RSF has elected to lower the interest rate by 25 basis points (0.25%) for the third quarter of 2012. RSF Prime will now be 4.75% and investors will earn an interest rate of 0.75%.
RSF’s most recent pricing meeting was held in Sebastopol, CA earlier this month. This was the twelfth such meeting we’ve had since RSF made the decision to change how our quarterly interest rate is determined. Prior to October 2009, we used the London Interbank Offered Rate (LIBOR) as a benchmark to determine our rate of return. Since then we’ve been using this customized rate established by our Social Investment Fund (SIF) stakeholders — RSF staff, SIF investors, and borrowers in our Social Enterprise Lending program. The SIF investor rate is then added to a 4% spread (for RSF’s operations) and the resulting rate, named RSF Prime, is the base rate for borrowers.
This pricing mechanism is more deeply aligned with our values to make financial transactions as direct, transparent, and personal as possible. Further, we’ve been able to offer a significantly higher interest rate to investors than if we had continued using LIBOR. Important to note: with this change in pricing, investors will continue to earn a rate several times that of a conventional bank CD.
Following the meeting we reflected on an important conversation that took place: would lowering RSF Prime make us more competitive in attracting high impact social enterprises in need of financing? Ultimately the answer was yes.
With that said, we are aware that the average RSF investor, for this next period, will experience a lower return (a decrease of $125 annually for the average $50,000 SIF Investment Note). For borrowers the impact is greater, as their average loan size is over $900,000, and their annual costs will be lowered by $2,000 to $2,500 annually.
We believe that lowering RSF Prime to 4.75% will help us retain and attract worthy projects to support through our Social Enterprise Lending program. To learn more about the projects we fund, visit the RSF Impact Map.
Thank you for your attention to this matter. In a spirit of transparency, we are happy to talk with you about our decision directly.
Current investors can contact Mark Herrera, Senior Manager, Client Development at mark.herrera@rsfsocialfinance.org or 415.561.6160.
By Mark Finser, RSF Chair of the Board and John Bloom, Senior Director, Organizational Culture
In 2004, we began to refer to our work at RSF as social finance. John Bloom and Mark Finser discuss that shift and our ongoing role in this developing field. This was originally printed in our quarterly newsletter. To hear more of the conversation, listen to the Reimagine Money podcast.
John: One of the comments that has been made about social finance even as a concept is that you can’t possibly have finance that isn’t social by definition. For finance to happen it takes relationships and transactions of all sorts. So, what do we really mean by social finance?
Mark: I think it’s being conscious of the way money works to connect people. It’s not just allowing the chips to fall the way they can, but to really consciously be mindful of the consequences of one’s financing, what the ripple effect is, and what kind of social impact that could have. I’m not stuck on the term, because I think at the end of the day if we are successful it will just be good finance.
John: You mean that it will become the norm?
Mark: Exactly. And people will know that a triple or quadruple bottom line makes good business sense— plus it really will benefit the planet and the people, and the culture in which it’s embedded.
John: When we talk about social finance, does that have something to do with a set of values or intentions that one is investing with it? Is it more of an outcomes process?
Mark: And, where do we push the envelope, where do we encourage a new world that we want to imagine, while recognizing that it’s always moving? In terms of outcomes, it’s a moving target. But we must realize that our financing is collusion if we’re just continuing with what’s currently the case, just allowing the status quo. I would never want to come across as if we know it all. I think for us, we’re always questioning and practicing. And we’ve always invited all sectors, our borrowers, our grantees, our donors, and our investors to join us and to participate in that process.
John: I’m going to change the topic, if that’s okay. In a perfect world, do you think private wealth would be privately owned, or should there be something else in place that is more public in nature, more of a common good focused group that looks at wealth in a different way?
Mark: There’s a statement I read of Steiner’s where he asks about: What would it be like if human beings, when they’re born, have a right to a certain plot of land that was really theirs to cultivate, to have a shelter on, and where one could work in community in that regard? When I look at capital—or at least surplus capital— I also see it in relationship to our commons, to the land and to the air, and to the water that we all have in common. I’m really struck by this whole concept of trusteeship, which Terry Mollner talked about, and how we really are trustees, whether it’s of the land or capital that we receive.
