Where Does Your Money Sleep at Night?
The Power of Impact Investing
I have a dream where people invest in local equitable capital markets that enhance the economic, social and environmental wellbeing of all in the community. A dream where people take a sustainable view of investing, one where we understand the long-term impact of investments on our communities, health, and natural resources. A dream where we think first about social impact and then about the economic return. Where we genuinely use our money for good. Where impact investing is the norm, not the exception.
The power of impact investing lies in harnessing the collective interests of conscious investors to finance social enterprises that build community wealth. Being an irrepressible optimist, I’m constantly in tune to new models that ensure money is being used for good. According to Michael Shuman, author of Local Economy Solutions, investing in local businesses has an economic multiplier of 2.6 – meaning money invested in your community not only stays in the community, but also has real, measurable impact. There are countless articles and infographics showing how our current economic policies result in massive income disparity, maddening abuse of tax incentives and legitimate concerns about the source of foundation funding. Impact investing enables an investor to channel their money into a project and bypass traditional Wall Street investment houses and ineffective government programs. Impact investors look for purpose driven businesses focused on making a profit AND making a difference through measureable social and/or environmental impact.
Full disclosure, I had already started to write this post when one of my talented students from Presidio Graduate School, Tyler Jackson, wrote a blog with basically this exact title. A true testament of his scholar, Huffington Post picked up the piece and it quickly became one of the most “emailed blogs” of the year. In the article, Tyler points out that decoupling purpose from profit is fast becoming an outdated form of capitalism and suggests harnessing the power of profit through impact investing to effect social change. Its worth taking a moment to check out his article here and join in the discussion.
So, where does your money sleep at night? And more importantly, who is it hanging out with during the day? If you’re like most people, its hosted by one of the leading global financial institutions and your money is spread out over a mix of mutual funds, being managed by someone in a faraway community who is enjoying a comfortable lifestyle and enriching an already enriched community. What if you had the opportunity to shift some of your money into a long-term, stabilizing and transformative investment that has true economic, social and environmental impact in your community? These opportunities currently exist through Community Development Loan Funds, crowd funding and private impact investing funds. My dream is that we leverage these existing facilities and perhaps create new local impact investment funds to grow purpose driven businesses right here in the Sierra.
Why? Because impact investing has a way of leveling the economic playing field by providing investment capital to businesses that might be overlooked by traditional banks. This kind of “place-based” investing helps build the local economy by creating jobs and enhancing social mobility and community vitality.
After working with Sierra Business Council’s Small Business Development Center for the past 9 months, I’m starting to believe that my dream can come true. There is some great energy and interest from new investment funds, local banks and crowd funding platforms with clear social missions. For example, we just assisted a client with a loan from a non-traditional, local Sierra-based lender. This same loan was turned down by a “not to be named” behemoth, national bank. Working with the local lender, I was struck by how genuinely concerned they were about the business owner as a person. The underwriter spent an inordinate amount of time ensuring the financing was the right fit for the business, jobs would be created and the owner’s vision was on track. For another client, we assisted with a crowd funding effort that will allow them to open their business with a manageable debt load.
In other communities, local revolving loan funds have been created specifically to fund mission-based businesses… that would really be my ultimate dream for our region! These experiences have given me renewed hope that we can facilitate these new forms of capital, deploy them locally and know that yes, our money can sleep right here and truly make a difference.
If you have questions about impact investing or where to find investment capital for your business, give us a call at 530.582.5022