 So we're just really excited to be here. I know many of you have been here for a few years. Some of you are new But for us, it's really amazing to be here leading organizations that have been doing this work for in the Kaisima Organization more than 30 years and Willie more than a decade to talk to us for a few minutes about What it really takes to make impact investing work and specifically we just wanted to talk about three things what we do What it takes for it to work and then most importantly What are we learning from the doing of it many of us for many years have been talking a lot Writing listening But it's a rare opportunity to learn from a doer like Willie and I'll talk about what my team does as well My sense is that it's so cap. There's always three kinds of people on impact investing. There's haters Who really believe that what we're doing either is crazy or destructive? There are hypers who say that everything about impact investing is amazing is going to work really simply And then they're doers and I really think of Willie as an amazing example of a doer from whom we can learn I know you guys have been sitting for a while. So that's what I want to stand up and it's really quickly if you characterize yourself as a doer Stay standing if you're a hyper or a hater or hopefully something else have a seat Get a sense of who we are I know none of the haters are gonna you know coming here and being a hater is like going to Yankee stadium as a Red Sox fan Which I've done so you're not gonna own it, but if you're a doer stay standing and if not take a seat Great so we have a lot of self-described doers So maybe we don't have a lot to teach you guys But hopefully we'll be able to share some insights from what we're doing. So just wanted to start and we're a little bit rush But really just starting to talk briefly about what we do I said to Willie early that anyone who comes to so cap and doesn't know what Willie foot does and what root capital is about Maybe should do a little bit more research, but he's not as presumptuous as I am so He insists I'm telling you a little bit about what he does at root capital Then I'll talk a little bit about what I do at non-profit finance fund and then we'll talk about What it takes to succeed and most importantly what it is. We've learned from the doing since we were last year great Good morning everybody Speaking of haters my mother. I mean well my wife hates the jacket and wearing out because it's fake leather But I've worn it virtually every single time I've been on stage or hung out with with Anthony So that's why it's here. Thank you for indulging me Super excited guitar at home. So those of you know about that will be appreciated excited to be back at so cap and what a wonderful theme Igniting vibrant communities just quickly kind of laying out what we do at root capital So we're we're an impact first agricultural lender and enterprise accelerator if you will We Mission is to grow prosperity in rural areas right in poor environmentally vulnerable places and we do that by investing in Agricultural businesses that build sustainable livelihoods for small-scale farmers who often lack, you know, the very basics clean water electricity Medicine so specifically we lend capital We deliver financial training and we strengthen market connections for small and growing Agricultural businesses so we're kind of we're a social purpose ag lender really the combination of a non-bank financial institution and an NGO That we founded 15 years ago to address the missing middle of real finance right businesses that might aggregate Or serve hundreds or thousands of farmers, but they get stuck in that missing middle too big for Microfinance too small too risky too remote for the banks and really we start from the conviction that these agricultural businesses Whether they're a farmer association or a private entrepreneur that's working with small holders Through say outgrower schemes or a seed company or an agri processor They're an economic engine that drives prosperity in rural areas And the challenges they get stuck in the missing middle so they can't access capital or qualified employees or markets that they need to To grow their operation or invest in infrastructure or merely pay the farmers on time Right so they they're missing out on good business opportunities and too often they fail to flourish so we've grown pretty quickly in recent years and a lot of challenges there but this year we're on track to lend a hundred and fifty five million dollars to an active portfolio of nearly 300 businesses that Reach roughly five hundred thousand farm households across 33 countries And so including for instance 2.5 million dollars that'll go to four businesses Representing 18,000 coffee farmers in the Congo in the eastern DRC and so just maybe to wrap Regardless of how much we lend or where we lend the larger vision is really to try to catalyze a small holder agricultural Finance industry that serves all five hundred thousand. I'm sorry five hundred million small-scale farm households in the world and we'll do that by Demonstrating business opportunities in the countryside with many others and crowding and competition and this is a more recent thing and awkward But very powerful working with our peer institutions aka our competitors to Blueprint this nascent industry of small holder agricultural finance and create the kind of Standards and best practices that will underpin a thriving agricultural finance market that That is stable. That's sustainable That's responsible. That's inclusive Hopefully that you know that that ignites vibrant communities, right? So what Willie's been doing for 15 years at root