Tuesday, October 27, 2009

Database of State Incentives for Renewables & Efficiency (DSIRE)

DSIRE is a comprehensive source of information on state, local, utility, and federal incentives and policies that promote renewable energy and energy efficiency. Established in 1995 and funded by the U.S. Department of Energy, DSIRE is an ongoing project of the N.C. Solar Center and the Interstate Renewable Energy Council.

Established in 1995, the Database of State Incentives for Renewables & Efficiency (DSIRE) is an ongoing project of the North Carolina Solar Center and the Interstate Renewable Energy Council (IREC). It is funded by the U.S. Department of Energy’s Office of Energy Efficiency and Renewable Energy (EERE), primarily through the Office of Planning, Budget and Analysis (PBA). The site is administered by the National Renewable Energy Laboratory (NREL), which is operated for DOE by the Alliance for Sustainable Energy, LLC.

Sunday, October 25, 2009

Amazing Grace; finding Common Ground to Build a future together

'Amazing Grace' and the End of the Slave Trade
February 22, 2007

Two hundred years ago, the passion and oratory of a man named William Wilberforce drove the British Parliament to abolish slavery. Michael Apted, director of Amazing Grace, talks about the film adaptation of the life of Wilberforce.


Michael Apted, director, most recently, of the film Amazing Grace, which opens nationwide on Friday, February 23

Eric Metaxas, most recent book is Amazing Grace: William Wilberforce and the Heroic Campaign to End Slavery; author of many children's books; humor pieces have appeared in Harper's magazine, and The New York Times

Excerpt: 'Amazing Grace'
We often hear about people who "need no introduction," but if ever someone did need one, at least in our day and age, it's William Wilberforce. The strange irony is that we are talking about a man who changed the world, so if ever someone should not need an introduction — whose name and accomplishments should be on the lips of all humanity — it's Wilberforce.

What happened is surprisingly simple: William Wilberforce was the happy victim of his own success. He was like someone who against all odds finds the cure for a horrible disease that's ravaging the world, and the cure is so overwhelmingly successful that it vanquishes the disease completely. No one suffers from it again — and within a generation or two no one remembers it ever existed.

The roots of the thing Wilberforce was trying to uproot had been growing since humans first walked on the planet, and if they had been real roots, they would have reached to the molten core of the earth itself. They ran so deep and so wide that most people thought that they held the planet together.

The opposition that he and his small band faced was incomparable to anything we can think of in modern affairs. It was certainly unprecedented that anyone should endeavor, as if by their own strength and a bit of leverage, to tip over something about as large and substantial and deeply rooted as a mountain range. From where we stand today — and because of Wilberforce — the end of slavery seems inevitable, and it's impossible for us not to take it largely for granted. But that's the wild miracle of his achievement, that what to the people of his day seemed impossible and unthinkable seems to us, in our day, inevitable.

There's hardly a soul alive today who isn't horrified and offended by the very idea of human slavery. We seethe with moral indignation at it, and we can't fathom how anyone or any culture ever countenanced it. But in the world into which Wilberforce was born, the opposite was true. Slavery was as accepted as birth and marriage and death, was so woven into the tapestry of human history that you could barely see its threads, much less pull them out. Everywhere on the globe, for five thousand years, the idea of human civilization without slavery was unimaginable.

The idea of ending slavery was so completely out of the question at that time that Wilberforce and the abolitionists couldn't even mention in publicly. They focused on the lesser idea of abolishing the slave trade — on the buying and selling of human beings — but never dared speak of emancipation, of ending slavery itself. Their secret and cherished hope was that once the slave trade had been abolished, it would then become possible to being to move toward emancipation. But first they must fight for the abolition of the slave trade; and that battle — brutal and heartbreaking — would take twenty years.

Of course, finally winning that battle in 1807 is the single towering accomplishment for which we should remember Wilberforce today, whose bicentennial we celebrate, and whose celebration occasions a movie, documentaries, and the book you now hold. If anything can stand as a single marker of Wilberforce's accomplishments, it is that 1807 victory. It paved the way for all that followed, inspiring the other nations of the world to follow suit and opening the door to emancipation, which, amazingly, was achieved three days before Wilberforce died in 1833. He received the glorious news of his life-long goal on his deathbed.

Wilberforce was one of the brightest, wittiest, best connected, and generally talented men of his day, someone who might well have become prime minister of Great Britain if he had, in the words of one historian, "preferred party to mankind." But his accomplishments far transcend any mere political victory. Wilberforce can be pictured as standing as a kind of hinge in the middle of history: he pulled the world around a corner, and we can't even look back to see where we've come from.

Wilberforce saw much of what the rest of the world could not, including the grotesque injustice of one man treating another as property. He seems to rise up out of nowhere and with the voice of unborn billions — with your voice and mine – shriek to his contemporaries that they are sleepwalking through hell, that they must wake up and must see what he saw and know what he knew — and what you and I know today — that the widespread and institutionalized and unthinkably cruel mistreatment of millions of human beings is evil and must be stopped as soon as conceivably possible — no matter the cost.

How is it possible that humanity for so long tolerated what to us is so obviously intolerable? And why did just one small group of people led by Wilberforce suddenly see this injustice for what it was? Why in a morally blind world did Wilberforce and a few others suddenly sprout eyes to see it? Abolitionists in the late eighteenth century were something like the characters in horror films who have seen "the monster" and are trying to tell everyone else about it — and no one believes them.

To fathom the magnitude of what Wilberforce did we have to see that the "disease" he vanquished forever was actually neither the slave trade nor slavery. Slavery still exists around the world today, in such measure as we can hardly fathom. What Wilberforce vanquished was something even worse than slavery, something that was much more fundamental and can hardly be seen from where we stand today: he vanquished the very mind-set that made slavery acceptable and allowed it to survive and thrive for millennia. He destroyed an entire way of seeing the world, one that had held sway from the beginning of history, and he replaced it with another way of seeing the world. Included in the old way of seeing things was the idea that the evil of slavery was good. Wilberforce murdered that old way of seeing things, and so the idea that slavery was good died along with it. Even though slavery continues to exist here and there, the idea that it is good is dead. The idea that it is inextricably intertwined with human civilization, and part of the way things are supposed to be, and economically necessary and morally defensible, is gone. Because the entire mind-set that supported it is gone.

Wilberforce overturned not just European civilization's view of slavery but its view of almost everything in the human sphere; and that is why it's nearly impossible to do justice to the enormity of his accomplishment; it was nothing less than a fundamental and important shift in human consciousness.

In typically humble fashion, Wilberforce would have been the first to insist that he had little to do with any of it. The facts are that in 1785, at age twenty-six and at the height of his political career, something profound and dramatic happened to him. He might say that, almost against his will, God opened his eyes and showed him another world. Somehow Wilberforce saw God's reality — what Jesus called the Kingdom of Heaven. He saw things he had never seen before, things that we quite take for granted today but that were as foreign to his world as slavery is to ours. He saw things that existed in God's reality but that, in human reality, were nowhere in evidence. He saw the idea that all men and women are created equal by God, in his image, and are therefore sacred. He saw the idea that all men are brothers and that we are all our brothers' keepers. He saw the idea that one must love one's neighbor as oneself and that we must do unto others as we would have them do unto us.

These ideas were at the heart of the Christian Gospel, and they had been around for at least eighteen centuries by the time Wilberforce encountered them. Monks and missionaries knew of these ideas and lived them out in their limited spheres. But no entire society had ever taken these ideas to heart as a society in the way that Britain would. That was what Wilberforce changed forever.

As a political figure, he was uniquely positioned to link these ideas to society itself, to the public sphere, and the public sphere, for the first time in history, was able to receive them. And so Wilberforce may perhaps be said to have performed the wedding ceremony between faith and culture. We had suddenly entered a world in which we would never again ask whether it was our responsibility as a society to help the poor and the suffering. We would only quibble about how, about the details — about whether to use public funds or private, for example. But we would never again question whether it was our responsibility as a society to help those less fortunate. That had been settled. Today we call this having a "social conscience," and we can't imagine any modern, civilized society without one.

Once this idea was loosed upon the world, the world changed. Slavery and the slave trade would soon be largely abolished, but many lesser social evils would be abolished too. For the first time in history, groups sprang up for every possible social cause. Wilberforce's first "great object" was the abolition of the slave trade, but his second "great object," one might say, was the abolition of every lesser social ill. The issues of child labor and factory conditions, the problems of orphans and widows, of prisoners and the sick — all suddenly had champions in people who wanted to help those less fortunate than themselves. At the center of most of these social ventures was the Clapham Circle, an informal but influential community of like-minded souls outside London who plotted good deeds together, and Wilberforce himself was at the center of Clapham. At one point he was officially linked with sixty-nine separate groups dedicated to social reform of one kind or another.

Taken all together, it's difficult to escape the verdict that William Wilberforce was simply the greatest social reformer in the history of the world. The world he was born into in 1759 and the world he departed in 1833 were as different as lead and gold. Wilberforce presided over a social earthquake that rearranged the continents and whose magnitude we are only now beginning to fully appreciate.

Unforeseen to him, the fire he ignited in England would leap across the Atlantic and quickly sweep across America — and transform that nation profoundly and forever. Can we imagine an America without its limitless number of organizations dedicated to curing every social ill? Would such an America be America? We might not wish to credit Wilberforce with inventing America, but it can reasonably be said that the America we know wouldn't exist without Wilberforce.

As a result of the efforts of Wilberforce and Clapham, social "improvement" was so fashionable by the Victorian era that do-gooders and do-goodism had become targets of derision, and they have been so ever since. We have simply forgotten that in the eighteenth century, before Wilberforce and Clapham, the poor and suffering were almost entirely without champions in the public or private sphere. We who are sometimes obsessed with social conscience can no longer imagine a world without it, or a society that regards the suffering of the poor and others as the "will of God." Even where this view does exist, as in societies and cultures informed by an Eastern, karmic view of the world, we refuse to believe it. We arrogantly seem to insist that everyone on the planet think as we do about society's obligation to the unfortunate, but they don't.

No politician has ever used his faith to a greater result for all of humanity, and that is why, in his day, Wilberforce was a moral hero far more than a political one. Alexander Solzhenitsyn and Nelson Mandela in our own time come closest to representing what Wilberforce must have seemed like to the men and women of the nineteenth century, for whom the memory of what he had done was still bright and vivid.

