Courageous Capital Stewards
Courageous Capital Stewards
Courageous Capital Stewards - Bruce Reed’s Impact Journey
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Dr. Steph

Welcome. My name is Dr. Stephanie Gripne, and this is our podcast, Courageous Capital Stewards. I founded and Lead Impact Finance Center. We’re based in Denver, Colorado, and our primary focus is we identify individuals, foundations, family offices, corporations, and now starting to be pension funds who want to learn about impact investing. We identify them, educate them and activate them.

 

And we’re super excited to to reconnect with our long term friend and colleague, Bruce Reed, who leads Edwards Mother Earth Foundation. Bruce, We met several years ago, but I’d like you to start the conversation either even further back about telling us where you grew up and how you found your way to Seattle.

 

Bruce Reed

Sure. Yeah. Yeah. Happy to be on the podcast too, Steph. I grew up in Massachusetts and a little town called Duxbury, which is about 30, 40 minutes south of Boston, kind of halfway between Boston and the Cape. And I went to college in upstate New York, Ithaca, and I majored in film and ultimately went out to Los Angeles and kind of worked in the film business out there for about five years and then later transitioned.

 

Moving up to Seattle, got involved with philanthropy, got my master’s in public administration at the University of Washington, and I worked with Laird Norton Family Foundation prior to joining Edwards Mother Earth Foundation in 2014. So I been with E and F for about nine years.

 

Dr. Steph

That’s amazing. It’s super interesting because there are now degrees in philanthropy where there probably weren’t when we went to college in that same way. And and it’s interesting how people find their selves to philanthropy. Like, what about philanthropy attracted you to to make that kind of unconventional step into that space?

 

Bruce Reed

Yeah, I was really interested in working with the family, the multi-generation family, supporting collaborative philanthropy and for MF in a way, we have a dual purpose. There’s there’s the collaborative family philanthropy that we’re trying to support. Engaging The family were set up to exist in perpetuity as a multi gen organization. And then we also have the grantmaking program, the impact investing, trying to have the most impact that we can on the program side.

 

So I was just really interested in kind of doing both of those things. And I’m really interested in in climate mitigation, which is the focus for IMF was also focus with Laird Gordon. So just kind of have a passion both for that, working with the families and also on the program side.

 

Dr. Steph

Fantastic. Tell us a little bit more about the history of EMES and also their mission. And before we jump into the impact investing and even the endowment part of it talked about like the focus of your grantmaking.

Bruce Reed

Yeah, EMEF was created in 1997 by Bob and Jean Edwards, and I think a lot of the wealth was created through real estate investing and the they created the foundation. They engaged with their kids, which was the second generation. And to really get it, get it started, they they kind of launched the foundation, created kind of, you know, set up articles and bylaws.

 

I think there was a lot of work around crafting a mission that was somewhat broad, but it overall was focused on environmental sustainability and trying to engage the larger family in philanthropy. And in 2007, that second generation kind of made a commitment to climate mitigation as a as a focus and started a new program around energy efficiency policy, mostly at the state level.

 

And by this point, ten years down the road, I think then you had the third generation and family members starting to get involved. The board started out with just a few family members and it expanded to include cousins. Different branches of the family that was growing. And then so that energy efficiency policy work spanned over a decade.

 

And that’s sort of where I got hired. I came on board and we started a new program focused around green building. We work with a consultant called Eco Trust, and we worked on that really over the last eight or nine years since I’ve been involved. And we just recently launched a new program around Agroforestry. And again, all those programs kind of support the broader climate mitigation mission.

 

And the family chose to have a single focus for the board. I think that they just felt like getting alignment really helped to have more impact in terms of the program. And prior to that, I think is the foundation in the first ten years when EMEA was being set up, I think there were multiple interests.

 

There were kind of there were maybe three different areas that the board was looking at, and it just kind of it ended up fostering more of a competitive environment. And there were pros and cons to that. But ultimately sort of that evolved into the board deciding, you know, it’s better given our size, our grantmaking capacity, having a single focus was just more effective.

 

Dr. Steph

We were talking before the we started recording about when people ask me about whether I like working with foundations or not, meaning that are they complicated? And I know you must have done a tremendous amount of work and family dynamics work, but when our paths crossed, it was really when we supported you choosing your investment advisor then.