capital, which is really combining capital and expertise To unlock the potential of his clients who are these cooperatives and other Organizations that are enabling farmers to get the most value out of their work Is a real parallel for what we at the non-profit finance fund have been doing for 34 years here in the US Where our clients are non-profit organizations? They are health clinics homeless shelters soup kitchens charter schools Performing art centers all of whom similarly are being hampered by their inability to access the right combination of the right kind of investment capital and the Expertise that they need to run their organization as an effective business and so we began in 1980 in New York City And you probably figured out that I'm young enough that I when I say this it's with a bit of a wink But I always say you know you remember in 19 the late 1970s that the oil price had spiked I don't but I think some people in this room do not too many people though looking out But the oil price it spiked in 1970 and a lot of the old homeless shelters and settlement houses in New York City Were built in the 20s and 30s by the first wave of philanthropy that had come to New York And those were old hulking buildings that were incredibly energy inefficient in 1980 They came to their funder the New York community trust who had funded them for years and said our heating oil bills have gone up We need a bigger grant to cover our increased costs because that's what nonprofits did they covered their costs by going to foundations Getting grant money going to governments and getting contracts the non-profit finance fund was born out of a very simple But powerful idea that rather than going and getting another grant from the foundation What those organizations really needed was a loan to do two things Put a new boiler in their basements that could be more energy efficient and put new windows in the buildings That would trap their heat and with that loan. They would be able to Reduce the amount of heating all they needed to the extent that they could repay the loan and end up with a better capitalized Organization that's a really simple idea and now we call it green retrofit finance and everyone's excited about it back then It didn't have a name But it was something we started doing but it was also a really radical idea because the premise was that a non-profit Organization could access finance and think of itself as a business that had revenues and cash flows That could ultimately support a loan and that's the idea. We were born out of in 1980 And since then we haven't grown as quickly as Willie has but we've done about 320 million dollars worth of lending we've made 700 loans never lost a dollar of our investors money And last year lent across the country to a wide range of organizations pursuing that basic understanding that as a non-profit organization That's mission oriented You don't need to be excluded from the capital markets and from the opportunities that investment capital has and on the other hand as Investors are the people we borrow from who we are paying back have bought into the idea that they can make investments that support both The social purpose they care about as well as their financial return So that's what we do and Willie and I over the years have had many conversations about the surprising Parallels between our work despite it being on the face quite different in terms of the kinds of clients we fund and Specifically where we work and so we just wanted to talk briefly about What have we learned from all this doing about what it takes and what does it take to make this work? And why can it be powerful? So yeah for us Success factors, maybe We could go into I think a whole host of Success factors about our own shops that for us would be for instance embedding deeply in local Talent and local markets and local culture being as close as possible to your clients Building deep industry expertise, but I want to share I think the most important point That's relevant for a soak up would be the following that for us success has been all about identifying the early-stage agricultural businesses that have Huge potential for impact economic social environmental But that face a ton of challenges that if addressed they become an engine of prosperity for countless rural kind of households and The challenges are Daunting if you take subs here in Africa, you know governments on average spend 5% of national budgets on agriculture Even though it's the primary economic activity of 70% of the population So massive underinvestment in agriculture has left the continent in Africa Decades behind other developing regions so as much as anything our journey at root capital has been kind of a Process of continual discovery and understanding of the constraints to business growth and success and since not just that say the firm level weak financial management for instance, but weak sourcing channels from farmers dependent on NGOs for inputs and technical assistance, right poor infrastructure You know bad roads unreliable electricity crappy cold chain the usual host of inhibitory laws and Regulations and subsidies and taxes so in short. It's really tough To serve that lower segment the lower end of the agriculture finance market And I would say over the years in this probably the most relevant comment maybe I have to share today in terms of our if not success factors our experience is that Critical thing has been not Overpromising and not overselling that lots of good and lots of deep impact will happen without real risk and cost and Even in some cases significant subsidy and we like to joke on our team that we're at the high risk low return