Social Finance

Reflecting on SRI in the Rockies and True Impact

November 5, 2009

By Taryn Goodman

“We need another screened mutual fund like we need a hole in the head.” This direct quote from a presenter at the 2009 SRI in the Rockies Conference seemed to capture the same sentiments I was feeling during my time at the event.  As a new employee of RSF, I am continually amazed at the innovative paths we choose to take here as it relates to impact investing (and beyond), which is why I was so surprised by the intense focus on screening at this conference.

In 2005, RSF first decided to focus its Donor Advised Fund Portfolio on impact investments.  At that point, we had been working with asset managers to invest in funds that screened companies according to their environmental and social impact, finding best-in-class investments in each category for the portfolio.  Nearly five years later, we have altered that strategy as we decided it did not fit with our core belief that investments need to be direct, transparent and personal, nor did it allow us to realize the true transformative impact which we seek in all we do.  To that end, our current portfolios rely heavily on private equity investments, ensuring transparency and deep social impact as well as a holistic approach to change.

Even though they are not always focused on unique, ground-breaking investments that support deep social and environmental change, SRI in the Rockies attendees are still pushing the limits and providing a valuable resource focused on keeping public companies and the financial system in order.  The idea of advocacy was a key theme at the conference, with Phaedra Ellis-Lamkins from Green for All, Smeeta Ramarathnam from the SEC, and Damon Silvers from the AFL-CIO urging the community to use their voice along with their dollars to promote change and reform as it pertains to the financial system, corporations, and the federal government.

While advocacy using dollars and voices is a clear and important need, I would still urge industry leaders to look beyond pure screening and shareholder voting, as these types of investments/activities do not provide pioneering impact.  I now realize that what I thought was common sense – moving your cash to community development banks where it is working to create low-income jobs and support smaller communities; using your dollars to support direct investment in revolutionary approaches to solving the world’s problems; not looking for short term gains while creating greater economic loss, etc. – is actually what makes RSF so special and unique.

I think Ben Cohen of Ben & Jerry’s fame put it best when he asked RSF CEO Don Shaffer and me, “Why are you guys so weird?”

Taryn Goodman is Impact Investing Manager at RSF Social Finance.

The Economics of Peace Conference: A ‘Stimulus Package’ for the New Economy (Part II)

November 2, 2009

By John Bloom

(This is a continuation of a post from 10/29/09, which you can read by clicking here.)

Economics of PeaceEach afternoon of The Economics of Peace conference there were workshops related to the many facets of money and financial systems. Monday there were four offerings. RSF President & CEO Don Shaffer led a packed workshop entitled “Social Finance: Building Regional Capital Markets.” Through a brief presentation and small discussions, the group explored: what would the economy look like if active and diverse regional capital markets were developed? What will it take to create more place-based markets and means of exchange? Can we rebuild our sense of community self-reliance in relation to national and international economies?

Also on Monday afternoon, Norman Solomon addressed the barriers and opportunities of “The Green New Deal.” He explored how the quest for green sustainability might merge with the drive for economic justice. He presented what some of the new strategies need to be, and the challenging dynamics of the current situation in the media, financial systems, and the psychology of economic crisis. Charles Eisenstein led a workshop on Sacred Economics, the title and subject of his forthcoming book. This workshop explored the many perspectives of gift economics. He talked about the history of money systems that organically encourage sharing instead of competition, egalitarianism instead of polarization of wealth, and the building of social, natural, cultural, and spiritual capital, instead of their destruction. As a step toward peace, he proposed the radical idea that all workshop participants make investments that earn 0% interest. Trent Shroyer led “Sustainable Economic Cultures,” which looked at several models of sustainable economic practices including: Gandhi’s Swaraj, the no-growth movement in Europe, and examples of Ivan Illich’s post-secular vernacular domains.

On Tuesday, four more workshop sessions followed a panel presentation on complementary currencies. C.J. Callen, Pilar Gonzales, and I led a conversation on “Money, Race, and Class.” This facilitated conversation served as a safe space to talk about some of the most complicated and unaddressed issues in economics and our financial systems. The approach allowed for a depth of conversation that supported listening and speaking in such a way as to allow for transformation in the participants’ way of thinking.

Following the morning plenary theme of local living economies (as articulated by Judy Wicks and Stephanie Rearick), Kelley Rajala and Derek Huntington of Sonoma County GoLocal Cooperative and Mary Rick of BALLE presented “Accelerate the Sustainability Movement in your Community.” They worked with the processes of forming a values-based network, mapping the resources of the community, developing sustainability policy, and implementing community-based financing models. This workshop was well attended as there is significant interest in re-localizing economies and understanding what that means from economic, cultural, and political perspectives.

