The saying “Necessity is the mother of invention” has never been more relevant.  The world is facing environmental degradation on one side and economic collapse on the other.  Fortunately, one can counter with the adage of “crisis is another word for opportunity” still holds true.  The Buckminster Fuller Challenge is an annual contest for harvesting big ideas and strategies that aim to solve a pressing global problem.  These strategies are systematic means of changing the world which take into consideration the complexity of such a large task.  First place winners receive a cash prize of $100,000.00 to support the on-going development and implementation of their winning solution.  The first two contests have shown just how wide the scope of focus has been.

The ”Idea Index” is a catalog of the entries submitted to the contest in its first two years.  Here you can see what issues the contestants thought to be most pressing and how they would solve them.  The 2008 winner, John Todd, focused on restoring the overly strip mined areas of Appalachia in a piece named:  Comprehensive Design for a Carbon Neutral World: The Challenge of Appalachia.  Todd suggested a four stage process that took account of all angles, including land purchasing and funding to create a better design for producing energy (namely replacing coal power with wind power in Appalachia).  This year saw 33 contestants make it to the final round of judging.  The winner was the student team from MIT’s Media Lab with their entry titled:  Sustainable Personal Mobility and Mobility on Demand Systems.  The winning entry was much more than futuristic cars and transportation systems.  A 2009 juror stated:  “Sustainable Personal Mobility isn’t just about the design of these lightweight, highly efficient, electric vehicles, it also about inserting that technological innovation into the social and cultural environment and designing an intuitive system within which they function.”  To view a detailed list of entries and submitters, the Buckminster Fuller Challenge website has created the Idea Index.  Here is where one can go to see what problems people see around them and what strategies they would utilize to solve the conflict.

Buckminster Fuller will always be known as one of the greatest visionaries and forward thinking people who have changed the world.  This challenge series will keep his spirit alive as others attempt to tackle the troubles of the world.  We’ll keep you posted with any updates for further Buckminster Fuller Challenges.

 Visit the official Buckminster Fuller Challenger site:  http://challenge.bfi.org/home

In this interview from March 25, Kimberly Miller speaks with Gil Friend, who will be speaking at the Green Cities Conference taking place May 19-21 in Orlando, FL. Gil Friend discusses his inspiration for founding Natural Logic, the urgent need to act on climate change and how his martial arts training keeps him centered each day. Subscribe to our podcast and make sure not to miss the rest of the interview series.

“Let’s face it; we are looking at the opportunity for nothing less than a reinvention of the industrial economy.  It’s possible and it’s necessary.” – Gil Friend

Transcript of  Interview
March 25, 2009

We can start by discussing Natural Logic.  Can you tell me about some of the work you guys do?
Natural Logic is a strategy consulting firm.  We advise companies and cities and governments in delivering what it’s trying to deliver to it’s costumers to it’s business partners, to it’s citizenry, to it’s constituency.  We are just shy of 10 years old.  We’ll actually be 10 years old by the time of the Green Cities conference in Orlando.  We are having, frankly, a frolicking good time as sustainability gets picked up much more substantially across the economy.

The Natural Logic tagline or slogan is:  Building exceptional environmental and economic performance by embedding the laws of nature at the heart of enterprise.  Do you want to talk a little bit about how you do that?
We look at whether we are working with a large company or a small company or city.  We look at the organization from what we call an “Ecological Web”.  Our framework is the 3.85 billion years, give or take, experience that living systems have in creating systems that are efficient and adaptive and productive and resilient.  As I like to say “Why reinvent the wheel if the R&D has already been done”.  Using nature’s playbook we look at a client’s organization and look at opportunities to reduce footprints by reducing waste, therefore reducing lose, reducing cost therefore improving profit.  We use that perspective as a guide to strategy and to design and innovation.  We apply the findings of that kind of perspective to help engage the entire organization top to bottom and side to side.  Side to side being the whole supply chain, The folks who supply what an organization needs and the customers who buy what it produces.  Trying to get everybody to the table on a common framework.  Shared vision, clear, testable and measurable strategies for implementing the changes that the organization decides to produce.

So, is this some of what you’ll be discussing at Green Cities Orlando?
Yes, we’ll be talking about some of the nuts and bolts of how an organization whether it is business or government institution can look at itself, look at itself in relation to it’s goals, it’s measures of success, it’s resources for accomplishing that mission.  It’s policies and procedures, approaches and practices for how to put that into a built in organization practice.  One thing that we’re very clear on is that as great as it is for an organization to have a profound mission and challenging set of goals unless that can be translated into day to day work, translated into what Bob and Mary do on Monday morning and differently than what they did before, then it’s all just theory and philosophy.  So we’ll be focused on the nuts and bolts.  What do you do?  How do you identify the opportunities?  How do you build them into practice?  And a particular concern of mine, how do you measure results so that you can actually help people see where they are and where they are going and how well they are doing at getting there.  Exactly one of the things we’ve learned over the ten years that we’ve been working as Natural Logics, 37 years that I’ve been working in this field, is that it makes a world of difference when people have good clear relevant accurate feedback on how well they are doing in relation to their goals.  So we put a lot of attention on not only helping our clients set clear and powerful goals, but identify the performance measures that will help them track performance towards those goals and how to drive performance in the organization.  Providing real time dashboards whether it’s if this is a level of a business facility, a home, a neighborhood, a city, a county, an industry.  Providing that kind of real time feedback showing an organization’s progress and showing how its doing compared to others like it.  We find its one of the most powerful tools in the toolkit for embedding consistent change in an organization.

