 1, 2, 3, testing, testing, testing, 1, 2, 3, testing, testing, 1, 2, 3, testing, testing, testing, testing, testing. Governor's office. Good afternoon and welcome. I'm so pleased to be here. I sound a little like Winston Churchill. So we're going to turn down the monitors of these television sets as we welcome you here. So, Aiden, you're going to need to find the remote control and you're going to have to turn the sound down on these television sets. Okay. And once we do that, I'm going to welcome you to Finance Friday, which is part of the continuing series here on Channel 17. So that should be maybe behind you or ask Kim or we can actually just manually do it. So I'm going to just wait until we solve this particular problem and then we'll start again. Good afternoon and welcome. We are here at Finance Fridays, which is part of Common Good Vermont's continuing series on helping nonprofits think about different ways to be sustainable and to really learn about the numbers and learn about different ways that we can do the work that we do in a financially healthy way. So today we're going to be talking about social impact investing and also social benefit corporations, which are part of the social economy. Non-profit organizations are no longer just the only game in town when it comes to making good happen in our states, in our country, in our local communities. And so we have been interested in following this question of social impact investing for the past couple of years. And in the process, we've made some friends who are working in this field and we thought we would share what we've been learning with you today. Of course, you can give us a call at 802-862-3966 if you have any specific questions. And also you can email your questions to morganwebster, who's our director at commongoodbt.org. In the meantime, we have with us today four guests. We have Simeon Chapin. Simeon is the director of social and community development for the Vermont State Employees Credit Union. And we have Jake Ide, who is the director of investment and philanthropy for the Vermont Community Loan Fund. Laura Jacobi, is that the best way to pronounce your name? Yes. Yes. Is the executive director of the Old Spokes Home, which was once a for-profit business and is now a non-profit business. So we're going to learn a little bit about that transition. And my old friend Mark Redmond, who's the executive director of Spectrum, which also has its own social enterprise called Detail Works. And we'll be hearing more about that. Thank you all for coming today. Thanks for having us. Thanks. It's great to have you and it's great to have our viewing audience. And we even have a television live television audience. So thank you so much. So why don't we just start with maybe a little bit of history about how social good has taken place in the United States. Because we, I think we think that the non-profit model is the only model that ever existed. And this goes back a ways, doesn't it? Yeah. Well, I come at this, you know, from my place in the credit union, which we look at, you know, coming out of a social justice movement in Europe during the, you know, the forming of co-operativism in Europe around the agricultural sector. So I look at it kind of from a large perspective and I saw, you know, historical trends of, you know, Rockefeller donating money after the fact of earning, you know, huge amounts of money in doing business or the robber barons kind of thing, then deploying capital out into the nonprofit space. And seeing that that's been changing over the years towards a more participatory approach with more nonprofits going direct to the masses for donations, fundraising exercises, so more and more people getting involved at an individual level. And I see at the same time, you know, the rise of local investing, local food, local awareness, people seeing where their money goes actually makes a difference in their purchases and how that connects to social good in the community. You know, VSECU and also the Community Loan Fund are interesting places because we're both places where people can invest their money and put their money into those organizations to make a return on their deposits, but also a place where we're turning around and then looking out in the community to say, where is the best place for that money to be deployed? And it's a really interesting nexus piece because where we focus that work, either with our investment dollars or with our philanthropic dollars as VSECU has kind of both in play, really can make a difference and kind of help direct where everyone's headed. And I'm not saying that we're, of course, not the direction of everyone, but as that change happens from a, you know, industry to nonprofit to more people and a wide-braced approach, thinking about how their money makes a difference in their purchases, I think that that's the large-scale trajectory that I see happening. So traditional financial institutions and traditionally they've invested in the private sector because they're looking for the highest rate of return. But the values and the model for both the credit union and the loan fund is different. That's what you're explaining. You're not just looking for highest return, you're looking for something socially important to be achieved. Is that right, Jake? Yeah, absolutely. We certainly, we make loans, we're a lender, and like any lender, we want those loans to perform. And that necessitates us being able to get the money back and redeploy it and repay our investors when we need to repay them. But alongside looking for just that financial return, we're looking for, we're looking through another couple of lenses, a mission lens. We're looking to be able to deploy our capital to folks that typically wouldn't have access to capital from traditional financial institutions. Maybe businesses that are in an earlier stage or just folks that traditionally wouldn't have access to it, distressed communities, businesses and organizations serving lower income Vermonters. We finance affordable housing developers, the local community land trusts and housing developers like that. We finance local businesses that are trying to create jobs, not trying to actually creating jobs, preserving and creating jobs in the Vermont economy right here in Vermont. We're financing other nonprofits and community facilities that are providing all kinds of services, whether it's health centers or arts organizations, anything in the nonprofit sector that's providing services to lower income Vermonters or Vermonters at large. And we're also financing early care and learning organizations, childcare, early care and education organizations of all shapes and sizes, home based, center based, large, small, all around the state. So yeah, we're looking for that financial return because our business model demands it, but we're applying a mission