Success Story: BlueHub Capital

Introduction – Calvert Impact Capital's history with BlueHub Capital

In August 1998, Calvert Impact Capital made a $25,000 loan to the BlueHub Loan Fund (then “Boston Community Loan Fund”), managed by BlueHub Capital, a national mission-driven nonprofit dedicated to building healthy communities where low-income people live and work. BlueHub was founded to address damage wrought by decades of predatory lending practices that resulted in racially and economically segregated communities. Their work targets people who have been systemically denied access to capital, disproportionately people of color and women. At the end of 1998, BlueHub was a growing Community Development Financial Institution (CDFI) with $13 million in total assets. By the end of 2019, they had $451 million in total assets and had cumulatively invested over $2.1 billion in underserved communities since their inception. BlueHub also expanded from serving the greater Boston area to investing in 29 states across the United States, from West Virginia to California.

Over two decades and nearly a dozen loan renewals and increases later, BlueHub Loan Fund repaid Calvert Impact Capital’s latest loan in Spring 2020. Around the same time, they also issued their first public bond, valued at $75 million, which received a Moody’s A- rating. Our loan, alongside other lender financing, helped BlueHub Loan Fund grow their portfolio to have deep community impact and supported the organizational strength that enabled the bond offering in 2020.

In addition, Calvert Impact Capital made a loan to BlueHub’s Stabilizing Urban Neighborhoods (SUN) Initiative in 2011, a program that was developed in the wake of the Great Recession and helped over 1,100 families avoid foreclosure as of the end of 2019. The loan was repaid in 2015.

How did our loan have an impact at BlueHub?

As we lent to BlueHub Loan Fund over the past two decades, they grew geographically and solidified their reputation as a leader in the CDFI market. While BlueHub Loan Fund was eventually able to raise capital from diverse, and oftentimes more affordable, sources, they appreciated the flexibility of our loan. For example, much of the bank financing that supports CDFIs is programmatically or geographically restricted, meaning it must be used for a specific purpose or in a specific city, state, or region. Calvert Impact Capital offers unrestricted balance sheet financing, and CDFIs like BlueHub can utilize this capital for wherever they need it most within their portfolio. Additionally, our loan supported BlueHub in demonstrating the viability and effectiveness of their SUN initiative.

BlueHub highlighted two aspects they appreciated about our financing over the last two decades:

1. Our long-term relationship: With almost a dozen renewals over 22 years, our contribution went beyond simply capital. Knowing that Calvert Impact Capital was a dedicated long-term partner provided stability and reliability that supported their strategic growth.

2. Our identity as an impact investor: Our emphasis on collecting social and environmental impact data was aligned with BlueHub’s strategic focus on developing capacity and credibility in the impact investing space. Specifically, our focus on measuring the impact of our financing prepared them for other impact investors who now want to see robust community impact data through their bond offering.

How did BlueHub impact the communities they serve and the CDFI market overall?

BlueHub's lending has always been strongly aligned with our community development theory of change and their impact on communities expanded greatly since our first loan. Since their founding in 1985, BlueHub has cumulatively invested over $2.1 billion, helping:

• Build, preserve, or enhance over 24,000 affordable housing units

• Finance school and youth programs serving over 44,900 students

• Develop state-of-the-art health care facilities serving over 197,700 patients

• Generate over 49 million kWh of solar electricity, enough to power 1,000 homes on average annually

• Develop other areas of impact such as SUN and other green initiatives

In addition to serving marginalized and historically underinvested communities, BlueHub advocates publicly on issues critical to the CDFI market and is often innovating to improve solutions for the communities they serve. As part of their strategic plan, they focus on strengthening affordable housing and foreclosure prevention policy and promoting sustainability through energy efficiency and renewable energy. BlueHub's advocacy work is an important, if indirect, service to the low-income clients they and other CDFIs serve.

BlueHub Loan Fund's impact screening and work to promote racial equity are exemplary. They have a robust impact scoring rubric that prioritizes end beneficiaries and helps them screen investments for impact factors, highlighting not just scale of impact, but quality and depth of outcomes experienced by beneficiaries. They also integrate racial equity principles into their lending practices and have co-developed a Racial Equity Matrix tool that assesses how effectively potential investments in education support Black, Indigenous, and People of Color (BIPOC) students and families. In 2021, they also partnered with BIPOC peers in investing, evaluation, and community organizing to develop a comprehensive Racial Equity Assessment that they can use across their portfolio. They maintain a diverse board and senior management team with over 50% women representation on both. They were also part of a collaborative that led research to advance diversity, equity, and inclusion at CDFIs, and are a member of the Impact Frontiers Collaboration, which promotes impact-financial performance integration, and of which Calvert Impact Capital is also a member.

BlueHub demonstrates strong leadership in impact practices in the CDFI industry, which we have been proud to support throughout the last two decades.

What we can learn from BlueHub's sucess

• Long-term financing relationships can provide stability and reliability for a client, enabling long-term strategic growth;

• Impact investors' reporting requirements and approach can help borrowers strengthen their impact reporting capacity and credibility in the impact investing space;

• Focusing on the depth, breadth, and quality of impact data – not just impact data on scale – is important. Impact data is almost always contextual, and we learned the need to understand the unique lending context in order to understand the true impact of financing.

Calvert Impact Capital's portfolio strategy is to help our borrowers build, grow, and sustain their operations and impact. We have seen BlueHub advance through each of these stages over the last two decades – from a small, Boston-based portfolio, to an expansive geographic reach, and to now, having achieved the scale necessary to support a public bond offering. Our relationship with BlueHub demonstrates our portfolio strategy in action and validates our approach.

Our relationship with BlueHub has been a great learning experience in addition to an opportunity to create powerful, sustained impact. We're proud to share these insights and hope they are of use to the broader impact investing field.