John: I think that draws a very important distinction between ownership as almost a spiritual deed versus ownership as a right.
Mark: Yes, there is responsibility in every experience of ownership, and also transaction. Carlo Petrini, for instance, calls consumers co-producers. I really like that because you’re part of helping that production to happen by being engaged. We at RSF like to talk about this whole idea of associating with a wider constituency and basically creating a different kind of economics and a different kind of social finance that’s based on associative principles, where all stakeholders are engaged. This then will create a stronger company, it will create a stronger community, and it will create a better possibility for return of the investment.
John: Speaking of return on investment, I’d love to focus more time on the qualities of that money or capital. Let’s talk about the different kinds of capital, such as loan money, investment dollars, gifts, and so on, that circulate in the realm of social finance.
Mark: There are many kinds of capital and financing stages, from friends and family, angel investment, early-stage investment and expansion-stage capital that go into a company. That’s all on the ownership, or coownership side of the enterprise. And then you have the debt side, subordinated debt and secure debt. That also comes from surplus capital. From a social finance standpoint, the way the money moves and the way the enterprise develops is not just through a one-time transaction; it’s actually through what is built up over time and how that organization or how that enterprise integrates itself within its larger community.
John: And to take a step back, what is capital?
Mark: For me a simplistic way of looking at it, it’s money that’s accumulated through the creation or the creativity of human capacity. So it’s different than money that’s being circulated on a day-to-day basis in the sense of what we use to buy and sell things.
John: As you survey the field, do you see associative economic principles just naturally emerging out of people’s good common sense—whether that’s community or just a desire for connection?
Mark: Yes. I think that’s what this whole local movement is about as well. This is just a starting point. With transportation costs and so on, it will make a lot more sense to do things locally and regionally. But at the end of the day, the planet is getting so much smaller, and it will feel like we’re literally touching somebody across the planet as well. I think our consciousness will get to a point where we actually can feel that what we do right here, what we pour down our drains, or the detergent that we use is affecting somebody on the other side of the planet.
John: That’s a development of a certain imagination about the consequences of our acts. That would be a huge shift in our economic life.
Mark: It would. That’s why Rudolf Steiner touched on the fact that when you talk about finance and you get more into the economic area of the world, that’s where you actually want to build brotherly and sisterly connection, brotherly and sisterly love—because you have the possibility to really meet human needs, and be aware of the consequences of the needs you may be violating or supporting. We often talk about this more from the standpoint of the production of goods and services to meet human needs. But I think the human aspect is very, very important because I think it’s actually the one that can be the most transformative. And maybe not just for human beings, it’s everything. It’s the animal kingdom, it’s the plant kingdom—it’s all spheres of life.
John: From your perspective, what is RSF’s role in this transformation?
Mark: I think RSF’s role is to constantly deepen and to ask the hard questions. It is also essential for us to use the money that’s been entrusted to us—whether, through the Donor Advised Funds or through opening up a Social Investment Fund account—by using each moment when we receive that money and when we make our loans, as an opportunity for furthering this kind of connection and the building of this kind of community. I think it’s true that you actually advance, the individual advances, and the community advances, through the capacity to experience what it’s like to be in somebody else’s shoes.
Reimagine Money is a monthly investigation into the power of money to support social enterprises that are changing the fields of Education & the Arts, Food & Agriculture, and Ecological Stewardship. In this series, you’ll hear from impact investing practitioners, social enterprise executives, social finance thought leaders and more, discussing their work and ideas.
We will keep posting podcasts here on our website; you can also get the latest by subscribing to Reimagine Money in iTunes.
It’s always such a good feeling to kick off a new year and we are really looking forward to what’s to come in 2012. But before we dive in, it’s worth taking a look back at what happened in 2011.
I pulled a few statistics on the past year and was very impressed with the results. We certainly experienced a flurry of activity in the last quarter, and although the dust hasn’t completely settled (stay tuned for our 2011 Annual Report for the final numbers – they could be even higher) this is a great indication of our work last year.
