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Changes at Investors’ Circle, a look to the future

Change is brewing here at IC.  Here are a couple key updates:

Staff Transition

Deb Parsons, co-Director of IC, has indicated her intention to move on to work more directly with entrepreneurs and will be stepping down effective July 9.  Deb has been a strong ambassador for IC in the community and has fostered many new relationships for IC.  We are so grateful for her important and valued leadership and community building.

We wish Deb all the best in her next chapter and thank her for her many contributions to IC and in the community of impact investing.

Executive Leadership

We are very excited to announce that Suzanne Biegel is taking on the role of Acting CEO of Investors’ Circle as we move into our next phase of work and evolution.  Suzanne brings more than 25 years of experience as an active entrepreneur and angel investor, a philanthropist and board member, and a strategist and thought-leader in this early-stage, high impact investor space.  She is based in London, but will travel to the US about once a month to work closely with IC’s strong staff in San Francisco.  She reminds us all that much can be accomplished via Skype and virtual collaboration tools, and, in fact, that we are increasingly working as part of a global marketplace.  She is also currently working with IC member Go Beyond, Ltd. to produce a venture fair and summit on European early stage impact investing in Geneva this September.

Suzanne has been facilitating our strategic planning process over the past several months, working closing with the board, members, and other stakeholders.  Suzanne’s unparalleled grasp of the landscape and context, her sensitivity to the needs of early stage investors and entrepreneurs, and her long-time dedication to IC and its valuable mission have enabled us to undertake this aspirational effort with confidence.  We are thrilled that she is willing to expand her leadership role to help us refine and implement the early phases of our new strategy.

Transparency in Action: An Interview with B Lab and a Look at GIIRS

Investors’ Circle is proud to be the first GIIRS partner.  To explore the new GIIRS system, IC Undergraduate Fellow, Rosie Sharp, spoke with B Lab/GIIRS representative, Beth Richardson.

Q: Can you tell me about how GIIRS developed and how it is different from the B Ratings system?
A: A group of investors from the Global Impact Investing Network (GIIRS) identified a need for a ratings system that would allow them to make more investments in the space. The steering committee determined that the B Ratings system had shown the most progress and was the closest in terms of outputs that they were looking for in a third party ratings system. They asked B Lab to put a business plan together for what has now become GIIRS.

To clarify, GIIRS is powered by the B Impact System, which is the system used for B Certification. Any certified B Corporation will have access to a GIIRS rating for free. In fact, it will be generated for them.

A key means of differentiation between the two is that a GIIRS rating is used mainly for a company’s capital raising process because it generates different reports. In addition to the B Impact Assessment, investors have been interested in seeing more raw data, Key Performance Indicators (KPI), and benchmark data. Whereas companies need to score a total of 80 or above to become a certified B Corp, their GIIRS rating reports are used for investment purposes.

Q: Which types of organizations benefit the most from using each evaluation method?

A: Companies looking to become a B Corporation clearly benefit from the B Impact Assessment as it provides a standard they must meet in order to become certified. If they aren’t meeting the standards, they benefit from the best practices tools built into the survey providing goals to strive for in social and environmental performance.

Companies and funds that are trying to raise capital benefit greatly from GIIRS, as do institutional investors who are investing in those companies and funds.  Investors receive access to comparable data on which to base their investment decisions.

Q: How do you collaborate with others in the space like Global Impact Investing Network (GIIN), Impact Reporting and Investment Standards (IRIS), foundations, etc.?

A: Initially, GIIRS and IRIS were one project, but it was decided that IRIS should be a stand-alone entity. IRIS was launched by GIIN, B Lab, Acumen Fund, and the Rockefeller Foundation.

As far as the differences between IRIS and GIIRS, IRIS is a reporting framework with metrics and common definitions like GAAP for financial statements. We realized that this was missing in our sector and created GIIRS. GIIRS, on the other hand, provides a judgment. It determines which metrics should be tracked and what is good or good enough in terms of performance. GIIRS is more like Morningstar or Moody’s.

Q: Would you say that the ultimate goal of B Lab is to create a movement around new legal structures or to actually lobby for new corporate forms for social enterprises?

A: B Lab’s mission is to help create a new sector of the economy. There are 40,000 businesses that are already creating products and services that promote social and environmental change. They do this through Fair Trade, green initiatives, energy efficiency, and many other vehicles. Our goal is to create a collective voice for this community.  Once this is achieved, there is further infrastructure that is needed. As far as policy, the first piece is creating a new corporate form that allows and requires companies to consider the interests of their stakeholders in decision-making processes. The second piece is to build incentives for companies to do business in this way. A key distinction though is that the corporate form is of higher importance and priority, and incentives will be built later off of that platform not the other way around.

