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Living Responsibly on Our Island

Written on January 13, 2012 by Roland Van der Meer in stewardship, sustainability

As we all know, each of us lives on this massive island called “Earth” and for the most part, we use it as we see fit.

Progress in the developing world is accelerating at an amazing clip of 7-9% annually; advancement in the so-called “developed world” is mostly flat. The developing world wants what the developed world has: namely, food, cars, and comfortable housing. Herein lies the fundamental environmental issue: The world cannot sustain us as it is, nor can it support us all having the same conveniences and lifestyle.

When you really understand this little island with 9 billion people on it, you realize that it is critical that we recycle and reuse everything. We should strive for a zero waste society. As long as there is waste, it will continue to accumulate over time and important parts of nature will continue to be destroyed. Every natural resource we have — water, energy, food, and minerals – can and should be reused. If not, we will eventually run out of these resources and there are will be no more substitutes. For sustainability of species’ the planet, we must adopt the full recycle mentality to keep our island healthy. Here is an example of one person’s efforts to live “zero-waste.” Couldn’t we all do our part to move in this direction?

Also, we must keep our natural systems functioning in order for us to prosper as humans. The very systems that supported life for millions of years are being thrown off balance and are becoming unpredictable as we alter the landscapes, oceans, and atmosphere. The balance of climates is shifting so fast and significantly that we are seeing the extinction of massive species. Our arrogance lets us believe that we are not affected. But we are. Many societies in the past 20,000 years have perished as they altered their environments to the point of their own undoing (for example: Mayan, Angkor wat, Babylonian, etc.)

Similar to societies before us, today we believe that our technology is superior and can empower us to alter everything to suite our needs. This is not the case. For example, we are using up carbon-based fuel. “So what?” many people say as we continue to find renewable replacements. Solar, wind, hydro, etc. all appear to be adequate alternatives, but we are putting them into the atmosphere as well as the ocean and land pollutants. These all amount to big changes in chemistry to our little island.

Every day, we are carving up huge tracks of land in pursuit of minerals and fossil fuels, leveling mountains, stripping landscapes bare and leaving nothing behind. We are taking out the last dense tropical forests at an alarming rate. We have created land dumps and land fills the size of the State of New Jersey (not to pick on them). We are dumping so much garbage into oceans that an island of trash the size of Texas is floating in the Pacific, killing the ecosystem, indigenous species and making navigability a big challenge.

As we farm more than one-third of the Earth’s surface, we are stripping soil of all its biology and injecting chemicals and fertilizers, which contaminate the air, earth and water.

We have to rethink and redo our fundamental premise of what we can and cannot do here on our little island. We need to apply true costs — environmental and social — to our actions and decisions and understand there is no free ride. It is a zero sum game and potentially a negative growth game to enable us to keep our world safe for future generations. We have to address our need to “grow our way out of our economic problems” philosophy, as the world might not tolerate much more growth.

If you really want to experience what we have and why this matters try this lovely view of Earth.

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2011 — A Pivotal Year for Investors

Written on December 16, 2011 by Roland Van der Meer in Community, Economics, investing, stewardship

Impact Investing, Sustainable Investing. Double Bottom Line. Triple Bottom Line. Investing for Change. Three years ago, these were big ideas and messages that 99% of the world didn’t understand or even care about. They amounted to doing good and trying to make some money. It was the world of foundations and charities trying to express that they are not all giving money away, but rather are trying to use some of the principles of capitalism.

This year we have seen a major shift in the choice of words used to describe what is going on and what investors are willing to invest in. We are in the middle of the shift to investing in key resources that are under pressure or becoming scarce. We are seeing mainstream capital pay attention to the value of these resources and how they are being used. Sometimes, unfortunately, not for the betterment of that resource but for the exploitation of the opportunity, but we will get back to that later.

We are now seeing the first of the mainstream investors stepping up and realizing that not only can they invest in agriculture, water, energy and real estate, but they can do it the right way and take into account the environmental and social costs: By first investing in asset managers that understand and make more money (enhanced Alpha,) and then the asset class as a whole. This is a huge and significant step for capital management and the environment.