How did you get started doing this kind of work?
I got started doing this kind of work way back in the last century.  Early 1970’s, Stafford graduate at college I spent a month in the summer at Southern Illinois University in Carpendale, Illinois working with Buckminster Fuller’s World Game Workshop.  Bucky Fuller is probably best known as the inventor of the geodesic dome, but he was also the force behind World Game, sort of the inverse of war games.  He thought that we have very highly developed technology for training armies on how to be more effective armies.  What if we used the same kind of gaming approach to help us figure out how to have a world that works for 100% of humanity in the shortest possible time through spontaneous cooperation without ecological offense without a disadvantage to anyone?  I heard that and thought:  “My My. That sounds pretty juicy to me”.  I spent a month in a deep dive design shrift for the planet looking in a very rigorous whole systems analysis at the state of the world and state of the needs of the world around energy, food, housing, healthcare, transportation, communication and a host of other areas.  The lesson out of that month long intensive was that there is no necessary physical obstacle to the planetary success.  More a question of what we choose to do and how we choose to organize ourselves to do it.  So that’s what set me on this road to do what I could to contribute that vision that Bucky laid out forty something odd years ago.

How did Natural Logic then spring from this inspiration of Buckminster Fuller?
The quick trajectory is from BM Fuller cofounding the Institute for Local Self Reliance.   A think-and-do tank headquartered in Washington D.C that still works on urban economics that are ecologically rooted.   So the Institute for Local Self Reliance has worked on urban food systems, distributed energy production, waste reduction and recycling as an economic development strategy.  I did that work through the 70’s.  I spent four years working for Jerry Brown, who was governor of California, trying to bring some of these ideas into California state policy.  I ran a marketing communications company in the 80’s and since about 1990 I’ve been doing this work of looking at the intersection of business and environment, because it seemed to me that is where the leverage was both in terms of the change that was needed and the skills that I bring to the game.  Since the early 90’s I’ve been advising companies on these strategies.  In 1999 I created Natural Logic as a corporation that could do what I had been doing as an individual, but at a much more significant scale with bigger clients and the capability of building tools we could leave behind with our clients so they can actually do the work without us as they go forward.  As you could imagine, over that time I’ve had the opportunity to see the sustainability movement really mature and take root as not just a social movement into something that is a major trend in business in the U.S. and worldwide.

What are some of your hopes with the new administration?  Do have any thoughts maybe about the stimulus package or how the economy is going?
Well one of the things that is striking about the new administration is that we have for the first time in a long time political leadership that not only understands these issues and understands the risks and opportunities around sustainability but, that is also committed to a science based, facts based approach to this work.  We’ve seen what I think are stunning appointments at the Department of Energy and the environmental agencies; a real commitment and understanding that shifting the energy economy in the U.S. is key part of the recovery strategy.  Moving from a pollution based fossil fuel based economy will improve the economics  in the U.S. it will improve our balance of payments in the most obvious way.  It can help improve the efficiency of businesses and communities across the country.  It can reduce the so-called “external economic cost” of health and environmental damage.  Particularly important for the stimulus package is the investment in new infrastructure and the investment in new energy economy I think is going to be one of the levers that powers us out of the pit we are currently in.

You recently spoke about Masdar City, which is the world’s first car free, zero CO2 city. To be completed in 2016. You said “I see on one hand Masdar City as a playground for the rich, but on the other hand as an R&D opportunity to deploy and test out technology that if things go well will show up in other cities.”  My question to you is:  What do you think we can end up learning from Masdar City and what do you think is a better approach to sustainable building?
I think what we can learn from Masdar City is the value of the comprehensive, integrated approach.  The advantage that Masdar has is that since money is no object they are able to put everything on the table and say:  “How do we do this in the most comprehensive, systematic way that is can be done now”.  No other city has the money is no object approach, but any city can take that comprehensive approach.  We find, frankly, whether it is the scale of cities or the scale of a building retro fit project, that the projects that put everything on the table that look at every aspect and interconnection, bring all the stake holders together and do this as early as possible in the project have both much greater likelihood of success and far better economics.  The greening projects that sort of slap green on as an afterthought or as an add-on of say “We already got a design and now we want to make it green as possible.”  Tend to be more expensive than the projects that start at the beginning and say:  “How do we identify all of our concerns, the concerns of all of our stakeholders have those as the framework and the context and the drivers of the design process and develop design solutions that integratively address all of those  and produce results that are more economical, have lower environmental footprints and make for much happier residence and constituencies once the project is developed.  The no budget limit of Masdar is a rare event.  The comprehensive approach is something that is within reach of every community and we really encourage communities and companies to think that way.

