Social Investing That Hits Home
By making deposits at community investment banks, you can help fund affordable housing and small businesses.

(FORTUNE Magazine) – Like millions of Americans, you probably donated to charity after Hurricane Katrina. To make a long-lasting difference--not just to the Gulf Coast but to distressed communities across the nation--consider making a deposit in a bank or credit union committed to community investing.

Community investing has been around for years, but it's getting renewed attention after Katrina. Here's how it works: By making deposits in the form of CDs, money market accounts, or savings accounts, investors help finance affordable housing or loans to small businesses or nonprofits. About 750 community development financial institutions, or CDFIs--banks, credit unions, loan funds--have been certified by the Treasury Department, which means they serve poor census tracts and educate low-income borrowers. The banks and credit unions are regulated, and the accounts are insured; the loan funds are not insured. A list of CDFIs is at "These are safe and sound investments, just outside the radar screen of conventional investors," says Mark Pinsky, CEO of the National Community Capital Association, a community investing trade group.

To support a broad range of banks, credit unions, and loan funds, the Calvert Foundation in Bethesda, Md., has created a product called Community Investment Notes (see Interest rates are below market and set by investors, with a current 2% maximum for three-year deposits. "The idea is to blend philanthropic impact with financial returns," says Shari Berenbach, the foundation's executive director. Notes can be targeted for specific purposes--Gulf Coast rebuilding, micro lending in the developing world, faith-based projects, or support for lesbian and gay communities. The loan portfolio has tripled in the past five years but remains small, at about $88 million.

Andy Loving, a financial counselor with Just Money Advisors in Louisville, has put a lot of clients into the Calvert notes. He says, "You forgo $100 or $200 in interest but you, in essence, put a $10,000 loan into the hands of a person who wants to start a business or buy a house. It's the perfect charitable gift for a compassionate conservative."

Another option is Chicago-based ShoreBank, the first and still the biggest community development bank, with $1.7 billion in assets. ShoreBank has subsidiaries in Detroit, Cleveland, and the Pacific Northwest. It offers a money market fund through Domini Social Investments ( that pays 3.25%. Self-Help Credit Union (, based in Durham, N.C., is another high-profile CDFI. It focuses on affordable housing and fair lending practices. Self-Help's one-year CD recently was paying 4.67%, well above average for banks.