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It feels sooo good to be investing my retirement funds in socially responsible ways, knowing my money is being put to work trying to solve social and environmental problems instead of causing them. The vehicle that has enabled me to re-direct these funds in this way is the checkbook control LLC self-directed IRA (SDIRA), which I opened 2.5 years ago. In this post I’ll reveal what I’ve invested my SDIRA money in so far.
While not all of the investments I’ve made through my SDIRA achieve regenerative status, everything is at least “less bad” than what I would have been investing in had I left my money in traditional mutual funds, even the socially responsible ones. Below is a chart I created based on my interview with Ethan Roland of How Good, Inc. in which we discussed regenerative investing. I’ll use these levels of regenerative investing to give my personal ranking to each of the SDIRA investments I’ve made to date.
What I’ve Invested In
First, my disclaimer – I am not a certified financial planner and I’m definitely NOT your certified financial planner. All information presented here is for educational purposes only. Do your own due diligence prior to opening any self-directed retirement account. And before deciding if one of these accounts is right for you, consider consulting a tax advisor first.
Moving my Money from Wall Street to Main Street
The very first investment I made with my SDIRA monies was in Streetshares‘ Veterans business bonds (LRI scale – 2). Streetshares pays investors five percent interest and uses the invested funds to make loans to main street and veteran-owned businesses. This investment appeals to me because I like the idea of supporting smaller, locally-owned businesses (even if it’s not in my town these businesses are more likely to be involved in and directly benefit their communities unlike international conglomerate.)
It’s fairly easy to create an online Streetshares account and load it with the minimum $25 (or more) to get started investing in these 3-year bonds. I paid no up-front fees to invest and would only incur a fee of 1% were I to withdraw funds early – other than during the 2-week redemption period each year on the anniversary of my original investment. So far, I have not withdrawn any funds and will likely just wait until the end of the three year bond term to access those funds.
My First Foray into Crowdfunding
Next up I invested in four start-ups, with missions that resonated with me through the crowdfunding website Wefunder.com. It was relatively easy to create an online account with Wefunder for my SDIRA LLC. I paid a $10 fee for each investment made through this platform for a total of $40 (in addition to the amount I invested in each business). Because investing in start-ups is considered high risk with little to no liquidity I only invested a small amount of money into each one.
The first investment was in the form of a promissory note (loan) to Urban Juncture (LRI scale – 3) that pays 5% interest. In its own words Urban Juncture is “Working in developing commercial real estate and related enterprises that address the needs of underserved communities” in the Bronzeville neighborhood of Chicago. Last year was the first time an interest payment was due on the note and it was paid right into my SDIRA LLC’s bank account.
The remaining three Wefunder investments were all equity or ownership shares. It’s typical to hold early-stage private equity investments like these for three to five years or longer until an acquisition or an initial public offering occurs. This means even if these companies succeed I won’t see any return on these investments for a number of years.
Tradefox, formerly Scrap Connection, (LRI scale – 2+) caught my attention with its effort to provide software solutions to companies that buy, sell, or broker recyclable materials. The Tradefox team is growing and has initiated a second round of fund-raising on Wefunder. I receive fairly regular updates from the CEO about the company’s activities so they are doing a good job of keeping me engaged.
Ganaz ( LRI scale – 2+) bills itself as “the workforce management platform built for agriculture and food manufacturing.” I like that it more easily links seasonal farm and food industry workers to employment opportunities. One of the co-founders has left since I invested and that now makes it a woman-led company. And this female CEO had a fourteen-year stint with Fair Trade, USA before leaving to start Ganaz.
I find several updates each year in my email inbox from Ganaz that keep me engaged as well. A little over a year after making that investment I received notification that the SAFE (Simple Agreement for Future Equity) I had entered with Ganaz had been converted into Series Seed 3 Preferred shares so there appears to be forward momentum on this front.
The final Wefunder investment I’ve made to date is in Native American
Natural Food Products ( LRI scale – 3). I view this as a meaningful way to infuse some more capital and create more opportunities in an indigenous community here in the US. Plus, this company is a Certified B Corporation, which means they have committed to equally balancing purpose and profit. To date, I have received this very cool certificate of investment, but little additional communication.
Buying (a share of) the farm
The next investment I made was the largest to date. My boyfriend Albert and I pooled our funds to purchase an ownership share of a relatively new permaculture farm in our area (LRI scale 4+). This ten-acre farm is managed by the premier permaculture instructor in our region of Florida. This is not a typical monocropping production farm consisting primarily of rows and
rows of the same crop(s), which is very resource intensive and depletes the soil. The vision for the farm is to create food forests and an orchard, with the emphasis being placed on polycultures and perennial (not annually planted) trees and plants that grow well in this part of Florida. Another major component is the educational side. Permaculture and other resilience-focused courses and events are held here regularly.
