“It’s about your connection with your money — being proud that it is creating a better life for someone, while also generating a return for you.”
ESG. SRI. DFI. Acronyms that all point to one key investing trend: people are starting to care about the long-term effect of their dollars. Part of that trend includes impact investing, which emerged in 2007 as a way to drive capital towards social and environmental causes while still generating a financial return. The Global Impact Investing Network reported that in 2018, over 1,340 organizations managed $502B (USD) in impact investing assets across the globe!
Yuliya Tarasava is one of the individuals driving that trend. As the COO of CNote, she ensures that money from individual investors flows into small businesses and local communities, to minorities and individuals who may not otherwise have access to capital. And investors get a stable non-market-correlated return, while knowing that their dollars are making a difference.
CNote has many stories of impact, but Yuliya’s story is unique in and of itself. Originally hailing from Belarus, her post-Soviet upbringing and early experiences in America shaped her perspective on the power of money, and how to harness it for good.
I loved hearing the story of how you got into impact investing. Can you tell us about that journey?
It starts with the fact that I’m an immigrant myself, because it helps set the stage. I was born in the Soviet Union, in Belarus, and moved to the United States almost 15 years ago. Everything that I had learned about the United States when I lived in Belarus was that America was beautiful and aspirational and inspiring in many ways. As you might know, foreigners talk about the United States as a rich country, a developed country, a free country – and all the wonderful things associated with that. But when I moved here to study finance, I experienced a very big culture shock. I worked as a student and didn’t have a lot of money and I found myself living in quite poor neighborhoods. I realized that not everyone had the opportunity that you would imagine, that you see in the movies and the news. That was a good reality check for me.
So when I went to school and started working on Wall Street, I kept thinking of where I started and what I experienced right after I moved to the United States, about where I came from and my background being born and raised in the Soviet Union. My upbringing and the experience of my first few years living here set the stage for what I do right now and what I hope to do for a long time. My view, which might be unique, is that, finance is about leveraging our power and the power of our systems and governments to create an equal opportunity environment for everyone, and to create a society as just and as equal as possible.
How did your experience of coming to the United States specifically influence your perspective on finance? How did it transform?
I studied economics in Belarus and not surprisingly, everything we learned was based on the opinions of American economists because they were considered the “holy grail” on the economy and free markets. For me, I always looked at finance as a tool for economic development and one of the things I learned quickly was that it was not good for me to stay in Belarus and study finance because we were just getting out of communism and socialism and moving into a new environment. I always had this desire to study finance in a country that would live and breathe it every day. But again, finance was for me not just a way to get rich and wealthy, but a way to contribute to economic development of a country, to contribute to the economic freedom of society.
So I came here, and I experienced poverty and found myself living in neighborhoods that were honestly redlined by banks and lacked access to financial services. I had the chance to live in poor areas and see both worlds – people in my neighborhood struggling to find jobs and a higher crime rate, and then crossing just one town over and being in a safer area with better schools. And when I started working in the financial world, I quickly realized that finance didn’t serve people in the way I had hoped it would. It was really focused on building wealth for the rich instead of the 98% of us who need finance to build our futures, raise our kids in a safe environment, and sustain ourselves with a certain level of financial freedom.
So what was the inspiration for starting CNote?
That thought of using finance as a tool for economic development never really left me. I talk about myself being stuck in the corporate world for quite awhile (I was on Wall Street for 10 years) and eventually the desire to figure out the better side of finance, and what I could do with my skills and experience, woke me up to the idea that I wanted to go beyond traditional finance and see how we could use finance for good. That’s when I started working with an impact investment fund. I moved and worked in Kenya, which was really interesting because even though the United States has a strong financial system, it’s very interesting to observe that in emerging markets, they don’t have the “luggage” of finance that we have to carry in the U.S. They can start from scratch and build financial systems and products from a very human-centric approach, in a way that really serves people. That was a very refreshing experience for me. When I worked on Wall Street, I was a product developer creating new financial products. And very often, creating new products was a result of watching market trends and Bloomberg and trying to figure out what was sellable, as opposed to thinking about the person who was going to be using the product and how it would help to alleviate poverty or send kids to school, or how it would connect to their life.
What is CNote’s mission?
CNote was born out of passion and frustration. Passion for a better financial world and a better relationship between people and their money, and at the same time frustration with the status quo. Through my experience in Kenya I saw how finance could really serve people, and I spent time reflecting on how the lack of financial services in certain communities contributes to economic inequality. So the thought behind CNote was to close that wealth gap using financial innovation and focus on redesigning finance for the individuals we’ve left behind.
From an investor perspective, we want to show people that you don’t have to be intimidated by money, you can be proud of your money, and you can talk about the good that it’s doing in your community. It’s not about complexity or greed – it’s about your connection with your money and being proud that it is creating a better life for someone while also generating a return for you.
And for the borrower who wants to grow a business to create wealth, but who doesn’t know who to borrow money from or where to start – it's about ensuring that that person actually gets capital, especially with all the biases that exist and the discrimination we see in the traditional financial world.
And if you didn’t know, CNote means $100 in urban slang, and the idea is that even $100 can make a difference. We have a $1 minimum to invest and we really want people to know that they can take control of their own power and realizing that they can make an impact.
How does CNote’s investment model work?