Thomas Jefferson and Abraham Lincoln both hailed him as an inspiration and example. Lincoln said every schoolboy knew Wilberforce's name and what he had done. Frederick Douglass gushed that Wilberforce's "faith, persistence, and enduring enthusiasm" had "thawed the British heart into sympathy for the slave, and moved the strong arm of that government to in mercy put an end to his bondage." Poets and writers such as Harriet Beecher Stowe and George Eliot sang his praises, as did Henry David Thoreau and John Greenleaf Whittier. Byron called him "the moral Washington of Africa."

The American artist and inventor Samuel Morse said that Wilberforce's "whole soul is bent on doing good to his fellow men. Not a moment of his time is lost. He is always planning some benevolent scheme, or other, and not only planning but executing ... Oh, that such men as Mr. Wilberforce were more common in this world. So much human blood would not be shed to gratify the malice and revenge of a few wicked, interested men."

The American abolitionist William Lloyd Garrison went further yet. "His voice had a silvery cadence," he said of Wilberforce, "his face a benevolently pleasing smile, and his eye a fine intellectual expression. In his conversation he was fluent, yet modest; remarkably exact and elegant in his diction; cautious in forming conclusions; searching in his interrogations; and skillful in weighing testimony. In his manner he combined dignity with simplicity, and childlike affability with becoming gracefulness. How perfectly do those great elements of character harmonize in the same person, to wit — dovelike gentleness and amazing energy — deep humility and adventurous daring! ... These were mingled in the soul of Wilberforce."

An Italian nobleman who saw Wilberforce in his later years wrote: "When Mr. Wilberforce passes through the crowd on the day of the opening of Parliament, every one contemplates this little old man, worn with age, and his head sunk upon his shoulders, as a sacred relic: as the Washington of humanity."

We blanch at such encomia today, for indeed, ours is an age deeply suspicious of greatness. Watergate seems to have come down upon us like a portcullis, cutting us off forever from anything approaching such hero worship, especially of political figures. With the certainty of a Captain Queeg, we are forever on the lookout for the worm in the apple, the steroid in the sprinter or slugger. And lurking behind every happy biographical detail we see the skulking figure of Parson Weems and his pious fibs about cherry trees and — of all things — telling the truth.

If ever someone could restore our ability to again see simple goodness, it should be Wilberforce. If we cannot cheer someone who literally brought "freedom to the captives" and bequeathed to the world that infinitely transformative engine we call a social conscience, for whom may we ever cheer? Especially knowing that he has been more forgotten than remembered, and that he himself would have been the first to denigrate his accomplishments — as we can see from his diaries and letters, which show us that he went to the grave sincerely and deeply regretted that he hadn't done much more.

In the thick of the battle for abolition, one of its many dedicated opponents, Lord Melbourne, was outraged that Wilberforce dared inflict his Christian values about slavery and human equality on British society. "Things have come to a pretty pass," he famously thundered, "when one should permit one's religion to invade public life." For this lapidary inanity, the jeers and catcalls and raspberries and howling laughter of history's judgment will echo forever — as they should.

But after all, it is a very pretty pass indeed. And how very glad we are that one man led us to that pretty pass, to that golden doorway, and then guided us through the mountains to a world we hadn't known could exist.

Thursday, October 22, 2009

Creative Capitalism; L3C, Low-profit Limited Liability Company

From Wikipedia, the free encyclopedia

A low-profit limited liability company (L3C) is a legal form of business entity in the United States that was created to bridge the gap between non-profit and for-profit investing by providing a structure that facilitates investments in socially beneficial, for-profit ventures while simplifying compliance with Internal Revenue Service rules for "Program Related Investments".


Vermont. The pioneer legislation approving the L3C as a legally-recognized form of business entity (House Bill 0775) was approved by the full Vermont House of Representatives on February 27, 2008 and by the Vermont Senate on April 11, 2008. It was signed into law by Governor of Vermont James H. Douglas on April 30, 2008. As of August 10, 2009 Vermont lists about 60 L3Cs in the state database, including a chess camp, theater, alternative energy companies, publishers, food companies and numerous consulting firms. [9]

Michigan. Introduced by Traverse City Republican State Senator Jason Allen on July 24, 2008, Senate Bill 1445 was signed into law on January 16, 2009[10] as an amendment to the Michigan Limited Liability Company Act[11] by Governor of Michigan Jennifer Granholm. The bill was supported by the Council of Michigan Foundations[12], and the Michigan Department of Labor and Economic Growth[13].
Utah. February 2009 - State Senator Lyle Hillyard (Utah politician) from District 25 introduced the Low-profit Limited Liability Company Act S.B. 148 on February 2, 2009. The Act is sponsored in the House by State Representative Kraig Powell of District 54.On March 23, 2009, Utah Governor Jon M. Huntsman Jr. signed the Low-Profit Limited Liability Company Act S.B. 148 into law. [14]

Wyoming. January 2009 - Wyoming State Representative, Dan Zwonitzer, introduced the L3C bill HB0182. On February 26, 2009 Wyoming Governor Dave Freudenthal signed the L3C Legislation into law.

Illinois. August 2009 - Gov. Pat Quinn signed Illinois' L3C bill on August 4, 2009. The law will take effect on January 1, 2010. [2] The law aims to make it easier for social enterprises to attract capital, said Sen. Heather Steans (D-Chicago), who sponsored the bill. "Foundations have a growing interest to not only make grants that achieve a social purpose but also use investments to do that," Steans said. Chicago attorney and financial adviser Marc Lane of Marc J. Lane Wealth Group, who helped spearhead the Illinois legislation, said the L3C law could create new jobs by supporting social enterprises that otherwise couldn't exist. It's particularly timely given the credit crunch, he said.

The L3C: A More Creative Capitalism

By Jim Witkin | January 15th, 2009

During his 2007 Harvard commencement address, Bill Gates, now the world’s best funded philanthropist, called on the graduates to invent “a more creative capitalism” where “we can stretch the reach of market forces so that more people can make a profit, or at least make a living, serving people who are suffering from the worst inequities.”

It doesn’t take a Harvard grad (or Harvard dropout like Gates) to understand that traditional market forces mostly work against the notion of a socially beneficial enterprise (one that seeks social returns first and financial second). Existing for-profit corporate structures demand a higher financial return than a social enterprise can usually deliver; while non-profit organizations have limited access to capital and a tax-exempt format that limits a strong profit orientation. If the social enterprise field is to evolve and grow, what’s needed is a hybrid of the two forms, a structure that supports a “low profit corporation.”

Enter the L3C (low-profit, limited liability company), a new corporate structure designed to attract a wide range of investment sources thereby improving the viability of social ventures. In April 2008, Vermont became the first state to recognize the L3C as a legal corporate structure. Similar legislation is pending in Georgia, Michigan, Montana and North Carolina. But if the L3C seems like the right choice for your social enterprise, you don’t have to wait! L3Cs formed in Vermont can be used in any state.

Flexible Ownership Attracts a Range of Investors
The goal of the L3C form is to bring together a mix of investment money from a variety of sources. This process starts with investments from Foundations known as Program Related Investments (PRIs). Foundations are required to spend at least five percent of their assets in a given fiscal year in order to maintain their tax-exempt status. They have two basic options for spending their money: they can make grants, where there is no financial return on the money, or they can make program-related investments (PRIs) investing in for-profit ventures and potentially earn a return.
But to qualify as a PRI, the investment must relate to the Foundation’s mission and the risk/reward ratio must exceed that of a standard market-driven investment (ie, the risk must be higher, and the return lower). Surprisingly, the use of PRIs by Foundations is limited even with the potential to earn a small return. Because of burdensome and costly IRS requirements to verify PRIs, many foundations shy away from investing in for-profit ventures due to the uncertainty of whether they would qualify as PRIs.

Unlike the Limited Liability Corporation (LLC), the L3C is explicitly formed to further a socially beneficial mission. The L3C’s operating agreement specifically outlines its PRI-qualified purpose. This should make it much easier for Foundations to make program related investments in social ventures while ensuring their tax-exempt status remains secure.

Like the LLC, the L3C is able to form flexible partnerships where ownership rights can be tailored to meet the requirements of each partner. This flexibility permits a tranched or layered investment and ownership structure. The Foundation’s L3C membership stake provides for a very low rate of return and can be subordinate to the other investors. Because the Foundation can invest through PRIs at less than the market rate while embracing higher risk levels, this lowers the risk to other investors and increases their potential rate of return. So the remaining L3C memberships can then be marketed at risk/return profiles necessary to attract market driven investors.

The end result: the L3C is able to leverage Foundation PRIs to access a wide range of investment dollars through a flexible partnership structure. Additionally, profit and loss flow through the L3C to its members and are taxed according to each investor’s particular tax situation, making it easier for non-profits and for-profits to partner together.

Some examples of L3C entities that have been created or are in the process: carbon trading, alternative energy, food bank processing, social services, social benefit consulting and media, arts funding, job creation programs, economic development, housing for low income and aging populations, medical facilities, environmental remediation, and medical research.

L3C Advocacy
The L3C concept was formed by Robert Lang, CEO of the Mary Elizabeth & Gordon B. Mannweiler Foundation, Inc. Marcus Owens, a tax attorney with Caplin & Drysdale in Washington, DC, wrote the basic law. The Mary Elizabeth & Gordon B. Mannweiler Foundation has funded the Americans for Community Development whose purpose is to promote the L3C and the adoption of this new corporate form in all fifty states. Mr. Lang and others formed the first L3C, L3C Advisors, for the purpose of helping social ventures structure, organize & finance L3C’s.

The L3C is still in “proof of concept” form, but will be put to the test this year. Because the first L3Cs were formed in 2008, this means 2009 will be the first year that the concept will be tested with the IRS. Hopefully, the IRS will readily accept Foundation investments in L3Cs as valid PRIs. Steve Gunderson, CEO of the Council on Foundations, which supports the L3C approach says “we’re optimistic” that the IRS will also support this approach to PRI investing.

The economic realities of connecting social needs with capital markets is leading to innovations like the L3C form. As the problems that social ventures try to solve get bigger and more widespread, hopefully these types of innovations will keep pace.