Albert and I wholeheartedly agreed with the farm manager’s stipulation that financial gains should NOT be our primary motivation for investing. Those gains are certainly possible in five to ten years, but they are not the most important return. We view this as an opportunity to put our money to work on a very regenerative project that truly feels like part of the solution to what ails people and planet today.
My Biggest Misstep to Date
In addition to investing in regenerative efforts like the permaculture farm I also prioritize sustainable investing opportunities in my own community. Such local opportunities that are open to non-accredited (i.e. not wealthy) investors like myself are hard to find. So I got very excited when I came across a crowdfunding campaign for Twin Bays (LRI scale – 3) an outdoor hydroponic hops farm on an urban lot in my own town.
I went and visited the site, but didn’t ask the founder enough hard questions. Nor did I slow down to think it through based on what I know about growing plants like hops in the challenging central Florida climate. Caught up in my enthusiasm for a truly local and somewhat sustainable option I dove in without doing much additional due diligence and transferred the funds via TruCrowd, another online crowdfunding platform.
I received an initial email from TruCrowd acknowledging receipt of those
funds. The email also indicated further action was needed on my part requiring me to provide additional personal information, including my social security number. I don’t have a clear memory of this now, but I would think that I contacted TruCrowd at this point to inform them that because the investment was being made from my SDIRA’s LLC that my account with TruCrowd must be registered under my LLC’s EIN# (Employer Identification Number), not my social security #.
Several months later having not heard anything more from either TruCrowd or Twin Bays I drove over to Twin Bays to find the site completely abandoned. There were no hops growing and no cars in the parking lot. In fact, the parking lot was closed off with a chain. Messages left on Twin Bays’ voice mail were never returned. TruCrowd was never able to confirm that Twin Bays had shut down and ceased operations. Or at least TruCrowd never called back to state that fact outright. What several phone calls to TruCrowd did reveal was that because my funds were linked to a LLC EIN# and not my SS# said funds were never transferred out of escrow into the hands of Twin Bays. After my call prompted TruCrowd to investigate and figure that out TruCrowd did return the money to me, but I find it disconcerting that TruCrowd just let my money sit there like that without ever attempting to notify me about it again after that email or returning the funds until I inquired.
This brings us to a cautionary note. I have since had a conversation with someone working in crowdfunding. In his words crowdfunding is still the “wild west” of venture capital. It’s a very mixed bag in terms of the caliber of the crowdfunding platforms, particularly the vetting they do of the startups they handle. His recommendation for me when pursuing crowdfunding was to stick with Wefunder for now. There are a couple other smaller crowdfunding sites that I see mentioned in the online impact and regenerative investing space such as Cutting Edge X and Crowd Fund Main Street that are likely more professional and reliable as well .
Investibule is a crowdfunding platform co-founded by Amy Cortese, the fantastic mind behind Locavesting. A number of leaders involved in promoting community capital serve on Investibule’s board. The site acts as an aggregator of thirty other platforms showcasing opportunities to invest in small, locally owned businesses across the country. I’m relatively sure that it was on the Investibule site that I first encountered the Twin Bays Hop Farm listing. I fully support Investibule’s goal of investing to increase community capital, but because it’s an aggregator site I encourage anyone considering investing in something listed there to not only conduct due diligence on the business to be invested in, but also the crowdfunding company (such as TruCrowd) through which you will make the investment.
I was fortunate. I know somebody else in my city that invested in Twin Bays and simply lost their money – which is of course, one of the risks of this type of investing. Based on my interactions with TruCrowd and hearing the stories of this other person’s experience and lack of response from TruCrowd I suspect that this is an example of that “wild west” experience. Never invest more than you can afford to lose in any investment!
Investing in the Circular Economy
With China greatly reducing the items it will accept for recycling, municipalities in the US are scrambling to deal with the formerly recyclable materials piling up in their midst. Terracycle (LRI scale – 3) is developing some innovative programs and products to help address this situation. While not a certified B Corporation, Terracycle does claim to be a social enterprise that “reuses, upcycles, and recycles waste instead of incinerating or landfilling it.” Stating that by doing so the company is “moving waste from a linear system to a circular one, allowing it to keep cycling in our economy.”
