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Slow Burn Slow Burn

Slow Burn

January 15, 2010

By John Collins Rudolf

Woody Tasch says we need to put the brakes on our investment portfolios. Don't worry, though: He still has a way for us to make money.

Money-not the paper stuff in your wallet, but the bits of data that whip around the world in billions of instantaneous transactions each day-moves too fast. So argues Edward "Woody" Tasch, a venture capitalist with a seemingly anticapitalistic ambition: to put the brakes on our money, bring it closer to home, and elevate sustainability over profits and growth.For Tasch, it's a goal more than 20 years in the making. In 1989, he founded one of the nation's first venture capital funds with a conscience, but it failed to attract the $25 million in investment for which he had aimed. Later came Investors' Circle, a network of about 150 venture capitalists, angel investors, and foundations that launched in 1992; as chairman, Tasch orchestrated the distribution of more than $130 million to hundreds of sustainable business start-ups.All this was a mere prelude for Tasch, who resigned from Investors' Circle a year ago to head the Slow Money Alliance, a nonprofit that hopes to do for capitalism what the Slow Food movement has done for food and agriculture. Over the next several years, he aims to raise between $50 million and $100 million in seed capital from individuals and foundations for a series of venture funds around the country, which will in turn finance thousands of sustainable local farming businesses."What we have to do is very simple," says Tasch. "We have to take some of our money and invest it close to home in local food systems."

A few years ago, with the stock market soaring, and hedge funds minting new fortunes overnight, such a proposition might have drawn snickers from the investing class-just another loopy idea from the hippie fringe.Yet the recent financial meltdown should cause skeptics to be a little more open-minded. Fast money-epitomized by reckless speculation in exotic derivatives, and the slicing and dicing of trillions of dollars into now nearly worthless subprime mortgage-backed securities-almost destroyed the world financial system last fall. Lightning-fast trades at the peak of the crisis shredded 401(k) accounts like confetti, while leaving rampant unemployment and record foreclosures that continue to linger like a bad hangover.Disgust with Wall Street may be at an all-time high, so it's not surprising Tasch's ideas have already struck a nerve. Since the Slow Money Alliance launched early this fall, it has attracted 130 founding members who have invested anywhere from $1,000 to $50,000 (membership now is available for dues ranging from $25 to $1,000). Several thousand more, including big names in the organic food business like the CEO of Organic Valley and the founder of Odwalla, have signed a set of "Slow Money Principles" circulating online. The principles highlight the basics of Tasch's philosophy: that money moves too quickly; that investments in local food can connect us with where we live; and that it's important to support a new generation of entrepreneurs. The Slow Money Alliance is also planning a social media strategy for early 2010, which they hope will bring the concept of Slow Money to a much wider audience."It hasn't gone viral yet," says Tasch. But he's just getting started.Tasch outlines his vision of sustainable investing in his recent book Inquiries into the Nature of Slow Money: Investing as if Food, Farms, and Fertility Mattered. In it, he calls not for a speed limit on the flow of global capital (as if Wall Street would ever allow such a thing), but for investors with a conscience to steer a portion of their money into local sustainable farming. This isn't just philanthropy. Done right, Tasch's theory is that this strategy will earn steady income for investors without selling out the planet.

Tasch's years in venture capital convinced him that simply reforming the existing financial system wasn't enough; what was needed was a completely new paradigm of investing-a Slow Money revolution.Most conventional investing, he found, underwrites precisely the type of unbridled growth that is putting ecosystems and the global climate in danger of collapse."If your money is in the stock market, 50 percent of it is going up a smokestack in China," he says. "That is what is keeping our portfolios afloat." Even many investment funds that bill themselves as socially responsible, he contends, continue to finance a system of production and consumption that is undermining the environment and our communities. "They're not sufficient," he says.
We have to take some of our money and invest it close to home in local food systems.
What Tasch proposes as an alternative is a series of regional financial hubs to connect individuals and institutions to local food producers in need of capital. Investments would earn modestly, in the low-to-mid single digits, yet they would also yield less traditional-but perhaps no less valuable-returns. Sustainable farming techniques would reduce pollution and restore soil fertility, while revenues from small farms would circulate locally, enhancing community stability. But food is only the beginning. Ultimately, these investment hubs could serve local manufacturing enterprises and other sustainable industries.While still rare, a few models for this type of financial intermediary already exist around the country. Since 1985, Philadelphia's Reinvestment Fund has delivered $893 million in capital to 2,480 local housing, renewable energy, arts, education, and small business projects. Its successes include building 11,800 affordable homes and financing nearly one gigawatt in renewable energy projects, as well as creating more than 40,000 small business jobs. In concert with the Food Trust, another Philadelphia nonprofit, the Reinvestment Fund has also brought supermarkets and farmers' markets to traditionally underserved inner-city neighborhoods.

Judy Wicks, founder of the White Dog Café in Philadelphia, which helped spark the locavore movement in that city more than 20 years ago, called the Reinvestment Fund and the Food Trust crucial tools for supporting sustainable agriculture in the region. "You need slow money to produce slow food," says Wicks, who also serves as board chair of the Business Alliance for Local Living Economies, an alliance of 80 local business networks in the United States and Canada. "If we want to grow community-based food systems, we need long-term, patient investment capital."Wicks practices what she preaches: More than 10 years ago, she sold all the stock in her portfolio-including blue chip companies like McDonald's-and bought into the Reinvestment Fund. "My return is anywhere from 4.5 to 5.5 percent," she says. "I get the same return every year, and I just reinvest it."Philadelphia's fund is still an anomaly, however. In most areas, such investment hubs need to be built from the ground up. To get the ball rolling, Tasch has spent the last several months touring the country, hosting a series of day-long "Slow Money Institutes" that have drawn hundreds of enthusiastic investors, donors, and local food entrepreneurs.Still, the prospect of pulling large amount of money out of the stock market to invest in, say, an organic soybean farm, has been met with some trepidation. "The word ‘scary' often comes up," says Tasch.Yet these fears may be overblown, particularly if Tasch's Slow Money funds are able to quickly ramp up in size. The greater the number of investors, the more diffuse the risk."If you have all your money invested with Joe the Farmer and he goes bankrupt, then you've lost your money," says Craig Wichner, managing director of Farmland LP, a San Francisco-based private equity firm that acquires conventional farmland and converts it to sustainable organic farmland. "If you have all your money invested with 100 farmers, you have portfolio risk."

While support for
the Slow Money movement remains small, it is not without its influential backers. George Siemon, the CEO of Organic Valley, is a founding member and investor who believes that Tasch's vision of investing in local agriculture is an idea whose time has come. "All you hear about now is local food systems," says Siemon. "There's been a shift back to that kind of old-world perspective." As the chief executive at the largest organic farming cooperative in the United States, with $527 million in sales in 2008, Siemon's support could help convince other deep-pocketed investors that Tasch's Slow Money cooperatives are a bet worth making.But the key to success for such investment co-ops will be careful vetting of which enterprises to fund, Siemon says. Businesses will have to be judged not only on their individual merits, but also on how they will work in the context of a larger local food network. "They're going to have to be awfully cautious," he says.Still, the principles of Slow Money investing have merit beyond their application to local food systems, Siemon believes. He credits Tasch with questioning traditional paradigms of investing that, in spite of the recent financial meltdown, remain unchallenged by most industry professionals, and by extension, the investing public. Such questions are simple, but potentially revolutionary."Shouldn't we invest our money in things that reflect our values?" Siemon asks.Illustrations by Tucker Nichols.

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