Below are some terms from our website which our visitors may not be familiar with. Click on the links for their definitions.
Community Development Corporation (CDC)
Community Development Investing
Community Development Finance Institution (CDFI)
Line of Credit
Mission-related investing (MRI)
Socially Responsible Investing
Accredited Investor: The SEC defines an accredited investor as the following:
- a bank, insurance company, registered investment company, business development company, or small business investment company;
- an employee benefit plan, within the meaning of the Employee Retirement Income Security Act, if a bank, insurance company, or registered investment adviser makes the investment decisions, or if the plan has total assets in excess of $5 million;
- a charitable organization, corporation, or partnership with assets exceeding $5 million;
- a director, executive officer, or general partner of the company selling the securities;
- a business in which all the equity owners are accredited investors;
- a natural person who has individual net worth, or joint net worth with the person’s spouse, that exceeds $1 million at the time of the purchase;
- a natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year; or
- a trust with assets in excess of $5 million, not formed to acquire the securities offered, whose purchases a sophisticated person makes.
Affordable Housing: Often used synonymously, though not accurately, with “low-income” housing, affordable housing is generally referred to as housing whose total costs do not exceed 30% of the household income.
Blended-value investing: Another term for impact investing whose return on investment is a “blend” of both monetary and social value. (not on our website)
Community Development: The improvement of a community’s quality of life and the empowerment of community members through education, organizing for political rights, health, quality, affordable housing, recreation opportunity and access to resources. This type of development is generally focused on under-served, disenfranchised and minority communities.
Community Development Corporation (CDC): Community-based nonprofit organizations whose activities are focused on the improvement of a specific geographic region, usually a town or neighborhood. CDCs are involved in a range of activities which include economic development, job creation, education, community organizing and real estate, including development of community space and affordable housing.
Community Development Investing: Community development investments are designed to create new opportunities--primarily related to affordable housing, small businesses, and jobs--that specifically benefit lower-income neighborhoods and populations. Learn more at the San Francisco Federal Reserve Bank’s Center for Community Development Investing here: http://www.frbsf.org/cdinvestments/
Community Development Finance Institution (CDFI): CDFIs are federally certified financial institutions that accept investor capital and extend or guarantee credit to low-income individuals for endeavors with a community development or personal advancement focus. CDFIs include banks, credit unions, loan and guarantee funds, and venture capital funds.
Community Investing: Community investing is capital from investors that is directed to communities underserved by traditional financial services. It provides access to credit, equity, capital, and basic banking products that these communities would otherwise not have. Learn more at the Community Investing Center’s website here.
Credit Union: A credit union is a cooperative banking institution that is owned and controlled by its members, and operated for the purpose of promoting thrift, providing credit at reasonable rates, and providing other financial services to its members.
Emerging economies: Emerging economies are regions or nations whose economies are characterized by rapid growth and industrialization.
Equity syndicators: Equity syndicators are qualified to syndicate investments for affordable housing projects which have qualified to utilize Low Income Housing Tax Credit equity as a part of their project financing. Many of the same syndicators are qualified to syndicate investments for projects utilizing New Market Tax Credits.
Impact Investing: Impact investing is actively placing capital in businesses and funds that generate social and/or environmental good and at least return nominal principal to the investor (Definition from the Monitor Institute report “Investing for Social and Environmental Impact: A Design for Catalyzing an Emerging Industry (January 2009)). Learn more here.
Line of Credit: Contact Fund issues lines of credit to organizations as a source of working capital which they can draw down on at any time, triggering interest payments on the use of capital. These lines of credit are meant to be used as sources of cash for the organization, sometimes targeted for use on a specific project.
Low-Income: “Low-Income” is a term defined by the U.S. Department of Housing and Urban Development (HUD) and revised annually as households earning below a certain percentage of any geographic region’s Area Median Income (AMI.) Different programs, federally and locally, have different percentage limits for people to qualify as “low-income.” For New York City in 2009, 100% of AMI for a family of four was $79,200. Low-income as defined for tax credit purposes is less than 60% of AMI, which for a family of four in NYC is $47,520.
Micro-lending: Micro-lending is an economic development tool that was created by Mohammad Yunus whereby loans are made to entrepreneurs that are too poor to qualify for loans from traditional banks. The concept has largely been implemented overseas in India, Africa and more recently in South America. Domestic micro-lending is becoming more commonplace with such organizations as Grameen Bank, Accion-USA and Seedco leading the field.
Middle-Income: Middle-income refers to families and individuals whose income falls within a range of 80% to 120% of Area Median Income (AMI).
Mission-related investing (MRI): MRI is when a foundation uses the corpus of its endowment to invest in social enterprises that are related to the mission of the foundation.
Note: A note is a promise of payment which Contact Fund sells to investors. Contact Fund notes are issued twice a year at near market rates benchmarked to a national 2-year CD jumbo rate average.
Philanthro-investing: Philanthro-investing is a term emerging from a new class of investors who invest their money in social or environmental cause.
Place-based investing: “Place-based” is a term used in policy and economic development discussions as a strategy that is opposed to “people-based.” The focus of such a strategy is to target improvement of a geographic region, not necessarily a specific slice of a population. Contact Fund invests in local organizations or programs that focus on New York City neighborhoods and communities.
Program-related investing (PRI): PRIs are defined by the U.S. tax code as investments made by foundations to support a charitable project or activity. PRIs may be structured as loans, loan guarantees, or lines of credit. PRIs must meet three tests:
- They must further an aspect of the foundation’s mission
- They must not be made primarily with the purpose of producing income or generating property appreciation
- They must not support lobbying or political campaign activities.
PRIs are expected to be repaid, generally with a below-market rate of return. They are counted toward a foundation’s 5% payout requirement.
Social Capital: The term social capital often refers to human resources, rather than economic capital, or money. Here we refer to social capital as capital invested in solutions to social problems.
Social Entrepreneurship: Social entrepreneurship is the application of business principals to help create innovative solutions to pressing social or environmental problems.
Social Investor: A social investor is an individual who invests their capital in ventures or organizations that are contributing to the solution of pressing social or environmental problems.
Socially Responsible Investing (SRI): SRI is a broad-based approach to investing that now encompasses an estimated $2.71 trillion out of $25.1 trillion in the U.S. investment marketplace today. SRI recognizes that corporate responsibility and societal concerns are valid parts of investment decisions. SRI considers both the investor's financial needs and an investment’s impact on society. SRI investors encourage corporations to improve their practices on environmental, social, and governance issues. You may also hear SRI-like approaches to investing referred to as mission investing, responsible investing, double or triple bottom line investing, ethical investing, sustainable investing, or green investing. (www.socialinvest.org)