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Curated experts in sustainability fields who can thoroughly elaborate their view based on their accumulated knowledge and experience


Christopher Marquis

University of Cambridge

September 21, 2023

Small Door Brings A New, Socially-Responsible Perspective To The Vet Industry

While sixty-seven percent of American households have pets, most of us don’t think a lot about the veterinary care industry as a source for innovative practices or customer service excellence. 

In fact, over the past decades there has been a trend toward lowering costs and standardizing services. According to a recent NPR report, as Americans have been spending more and more on their pets, large corporations have stepped in and been purchasing what used to be small veterinarian-owned practices. Such businesses are seen as reliable investments as they have low overhead and a stable cash flow. Of the about 6,000 small- to medium-sized veterinary practices in the U.S., I was surprised to learn that 5,000 of them are now owned by big corporations.

But many entrepreneurs and investors are working to bring personalization and innovative services to this industry. For instance, Josh Guttman and Florent Peyre recently founded membership-based veterinary care company Small Door, which aims to solve a number of issues that plague the industry including inconsistent care, difficulty in scheduling visits, and outdated systems.

Small Door opened its first state-of-the-art location in January 2020 in the West Village of Manhattan, and in August 2021 opened an Upper East Side location. I visited the new location to talk to Josh soon after it opened and was impressed by both the little touches to put pets and their parents at ease and also the state of the art facilities. In summer 2021, the team also launched a mobile veterinary unit, which popped-up in Southampton and East Hampton, and will continue to serve new communities in the future.

In early 2021, Small Door announced that it had received US$20 million in Series A financing, from Los Angeles-based Toba Capital. By 2025, the team aims to open 25 locations. 

Another unique aspect of Small Door is its mission to be a socially responsible employer and pet-care provider. Small Door was one of the first veterinary care company to become a certified B Corp and the company also obtained AAHA certification, which is a recognition of the quality of veterinary facilities, based on more than 900 strict standards, and only awarded to 15% of veterinary care providers in the United States. Small Door’s commitment to transparency is backed by their decision to provide veterinarians with competitive salaries vs. commission-based pay (Small Door veterinarians provide only the treatments that are necessary), along with benefits that include student debt repayment. 

In addition to visiting their Upper East Side location, I also conducted a joint interview with founders Josh and Florent. Both bring a unique set of experience to this venture. Florent was the co-founder and chief operating officer of Placemeter, which used computer vision and machine learning to build products for location analysis. And from 2013 to 2017, Josh served as a partner in the early investment team of Softbank Capital, the US$500 million venture capital arm of Softbank Corporation.

Below is an edited excerpt of our on-line interview. 

Christopher Marquis: The tagline on your homepage is “veterinary care reimagined” How so? Why does veterinary care need to be reimagined? 

Josh Guttman and Florent Peyre: After Josh’s boxer came down with a mysterious stomach ailment, he spent a year in and out of various veterinary practices searching for answers. He was repeatedly disappointed by the inconsistent care, difficulty scheduling visits, antiquated systems, confusing bills and inability to communicate with doctors outside of appointments. In response to this experience, we opened Small Door’s first location in Manhattan’s West Village in 2020 with a mission to reimagine the veterinary care model aiming to address these perceived shortcomings.

Small Door membership is based on a hospitality-led approach to care, including a dedicated member experience team that helps each pet and owner feel comfortable from the moment they arrive at our practice, and beyond. Members get a mobile app for booking appointments, obtaining medical records, and 24/7 telemedicine with access to Small Door’s medical team. Small Door’s locations are also designed by animal behavior experts to provide a stress-free environment for pets. 

Small Door ensures members receive a personalized, integrative approach to managing their pet’s health. Our medical team guides members through lifestyle and nutrition choices in conjunction with diagnostics, imaging, prescription medications, and priority access to leading specialists. Small Door is also committed to transparency in pricing, offering clear and easy-to-understand treatment plans.

Small Door is powered by a first-of-its kind approach to employee compensation which provides competitive salaries to doctors and avoids client misalignment issues that stem from commission-based pay. They also provide generous benefits packages including student debt repayment to veterinarians and technicians.  

Marquis: Small Door is one of the first veterinary to receive a B Corp Certification. Why was achieving this certification important for you? What did you learn that helped further differentiate your work and services?

Guttman and Peyre: It has been inspiring for us to join the global community of B Corp Certified companies. We're aligned with the movement's mission to elevate companies that put people and the planet before profits. We believe this is the future, and is the only way forward when it comes to becoming a successful enterprise. We want Small Door to have a social impact, not just for our veterinarians who are taken care of in an industry that is rife with mental health crises, but for our pet parents and patients who receive a personalized, integrative approach to managing health that has been lacking with the traditional veterinary standard. 

Marquis: I see you have recently raised $20M in Series A funding (congratulations!), what was investors reaction to your B Corp certification (both those that have invested and others you pitched the concept to)?  

Guttman and Peyre: Our investors were encouraged, but also not surprised, by our commitment to pursue and receive B Corp certification given our mission to be a change agent in the industry for our employees, veterinarians, and our members and their pets. We are proud to expand that mission and join a community of companies who want to be better for the people and the planet. 

Marquis: You plan to open 25 locations by 2025 and you’re opening a new office in the Upper East Side. What are your plans moving forward for expanding the company?