What are you hoping happens in the environmental/sustainability/building movement in the next 5-10 years?
I’m looking forward for the opportunity in the next 5 to 10 years in the sustainability movement, which you talk about, to put their money where their mouth is.  To take all these ideas that we have been cooking and testing and developing and refining over the last several decades and give them a real run for their money.  Do it with realism and practicality and measurement and testing, but with a high aspiration that is matched to the scale of the challenge that we face as a country and a world.  Let’s face it; we are looking at the opportunity for nothing less than a reinvention of the industrial economy.  It’s possible and it’s necessary.  We need to move from a pollution based society to a carbon free society.  To one that has been profligate with resources, to one that is efficient with using resources for human needs.  I think what is exciting now, and we will see this at the Green Cities conference, that there are enough people now with decades of experience and testing and building these ideas, that have ensured the strategies and techniques and their own capabilities so that we will be able to make a big difference in the quality of life in this country and around the world in the next 5-10 years.  And big differences in the quality of the economy and how that grows and how that moves forward from a new ecological base.

Who are some of your heroes and maybe even some people you hold in high regard that are in your field?
My mentors somehow all seem to have names that start with “B” the people I have really learned a lot from here are:  Bucky Fuller, who’ve I mention before.  Gregory Bateson the anthropologist and cybernetician and Stafford Bier, Welshman who is one of the leaders of both management cybernetics and  this approach to real time reporting as a way to transform organizations.  Those three really stand out a lot for me.  You are asking about the sustainability field per se.  The list is too long and really any list would be too long, because I will probably leave somebody off.   This is a highly collaborative field.  None of us have done this alone; we are standing on the shoulders of other people.  In fact as a measure of that, some of my best friends in this work are my competitors.  We don’t see this as a dog-eat-dog, beat each other out for jobs opportunity.  We see this as an opportunity to grow a pie rather than fight over pieces of a pie.  Even as we are each running our own companies we are all committed to this larger transformation in the economy and society so there’s much more common interest in that than competitive interest.  So there is rich dialogue and a rich exchange of ideas and rich learning from each other and in fact really funny phenomenon any time any number of thought leaders in this field hears another speak there’s a sense of “Wait a minute wasn’t I just thinking that yesterday.  I should write that.”  It’s not anything like plagiarism; it is just that people are developing a shared framework and a shared way of looking at these issues that is very powerful and is really taking root more and more broadly.

I think it’s important to progress collaboratively, because it’ll make it stronger.
Collaboration is one of the messages of the movement.  It’s not collaborative instead of competitive; we find them both in nature.  Back to what I was saying before about nature’s playbook as how we’ve learned to do what we need to do.  We see in living systems we see both collaboration with competition, both aspects are necessary for evolution and success.

You talked about having a house as a regenerative element on the landscape; I thought that was pretty interesting.  So how would a house be a regenerative element on the landscape?
In the same way that a tree is.  Instead of thinking of a house as something that you could build from materials brought in from far away, that you support with energy brought in from far away, water brought in from far away and produce waste of various kinds that have to be taken far away.  We can think about a house that functions much like a tree; sustained by ambient resource flows and the energy that falls on it, the water that falls on it, and the wind that blows through it.  That is made of materials that are at least not toxic and ideally beneficial to the people who live inside the house.   That produces so-called waste products that are edible by living systems.  In other words, that can become composted and soil building or transformed into other useful products through recycling or remanufacturing processes.  We can envision houses that are zero net energy as the city of Austin is going to require as the state of California is soon going to require.  Even houses that are net energy producers, that capture more energy from the sun and the wind than the residents need to sustain the house.  We can envision houses that are net water zero or net produces of clean water.  Here’s the thing; if a tree can produce food and clean air, powered only by sunlight, why can’t we?   If a chicken can produce another chicken with no waste in the process at all, why can’t we be as smart as a chicken?  The lessons are there and now it’s our challenge to adapt to those lessons time tested and to the complex systems of modern industrial society.  The big difference, I think, between this movement now and the land movement of 60’s and 70’s is now we are not talking about sacrifice.  We are not talking lowering standards of living.  We are not talking about doing without the modern amenities that we’ve come to know and love.  We are talking about how we do this in a much more intentional, wise and design elegant way so we can meet the need of more and more people with less and less stuff.

You recently sat down with some other leaders in sustainability for a piece in Natural Home Magazine.  You talked about being both hopeful and concerned about the future.  What are some of your hopes and concerns?
My hopes are that we can do what we were talking about during the course of this interview.  That we can actually invent and promulgate the kinds of technologies and infrastructure and economic systems that can support the kind of vision we’ve been talking about.  I think that possibility is within reach.  We know a lot of what we need to know to do that.  Technologies have advanced enormously.  The economic challenges have opened a lot of ears to these issues and opportunities.  I think we have a good shot from that perspective.
My concerns are that we are in a world of hurt.  We are not just in an economic meltdown and a credit crisis; we’re facing a whole series of crises behind that.  It is like a series of hurricanes stacked up off shore during hurricane season.  Where each storm isn’t the last, there may be another coming to hit you in a few days.  In addition to the immediate financial crisis we have the big question of climate change.  Whether the world will act with enough coordination and enough speed and enough seriousness to mitigate what could be a profoundly dangerous crisis for us.  Behind that we have the challenges of peak oil and peak water and peak uranium. The decline soil fertility and fisheries.  Issues of toxic accumulation and challenges to biodiversity and not to mention that a billion of us go to sleep hungry every night and two billion of us live on less than a dollar or two a day.  Untold numbers of children die every day of preventable diseases.  We got some big problems.  I think we have the knowhow and the skills to address them the question is do we have the will to address them and are we willing to muster that will in a coordinated and political/economic force.