focus to it. We're looking to serve the common good with the lending that we do as well. And are the investors that you have different than typical investors in that they're not looking for as high a rate of return and they have a social mission? I mean, sir, what's the profile of the person that invests to have you do this work? It's a really interesting question and I think that it speaks a lot to the environment around investing at large today. I think like Simeon said, you know, you used to kind of make your money and then maybe you could carve off a little bit and do good with it. I think that the idea of doing good with your money and doing well for yourself at the same time, that synergy is something that's more modern and is happening on a larger level now. And that investors are not having to sacrifice return, financial return to be able to achieve some kind of community return, however they would define it. Whether that's wanting to keep your money active locally in the community here in Vermont, whether that's wanting to have some kind of positive environmental impact with your investing or, you know, wanting to have your money have a gender lens to it, being able to invest in opportunities for women and girls, being able to invest in opportunities in countries around the world or just rest communities elsewhere outside of Vermont. There are opportunities for every investor to be able to do all of those things both through the traditional conventional investment world, through socially responsible investing and impact investing, but also through non-traditional opportunities like the Loan Fund, where you can lend your money and be able to do good with it right here. It's an interesting question about who. I mean credit unions particularly came out of a place where a group of people got together to share wealth amongst themselves when they needed it, right, as opposed to having to go to somebody else or go outside of their community to be able to get the credit that they needed. And that's just sort of continued in the credit union movement. It's really about that kind of one-to-one relationship. However, you know, as those groups have grown, of course it's been more and more financial services, but the idea is when you're, you know, the who is with social impact investing can be a wide range of people. And it's really about kind of the mindset that you bring to it. You can be an investor who's got, you know, thousands and thousands of dollars of discretionary income to invest for any kind of rate. If it's, you need a certain return, you can find a place that has a social impact mission to it. If you need to, if you need, can take more risk, you can find a place that has a different kind of return and risk profile to it. All the way down to, you know, many of our own members who are putting their money at VSEC because they see that that's part of the community that they're looking to support. There's the development of, you know, things that we do at the credit union now, which is, you know, a money market account where all of the money that goes into that account goes to only renewable energy projects within our membership. So if you care about the environment or care about weatherization for low-income folks or care about solar in Vermont, you can put your money there, have a guaranteed rate of return. It's not huge, but it's reasonable and it's good. And then see where that money's going at night. You know, I think one of the questions that many people had, you know, when you look at what happened last summer with the Dakota Access Pipeline, people sort of continuing its lead coming to awareness about what happens with their money when it's not actively being used by them. And social impact investing, to me, the overarching umbrella within that is more consciousness about where you're putting your money and finding the ways that are appropriate for you to get that risk and get the return you're looking for. So, Laura, I was going to say you've done a lot of work in the international development realm, and I'm wondering how you see this flow of capital coming from people that want to make things happen here into the international realm. You mean people that want to invest, Vermonters that want to invest internationally? Yeah. I mean, well, first of all, a lot of Vermonters, of course, have ties. Internationally, they may be recently arrived. And in fact, that's where a lot of capital comes from in developing countries is from folks that, the diaspora. So folks that have moved to the West, to the U.S., sending money back to support their families and to support their families investing, you know, in their countries of origin. And in fact, my most recent position was in, was working with Syrian, a lot of Syrian Americans who were using the money that they had, you know, made in America to provide relief in Syria during the conflict there. So, one of the questions that we have is, and you've started to mention it, but how do you find projects to invest in? And then I'm sort of interested in how do you find people to invest in the work that you're doing? So, you know, you've mentioned housing, you've mentioned energy, you know, do the folks in your organizations operate like typical portfolio managers? I mean, how do you find the best return for investment, both social and financial capital? Sure. I mean, I can speak to the kind of business loans, loans to nonprofits, loans into the energy space that we make that are products and services that the credit union offers. Those are managed just like any other loan fund would or investment portfolio would by the credit union. And that's, you know, regulated, looked at, it's backed by the NCUA, you know, it's that kind of level of how we approach and look for those partnerships or places to invest. The other side of things where we're kind of taking more risk, where we're making investments into things like milk money, which is the platform for local businesses to put up equity offers for other Vermonters to invest directly into, or Vermont Works investment management team, which we've made some investment into, which is a platform where they're looking to raise a $50 million fund to invest in growth stage businesses in Vermont here. Their mission is to bend the curve and keep high quality jobs in Vermont. Or if you look at Share Yourself, which is a platform we're working on to connect people with great ideas to be able to take them through the process of kind of creating a business plan around that great idea and getting the support that they need from others in the community. Those ones are more network approach. We are, you know, active in our communities. We're trying to talk to people as much as we can. And we talk about our mission first. We always lead with what it is that we're trying to do, which is to improve the quality of life for our