Archive for July, 2008

Following Hurricane Katrina, New Orleans and the rest of the Gulf Coast was devastated.  Access Capital Strategies, a SRI community investment firm, decided to use the tragedy of Katrina to showcase the power of community investment strategies.  The Boston-based asset management firm joined forces with Liberty Bank and Trust, a large local African American Bank.  Together, they played a key role in the reconstruction of the devastated areas by providing bridge loans, financial support, and commercial and residential rebuilding.  Other community investment groups, including The Calvert Foundation, Jewish Funds for Justice, and Hope Community Credit Union, joined in to further stimulate the region with more then $2.4 million in capital.  Hurricane Katrina provided a glimpse into an investment sector that has grown in the last 5 years from a $4 billion sector to nearly $20 billion.           


Historically, socially responsible investing (SRI) has referred to a set of approaches used in investment decisions that consider social, ethical, and environmental issues.  One of the latest incarnations of SRI is Community Investing.  This strategy involves using investment funds to provide capital or loans to communities that lack access to conventional funding sources or are overlooked by traditional financial institutions.  SRI values are incorporated into community based investments by concentrating capital toward housing projects, development banks, and infrastructure in order to strengthen a specific micro-economy.  Some of the successful strategies of Community Investing include micro-financing and the fortification of local credit unions.  The regions that have benefited most include Bangladesh, South Africa, sub-Sahara Africa, and the rural regions of Kentucky and Tennessee.  From a SRI perspective the primary goal of community investing is to apply responsible investing strategies to improve the standard of living within a micro-economy while earning competitive returns.  


Despite its rapid growth, community investing remains uncharted territory for most investors.  As world economies are experiencing inflationary pressure on food and increased energy prices, fragile economies are suffering the most.  Paradoxically, these struggling economies will act as proving-grounds for community investment strategies in the coming years.  Of the 84 Community Investment funds currently operating, listed below are a few that I think represent the best positioned funds to take advantage of the current economic climate.


Partners with international micro-finance institutions; accepts individual investments

Calvert Foundation – http://www.calvertfoundation.org

Offers community investment notes where investors can specify that their capital be directed to international loans or one of seven U.S. regions e+Co.


Offers investments based on loans to clean

energy entrepreneurs in developing countries


Finca International – http://www.villagebanking.org

Manages village banking programs in Africa, Latin America, Asia and Eastern Europe; offers investments that fund village banks

Fonkoze USA – http://www.fonkoze.org

Manages a socially responsible loan fund that lends to Haiti’s largest micro-finance bank

Shared interest – http://www.sharedinterest.org

Guarantees bank loans for low-income communities in South Africa; accepts investments for periods of three to ten years

Underdog ventures – http://www.underdogventures.com

Designs and manages customized single-investor social venture funds for HNW investors

Coalition of Community Development Financial Institutions – http://www.cdfi.org

Offers facts and figures on community investing

Community Investing Centerhttp://www.communityinvest.org

Accion international – www.accion.org


Copyright © 2008 David van der Roest


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South Africa: SRI Index Beats Market

The JSE socially responsible investment (SRI) index outperformed the Johannesburg all share index by 5%.  As the world economy navigates the doldrums, many have suggested that SRI strategies are a luxury we can’t afford.  The JSE SRI index is a wake up call!  If an emerging economy, yoked to a small stock exchange and heavy industry, can afford to care about SRI, so can we. 

Created in 2004, the sustainability index is comprised of companies on the JSE that meet the highest social, environmental, and economic standards.  It is the first of its kind in an emerging market, and the first to be launched by an exchange.  The objectives of this management style are summarized by the term “triple bottom line” (TBL). TBL organize SRI objectives into a hierarchy consisting of “people, planet, and profit.” 

When considering the criteria, location, and economic climate, this is a huge achievement for the ethical investing community.  Many onlookers, however, aren’t surprised.  They believe the index’s success reflect a higher SRI exposure (weighted 62%) to resource stocks.  Compared to the SRI index’s 10.8% YTD return, the JSE resource index has reeled in a whopping 28% year to date.  

Resource Stocks: Has the boat left the Harbor?

Along with the energy sector, resource stocks have been one of the few winners of 2008. Unfortunately, current economic indicators suggest resource stocks can no longer offer investors refuge.  Fears are mounting that growing oil prices are slowing world growth and lessening demand for raw materials and resources.  Fund managers are increasing their cash reserves (highest since 2002) and banks are paying more then 8% (normally 6.2-7%) to raise money.

June was the first month this year that saw a net loss (1.5%) in the resource sector.  Is the boat sinking or just adjusting course?  One thing is for sure, an exposure rate of 62% (as in the JSE index) to resources may be too risky considering the times.  At this time, I would not jump onboard.

Bottom Line

Tempting SRI funds should have no more then 40% of assets in the resource sector.  Early 2008 SRI gains may have been riding on the wave of energy speculation.  Regardless, South Africa is setting a high bar for emerging markets.

Copyright © 2008 David van der Roest

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