Watch Finance Friday: A Vermont Update on Social Impact Investing

As a strategy to realize social and financial returns, impact investing is gaining traction as an effective way to support communities and those in need in Vermont.

In our February 16th Finance Friday webcast “A Vermont Update on Social Impact Investing,” Common Good Vermont interviewed community leaders and funders utilizing impact investing for the greater good of Vermonters.

We spoke with Simeon Chapin, Director of Social & Community Development for Vermont State Employees Credit Union (VSECU); Jake Ide, Director of Investment & Philanthropy for the Vermont Community Loan Fund (VCLF); Mark Redmond, Executive Director Spectrum and Detail Works; and Laura Jacoby, Executive Director Old Spokes Home, to learn more about impact investing and what it looks like in Vermont.

What is Social Impact Investing? 

When asked what is social impact investing, Chapin of VSECU responds, “social impact investing to me the the overarching umbrella within that is more consciousness about where you’re putting your money and finding the ways that are appropriate for you to get the return you’re looking for.” 

Social Impact Investing takes many forms from funding for a nonprofit to change their business plan to an individual choosing to hold their finances at a credit union which invests back in communities and causes they care about. In this webcast, we cover ways financials institutions are supporting philanthropic giving and investing in new businesses models

To start, Vermont State Employees Credit Union‘s Milk Money platform has made it possible for 107 Vermonters to invest $327,050 back into Vermont since August 2016. Milk Money is where Vermonters discover local investment opportunities, get tips on how to evaluate those opportunities, and then make an investment.

But who is investing? On Milk Money, any Vermonter (18 or older), regardless of income or net worth, is eligible to invest in Vermont businesses.

Jake Ide of the Vermont Community Loan Fund affirms that, “It is no longer just this little group of impact investors, it’s all of us. We all have the opportunity to do it and there’s vehicles for all of us no matter what our asset class is, no matter how many dollars and cents you have or don’t have, there are opportunities for anyone…and that’s a really heartening change in the way that money is moving around.” 

VCLF transforms Vermonters’ lives by providing loans, grants and technical assistance for affordable housing, small businesses, child care providers and other community facilities benefiting lower-income Vermonters. VCLF helps investors give back to causes and communities they care about.

Ide, “Investors right now really have a lot of options to be able to define exactly what that means for them… and if that means sustainable agriculture there’s an opportunity for them to do that.” VCLF now has designated funds where an investor can really direct their capital to the causes they care about.

Chapin, “Nonprofits need to exist because there are things that cannot be served in this current culture, in this current place, that cannot be served by business outcomes. They can only be served by spirit of generosity and hearts of individuals or organizations giving…The relationships that can be developed between nonprofit and for-profit world show results, beyond the giving back and forth, but also creating opportunities to serve customers and clients in a different way that they couldn’t have before.”

In light of increasing federal and state funding losses, it is more important than ever for nonprofits to continue to diversify funds. Redmond says,“ we’ve seen one federal and state drop off…but the only thing that’s been saving us is the private giving from businesses like VCLF.”

“Everyone feel like we wish there was something we could do he wished that there was some opportunity that provided some kind of agency or gave us the power to make change to do something better and impact investing is definitely a tool a very real tool because it involves dollars and cents which is a very very real thing to be able to make positive change in the world around us”

Investing in New Business Models – Success Through Outcomes: 

Detail Works Provides Opportunity to Invest in Youth

Spectrum formed what’s called an L3C corporation, Detail Works, (unique to Vermont) a low-profit limited liability corporation as a separate corporation underneath spectrum which can accept charitable donations.The low-profit limited liability company (L3C) is a hybrid nonprofit/for-profit entity: like a nonprofit, its primary purpose is charitable or educational; but like an LLC, it can make a profit.

Launched in June of 2017, Detail Works is a social enterprise designed to help young people build the soft skills and trade skills they need in the workplace.

They employ young people to give them progressive, on-the-job experience. In our car detailing shop, we emphasize attention, communication, and accountability, and give youth a chance to try out these skills in a safe environment. When you send your car to Detail Works, you’re investing in the success of our youth.

Spectrum held a soft opening in June and while they have doubled youth who stay in work with this program, Redmond stresses,“important to know a lot of nonprofits think this I’m gonna start this business whatever it is and it’s gonna generate all these profits and that’s then gonna go pour into my whatever it is you’re running shelter or you’re probably you know forget it.”

“It was kind of a rude awakening if you break even you’ll be the rare nonprofit. But will we ever generate enough profit that it would help fund the rest of spectrum? No, but if we can break even we’ll be grateful. The real outcome to me is taking young people who really haven’t had success in the workplace and helping them to develop the soft skills and hard skills so they can leave us in earn a living wage.”

