystem, including community and national banks, government agencies, foundations, family offices and investment advisory firms.
Intermediaries such as Appalachian Community Capital, which raises and channels debt, equity and grant funds, and provides technical assistance to 44 locally governed CDFIs across the 13-state Appalachian region, demonstrate how this model scales. By strengthening the balance sheets and capacity of member institutions, intermediaries expand access to capital without losing local accountability.
Signals of a durable market
Recent research into CDFI investment note offerings underscores the consistency and staying power of these investments. This finding is validated by research conducted by Tern Strategies in collaboration with Stepping Stone Partners, funded by the CDFI Research Consortium, an initiative of The Center for Impact Finance at the UNH Carsey School of Public Policy, and supported by Citi Foundation’s Community Finance Innovation Fund.
CDFIs with active programs collectively report more than a billion dollars in outstanding notes capital and thousands of individual investors. Issuers such as Enterprise Community Loan Fund and Capital for Change illustrate how notes support diverse lending strategies across regions and sectors.
The vast majority of issuers say the benefits outweigh management costs. Many work closely with investment advisors, responding to comprehensive due diligence processes and providing a variety of materials to help them educate interested clients. Investors who participate show high renewal rates and strong intent to increase allocations.
These realities reflect a meaningful collective commitment to place-led solutions to ongoing, real-world economic development challenges. Investors are drawn not only by return, but by clarity of purpose: businesses started, housing built, community services provided. Advisors describe notes as a practical way to connect clients to tangible outcomes. Once investors understand how they are contributing to economic security and business ownership, engagement often deepens.
Despite this track record, community investment notes remain under-recognized in the broader impact investing field. Investors may be as likely to learn about community investing through personal relationships as they are through intentional portfolio construction.
Funds such as Genesis Community Loan Fund, which offers notes to nonaccredited investors, and Partner Community Capital, which works through accredited channels, both largely focus on rural regions, reflecting different entry points into the same underlying system.
Advisors as partners in accountability and mission
Financial and investment advisors play an essential role in letting clients know about private placement options as part of a values-aligned portfolio. They often operate as translators — helping investors understand how economic development finance works in community.
Advisors already navigate complex regulatory environments. Choosing to incorporate community investment notes into their practices adds administrative and fiduciary responsibilities with indirect financial incentives. Notes may be onboarded to advisory platforms due to client interest, though there are an increasing number of firms proactively expanding private community investment options as part of their advisory ethos and values-aligned strategy.
Advisors who engage with CDFIs consistently point to strong repayment histories, disciplined lending, and the ability to connect clients to tangible impact. But the vast majority are never introduced to these products.
Allocation
Catalytic capital is often discussed in theory. In practice, capital can be instrumental and catalytic as it flows through strong, locally governed institutions crowding in multiples of additional investment. Yet, economic resilience does not scale through one-time deployments of capital into geographies. It scales through healthy balance sheets, risk management, relationships, financing expertise and accountability over time.
That shift has implications for how dollars are allocated. If resilience is a stated goal, then investment portfolios should reflect it — not symbolically, but intentionally. Even a modest allocation, on the order of five percent, to place-led intermediaries and institutions would materially expand the capacity of systems already proven to deliver.
Community investment notes provide a direct pathway to do exactly that.
A relationship asset
For investors, notes offer a direct connection between capital and community outcomes. For CDFIs, they create durable relationships with investors that extend beyond transactions. For intermediaries and networks such as American Sustainable Business Network, community investing is a way to engage individuals, institutions, and advisors in dialogue about shared economic purpose.
Impact investors can work with their financial and investment advisors to identify and learn more about CDFIs in regions of interest. Opportunity Finance Network’s searchable locator lists CDFIs by name, organization type, area served, lending focus, and impact priority. Those offering investment notes often have information on their website about how to invest, or who to contact to learn more. CDFIs have been referred to as “unsung heroes” and “financial first responders,” and they are motivated to share knowledge and expand the number of investors engaged in their work as mission-driven financial institutions.
Liz Rogers is the CEO of Tern Strategies. She is a senior advisor to Appalachian Community Capital and a consultant to the Genesis Community Loan Fund, Partner Community Capital, and Woodlands Development and Lending. She is also an investor in Genesis Community Loan Fund and Partner Community Capital.
Guest posts on ImpactAlpha represent the opinions of their authors and do not necessarily reflect the views of ImpactAlpha.
