The demand for community development capital is as great as it has ever been, as economic conditions create critical financing gaps that cannot be met by the conventional marketplace.

So, where is that additional capital going to come from? Will investors interested in measurable, sustainable impact continue to see opportunity in community development financial institutions (CDFIs)? And what data should CDFIs be providing to demonstrate their capacity to deliver on both financial return and impact?

The answers to those questions are critical. Impact investors have helped CDFIs significantly scale their activity over the last five years, particularly during the pandemic, focusing on the needs of hard-hit communities and the deep racial inequities that permeate so much of our culture and economic life. Our organizations recently teamed up to analyze the landscape for CDFI investments to date, both documenting market activity and providing a clear menu of potential opportunities for investors. The goal is to help impact investors identify how and where they might put their capital to work and what expectations they should have for performance.

The result is CDFIs and the Capital Markets: Trends in Investment & Impact Measurement. It details how the CDFI sector has reflected the broader market reality: the demand for investment opportunities that align capital with purpose has rapidly grown, topping the $1.16 trillion mark in 2021, as retail, corporate and institutional investors all gravitated toward sustainable social impact.

More specifically, though, we look at how CDFIs have responded to that growing demand with new investment vehicles that span the risk-return spectrum—offering investors the chance to address the acute affordable housing crisis; persistent racial health, wealth and opportunity gaps; and disproportionate environmental impacts in low-income and historically underserved communities.

Read the full article about CDFIs and impact investing by Elise Balboni, Kathleen Keefe, and Anna Smukowski at LISC.