My Investing Journey (Part Two)
My Money Transformation
I’ve begun shifting more and more of my money into funds and enterprises where their governance and ownership structures give the decision-makers a chance to consider the environment, worker dignity, and community needs as part of their internal capital allocation and planning.
I want CEOs and Boards of Directors to consider my returns expectations right alongside the social mission of their business. If it means lowering my return from 13% to 11% to not go around regulators to dump toxic waste, I’d like CEOs to find a way to clean up the pollution and not push that off on an unlucky poor community or future generations.
If a board has to lower the returns on my money from 11% to 8% to be able to give some equity, profit sharing and a living wage to each worker and contractor that productively contributed, then I’d prefer everybody make a decent family sustaining wage versus a wage that also forces them to rely on food stamps or disability.
And if the board and executive team also think they need a budget for strategic initiatives to be inclusive in the workplace, to listen to community and facilitate participatory decision-making at every level appropriate, then I’m happy to have the CEO tell me that’s what lowered my return from 8% to 5%.
I’ve chosen to allocate the largest portion of my retirement savings to Kachuwa Impact Fund. Kachuwa is a mix between an impact real estate and impact company investments. Read about their strategy here.
Holdings include: Organic Valley, Equal Exchange, Namaste Solar, SJF Ventures, The Working World, LEAF, BlocPower, and others you can read about here.
I’ve also chosen to invest my time to directly helping:
- Apis & Heritage Capital Partners — helps business owners sell their businesses in a way that allows workers to buy it over time as the business grows in value. Their focus is on communities of color.
- Equitable Economy Fund — helps early stage co-ops get vital catalytic capital and introduces them to a community of co-op friendly investors.
The sad part is that because I have less than $1 million (!) in assets, the Securities and Exchange Commission (the SEC) labels me an “unaccredited” investor. And because I’m unaccredited, most small funds (like Apis & Heritage and the Equitable Economy Fund) can’t directly offer a way for me to invest in them without taking on pretty burdensome and costly legal work. This 1933 rule was set up to prevent people from selling “snake oil” investments to less sophisticated investors. The result is that it essentially prohibits me and 99% of America from investing in equitable governance and ownership structures.
How to Begin Doing Something Different
The good news is there are workarounds for this situation and a few smart people are working on them. The difficult part is none of these possible solutions (that I’ve heard about) is ready for prime time yet.
So if you’re unaccredited like me, my advice is to start with these two steps.
First, begin with a small portion of your total assets (maybe 1 or 2%) and invest it in something really close to home — like a Slow Money loan to build a direct relationship with a local farmer or entrepreneur and to get plugged into your local economy, community, and foodshed. You want to make sure you are seriously feeling comfortable losing this first $1,000 or 1% — (because 90% of small businesses don’t make it very long).
The point of this is to get yourself used to doing things that are different and against the conventional wisdom and “prudent” thinking of what the financial sector will tell you to do with your money.
To help with this first step, you can 1) read the book Slow Money (and join a local Slow Money chapter), 2) take a course with Slow Money co-founder Marco Vangelisti, and/or 3) watch this “Simple Carbon Math” 3-minute video and if you want more this 16-min challenge of conventional finance that I took and made from what I learned with Marco.
Second, after you’ve gotten confident in the theoretical and emotional part of why you’re doing this, then find a local CSA farmer and offer him $2,000 to increase his marketing / sales / outreach efforts to reach new customers next season.
Explain you’re only looking for 2% interest or a free box of produce and you’d like to get repaid in 2–4 years. And in the worst case scenario that she can’t repay you, you’re not going to try to evict them or take their land to get your money back.
Because you’re not the normal kind of investor. You care about people and the planet and your community and your kids well-being and you want your family name to have a decent reputation so your kids have an easier time in life.
Another step (if these ideas feel like too much work) is to put a small (maybe 1%–15%) of your money into community investment notes, issued by a community development financial institution (CDFI). These could be a large group like Calvert or C-Note (easy online platforms — and C-note has high liquidity — you can take it out easily) or with smaller more locally impactful groups like Washington Area Community Investment Fund (WACIF), Cooperative Fund of New England (CFNE), Boston Impact Initiative, Boston Ujima Project, or many others.
Or RSF Social Finance, another favorite because they’re facilitating alternative banking relationships between borrowers and investors through their quarterly “Community Pricing Gatherings.”
If you’re looking to put more than a couple percent somewhere, then I’d recommend Kachuwa Impact Fund because it gives you the diversity of a bunch of different investments like a mutual fund, while also balanced out by a good bit of real estate. They target returns that are a good bit better than community investment notes and slow money loans but are balanced in healthy ways with non-extractive relationships with communities, workers, and the environment.
I’ve gathered up some more Investing Resources in this post if you’re looking for more places to look. In my post about Catalytic Capital, I hint at some of the work I’ve started doing around redefining my own expectations, which feels like an integral part of this work.
My Portfolio Expectations
I believe a livable future is bound up in hundreds of thousands of people resetting their expectations around their investing. If we continue to allow conventional finance to dominate our thinking when we look at our retirement portfolios, our college savings, I think we are doomed.
And I know conventional finance will continue to set our expectations at 8%–10% consistent annualized returns.
For those of us that have walked with front-line communities that have experienced the extraction that these firms bring about, we have the visceral experience in our bones that tells us we can’t continue to allow that paradigm to win. We need Livable Future Investing. We need a new consciousness that helps us re-frame these questions.