The most critical part of our work is the people we connect with every day in our mission towards transforming the way we work with money. So here’s a look at how we grew the RSF Community.
Our friends from Small Vines Vineyard pouring biodynamic wine for festival guests.
Well isn’t that impressive! We’d like to thank all of our clients, partners, and friends who helped make this possible and we look forward to bigger and better things to come in 2012.
Jillian McCoy is Senior Associate, Communications at RSF Social Finance.
November 5 is Bank Transfer Day, an initiative asking motivated individuals to move their funds from large commercial banks to community banks and credit unions.
We’re excited to see a grassroots movement like this, reaching tens of thousands of people (over 70,000 people posted on Facebook that they are ‘attending’ this event) that calls to action anyone truly frustrated with the challenges of the current banking system, and who seeks a real economic change.
For inspiration, we wanted to offer an archive of highlights from our blog that speak to these challenges, as well as offer alternatives.
Transforming from what? To what? Well, in 2009, our CEO, Don Shaffer wrote that “The era of Wall Street domination is over.” Since then, he has written on the many alternatives to a Wall Street dominated economy and included a ‘wake up call’ after the New York Times wrote on secretive and elite derivatives trading. Ted Levinson, head of our Lending program, responded to Don’s post on the Banking Crisis on the perils of both big business and too big government.
Digging deeper into our roots, founder and trustee Siegfried Finser reflected on the nature of interest itself, a fascinating read for anyone who ever loans or borrows funds. Grounding our natural interest in interest, we developed RSF Prime, a rate determined through collaborative input and face-to-face pricing meetings between borrowers and investors.
We see Bank Transfer Day as an opportunity, along with countless others, to align your resources with your vision and values.
To learn more about investing with RSF Social Finance to support some of the highest impact non-profits and social enterprises around the country, please visit our investing page. The minimum investment is $1000, and over the course of our 27 year history we have maintained a 100% repayment rate (plus interest) to our community of investors.
A New Foundation for Portfolio Management is a paper that proposes new principles for creating an investment portfolio. Authored by Leslie Christian, of Portfolio 21 Investments with the support of Don Shaffer, President & CEO of RSF Social Finance, this paper challenges current assumptions about risk, growth and utility and proposes new principles to bring portfolio theory into the 21st century.
Through a process of inquiry, both RSF and Leslie Christian realized that the assumptions we were relying on to guide our investment strategy were no longer appropriate for the environment we are living in or for having the social impact we seek. It was this discovery that first led us to begin to rethink portfolio theory, and our investment strategy overall, and led to the creation of this paper.
The white paper provides a set of new foundational elements to build upon current investment including:
Integrated Risk – a scientific view of risk that incorporates ecological limits and uncertainty, both usually ignored in investing.
Selective Growth – growth can occur even if average economic growth is zero or negative, but it will be unique to particular sectors and companies rather than a function of rising per capita material consumption.
Multidimensional Utility Function – investors need to have clarity with respect to the unique purpose and goals of each asset beyond solely financial.
It is our hope that this paper will inspire deeper discussion in the investment community. We look forward to continued conversations.
‘Tis the season for conferences, gatherings and events inspired by the desire to improve our communities, our country, and the world through better business practices and meaningful investment opportunities. Social entrepreneurs, impact investors, and local food advocates all take stage this time of year and RSF is geared up for the festivities. We’re hosting, sponsoring and participating in over a dozen events this fall. The following highlights some of the upcoming gatherings. Visit our Where We’ll Be page for the full list of what we’re up to in the coming months.
SOCAP11 kicked-off on Tuesday, Sept 6 and is happening at Fort Mason in San Francisco until Friday evening. SOCAP is a multi-platform organization dedicated to the flow of capital towards social good. It’s an obvious fit for RSF and we’re proud to sponsor the conference. Don Shaffer and Leslie Christian, CEO of Portfolio 21 Investments, are leading a SOCAP Special Session to announce and present a new white paper, A New Foundation for Portfolio Management. Don and Leslie will also be speaking about the paper at a B Lab webinar on September 29.
