Jean Johnson is a member of the Seattle Impact Investor Group and an investor in the Local Food Fund. She and her husband, Peter Miller, are co-owners of Essential Baking Company, the region’s largest organic commercial baking company. She considers herself a relatively new impact investor and recently sat down with Slow Money NW to talk about what she has learned and her experience as an impact investor and with the Local Food Fund.
How long have you been an impact investor?
I first heard the term impact investing at a philanthropy workshop in San Francisco in the fall of 2012. It was introduced as a philanthropic tool, a way to blend my philanthropic goals with our investment interests. When I returned to Seattle, my husband and I connected with the Seattle Impact Investing Group, which was just forming at the Hub.
That said, my husband and I had made several impact investments for years, mostly at the micro scale, but weren’t using that term. We felt driven to move beyond the traditional investment models of giving our money to a big institution’s fund and mostly ignoring it. For example, we made a small loan to Lumana for a tomato cannery in Ghana which was repaid with interest.
Why do you make impact investments?
Impact investing has allowed me to merge my values with my financial interests. Rather than thinking in terms of creating assets in one part of our lives so that we can give away a certain percentage of those assets through philanthropy, impact investing merges the two. My investments now can be an extension of my values.
I also love getting to know the businesses I invest in and imagining how they can change and grow. There is a lot more meaning in that than the paperwork I receive in the mail updating me on my traditional investments.
Food is the nexus of a lot of our interests and a way to frame what we were already doing but felt scattered. Taken broadly, food can be an environmental play or a social justice play. Also, as co-owners of Essential Baking Company, organics specifically and food generally have been long-term passions for us.
People and organizations are throwing around the phrase “resilient regional food economy.” What does that mean to you?
For me, a resilient regional food economy creates space for small and medium growers to make a living while creating distribution channels that allow for food to be delivered throughout the economy, so that everyone in the region has access to that fresh local food. Farmers and the community benefit through increased economic activity, improved health outcomes, and farmland that is saved from development.
You mention that you consider yourself a new impact investor. How have you educated yourself to learn more about the space?
A lot of reading! The Stanford Social Innovation Review has a number of great articles, including a series by Paul Brest, the former head of the William and Flora Hewlett Foundation. I also recently took an online finance class through Coursera, and plan to look for other courses that will give me the vocabulary and understanding to evaluate prospective investments.
I’ve also learned a lot through my participation in Seattle Impact Investing Group, especially through doing due diligence for the Local Food Fund.
What did you learn from participating in the Local Food Fund?
I learned that it is really hard to say no. There are a lot of great companies out there, creating social change through their businesses, but we couldn’t invest in them all. Working with other members of the fund was a fantastic process. The group had a high level of compatibility and came to decisions easily. There was an unusual openness in seeing all questions as valid, which made it a learning experience for everyone.
I also was surprised to learn that business and investment decisions can be creative and interesting. Previously, I had avoided the field, assuming it was uninteresting and dry. Instead, I found much of the decision-making process fascinating and came out of the experience wanting to learn more so that I could make more educated decisions.
How has it affected how you’ll approach other deals?
Before I participated in the SIIF round, I thought of impact investing as being just a shade removed from philanthropy. My attitude was to view return as almost optional — icing on the cake. I did not pay much attention to due diligence and the potential for return. The SIIF process made me realize that in order for this sector to grow and attract investors, it has to work on both sides of the equation; you can adjust the returns on the financial and impact sides, but both need to be there.
Where do you see the industry evolving? Where is there room to grow?
There is a huge rush into the field, and a need to sort out what is true impact investment and what is impact investment light. What we really need are new investment vehicles and investment advisors who see them as a viable option.
What do you look at when you consider investing in a company?
Of course I look at all the same things as making a regular investment, but I also want to see that the company’s mission and values are essential to the company’s operations, not just an added layer. Leadership is also really important. I have to believe in the team that is running the company.
Beyond the group investments from the Fund, were you inspired to make additional loans to those who weren’t selected as part of the final 3? Why?
Yes, we made additional investments in two businesses and are maintaining contact with several others that we may invest in when the time is right.
One of the businesses, Our Table, has a leader who brings his high tech business experience to the field of sustainable agriculture. He spent years looking at the industrial agriculture system and how to disrupt it. The investment is risky, but it has the potential to prove a completely new cooperative structure that connects consumers to their food.
What advice do you have for other investors?
Don’t overthink it – just start. Just take a small amount and do something because the learning is in the doing. Figure out what you have to invest, talk to other people who are doing it, and find out how you can get involved.