Nonprofit Law Blog
L3C - Developments & Resources

Sunday, October 18, 2009

Smart City Radio

Smart City is a weekly, hour-long public radio talk show that takes an in-depth look at urban life, the people, places, ideas and trends shaping cities. Host Carol Coletta talks with national and international public policy experts, elected officials, economists, business leaders, artists, developers, planners and others for a penetrating discussion of urban issues. You can find a list of radio stations that air Smart City here

The guests on today's show offered ideas about building sustainability in areas of economic distress and poverty.

Katy Locker, Dave Egner and Prathima Manohar

Detroit is in the news again with Time Magazine launching a bureau of sorts from the city. But to get a real local's perspective we'll talk with Katy Locker and David Egner of the Hudson Webber Foundation. Hudson Webber provides grants to improve the quality

Speaking of Faith

Winner of a Peabody Award, Speaking of Faith with Krista Tippett is public radio's weekly program about "religion, meaning, ethics, and ideas." We are produced and distributed by American Public Media and currently heard on over 200 public radio stations across the U.S. and globally via the Web and podcast.

Krista takes a narrative, or first-person, approach to religious and philosophical conversation. She draws out the intersection of theology and human experience, of grand religious ideas and real life. A weekly national program since July 2001, Speaking of Faith is not so much about religion per se, but about drawing out compelling and challenging voices of wisdom on the most important subjects of 21st-century life; thereby creating a different kind of in-depth, revealing, illuminating dialogue than can be elicited by traditional journalistic treatments and debates. Topics range from "Einstein and the Mind of God" to "The Spirituality of Parenting" to "Diplomacy and Religion in the 21st Century."

October 15, 2009
We shine a light on two young leaders of a new generation of grassroots Muslim-Jewish encounter in Los Angeles. They're innovating templates of practical relationship and acknowledge questions and conflict, yet resolve not to be enemies — whatever the political future of the Middle East may hold.

Saturday, October 17, 2009


Concluding talk, Energy Pact Conference, Geneva, March 16-17 2009
By Johan Galtung 23-Mar-09

A very felicitous idea to bring together three major concerns in what could become a political, economic and intellectual pact. Like a poor, creative family in Kerala wanting to boil their rice, having neither electricity nor kerosene nor wood nor matches but a sheet of black paper, a used tire, a piece of window glass and noon sunshine. With the sheet on the ground, the pot with water and rice on it, the used tire around the pot and the glass on top of that for isolation, the rice is boiled in half an hour's time.

Renewable energy from that inexhaustible source, reusing rather than recycling waste, meeting basic needs (for a single person use a bicycle tire, for a nuclear family a car tire, for the extended family a truck tire, for more a bulldozer tire). Triadic thinking. Ugly? Put it all in a nicely decorated box. Primitive-traditional-modern-postmodern? Irrelevant problem.

The basic point is to integrate the three, looking for synergies; all the time mindful of the old Hindu wisdom that if we pursue only one we may not even get that one (for an example read that primer on political economics, John Perkins, Confessions of an Economic Hitman). There is holism at work. Sectorial-global approaches--one at the time--are needed, but we have many huge bureaucracies and single-minded academic disciplines. We also need integrated approaches focused on communities, rural and urban, where people live and feel where the shoes are pinching when only one is pursued, and can put their ingenuity to work.

As a matter of fact, "development ministries" might be wise to bring communities from all over the world--no region, no country has any monopoly on wisdom--together for exchange of positive experiences. There are, say, two million of them and more wisdom to draw upon than from 200 states or 2,000 nations.

Energy impacts on environment impacts on development, with conflicts all over. How to create cooperative, harmonious peace?

Take the major CO2 excess (and N2O, CH4). Years ago Japan piped CO2 from factories into greenhouses designed for agriculture next to the factory, speeding up the synthesis, producing oxygen, privileging communities mixing industry and agricultures. Putting CO2 to giant use, serving the whole triad, should be possible.

How much global warming is part of a mega-process after the ice age peaked, say, 10-15,000 years ago, and how much is human-made, is a major controversy. Whatever the percentage we should do our best, but quota-trading is not the approach. It smacks of somebody practicing slavery buying some quotas from those with a slavery deficit. The task is to reduce slavery and carbon emission, not to legitimize with fake markets. Much may be irreversible.

But that works both ways, flooding lowlands here, thawing icecaps and permafrost there (with its problems), liberating land in Alaska, Canada, Greenland, Russia. Who will pay for the move? If the polluter pays then he who pollutes most will pay most, pointing at USA-China. Or we all share. Cooperation.

We have had development with less developed countries (LDCs) now having things found in the more developed countries (MDCs), electricity, computers, highways, etc., but still with huge masses suffering at the bottom of countries at the bottom, exposed to capitalist machines pumping wealth from bottom to top, producing misery at the bottom (125,000 daily deaths, 25,000 from hunger, 100,000 from preventable-curable diseases), and excess liquidity, trading absurd products, at the top.

Result: a double crisis, one permanent another conjunctural, synergizing, feeding each other. Less so, however, in Islamic banks limiting loans to 30 percent of the capital (sharia). The eco-quake crisis hits those financially closer to Ground Zero, Wall street, more than others.

There are remedies for the permanent crisis. Labor-intensive agriculture and small farms are more efficient and softer on the environment. Water can be distilled using parabolic mirrors on sunshine, pumped from oceans to deserts in oil pipelines drying up as the oil madness subsides; and, Khosla's proposal, in cubic containers that can be used LEGO like to build houses. Plants Israel-Palestine, and Israel-Lebanon, might be peace-building.

Health can be served through dense networks of polyclinics and health workers who know enough to know what they do not know, top rate hospitals accessible by fleets of helicopters, generic medicines, hygiene everywhere. Education by internet run by solar energy, monopolized by no region, and alphabetization by students (Castro), and army officers (Saddam), living with the illiterate.

Why does it not happen? The energy costs serving the poor are small, the impact on the environment soft. Simply because:

- it is convenient to have poor people who can be paid poorly; and
- lest they treat us as badly moving upwards as we treated them.
This can best be handled in communities with rich and poor working together, like men and women, and older, middle-aged and children, so important as their habits are shaped for the future. China today uses much public-private-people community cooperation.

But there is another side to this issue: we should learn to lift the bottom without threatening the top, preparing them for the inevitable. Like men in patriarchic Spain when women rise. A winning argument in that case might be that with more ability to enjoy the joy of you partner sex becomes better. Equity = peace.

Renewable energy resources for conversion and storage is not good enough. We need local conversion to cut down transportation pollution. And we need energy equality, exploring a variety of profiles among, say, ten energy resources. High-low on all gives us 1024 profiles for all kinds of local resource endowment.

Military force to control resources creates huge suffering; equality helps. Like cooperation between the biggest consumer, USA, and the potentially biggest producer, Iran, on renewables (hydro: gravity and waves; bio: mass and genetic; thermic: geo and hydro; solar: heat and electric; wind, some carbon, some nuclear).

Make energy--underlying all basic needs--free, like streets and parks, health and education in decent countries, up to a point when the user pays for high speed motor highways etc. From tubes, sockets, free panels, like the Internet should be freely available all over. Give each household a 1m3 contraption on four wheels to roll into the sunshine for heating, then tapping for all purposes.

This would help people overcoming misery considerably. As would a labor-based economy next to the money-based one. If an Euro equals an Euro, why should not an hour lecture on mediation by a professor equal an hour cleaning by a cleaning man or woman? If we all have equal value so do hours of our lives. Easily done on a community basis; like local currencies to stimulate using local nature-production-consumption economic cycles. As would a basic needs-oriented economy like health for oil (Cuba-Venezuela).

Markets can make miracles, but a cure-all they are not, nor are them self-regulating. The three classical production factors land-labor-capital can also read nature-humans-capital. Economists have canonized capital equating economic growth with capital growth. How about Nature growth - meaning increased complexity based on diversity and symbiosis? How about Human growth beyond basic needs for survival-wellness-freedom-identity? The spiritual dimension, creating, transcending, not limited to optimization by those prisoners of prisoner's games, the economists. Thinking New!

We need a Capital-ism not going amok. But we also need a broader economics, with Nature-ism and Human-ism. As we see today.


Concluding talk, Energy Pact Conference, Geneva, March 16-17 2009.

Thursday, October 15, 2009

Challenging Existing Social Conditions; Social Justice is the foundation of a Green Future

"Washing one's hands of the conflict between the powerful and the powerless means to side with the powerful, not to be neutral."
~Paulo Freire, Brazilian educator and influential theorist of education

Justice in the Context of Environmental Sustainability
Kyle D. Brown, Ph.D.

Mainstream environmental designers, academic institutions, politicians, and non-governmental and governmental organizations have embraced the concept of environmental sustainability. Confusion may abound over a precise definition of the term as various organizations and interests adopt it for their own use, but as Scott Campbell (1996) declared over 10 years ago in an article in the Journal of the American Planning Association, “In the battle of big public ideas, sustainability has won: the task of the coming years is simply to work out the details and to narrow the gap between its theory and practice” (p.310).

One of the details still being worked out is the specific relationship of environmental sustainability to social justice. It is well recognized that social inequities are often compounded by unsustainable systems. These systems adversely impact marginalized communities through pollution, resource consumption, and environmental exploitation. Continue article here.

"Many impoverished people, living in racially segregated neighborhoods, express adherence to mainstream American mores; hard work, family loyalties and individual achievement are part of their cultural repertory. Nevertheless, the translation of values into action is shaped by the tangible milieu that encircles them. So, incidentally, is the ability of affluent families to actualize values into behavior."
~M. Patricia Fernandez Kelly

The Causes of Inner-City Poverty: Eight Hypotheses in Search of Reality
Excerpted from The U.S. Department of Housing and Urban Development's (HUD's) Office of Policy Development and Research (PD&R) website. Full article can be found here.
Michael B. Teitz, Public Policy Institute of California and University of California, Berkeley
Karen Chapple
University of California, Berkeley

Over the past 40 years, poverty among the inhabitants of U.S. inner cities has remained stubbornly resistant to public policy prescriptions. Especially for African Americans and Latinos, the gap between their economic well-being and that of the mainstream has widened despite persistent and repeated efforts to address the problem. At the same time, a continuing stream of research has sought to explain urban poverty, with a wide variety of explanations put forward as the basis for policy. This paper reviews that research, organizing it according to eight major explanations or hypotheses: structural shifts in the economy, inadequate human capital, racial and gender discrimination, adverse cultural and behavioral factors, racial and income segregation, impacts of migration, lack of endogenous growth, and adverse consequences of public policy. We conclude that all of the explanations may be relevant to urban poverty but that their significance and the degree to which they are well supported varies substantially.

