Beats | October 3, 2018

Reinvestment Fund taps capital market to raise $76 million for ‘impact investment bond’

David Bank
ImpactAlpha Editor

David Bank

Public bond markets are becoming a reliable new source of capital for community development financial institutions that lend to low-income communities.

A successful $76 million offering by the Reinvestment Fund, a nationwide “CDFI” based in Philadelphia, pushed total capital raised through four such general-obligation bond offerings since last year to more than $350 million. Reinvestment Fund itself raised $50 million in one of the first such bond offerings last year.

The potential is huge. As of 2016, the U.S. bond market was more than $39 trillion, including $3.8 trillion in municipal bonds. Reinvestment Fund manages about $1 billion in assets.

“We are pleased to be participating in the transformation of the socially responsible lending industry,” Reinvestment Fund’s Donald Hinkle-Brown said in a statement. “The issuance of multiple bonds since 2017 has catapulted CDFIs into a new category creating access and strengthening impact.”

The Reinvestment Fund tests the public bond market’s appetite for social impact

Access to the public capital markets lowers Reinvestment Fund’s cost of capital, Hinkle-Brown told ImpactAlpha and expands the investor base, at least for the handful of CDFIs that qualify for a rating from Standard & Poor’s. Reinvestment Fund said S&P Global Ratings had given both the issuer and the issue an AA- credit rating. CDFIs have traditionally relied on banks, which have financed the low-income lenders in order to satisfy requirements under the federal Community Reinvestment Act.

Among the investors in the latest issue were TIAA, the $1 trillion nonprofit asset manager, and QBE, the Australia-based insurance company.

Last year’s $50 million bond issue helped finance more than a dozen projects, Reinvestment Fund said, including grocery stores, health centers and mixed-use projects. In New Orleans, the financing helped the Rose Community Development Corp. transform a vacant church and former school buildings into a hub for arts, education and entrepreneurship.

The Local Initiatives Support Corp. was the first CDFI to issue a general-obligation bond, raising $100 million last year.

LISC offers first CDFI bond to bring private capital to low-income communities

Capital Impact Partners, a nonprofit loan fund and federally-certified community development financial institution, or CDFI, later last year launched a $100 million fixed-income security available to retail investors for as little as $1,000.

Community development lenders attract new investors to low-income neighborhoods