Richard Logie, the founder of GETS (Global Exchange Trade System), led an introductory workshop on what the elements of a complementary currency or credit clearing exchange might look like so that participants would have a context for working in this innovative business-to-business system. He used the lessons of VISA and the European Union to demonstrate the work of creating new agreements, setting up a framework of exchange methodology and standards so that users of the system can work toward mutual ownership of it. Richard also led a much longer, more detailed workshop on Thursday entitled “Get Real! With Currency: 50 Questions You Should Ask Before Starting Your Own Exchange.” The final Tuesday workshop was led by David Ransom on “Taking a Leap: A Marxist Look at Social Change in an Epoch of Economic Revolution.” Ransom looked at the impact of technology in relation to the value of labor and posed the question about whether the current economic revolution will bring about a social revolution as more and more of the work force is displaced.

Wednesday afternoon saw four workshops that touched on a wide range of topics. Sam Keen addressed the topic “Money and War: The Quest for a Moral Alternative.” He focused on the issue of social and economic justice as the avenue for achieving peace. Woody Tasch, author of Inquiries into the Nature of Slow Money, presented his work under the same topic. Tasch has been developing the notion of patient capital as an approach to investing that will rebuild local economies and change our attitudes about expecting or extracting short-term returns on investments that tend to bring about ecological and cultural degradation. Osprey Orielle Lake led the workshop “Respect for the Global Commons.” Lake was the artist-in-residence for the conference and also spoke about the value and beauty of our environment and natural systems, and the rightful use of these precious compromised resources. The fourth workshop was offered by Bev Bell and Mateo Nube. Named “Towards a Just Ecological and Economic Transition,” they presented the stories of those directly impacted by the financial crisis. They showed how those communities have developed practical solutions to the challenges through community self-determination.  What they demonstrated was that economic security and ecological sustainability need not be in opposition if worked through with transformative power.

Thursday, following a panel discussion on fair trade, Andrew Kimbrell went into much more detail about the concepts and practicality of “Salmon Economics” in a workshop. Bob Graham, one of the pioneers and leaders of micro-enterprise, led a practicum called “The Next Step After Putting Micro-entrepreneurs into Business—Helping Them Become Successful.” With a focus on Central America, he spoke about the fact that while micro-credit has made credit accessible to millions of people at the bottom of the pyramid, rates of poverty have not changed. He proposed a new direction for micro-credit as a tool to alleviate poverty in a more systemic and sustainable way.

Friday morning, prior to the closing session, there were three workshops offered. Daniel Pinchbeck presented “Why We Launched Evolver: A Social Network for Conscious Collaboration.” He spoke about his involvement with the new technologies of the internet as a way to engage with provocative and important questions such as: could the social technologies of the internet help us replace many of our financial transactions with exchanges based on trust and reciprocity? Can a social network be designed to help reengineer our current society, offer new ways for people to collaborate, and organize for social change? Julianne Maurseth led a workshop (“Purpose and Outcomes for Conference Participants”) designed to weave together many of the insights gained at the conference. And myself, Pilar Gonzales, and Katrina Steffek led a conversation called “What If…” which explored scenario thinking for the new economy. This participatory workshop elicited from attendees the tools they had gained throughout the week and then asked them to imagine how they will apply them to their home, organizational, or work life—their real life economies.

On Friday, the conference conveners each shared some appreciations and closing reflections on the conference, and I would like to leave you with my own closing comments summarizing the week: “During our journey here together in Sonoma we have been traveling new economic terrain, challenging social terrain, and transformative cultural terrain. I put this in the progressive tense—not because we are a room full of tense progressives—but, because the work of economic change will yet be hard, and seem long. Let’s take joy in every step forward, practice forgiveness so that it can heal, and, finally, trust in the nature of wisdom, the wisdom of nature, and in the aspirations of the human spirit as we see each other anew in our economic life. May peace be with you.”

John Bloom is the Director of Organizational Culture at RSF Social Finance.  If you enjoyed this post, look for John’s recently published book, The Genius of Money, now available from

The Economics of Peace Conference: A ‘Stimulus Package’ for the New Economy (Part I)

October 29, 2009

By John Bloom

Economics of PeaceFive days of intensive presentations, workshops, and conversations focused on the elements of an economy for the 21st century were at the heart of The Economics of Peace Conference held in Sonoma, California, October 18-23, 2009. The conference was co-convened by RSF Social Finance and Praxis Peace Institute.

World-renowned speakers such as James Galbraith and Vandana Shiva were keynotes at the conference. Both of them explained the current state of economic crisis from the point of view of systemic inequity, and made recommendations for how we can solve our economic problems by taking a long-term view of what is needed to restore the environment, have a more just, non-violent economy, and stem the disasters of climate change.

