Change Finance


New Products Bring Impact Investing to the Masses

Locavesting Staff | October 16, 2017


Many individuals would like to know that their investments are doing some good in the world. One recent survey found that 75% of investors were interested in impact investing. But the $114 billion impact investment market has traditionally been the domain of foundations, institutions and wealthy  individuals.

That’s changing.

“We are at a tipping point,” says Dorrit Lowsen, chief operating officer & cofounder of the aptly named Change Finance (pictured at right, above). “All the pieces of the puzzle are lining up.” That includes consumer demand and a realization among business leaders that doing good is good business, she says.

Lowsen’s company is among those tapping into public demand and opening up impact investing to all investors. We write about crowdfunding a lot on this site, so here’s a rundown of some of other new populist ways to do good while doing well:

Low Impact Investment Fund 

The Low-Income Investment Fund (LIIF), a San Francisco-based community development financial institution (CDFI), has been investing in low-income communities for over 30 years. Its loans support affordable housing, high quality schools, child care centers, health centers and other community facilities that benefit low income people and communities.

It used to be that only institutions and individuals able to write big checks could invest in its funds. Now the nonprofit lender has created the LIIF Impact Note, which has a minimum investment of $1,000 and is open to all. The note follows in the footsteps of mission-based lenders like Calvert Foundation and RSF Social Finance, who were among the first to create widely available notes for the so-called “retail” market.

The interest rate on the LIIF Impact Note varies from 1% for a 6-month note to 3% for a 10-year note. It is available on ImpactUS, a broker dealer “impact marketplace” that handles the back end for LIIF and other CDFIs. The LIIF note is among the first offerings on the site available to non-accredited investors.

Impact area:  Low-income communities

Fees:  None

Return:  1% – 3% interest


Want access to a broader range of CDFIs? CNote makes that easy.

The startup was founded by Cat Berman and Yuliya Tarasava to solve twin problems they saw in the market. On one hand, many people (especially women) have money sitting in low- or no-interest savings accounts that is being eaten away by inflation.

On the other, many CDFIs have had to turn away individual investors because they’re not equipped to handle lots of small investments. Instead, they raise money from banks that need to fulfill their Community Reinvestment Act mandates, grants and from wealthy investors.

CNote solves those problems by acting as a bridge between individual investors and CDFIs, pooling small investments from individuals and channeling them to partner CDFIs. It launched last year for accredited investors, but only began accepting investments from unaccredited investors (those with a net worth of less than $1 million or an income under $200,000) in September after being approved to do so by the Securities & Exchange Commission.

CNote is like an alternative savings account you can feel good about. When you open an online CNote account, your savings get invested in federally certified CDFIs that are working on the front lines of community development. Your money earns 2.5%, compared to .15% or less in a typical bank account. CNote does not charge investors; instead, it makes a small percentage from the CDFIs.

CNote’s Berman at South By Southwest, where the startup won top honors

While CDFIs are certified by the Treasury Department, they’re not federally insured like a bank. However, CDFIs have a strong social and financial track record stretching more than two decades. And their hands on-approach working with borrowers, along with the financial cushions they amass to absorb loan losses, make them a low-risk investment.

Impact area:  Women and minority entrepreneurs, low-income communities

Fees:  None

Return:  2.5% interest

American Homeowner Preservation

Hedge funds had a field day during the mortgage crisis scooping up distressed mortgages and profiting by flipping them. And they’re still at it. American Homeowner Preservation takes a different approach. It buys distressed mortgages, but then it works to keep families in their homes. Even after forgiving debt and lowering monthly payments for families, AHP still makes a nice return, thanks to the bargain basement prices it is able to buy mortgages for. Investors get the first 12% and AHP keeps the rest.

Last year, AHP conducted a Regulation A+ offering, allowing it to open the fund to everyday investors with as little as $100. Read our previous coverage about AHP here.

Impact Area: Housing for low to mid-income families

Fees: None

Return:  12%

Change Finance

Despite new investment options like those above, the stock market is still the dominant mode of investment for most Americans. And in that world, Exchange Traded Funds (ETFs) have gained popularity as an easy and inexpensive way to invest in a basket of stocks.

Colorado-based Change Finance is looking to raise the standards of socially responsible investing by combining the ease and low fees of an ETF with rigorous screening and impact analysis. Created by sustainability pioneers including Hunter Lovins and Donna Morton (pictured above with the Change Finance team), Change Finance plans to create a family of ETFs that are guided by the United Nations Sustainable Development Goals invest “in companies built for the 21st century,” says Change Finance president Andrew Rodriquez.

The company’s first product, the Diversified Impact U.S. Large Cap Fossil Fuel Free ETF, zeroes in on climate change. It began trading on Oct. 10 under the ticker symbol CHGX. The ETF will track the performance of the Change Finance Diversified Impact U.S. Large Cap Fossil Fuel Free Index.

“Roughly 95% of all invested capital is invested in public markets, so until public market investing has a rich set of tools to provide an impact lens, we leave on the table massive opportunity to create positive change,” says Lowsen.

By the way, if you want to see how your mutual fund or ETF stacks up on this issue, check out the Fossil Free Funds tool.

Impact area:  Climate change

Fees:  .75%

Retur:  Market driven

Investment Crowdfunding 

So where does crowdfunding fit in? That’s still the most direct form of impact investing in our view. But be aware that investing in small businesses and startups can be risky, and always do your homework (not that we’re financial advisors or anything!) You can check out a wide range of businesses raising money from the community on investibule, a crowdfunding aggregation platform (and sister site of Locavesting) that makes it easy for people to discover investment opportunities in businesses they care about.

Related: A Fund Where Investors and Homeowners Both Win


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