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.

Impact Investing: The Challenge of Job Creation

June 14, 2013

This is the third post in a series by Morgan Simon on the trends, challenges and opportunities of impact investment, focusing on an exploration of the mechanisms which allow affected communities to lead and shape investments.

What is impact investment? This might be the most important, and simultaneously, most overplayed question of our industry. Forgive me for repeating it; however, it is critical we return to the conversation to consider how communities can better engage in, and benefit from, impact investment.

What should count or not count, and who gets to make that decision? What types of activities deserve subsidized capital in a capital-constrained universe, and which financial institutions should receive your investment dollars? So far, impact investment has been largely defined by investors themselves—the Global Impact Investment Network (GIIN) has put out a general definition, “the intention to generate measurable social and environmental impact alongside a financial return.”  There exists a myriad of investment activities that attempt to generate such impact and return.

One of the primary impact investment activities pursued has been job creation to address worldwide poverty. The World Bank estimates we will need 600 million jobs by 2020 to keep up with population growth globally—and 200 million of these jobs will be needed in developing economies.[i] Small and Growing Businesses (SGBs) , the preferred instrument of impact investors to encourage job creation after microfinance, have been shown to be critically linked to GDP growth and overall poverty reduction in developing countries.[ii]

SGB growth is therefore supposed to help poor people through two mechanisms—it creates jobs, which provide much-needed income, and it encourages GDP growth, which, in theory, supports the overall economic health of a country and reduces poverty.

These arguments have a few fatal flaws that need to be addressed before we can wholeheartedly support job creation as a strategy for global poverty reduction:

  1. We live on a planet of finite resources. By design, GDP cannot grow infinitely.  While in the short-term it’s nice to show impact investors graphs that trend up, you can’t rely on short-term fixes for long-term global solutions. This is particularly important for those of us with a regional agenda, given that one country’s success may mean another’s ruin in the context of a global race to the bottom on wages and environmental standards. It’s imperative that people focused on poverty reduction rethink GDP as a benchmark. It simply doesn’t take in to account all of the variables for truly positive social and environmental impact.

  2. GDP and poverty reduction might grow in tandem; but evidence is inconclusive on its correlation to inequality. Certainly, there are many examples of countries like India and Brazil, whose miraculous growth in GDP did not change the fact that they are ravaged by inequality and host the greatest number of poor people in the world.To take the extreme case, the US has the highest GDP in the world—and in 2012, the top 1% of the US population received 93% of the income growth. Often, SGB development is ultimately an attempt to replicate the US model of a free-market economy internationally. Should we promote a model that enables such extreme inequalities? As one International Money Fund economist commented recently in the New York Times, “When a handful of yachts become ocean liners while the rest remain lowly canoes, something is seriously amiss.”[iii] Indeed, focusing on job creation without an equal focus on equality just reinforces this dichotomy.

  3. Most importantly, poverty is not caused by a lack of jobs; it’s primarily due to the proliferation of low-paying jobs.  Gary S. Fields provides several striking statistics in the great book Working Hard, Working Poor. He notes that globally, 85% of the poor are in fact working.  The International Labour Organization defines a “working poor household” as one in which at least one member is working but the household lives on less than $2 per person per day. The working poor constitute 39% of total employment in the world, and 80% of total employment in South Asia and Sub-Saharan Africa.[iv] Millenium Development Goal data for 2011 shows that 61.2% of people in developing regions were working—and that 18.2% of those working people were still earning less than $1.25 a day, with percentages as high as 38% of workers in sub-Saharan Africa and 35% in South-Eastern Asia.

    Is this employed person better off than his self-employed, equally poor counterpart? Or does he run a higher risk of income uncertainty given that he’s more likely to be an economic migrant with limited access to productive means such as land? I will leave this question to the statisticians, but let’s just assume for the sake of argument that living under $2a day is quite challenging whether you have been paid that $2 or generated it yourself. And I would assume that in both scenarios, your opportunities for advancement are minimal. To borrow a phrase from Fields, indeed, we don’t have a global unemployment problem—we have a global employment problem; in that the jobs we create are precisely what are keeping people poor.

