Local Dough: A Values-Based Investment Club

We believe any investment in Wall Street relies on the extraction of fossil fuels, human costs, and destabilizing the planet
Pat Thompson (l) is retired from a career in graphic design and Chris Kelly works in technology. After attending a national gathering of the Transition Towns movement, Thompson helped to launch Local Dough LLC in 2019. Photo Sarah Whiting

To us, Wall Street is a house of cards. We want our money to support things at a local level — real things that people need. We are trying to make that kind of investing possible for other people. We launched the Local Dough LLC investment club because we believe any investment in Wall Street relies on the extraction of fossil fuels, human costs, and destabilizing the planet. It is not just about screening out bad corporations.

When we began the club, which is based in Saint Paul, we discussed our common values. For instance, we did an exercise to talk about what level of financial return we wanted compared to what level of societal effect we looked for. We grappled with what we meant by “local.” We did some common reading, particularly Marjorie Kelly’s 2012 book “Owning Our Future: Journeys to a Generative Economy.”

Today we have smaller working groups among the membership that explore businesses in investment areas such as regenerative agriculture or renewable energy. We consider business plans that need funding. We supported a co-op by buying stock. We have offered loans.

Local Dough members put $100 a month into the general fund. We each get one vote on where to invest. Decisions are made with a simple majority of support among the members. Current members vote on whether to admit new members.

Membership is open to anyone who supports the values we have established for the businesses we want to support, and who live in Saint Paul or very nearby.

Those values are:

  • Does the business have a generative purpose as opposed to an extractive one?
  • Does it seek to serve the community in a sustainable way? What is it doing or creating?
  • What is the ownership and employment structure? Who benefits? Co-ops and employee ownership are a plus.
  • Where are the localized jobs and what are the returns?


Starting Your Own: Structural Dos and Don’ts

This kind of investment club can be replicated in other neighborhoods and towns, or other communities of commonality. It is a good way to support women and other undersupported entrepreneurs.

Have your purpose or core values in mind before trying to recruit members. You need a minimum of 20 members, and probably more like 30, to have a meaningful scale for investments and to create a sustainable organization. Federal law limits investment clubs to 99 members; that seems way too big to us.

The full group meets quarterly for 90 minutes. The officers put in more time, and we have committed to rotating the officer roles regularly.

Investment clubs have a special status under federal law that exempts them from a lot of Securities and Exchange Commission regulations. Limited Liability Companies are the easiest form of incorporation. At a minimum, you need someone to be the president or convener, which requires leadership and communication skills. The treasurer does IRS-related work and keeps members up to date on their investment balances.

We are happy to share our incorporation papers and operating agreement as a model.


ESG Investing

submitted by Joan Gilles

In the financial planning business, we have historically referred to “Socially Responsible Investing.” Now it is called ESG (Environmental, Social, and corporate Governance). It is an approach to investing that prioritizes returns along with a company’s impact on the environment, stakeholders, and the planet. The thought is that good corporate behavior means better business decisions and better results.

The “E” for Environment might focus on a company’s impact on the environment through things like its energy usage or pollution output. It might also focus on creating green products, renewable energy, or use of recycled materials.

The “S” for Social might focus on the company’s relationship with workers — equality in pay, diversity and inclusion, human rights, stance on social justice issues, and health and safety of employees.

The “G” for Governance might focus on how the company is run, such as transparency and reporting, and the gender diversity composition of the board of directors. It might relate to a focus on executive compensation, especially compared to the lowest paid employees.

In the past, ESG had a reputation for requiring a tradeoff on the investor’s part — less return for using ESG criteria. Today there is growing research that ESG investing generates comparable or superior results compared to their non-ESG-focused peers.

Unfortunately, there are no “standards” about what constitutes ESG investing. There is not a long-term track record on the performance of ESG strategies either.

Picking individual stock investments for ESG investing is difficult. Mutual fund companies have created products that employ ESG criteria. For most people, that is the best way to begin incorporating ESG principles into investing.

I think about ESG as putting our money where our values and priorities are. Doing that allows our investments to make the world a better place.


Details

• local-dough@googlegroups.com
transitionasap.org/transitionyourmoney


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