We want everyone to have an opportunity to invest in local communities, aligned with their values, on issues that they care about. You might have a bank account, and you know that the money isn’t actually sitting in the vault. But do you know what your money is doing? Do you know how the bank is deploying your money while they’re paying you a minimal return? And on the investment side, we often don’t know where to start or how to start, or there are trust issues with the financial system. So we end up leaving money in that bank account and don’t really ask what’s happening with it. At CNote, we want you to know what your money is doing, and that it can be doing amazing work in local communities while also creating a financial return.
If you open a CNote account, we’ll aggregate your money with other funds and then deploy it to local communities through our community-lender partners on the ground. The partners ensure that the money is used in communities that need it most. I often share the example of disaster relief and recovery. When something like a hurricane or flood happens, by the time donations arrive or the government can mobilize forces, by the time the money actually gets there, it can be too late. But because we have those partners on the ground, they can act quickly and the money goes straight towards recovery.
That’s an extreme example, but what happens on a day-to-day basis is that the money that’s deployed really serves those who may have a difficult time getting access to capital from a traditional institution. Just 30 years ago, women had to have a male cosigner to get a business loan. That’s not the case now, but bias still exists and even today, only 1 in 27 dollars goes towards women-led businesses. So the gap is still there, and while it’s shown that women-led businesses generate revenue at 1.5 the speed than those of men, they don’t grow as fast in part because of their access to capital. And then there’s a huge problem against people of color. Those statistics are even more disheartening, it’s extremely difficult for people of color to get access to business loans and mortgages. There’s a study that says that by 2053, if nothing changes, the median net worth of African American families is going to be $0. As we think about our society becoming more and more diverse, the discrepancy is growing. Therefore, we really need to focus on creating alternative assets and capital sources for people of color, and we have another area for immigrants. We know that the talent of immigrants helped build this country, and yet for refugees and immigrants it’s hard for them to get capital without a credit score or the financial foundation that Americans have. CNote’s focus is to show you that your money can actually do something great by helping the communities in your backyard and around the country, while also generating a competitive financial return.
Currently CNote investments generate a 2.75% return and in 2018, you created over 1,400 job and invested in 286 businesses. How do you strike the balance of healthy returns with far-reaching impact?
Very often in impact investing, critics claim that it’s impossible to get good returns and have a positive impact. You have to sacrifice, it’s either/or, and the competitive return is not possible. We have a strong opinion about that and we suggest that both returns and impact are possible out of one investment. What we’ve shown is that we can mitigate risk and deliver a stable return, and also generate jobs and support businesses. It’s nice to see the numbers, but I love to share the macro impact and change in those communities. We talk about our partners being involved at the community level — engaging people, restructuring the community to be more sustainable and resistant, diversifying community industries – that’s the story we want to tell. For us it’s the bigger picture, to show you that your money can contribute to rejuvenation and restoration of a community and that it can create a new life in an area that might have been languishing.
Do you have any examples of borrower stories?
Some of the most beautiful stories have a connection between not just creating a business, but creating something that has a ripple effect. Cinde Dolphin is a great example, she’s a four-time cancer survivor so she spent a lot of time in the hospital going through difficult procedures. And as a result of that, she developed a medical device – a pouch, really – that a patient can carry to collect liquid byproducts of certain procedures. It’s very simple, but she said that everything she had to use herself was uncomfortable and ugly and impractical. So she designed something for herself and her own use, but then she realized that other people might want to use something similar, so she ultimately started a business. So she now has this company that manufacturers those pouches, and she has contracts with hospitals and clinics around the country. But what’s most interesting is that she went the extra mile – she found a group of women in Tanzania and partnered with them to create unique designs so that people wouldn’t be ashamed by these medical pouches. And those women in Tanzania are now employed and providing for their families.
We have some 80 million millennials who want to express their values through their investments. What is the future of impact investing?
At the end of the day, impact investing is still investing. One hurdle I’ve seen is that people don’t know where to start, despite good intentions. Especially millennials, they want to buy fair trade coffee and products that are child-labor free and organic. We already go the extra mile to restructure our day-to-day purchasing decisions to align with our values and be more socially conscious. And yet we still leave a lot of power in someone else’s hands, especially when it comes to money decisions. You’re buying coffee for $5, but you have $100 in your bank account and you don’t think it’s enough to invest. Or you’re waiting for a certain wealth or debt level to do any investing. We spend a lot of time talking to young people to help them understand that they don’t have to wait to make a difference. Even the name “NeedleMover” is a good example – on my own I can’t move the needle, but together we can move mountains. $1 adds up if everyone contributes.
How would you say that you move the needle?
When me and my co-founder (Catherine Berman) started our company, we really focused on democratizing investing and to make sure you don’t have an excuse not to try impact investing. Even with $1, you can make a difference. We actually went through quite a lengthy process with financial regulators to secure that minimum and accessibility to everyone. That’s what I’m especially proud of. Even though that effort was a big undertaking, we opened up doors for companies after us and paved the path for them. So our needle moving is in the fact that now impact investing is possible with just $1.
Yuliya hosts a decade of experience on Wall Street and has developed financial products on 3 continents. She started her career designing investment solutions for the global asset management firm AMG Funds, and later joined the wealth management boutique Summit Rock Advisors to develop the firm’s risk management framework. Over the years, Yuliya has maintained her passion for demystifying finance, including creating an investment education portal in Russia and advising non-profits and startups around the world.