Wednesday, January 29, 2020

Energy Efficiency Financial Institutions Group. Comments by Jalil Boulahssas, Impact Investing Intern, University of Richmond


The Energy Efficiency Financial Institutions Group (EEFIG) – New Working Groups Webinar was held early Monday morning (Jan. 27, 2020) to address long term barriers to energy investment in Europe. 

Led by Martin Schoenberg of the United Nations Environment Programme Finance Initiative, the webinar discussed the role of energy efficiency within sustainable finance as banks work to align their portfolios with the Paris climate change agreement.

As of September 2019, financial institutions and alliance investors have adopted principles for responsible banking to reach net zero emissions by the year 2050. As real estate loans form a large portion of bank asset composition, the energy efficiency of mortgages comes under focus as a significant point of improvement. 

According to the EEFIG, the global economy must double its investment in energy efficiency by 2025 and double it again by the year 2050. Many European banks are looking to establish a standard definition of energy efficient mortgage, which is generally tied to crediting a home’s energy efficiency into its mortgage. These efforts are to be supported by the European Green Deal Investment Plan, an important facet of the overall European Green Deal. This plan seeks to mobilize a minimum of €1 trillion by 2030, unlock and incentivize private investments, as well as to support project promoters in their execution of sustainable endeavors. 

After interest in increasing the amount of working groups within the EEFIG, there are now four new groups. These new working groups include the Financial Performance of Energy Efficient Loans, Financial Instruments, Multiple Benefits, and Communications/Dissemination groups. The Financial Performance working group looks to analyze energy efficient loans to assess their credit quality and the overall risk of such investments. Similarly, the Financial Instruments working group will aim to compare leading financial instruments to increase energy efficiency in various markets. 

As they conduct their research, several benefits and communications groups will assess the benefits of energy efficiency on macroeconomic factors such as GDP and share the results with the global finance community.

(Ed note: for our work in this area from 2002-2006, see: https://www.creativeinvest.com/EnergyEfficientMortgageMBSJune2006.pdf)

Sunday, January 26, 2020

Citi's Impact Fund. Comments by Nathan Pratt, Impact Investing Intern, University of Maryland.


With the record levels of profits banks have made in 2019, Citigroup is responding by allocating a portion of this money for investments in companies with positive social impact. Citi announced they are starting a $150 million Citi Impact Fund, which will also help fund minority and women owned businesses.

Businesses of this nature represent great potential economic growth for a number of reasons. First, minority and women owned businesses are underrepresented in overall business activity due to structural flaws in the banking system. I believe there is great demand for them.

Given the reality that lack of access to credit is one of the biggest hurdles these entrepreneurs face, the Citi Impact Fund could help address this issue. Furthermore, investing in businesses that promote positive social impacts would likely be beneficial to the average citizen, considering these firms attempt to help provide better infrastructure, access to information, and sustainability.

In conclusion, the Citi Impact fund is a step in the right direction, from an economic perspective. We can only hope that more banks decide to follow in CitiGroup’s footsteps.

Review of "Income Inequality, Record Bank Profits and the Citigroup Impact Investing Fund" by Minwoo Kim, Impact Investing Intern, American University.


These days, it seems that sustainable investing is a global trend. In this context, Citigroup seems to want to join the trend of the times through impact funding.

I think it is important to decide which business to invest in using criteria related to the positive impact on society such an investment may have. The question seems to be whether to place the selection and evaluation standards totally on the potential to succeed financially or on equality related factors such as status of the business owners as minority or women.

From a purely economic point of view, it would seem to be much better to put full importance on the potential to succeed financially. But we should also take the global trend toward consideration of equality and sustainable growth into account.

Though Citigroup plans to invest in minority and women-owned businesses, one concern is how can those business keep growing and move forward to the mid-long term. I think a good solution to this concern is to utilize a ‘business incubator’ approach that can systematically educate and support those women and minority-owned businesses.

This way, we can help them get through the well documented difficulties in the start-up stage and move on to the next growth stage, rather than just supplying short-term financing.

(Edited by William Michael Cunningham).

Saturday, January 25, 2020

Citi's Impact Fund. Comments by Jalil Boulahssas, Impact Investing Intern, University of Richmond


As Citigroup establishes its $150 million Impact Fund, it takes aim at the issue of funding minority-owned businesses. A fund like this one should look to create a successful equity financing vehicle in a sector with few sources of financial support.

