Local economies

RSF in the Wall Street Journal

August 20, 2014

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Dear Friends,

The RSF Social Investment Fund was recommended in the Wall Street Journal for the first time last Saturday, August 16, in an article titled “The Payoffs of Investing Locally.”

We’re thrilled to get such prominent coverage, and I have one brief clarification:

In the article, the journalist wrote, “returns are often lower than other fixed-income investments.” I want to address this statement.

Working directly with our investors over the past seven years, I have observed two primary reasons why they choose the RSF Social Investment Fund:

  1. They want to support inspiring social entrepreneurs.
  2. They want a low-volatility, liquid investment that has minimal downside risk.

Regarding #1, we have a track record of finding great social enterprises to support, often before a commercial bank will step in.

Regarding #2, we have a 100% repayment rate (principal + interest) to our investors since RSF was founded in 1984.

The investment is structured as a 90-day note, similar to a bank certificate-of-deposit (CD). Because of the liquidity and the low-risk profile, investors should consider the RSF Social Investment Fund as a part of their cash/savings asset allocation, not their fixed-income allocation. This is the critical point.

The Wall Street Journal writer correctly observes that the average return on our 90-day note over the past year has been 0.53%. This is two times the average financial return of bank CD’s with similar duration, according to Bankrate.com.

And with a big-bank CD, you have no idea where your money is being invested. It may be going to support small-business loans in your community, or it may be going to support clear-cutting of rainforests in Malaysia through the bank’s proprietary trading operations.

Nowhere else but with RSF can you find a bank CD-like investment (in terms of high-liquidity and low-risk) in a diversified direct-loan portfolio of over 90 phenomenal social enterprises, with an institution that has been a pioneer and a leader in social finance for over 30 years, with a minimum investment of $1,000. You know exactly which social enterprises receive loans from us (see a list of all our borrowers here). And the financial returns are actually superior to any comparable-term savings account or CD at a bank!

Thank you for your attention and interest. Again, we certainly appreciate the great story in the Wall Street Journal.

All the best,

Don Shaffer

President & CEO

Seed Fund Grantee Highlight: Sustainable Economies Law Center

February 25, 2014

by Alex Haber

Building the next economy will take work in many sectors. RSF focuses on work with investors, donors, and entrepreneurs to build the direct, transparent relationships necessary to make economic renewal a reality. But as all these groups move their money and conduct their business with deep values, ossified legal structures will have to adapt and become more flexible to meet the needs of new economic relationships.

Sustainable Economies Law Center 1RSF Seed Fund grantee, Sustainable Economies Law Center (SELC), works precisely at this intersection. SELC provides essential legal tools – education, research, advice, and advocacy – to support a transition to local, resilient economies. It focuses in many areas, including cooperatives, community-owned enterprises, co-housing, urban agriculture, barter, and local currencies.

Last year, SELC received a grant from the Seed Fund to support a new project that helps farmers interested in sustaining and growing their businesses through community-based or crowd-sourced financing methods. These methods allow local, small-scale investors to become financial stakeholders in an enterprise, and allow enterprises to seek capital from friends, family, and community members instead of high net-worth individuals or banks. With RSF’s funding, SELC was able to run an outreach campaign and application process for this new service to assess interest among farmers, and the response was very strong.

South Central Farmers 1One of the most promising candidates was the South Central Farmers’ Cooperative (SCF), a worker-owned farm in California’s Central Valley. The coop grew around South Central Farm, a former fourteen-acre urban farm in South Central Los Angeles. After ten years of cultivating the land and building the community around it, the farmers were evicted in 2004 when the plot was slated for development. This eviction led to significant protests and civil disobedience, as well as an Academy Award nominated documentary, The Garden.

Since then, the South Central Farmers have been cultivating land in the Central Valley, and are currently looking to expand and help start other worker-owned farms. In order to do this, and to avoid the threat of eviction, SCF is looking to form a non-profit organization that could purchase land it could lease to worker-owned agricultural cooperatives, and to finance these land purchases through a public offering, so small investors, potentially from all over the state, could invest in these farms.

South Central Farmers 3

SELC and SCF hope to continue working together on this project as it evolves, and SELC is looking for funding to continue the work and develop a how-to guide for other farms interested in community-based and crowd-sourced funding.

Click here to learn more about how you can get involved with the Seed Fund to support great organizations like Sustainable Economies Law Center.

Alex Haber is Program Manager of Philanthropic Services

Community Foundations: What It Takes to Become Dynamic Hubs of Local Capital

February 24, 2014

by Don Shaffer

Community foundations—with their deep local ties, significant assets, and community benefit missions—are ideally positioned to play a leading role in solving our communities’ most profound and difficult challenges. Yet many are stuck in a pattern of disbursing only a small percentage of their assets in grants and investing the rest in traditional portfolios that don’t advance (and may even undermine) their mission.

What is preventing these anchor institutions from realizing their potential? What exactly is that potential, and how can community foundations shift to an impact investment strategy that really makes a difference to community success and resilience?

RSF is taking a hard look at these questions. We recently brought together senior executives from 24 of the most innovative community foundations in the U.S. and Canada, along with RSF advisors and other impact investment experts, for “A Field-building Collaborative: Changing the Game through Local Impact Investing,” a conference looking at barriers to place-based investing and how to overcome them, lessons learned, and drivers of change.

