Post contributed by Aaron Fairchild:

I was recently invited by the Federal Reserve Bank of St. Louis to present in Louisville, Kentucky at a symposium on “Green” Finance Investing in Sustainable, Energy Efficient Developments. I was very honored to participate and to share what we are working on at G2B Ventures. You can download a PDF of the agenda here. There were a lot of other very cool programs presented, like The Babylon Project out of Babylon New York, and Enterprise’s Green Communities program.

I headed to Louisville with a healthy dose of humility, expecting to be an outlier from the speaker’s podium, and left there with the impression that I was indeed an outlier, but only because I was one of the only speakers talking about for-profit approaches to improving our existing residential building stock. In fact, G2B was the only group represented on stage with a for-profit solution to improving the energy efficiency of existing single family housing. As a result, I had a great time sharing what we were working on and enjoyed several questions and discussions about how to implement a program similar to ours in Louisville and beyond.

I also left Louisville with a new outlook on the city. They are making big strides toward energy efficiency, and Kentucky is working on retrofitting 10,000 homes with their Clean Energy Corps! I had the opportunity to visit a very progressive and fun hotel / museum, 21C, and would recommend the city to anyone interested in visiting. Thanks for the hospitality Louisville and thanks to the team at the Federal Reserve Bank of St. Louis.

Post contributed by Aaron Fairchild:

Social Capital Markets 2009 (SOCAP09) - “It’s All About the Bag”

Last week I was at a conference in San Francisco called SOCAP09. The focus was social capital markets and the eco-system of related investors and entrepreneurs. The first two lines of the SOCAP Conference Guide read, “There’s so much happening at this conference, it’s hard to know where to begin. But when you get right down to it, SOCAP09 is about the bag.” The organizers decided to highlight a bag created out of Indonesian garbage heaps as an example and symbol of what SOCAP09 is about. The bag and the business model aren’t scalable and nowhere near having the kind of volume or sales and distribution that allows for a sustainable business. In his opening address, conference organizer Kevin Jones talked at length about the bag that the XSProject created through the guidance and vision of Ann Wizer.

After Kevin finished his opening he handed the microphone to Sonal Shah, Director of the White House Office of Social Innovation. Sonal went on to discuss how the government is looking for great ideas that have the ability for scale, and spoke about the Serve America Act and the need for participation across sectors to address our social issues. Nowhere in her discussion or in the panel she was a part of after did they mention the role of for-profit businesses. They spoke to non-profits, foundations, and government programs. Finally, during the Q and A time of the panel someone asked about the role of for-profits and investment capital in search of returns as well as impacts. I thought to myself, “I flew down to San Francisco because here we are on the cusp of a massive, national and global social transformation, and it is all about the bag?” Capital and financial markets have begun investing in companies, organizations, and strategies that take into consideration social and environmental impacts, traditional economists consider these externalities that should be ignored, and it is all about the bag? Investments that account for these externalities are predicted to grow to 5% to 15% of total invested capital by the year 2015, this represents trillions of dollars, and the organizers of Social Capital Markets 2009 highlight a humble bag and non-scalable business model? I left the first day feeling skeptical if not a bit cynical.

I got to the conference early the next morning for some coffee and I ended up running into Kevin Jones. Kevin is a big, red faced man with stony-tint glasses and a very unassuming style. After the pleasantries and congratulations I learned that last year they had just over 600 participants (good for the first year), and that this year they had around 1,000 participants. I asked him where SOCAP was going, and he said they would like to have more entrepreneur grants next year and that he would like to eventually see somewhere around 1,500 entrepreneurs along with the cadre of fund managers and investors large and small. So then I asked where are social capital markets in general headed? He told me the first panel of the morning would be addressing that question. When I pushed him on my observations from the first day and the slant toward non-profits that I felt, he disagreed wholeheartedly and said that his intention for the conference was to highlight and encourage profitable solutions that considered and accounted for environmental and social impacts in their business models. He insisted that capital was flowing in larger and larger amounts in that direction as investors understood that the externalities of yesterday are not the externalities of today. Okay, okay… I decided to approach the morning’s sessions with an open mind.

I could not have been better rewarded for the renewed outlook and came to understand the symbolism of the bag. I found it astounding that the conversations I had throughout the remainder of the conference with investors, fund managers, and entrepreneurs alike often became philosophical and reflective while at the same time there was a transcendent feeling that those of us in this sector are sitting on a geyser.

Charly Kleissner talked about holistic investing and “going away from black and white." He sees investment capital moving away from “or” and to “and." Dan Crisafulli talked about enhanced transparency and larger partnerships between private and government capital as the need to “move the needle” on our social and environmental issues continued to become more intense. Amit Bouri talked about greater standards that are widely accepted by the social capital and financial community alike, such as Impact Reporting and Investing Standards (IRIS). I talked to a Canadian investment adviser about meekness and power appropriately placed.

I also had conversations with 3 other fund managers that in many ways were like listening to recorded conversations we have had within G2B Ventures and our sincere belief that we are pointing the market toward profitable investment in existing residential energy efficiency, and doing our small part to help transform the market and the world. Yet we remain humble and open to advice and dedicated to transparency, we remain optimistic, and we remain convinced that the investments made in triple bottom line ventures like ours will help change a world where economies dictate the way we all live.