 

And it’s super interesting because if you ask me, we have 25 pieces of community infrastructure and services that we offer at Impact Finance Center and, hands down, the most important thing we do is help organizations evaluate their investment advisors and search for new ones. And I can count the number of times I’ve been asked to do that on my one hand, it’s not something very common.

 

For some reason we think that that’s the place where we should do it yourself or lean on the board or anything else like that. Can you, I don’t know if you can remember back when how we got connected or not even how we got connected, but what you saw the need for there. But I was always really struck by how your board is large and it was very aligned at that point.

 

So do you want to talk about, you know, how your impact investing journey started, where we came in at that place of that impact investing journey and start to give us a sense of what happened then and how we got from then to today.

 

Bruce Reed

Yeah, yeah. Steph happy to talk about that and I think this is I would when I was hired in 2014, one of the things that the EMEA four wanted to do was explore impact investing. They were really interested in doing more of that. I think they’d done a couple of small direct investments or some more, but was really asking, you know, we’re focused on climate, we’ve got the grant program, you know, we’re required by the IRS to pay off 55% every year.

 

We use the grant we those credits to help support our mission. But what about the other 95%? You know, this folio, this endowment that we have invested? I mean, are we are we doing all we can for that mission? Are we somehow undermining perhaps our mission by the investments that we’re making once the board started asking those questions?

 

Ultimately, that kind of led to the board kind of creating a committee to look at what else EMEF could do. And I think that group, yeah, I worked with them and then I think we found you kind of I think worked with you as our consult to help guide us through a process, to help us find an impact investment advisor And he and we have had worked with, with an advisor for a long time.

 

What we did was we, we could have talked with that advisor about things that we could do on the impact side and ultimately that, that that investment advisor said, you know, this is really what I do. You know, it’s, you’re going to have to find somebody else to help you. So we developed a request for proposal process went out.

 

I think we identified, you know, seven or eight different firms ultimately kind of call that down to three or four top candidates. And then we selected Caprock, based out of Boise, who we hired as our new investment advisor. And that really got the the process rolling in terms of the impact investing were we we you know that was in 2015 that we we hired Caprock and yeah that was really a teacher I know working with you you really helped us a lot kind of advising us as we went to the RFP, crafting the RFP, doing interviews with the different head investment advisor firms.

 

And it was really helpful because I think ultimately, you know, we made a good decision and we’re still working with Caprock today, you know, eight years later. So that really has turned out to be a great decision, I think.

 

Dr. Steph

And Caprock wrote a great case study up on that I believe that will share with the podcast on it. And I believe they even updated it maybe recently. So it’s great to have like a longitudinal case from you doing that. So it sounds like in some ways the hardest part was like getting that alignment upfront.

 

Then you had to basically, you know, ensure you were selecting the right person and firm and then once you got that right firm, you’ve been off to the races, for lack of a better word in doing that. And so you actually have. Do you want to talk a little bit about I’m guessing we haven’t caught up in a long time positive and negative screening, investing in private investments, and also, I’m guessing a robust direct investing program.

 

Do you want to talk a little bit about how that type that structured at a high level and maybe what are two of your favorite transactions?

 

Bruce Reed

Sure. Yeah. The case study that you referenced that Caprock put together about EMEF two is great. It provides a good overview. I know we may update that, I’m not sure, but has been updated recently, but it really covers at least the first three or four years of our journey as we were starting getting into impact investing. And I know that can I think it’s, yeah, definitely a great resource.

 

So once we started working with Caprock Group, I think, you know, initially we were just kind of dipping our foot in the water. We had this kind of traditionally invested portfolio of stocks, bonds and cash and we, we worked with Caprock Group to select a couple of different fund managers, impact managers that did ESG screening for both the stock and the bond portfolio.

 

We work with a Perio group to kind of restructure the equity portfolio and then SNW, which I think now is Invesco handles the bond portfolio. So we and we kind of think of that as impact. Like, you know, we’re screening using positive screens, identify companies where there’s good alignment with our values around climate and were negative screening companies out that where we just don’t have good alignment and at the same time we’re trying to support having a diverse portfolio.

