INVESTING: Putting our money where our mouths are
HOST: Paul Delilo, founder & managing partner, Grassroots Capital Management, New York NY & Plainfield MA
Scott Budde, project director, Sustainable Agriculture Credit Union Research Project, New York NY
Ellen Golden, managing director, CEI Investment Notes, Inc., Wiscasset ME
Esther Park, RSF Social Finance, San Francisco CA
In this session, several experts in the field of socially-responsible investing described the organizations with whom they work, repeatedly recommending Michael Shulman’s 2012 book, “Local Dollars, Local Sense: How to Shift Your Money from Wall Street to Main Street and Achieve Real Prosperity–A Community Resilience Guide.” Because the SEC imposes important barriers to lending, the panelists explained, these small aggregator organizations find themselves in constant discussion as to how to connect individual, unaccredited investors with regional loan projects. The presenters agreed that small-scale investment is labor-intensive to manage, diversification is vital, and “small-scale” must be regional in nature if it is to balance risk. Return rates are low compared to what investors have come to expect. Thus, in the new culture, investment becomes an act more akin to philanthropy than to the speculative accumulation of vast personal riches.
According to Scott Budde, Community Development Financial Institutions include loan funds, community development banks, and community development credit unions with the aim to provide loans to isolated rural as well as underserved urban populations. Loans may support affordable housing, homeownership and financial literacy programs among others.
CEI Investment Notes, Inc. is a community development institution that brings access to capital to rural Maine with “the balance of the 3E’s: economy, equity and environment” as their key values. A “note” may be purchased for a specific length of time at a fixed rate of interest which is paid annually. The funds raised by the sale of notes are combined and then offered as loans at bank-competitive rates for affordable housing, childcare centers, small and micro businesses, and projects that steward natural resources or reduce pollution. Overall, projects should support stable, quality livelihoods for disadvantaged populations.
Drawing from a diverse stream of incomes has been vital to the success of CEI by allowing them the flexibility to respond swiftly to situations and opportunities. Investors have been banks, private foundations, government programs and private individuals through their inclusion in a mutual fund. Targeting of funds toward specific programs has been discouraged. Because many motivated givers have surfaced of late, seeking ways to participate, CEI has created a security similar to a bank CD that offers a modest return but is presently still open only to accredited investors.
RSF Social Finance, rooted in the teachings of Rudolph Steiner, is a national program for lending. It is open to unaccredited individuals with the intention of fostering transactions for social and ecological impact rather than by financial profit alone while earning consistent, positive returns. Transactions are characterized by long-term, direct relationships between donors and community-based projects within the same geographic region in the areas of food and agriculture, education and the arts, and ecological stewardship. Both lending (5%) and profit (1% annualized) rates are revisited quarterly in face-to-face reviews. Ms. Park describes these meetings as “magical.” The question on the table is: How can we make something good happen and all win? “We want one another to fulfill our missions of creating benefit to the world,” said Park.
One must be a touch altruistic to brave this merciful financial model in which wealth is slow, measured by natural and social currency, and the word “investment” refers anew to an act of devotion.
– Shira Wohlberg