Description:
Natural Capital Investment Fund is the nation’s only community development financial institution with 100% of its investments in sustainable natural resource-based businesses. Since beginning NC operations in 2007, NCIF has loaned $800,000+ to renewable and biomass energy companies and low-wealth farmers, providing patient capital to grow sustainable businesses.

Executive Summary:

Natural Capital Investment Fund (NCIF) is a certified community development financial institution (CDFI) that provides patient capital for businesses that use natural resources in a sustainable way. A wholly-owned subsidiary of The Conservation Fund (TCF), NCIF was established in 2001 to provide technical assistance and loan capital to natural resource-based businesses that were unable to secure investments from traditional lenders. It operated in West Virginia until 2007, when programs and services were expanded to include a service area encompassing North Carolina, Virginia and Tennessee. Utilizing rigorous due diligence procedures, NCIF provides technical assistance and other support to help client enterprises meet the “triple bottom line” criteria of providing quality jobs at good pay for businesses that also achieve important environmental benefits. NCIF funds companies in a range of sectors: • Value-added & sustainable agriculture • Renewable energy & fuels • Sustainable forestry & forest products • Eco- and heritage tourism • Recycling & water conservation • Green Building • Natural medicines • Energy efficiency NCIF specializes in providing subordinated debt and equity, which is critical for young sustainable companies that need capital to grow but lack the track record or asset base needed to access commercial financing. By taking the “risk capital” slice of a financing package, NCIF is able to reduce the real and perceived risk that collateralized lenders face in looking at young companies. One of NCIF’s objectives is to help companies in a range of new sustainable business sectors transition to the traditional lending community. The Fund’s financing amounts typically range from $35,000 to $250,000. NCIF’s impact has been diverse. NCIF’s risk capital was critical in catalyzing over $2.8 million to start Carolina Wood Pellets in Franklin, NC, which will make use of wood waste to create a renewable, affordable fuel for home and commercial heating. In addition to creating 32 new positions in an economically distressed county, Carolina Wood Pellets has the potential to reduce home heating costs for families in Western NC by providing a ready, reliable source of pellets. In Eastern NC, NCIF is helping Greene County farmer Neil Moye diversify his tobacco farm by starting an organic dairy that will come on-line in 2011. FLS Energy in Asheville, NC has used NCIF’s capital to hire a dozen new installers and defray development costs for the 1 Megawatt solar farm (enough to power 700 homes) in Haywood County that will sell power to Progress Energy. Most importantly, NCIF creates a badly needed source of capital for new sustainable sectors. In renewable energy, for example, NC Sustainable Energy Association’s “North Carolina Renewable Energy and Energy Efficiency Industry Census 2008” found that over ¾ of the renewable energy and energy efficiency firms surveyed in NC had 10 or fewer employees; 50% had entered the industry since 2004 (71% since 2000). Too young for conventional collateralized financing, these companies also are not candidates for venture capital, since they are not typically pure technology companies or able to grow fast enough for VC return expectations.

What specific results have been achieved?

NCIF was established in 2001 and operated for six years in West Virginia. Operating in a very challenging economic environment, NCIF deployed over $2 million in 20 enterprises, creating or retaining 211 jobs, for an average of $9,700 for each job retained or created; and leveraged an additional $10.9 million in outside investment, or $6 for every NCIF dollar invested in some of the nation’s most economically- and socially-distressed Appalachian communities. In late 2007, NCIF expanded its operations to include North Carolina, Virginia, and Tennessee. In just over two years, by partnering with its sister program at The Conservation Fund – the Resourceful Communities Program -- and an extensive network of partners across NC, NCIF has put over $800,000 to work in 12 North Carolina companies and farming operations. NCIF’s financing has helped these enterprises create 48 new jobs and increase the income-producing potential of 7 low-resource family-owned farms. In addition, NCIF has more than doubled its capitalization to $5.8+ million, with support from a range of NC sources ranging from the Mary Reynolds Babcock Foundation, to the Appalachian Regional Commission and the NC Tobacco Trust Fund Commission. NCIF has become an important partner for traditional and community development lenders, for whom its capital reduces risk and creates bankable customers. Through targeted technical assistance and strategic financing, NCIF is key to supporting the growth of companies in sectors that have tremendous economic development potential for the state.

In what ways are the efforts of this organization/individual unique and innovative?

NCIF is unique and innovative in multiple ways, including: • The only certified CDFI in the US with 100% triple bottom line lending. • The only CDFI in NC focused solely on natural resource-based businesses. • Affiliation with The Conservation Fund. TCF has a unique dual mission of natural resource conservation and economic development. Its focus on “working landscapes” recognizes the need for rural communities to retain working forests and farmlands; NCIF is a natural extension of this unique approach to conservation. Our expertise in forestland and forest products helped finance NC’s first wood pellet manufacturing company, Carolina Wood Pellets. • NCIF utilizes partnerships to extend its impact. It has partnered with the NC Agricultural Development and Farmland Preservation Trust Fund to administer cost share grants and loans to minority and low wealth farmers. These resources have enabled these farmers to purchase grain bins that allow them, for the first time, to take advantage of market timing to realize higher grain prices. This program has also helped these farmers branch out into additional sustainable production strategies. • NCIF uses technical assistance grants in combination with its capital to help explore promising “game changing” approaches. For example, it is funding a pilot project aimed at developing a local, naturally raised poultry industry that has the potential to provide poultry farmers -- who have lost contracts with large processors – with new markets and outlets for their production.

How has the broader community been impacted?

Through its unique triple bottom line approach to lending, NCIF is helping to develop important new sustainable industries in NC. NCIF has served as a direct pipeline to channel capital investments in natural resource-based businesses in low-income communities, communities of color and other underserved constituencies. NCIF has also impacted the traditional lending community, leveraging $5 to $6 for every dollar of capital invested in client businesses. Its subordinated debt and equity “buy down the risk” for traditional lenders and encourage their participation in emerging sustainable sectors. Access to these larger pools of capital is essential if these industries are to grow and realize their full economic development potential. Renewable energy; local and healthy food production; and renewable fuels are all important innovations that have the potential to touch the lives of families across NC. To achieve this vision, pioneering companies are needed to demonstrate the financial and economic potential of offering products and services that do right by the environment and people while turning a profit. NCIF is demonstrating that financing these companies can be successful and sustainable. It is part of the Triple Bottom Line Collaborative, a group of innovative CDFIs across the country that are sharing best practices and developing tools to measure the growing impact of sustainable businesses. By partnering with other innovators, NCIF is, company by company and investment by investment, impacting local communities and the broader policy arena in embracing the potential of sustainable businesses.