    This is why organizations like the Aspen Network of Development Entrepreneurs have put an emphasis on defining “quality” jobs—and others argue that we should not focus on jobs at all. Recently I sat on a panel with indigenous leader Winona LaDuke—who shared with us, “Lots of people come to the res[ervation] to talk about job development. We don’t want FTEs. We don’t want to leave the res to work for Walmart. We want the preservation of our historic ways of generating our livelihood.”

  4. Employment and assets are very different and critically important. Assets (items of ownership convertible into cash) are based on a variety of factors beyond employment, such as inheritance, home ownership, and education.[v]  While a job may provide a short-term income boost to a household, it would take generations to make up for the asset short-fall that family is facing. Furthermore, assets are better indicators of inequality, including limits to economic, social, and political mobility. For example, the average wage for an African American man in the US is 25% percent lower than their Caucasian counterpart—but the more frightening statistic is that African American families in the US have twenty times less assets than Causasian families. So while a job may provide a short-term income boost to a historically disadvantaged group, it would take generations to make up for the asset short-fall that family is facing; even if incomes are relatively equal in a society. In this context job creation might help address income distribution, but would do little to address asset distribution.

 

Let’s take a step back from job creation to consider what it means to be poor. I define poor as a lack of choice to live life in a way that respects your physical needs, cultural values, social and political context, and familial obligations. This of course varies country by country, region by region, which is why as impact investors I invite us to rethink how we consider poverty reduction to be more than just a simple economic equation.

Let us consider:

-     Rather than income, what if we focused on asset-building for individuals and communities?

-     What if we focused on culturally-appropriate livelihoods, rather than limiting our viewpoint to wage employment?

-     What would it look like if we focused on equality just as much as growth?

Perhaps we would still consider job creation to be an important cornerstone of impact investment. My hope would be that we feel a greater level of confidence that our impact investment dollars were really leading to global poverty reduction and more autonomous communities.

I’d like to offer two of examples of organizations addressing these job creation challenges. First is Liberty and Justice, a West-African company which has a strong focus on livelihoods and asset-building. Co-founder Chid Liberty, a Liberian who largely grew up outside of the country, came home as an adult wanting to address poverty, and the 90% unemployment rate in Liberia. He then built Africa’s first fair trade factory—a clothing manufacturing facility employing 60 women.  These women not only have access to high-quality jobs—they own 49% of the factory, and are being trained to one day run the factory themselves. Investors (including several Toniic members) participate in a US trading company, which partners with the factory and ensures it complies with global quality standards. Chid’s vision was not only to create good jobs for women, but to help close their asset gap.

Another company that has similarly worked to level the playing field for its workers is Namaste Solar, a profitable Colorado-based solar company led by CEO Blake Jones. Their 100 employees are given the option to buy a share of the company, and have an explicit salary scale where the highest paid employee cannot make more than 4 times the lowest paid employee. This activity created a company of co-owners, which has significantly reduced turnover and helped drive profitability. Their recent investment round was oversubscribed. ­­

Who are the others like Chid and Blake? What projects have you seen that create high-quality jobs, livelihoods or grow assets while also creating viable returns for investors?

Morgan SimonMorgan Simon is the co-founder of Toniic, a global network of early-stage social investors. Toniic members share deal flow, due diligence and monitoring on global investments in this action-oriented community looking to move $100 million into global social enterprise. She is also the co-founder of Innovacion Investments, the first community development venture capital fund in Texas, and was the Founding Executive Director of the Responsible Endowments Coalition, leveraging the $400B managed by US colleges and universities. In all her work, she emphasizes community empowerment, leadership and ownership.

Thank you to Allison Basile, Grassroots Business Fund, for her contributions to this post.

