By Don Shaffer, President & CEO of RSF Social Finance
Recently, I met with an organic food entrepreneur at a large trade show in Anaheim, California. This entrepreneur, who is seeking a loan from RSF Social Finance to expand her business had just been interviewed by a journalist. She introduced me to the journalist, and could have talked about what we do at RSF – as lender to many leading organic food companies: Numi Tea, Happy Family, Mary\’s Gone Crackers, Late July, Revolution Foods, Guayaki, etc.
Instead, she talked about how we do it – our unique approach to working with money.
“It\’s not just about getting more funding to great entrepreneurs like me who are changing the world,” she said. “RSF is actively creating a whole community, connecting entrepreneurs with each other, investors with each other, entrepreneurs with investors – making the process much more direct. It is so old-school, I love it!”
This was music to my ears.
This is part of what differentiates RSF from a commercial bank or any other financial intermediary. It boils down to this:
We have found that if participants in a financial transaction can be more visible to each other – if they can understand each other\’s needs and intentions, and sustain a personal connection whenever possible – then risk decreases and fulfillment increases. We believe this is nothing less than an antidote for the adverse impacts of modern finance.
But let\’s step back and acknowledge the systemic problem first, because it is huge. For most of us, we simply don\’t know where our money is going anymore; we are almost completely disconnected from the real consequences of our economic and investment activity.
As a result, we are experiencing a multi-layered spiritual crisis. Not only are natural resource depletion and climate change creating anxiety, not only is severe income inequality creating conflict, but we must now also come to grips with the fact that until many of us make significant changes in what we buy, where we bank, how we invest…we are all contributing to these problems.
A Few Things to Consider
Regarding banks, our policies are enabling a small number of multinational corporations to control an entire sector of the economy. This runs against all the ecological principles we know: that any living system gains strength and resilience to the extent it is diversified and de-centralized. It also runs completely counter to the American spirit of entrepreneurship. The recent bank bailout amounts to privatizing profits and socializing losses for big corporations.
And each quarter brings increased levels of volatility in financial markets. We continue to see problems with high frequency trading and liquidity shortfalls that lead to dips in the market that then send investors fleeing due to a lack of understanding and fear.
One could argue that an individual investor with a long-term buy-and-hold approach does not need to be as concerned about these short-term issues, or that increased regulation will mitigate the problems. I would posit that we can\’t count on the regulators. The financial services industry spent $2.3 billion on federal lobbyists between 1990 and 2010, more than the healthcare, energy, defense, agriculture, and transportation industries combined.
A New Normal
At RSF ( http://www.rsfsocialfinance.org ), we believe we have entered a \’new normal\’ economic period that may last for a long time. For individuals and families this means more saving, less debt, and less purchasing of non-essentials. For investors this means lowered expectations of financial returns.
We believe this long-term trend is good. We believe it is healthy to have less consumer debt and spending on non-essentials. We also believe it is rational for investors to expect lower returns. We believe the 60-year period following World War II will be viewed as a historical anomaly, in terms of artificially high investor returns.
Within the next ten years, we believe that new measures of wellbeing and quality of life will begin to be implemented in major countries like the U.K., and will rival GDP as the predominant metric of economic health. In addition, we have already begun to see that the B Corporation and other hybrid corporate forms are going mainstream; social and environmental impact assessment are becoming standard practice for leading companies; and these companies are starting to receive increased investment.
Finally, we believe our centralized global economy dominated by large transnational corporations will begin to be supplanted by a network of diversified regional economies, where small-and-medium-sized, triple-bottom-line businesses produce the most jobs and hold the trust of their communities.
In order for this transition to happen in a timeframe that meets the urgency of our current situation, we need to provide the right kinds of support to those who are on the leading edge of this shift: promising social enterprises and the networks facilitating their development (BALLE, B Lab, etc.) need sufficient funding; and individual investors and donors who are challenging conventional investment practice and philanthropy need opportunities for experimentation and learning, including strong networks like Slow Money and Toniic.