Guttman and Peyre: We're very excited about this summer, as we debut our Upper East Side practice — our second permanent location — alongside a new, mobile veterinary practice which is now offering services in East Hampton and Southampton (for members and non-members alike). Soon we will also be announcing the opening of several more locations toward our goal of 25 by 2025. In every new community, we look forward to providing exceptional care for pets and remain committed to doing it with the promise of transparency to our members.

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September 21, 2023

RSF Is Leading The Way In Moving From Impact Investing To Regenerative Finance

Over the last decade and a half, the idea of “impact investing” – where funds are directed to generate not just financial return but also social and environmental impact – has become increasingly popular in investment and social impact circles. According to a report by the IFC, $2.3 trillion were invested for impact in 2020, an impressive sum, yet this is only around 2% of total assets invested globally in 2020. 

A pioneering firm in the impact investing space is RSF Social Finance. While the Rockefeller Foundation coined the term “impact investing” only as recently as 2007, San Francisco-based RSF has been working according to the field’s underlying principles since its founding in 1984. RSF currently has over $230 million under management. 

More recently, RSF has been pioneering in a new investment area, “regenerative finance”.  As part of my research of purpose-driven businesses, I interviewed RSF CEO Jasper van Brakel to learn more about this new type of investment and why it is important for society and the planet.  He told me that “In short, regenerative finance is a tool to support change makers who are moving our economy from being extractive to being regenerative.” 

Please read more about regenerative finance and RSF’s work in this area in the interview below:

Christopher Marquis: You recently wrote that regenerative finance is emerging as an essential tool for solving systemic problems. Can you describe what regenerative finance is, simply? How is it different from finance as we know it? And why do you and RSF Social Finance think its time has come? 

Jasper van Brakel: Regenerative finance describes the use of various forms of capital to create healthy and equitable social and environmental systems. 

The difference between this regenerative approach and traditional finance is that success in traditional, conventional finance is defined by the financial return on capital; positive social or environmental impacts, if they occur, are a by-product. In regenerative finance the goal is to make positive change possible, with the financial return as a by-product. Regenerative finance sees money as a means, not as an end. It’s about circulation, not accumulation. 

The time for regenerative finance is now. There is a role for the capital markets to make restoration, regeneration and healing possible at scale. We can no longer hide from systemic racism, growing inequality or the climate emergency that impacts everyone—although not everyone equally. Regenerative finance provides a third path that neither counts on government to solve all problems nor expects free-market capitalism to suddenly include multiple stakeholders in corporate governance and refocus on the long-term. A fundamental shift is needed, all the ingredients for the solutions are here, and we have this decade to do it. 

Marquis: Can you provide an example of a systemic problem that regenerative finance is addressing, and how it is doing so?

van Brakel: Racial inequity is a systemic problem that many regenerative finance practitioners are working to address. BIPOC (Black, Indigenous and people of color) entrepreneurs face significantly higher hurdles to obtaining capital than their white counterparts, and they are routinely underfunded. Regenerative finance approaches fill that capital gap, and they do it in ways that address the underlying structural barriers. 

I admire the work the Boston Impact Initiative Fund is doing in this area. When choosing investments, the fund uses a race-based lens that considers the enterprise’s ownership, opportunities it provides, and the degree of worker participation in key decisions. And then it uses integrated capital financing, which could include loans, equity investments, direct public offerings, and other tools, to tailor its support for the enterprise.

Candide Group’s Olamina Fund is another good example. It provides capital to community development financial institutions and other impact-focused lenders that support high-quality jobs and self-determination for low-income communities. At least 80% of these community borrowers are led by people of color and women, and they participate in Olamina’s governance and solution design. 

As RSF we’ve begun focused work on addressing inequity with the Racial Justice Collaborative, which uses philanthropic money to support U.S.-based social enterprises with BIPOC owners and leaders. We’ve engaged external advisers with community wealth building and racial justice expertise to play a central role in funding decisions, which helps ensure accountability to the communities we’re trying to serve. 

Marquis: Tell me more about mission-first business structures and how they relate to regenerative finance. What companies are adopting these structures?

van Brakel: Mission-first structures are ways to implement stakeholder control and ensure that companies can create the outcomes that regenerative finance seeks. These structures share three foundational principles: Profits serve purpose—they are reinvested in the business, shared with stakeholders, or donated. Control resides with stakeholders who are actively engaged in or connected to the business, which can’t be purchased or inherited. And governance and ownership are separate—outside investors don’t have voting or controlling shares.

This is a significant step beyond benefit corporations because it fully protects the mission and tilts the power dynamic. Shareholders are still an important stakeholder, just not the only one that can make decisions. If the decision makers in a company answer to the mission and to all stakeholders, they have different incentives and materially different results from decision makers who answer to investors only. 

There are large, multinational companies like Bosch that adopted this model many decades ago; there are start-ups that are baking a mission-first structure into their DNA from day one; and there is everything in between. From tech to food, from climate to land conservation—there is a lot of innovation in this space.

Purpose Foundation and Alternative Ownership Advisors are great resources to go to for more information about the specific structures and how they work. 

Marquis: Can you talk about a few other examples of regenerative finance?

van Brakel: There’s a new five-year regenerative finance initiative called Funders for Regenerative Agriculture that is collaborating with people who focus on getting all the elements of the farm and food system to work in harmony and continually replenish natural resources. Others include Grounded Capital Partners, which also funds regenerative food system enterprises, and Beneficial State Bank. They’re all helping to solve systemic problems with a regenerative mindset and toolset. 