 

So we are invested in different sectors as much as we can be to support kind of our our impact and return goals for the foundation. And when we started, you know, really like 100% of the portfolio was kind of invested in in public securities and now I’d say it’s probably 5050, maybe even less than 50% public. So getting into private opportunities was sort of the next step on that journey.

 

And we started getting into mostly funds, EMEA, if we we made a few direct investments by seed. Mostly we’ve been investing in funds and we have these these funds kind of we feel like they’re we’re having deeper impact through those private fund investments. They’re supporting things like renewable energy, energy efficiency, clean technology, sustainable oceans, sustainable Food and Farm Fund.

 

We’re investing aligned lime timber funds that support sustainable forestry. So and a couple of different climate bonds. And you asked me to mention a couple of examples that I was writing down The list we, we got. We recently invested in the lights, light Smith Climate Resilience Fund and also the Green Backer Renewable Energy Corporation has been another really, really good investment for us kind of on that deeper impact fund side.

 

And so so not as much direct investments on what we think of as that is part of our impact investment portfolio that other 95%. But on the program side where we’ve been supporting things like green building and energy efficiency, we have made investments that we think of as being pretty deep impact into things where we’ve used program related investments in renewable grants to support organizations in Prime Coalition is a great example of that.

 

They have an impact fund. We invested $1,000,000 into that fund mostly supporting early stage clean tech companies.

 

Dr. Steph

Where Sarah Carlos and Sara Carty is amazing. Yeah, yeah.

 

Bruce Reed

Yeah, yeah. And um, yeah, another example, we kind of made a two different program. Really the best was to support a company called Lot Time that’s a nonprofit that’s also kind of working in that clean tech space. So those I think of it as, you know, technically they were part of our, our payout, our 5% that we’re putting out.

 

But real you know potential for for deep impact. A lot of those are structured as recoverable grants where we don’t have a specific term like a loan term or we might have for a PRI. They kind of booking now 15 plus years. So, you know, their long term play is kind of just to see what happens again, kind of mostly investing in early stage companies.

 

Dr. Steph

That’s amazing. And part of the reason we’ve gotten reconnected is I have a partnership with the U.S. Forest Service. They called us and they they said there’s this new technology called mass timber. And you can basically take the small wood that in many cases out west as causing the forest fires because we haven’t been doing the forest health restoration work and we’ve been preventing fires from happening.

 

And so there’s been this build up at the Smallwood and now there’s this technology to take the small wood and glue it together in beams and panels that can be as strong, if not stronger than steel and concrete. So you’re starting to see the Microsofts and the Googles and people build out of mass timber, which are gorgeous, beautiful buildings that also sequester carbon.

 

You were an early adopter in green building. In fact, I realized through this work with the Forest Service, you know, there’s a lot of this is inside baseball for if you don’t know the foundation world, but there’s lots of associations that foundations so there’s I’m sure you’re connected to philanthropy. Northwest we have philanthropy Colorado there’s also there’s a funders network in sustainable agriculture and food.

 

There’s one in smart growth in cities, but there isn’t one in climate and forests and, and, or like the built environment in this space. Why do you think the trustees decided to go that direction for green building? I think I’m guessing I know the answer here, but what excites you right now? And that system that you’re either invested in to your -100% grant dollars or your prize or your funds, like why?

 

Why is that a focus for M in MLS?

 

Bruce Reed

Yeah, I think, you know, we got into you know, you’ve got into green building or what we call climate wise building because because I think we just felt like we could have a big impact. It’s a big, big sector accounts for, you know, a large chunk of climate emissions. If you kind of look at the data and we felt like, you know, we could help support, you know, demo projects and, you know, innovative work that was happening on the ground there.

 

There are a couple of examples. Early on, we provided a PRI to eco trust. They developed what they call the Red Project in East Portland. And that’s, you know, that they, you know, they were creating a food hub, food distribution hub in Portland so EMEF is really happy too. So to support that project, we also we invested in it also on the impact side in different kinds of funds.

 

I mean I mentioned Lion earlier, which is more forest, but green canopy Homes is a green builder in Seattle. We invested in one of their funds, the Bridge Fund, to support their work there, build a net zero homes in Seattle and Portland. Now I think.