The imperative of impact investing

We were pleased that the Jan. 29–31 event, co-hosted with the Arizona Community Foundation in Phoenix, attracted so many community foundation leaders from across the country, representing rural as well as urban communities and holding assets totaling more than $5.5 billion. But we weren’t surprised: a powerful combination of generational change and aspiration is motivating community foundations to explore local impact investment strategies. Foundation leaders are searching for ways to stay relevant to the next generation of donors, who tend to take a hands-on approach and often are entrepreneurs who made their money by thinking big and taking risks. These leaders also aspire to make their institutions drivers of local economic health. They see the opportunity to become dynamic hubs of community capital, deploying a full range of low-interest loans, loan guarantees, convertible notes, and other forms of investment funding to social enterprises.

Kelly Ryan is on her way to doing that in central Wisconsin as CEO of the Incourage Community Foundation. She told the story of how her community lost 40 percent of its jobs overnight when their major employer moved overseas. The foundation rallied, changing its focus to creating jobs and supporting local businesses, essentially saying, “We’re going to be the institution that brings everyone out of the ashes.”

All community foundations have that opportunity right now. The questions we started exploring with “Changing the Game” are, is it possible to make that happen before reaching the tipping point of a massive crisis? And if so, how?

Identifying roadblocks

The motivations and opportunities to invest for local impact are powerful—but so are the countervailing forces. Foundation leaders who take steps toward changing their institution’s investment practices confront a thicket of challenges. Two sets of issues stood out in the presentations and discussions.

Culture. The cultural assumptions of boards, investment committees, investment advisors and even staffs can present significant roadblocks. RSF advisor John Fullerton captured the problem: the people serving on investment committees often have spent their careers living and breathing current models of portfolio theory and investment management. They’re focused on fiduciary responsibility, and in their minds that means making sure the money makes more money—not ensuring that investment has a positive impact on the community. It’s hard to convince a board member who spent their career on Wall Street that financial return is not the number one goal.

Capacity constraints. Most community foundations don’t have the staff expertise to evaluate and manage direct investment in local enterprises, or to develop a cohesive local investment strategy. Even hiring appropriate consultants can be a challenge. Impact investing is relatively new, so the pool of experts is not yet deep. Another challenge is tension between programming and investment—the program staff may feel that impact investments are invading their turf. In addition, the lack of history with direct investment means the opportunities may not be obvious to foundation staff.

Creating space for impact investing to grow

Discussions at the event revealed a big gap between the desire many have to pursue impact investing (“Why wouldn’t we want to do this?” was a commonly expressed sentiment) and the knowledge they need to actually do it. RSF advisors and foundation leaders who’ve started down the path shared suggestions for moving forward.

Work with the board to change investment culture. Private foundations are often created with one large gift that’s expected to last; they are risk-averse and focused on returns because they want to ensure perpetuity. Community foundations, however, are public institutions whose growth and success rest on the number of donors they can continue to attract over time; they should be free to focus on demonstrating their relevance to the community and attracting the next generation of donors. There’s no structural reason for them to be risk-averse and returns-focused—the fact that many are is often a result of board culture.

Brian Byrnes of Santa Fe Community Foundation encountered tremendous board resistance to a shift in investment strategy; to counter that he took the board through an analysis that revealed their level of investment in areas contrary to their mission. Byrnes said the exercise was a powerful force in opening minds. Kelly Ryan reconstituted her board at Incourage so that they could implement a community investment strategy as a central feature of their mission.

Redirect investment expenses. One of the most eye-opening moments for many participants was RSF advisor Leslie Christian’s “do the math” challenge. “How many of you are experiencing a roadblock in that your boards think impact investing is too expensive?” she asked. Hands shot up all over the room. She then did the math: a $100 million foundation paying a typical 0.8 percent fee to its investment advisor is spending $800,000 a year to maintain its portfolio. What if the foundation fired the investment manager and instead put all that money into a Vanguard index fund, which historically has long-term returns as good as or better than investment managers? With a typical mutual fund fee of 0.08 percent, they’d free up $720,000 they could use to hire impact investment experts.

Restructure your organization. Dana Pancrazi of the FB Heron Foundation put forward a structural solution to internal turf battles and mission conflicts: the foundation dissolved its grantmaking and investment teams, replacing them with an operations team that provides administration and support, and a capital deployment team that handles grants and investments—and treats both as 100 percent mission driven.

Pioneers wanted

A few foundations have already made great progress on local impact investing, but it hasn’t been easy—and it won’t be for the next wave of pioneers, either. In addition to inspiring stories, we also heard “it’s not all rainbows and unicorns.” At RSF, we know how hard this is, having spent the last 30 years building up the expertise and insight to invest for impact effectively. There will be failed investments and difficult expectation setting. But as entrepreneurs know, failures teach the lessons that lead to ultimate success. Why not give the non-profit sector the same opportunity to use investments to try out innovative solutions to our communities’ most pressing problems?

We’re hoping to spark this change by inviting the most committed community foundation leaders to join a community of practice that will go deeper into what it takes in terms of personal leadership to shift to impact investing. The group will provide peer support and share everything from in-progress case studies to best practices to credit memos.