In public and liquid securities, 2011 has been a turning point as well. This week, Generation Investment Management published the Manifesto for Sustainable Capitalism, citing what companies are doing, should be doing and how investors can view their portfolios differently to encourage long term gain through better management of resources, assets, environment and people. Clearly this message is going mainstream and it is not just a negative screen or positive screen: It is a new understanding of how companies think about their impact and use of resources. It is becoming definable, measurable and investable.

One of the largest data providers, Bloomberg Data Services, makes it possible to analyze many factors of ESG that public entities publish now. For instance, we can evaluate how efficiently energy, water, carbon is being used compared and crossed with revenue, employees, sq. ft. of space, etc. It looks at the social metrics as well, such as how a company invests into its communities of interest. Bloomberg also tracks the governance metrics that look at policies, objectiveness and transparency. These are important metrics and can only get better over time. There are 5 to 10 other interesting metric providers and we can expect that many of these will get absorbed into the mainstream investing as well.

This is also a key year for B-Corporations, a new type of corporate classification that says we are in business to make money but also count into the equation of looking at the environment and social issues that the business effects. They promise to publish even more data and have more transparency in their business operations. This year 5 more states (New Jersey, Virginia, Hawaii, California, and New York) have adopted the corporate form from the original two (VT and Maryland) and it looks like 10 more will for 2012.

Major investors such as Pension Funds, Endowments, Wealth Management Firms and Private Banks are all looking for products in agriculture, water, energy, land, real estate as well as other valuable resource investment plays. While this is good, and can be better, they do not completely understand which ones are creating a better environment and social construct versus those that just exploit the short term value: For instance, an agriculture investment that improves the land, the soil and the natural systems versus one that uses the industrial system of agriculture and also can deplete soils and ruin the environment will perform better over the medium and long term.

More time is needed to inform investors of what is possible using best practices and methodologies. More investors need to take the time to learn which are the driving forces that can make all the difference. As we look back on 2011, we will remember many key milestones — in politics, innovation and environment — and hopefully move forward in our goals to be better stewards of our planet.

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Farming is an entrepreneurial business.

Written on November 18, 2011 by Roland Van der Meer in Organic, agriculture

Farming is the epitome of entrepreneurship. It is not easy work. It is a business that first requires an understanding what the market wants: How much does the market need, what can you sell and to whom? Then you have to figure out if you can grow it for a certain cost and still make a profit. If you approach it any other way you will most likely fail. Like any other new venture, it all starts with the market.

A recent article in the New York Times, “Young Farmers Find Huge Obstacles to Getting Started,” sites many of the issues of getting into farming and how hard it is. Many farmers cannot affordthe land, and even if they can, they have a hard time getting the farm working and selling the produce at market. Yes, it is hard to run a farming business.

By way of example, suppose I decide to sell pencils. Everyone needs pencils, right? They are always consumed. So I buy the wood, lead/graphite, metal, and rubber, and then I purchase the machines to roll stamp and press the pencils. And finally I rent the building to do all this in. I spent all my capital to do this. Then I go to the corner store and ask him to buy my pencils to sell in his store. The store owner (being the nice local merchant he is) ask how much I will charge him for the pencils. I tell him, “$1 a piece, they are locally made”. He tells me, “I buy pencils from my supplier for 25 cents, and I don’t think my customers will buy $2 pencils.”

Then I pursue the option of opening a corner vendor kiosk and selling my pencils direct to the customer for $1 each. I sell a few, but within a year I am out of money, out of pencils and out of business. That’s when I say this is a hard business. Yes it is.

So what went wrong? I did not understand the market, the customers and the customers’ need to get a product at a specific price. It’s that simple.

When you read the article about how tough it is to be a farmer and how many new farmers failure, put this in context: They say that 22% of new farms turn a profit the first year. That is great actually. But only 1 out of every 5 farmers make it all the way to sustainable profitablility. How many other new business start ups fail in the first 1 to 5 years? How many actually make it through that long, hard start up phase to actually make a profit? 1 in 5. Sound familiar?

