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CCM FAQs: How Can Clients Customize Impact Investments?

November 2017 | Impact Investing

images.jpegThe flagship impact investing bond strategy at Community Capital Management enables investors to target their impact investments whether in a separate account or a mutual fund (CRA Qualified Investment Fund). In our recent webinar, we dedicated time to discussing some of the most frequently asked questions we hear from investors:

  1. What is targeting/earmarking?
  2. How do you target investments within a mutual fund to specific geographies or social impact themes?
  3. What type of reporting do investors receive?

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Below the President and Chief Operating Officer of CCM, Alyssa Greenspan, CFA shares answers: 

  1. What is targeting/earmarking?

The earmarking process which might sound complicated is actually fairly simple for investors.  The first part of the earmarking process is the ability for investors to customize their investment.  But what does that mean?  It means that investors can have their investments benefitting specific geographies within the United States or specific social impact themes.  

Many investors ask us, “Well, how narrow can you customize a particular geography?” The answer is that we can narrow down the investments to the county level.  Another common question is, “Can I choose multiple counties, regions, or states?”   The answer is yes, we can absolutely target multiple regions.  In fact, we do this for a large percent of our shareholders. Finally, it’s important to keep in mind that investors can choose the target by geography or by social impact themes, but not both. In the case of investors opting to customize by impact themes, we’ve expanded these over time and currently offer 17 impact themes. Many of them may resonate with you. For example, the environment, gender lens, the arts, and education are just a few examples.

  1. How do you target investments within a mutual fund to specific geographies or social impact themes?

Each client is provided a targeting form. This is the form that we utilize to memorialize the targeting choices of our clients. The current minimum investment for customizing in the mutual fund is $500,000. After we receive the targeting form, we then track and manage the implementation process, thanks to our proprietary and patent pending earmarking technology which we appropriately call Tracker. The portfolio managers use Tracker to find bonds that meet our clients’ customized options. It’s key to point out here that financial performance is of equal importance in our management and oversight. As a fiduciary, our primary objective is to choose and manage investments prudently. If we see a bond that has an amazing story from an impact perspective, but the financial aspects do not meet our standards, we will not purchase the bond. And trust me this happens. I do want to stress that shareholders do not receive the financial returns of their earmark securities. They own a pro-rata share of the mutual fund. The customized or earmarked securities are done behind the scenes in Tracker. Almost like creating customized mini-portfolios within the larger mutual fund.

In summary, from an impact perspective, each client has a customized portfolio of the earmarked securities. From a financial perspective, the client owns a core bond portfolio. One additional item I want to highlight is that not every client wants to customize their investments and that’s fine. Many of our assets comes from investors that just want their fixed income dollars to have a positive impact. And they don’t have a preference as to a geography or impact theme. Customization is an option and a value add for investors, it’s not required.  

  1. What type of reporting do investors receive?

After the investment is purchased and earmarked in the mutual fund, the CRANX investor will receive two different types of reports. First, an impact report which details the positive impact of the investor’s dollars. Second, financial reports which are your standard mutual fund quarterly performance updates. We believe our detailed reporting is a primary component and benefit of our process with the goal of being as transparent as possible and illustrating how your investment dollars are having a positive environmental and/or social impact within your community or on a broader scale. We report using a mix of quantitative metrics and qualitative details, or stories, to understand what each bond is financing and its multiple positive-based outcomes.

For those clients that opt to customize, we provide an impact report on each earmarked bond highlighting quantitative metrics and qualitative details. We additionally provide to all our clients a quarterly impact summary, our annual impact report, and various topical white papers that include investment samples. 

We have received very positive feedback from clients on our impact reporting. In fact, we love to hear all feedback so we can continually look at ways to improve our efforts in data collection, reporting outcomes, and measurement. Please share any comments below!

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The Fund is distributed by SEI Investments Distribution Co. (SIDCO), 1 Freedom Valley Dr., Oaks, PA, which is not affiliated with Community Capital Management, Inc.

Bonds and bond funds will decrease in value as interest rates rise. High yield bonds involve greater risks of default or downgrade and are more volatile than investment grade securities, due to the speculative nature of their investments. The CRA Qualified Investment Fund is non-diversified.

Carefully consider the investment objectives, risks, and charges and expenses of the Fund before investing. This and other information may be found in the fund’s prospectus, which may be obtained by visiting www.ccminvests.com. Please read it carefully before investing.

A full list of regulatory disclosures for Community Capital Management, Inc. are available by visiting: https://www.ccminvests.com/regulatory-disclosures/.