Impact Investing | November 9, 2023

Impact products for retail investors prove resilient in a high rate environment

Andrea Riquier
ImpactAlpha Editor

Andrea Riquier

ImpactAlpha. Nov 9 – From real estate to car loans, there are few areas of American life where the Federal Reserve’s “higher-for-longer” interest rate hikes haven’t started to bite. At big banks, for example, deposits have been falling for five straight quarters, as investors have put money into higher-yielding money market funds, CDs and treasury bills.  

Impact-oriented financial institutions may just buck the trend. 

“Retail investors who invest in community impact have always prioritized the non-financial aspects” of such investments, said Andrea Longton, author of the forthcoming book, The Social Justice Investor, and a former executive at Opportunity Finance Network. “You’re not really seeing them leave.”

For the past year, Longton said, “the big question has been, are people going to stay in what are now lower-rate accounts? For the most part, people just rolled over their money.” 

Longton’s comments are anecdotal — there’s precious little timely data on the kinds of impact-oriented institutions she’s talking about. But conversations with impact-oriented financial institutions bear them out. 

Staying the course

“We have not seen any withdrawals because of yields,” said Catherine Berman, CEO of CNote, which offers interest-bearing notes that are invested with community-based lenders. “If anything, we are seeing more demand.”

CNote’s Flagship Fund, which is open to all investors, is currently yielding 3%.

That’s not to say there are not challenges. “Definitely this rising rate environment has been tough for us and other nonprofits in the impact space,” said Justin Conway of Calvert Impact Capital. But, he added, “we provide a lot more value than just the financial return. We have not seen folks leaving to go elsewhere.”

Calvert had raised its rates just a week or so before Conway spoke with ImpactAlpha. Its Community Investment Note is a fixed-income security that consumers can buy directly from Calvert or through a brokerage for as little as $20. As of November 1, Calvert Impact’s five-year maturities were yielding 5%, up a full percentage point, while 1-year maturities offered 3.5%, up from 3%. 

From Calvert’s perspective, raising rates brings “money off the sidelines from impact-motivated folks,” Conway said. That said, “We’re not trying to attract ‘hot’ money,” he said, such as customers who chase yield.

In fact, consumer demand is strong enough that both CNote and Calvert are exploring widening their product lineup. CNote already has a product called “Impact Cash” for foundations and  corporate treasuries, but is exploring something similar for retail consumers, Berman said.

Parking cash 

“There’s definitely more demand in the impact investing world for a cash-like product,” Conway agreed. 

It’s important to note that neither Calvert’s Community Investment Note or CNote’s Flagship Fund are substitutes for bank accounts: neither is insured, and customers don’t have immediate access to deposits in those accounts in the same way they would at a bank.

In the meantime, impact-minded consumers do have alternatives for their cash. Longton notes that many credit unions are community-minded and mission-driven. She recommends using the resources at, which allow customers to see exactly how different financial institutions use depositor money.

For anyone on the fence about moving even a bit of cash into impact-oriented banks and cash alternatives, there’s no better time, Berman says. “This rate environment is certainly challenging for our incredible community finance institutions,” she said. “I will also say it’s also an opportunity for those to have a front row seat to see how strong that ecosystem is. These institutions are weathering this volatility in a strong way.”

Some of the community organizations providing social services to lower income communities are struggling with higher borrowing costs, Conway said. “The overall increase in demand is why we’re hoping to attract even more capital.”