Hypotheses on Urban Poverty
Whatever the debate about its nature and causes, almost all observers would agree that inner-city poverty is multidimensional, extraordinarily complex, and difficult to understand. Various disciplines and policy frameworks give rise to very different notions of poverty and of its sources. To economists, it is an issue of labor markets, productivity, incentives, human capital, and choice. Sociologists and anthropologists tend to emphasize social status and relations, behavior, and culture. For social psychologists, the issues may include self-image, group membership, and attitudes. For political scientists, the questions may focus on group power and access to collective resources. City planners and urbanists see the effects of urban structure, isolation, and transportation access. No single conceptual framework can incorporate or reconcile these conflicting and complementary perceptions, but, equally, a characterization that simply lists each disciplinary perspective would not do justice to the wealth of existing, cross-disciplinary insights.

In brief, the eight hypotheses on inner-city poverty are:

Inner-city poverty is the result of profound structural economic shifts that have eroded the competitive position of the central cities in the industrial sectors that historically provided employment for the working poor, especially minorities. Thus demand for their labor has declined disastrously.

Inner-city poverty is a reflection of the inadequate human capital of the labor force, which results in lower productivity and inability to compete for employment in emerging sectors that pay adequate wages.

Inner-city poverty results from the persistence of racial and gender discrimination in employment, which prevents the population from achieving its full potential in the labor market.

Inner-city poverty is the product of the complex interaction of culture and behavior, which has produced a population that is isolated, self-referential, and detached from the formal economy and labor market.

Inner-city poverty is the outcome of a long, historical process of segregating poor and minority populations in U.S. cities that resulted in a spatial mismatch between workers and jobs when employment decentralized.

Inner-city poverty results from migration processes that simultaneously remove the middle-class and successful members of the community, thereby reducing social capital, while bringing in new, poorer populations whose competition in the labor market drives down wages and employment chances of residents.

Complex social phenomena rarely have simple causes, despite the assertions of those who claim to have answers to social problems. It is perhaps disappointing not to be able to point to one argument about inner-city poverty and say that it dominates all others. Yet one of the real benefits of social science is that it forces us to consider complexity. That may be unwelcome to advocates of particular policy prescriptions, but it is often the rock on which those prescriptions founder. There is still much that we do not know about the nature and causes of deep urban poverty in the United States, but this review suggests that much is known and that it is not a simple issue. There is substantial, if uneven, evidence that elements of all eight hypotheses contribute to inner-city poverty in a significant way. What we do not know is the relative importance of each hypothesis. Furthermore, at this stage in the development of social science, there is no way to know. Thus if we want to say something about their relative weight, we must rely on experience, intuition, and judgment.

From the evidence of the hypotheses, some things do stand out. The inner-city poor do lack human capital to a profound degree in comparison with other groups. They are segregated and detached from the labor market. Demand for their skills at manual labor has declined. They face discrimination in employment and housing. They live in a social milieu that reinforces detachment from the mainstream economy, though how much that milieu results in a different set of values and behaviors is subject to much debate. Similarly, segregation has separated the inner-city poor physically from employment opportunities, but there is no clear agreement about the impact of that separation. Their communities have weakened in the past four decades, but whether this is due to outmigration by the middle class or has resulted in that migration has not been determined.

They face competition from new immigrants, but these immigrants also create employment opportunities. Their communities do not generate new businesses, but whether that deficit is crucial for employment opportunity is not known. Finally, they have disproportionately experienced negative effects from public policy, but whether this has made the critical difference is probably not measurable.

Can we assess the relative causal strength of each of the eight hypotheses? In a cross-disciplinary context, an assessment can only be done judgmentally. Nonetheless, it looks as though conventional wisdom, in this instance, may be correct. We would assign the greatest weight to the first two hypotheses: industrial transformation and human capital. Without employment opportunities and adequate human capital, there is little prospect that the situation of the inner-city poor will improve. Following these two causes, our assessment is that the evidence shows that segregation, the spatial mismatch, and employment discrimination are very significant factors. In general, we are inclined to give less weight to migration and cultural behavior as explanations. However, the role of the social system within which the inner-city poor live remains open to debate. Whether it constitutes an iron cage or a rational adaptation to a harsh environment, and whether (and how) it must change before poverty can be alleviated, are now in the realm of ideology, though good ethnographic research is revealing the weaknesses of some underclass arguments.

The question of endogenous growth in low-income communities appears to be important, but it is sadly deficient in rigorous research. Finally, we see public policy as a contributing but not a dominant factor that, in principle, can be alleviated.

Even more debatable are the policy measures that might reduce urban poverty. To suggest policy approaches is not the purpose of this article. Our sense is that policy advances are possible in most of the areas discussed, though the industrial transformation that destroyed the employment bases of inner cities is effectively irreversible and efforts to transform people’s behavior without changing their material circumstances are probably futile. However, it must be stressed that, the fact that inner-city poverty is demonstrably complex and resistant to change does not imply that equally complex policy responses are the only way to proceed. Such responses are likely to collapse under their own weight, either during the legislative process or in their implementation. Given that poverty is remarkably complex suggests that it requires a sophisticated response strategy that takes into account its complexity but relies on multiple and simple elements for implementation.

If the War on Poverty was not won, perhaps that is because, like all wars, victory requires a strategy that combines a deep understanding of the environment within which the war is waged and the willpower, resources, and weapons to do the job.

Michael B. Teitz is director of research at the Public Policy Institute of California and Professor of City and Regional Planning at the University of California, Berkeley. His major areas of work have been housing, especially rent control, and regional and local economic development.

Karen Chapple is a Ph.D. candidate in the department of city and regional planning at the University of California, Berkeley. Her dissertation examines the job-search strategies of low-income women and the geography of low-wage labor markets.

Monday, October 12, 2009

The Sekem Initiative

The Sekem Initiative, Egypt

First published in LEDIS, Local Economic Development Information Service, 2005

The Sekem Initiative is a successful example of social capitalism, operating on organically managed farmland reclaimed from the desert, outside Cairo. It promotes both economic and social and cultural development among its 2,000 employees.

Sekem started with the personal vision of Dr. Ibrahim Abouleish, who was born in Egypt in 1937. After training in Austria in chemistry, medicine and pharmacology, Dr. Abouleish returned to Egypt in 1975, where he was overwhelmed by his country’s lack of education, its overpopulation, and its pollution, particularly from the use of chemical pesticides.

A vision was kindled in his heart, and he returned in 1977 to establish Sekem, which means “vitality from the sun”. Egyptians recognize that the sun is a life-giving force, permeating and enlivening the Earth’s entire being. “I had a vision of a three-fold project that would allow me to contribute to community-building, humanity, and healing the earth. The desert was like the canvas of a painting, but without a frame.”

He founded Sekem on a 70-hectare patch of scrub and desert near Belbeis, 60 km north-east of Cairo, on the eastern edge of the southern Nile Delta. With a group of Europeans and local Egyptian farmers, planted many trees, bringing life to an untouched part of the desert with the aid of natural biodynamic organic fertilizers. As the soil improved, they planted herbs, and started producing and selling herbal medicines. By 1983, they were harvesting their first crops of organic fruits, vegetables and spices. In the years since, Sekem has grown into a rich community of businesses, schools, and non-profit societies that employs some 2,000 people.

Aims and Objectives
Sekem is intended to establish a blueprint for a healthy corporation in the 21st century, and to show that profit-making can go hand-in-hand with social and cultural enrichment. To quote Dr. Abouleish: “We strive at Sekem to build a community in which people of all nations and cultures work and learn together with the aim to acknowledge, nurture and love the super-sensible world and noble ideals.” As well as producing a large variety of organically grown consumer products of high quality, and restore the earth by means of biodynamic agriculture, Sekem seeks to achieve a greater integration of the arts, religion and sciences, with the main aim of developing people.

“It was my wish for this initiative to embody itself as a community in which people from all walks of life, from all nations and cultures, from all vocations and age groups, could work together, learning from one another and helping each other, sounding as one in a symphony of harmony and peace.” (Dr. Ibrahim Abouleish)

One of Sekem’s offshoots, the Egyptian Society for Cultural Development, aims to elevate the total welfare of the Egyptian people by enabling them to determine and realize their own socially unique and culturally appropriate development path.

“All the different aspects of the company, whether the cultural ones or the economic ones, have been developed out of Islam. We believe that it is possible to derive guiding principles for everything from pedagogics, to the arts, to economics, from Islam.” (Dr. Ibrahim Abouleish)

The Sekem Holding Company operates six businesses, and the Egyptian Society for Cultural Development, which is responsible for social, cultural and health initiatives. Sekem has also established the Centre for Organic Agriculture in Egypt, and the Egyptian BioDynamic Association (EBDA). The six businesses are:

Sekem, a processing company whose 81 employees process and sell herbs, spices and dried vegetables from biodynamically cultivated plants. Founded in 1979.

Atos, a phyto-pharmaceutical joint venture with Gebrüder Schaette AG in Germany, whose 384 employees research, develop and produce medicines made from natural ingredients for heart disorders, cancer, hepatitis, and many other diseases. Founded in 1986.

Libra, an organic farming company whose 225 employees grow rice, cotton, legumes, oils, oil seeds, and essential oils, for distribution to other Sekem companies, and in Egypt, Europe and America. Founded in 1992.

Conytex, whose 241 employees use organically grown cotton to design, develop and make 250 different articles of baby clothing, bathroom wear, bedsheets, and kitchen ware. Founded in 1994.

Hator, whose 74 employees produce and pack fresh organic fruit and vegetables for local and export markets. Founded in 1996.

Isis, whose 84 employees produce and pack organic cereals, bread, dairy products, oils, spices, teas and conserves for sale in Sekem’s chain of five “Nature’s Best” shops in Egypt, all supermarket chains, grocery shops and pharmacies, and the herbs in Europe. Founded in 1997.