sweet spot of smallholder agricultural finance and what we mean by that is That you know on the continuum of where mainstream markets meet Clients needs efficiently on one side and on the other where economic realities dictate You know exclusive reliance on charity We are squarely positioned in the capital preservation camp like paying a small coupon Combined with rigorous impact measurement But also raising enterprise philanthropy to build a balance sheet and for capacity building and for industry Facilitation and always always are the view toward reaching those earlier stage businesses and helping to unlock their growth and their Impact in spite of all the challenges and just one last point on this and maybe this is like a call to action But for for those of you who aspire to reach those least-serve market segments, and I hope many of us do Consider what we call the cross-sub city model where in our case we are building The a pipeline of early-stage businesses for ourselves and for the larger industry Knowing that those early-stage clients are going to be typically loss leaders at first and then we accompany their growth right over time to the point where We achieve operational sustainability through a cross-sub city from the larger clients that are profitable to serve and so we're not maximizing return necessarily at root capital, but what we are doing is helping to ensure that this agriculture finance market is Inclusive in addition to being stable and sustainable and and responsible. Yeah, I think it's really true And I've heard Willie say this before that knowing who you are and being clear about that is a really important success factor And and I joke that the impact investing is like a wedding. Those you've been in it at soak after a few years We'll know that we were earlier. We were in this sort of Weird phase after the ceremony when everyone's standing around they're passing around on doors But you don't know who's in the bride's party. You don't know who's in the groom's party You're not sure who you should be talking to and it's quite chaotic and in that moment Everyone can sort of present to be something different different people So you talk to one person you say I can deliver you market rate returns Then you talk to the foundation you say I'm all about impact now We're moving into the seated dinner phase where you get to look underneath your name tag and you see table one and table one You're sitting with Willie and Willie's about I'll preserve your capital I'll deliver incredibly strong impact and I'll do the really hard things and that's where we are in the US side Over in table eight are people who are managing fiduciary money with the Rissa compliant pension funds who are doing something different We need it all and you wouldn't have a wedding party under that tent if you didn't have everyone But I think being really clear and not trying to Deal with that confusing period by trying to pick yourself in too many ways too many people has been very helpful for us in our work We are absolutely in that same camp as Willie We haven't lost our investors money and we can't because of who we borrowed from we borrow from the He's lost a little bit of our investors money just a little Okay, yes, he has better investors than I do or more more lenient But I think certainly for us it's you know It's a similar story in the US and we don't have our clients don't have problems with roads And they don't have problems with the power going off all the time that really hampers their ability to operate But they do operate in a crazy system It's a system where at the best of times nonprofits are delivering one or two percent margins We do a survey every year of the state of the nonprofit sector in the US and we can tell you that half of all Nonprofits have less than 90 days of cash on hand at any time That's who we're lending to in the good years if they manage their contracts Well, they're maybe making a slim margin those contracts are often getting upturned for very strange reasons So I think so similar we are finding that in our work to be successful or creates You can't just simply put the money out there and say well come to us people who want deals And it's not just about finding the deals But it's what my team does is not take more risk But work much harder and be much more creative to turn what a regular banker would look at as a completely unviable Deal and work to make it happen and subsidies often a big part of that But there's no substitute. We've also found and this is for me transitioning from being a Hyper of impact investing and understanding it theoretically to running an investment fund One of the biggest things I've learned is how important it is to get into what I call the black box of the clients Rather than just saying if we create the investment fund and there's clearly a capital need those two things will meet They don't meet in a marketplace They meet in the context of a very specific investment you make into a very specific for-profit or non-profit Entity and understanding how that entity works and the pressures that are on that team is the starting point for us to be successful What we do so I see we're running out of time And I wanted to make sure that we got to what I think is the most exciting thing to be here talking about and that is What are we actually learning from doing so what I asked really to think about and I'll offer my thoughts is Since we were last at SoCAP and were you here last year? No, so he has two years. I have one year What do we now know about this work that we did not know in his case two years ago in my case one year ago? Because of the doing we've been doing over the last