We believe the opportunity for change is profound. If a relative handful of community foundations reinvented themselves right now, they could truly change the game for communities across the country.

Don Shaffer is President & CEO at RSF Social Finance

Community foundations conference attendees.

Community foundations conference attendees.

2013 BALLE Conference Recap

July 23, 2013

BALLE_Logo_RGB

by Catherine Covington

 

It’s a beautiful morning here outside my sun-porch office at RSF and my spirits are high. I am reminded of the level my spirits reached during BALLE’s 11th annual conference in Buffalo, NY, last month. I came back so inspired by my fellow attendees, the projects they are working on, and the action they are taking in their communities.  RSF has been a long-time sponsor of BALLE’s annual conference. BALLE’s work, which is focused on creating real prosperity by connecting leaders, spreading solutions and driving investment toward local economies, is very much in line with our mission and the kind of collaboration we seek to support.

A theme that was continually referenced throughout the conference was a focus on shifting from an “egosystem to an ecosystem”, from a system focused on “me” to a system focused on “we”.  This theme resonated with me and the image of what such a community would look like continued to develop in my mind as the conference progressed.  Janine Benyus, Founder of Biomimicry 3.8 Institute, gave an incredible presentation on not what we can extract from organisms and their ecosystems, but on what we can learn from them.  She highlighted sustainable solutions that can be found by emulating nature’s time-tested patterns and strategies and left the audience awestruck with her visual images and analogies.  A similar presentation by Janine, given at a TED conference, can be found here.

What would our economy look like if everyone knew their neighbor, lived with less and wasted almost nothing, and could invest money in their local community?  Well, one aspect of community health that is important to all of us, the production of and access to healthy food, could be addressed in part if local investment models such as the Farmer Reserve Fund were replicated in other communities.  Tim Crosby of Slow Money Northwest shared the nuts of bolts of how the fund was established during a panel we both participated on called “Rethinking Investment for the New Economy”.   The Fund was made possible by a partnership between Slow Money Northwest, RSF grantee and borrower Viva Farms and North Coast Credit Union (NCCU), which serves Skagit and Whatcom counties in Washington.  Much more detail can be found on Slow Money Northwest’s website, but in short, the Fund is able to provide a pool of capital to help new farm businesses, which often don’t have a credit history, have their best shot at being successful.  The innovative structure of the Fund builds on NCCU’s internal system of risk management and rigorous due diligence, reduces the risk of the loans by utilizing Viva Farm’s expertise to provide technical assistance to the borrowers, and enhances the existing loan loss reserve balance by leveraging small foundation grants and gifts from individuals.

I highly encourage you to check out some of the video clips from the conference. In particular, there is an inspiring presentation by Nikki Henderson, Executive Director of People’s Grocery, a long-time RSF grantee (the clip begins 1 hour, 56 minutes into the BALLE Friday Morning Session video).  She never ceases to amaze me with her ability to engage with the audience so naturally while delivering a powerful message in a most memorable manner!  Her message focuses on moving from breakdowns to breakthroughs, the difference between intention and impact, and responsibility without shame.  My favorite part is the how she finishes out her talk with an emphasis on how she sees us being able to bring all of work together to “congeal” through celebration, culture, and rhythm (she likes to dance!).

Click here to view more conference videos

Catherine Covington is Senior Associate, Philanthropic Services at RSF Social Finance.

Good Morning, Beautiful Business

June 26, 2013

This essay was originally published in the Spring 2013 RSF Quarterly.

Judy Wicks Headshotby Judy Wicks

Not long after I opened the White Dog Cafe in Philadelphia in 1983, I hung a sign in my bedroom closet in my home above the shop – right where I would see it each morning. “Good morning, beautiful business,” it read, reminding me daily of just how beautiful business can be when we put our creativity, care, and energy into producing a product or service that addresses our community needs. I would often think of my own business, and how the farmers were already out in the fields harvesting fresh organic fruits and vegetables to bring into the restaurant that day. Business, I learned, is about relationships—relationships with everyone we buy from, sell to, and work with, and our relationship with Earth itself. My business was the way I expressed my love of life, and that’s what made it a thing of beauty.

My new memoir Good Morning, Beautiful Business: the Unexpected Journey of an Activist Entrepreneur and Local Economy Pioneer follows my evolution from a little girl who rebelled against playing with dolls and learning to cook, to a businesswoman who fully embraced her feminine energy to help build a new economy—one based on caring and sharing.  A key turning point in my evolution came when I moved from being a competitive businessperson to a cooperative one.

This story begins when I learned about the cruel and unhealthy treatment of pigs in the industrial system, where sows are crammed into small crates in windowless factories for their entire lives.  I was aghast that the pork I was serving at the White Dog must come from this barbaric system, as most of the pork in our country does.  The next day, I went into the kitchen and announced, “Take all the pork off the menu. Take off the bacon, the ham, and the pork chops. We cannot serve pork again until we find a humane source.” Our chef asked farmer Glenn Brendle, who was bringing in free-range chicken and eggs, if he knew a place that raised pigs in the traditional way.  It wasn’t long before he was bringing us two pigs a week.

