16 Nov Beneficial Returns
Interview with Ted Levinson, Founder & CEO
Beneficial Returns & The Reciprocity Fund
I met Ted Levinson when I was at the Swift Foundation and he was developing the idea for Beneficial Returns. As a former leader of the RSF Social Finance social entrepreneurship loan team, he has inspired me to rethink investment approaches to benefit people and planet. The Beneficial Returns portfolio is full of small companies with transformational businesses – ones that sell biogas digestors, clean water filters, solar refrigerators, and market organic and biodynamic agriculture. As part of my upcoming report to highlight fund managers who are using integrated capital to transform opportunities for people and the planet called The Transformative 25, I talked with Ted in November 2020.
Jen: Why did you start Beneficial Returns and then the Reciprocity Fund?
Ted: I started Beneficial Returns because I believe social entrepreneurs have a tremendous role to play in reducing global poverty and healing the planet. I saw $1 trillion dollars sitting in U.S. foundations and donor advised funds that is inactive, and I knew this capital could be deployed to create the world we want and need.
We launched the Reciprocity Fund because indigenous communities face even greater obstacles to secure financing and we knew there was a need for even more flexible and risk-taking capital that was simultaneously culturally aligned. Indigenous people experience disenfranchisement, economic isolation and exploitation in tragically profound ways. Supporting businesses in these communities is an effective way to combat these threats and build individual agency, community resiliency and economic self-determination.
Jen: How are investment funds catalytic in a way that is different from other funds?
Ted: We are oftentimes an early lender and an early institutional investor to a social enterprise. Not only does our capital help them grow but our investment winds up paving the way for other investors to support them.
A borrower in the Philippines called Ananas Anam makes vegan leather, an ecological alternative to conventional leather that uses pineapple waste. It is better for the planet, more humane and provides additional income to pineapple farmers. We were their first lenders and since we made a loan, the Asian Development Bank has extended a loan.
Jen: How do you describe the kind of non-financial returns the fund offers?
Ted: I was intentional about choosing the name Beneficial Returns. Our investors are compensated by putting their capital to work to reduce poverty while protecting and restoring the environment. That is the number one way we compensate our investors.
One of our newest borrowers is Kiwa. Based in Ecuador, they produce and sell vegetable chips that you can buy in the U.S. All the ingredients come from smallholder farmers. Kiwa supports these farmers by providing them with fair, fixed contracts and technical assistance so they can earn more without compromising their traditional way of life.
Jen: Can you describe how you use integrated capital to do your work?
Ted: Our investors participate in Beneficial Returns via a recoverable grant. We repay one-seventh of that grant each year over a seven-year period. Our access to this zero percent interest philanthropic capital enables us to make low cost loans to social entrepreneurs that are too risky for a conventional investor. Every loan we make, by virtue of the source of our capital, is a manifestation of integrated capital. Since we use philanthropic capital it permits us to do things that are otherwise impossible. In my mind, that is the role of impact investing -to use finance to make something positive happen that otherwise wouldn’t happen.
Jen: What is transformational about the businesses and entrepreneurs that attract your capital?
Ted: They are using conventional business models in really unconventional ways. Rather than focusing on profit-maximization, they are focusing on impact-maximization. We need to reimagine entrepreneurship. We need to change its goals and expectations. I believe when we do that we achieve something that is transformational.
Jen: What does a foundation or donor advisor need to understand in order to invest in transformational businesses?
Ted: They need to approach this in a completely different manner than conventional investing. The first question that most investors ask is “What do I need?” The first question anyone focusing on transformational investing needs to ask is “What does the world need?” It requires just as much sophistication and thoughtfulness but a shift in expectations and returns. We are all taught that a good investment increases your money. A transformational investor is looking for an increase of impact.
Jen: What do you tell people who think your fund is risky?
Ted: I tell them that they are right. This is the hard work that we need to do. It is inherently risky work and that is why it is not being done enough and why it hasn’t received the resources that it requires. We need to take risk if we want to see change. If you want market returns, you are going to replicate the market that we have today.
Jen: What will happen if we don’t do this kind of work?
Ted: The world will continue as it has for better and for worse. Social entrepreneurs are scrappy people, they won’t give up, but they won’t be able to grow as quickly as they need to.
If you don’t think there is urgency, don’t be a transformational investor. This is not for the faint of heart. There is only a small segment of society that is willing to take the risk and be a pioneer.
|Investment thesis / What is your rationale for your approach to investing?||By providing debt capital to small and medium social enterprises that create income and protect the environment, we create sustainable paths for a healthy people and planet|
|Geography||Latin America, Southeast Asia|
|Year Founded||2015 First loan was 2017|
|# of Investments||13|
|Funds Raised||Over $3 Million|
|Investment thesis / What is your rationale for your approach to investing?||We provide USD 25,000 to 75,000 unsecured loans including working capital and fixed asset purchases to social enterprises reducing poverty that are led by or benefiting Indigenous communities.|
|Geography||Latin America, Southeast Asia|
|# of Investments||4|
|Book||Factfulness by Hans Rosling|
|Song||Mississippi Goddam – Nina Simone|
|Podcast or streaming program||I buy and read the print version of the New York Times. It makes me more informed and we need to support the critical watchdog role of the news media.|