Two Green Investors Discuss Impact Investing and Reimagining the Economic System

The old adage “money is power” is truer today than at any other time in human history. Money plays a part in nearly every part of our lives, and it is often our dollars, rather than our voices, that have the ability to influence politics, society, and business. It’s no wonder, then, that so many of us are underserved by these entities — financial inequality as at an all-time high.

Joel Solomon, co-founder of mission-driven venture capital firm Renewal Funds, is a regular voice in the conversation about finance’s role in creating a more sustainable, equitable world. His book, The Clean Money Revolution (New Society Publishers, 2017), tells the story of Solomon’s path to becoming a impact-investing influencer and discusses how the next generation of wealth-holders will change the world’s economy. The following interview between Solomon and fellow financier Don Shaffer is excerpted from the book.

We’re thrilled to welcome Joel Solomon to the 2017 Bioneers Conference, where he’ll be speaking on a panel about clean money.

Don Shaffer has been President and CEO of RSF Social Finance, a financial services organization that seeks to transform the way the world works with money, since 2007. RSF has made over $275 million in loans and $130 million in grants since 1984 to social enterprises working in three areas: food and agriculture, education and the arts, and ecological stewardship.

How did you get into this work?

I grew up outside of Princeton, New Jersey. It was a community where lots of Wall Street traders and bankers lived. My first job, when I was fourteen, was caddying at a golf course where these people played. It was clear to me they had a lot of power and wealth in society, so I’d ask them what they did to make their money.

My dad was a sheets and towel salesman; he worked for a textiles company. That was pretty easy to understand. But from these guys I got wildly variable answers. It’s hard to explain to a 14-year- old kid about derivatives and leveraged buyouts — and about using lots of borrowed money to invest in high-risk stuff, not to mention explaining who’s left holding the bag if you don’t get the money back.

Their explanations were completely unclear to me and it was frankly jarring. I said to myself, “So how does this actually work and who does it ultimately serve? And what is money anyway?” Since then I’ve basically been obsessed with how the financial system operates and how we could reimagine it. My work is trying to find innovations that make our financial system more direct, transparent, and personal — unlike typical Wall Street innovations, which generally make things more complex, opaque, and anonymous.

What are the risks we face if we continue with business as usual?

The stakes are extraordinarily high. In terms of risks and stakes you could talk about increasing income inequality, you could talk about climate, you could talk about all these major kinds of things that are at stake and most of us are aware of. Instead of waiting for that to happen, why not start doing things differently?

There are several root systems in our society. One of them is agriculture. One of them is energy. Another is capital itself. If we can’t figure out how to reimagine the current system, we’re going to keep getting the results that we’ve been getting recently, which is extraordinary volatility. Go back to 2008. Is that something that we want to see again? I am not really an Armageddon-type person, but what’s at stake is that we continue on with highly centralized, top-down gigantic organizations that don’t even know how to govern themselves. The banks are only bigger now than they were in 2007. If the Dow average goes from 17,000 to 3,000 we’re talking about 30 percent unemployment across the board — as opposed to just African American men.

Why do so many good-hearted, ethical people ignore the true impact of what their wealth is doing?

One reason is that given the choice, people would rather not deal with their money at all. To say that people are money-averse is a gross understatement. So A) people don’t want to deal with it, because there are lots of more fun things they could do with their time and B) the system is set up to reinforce that inertia. The approach of the banking and financial services industries is to create inertia and intimidation.

The inertia is that these industries actually make it relatively hard for you to switch out of something once you’ve put your money in it. On the intimidation side, you get the army of guys in blue blazers who pat you on the head and say, “Honey, we’ll take care of this for you. Just chill out.” And while you’re there they give you a whole bunch of glossy reports that have seven thousand words on them that you’ve never seen before, and your takeaway will be: “God, I thought I didn’t want to deal with my money before, now I want to deal with it even less!” And you’ll want to say, “Yeah, Joe, yeah, why don’t you just take it from here. Let me know how it goes next quarter and I’ll just wait for my statements.”

Do you have suggestions for solutions?

We should do more from the grassroots perspective, because that’s what’s going to lead to real, lasting change. It’s really around changing hearts and minds. One item, for each of us as individuals, is to think through where your banking relationship is. Whether you’re a high net worth person or a small investor, think about who you bank with. If you have a chequing account at Bank of America, you have no idea if that money is being used to make loans in your community to organizations that you would feel really good about — or if it’s being farmed out to hedge funds to clear-cut rainforests in Malaysia. As Vince Siciliano at New Resource Bank says, “Where does your money spend the night?”

That’s solution number one. Number two would be to do the same in terms of your investments. Even if you don’t want to make it your day job like it is for me, I feel people are obligated to think it through. If you’re a sustainable agriculture supporter or activist, you cannot own Monsanto stock in your retirement portfolio. That is just not okay. It’s too much cognitive dissonance to not pay attention to the stocks you own and the system you’re participating in.

If people feel their banks and portfolio managers are working against their values, what do they do?

There are viable alternatives. For problem number one, you can bring your money to a community bank instead of Wells Fargo. You just have to get over the inertia and do it. Sure, the online bill pay system may not be as snazzy as your big bank. Deal with it. At least you’re voting with your dollars and standing up for something. And on number two, there are way more options than there were even ten years ago to construct a portfolio, even as a small investor, that ensures your investments are at least closer to not directly conflicting with your values.

The very first thing to start with is clarifying what you’re absolutely the most passionate about in life. What is the world you’d like to see? Start investing in those things. Then — as Leslie Christian says, a financial adviser who I think is the most innovative in the United States right now — then you can actually have a shot at developing what she calls a “beautiful portfolio.”

Instead of getting your statement at the end of each quarter, and hoping it went up by 0.7 percent and then throwing it away — and ignoring the damage your money may be doing — you could actually get your statement and it would reflect a beautiful portfolio. It would show you all things that you are so happy to own, and how they’re doing, and you’ll be part of that. You’ll want to read the stories. You’ll want to connect with the people behind it. Those are the benefits of what she calls a beautiful portfolio.

This excerpt has been reprinted with permission from The Clean Money Revolution by Joel Solomon, published by New Society Publishers, 2017.