Having read positive articles about the company in Forbes and seeing that TerraCycle has won over 200 awards for social entrepreneurship and sustainable business I decided to take the leap. I purchased my shares of Terracycle’s private stock through their website. Their offering is still active and currently pops up on the far right side of their home page. The company paid out dividends earlier this year for the first time and has committed to do so every year it is profitable.
A Community Saves the Farm
Sweetwater Organic Community Farm, the longest-running certified organic farm in Tampa, FL was at risk of closing down and possibly being
sold off to developers. Chris, a good friend of mine and ally in efforts to strengthen our local economy stepped in to raise the funds to pay off the farm’s debt and take over leadership of the non-profit entity managing the farm. Chris was successful in weaving together a rich tapestry of funds including a small very low-interest loan from me. The terms of the loan are for it to be paid back in full with interest two years from the date it was issued, which will be later this spring. (LRI scale – 4)
A Cooperative Impact Investing Fund Open to Non-Accredited Investors
The best online space I know of that can be accessed for free to participate in discussions about socially conscious investing options outside of stocks and mutual funds is the Socially Conscious Mustachians Facebook group. That’s where I learned about Kachuwa Impact Fund (LRI scale – 3+), an investment cooperative and public benefit corporation focused on owning and operating “impact real estate” and investing in privately-held “impact companies.” According to the Kachuwa website the fund “is similar to a Real Estate Investment Trust (REIT) combined with a mutual fund whose diversified holdings have a positive impact on society and the environment.”
Kachuwa has identified a set of impact themes that are very much aligned with what I would like to be investing in:
- Environmental conservation and stewardship
- Renewable energy and energy efficiency
- B-Corp, LEED, organic, and/or fair trade certification
- Full or majority ownership by employees, women, and/or people of color
- Democratic workplaces
- Sustainable agriculture, forestry, and land use
- Social justice
- Community wealth building
A couple of months ago after speaking with Kachuwa founder, Blake Jones, by phone and reading over the prospectus I filled out the forms electronically and made the minimum investment of $5,000 securing one Class A Common Share of the Cooperative. I would like to see much more of this type of investment model, especially targeting specific communities, such as the East Bay Permanent Real Estate Collaborative in California. I would LOVE to see something like this come to fruition in my part of Florida.
Helping People Stay in their Homes
American Homeowner Preservation (AHP) is an innovative crowdfunding platform that uses investors’ capital to buy distressed mortgages and then works to keep the homeowners living in their homes. I first heard about AHP a year or so ago, but forgot about it soon after that. I was recently reminded of it during an online impact investing forum. After finding that Amy Cortese had profiled AHP on Locavesting.com back in 2017 I felt even better about investing in the company. The online process for creating an account with AHP was pretty easy to navigate and the staff responded quickly to emails and phone calls. AHP requires a minimum investment of $100 and seeks to provide a 10% return to its investors. Invested capital is generally returned in five years.
Investing in those Greener Pastures
Soon after this post goes live, I will begin the process of investing in Iroquois Valley‘s REIT (real estate investment trust) Equity Shares (LRI scale – 3+). Iroquois Valley (another Certified B Corp) is a“restorative farmland finance company that provides leasing and mortgage funding with a focus on the next generation of organic farmers.” This unique investing instrument allows non-accredited investors in most states to put their dollars to work “supporting family farms and expanding organic farmland acreage” with a minimum investment of $10,183, which secures 17 shares @ $599 each.
And now it’s Your turn
I hope after reading this post and watching this fun musical video about impact investing that posits questions such as “What if we started investing to make the world stronger?” more readers will get inspired to divert their money from Wall Street into more regenerative options. It’s certainly not the path of least resistance, but it’s as enjoyable, exciting, important, and as rewarding as they make it look in this video….
This post is the third in my series on pursuing socially conscious financial independence through SDIRAs and Solo 401ks. The first post in this series provided an overview of these accounts and examples of other people using them (although, not for socially conscious investing) to pursue FIRE (financial independence/retire early). In the second post I outlined what the process of opening my checkbook LLC SDIRA entailed. I had originally planned to also cover some of the hiccups and headaches I’ve encountered along the way pursuing this DIY investing path in such uncharted territory in today’s post. However, including those details began to make the piece feel unwieldy so I will share all of that in a fourth article in this series next time around.
— I have also made a few other socially responsible investments outside of my retirement funds that I’m very pleased with, including Worthy and CNote. You’ll find more information about them and other conscious money tools on the personal finance resources page.
What about you??? What socially responsible investments have you made? How would you rank them using the Levels of Regenerative Investing scale?
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