The concepts and practices of local living economies were another central theme throughout the conference, evidenced primarily by the innovative idea of siting the conference in the local living economy of Sonoma. Conference attendees made use of local restaurants, hotels and guest stays with local residents. Plenaries and workshops were held in the reconditioned Sebastiani Theater, the Sonoma Community Center, and other spaces connected with local businesses. Local musicians and artists performed at each of the events.

The Sunday night opening ceremony included the Mayor of Sonoma reading a formal City Council Proclamation recognizing the importance of the conference, followed by a brief presentation from Congresswoman Lynn Woolsey (who represents Sonoma). Don Shaffer, President and CEO of RSF, spoke briefly about the importance of transforming the way the world works with money toward an economics of peace. Shaffer was followed by A.T. Ariyaratne, founder and president of the Sarvodaya Shramadana Movement in Sri Lanka. Dr. Ariyaratne outlined the values of Buddhist economics, the eight-fold path with a focus on right livelihood. He spoke particularly about the important distinction between full employment and full engagement in economic life in the Sarvodaya villages.

Jacob Needleman and Sam Keen, two noted philosophers and authors, began the Monday sessions, with a deep dive into the psyche, mythology, archetypes and consciousness of money and economic activity from the view of the inner human being. In the evening, David Korten gave a fiery presentation outlining the agenda for a new economy based upon overcoming the ills of the current one. Korten spoke about the value of re-localizing economies and exposing the abuses of Wall Street and large corporations.

Tuesday morning, Judy Wicks, the founder of White Dog Café in Philadelphia, spoke about “Creating a Non-Violent World through Local Living Economies.” She discussed her decision to collaborate with other local restaurants to support local farmers, pay living wages to staff, and remain sustainable. Out of this decision, the Business Alliance for Local Living Economies (BALLE) was formed. Wicks was followed by Stephanie Rearick, who spoke on “Real World Caring Economics: TimeBanking and Social Justice”. Rearick is the leader of the Dane County (WI) TimeBank, the most successful TimeBank in the US. She explained how time could be used as a currency to support exchange activities that would not normally be funded by federal currency.

Ellen Brown, author of Web of Debt, then presented ample evidence of why the issuance of debt as money by banks has caused such enormous economic hardship. Using the model of the successful Bank of North Dakota, a state-owned bank, she proposed that it would be possible to do the same in California and thus return ownership of the bank to the people that it serves.

The focus on Wednesday was the practice of worker-owned cooperative businesses. Two leaders from the Mondragon Cooperatives in Spain, Mikel Lezamiz and Fred Freundlich, spoke at length about the founding and evolution of Mondragon, which has developed into the largest worker-owned co-op in the world (with over 34,000 workers). Their activities include everything from industrial manufacturing, to agriculture, to their own bank and insurance companies, to mention just a few. There were also several Northern California worker-owned businesses on hand to discuss methods of running cooperatives: Alvarado Street Bakery, Arizmendi Bakery, and Rainbow Grocery.

Thursday morning started with speaker Tom Greco, author of The End of Money and the Future of Civilization. Greco made a passionate plea for us to take back the credit commons from the banks by creating our own mutual credit clearing mechanisms. This is a tried and true model that has been in use by businesses through barter for many years. He suggests that it could have much broader applications for how we conduct economic activity. Greco was followed by noted environmental attorney Andrew Kimbrell. Kimbrell spoke on “Salmon Economics”. He described the entire life cycle of the salmon and explained how it could serve as a model for how we could think about economic cycles as meeting everyone’s needs rather than just those of the few. He also articulated what the salmon have to tell us about the symbiotic relationship between local and global economies.

Friday closed with some reflections on the conference, via the humor of Swami Beyondananda, followed by an exploration of next steps. It was also announced that videos of the plenaries will be posted within the next couple weeks on the conference website: There will also be footage of many of the workshops and panel discussions available soon. We will also report on some of them in future posts.

The five-day event marked a watershed in economic thinking. By bringing together leaders and practitioners in transformative economic practices, new collaborations and projects were already developing before the end of the conference. As one participant said, “It is amazing when you bring 200 people together for five days to talk about money. When else has that ever happened?”

John Bloom is the Director of Organizational Culture at RSF Social Finance.  If you enjoyed this post, look for John’s recently published book, The Genius of Money, now available from

**Watch for Part II of this blog post in the coming days, where John will reflect on some of the workshops and panel discussions from The Economics of Peace conference.

RSF Fall Board Retreat: Kicking Off the Next 25 Years

October 19, 2009

By Mark Finser

For the past several years, the RSF Social Finance Board of Trustees has met in late September for a special meeting and retreat with invited guests. This September was distinctive since 2009 marks RSF’s 25th anniversary of social enterprise lending. Due to both this exciting occasion and the exceptional economic times we are in, the Board and staff not only wanted to look back at the past, but more importantly, wanted to meet with friends and colleagues who are also leaders in the space of social finance.  We hoped to collectively imagine with them what the world might be like 25 years from now and what is needed between now and then in order to create a world that provides for everyone in a socially and environmentally responsible way.