Next I discovered the plight of the cow—herbivores confined in barns and crowded feedlots and fed subsidized grain. So we found a local source for grass-fed beef and dairy. After much work on our chef’s part to find humane sources for all our animal products, I looked at our menus and thought, At last! We’ve done it! All of our meat, poultry, eggs, milk, yogurt, and cheese come from farmers who treat animals kindly. No product comes from the industrial system of factory farms. And we were the only restaurant in town that could make this claim. So this was our market niche. Our competitive advantage!

Then my transformational moment came. I said to myself: Judy, if you really do care about the pigs and other farm animals that are treated so cruelly; the small farmers who are being driven out of business by factory farms; the environment that’s being polluted by the concentration of waste and unhealthy practices; the workers in these ghastly slaughterhouses and factories; the rural communities that are being destroyed; and the consumers who eat meat that’s full of antibiotics and hormones, then rather than keep this as your competitive advantage, you should share your knowledge with your competitors.

Up until this point I had always felt that my highest calling was to model socially responsible practices within my company, but it was no longer enough. After all, there is no such thing as one sustainable business, no matter how great our practices are, we can only be a part of a sustainable system. I had to move from a competitive mentality to one of cooperation in order to build that system—an entire local food system based on the values I upheld.

I was ready to roll. We needed to expand the small network of local farmers supplying the White Dog to a much larger network of farmers supplying as many restaurants and retail markets as possible. I asked farmer Glenn if he would like to expand his business.

“Yes,” he replied.
“What’s holding you back?”
“I need thirty thousand dollars to buy a refrigerated truck so I can deliver to more restaurants.” I loaned Glenn the thirty thousand dollars, and he bought the truck.

It takes a lot of capital to build a new economy. The type of low-interest loan I made to farmer Glenn for his refrigerated delivery truck is needed across the country. Yet most people, even those who want to bring social change and see the need for a more nurturing economy, invest their savings in the stock market where it perpetuates the old exploitive economy. My own experience in learning how to invest differently began in 1999 when I suddenly became a stockholder. After my mother passed away, I inherited a stock portfolio comprised of holdings first purchased by my grandfather and kept in the family for over fifty years. I wasn’t quite sure what to do with it all.

At first I hired a broker to trade my stock for what was considered “socially responsible investing,” a concept where stock is “screened” to eliminate companies involved with such things as weapons, tobacco, and animal testing. But when I looked at my new portfolio, I was shocked to see Wal-Mart, a company known to destroy local economies and underpay its workers. How could I support such a company—even if it had passed through the screens created by brokers for socially responsible investing?

That’s when I realized that I did not want to participate in the stock market at all. These are single-bottom-line companies, who by law are directed toward maximizing profit for stockholders above the interest of other people and our planet. Instead, I wanted to invest in companies that passed through a different screen, one that could filter out all companies who are not independently owned and triple bottom line.

So in 2000 I sold all my stock. That’s when I first became an investor in RSF Social Finance and a local investment vehicle called The Reinvestment Fund (TRF), where I knew my money would be used to build the economy I envisioned. To the surprise of my investment-savvy friends, over the long term my investments at RSF and TRF outperformed their stock market returns.

When I discovered that the wind turbines bringing renewable electricity to Philadelphia were capitalized by TRF, I coined the term living return. The return on my investment was not only paid in dollars, but by the benefit of living in a healthier community. I began receiving a living return, and with it the happiness and satisfaction of knowing where my money was—doing good right in my community.

Naturally, I also saw living returns from direct investment in my supply chain. My loan to farmer Glenn improved my menu and supported local sustainable farming.  I made another supply chain investment in my coffee source helping Zapatista revolutionaries in Mexico export organic fair trade coffee.  Previously, the growers were forced to sell to local representatives of giant coffee corporations for such a low price that it kept them in poverty. After learning of the violence and oppression waged against the indigenous people of Mexico, I organized a group of coffee importers and investors to assist the pro-democracy struggle by developing direct fair trade routes between an indigenous cooperative and two coffee importers in the U.S.  A fellow investor and I each made a $20,000 low interest loan to the two U.S. fair trade importers who then pre-paid the cooperative so they had enough money to buy the coffee from their members.  Once the coffee was shipped to the importer and sold to coffee roasters around the country, my loan was repaid. After the second year’s loan, the indigenous cooperative had enough capital to pay their members for their coffee without a pre-payment from the importers.  Again the pay-off for me for investing in my supply chain was not only financial but in having access to organic fair-trade coffee grown by people I knew and trusted.  And, importantly, it was also an experience that helped me envision a new global economy—one comprised of a network of local economies self-reliant in basic needs and connected by fair trade.

Building a new economy, I came to realize, rests on a simple quality: our capacity to care—followed by our willingness to do what is necessary to defend and nurture what it is that we truly care about. Change begins in the heart of the entrepreneur. And for that matter, the hearts of the investor and consumer as well. It’s the power of love and compassion that can bring transformative change and build an economy that is prosperous and strong, yet one where loving relationships matter more than profits.

Judy Wicks is an entrepreneur, author, speaker, and mentor working to build a more compassionate, environmentally sustainable, and locally based economy. In working toward this vision she founded Fair Food, the Sustainable Business Network of Greater Philadelphia, and co-founded the Business Alliance for Local Living Economies, BALLE.  As an entrepreneur, Judy is best known for Philadelphia’s landmark White Dog Cafe, which gained national recognition for community engagement, environmental stewardship, and responsible business practices. With Chelsea Green Publishing, Judy recently published Good Morning, Beautiful Business (from which this essay was adapted). For more information or to purchase a copy of the book, please visit www.judywicks.com.