members and for the Vermonters who live, who we live with. And then from that values discussion, figure out how to move forward and see what's applicable. With those investments, you know, we're not looking for a great return on them because we're balancing the social impact that it can have. Or, you know, we hope it can have if it works out and the amount of money that we can put into it. You know, those investments are, they're sizable. They're not, you know, we're not putting an inordinate amount of our members' money at risk by making these sorts of investments. But that's how that happens is really starting with the mission and the vision first. How do you measure social impact? I mean, it's easy to measure capital. You know, you've increased your financial yield. And then I'm interested in how you've set up the project, the detailing project at Spectrum. Maybe tell us a little bit about that and why Spectrum took it up. Sure. So we did strategic planning about three years ago. And we work with homeless youth, runaways, youth who've been incarcerated, kids suffering from mental illness and addiction. And we have a program that places them in jobs, right, in cafes, pizza stores, restaurants, wherever. And we have actually pretty good outcomes compared to other programs like that in the state. But most of our kids don't succeed in the workplace, you know? They didn't go out in families where it was modeled, how to show up on time, how to dress at work, how to speak to customers, how to speak to a boss. So they usually either quit or get fired within 90 days. So that's led us to think about how can we do this differently? What if we start a business? What if we start a social enterprise? And we're the boss and we hire these young people. And we put somebody in staff who knows how to work with this population. Most people are trying to run their restaurant, their coffee shop, whatever, their bank. They're not trained in how to do youth work, but we are. So we came up with that idea. And with the hopes, again, what would the outcome be? More of our youth would actually stay in jobs and not get fired or quit within 90 days and actually learn soft skills and hard skills. Then it was like, which business do you pick? So we formed an advisory board, put a lot of entrepreneurial types on that. Leadership Champlain, which is a group that comes out of the Chamber of Commerce. They did a tremendous amount of help to help us pick the business, pick the criteria, and then develop a business plan. So we landed on car detailing for a couple of reasons. We did focus groups with kids. It sounded like they wanted to do it. Number two, there is a need. Most of the car detailing places in this county, you have to wait a couple of weeks or months to get in there. Low cost to start up. You can literally start a car detailing the equipment, the soap. It's less than $5,000. So if it wasn't going well, we could get out of it without a big loss. So anyway, that's where we started. Now we formed what's called an L3C Corporation, which is a Vermont invention. We looked at an LLC, Limited Liability Corporation, with the L3C, which I think the technical title is Low Profit, Limited Liability Corporation. So it's a separate corporation underneath Spectrum, and it can accept charitable donations, because we hoped that people would want to donate to start this. So that's what we did, and we picked car detailing. We rented space. We just moved during the Williston now. And every morning at 7.30 a.m., we have four or five youth who were homeless, probably living with us, kids who've struggled in life. They meet in our drop-in center. We drive them up there. They detail a couple of cars. In the noon time, we bring them back. The next crew of kids that just had lunch, we bring them up there and we bring them back. So we've been at it soft opening in June, hard opening in September. So we've been at it for a while. We've more than doubled our percentage of youth who were able to stay in work for 90 days or more. So that's the first, you know, indices. Now what I want to see long-term is we've gone to some of the auto dealerships on Shelburne Road and other places. They're like, can you teach these kids how to detail cars and how to show up on time and call it sick? We'll hire them on at a living wage. So we're really, again, it's still early in the process. Now, this is important to know, a lot of nonprofits think this, I'm going to start this business, whatever it is. And it's going to generate all these profits. And that's then going to go pour into my whatever it is you're running. Shelter, you know, forget it. We did a lot of research on this. We went to Denver to a national conference. And it was kind of a rude awakening. If you break even, you'll be the rare nonprofit. That's what I was going to ask you. Wendy, are you going to turn a profit on your detail? We have a business plan that says by the end of year three. Now there's some promising signs. We never put in our business plan. We thought, well, hope we'll get donations. Well, a hospital donated 70,000 to us. No, 18,000, 70,000 to us. So we've gotten all kinds of foundations that focus strictly on this they've given to us. The hospital gave us a contract for 17 of their vehicles. The state gave us a contract for two of their vehicles. Howard's Center this week just gave us a contract. So that and then jump on it and all the Facebook, everything were full up, you know. So we think by the end of year six, we can actually be, we'll lose X dollars in year one, a little less in year two, a little less in year three. But will we ever generate enough profit that it would help fund the rest of the spectrum? No, but if we can even break even, we'll be grateful. And but the real outcome to me is taking young people who really haven't had success in the workplace and helping them to develop the soft skills and hard skills so that they can leave us and earn a living wage. We're paying minimum wage now. We want them to be in careers. Not everybody can go to college. Not everybody should go to college in my opinion, but everybody's going to need to learn some skill. So that they can survive in this economy and make a living wage. Now, Laura, are we going to respond to? Well, I was going to say, I mean, I was thinking about, right, so we do skills development. We train mechanics. And as a retail shop, Old Spokes Home has always been a great place to get a summer job and to learn these great skills out of, you know, customer service skills, mechanic skills, which are really help you develop these problem-solving skills. You know, they look at a bike, they assess it, they figure out what's wrong with it. You go through this whole step-by-step process, right? So it's been great. The difference now that we're a nonprofit is I can hire people that, you know, won't make me money right away, right? So