RSF’s Social Investment Fund, which is a debt fund 100% dedicated to social enterprises, is another example. Investors in the fund receive a nominal return but know that their money is out there working to create a better world. The entrepreneurs who have loans with the fund appreciate the fact that their lender and the sources of their capital are aligned with their mission. There’s also a community governance element: we bring groups of investors and borrowers together quarterly to discuss interest rates and advise us on adjustments.

Marquis: You said we can’t fix broken systems with our broken financial system. Why not? What makes the current system so broken? Do you see a role for everyday investors in terms of addressing this?

van Brakel: That’s right. Because the incentives in the current financial system are set to maximize profits, to discount or ignore negative impacts from business operations, and to see money as a goal rather than as a tool. 

What your dollars do when you’re asleep matters, no matter the amount. We like to think about impact investing and regenerative finance as something investment funds, banks and other financial institutions could do. And they should! Everyday investors, everyone with a bank account, a 401(k) or any kind of financial assets, has a choice: what do I want my money to make possible? Who is making those decisions on my behalf? What would one small change look like?

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September 21, 2023

Banking On Entrepreneurs: BDC Bank Is Supporting SMEs To Amplify Social, Environmental Good

The past year and a half have been challenging for almost all businesses but especially for many small businesses. Throughout the coronavirus pandemic, many local businesses have shut their doors and more still have been clinging on desperately amid month after month of financial difficulties. These losses have been very consequential for communities around the world.

While many financial institutions tightened up on financial services like loans and investments, the Business Development Bank of Canada (BDC) leaned in and worked to help its network of entrepreneurs through the tough times.

“Historically, in periods like Covid-19 or in economic slowdowns, banks retrench and pull back,” says Craig Ryan, Director of Purpose Entrepreneurship at BDC. “Because we're a development bank, we did the opposite. We focused on more loans and more activity.”

BDC is a financial institution created by the government of Canada specifically to support small- and medium-sized businesses. Ryan and others at BDC believe that entrepreneurship is at the heart of a sustainable, purposeful economy. Entrepreneurs create innovative products and services while simultaneously stimulating local economies through job creation and other economic activities. BDC is also a Certified B Corp and recognized as 2021 Best for the World for Governance by B Lab.

Recently, I spoke with Ryan and Carla Heim, Senior Advisor, Sustainability and ESG, as part of my research on purpose-driven businesses and to learn more about the reasoning behind the bank’s intentional focus on entrepreneurship, how it continues to navigate Covid with its entrepreneurs, and how they view the state of mission-driven financing in Canada.

Christopher Marquis: BDC calls itself “the bank of entrepreneurs.” Why do your services focus specifically on helping entrepreneurs?

Craig Ryan: That's my favorite question actually because it's the most important one. And I think it's easier to answer now with everything that's happening in our world. People are realizing that if you don't have a real economy that's robust and inclusive that you'll never create the economic belonging that we as people need. 

So our Bank only does one thing: work with SME entrepreneurs throughout Canada and  support them in dozens and dozens of ways. When these people succeed, they make a contribution to sustainability that nobody else makes, not just with the products and services that they sell but by creating livelihoods and robust local economies across the country.

Marquis: Also on your website, you list several categories of entrepreneurs: women entrepreneurs, Indigenous entrepreneurs, Black entrepreneurs, and more. Why is it important to you to have specific information and services based on people’s identities?

Carla Heim: We've always had a commitment to support all entrepreneurs. And what we have found is certain individual groups have more barriers to success than others. Maybe they don't have easy access to financing or easy access to assistance or advisory services or even just support networks that can really help them grow their businesses.

Recognizing that we can't be all things, partnerships are so important. We looked at a way that we could support these entrepreneurs from a BDC perspective, but also from a networking perspective. We've supported Indigenous entrepreneurs for years. One partnership we just announced not too long ago is a $150 million partnership with the Indigenous Growth Fund (IGF). BDC is an investor in the fund. The IGF will provide access to capital that Indigenous small and medium-sized entrepreneurs have long needed, but lacked. We've done this in partnership and the fund will be accessed through aboriginal financial institutions throughout the country. So this is an example of how BDC plays a role in making this come to life, but we're not managing those funds because the aboriginal financial institutions have the expertise and the connections in that community.

The next group that we turned our attention to about eight years ago were women entrepreneurs. We did an accessibility review, but we also listened to other studies that were happening in Canada and abroad that told us women entrepreneurs have different challenges and have different priorities. With only 14% of business in Canada being majority women owned, we knew we had some work to do. We developed a Women in Technology Venture Fund because there just wasn't anything like that in Canada, at the time. We have one of the largest women in tech funds in Canada, and it’s very successful. We've been able to work a lot closer with those entrepreneurs, identify the needs and the gaps in the marketplace, and then either develop that offering ourselves or go out to partners that are close to these entrepreneurs who need that assistance.

Through the work that we've done in those two groups, we really found out that a specific nurturing and support and allyship plan was very beneficial. Just this year we combined all of those entrepreneur groups under a Client Diversity team. It's an amazing team of leaders that have been in the banking industry for a long time that have a lot of history mentoring entrepreneurs, so they know exactly what entrepreneurs need, and they're also really connected to these diverse groups. The purpose of this work is to make sure that we are there as a catalyst to link these entrepreneurs up with different partners all over Canada and the world to ensure that they feel like they’re part of something so that they can build their business knowing they've got access to both financing and advisory services. 