Old Spokes Home Changes Businesses Model to Diversify and Increase Impact

Glenn Eames opened Old Spokes Home in 2000. Dubbed “the most unusual bike shop in the world” and it has lived up to that name. Jacoby explains, the former owner had great social goals and was community minded but, as a for-profit businesses always focused on making a profit.

In 2015, staff and volunteers at the neighboring Bike Recycle Vermont (a program of Local Motion) raised funds for the purchase of Old Spokes Home. The goal was to establish new nonprofit organization that would manage both shops and merge their operations, staff, and resources. As a single organization, Old Spokes Home & Bike Recycle Vermont have grown their social programs and services, adding job training opportunities, classes, youth programs, rides, trips and other services and events designed to get more people enjoying the benefits of bicycling.

Now called Old Spokes Home, they are a bike shop and a nonprofit, here to make bikes accessible to everyone in their community. These changes increase impact to community by expanding programs, increasing numbers of people served, and enhancing the quality and quantity of programs.

The retail shop and social programs also cover operating costs but, Jacoby says, the major financial benefit is the shared operating costs by the shop and the nonprofit. A perfect match.

Creating Opportunities Beyond Dollars Through Partnerships

Social Impact Investing also creates unique opportunities for business and nonprofit partnerships. As Chapin of VSECU explains, People are looking for opportunities to donate their time to raise money for organizations. So if we have a partnership, with say spectrum, we’re giving philanthropic dollars to their fundraiser but we also send a team of employees [to volunteer] who are fired up about the cause. That creates a place where people want to work. So that’s a really great kind of way that the partnerships can enable and help. Business can help their employees and help the community by finding that generosity of spirit and giving a place for it to happen in the partnership.”

Federal Tax Reform Bill & Impact Investing in Vermont

There is good news from the Federal Tax Reform Bill. Impact investors are going to be able to earn tax relief by dedicating their investments to designated geographies through vehicles like a CDFI or other kinds of financial organizations. Community development financial institutions (CDFIs) are private financial institutions that are 100% dedicated to delivering responsible, affordable lending to help low-income, low-wealth, and other disadvantaged people and communities join the economic mainstream.

Ide explains, “Essentially the the state governments are going to designate these geographies in which the investments can be made the governor’s offices around the the country are working on that right now. Vermont and Governor Scott’s office are working on that right now and that will be the first step towards getting this thing launched it’ll take a year to probably to roll out the regulations through Treasury and exactly how mechanically it’s all going to work but it’s in that tax bill and like everything else it’s going to be a part of the tax bill moving forward so we’re excited about that it’s a great opportunity to again realign our capital with our values and and get money into you know to create opportunities for folks that have been disenfranchised and left behind by our current financial system’”

 

 About our speakers:

As director of investment & philanthropy, Jake Ide is responsible for the Vermont Community Loan Fund’s fundraising, capitalization and communications strategies. Prior to joining the Loan Fund in 2005, he worked as director of development for the Richard A. Snelling Center for Government and most recently as director of corporate and foundation fundraising for Florence Crittenton Services in San Francisco. Jake serves on the Board of Directors for Girls Rock Vermont and is a graduate of Brown University.

At VSECU, Simeon Chapin leads the conceptualizing, directing, and implementing of a comprehensive and diverse community presence and engagement strategy for the organization. He has a background in music performance and business, anthropology, non-profits, and mission based business. When not building community with VSECU, he will likely be found with his wife and two boys enjoying hiking, biking, making music, and cooking local food.

Mark Redmond has been Spectrum’s Executive Director since 2003. He has worked with homeless and at-risk youth since 1981 – in New York City; Westchester, NY; and Stamford, CT. Before coming to Spectrum, Mark was the Associate Executive Director of the Domus Foundation and helped start the city’s first charter school for low-income middle school children. In addition to working at Spectrum, Mark is a writer for the Huffington Post and the author of The Goodness Within: Reaching out to Troubled Teens with Love and Compassion (Paulist Press). He has had articles published in Forbes, The New York Times, Stamford Advocate and Burlington Free Press

Laura Jacoby is Old Spokes Home’s first executive director as of October 2016. Most recently worked with non-governmental organizations (NGOs) founded by Syrians and Iraqis to respond to the crises in their countries. Grateful for the opportunity to be part of a local effort to distribute  a valuable resource — bikes — in an equitable way as a means of increasing the health of our community, economy, and environment. Also excited to revist Vermont’s amazing mountain bike trails.

 

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