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Sustainable Investing: Financial Institution Providing Capital to Meet the Needs of the Underserved

The Impact Investing Team at RBC Global Asset Management invested in a corporate bond that supports the operations of the BlueHub Loan Fund, a community development financial institution (CDFI) that makes loans to improve equitable access to opportunity and support community development projects that build healthy communities.

The Impact Investing Team at RBC Global Asset Management invested in a corporate bond that supports the efforts and operations of the BlueHub Loan Fund. The purpose of this bond is to support community resources by providing hard-to-find capital to borrowers in need. The bond proceeds will allow BlueHub to offer low-income borrowers more flexible, longer-term capital to match their financing needs.

Case Study: RBC Access Capital invests in bond of CDFI to help support underserved community development

Strategy Approach: Integrating

Asset Manager: RBC Global Asset Management’s Impact Investing Team (Access Capital)

Security Type: Corporate bond

Background

Founded in 1985 by socially responsible investors, BlueHub Loan Fund is a certified community development financial institution (CDFI) which makes loans to support community development projects that build healthy communities. The Fund is rated A- with a stable outlook—signaling strong credit worthiness—by S&P Global Ratings.

The Loan Fund also supports foreclosure prevention work, including Stabilizing Urban Neighborhoods (SUN) Initiative and green initiatives.

CDFI’s are mission-driven financial institutions that are dedicated to providing financial services to meet the needs of economically disadvantaged individuals within underserved communities.

In order to become a certified CDFI, the financial institution must:

  • Have a primary mission of promoting community development
  • Provide financial products and services
  • Serve one or more defined low-income target markets
  • Maintain accountability to the community it serves
  • Be a legal non-governmental entity

Manager Intervention

The Impact Investing Team at RBC Global Asset Management invested in a corporate bond that supports the efforts and operations of the BlueHub Loan Fund. In January of 2020, BlueHub Loan Fund, an affiliate of BlueHub Capital, a $1 billion+ national nonprofit community finance organization, completed its first public debt offering, a $75 million Sustainability Bond. The offering was comprised of $56.25 million in 10-year bonds and $18.75 million in 7-year bonds. Across Impact Bond accounts (including ACCSX), the Impact Investing Team purchased both maturities issued: $750,000 of the 10-year issue and $1 million of the 7-year. The purpose of this bond is to support community resources by providing hard-to-find capital to borrowers in need. The bond proceeds will allow BlueHub to offer low-income borrowers more flexible, longer-term capital to match their financing needs.

BlueHub partners with other organizations to connect low-income communities with capital that helps to generate economic opportunity and stability. They have made loans totaling over $1.3 billion to enhance the lives of families by supporting over 23,000 affordable housing units, creating/retaining 13,000+ jobs since 2012, and serving thousands of children in schools, youth programs, and childcare. They also focus on sustainability and energy resiliency.

Sustainalytics, the largest independent provider or ESG research and ratings, independently reviewed the BlueHub Loan Fund Sustainability Bond Framework and concluded that BlueHub's loans contribute to or advance eight of the United Nation's Sustainable Development Goals (SDGs), a global agenda to end poverty, protect the planet, and ensure prosperity for all by the year 2030. This closely aligns with the proprietary impact measurement framework employed by RBC GAM’s Impact Investing team. The team’s measurement process is grounded in the SDGs, which it uses as a lens to evaluate each investment or project.

Outcome

BlueHub builds healthy communities by financing a broad range of projects. Results include:

  • Affordable Housing: 24,000+ units built, preserved, or enhanced
  • Healthcare: Facilities offering a comprehensive range of care to 197,700+ patients
  • Childcare: Facilities serving 17,400+ children
  • Education: Schools and youth programs serving 44,900+ students
  • Commercial Real Estate and Community Facilities: Development of over 6 million square feet of commercial real estate and community facilities
  • Jobs: Nearly 13,800 jobs created or retained since 2012
  • Healthy Food Retail: Facilities serving 128,000 customers annually
  • Sustainability: Collaboration with BlueHub Energy to bring energy resilience and cost savings to low-income communities

Sustainable investing approaches (Aligning, Integrating, Engaging)

Aligning a client’s values with their investments to minimize exposure to companies or industries whose business practices conflict with their personal convictions.

Integrating ESG factors into investment decisions to identify and emphasize investments in companies or industries with positive ESG practices or that solve specific ESG challenges; and to limit exposure to those with poor ESG performance.

Engaging with portfolio companies and fund managers to encourage improvements in ESG performance and mitigate risks related to ESG, and improve financial systems.

Sustainable Investing

For many of today’s investors, the way they invest matters. Sustainable investing is a force for that positive change.

Investing With Purpose

In this case study, learn about a mission-driven financial institution dedicated to providing access to credit to the underserved.

Sustainable Investing Resiliency

Sustainable investing can have fewer hidden risks, even in light of events like COVID-19, changing the investment industry and helping communities.

IMPORTANT DISCLOSURES

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

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Environmental, social and governance (ESG) funds are subject to the risk of underperforming the broader equity market or other funds that do not utilize ESG criteria.

This Research material was prepared by LPL Financial, LLC.

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