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Renewal Funds: Investing for Change

by Joel Solomon with Rebecca Cuttler, Renewal Funds

 

Joel Solomon
Renewal Funds: Investing for Change

The 21st century will see dramatic retooling of the ways we live together on the planet. It’s time to shift capital to the regenerative economy.

I’m the Chair of Renewal Funds (www.renewalfunds.com ). We are a social venture capital firm that invests in change by supporting businesses at the forefront of social and environmental innovation. I believe that there must be a fundamental reinvention of where and how capital is deployed.

Renewal Funds is one among an emerging sector of new mission-driven investment models. We call ours ‘social venture financing’. We aim to deliver above market financial returns, as well as strong community and earth-friendly returns, by investing in Canadian and US businesses that provide meaningful and positive advances.

Renewal Funds focuses on organic and natural foods, green consumer products, and social and environmental innovation. Our portfolio includes companies like Spud, North America’s largest Internet grocer of organic and natural foods; Aquatic Informatics, which develops water and climate data software and analytics; Alter Eco, an importer and seller of fair trade, organic and carbon neutral food products including quinoa, rice and chocolate; and Sensible Organics, USDA certified organic skin and beauty care products.

Renewal Funds’ investment criteria include annual revenues of more than $1 million, a scalable business model, and headquarters in Canada or the USA. Our initial placements range from $1-2 million. All of our portfolio companies have a “mission first” approach to their businesses. They care about increasing shareholder wealth, and also about providing organic, greener and cleaner alternatives to conventional choices. They treat their employees well, and their products inherently increase environmental safety, broader opportunity, and economic equality.

Our due diligence process begins with mission and culture screening. We work to assess whether the products or services offered by a company under our consideration will have a truly positive effect on the planet. We meet with the company’s management team to review their manufacturing processes, supply chains and employee management practices. We do this in order to ensure that the company authentically stands by its stated mission commitments. Our portfolio selection ensures that we are a mutual fit with the company and that we share a similar outlook. Renewal is a founding B Corporation (www.bcorporation.net ), also we are GIIRS-rated (www.giirs.org ), and a 1% for the Planet company (www.onepercentfortheplanet.org ).

Despite the innovation of this mission-first approach, our portfolio is excelling, on track to meet or exceed our “above market” IRR (internal rate of return) target.

I first began working with Renewal Funds Co-Founder Carol Newell in the early 1990s to invest in companies with strong environmental and social strategies. People thought that we were crazy. We were told repeatedly that our commitment to use capital for social impact would not turn a profit. But, thanks to Carol’s extraordinary vision and tenacity, we built a strong team that worked together to demonstrate that investing in companies with a mission and purpose, could prove financial viability, be generative, and be replicable. Through Carol’s “activist family office”, with its “whole portfolio activation to mission” philosophy, Renewal Partners (www.renewalpartners.com ) successfully built an investment portfolio that included companies such as Stonyfield, Seventh Generation, Jantzi Sustainalytics, Village Real Estate, Salt Spring Coffee, Horizon Distributors, Lunapads, Sounds True, Happy Planet and more. (Note:  Find a list of company websites at end of this article)

In 2008, Renewal Partners gave rise to Renewal Funds, designed for outside investors. We now have over $98 million in assets under management, and our most recent offering, Renewal3, is a testament to the excitement that investors have for a truly mission-first option for their money. Our $30-$50 million goal for Renewal3 was exceeded and we closed in February 2014, at $63 million. That made us into a truly going concern. We are right sized for the per company attention and scale of business that is our sweet spot. We are proud now to have over 125 individuals, families, foundations and SRI wealth managers as our Limited Partners.

A huge change in public consciousness has happened since the early days of Renewal Partners. This advance is in part because of a massive inter-generational shift in wealth and consciousness that is now underway. It will pick up more momentum, with baby boomers poised to bequest the largest transfer of capital in history, somewhere between $30 and $50 trillion over the next three decades. These new wealth holders face a more uncertain economic environment, species collapse, global population growth, a growing economic divide, climate change, and dramatic uncertainties. These factors are contributing to the booming demand for investment products with a focus on longer-term societal resilience. People increasingly want “organic money,” as well as clean food, clean energy, more direct, transparent, local and authentic products and services of all kinds.

Renewal Funds’ sectors are critical for a resilient society. They possess strong growth trends. Research studies demonstrate that consumers are making healthier choices for themselves, their families and the planet, and are willing to pay a premium to align their purchases with their values. Yet these sectors are underserved by professional investors. Ninety percent of all venture capital investment in North America has been directed to tech, clean-tech and biotech businesses. Our unique positioning provides us with excellent access to opportunities to partner with visionary entrepreneurs and companies. After a first round investment we reserve capital for follow-on investment to support our companies as they grow and need more capital.

Today, I’m excited to be working towards Instinct, a new seed capital fund, with a broad mandate to make smaller investments with quicker decisions. This fund will support earlier stage companies that have powerful potential to shape the economic landscape for the future.

A new industrial evolution is underway. Practices that once dominated the world’s economy are growing increasingly unstable – from conventional agriculture, to poverty wages for workers, to unchecked non-renewable resource extraction, to unexamined consumerism. A new form of capitalism is rising. Organic foods and solar panels are rapidly dropping in price. Fair trade and worker ownership are ensuring broader access to a high quality of life. Enormous growth in social entrepreneurism is underway. The emerging collaborative economy – as just one example – is poised to disrupt many sectors. Watch what happens to the financial industry over the next few decades, as the winds of change reach this bastion of old school thinking!

A dramatic reorientation is taking root for wealth. We now have the opportunity to look beyond incumbent investment theories and use our money as the powerful tool that it is, to shape the type of world we want to see for future generations. Renewal Funds, and our fast growing number of colleagues in the world of financial services with a related point of view, are truly “investing for change.”

Article by Joel Solomon, Chair of Renewal Funds (www.renewalfunds.com ), Canada’s largest social venture capital firm, with $98 million assets under management. Renewal Funds invests in organic food, green products, and environmental innovations.

Contributing to this article is Rebecca Cuttler, an experienced administrator committed to supporting healthy local economies. Prior to joining Renewal Funds, she worked as Executive Assistant to SFU Woodward’s Cultural Programming office.

Company websites mentioned in the article:

Alter Eco –                                        www.alterecofoods.com

Aquatic Informatics –                       www.aquaticinformatics.com

Happy Planet –                                 www.happyplanet.com

Horizon Distributors –                      www.horizondistributors.com

Jantzi Sustainalytics –                     www.sustainalytics.com

Luna Pads –                                     www.lunapads.com

Salt Spring Coffee –                         www.saltspringcoffee.com

Sensible Organics –                         www.sensibleorganics.us

Seventh Generation –                     www.seventhgeneration.com

Spud –                                              www.spud.ca

Sounds True –                                  www.soundstrue.com

Stonyfield –                                      www.stonyfield.com

Village Real Estate –                        www.villagerealestate.com

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