Additionally, there is the role of capital markets for B Corporations and similar companies.  Without capital, these companies are unable to scale. GIIRS, which again is powered by the B Ratings System, will help accelerate that change and help investors connect to companies in order to invest in a mission aligned way. The collaborative efforts of B Lab and IRIS are moving these goals forward.

As far as progress, these pieces are moving simultaneously. There are now 275 B Corporations, so the community piece is definitely growing, and on the policy front legislation has been proposed in Vermont and Maryland and is up for passage in both those states. Looking to the future, GIIRS will launch in January 2011.

Q: How does becoming a B Corp promote a company’s transparency in the market?

A: Certified B Corporations are required to publish their B Impact Assessment on our website. Bcorporation.net shows exactly how companies score on their assessment so that their social and environmental performance is very transparent.
Q: What competitive advantage do you feel companies gain from transparency? Do you feel like social enterprises have more to gain from it than traditional business?

A: A social enterprise may not benefit more from transparency than a multinational corporation.  However, a company that is becoming a B Corporation is holding themselves to a higher standard of transparency and backing claims up with rigorous assessment is crucial to establishing trust with consumers. A large multinational corporation may also benefit from this type of transparency similarly to benefitting from a Global Reporting Initiative (GRI) report. In conclusion though, social enterprises may not benefit more broadly per say, but because they make certain claims about social or environmental standards they need to be able to back those up.
Q: How could a B Corp certification strengthen a company’s value for investors?

A: There is definitely a value-add for investors when a company is a certified B Corporation. Part of what we see in becoming a B Corporation is that a company shows that its mission is built to last. From an investor’s perspective, this is exactly what you want, as you don’t want to find out that the intent of the company is different than you thought it was. It’s easy for companies to cherry-pick data. For example, a cleantech company might be doing great things as far as creating energy efficient products, but you don’t know how they treat their employees, community, etc. B Corporations are a way to align the interests of entrepreneurs and investors by exposing not only what a company wants to communicate about itself but its overall performance.

We envision that investors will use ratings as a place to start a dialogue and as a model for rating social and environmental performance. Then they can ask their own due diligence questions and inquire about performance.
Q: We are very excited at IC to be the first GIIRS partner. What does this mean for our membership?

A: This model can be used to create consistent information processing that’s comparable across companies with very different impact models. It can assist investors in the due diligence process, be updated, show progress and be used as a tracking tool. For some investors it will serve as a starting point for due diligence, giving them information on which to base conversations with companies and ask them questions about performance. There will also be a discount for IC fund members to receive GIIRS ratings for their own funds.

B Corporations are a new type of corporation which uses the power of business to solve social and environmental problems.  B Corporations are unlike traditional responsible businesses because they:

  • Meet comprehensive and transparent social and environmental performance standards.
  • Institutionalize stakeholder interests.
  • Build collective voice through the power of a unifying brand.

For more information, visit http://www.bcorporation.net.

Transparency: the New Competitive Advantage

Transparency: the New Competitive Advantage
By guest blogger, Amie Vaccaro reporting from the Spring Investors’ Circle Conference, San Francisco April 20, 2010

The Investors’ Circle closing plenary discussed how and why transparency is becoming more and more important and also a source of competitive advantage.

Moderated by Allison Arieff of GOOD Magazine, Steven Scheuth of First Affirmative Financial Network, Dara O’Rourke of Good Guide, and Anndrew Kassoy of B Lab discussed how they are embracing transparency in their business operations.

O’Rourke pointed out that the most forward thinking companies (Timberland, Patagonia, even Dole) are responding to consumer demand for more information by displaying more and more information about where the product and its component parts came from and how they were made. But consumers are confused and overwhelmed by the proliferation of logos, labels and certifications. At Good Guide, O’Rourke is trying to understand which pieces of information are most important to the consumer and which will actually influence shopping decision making so as to streamline the information.

One problem in transparency is that often the company itself does not have all the answers. Inquiring customers will help change this by demanding accountability for this important information.

