Investing with Purpose: Sustainable Investing Strategies

Aura Financial LLC is an example of community development alongside a financial return and a mission-driven financial institution dedicated to providing access to credit to individuals underserved by traditional financing sources.

Consumer-friendly products, such as the Aura loans, can provide the opportunity to build credit and improve financial capability.

Case Study: Aura Financial LLC (Aura) example of community development alongside a financial return

Strategy Approach: Integrating

Asset Manager: Community Capital Management

Security Type: Asset-backed security

 

Background

Founded in 2012 and headquartered in San Francisco, Aura Financial LLC (Aura) provides access to credit to individuals underserved by traditional financing sources. Aura uses technology to power lending at 1,200 locations across 100 businesses throughout California, Texas, Illinois and Arizona.

Aura, formerly known as Insikt, was certified by the U.S. Treasury Department in April 2018 as a Community Development Financial Institution (CDFI). CDFI’s are mission-driven financial institutions that are dedicated to providing financial services to meet the needs of economically disadvantaged individuals within underserved communities.

In order to become a certified CDFI, the financial institution must:

  • Have a primary mission of promoting community development;
  • Provide financial products and services;
  • Serve one or more defined low-income target markets;
  • Maintain accountability to the community it serves;
  • And be a legal non-governmental entity.

In recognition of Aura’s product and mission to improve the lives and financial health of low-income households, Aura has received this certification.

Manager Intervention

Community Capital Management (CCM) and its CRA Qualified Investment Fund (CRANX) invested in the Aura Financial LLC, Series 2019-3 notes represent 14,514 customer-friendly small consumer loans to borrowers with limited or no credit history.

Consumer-friendly products, such as the Aura loans, can provide the opportunity to build credit and improve financial capability. Sixty-five percent (65%) of the loans were made to borrowers in California with an average borrower income of $37,250 or 45.3% of the statewide area median income; 25% of the loans were made to borrowers in Texas with an average borrower income of $33,527 or 47.1% of the statewide area median income; 7% of the loans were made to borrowers in Illinois with an average borrower income of $31,240 or 38.2% of the statewide area median income; and 3% of the loans were made to borrowers in Arizona with an average borrower income of $33,663 or 49.6% of the statewide area median income.

Outcome

Since 2014, Aura has helped over 350,000 customers saving over $308 million in potential fees by borrowing money from the company instead of choosing other alternatives typically available to people with limited credit history. In addition to offering loans at affordable rates, Aura helps customers build and repair their credit scores and creates a path to the financial mainstream. Even for borrowers with no credit history, after three successful loans a customer can build to a FICO score of 660. Additionally, 67% of customers with two loans increase their credit score by 312 points and 78% of customers with three loans increase their credit score by 410 points

The average Aura customer has an annual gross income of $34,300 and 34% of customers have no credit score. Twenty percent of customers are unbanked. The average FICO credit score for scorable customers is 627. The median age is 40 and 91% of customers rent their homes. The top reason customers obtain a loan with Aura is to build a credit history (39% of loans), followed by the necessity of paying bills (24%) and to purchase or repair a car (13%).

  • Aligning a client’s values with their investments to minimize exposure to companies or industries whose business practices conflict with their personal convictions.
  • Integrating ESG factors into investment decisions to identify and emphasize investments in companies or industries with positive ESG practices or that solve specific ESG challenges; and to limit exposure to those with poor ESG performance.
  • Engaging with portfolio companies and fund managers to encourage improvements in ESG performance and mitigate risks related to ESG, and improve financial systems.

Sustainable Investing

More than ever, people care about how and where their money is invested. The growth in sustainable investing has been remarkable..

Sustainability Report 2020

LPL delivered another year of solid business and financial growth, driven by a continued focus on our strategic priorities.

Community Involvement

At LPL, we support initiatives and programs focused on increasing access to career pathways for under-resourced teens and young adults.


IMPORTANT DISCLOSURES

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

This Research material was prepared by LPL Financial, LLC.

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