 


[i]  IFC Job Study Report: Assessing Private Sector Contributions to Job Creation and Poverty Reduction; January 2013 http://www1.ifc.org/wps/wcm/connect/d3b612004e3468c783d5ab7a9dd66321/IFC_FULL+JOB+STUDY+REPORT_JAN152013_FINAL.pdf?MOD=AJPERES

[ii] Poverty Reduction through Job Creation and GDP Growth: Understanding the Potential for High-Impact Entrepreneurship http://www.endeavor.org/blog/fight-poverty-move-the-gdp-needle/

[iii] http://www.nytimes.com/2012/10/17/business/economy/income-inequality-may-take-toll-on-growth.html?pagewanted=all

[iv] ILO, Global Employment Trends, January 2011

 

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.

What Funders of Social Enterprises Want

June 5, 2013

Don Shaffer - Default

Originally published by Sustainable Industries

by Don Shaffer

Interest in social enterprises is growing—and believe it or not (some entrepreneurs may have their doubts), so is the pool of capital available to them.

The broad field of impact investing—which involves directing capital to enterprises that are doing good, rather than simply screening out companies that have strong negative effects—is projected to grow by a billion dollars this year. Impact investors surveyed for a J.P. Morgan and the Global Impact Investing Network (GIIN) report released in January said they plan to commit $9 billion to impact investing in 2013, up from $8 billion in 2012.

Of course, much of that money will go to larger, more established businesses, not to emerging social enterprises. But RSF Social Finance does finance social enterprises that need growth capital—and our investment funds mirror the broader trend. RSF’s main investment vehicle, the Social Investment Fund (SIF), grew 20 percent in 2012, to $90.5 million.

In addition to a larger pool of capital, several other trends are creating opportunities for social entrepreneurs:

  • There’s a growing focus on developing social entrepreneurs through the use of accelerators and technical assistance groups. Some examples are Village Capital, Ashoka Fellowships, and Hub Ventures.
  • Investors are looking at alternative forms of investing, including royalty payments.
  • There’s increased interest in investing regionally, specifically in the United States.

What are investors looking for?

Many of the investment organizations funding social enterprises specialize in particular niches, or work on a few key focus areas at a time. If you’re seeking capital, your first stop should be a funder that specializes in your area—they’re more likely to understand the business opportunity, and can plug you into a valuable network.  For example, one of RSF’s current focus areas is the creation, support and expansion of decentralized, regional food processing and distribution operations, because they contribute to strong local economies by providing markets for small and midsize farmers, helping with the logistics of aggregating food from multiple suppliers across a region, and serving as market creators by connecting producers with local food buyers.  We’re also seeking to build relationships with impact-making borrowers in our other two focus areas: ecological stewardship, and education and the arts.

What qualifies as a social enterprise?

Every funder has their own criteria, but ability to demonstrate impact and capacity to run a successful business will probably always be top of the list. RSF defines a social enterprise as a for-profit or non-profit venture in which the economic activity is a means toward creating significant social or ecological impact. We vet borrowers for:

  • Social and ecological impact for public benefit: Is the organization’s economic activity a means toward directly solving or alleviating society’s greatest challenges in our focus areas?
  • Advocacy for change: Is the organization an advocate for or does it demonstrate social change in its field? Does the organization hold itself accountable and is leadership committed to the social mission?
  • Capacity to accomplish the mission: Does the organization have the capacity to tackle the problem? Do its activities have the potential for scale?
  • Commitment to financial and operational sustainability: Is management committed to and capable of growing a profitable or self-sustaining independent enterprise? Could RSF’s involvement be catalytic? Does the business meet high standards for workplace and environmental practices?
  • Community building: Is the organization building a community committed to its success?

If you have an enterprise that meets those criteria and needs a finance partner to reach the next level, please get in touch. If you’re not there yet, I encourage you to take advantage of the resources available to social enterprises. There’s never been a better time to be a social entrepreneur.

Don Shaffer is President & CEO of RSF Social Finance, as well as an alumni speaker at the Sustainable Industries Economic Forum.

Safe, Ethical, and Transparent Fashion

May 23, 2013

RSF borrower Indigenous has been pioneering fair trade fashion for years, and the recent tragedy in Bangladesh shows how much their work is needed. Indigenous is now offering to share its transparency and labor practices with the rest of the fashion industry, and urging consumers to demand ethical fashion.