At B Lab, Kassoy outlined the 3 ways that he is working to promote radical transparency.
1) Building the B Corporation Community: To date, 300 companies have been B Lab certified. Their results from the B Lab survey tool can be found online. Some companies display their scores with pride. The next step for some B’s is to make the entire B survey available, rather than just the summary (at that point I begin to wonder who would really care, but better to have the information available than not I suppose.)
2) Accelerating the Growth of the Impact Investing Field as an Asset Class: Kassoy described the Global Impact Investing Rating System (GIIRS) which allows investors to understand how their investments stand up in terms of positive impact. If investors can access such information, they can demand it from more and more funds and drive transparency in that manner.
3) Promoting Supportive Public Policies and Incentives for Social Enterprise: B Lab works to drive policy change that will better support entities that drive positive impact and are transparent about their weaknesses. For example, Philadelphia recently gave B Corps a tax break for creating pubic benefit.

Is more information always better? Not always. Scheuth pointed out that the more options available, say for a 401k plan, the less likely individuals are to make a choice. Quality of options is more important than quantity in many cases. And it’s also important to ensure language is intelligible to the average person off the street – too often labels are filled with scientific information that is lost on the average consumer. For consumers to choose one product over the other, it must compete on price and quality. In Scheuth’s world that indicates that the financial performance of a “sustainable” investment must rival the market rate.

My takeaway from the discussion is that, you and I both have the ability to make a difference. Business is undergoing a radical shift towards revealing more information about its practices. Even a lowly consumer like me has the power to influence corporate disclosure of information by asking questions. Its up to every one of us to demand and reinforce the importance of transparent business practices.

Social, Environmental, AND Financial returns? Now that’s crazy…

By Rosie Sharp

Investors’ Circle was recently highlighted on Cause Capitalism’s list of “15 Social Venture Capital Firms That You Should Know About,” which discusses the changing nature of funding for social enterprises.

This type of out of the box thinking is finding its way into mainstream business and financial systems more and more each day. Social Entrepreneurship is growing in popularity and will hopefully be a trend that lasts for the sake of our planet and all those who inhabit it. It is true that sometimes sacrifices must be made as far as the scale of financial returns when a company has social and environmental priorities, but one truth that our past presenters and portfolio companies have proven is that it is possible to not only run a successful social enterprise, but also to scale that business into sustainable, lasting change. Will higher education and traditional markets pick up on this idea of a triple bottom line so social enterprises can continue to thrive? This is what we hope to achieve through impact investing and the success of our conference, coming up in less than two weeks!

Check out the article here: http://causecapitalism.com/15-social-venture-capital-firms-that-you-should-know-about/

Support the patient capital movement, impact investors, and social entrepreneurs at our Spring 2010 Conference and Venture Fair on April 18-20 in San Francisco, CA. Online registration closes Friday, April 9th so be sure to register today! http://www.investorscircle.net/2010-conferences-1

A new funding sector? Agriculture 2.0

By Deb Parsons, Co-Director

Last Wednesday, I attended the Silicon Valley Agriculture 2.0 conference hosted by one of our members, Janine Yorio of New Seed Advisors. It was a new mix of people at a conference focused on agriculture, food systems and technology. I saw many familiar faces like the folks at RSF Social Finance and several IC members but also in attendance were Kleiner Perkins, US Venture Partners and corporate vcs. Is sustainable agriculture the next “clean tech” sector?

This certainly has been a topic of conversation at Investors’ Circle for many years. The Slow Money Alliance actually became a movement into itself to address the long term capital needs for sustainable agriculture. But the question last wednesday really was is this a hockey stick return kind of space or more patient capital? I would argue that it is both and that some vc’s will be extending the investment horizon from the 3-7 years to 5-10 years.  And at what point does an investment become “patient”?

During the event there were about 12 venture pitches throughout the day and a side conference focused on Aquaculture.  While I didn’t attend the aquaculture pitches I did see a few interesting companies that are still too early for IC but ideas to watch and some that have already presented to IC.

18 Rabbits: an all natural granola bar with a great community story pitched. Alison Bailey Vercruysse pitched to our network in the Fall 2008. She continues to have success and if you haven’t tried her product check it out at Whole Foods or Peet’s coffee.

Marrone Bio Innovations: this is a company that was in the IC20.  Pam Marrone continues to create innovative, environmentally friendly products for increasing yields.

Too early for IC but to watch:

  • Cityscape Farms- an aquaponic rooftop garden focused on increasing the quality and quantity of good food in urban areas.  Ideally addressing food security and scarcity issues.
  • Capay Valley Farm Shop – this is a CSA model and then some run by a great management team.  If only they could figure out a way to also include micro-brew and bread.
  • Inka Biospheric Systems – a socially conscious company that has created a series of solutions in response to the global “water, food, and housing” crisis.  This company has great mass commercial potential as well as products that would be essential in developing worlds, refugee camps and areas of crisis.