Ryan: It’s also important to have the right people working with these groups. So our colleague responsible for our Indigenous outreach is Indigenous herself, and she's got those relationships. Similarly, as the IGF shows, it’s important to provide capital to organizations that have connections in specific communities, and which can provide entrepreneurs with the financing they need. And it'll vary from group to group because the communities, institutions, and organizations present in each group are different. And it's Canada, so there is no one organization that can work across the whole country. There's always a gaggle of them. You get to know them, and you work with them, and it requires flexibility to accept that there will be no one organization that can do everything. It also takes patience, a lot of patience, because it takes time to build relationships.

Marquis: How have you supported your entrepreneurs throughout the coronavirus pandemic?

Ryan: It was all hands on deck to handle the historic volume of loan applications. Doing our work during Covid wasn't that difficult for us at BDC because what we're selling doesn't have to be delivered in a box. We just work from our living rooms, so to me that's not a significant thing. But huge numbers of entrepreneurs needed money to get through the difficult period, so the first challenge for us was managing historic volumes of loan applications. And of course, it varied a great deal by sector. One of the standard things we did is we offered a principal payment holiday. We also took a more tailored approach for other specific sectors. As a crown corporation, our role was key in providing relief programs in collaboration with financial institutions and adjust throughout the pandemic. While some industries struggled like the hospitality sector, other experienced fast growth like technology. We had to adapt to both and offer the right level of financing and advice.

Heim: We also put a huge focus on working capital because that's what most folks needed. We had partnerships through the government of Canada, so we backed a lot of the loans that were given through the charter banks or credit unions in the country as well. So we were all hands on deck supporting our own clients with postponements of principal payments or whatever they might need and then also supporting other banks in the country to help guarantee loans that needed to get out to entrepreneurs at the time.

Marquis: On your website, you list services for companies in the oil and gas industry. How do you balance serving those customers with your commitments to positive environmental practices?

Ryan: To answer that question, we really have to start with first principles, which is we're dedicated to the real economy of Canada in all its variety. And as a development bank, we see our role as to not abandon our clients, but to see them to and through the energy transition. We're one of - maybe the most - important cleantech investors in Canada. In the oil and gas sector, our clients are small- and medium-sized enterprises in the supply chains of the larger firms. We have defined our role as a company that will accompany them through the clean energy transition which, for most SMEs, even in that sector, is barely beginning.

One of the first things we do is we target those companies that we perceive as being more likely to be facing transition risk pressures. We have learned that what they want and need first is information and a tool, including where to start, so we use the B Impact Assessment. This past summer, we invited 20,000+ SME entrepreneurs to learn why and how acting on climate change will improve their company’s performance. We see it as an exercise in prompting and helping.

Also, companies in the oil and gas industry account for a simple digit percentage of our portfolio, so it is a very small group that we work with.

Marquis: Could you share your insights on the state of purpose-driven financing in Canada?

Ryan: Well, in many mainstream organizations, I'll be honest: what I see is a lot of cosmetic defensive ESG stuff. But we're fortunate in Canada because there are some terrific co-ops and other financial organizations like Kindred Credit Union in Ontario or Assiniboine Credit Union in Manitoba. Those are organizations that are dedicated to people and rooted in a place, and they regularly blow me away with their creativity and their efforts.

So I guess I’d say there's still a lot of dust in the air created by the capital markets moving toward ESG, but, in my view, it hasn't really shaken out or transformed itself into tangible results yet. What gives me hope and faith in the future is what I see organizations like Kindred and Assiniboine doing.

Heim: One thing we always must remember is that, for the most part, banks are in the business of loaning out money. The number one thing they're going to look for is can you repay that debt. And whether you're a purpose-driven entrepreneur or not doesn't have a lot of bearing on whether you can repay that debt. 

I think what we're going to find is that if you look at who you're going to actually do business with in the future, the definition of risk is going to be broader. So, risks include environmental harm or the lack of climate action or treating your employees really badly. 

But we're not there yet. We're not seeing that in the main financial channels just yet. We're seeing it with banks that are completely dedicated to sustainable investments and sustainable lending. They're asking the broader question around risk. But you're not seeing it in banks that service all entrepreneurs right now.

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September 21, 2023

Banking On A Better Future: Beneficial State Bank Aims To Transform A Traditional Industry By Empowering Consumers And Communities

In establishing Beneficial State Bank as a financial institution with social and environmental impact in mind, co-founders Kat Taylor and Tom Steyer saw an opportunity to serve as an example for others in the U.S. financial industry, which handles trillions of dollars in finances daily. The potential for positive change is great in a system where the biggest U.S. banks have trillions in assets, and even smaller financial institutions oversee millions.   

“It’s a very powerful system that has monopolistic tendencies. Banking is really a utility that should be governed in the public interest,” Taylor says. “We had a hunch that this powerful positive public system was going terribly awry, and somebody had to set an example for the banking industry that said, ‘You can be financially sustainable without trashing people or the planet.’”

