What if your money could do good? What if it changed lives and still helped you retire comfortably at the same time. Sound impossible? It’s not. Organizations like RSF Social Finance are reinventing how we use and think about money in the 21st Century. CEO Don Shaffer—a featured speaker at Springboard Innovation’s ReVisioning Value Conference on April 26 2010 in Portland, OR—makes the case for looking at money in a new, and more altruistic light.
SE: The first thing we saw when we went to the RSF Social Finance website was a series of questions. Can money nurture your spirit? Can it heal the planet? Can it inspire us to learn more about our world? We’d like to hear your answers to those questions.
DS: We clearly believe the answers are yes. One of our primary operating principles is that in working with our community of investors, clients, donors, borrowers and grantees, we want to ask hard questions together and learn the answers together as well. We don’t feel like we have all the answers by any stretch and in the context of history, we’re still in the embryonic stages of what social finance means. We’re still asking: How are people thinking about investing now with a triple bottom line or a community-based lens?
There are a lot of things that are shifting right now, and therefore, staying in a mode of inquiry is very important as opposed to jumping to rigid answers for a complex set of questions. That’s the primary point we’re trying to get across with that series of questions—that we’re still asking and that we’re interested in entering a dialogue surrounding them as a central part of what we do.
SE: Can you give us a run down of what RSF’s role and purpose are? What are your mission and goals are as an organization.
DS: RSF is a non-profit public charity. Our purpose is to transform the way the world works with money. That’s a fairly substantial objective and we’re aware of that. And it begs the question: To transform it towards what? We feel like our values and operating principles (listed on the website) capture a specific picture of what it is that we’re trying to achieve.
In terms of what we offer to the world, we have a number of loan funds. Direct lending is our bread and butter. Over the last 25 years we’ve made over $200 million in direct loans to small and medium-sized, privately held, triple bottom line social enterprises. We also have a long history of lending to non-profits, particularly schools and health clinics.
We also facilitate about $20-30 million a year in new loans, plus $12-15 million a year in grants through our Donor Advised funds. Both of these areas of activity are sector-focused in food and agriculture, education and the arts, and ecological stewardship. In addition to those areas, we also focus on the nature of social finance and how we work with money itself. We’re very interested in exploring how people’s core values translate into working with money, how they invest money and how they give money.
Above all of that, our mandate is to not only focus on the product offerings we have and the things people can sign up for, but also to help build the field of social finance more broadly. The ReVisioning Value Conference is part of that effort and we are longtime sponsors of many organizations that are trying to move the needle in this field. That includes Social Venture Network, Investor Circle, BALLE, Bioneers and many others. We’ve made substantial contributions to keep them doing what they do regardless of what direct impact it has on our day-to-day business.
SE: Why is that important—working across the spectrum and doing investing, lending and giving under one umbrella? How does that give RSF a tactical advantage in achieving its goals?
DS: We feel that working across the different types of finance or capital in lending, giving and investing gives us a unique perspective on the transformative effect that money can have. For example, this fall we hosted a conference called The Economics of Peace and we looked at the direct relationship between our economic and financial systems and the theoretical and conceptual frameworks that support those systems. We also looked at the practice of actually putting those systems to work. In general, today’s financial system can be described as complex, opaque and anonymous, based on short-term outcomes. Where we need to get to is a world where our financial systems support actions that are direct, transparent and personal, based on long-term relationships.
Being involved in investing, lending and giving gives us a window into how to make that happen. We look at it one relationship at a time. We’re not involved in top down solutions—regulatory or federal policy kinds of solutions. We’re involved in working with individuals and small groups, and grappling together over how we can better evolve our understanding of what money is for and how the systems we participate in could change as a result of a grassroots shift in the perception of what it means to invest, lend and give.
SE: What are the roles of relationships and networking in the evolution of social investing and finance?
DS: At RSF, we see ourselves as one hub or trust holder in the broader ecosystem of those who are interested and/or participating in social finance. We feel like, in general, humanity is shifting from a top-down, command and control form of hierarchical organization and social leadership into one that is more networked. And we, as human beings, don’t really know how to do it that well yet—we haven’t totally figured our how to lead and manage a network without it becoming centralized and hierarchical.
Pushing and distributing power and decision-making out to the periphery is something we’re seeing a lot of interest in through social networking and the growth of organizations like the Business Alliance for Local Living Economies (BALLE). There’s clearly nascent interest in how we do this. We at RSF, along with other organizations we regularly work with, try to advance our understanding of how networks work effectively, how decision-making can occur in a more decentralized, distributed way, but still be able to hold a center around a certain set of values and principles. This is really fertile territory right now for exploration. There are a lot of smart, motivated people thinking about this and so it’s very exciting for us to see that there’s progress being made in this way.
If you look at the founding of the United States, for example, the idea was not to have an overly strong, centralized federal government. The idea was to have balance between the federal government and the states in order to create a more decentralized approach to power. If you look at financial markets in that way, where we are today is very focused on the global capital markets, which have essentially become a global financial casino, with relatively centralized power on Wall Street and in Washington D.C.
What we’re advocating, and feel would at least provide a healthier balance, are diversified regional capital markets that will keep more money circulating in local and regional areas, and also support basic needs like food, energy, clothing, shelter in such a way as to make us less dependent on the global economy and capital markets.
SE: What other opportunities do you see as “fertile territory” for social investing?
DS: One of them is around the notion of “whole portfolio activation.” There’s a lot of syllables there, but the basic idea is that if individual investors are motivated to connect their core values with their investments—and I’m talking about the investments they’re making for their retirement or for their future—there are ways of doing that now where you can have a balanced portfolio across different types of assets, such that 100 percent of what you’re investing in is aligned with your values. That may be community development in your region. Or it may be that you’re passionate about fair trade or you’re passionate about ecological stewardship on a broader level.