At the Spring IC Conference April 20 (Registration still open), we will be addressing the topic of “Investing in Lood Systems” hosted by Amy Dickie of CEA Consulting and Elizabeth U at RSF Social Finance.  The topic will be building off Amy’s paper ” Local Foods: A guide for Investors and Philanthropists”. And if you want to learn even more about the topic check out Slow Money’s annual event in June.

Member Spotlight: Ellen Fish, Friends of Tilonia

by Alexandra LaForge

Q: Could you briefly explain what Friends of Tilonia does and how you got involved with the organization?

Friends of Tilonia is a US nonprofit that works primarily with the Barefoot College and its affiliates in India.  We’re based in Tilonia, India, which is a small village in the desert region of Rajasthan.  Barefoot College trains the poorest of the poor to become “Barefoot” professionals and supports them in addressing basic needs for water, electricity, housing, health, education, and income within their own communities.  I work specifically with craft production.  Working with the College, Friends of Tilonia operates an online store (www.tilonia.com) that sells handcrafted home textiles, accessories and gifts produced by nearly 800 artisans.  The production, warehousing, and order fulfillment for the store are all handled in India, by the team in Tilonia. Our mission is to create a social enterprise that is sustainable and profitable, and managed by members of the local community.

I first visited Tilonia in 1982, while stationed in Delhi with the US Foreign Service.  I went back to Tilonia in 1998 as a volunteer and helped launch the first Barefoot College website.  After working on Wall Street for many years, I left three years ago to develop Tilonia.com as a social enterprise.

Q: What are the specific challenges to working in rural and emerging markets?

My capability is building business.  Much of my experience comes from working on Wall Street in new products and business development.  The process of working now with Barefoot College and Friends of Tilonia is the same in that I am continuing to identify products and services and mapping them to target markets.  I have spent a lot of time working in London with partners across the US and have found that there are challenges to global business and these are similar between developed and rural markets.  You have the same issues – crossing cultures, crossing languages, crossing time zones – regardless of what you’re doing.  Though the Barefoot College is different in terms of geography and its economic situation, the process is the same.

Q: Are there unique benefits or payoffs?

The results have more impact.  We’re working in a community where people make less than $1 a day, where the livelihood is typically subsistence farming, and where fulfilling basic needs can be a struggle.  The income from craft-making, for example, is small by US standards, but it is significant within this community.

Q: What brought you to Investors’ Circle?

I believe in the mission.  Many people in the network share my way of looking at the world.  I’ve found that the members are smart, successful business people who want to have an impact in building a sustainable future.

Q: I know that you are participating in the Selection Committee for the Community & International Development track.  Is that the area that most interests you or are you looking to explore other industries within IC’s reach?

I’m learning.  I come at business from a more operational point of view and it is really helpful to learn where others are coming from in terms of investing.  And, yes, international development is the segment that interests me most.

Q: What advice would you give to investors who are interested in international and emerging market deals but who don’t have experience in the field?

[Laughs] I think it’s a little presumptuous of me to give advice – most IC members seem to be quite sophisticated about these markets.  However, I think collectively IC members can do more in this arena.  We should put our heads together and think about the point of investing in these enterprises, which is to impact the future.  Together, we can change the space and have an impact on many types of companies – and companies in emerging markets should be included in this mix.

Would you sell yourself for social change?

By Rosie Sharp

Next week I’ll be attending this event along with some great Bay Area social enterprises, and I’m thrilled to be in such good company. I can’t say I know exactly what to expect, but I’m looking forward to any shocks, surprises, and new lessons to be learned.

SOCAP10 and Hub Bay Area Present: The Life Investment

Next week Hub Bay Area and SOCAP10 will host a thought-provoking event about a new way to invest in social entrepreneurship. Instead of investing in promising social ventures, the Thrust Fund asks investors to consider investing in the entrepreneurs themselves. Will this experiment reveal that the success of a company can rest solely on its visionary entrepreneur? Or will it conclude that you can’t sell yourself for social change? What will returns look like? And what social impact could be created by this endeavor? Lots of questions, and hopefully some answers next week!

Join the discussion with fellow social innovators on March 3rd!

Register here:

http://lifeinvestment-efbevent.eventbrite.com/

More about the Thrust Fund:

http://www.thrustfund.com/index.html

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