An Innovative Approach to Financing

June 7, 2013

by Kate Danaher

 

Normally, when a values-driven non-profit social enterprise needs a large influx of capital to purchase property and expand its operations, it has three options: wait to raise all of the necessary funds from donors and foundations; approach a conventional lender, often a trying and unsuccessful process; or, seek funding from both sources, a time-consuming and also challenging process.

Common Market logoLast year, when Common Market Philadelphia, needed to expand their operations, RSF was able to assist them with an innovative combination of both debt financing and philanthropic support. This unique approach provided Common Market with the financing they needed in just a matter of months, financing they could not have received from a conventional lender.

In December of 2012, RSF Social Finance provided a $1 million mortgage loan to enable Common Market Philadelphia to purchase a 73,000 square-foot facility, now called the “Philly Good Food Lab.” The RSF lending team and Common Market’s founders worked closely together to secure the loan. Considering Common Market’s size, making a loan of this magnitude required an innovative approach including a combination of grants, guarantees, and debt financing—what we call an integrated capital approach.

When Tatiana Garcia-Granados and her husband, Haile Johnston, moved to North Philadelphia’s Strawberry Mansion neighborhood in 2002, they found themselves in a fresh-food desert. The couple started working to bring a farmers market to the neighborhood and discovered a much bigger problem. “It wasn’t just neighborhoods like ours that didn’t have a link to the farmers right around us; it was also hospitals, universities, and schools,” says Garcia-Granados. Working with other local farm and food advocates, including Bob Pierson of Farm to City, they created Common Market in 2008 to forge a distribution link between threatened farms and fresh food-deprived urban communities.

Since then, the venture has grown rapidly. In 2012, Common Market supplied over 150 customers—institutions such as schools, hospitals, retailers, restaurants, and buying clubs—with produce, dairy, and meat from about 75 sustainably run regional farms.

And that market is only continuing to flourish. Last year, Common Market’s limited facilities became the greatest bottleneck to future growth. As they expanded their product line, and more institutions requested their services, Common Market had to turn down sales opportunities due to lack of storage and packaging capacity. The path became clear. Common Market had to move to a larger space and they needed to do it quickly.

This growth in business has also driven growth in the diversity of the community ready to stand behind Common Market’s success. To secure the loan, Common Market called upon well-established relationships with organizations such as the W. K. Kellogg Foundation, the Claneil Foundation, and the 11th Hour Project to procure over $350,000 in pledge contributions in conjunction with a $100,000 RSF Donor Advised Fund grant. Additionally, the Common Market community came together to make $35,000 in individual guarantees through the RSF Social Investment Fund.

This collective effort accomplished two very important goals. From a financial perspective, it made the loan possible. The grant funding strengthened the credit and made for a sound financial transaction. Equally important, at a social level, the deal built and reinforced important long-term relationships.

“Trading in a modest rent bill for a million dollar mortgage is a huge leap,” says Ted Levinson, RSF’s Director of Lending.  “The guarantee community and the multi-year commitments from foundations convinced us that Common Market was up to the task.”

RSF’s relationship with Common Market actually began in 2010. At that time Common Market had ready suppliers and buyers; the big challenge was cash flow—institutions are used to paying in 60-100 days but supporting farmers requires a shorter payment cycle, typically 15-30 days.

“As we grew we realized we were facing a huge cash flow gap. That’s where RSF came in,” says Garcia-Granados.

RSF provided a $130,000 line of credit through the RSF PRI Fund.  At the time, the Program Related Investing Fund (PRI) was a perfect match by providing low-interest loans to social enterprises not quite ready for long-term debt financing. A year later, as the organization grew its revenue and increased its stability, RSF was able to increase the line of credit to as much as $350,000 through the Social Enterprise Lending program. To date, RSF has extended this credit line into a third year.

While the demand for Common Market’s mission-driven services is strong, the capital to support their efforts was hard to come by. This is a familiar problem for social enterprises, particularly those working for a more just and sustainable food system. Oftentimes, whether for-or non-profit, organizations acting as aggregators and distributors of sustainable, local food are new with limited revenue and access to capital.

Conventional lenders and equity investors rarely take the slow growth approach to helping these businesses succeed. These companies often get their start with personal funds and the support of community, friends, and family. But, when it comes to really making a larger impact, scrappy bootstrap methods only go so far. This is where social finance comes in. Organizations need substantial financial support in order to scale. And they need it from foundations and lending institutions who understand the value of positive impacts in addition to financial return.

At RSF, we pride ourselves on supporting game-changing social innovators, like Tatiana and Haile, who don’t meet the standard expectations of traditional finance.  We have established a track record for this through debt—with steady, incremental payments—and close working relationships with our borrowers. The integrated capital approach pushes our model one step further; it allows us to offer a mixture of traditional debt financing and philanthropic funding for an organization’s growth needs—all in support of its important transformative mission.

This article was originally published in the Spring 2013 RSF Quarterly

Kate Danaher is Senior Lending Associate at RSF Social Finance.