That’s a lot to be concerned about, but I think you are right.  We have the tools to make it happen.
I think we do.  Again the question is do we want to make it happen?  Are we willing to commit ourselves at the level of personal lives and personal practices and the work we do at our jobs and our companies and our voting and our purchasing patterns to actually put our ideals to work in the world?  It does no good for people to know all this stuff and care about it and not act and say “Gee isn’t it horrible.” And “Gee what if those people did that?” and “Gee what if I did this?”

To wrap all this up I’m going to ask you about your black belt and how that helps you.  This is a question from Twitter.
(Laughter).  My martial arts practice is in an art called Aikido.  It’s of Japanese origin and bares resemblance to Tai Chi and other arts that are often called internal.  There are not just about the technique of the attack/combat that someone is engaged in, but also the state of mind and state of being that somebody brings to the work.  The training in Aikido in addition to the visible techniques and grappling and throwing and parrying is really centered on…centering.  Helping you to learn to be centered and balanced and at peace in any situation, including situations of conflict and threat.  The response when someone comes at you with an attack.  The first response is the internal response not the external.  If the internal response is fear or attention or locking up of the muscles then you lose degrees of freedom and you lose the ability to move effectively and respond effectively.  As you can learn to be calm in the face of conflict and centered in the face of conflict you have more degrees of freedom in your motion.  You can move more effortlessly and more effectively and in more appropriate response to the situation that you are facing, rather than any ideas that you may have about the situation that you are facing.  I find this to be enormously effective certainly in the dojo in the training center, on the mat, grappling and throwing and so forth.  Also on the highway, dealing with crazy drivers in big cars.  Also in relationships between people dealing with conflict and stress.  Also in business and negotiations, because  the same phenomenon of being present, being centered, being engaged and being open seems to work very well in all those arenas.

Terrific. Well Gil, thanks so much for talking with me today and I look forward to seeing you at Green Cities.
It’s been my pleasure.  I’ll see you there soon.

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“Buildings are very important. They are the world’s largest industry. When you include the products in it and cover the supply chain, which our standards do, it covers about 80 percent of all global economic activity. So it’s a very powerful engine to promote global sustainable improvement and economic improvement and the cities are the leaders.” – Mike Italiano

Transcript of Interview
February 12, 2009

I’m going to be covering our capital markets partnership sustainable investment initiative, which covers several things. Green building underwriting standards, and their use in the market, our capital markets briefing paper which concludes after 4 years of Wall Street due diligence that green buildings certified sustainable products, smart certified, which is consensus standard are more profitable, less risky and preferred by investors without exception in a survey that we initiated with standard of porous governments covering over 3.2 trillion dollars in assets. Part of that will include green building financing programs that we have ongoing pursuant to those activities including a $500 million dollar sustainable building security. That is a bond backed by 100 percent green buildings. Also what we are doing in California with EBA11, which is California statute providing green building financing through local governments and financial institutions, which is taking off and moving throughout the country.

So what interests you about speaking at Green Cities?
Well Green Cities is important because the cities are early adaptators in sustainability. They are farthest along compared to other governments and corporations, so they are the leaders and this is where you know we’re making the most of the progress. This is true both in green buildings and certified sustainable products and other activities.  The cities are the leaders in climate change. This is really where the action is, it’s where things get done. We have a resolution of support by the US Conference of Mayors that’s very much in line with the activity of the Green Cities program.

I was looking into your background a little bit and I saw that you had worked with the White House Science Office. Do you want to talk a little about what was that like and the kind of work you were doing there?
Yeah, I worked there both during the Carter and Reagan administrations, so it was few years ago. What we were doing was placing a priority for, in the federal budget, for eliminating hazardous waste generation, number one, and improving clean air and clean water. So we had a specific relationship with local governments on those activities and improving the priority of science within all government. So those were the primary activities at that time.

So it sounds like you were laying the groundwork there for the environmental initiatives that are happening now in some way with the work that you were doing then.
Yeah, very much so and also other work that we did on standards that the market place has adapted including standards for environmental cleanup, which we worked at and got approved, national consensus standards, as well as standards for dealing with commercial real-estate including the green building standards, the LEED standards. We set up the US Green Building Council. I’m the founder, back in 1992, and put together a few years later the LEED standard. We also put together our sustainable product standard, the SMART standard, which has now been incorporated into the LEED. Sustainable products are a lot more complex than green building, if you can believe it, because you have to cover the entire global supply chain of manufactures so those standards were actually a 20 year process.

That is a lot of time.
That is a lot of time. That is a lot of work, it was very controversial. But it adds enormous value. The leading manufactures certified, that are smart certified, are climate neutral at their manufacturing facilities, and that’s a huge benefit to society.

Could you talk some about founding the Green Building Council?
Yeah, it evolved out of our efforts through a national committee that I chaired on consensus standards. We developed consensus standards for environmental cleanup and commercial real estate. We tried to develop green building standards but the industry trade associations blocked it so we couldn’t make any progress. So we had to create a new organization and set up our own consensus process and have rules for industry trade association participation and the federal government. So that allowed us to developed the standards to get them out in the market, to get substantial traction and success which would not have happened if we did not create a whole new organization. So we also launched it with some funding that we got through our lobbyist from the federal government, it was about 10 million for green buildings, so both those activities really helped. Although it was a long, hard, arduous process because even though we set up our special rules the industry trade association then dominated. The building industry is the worlds biggest and has the most players and still is most controversial. Although now both with certified sustainable products and certified green buildings, the LEED and the Smart standards, they are both motherhood and apple-pie because people have seen the value and our underwriting standards and our briefing paper with Wall Street to show that these are more valuable and that people prefer them.