On Sunday, September 25, RSF is celebrating the life and legacy of Rudolf Steiner at a festival in Golden Gate Club in the Presidio. If you’re in the San Francisco area, join us from 11am – 4pm for organic & biodynamic food & wine, a Marionette show, gardening activities, Dr. Hauschka skin care treatments, a talk with Paul Dolan and so much more. Check out our event page for more information.
In early October we’ll be in New Orleans for SRI in the Rockies (no longer only in the Rockies). 2011 marks the 22nd year SRI in the Rockies has been bringing investors and investment professionals together who are working to direct the flow of investment capital in more positive, healthy, and transformative ways. RSF has been a long time sponsor and participant and thrilled to be involved again. Don Shaffer is moderating a panel titled Innovation and Impact: Investing for a Truly Sustainable Future. If you’re planning to attend the conference Oct 2-5, be sure to check out the discussion!
October 12 -14, we’ll be back at Fort Mason sponsoring Slow Money. The Slow Money National Gathering brings together people who are rebuilding local food systems across the U.S. and around the world. More than 1,000 people attended the first two national gatherings—resulting in more than $4.25 million invested in 16 small food enterprises! Don Shaffer will be joined by Joel Solomon, RSF Entrepreneur in Residence and Leslie Christian, Portfolio21 Investments CEO to discuss place-based strategies and the future of social investing. And Taryn Goodman is on a panel titled Mission-Related Investing: Strategies for foundations to invest in small food enterprises. Find out more and register today.
Later in October we’ll be in Philadelphia for back to back to back events. First, the B Corps Champions Retreat starts October 25. The retreat is for B Corp leaders and includes an annual awards dinner. Last year Don was MVP! Second, Investors’ Circle Fall Venture Fair kicks off on October 26. RSF is again sponsoring Investors’ Circle, an organization committed to catalyzing the flow of capital to early stage companies that address major social and environmental problems. Lastly, the Social Network Venture is hosting Movers, Shakers & Changemakers, their annual fall conference. The conference, being held Oct 27-30, will bring together an influential and diverse network of social entrepreneurs from around the world to explore, inspire and create innovative ways to build a just and sustainable economy.
November 3-5, RSF is excited to sponsor Making Money Make Change. The gathering is hosted by Resource Generation and is for young people with wealth who believe in social change. Resource Generation organizes to transform philanthropy, policy, and institutions, and leverage collective power to make lasting structural change. If you know of a young person with wealth, encourage them to get involved!
Melinda Cheel is Senior Associate, Partnerships and Communications
‘Direct, personal, transparent, and based on long-term relationships’ is a sort of mantra at RSF. We talk and write about these values often. It’s how we envision the future of finance. In order for that future to be realized we’ve put a number of initiatives in place to engage our community including our quarterly pricing meetings.
Last month RSF held the most recent pricing meeting at the Summerfield Waldorf School & Farm in Santa Rosa, CA. Not only did we have a spirited meeting with RSF staff, borrowers and investors, we also had a phenomenal community dinner on Summerfield’s campus.
Pricing meetings begin with an opportunity for all participants to say a few words about how they became involved in the RSF community and why the relationship is significant to them. Sarah Hawthorne, an RSF investor of five years, said she desired change and wanted to see more socially meaningful and ecologically beneficial projects in the world. She told the group, “I thought money was one of the best ways I could make a statement.” Jane Hein, introduced to RSF by a friend, spoke to how RSF allows her to align her money with her values and noted, “RSF was everything I was looking for but didn’t know I was looking for until I found it.” Jane’s sentiment echoes that of many people’s introduction to RSF – a realization that investments can make a positive impact and there’s an opportunity to engage with the people behind the projects and initiatives the investments are supporting.
When the conversation moved to pricing there were many thoughtful suggestions and questions about RSF’s interest rate. Discussions at all the pricing meetings has varied but there has been a common theme…appreciation for the community. Not only are the borrowers grateful for the investors and their funds, the investors are thankful for the transformational work of the borrowers, and RSF is of course deeply grateful for everyone’s involvement. The combination of the personal and direct experience of the pricing meetings along with this deep appreciation shared by the participants creates a dialogue one might not expect from people discussing their money. One borrower, after reflecting on the transaction from the investor point-of-view, stated concern that the current 1% may not be enough. An investor expressed concern for RSF by asking if the margin was enough to support our work and growth in the field. Have you heard of investor checking in with their financial institution to make sure they’re making enough? It’s truly incredible to see community members engaging this way.