Between Land and Money: An Economic Consideration, Part V

March 20, 2013

This is the fifth and final post in a series by John Bloom on money (global) and land-based (local) economic systems. While we are largely accustomed to the former, this historical analysis makes the argument for a new kind of economy, one which raises the profile of land-based systems to benefit and balance the global economy as we know it.

In my last post, I described the distinct differences between money and land-based economies.

We need both facets of the economy, but with a renewed awareness of land. By and large the land economy has been adumbrated by the money economy. Everything, it seems, has been monetized. What the Relocalization Movement, Transition Towns, Business Alliance for Local Living Economies, TimeBanks, BerkShares, Buy Fresh Buy Local, and Community Supported Agriculture, along with numerous other groups are doing, each in its own way, is trying to reawaken the local-regional economy consciousness with the rebuilding of community and resilience at the core of all initiative. In essence they are encouraging communities and individuals to take back authority as much as possible for the development of economic life out of a sense of interdependence. In some cases these groups are creating their own innovative means of exchange in order to complement the conventional money system. And the new tools are more in alignment with the values they are cultivating. The money economy has set us in competition with one another, atomized us and left some of us in a state of fear of not having enough to take care of ourselves—all on the assumption that the only way to meet one’s needs is through money. Since we are so busy trying to make money, and do not have time to do anything else, we are left with paying someone else to take care of matters. The extreme of the money economy is that we work so hard at our livelihood that we end up outsourcing our life.

The conclusion of all this economic history and analysis is to say that we need a new kind of economy, which raises the local-regional land-based on equal ground with the global, recognizes the value and role each play, and manages capital in a way that supports the interplay between them. This management component would raise community self-determination to a new level beyond politics, recognize the importance of multi-stakeholder participation and at the same time steward the intersections between local and global via larger scale associations of stakeholders. A picture that says only one system is the answer for all, that to be economically viable and profitable, for example, everything must be built out to large-scale efficiencies, no longer works.

Both the money system, though overstretched and fraying at the edges, and land-based systems are already working, even if the latter is still surviving only in the background. However, in many cases the local or regional land-based solution is going to be far more resilient in the future because those who create it usually feel responsible and accountable for what they have co-created and accomplished. To change our economic being will require a radical reconsideration of ownership—how we own, why we own—and a major disruption of the myth of self-interest. The reality of our interdependence in economic life will have a new story that also celebrates the importance of community-interest, both local and global.

What we seriously lack in order to move toward this new level of economic system consciousness is an educational infrastructure that seriously challenges the current economic and money paradigm while researching and experimenting far more broadly the methodologies and benefits of the land-based economy. But nothing will happen in this direction unless each of us steps out of consumer consciousness—one endgame of the money economy—and finds a way to really reconnect with land, not as real estate, but as the source of all economic life.

John Bloom is Senior Director, Organizational Culture at RSF Social Finance.

Between Land and Money: An Economic Consideration, Part IV

March 7, 2013

This is the fourth post in a series by John Bloom on money (global) and land-based (local) economic systems. While we are largely accustomed to the former, this historical analysis makes the argument for a new kind of economy, one which raises the profile of land-based systems to benefit and balance the global economy as we know it.

In my last post, I described the rise of various visionary economic thinkers who viewed the economy as a whole system in contrast to the limited money-based view.

The money economy is global. It allows for trade and the movement of manufactured goods across political boundaries, and money can move around the world at electronic speed. It supports scale and efficiency and has made the accumulation of wealth a bedfellow of unparalleled poverty. Much of that wealth is a result of enclosing and owning natural resources and newer technological infrastructure that could more rightly be considered in the commons. It was this disparity and the injustice that accompanies it which led Henry George to seek a remedy. It is not hard to see both the genius and shadows of the money economy; many of us benefit and suffer from it. It has, unfortunately, pervaded all aspects of economic life to the exclusion of other ways of being economic.

A land-based economy is by definition rooted in place, animated by its inhabitants, and conditioned by the natural resources that make up the span of its geography, however that is defined—one day’s horse ride, river or mountain boundaries. Agriculture, for example, cannot be anything other than land based. In many ways, I would venture that most economies prior to the modern era and certainly prior to the ascent of the money economy worked that way. Such an economy understands and depends upon a social ethos in order to function, and every community member is valued though each has different capacities. In its ideal, it is a kind of gift economy. The Sarvodaya Movement in Sri Lanka founded by Dr. A.T. Ariyaratne is a living example. There are now some 15,000 villages practicing economic self-reliance based upon the land. Everyone is cared for, and everyone has meaningful work to contribute to the community regardless of age. They never talk about full employment as we do in Western culture. Instead they speak of full engagement. The beauty of such an economy is that the quality of community life is lifted and with it each individual. While a land-based economy may not generate such enormous wealth for individuals, it is, as in the case of Sarvodaya villages, more likely to foster a more fair economy that produces sufficiency. Of course, the risk involved in working this way is a shadow, a closed community that oppresses the life of the individual.