So what initially got you involved in doing this kind of work? What was the pivotal moment, if there was one?
Yeah the pivotal moment was when I was in high school and a neighbor of ours taught civil engineering at Syracuse University and was working on cleaning up the most polluted lake in North America, which has gotten much cleaner now, Onondaga Lake, because its major industry polluters have closed down. Their manufacturing facilities have shut down. He invited me to one of his classes and I just became fascinated with it and it was the reason I got into both environmental law and environmental science, both professionally and academically.

Speaking of the current economic climate, in a way, what are your thoughts with what’s going on with the economy and how that’s going to affect green building that’s happening?
Well green building is still fairly strong, it slowed down definitely because the economy. Getting the capital market to move forward with green building certified sustainable products can literally get us out of this recession, prevent a depression. And we’re working to make sure that all the ground work is laid and top management can understand that we can get the financial institutions and governments to realize it and move forward in a united front to commercialize both of these activities, which is over an $800 billion market. That’s just in the U.S. We think it will happen globally, the Capital Markets Partnership, which is another organization I run, has four countries as members, the U.S., Canada, U.K., and Australia. We see that this will happen simultaneously. We did this in the past where we commercialize standards in the entire building industry and it generated huge risk reduction and value creation and enormous profits by Wall Street. The investment bank partners that we have now that is working on the sustainable building security believe, as we do, that this will do the same and can get us out of this depression. So there is a lot of money to be made in green buildings and certified sustainable products. We need to launch them, commercialize them to get us out of this recession, and also prevent eminent irreversible dangerous climate change. One of the reports that we put together, with the state of California and also the NASA and the IPCC scientists, calculates how much climate pollution we need to reduce by 2015 to prevent dangerous climate change from going irreversible. We’ve put that into a report and it was peer reviewed by the capital market partnership and was adopted by the US Conference of Mayors as a resolution and specifies that we need 2.8 million green and climate neutral buildings and 2.1 million sustainable certified products by 2015 to stop dangerous climate change from going irreversible. That includes 60 percent margin of safety in using the worse case climate pollution projection of IPCC. So that’s an important milestones that we still have to be very mindful of and try to reach because there is no climate change legislation, and it’s uncertain that we’ll get some soon, and even if we do its uncertain it will move fast enough.

So do you think with the new administration, do you think there will be new climate change initiatives?
There already has been. One of the first things that the president did was to direct transportation to move forward on the fuel efficiency standards, I think by 2010. That was a very important component. The Department of Energy obligated $80 billion for federal green building and the stimulus bill $20 billion more and there is substantial funding for renewable energy financing, which the new administration supports. But there is no climate change legislation to deal with the irreversibility problem, and that’s because the stimulus is taking priority, but he has done some things that will deal with that.

So what do you think is the role of cities in building in the environmental movement? I have spoken with some people who think that buildings specifically are the cornerstone upon which we should be building the environmental movement.
Buildings are very important. They are the world’s largest industry. When you include the products in it and cover the supply chain, which our standards do, it covers about 80 percent of all global economic activity. So it’s a very powerful engine to promote global sustainable improvement and economic improvement and the cities are the leaders. They really control where the buildings are. They’ve taken that lead. They have adopted more green building programs both for their own buildings and the private sector, more than any other entities and also taken the lead on sustainable products and purchasing. So the cities are really critical to the progress we have made and future progress.

So what cities do you know that are on the fore front of green building?
Well, San Francisco is one of the leaders. Mayor Newsom, of San Francisco, is Chairman of the Capital Market Partnership representing the US Conference of Mayors. They have adopted green buildings for their city buildings and also for the private sector. Los Angeles has done the same, Washington DC; I think there might be 10 programs where they mandated green buildings for the private sector. There’s probably over 100 local government programs for green building programs in one way or another.

In these cities, what do you think they do well, and what could they do to make these programs better?
Well I think on the financing side, which is really critical, the cities have moved forward and have the framework in place.  We have partnerships with the state of California and San Francisco and other cities, Santa Monica, but also with the council of development financing agencies. There are 250 local governments that fund private sector activities in the public interest. There is a need to educate the cities on proper underwriting using green building underwriting standards, and consensus certification so that the financing of green homes and green buildings is done in a way that we know will reduce climate change, pollution, reduce conventional energy, and therefore add value. Our underwriting standard documents for commercial buildings on a one to 1000 score for all properties and portfolios. What activities increase cash flow and reduce expenses. That’s how the markets value buildings. For homes it’s what reduces expenses and increases value and our standards cover both of that. Again for all homes and portfolios. So understand this for private sector buildings because the cities now have a very important role with financing, is really critical so that the money that is being spent through California statute and these federal legislation proposed is going to be money that is well spent, is actually reducing conventional energy. Therefore the financial institutions will embrace it and put a lot of capital into it. Without good underwriting everybody will lose because we know from sub prime that we cannot afford to do that in the future.

