Root Capital Investments in Coffee
The New York Times’ conservative Op-Ed columnist David Brooks recently penned a piece on impact investing — leading some to ask, “Has impact investing gone mainstream?” You may have just answered that question with a resounding no if you are asking yourself, “What is impact investing?”
Impact investing seeks to generate a wide range of financial returns alongside measurable social and environmental impacts. J.P. Morgan estimates that last year, there were more than $46 billion in impact investments under management, a nearly 20 percent increase from 2013. Just last month Unilever and The Clinton Foundation announced a $10 million impact investment that will be used to strengthen smallholder value chains.
Brooks’ column, How to Leave a Mark, examines the role of impact investing in creating social change. Brooks touts the promise of social capitalism — the blending of nonprofit and for-profit minds — in providing solutions to vexing global issues from poverty to climate change. There are many models to look to, ranging from Benefit Corporations (or B Corps) like Sustainable Harvest, to social investment funds like Root Capital—both of which were born in and of coffee.
Willy Foote, my partner in crime, founded Root Capital to grow rural prosperity in low- and mid-income countries. We provide tools—loans and financial training—that enable small and growing agricultural businesses to access global markets and improve livelihoods for smallholder farmers. As better run, more efficient businesses with access to capital, Root Capital clients become more reliable suppliers. They are able to procure, process, and sell greater volumes of agricultural goods, like coffee, while also investing product quality and consistency—all of which is critical to the long-term resilience and viability of the coffee industry.
In 1999, we made our inaugural loan of $73,000 to a coffee and cardamom cooperative in the highlands of Guatemala. Since then, Root Capital has disbursed nearly $800 million in credit to 530 agricultural businesses, representing 1.1 million smallholder farmers around the world.
While David Brooks and some of his readers are just waking up to the power and promise of impact investing, it is something that the coffee industry has been brewing up for over a decade.
Atlantic (Ecom), Dean’s Beans, Green Mountain Coffee Roasters (now Keurig Green Mountain), and Starbucks were among Root Capital’s first investors. These trailblazers’ pioneering investments were catalytic for Root Capital. On a larger scale, I believe that they are the unsung heroes of impact investing. Their leadership has helped give rise a new financial services industry, focused on serving the world’s 450 million smallholder farmers.
Thanks to those early innovators and the hundreds of investors who have followed, Root Capital reached an important milestone earlier this year. For the first time in our history, our outstanding portfolio balance – the amount of capital we have actively deployed – has exceeded the $100 million mark. Whether you look at this milestone from the perspective of scaling our direct impact on farm families or evidence on new models for using capital for good, we hope this accomplishment can serve as a testament to the viability of our clients, our model for impact-driven agricultural finance, and the emerging field of impact investing.
Brooks ended his piece by saying that if we want to leave our mark and create positive change in the world, we should consider getting involved in impact investing. We couldn’t agree more. It’s proven, and we have a 15-year track record to show for it. Impact investing works because we work together. And together, we are growing prosperity throughout the entire value chain—including -and especially- for farmers, who are the very lifeblood of this industry.
By Liam Brody, Root Capital