They launched Beneficial State Bank in 2007, just before the Great Recession, as a foundation-owned, for-profit bank as well as a Community Development Financial Institution and Certified B Corporation. All of that adds up to a mission-focused bank committed to doing good in its communities — so the money goes toward community, environmental, and social benefit. With about $1.5 billion in assets, Beneficial State Bank has offices in California, Oregon, and Washington, and an eye on expansion of its services to provide more people a banking option with positive impact. 

By establishing Beneficial State Foundation as the owner of the bank’s economic rights and a public charity, Taylor and Steyer sought to ensure that no entity would use its resources for self-serving interests and instill the community connection from the start. The foundation works with coalitions, campaigns, and other partnerships to advance social and economic justice, and environmental advocacy.

In 2020, Taylor shifted from her role as CEO to a member of the bank’s Board of Directors, and Randell Leach was named to succeed her. As a longtime COO at Beneficial State Bank, Leach is familiar with its unique value set that helps it envision and provide new products, services, and outcomes for its customers and community partners. 

“We’re focused on creating enduring value and sustainability, social impact, environmental resilience, and financial prosperity for communities,” he says. “We just want to earn a fair return so that we can be safe and grow and mature and continue to have this model perpetuate.”

As part of my research on purpose-driven business, I recently spoke with Taylor and Leach about Beneficial State Bank’s work to provide customers with a banking option that also is better for people and planet. Below are excerpts from our conversations. 

Christopher Marquis: In establishing Beneficial State Bank, you wanted to re-envision the model for consumers as well as leaders in the industry. How are you working to convince consumers and other banks that purpose-minded banking is the right thing to do?

Kat Taylor:  We have seen proclamations around pay fairness and divesting from fossil fuels in the banking industry. We don’t claim attribution for the change that we see, we just try to be a catalyst for change. The trick now is that these big banks are on to the PR aspect of operating with positive impact in mind, but they’re not fundamentally changing. 

Randell Leach: It really just comes down to awareness and recognition. For so long, banking customers haven’t known any other way. It’s always presented that ‘This is the way the banks did this, this is how they did that.’ It's refreshing to be on the solution side of it, and seeing people say, ‘Wow, I didn’t even know this was an option. I didn’t know that there’s a different way to do it.’

When they hear our model and what we’re trying to accomplish, with more intentionality, they understand our values and what we want to accomplish, they want to align with that. It’s very powerful. Whether it’s consumer or commercial business, we’ll go toe to toe with the big banks on service and our values are what set us apart. On the consumer side, it’s a very personal decision and depends on their personal values and what they’re really trying to achieve. 

When you step back and look at the big picture, and think about it from an industry-scale perspective, you can imagine how our economic system, and our social system could change if the top 60 banks moved to our business model. Instead of extraction for profit that’s causing negative social impact and damaging the environment, you can still have a healthy bank and business and make an investment in our communities and we can all benefit. The question is, why not? 

Taylor: We’re not movement-makers — we don’t have that expertise. But we can partner with movement makers like Dakota Access Pipeline Protest or Green America or unions or organizations that are in the business of generating allegiance and membership. They understand how banking fuels injustice. All banking should be beneficial.

We have three theories of change, which are, first, that choice and accountability mean people can align their banking with their values. It’s a heavy education lift as most people think of banking as either the deposit products that they love or hate or the loans that the bank is associated with. They don’t put the two sides of the balance sheet together to know that when they deposit in a mission bank, that has a multiplier in financing good projects and puts mission at the heart of the products and services upon which they depend. To help people envision what that financial impact looks like, we created an online deposit calculator that shows them what their money can do with us. 

The second theory of change is industry relations in that we can convince other banks that may not have a mission motivation at all that it's just the smarter thing to do, that these new generations who face climate change, racial reckoning, and massive uncertainty aren't going to put up with the junk that banks have handed them, so they have to get their act together and stop lending to things that are pernicious. 

And then the third is influencing the regulatory system because banking is a quasi-public system. It’s really the original and most powerful form of crowdfunding, not that a specific deposit funds a specific loan, but all deposits fund a lending practice. And the regulators are already regulating for some values that are non-financial, non-safety, and soundness related — like fair lending, cyber security, anti-money laundering so — they should expand to include governance of systemic environmental risk and other aspects of societal harm. For example, extracting deposits and not lending them back into low-income communities dealing with historical harm should be part of public risk management at this time of racial reckoning.

Marquis: How did you develop and build out a set of products with social impact as the centerpiece?

Taylor: We insist that 75% of the loans made are mission positive, so they must create positive benefits for communities and the planet. The other 25% can be neutral, so they are projects that do not cause harm. Our goal was to discipline the lending practice at the highest level, to create harm to none, and benefit to all. And the harm to none is very important, because if you look at the biggest banks — if they would just stop doing the harm, just stop financing private prisons, fossil fuels, predatory lending, and other harmful projects — we could probably let them off the hook for the shiny bright objects they hold up, like how much affordable housing they fund and that kind of stuff. 

We have third-party auditors and Beneficial State Foundation that are deeply integrated into our loan system in order to have real-time verifiable data. We participate in a lot of independent third-party certifications to help us and other banks objectively measure their true impact. And we put mission at the heart of every product and service.

Just to use overdrafts as an example, we process checks smallest to largest. We limit how many overdrafts you can have a day. We have lower fees than the industry average by far, and we notify people when they have an overdraft, so they can correct it rather than collect multiple fees. With our credit cards, we strive for low or no fee; we have aligned rewards. 

