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July 29, 2010 |
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| September 17, 2008 |
By: Wayne Tompkins |
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outh Florida community banks touting their “green banking” initiatives are putting their money where their marketing spin is.
Weston-based Community Capital Management is managing a mutual fund with more than 300 banks as shareholders, whose members are requesting that their investments go to green projects that demonstrate their commitment to environmental sustainability.
The company’s CRA Qualified Investment Fund, which lists 20 Florida banks including BankAtlantic, BankUnited and TotalBank among its members, finances community and economic development projects that can earn banks credit for Community Reinvestment Act requirements. The 9-year-old fixed income fund requires a minimum $500,000 investment.
The banks’ participation in the fund is just one sign that not only has green banking gone mainstream but, increasingly, that the financial sector as whole is signing on.
Just last week, Florida’s Chief Financial Officer Alex Sink announced that Florida is the first treasury in the nation to formally analyze investments for the financial impacts of climate change. In an effort “to better protect the Treasury portfolio from emerging risks,” Sink has launched a semi-annual review process to assess how public fund managers incorporate climate risk in their portfolios, partnering with RiskMetrics Group to analyze the corporate bond holdings of 20 external fund managers and one internal fund manager. Corporate bonds represent approximately $3.4 billion of Florida’s $24 billion in Treasury funds.
“Climate risks are converging not only on our state, but also on the investments we manage on behalf of our citizens,” Sink said.
Fund managers that have higher composite scores on their corporate investments have selected companies with governance practices in place that make them better positioned to meet the challenges and opportunities related to climate change.
“Green is the new black,” said Todd Cohen, Community Capital Management’s president and chief investment officer, citing a bumper sticker he recently saw that he said confirms environmental sustainability is here to stay.
So what exactly is a “green” project?
“Some of the activities include adaptive re-use of existing facilities, proximity to mass transit, light-reduction activities and energy-efficient appliances,” Cohen said. “In the past year, what we’ve started doing is tracking the investments that we’re making that are sustainably environmentally friendly. On the banking side, along with the CRA documentation, we’ll also provide the environmental impact.”
In 2008, the company has made approximately $70-75 million in investments that support environmental initiatives, basing the environmental impact of its investments from a research report from Global Green USA and a report from the U.S. Green Building Council.
The company turned to those two organizations, Cohen said, because definitions of what is “environmental” can be highly subjective.
The Fund invested in a Miami Beach Redevelopment Bond which is helping to finance the redevelopment and revitalization of the area surrounding the Miami Beach Convention Center and Lincoln Road. Proceeds aid the development of public areas, convention quality hotels and other commercial enterprises to the once blighted area.
“The Miami Beach investment supports sustainable development and environmental preservation through the revitalization of existing communities and the reuse of historic structures in conjunction with new hotel development,” said Barbara VanScoy, CCM’s Executive Vice President & Senior Portfolio Manager. Portions of the project are located in an Enterprise Zone, a designated area within Miami-Dade County offering fiscal incentives to businesses that locate or expand within the zone, with the objective of encouraging investments and job creation in economically distressed areas.
The bond proceeds from the Housing Finance Authority of Palm Beach County were used to finance the acquisition and construction of Malibu Bay Apartments, an affordable housing property in West Palm Beach. “The development site was a former golf course that had been designated a “Brownfield” site due to arsenic contamination,” VanScoy said. “Prior to construction, the project site completed environmental remediation. The development site is in an area with good access to shopping, banks, churches, restaurants and other neighborhood services which helps reduce the pollution generated by car travel.”
Elsewhere across the country, the fund’s investments in the restoration of a historic Albuquerque, N.M., high school, converting it to a mixed-use apartment, office and retail development, scored environmental points for its convenient location within walking distance of businesses and entertainment venues. Keeping the school’s original structure intact significantly reduces construction waste. Reusing buildings eliminates the environmental affects of raw material extraction, manufacturing and transportation of materials.
A San Francisco low-income senior center hit the target through the use of solar panels, which generate as much as 25 percent of the power used in common areas, low-flow water fixtures and proximity to public transportation.
As these projects show, folding environmental priorities into the Community Reinvestment Act’s traditional mission of redeveloping blighted communities can often be a seamless process, bringing the benefits of water and energy conservation to affordable housing projects, for example.
“We like it because there are times when we may not have the manpower or expertise to invest in specific local communities,” said Rick Kuci, chief lending officer of Coconut Grove Bank, an investor in the fund. “So here, they do it, they monitor it, they put together the pool of funds and we get our CRA investment credit and, on this one, it was great that they are also trying to be green. So to me, that’s a double win.”
The fund has also been a winner for its investors, delivering returns at or above the Lehman Brothers Aggregate Bond Index.
“Because our returns have been very competitive...we’ve opened up two new share classes, for retail investors and for institutional investors not subject to the CRA,” Cohen said.
Wayne Tompkins can be reached at wayne.tompkins@incisivemedia.com or at (305) 347-6645.
Todd Cohen photo by Melanie Bell
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