All told, there were more than 35 of us present, which resulted in many unique contributions and thoughts being shared. I would like to highlight just a couple interesting thoughts that seemed to recur throughout the weekend. One has to do with the theme of food. As one participant said, “if we get food right” then everything else seems to follow. I know there are many other equally valid starting points for discussion, but there is something so tangible about the need for food – and water, I might add – that it really does make sense as a base to build around. There are so many great local food initiatives, and paying attention to the land in this way allows us to easily imagine a new economy establishing itself based on regional and local food systems.

Another participant called for ways to give more support to the local entrepreneurial businesses that naturally spring up after agriculture has been established in a healthy way. This led to the question of how to have more services and training to encourage and support the entrepreneurs leading these businesses so that we can move away from their companies being seen as high risk investments that are paying low risk returns.  There is also the issue of today’s business models being such that social entrepreneurs in need of capital very often find themselves funneled into the only current model of success – namely to grow and grow and then be acquired in order to provide liquidity for both the investor and the entrepreneur. This may be perfectly appropriate in some instances in order to have greater impact; however, many of us were in agreement that we need to support other models in order to encourage different forms of sustainable business and to keep social missions intact for the long term.

All of us felt blessed to be part of such a conversation and to learn about each other’s initiatives to support a more just and sustainable world. Whether it was in the sphere of complementary currencies, or developing new, holistic economic and financial models, or creating charters for businesses and communities dedicated to the common good, every project is inspiring and all of the participants are committed to shifting paradigms in our respective fields. RSF is thankful to our guests for having devoted their time and thought to participating in such a dialogue with us, and we are thrilled about the opportunities for collaboration in this ever-growing field of social finance.  We look forward to hearing our readers’ thoughts in this dialogue on the future of social finance here on the Reimagine Money blog!

Mark Finser is Chair of the Board of RSF Social Finance.

SOCAP09: Learnings and Questions

September 30, 2009

By Jenny Hsieh

The 2nd annual Social Capital Markets Conference (SOCAP09) convened earlier this month over three days in San Francisco’s Fort Mason Center.  This year, attendance was close to 1,000 and included investors, entrepreneurs, and nonprofit and for-profit organizations.  With over 50 different breakout sessions and plenary panels, the conference addressed the many different interests, social agendas, and backgrounds of its attendees.   “SOCAP09 Is About Connections” was this year’s focus, recognizing that the social capital markets have come a long way and collaboration is key in order to achieve scale.

After interning at RSF over the summer, I attended the conference as both a participant and a volunteer.  It’s nearly impossible to fit all the “a-ha” moments I had during the conference into this entry, but below are some of the questions and themes that came up during the conference for me:

How much of a role should government play in the social capital markets?

  • The conference started off with a keynote address from Sonal Shah, Director of the White House’s new Office of Social Innovation.  In her address, she emphasized the supportive role of government and its intention to help focus current resources, to cultivate environments, to rely on partnerships with existing NGOs and social enterprises, and to support measurement, evaluation and transparency.  With the creation of this new White House office, it seems like we’re moving in the right direction and breaking down the barriers that many social enterprises face in accessing government funds.  But it’s still unclear what exact policy implications this will have overall.

What are the strengths and weaknesses of cross-sector partnerships and when do they make sense?

  • I attended a session entitled “Investing at the Intersection of Public Good and Market Discipline: The Case of Agricultural Finance.”  This panel focused on Root Capital, and how Starbucks, which started out as a guarantor on Root’s loans to coffee farmers, has now become a meaningful investor (announcing an additional $2M investment to bring their total to $9M).  This panel exemplified one way that partnerships between nonprofits and private enterprises can work well and offer maximum benefit to all stakeholders.

Is it a good sign when traditional investors enter the social capital markets?

  • I attended a panel entitled “Wealth Managers: Catalysts for Change?” and Raul Pomares of Guggenheim Partners gave an example of a client who wanted to invest in a socially screened mutual fund – not for the social mission, but rather because it outperformed its peers.  Is this heading us in the right direction or the wrong one?
  • How do we address the “two-pocket” investor who wants to keep her investments and philanthropy separate?

Why are the social capital markets still overlooked?

  • During the “Showcasing the Social Capital Spectrum” plenary, panelists questioned why the same people who seemed to get us in our current financial/economic mess are those same people trying to find a solution. A subsequent challenge was made for the media (and moderator Matthew Bishop of The Economist) to shine a spotlight on social capital markets and focus on what’s working rather than what’s not.

Measurement, measurement, measurement.  Network, network, network.