 

Dr. Steph

That green canopy is the one that just merged with Node, right? Is that.

 

Bruce Reed

Right? Yes. Yeah.

 

Dr. Steph

Yeah. That seems like a pretty exciting new partnership going on there.

 

Bruce Reed

Yeah. Yeah. They I think, you know, they’re really looking at developing almost like modular technology, I think to help, you know, support the scaling of green building and to make it affordable. I think that’s and.

 

Dr. Steph

I they’re also working on the carbon protocol for mass timber which will provide another revenue stream that will help crack that net of affordability, which is super exciting.

 

Bruce Reed

Yeah yeah yeah that’s a we yeah. On green building. You know we, we as I mentioned earlier, we transitioned we’re just started funding agroforestry as a new grant ramp program. We’re just kind of going into a second year, but we have a lot of kind of like, you know, long term program related investments or a couple of grants that were kind of, well, wait and see on the green building side, you know, see how, you know, we’re continuing to monitor those projects and yeah, but lots of interesting work going on.

 

I don’t know your question around climate. I mean, it seems like there’s a lot more focus around the the, you know, the interplay between climate and green building. And I you know, these things like, for example, like embodied carbon. How do you account for that? Some of it gets marginalized sometimes in thinking about how you’re accounting for for carbon.

 

And with the buildings. And I know we did, you know, a fair amount of our funding went into kind of now, you know, lifecycle cost analysis, climate analysis for green buildings. How can we do that better when we’re thinking about building them and how can we support better? Yeah, valuation metrics are around a cloud wipes, but like.

 

Dr. Steph

Bruce says, we we have an amazing partnership. We’re not starting a new funder affinity group, but we’re going to do a climate course Funders workshop series and a several events over the course of the next three or four years in partnerships with other funder affinity groups. And so one of our events will be in Tahoe, Truckee, in partnership with the Tahoe Truckee Community Foundation that has the Tahoe, they have the Forest Futures Fund, and they’re, to my knowledge, the first Community Foundation to really go deep and say, we’re going to raise 30, 40, 50, $100 million to work on the whole supply chain from planting trees, cutting trees, you know, producing trees into amazing affordable

 

housing or bioenergy or the workforce component. As we build that list of more people that are funding in this sustainable forestry built environment space and start building that other list of what I’d call a bit of a fragmentation of there are funders like you doing this, but what we want to do is help convene them and connect them.

 

Do you have advice for folks getting into the space? Are you willing to connect with other peers in this way just to share your lessons learned of what you’ve learned about along the journey?

 

Bruce Reed

Sure. Yeah. I mean, we’re you know, I think our only the only challenge for EMEF up is, you know, until I’m the only staff person, but our board is really active and they get out there, we try to get out to convenings and different events and conferences. I’m active in Seattle. There’s kind of an impact investing group.

 

And I mean, definitely around agro forestry, we’re kind of on a steep learning curve trying to learn more and more about that. So we’re kind of moving around within those broader forestry, you know, sustainable forestry circles. And yes, absolutely. I mean, you know, we’re yeah, well, we’re trying to learn as much as we can and learn from others.

 

So. So yeah, I you know, and if you know about yeah, it could be convenings that you’re helping to put together, participating in. Happy to learn more about those a role especially if they’re related to to agro forestry particular as we’re kind of, you know, dive deeper into that program.

 

Dr. Steph

And why don’t you tell us more for the audience when they hear agroforestry? What does that mean? How are you all? What is the range of ideas that you’re seeing in agro forestry that are and why is EMEF like going in this direction next?

 

Bruce Reed

Yeah, we EMEF, you know, we looked we took a long look at the drawdown report that came out with Climate Solutions, sort of a list of climate solutions from four or five years ago. Agroforestry was definitely one of those ideas near the top of the list that could have pretty big impact on the climate side. Again, you know, even if we’re a relatively small funder, but we were interested in that space.

 

We did a feasibility analysis, SWOT analysis, looking at different areas that EMEA could focus on. We were working with a fellow named Sean Pentroth, who works with Gordian Knot Strategies based out of Portland. We’re kind of partnering with him on on the agroforestry work, but that feasibility analysis were kind of looked at different areas and the board ultimately decided to focus on agroforestry, which is really the it’s like the mixing of forestry and agriculture.