It’s important that we look at the design of every product and service; it’s important we manage the lending practice. But there are other areas of banking that you have to get aligned with purpose as well, including governance, corporate practices in general, transparency, and accountability.

Regarding our corporate practices, we pay everybody above living wage and the banking industry has a history of chronically underpaying people. A 2013 study found that one-third of bank tellers nationwide were on some form of public assistance, which if you think about it is a shocking transfer of costs from private corporations to draw on a public resource; that shouldn’t even be allowable. We also manage our landfill, water, carbon footprint, and make them lower every year that we possibly can. It’s all third-party audited through the B Impact Assessment and other arms-length organizations like the Global Alliance for Banking On Values, so there’s a huge amount of transparency and then there’s accountability.  

We will not lobby for self interest and things that are against the public interest. The big corporate banks have large lobbying budgets and advocate for something that's good for their profit, their bottom line rather than overall benefit.

When you think about one business line that can have a huge impact, I think of auto loans, which in the mainstream have more abuse than payday lending. Auto loans are a gateway product into the banking system — much more common than mortgages — and so a big segment of our mission business is refinancing out of high-priced loans. It’s like rescuing somebody. In our refinance business, for example, we’re often able to take somebody out of an 18% or 19% loan and get them a loan at 11% interest, which is not only very significant to them but also sustainable for us.

Leach: There are hundreds of different little levers you can intentionally pull to set up your product; for us we use our values at every step to design it for the best positive impact, and the result is quite different from conventional banking that is solely seeking to maximize its profit. In general, we look at access (or the fairness of delivery) and what specific needs are we addressing for the client (some may have limited credit history, or damaged credit, or have low income, or low wealth, or a combination); so we intentionally design our products to help our clients.

Yes, the consumer auto business is one important business line that’s very different for us compared to our peers. Financing through car dealerships is very unregulated and the industry has a reputation for unfairness - used car dealers can make more money on arranging the loan than selling the car, and there can be much inequity for those seeking access to fair financing. There absolutely is a fair way for dealers and lenders to do it, without disadvantaging the consumer. From the bank’s perspective, we approach it starting with our values, ‘How can we best help someone?’ We are not trying to maximize our profit at the consumer or dealer expense, so we are able to get a different outcome. One that is fair for the dealer, and is helpful for the consumer as well. Two totally different problems are solved: Better access and higher rates of repayment. We also screen out organizations that are not aligned with our values, and they screen us out too.

I see us as a social intermediary in addition to a financial intermediary; we help connect people based on their values. Part of our mission is to go help people and lift them up. There are a lot of other people who are on that same mission, and when they find us, they realize they can accomplish their mission by partnering with us. A large portion of our client base includes businesses or individuals or foundations or nonprofits with a mission similar to ours, and that we are basically an ally on that mission.

For nonprofits, for example, that could involve more complicated underwriting that our peers wouldn’t be willing to spend the time to go do. Other times where we’re helping connect folks like that, there’s a need, and they’re looking for another partner on their mission.

Marquis: How is the bank/foundation involved in advocating for policy change at financial institutions — for example, divestitures or financing related to social justice issues that align with your mission? 

Leach: We’re quite active in that. At the bank, we will advocate on a regular basis on economic issues sort of as an advisor out there for social and environmental type issues as they relate to money and economics. 

Taylor: In California, we’ve been very involved in regulatory reform. Much like the auto industry, my impression is the banks build products for California, because it’s the biggest market. So if you get the product right in California, there are benefits you can replicate in the other states. 

So there's been so much discrimination in credit in this country. And so much wealth has been stripped out of communities of color by redlining, redevelopment, and eminent domain. One of the things we ran into very early at the bank was debt is not always sufficient to build wealth in low-income communities, because they have no equity — it’s all been stripped away — to get a loan as an enterprise or a household. 

We’re working hard on a couple of things. Beneficial State Foundation is leading a working group on examining underwriting practice for bias and seeing alternative ways of underwriting credit that will include more people, more enterprise, more communities. We also are looking to improve lending opportunities for minority-owned small businesses, because women and people of color only get something like 2% of all venture capital funding. They get much less money, but they create more positive impact with it. In 2018, the top 10 non-women, non-people of color financings was for rideshare, gaming, e-cigarettes, while the top 10 women and people of color financings was in health care, communications, and education. So capital allocation really matters. 

We have $1 billion invested in mission loans in 2020. To give you a proportionate sense of where those were going, $275 million of that — so over a quarter of it — was to affordable housing, $258 million was to small business, $120 million to auto loans, and $275 million to nonprofits. So we have a huge commitment to affordable housing. Because it’s where we are: very high-cost states with a very low housing supply. People are now spending 66% of their income on housing, and the advice was no more than 33% of income, so that’s a very big commitment.

Leach: We also aim to raise customer awareness of how their money can be used for good — or bad. Recently, I co-authored an article calling attention to banks that continue to provide funding for fossil fuel companies, which in turn exacerbates our climate crisis. With articles like this we can help more people realize that their money can be used for good and encourage other banks to stop those practices and instead provide funding for the transition to renewable energy and a more resilient future.