By the end of the conference I felt excited and driven by all the amazing work and new ideas in development.  SOCAP09 did fulfill its mission: to provide a forum to make connections so that the work we do going forward is that much stronger and better informed.  I left Fort Mason knowing that there’s still a lot of work to be done, but optimistic given how much has already been accomplished.

For more information, please check out the SOCAP09 website:

Jenny Hsieh is an MBA candidate (2010) at the Haas School of Business at UC Berkeley.  She interned for RSF’s lending team during the summer of 2009.

Some Reflections on Interest

September 21, 2009

By Siegfried Finser

In my book, Money Can Heal, I mention discussions on the subject of “interest” by the early founders of RSF Social Finance. Perhaps it would be helpful if I shared the gist of those founding conversations.

At the time, we (along with other Rudolf Steiner-inspired banks around the world) read an interesting pamphlet by Margrit Kennedy. The author described the consequences interest has had on all of us, and instead pictured an interest-free world. Interest is charged by those having means, or at least by those who had enough wealth to lend to others; as a result, the costs of almost everything everybody needed – electricity, water, fuel, transportation, and machines – increased. One statement in the article was that about 90% or more of the cost of all those things was debt service. From her perspective, all of humanity was being charged an interest that benefited only those who already had enough resources to lend. The conclusion was that “interest” was bad since it burdened everyone to support the few who were wealthy.

I remember us pondering that issue. We considered how the Islamic world viewed interest. Was charging interest inherently evil regardless of whether it was usurious or not? Would the world be better off if we did not charge interest and simply loaned money to those who could make better use of it? Should RSF Social Finance offer investment accounts that paid no return – only the satisfaction of knowing the money was doing good work?

The GLS Bank in Bochum, Germany actually offered certain socially constructive accounts that paid no interest. We might have continued examining different schools of thought and discussing the question of interest for months had we not engaged in some practical transactions.  Presented with the task of financing our first project, we needed capital and so we began conversations with prospective investors.

One potential investor wondered whether his investment would gradually diminish and eventually disappear due to inflation if he received no return whatsoever. The reality of this situation suggested maybe some interest was necessary to protect the investor.

Another one of the earliest investors was a retired Waldorf school teacher. He wanted his savings to help Waldorf schools as well as other worthwhile projects. Being of modest means, he needed the interest income for his daily expenses. If we did not charge interest, he could not afford to invest in our worthy causes. We wanted to make sure that people with various levels of income could invest in good work.

These examples influenced our ultimate decision. We began by charging and paying modest interest based on an accepted U.S. federal benchmark. Even though zero interest might be better for the world in the long run, we opted for “freedom.” We felt the question of interest needed to be decided by each person depending on his or her situation and motivation.

If we left it to the individual, then we were counting on something altruistic developing in each person which, in time, could possibly lead to an interest-free world. We supported individual freedom and trusted in the unfolding consciousness in every human being.

We wanted RSF Social Finance to offer every individual the opportunity to act of their own free will for the benefit of others. In other words, we needed to make visible opportunities for giving as well as lending/borrowing.

RSF would pay a modest return to every investor, charge a modest interest to borrowers, and make transparent a modest fee to support operations.  As RSF grew in size and complexity, we replaced the fee with a more traditional spread between the interest rate paid to investors and the interest charged to borrowers in order to keep the organization financially sustainable.

To achieve our long term mission of advancing human consciousness, we decided that we would use every lending/borrowing transaction and every giving/receiving transaction to transform how the world viewed and worked with money. This required continuous work to educate our clients about the way that we functioned.

Sure enough, over time, some investors needed their interest for daily living expenses, while others just took it for whatever reason; still others let it accumulate in their accounts, or phoned or wrote us that they wanted some or all to be given to a special project that seemed important to them.

That was how RSF was conceived as a threefold organism: to make transparent the social/spiritual nature of (1) every lending/borrowing transaction and (2) every giving/receiving transaction. A third aspect of our work was advisory and educational activity that would encourage the development of humanity toward social altruism.

Is interest good or bad? Like most things in life, interest (and money in general) can contribute to both good and bad depending on what is done with it. In those early days of RSF, we decided our task would be to facilitate meaningful transactions and to educate investors and borrowers on the social and spiritual consequences of their financial activity. Twenty-five years later, this impulse remains at the core of our mission to transform the way the world works with money.

Siegfried Finser is a Trustee and Co-founder of RSF Social Finance.  He is the author of the book Money Can Heal.  To read a recent Reimagine Money blog post about RSF’s current thoughts and practices around interest rates, click here.