Banks have extended less credit to small firms than they did prior to the Great Recession. According to a Richmond Federal Reserve study, 51% of black-owned small businesses experienced challenges in the availability of credit, compared to 30% of white-owned small businesses. (1)

This trend is also seen in the size of loans received. A smaller share of black, hispanic, and female-owned businesses tend to receive loans over $100,000 and they are also more likely to use owner loans than white and white-male owned businesses. (2)

This points to the larger trend that, while black-owned businesses are the most likely to apply for bank financing, they are the least likely to receive full funding, with only 31% receiving the whole amount requested.

While there is a well recognized shortage of credit to hispanic and black-owned businesses, we note that the main reason these firms seek to borrow is to pursue new opportunities and business expansion. (3)

Similarly, female-owned firms are less likely to receive financing than male-owned firms.

Positive efforts such as the Citi Impact Fund stand to potentially drive an increase of credit to the aforementioned minority groups.


[1] McKay, Shannon. Key Findings from the Small Business Credit Survey on Minority-Owned Firms. Federal Reserve of Richmond, pp. 1–29.
[2] Report to the Congress on the Availability of Credit to Small Businesses. Board of Governors of the Federal Reserve System.
[3] McKay, Key Findings

Thursday, January 23, 2020

Review of Citi Impact Investing Fund article by Yutong (Erica) Wu, ESG | Impact Investment Intern, Georgetown University.


My review of  Income Inequality, Record Bank Profits and the Citigroup Impact Investing Fund follows.

Business, government, and technology are three forces driving a society's sustainable development forward. Specifically, by providing equity funding to minority and women-owned businesses, Citibank is providing a practical solution to supplement traditional economic tools driven by the public sector, government, and international institutions.

These tools, like income redistribution (tax), regulation, and international initiatives, are no longer enough to eliminate social inequality, particularly income inequality, that are as a result of social division, history, culture, and social stereotypes from last century.

One "side concern" that comes with the growing trend that businesses take responsibility for social or environmental issues is that, instead of focusing on the issue itself, some businesses may treat this responsibility as a marketing tool. This is the reason some people question the "real impact" that businesses - in this case, Citi - could generate.

We believe we need more reliable methods that measure and evaluate the flow and impact of the funds provided by Citi and other financial institutions.

Yutong (Erica) Wu, ESG | Impact Investment | Environmental Sustainability, Master in Public Policy, McCourt School at Georgetown University.

Wednesday, January 22, 2020

Hope or Hype? Citigroup's New Impact Fund

Banking giant Citigroup recently announced the launch of the $150 million Citi Impact Fund. (We have long been concerned with Citi, having filed an October 1998 petition in the US Court of Appeals for the DC Circuit (Case Number 98-1459) concerning the merger that created the bank. In our appeal, we noted that our economic models showed evidence that growing financial market malfeasance greatly exacerbated risks in financial markets, and that this would lead to a financial downturn.)
Citi now claims it “will make equity investments in ‘double bottom line’ private sector companies that have a positive impact on society.” These investments in U.S.-based companies (not individuals) will be made using the bank’s own capital. Citi states that it is looking for innovative companies in workforce development, financial capability, physical and social infrastructure and sustainability.
Citi has committed to providing seed funding for businesses that are led or owned by women and minority entrepreneurs. According to the bank, you do not have to be a Citi customer in order to be considered by the fund.
Citi’s announcement has been received positively, especially in the black business community. I think the announcement is a positive one, because of the potential that other banks may follow Citi’s lead and create additional equity funding vehicles targeting minority and women businesses.
We must place this action in the context of recent impact investing developments. Blackrock, the world’s largest investment firm, announced that they would be “making investment decisions with environmental sustainability as a core goal in meeting their fiduciary obligation to clients.” This concern with social issues is new.
Citi’s announcement must, likewise, be viewed in the context of current banking industry activity. JPMorgan Chase, the country’s largest bank, last week reported record profits of $36.4 billion in 2019, the highest annual earnings any U.S. bank has ever reported. Citigroup itself announced its best results since the 2008 financial crisis, reporting $19.4 billion in profits for 2019.  
Given these profit levels, we expected that banks would seek to address income inequality, especially in light of the attention this issue is getting on the presidential campaign trail. Two Democratic frontrunners — Sens. Elizabeth Warren (Mass.) and Bernie Sanders (I-Vt.) — have made income inequality a key issue. In addition, the #MeToo movement helped raise serious concern about the gender pay gap. This fund may be Citi’s way of getting in front of these issues.
According to the bank, the new fund is being run by the Global Public Affairs unit, which includes Citi Foundation, Community Development and Inclusive Finance. It is being managed by the same executive who established Citi’s affordable housing finance business. We note, however, that the Global Public Affairs unit is not a core, bottom-line impacting operational division of the bank.
Whether or not the fund will actually help black businesses depends upon the allocation of funds to each minority group; that is, it depends upon the number of dollars invested in black, white women or Asian or Hispanic businesses. Citi is silent on this.
While $150 million sounds like a lot of money, it is 0.8 percent of Citi’s profits. Equity financing needs in the black business sector are at least $20 billion, based on demand in this sector, which we calculate by looking at total black loan applications, loan rejection rates and the potential number of new black-owned firms.
We also note that, as reported by Black Enterprise Magazine on Jan. 13, “Black business owners are being denied business loans from banks despite having good credit scores and showing consistent annual profits.”  
We have reason to hope that this fund may be fairer. 