Farming is also unique in that one learns to farm through trial and error. Failure of a crop is inherent in farming and then you learn to do it better.

The top 5 reasons for business failure are:

1. Lack of experience

2. Insufficient capital (money)

3. Poor location

4. Poor inventory management

5. Over-investment in fixed assets

All of these elements are within the control of the new businesses owner. These reasons apply to farming and business. A well thought out business plan mitigates these issues.

Farming is a hard business but you need to start with the notion of the market and then you have a fighting chance.

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A Whole New Look at Green Building

Written on November 7, 2011 by Roland Van der Meer in Energy Efficiency, Uncategorized, agriculture, sustainability, waste water

Urbanization is reaching new levels around the world. In developing countries the continuing influx of people from the country side and small villages is accelerating. These people are searching for better paying jobs and a way to support their families. There is also a trend towards greening the cities; becoming more energy efficient, recycling water, creating local (roof top) power generation, etc. Cities are wonderfully efficient if designed right. In these urban settings, the power and water consumption are lowest per capita, and the walkability makes living easier and healthier.

One of the biggest trends is the greening of roofs and walls in buildings. The popularity of “green walls,” “vertical gardens” or “living walls,” is hitting a new benchmark. Many new firms are developing the technology and services to support these efforts, such as Gsky plant systems. Establishing plant material on rooftops provides numerous ecological and economic benefits, including stormwater management, energy conservation, mitigation of the urban heat island effect, and increased longevity of roofing membranes, as well as providing a more aesthetically pleasing environment in which to work and live. It is truly remarkable what we will begin to see in the next decade.

Just when you thought sustainability and Platinum LEEDS was as good as it gets, leave it to the Italians to redefine the green building. The Vertical Forest Buildings of Milan are reaching for exactly that: living in a vertical forest. They are amazingly efficient with water (gray water) heat and light shading. These could be one of the most beautiful buildings to live in. Your personal yard and forest on the 20th floor. Very clever.

I believe the innovation we will begin to see in new developments around the world will redefine what good standard of living is in cities. The resource and living benefits of mid to high density living, coupled with as much nature as possible, will reset the way we look at urbanization.

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Rethinking Existing Infrastructure Systems — Part II

Written on October 17, 2011 by Roland Van der Meer in Economics, stewardship

I had a good talk at the Wharton School’s IGEL Program (Initiative for Global Environmental Leadership) A great group of MBA students attended. While the presentation was one about the key asset areas that both Bio-Logical Capital and Equilibrium Capital are focused on (energy, water, agriculture, real estate, etc) the questions were even more interesting.

The most awakening realization seemed to be that in these key sustainability sectors, it is possible to build business models that generated outsized returns while “doing it right.” In other words, by becoming a steward of the resource and managing for the long term, the IRR were more stable and higher yielding.

This surprised most people as it should. The work that needs to be done can get done and provides a path for driving change that can make great returns, and in turn, drive more capital into the sector which drives more change. It becomes a virtuous cycle. While I gave examples of how Bio-Logical Capital can turn around an agricultural system, or a wastewater treatment system and generate superior returns, it is often hard to see until you work through the plans, the numbers, and see it in action.

I could see that the audience liked the idea of the potential to work in sectors that are interesting and prospering while taking care of the environment. Rarely do people get to hear this viewpoint. There is a sense that most initiatives in the area of CSR or ESG are just a tax to the corporate P&L. These thoughts exist in Corporate America and even in most business schools.

I began my presentation with this key point: These initiatives (CSR, ESG, impact investing, etc.) all understate the problem and underestimate the opportunity. There will be fundamentally new businesses created in the key resource areas that will drive the changes needed to maintain or restore our much needed natural resources.

One student asked, “Why don’t other people do this?”
My response: It requires a rethinking and systems view and you cannot fear the complexity of what we are doing.