The pricing meeting marked the eighth such meeting we’ve had since RSF made the decision to change how our quarterly interest rate is determined. Prior to October 2009, we used the London Interbank Offered Rate (LIBOR) as a benchmark to determine our rate of return. Since then we’ve been using a customized rate established by our Social Investment Fund (SIF) stakeholders — RSF staff, SIF investors and borrowers in our Core Lending program. The SIF rate is then added to a 4% spread (for RSF’s operations) and the resulting rate, named RSF Prime, is the base rate for borrowers. It is not a decision we regret – not only is the new process more aligned with our values, we’ve been able to offer a higher interest rate than if we had continued using LIBOR. For more information on this decision, see this November 2009 post from our President & CEO, Don Shaffer.
RSF staff, borrowers and investors at the June 1 community dinner
With so many of our clients in the area and Summerfield’s gorgeous location we were inspired to have a community dinner following the meeting. We invited borrowers’ staff, additional RSF investors, the Summerfield Waldorf School community and friends and family of all the above. Indigenous Designs, with their home right down the road, brought close to 30 people! It was amazing to connect with their staff, meet their families and speak with some of their other investors. Scott Leonard, Indigenous Designs CEO, commented on his excitement about RSF hosting an event in his neighborhood and his long history with us. “RSF has stood as a creative and supportive financial partner for Indigenous. The RSF relationship continues to reinvent itself in so many positive ways.”
The plan was to have the dinner on the school’s farm but with the unusual June rain we had to move it indoors. Several last minute changes were required but the Summerfield community volunteers were there to make it all happen. (Special thanks to all the helpful Summerfield board, staff & parents!) The rain was torrential that morning but by the time the dinner bell rang, the skies had cleared, allowing a couple dozen people to tour Summerfield’s gorgeous property and see some of the campus highlights including their biodynamic farm.
Jeffrey Westman from the Summerfield Board of Directors and head pizza chef
The menu for close to 100 people included pizzas prepared by Summerfield volunteers and salads from a local restaurant. The pizza crust and sauce came from RSF borrower, Rustic Crust. The toppings included produce that had been harvested from the Summerfield Farm that morning and local, organic lamb sausage made by one of the volunteers. The organic salads came from Peter Lowell’s Restaurant in Sebastopol. (Lowell is a Summerfield alum.) Paul Dolan from Paul Dolan Vineyards and Paul and Kathryn Sloan from Small Vines Wines served biodynamic wines from their respective vineyards.
It was a memorable evening. It’s hard to go wrong with delicious food, incredible wines and lovely company but it was more than that. The whole room was buzzing with a celebratory vibe. The energy was palpable – created from the excitement of the pricing meeting participants and the connection the community members were making to one another through shared values and stories.
I enjoyed my pizza and wine with staff from Summerfield. The interaction provided me with an opportunity to learn more about one of our borrowers and for them to hear about our values and why we hold the pricing meetings. The reaction from the table was unanimous: Wow! We’ve never heard of a financial institution embracing their community and engaging them in conversations like you are. Nor have we! Our pricing meetings are undeniably unique and radical. As we work towards a financial future that honors direct, personal, transparent transactions based on long-term relationships, we’ll continue to explore how we can engage our community in the transformation.
Melinda is Senior Associate of Partnerships and Communications at RSF Social Finance.
RSF provided six Community Capital Scholarships for the recent BALLE ‘Place Matters’ Conference held June 14-17 in Bellingham, WA. This is the second year RSF has worked with BALLE to offer scholarships for individuals who are transforming the way their communities work with money. We were again thrilled to assist in making the conference more accessible to people doing exceptional work. Catherine Covington, RSF’s Philanthropic Services Program Associate met with five of the six recipients at the conference to hear more about their projects, passions and what’s ahead. Check out the videos below.
