by Lyle Estill
I used to beg my wealth management guys to keep my portfolio aligned with my values. Usually they just looked at me funny. Where I wanted my money to go to work became a regular joke at our regular meetings.
I’m in the biodiesel business. At Piedmont Biofuels we collect used fats, oils, and greases from within fifty miles of our plant, spin it into a cleaner burning renewable fuel, and sell that fuel back into our community. We are a local fuel play. And we anchor an eco-industrial park in our small town in North Carolina.
There was a time when our bank line was collateralized by my holdings, and the people managing those holdings were happy to have my money in Exxon. When I would complain, they would hide behind their carefully calculated diversification strategy that was certain to be in my best interest over the long haul.
Wanting moral congruity, I sold off everything I had under management with them, paid off the bank, and ran my business without them. Now my bank line is collateralized by a certificate of deposit marketed at a locally owned bank. People who are interested in supporting our project can buy a Piedmont Biofuels CD, and those deposits make my loan possible.
In a world of unfathomably complex financial instruments people often celebrate this arrangement as a miracle of alternative finance. I wish that were so. Sadly, it’s not “alternative” at all. It’s merely the way banks are supposed to work. People with money are supposed to deposit it in the bank, and the bank is supposed to loan it out to people who need it.
Once I was free of my major wealth management team I started investing in local businesses that I believed in. I put money on Chatham Marketplace, our local Coop grocery store. And I invested in a handful of other local enterprises, ranging from small sustainable farms, to a vermiculture operation, to hydroponics to aquaponics. I’m basically a sustainability freak with a chemical plant that makes fuel out of fat.
Judy Wicks passed through town. She’s the former owner of the White Dog Café in Philadelphia, and the author of Good Morning, Beautiful Business. She stopped by to tour our eco-industrial park, and while doing so she said told me she had managed to localize 100% of her investments.
This from a woman who had to figure out how to process a whole cow in order to profitably offer sustainable beef in her restaurant. At the time my portfolio was roughly 60% local. I felt sheepish and went to work.
I called up my secondary wealth management team at UBS. They are the Swiss bank, founded on Nazi wealth, that paid some of the biggest fines in U.S. history for violations of security laws. One problem was that I liked their people a lot. Instead of joking about my desire for moral congruity they listened and tried. They were community minded. They were great people.
But in an attempt to localize I swept everything that was not in IRAs or 401Ks into cash.
About that time Woody Tasch came to town to talk about Slow Money (www.slowmoney.org ) and to tour our eco-industrial park. He inspired Carol Hewitt, author of Financing our Foodshed, and Jordan Puryear, founder of the Grassroots Festivals, and myself to get busy making peer-to-peer loans. Together we founded Slow Money NC and went to work.
Our “slow money” loans were designed to bear low interest. They had capital preservation, rather than return in mind. Slow Money loans moved my portfolio into a 90% local position.
The other 10 percent? It’s trapped in 401Ks, and rolled over IRAs from employers gone by. We are too young to avail ourselves of that money without penalty, which means we need to convert it all to a self-directed platform with a sympathetic custodian—which we have not found yet. I’m working on it.
What’s not entirely clear is whether or not we can outperform the S&P 500 index funds with our “localization” investment strategy. Of course the answer is, “it depends.”
Sometimes we are ahead, sometimes we are behind, but there is a beauty in knowing where our money is and what it is doing. In some of my previous portfolios my money was traveling around the world at the speed of light, helping to build bombs that would be accidentally dropped on girl’s schools in Afghanistan.
Today only 10 percent of my money does that. The other 90 percent is riding on local businesses that I believe in, deposited in local banks or credit unions and doing the work that is aligned with my values.
Time to mop up that last 10 percent so that I can sleep at night…
Article by Lyle Estill, the author of four books, ranging from biodiesel to local economy to industrial development. His most recent book, “Small Stories, Big Changes; Agents of Change on the Frontlines of Sustainability” is an anthology, which explores the personal, financial, emotional, and spiritual impacts of being an “agent of change.”
