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For investors with a conscience, options grow

With $10,000, ethically minded investors can help fund budding companies devoted to community development.

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Opportunities are growing for ethically minded investors to buy into pioneering companies that haven't yet gone public. To play in this court, deep pockets and a strong stomach are often required or strongly suggested - but not always.

Consider the high-stakes world of community development venture capital (CDVC) investing. Here, institutional investors provide much of the juice for young companies to create hundreds of jobs for a particular region, frequently in impoverished areas. They invest - with no guarantees - on growth-stage start-ups for the chance to earn 10 to 15 percent or more per annum over 10 years, to bankroll an innovative social model in the marketplace, or both.

Yet as the field expands, individual investors are also taking notice, learning lessons from the sidelines and sometimes jumping into the game themselves.

Numbers tell of a growing universe, at least for qualified or "accredited" investors with net worths of at least $1 million (not including personal residence) or annual incomes above $200,000. In 2000, 55 CDVC funds were either established or raising money for a launch. By 2004, that number had grown to 82. Over the same period, capital under management in CDVC funds grew from $400 million to $870 million, according to the Community Development Venture Capital Association, based in New York.

Association President Kerwin Tesdell estimates that about 40 funds are open to individual investors who qualify. Yet because these investments are inherently risky, regulations require most funds to admit only accredited investors. And unlike mutual funds traded on a stock exchange, these funds normally raise cash only for a limited time and then stop taking new investment.

Still, opportunities are emerging in this sector for smaller-scale investors who need stability and don't meet all the usual criteria. And even for those who would rather sit back and watch, the arena has much to teach about the dynamics of ethical investing.


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