Impact Investing in Oregon: The Nonprofit: Ecotrust
In our latest post on impact investing in Oregon, we discuss Ecotrust’s hybrid nonprofit/for-profit approach to impact investing with their Director of Investment Strategy, Nathan Kadish. Read our other posts in the series to learn about the definitions we use and how other local actors are shaping the space:
- Impact Investing defined; Meyer Memorial Trust’s Invest Oregon
- Willamette University’s proposed student-led impact investment fund
- The NW Social Venture Fund
Interview with Nathan Kadish, Director of Investment Strategy at Ecotrust
Impact Entrepreneurs: How would you describe Ecotrust in a single tweet?
Nathan Kadish: Ecotrust is building a #neweconomy that restores nature and invests in people. www.ecotrust.org
Would you explain the structure and approach of both the Natural Capital Fund and Ecotrust Forest Management?
At Ecotrust, we want to meaningfully contribute to the building of a resilient regional economy that creates wellbeing for people and place. A critical component of working toward this vision is our ability to creatively deploy capital. The Natural Capital Fund is Ecotrust’s working endowment. We use the term ‘working’ because it’s capital hard at work growing businesses in the bioregion. Our goal is to invest our fund in one of two ways: Either we incubate business ideas within Ecotrust’s nonprofit programs that we can transition into for-profit businesses and investment opportunities, such as Ecotrust Forest Management, or we seek deals outside Ecotrust that are aligned with our mission.
Fifteen years ago, in the process of renovating the Natural Capital Center, Ecotrust encountered an unexpected challenge: even in the heart of the most productive temperate forest ecosystem on Earth, there were few sources of sustainably harvested timber products. Instead, we found single-species tree farms subject to cycles of monoculture, growth, asset liquidation (clearcut), and sale — a pattern of churn whose deleterious impacts are found in impoverished landscapes and communities that depend on them, and in the intractable conflict between the timber industry and environmentalists over harvest plans on public land. Over the next six years, we applied $1.2M in philanthropic support to the articulation of the problem, analysis of its origins, exploration of its social and economic drivers, conceptualization of an alternative, and establishment of a mechanism for its actualization. That mechanism is Ecotrust Forest Management, Inc (EFM) — the world’s first Forest Investment Management Organization (FIMO). Catalyzed by a seed investment from the Natural Capital Fund, EFM manages over 13,000 acres of forestland under FSC certified management. It delivers both wood products and aims to monetize significant ecological outcomes in terms of carbon storage, salmon habitat restoration, benefits to tribes, and open access to our forestlands for recreation.
What are some past deals that exemplify Ecotrust’s investment strategy?
In addition to Ecotrust Forests, the Natural Capital Center (also known as the Ecotrust Building) is a strong example of Ecotrust’s investment strategy. We used the Natural Capital Fund to finance the building, which now houses other leading social enterprises demonstrating new ways of living and doing business. The Natural Capital Center is a for-profit enterprise, earning revenue from leasing office space as well as events. A pioneer in the green building space, the Natural Capital Center has seen over 5 million visitors walk through and hosts more than 500 events a year.
How do you measure the social and environmental impacts of your investments?
We have a team of economists on staff at Ecotrust who are able to help quantify impact, but as anyone working in this space knows, calculating social and environmental return on investment (SROI and EROI) is always challenging. On the environmental side, we often look at impacts on carbon, acres of habitat, and water/air quality as metrics. For social considerations, we think about jobs, general wellbeing indicators, and education.
What do you see as the role of nonprofit-led funds in moving impact investing forward as a field?
Nonprofit-led funds have tremendous opportunities in this space. Any nonprofit with deep sector expertise has a competitive advantage over a for-profit investment shop — the nonprofit fund can do ‘free’ R&D using grant funding to drive its program work. To make significant impact in any given sector, investors need opportunities that are well-informed and have a proven track record. Nonprofits like Ecotrust are best positioned to provide these opportunities as they hold deep sector expertise and experience in providing social and environmental value. A nonprofit endowment is the perfect funding vehicle to capitalize on the unique knowledge and networks the nonprofit holds, but also to drive the organization’s mission.
I also believe we should place foundations in the category of nonprofit-led funds. Foundations that just think about the 5% distribution they make each year are missing the work that 95% of their assets can be doing toward driving impact. By aligning a foundation’s corpus with its granting mission the foundation can magnify its impact tremendously. [Ed. note: read the first post in this series to learn how Meyer Memorial Trust is investing part of its endowment to create regional social impact.]
What are the biggest barriers to — and opportunities for — impact investment funds in Oregon?
I’m not sure that Oregon poses any unique issues. My perception is that one of the greatest challenges stems from placing the terms ‘impact’ and ‘investment’ in the same phrase. These terms are both so loaded that combining them creates chaos. As soon as you say ‘impact,’ investors assume they’re losing money and shift their thinking toward the philanthropy end of the returns spectrum. The term ‘investment’ immediately draws impact-minded people toward thinking that the social and environmental impact is compromised. This leads to a formidable barrier, which is actually getting the capital moving.
Oregon has a tremendous opportunity to be a state where we throw out the term impact investing and just focus on getting deals done — matching needs for capital with available capital. Reframing the ‘appropriate risk-adjusted rate of return’ conversation to one that focuses on how do we use capital to solve social and environmental challenges while still growing economic prosperity.
What else would you like our readers to know that we didn’t ask?
Making investments that are aligned with one’s values is challenging, especially for non-accredited investors, but having the conversation with your friends, family, and financial advisor is an important first step. Then find an investment and do it. The sooner we all take small actions to move this field forward, the faster it will evolve, generating financial, social, and environmental returns.
By Jacen Greene, Program Manager, Social Enterprise Intiatives at Portland State University’s Impact Entrepreneurs