Here’s a taste of what Scott Leonard, Indigenous CEO and co-founder, has to say about the current situation and what’s possible:

“Many fashion industry executives claim full transparency is too hard to accomplish, too elusive, too big to get their arms around. At Indigenous we believe they are not trying hard enough, and they are not using the right tools. This Fall every INDIGENOUS garment will include a QR code on its hang tag. This code launches our ‘Fair Trace Tool’ application. The Fair Trace Tool shares the story of the artisans who make our clothing, information about our supply chain and social impact survey data.”

Read Scott’s full blog post here

As he says, “No one should have to suffer and die to produce the clothes we wear.”

A Healthy Stream of Capital

April 25, 2013

by Tammy Childers

Originally published in the Spring 2013 RSF Quarterly.

RSF’s purpose is “to transform the way the world works with money,” but what exactly does that mean? In pondering this question, I recalled time spent outdoors exploring a particular creek. I realized there was a metaphor in the story of that creek for a transformed financial system.

Last summer, with my family, I visited Filigreen Farm, a diverse Demeter certified Biodynamic fruit farm in Mendocino County. One morning, my mother-in-law, Joellen, and I set out to tromp through the creek that bisects the farm. This creek, the Anderson Creek, is a major tributary feeding into the Navarro River and to the Pacific Ocean twenty miles away.

In the year that had passed since my last visit, the creek had changed. The water was deeper in some places, but there were also more sandbars. Standing up to our knees in cool, clear and slow moving water we marveled at dark pools of circling fry, audible frogs, and lush vegetation. We lingered in shallow water searching for captivating treasures.

By the time the sun was directly over our heads, we were ready to head back to the cool shade of the house, but with willows, shrubs, and grasses crowding the creek banks and islands, we could see no obvious path to the farm on the other side.

When we finally emerged, we ran into Stephanie Tebbutt, one of Filigreen’s managers. We thanked our host, and Joellen commented on what great fun she had in the creek. This creek, Joellen said, struck her as particularly beautiful; she had not seen a stream as clear as this one since she was a child on her family’s farm in Nebraska.

When Stephanie and her husband Chris, both landscape designers, first came to Anderson Valley in 1982, “the stream looked nothing like its present self: curving, clear, and about twenty feet further back from its former location,” Stephanie said. “It looked like others up and down the Anderson Valley: straight, denuded of vegetation. The landowner at that time had bulldozed the creek each autumn to straighten it, clearing any vegetation brave enough to rear its head along the way. What little survived was grazed down by the cattle.” The practice had eroded the farm land, sending topsoil down to the sea, creating a steep cut bank, and facilitating spring flooding.

Lush landscape and Filigreen Fram

Lush landscape and Filigreen Fram

Together the Tebbutts set out to stabilize the creek bank. Bringing the natural rhythm and energy back to the water would be the key to the riparian restoration. “Water is not meant to flow in a straight line,” Stephanie said. “There are unintentional consequences to forcing water in that way: flooding, bank erosion, and a wider, shallower summer creek bed with higher water temperatures unsuitable for nurturing new life.”

They began by planting willows and cottonwoods along the banks, and over a period of 18 years, experimented with an array of engineering techniques to stabilize what was considered one of the worst erosion problems in the county. Many of those early efforts failed, but eventually, Chris came up with a system to build jetties, or “nick points” to slow the creek in flood. The jetties were planted in fast-growing riparian trees and formed the basis for what would eventually become the flowform structure that enabled meander to return to the creek. Now the water would hit a berm, follow the curve, hit another berm, and follow the curve, depositing silt and topsoil from upstream at the back of the jetties, and scouring out deep pools in front, effectively changing the flow of the water back to that of a healthy creek.

In time, silt and soil built up along the banks and native weeds and woody plants moved in to capitalize on the new territory, thus providing habitat for the life we witnessed. Now this half-mile stretch of Anderson Creek is monitored by county and state agencies for its remarkable come-back.

As Stephanie explained this, I exclaimed “That’s what RSF is trying to do with money! We are trying to change the flow of capital so that it flows to the businesses and organizations that are creating a deep, positive social impact.”

