If you are like most of us, you kick off the New Year reflecting on life – your past and your future. I traded in turkey and stuffing with my family for a trip to Nicaragua to work with Habitat for Humanity on a Global Build. For 9 days we began our days at from 6:30am and finished up dinner at 8pm. We moved and laid cinderblock, mixed concrete and mortar, cut, bent, and tied rebar, and tamped a floor all without the use of a single power tool or running water. To marvel at the impact that a 38 square meter home will have on, not just a family but a generation, is an understatement. And I am unalterably grateful for my time here.
And yet, as I pushed through hour 5-6 of rebar bending, I began to be grateful for other small lessons. Lessons like the privilege we have to access technology and innovation. Innovation to solve societal challenges is not new, but there is a growing amount of discussion and pilot projects happening around the country on how to best connect wealth with entrepreneurial innovations solving these societal challenges. This is what we call Impact Investing. Similar to investments in any new business venture, Impact Investing has a level of risk higher than that of traditional financial models. However unlike traditional philanthropic giving, you have the chance to not only give to a cause you care about but also potentially make a return on your investment through a Business for Good.
Let’s look at an example of the Business for Good Model (B4G). Just Grow is an early stage start up company that sells a fully sustainable indoor aquaponics ecosystem. The sleek modern design and compact size make it perfect for a home, office or customer waiting room. You have the visual appeal of a fish tank combined with the functionality of an indoor herb or vegetable garden all in a low maintenance, self-sustaining and resource efficient tabletop unit. This alone is impact on some level, but this is only the beginning of the story. Just Learn, a sister 501c3 organization, uses the proceeds from Just Grow to place these units into K-12 classrooms along with science and math curriculum equipping teachers with the tools they need to bring nature front and center in a child’s world. This is Business for Good. This is Impact.
So let’s assume we all see the value in a company like Just Grow. The first few questions might be: How do I make an investment? How do I find out about other Businesses for Good that are looking for investors? And what about risk?
The answers are not nearly as simple. If you circulate in the world of start-ups, you might stumble upon a great company looking for investors. And if serendipity works its magic and the stars align between your interests and their business model you might make an investment. But this is obviously a long shot and exactly what myself, and others around the country, want to see change.
Cities from San Francisco and Oakland to Cincinnati and Pheonix, are examining ways to better link innovative entrepreneurs to forward thinking investors. Some communities are finding ways to fund a System Entrepreneur, a person who is employed just to architect these relationships.
In Oakland and Seattle, Kaiser brought together a cohort of more than 13 hospital systems to fund this role in their communities to look for B4G companies focused on solving a wide range of community health issues.
In Cincinnati, it was the faith-based communities that rallied to fund a similar position to accelerate linking B4G with Impact Investors looking to address issues directly relating to the poor.
Other cities are piloting new financial tools, like Friends & Family certificates of deposit which pool money from a wide range of investors ranging from community foundations to high net worth individuals to millennials with inherited wealth. These funds typically have a loan loss reserve, which does not guarantee a return on their investment but does offer full protection against loss.
Any of these or other new financial models have the potential to increase B4G entrepreneurs access to capital and thereby increase their potential impact on their communities and our world.
Not everyone has the inclination to give up 9 days of his or her life to do tough work in even tougher conditions but nearly everyone has a desire to make an impact in their own way. I will likely never have the money to be a great philanthropist or an angel impact investor so I give what is precious to me – my time, my mind and my physical strength – to projects like homes in Nicaragua and innovative start ups like Just Grow. If, like me, you are intrigued by the potential of moving beyond traditional philanthropic giving and supporting the future of innovative solutions to our community’s greatest needs, then I encourage you to join the impact investing movement. Let’s support great businesses solving today’s greatest challenges with tomorrow’s greatest innovations.