sri-advisor.com
where checking accounts rebuild communities
Back to homepageInstitutional ReportsSRI Financial Professionals DirectoryToolsNewsSRI Performance and TrendsAbout Us   
News


May 23, 2006
Ecological Community Loan Pool Directly Links Ecologically Minded Investors to Eco-Preneurs
    by Bill Baue

The portal created by Ecostructure Financial tweaks the community development financial institution model to allow investors to lend directly to startups solving environmental problems.


There is a gap between public investors and so-called eco-preneurs--or entrepreneurs designing businesses whose purpose is to solve one environmental problem or another--that Ecostructure Financial is seeking to bridge. Many of the companies solving environmental problems are not yet publicly traded, making them investable only to venture capitalists, angel investors, and the like--and unavailable to retail investors. On the other side of the equation, many start-up eco-preneurs are too early in their development to appeal to venture capitalists, and need smaller infusions of capital to get their businesses off the ground.

Enter Ecostructure Financial's Ecological Community Loan Pool, which links eco-preneurs directly to ecologically-minded investors willing to loan relatively modest sums. Ecostructure has already established a venture capital fund to finance eco-preneurs, but it wanted to open the space wider for public investor access. Starting a mutual fund is a costly endeavor, coming in at about $1 million, and limits investment to publicly-traded companies, thus preventing support for the seeding of eco-preneurs coming up with new environmental solutions.

So Ecostructure started looking to the community development financial institution (CDFI) model of making loans to solve social problems. Then, serendipitously, Ecostructure Founding President Mark Winstein (himself an eco-preneur of more than 20 years) stumbled upon Prosper.com, an online peer-to-peer lending portal that links borrowers directly to lenders.

"You could call our system the EBay for ecological investing," Mr. Winstein told SocialFunds.com. "For us, this is a low-cost way to essentially replicate a community development financial institution at a small level to allow the public to directly invest in companies that are doing some amazing work for the environment."

"There's a whole wave of companies whose very purpose is to solve an environmental problem, and almost none of those companies have publicly-traded stock," he continued. "If we want to solve these environmental problems, we need to open up a lot more investment to a larger section of people."

Prosper.com allows for the creation of groups focused on specific lending issues, so Ecostructure established an online lending community for supporting eco-preneurs and environmental businesses. Prosper.com caps loans at $25,000, but this amount can be cobbled together from many different lenders, a structure that lends itself to the pooling model that Ecostructure is pursuing.

"There are at least 4000 eco-preneurs out there, and for many of them a $25,000 loan would make a really big difference," said Mr. Winstein.

And as with EBay, where the price is suggested by the seller but determined by the bidders, the interest rate of the loans on Prosper.com are suggested by the borrowers but ultimately determined by the lenders.

"We might give some advice to eco-preneurs about how to price the loan, but in the end the market will price it for them," said Mr. Winstein. "Our company is responsible for monitoring both the financial and the ecological bottom lines of these enterprises," he added.

Ecostructure has a scientific advisory panel made up of PhD ecologists at the Universities of Idaho and Washington that evaluates the environmental soundness of business plans submitted by eco-preneurs. Ecostructure's staff of "hardcore environmentalists" vets the plans before passing them along to the advisory panel not only for environmental attributes, but also for financial soundness.

"For example, acetone is a big pollutant--a greenhouse gas, carcinogen, water pollutant, and there's 100 million gallons of it used in America every year," Mr. Winstein explained. "One of the companies we're working with has a pure plant-based substitute that actually works better than acetone for the chief purpose it is used--as a solvent for oily substances.

"So by investing in that company, we actually have the potential of erasing acetone as a product--that's a really great opportunity to solve a very serious environmental problem," he concluded.

 

 
Home
| Reports | SRI Financial Professionals Directory | Tools | News | SRI Performance and Trends | About Us | Contact
© SRI World Group, Inc. - All rights reserved
Terms of use - Privacy Policy - OneReportTM Network