With our current financial system, if we speak of the flow of water as the flow of capital, we could say the flow has been interrupted; it has been bulldozed and channeled straight. As a result, the flow is muddy and opaque and the wealth is removed from its origins and deposited far downstream.  When bad news hits, businesses lacking deep roots in the community are wiped out in a flash flood. As aggradation, or the displacement of sediments caused by repeat floods, alters geography resulting in shallow and dispersed water flow, a financial crisis erodes capital from communities and displaces it to far off investors resulting in less capital for local initiatives.

A healthy financial system can be seen as a healthy stream with its meander restored by the actions of the social finance community. Through direct lending, investing, and giving, RSF can contribute to restoring the natural flow of capital to businesses and organizations that encourage a healthy economy, environment, and people.

With a transformed financial system, we will directly invest in businesses and organizations with deep social impacts that encourage and support their communities. There will be diversity among these businesses and they will add value to their community by investing in people and practices that are good for society and the planet. The flow of capital will be patient and will settle into areas suitable for sparking new opportunities that, in turn, contribute back to the greater flow. More people will have access to and benefit from this flow, increasing the diversity of businesses and organizations. When bad news hits, it will not be a tragedy because our businesses and organizations will have established deep, healthy, community-based roots.

Now I ask you to ponder: What does it mean to you to transform the way the world works with money? How would that world be different than it is today? What needs to happen to make that change? And what can you do to contribute to it?

Tammy Childers is Loan Servicing Manager at RSF Social Finance.

Easter in the Investment Conference Room

March 28, 2013

At this time last year, RSF investor Rosemary Feerick, brought her two sons to our office to open their very own Social Investment Fund accounts. Later, she decided to share the story of her experience that day.

This essay was originally published in the Harvest Time newsletter.

by Rosemary Feerick

When we arrived at RSF Social Finance, Ellie, the receptionist, asked if we wanted a cup of tea.  It was the day after Easter, a day off from school for my sons.  I told the boys that we were going to San  Francisco to invest some of their college savings.

On the way to the city, we stopped at our credit union and withdrew money from a savings account I had set up for my eight year old son Ian. I gave Ian the check to hold in the car. He studied the piece of paper carefully. When we got to RSF Social Finance, he was still holding the check with care.

“I would like a cup of darjeeling, please,” Ian responded to the receptionist’s question.

“Darjeeling. Hmm. Let’s go see if we have some,” she offered, leading us into the kitchen.

Mark Herrera, RSF’s Client Development manager met us there. As Ian and Ellie focused on tea, Mark showed the composter to my 11 year old Roddy and explained what biodynamic sugar is. “These are some of the products made by the companies supported by the fund in which you’ll be investing,” Mark explained.

Next, he led us upstairs to the conference room overlooking the Golden Gate Bridge. We felt very important.

In the conference room, Mark gave the boys samples of organic cookies. Together they read the ingredients, all of which actually sounded like food. Then, Mark told the boys about a company that employs people who are newly released from prison. Next, he described with excitement a sustainable fishery in Alaska that is allowing the Eskimo people to keep their way of life. “These are more of the companies the fund you are investing in supports.” The boys nodded.

Mark then sat down with Roddy and Ian and explained the mechanics of the investment, making sure they understood how it worked and what the rate of financial return would be. Together they did the math to figure out what that translated to in terms of the boys’ investments.

Rose Feerick & Sons

Rose with her sons Ian and Roddy.

When Mark was satisfied that Roddy and Ian understood what they were getting into, he had them each fill out an application and sign it. Their accounts were officially open.

On one level, this exchange felt like no big deal; it seemed like how making an investment should work. But as I watched, another part of me wanted to celebrate. I was aware that what I was witnessing was the result of years of my searching for a different way with money.

Twenty years ago, I received a gift of love that came in the form of a financial portfolio. At the time, I understood little of how investments worked. But as I learned about the mutual funds in my portfolio, I realized that I was invested in companies whose products and ways of doing business offended my conscience. I searched for other models of investing and discovered socially responsible mutual funds.

