Green America: Growing the Green Economy for People and the Planet

Community Investing

Economic action to build sustainable communities worldwide

How to Do It

Here's a brief overview of community investing, how it helps to create healthy and vibrant communities worldwide, and how you can become a community investor.

What is community investing?
Community investing is financing that creates resources and opportunities for economically disadvantaged people in the US and overseas who are underserved by traditional financial institutions. Community investors make it possible for local organizations in rural and urban areas to create jobs; provide financial services to low-income individuals; and supply capital for small businesses, affordable housing, and vital community services, such as education facilities.

How can I get involved today?
You can become a community investor simply by doing your banking with a community development bank or credit union. Community development banks and credit unions operate very much like their traditional counterparts, but these institutions focus on funding economic development in low- and moderate-income areas.

You can open a checking account, savings account, money market account, or CD in one of these banks or credit unions; accounts are federally insured up to $100,000. See our Community Investing Resource Center to find a bank or credit union near you, or find community investing financial institutions in the National Green Pages™.

Besides banking, what other community investing options are available?
If you're interested in additional high-impact investments, there are several other options to explore. These are generally long-term investments (one to five years), that offer market or below-market returns (0 percent to 4 percent), and are not insured. These vehicles have the highest impact because investor money is able to reach the “highest risk” borrowers who are most in need of capital to build their communities.

As with any investment, you should do your research to make sure that the investment vehicle works for you.

  • Community Development Loan Funds provide affordable financing for housing and economic development projects, cooperatives, and community-based nonprofit organizations. These loan funds are not insured, although they use grant money and loss reserves to help protect individual investors.
  • Microenterprise Loan Funds provide small loans and training to entrepreneurs in the US and overseas to create economic development and jobs.
  • Community Development Venture Capital Funds provide loans to businesses that are creating jobs in low-income communities.
  • Pooled Investment Portfolios are a great option if you want to diversify your community investments. You invest through one large facility, which spreads the money out within a pool of institutions that serve many low-income areas in a variety of ways.
  • Mutual funds: A mutual fund is a pool of money invested in stock, bonds, and/or money market instruments by professional managers. Some socially responsible funds devote up to ten percent of their assets to community investing, and two even put 100 percent of their assets into underserved communities. With these funds, you can use your investment dollars to promote corporate responsibility and contribute to improving disadvantaged communities, while saving for your own retirement. These funds are not federally insured.

See the Community Investing Resource Center for links to these community investment funds.

What impact will community investing have on my investment returns?
It depends on what type of community investing vehicle you choose. If you choose to open accounts at a community development bank or credit union, you'll find the interest rates to be comparable to those at traditional banks and credit unions. With community development loan and microenterprise funds, you will often find the returns to be in the 0 percent–4 percent range. (The interest on venture capital funds varies.) No matter what type of market we're in, experts agree that every investor should have a diversified portfolio to minimize risk and achieve a variety of investment objectives. Community investing can be a healthy part of a diversified portfolio.

Are community investments safe?
All accounts at community development banks and credit unions are federally insured, so they are just as safe in these institutions as they are in a traditional banks or credit unions.

Community development loan funds, microenterprise funds, and venture capital funds are not insured—and the same holds true for mutual funds with community investment components—so the risk is higher. Be sure you're fully educated about these options before you decide to invest.

Learn about our campaign to increase community investing »