year. So what are the few things you've learned since last time you're here, Willie? Okay, so I have a tendency to overshare. So I'm gonna overshare a little bit um, I Think what I have learned what we have learned as an organization is How much trouble you can get into if you don't have clear expectations up front? with your investors and your donors about one really key thing which is that you can't Decode everything up front in the face of market failure that we have to dive into this work But with our supporters We need to have room and license to adapt and iterate and if you don't set that expectation very clearly up front You can you there can be serious misalignment. So I'll just start quick story We hit serious headwinds in 2013 as an organization first time ever we didn't grow Largely managing kind of macro forces that were Beyond our control But that can threaten even the best laid strategies So for instance market externalities collapse of the coffee price in 2013 coffee leaf rust disease a Biblical scourge that many of you will have read about that's hitting the Americas with the vengeance tied to climate change The Rising competition from other social lenders. God bless them moving into our space a great thing for market creation Meanwhile, we had recently Undertaken a large multi-year Pre-raise of capital for a debt and grant funding for a five-year strategic plan Which was pretty successful the pre-raise, but we didn't hit our targets last year In terms of volume credit volume in terms of revenue in terms of risk not radically off, but we didn't hit our targets as a result of managing these headwinds and some got spooked and And and pulled out even as others kind of deepened their engagement But the end are kind of successful pre-raise kind of unraveled. So here's what we did quickly Right so we did just because I don't want my communications person is glowering at me right now What we did right last year was we very aggressively communicated and shared our learnings throughout the headwinds with our investors and our donors and our board and everyone else we We implemented lean cost controls But being very careful not to undermine our productive capability in the field where most of our team are local Africans and Latin Americans spread across eight regional offices We focused on voice of customer business initiatives to manage the situation and I think actually got Better much better at serving our clients and then this year the market certainly in coffee the market rebounded and I'll be it with a lot higher volatility in in the commodity markets in general that we need to manage and we were there Ready and standing by to resume growth kind of together together with our clients So two key learnings and I'll wrap First one I mentioned it again You cannot decode everything up front and you really need to have kind of like in Silicon Valley as a tech company You need to have the license and the room To iterate and to adapt to changing circumstances We should have done a better job of setting those expectations up front And we certainly intend to do that going forward Second key learning and this is kind of picking up on some of the themes that Anthony just mentioned and I'll close here We appreciate now that impact investing is much more specialized with a lot more segments Within it then even just a few years ago So you've got government agencies and corporates and foundations and religious pension funds and high net worth individuals and family Offices and so on and so forth and with that comes many different theories of change Right, everybody has their own theory of change and so you have to and that's not a problem But you have to be very careful about aligning your theory of change Even if it's artfully adaptive but not bleeding into chameleon like your theory of change with a theory of change of your of your of your investors And so for instance finding alignment around in our case Financial what's your philosophy behind financial performance right in our case operating self-sufficiency or OSS or break even is a very key driver of internal operational efficiency right and it's an important indicator for Achieving a demonstration effect, but it's not the most important one It's not the only one and you have to weigh it against mission trade-offs in terms of maximizing financial return versus as I mentioned earlier Creating a very inclusive market as a catalyst kind of pipeline builder for our industry another one is in our case We are absolutely in the school of a multi pronged Strategy to achieve impact at scale and so it's inextricably linked finance advice Catalyze lend capital build local capacity through financial management training So folks can better compete in global or local markets and then catalyze an industry thought leadership field-building impact measurement And so on all three together are the three legs of the stool my father by the way said to me once please don't call it a strategic stool But now the less those three together Do you have alignment or people like I don't care about the advice stuff? I don't care about the catalyze test there. They're inextricably linked and lastly Within the factory gates. What's your direct service delivery? What about outside your factory gates? Like what do you do through partnerships? How do you engage at the landscape level? How do you leverage the ecosystem all these things in the face of what is a multi-dimensional very complex thing called poverty? So what I can promise is this year Come back coming back next year We will have learned a lot more and we will unapologetically continue to adapt and to iterate Into next year that's great, and I