Tuesday, January 21, 2020

The Right to a Roof: Tackling Homelessness. Nathan Pratt, Impact Investing Intern. University of Maryland.


This symposium included the input of lawmakers and experts in the field of homelessness, as they attempted to address its causes, impacts, qualities, and solutions. While an obvious cause of homelessness is the lack of affordable housing, other factors played a role including poverty, income disparity, mental health, unemployment, lack of resources, and discrimination. Each of these factors can lead to temporary or even permanent homelessness.

Some lawmakers focused on youth struggling with the effects of homelessness. Representative Danny K Davis claimed that one issue was that, while resources are available, they are not properly targeted to youth. He cites a lack of educational programs and institutions as a significant issue. Representative Lowenthal’s district in California serves as an example that other issues, such as mental health, can sometimes play a larger role than poverty, as he approximates that 1 out of 4 high school students are in and out of homelessness in a relatively affluent community. Furthermore, Representative Davis acknowledged that operational issues can play a role, mentioning an example of a family who lost their home because they did not receive the social security benefits they were owed.

The topic of discrimination also must be taken into account considering homelessness disproportionately affects African Americans and other minorities. Marc Dones, the Executive Director of National Innovation Services explained that it is crucial to consider historical and structural racism as a driver of homelessness. Dones holds the belief that network impoverishment reduces the margin of error for minority families trying to stay afloat. Representative Joyce Beatty acknowledged this as an issue and called for the people at the top to promote diversity and inclusion. The lawmakers on the other side of the political spectrum focused most of their time speaking about veteran homelessness. They found mental health issues and addiction to be some of the main causes. Representative Zeldin explained that many veterans feel isolated and alone, so he has found success using a peer-to-peer support model.

Among lawmakers, there was a generally held belief that working together is the only way to solve the problem of homelessness. They argued that bipartisan cooperation and an effort to allocate more resources to solve the problem. Other more specific solutions were posed as well. When asked about legislation or initiatives that could be used to tackle the problem, Executive Director of the US Interagency Council on Homelessness Dr. Marbut contends that affordable housing stems from affordable construction. By removing red tape and making it easier and less costly to build housing, he believes that more affordable housing will be available. Dr. Marbut was also a strong proponent of services being merged with housing, as it had a higher success rate according to his data. This proved to be a point of dissention among the experts, as many championed a housing first model. Other research found this model to be effective.

A benefit of the housing first model is that it still offers the services, but housing is not conditional on the use of them. The other solutions proposed by experts included more creative and affordable housing, low-interest loans, more housing vouchers, and a flexible pod of funds.

Wednesday, January 1, 2020

Two fake “tribes” in Alabama got over $500 mil in no bid Federal contracts

The LA Times @latimes found members of 2 fake “tribes” in racist, bigoted Alabama got over $500 mil in no bid Federal contracts as minority business owners. This brings the grand total of Federal SBA dollars swindled uncovered by @latimes to over $800 mil.

The Small Business Administration certified William Michael Cunningham as an 8(a) program participant on October 19, 2005. He did not receive any federal government contract revenue. He withdrew from the program, under retaliatory pressure by the SBA in 2008, shortly after he met and wrote to Henry Paulson, Jr., Secretary, US Department of the Treasury, offering to assist the country recover quickly from the financial crisis. He wrote to the Honorable Nydia M. Velázquez, Chairwoman, Committee on Small Business of the United States House of Representatives, describing his experiences. See: https://www.sec.gov/comments/s7-08-13/s70813-32.pdf