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Commerce in the Community: Watershed Capital Utilizes Impact Investing as an Innovative Approach to Sustainable Community Development

Burgess COMMENTARY

Peter Burgess

Commerce in the Community: Watershed Capital Utilizes Impact Investing as an Innovative Approach to Sustainable Community Development

Ed. Note: This post is part of the Commerce in the Community series highlighting the work of community leaders and organizations that are strengthening the middle class and providing ladders of opportunity for all Americans.

Below is an interview with Shawn Lesser and Michael Whelchel, Co-founders and Partners at Watershed Capital Group. Prior to starting Watershed, Shawn sold institutional equities to European banks and Michael co-managed two private equity funds in the U.S.

Question 1: Tell us about Watershed Capital. What is your mission and main focus?

Watershed Capital Group (www.watershedcapital.com) is a boutique investment bank focused on the area of impact investments. Our mission is to scale impact investing with a specific emphasis on helping companies and funds raise capital and execute mergers and acquisitions. Over the past seven years, we've worked with over 20 sustainable companies and over 60 private equity funds.

Question 2: How is Watershed Capital Group working with the Department of Commerce to expand its impact?

In collaboration with the U.S. Department of Commerce around the Obama Administration's impact initiative, last October we organized the first impact and sustainable trade mission to Europe. Specifically, we brought together 10 US-based impact funds and introduced them to close to 90 European investors in London, Zurich and Amsterdam. The trade mission included high-level conversations about the impact investing space and was capped with a policy roundtable in London which brought together stakeholders both from the US and the UK.

Following up on the success of the first trade mission, last month we organized the second impact and sustainable trade mission to Nordic region with delegations meetings in Oslo, Copenhagen, Stockholm and Helsinki. This October we will be returning to Europe the week of October 20th for the third impact and sustainable trade mission with delegation meetings in London, Zurich and Amsterdam.

Question 3: Watershed is noted as a Certified B Corporation. What does that mean, and how did you attain that certification?

We were one of the founding B Corporations, called “B Corps,” which are companies certified by the B Lab to meet rigorous standards of social and environmental performance, accountability and transparency. We support B Lab's view that to scale impact investing there must be a way to measure the impact. There is a difference between good marketing and good companies and there needs to be a way for investors and consumer to easily tell difference. We went through an initial certification and have to go through a recertification every couple of years.

Question 4: In what ways does Watershed utilize impact investing as an investment strategy to promote sustainable economic development?

One of our key strategies to mainstream impact investing is to make sure investors are exposed to high quality investment opportunities that generate a market return and have impact. We call this 'SmarterMoney+'; that is, maximize return and maximize impact. A myth exists in the investment community that to do good one must be willing to accept a below-market return. This misconception is a hurdle to mainstream impact investing. We challenge this myth through a number of our activities, including:

Five Fund Forum

Five Fund Forum is an investment forum showcasing five leading sustainable private equity fund managers. The roadshow travels to New York, Chicago and San Francisco where the five fund managers meet close to 100 mission-aligned investors over a three-day period. We have organized the Five Fund Forum now 14 times and it has become a well-established, well-recognized event in the sector.

Impact Capitalism Summit

In April of this year, we organized a national conference that brought together 250 family offices, foundations and their wealth advisors. The conference was the first of its kind to take a portfolio approach toward impact investing by showing investors how they could maximize return and impact across various asset classes. The group represented one of the largest amounts of investable assets earmarked for impact investing. As part of the conference, we put together a primer book highlighting recent research around mainstreaming impact investing. In addition, the conference included a leaders summit where groups such as the World Economic Forum, JP Morgan, Morgan Stanley, Rockefeller & Co., Deutsche Bank, Credit Suisse and others came together to discuss joint initiatives to further the sector.

Individual Mandates

In addition to events we organize, we work individually with companies and funds to help them raise capital. For example, we recently worked with the fastest growing food/beverage company in the Inc. 5000 rankings. It is a sustainable food company that is providing a scalable model that provides a sustainable alternative to factory-farmed food.

Question 5: If people want to learn more about Watershed Capital, what should they do?

More information on Watershed is available on our website at https://www.watershedcapital.com. People can also email me, Shawn Lesser, at shawn@watershedcapital.com or Michael Whelchel at michael@watershedcapital.com.