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May 26, 2006 3:51 pm

Working for the gift that keeps on giving

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It’s a great event for my guys,” says Drew Neiporent, standing in a cramped Manhattan conference centre. Neiporent, who owns some of New York’s best and flashiest restaurants including Nobu, Mont­rachet and Tribeca Grill, clutches a soft drink in one hand and greets past employees and friends with the other. “They get out of their own little work kitchen. They see other guys. It gets competitive,” he says.

Chefs from 60 restaurants in the city are here to show off their skills with a dish or two. Hungry epicures push their way among the stalls, dragging friends to sample something. On a stage at the back is a cook-off between chefs. There is also a silent auction with wine and food packages, spa treatments and a trip to Ottawa on offer.

The atmosphere is identical to that of scores of city food events. The difference is that all the money raised goes to feed the poor and this event will be repeated across the US. “When the charities are genuine and the money does not all go on expenses, we get involved,” says Neiporent, whose chefs contribute to about 50 such events a year. “This is in part about world hunger, so it’s a no-brainer for us. Bill Shore has been very clear about getting the funds to the right people; he makes sure the wealth gets to the food charities in the cities where these events take place.”

Shore is founder of Share Our Strength, which puts on the 60 or so Taste of the Nation events each year. More than the money that gets distributed, Taste of the Nation illustrates Shore’s cutting edge work in the small but growing field of sustainable philanthropy. When he founded SOS 20 years ago, he decided he would not take money from foundations. To do so, he says, would be to redistribute wealth. “I wanted to be a grantmaker, not a re-grant-maker,” he says. So, he tried to lure chefs and food companies to give time, food and equipment to his events. It was a far-fetched idea but since 1988 the events have raised $55m to feed the poor.

The idea came to him when he was working as a policy advisor for Gary Hart’s 1984 presidential campaign. Moved by coverage of the Ethiopian famine, he started SOS as a side project with Debbie, his sister. During two more failed presidential campaigns he built upon what he learnt on the campaign trail – that it only took 25 people to spread the word to others.

“How do we get to Alice Waters and Danny Meyer?” was the important question for him. Once he had signed up the California chef and New York restaurateur, SOS gained legitimacy. It now has about 10,000 chefs that it can call on. Through them, Shore’s goal is to end childhood hunger in the US, which he believes is five to 10 years away.

The Taste of the Nation events demonstrate his ability to wheel and deal. In New York, it cost $250 for regular admission and $375 for a VIP cocktail reception. He enlisted the new Georgia Aquarium in Atlanta to host an event a week before New York; admission there was less expensive ($175-$275) but each restaurant was asked to raise $5,000 from local sponsors, adding $200,000 to the pot. All money raised goes to charities, most of them local.

Shore also has about 20 corporate sponsors and promotes them heavily at the events. Jenn-Air pays an annual marketing fee and provides cooking ranges for all events. “We try to help companies that underwrite the expenses,” Shore says, noting the cook-offs draw attention to ranges. “If I can help Jenn-Air, it’s great. I know I won’t have to go out to find another sponsor.”

His success spawned the formation eight years ago of Community Wealth Ventures, a for-profit consultancy wholly owned by Share Our Strength. It receives any excess it makes from its operations. Its business is to teach other charities how to be self-sustaining. A Washington DC charity had a kitchen preparing 600,000 lunches a year for children. Advisors said it had capacity to make 1.3m meals a year; it now provides food service for assisted living facilities as well.

A less obvious example is Pioneer Human Services, a halfway house in Washington state. The group wanted to give ex-prisoners jobs so they could have a better chance of re-entering mainstream society. Pioneer ended up in the precision sheet-metal business and is now a contractor for Boeing. Revenues went from $4m to $50m, says Shore. Similarly, the Latin American Youth Center in Washington, DC, bought two Ben & Jerry’s ice cream franchises and uses them to train children as well as to pay for its operations.

This is where SOS plans to go next with Social Franchising Ventures, which will operate under the philosophy of “why not buy a business if you can’t start one?” Shore says. He admits all of this is a lot of work. Not all charities can be self-sustaining. Of the 120 charities Community Wealth Ventures has advised, only 30 to 40 have succeeded in bringing in revenues. But he notes that a secondary benefit has been to measure the non-profits by more rigorous business standards.

That is where groups such as Venture Philanthropy Partners are working. Mario Morino, its chairman, who has served on boards with Shore, says with a good-natured smile: “What Billy is doing is really needed but it is cutting edge.” Morino, who made his fortune in the IT industry and is also a board member of General Atlantic, operates VPP like a private equity fund.

In 2000, he raised a $32m fund that has since been invested in a dozen non-profits in the Washington area, such as Heads Up, an after-school programme, and Mary’s Center for Maternal and Child Care. He is raising a second fund of $40-$50m. Its annual grants include assessments by McKinsey.

“The money is for the growth part of the organ­isation; the idea is to scale up,” he says. “The goal is to build these organisations to a point where they will be better off when we leave. If they just sustain that level, they are fine.”

He believes the groups he funds will always need public money. “Social service organisations are not going to replace that public money with philanthropy,” he says. “So first of all you have to come up with a way to get that public money better.”

Using the financial markets to a non-profit’s advantage is also gaining ground. Chris Page, senior vice-president at Rockefeller Philanthropy Advisors, tells the story of a woman who two years ago wanted to build houses along the Texas border for low-income families. With only $80,000 to start, she built three houses in succession; she then received government money to continue, leveraging the initial amount to $400,000.

In the process, she became a regional distributor for Eco-Block – a styrofoam-and-concrete building material that provides better insulation – and has attracted offers of support from a prominent Latin financier. To date, 25 houses have been built and another 20 are planned.

Self-sustaining philanthropy of this nature is still on the fringe. But one thing its success has shown is there are plenty of comp­anies willing to reach its early adopters. At the New York Taste of the Nation, Beefeater Gin not only supplied its gin to all the drinkmakers but it commissioned a young chef to create the “Beefeater martini rub” for grilling meats in the spirit of the event. “From a philosophical point of view, we are able to contribute financially to the cause of feeding the homeless,” says Suzanne Freedman, brand director, who estimates cash and product contribution at $300,000.

ENLIGHTENED INVESTING: AN ADVOCACY APPROACH TO STOCKS

Marc Lane practises what could be called the return-oriented version of self-sustaining philanthropy. It could also fall under the rubric of “put your money where your mouth is”.

Two years ago, Lane, of Chicago-based Marc J Lane Investment Management – which has about $1bn under management – started researching ways to make socially responsible investing as lucrative as the best stockpicking. With the backing of one very wealthy family, he developed a vetting system that he calls “advocacy investing”. Depending on what most concerns a client – the environment, employee rights, and so on – Lane screens companies based on whether they are good investments. From that pool, he screens them again to see if their practices mesh with what his clients hope to achieve.

“Our approach seeks to align the values of investors with the managerial behaviour of the companies in which they invest,” he says. “Now the charitable endowment or other funds can be deployed in a way that drives the mission and shies away from those that are inimical to it.” So far, only $50m of the $1bn he manages has switched to this model. But he points to several examples where it has satisfied clients.

For example, a non-profit whose mission was to increase business opportunities for women and minorities focused its pension money on companies that had aggressive outreach programmes for female- and minority-owned vendors.

For an environmentalist client, Lane is doing two things: protecting land the man owns in Brazil and looking for companies that have the best environmental record in their sectors. This approach allows for a bit more wiggle room.

“Even with energy companies, there are horrific performers and ones that are trying to do better,” he says. “We want companies to have positive and enlightened programmes.”

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