An example of the transformation of a land-based economy to a money-based one might help illustrate the distinction between the two. In Indonesia, prior to its independence following World War II, village life was very strong. The staple food crop was an indigenous variety of red rice, which provided a wide range of nutrients and supported people’s wellbeing; there was little disease or starvation. Following upon independence, the new government wished to participate in the emerging global economy and essentially directed rice growers to cultivate white rice that could be exported to hungry markets. The government provided the necessary subsidies and support. Shortly thereafter, with a shortage of red rice for nutrition and white rice transported out of the community to the marketplace, there was a rise in disease, malnutrition, and poverty. At the same time, wealth accrued to those who controlled the marketplace, who did not live in the villages, but rather in the ports and centers of capital. This portrayal is oversimplified to make the point, but the facts remain and the circumstances are nonetheless true—and, sadly, it is not an isolated case.

In the land economy, people are connected to the food they eat, the people that grow it, and the soil in which it is grown. Land based enterprise might include food processing, crafts and manufacture from regional materials, localized energy production through wind or solar, and the list I am sure can be much longer. The point here is that the economy emerges from working on the land. This framework does not in any way limit exchange between communities because the exchange remains between people who have their own connection to the land. Because the land held in common is a source of production, and not economic in and of itself, the land economy is much less likely to have externalized costs. And, there will be more ecological consciousness as the community has to live with the consequences of its own activities. In a land economy, transparency means that a product can be traced to its sources and makers.

On the other hand, the money economy makes it possible to manufacture on a scale and with efficiency not possible at a regional level. It would be absurd, for example, to think that each region has to make its own mass transportation vehicles. One question would be whether externalized costs and other less visible human and environmental consequences of manufacturing can be accounted and paid for, and mitigated in a restorative manner.

John Bloom is Senior Director, Organizational Culture at RSF Social Finance.

Common Market Boosts Urban Access to Fresh Food, Helps Local Farms Thrive

September 6, 2012

Building the Next Economy

When Tatiana Garcia-Granados and her husband, Haile Johnston, moved to North Philadelphia’s Strawberry Mansion neighborhood in 2002, they found themselves in a fresh-food desert.

“Most of our neighbors were getting their food from corner stores. You walk into these stores and there’ll be all these different flavors of potato chips and Twinkies, but no fruits or vegetables,” says Garcia-Granados. The couple started working to bring a farmers market to the neighborhood and discovered a much bigger problem. “It wasn’t just neighborhoods like ours that didn’t have a link to the farmers right around us; it was also hospitals, universities and schools.”

Working with other local farm and food advocates, they created Common Market in 2008 to forge a distribution link between threatened farms and fresh food-deprived urban communities. Today, with a crucial assist from the RSF PRI Fund, Common Market supplies about 200 customers—institutional kitchens, retailers, restaurants and buying clubs—with produce, dairy and meat from about 100 sustainably run regional farms.

INSPIRATION

“Fifty years ago there were deep connections between the farmland right around Philadelphia and city residents,” notes Garcia-Granados. “With the rise of global commodity agriculture, that has changed—we’re more likely to find peaches from California than peaches from New Jersey.”

“When we started planning this, the distribution void was not on people’s radar,” she says. “We got blank looks when we talked about what we were working on. People didn’t realize this was a problem.”

What drove them forward was making the connection between health problems in the city and the loss of farmland. “We were seeing the health disparities that exist in our neighborhood and realizing what a huge role food plays in people’s lives and their ability to pursue opportunity. And every time we went to Lancaster County we would see more farmland being turned into housing developments.”

INNOVATION

Common Market’s key insight—the big step forward in solving the farm-to-city problem—was the value of cultivating institutional customers.

“With the amount of food an institution like a hospital is purchasing, we could have an immediate impact on the farms,” says Garcia-Granados. “We also targeted institutions that serve a cross-section of the population. That allows us to reach people who didn’t already have access to fresh food through farmers’ markets and high-end retail.”

Common Market had ready suppliers and buyers; the big challenge was cash flow—institutions are used to paying in 60-100 days. “But supporting farmers requires paying them quickly, as close to 15 days as possible,” says Garcia-Granados. “As we grew we realized we were facing a huge cash flow gap. That’s where RSF came in.”

The founders made the rounds of commercial banks and state and municipal development lenders, “but no one understood our business model or the sustainable agriculture piece and why what we were doing was meaningful,” says Garcia-Granados. “Common Market is a nonprofit social enterprise—it runs like a business but will invest any profits in expanding access to markets for farmers and to fresh food for urban communities. “The people at RSF were the only ones who understood.”

In 2010 RSF provided a $150,000 credit line (it’s now $350,000) through the RSF PRI Fund, which supports non-profit and for-profit social enterprises addressing key issues in food production, food access, value-added processing, distribution, retail and waste management.

“We had the customers and the infrastructure, but it was that access capital that allowed us to increase our sales and have an impact,” says Garcia-Granados.

IMPACT

Common Market nearly doubled its sales from 2010 to 2011 and its customers include more than 50 public and charter schools in Philadelphia and New Jersey. That’s a key audience given the enterprise’s big goal: changing what people eat and how they get their food.

Achieving that goal will require many more Common Markets, and the enterprise increasingly serves as a model. “Every other week we get a call from an enterprise or development agency,” says Garcia-Granados. “We share our business plan and feasibility study widely and invite people to come see our operation.”