Social Enterprise, Exits, and Liquidity Events

September 7, 2009

By Elizabeth Ü

True Confession: while studying toward my MBA in Sustainable Management, I was baffled by the concept of an “exit plan.” I just couldn’t understand why a social entrepreneur – especially one who poured her heart and soul into building a mission-driven business – would ever want to leave that business in the hands of others… others who probably did not share her passion, commitment or values.  Wouldn’t the founder’s exit lead to a dilution of those values?

Since then, I’ve gained a better understanding of the need for exit plans. Of course there are several reasons why a social entrepreneur might want to move on from a company she birthed and nourished: she might be ready to retire or turn her energy toward other projects. She may be called to take care of herself (or family) in the event of illness. Or perhaps the founder is truly an entrepreneur at heart, and navigating the waters of a mature business just isn’t as exciting to her as starting up a brand new social enterprise.

In order for there to be enough cash on hand to repay the exiting founder for her investment in the business, a succession plan requires some kind of liquidity event. If there are outside equity investors involved, the liquidity event is when they would see their return as well. (See Terri Spath’s recent blog post:, which outlines the benefits and drawbacks of traditional loans and equity financing, and what RSF is doing to offer alternatives.)

Historically, a social entrepreneur has had two choices with regard to liquidity events: 1) Offer up the business for sale to another business (in this transaction, known as an acquisition, the purchaser provides the liquidity), or 2) raise cash through a public offering (also known as the IPO, or Initial Public Offering).

Both of these events can be problematic when it comes to maintaining the values of a mission-driven business. There’s no guarantee that the acquiring company will honor the environmental or social practices of the original social enterprise; there’s also the possibility that the smaller company’s offices may be shut down altogether, with any remaining jobs moving to the acquirer’s headquarters. In the case of taking the company public… well, suddenly there are quite a few shareholders who can exert their voting power in whichever direction they please.

Whether you believe that the sale of Odwalla, Ben & Jerry’s, Stonyfield, Tom’s of Maine, or Burt’s Bees to much, much larger — and in some cases, multi-national — corporations has had a positive or negative effect on the social responsibility of the acquired (or acquiring!) companies, we consider it part of our mission at RSF to champion new and meaningful options for community ownership, wealth creation, and social impact. Here are a few examples for social entrepreneurs seeking alternatives to the usual exit or liquidity events:

One option is to transfer ownership of the social enterprise to its employees, rather than to another company or to the public. When employees have played key roles in developing and implementing the company’s social mission, they can be well-positioned to steward that mission over time; there are also tax benefits to this plan. (For more information about employee stock ownership, read this article by Esther Park, RSF’s Director of Lending:

Another promising model is that of Upstream 21, which is essentially a holding company for small, independently owned companies with products or services designed to benefit their employees, communities and environment. Upstream 21 does more than just talk about values; its founders have written them directly into its corporate charter, mandating that the “best interests” of the company include consideration of employees, the environment, and both the short- and long-term interest of customers, suppliers, and the communities in which the company and all subsidiaries operate. In other words, the risk of mission dilution usually associated with acquisition is extremely low! Focusing within the Pacific Northwest, this is an example of a truly place-based approach.

If you’d like to learn more about the truly innovative work of Upstream 21, visit their website ( and watch this video featuring Upstream 21’s chair (and member of RSF’s investment advisory committee) Leslie Christian, from last year’s Summit on the Future of the Corporation.

Finally, it should come as no surprise that Judy Wicks, chair and co-founder of the Business Alliance for Local Living Economies and inspiration to countless social entrepreneurs, blazed a new path when she decided to transition leadership of her iconic White Dog Café in Philadelphia. Rather than sell the business outright, she drafted a detailed social contract for the new owner. She also retained ownership of the name White Dog Café, which she licenses to the new owner. If the social contract (which details operational standards such as the procurement of local ingredients and equitable pay scales, and requires ongoing leadership in socially responsible business practices) is breached, she can revoke the license. A passionate advocate for all things local, Wicks of course drafted the contract to stipulate local ownership of the Café. (Read more in this article, written after Judy spoke at the Investors’ Circle conference last spring.)

If you have experience with either traditional exit plans and liquidity events or their alternatives, we’d love to hear your stories in the comments section below.

Elizabeth Ü is Manager of Strategic Development at RSF Social Finance.

RSF’s First Annual Borrower Gathering

August 24, 2009

By Ted Levinson

Steiner wrote that in the acts of lending and borrowing “human mutuality or ‘give and take’ enters the economic process in a striking way.”  On July 24th, 15 RSF borrowers and 11 RSF staff experienced this firsthand in San Francisco.

RSF’s first ever borrower gathering was an eye-opening experience that made apparent a gap in our efforts to foster strong relationships.  Although we experience the “give and take” daily with our borrowers, until this July meeting we have done little to foster that same human mutuality between our borrowers.  We have been missing out.

