Indie Investing

Before you give your money away to the organizations, projects and people that inspire your philanthropic activities, it is invested somewhere – whether in a bank account or a company stock or a municipal bond. Do you know what your money is supporting? Is it invested in activities that are aligned with your deepest values? Is it being put to work to create a world you want to see? Or is it supporting enterprises and activities that perpetuate social, ecological and ethical disasters?

It’s not uncommon for a foundation with a mission to reverse climate change to have its endowment invested in the very fossil fuel companies that are contributing to the climate disaster in the first place.

Imagine the potential here, to unleash investment capital in ways that benefit the very same communities that receive your grant dollars. The concept and practice of Indie Investing for funders is new and emerging, with lots of room for us to reimagine investing, together!

• What is Indie Investing? (Investing, Reimagined)

  The vast majority of funds held by foundations – even those committed to socially responsible investment – are invested in the stock and bond markets, still tied to a financial system that is inherently unsustainable. The traditional financial markets, designed to serve short-term profits and ever-increasing growth for investors, ignore their impact on people and the planet. By design, they can end up working against long-term planetary sustainability, human rights, justice and the rights of nature.

  There is a growing movement of funders who believe we have a moral imperative to ensure that our investments are not working at cross-purposes with our philanthropic goals (as much as possible). Mission-related investing, impact investing, and socially-responsible investing are all terms that refer to the practice of specifying investment criteria that ensure your choices optimally reflect your core values as well as social and environmental commitments.

  Indie Investing refers to the concepts and practices that take responsible investing a step further. It involves divesting from industries and companies that are at cross-purposes with your philanthropic goals, and placing investment dollars in enterprises that are: 1) truly aligned with your philanthropic mission; 2) actually generating products and services that offer solutions to our most pressing problems; 3) adding value to people and the planet, rather than destroying resources or exploiting workers; and 4) when possible, incorporating communities in their design, governance and ownership, thereby offering long-term economic benefits to communities that have previously been left behind by the dominant financial system.

• Why is Indie Investing important?

  Indie Investing is a powerful part of making a positive difference as a funder, allowing you to:

  • Leverage your philanthropic mission. Upwards of 95% of resources devoted to philanthropic activities at any given time are actually invested, rather than given away. The question is whether they are invested in things that align with your mission as a funder, or not. Imagine giving $5,000 to a community group working to shut down a dirty coal plant, while putting $95,000 into the coal company’s coffers. That’s an example of non-alignment and working at cross-purposes. Now imagine investing that $95,000 in a revolving loan fund, which would disburse those funds in the form of low interest loans to local clean energy companies needing an infusion of capital. When your investments are aligned with your mission, you are leveraging your impact tremendously.
  • Support the transition to a new economy. Creative ideas and opportunities abound for new economic models and investment vehicles that are truly generative, sustainable and just. Most traditional investors prefer to maximize their financial returns and pursue narrow personal interests, rather than optimize financial, social and environmental returns in order to balance personal and collective interests. Creative changemakers who are working to evolve the field of investing need forward-thinking investors to help get these new models off the ground!
  • Diversify your avenues to make change. The private sector is a major driver of change. Like it or not, business plays a powerful role globally, in our communities and in our daily lives. The majority of the products we buy, the media we consume (and dare we say the political decisions we must live under) are produced by companies. Business can be a force for harm, or it can be a force for good. By directing investment dollars toward private sector initiatives designed to drive positive change, you are diversifying your avenues for making a difference.

• What does Indie Investing really look like?

  The possibilities are enormous and varied. Indie Investing can include a full range of payout scenarios – from those with no expected financial profit for the investor (simply a return of the original investment capital), those with “below market” returns (some anticipated financial return, but less than one would expect from another investment of comparable risk) and “market” rate returns (where the financial return on investment is expected to be equal to that of other similar investments without the social mission).

