"The current fight over how we should pay for affordable housing, and who will fund it, is beating on the wrong drum."
Social and environmental impact investing and businesses continue to capture the interest and imagination of the Pacific Northwest, part of a broader global trend. Local early adopters affiliated with Element 8, Impact HUB Seattle, Seattle Impact, Mission Investors Exchange and other institutions and individuals have forged impact investment paths that many others now find themselves traveling. It’s exciting to see the local impact investing ecosystem and communities flourish. However, a market imbalance persists with more impact investor dollars available than the limited number of qualified investment opportunities can absorb. Fortunately we’re seeing signs that the supply of impact investment opportunities is starting to catch up with demand from impact investors.
Green Canopy is an example of an impact-investor funded company that has been fueled by local early adopters. The company operates in a commodity industry: designing and building single family homes. However, we have been fortunate to attract thoughtful, impact-motivated equity and debt investors, due in large part to our mission, vision and values focused on achieving long term positive environmental and social change while simultaneously pursuing solid financial results.
Since 2011 Green Canopy has acquired nearly 90 projects; steadily building a community of homeowners, real estate agents, employees, shareholders and fund members that share our passion to inspire resource efficiency in residential markets. Importantly, we pursue our mission while being uncompromising in achieving key sustainability metrics, paying our employees a fair wage, selling our homes at fair market prices and generating long term shareholder value. Green Canopy has an opportunity to demonstrate it is not only possible, but highly rewarding for all involved to create and operate under a business model predicated on shared, blended value creation.
Similar opportunities are emerging across a wide spectrum of investment strategies that seek to satisfy growing consumer and investment demand for highly impactful market-driven solutions. As Seattle continues to attract tens of thousands of employees each year to fill quality jobs at companies like Amazon, Nordstom and Microsoft, our entire region feels the benefits. And yet, we are all faced with the unintended consequences of the additional infrastructure needed to support increased demand for critical services, including affordable workforce housing. The current fight between the City and the Coalition for Sustainable Jobs and Housing over how we should pay for affordable housing, and who will fund it, is beating on the wrong drum. Neither side seems to be asking the right questions or putting forth a broadly acceptable or effective solution for quickly increasing the supply of affordable workforce housing.
One example of an alternative solution is Bellwether Housing’s recently launched Seattle Futures Fund. Bellwether has successfully developed and managed affordable workforce housing in Central Seattle for 35 years. However, as affordable housing has become an increasingly rare commodity in the communities Bellwether serves, the organization has had to innovate how its projects are financed; necessity = the mother of innovation. Through the Seattle Futures Fund, Bellwether believes it will more rapidly scale the number of units available to house social workers, teachers, baristas, police officers, firefighters, government workers, data center workers and others that serve our communities. A potentially wonderful, local example that attracts private capital as part of the solution to develop housing that is affordable and accessible to our urban working families.
As a community, we must collaboratively develop innovative, smart, market-driven solutions to problems that impact a wide range of constituents. Hopefully, a greater supply of viable impact investment opportunities for investors to assess, like Bellwether’s Seattle Futures Fund, will be forthcoming in the near-term. In the meantime, we would encourage investors and entrepreneurs alike to continue viewing our social and environmental problems through the lens of impact opportunity.
Contributed by Kyle Mylius, Board of Directors for Green Canopy, Inc. & Aaron Fairchild, CEO of Green Canopy, Inc.
Post contributed by Aaron Fairchild:
I got back from the West Coast Green green building conference recently, and I continue to be struck by issues of contrast. Green “do-gooders” and green “capitalists” mingle about with policy wonks like one big happy family. I have written about this contrast before. But what I continue to find is that, while tension still exists, we are for the most part coming together nicely. There are a lot of people out there who have been fighting for the environment and changing their behaviors for a long time. Some of these folks have a proprietary feeling regarding issues of the environment, but the majority holds open their arms to welcome in the mainstream. I see the convergence of three major sectors around a new green economic imperative or paradigm on the horizon: for-profit business, non-profit, and government.
On the government side, I had the opportunity to talk to a small business owner at West Coast Green named Nathan Doxsey who wanted his city to do more to support sustainability. Nathan owns a small real estate company in the city of Austin, and is focused on marketing Green homes. Nathan was instrumental in helping the city adopt a brilliant ordinance requiring most all residential homes to have an energy audit done during the purchase and sale of a home. Energy audits performed at the point of sale is just smart policy. Energy is a public good and the use and application of energy affects everyone in society. It is already a regulated resource and the thoughtful use and monitoring of energy should not be left entirely up to the free market. The arguments pro and con couldn’t be exhausted in one or even two essays. Needless to say, at G2B Ventures we are promoting a similar policy for the city of Seattle.
At West Coast Green I also listened to panel discussions that were full of good intention and short on actionable ideas. Those panel discussions brought me back a few years, because they had the activist feel without creating pathways to sustainability through profitability. However, I also met Adam Boucher at West Coast Green. His resume need only read: “Entrepreneur with a golden revenue model; eco-capitalist.” Adam is creating financing solutions at the project level in addition to bringing solar panel to over 100 homes in southern California. Go Adam!
