November 15th, 2023 at 9:00 – 10:30 ET, 15:00 – 16:30 CET

Be The Earth Foundation

Over a decade ago, Seth Tabatznik, Founder of Be The Earth, sat in a board meeting that changed his life. He discovered that some of his family’s for-profit investments were doing the exact opposite of what their philanthropic funding was aiming to achieve: giving with one hand yet taking with the other. Ever since, Seth has been on a journey to align 100% of his capital with his values. With his partner, he started Be The Earth in 2019 in order to combine all the forms of capital of which he was custodian under a single vision.

In this session, we explored the divestment journey that Seth and his family are on, shared how Be The Earth aligns for-profit capital with its philanthropic goals, and presented case studies showcasing what it means in practice to do things a little bit differently.

About Be the Earth:
Be The Earth is a Foundation that works with a closed loop model, combining Impact Investments and Philanthropy for a world that nurtures all beings. All of Be The Earth’s capital is invested under the same vision, strictly attached to the values of planetary regeneration. Be The Earth Investments is a subsidiary of Be The Earth Foundation. All profits are either reinvested or donated.

Takeaways, lessons and notes from the conversation:

The hypocrisy of philanthropic investments and the responsibility of the philanthropic sector

How funds are generated, how foundations seek longevity and how they give out grants can be opposing. Foundations end up moving financial resources to solve problems that their money has created in the first place.
Philanthropy dissociates itself from the divestment ecosystem when it should not.
Philanthropy as a sector needs to create a structure of inquiry and openness to look at the role of the entire sector at this day and age to reimagine capital and capital flow and to grow this movement of regenerative economies for a post-capitalist society where all beings are nurtured.
Philanthropy’s role can be thought of as ‘resource redistribution’ versus grantmaking/philanthropy since redistribution really acknowledges an equity/justice lens which ultimately affects people’s inner narrative and purpose in the sector
Large NGO’s and CSO’s can also have this hypocritical financial model where investments go against stated goals and missions. They also have investment managers that don’t share the same vision of the organization and operate with the traditional goal to produce as much as possible so that the NGO can continue operating and growing. Funders and grantee partners need to hold eachother accountable on this issue.
To shift the sector, people employed need to understand how investments work and to be trained in researching and exacting due diligence in understanding how money flows to them and towards their grantee partners. This is an education and a capacity building to the sector and its employees that is needed.
The philanthropic sector can also begin being more experimental in utilizing multiple forms of capital, not just philanthropic and investment, but more concessionary investments, debt equity, alternative financing models, revenue based loans, which intend to be far less extractive. There is still a lot to explore on this point.

Creating internal alignment and a common vision for all capital

Aligning all capital under one vision can be a starting point. When capital is under one vision, people working might be in different offices and different teams but the money is funneling from one money-generating aspect to a money-giving aspect in an aligned way.
The main audience is ultra high net worth individuals (UHNWI) with full control of their capital. With their privilege, comes the responsibility to leverage their freedom and control to make sure that their family, trustees, advisors and team are aligned with their philosophy and vision to invest their money differently. The conversations need to question the taken for granted assumptions by investment teams like the need to have an annual 10% growth at all costs. Why is that needed?
Meditations and regular check-ins which are not practices usually present in trustee and investment meetings can be tools to bridge gaps and set a new tone and culture for the work. Changing language to be about capital they are collectively stewarding rather than growing or owning can also be helpful.
In the cases of family foundations, pockets of change with particular trust funds or money streams can act as encouragement for other family members to replicate different investment practices that center impact. Data collection, documentation and narrative building is therefore important.

Hammering down on what numbers mean: market and annual growth rates

In order to assess investment portfolios and reimagine investment and philanthropic plans, some questions to ask could be: what does that “enough number” of capital/profit look like and how long do we want the foundation to exist? Do we want to create more profits so we can continue to do our work? Do we want to do so indefinitely? Do we want to increase how much money we have because we want to do more? Do we want to spend down in a short period of time because we think that’s gonna have the greatest impact?
These questions will not be answered easily and will be constantly grappled with but are important to consider.
A way these questions can affect investment decisions is for example exploring how potential investments also think about their returns and profit. Do they have a “capped number” or an “enough number” for their profit in mind? Are they seeking indefinite growth or is there another reason they are starting their business?
For Be The Earth, since they are looking to spend down, they are thinking of targeting 7% net return for some investments. Typically those types of investments attract a 20% return because they are early stage businesses but they are saying 7% feels fair.
High numbers chosen have no logic to them beyond exaggerated profit. It is okay to reassess and choose numbers that fit values-aligned goals.