Do you have any projects that you have on the horizon that you are excited about that you would like to share?
We are very excited about the 500 million sustainable building security because we think that this is going to be copied and can really get securitization going. The securitization market is 40 percent of our economy and essentially dead now and there is no money to be lent so we think this is a way of using good underwriting, having higher valued collateral, in other words these buildings are worth more, generating a lot of improvement to the buildings stock while also making money for people and adding almost a trillion dollars a year to the economy. We have monetized that based on actual green buildings. So that’s very important and we are using the underwriting standards in that. I think the 2nd thing that is very exciting is the opportunity with the local governments and the state governments to move forward on green building financing and sustainable product purchasing.

In your field, in general, what is a hot topic or project going on in the field that is something that is interesting to be aware of?
Well we have one green building financing pilot we are working on which is a billion dollar green building. We are working on creating the financing and also getting the financing at more favorable terms. So what we have done is scored the proposed public. It’s a public/private building with the underwriting standard. It scored an 87 it is at a platinum green building level, LEED certified, and included that in a report that Ernst & Young is recommending including our capital markets briefing paper for financing feasibility. We’re working on a proforma that will show increased cash flow and reduced expenses that will be in a report to the city where this is to recommend the first $500 million in bonds and then we plan on including that proforma also in the official bond statements, so the investors know in this added value and then working with the LEED banks, JP Morgan, Chase, Bank of America, on cheaper cost of capital for the private sector funding the 2nd 500 million.

Wow that does sound pretty exciting. Sounds like a big project.
It’s a big project; it is very exciting because these are all things where we can actually get the financing to work and to have a cheaper cost of capital incentives. This could include actually higher ratings for the $500 million bonds that are issued.

Okay so last question, on a more personal level. Aside from green building and law what else do you like to do?
Well, I do spend a lot of time of this because we are at the threshold of the meeting together of speak, greet, and sustainability which I think will solve a lot of problems, but I also do enjoy a lot of hiking, golf, rollerblading, you know aerobic activity like that, it keeps me occupied.

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Mike Italiano is President & Chief Executive Officer for Market Transformation to Sustainability (MTS) and Capital Markets Partnership. He founded the Capital Markets Partnership, MTS, U.S. Green Building Council (USGBC), Risk-Based Corrective Action (RBCA) Leadership Council, and American Society of Testing & Materials (ASTM) Committee E50 on Environmental Assessment. He is a Director of MTS, USGBC, USGBC CEO Board, Sustainable Furniture Council, and former Director of ASTM and Chairman of ASTM E50. Mike has been responsible at over 200 waste sites for expert testimony, litigation, cleanup, settlement, and scientific and technical analysis.

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“We’re tremendously excited about the fact that the Obama administration seems to understand that the future for business is all around sustainability and broad context of sustainability, so that means not only green, but social concerns have to be enveloped in that and profitability has to be addressed.”  – Karyn Barsa

Transcript of Interview
February 11, 2009

So I guess what I first want to start out with is the talking about the projects you’re involved in right now and the companies you’ve been involved with previously and are currently involved with?
Ok, well let me explain a little bit about Investors’ Circle. We are actually the oldest, largest and the only national early stage investor group that is devoted to socially and environmentally responsible businesses. So we are some 225 members strong across country, looking at mission based businesses in a broad spectrum of sectors. So it’s a great opportunity for entrepreneurs who are interested in really making a mark in the world using for-profit business to find funding. So Investors’ Circle being a collection of early stage essentially “angel investors” or private investors each member makes his or her own investment decisions. We don’t manage a fund here that invests on behalf of Investors’ Circle , so at any given time there are a number of different companies that are in play or being considered in a due diligence process by any number of our members.

Ok, and so what is your role specifically at Investors’ Circle ?
I am President and CEO here.

And so what does that mean as far as the kind of work that you get to do?
AH! I get to do all the fun stuff actually because Investors’ Circle is a lot more than just an “angel group” if you will, we’ve been known for 10 or 12 years as a “thought leader” if you will and an organization that helps develop a sector called “social enterprise” and specifically for-profit social enterprise and move that forward. So my big goal is not only to facilitate the process of moving capital from our members and others into social enterprises, but also to help the world understand what are the benefits of for- profit business in creating real and sustainable and lasting change in our communities and the potential for this is just phenomenal. There is so much work that Investors’ Circle really wants to do going forward, and so much creative financing that can be organized for the benefit of social enterprise and ultimately for the benefit of the communities and the world we live in, that its every morning that I get up and it’s a new idea and it’s a new concept to chase down and invite collaborative partnership into. So what I do is really great fun.

Yeah, it sounds like a phenomenal job to have, that’s for sure. So could you give me an example maybe of the type of start up that’s Investors’ Circle helps along?
Sure, because we have such a broad range of members and some individuals who are accredited investors and others who are what we call institutional members, they might be funds, they might be family foundations that sort of thing. We fund a broad range of companies in various stages of development, so yes we do provide some seed capital, but we also provide expansion capital to companies that are more well established. And I can tell you that there are a number of companies that have come through Investors’ Circle and have been financed by our members that you might know about, so for instance, there are very well known brand names like Niman Ranch, or Zip Car or Justice Earth if your out here on the West Coast, companies like that, Guayaki, which have really been able to transform their sort of startup and small enterprise from concept to national and sometimes international brands. So Investors’ Circle is very interested in working with an entrepreneur to say “ok, how can you maximize the impact that you envision?” And in some cases that means staying small and slow in terms of growth and local and in other cases it means, “hey lets take this brand out to the world,” because the brand has a message that we want everyone to understand.