Another asked, “Is there an exit path for shorter term investors? (Typical being 5-10 years for these assets). Are you are talking about being stewards for a longer period of time?”
My response: Yes, once a project is up and running and stabilized the risk/return changes, we can securitize it in a REIT like or MLP-like structure with reduced yield but very predictable returns.

After the presentation, I heard from Wharton professors who said students continued to talk about the ideas for hours after the talk. They discussed how it would be great to create a roundtable/panel discussion to engage students from different parts of the college (policy, social work, design) who could discuss and debate the ideas and approach from multiple angles.

For me, being able to participate in the discussion of creating impact by doing it profitably and doing the right thing is exhilarating. I encourage others to follow what is going on and get in front of this big wave of change. It will be bigger than most people ever thought and it will be paramount to any society that wants to survive.

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Rethinking Existing Infrastructure Systems

Written on October 12, 2011 by Roland Van der Meer in Community, Economics, agriculture, sustainability

On October 13th, I will be giving a talk to The Wharton Program for Social Impact and the Initiative for Global Environmental Leadership (IGEL).

The essence of what I will be speaking about is how the world needs to rethink or redo how we live. This is more than a question of sustainability, instead it addresses what will be needed to allow us to thrive again on this planet. While it might sound lofty, it is all about how to invest into and profit from the redesign of our core services. I will speak in depth on how Bio-Logical Capital, a land development and conservation company, is looking at large landscapes to restore, redevelop, and conserve the land so the human settlement can thrive within the natural environment. We are creating a living model that will not only function well, but be a great place to live and profit so that many can follow.

Our basic services and systems of water, energy, agriculture, transportation and housing are all in major need of not only an upgrade, but a fundamental philosophy and design change. It is not that these services and systems were ever bad, they are now just outdated in function, design and technology. Just because something worked 100 years ago does not mean that it is right for today. These systems were never designed to carry the loads they are experiencing today. More importantly they never really looked at natural systems as an alley, but rather viewed them as an impediment and obstruction that needed to be altered to suit man’s needs. We keep patching a framework that is now a flawed design.

Let’s look at water and wastewater for starters. Water naturally flows down hill. It rains up top and runs in rivers to the ocean, then is evaporated into the atmosphere and back again. Our water systems do the same: We take water from a source use it, filter it and dump it back to the ocean. We take rainwater and wisk it away to big pipes and dump it in the ocean. Good right? Not really. Nature stores water everywhere. Good rich soils, forests, and aquifers store water and hold onto it for dry times.

Natural systems have cycles that the animals and plants learn to work with.

Our water system interrupts all that evolutionary work and short-circuits it. So how do we redesign this? First, we must think decentralized solutions. We need to recycle water on a local basis, using gray water (which is practically potable) where ever possible. We need to use natural water stores for rain in the land, soil, and aquifers. We need to use more decentralized natural filtration techniques (biomimicry). We should use that big brown pipe full of wastewater and harness the energy from the waste, which will either be additional revenue or an offset of cost. We can also resell the nutrients from the wastewater as well as sell the gray water itself as a product. This shift is so fundamental that the costs of such a system are dramatically less and the profits much more.

To touch on agriculture as I have written before, if we use the natural systems we can grow food more sustainably, growing healthy soils and healthy food in a post industry agriculture system that is robust, resilient and abundant. Food and agriculture are central to the health of a community. Knowing where your food comes from is not only necessary for good health but wonderful in that it brings people together. A large part of the failures of our healthcare system can be attributed to our food system. Natural agriculture solutions work in cooperation with nature and leverage its resourcefulness.

I use these two examples to show what is possible in all the basic services. Bio-Logical Capital is in process of rebuilding communities based on the principles of natural systems, as pioneers of stewardship development. How can mankind fit into this landscape and build a living environment that we all would like to see and be part of?

