Blog Post - December 2020
Pearl Wealth was founded in 2018 as an investment services firm centered around personal ethics, moral responsibility and wealth advancement, placing our business emphasis on building long-term relationships. As a firm, we strive to meet our clients’ financial goals and objectives while also making a positive impact with strategic investments in the capital markets. This double bottom line is accomplished through responsible investing.
As we come to the end of a uniquely challenging year, our vision could not be more relevant. We have recently borne witness to environmental collapse through violent and numerous hurricanes in the southeast United States, devastating fires in CA, OR, WA and CO (including some we could see first-hand in Boulder) and flash flooding and other extreme weather systems in the Midwest. We are living through some of the most economically confusing times in recent history with the pandemic shutting down small and mid-size businesses globally, halting travel, tourism and growth in many sectors. And yet the stock market has risen significantly in 2020. Related is the widening gap between the 1% and the 99%, and too many stories in the news starkly showing systemic racism and its deadly effects. Many have been vocal via social media and in-person, leading and participating in protests against environmental abuse and human rights violations trying to institute change before it’s too late. But what impact can the average investor make with investment decisions that can help fund the change we want to see in our communities, country and broader world?
Putting Money Where Your Mouth Is
One type of investment that facilitates positive change at a grassroots level is accomplished through Community Development Financial Institutions (CDFIs). CDFIs are private sector financial institutions that focus primarily on personal lending and business development efforts in poorer local communities requiring revitalization in the U.S. CDFIs can receive federal funding through the US Department of the Treasury. They can also receive funding from private sector sources such as individuals, corporations, and religious institutions. With a local focus, CDFIs seek out those communities that are underserved by the traditional banking sector.
Calvert Impact Capital (“Calvert” or “CIC”) is an example of a firm that has been funding CDFIs since 1995. In their 25 years they have raised $2 billion from over 18,000 investors through their flagship Community Investments Notes. CIC has lent funds to over 500 borrowers and has tracked a 100%* investor repayment rate. CIC has created investment opportunities for those with modest amounts to invest to impact global change. The Note is a fixed income product that invests in a global portfolio of intermediaries and funds that finance mission-driven organizations.
Helping the Environment
CIC makes its mark on many pro-environment organizations, but one that caught our eye (think; fire mitigation!) this year was the Forest Resilience Bond (FRB). As a Calvert borrower, FRB is a project financing vehicle that takes an innovative approach to funding increasingly urgent fire prevention projects. FRB is a public-private partnership developed by Blue Forest Conservation, the World Resources Institute, and the US Forest Service, where they sell bonds and use the funds raised to pay the upfront costs of forest restoration in California. Because investors like CIC are able to help off-set upfront costs, the partnering agencies can restore larger swaths of forest immediately, paying investors back over time. The restoration they provide mitigates catastrophic wildfire, while protecting natural resources like watersheds, carbon storage, and preserving jobs in rural communities. This is one innovation in lending where CIC and their investors have been able to make huge impacts through their loans. In addition to FRB, Calvert makes loans in renewable energy, biodiversity preservation, sustainability and many other sectors that support our natural environment.
Here’s a quick look at the environmental impacts of CIC’s borrowers over one year**:
- 27 million metric tons of CO2 avoided due to conservation, agroforestry, carbon offsets and waste reduction
- 160,633 tons of waste reduced, which equals 23,000 garbage trucks of waste recycled instead of thrown into landfills
- 1.5 million acres of land managed sustainably
- Reduction of CO2 in the atmosphere by461,017 metric tons
- Provided over 17 million people with improved access to energy, air quality, and health that will generate 2.4 billion kWh of clean energy.
Building Communities
Helping underserved or underinvested communities is another sector focus for CIC. With COVID-19 and housing insecurity top of mind (especially given recent news about increased evictions), we were heartened to read that Calvert is actively supporting under-resourced communities with low-income housing options. Last year alone, they created or preserved over 70,000 affordable homes, housing more than 300,000+ people. Hand in hand with the housing initiatives, CIC supported institutions that aid in revitalizing neighborhoods while serving the local population – thereby supporting housing AND economic independence for the communities. More jobs and better housing opportunities equates to thriving communities, better educational options, healthier populations, and more secure urban living.
Impacting Today’s Economy
With COVID-19 infection rates climbing, hospital and care facilities approaching maximum capacity rates, and state-wide restrictions on businesses, impact investors like Calvert help support those disproportionally impacted by unforeseen economic events. Leveraging economic vehicles like microfinancing, Calvert supports small businesses, affordable housing, healthcare facilities and other vital community services. While they have been supporting these initiatives for 25 years, CIC has seen an uptick in investors wanting to invest for impact in the wake of the COVID-19 economic environment. Furthermore, with additional investment in borrowers like the Community Reinvestment Fund and Advance Global Capital, investors participating in the Calvert Notes have been an integral part of keeping schools functional while they transition to online classes, providing needed cash flow for small businesses to allow them to keep paying their workers while in shutdown, and transitioning how they do business to cope with the new pandemic restrictions.
According to their most recent impact report, CIC is responsible for $5.02 billion leveraged by their underlying borrowers to fund positive change. For many, aligning their moral compass with how their money is invested has become more important in this challenging year.
There are many other ways to invest for impact in public equity, fixed income and various private market vehicles. Stay tuned as we will be highlighting more ways investors can advance their wealth through investing in areas that align with their values, and thereby fuel change they wish to see activated in the world. Now that is something to be grateful for as we close out 2020!
* Past performance is no guarantee of future results. As with all investments, there is risk.
** Source Calvert Impact Capital 2020 Impact Report
Important Information
The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor for advice on your situation.
The views expressed in this commentary are subject to change based on market and other conditions. This document may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.
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