Pam Curry is the CEO of Center for Economic Options and working to create sustainable business opportunities and wealth in rural areas of West Virginia.
Listen in to hear why Bob Leighty from the Economic and Community Development Institute in Ohio is so ecstatic about attending his first BALLE conference.
Learn how Kati Mayfield from the Oregon based Adelante Mujeres is empowering immigrant Latino families in her community.
Joel Moyer from New Hampshire is a recent graduate from Antioch University New England’s MBA in Sustainability program and an RSF Fellow.
Caitlin Quigley is a Bellingham, WA local and works with the Whatcom Investing Network. (Fun fact: At the close of the BALLE conference, Caitlin was announced the winner of the Back-of-the-Napkin Business Plan Competition for her Poo-Op, a worker cooperative offering composting portable toilets for public events. Nice work, Caitlin!)
Melinda Cheel is Senior Associate, Partnerships & Communications at RSF Social Finance.
The Federal Reserve, getting ahead of the battles that will dominate national politics over the next two years, moved Wednesday to jolt the economy into recovery with a bold but risky plan to pump $600 billion into the banking system…The action was the second time in a year that the Fed had ventured into new territory as it struggles to push down long-term interest rates to encourage borrowing and economic growth. – NYT, November 3, 2010
In sharp contrast to national news about “bold but risky plans” for interest rates, twenty-one individuals gathered at the New York Branch of the Anthroposophical Society in America in Manhattan for RSF’s fifth quarterly pricing meeting. Representatives from amongst the 1,000 investors of our Social Investment Fund and the 75 borrowers of our Core Lending Program met, discussed their motivation for being a part of the RSF community, and considered the potential impact of raising or lowering RSF Prime.
Over a year ago we decided that quantitative easing in Washington DC or rising inflation in China shouldn’t dictate the rates we pay our investors or charge our borrowers. Instead we decided to have our rates influenced by what really matters – namely the needs and wants of our community.
Reflecting the diversity of borrowers and investors in attendance at the pricing meeting, there was plenty of lively discussion. Strained by the economy, some borrowers made a pitch for low rates – pointing out that the less they paid in interest the more they would have to further their social mission. Some investors offered to add to their accounts if the rate increased while others said that yield didn’t matter as long as they knew their investment was secure and having a positive social impact.
The remarkable thing about these pricing meetings is how prominent a role trust plays in our Social Investment Fund. At its most basic operational level, we operate no differently than a bank that collects money from depositors and lends money to borrowers. But strip away the branches and the ATMs, the anonymity and enormity of our banking system, and you are left with people, money, and the trust that brings them together.
Mark Herrera and I represented RSF at the pricing meeting. As RSF’s Manager of Client Development, Mark knows most of our investors and in many instances is responsible for bringing them into our community. Our investors forego FDIC insurance and in some instances even gift their interest payment to RSF because they trust that we will be good stewards of their money – lending it wisely to non-profits and social enterprises that have deep impact.
Our borrowers in attendance certainly felt and appreciated the trust that girded their loans. Many expressed their gratitude for their loan and the implicit vote of confidence that it carried at a time when conventional lenders were unwilling to support them. It was especially gratifying to have representatives from the Threefold Educational Center in attendance since they have been both borrowers and investors over the years – experiencing the same lending community from two different vantage points. Soon after the meeting one of our newest borrowers opened an account at RSF for her newborn son.
As Senior Lending Manager at RSF it is humbling to meet the individuals whose money you are responsible for managing; I imagine our borrowers feel the same way. It is inspiring to meet people who are trying to improve the world with their money – they are true pioneers. They are also a constituency we desperately don’t want to disappoint and meeting them in person makes me appreciate their trust even more. It is one example of why we believe people are best served by financial transactions that are direct, transparent, and personal, based on long-term relationships. Rudolf Steiner said that “In the long run, credit cannot work healthily unless the giver of credit feels himself responsible for all that is brought about through his giving credit. The receiver of credit…must give him grounds to justify his taking this responsibility.” RSF, and our pricing meetings in particular, are a tangible effort to bring this humanity back into the world of finance.
Ted Levinson is Senior Lending Manager at RSF Social Finance.
