The NonProfit Times - November 1, 2008 - (Page 8)

LOANS Continued from page 1 Berenbach said.“Part of that is the world is divided between the investment people and the philanthropic people and we clearly rest in between. We’re using the rigor and discipline of investment to accomplish direct community impact that would typically be associated with philanthropy,” she said. “The radical concept is that we’re really all about interfacing these direct investments into the financial mainstream by resolving regulatory and legal complications,” she said.“In many ways, we’re the vehicle that links the nonprofits with the financial market,” Berenbach said. The premise of the Calvert Foundation is using investment as a tool to end poverty, Berenbach said, instead of the traditional understanding that to make a philanthropy-styled impact one needed to make a donation.“The real challenge is really helping people to wake up to the opportunity to use investment as opposed to just giving,” she said, where donors give, get a tax deduction and the money is gone, though there are no tax benefits with community investment notes. People can choose a geographic region in the U.S. or internationally to invest in, and if they do it online they can get into much more finite, granular targeting, specifying a region like the West Coast or midAtlantic, etc. Investments are pooled into a managed portfolio of affordable loans to more than 200 nonprofits and social enterprises, focusing on alleviating poverty. At the end of the community investment note’s maturity, an individual investor gets their money back with interest. It’s designed to make it very flexible and responsive to customer interest, Berenbach said. An investor can choose a variety of terms (from 1 to 10 in two-year increments) as well as the interest rate (0 to 3 percent). The average term is about three years, she added. Why would someone choose to earn zero percent interest on an investment? More than 15 percent of investors actually selected zero interest, which allows Calvert to offer better rates and more flexible terms to the nonprofit borrowers. Approximately half of the capital is invested in the United States to support affordable housing, community development through loans to affordable housing developers or community development financial institutions (CDFIs), which are Calvert’s principal buyers.There’s also a mix of social enterprises, she added, where there might be a nonprofit social service agency that has a subsidiary for-profit business. Calvert also lends to microfinance international organizations and fair trade cooperatives. Community investment notes can be purchased through a broker or financial planner, directly through the foundation, or online at MicroPlace.com, a broker/dealer operated by eBay. There is a $1,000 mini- Habitat for Humanity volunteers get involved with the Jimmy Carter Work Project in Los Angeles last year. mum through a broker while online the minimum is $100. Individuals buy fully registered securities with the Calvert Foundation, which takes all the risk in guaranteeing the investment since investments are not federally guaranteed like a bank account. “We make it safe and convenient for people to do this and handle all the administration and all that,” she said. Berenbach estimates that losses have been less than 0.25 percent, roughly $300,000 out of the more than $130 million in its portfolio. “These instruments are very liquid,” Berenbach said. “The foundation sort of stands ready to buy it back if you were to need to get your money back before maturity,”she said, though there would be interest penalties. “The real value proposition is that we’re designed to help make it safe for investors so many foundations are providing a layer of cushion or support of about $30 million that stands between the investor and any potential losses,” Berenbach said. “It all works because investors can fully expect to get their money back.” The foundation earns its keep off the difference between what it pays investors (up to 3 percent) and what it charges borrowers (about 4.5 percent). Internationally, the risk is greater so the cost is usually higher, more like 6 to 8 percent, according to Berenbach. There’s also more field supervision in place in Europe to make it safe and reliable, she added. In seeking more ways to raise capital, Atlanta-based Habitat for Humanity International announced in July its partnership with Calvert Foundation. Though it’s not clear yet how much capital will be generated by the community investment notes, it will be another source of funding for Habitat’s existing lending program.“This is just another way for us to access capital Loans, page 11 8 NOVEMBER 1, 2008 THE NONPROFIT TIMES www.nptimes.com http://www.MicroPlace.com http://www.orrick.com/public_finance http://www.orrick.com/public_finance http://www.specializedfundraising.net http://www.specializedfundraising.net http://www.nptimes.com

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The NonProfit Times - November 1, 2008 Reach Out Community Investment Loans Agencies Aim For Back Office Savings Contents Page 4 Special Report: An In-Depth Study of America's Largest Profits Charity Accounts Foretold Ecomonic Meltdown Liquid Assets Groups Shaving Expenses With An Eye Toward ROI Green Is Good Governance Becoming Institutionalized National September 11 Memorial & Museum Finds Its Footing NPT 100 Groups Turning Real Estate Into Cash NPT 100 Investments Beat Broader Market The NPT Power & Influence Top 50 Gala Calendar NPT Jobs Resource Directory

The NonProfit Times - November 1, 2008

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