as a sole proprietorship, Glenn Ames had Old Spokes Home as a great bike shop. The big difference is that, you know, I'll hire young people or we have a mechanic that's deaf. I'll hire people that I have to spend money on working side-by-side with other mechanics because I don't, as a nonprofit, I don't have to be so concerned that every single employee is generating revenue. I mean, for a small business, the profit margins are really narrow. And like you were saying, you can't expect to make a lot of money on a small enterprise, necessarily. But what you can do, right, is create a place where young people or anyone can really develop these skills in a setting that is professional, where the expectations are high, you know, but they may need hand-holding as they develop those skills. And so I'm employing people that, like as a small bike shop, I could never afford to employ if I wasn't also getting donations and grants and that kind of thing. And why did the business move from being a sole proprietorship to a nonprofit in order to achieve these social goals? Well, so as a bike shop, Glenn was a sole proprietor, Glenn Ames, and he always was very community. Like he always had social goals, right? He was always, you know, he made bikes affordable. He always sold refurbished used bikes that were reliable because mechanics were refurbishing them. He always, again, bike shops are a great place for high schoolers to get great job skills. But he, you know, he had to make a profit. He had to, you know, he had to stay in business, right? So the big difference, so then when he wanted to sell the business, he sold it to the nonprofit, which was always also across the street, Bike Recycle Vermont. And they were always a nonprofit and they were always, you know, selling bikes for like $25 to $50 to folks that had been, these bikes had been donated and refurbished by volunteers and one mechanic. So it was basically kind of running on a shoestring. But so Bike Recycle Bottled Spokes Home as a way to cover, you know, the cost, the operating costs of their social programs. And Glenn was very happy to be able to sell it to a nonprofit because, I mean, again, as a small business, he was always very community minded. But I think the big difference between when Glenn owned it and now that it's a nonprofit is who our customers are and who our employees are. And our customers are now folks that, you know, can only afford a $25 or $50 bike. And our employees are sometimes mechanics that need to spend time one-on-one with a professional mechanic and, you know, who can't generate revenue coming in the door. But after working with us a season two seasons, they're professional mechanics. So in effect, you diverse the Old Spokes Home diversified its revenue sources by becoming a nonprofit. Yep, exactly, because now we get donations and grants and that kind of thing. So we've actually, and in the year since I've been on, we've raised enough funding to be able to really expand our programs in terms of the number of people we serve, but also the quality of programming. So we just are doing things like we're selling now accessories at cost. And, you know, a mom can get her child on a bike seat, you know, and all that's at cost. You know, folks that come in and they rely on their bikes for transportation, now they can get racks and lights and helmets and locks, which is what you really need to be able to commute on your bike, all that at cost. So we've really, and we've started going out to communities with a mobile repair unit. So, and we did that in partnership with, we launched that last summer in partnership with Spectrum. So the Spectrum youth were trained in flat fixes and basic adjustments, and they went to, with one of our professional mechanics to low-income communities where they can't access bike repair services. Because if you rely on your bike, you can't, you can't get to the shop if it's not working. So we thought, and a lot of them, it was literally flat fixes, right? I mean, that's what was keeping people off their bikes. And so these kids with the Spectrum kids after, you know, they worked with our professional mechanic, but they can fix flats, right? And so they were doing that. We got hundreds of bikes back on the road. So, so we've been able to increase our services. And a lot of that is because we've been doing some fundraising to complement, you know, the, what we generate, the revenue we generate from the retail shop. So what I would say is the retail shop, it covers our operating costs, but the, with some revenue transfer, but the majority is with shared resources, right? So we share mechanics. We share inventory management systems. We share point of sale, you know, software. We share, you know, all the, like accounting and, you know, so, so it's, because we're able to, it's a lot of in kind more than the actual cash that's being transferred from the retail shop to the, to the social programs. So you've created an economy of scale by being able to do this work on sort of both sides of the ledger, so to speak, but with the same infrastructure. Right, exactly. So, so I would say an independent, like a small bike shop, retail bike shop, wouldn't fund most nonprofits. It would only really, it would only really create enough resources to fund the kind of nonprofit that we've got. Right. So you've talked a lot about social impact as kind of the primary measure, and I wonder, are there projects, you know, L3Cs, as you said, as a Vermont creation? Are there L3Cs in Vermont that are actually achieving a revenue gain that you invest in as investors? Do you see what I mean? I mean, we're hearing a lot about how this, this is big social impact, but what about this balance of social impact and financial profit? Sure. Like, are there successful examples in Vermont? Well, it's really interesting. I mean, just the discussion here about the various forms that a social impact business can take, right? Whether or not it's part of a business that's actually a nonprofit structure or an L3C structure, like the various forms that can happen. And I thought about Vermont businesses for social responsibility. This is a number of highly successful businesses who have started with a social mission first, who are having social impact, but also have revenue goals. So that's another kind of part of the spectrum of different ways that business and social impact can be made. In terms of L3Cs that are active, you know, milk money is an L3C that we've invested in. You know, they're still in the growth stage and becoming profitable. They haven't made that yet. I actually spent some time working for Farmers to You, which was a business that's aggregating Vermont agricultural products and selling it out of state in Boston to a direct market. You know, with some grant funding, with some investment, you know, a stacked capital approach to how