As Muindi started to structure his fund, he ran into another problem. There was a dearth of community banks with the necessary experience to make targeted loans that benefit minority communities.
Since 2008, the number of Black-owned banks has fallen by 49%, while the number of banks overall decreased 38% to 5,116, according to a study by the Urban Institute. In the first quarter of 2020, there were just 21 Black-owned banks, a 9% drop from 2018.
So ServiceNow decided to partner with RBC GAM, which has 20 years of experience with impact investing.
“We lie at the intersection of generating both competitive returns and social impact,” says Frye, the investment portfolio manager.
RBC GAM’s Access Capital Community Investment Fund currently has $1.9 billion in assets under management with plans to double in five years. Last year, the AAA-rated fund earned a gross market return of 5.53% from investing in projects that provided affordable rental units, housing for low- to moderate-income buyers, small business loans, and nursing home beds.
Frye says that some people think such funds are risky. In reality, they are “very liquid, fixed income solutions that don’t have to be complex or difficult,” she says.
The challenge is to attract more corporations and high net worth individuals to these funds, Frye says. “It’s going to take everybody to scale impact investment.”