The Sekem Holding Company supports Sekem’s six companies by promoting the overall biodynamic concept to the public, cooperating with the government, NGOs and other partners, and supporting Sekem’s six companies in the areas of finance, exports, graphics, business solutions, legal affairs, information technology, etc. Founded in 2001.

The Egyptian BioDynamic Association groups together and advises 400 different farms throughout Egypt which use the biodynamic organic methods of agriculture on over 8,000 acres of land, 1,800 acres of which is newly reclaimed desert land. The Centre for Organic Agriculture in Egypt certifies the farms as organic. Founded in 1994.

On the social and cultural side of Sekem’s activities, the Egyptian Society for Cultural Development, founded in 1984, is designed to develop a strong sense of self-consciousness and dignity among Sekem’s farmers and families. It has helped Sekem to build a kindergarten, the Sekem primary and secondary schools (300 pupils), a vocational training centre, an Institute for Adult Education, the Sekem Academy for Applied Arts and Sciences, an illiterate children’s programme, a special education programme for handicapped children, and the Sekem Medical Centre, which provides medical, health outreach and women’s health services to Sekem’s families and to the local community, treating 30,000 people a year.

Structure and Finance
Sekem Holdings is a privately owned holding company, whose six companies are wholly owned subsidiaries. The Egyptian Society for Cultural Development and the Egyptian BioDynamic Association (EBDA) are non-profit, non-governmental organizations.

Taken together, approximately 40% of Sekem’s income comes from its own activities. A further 30-35% comes from grants, and 15-20% from aid, mostly from the EU and the US. Sekem workers contribute a small part of their salaries to help maintain a social fund for colleagues in need, managed by the cooperation of Sekem Employees, and Sekem itself donates 15-20% of its profits to the social development side of its activities.

The EBDA is almost self-sufficient, based on fees from participating farmers (50 E£ per acre). (1 Euro = 8 E£). In 2002, Sekem obtained a $5 million US loan from the International Finance Corporation (an arm of the World Bank) to expand, reorganize, and financially restructure its six companies.

There is one other aspect of Sekem’s structure that should also be mentioned. Every morning, at a set time, the employees of every company meet in a circle, where each person reports briefly about their activities of the previous day, and their intentions for the present day. Each company has an administrator who is responsible for the wellbeing of the workers and the quality of their work environment, and who organizes their training, career development, and health care programme. The Cooperative of Sekem Employees works to ensure that workplace issues are looked after, and that the democratic rights and values of the workers are respected.

Sekem has grown from one man’s vision, in 1977, to employ 2,000 people. Revenues grew from 37 million Egyptian pounds in 2000 to 100 million in 2003. In 2003, Sekem earned $81 million E£, and realized a 25% increase in profits. 55% of its sales are domestic, within Egypt.

In 2003, Dr. Ibrahim Abouleish was awarded the Right Livelihood Award in Stockholm, “for a business model for the 21st century in which commercial success is integrate with and promotes the social and cultural development of society through the ‘economics of love’”. In 2004, the World Economic Forum selected Sekem’s founders as outstanding social entrepreneurs, establishing the blueprint for the healthy corporation of the 21st century.

In addition to the successful employment of 2,000 people, and the provision of social and cultural services to their families and other villagers, Sekem’s initiative in founding the Egyptian BioDynamic Association has led to a major expansion of organic farming in Egypt and further afield in Tunisia, Morocco, Palestine and Lebanon. Within Egypt, 600 farmers from Aswan to Alexandria are applying the international guidelines for biodynamic agriculture on over 8,000 acres, after undergoing a 2-3 year transition process..

In one specific area – the cultivation of cotton – Sekem has achieved a major breakthrough. After the Aswan high dam was built in 1970, the Nile no longer floods, and the farmer’s fields have been deprived of the nutrients that came with the silt. As a result the farmers have turned to the heavy and expensive use of chemical fertilizers and pesticides, especially on cotton, but with no increase in their average yields pf 900 kg per acre.

Working in collaboration with Egypt’s Ministry of Agriculture, Sekem researched and then introduced the use of biological pheromones to control cotton insects, which led to a ban on crop dusting throughout Egypt. (Pheromones are hormonal substances secreted by female insects, used by organic farmers to trap and eliminate male insects.) By 2000, the use of pesticides on Egyptian cotton fields had fallen by over 90%. 80% of Egypt’s cotton is now grown without synthetic insecticides, and average yields have risen by nearly 30% to 1220 kg per acre. The organic cotton also has better fibre elasticity, and is less contaminated with leaf fragments.

Sekem also has a deep aesthetic commitment to beauty. The farm and other buildings are painted in pastel colours, and the pathways are all lined with flowers and trees, in striking contract to the chaos, noise, dirt and smog of nearby Cairo.

As the number of farmers who are growing biodynamically increases, Sekem can expect to see a major increase in the direct suppliers of organic produce sold to Sekem for processing, packaging and distribution. The market for Fair Trade products is also opening up, now that a number of Sekem’s business activities have been Fair Trade certified.

For further information contact :
Helmy Abouleish, Managing Director
3 Cairo-Belbeis Desert Road,
P.O. Box 2834
11361 Cairo, Egypt
Tel: +2 02 65 64 124/5
Fax: +2 02 65 64 123

Sunday, October 11, 2009

Capitalism with a Human Face

Capitalism's Human Face
From BusinessWeek Online

Social Entrepreneurs tackle the world's problems in the face of a global downturn.

PHILANTHROPY November 25, 2008, 5:00PM EST
Social Entrepreneurs Turn Business Sense to Good
As charitable giving dries up, new kinds of leaders are taking on the world's problems, using the for-profit world as a model

By Steve Hamm

As chief executive of Mercy Corps since 1994, Neal Keny-Guyer helped turn the Portland (Ore.) relief organization into a global powerhouse with 3,500 employees and a budget of nearly $300 million. But he was taken aback last year when one of his lieutenants proposed the radical step of buying a bank in Indonesia. Why would a not-for-profit disaster relief agency go the capitalist route and buy a bank?

Gradually, though, he warmed to the idea. He saw that, if Mercy Corps operated a wholesale bank that could offer capital to some 2,000 local microcredit organizations and had an ATM network, it could help turn microfinance into a powerful force in Indonesia. Keny-Guyer was in uncharted territory, however. In the last days before the acquisition closed in May, he feared the risky gambit would end in disaster. "I imagined a newspaper headline saying, `Mercy Corps' Bank in Bali Fails,' " he recalls. "I thought of the reaction of our donors to that bit of news."

Now, as the renamed Bank Andara cranks up operations, Keny-Guyer is hopeful. If the strategy works in Indonesia, he says, Mercy Corps may try it in the Philippines next.

This departure from business as usual in the nonprofit realm is part of a major shift in the way people are taking on the world's social problems. In developing nations and parts of the U.S., governments have failed to make substantial progress against poverty, disease, and illiteracy. Traditional charities and social service agencies often provide Band-Aids for problems instead of long-term solutions. Now a new breed of do-gooder—the social entrepreneur—is trying fresh approaches. While the term is used in many different ways, there's a narrow definition that gets to the heart of what makes these people stand out: Rather than depending solely on handouts from philanthropists, social entrepreneurs generate some of their own revenues and use business techniques to address social goals. "Traditional ways of doing things haven't produced the kind of progress we all hoped for, so we're trying to come up with new approaches that are truly transformational," says Keny-Guyer.

The idea of the social entrepreneur has been percolating for decades, but it has become a mass movement in the past couple of years. Thousands of people are launching ventures and trying out new business models, both for-profit and nonprofit. Now that the global financial crisis is squeezing charitable giving, socially oriented organizations are pushing even harder to reduce their dependence on donors and generate their own funds. Lehman Brothers, for instance, was a generous backer of both nonprofits and social entrepreneurs. No more. In this climate, only the most efficient and effective organizations will thrive.

Social entrepreneurs are being backed in part by a new generation of super-aggressive philanthropists and social investors, including Microsoft (MSFT) co-founder Bill Gates and former eBay (EBAY) executives Pierre M. Omidyar and Jeffrey Skoll. These guys expect results from their social investments and grants. Says Gates in an interview with BusinessWeek: "Nonprofits are applying what we've typically thought of as business strategies for better outcomes, and businesses are beginning to apply what I call creative capitalism strategies to increase the positive social impact of their work. That's a powerful combination." He believes the most effective way to make social progress is through partnerships among nonprofits, businesses, government, and philanthropists.

In this emerging social sphere, there's a danger of confusing enthusiasm with effectiveness. Many social enterprises, from microfinance organizations to those aimed at purifying water or improving agriculture, aren't being built to grow large or to last. They're poorly managed, undercapitalized, or overly dependent on philanthropic handouts. In India, for example, there are an estimated 1.2 million organizations aimed at addressing social problems. "Many are just too small to be effective," says Manoj Kumar, chief executive of Naandi Foundation, a large Indian social service organization.

In a sense, the social enterprise phenomenon is like an industry just starting to take shape. Think of the early days of autos or computers, when startups tried a variety of approaches to see what worked best. For this movement to have a major impact, it needs the same kind of dynamic business climate as Detroit in the 1920s or Silicon Valley a decade ago. What's necessary—once the global financial crisis eases—is free-flowing capital, a willingness by entrepreneurs to aim high and take risks, and a level of transparency that quickly makes obvious what's working and what isn't. "You have to get beyond the gee-whiz factor of social entrepreneurship," says Michael E. Porter, a professor at Harvard Business School. "Which of these models really works? How do you create a high social value per dollar invested?"

It's difficult to prove success in such an immature field. Nobody has come up with numbers quantifying the overall impact of social entrepreneurship. Some organizations make impressive claims. Grameen Bank, the pioneer of microfinance, says it has brought 65% of its 7.5 million clients out of "extreme poverty." Yet while Grameen's home base of Bangladesh is crawling with microfinance outfits, it remains one of the poorest countries in the world, with 40% of its people under the poverty line.