So you talked earlier about social enterprise, what does that mean exactly?
For us that really means, and I have to admit that the term “social enterprise” is used somewhat loosely and could really benefit from greater standardization of definition here, but social enterprise generally speaking are organizations that put missions even ahead of profit, if you will, and it doesn’t mean that they can’t achieve profit and very strong profit, but the reason that they exist is to benefit the communities that their involved with in one way or another. Its really baked into the DNA or the business plan of the company, and social enterprise can refer to organizations that are for-profit companies as we traditionally know them or can refer to non-profit organization that want to develop for-profit entities within them so that their less reliant or sort of the vagaries of contributions as their main revenue source. I’m trying to think of a good example of a non- profit organization that has an embedded social enterprise, and perhaps the most well known is Goodwill for instance with their retail stores, and you know there are a number of other organizations that use it to great impact. It really helps support the community work that their doing.

So whenever you speak at Green Cities are you going to be speaking on social enterprises and how for- profit business can make a social impact?
Yes, and in fact I have to say I’m waiting for some direction from the Green Cities event managers to understand to how I might best add value to the program. But I’m happy to speak from particularly a green perspective or speak from the stand point of the power of for- profit enterprise to make a tremendous difference or whether it’s specifically green, whether it’s a broader context of sustainability or whether it’s a social impact that one wants to put forth.

So switching gears just a little bit, I’m curious to know what the pivotal moment was that prompted you to do the type of work that you do, because it is phenomenal work, it’s very impactful and you’re doing it at such a high level that you actually have a chance to influence and change, it seems, a number of social causes.
Well, you know, I thank you for asking that because it brings a big smile to my face when I think about it. I actually started my career in investment banking and did all of those wildly rapacious things that investment bankers are known for. I eventually moved through hook or by crook and became Chief Financial Officer at Patagonia, and at the time in the mid 90’s Patagonia was really seen as counterculture organization and my friends from Wall Street ribbed me to no end about moving out to a place where I had to wear Birkenstocks everyday and what have you, but Patagonia is involved and committed to its mission of using business to implement and inspire solution to the environmental crisis, to such and extent that the consumer doesn’t even begin to see, really only sees the tip of the iceberg in terms of what Patagonia is involved with. Patagonia reaches back into its supply chain and reaches forward into its customer base really to spread the concept of environmental impact reduction and works very directly with companies all over the globe to help them reach those goals in that regard. So I was so inspired by what was going on at Patagonia and became quite a convert in my understanding what for- profit can do to actually make a difference in the world, that when I eventually became CEO at Smith & Hawkin, which is another company that is known for its commitment to environmental impact reduction and sustainability, it had just become a part of my perspective and my life focus at that point, so to move to Investors’ Circle with two mission based businesses in my background this is an absolute joy, I mean talk about a culmination of everything I wanted to do, I come from a finance background in investment banking and here I get to play with investors and entrepreneurs, there could be nothing better, I have to tell you.

Everyone can only hope to be able to do that kind of work after laying those solid foundations in other companies.
Well you know its true but in all honesty and I won’t take up too much of your time with this perspective, it really is a matter of being open to the sort of inputs that come into your life, and understand what their meaning could be, and not working against them but working with that sort of natural flow. It’s been a phenomenal opportunity for me, I’m just thrilled.

So I guess we could talk about things outside of work for just a moment, just talk about who Karyn Barsa is, what other interest do you have, what other things are you currently involved with?
Well I’m really turned on by business and using business to solve some of the worlds biggest issues and I also serve on a number of other boards. I’m on the board of a wonderful company which is doing phenomenal things; they are a mission based business that sources organic fair trade cotton from India and does a lot of work on the ground to improve the lives of Indian farmers. I’m also on the board of a public company called Decker’s Outdoors Corporation. And Decker’s makes footwear including UGG brand boots and shoes, but they also make a brand called Simple and they aspire to make Simple the most environmentally responsible footwear line in the entire world, and they are working very hard to do that. So when you see this sort of impact that small business can have in communities and large public companies can have it become a very inspiring, sort of get you out of bed in the morning sort of prospect. And when I’m not working with those companies I’m skiing, or bicycling, either mountain biking or road riding. I have to say Northern California provides the greatest access I’ve ever had to whole spectrum of outdoor activities, that frankly if you really enjoy being in a fog enshrouded space, you can find that, and if you enjoy being in bright sunshine all the time, you can find that as well. It’s perfect.