Initially, I felt good about moving my money into those funds. But as I read through the prospectuses and annual reports, I soon realized that in spite of a variety of social screens I was still invested in companies whose products I would not buy. The socially responsible mutual funds I had in my portfolio felt to me like the lesser of two evils.

A few years later, I was attending a conference on Sabbath Economics when Rob Baird of Progressive Investments (now Portfolio 21) got up to speak about investing. He did not have any fancy visuals, but as he spoke, I felt as if fireworks were going off. Listening to Rob, I saw for the first time a way that investments could do something good in the world.

Up until then, I felt I had to hold on to some of my investments in order to care for my family. But I felt horribly conflicted about doing so because it felt that my money was sitting inside of a global economic system that is causing harm. As Rob spoke about different models of investing, a door to a whole new world opened for me. I started to search for investments that could do good.

I learned about investing in microcredit; in affordable housing mutual funds; in community development banks; fair trade companies; and social investment funds. I worked with Andy Loving, an advisor who shares my faith and began to move some of my money into those kinds of investments. When the financial statements came each month, I noticed how differently I felt opening the ones that came from investments I had chosen. Instead of feeling guilty, I felt excited. It felt like a privilege to participate in the work of fair trade companies and local organic farms.

Shifting to alternative economic models required that I let go of the possibility of a high financial return. Having been raised to believe that receiving a high financial return was “good stewardship,” that was hard at first. Didn’t I have a responsibility to seek high returns for myself and for my children?

But as I learned about the impact many corporations are having on the ecosystem and the human family, I came to believe that that definition of good stewardship was inadequate. Good stewardship, for me, needed to take into account the world that I am passing on to my children as well as the money that will eventually change hands. I wanted any investments that I participated in to be part of creating a world full of life.

On one level, my visit to RSF Social Finance to invest a portion of my children’s college savings on Easter Monday was simply the next step in my process of shifting the investments I manage into such vehicles. But that day in the conference room I felt as if something else was happening too. There was something there that felt holy.

As a mother, I feel a responsibility to form my children in Easter hope. I try to do that by modeling and letting my children know about ways of living that respond to the crises of this historical moment with alternatives that bring life. My children will inherit this world. For me, it is not enough to bring them to church. I feel I also need to show them how to discern where God is moving in the world and teach them how to participate in that.

That is what it felt like was happening that day at RSF. In the conference room, I sensed that my boys and I were participating in a way of investing money that brings life to everyone it touches. In addition, Mark’s taking the time to teach the boys about how their investment would affect others was powerful. It was as if he understood that giving children life-giving possibilities when it comes to money is a radical investment in the future.

As I witnessed the exchange, I felt a sense of awe and gratitude. I felt a Holy Presence with us as we sipped tea, ate cookies, and filled out investment account forms on Easter Monday.

Impact Investing for All

December 4, 2012

Earlier this year, Mark Finser, RSF Board Chair, had a lively conversation with Chris Mann, Guayaki CEO, and Matt Reynolds, Indigenous Designs President. Matt and Chris were energized about the RSF pricing meeting in which they had just participated and were enthused by the community spirit. They started asking several questions including: How can RSF borrowers better acknowledge their relationship with RSF? In what ways can the borrowers cross-promote their brands and support one another? How can the borrowers leverage their communities to raise more awareness about RSF and the Social Investment Fund, which allows individuals to make a return on their investment while providing loan funds to phenomenal social enterprises?

Chris and Matt’s spirited energy is something we always see following the RSF quarterly pricing meetings and community receptions.

There’s no question that RSF’s pricing meetings are unique. The three stakeholder groups in the RSF Social Investment Fund—investors, borrowers and RSF staff—come together to discuss the interest rate for the upcoming calendar quarter. As far as we know, this process is unprecedented in the world of financial services. What bank is out there asking investors what rate they should receive or inquiring of borrowers what a fair loan rate would be? But, it’s not just the discussion of price that makes the pricing meetings so revolutionary. It’s what happens during the meetings while the participants are sharing their needs and motivations. It’s the stories they tell about what led them to become an RSF investor or, as a borrower, what the RSF loan has allowed their social enterprise to accomplish. It’s community building around financial transactions. Through our expanding and engaged community, amplified by the impact of our borrowers, we’re building the next economy—one that considers everyone’s needs and restores trust in financial relationships.