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Building the Economy with Recycling

Written on October 3, 2011 by Roland Van der Meer in Economics, Energy Efficiency, stewardship, sustainability

When we talk about the green economy, it does not mean we are speaking of something that is good vs. something bad. Instead, we speak about an economy where we use and reuse all resources as if they were our last ones. A green economy is about caring for the health of our very vulnerable ecosystems and natural resources: Letting nature do what is does best, and working with these processes, not derailing, blocking or altering them.

So how do you build the new Eco Economy? Is it possible? Yes it is, and it is beginning to flourish. A great example is the Appliance Recycling Centers of America joint venture with GE. These plants are the beginning of what we can expect a lot of in the coming decades. They recycle and reuse 98% of the materials in old appliances. But what is fantastic is the whole system and how it deconstructs the appliance and then optimizes each piece and part to its best application. The website for Planet911 is very interesting as they are tracking each piece that is recycled and the businesses that are being created and pushing this agenda with great success.

This is a complete rethinking of a process and system. A careful evaluation of the economy and the resources needed bring to light many of the opportunities in the Eco Economy. Most economic theory suggests that there are no finite resources in the long term and scarcity is temporary, as every component has a replacement one. The substitution principal guides most economic models. Now it is becoming clear that it is not so. We cannot replace fisheries, nor key minerals, nor even ore itself, or our tropical forests. Even worse, we cannot undo the massive amount of destruction and contamination of water, soil and air from shale oil and gas or coal mountain top removal or industrial agriculture. These resources are truly irreplaceable. These are natural systems that have prospered, thrived and adapted for the ages and we have the ability to destroy them in a mater of years. Nature is dynamic and adapts to all sorts of shocks and events but not at the speed we are moving.

To keep the Earth’s natural systems we cannot extract a resource, produce something, use it and then throw it out. We need to repurpose and reuse everything. We must make sure nothing is wasted. A byproduct or waste stream from one process becomes the input for another. Systems are intertwined and working with nature in a way that is robust resilient and fault tolerant. Why don’t we do this today? It’s simple: The cost of recycling is higher than extracting, building, producing from scratch or new.

We do not have a true costing of the externalities that exposes the hidden cost to people or to the environment. So lets create a system of cost accounting that includes that of natural systems and resources. This will help us appreciate what we have around us and live harmoniously within our environment.

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Sustainable home improvement update

Written on January 26, 2011 by Roland Van der Meer in Community, Energy Efficiency, stewardship, sustainability

A long year of work and not much progress to show at my house. We set out to become as waste free as possible. We quickly realized this is hard work. Here is an update on our home improvement progress towards living more sustainably:

We installed the solar system that powers our whole house. Now we enjoy about seven months of the year “off grid” while the other five months we get only 50% of our power needs from the system. We knew this when we started but the idea of “free” electricity is addictive.
We have installed CFL bulbs where possible and are stuck with a Halogen lighting for much of our home. While very efficient, it is not up to par with LED systems, which still have to drive down the cost curve.
We have tracked our power consumption issues to AV and computer equipment around the house. These are notorious uses and we are installing power down smart sockets where we can. The other big culprit was the pumps for the pool. We now only run the filters at night and have upgraded to more efficient pumps as well.
On the food front, our garden did very well and continues to produce lettuce for us into winter. But we are retooling for a better spread of a growing season and selection. We also are experimenting with our own composting and we will wait to see if we are successful.
Our water consumption is doing fine as we are all on a much reduced shower plan and take group showers (just kidding). Really, we are all now super conscience of how much time we shower and trying limited toilet flushing when possible.

Which now leaves me to the big issue of garbage. This past Christmas we were shocked at the waste of packing and materials that were used. We are going to think about how we change wrapping and even the packaging of things we give as gifts. I am not sure Santa would approve, but even he must care about the trees. In general we are down to one garbage can and a huge recycling bin.

I read about a family that has taken this to a whole new level, The Johnsons. They have a zero-waste approach to using resources that is admirable. They have fantastic approach that made the process manageable and have achieved amazing results. Maybe something we should try next?

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What is a Sustainable Community?