So what do you think about the current economic situation and the future of business? And what socially responsible businesses are going to have to do to stay viable?
You know I have to say that I would guess that the majority of individuals involved in this sustainable business movement and social enterprise and what have you are absolutely thrilled with the current economic environment and the change in the administration. We really feel that we have a wind at our back, first of all the old economic order is falling apart at the seams. We’re going to have to learn now to live with a much less leverage in our society so we’ll start to get down to real value add from a company stand point, rather than the creation of more dollars from a single dollar through what is essentially a leverage or a smoke and mirrors sort of approach. We’re also tremendously excited about the fact that the Obama administration seems to understand that the future for business is all around sustainability and broad context of sustainability, so that means not only green, but social concerns have to be enveloped in that and profitability has to be addressed. So there is a role for business to play that begins to overlap non-profits and the government sectors have been doing for years. And when you consider the fact that we are going into a significant amount of debt from a government standpoint, you wonder whether or not the government should be relied upon to provide the sort of social benefits that it’s been providing as the sole provider for so many generations. And when you think about the opportunity for for-profit business to generate some return in that regard I think that’s a spectacular use of funds to support business in that regard. So, it’s all gonna work out eventually, the economic cycles can be very painful to go through but they always come through in the end, and we see an upswing, and I think that social enterprise and sustainable businesses will be at the forefront of all this as soon as we start to pull out of the tailspin.

So what kind of specific sustainability work have you been involved in? Because I know with Green Cities there is a lot of talk about sustainability as it relates to the municipality. So if you could just talk about some sustainability work.
Well you know sustainability is such a broad term and I know that Green Cities is specifically on environmental and green approaches and I think that that’s really one leg of a three part stool if you will, to use a tired metaphor but, to be truly sustainable community or business or even organism with that you really have to consider all of the aspects of your existence, and that does include the three part process of people, planet, profit. So Patagonia is probably from a personal stand point where I had the most experience in terms of reducing environmental impact and helping organizations understand how to grow in an environmentally respectful matter. We also worked with a number of non- profits, one of which I had experience with was Save Mono Lake organization. And after they had worked so hard to Save Mono Lake which is a large salt water lake in California, I take that back let’s just call it a large lake in California because I don’t know what the salinity or the density is these days. Well once they had worked so hard to save Mono Lake they said, “well now what?” Do we cease to exist or can we turn our efforts to help organization and municipalities learn how to develop a sustaining sort of environment, and at Patagonia we helped them create a business plan that would move their efforts and whatever they had learned through that process into more of a municipal focus. And as well the former CEO at Patagonia, who’s no longer there Dave Olsen, is involved directly with working with municipalities to reduce their environmental footprint. And he does some spectacular work throughout the state of California and nationally. So I’ve been associated with green work from a municipal standpoint by association and also in a small way through Patagonia as well.

Is there anything that you have coming up; any kind of projects that you’re excited about that maybe isn’t out there in the world of news yet, but that your working on and looking forward to?
Sure, you know what, there are a number of things at Investors’ Circle that are very exciting to me but I’ll mention just a couple and the first is that we put on two conferences each year and we have one conference coming up in San Francisco coming up in April, April 19^th through the 21^st. So that takes up a lot of our focus and effort because we try not to just put on a venture fair process where companies come and meet investors and make their presentations, but we have an entire day that is devoted specifically to promoting the social enterprise space forward. So it’s a wonderful conference with really stimulating keynote speakers, plannery sessions and what have you all designed to be very interactive. The other thing that we’re working on I think from a project standpoint is something that might be interesting to a number of socially or environmentally minded entrepreneurs, and that is that there is a, we believe there is a large amount of capital that could be deployed by various foundations under programs called Program Related Investments. And this is actually an IRS construct that allows a foundation to make investments in for- profit and non- profit businesses that are designed to actually return something to the foundation, but the key is in order to qualify from an IRS standpoint, these investments have to be made in a way that is “below market.” So entrepreneurs that qualify for that sort of PRI Investment enjoy very low cost debt for instance that financing and some very interesting and positive and flexible terms and what have you. What we would like to do at Investors’ Circle is do some work around unlocking the potential for more PRI Investment from foundations and partner with a couple of our very well known partners, like RSF Social Finance, to make that a reality and be able to package these deals for our entrepreneurs who come to us for funding. And I’m really excited about that because what makes green investment so exciting to me from an investor’s standpoint is that many of these companies are eligible for subsidized capital, they’re eligible for grants from foundations, and PRI monies from foundations and when they come to an “angel group” or an individual angel for funding, that angel benefits from the capital that’s been put in the form of grants and PRI’s. It’s a beautiful way to construct a very solid capital structure and for angel investors to enjoy a significantly reduced risk profile. So that is one of our chief ways of looking to catalyze the flow of angel investments into green and socially responsible companies.

Well that sounds really, really terrific and all very, very exciting work.
It is it really is. I can’t tell you I bounce out of bed every morning.

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Karyn Barsa serves as President for Investors’ Circle. Formerly CEO of Smith & Hawken and COO/CFO of Patagonia, Karyn has led two vibrant organizations that serve as models for values-centered leadership around the world. With a career that includes investment banking, commercial banking, and turnaround corporate finance, Karyn has specialized in opportunities to meld business and social missions and has been a featured speaker for numerous organizations including the American Management Association, Business for Social Responsibility, and various sponsored conferences. In addition to serving on the board of Investors’ Circle, Karyn is a member of the Board of Directors at Deckers Outdoor Corporation (Nasdaq: DECK) and a member of the Board of Directors of NESsT. Karyn also serves on the Advisory Board of inResonance, Inc. Karyn holds a B.A. in Economics from Connecticut College and a MBA from the University of Southern California.

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