More recently, this afternoon I was at a round table discussion at McKinstry sponsored by Climate Solutions talking about Federal regulation. That was the trifecta of for- and non-profit coming together with federal and state policy makers around the issue of climate change and cap and trade. I have rarely seen such as sense of possibility and urgency as I witnessed in that gymnasium.
In meeting after meeting, I have become more and more convinced the world is changing as you read this. All sectors of our society are pivoting toward green issues. Green had become code for being environmentally and socially responsible. Green equals awareness, but it shouldn’t only equal non-profit “do-gooder” or government bureaucrat. The free, public markets and making money is part of the economic green transformation. Note Apple rejecting the US Chamber of Commerce for its stance on climate change. Note Wal-Mart’s efforts to create a more sustainable supply chain. Note Daniel Pink’s video, “the surprising science of motivation.” Green gives us a purpose to our businesses and makes those businesses more productive and profitable as a result. The green revolution is not only being televised, it is being brought to you in every sector of your life.
Post contributed by Aaron Fairchild:
Social Capital Markets 2009 (SOCAP09) - “It’s All About the Bag”
Last week I was at a conference in San Francisco called SOCAP09. The focus was social capital markets and the eco-system of related investors and entrepreneurs. The first two lines of the SOCAP Conference Guide read, “There’s so much happening at this conference, it’s hard to know where to begin. But when you get right down to it, SOCAP09 is about the bag.” The organizers decided to highlight a bag created out of Indonesian garbage heaps as an example and symbol of what SOCAP09 is about. The bag and the business model aren’t scalable and nowhere near having the kind of volume or sales and distribution that allows for a sustainable business. In his opening address, conference organizer Kevin Jones talked at length about the bag that the XSProject created through the guidance and vision of Ann Wizer.
After Kevin finished his opening he handed the microphone to Sonal Shah, Director of the White House Office of Social Innovation. Sonal went on to discuss how the government is looking for great ideas that have the ability for scale, and spoke about the Serve America Act and the need for participation across sectors to address our social issues. Nowhere in her discussion or in the panel she was a part of after did they mention the role of for-profit businesses. They spoke to non-profits, foundations, and government programs. Finally, during the Q and A time of the panel someone asked about the role of for-profits and investment capital in search of returns as well as impacts. I thought to myself, “I flew down to San Francisco because here we are on the cusp of a massive, national and global social transformation, and it is all about the bag?” Capital and financial markets have begun investing in companies, organizations, and strategies that take into consideration social and environmental impacts, traditional economists consider these externalities that should be ignored, and it is all about the bag? Investments that account for these externalities are predicted to grow to 5% to 15% of total invested capital by the year 2015, this represents trillions of dollars, and the organizers of Social Capital Markets 2009 highlight a humble bag and non-scalable business model? I left the first day feeling skeptical if not a bit cynical.
I got to the conference early the next morning for some coffee and I ended up running into Kevin Jones. Kevin is a big, red faced man with stony-tint glasses and a very unassuming style. After the pleasantries and congratulations I learned that last year they had just over 600 participants (good for the first year), and that this year they had around 1,000 participants. I asked him where SOCAP was going, and he said they would like to have more entrepreneur grants next year and that he would like to eventually see somewhere around 1,500 entrepreneurs along with the cadre of fund managers and investors large and small. So then I asked where are social capital markets in general headed? He told me the first panel of the morning would be addressing that question. When I pushed him on my observations from the first day and the slant toward non-profits that I felt, he disagreed wholeheartedly and said that his intention for the conference was to highlight and encourage profitable solutions that considered and accounted for environmental and social impacts in their business models. He insisted that capital was flowing in larger and larger amounts in that direction as investors understood that the externalities of yesterday are not the externalities of today. Okay, okay… I decided to approach the morning’s sessions with an open mind.
I could not have been better rewarded for the renewed outlook and came to understand the symbolism of the bag. I found it astounding that the conversations I had throughout the remainder of the conference with investors, fund managers, and entrepreneurs alike often became philosophical and reflective while at the same time there was a transcendent feeling that those of us in this sector are sitting on a geyser.
Charly Kleissner talked about holistic investing and “going away from black and white." He sees investment capital moving away from “or” and to “and." Dan Crisafulli talked about enhanced transparency and larger partnerships between private and government capital as the need to “move the needle” on our social and environmental issues continued to become more intense. Amit Bouri talked about greater standards that are widely accepted by the social capital and financial community alike, such as Impact Reporting and Investing Standards (IRIS). I talked to a Canadian investment adviser about meekness and power appropriately placed.
I also had conversations with 3 other fund managers that in many ways were like listening to recorded conversations we have had within G2B Ventures and our sincere belief that we are pointing the market toward profitable investment in existing residential energy efficiency, and doing our small part to help transform the market and the world. Yet we remain humble and open to advice and dedicated to transparency, we remain optimistic, and we remain convinced that the investments made in triple bottom line ventures like ours will help change a world where economies dictate the way we all live.