On the last day of the conference they convened an open discussion designed to give participants the opportunity to suggest ways that the XSProject could be turned into a viable and sustainable business. Businesses start with a seed idea, the idea takes root and begins to sprout through the thoughtful fertilization of outside ideas and inputs, the germinated seed then grows into a business through careful cultivation, hard work and applied capital. We all understand the cycle; the difference is our determination to make a difference in a world in need of change and that we know we don’t have all the answers and are willing to ask for help. The key to SOCAP was the humility interwoven throughout the conference and the determination to learn from the mistakes of the past while focusing on profitable solutions for our environmental and social problems. I returned to Seattle with my unbridled optimism intact – the bag had done its work.

Post contributed by Aaron Fairchild:

The same day that I received an email from a friend saying that he thought G2B Ventures just might be too early in the space and ahead of the market, I read an article in the Harvard Business Review about how, “smart companies now treat sustainability as innovation’s new frontier." There were a few articles in the September 2009 issue relating to green and sustainability. The lead article says that companies won’t grow unless they throw themselves entirely at green initiatives. I am in the thick of establishing the Efficient Real Estate Investment Fund, so naturally I tend to side with HBR over my thoughtful friend. Frankly, it is just amazing to observe how far we have come in the green and sustainability business world. We couldn’t have done what we are attempting to do in green real estate 5 years ago, but today it just makes sense.

When Harvard is saying the business world MUST go green to grow, you've got to think G2B is in the right space and at the right time, not just because we are doing good for the environment and society, but because we can make money at the same time.

Post contributed by Aaron Fairchild:

Not too long ago I gave a talk at Bloom!, a local Seattle function where sustainable business entrepreneurs have 18 minutes on the clock to tell their story, answer questions and then move on.

It is a jazzy and frenetic format, and I had a lot of fun being part of the party-like speaking event. A week or so afterwards I asked the event organizers if they received any feedback on my talk, good or bad. The response was for the most part positive, except one person who commented that I was, well, “too capitalistic.” Pause… Deep breath… Contemplative grin…

I cut my green teeth nearly 20-years ago, at what was then, the hippy liberal University of Western Washington, taking classes on environmental justice and ethics. At the time I lived with Johnny D, an Earth First activist who used our kitchen as the hub that the local Earth First crew used to plan out their next monkey-wrenching action against the man. We thought that a career in environmentalism meant that you were either going to be an activist, an advocate in a non-profit somewhere, or an academic. No one at that time was considering capitalism’s role in the environmental movement. We considered capitalism to be the cause of our environmental problems, and not one of many remedies that can be used to cure them.

I understand where the comment after the speaking event comes from, and it continues to cause me to smile when I reflect on it. I don’t begrudge that perspective; I welcome the discussion as long as we don’t get bogged down in it. I continue to think it is amazing that there is even a discussion to be had, which is a sign of how far we have come. The fact is, markets that are allowed to run free within the regulatory framework imposed by society have efficiency, scope and scale far beyond academia, advocacy, and activism. However, we shouldn’t embrace free markets and capitalism at the expense of the others. They all need to co-exist and be cross-functional and supportive, but we must recognize that economy rules our world, and a fringe issue that is not embraced by the economy will always remain on the fringe. Until capitalism goes green, or the green movement goes capitalistic, society will continue creating brown fields, brown skies and toxic resources at the expense of future generations. Let’s take a peek into where capitalism is heading…

Daniel Goleman, the nationally known social psychologist and author of the #1 bestseller, Emotional Intelligence, recently completed a new book, Ecological Intelligence. In his book he explores how to remedy the lack of insight and understanding into the ecological impacts of the products we buy. He argues that by boosting our “ecological intelligence” we will collectively increase our understanding of the hidden ecological impacts and in so doing, bolster our resolve to improve them. He discusses how brain researchers examining purchase decisions have demonstrated that consumers’ emotional reactions to products’ ecological impacts matter for sales. Goleman examines how companies in several industries such Wal-Mart and industrial chemical production companies are already changing the way they manage their supply chains to address the need to limit their impacts and position the business to thrive in a radically transparent marketplace. He states that his mission is to, “alert businesses to a coming wave, one that will wash over any company that markets a man-made product.” He calls for “radical transparency” in the marketplace that allows consumers to be ecologically intelligent about the products they purchase.

Another new arrival on the marketplace scene is the L3C. The L3C is a “Low-Profit, Limited Liability Corporation.” This is a new type of LLC that is designed to attract private investors and philanthropists in ventures designed to provide a social benefit. An argument can be made that a new legally designated entity doesn’t need to be created in order for organizations to provide a social benefit. If a profit maximizing organization tackled the same business sector as a low-profit organization I would submit that it could provide a far greater social benefit. There are several issues that would need to be addressed to flesh out the argument, but the fact that there is an argument to be had is encouraging. The L3C is yet another sign of our progress and the nature of our progressive times.

There are more examples of capitalism gone green, from Socially Responsible Investing (SRI) to sustainable supply chain management. In fact, there are so many examples that I simply can’t mention them all, however, one example that is close to home remains. At G2B Ventures we are actively engaged in helping to support efforts in profitable environmental enterprise. We are working hard to demonstrate the value of smart energy efficient refurbishments in the residential housing market using a market-based approach that is acutely aware of public policy overlap into the sector. By being focused on profit maximization, and working with several local stakeholders to develop a market-driven premium for energy efficient homes, we will capitalize on the enhanced returns of energy efficiency to the benefit of our investors. If we can do this, we will be one more example that when green goes capitalistic, society and the environment are beneficiaries as well as the investor.