Shifting investments does not need to be 100% from day one, this is definitely a longer journey

In the case of Be the Earth, it has been 13 years and ⅔ of their investment portfolio has shifted to be aligned with their environmental and social goals as a family.
Due to different family dynamics and different players, the number might never reach 100% but there is constant moving in the right direction.
There is a dopamine to making money out of traditional investments and seeing numbers in the bank account increase in the game of capitalism but when that is not the ultimate goal of how you handle investments and capital, the urge to celebrate is counterbalanced with the realization that there is no lasting meaning in generating money from harmful investments.
Initial investments that felt aligned might also shift. What are seen as traditional successful exits where a small company invested in is sold to a bigger company, are not necessarily successful with the lens of regenerative economies since they are feeding a system where ultimately a handful of companies dominate markets
This is where the journey of impact investing and divesting needs to also include exiting investments. There’s so much gray area and people are scared to operate within that area if they’re a lawyer but it is possible albeit risky.
Risk as an entry point can prove effective, instead of aiming for 100% shift off the bat, the conversation with financial managers, trustees, family members and other decision makers can be framed as “are you willing to be risky with X% of your funds to try out a different model?” From there, that number can grow.

Experimentation and collaborations as a privilege and responsibility

Experimenting with how philanthropy can be done differently aligns with being risky with investments. It is easier when the barrier of risk is broken to then also refute traditional models of philanthropy.
The seeking of models that do not perpetuate the same systems that foundations say they want to change applies to models of doing philanthropy and how philanthropic money is moved. Alternative models that decenter power include flow funding, pool funding, giving circles and spending time building partnerships with grantees in a similar way that time is spent building relationships with small businesses being invested in.
On the investment side, one concept being experimented with and explored is Steward Ownership where there are capped returns and there’s a golden share that makes sure that the mission is held at the core of the organization.
Funders who have embarked on the journey towards divestment and impact investments need to also invest time and energy in collaborations with other funders since this shift has to be beyond individuals. Networks like EDGE can help in those collaboration building.

Assessing impact in impact investments

Assessing impact before investing is not easy. Financial measurement is relatively easy due to its quantitative nature but impact measurement is more qualitative.
One way to go about it is to create a set of fixed indicators against mission and vision to assess if the foundation is genuinely moving money towards its objectives on both the philanthropic and investment sides.
Another aspect to consider is the profile of the founders and how passionate they are about their core mission versus their eagerness to turn a profit.
Over the last few years, there has been a lot of green washing with mechanisms like ESG (environmental, social, governance impact measurements) that help companies green wash their practices and claim an impact mission that is not true to their practices.
Having generic ratings of impact might not be the most fair tool. The impact of a small group of people working on a specific issue in a specific community, cannot be measured the same way as a wide ranging movement for example.
There needs to be impact narratives that are not about scale, pure positivity and growth and rather have other ways of measuring impact that account for smaller, particular, slower but equally impactful ideas. Combining objective and subjective indicators are totally fine.
Beyond assessing impact of companies, it is important for funders and investors to also assess their own impact. Are they influencing other HNWI, are they bringing other investments to the companies they partnered with? This is another way to influence since that is moving money away from extractive investments.

Divestment is a start of the conversation but exploring where money needs to go instead is just as important

Divestment is a great start to the conversation to decide on where you would not like to invest and where money should not move towards. It is important to also make clear what the intentions are when moving capital differently and where else alternatively would you like to move the divested money to and assess those risks and have those conversations with the decision makers if the intention is to maintain flow of money.

Impact investment is a step towards the right direction but it is not the destination if the goal is systemic change

Within the impact investment narrative, there is still a desire to only focus on “winners” or investments that are win-win: impactful and generate returns. As much as that is understandable, it is not necessarily the way to go about changing systems. In order to challenge traditional impact narratives, where money usually is invested and capitalist models, there needs to be a a willingness to forego returns at least partially.
In building a new world with a new economic model and new ways of moving resources, do we want grantees to be lured into entrepreneurship and impact investing? Do we want social movements to also find ways to return investments? Probably not! That is why philanthropy and grant systems need to exist alongside impact investments as a tool to fund those radical solutions that challenge the very systems that generate profit for the few.