Despite the increasing size and sophistication of community financial development institutions (CDFIs) like PCV — as well as the broader impact investing industry — accessing capital from institutional investors like insurance companies remains exceptionally difficult for most CDFIs and other investors seeking financial returns in addition to positive social or environmental impact.
Raising institutional capital can be challenging for several reasons, namely the institutional investors’ stringent investment policies, lack of familiarity with the impact investing industry, the misconception that investments in this arena are necessarily concessionary, and the mismatch between supply and demand for capital — the smallest investments that large institutional investors can make (e.g. $20 million) is often much larger what a CDFI or small fund manager wants or is able to raise. Yet with over a trillion dollars in annual revenues, the U.S. insurance industry represents a vast, largely untapped source of capital for impact investors.
The California Organized Investment Network (COIN), a government entity within California’s Department of Insurance, plays a critical role in inter-mediating the flow of capital from insurance companies to affordable housing developments, small or sustainable businesses, and community facilities that benefit rural or underserved communities within the state of California.
We are pleased to release COIN’s inaugural impact report, which examines their impact within the state of California over the past five years (2011-2015), assessing both the quantitative and qualitative social and environmental benefits supported by COIN’s activities, as well as the financial performance of COIN-facilitated investments. Our findings demonstrate that COIN has played an important role in facilitating safe, low-risk investments that significantly benefit California’s underserved communities. Encouragingly, CDFIs and other intermediaries’ financial performance and low charge-off rates show that insurers need not sacrifice risk-adjusted returns to pursue positive social and environmental outcomes in California.
Key Findings
Between 2011 and 2015, COIN has delivered significant social and environmental impact, particularly within low-to moderate-income (LMI) communities across California, by facilitating investment opportunities that offer a competitive financial return to insurers and other investors.
Highlights include:
- COIN facilitated the investment of $237.5 million into 34 organizations, which in turn deployed $505.7 million of pooled funds into projects and businesses that benefit underserved communities across the state of California.
- The creation of 985 new permanent jobs and supported 2,300 existing permanent jobs throughout underserved areas of California, primarily through the financing of real estate projects and small and medium-sized businesses. Additionally, 3,230 construction jobs have been created.
- The development of over 12,000 units of affordable housing across California for 18,184 residents, two-thirds of whom are very low income individuals earning less than 50 percent of the Area Median Income (AMI).
- Financial support for 212 small businesses that employ 884 individuals. Approximately 68 percent of these businesses are minority-owned or controlled.
- The construction or expansion of 22 community facilities including healthcare centers for the medically underserved, childcare centers and facilities offering social services. These facilities serve over 210,000 individuals, over 40,000 of whom live in rural communities.
- Construction of nine water treatment facilities, water access projects and desalination plants, which provide 2,765 households and businesses with safe drinking water.
Read the full report below:
In order for the COIN program to best serve California’s insurers, other investors, and intermediaries seeking to invest in and support underserved communities, we believe that COIN should be made permanent to demonstrate that investments that benefit California’s underserved communities are a high priority for the state. Other states as well as the federal government should look to COIN for innovative solutions that governments can take to increasing the flow and efficiency of institutional investments that the benefit communities and geographies in greatest need of capital.
We look forward to your comments and questions on this report. Please feel free to contact us at twoelfel@pcvmail.org.