Investors’ Perspectives: A Time for Community Bonds

by Maureen Stapleton, Alliance; June 2009.

Alliance magazine is a quarterly journal aimed at informing philanthropists and social investors about the latest trends in the field worldwide. It may be a sign of the growing popularity of new financial instruments pitched to philanthropists, that the magazine is now featuring financial products. This article provides a brief introduction to yet another social investment opportunity: community bonds. According to the author, community bonds are in use in the UK, the US, and Canada.

Citylife in the UK created a five year zero coupon social investment bond to help charities raise funds. Since 1999 Citylife has raised more than 10 million pounds for charities through these bonds. From the US the article points to the work of the Calvert Foundation. Calvert’s “flagship product” is the Calvert Community Investment Note. This instrument allows investments to be pooled and placed in a portfolio of affordable loans granted to more than 200 non-profits in over 100 countries. In Canada, the example cited is the Municipal Finance Authority of British Columbia which has had a Community Bond Program since 1995. Disappointingly, there is very little detail about the examples cited. It is unclear how the products are regulated, how they are pitched to investors and whether investors are clamouring for more. Finally, the author falls into the trap of reporting the amount of money that has been raised without any detail about the value created by this type of funding.

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