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Kickstarting social innovations

Impact Investing and innovation

Spreading those killer social innovations can be tough. There’s rarely enough money to support the ventures, the marketplace needs to take a leap of faith and if the government is involved, well, things are slow.  We’ve had our share of all of these frustrations and more here at Ecotrust. But early on we saw that raising investment capital with a venture tint to it — high-risk, high-return — was crucial to making innovation fly.

We raised money for our Natural Capital Center building and for ventures in ecotourism, emerging technology and progressive media through our Natural Capital Fund. That fund also matched investment from ShoreBank of Chicago in the social and environmental banking venture, ShoreBank Pacific — now part of One PacificCoast Bank. And we attracted three dozen private investors to back Ecotrust Forests, a fund which derives financial returns as well as environmental and social benefits from 12,000 acres of forestland in the Pacific Northwest.

All of this was early impact investing.

This week we’re watching with intrigue as our friends at the Hood River, Ore.-based Farmer’s Conservation Alliance are beginning an innovative capital raising move that — although it doesn’t offer the financial returns of true impact investing — promises to push social innovation financing forward.

FCA builds innovative screening devices to keep endangered fish out of irrigation canals and they’ve announced a $1.5 million growth capital campaign that promises tangible benefits for each “unit” purchased in the campaign — something like buying a share. Each of thirty $25,000 shares bought will open up 36 river miles to safe fish passage, deliver 1.5 Megawatts of green, fish-friendly hydro power driven by irrigation water and will enable $66,125 in savings annually by landowners, mainly in avoided maintenance costs on irrigation canals. The group is also offering eight hundred $1,000 shares.

One of the Farmers Conservation Alliance screens at work. Courtesy: FCA.
One of the Farmers Conservation Alliance screens at work. Courtesy: FCA.

The details are in a prospectus, drawn up with the help of the Nonprofit Finance Fund, the national community development bank and consultants.

FCA’s technology has potentially broad application. There are 300,000 water diversions across the country and an estimated 75% are unscreened, endangering fish that could be pulled out of rivers and into irrigation canals, and also leaving canals open to leaves, sticks and other clogging debris. FCA has installed just 25 screens from Oregon to Wyoming and already they estimate they’ve saved landowners close to $500,000 in maintenance costs.

But installing FCA’s patented technology  — which shoots fish and debris over the top of a screen that allows water to fall vertically into irrigation canals — is a long process of government permits and design approvals from public agencies. That’ll be shortened by a recent approval of the FCA device by the National Marine Fisheries Service. But the Hood River group needs bridge capital to push its innovation forward, and that’s where the new investment will help.

“We’re sort of like a pharmaceutical drug going through the approval process,” says FCA director Julie Davies O’Shea. “We need this capital because our project timelines are long.”

The group grew out of technology developed by farmers in the Hood River Farmer’s Irrigation District. The inventors licensed the screen design with the stipulation that FCA market it widely and reinvest profits in similar social ventures that will help rural areas.

Still in the early stages of revenue generation, Davies O’Shea says the current capital push will eventually allow the group to tip its venture to profitability, and then begin to spread the wealth to other rural ventures.  That’s what we call impact.