At the same time, there's much disagreement over which business models are best. Grameen founder Muhammad Yunus, who won the 2006 Nobel Peace Prize for his work, argues that social businesses should not make a profit off of poor people. In other cases, people who call themselves social entrepreneurs seem to be in it mainly for the money. Banco Compartamos in Mexico, for example, charges interest rates topping 100% per year, claiming that such rates are justified because it's expensive to operate a microfinance business (BW—Dec. 13, 2007). Yunus berates for-profit outfits for charging exorbitant interest. "When you charge high rates, you're no longer microcredit. You're a loan shark," he says (see a video interview with Yunus).

To others, the profit motive is crucial for addressing the needs of poor people. C.K. Prahalad, a University of Michigan Ross School of Business professor and author of the influential book The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits, argues that the poor should be seen as consumers, not charity cases. Their basic needs can best be addressed by businesses that are attuned to dealing with them. "If we get entrepreneurship right, social entrepreneurship won't matter as much," he says.

Vikram Akula, a social entrepreneur based in Hyderabad, wants it both ways. He's out to prove you can make a healthy profit while serving—and not gouging—the poor. Akula grew up in Schenectady, N.Y., but returned to his native India in the mid-1990s after he got a PhD in economics from the University of Chicago and worked as a consultant at McKinsey & Co. He first worked for a government-run microfinance organization. But with limited funds, it couldn't expand fast. He says his conversion to the for-profit, faster-growth model came after an encounter with a poor woman he had to turn down for a loan because he couldn't operate in her village. "She said: 'Don't I deserve to get out of poverty, too?' " he recalls. "I decided to come up with a model that works so you don't have to say no to anybody."

Today, Akula is chief executive of SKS Microfinance, which has 9,500 employees and 3.3 million customers throughout India and is adding 300,000 new clients per month. SKS charges an average of 26% annualized interest. Given the cost of granting and servicing microloans, that's considered a reasonable rate by many industry observers. SKS had revenues of $48 million in the half-year ended in September, up 153%, and net income of $6.16 million.

A journey with Akula into the villages of India's state of Andhra Pradesh shows just how aggressive he is about applying business methods to economic development. In a schoolyard in Narayanraopet, a village of 3,500, three dozen women dressed in brightly colored saris sit in a circle in the shade of a spreading rain tree. K. Sandhya Rani, a self-assured 18-year-old SKS field assistant, takes attendance, collects weekly loan payments, and hands out new loans with all of the efficiency of an employee at McDonald's (MCD), which, in fact, Akula uses as a model of business-process excellence. (When he set up the company, he even tracked the time it took to do things with a stopwatch.) The whole meeting lasts just 25 minutes.

Afterward the women hustle back to their shops and farms. There, money from SKS pays for more goods and for the purchase of chickens and buffalo. A woman named Sarojamma carries in her hands a six-inch pile of currency with which she plans to buy rice, lentils, and other food to replenish the shelves in her four-year-old kirana, or mini general store. In the coming days, she explains, her husband will call on his mobile phone to suppliers in neighboring cities to find the best prices for the items they stock, then take a bus and a taxi to fetch the goods back to Narayanraopet. Sarojamma has a simple dream: "I want to make my shop bigger."

Sarojamma and people like her represent a new market opportunity for companies that hope to reach India's vast population of villagers. SKS's Akula is using his network of field agents and customers as a distribution channel for moving a wide variety of products and services on behalf of business partners such as Nokia (NOK). SKS helps sell mobile phones, insurance, and foodstuffs for shopkeepers. "The potential here is huge," says Devinder Kishore, Nokia's marketing director in India.

While Grameen Bank's Yunus doesn't believe in profiting off the poor, he, too, sees his microlending network as a strategic jumping-off point for all sorts of economic activity. The bank's parent company, Grameen Family of Enterprises, is forming joint ventures with large multinationals in an effort to develop vast new markets and improve the health and livelihoods of poor people. The first of the ventures, Grameen Danone Foods (GDNNY), sells nutrition-enhanced yogurt to poor people in affordable, single-serving packages, with a portion of the deliveries handled by Grameen Bank customers.

But the strains between social goals and business imperatives are showing. Wahidun Nabi, the executive director of the venture, who came from Danone in mid-2007, says he's being forced by economics to sell larger packages and market to those with more money, which means he's doing less than he might have for poorer people. "For the success of the project, we must improve the bottom line," he says. "This is a social business, but business is business."

Such strains are even more intense in fledgling social enterprises. Belgian Bart Weetjens was focused purely on altruism when he started an organization called Apopo a decade ago. It trains African giant pouch rats to sniff out land mines on former battlefields. The mines, if they remain undetected, occasionally blow up and hurt people and animals. The program was a modest success, with mine-clearing operations in Mozambique and a contract to expand into Africa's Great Lakes Region. But Apopo ran into problems when Weetjens tried to secure a more dependable source of funding. An adopt-a-rat program launched on the Internet, HeroRATS.org, failed to attract many supporters. "We're living in uncertainty," says Apopo Chief Executive Christophe Cox. "If some of the main donors drop off, then we're finished."

So Weetjens and Cox decided to run Apopo more like a business and generate their own money from operations. Earlier this year they hired Virtue Ventures, a consulting group specializing in social enterprises, to help them write a business plan. And in the summer they brought four interns from the MBA program at Oxford University to their headquarters in Tanzania to help size up their money-earning potential. Options include expanding mine-clearing operations to the Middle East, getting into the cargo-inspection business, and forging aggressively into disease detection. It turns out the rats can sniff out the presence of tuberculosis, and perhaps other diseases, at costs dramatically cheaper than traditional laboratory tests.

The pressure of switching to a for-profit model is evident during a meeting of the two founders and their student advisers in Morogoro, Tanzania. The six gather for their weekly progress discussion in the war room, where interns work in stifling heat under two fast-spinning ceiling fans. It's not clear how big the long-term cost differential will be for their rats compared with other outfits that use European-trained dogs for mine-clearing. Cox cautions against exaggerating their advantages: "We don't want to compare the worst dogs with the best rats."

Weetjens, the organization's front man, says it now looks like Apopo may continue the mine-clearing operations on a not-for-profit basis but try to turn disease detection into a profit-maker. Their tests with Tanzanian health-care clinics are producing strong results in cost and quality.

For all the challenges that Apopo faces, there is anecdotal evidence that social enterprises can grow large and balance their social and economic imperatives. But it requires a lot of time and effort.

That was the case with Sekem Group, an Egyptian conglomerate with businesses in organic farming, garment manufacturing, herbal medicines, and food processing and distribution. The family-controlled company got off to a fragile start in 1977 in the desert 50 kilometers northeast of Cairo. Egyptian-born founder Ibrahim Abouleish had been managing a pharmaceutical-research facility in Austria but returned to his homeland after he realized that two decades of socialism had ruined the economy. His goal was to convert the country to organic farming and enrich Egyptian culture with a renaissance of art and education. Abouleish chose a place in the desert far from urban influences so he could create a self-defining community. It all started in a mud hut built for him by Bedouin.

The original hut remains as part of a guest house on a campus that now includes 20 sparkling-white buildings for offices, farm operations, and factory work. Sekem has 2,500 employees, 500 acres of nearby farmland, and a vast composting operation. The company, which has been growing at 25% per year, brought in $40 million in revenues and $3 million in net income in 2007—after spending much of its operating profits on schooling and health care for employees' families. Sekem just bought 4,000 acres of arid land on the Sinai Peninsula and in the Western Desert that it plans on converting to farming.

For Abouleish and his son, Helmy, who now runs day-to-day operations, more important than the financial accomplishments is the impact of Sekem on Egyptian agriculture. When done right, organic farming uses a lot less water, and farmers don't spend money on expensive and polluting herbicides and pesticides. When Sekem started operations, there was no organic farming in Egypt. Today there are several other major organic growers, and Sekem has developed a network of 800 independent farmers on 50,000 acres whose produce it exports to major grocery chains in Europe. The company's nonprofit Sekem Development Foundation runs a school, a medical center, and economic development programs in the seven villages around the campus. But Ibrahim Abouleish is not satisfied. "What we have achieved is a great model. Now we have to change the whole country," he says. He figures it could take more than 100 years to reform Egypt from the bottom up.

While Sekem shows that such enterprises can grow up and make progress, there are many economic and social hurdles that need to be cleared for this phenomenon to become powerful. Money is a major issue. While philanthropies and investors are plowing hundreds of millions of dollars into social enterprises, that's still minuscule compared with the $35 billion in venture capital invested worldwide last year.

To attract more capital, social enterprises have started trying to better quantify their results. A group spearheaded by Acumen Fund, a nonprofit supporter of social enterprises, has begun gathering an ocean of information into one massive, easily accessible database. That way, results can be monitored by the funders and investors, and social entrepreneurs can see how they stack up with their peers.

Still, it's hard to justify most social enterprises on strictly financial grounds. In many cases, investors have to accept lower returns than they would expect from traditional investments. That trade-off has tormented investors in Freeplay Energy, a social business that sells hand-crank radios and lights for people in developing countries and Western nations. The company went public in Britain in 2005, but its revenues have been disappointing, and its stock price plummeted until it was taken private again this year. "It's hard to have a social mission in a capitalistic system," says Rory Stear, Freeplay's co-founder and co-chairman.

When Ramalinga Raju, chairman of India's Satyam Computer Services (SAY), set out to improve India's woeful health-care system, he decided to bring in government as his partner. His idea was that, by combining Satyam's technology and business-operations expertise with government resources, innovative new health-care initiatives could spread rapidly. Emergency Management and Research Institute, a free ambulance service he launched in 2005 in the Indian state of Andhra Pradesh, has branched out to two other states. The government pays 95% of operating expenses. "I have no doubt that this will be a model for the rest of the world," Raju says.

Maybe. Raju's ambulance service is catching flack from rivals. Sweta Mangal, co-founder of Dial 1298 for Ambulance, which operates in Mumbai, says EMRI relies too much on government support, which might be fleeting. She also doesn't think it's affordable for governments in emerging nations to offer free ambulance service for everybody. Her company charges wealthy and middle-class patients, which subsidizes free service for poor people.

This is just one of the debates that show how unsettled the world of social enterprise is—and may remain. Until today's entrepreneurs discover which business models really work, there will be uncertainty and wasted effort. The movement is growing and taking on more ambitious projects. But from Mercy Corps' Keny-Guyer to Satyam's Raju, these entrepreneurs know most of their work still lies ahead of them.