that was funded and how they're bringing in money on their weekly ships of farm produce down to Boston. But that spectrum is really interesting to me about how it can work. You know, we at VSEC, you talked about how we measure our social impact, right? Primarily, it's, you know, how many people can we serve with high quality financial services that can give them access to the capital they need to make their lives happen or give them a reasonable rate of return. Also, how we measure the triple bottom line aspect of our business, the environmental, social and financial prosperity pieces, is actually to see how much of our assets at risk are specifically going to these aspects. So how much of our assets at risk are going into environmental loans. So for solar development or for weatherization or for, you know, people in low income communities to get housing or various pieces of them. And what can we do to help direct more of our capital towards these social impact pieces? So that's, we look at the numbers, but then we also look at how many, you know, the numbers of like how many dollars we have, but how many are we able to do, how many people are we able to serve. And on the philanthropic side, you know, it's more of a case by case. We're looking at heat, shelter, financial literacy in the environment as kind of the focuses that we're trying to make impact on. But each individual gift that we make, you know, is more about what's the nonprofit going to do with it and then can they achieve that with it. And so that's where the impact on that, the measurement on that side comes from. You're looking at what difference people are going to make with the dollars you're investing. Absolutely. Not how many meals they're going to serve, but why was that important? Right, and it's interesting, you know, both of you were talking about, you know, human capacity as the outcome. Right, exactly. And that's so important, right, whether or not it's somebody becoming financially literate on their own to be able to make good savings decisions or investment decisions or someone coming, you know, to work every day and learning how to talk to a boss or learning how to, like, show up. Those sorts of human development capacity-building pieces are just huge. But also, I mean, that has an impact on economic development. I mean, it's kind of a virtuous cycle, right? Because we have, like, 2,000-plus jobs that go unfilled every month in the state of Vermont. I mean, that's what people figure. And I feel like anything that we can do to help people get to work by getting them transportation that they can afford or training that helps them get a job, that's got to be good for the economy, which generates more revenue to invest, right? I mean, is that how investors look at it? I mean, is there kind of this vision of the greater, like, it's almost... The more you do to help people get to work, the better that is for businesses, right? Absolutely. Absolutely. So if we can help someone get into a car so they can get to work, that makes a big difference. If we can help create a platform where small businesses are able to get capital, access to capital that they need so that they can employ people, that's huge, too. You know, I mean, part of the development with our environmental work, right, being able to have specific products that help the solar industry finance their projects is about also workforce development, because we've been able to help these many different installation businesses get more work because we're able to give their customers low-cost financing so that they can actually go and develop those projects. It is a virtuous cycle and it is an ecosystem approach, the holistic approach that, you know, where we put our money when it's not in our pockets makes a big difference. It makes a big, big difference. So you can park your money in some, you know, investment portfolio that you don't touch. You don't know anything about it. You just kind of give it to your manager and they go it. Or you can say, hey, you know, I want to have an SRI fund, a socially responsible investment fund, because I care about that. And then actually, you know what, I want to put some money in the community loan fund because I know that, you know, there's risk there, but, you know, they're really solid and, you know, they're investing in Vermont. Or I want to put something in a money market account at VCC because I know that that's going to go towards these outcomes. Or I want to, you know, go get my car detailed, you know, and do it through this because I know that the person who's going to detail that car is taking some very, very positive steps towards helping themselves. Right. So. Jake, what are some of the projects that in the last year or so that have really excited you that the loan fund is invested in? Well, the, I think that what we've done in the last couple of years has been really interesting is that while the loan fund is 30 years old and has lent $102 million, I think at this point, over those 30 years, we've always asked our investors to invest in the fund in general and that their investment was going to be protected by the entire portfolio of the loan fund. And I think that what's really special about the current climate and kind of speaks to what Simeon was just talking about is that there are so many options that impact investors are really able to dig down and while they're guided by that virtuous cycle and wanting to do good generally, I think that investors right now are really have a lot of options to be able to define exactly what that means for them. And if that means, you know, women and girls, then there's an opportunity for them to do that. And if that means sustainable agriculture, there's an opportunity for them to do that. And so one of the things that we've been doing in the last couple of years to speak to that need is for the first time having designated funds where an investor can really direct their capital as opposed to into the loan fund in general, we're allowing folks and helping folks direct their funds into a specific issue or impact area. So that started in 2015 with the Next Generation Fund which was for impact investors to direct their money into our early care and learning work specifically and then in 2016 with our Food, Farms and Forest Fund which allowed folks to direct their money into sustainable agriculture and agriculture in general, the working landscape in Vermont. And those funds have both been really interesting and just provided another opportunity in the spectrum of things that folks can do in Vermont to really direct where their money is and really feel that connection. I think that we all, and we all, I'm going to speak in broad terms now, I think that not just investors but people, certainly I would imagine the five of us sitting around this table and certainly everyone that's out there watching