The day-long meeting revealed personal connections, business opportunities, and shared challenges amongst a fair trade tea company (Numi Tea), a performance arts center (Napa Valley Opera House), a gluten-free cracker company (Mary’s Gone Crackers) and  a major network of innovators (Bioneers).  Jeff Mendelsohn from New Leaf Paper left the meeting with a prospective customer for his recycled papers and Robin Brown of Erbaviva may have a new outlet for his line of organic body lotions.  This provided a glimpse into the world of possibilities that could result from our whole community of borrowers (upwards of 80 organizations) connecting with each other.

In my mind, Napa Valley Opera House board member Bob Muh provided the best concrete suggestion for nurturing and expanding these connections amongst borrowers.  He proposed an online platform for borrowers to “give and take” between themselves.  In a twist that perfectly reflects RSF’s spirit, Bob proposed that all the borrowers offer what they can give, rather than what they want.  We’ll be working on putting this valuable idea into action in the coming months.

Steiner’s “human mutuality” ran deeper than simply the business connections that were formed.  There were also lengthy discussions about various issues that we all face, including one in particular: social impact.  Our borrowers share a commitment to deep social impact, and we spent a good portion of the day talking about how to foster and measure this amorphous concept.

There’s no doubt that social impact and financial health are often in conflict.  The most environmentally-friendly packaging is oftentimes the most expensive choice, just as a refusal to compromise on the treatment of workers throughout a supply chain may very well mean a compromise on sales growth.  Nonprofits need to balance the goal of their mission and the path they follow to get there as well.  Hearing our borrowers struggle with this challenge will influence our underwriting moving forward.

Stepping back from the agenda of our gathering, it is worth reflecting on just how unusual and refreshing it was to convene a room full of borrowers with their lender.  I imagine this is a rare event outside of a class-action lawsuit (and much more pleasant).  For me, the day was a tangible example of how RSF is transforming the way the world thinks of and works with money.  The “give and take” bond between a buyer and a seller or between a lender and a borrower is an obvious one.  Less apparent and less mentioned, but no less meaningful, are the bonds that we can promote between our borrowers.

Ted Levinson is Senior Lending Manager at RSF Social Finance.

Revenue Participation Notes: What are they, and why are they an innovative social finance tool?

August 10, 2009

By Terri Spath

Traditionally, enterprises receive capital in one of two ways: they get a loan, or they sell equity in the enterprise. Sometimes, however, neither of these options provides the right fit for an enterprise’s needs and goals, which is where revenue participation notes can provide an innovative solution. But before diving into what revenue participation means, let’s look at the benefits and drawbacks of traditional loans and equity financing.

Traditional loan

With a loan, an enterprise receives cash, and enters into an agreement to repay that cash with interest. The tradeoffs for a loan:

Less Expensive Financing: It is generally less risky for someone to lend money than to extend equity. With a loan, there is usually a valuable asset (a guarantee, a piece of land, or machinery, etc) that the lender could legally take if the loan isn’t paid back. Since lending is less risky, it usually carries a lower price than equity, thus being a less expensive choice for financing.

Promise to Pay: With a loan, there is a legal obligation to pay the money back with interest. Also, lenders will only provide so much – at some point there aren’t enough assets to secure the loan and/or the ability to pay the interest.

Equity financing

By selling equity, an enterprise can raise cash by offering the investor some ownership of the enterprise. There are tradeoffs with equity financing, too:

No Short Term Cash Flow Constraints: In exchange for a cash investment, the investor owns some of the enterprise and the investor’s return is expected to come through the growth of the enterprise. Generally, there are no cash interest payments, and no legal obligation to ever give the money back.

Ceding Some Control: Since the investor now owns part of the enterprise, they have a right to some amount of control over the investment – and, therefore, a voice and frequently a vote about business decisions. The investor’s point of view may or may not align with the founder’s. This ownership gives the investor control over the enterprise that a lender does not have.

“Exit” Requirement: The new owner will want their money back plus handsome profits. This generally involves selling the enterprise to a new party, who will want to run the show (usually without the original founder).

An alternative – Note (i.e. loan) plus “Revenue Participation”

The traditional options don’t always fit for emerging social enterprises, entities built to grow profitably around an important social vision.

Case study: A Great Beverage Enterprise (GBE) that has created a healthy beverage to sell in the U.S. that supports sustainability in the Amazon rainforest.

GBE could sell more product if they had more money to spend on marketing (sales people to get into more stores, creating more products to put on more trucks for delivery, free products at sporting events, etc). However, the founders’ vision does not include the eventual transfer of ownership to a Big Giant Corporation that may dilute GBE’s mission in a drive for high profits (e.g. by creating cheaper formulations that no longer support the indigenous farmers of the Amazon).

Equity providers don’t have a clear way to recoup their original investment (no “exit strategy”), and are therefore hard to attract. GBE can try to borrow money, but the risk for the loan is high – many lenders are unwilling to lend as much money as GBE needs. What should GBE do?