A Social Entrepreneurship Schism
In Philanthrocapitalism: How the Rich Can Save the World, Matthew Bishop and Michael Green argue that the wealthy can save the world by giving money to social entrepreneurs. But Michael Edwards wrote a sharp critique called Just Another Emperor? The Myths and Realities of Philanthrocapitalism. His concern: The hype will divert attention from the deeper changes he believes are required to transform societies.

To read Edwards' summary of his book, go to BusinessWeek Business Exchange; http://bx.businessweek.com/social-entrepreneurship/reference/

Hamm is a senior writer for BusinessWeek in New York and author of the Globespotting blog.

Saturday, October 10, 2009

Edward Norton's $9,000,000,000 Housing Project (that's $9 Billion)

Article can be found here
Fast Company Magazine Online
November 25, 2008
Edward Norton's $9,000,000,000 Housing Project (that's $9 Billion)
By Ellen McGirt

Edward Norton, the two-time Oscar nominee, stood at the podium at the Hilton Washington this past May and tried to be humble. The actor was in the capital to present a major civil rights award to someone he knew well -- his grandmother. It was gearing up to be a nice moment. "I work in a profession," he told the crowd of social workers, lawyers, and community organizers, "that gets a totally disproportionate amount of attention relative to its true contribution to our culture." Suddenly, from the front row, the no-nonsense clerk of the U.S. House of Representatives, Lorraine Miller, snorted, then began to clap, slowly and theatrically, beat by sarcastic beat.

Startled, Norton looked up from his notes and peered into the dark ballroom. Then he shrugged and started to laugh along with the audience.

Tough crowd, D.C. Not even the Hulk can get a break -- which, in this case, wasn't really fair. Norton went on to honor 82-year-old Patty Rouse for her role in Enterprise Community Partners, an affordable-housing organization that she cofounded with Norton's grandfather, real-estate developer James Rouse.

But Norton's appearance wasn't merely a cameo, a movie-star drive-by. On the contrary, he has been an active participant in Enterprise since he was a kid. His first job after college was an analyst spot there; he sits on the board and has donated more than $1 million. What's more, he has played a key role in encouraging Enterprise to embrace green building -- a shift that has enabled the business to keep moving despite the housing crisis and mortgage meltdown. In fact, Enterprise is arguably the one bright light in an industry dominated by excess and foolishness. Its model offers clues to how we all might climb out of our real-estate mess.

Enterprise may be one of the most influential organizations you've never heard of. A for-profit/not-for-profit hybrid, Enterprise has invested $9 billion in equity capital, predevelopment lending, mortgage financing, and development grants to house low- and moderate-income Americans. It has revitalized some of the country's poorest neighborhoods, from Fort Apache in the Bronx to the Tenderloin in San Francisco. Perhaps its most important accomplishment was helping to create the low-income-housing tax credit (LIHTC) that for 25 years has provided a way for the business world -- developers, bankers, and boldface names like Warren Buffett -- to address the pressing social need for affordable housing while still making a profit. That credit has had a bigger impact than the Department of Housing and Urban Development, accounting for some 90% of the affordable rental housing in the United States.

Norton is hardly the only contributor to Enterprise's success. It has been an ensemble performance, including former CEO Bart Harvey, who was tapped this fall to join the reconstituted board of Fannie Mae; his successor, Doris Koo; and Charlie Werhane, who runs the organization's tax-credit business. There is no assurance that the credit storm will not undo two-and-a-half decades of Enterprise's good works. But it's instructive to look at Norton, Enterprise, and their behind-the-scenes role -- even in the current drama, in Congress, and at the White House -- to see what is possible when responsible business and a farsighted social mission dovetail in a search for creative solutions.

From the beginning, Enterprise has used a combination of market forces, good data, and political savvy to create mechanisms -- no, not subprime mortgages or mysterious derivatives -- that help nonprofit developers and cities build high-quality housing for low- and middle-income people. Now, with the neighborhoods it has helped resurrect under pressure, Enterprise has launched a new round of financial innovation. Armed with mounds of real-world construction-related data about energy efficiency, carbon emissions, and public health, and dismayed by the vulnerability of traditional credit schemes, the Enterprise team is marketing regional green-building investment funds to companies anxious for both financial returns and environmental cred. It has also launched the first carbon-offset fund designed to raise money for affordable housing. At the end of the day, Enterprise's mission has always been to provide people with clean, safe, affordable homes and create communities that work. But if its efforts can help buoy the whole real-estate market -- and save the planet as well -- so much the better.


With the stock and credit markets in full meltdown mode -- and Congress, the media, and taxpayers melting along with them -- late September was not a good time to be in the housing sector. But some good news went largely unnoticed. In Los Angeles, Mayor Antonio Villaraigosa announced an ambitious five-year, $5 billion plan to build or restore 20,000 affordable-housing and mixed-income units in neighborhoods threatened by mass foreclosures. To pull it off, the mayor will need public and private financing, but he had one critical piece in hand: a $700 million check from Enterprise Community Partners.

Meanwhile, in Chicago, Mayor Richard Daley said that the city would launch a green retrofit program for thousands of units of low-income housing. The initial funding will come from Enterprise.

And in D.C., Enterprise was busy on Capitol Hill. Back in January, newly minted CEO Koo warned the Senate Committee on Banking, Housing, and Urban Affairs that looming foreclosures were going to hit cities hard. "The Center for Responsible Lending has estimated that 44.5 million homes adjacent to subprime foreclosed properties will lose value," she testified, "and $223 billion in neighborhood wealth will be lost." She walked the senators through an earlier Enterprise-inspired program that had helped the Federal Housing Authority dispose of 40,000 homes in the last foreclosure crunch, and she made the case that a $10 billion fund to shore up neighborhoods could also generate new revenue and more jobs. Chairman Christopher Dodd, among others, took note.

As the reality hit that Fannie and Freddie were near collapse, Enterprise stepped up its campaign to turn the idea into reality. By June, as the 600-page Housing and Economic Recovery Act worked its way through Congress, Koo's proposal morphed into the Neighborhood Stabilization Fund, a $3.9 billion block grant to help states and local governments buy or rehabilitate foreclosed properties. The bill even included language championed by Representative Barney Frank that favored use of the fund for green housing.

But at the other end of Pennsylvania Avenue, the bill's momentum evaporated. A "fact sheet" from the White House raised the "bailout" objection: "The principal beneficiaries of this type of plan would be private lenders, who are now the owners of the vacant or foreclosed properties, instead of struggling homeowners who are working hard to stay in their homes." President Bush was adamant. Take the fund out, he insisted, or the bill dies on my desk.

It was not the first time Enterprise had felt push-back from the White House. In 2003, a Bush administration tax proposal threatened to gut the low-income-housing tax credit, the basic financing vehicle for affordable housing across the country since Harvey, then a senior executive at Enterprise, helped establish it in 1986. Bush proposed that companies could either use tax credits or increase dividends to shareholders, but not both. "It would have entirely removed the incentive for corporations to invest in any tax-credit program," says Stockton Williams, senior vice president and chief strategy officer for Enterprise. In the midst of the battle, Karl Rove called with a message for Enterprise: Stand down. "It was a very intense experience," says Williams diplomatically. Ultimately, moderate Republican senators scaled back the tax cuts and, in the process, killed the troublesome provision.

This year, it was Fannie and Freddie's plummeting fortunes that got Bush to blink. According to two people familiar with the matter, Treasury Secretary Henry Paulson went to the president in early July and told him in Washingtonian terms to hold his nose about the stabilization fund and sign the bill. "Paulson was no fan of the provision," says Williams, but by then, the magnitude of the mortgage crisis was stark.

For places like troubled Tarrant County in North Texas, relief arrived in record time. The county, which includes Fort Worth, was facing a dramatic year-over-year spike in foreclosures; in one zip code alone, 38 of every 1,000 homes have been posted for foreclosure. In September, the county was awarded a $3.3 million allocation from the new Neighborhood Stabilization Program. (By contrast, provisions in the behemoth housing bill to help individual homeowners renegotiate their existing loans to avoid foreclosure didn't go into effect until October.) Says affordable-housing expert Frank Alexander, a professor at Emory University Law School: "The neighborhood stabilization grants are the only good news coming out of all of this for the affordable-housing marketplace."

Washington-based emergency measures aren't the only innovations Enterprise is championing in this volatile climate. It has smart long-range plans, too. And, surprisingly, to understand them, the best person to start with is Edward Norton.


Early on the day of the awards ceremony in May, Norton testified on Enterprise's behalf before the House Select Committee on Energy Independence and Global Warming. Well-prepared with facts, figures, and a detailed 10-point policy plan -- the Beltway equivalent of a supercharged PowerPoint presentation -- Norton politely made the case for green construction. An investment of only 2%, he told the committee, could reduce energy costs by 20%. "We can make progress on all these issues, create green jobs, and lock in long-term environmental benefits by making green affordable homes a national priority."

Norton grew up in the town his grandfather built, Columbia, Maryland. The family spent many nights gathered around Jim and Patty Rouse's kitchen counter, cooking, doing dishes, and talking relentlessly about their mission. For the Rouses, a clean and decent home was a civil right, a starting point for all citizens. "Here we are, the wealthiest country in the world," Jim once lamented in a speech, "and we let millions of our people live in these deplorable conditions." And he held no illusions about fellow real-estate developers, who were driven all too often, he said, by the "determination, at whatever cost to the community, to make a profit." Enterprise was the Rouses' vehicle to help poor and working-class people and save American cities.

"Social entrepreneurs run on rocket fuel," Norton says. "I've seen my grandfather and Patty talk through waves of younger people who would fall away and go to sleep. They never stopped. Ever." He sums up: "You might not fully appreciate how exhausting it was!"

Something about the late nights -- or perhaps it was a young man's quest for a dose of spiritual rocket fuel -- was embedded in Norton. Discussing his role at Enterprise, he told me after his congressional testimony, "The thing I've been most proactively working toward is the notion of converting our model into a green program." The son of an environmental lawyer, Norton has long been a green activist. But, he explains, "we didn't have a whole lot of data within Enterprise for how high-cost premium items like solar would impact the low-income context. I came up with Solar Neighbors as a mechanism to gather data."