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September 21, 2023

Searching For A Solution: Ecosia Is Taking On Google And Aiding Reforestation Efforts In The Process

When many of us have a question, want to find something nearby, or are looking for information, we think, “I’m going to Google that.” Google is the world’s predominant search engine, commanding more than 90% of market share. The company’s name is synonymous with looking something up on the internet. But, like many large tech companies, Google often faces criticisms for its handling of user privacy, its algorithms that determine how information is disseminated, and its employee relations.

There are, of course, other search engines people can use, including Ecosia. Ecosia is the largest search engine based in Europe, yet it still only has about 1% of market share. The company is trying to attract users with a unique proposition: Every search on Ecosia helps reforestation efforts around the world.

“Technology can play a role in the solution to climate change, of course. Obviously I'm a fan of technology, but I don’t think technology is more than 50% of the solution actually,” says Christian Kroll, founder and CEO of Ecosia. “The other 50% is nature, and the power of nature is currently heavily underestimated. When it comes to forests and agriculture absorbing CO2 emissions from the atmosphere, there's a huge potential, and we want to help scale that potential and give it visibility.”

Kroll says his love of technology and his realization about the harms of climate change gave him the idea to launch Ecosia in 2009. Since then, the company has planted more than 130 million trees; launched Ecosia Travel, a hotel search engine that plants trees based on a user’s booking value; and has gone carbon negative, removing carbon from the atmosphere by running its servers on more than 200% renewable energy. The company is also a Certified B Corporation

As part of my research of purpose-driven businesses, I spoke with Kroll to learn about Ecosia and how the company executes its tree planting strategy.

Christopher Marquis: What is it like to take on search engine giants like Google?

Christian Kroll: It's a little bit like David against Goliath — and it's a very big Goliath, and we are a very small David. What we have is a competitive advantage that Google can never copy, and that is basically how we are structured as a business. Google is a profit-maximizing company. It has to pay dividends to shareholders, if not shareholders will get very angry. We have a different kind of structure where basically the company can never be sold and profits can never leave the company. That sets us up in a very different way and that allows us to      create that competitive advantage where we're giving basically all the profits that we're generating to tree planting. That combined with a lot of authenticity and transparency makes us a lot more interesting to a lot of people who care about climate change and other social justice topics.

Things can be done better. Because we're not a profit-maximizing company, our business objectives are totally different. We're running a search engine because we want to solve climate change. Sometimes I say we're making money because we want to plant trees; whereas, other businesses plant trees because they want to make money or to greenwash because, in the end, the bottom line is they want to make their shareholders happy.

For us, it's completely the opposite, and that allows us to do things that are very, very different. That allows us to attract different types of users and different types of employees in this very, very competitive market. We have really, really great people here at the company, and that allows us to gradually gain market share. And even being Europe's biggest search engine, which sounds very fancy, we actually only have around 1% market share. Google has more than 90% in most ranking markets. But we're growing exponentially, so who knows how far this model can take us. 

Marquis: Where did you get the idea to start a search engine that helps plant trees?

Kroll: I didn't really know what I was getting into. I just had the courage to basically do it. I studied business administration, and already during my university years, I thought that I wanted to do something that has more of a purpose than just having a normal career and making money. But I didn't really know what. So after I finished university, I decided to take a lot of time off and make a trip around the world. Initially, I think I wanted to do it for half a year, but it stretched to one and a half years. I spent a lot of time living in Nepal and in South America, most of the time in Argentina. 

During that time, I really observed how much we're destroying our planet and also how unfair the world is. Basically, there are so many people in Nepal, who are more intelligent, more hard working, and just really great people who didn't have the same opportunities as I did just because I was born in Germany and they were born in Nepal. So I saw this kind of big, global injustice and unfairness that just convinced me that I need to dedicate my life to helping people who don't have the same opportunities. 

Then later on living in Latin America, I was just observing this massive destruction of our planet. In 2007, I found out about climate change for the first time and realized how much of an existential threat that is to humanity. Those things coming together really got me motivated to help people, help our planet and solve climate change. So I analyzed a little bit to learn what are the biggest drivers of climate change and social unfairness, and I realized cutting down trees is a big, big driver, so I wanted to tackle that.

I have always had an interest in computers and information technology. At a very young age I started putting together my own computers, although mostly, I was playing computer games. And during university, I actually started m     y first business, which was a website that compared different financial products and different banks. If a user would sign up for a bank account, I would earn a commission so that was basically the business model. There are a lot of big companies doing that now and doing that very profitably, but at the time there were not many, that was my side project to earn a little bit of money to finance my trip. 

Then I realized that I was actually spending most of the money that I was earning on Google to get visitors on my site. I thought, “What a great business model Google has.” Not only are they apparently making a lot of money, but they also have the power to decide who gets visibility on the Internet, this super-important new medium. That's what got me excited about the search business basically. 

So because I wanted to plant a lot of trees and wanted to get into search, I just put them together, and that's how the idea came about. Maybe from an outside perspective it doesn't make much sense, but for my background it actually was a good answer for what I wanted.

Marquis: Could you tell me about the tree planting aspect? How do you identify where the trees should be planted? And do you partner with organizations to do the planting?

Kroll: We have a Tree Team, and we have a Chief Tree Planting Office — and I’ve jealously wanted to have that job, but I wasn't sufficiently qualified. So basically, their job is to find the right tree planting partners and to negotiate contracts with them, including how and where they are going to plant trees and then follow up to see if the partner has actually delivered. In the long term, through satellite images and through people walking through the field taking pictures on their mobile phones and also on project visits, we can follow up on the success to actually see if things are going well or not. If they're going well, then we increase our spending with the partner. At the moment, we have more than 60 tree planting partners. 