If you’re someone who has these passions and interests and really has a drive to figure out how your banking relationship connects through to how you invest your retirement savings, there’s more to choose from now than just screened mutual funds. Screened mutual funds let you choose what you’re not going to invest in. You can say that you’re not going to invest in firearms or gambling or tobacco. Now there are so many more choices of how to build your investment.
We just finished a project that was sponsored by the Rockefeller Foundation and the Global Impact Investing Network to create a database of over 1000 different funds that are out there now, representing different asset classes and sectors of investment that people can choose from. Up until now, many people said they would love to invest closer to home or more in alignment with their values, but there wasn’t much else to do except setting up a screened mutual fund. Now there are a lot more options and that will continue to grow over the next 5-10 years and beyond. I see this as a very exciting development, because people will no longer need to compromise.
Another example is the Move Your Money Campaign that started around the beginning of 2010. It encourages people to switch their checking and savings accounts from the Big Four banks—J.P. Morgan Chase, Wells Fargo, CitiGroup and Bank of America—into community banks and credit unions in their area. Since the beginning of the year, nationwide there have literally been tens of thousands of people who have switched their accounts because they want to vote with their dollars for their community as opposed to Wall Street. And interestingly, the State of New Mexico decided to pull their funds out of the four big banks and put it into local and regional banks in their area.
SE: In our interview with Tamzin Ractliffe, she said she does not believe that charity and poverty are inextricably linked and that we don’t always have to have “the poor.” What are your thoughts on that idea?
DS: I too am very interested in that subject. We’re in the midst of a transition from a very 20th Century mentality—which can be described as a wealth now, philanthropy later way of compartmentalizing the two and getting wealthy before you can get into charitable and philanthropic activities.
What it seems to be transitioning into with younger generations is a blending of those two buckets—investing/wealth and philanthropy. Instead of looking at it in a compartmentalized way, they see it as a spectrum, especially when it comes to rate of return on investment. You could have plus 15 percent on the high-end, and negative 100 percent on the other end—which is to give money away—and a whole range in between with a lot of territory in it.
What would it be like if people said, “I’m going to take 10 percent of my investable assets and strive for a negative 20 percent return?” So it’s not pure philanthropy. They’re expecting to get 80 percent of their money back. But they’re looking at their portfolio in a different way based on that spectrum. I see that as being very encouraging because there is an incredible explosion of social entrepreneurship happening all over the world right now, addressing key issues of poverty and ecological sustainability, etc.
On the entrepreneur side, you have entrepreneurs who are blending that previously compartmentalized definition of for-profit entrepreneur vs. a non-profit leader. There are now for-profit businesses that would not be in business were it not for their social mission. You also have non-profit leaders looking at much more advanced earned income strategies and are running their non-profit more like a business. There’s a new hybrid there of the entrepreneur at the enterprise level and an analogous hybridization happening for investors as well.
As long as someone is prudently taking stock of the kinds of returns they need to get, doing that in an intelligent way and looking at a longer time horizon—then this can be a really healthy development. And it could have substantial impact on poverty alleviation on a much larger scale than just charity and philanthropy as we’ve conceived of it today.
SE: Are there any upcoming projects that you’re excited about at RSF?
DS: I can point to a recent loan we’ve made that we feel represents a great combination of impact for us and for investors in the field. The company is called Revolution Foods and they’re based in the San Francisco Bay Area. They are distributing over 50,000 school lunches per day to low-income schools and students, who otherwise would not be able to afford healthy lunches based on sustainably raised food from local and regional farmers.
Revolution Foods has been able to get the price such that they can deliver literally thousands of these meals daily, while still sourcing from organic and bio-dynamic farmers. And in many cases, these are farmers that are based within the region the students live and go to school in.
Besides providing lunches, Revolution Foods is providing solutions to several different issues. It’s a viable business and it’s growing in such a way that it’s having a tremendous amount of impact. On the social side, it’s providing healthy food—much healthier than orange drinks and cheese sticks—to students who haven’t otherwise had an opportunity to access that kind of food on a daily basis. It’s also providing awareness to those students on where their food comes from, the importance of various aspects of nutrition, as well as the ecological ramifications of eating highly processed foods based on high fructose corn syrup vs. bio-dynamically produced food that comes from their region.
There’s a big impact on the social and health aspects plus the education and awareness side of things. It also makes a positive environmental impact because there’s that much more organic acreage that’s in cultivation and there are many more small family farmers that will be able to make a living over time based on Revolution Food’s focus on sourcing the food locally/regionally.
That’s a classic example of a loan that we would love to be a part of. They get a values aligned partner for their loan plus they are participating in a community of borrowers that are seeking values aligned capital and are therefore bringing our investors into much closer connection with the work they’re doing. We do a lot of work to make those connections as strong as possible between the borrowers and the investors and Revolution Foods is a great example of that.
Don Shaffer is the President and CEO of the non-profit, public charity RSF Social Finance. He’s also a speaker at the ReVV 2010 Conference in Portland, Oregon. You can learn more about Don and his work with RSF: http://rsfsocialfinance.org/about/
The ReVV 2010 Conference takes place on April 26-27, 2010 in Portland, Oregon at The Gerding Theater at The Armory. ReVV 2010 is a two-day conference geared towards educating citizens on social change and investment, and also including the community in finding solutions. The April 26th (Monday) agenda is a full-day schedule of educational sessions with leading social investment experts. Tuesday focuses on putting that knowledge into action through workshops, and discussing and brainstorming solutions for local, national and international issues. Tickets can be purchased for both days (best deal) for $349.00. Conference Only (April 26th | The Gerding Theater) is $239. Click here to register now and to view additional registration options.
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