a webcast on impact investing. Look at the world around us right now and feel like we wish there was something we could do. We wish that there was some opportunity that provided some kind of agency or gave us the power to make change, to do something better. And impact investing is definitely a tool, a very real tool because it involves dollars and cents which is a very real thing to be able to make positive change in the world around us and designated specific funds at the Loan Fund allow you to do that. And there are a lot of other opportunities as well. But I think that you're seeing a class of investor that is no longer just this little group of impact investors, it's all of us. We all have the opportunity to do it and there's vehicles for all of us no matter what our asset class is, no matter how many dollars and cents you have or don't have. There are opportunities for anyone watching this to be able to do exactly what we're talking about it. And that's a change and that's a really heartening change in the way that money's moving around in the world, I think. Mark. So what do you folks think of social impact bonding? The social impact bond is a really interesting thing. You want to explain it first. It's a little complicated. It's a little complicated. Typically the state or a government and I am no expert. So let me preface these remarks with that statement. As I understand it, the government instead of paying for just services to be reformed pays for the results, the eventual results and the community change that programs are trying to have. Right. Ultimately. So it's a pretty complicated financial transaction where certain organizations finance future results and the state only is on the hook to pay if those results are achieved. It's there are a couple of them and by a couple I mean 20 perhaps around the country that are happening right now. It's something that we've been exploring in Vermont. Typically an organization like the Vermont Community Loan Fund Community Development Financial Institution or CDFI which is used to moving money around in social ways plays some kind of role in facilitating the social impact bond. One of the things that I think are really necessary that certainly all the examples of success that are happening right now with social impact bond and some of the cautionary tales maybe involve a government that is very committed from the get-go and really wants to see it happen and is really leading in a way and so that can sometimes be the switch that needs to get flipped first. I mean I like the concept because the concept is this. So let's look at if we invest X dollars up front we won't be paying X plus Y down the road, right? So let's look at prison. Prison is one of the most expensive thing, right? Yeah. In Vermont what is it? $55,000 per year for a male like 8,000. Right? We know that. So if you take the millions that we spend on that and instead put the money up front and say early child education, okay? Can we then say by investing those millions here we're now down the road we're going to save those millions there? Yeah. And so the government entity puts up the money but then it always involves like a bank or a financial institution or a Morgan Stanley type, you know. The government entity eventually promises that they will pay but the money needs to be there for the services to move forward to pay for the services as they happen. And at that point you get a mix of philanthropy, community development, financial institutions like the Loan Fund and folks like that that are kind of essentially lending the money to the folks that are doing the work to get the work done so the results can then be demonstrated in the state will eventually pay or municipality will eventually pay. Or individual impact investors might come in on that too, right? If they're part of a fund and they're doing it because of this balance of social good and investment because they need to see a return on that money. It might not be as large as they would if they're going to, you know, go into just the regular capital markets of course but they're investing with the understanding that if all that happens they're going to get paid back. Yeah, right. And it's a long-term game too. It has to be very patient capital at every phase of the game and that can be a real challenge. And I think Mark hit it on the head, you know, where the, or you said it, I think, is that the leadership at the governmental level needs to be there because if the nonprofit community or the impact investment community is trying to make it happen but at the end of the day the state's not willing to reserve those funds or isn't really sure about it or doesn't quite understand the mechanism or is not quite clear on what the goal, I mean, not ready to reserve those funds for that goal, then the whole thing doesn't work. Right. And that's what we've found to be the case in Vermont because, you know, we've spent a lot of time talking to folks in government about this and the potential. I mean, think about how you might be able to clean up the lake with dollars like this, you know, there's big environmental projects that have been funded. I think Washington, D.C. is one of the examples where it's happening. And, you know, the state's in a situation where they have a certain amount of, and you can correct me on this, but they have a certain amount of capital that the governor is willing to set aside for indebtedness, right? Mm-hmm. And you say, well, let's set aside some of this for this project in the lake and she's gonna say, well, no, I have all these other things I have to do. So, you know, so there's so many competing pressures on a state like Vermont for the little capital that it does have that it might be harder to pull it off in a state like this even though you would think it might be easier to pull it off in a state. You know, it's harder to get the government initiative like that. And I think it's similar to something that I think all of us in our own businesses or in our own personal lives are trying to balance, which is the immediate need that we have versus the long-term, you know, goals we're trying to have and how do we invest for the future. And, you know, coming from a member-oriented organization I can just say, you know, everybody can do it in a little way than the collective, and collectively we all move forward. So, you know, look for the smaller, the small ways that we can do it, trying to start a different kind of business or going to a different model or, you know, investing in a community loan fund or having your finances run by a certain organization, credit union or other, you know, credit union would be great. But, you know, just those competing priorities, right? Right. Competing things like you need to serve that person who's right in front of you, and the state has people they need to serve who are in