The Solar Neighbors program, in concert with energy giant BP, encourages famous folks -- like actors Don Cheadle, Brad Pitt, Alicia Silverstone, and Will Ferrell -- to install a solar system on one of their homes. BP then donates a solar installation to a low-income family. Twenty-nine celebrities have participated since the program began in 2003; in return, BP has provided 41 systems, 39 of them to low-income single-family homes, mostly in south Los Angeles. The recipients have offset their electric bills by 30% to 80%.

The program has been a financial boon for the rich and famous, too. Actor Larry Hagman, who embodied housing excess as J.R. Ewing on Dallas, became one of the first Solar Neighbors in 2003. The annual electric bill for his 46-acre Ojai farm has dropped from $37,000 to $13, he says. According to the California Public Utilities Commission, Hagman and his wife, Maj, own the largest residential solar-power system in the United States; it sends 10,000 kilowatt hours a year back to the grid. Six L.A. families received solar units in Hagman's name in 2004.

For 25 years, the low-income-housing tax credit (LIHTC) has worked as a business because it gives profitable companies from Sherwin Williams to Disney to Deutsche Bank an incentive to invest in below-market-rate housing, and make money doing it. What Enterprise got from Solar Neighbors -- beyond PR pop and solar panels for a few units -- is real-world data about the economic benefits of going green that Enterprise could use to devise new ways to fund affordable housing.

"Our priority has always been getting people into homes, not saving the environment," Williams says. Sitting in Enterprise's spare D.C. office, he and colleague Dana Bourland are trying to explain how they ended up in the climate-change game. "We were focused on the social issues related to the environment, like asthma," Bourland says. Then, around 2003, Williams recalls, "we were seeing the excitement around the Al Gore slide show on climate change that eventually became An Inconvenient Truth and realized we had a contribution to make." Because many of its not-for-profit developer partners were open to the idea of green construction, Enterprise was in a position to collect data measuring the impact of this new way of building. "If we could prove the benefit of green building," explains Bourland, "we could create new financial products and a marketplace around it."

The data from Solar Neighbors were a start, but they wouldn't be extensive or rigorous enough to convince investors, so the Enterprise team put together a Green Communities checklist of mostly mandatory specifications covering construction, materials, and design -- the first nationwide green criteria for residential construction -- and set a goal of building 8,500 residential units in five years. Michelle Moore, the senior vice president for policy and public affairs at the U.S. Green Building Council (USGBC) -- which expanded its LEED standards to residential building only in 2007 -- marvels at what Enterprise has accomplished. "Their data really appealed to us because they're focused on affordable housing," she says. "We can't let a green home or school be 'eco-bling.' It's great to demonstrate that a green lifestyle is not just something celebrities can afford. We've learned a lot from them."

Enterprise met its 8,500-unit goal two years ahead of schedule. Showing an analytical fortitude that would make Silicon Valley proud, Bourland is leading the charge to crunch the resulting data and determine what it costs to integrate Green Communities building criteria and what savings can be harvested. By 2008, she says, it was clear that "water savings are 20% above baseline. Energy is pretty close to that. Those are stunning figures." The team also learned that asthma in children could be reduced for a tiny expenditure. "It's a database that exists nowhere in the world," she says.

Those data are driving financial innovation. Enterprise is introducing its first Green Communities Retrofit Fund, which will work with energy-services companies, or ESCOs, to provide affordable-housing operations with in-depth assessments of energy efficiency, construction plans, and loans based on the expected operating savings. Williams says the fund could grow into a stand-alone ESCO, staffed with its own auditors, trained in energy efficiency and home building, and generating green jobs. For the Chicago project that Mayor Daly announced in September, says Williams, "basically we'll be making low-interest-rate loans that will finance the retrofit of affordable-housing developments. We plan to prove that, for the first time, we can scale this across the country."

Perhaps the most ambitious new product is the Green Communities Offset Fund, which plunges Enterprise into the controversial world of carbon trading. Again, the data drove the financial innovation. "We can now look at numbers by region and project type, and know specifically what each improvement costs and what carbon benefits they provide," Bourland says. "And we can sell an offset because our data are measured and verified and real." Developers apply to the fund for financing; once the project is approved, the fund sells credits in the voluntary market, based on the amount of carbon that will be saved by building to Green Communities standards.

The fund is at an early stage. It has raised nearly $500,000 and made its first transaction, for a new apartment building in Albuquerque, New Mexico, for low- and middle-income tenants. Because the fund lives within the nonprofit part of Enterprise, future investors can offset their own carbon-rich lifestyles and get a tax deduction. (In a nice karmic nod, the USGBC plans to offset the carbon associated with its own annual shindig.) With banks and investment banks struggling to regain their footing, "it may very well be that Enterprise will become a major player in the carbon market," says Garry Hattern, a vice president at Deutsche Bank and creator of its community-development financing group. (Over the years, Deutsche Bank has participated in more than $120 million in tax-credit funds.)

Enterprise is also using its green-building expertise to reenergize its tax-credit operations, which have provided about $700 million in capital each year to affordable-housing efforts across the country. Under the rules administered by the Internal Revenue Service, the federal government allocates low-income-housing tax credits to all 50 states based on population. Developers make proposals to the state housing agencies, which review and award credits based on the size of the projects. "Then," explains Werhane, "the developer takes the credits to people like us, and we syndicate it to investors." The marketplace sets the dollar value of the credits.

Most tax-credit investors have been financial institutions with plenty of profits to offset and a comfort level with complex markets. Harvey recalls the first big commitment, from Hugh McColl at NationsBank, later CEO of Bank of America: "Hugh said to me, 'You can invest in these areas and make money doing it? I don't believe it.' He checked with his CFO and came back in and said, 'We'll take a billion.' " Today, with banks in disarray, the value of the credits has fallen -- from about 90 cents on the dollar last year to as little as 75 cents in some regions today -- leaving developers scrambling to make up the shortfall or postponing new projects.

To attract new investors, Enterprise has begun creating green-themed regional funds that might appeal to profitable companies that want to be part of the environmental movement. Think energy companies. Werhane and his team have been plugging away for over a year. "Tax credits are a tough investment to understand. It takes a lot of explaining," says Rich Gross, who plans on closing Enterprise's first California Green Equity Fund for $45 million in mid-December.

Gross has set his sights on tech companies for another California Green Equity fund to close next year; he has been working closely with the Silicon Valley Leadership Group, an organization designed to advance the local public-policy initiatives of more than 200 businesses in the valley. "Enterprise is unlike other tax-credit syndicators in that we offer technical assistance and expertise to developers," which prospective investors seem to like, he says, adding that he's optimistic that the Googles and HPs will come on board. "California now accounts for about 25% of Enterprise's green affordable housing. The new fund can really grow that number."


Like Enterprise, former CEO Bart Harvey has shifted gears. "It's been a very difficult time," he says of his new role on the board of Fannie Mae. "Job number one is to make sure that Fannie is healthy and that it's making sensible loans and policy around those loans." Although the government has sent a clear signal that affordable housing is a priority, Fannie and Freddie will not be purchasing housing tax credits anytime in the near future. Will the affordable-housing market survive the onslaught to come? "I'm definitely ..." he chooses his words carefully, "concerned."

But Harvey is also mindful of what Enterprise has accomplished -- and optimistic about the team that Jim and Patty Rouse's vision has attracted, from family like Norton to pros like Koo. Harvey still credits Rouse as the inspiration for Enterprise's success. As a child in Baltimore, he recalls, "I watched Rouse take the decaying downtown of a written-off city and bring it back to life." But when Harvey was asked to join Enterprise from Dean Witter, where he was managing director of corporate finance, he wasn't sure about Rouse's new venture and the idea that affordable housing for all was possible. "I thought Jim was crazy, out of his mind," he says, laughing. Who is going to invest in those neighborhoods? What are the financial products? "You'll have to invent them," Rouse replied. Harvey pauses. "So we did."

Article can be found here

Correction: A previous version of this article stated that Community Enterprise Partners closed their first California Green Equity Fund for $50 million with PG&E on board.

High Point: Seattle's Green Community
Article location: http://www.fastcompany.com/magazine/131/a-high-point.html
November 25, 2008
Tags: Ethonomics, Doris Koo, asthma, Enterprise Community Partners
By Fast Company Staff

"When George shows you his water trick, be very amazed," whispers Enterprise Community Partners CEO Doris Koo. "It's his favorite." We are at High Point, a 120-acre mixed-income project in Seattle, waiting for George Nemeth of the city's housing authority. He arrives bearing charts, graphs, and a bottle of water. About 10% of the water runoff from High Point ends up in a 4-mile salmon stream called Longfellow Creek that has been stressed by overdevelopment, Nemeth tells me, and High Point was designed to be a natural-water channel and filter: "We attempted to re-create what nature has always done." Vegetated drainage channels replace gutters and curbs, and sidewalks are made of a material that allows rainwater to seep quickly into the ground. Nemeth pops open his bottle of water and dumps its contents on the sidewalk on a steep incline. The water magically disappears into the ground -- and I am amazed. This single feature has saved millions in engineering costs and even more in environmental damage -- and provided a template for urban development around the country. ("I plan to steal those ideas," San Francisco's enviro-mayor Gavin Newsom told me.)

It took $8.5 million from HUD and $27 million in financing from Enterprise -- Bank of America was the lead tax-credit investor -- along with state and private funds to transform what was once one of the grimmest housing projects in Seattle into an idyllic neighborhood. High Point is part New Urbanism, part environmentalism, and part civil-rights triumph, designed from the beginning to seamlessly mix subsidized low-income housing, Habitat for Humanity projects, apartments specially designed for the elderly, and 252 market-rate townhouses and single-family houses built by private developers to meet Enterprise's Green Communities standards. There are also 35 Breathe Easy homes designed and built with asthma and pulmonary patients in mind. Developers created new protocols -- everything from no smoking on the job to airtight construction, insulated windows, hydronic heating instead of forced air, blinds instead of curtains, and HEPA vacuum filters -- all for about $6,000 per unit. Six-year-old Ozie Whitfield IV hasn't had an asthma attack since his family moved in 18 months ago.

Koo, who was a housing advocate on New York's Lower East Side when she first met Enterprise founder Jim Rouse, says she feels his influence in every blueprint, financing gizmo, and clean home. "Jim knew that dignity is everything," she says. "When everyone is invested, everyone is a neighbor."