The benefits accrue widely, she says. “For our farmers it’s giving them the ability to differentiate their product and take it out of the global commodity chain. For entrepreneurs, it’s allowing them to serve and sell local produce. For people who wouldn’t otherwise have access to local produce, it’s changing the food they are eating.”

VITALS

Company name Common Market Philadelphia
Impact area Food & Agriculture
RSF relationship PRI Fund
HQ Philadelphia
Revenue $1.6 million in 2012 (projected)
Employees 12
Community served Delaware Valley (New Jersey, Pennsylvania and Delaware)


 

Towards an Economics of Happiness – Part II

August 10, 2012

Originally published in the Summer 2012 RSF Quarterly

 

Click here for Part I

 

By Helena Norberg-Hodge

Localization for community and the environment

At its core, localization is about shortening the distances between production and consumption, while also encouraging smaller scale and more diversified production – particularly in food, farming, forestry, and fisheries.  All forms of primary production are expressions of a society’s environmental stewardship or lack thereof.  Yet, it is the way we produce food that provides an ideal example of the differences between global and local economies.

The global food system is extremely energy-intensive and inefficient, wasting precious fossil fuels to needlessly ship identical products around the globe.  It has systematically driven people from the land, increasing both unemployment and urbanization in North and South alike. With the absurd distribution of food, we see starvation in one part of the world and obesity in another. Because the global food system is homogenizing diets and food production worldwide, biodiversity is under assault and food security is increasingly at risk.

The continued expansion of the global economy means that local food rarely accounts for more than 10 percent of total consumption.  This is a dangerous position to be in: it is estimated that with any major breakdown in infrastructure or supplies of transport fuel, people in most parts of the world will be scrambling for food within three days. For environmental, economic, and survival reasons, we should be aiming to meet 60-90 percent of our food needs locally or regionally, depending, of course, on the agricultural capacities of the local area. This shift won’t happen overnight, but the localization movement is putting even big cities on the right track.

As we argued in our 1999 report (‘Bringing the Food Economy Home’), the local food movement demonstrates that shortening the distance between farmers and consumers provides huge benefits for both communities and the environment.  A more recent report co-authored by Michael Shuman, an economist with the Business Alliance for Local Living Economies (BALLE), looked at examples of locally-owned food initiatives around the world. Community food enterprises not only helped build local skills and economic networks, but provided tastier, fresher food and cheaper delivery costs.  As just one example, the study found that a $470 share from a Community Supported Agriculture scheme provided the equivalent of $700 of produce bought at a store.  Further benefits of these projects included a closer relationship between producer and consumer, and incentives for the farmer to diversify production to meet consumer demands.

Diversified systems help to sustain the numerous crop varieties that ensure long-term food security.  They also lend themselves better to organic methods, which translates into greater biological diversity on the farm and in the surrounding environment. They provide more job opportunities, with people power replacing the use of chemicals and gas-guzzling machinery. Finally, small, diversified farms can actually produce more food per acre and unit of water and energy than large, industrialized monocultures.  Thus it is clear that local food is one of the most vital links between healthy communities and ecological stewardship.

Going local

There is a heartening movement now of young people choosing to grow food.  They are debunking the myth that farming is drudgery and non-stop, backbreaking labor. When farms are smaller scale and more diversified, the work can be far more rewarding, healthy, and enjoyable than sitting at a computer all day.

There are numerous other examples of localization in action: local business alliances, local investment and finance strategies, Local Exchange Trading Systems (LETS), co-operatives, locally-run farmers markets, credit unions, and municipal bonds. However, many widespread assumptions – often cultivated by vested interests – continue to undermine the localization movement. They include charges of isolationism, elitism, and NIMBYism. There is a great need to counter these reactionary ideas and to debunk a pervasive myth that undermines localization in both North and South: that poverty in developing countries will be reduced through ever more global trade.

After years of colonialism and debt enslavement, it would make more sense to allow people to use their labor and precious natural resources to provide for their own needs as a first priority. To pretend otherwise merely serves the interests of those who stand to profit from exploiting the cheap labor and resources of the global South. Communities that embrace localisation are not turning their backs on the poor; rather, they are giving themselves and others the opportunity to become community-reliant rather than dependent on distant bureaucracies and corporations.

Throughout the cities of the western world, the movement to go local is gaining momentum. People are beginning to realize that it’s possible to increase the number of jobs and productivity on the land while reducing pollution and waste.  It’s becoming clear that there is no fundamental trade off between ecological and human needs.

Once we acknowledge what we lost when we abandoned community life and more diversified economies, it’s easier to see how to redesign our societies, to create a more human scale and human pace of life. This is not about going backwards, it’s about embracing our ecological roots and our common humanity to move toward a lasting economics of happiness.

Author and filmmaker Helena Norberg-Hodge is the founder and director of the International Society for Ecology and Culture. She is a pioneer of the “new economy” movement, and has been promoting an economics of personal, social and ecological well-being for more than thirty years. Trained in linguistics, she has given public lectures in seven languages, and has appeared on broadcast, print, and online media worldwide, including MSNBC, The London Times, The Sydney Morning Herald and The Guardian. Her ground-breaking work in Ladakh, or “Little Tibet”, earned her the Right Livelihood Award, or “Alternative Nobel Prize” and her book, Ancient Futures, along with a film of the same title, has been translated into more than 40 languages.

Local economies

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