desperate need right now. Right. If you went to the legislature today and said, hey, we would like to reserve X billions or millions of dollars for early or whatever, they'd say we don't have it because we still have these prisons we've got to run, these mental health facilities we need to use, psychiatric, you know, so, right, where can you get the money? I mean, our social enterprise, I'll be honest with you, the only reason we're able to start, we didn't have to take a loan out, a major donation dropped in our lap out of the blue, you know, and our board met and said, let's use it for this, you know, so we were able to put this money up front on the gamble. We hope it works out that down the road, these kids are going to gain skills and have better jobs and not end up in the homeless system or the corrections system or whatever else. Right. Right. And you've already doubled, you said, the amount of... Yeah, I mean, early indications after a few months are quite good, but we don't want to declare victory and go home. I think it's the same, it'll be the same story with the social impact bond or pay for success is that it's still a really young instrument. Right. And I think that you've seen some good returns on some of them that are happening and some not great returns. I think on balance, the mechanism is so progressive and totally appropriate that I think that it will, 20 years down the line, there will be lots of examples of how these things worked and it will become more commonplace and it's totally doable in a common sense, kind of political and fiscal environment like you want. Right. One of the things you said earlier was that nonprofits need to think carefully before doing something like this and I remember Dolly Fleming at Mercy Connections convening a group of people to look at what you've done at Spectrum and see if they want to do it. So, and I use her as an example because as you said, they decided in the end not to take it up. Not to do it. Right. But they had a really due diligence process and maybe you could talk a little bit about that. So if a nonprofit wants to think about diversifying its revenue and achieving its impacts through a kind of for-profit enterprise, what are the steps? I think you have to do something that relates to your mission, right? And it's going to have some impact on whatever client group, you know, that you're working with. So that's number one. If you're going to start running something that's totally, we're going to start a TV studio to compete with, you know, like that's so far out of our mission. So I think that's number one. Don't do anything that's just like so far away from your wheelhouse. That would be key. And then I think you have to have business types on your board of directors, everybody. We're able to really look at this with a fine lens and say, is this going to sustain itself or not? Or how much of a loss are you willing to take? So we were fortunate to have leadership, Champlain, people from dealer.com, Union Street Media, who were on our advisory board and really looked at this very carefully. Otherwise you can march ahead and then have a mess. You need a business plan. You need a business? It was so funny. So many times, you know, someone would say, hire this person. And I go meet with them. And I can use her, and at least Samuel's, you know, very established business person. She was like, I was like, I'll hire you to write the business plan. She said, I will do this project under one condition. You don't pay me. So I was like, all right, I can meet that. So she did a great job. Great job. And said to me, you have to do this, this, and this. You've got to research this. So we came up with a really solid plan that I mean, I was able to go to our board and say, we're going to lose X hundred thousand dollars on this project over the next three years. And they just didn't say, oh, okay. They really want to know on a per-youth basis how much is this going to cost versus our other jobs. So they really, really looked at it very closely. And in the end, they unanimously approved it. But I think nonprofits need, you need those types of people on your board. We have other people on board who are social workers or clinicians, but you need people who have a financial mind and a business mind if you're going to go in this direction. It's fascinating. It's been really eye-opening for me the cultural difference, right? I mean, so, especially, again, a small business, every single decision, you have to look at the impact on the bottom line, you know, and how are you going to lose money on this? Or if you're going to make money, exactly how much money are you going to make? And, yeah, coming from a nonprofit world, like, that's a mental shift. And, again, you know, sometimes I had to say, well, you know, we're not going to make money. However, so here's the gap that we're going to have to raise the funds, you know, from donations and grants. And because, you know, that's our mission to expand this programming. But, you know, so it's not just a business plan, but it's also, like, the culture and every single decision has to, is driven by are you going to make money or are you going to lose money, you know? And if that's not ingrained in the organization, which it's not in a lot of nonprofits, then it's like, you need to bring it in. Right. Well, I would think that that would be a core competency of any nonprofit anyway. Right? Hopefully, yeah. I mean, and I think we, you know, we know that which is actually why we do Finance Fridays, because people are so mission driven and it's also why we've been so invested in results-based accountability. It's like, you know, it's one thing to get up in the morning because you feel children need to be fed, but it's entirely another one to understand what the economics of feeding them and why it is important on a higher level that they have what they need to go through their day. So there are these kind of different levels of evaluation and assessment that we as nonprofits need to get really competent in no matter what business enterprise we're working in. I mean, I'm shocked at nonprofits that have been around for some for hundreds of years that suddenly go belly up, you know? Hall House, started by Jane Adams, right? In Chicago, boom, they're gone. Hale House in New York City. And I look and I'm like, how could they be around for that long? I'm sure they had some savings or endowment, and it's like, you just can't keep spending the money. In the end, you have to make payroll. In the end, you need money in the bank, you know? And you just got to be very, very careful. And our board, you know, we have business people like that on our board who are just not going to let us spend wildly. So it's a cautionary tale. That and a lot of nonprofits, especially in Vermont, have relied on government funding. You know, we've gone