The Soul of Investing with RSF Social Finance

By Amber Bieg

What if your investments reflected your spiritual values? What if you put your money where your heart is?

RSF Social Finance is helping pave the way for investors and entrepreneurs to incorporate their values and even spirituality into their investing practices.  The company's goal, as President and CEO Don Shaffer recently communicated at SOCAP 2015, is to transform the way the world works with money. Its way of doing this is by creating an entirely new model for investing -- a model
based on humanness and relationships, rather than the impersonal “business is business” approach of the current financial model. This new model is based on openness, transparency, aligned values, personal relationships and education.

RSF has worked to achieve this by creating an institution that functions both as a bank and a foundation. The company chooses to work only with social enterprises it finds to be inspiring and that need investment but may not be able to acquire loans from conventional banks.  

Shaffer recently explained that RSF's founder was inspired by Rudolf Steiner, who predicted that as the economy became more globalized, we would see more and more problems in society.  The accuracy of his prediction is evident  in our current financial systems, which Shaffer said can be described as complex and opaque. RSF’s solution is to open the system back up, and reconnect people to each other through their relationship with money and lending.  

Shaffer explained that this is more than a philosophy; there is a spiritual dimension to what RSF is doing. There are only two choices in life -- to come from love or to come from fear.  He explained that most people have a strange relationship to money, often motivated by a fear of lack. Generally speaking, most people haven’t spent a lot of time thinking about how to shift that relationship with their finances, including how to transform those fears into productive creativity and abundance for all. If we don’t question our assumptions about money, we live in those patterns forever. RSF challenges the public to consider transforming that fear model into a values perspective.

RSF feels that money can be something very healthy, Shaffer explained. In other words, money is not intrinsically bad or the root of all evil; it is just how we have been using it that needs to evolve. The company's solution is to create a sense of interconnectedness in its transactions. Whether they are considering a purchase, an investment or their 401(k), Shaffer’s hope is that people begin to think about the effect their money has in the world.  

Spending money and allocating personal resources thus becomes a spiritual exercise, because it forces us to ask some powerful questions, such as: What do I really value?  What are my highest values?  What is my priority?  Why am I here?  Do I really need to buy the things I have been buying, or are there other ways of allocating my resources that are more in alignment with what I want to see show up in the world?  How can I contribute to the whole, rather than focusing only on my or my nuclear unit’s needs?  How do I want to work with money to express my values in the world?  

After all, spirituality and values have no meaning unless they are manifested by our everyday choices. 

Shaffer elucidated this by recounting a recent meeting with a foundation in New York with a billion in assets. This foundation is focused on sustainable agriculture, sustainable energy and social justice, yet it invests in Monsanto, fracking and for-profit prisons. Shaffer said the cognitive dissonance there is beyond comprehension, and it is symptomatic of how most people still invest their money, either individually or through investment funds.  

The field of impact investing turns that game around, so our investments are part of our spiritual practice; there is no cognitive dissonance or inconsistency. Instead, there is harmony and alignment alignment between spirit, soul, and body. Thus we make our values manifest on Earth.  

To participate in RSF's core loan fund, one need only invest a minimum of $1,000, allowing lower-income investors to participate in values-based investing. When someone invests with RSF, that person is helping hundreds of social enterprises -- primarily in the areas of food and agriculture, education and the arts, and ecological stewardship. Then, the investor has a say in the rate of return and the interest rate the borrowers pay. This reinforces the understanding that we are all interconnected and that our voice matters, Shaffer explained. 

One of the many ways in which RSF is creating new models, for example, is in how it determines interest rates for borrowers. First, RSF abandoned the London Inter-Bank Offer Rate (LIBOR) and commercial banks’ arbitrary interest rates. Instead, RSF made a radical move, and its own community-based method for determining borrower rates. Loan rates may be risk-adjusted upward based on collateral and security.

Borrowers, investors and RSF staff meet quarterly to discuss an appropriate rate, and RSF's internal pricing committee sets a rate that takes their recommendation into account. The current base rate, called RSF Prime, is 4.5 percent. Shaffer explained that the important feature of this dynamic is the relationships that form. Business, in other words, is no longer just business: It is about people.  

The result has been very successful, Shaffer said. So far, RSF consists of an agile and emergent trust network of 1,500 investors, 85 borrowers and a large network of other stakeholders. It has lent $300 million in the last 30 years with a less than 2 percent default rate. Shaffer attributed the company's success to the premium it places on relationships: “We go to a deeper level than other funds."  

Incidentally, a few years after they got off the Libor, the world learned that the 16 banks who ran it were rigging it  for their own benefits. Their penalty?  “They got fined. The big banks ... it is a scam. Now they have a line item for legal fees to bail them out ... “

When asked about Wall Street, Shaffer suggested that the financial services industry should be about a tenth of the size it is now. For example, the CEO of Citadel, a hedge fund and high frequency trader, is making $100 million per month. Shaffer said: “I am livid. This should be an existential crisis that this exists. I hope he hears this and calls me and we can have a conversation about how he actually adds value to the real economy.”

When asked about the future, he explained that RSF's aim is potency, not scale. Its model is to outsource and open-source what it does. For example, it's hosting a peer learning circle of community foundation leaders to educate them about what RSF does. They learn, for example, what it costs to create a loan servicing department. Shaffer laughed: “Effectively, long-term, we are putting ourselves out of business!”

Amber Bieg is a philosopher-inventor-ecogeek with a passion for ethical finance and a mission to create a thriving future for everyone. She has nearly 15 years of experience in sustainability marketing, systems design and sustainable development. As the principal of Green-Ideas, Amber has worked with clients such as the City of San Francisco, Autodesk and ChicoBag on strategic sustainability marketing and sustainable behavior change campaigns.

Image credit: Stew Dean, Flickr