What is Community Investing?
Community investing is a form of socially responsible investing that generates returns for investors while funding projects to benefit communities. Building K-12 schools, running local hospitals, and turning vacant land and buildings into affordable housing units are typical projects funded by community investing. While you may think such opportunities are for experienced investors, the millennial generation already has the potential to make a significant contribution. By getting involved now, you can directly help your neighbors and your city or town.
Community investing is growing rapidly – almost doubling between 2012 and 2014, to $6.57 trillion – and many millennials are already involved in this new movement. According to the White House Council of Economic Advisers, millennials “are more likely than previous generations to state that making a contribution to society is very important to them and that they want to be leaders in their communities.”
Where Does my Community Investment Go?
Investing in a community development bank, microenterprise loan fund, or pooled investment portfolio are common ways investors support community development. Financial services benefitting low-income areas, as well as economic development projects, are common uses of these investments. At Neighborly, we’re focusing our attention on municipal bonds, because munis are fairly straightforward investments and can be accessed by investors from a wide range of backgrounds.
Muni bonds have a proven track record of benefitting communities. First, munis can revitalize neighborhoods by providing small business development support. These opportunities may pump new revenue streams into communities. Next, munis can support workers at every career stage; for example, the state of Kansas is considering muni bonds to fund a pension plan system for future retirees. Furthermore, munis provide much-needed services for child development facilities. For example, the Childhaven Development Center in Seattle, which is backed by municipal bonds, offers “scientifically supported programs to protect and treat children aged one month to five years and their families.”
Overall, these are just a few examples of how municipal bonds can be a great tool for building stronger communities.
Public Health Initiatives
Not-for-profit hospitals and healthcare research facilities have relied on muni bonds for years. Almost 70% of urban hospitals in the United States are not-for-profit. In addition, nursing homes, assisted living facilities, and homes for the developmentally disadvantaged may be funded by these types of bonds if they accommodate low-and middle-income residents.
Housing bonds are often used to help fund affordable accommodations. They can can provide mortgages for lower income first-time homebuyers, as well as the production of affordable apartments for lower income families. For example, 252 affordable homes in Hampton, Virginia were recently preserved thanks in part to a $10.5 million bond. Affordable housing can help communities achieve greater economic vitality, more stable family environments, and even better nutrition for children.
“An investment in knowledge pays the best interest.”
– Benjamin Franklin
Municipal bonds are a great vehicle for funding primary schools and universities. For instance, an overwhelming majority of voters in Guthrie, Oklahoma recently supported the issuance of $16.2 in muni bonds to update their school district’s buildings and technology. And recently KIPP LA, which operates 11 schools in South and East LA, issued bonds to help provide permanent school facilities. Really, it is almost impossible to overstate the overall importance of quality education, so schools are a fantastic recipient of muni funds.
Growing Role of Munis in Community Investing
Muni bonds’ increasing impact in community investing has caught the attention of some pretty important players in the financial world.
According to Winnie Forrester, the associate vice president at Wells Fargo Advisors, “Individual municipal bonds are the quintessential (socially responsible) investment: They support the infrastructure of our country, like schools, education, water, and utilities.”
Muni bonds have supported communities for over two hundred years, so it’s safe to say they got the jump on this trend long ago.
How to Invest in Community Causes
Until now, in order to invest in a muni bond, you would need to get an account with a broker and spend hours doing research using multiple, often expensive sources. With Neighborly, you can build an investment profile that matches your interests, create an account, and be ready to invest in under five minutes. If you want to invest in an area such as education or poverty alleviation (as well as many more), Neighborly is here to help.