 

And in the case of Solar Pact, sorry, silver pasture, working with livestock and forestry as well. So kind of the interplay of those two different things. Agro forestry is more widely practiced in other parts of the world, like Latin America, but not so much in the U.S. And so we’re focused in the U.S. There seems like there’s an opportunity to scale agro forestry.

 

You know, if we if we can get kind of resources aligned and there’s there’s been more government funding recently. There was just a climate Smart Commodities funding award of 60 million that came down through the Nature Conservancy to support a lot of agro forestry producer work. So yeah, even if we felt like there weren’t a ton of funders in that space, a few working in agro forestry, but we feel like we can we can have an impact to help try to scale and have have more impact.

 

Dr. Steph

You said this earlier on, but I want to reiterate the fact there are tons, another foundation that we evaluated, evaluated their investment advisor and searched for. Their investment advisor was a AJLFoundation woman. I tell the story of what you’ve done and what they’ve done. They now have a staff of two and a half, I believe, but they started off with a staff of one and a half, and you’ve done this with a staff of one, and I think it can be that the journey can seem really daunting to people that have 3 to 10 staff and how you go on that.

 

So I just want to applaud you and and and your you and the trustees for going on this journey, because it’s a it sounds at one hand simple and easy to do, but it’s a lot of work. And so congratulations for going this far in the journey and then continuing to innovate. And we’re looking at project Drawdown and saying, okay, what’s the next best thing we can do to deploy our resources to achieve our climate goals?

 

So a huge congratulations to you for going on that journey.

 

Bruce Reed

Yeah, no thanks, Steph. Yeah. I mean, as I said, and I get there’s there’s a lot of work. I mean, the board like our board is really active, really supportive. I mean, they, they do, they do a ton of work. You know, maybe the the truth that there is the alternative model, the private foundation that maybe has more staff doing a lot of the day to day program work.

 

And then, you know, you’ve got the board coming in and kind of making decisions a couple of times a year. And I think, you know, we’ve got those board meetings happening. The committees are meeting in between board meetings and and we’re doing a lot of work. I mean, they’re pretty gauge. So I feel like in some ways I’m like a staff of 11, even though, you know, in name I’m only a staff person.

 

Yeah. Really the whole board support I mean which is which is great.

 

Dr. Steph

Fantastic Bruce. Well, those are great questions for you today. Is there anything else you want to share with us about something that’s exciting you or something that you’ve invested in or supported that that you were like, That’s really cool and other people should know about that. Any other last words from you?

 

Bruce Reed

Yeah, I think the only thing I would say is for people that are thinking about getting into impact investing, you know, compared to when we started our journey, you know, almost eight or nine years ago, it just it seems to me there’s a lot more opportunities, just fund opportunities to support, you know, different types of things related to environmental sustainability, affordable housing, poverty alleviation, you know, climate change, healthy food.

 

So there’s just a lot more out there. And if you’re a private foundation and you know, you’ve got a portfolio that you’re managing and you’re doing the stuff on the grant side, you know, as I said, it’s it’s definitely more work, but it’s a great opportunity just to learn about get more engaged on, you know, on the investment side of things and, you know, to be able to better leverage your your your resources as a private foundation.

 

So a great opportunity. I encourage people to, you know, to explore it because it’s like another tool in the toolbox that you could you can be using.

 

Dr. Steph

Yeah I they’re not many of you early on that have gone in to say we’re going from 5% to 10% to, you know, to 20% to 30%. And as you creep up towards that 100% portfolio, it’s just it shows what’s possible. And then you can say, wait, how do we use 100% of our portfolio to leverage another two X or three X or four X impact?

 

And so it’s that alignment, that willingness to be flexible and use multiple tools for recoverable grants to properties to the actual endowments and investments and getting comfortable. And and part of it is like you have to get confident at that, taking that step and knowing like, oh, it worked. Okay, let’s take another step and know that it worked.

 

And so I just am so grateful that you and your board have been brave. And because we need more and more people to be more brave in the space and excited to hold you up and celebrate you for going on that journey.

 

Bruce Reed

Right? Yeah. Thank step. Yes. For good talking with you.

 

Dr. Steph

It’s been good talking to you too.