After several discussions and brainstorms following up on Mark, Chris, and Matt’s enthusiastic conversation, we launched a Facebook campaign: Impact Investing for All. Along with Guayaki and Indigenous Designs, we’ve been joined by additional RSF borrowers: gDiapers, Happy Family, Late July, Mary’s Gone Crackers, and Nutiva.

Impact Investing for All highlights the RSF Social Investment Fund (SIF), in which anyone can become an impact investor with a minimum of $1000. All of the money in SIF is loaned to path-breaking social enterprises. If you open an account, you know where your money is working while you receive a financial return! (And, you’ll be invited to participate in the quarterly pricing meetings.) For the duration of the campaign, the borrowers will be promoting each other and highlighting this incredible community of social enterprises.

These participating social enterprises are passionate, inspiring, dedicated, and making a world of difference. We are honored to have them as part of our borrower community and we are all lucky to have such committed, mission-driven businesses in the marketplace.

Wondering if you should participate in the Impact Investing for All campaign by opening an SIF account?

Are you a mom or dad in love with the Happy Family lines which offer delicious and nutritious food for your kids? Or, are you a gMum or gDad, committed to your baby’s comfort and a healthier environment by going with disposable gDiapers?

Perhaps you’re gluten free and can’t get enough of Mary’s Gone Crackers? Or are superfoods your thing and Nutiva products a dietary staple? Do you appreciate delicious organic snacks and reach for Late July when you need a treat?

Maybe you’re a Guayaki yerba mate aficionado (we have a few on staff!)?

Is fair trade fashion a passion and Indigenous Designs a trusted purveyor?

Or are there other borrowers in our community you know and love?

If you’re interested in participating in building the next economy and know that direct, transparent and personal transactions are necessary for a resilient financial system, become an investor at RSF. All of the participating borrowers have offered generous discounts, so we have gift packages for those who open a Social Investment Fund account before Dec 31, 2012. The gift includes a $50 Indigenous Designs gift card, a $25 Happy Family basket, and much more! The gifts are limited – get yours today!

To learn more about the participating borrowers, check out the campaign page: here

To open an account, contact Mark Herrera at Mark.Herrera@RSFsocialfinance.org or 415.561.6160.

 

Building the Next Economy

October 8, 2012

You’ve probably heard of the “new economy,” which often refers to social media, sharing-based businesses, and sometimes socially responsible businesses. RSF Social Finance is working to build the next economy: one that’s rooted in community, considers everyone’s needs, and restores trust in financial relationships through transactions that are direct, transparent and personal.

Through our innovative investing, lending, and giving programs, RSF provides critical access to capital for path-breaking social enterprises working in Food & Agriculture, Education & the Arts, and Ecological Stewardship. We collaborate with like-minded organizations to create a financial infrastructure that will support the next economy. And we’ve democratized impact investing with our Social Investment Fund (SIF), which allows anyone with a $1,000 minimum investment to participate in building the next economy.

This is incredibly ambitious. We’re asking you to help spread the word as we promote our “building the next economy” stories on our website, Facebook, Twitter (#nexteconomy) and elsewhere. We’re focusing on these points:

  • RSF provides critical access to capital for path-breaking social enterprises.
  • RSF collaborates with like-minded organizations to create a financial infrastructure for the next economy.
  • RSF has democratized impact investing with the Social Investment Fund, which allows anyone with a $1,000 minimum investment to participate in building the next economy. More information on opening an account: here

Read our latest borrower stories on the Reimagine Money Blog:

Guayakí Pioneers Market-Driven Restoration

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

Indigenous Sets Out to Remake the Apparel Industry

B Lab Seeds a Movement Toward a New Kind of Corporation

Strong Vision Helps Pine Hill Waldorf School Persevere and Lead

RecycleForce Keeps Electronic Waste Out of Landfills and Ex-Felons Out of Prison

 

Strong Vision Helps Pine Hill Waldorf School Persevere and Lead

September 24, 2012

Building the Next Economy

Fire is a defining element for Pine Hill Waldorf School—as both metaphor and history. In a sense that’s true for RSF as well.

