New Funding Options for Recyclers

There is a growing new source of funding for recycling businesses that are located in lower income areas and that employ people living in those areas. That source is community development financial institutions (CDFIs). Although CDFIs are not new, they have been growing in size and number and several CDFIs now have recycling and environmental business financing programs.

The U.S. Treasury Department defines a CDFI as “an organization having a primary mission of promoting community development, principally serving and maintaining accountability to eligible target markets, being a financing entity, providing development services, and not being either a government entity or controlled by a government entity.”

Nationwide, there are currently 262 CDFIs in 45 states and the District of Columbia. Some have begun to focus on financing environmental companies or adding an environmental component to their commercial services. This “green” focus has been helpful in attracting depositors and investors to CDFIs such as ShoreBank Pacific, Seattle, and Self-Help, Durham, N.C.

SUSTAINABLE JOBS FUND

The Sustainable Jobs Fund (SJF), Durham, N.C., is a new community development fund with a strategic focus on recycling, remanufacturing, environmental and other sectors. SJF founders consider businesses in these sectors uniquely suited to generating employment for former welfare recipients and low-income individuals in economically distressed neighborhoods. 

The Fund was conceived and developed by David Kirkpatrick and Richard Defieux, who met during the recycling investment forums co-organized by Kirkpatrick between 1995 and 1998 through his economic development firm, KirkWorks.  Kirkpatrick had an interest in expanding the availability of patient capital for recycling and environmental businesses, especially those that created needed employment. Defieux, who is a successful venture capitalist with the Edison Venture Fund, was  concerned about the impact of Welfare to Work mandates and sought a way to help create jobs in low-income communities. Together, they realized that recycling, remanufacturing and selected environmental companies can often generate quality job growth in those communities.  However, the growth of many of these firms is often hampered by lack of access to capital.

“In Philadelphia alone, the City projects that 66,000 former welfare recipients will be looking for work in a few months, and that only 15 to 20 percent will succeed in finding jobs,” says Kirkpatrick. “We believe that investing in environmental and recycling businesses can help create jobs that are accessible to these citizens, both in location and required skills.  In contrast, conventional venture capital is creating mostly high-tech, white-collar jobs in suburban areas.  SJF plans to use community development-oriented capital to fuel similar rapid job growth in poorer urban and rural regions.”

ALLIANCES FORMED

The National Recycling Coalition (NRC), Alexandria, Va., is a key ally in the development of SJF.  The NRC is raising grant funds to support business outreach, research and assistance services.  Already, NRC has received $115,000 in grants from the Citicorp, Z. Smith Reynolds and Turner Foundations for the Sustainable Jobs Fund.

In addition, two of the nation’s leading CDFIs – Self-Help and the Delaware Community Reinvestment Fund (DVCRF), Philadelphia, Pa. – are CDFI allies for SJF’s Southeast and Northeast operations, respectively.

The Sustainable Jobs Corporation (SJC) is organizing and will manage the Sustainable Jobs Fund. The primary mission of SJC is community development through financing and assisting companies that create and retain jobs in economically distressed areas.  The corporation has applied for certification as a CDFI and has received a $50,000 technical assistance grant award from the CDFI Fund of the U.S. Treasury Department.  

SJF is being organized as a ten-year limited partnership to be capitalized by up to $15 million in investments and up to $7 million in loans from financial institutions, foundations and other community development investors.  SJF will invest in seed, growth, and expansion stage private companies.

Kirkpatrick and Defieux hope to create an investment model that they and others can replicate in future funds, multiplying the community development impacts. 

SJF has already identified an initial prospect list of 16 companies fitting the Fund’s criteria. These companies, located in the Eastern U.S., will create jobs in economically distressed locations and offer the potential for strong financial returns. They are active in promising recycling and environmental sectors.  Some examples include:

An inner-city firm that markets and produces deck boards from plastic

lumber seeking expansion capital to meet large new orders.

An urban wood waste company

seeking start-up capital to produce

pallets, wood chips and wood flour at an abandoned shipyard site.

A manufacturer of decorative

construction tiles from scrap glass and concrete, planning the creation of more than 60 jobs at its first plant in an urban economic development zone.

OTHER CDFIs

SJF’s CDFI allies, Self-Help and DVCRF, are also developing recycling and environmental funding initiatives. DVCRF is establishing a Sustainable Development Fund (SDF) to promote energy efficiency, renewable and clean energy enterprise development and other sustainable business development – including the recycling, reuse and remanufacturing industry – in Pennsylvania’s Delaware Valley region.  A small surcharge related to the deregulation of the energy market is expected to generate about $10 million for DVCRF.

Self-Help is North Carolina’s community development bank. The organization has an environmental lending initiative that offers loans in amounts from $500 to $2.5 million to businesses in recycling, wastewater treatment, pollution control, environmental testing, and other segments.

ShoreBank Pacific, Seattle, is a commercial bank that is committed to supporting environmentally-friendly businesses in the Pacific Northwest region. To date, the bank has financed recycling manufacturing companies, rural septic systems, and value-added sustainable timber. In both the Pacific Northwest and the Cleveland market, ShoreBank has worked with integrating environmental considerations into their commercial lending activities.

The author is a consultant to Sustainable Jobs Corp. and a former editor of Recycling Today.