On the last day of the conference they convened an open discussion designed to give participants the opportunity to suggest ways that the XSProject could be turned into a viable and sustainable business. Businesses start with a seed idea, the idea takes root and begins to sprout through the thoughtful fertilization of outside ideas and inputs, the germinated seed then grows into a business through careful cultivation, hard work and applied capital. We all understand the cycle; the difference is our determination to make a difference in a world in need of change and that we know we don’t have all the answers and are willing to ask for help. The key to SOCAP was the humility interwoven throughout the conference and the determination to learn from the mistakes of the past while focusing on profitable solutions for our environmental and social problems. I returned to Seattle with my unbridled optimism intact – the bag had done its work.
Post contributed by Aaron Fairchild:
Not too long ago I gave a talk at Bloom!, a local Seattle function where sustainable business entrepreneurs have 18 minutes on the clock to tell their story, answer questions and then move on.
It is a jazzy and frenetic format, and I had a lot of fun being part of the party-like speaking event. A week or so afterwards I asked the event organizers if they received any feedback on my talk, good or bad. The response was for the most part positive, except one person who commented that I was, well, “too capitalistic.” Pause… Deep breath… Contemplative grin…
I cut my green teeth nearly 20-years ago, at what was then, the hippy liberal University of Western Washington, taking classes on environmental justice and ethics. At the time I lived with Johnny D, an Earth First activist who used our kitchen as the hub that the local Earth First crew used to plan out their next monkey-wrenching action against the man. We thought that a career in environmentalism meant that you were either going to be an activist, an advocate in a non-profit somewhere, or an academic. No one at that time was considering capitalism’s role in the environmental movement. We considered capitalism to be the cause of our environmental problems, and not one of many remedies that can be used to cure them.
I understand where the comment after the speaking event comes from, and it continues to cause me to smile when I reflect on it. I don’t begrudge that perspective; I welcome the discussion as long as we don’t get bogged down in it. I continue to think it is amazing that there is even a discussion to be had, which is a sign of how far we have come. The fact is, markets that are allowed to run free within the regulatory framework imposed by society have efficiency, scope and scale far beyond academia, advocacy, and activism. However, we shouldn’t embrace free markets and capitalism at the expense of the others. They all need to co-exist and be cross-functional and supportive, but we must recognize that economy rules our world, and a fringe issue that is not embraced by the economy will always remain on the fringe. Until capitalism goes green, or the green movement goes capitalistic, society will continue creating brown fields, brown skies and toxic resources at the expense of future generations. Let’s take a peek into where capitalism is heading…
Daniel Goleman, the nationally known social psychologist and author of the #1 bestseller, Emotional Intelligence, recently completed a new book, Ecological Intelligence. In his book he explores how to remedy the lack of insight and understanding into the ecological impacts of the products we buy. He argues that by boosting our “ecological intelligence” we will collectively increase our understanding of the hidden ecological impacts and in so doing, bolster our resolve to improve them. He discusses how brain researchers examining purchase decisions have demonstrated that consumers’ emotional reactions to products’ ecological impacts matter for sales. Goleman examines how companies in several industries such Wal-Mart and industrial chemical production companies are already changing the way they manage their supply chains to address the need to limit their impacts and position the business to thrive in a radically transparent marketplace. He states that his mission is to, “alert businesses to a coming wave, one that will wash over any company that markets a man-made product.” He calls for “radical transparency” in the marketplace that allows consumers to be ecologically intelligent about the products they purchase.
Another new arrival on the marketplace scene is the L3C. The L3C is a “Low-Profit, Limited Liability Corporation.” This is a new type of LLC that is designed to attract private investors and philanthropists in ventures designed to provide a social benefit. An argument can be made that a new legally designated entity doesn’t need to be created in order for organizations to provide a social benefit. If a profit maximizing organization tackled the same business sector as a low-profit organization I would submit that it could provide a far greater social benefit. There are several issues that would need to be addressed to flesh out the argument, but the fact that there is an argument to be had is encouraging. The L3C is yet another sign of our progress and the nature of our progressive times.
There are more examples of capitalism gone green, from Socially Responsible Investing (SRI) to sustainable supply chain management. In fact, there are so many examples that I simply can’t mention them all, however, one example that is close to home remains. At G2B Ventures we are actively engaged in helping to support efforts in profitable environmental enterprise. We are working hard to demonstrate the value of smart energy efficient refurbishments in the residential housing market using a market-based approach that is acutely aware of public policy overlap into the sector. By being focused on profit maximization, and working with several local stakeholders to develop a market-driven premium for energy efficient homes, we will capitalize on the enhanced returns of energy efficiency to the benefit of our investors. If we can do this, we will be one more example that when green goes capitalistic, society and the environment are beneficiaries as well as the investor.
The Green Canopy blog is written by our CEO and Culture Curator, Aaron Fairchild, as well as our staff and a few very special guests.