Exploring Innovation Innovation in Community Development Finance St. Louis Federal Reserve

1. Exploring Innovation Innovation in Community Development Finance St. Louis Federal Reserve May 13, 2013 St. Louis, MO Kristin Faust, Director of Lending

2. Mission Wyman Center, St. Louis, IL IFF/PCG loan At PCG, our mission is to advance economic justice and opportunity by partnering with organizations that provide access to capital for low income people and communities.

3. INNOVATION IN COMMUNITY DEVELOPMENT FINANCE BACKGROUND ON PCG PCG buys participation loans from other CDFIs across the country that : • Create affordable housing • Operate community facilities that provide critical community services (e.g. health care, child care, education, social services, etc.) • Promote neighborhood revitalization • Promote double bottom line businesses We also invest in International development funds promoting microfinance & fair trade

4. INNOVATION IN COMMUNITY DEVELOPMENT FINANCE HOW DOES PCG WORK? • PCG delivers its credit products through: • Partnerships with CDFIs in local markets • Direct lending to the borrower • PCG’s goal is to facilitate the development of a network of lenders dedicated to serving nonprofits and mission oriented enterprises. • PCG operates as a wholesale participation lender • PCG is building the CDFI industry’s first loan participation network • Model provides an effective way for CDFIs to work in more collaborative and sustainable ways to deliver capital to communities • Strategy to serve community based borrowers more directly and generate greater and more targeted community impacts • Alternative model for community investors to achieve high social impact in a more sustainable manner

5. INNOVATION IN COMMUNITY DEVELOPMENT FINANCE Working with 30+ different CDFI Lending Partners and impact investors across the U.S., we see tremendous innovation in the community development finance field 5

6. INNOVATION IN COMMUNITY DEVELOPMENT FINANCE Five Areas of Innovation 1. SCALE 2. TECHNOLOGY 3. THINKING GREEN/SUSTAINABILITY 4. WORKING ACROSS SILOS 5. NEW MODES OF THOUGHT 6

7. INNOVATION IN COMMUNITY DEVELOPMENT FINANCE SCALE CDFI Bonds – proposed regs issued in January; potential source for long term loan capital HPN REIT – HPN is a cooperative of the biggest CDC’s and CDFIs in the country. They are forming their own real estate REIT. 7

8. INNOVATION IN COMMUNITY DEVELOPMENT FINANCE TECHNOLOGY POLICY MAP – wonderful data tool created by The Reinvestment Fund CAPNEXUS – online platform to match borrowers and lenders created by PCG MICROPLACE – online investment platform created by Calvert Foundation 8

9. Our Newest Initiative: CapNexus 9

10. INNOVATION IN COMMUNITY DEVELOPMENT FINANCE GREEN/SUSTAINABILITY Sustainable Communities- years of laying the groundwork are now paying off in favorable policy environments to support sustainable communities and we in community development finance know how to bring the pieces together and make them work, i.e. TOD, public private partnerships ESCOs – non-profit energy service companies 10

11. INNOVATION IN COMMUNITY DEVELOPMENT FINANCE Breaking Down Silos Health Care and CDFIs---led by LIIF Arts-led Economic Development---engaging the creative class Holistic Neighborhood Developmentand the role of quarterback --- see What Works article by David Erickson of the SF Federal Reserve Community Network Building--- see Trusted Space blog Refining and Improving Social Impact Measurement---forcing us to think holistically 11

12. INNOVATION IN COMMUNITY DEVELOPMENT FINANCE New Modes of Thought Crowdfunding Supply Chain of Money --- understanding how your deposit and investment dollars are used the same way you know which farmer cooperative your fair trade coffee comes from International Development Successes Being Applied Domestically in US Business Schools Teaching Social Enterprise Millenials Want Solutions to Worlds Problems Not Partisan Bickering 12

13. INNOVATION IN COMMUNITY DEVELOPMENT FINANCE TOP INNOVATION IN COMMUNITY DEVELOPMENT FINANCE IS: CDFIs 13

14. INNOVATION IN COMMUNITY DEVELOPMENT FINANCE CDFIs as leading innovators Work in partnership with many parties CDFI’s are R&D factories for mainstream banking system CDFI’s incubate new products CDFIs continue to masterfully manage risk as we are pushed further out on the risk continuum CDFIs seek profits but are not profit-maximizing CDFIs are the original social enterprise 14

15. INNOVATION IN COMMUNITY DEVELOPMENT FINANCE CDFIs are the original social enterprise utilizing business principles but measuring return in both financial and social return. We hold ourselves accountable to our customers, our funders, our beneficiaries, our communities and our nation. 15

16. INNOVATION IN COMMUNITY DEVELOPMENT FINANCE Two Core Principles CDFIs Must Keep To Stay Innovators Collaboration - Open networks are necessary for creativity - CDFIs are unique in the financial world for theirlevelof collaboration amongst each other and other public, private and non-profit partners Vulnerability - Willingness to try new things and to fail – as individuals and organizations - To be creative is to be humble . 16

17. INNOVATION IN COMMUNITY DEVELOPMENT FINANCE To be good stewards of capital we must plant it like a grain of rice, grow it, share it, it multiplies and we replant and reinvest it for the benefit of ourselves and others – that will indeed create the beloved community. 17

18. Kristin Faust Director of Lending and Network Services Partners for the Common Good faustk@pcgloanfund.org 202-689-8935 faustk@pcgloanfund.org • A special thank you to the many, many people whose ideas contributed to this presentation including Ben Hecht, Kevin McQueen, Clarence Williams, Dan Soliman, Jeannine Jacokes, Frankie Blackburn, David Landis, and Adina Abramowitz.