One great solution is a note (typical loan with a coupon) plus revenue participation. With this structure, GBE gets a loan and is responsible for the interest and repayment of that loan. Revenue participation is attached to the loan, and defined as a percentage of the sales. As the revenues of the enterprise grow, it is in a stronger position and its revenue participation payments increase (the percentage stays the same, but the total dollars grow). The note plus revenue participation structure gets capital to the enterprise without affecting its ownership, goals or mission. At the same time, the lender/investor is properly compensated for the risks involved.

The RSF Mezzanine Fund is using this innovative tool to meet the needs of social enterprises, while earning a solid return for its investors. Ensuring that mission-driven companies can retain ownership and continue to have a high level of social impact while expanding their business was the key consideration for RSF in creating the Mezzanine Fund. We hope to see this type of financing become more common as an alternative for triple-bottom-line social enterprises whose priorities are not just profits, but people and the planet as well.

To learn more about the RSF Mezzanine Fund, click here. To find out how you can apply for financing from the RSF Mezzanine Fund, click here.

Terri Spath is the Managing Director of RSF Capital Management.

It’s Happening Right Now

August 3, 2009

By Don Shaffer

Mortimer Zuckerman, editor in chief of U.S. News & World Report, wrote an opinion piece in The Wall Street Journal three weeks ago (July 14, 2009) entitled “The Economy Is Even Worse Than You Think.”

Mr. Zuckerman outlines 10 reasons why we are “in even more trouble than the 9.5% unemployment rate indicates.”  He states that job losses are now equal to the net job gains over the previous nine years, making this the only recession since the Great Depression to wipe out all job growth from the previous expansion.

We can read accounts like this and crawl into a shell; we can hope for the best.  Or we can apply as much ingenuity as we possibly can to address the root causes of our present crisis.

I’d like to propose a “What if” exercise.

What if we create a groundswell around the country where each of us shifts 50% of our investments to within 50 miles of where we live?  This is a challenge introduced by Woody Tasch in his recent book, Inquiries into the Nature of Slow Money.  It’s a provocative idea.

What would be the effect on job creation?  What long-term financial returns would be generated?  How much risk would be involved?  If all the companies and organizations receiving investments used triple-bottom-line standards to measure their success, what would be the effect on community health and ecological well-being?  Is this just a romantic throwback to a previous era?  Would it crimp our global competitiveness?

Picture a regional economy like the San Francisco Bay Area.  What if we stitched together a set of financial vehicles designed to match investors from the Bay Area with small- and medium-sized, privately held, triple-bottom-line, community-based enterprises in the Bay Area?

What if you believed you could earn a consistent rate of return (e.g. 5%) on your portfolio investments, with relatively low volatility, while keeping a much more significant percentage of your money circulating in the regional economy?  What if you lived in the San Francisco Bay Area and you had access to all of the following options addressing the full range of investing, lending, giving, and day-to-day purchasing?

  • Community banks and credit unions (for checking/savings accounts, CD’s, etc): New Resource Bank, OneCalifornia Bank, and Exchange Bank are a few examples based in the Bay Area
  • Direct lending models (for making direct loans to small companies), such as a regional version of Kiva
  • Community credit and loyalty cards (for supporting local merchants and nonprofits) like the following which have implemented in several regions:  GoLocal Rewards and Locals Care
  • Angel networks (for regionally-based, triple-bottom-line equity investing) that might operate like regional versions of  Investors’ Circle or Golden Seeds
  • Direct philanthropic models (for making gifts to local nonprofits) similar to or Portland’s ChangeXchange
  • Community development venture capital funds (for early-stage equity investing) like Pacific Community Ventures
  • Regional stock exchanges (for investing in mature, community-based businesses), such as a regional version of the Social Stock Exchange being developed in the U.K.
  • Regionally-focused holding companies (for helping mature, community-based businesses with leadership succession and liquidity) like Upstream 21
  • Complementary currencies (for encouraging local purchasing) like Time Banks or the BerkShares system in Massachusetts.

Imagine this is possible, because it’s happening right now.  In sectors like sustainable agriculture, renewable energy, zero-waste manufacturing, independent retail, and green building, there are a growing number of excellent companies in which to invest.  With financial vehicles like those listed above, there are more and more viable ways to keep your money closer to home, supporting your neighbors while they support you.

Instead of having all your money tied up in a financial system that has become increasingly complex, opaque, and anonymous, based on short–term outcomes, you can now help create an alternative that is direct, transparent, and personal, based on long-term relationships.

Here at RSF, we are finding ourselves at the center of these developments.  Please contact me to learn more about what you can do to get involved.

Don Shaffer is President & CEO of RSF Social Finance.

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