RSF\’s Future: Integrated Capital and Regional Food Systems
A powerful role for RSF is emerging: to use our unique \’integrated capital\’ approach to create diversified regional food systems based on organic & biodynamic agricultural practices.
At our 25th anniversary celebration in September 2009, we convened a group of social finance leaders who said, “If we get food right, everything else will follow.” Our clients are increasingly asking for us to do more in this area. And we have a long track record and deep networks in sustainable food and agriculture, in addition to the foundational basis in Rudolf Steiner\’s work with biodynamics and associative economics.
In many ways, food is the root system within a healthy regional economy, and the local food movement has gained incredible momentum over the past few years.
There are a multitude of projects that need investments, loans, and grants within the food sphere: growers, processors, distributors, retailers, and value-added product companies. We can also define agriculture to include any product that is grown, harvested, and processed directly from the earth: fish, textiles, forests, water & land itself, etc.
In the past two years, RSF has supported efforts to bring healthy food to underserved populations using the following different types of capital:
- Seed Fund: Grant to an organization called Community CROPS in Lincoln, Nebraska that provides farming instruction and English language training for new immigrants.http://www.communitycrops.org
- Shared Gifting Fund: Grant to Movement Generation\’s justice and ecology project that offers permaculture courses tailored to meet the needs of local grassroots organizations in communities of color.
- Donor Advised Funds: $3M fund recently established to support regional food processing and distribution. One of the first grants will support the Great Lakes Food Hub Network, which works with African American farmers and local food hubs.
http://blog.sustainablework.com/2011/03/what-do-you-name-hub-of-hubs-hubba.html - PRI Fund: Loan to Hana Health in Maui, Hawaii. Hana is a community made up of mostly low income native Hawaiians. Hana Health operates a six-acre diversified organic farm, profitable farm stand, and health clinic with a mission to encourage preventive healthcare through nutritious food.
http://www.hanahealth.org - Social Investment Fund: Loan to Guayaki Yerba Mate, which imports organic, sustainably grown yerba mate from South America. The company\’s mission is to restore 200,000 acres of South American Atlantic rainforest and create 1,000 living wage jobs by 2020. http://www.guayaki.com
- Mezzanine Fund: Loan to Dancing Deer Baking Company, which provides jobs to low income residents in Boston, MA. The company seeks to sell their organic cookies and brownies in mainstream grocery stores at an affordable price point.http://www.dancingdeer.com
- Liquidity Portfolio: Certificate of Deposit with Southern Bancorp, which operates community banks and development organizations that work together to promote comprehensive development in the Delta region of Arkansas and Mississippi. They support farmers and value-added food products; 75% of its loans are for $25,000 or less.
http://banksouthern.com/ - Impact Portfolio: Equity investment in Elevar, a unique microfinance fund working in India, South America, and Africa that keeps a much higher percentage of investment returns circulating in the local economy through technical assistance and other related services; many of those served are agricultural enterprises. http://elevarequity.com
- Transformation Portfolio: Loan to Corbin Hill Farm, which has grown its CSA from serving 200 families to over 1100 families since we made the low interest loan. This CSA has taken on the challenge of exclusively serving low-income families in Harlem and the South Bronx.
http://corbinhill-foodproject.org/
Using this integrated capital approach (coordinated investments, loans, and gifts to address a particular problem) coupled with targeted sponsorships of the networks and conferences that support social enterprises, we have become an important contributor to a rapidly-transforming food system. Stay tuned for more innovative ways that we are going deeper with this strategy. In the spirit of co-creation, please let us know if you are interested in working more closely with us in this area.
Article by Don Shaffer, President & CEO of RSF Social Finance
This article was originally published in the RSF Quarterly (Spring 2012). Reprinted with permission. Get a copy of the complete Spring issue at-
http://rsfsocialfinance.org/wp-content/uploads/downloads/2012/04/Spring-2012-New.pdf
