Paul DiLeo hosted the panel and works for Grassroots Capital Management. His big question for the group was ‘How do we put our money where our values are?’ Paul and others at the event highly recommended book Local Dollars, Local Sense by Michael H. Shuman – Chelsea Green publishers, to get us started in answering this question. Paul has worked with micro-finance projects around the world and has invested some of his own funds in these types of projects, but most of his portfolio is invested in things that he is sure would cause his skin to crawl if he knew what they were. What are the alternatives?

Esther Park works at Rudolf Steiner Foundation (RSF) Social Finance, doing strategic development and expansion of their products and services. Before that she worked with a number of different Community Development Finance Institutions (CDFI’s). Esther told a story of the LiveStrong mutual fund that is associated with Lance Armstrong and is known for supporting research to cure cancer. She said that when RSF researched the fund they found that LiveStrong’s top investments are in companies like Exxon Mobil that are associated with toxic legacies.

RSF was founded in 1934 but was never seriously endowed and basically lay dormant for many decades. It was re-formed in 1984 with $6,000 in the bank. Their first project after reformation was to help to rebuild the Pine Hill Waldorf School in NH after a fire had devastated it. In order to do this they went around to all of the neighbors of the school and asked them to make loans to RSF for the reconstruction. This initiative was wildly successful and they decided to repeat it. Many times. At present RSF has $76 million in loans and 1,250 investors. After using standard systems of determining interest rates for their programs, a group in the foundation decided to study the economic teachings of Rudolf Steiner for guidance. The fund now uses an ‘RSF prime’ to set their rate of return that is based on a discussion between their investors and their borrowers. As of today it is 1% to investors and 5% to borrowers. Esther is continually amazed at how people in these meetings show their humanness and come to the mindset of ‘how can we make this a win-win for everyone?’ The borrowers and lenders meet face to face to hear each others’ needs and visions. RSF’s foci are sustainable agriculture, arts & culture and ecological stewardship. Their fund is open to unaccredited investors with a $1,000 minimum if one lives in one of RSF’s 43 states. (an ‘accredited’ is someone with $1M in net worth excluding their primary residence, i.e. enough to assume that they either have a financial advisor or are a sophisticated enough investor to understand the risks.)In the past they have allowed for targeted investments, then stopped this for a while, but are re-thinking how to make it happen again.

Scott Buddeis heading a research project on a sustainable agriculture credit union – federal, for small scale agriculture in NE, NY NJ. Before that he worked for TIAA CREF in their socially responsible investing program. His project will be focused on the members of the NOFA chapters – i.e. support organic farming. It likely will not be used much for checking accounts, but more for IRA’s and similar investments. Scott said that people often want their investments to be as local as possible, but this is very difficult in terms of having a large enough scale to make the project work. He also pointed out that holding one’s investments all locally caries its own risks.

Ellen Golden works with CEI Investment Notes in Maine which has been supporting the ME economy with a CDFI for about 35 years. They believe that “access to capital is a means for low-income people to get access to wealth.” They do a lot of triple bottom line financing, such as 1,300 units of affordable housing. Recently they have developed a program for individual ‘social’ investors – their ‘Notes’ program. It acts much like a CD from a bank, a security, except that it is not FDIC insured and is limited to accredited investors. Their terms are: 3 years at 2%, 5 yr. – 2.5%, 7 yr. – 3%, and 10 yr – 3.5% yr. The Notes program was started in January of 2010, now has 50 investors including a community bank, and carries $2.5M in assets. They employ a subscription agreement that makes sure the investor is accredited and understands the risks. They also use a diverse pooled fund to disperse the risk.

John Hamilton of the Community Loan Fund of NH focuses on affordable housing & childcare. Their investments carry a $1,000 minimum with a range of terms from 1 – 10 yrs. They are not limited to accredited investors but are limited to New England states plus a few others.

Janice St. Onge spoke from the audience, of the VT Sustainable Jobs Fund which is available to accredited investors. They do royalty financing and their focus is on preserving VT’s working landscapes.

Esther Park mentioned Upstream 21, based in Portland, ME, a mutual fund that has a wonderful corporate policy of being highly transparent.

A local business that was present was queried by the panel: what types of financing have you needed to grow your company? They are committed to seasonal food processing which has required a very particular set of financing types, especially when they outgrew the business incubator that they had started in. The owners want their business to be replicable and have a huge amount of debt burden even now that they have become consistently profitable. The owners have been pondering how to involve the community and have it assume some of the financial risk of the company and take it off of the shoulder of the entrepreneur, since the community is really benefiting from having local, healthy food.

Paul said that one of the charges of folks here who think about these things is to find ways to provide risk capital for businesses that embody a strong social or environmental ethic.

Ellen brought up the topic of legacies. They have developed one that supports micro-loans to farmers. It was initially set up by a farmer who died and left $100,000 to be used for this purpose and has been used to support many other farms to start up.

Esther said that there are substantial institutional barriers that prevent unaccredited investors from being involved with these types of socially responsible funds. The smaller the scale of the lending the more expensive it is to manage it, too.

A question was asked about investments in energy conservation – can they be structured such that payments increase when the original energy conservation measures have paid for themselves. An investment expert from the audience said yes – provided it’s not used for start-ups and the company borrowing has a healthy profit margin of 20-30%.


Tad Montgomery