I think we're the biggest private tree planting organization when it comes to how many organizations we’re managing, and we have more than 15,000 different locations where we're planting trees. That's quite a challenge to keep up with all that, so we have a huge database to monitor it. Our idea was to basically become an organization that manages a portfolio of tree planting partners. The goal behind that is that we really want to kick start this reforestation movement because we lost billions of trees — trillions of trees actually — and we need to reform our planet very, very quickly. We see our role as the pioneer that's kind of making that possible. 

Hopefully soon, the big, big corporations or governments will wake up and say, “Oh yes, we really need to reform our planet and we need to put billions and billions of dollars into that.” The problem at the moment is that the infrastructure isn't there to do that. So we see ourselves as kind of starting to set up that system and set up the right standards then help scale that tree planting industry. There are a lot of organizations we're talking to about planting billions of trees. The problem, though, is that you need to actually do it. Commitments are very easy, and even planting trees is easy, but then doing that successfully so the trees actually grow and survive and really benefit the communities and biodiversity, that is the difficult part and that's what our Tree Team is basically dealing with. 

I really think that tree planting is one of the most underestimated solutions to climate change. The potential is huge. Scientists are coming together, looking at the top solutions that we can implement to address climate change, and if you look at the top 20 solutions, out of those, I think 11 or 12 are actually solutions that deal with land use, so either how we grow food and how much food we grow or how we're dealing with our forests. The potential there is really enormous, so I would say if we don't manage to plant at least a trillion trees in the next two decades, then we probably will not be able to solve climate change. 

At least in Germany, people are always just talking about electric cars, but electric cars are actually rather insignificant. Technology can play a role in the solution to climate change, of course. Obviously I'm a fan of technology, but I don’t think technology is more than 50% of the solution actually. The other 50% is nature, and the power of nature is currently heavily underestimated. When it comes to forests and agriculture absorbing CO2 emissions from the atmosphere, there's a huge potential, and we want to help scale that potential and give it visibility. We sometimes see ourselves as the marketing department for tree planting because electric car companies have marketing budgets but tree planting unfortunately does not. 

When we decide where to plant trees, what we're focusing on is usually biodiversity hotspots, areas where you have a lot of biodiversity that's critically endangered and where there's a lot of forest being lost. We're getting active in those areas, and we're trying to see where we can get the best return of our money spent, basically the most trees per dollar. That usually means that we're active in developing countries in the tropics with high biodiversity. Examples would be Madagascar, Brazil, Ethiopia, and Burkina Faso. 

Tree planting, for me, is really a magic solution to a lot of problems that we have. First of all, we're paying people to plant trees, which is kind of a kickstarter for the local economy, and usually the trees have a positive impact on the soil, which means that people can then grow food or harvest rice. Some trees also produce nuts and fruits, so that has a lot of benefits. It's really good for the local biodiversity, it helps the local water cycle, because it prevents flooding and also prevents droughts, and then it takes a lot of CO2 emissions out of the atmosphere.

Marquis: How did you get the mechanics of the search engine, like the algorithm, set up?

Kroll: I mean I didn't have billions of dollars lying around to develop an algorithm, so the idea was to always work on partnerships. In the beginning, my first partnership was actually with Google. A few days after launch, they canceled the partnership, so that was a shame. They canceled the partnership so early that it was never an option for me to really build the core of the product.

I then went to Yahoo, and I convinced them to basically grant me access to their algorithms, so that I could best build a search engine on top of it. At some point, Yahoo handed over this business to Microsoft, so we thought it didn’t make sense to be with Yahoo anymore, and we became a direct partner of Microsoft.

In the first years, we didn't really make money. It was also more of a hobby project. But then, after a while, we had enough users, so that actually we also made some revenue. Then after three, four years, we were able to actually pay employees. There was no venture capital or anything like that, so I really had to build up everything from incoming cash flows, and it took a few years to get to the point where we were able to really hire people. Until then, it was mostly friends and freelancers. 

So then, we really started building a real company, a real organization that was also able to develop the product further. Now we have almost 100 people. We are still partnering with Microsoft on the back end of the algorithms, but there are a lot of things that we're building around that, including our mobile apps, for example, and enriching search results. It’s a lot of additional production.

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September 2023 (13)


Christopher Marquis is the Sinyi Professor of Chinese Management at the University of Cambridge Judge Business School and the author of the award-winning books Better Business: How the B Corp Movement is Remaking Capitalism and Mao and Markets: The Communist Roots of Chinese Enterprise.

Chris has written over 20 peer-reviewed academic articles and published over 50 Harvard Business cases. He received a PhD in Sociology and Business Administration from the University of Michigan and served as Vice President and Technology Manager at JP Morgan Chase before returning to academia.
Passionate about how academic research can help people around the world address our most significant challenges, he examines how some of the biggest crises of our day —climate change, inequality, and racism — are intimately connected with how our current form of capitalism has prioritized accumulating and concentrating wealth for the few affects the concerns and needs of everyone and everything else. His research and writing focus on the need to rebalance the interactions between corporations, governments, and civil society to deliver socially and environmentally beneficial outcomes to all.