California Community Development Finance Meeting: Strategies to Respond to the Economic Crisis Issues Backgrounder

Providing capital are significant private, philanthropic and government investors representing a spectrum of risk tolerance and risk-adjusted return expectations. The nation's largest pension funds and insurance company consortia making high quality investments in LMI communities are based in the State. Together with the nation's largest banks, and regional banks encouraged by the Community Reinvestment Act (CRA), these investors have directed billions of dollars to California's underserved communities. A growing number of foundations and other social investors seeking double or triple bottom lines of financial, social and/or environmental performance are joining this investor base, if at more modest investment levels. Finally, $85 billion of federal stimulus dollars are expected to flow into California under the American Recovery and Reinvestment Act of 2009 (ARRA), augmenting existing public sector grants and tax incentives that support investments in the State's community development finance sector. Through forty years of partnering with investors who share a vision of increasing opportunity in underserved markets, the community development finance sector has successfully created investment products suited to investors with appetites across the risk-return spectrum. The November 9 discussion will focus on how public, private and philanthropic investors can co- invest in these structures to most effectively support California's economic recovery. As background, this document briefly summarizes the important niche filled by CDFIs and similar organizations, the investors and investment structures that support their work and the opportunities and challenges for expanding the use of these structures in the State.