  Here are just a few brief examples of Indie Investing:

  • Supporting local businesses, non-profits, and environmental initiatives by moving your cash out of your multinational bank and depositing it locally with a community bank or non-profit credit union.
  • Making loans through one of the hundreds of community-based financial institutions (CDFIs) around the country, or the RSF Social Investment Fund, that can put your capital to work on the very same issues your fund with your granting dollars – such as ecological restoration, affordable housing, or women’s empowerment.
  • Buying shares of a local enterprise through a Direct Public Offering, such as the one initiated by People’s Community Market in Oakland, California.
  • Supporting worker-owned cooperatives through a revolving loan fund like Working World.
  • Providing financing and technical assistance to local organic farms through programs like The Carrot Project in New England.
  • Turning renewable energy into community empowerment, equal opportunities and democratic governance through The Yansa Group.
  • Making a Program Related Investment in any issue area that’s aligned with your funding mission, or joining a PRI Fund.

• What are the limitations and challenges of Indie Investing?

  There are a number of reasons why people don’t take the leap, including:

  • Concern about fiduciary responsibility. Traditional financial managers and investors are trained to maximize financial returns. Most are also focused on a narrow band of asset classes, such as stocks, bonds, real estate and cash held in large banks. Endowed foundations often want to grow their assets. Indie Investing requires a willingness to think beyond a narrow goal, and open to new outside-the-box possibilities, including prioritizing social or environmental impacts over a financial returns. This can be uncomfortable or even fear-inducing for people to consider.
  • Opacity and complexity. Funders usually place high value on transparency for their grantees, requiring detailed reports about how dollars are spent. However, individual and foundation donors aren’t often asked (or required) to tell their money story – how they acquired or made the money they are giving away or what their investment policies are. Some foundation trustees and individual donors don’t even track what their assets are invested in, in part because investing can be seen as opaque, complex and difficult to understand.
  • Limited market. While there is increasing interest in this topic, most funders (and their advisors) don’t know how to find viable investments that actually enhance the quality of life on our planet, and in our communities. This is partly because there isn’t yet an abundance of options available (and partly because they don’t know where to look!). If you are inspired by the possibilities, there is a huge opportunity for you lend your creativity and ideas to the many initiatives that are emerging right now.
  • Most financial advisors are not familiar with the territory.There are now dozens of money managers and mutual funds that cater to the socially responsible investing market and can help their clients apply social and environmental screens to their stock portfolios, but far fewer who really know about or champion community-based investment opportunities. Having access to good information (and the right team, if you have enough assets to need professional advisors) is essential to being an effective Indie Investor.
  • Fear of future financial uncertainty. In the United States, and elsewhere globally, many people fear growing old without a social safety net that will ensure their basic needs are met. It can seem counter-intuitive to sacrifice financial return for a social mission when you are not sure you’ll have enough resources to care for yourself through your lifetime. Indie Investing invites us to think about building social networks, strengthening local food systems, considering communal living and other possibilities for strengthening community, so that we are less dependent on individual wealth for a sense of security.

• How do I start?

  There is a steadily growing community of individual and foundation funders who are taking this very seriously, and bringing these issues more into the mainstream. There is also increased interest within social and environmental movements for attracting investment dollars to high-impact business-sector activities that further their missions.

  This is a good place for a disclaimer: Nothing discussed in this introduction to Indie Investing should be taken as investment advice! IPI and Kindle Project are not money managers. We are simply raising questions, introducing some ideas and offering a handful of suggestions about where you can learn more. Aligning investments with your values is a process, and can take time to implement.

  Whether you are an individual or part of a foundation, you can engage with Indie Investing. Here are a few ideas to get you started:

  Peruse a set of principles put together by people who are re-thinking investments in ways that are aligned with Indie Philanthropy, check out Slow Money, Transform Finance and Regenerative Finance.

  Learn more about moving your cash through Carry the Cash from Confluence Philanthropy or Break Up with your Mega Bank from Green America.

  Connect to the Divest-Invest Philanthropy campaign, which is a group of foundations and individuals divesting their assets from fossil fuels and investing in climate solutions and the new energy economy.

  Explore Confluence Philanthropy, a network of over 300 private, public, and community foundations who are seeking to align the management of assets with organizational mission.

  Connect with New Economy Coalition, which convenes and supports those who might contribute to an economy that is restorative to people, place, and planet, and that operates according to principles of democracy, justice and appropriate scale.