would recommend I think wheelie and his team are a gold standard in communication And it's all on his website root capital dot org Really great quarterly reporting and are able to convey both the metrics as well as the stories of what they do I'll just talk about what we've learned in the last year I think we've come here and you're gonna hear in a minute about a big policy initiative That some of us have been a part of one of my biggest learnings is the role of government and impact investing in last year When I say I said don't ignore the role of government because government creates the conditions under which we can operate I've really come to appreciate even more. It's not just that government creates the conditions But if you are going to do impact investing, especially in a developed market Where you are trying to assess or address issues of real poverty and social inequality and justice Ultimately, you are going to be investing in organizations that rely on government funding to pay you back That's a huge insight that I've had my team probably had it 20 years ago But a real understanding is not just that we need government to create the conditions of which we as private investors can make a difference Almost all the work we do at some point down the chain We are getting repaid because government is helping to fund a service. It's true in the US It's even more true in Europe and in the developed parts of Asia. So if you are operating in developed markets Let's give you three quick examples We've helped finance a 200-bed homeless shelter on 25th Street in Manhattan a 20 million dollar project We were able to lend two million dollars into it We are paid back because the city of New York and the state of New York are committed to funding those services We are ultimately financing government through the financing of a nonprofit just south of here in Los Angeles We've been financing an amazing charter school that sends a huge percentage of kids Not just to college but gets them to graduate from college out of a high school They've set up they needed money from us to rehab a building and start their new school Ultimately, I'm going to get repaid when the state of California provides that charter school with the revenues They need to Do the education and pay us back. We see this in sector after sector There's a health clinic in rural Hawaii serving a population that previously had no access to primary health care in their community We were able to make that loan help that facility get started Ultimately, it's government Medicare and Medicaid payments are going to make that happen So government and the role of government you cannot be an impact investor and make a difference on real issues of deep poverty And social justice and inequality in a developed market If you do not get really smart about understanding and supporting the flows of government into your bar into your borrowers The second thing we've learned and again I think the investors in this room with more experience than me would say this is a no-brainer It's about the management team when I'm trying to get it I just we got a three and a half million dollar loan approved through our committees And the loan is going to enable an amazing nonprofit to take a state contract And massively expand this delivery of health care into a certain population the state they operate to make that happen They have to go from a 700 person team to a 1400 person team and that's what they needed the loan for They needed upfront money to put in the IT systems the recruiting practices and get that engine going Ultimately, I only got that loan through my committees because we were able to convince the committee that we Absolutely believed in the management team of this organization If you are not backing management teams and you're backing real estate collateral and you can do some great things But ultimately to do amazing work as an investor. You have to understand the management teams I'm the last thing I'll say and we've been told to wrap is My biggest learning last year and I think Willie certainly knows this is true This is hard And this is why I think the the hypers out there are constantly looking for information that affirms their hypothesis that this is easy and inevitable And the haters out there look at any kind of hiccup and say see we were right. This is impossible. You can't do it The main thing I've learned is that this is just really hard to do and there's a lots of ways Elizabeth Littlefield was mentioned earlier at OPIC She's a great line. She says, you know, there are a lot easier ways for me to make money I do what I do at the simplest level what we do we do because we aren't the kinds of people who are trying to do the easy thing That's easy to say and it's hard a lot hard to live with, you know, I think Willie talked about root capital doing cost alignment And that's a euphemism for an absolutely traumatic and emotional thing that goes through an organization that is trying to do something hard And it's not about you know, you feel like you have a failure of leadership But what we do is really hard and I just learned again. That's why I just going back to Accept that this is hard and what Willie said earlier. We are not going to learn by sitting and talking We're going to learn by doing and doing with a humility that comes from knowing that what we do is hard And what we do is supremely worth it So I'm just really excited to be able to share these thoughts and it's always great to be on stage with Willie And very much look forward to hopefully being able to work with many of you in the in the coming years as you Take on this journey and grow with us Thank you. Thank you