from 98% government revenues to 48%. We have watched, I was in a meeting yesterday, there's another big chunk we may lose next year. We've seen one federal and state grant drop off the rate after the other. Luckily, we haven't had one death loss, you know? We had diversified earlier, but the only thing that's been saving us is the private giving for places like VCCU. One funding has gone like this and the other one's gone like that. Yeah. And I just want to, another thing that another point I think should be made is while, you know, businesses can be, you know, have a social mission and turn the bottom line and that's critical that businesses have, you know, I think, you know, the environment is important to them, the kind of social equity is important to them, but I think that there is always going to be a place for nonprofits. And again, you know, I say that because, again, Glenn was very, as a businessman, he was very, you know, socially responsible. I mean, he cared a lot about the community. He wanted to make bikes accessible. As a nonprofit, we also want to make bikes accessible, but we're really serving, you know, we're really able to serve customers that Glenn could have never served as a for-profit bike shop, right? And we hire people that Glenn could have never hired as a for-profit bike shop. So, and we're only able to do that because of donations and because of philanthropy and, you know, we don't get any, well, get some grants, but so while it's so, while I think it's great that businesses are so, you know, the triple bottom line and they're so committed to their community and the environment, I think that's great, but I do think, again, seeing both, I think that there is always going to be a place for nonprofits. Oh yes, for sure. But I just think that, you know, there are some things that are going to lose you money and, you know... And then it's a decision, is it worth the cost? Is it worth that kind of life, you know? Where else are we going to get that money? Right, where else are we going to get the money and is it worth the benefit you're going to provide to people? Exactly, but where else are these people going to get bicycles and where else are these youth going to get job training when, you know, for... Right, right, but, you know, you said for the last three or four jobs they weren't able to kind of make it work, but, you know, if you have the right combination of supports or whatever, then they can and then they launch. So, yeah, I think it's hard to do that kind of stuff while turning a profit. Yeah, I completely agree. I mean, we're not for-profit, we're not a non-profit, we're structured as a not-for-profit, but, you know, coming from the sort of public-private partnerships, right, this kind of idea that nonprofits need to exist because there are things that cannot be served in this current culture, in this current place, that cannot be served by business outcomes. Right, they can only be served by generosity of spirit, generosity of heart, generosity of individuals or organizations giving for that. And we're going to be there, I think, for a very long time, just in that same... However, you know, the relationships that can be developed between the non-profit and the for-profit world have seen to show such results, you know, beyond the giving back and forth, but also creating opportunities for the business to serve those customers or those clients in a different way that maybe they couldn't have that. Or, you know, for an organization like ours, we have 170 people who are looking for opportunities to donate their time, to raise money for organizations. So if we have a partnership with Say Spectrum, you know, we're giving philanthropic dollars to their fundraiser, but we also send a team of employees who are also fired up about the cause. That creates us as a place where people want to work. That's true. So that's a really great kind of way that the partnerships can happen and also enable and help like our, you know, not for-profit business can, you know, help our employees and help the community find that generosity of spirit and give place for it to happen in the partnerships. Yeah. Jake, is there any good news in the federal tax bill that might help stimulate some of this activity? Sure, the federal tax bill. Who would have thought that there was something good that came out of the federal tax bill? There is an idea that community development financial institutions or CDFIs like the Luma Fund have been championing for a while now called Opportunity Zones that did somehow through advocacy. It's not somehow, was a perhaps surprising inclusion in the tax bill which is going to designate certain distressed communities and populations around the country by geography, I think, in the end. So by counties or census tracts, perhaps. Where investors, impact investors, social investors are going to be able to earn tax relief by dedicating their investments to those geographies. Probably through vehicles like CDFI or other nonprofit kind of financial organizations. But yes, it did get into the tax bill. It's still in progress, but it's looking like it is going to bear fruit. Essentially, the state governments are going to designate these geographies in which the investments can be made. The governor's offices around the country are working on that right now. The state of Vermont and Governor Scott's office are working on that right now. And that will be the first step towards getting this thing launched. It'll take a year or two probably to roll out the regulations through Treasury and exactly how mechanically it's all going to work. But it's in that tax bill and like everything else, it's going to be a part of the tax bill moving forward. So we're excited about that. It's a great opportunity to again realign our capital with our values and get money into, to create opportunities for folks that have been disenfranchised and left behind by our current financial system. Great, that's great news. Love it. I know it. Well, I want to thank you. Let's end on a happy note. That's it. That's what I'm saying. I want to thank you all for joining us and thank you very much for watching. We've been talking about social impact investing and how it might impact your organization and the state of Vermont as a whole. There's a lot of exciting work that's being done both on the financial investment side but also on the nonprofit organizational side that we've learned about today and there's plenty more to learn about. So stay tuned here. I want to thanks to me and Chapin from the Vermont State Employees Credit Union, Jake Eyed from the Vermont Community Loan Fund, Laura Jacoby from Old Spokes Home and Mark Redman from Spectrum. Thank you all for joining us. Thank you very much for watching. Stay tuned here. Come and give Vermont and Channel 17. We're always glad to see you anytime. Thank you, Lauren.