Investing With Capital Impact Partners (Review)

Capital Impact lets you invest in underserved communities by buying its ‘A’-rated Capital Impact Investment Notes. Learn if you should invest.

SustainFi July 23, 2021

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Rating: Excellent (4.0 / 5)

Capital Impact Investment Notes

  • Investment Type: fixed income (note)
  • Certification: nonprofit CDFI
  • Minimum Investment: $1,000
  • Advertised Return: varies
  • Maturity: 1-15 years
  • Liquidity: none
  • Open to non-accredited investors
  • Fees and expenses: none
  • Account types: taxable investment accounts

Pros

  • Invest in underserved communities
  • No fees
  • Low minimum investment
  • CDFIs are generally safe
  • “A” rating from S&P Global, the credit rating agency
  • Available for purchase through your brokerage account

Cons

  • Low interest rate
  • You can’t get your money back until the Notes mature
  • Your money is not FDIC-insured
  • You will need to call your broker to buy the Notes

What is Capital Impact?

Capital Impact Partners (“Capital Impact”) is a community development financial institution (CDFI) with a 38-year history. CDFIs are U.S. government-certified financial institutions that give loans to low-income communities neglected by the big banks. In 2019 there were over 1,100 CDFIs in the U.S with over $136 billion in assets.

This District of Columbia-based nonprofit was formed in 1982 to provide financial services and assistance to underserved communities throughout the U.S.

Capital Impact focuses on lending to develop:

  • Affordable housing
  • Senior housing for low-income, older adults
  • Charter schools (Capital Impact has directly financed 30% of all charter school lending nationwide)
  • Public health centers
  • Marketplaces and healthy food enterprises (Capital Impact tries to bring fresh food to lower-income neighborhoods)
  • Community centers
  • Co-ops

Capital Impact also runs several community development programs, including the Healthier California Fund, Detroit Neighborhoods Fund, Age Strong Fund, National Cooperative Grocers Fund, and Michigan Good Food Fund.

Throughout Capital Impact’s history, the nonprofit has deployed over $2.7 billion across the U.S. Its portfolio of loans currently exceeds $700 million.

Although Capital Impact invests nationally, they try to cluster investments in places they know best and leverage local relationships. As part of that effort, they are focused on specific regions, such as California, Michigan and northwest Ohio, the New York Tri-State Area, Texas, and the Washington, D.C. Metro area.

Capital Impact believes that over its 38-year history, the fund had a strong impact on local communities. In particular, they estimate that their financing led to the creation of over 37,000 jobs and the construction or expansion of:

  • 548 health centers, serving more than 2.9 million patient visits annually
  • 264 charter schools, serving more than 270,000 students annually
  • 100 healthy food retailers, expanding access to healthy food for 1.2 million people
  • 39,000 units of affordable housing
  • 221 cooperative businesses, serving 869,000 customers

What are the terms of the Capital Impact Investment Notes?

Capital Impact continues to offer new Notes. You can check the latest terms on their site before you invest.

The Notes are offered with 1, 3, 5, 7, 10, or 15-year maturities. You can’t get your money back before the stated maturity.

The annual interest varies. The latest Notes Capital Impact issued matured in 2028 and paid a 1.65% annual interest.

The minimum investment is $1,000.

You can buy the Notes directly through your brokerage account. You will need to call the broker, however, because you can’t just buy the Notes online like a stock.

The Notes are offered to residents of most U.S. states except for Washington and Arkansas.

Are Capital Impact Investment Notes safe?

The Notes are rated ‘A’ with a stable outlook by S&P Global, the credit rating agency. S&P notes that Capital Impact has “demonstrated robust financial strength” and “an ability to implement strategic objectives.” They believe that Capital Impact’s “asset quality is very strong.”

However, the Notes are an investment product, not a savings account, so your money is not FDIC-insured.

💰 Takeaway

Investing in the Capital Impact Investment Notes is a good way of supporting underserved communities, but, given the low interest, you won’t generate substantial returns.

Are there other ways of investing in CDFIs?

An online platform called CNote and Calvert Impact Capital also let you invest in CDFIs.

🔔 Read the review of CNote.

🔔 Read the full review of the Calvert Impact Capital Community Investment Note.

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