Written on January 21, 2011 by Roland Van der Meer in Community, Energy, stewardship, sustainability

Many times I find myself in discussions around what a “sustainable” community is, and how it is different from a “normal” community.

There really should be no difference when you think it through. What we mean when we say “sustainable” is that we are setting the goal of something being self-sustaining, which is virtually unattainable. This means that everything (and I do mean everything) that is consumed is produced within the community. In today’s world we know it is not practical to have everything produced and consumed locally, so in reality when we say “sustainable community” we mean that what is produced has a very low impact footprint on the resources used.

The idea is not to take away more from the earth than what we put back, in the form of renewable or recyclable materials. Ultimately, what also matters is how we live and exist in our communities – from the basics like water, energy, gas, food and garbage to the more subtle ideas of livability indexes that measure quality of life and “net user” — and consider our role as “net-giver-back” to the environment or Earth. We need to pay attention to the materials used in homes, buildings, and infrastructure of the community and strive to have them be renewable or recycled whenever possible.

Creating sustainable thriving communities is essential to having a robust economic engine. A sustainable town or village at its best can only support 15-25% of the jobs needed. This is good in the sense that today’s suburbs probably only support less than 5% of the jobs in the community.

In creating sustainable communities, we are going to have to ask not only what can be more economically produced or serviced locally (because that answer is very limited,) but also what is the total cost to the environment or population of any given product or service. No where is this more obvious than in the local food equation, but it also applies to a host of other products and services, such as medical services (every town needs doctors to care for its people.)

The article in The San Francisco Chronicle “Small-town emergency” is a classic tale of economic optimization which does not take into consideration the overall cost to the community. There are many such examples. We have to think differently about the entire cost of living and how we as people want to live. The more services or products that can be produced in a community, the more integrated it becomes and usually the happier and more interconnected the commmunity is.

To solve the bigger equation of employment, every community needs an economic engine that drives it. We can use the example of a company town; one where many people find employment at the local company plant. That has many benefits to the community, but we have also seen the downside when that company ceases to operate. The more dependent a town is on one industry the more vulnerable it becomes. We have seen many towns in the east, mid-west, and west go bust as the industry that helped launch the town died.

The key to community survivability and sustainability is diversification of economic engines or the adaptability of the community and this we can discuss in future posts.

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Exploring the Concept of Shared Value

Written on January 3, 2011 by Roland Van der Meer in Community, investing, stewardship

This month, Harvard Business Review’s cover article is titled, “The Big Idea: Creating Shared Value”. This is a great article. The concept of Shared Value is on the right track and trying to define a needed new paradigm, but it has to reach further to accomplish the bigger objective of stewardship of the land, environment and community.

The real issue is scarcity of resources, environmental and social consideration. We live on a fixed ball in space and need to think about the implications of everything we do holistically and systemically. This of course is very hard to do on a global scale, so then we must push to approach it from as large scale as possible, yet with a local view as possible.

BioLogical Capital, a Denver-based company, for instance looks at the issue from land sizes from 20 thousand acre to greater than 100 thousand acres it will manage. They become the steward of the land; to own and optimize with the community for all services and businesses that can co-exist with the natural habitat. Without this vision for man, nature and the total environment; people will suffer in long term.

So how do you shift this framework to a more global perspective? If you think in as big of scale as possible (space and land); can you optimize the solution for the biggest benefit for the environment and the people while building sustainable businesses. Here is the catch; if each business is self optimized, then by definition whole is not. Enter Regulation to control manage and set rules and standards, which is brought up in the article, yet as mentioned, this never solves this problem, although it tries. So how is this problem solvable? What Porter is trying to do is give a path to a better outcome. To take the best Capitalism has and marry this with the notions of real costs and consequences for people and environment; and in addition, you must take a very long term view. To use a simple example; if you produce food, but your minor toxic run-off that is creeping into the water table is killing your customers over decades; you will eventually put yourself out of business. This piece is the beginning of a bigger framework that needs to be built for the planet and people to succeed.

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