The old New Hampshire farmhouse the school had occupied since shortly after its founding in 1972 burned to the ground in 1983. Determined to rebuild, the school formed a fundraising team. Among those they approached was Siegfried Finser, who at that moment was reviving the Rudolf Steiner Foundation (now RSF Social Finance) as a social investment vehicle.

“Our situation ignited the rebirth of RSF,” says Arthur Auer, then a Pine Hill teacher and now director of the Antioch Waldorf Teacher Training program, located during the summer on Pine Hill grounds. “Forces and people coalesced and created a comprehensive school master plan and one of the most striking examples of Waldorf school architecture in the U.S.”

INSPIRATION

“I saw an education for children where their whole beings were tended to and cared for—bodies, minds, spirits—and people coming together who all wanted that,” recalls Sherry Jennings, who has been a Pine Hill teacher from the beginning. “I was very inspired to tend that flame.”

She notes that Pine Hill was at the forefront of a surge of interest in Waldorf schools, which numbered only about a dozen at the time, most of them started in the 1940s. “Parents were looking for a new kind of school community, where they could be part of it and have connections with other adults who shared similar values.”

A similar “hunger” arising again today gives the school fresh inspiration, she says. “We’re coming full circle, in a way. I see that parents are really longing for deep connections.”

INNOVATION

That intense parent connection to the school was an important aspect of an innovative $1.1 million rebuilding package that included $500,000 in pledge loans and loan guarantees through the newly minted RSF and an innovative parent bond program. To spread costs, parents of new students were required to purchase a $1,000 bond that could be redeemed upon graduation; at that point many opted to donate their bond to the school, producing an ongoing asset-building stream.

With Pine Hill as a model, RSF has continued to support Waldorf schools, not only by providing capital but also by helping them to build communities willing to commit financial and other resources to a project’s success.

At Pine Hill, the school community also was integral to designing the new building. The architect interviewed teachers, friends, parents and children, and the children drew pictures of what they thought the building should look like. The result was a building that appears to emerge from the land itself.

“We wanted the building to arise out of a sense of place in the forest, on that granite hilltop,” Auer says, “and we wanted it to be not just environmentally friendly but also to fit into the environment. Its main gesture is a big heart of an auditorium in the center and two classroom wings embracing the children as they stream into the building.”

The auditorium was completed several years later in a second building phase, and unbelievably, a second fire struck as the last coat of finish on the stage was drying. It destroyed the auditorium and damaged both classroom wings. Insurance covered the cost of rebuilding, but “that fire was extremely painful,” says Auer. “That building was built with love by a whole team of parents.”

Now Pine Hill is building again, and again with help from RSF. The Children’s Village, an early childhood education center that fulfills the school’s master plan, is taking shape next to a biodynamic community farm. “We’re really excited about The Children’s Village,” says Jennings. “This is a space where we can protect and honor the needs of the really young child. We’re also doing publicly accessible parent education, which is a way to contribute to the whole community.”

Pine Hill child care center

IMPACT

“Without RSF we would not have been able to develop as full a master plan and model school,” says Auer, adding that the impact is not just local: The Children’s Village speaks to other Waldorf schools about the value of establishing their own early childhood education centers.

“One could become very anxious about taking such a risk in a recession,” Auer says. “But I think The Children’s Village is the right decision, to have the courage to go outward and serve the community. Others might say this is not the time to do it, but we are not doubting. Having gone through two fires has proven that Pine Hill has a strong body of life forces. I always have had confidence that those forces will prevail and bring us through to another new phase.”

VITALS

Organization name Pine Hill Waldorf School
Impact area Education & the Arts
RSF relationship Loan recipient, RSF investor
HQ Wilton, New Hampshire
Annual budget About $2 million
Employees 20+
Students 180 children, 125 teacher trainees (summer campus)
Communities served Local area and Waldorf education nationally

 

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