Joel Solomon: The conscientious capitalist

GREEN GIANT | Joel Solomon, a vanguard of socially responsible investing in North America, also founded Tides Canada

While he’s best known as the money behind Vancouver Mayor Gregor Robertson, Joel Solomon has been quietly building a reputation as one of the city’s smartest financiers

The 180-degree outlook from Joel Solomon’s 10th-floor patio deck is a perfect metaphor for his complicated and sometimes controversial world view. Solomon’s condo is in Railtown, boxed between the tracks along the Vancouver harbour and some boarded-up, light-industrial spaces in what is inevitably known as Canada’s poorest neighbourhood. But the view is spectacular. Directly to the north lies the brightly lit Meccano-land of Port Metro Vancouver—strangely beautiful, especially at night. The giant cranes are constantly in motion, sweeping and dancing, loading and stacking steel containers like so many colourful blocks—all in the service of what Solomon describes as “shipping off rocks that come back as televisions.”

Look past the port and your eyes are caught by the sparkle of lights on snow, on Grouse Mountain and Cypress. And to the left, there is the twinkling lace of yet more lights on the Lions Gate Bridge. 

Then comes the looming darkness of Stanley Park and the gleaming towers of the city’s burgeoning commercial centre, and finally, due south, the gloom of the Downtown Eastside. The 61-year-old financier sums it up succinctly: “You have industry, nature, capitalism and the cost of capitalism.”

It is, apparently, an irresistible one-liner for the man sometimes caricatured as the éminence grise of Vancouver’s lefty establishment. Joel Solomon, after all, is the man who bankrolled Gregor Robertson—as an organic juice magnate, an NDP MLA and, since 2008, as Vancouver mayor and inspirational leader of the bright green municipal Vision Vancouver party. Solomon was also the co-founder of Tides Canada, a national charitable organization that former prime minister Stephen Harper and his energy minister, Joe Oliver, targeted as a suspicious nexus through which “foreign radicals” would infiltrate the Canadian environmental conversation. The Harperites even bulked up Revenue Canada’s audit budget in what the Globe and Mail reported was an effort to revoke Tides’ charitable tax status.

Standing on the deck, surveying the view on a brisk but clear winter evening, Solomon even looks the part. It’s not that he lives the cliché of the dishevelled old hippy; Solomon’s style is neat and nerdy—even if there is nothing in his entire wardrobe that requires pressing. But his clothes and manner are uniformly unassuming. Going from his home on Alexander Street to his office at West Hastings and Cambie, he walks through the most harrowing corners of the Downtown Eastside—as he has every day for almost three decades—without standing out, without attracting either attention or trouble. As for his tentacled influence, he is neither excessively proud nor in any way secretive. On this particular night, Solomon is hosting a reception for Melanie Mark who, within a week, will be elected as the first B.C. MLA who is a woman of aboriginal origin. 

But here’s the thing—in contradiction to the charge of anti-establishment radicalism or to the implication, from his “cost of capitalism” comment, that he harbours some deep disdain for the business community: Joel Solomon is a committed capitalist. In certain exclusive, influential and very-high-tax-bracket circles, he is a model capitalist: using his and other people’s money to make more money. And through his Renewal Funds, and through his leadership and advocacy in organizations like the international Social Venture Network, he’s doing it in a way that proves you can belly up to the capitalist trough and still admit to your neighbours—and your children—how and where you are making your profits.


Renewal Partners Investments


Of course, socially responsible investing is hardly avant-garde. The Wall Street Journal began this year by noting that “2015 might well have been when sustainable investing became sustainable.” Yes, there is still money to be made investing in oil and tobacco, but these are no longer inevitable holdings in any profitable portfolio. On the contrary, the financial industry research firm Morningstar, Inc. reports that, on average, socially responsible investment (SRI) funds slightly outperformed non-SRI funds across the board in 2015, measuring both short- and longer-term (10-year) returns. There are now almost 1,400 signatories (up 37 per cent from 2014) to the United Nations-supported Principles for Responsible Investment, which offer investors and investment managers a set of “voluntary and aspirational” guidelines that incorporate environmental, social and governance considerations into investment decisions. Those signatories—those principled investors—now manage US$59 trillion, about half of all institutional assets worldwide.

As for what constitutes a socially responsible investment, that depends on who you ask. Traditionally, SRI funds—such as the “ethical” mutual that emerged during the 1990s—promised to filter out investments that might offend on ethical or religious grounds: alcohol, tobacco, pornography, gambling, weapons manufacturing and nuclear power. But, with the exception of nuclear, this sweep misses the environmental category and doesn’t really capture social issues (for example, there is no filter for child labour)—and so, around the turn of the century—not long after author and entrepreneur John Elkington coined the term “triple bottom line”—funds started rebranding from SRI to ESG, for Environment, Social and Governance. Even then, according to a 2015 report from the CFA Institute, most money managers who take ESG issues into account do so because the governance filter is a good indicator of how well their target companies are being managed. It’s still about the economic bottom line.

A growing group of investors want more. It’s not enough to avoid doing damage; they also want to know that their investments are having a beneficial impact. And among those, Solomon is a pioneer. As Don Shaffer, president and CEO of RSF Social Finance, a San Francisco-based fund that manages US$175 million, puts it: “Joel Solomon is one of the most influential leaders in the field of social finance in North America.”

Born on December 8, 1954, in Chattanooga, Tennessee, Joel W. Solomon (Jr.) started out as the son of a local shopping mall developer—not a Rockefeller, but someone accustomed to a degree of comfort and influence. The Chattanooga Courthouse and Post Office is housed in the “Joel W. Solomon Federal Building,” named in recognition of Joel’s father, who served for three controversial years (1977-79) as the head of the General Services Administration—the U.S. government’s second-largest purchasing arm, after the Pentagon, and an organization Solomon Sr. worked hard to clean up. His obituary in the New York Times observed: “Some people close to the situation say Mr. Solomon was ousted because of his public frankness about corruption and because he alienated powerful forces in Washington.”

The father died young, at age 62—complications from a chronic kidney disorder—leaving his son an inheritance of US$3 million, barely enough today to buy a nice west side Vancouver house but a significant stake in 1984. And Solomon the younger was already a player. An idealistic graduate of the exclusive Vassar College (BA political science), he had learned some early political lessons working as a staffer in the Jimmy Carter for President campaign. But he turned quickly from politics to business, working in the family real estate development company and, even then, advising on corporate-side investments. His first personal investment, in 1983, was in a dairy business called Stonyfield Farm, now the most successful organic yogurt producer in the United States.

But the death of his father, coupled with a related and serious health scare of his own, inspired Solomon to break away from the stress and pressure of the developer’s life. He struck out in what sounds like an unstructured search for health and happiness, including travels that brought him periodically to B.C.—as a visitor and, ultimately, a suitor of his first wife, a British Columbian whom he married in 1986. It was also during this period that he emerged personally as an economic activist—not only a philanthropist who would give away money to the needy or the worthy, but an investor who would leverage his fortune for societal, as well as personal, benefit. He’s a founding member of the Social Venture Network (1987)—the granddaddy in the SRI space, whose offshoots include organizations like Business for Social Responsibility (BSR), Net Impact, Business Alliance for Local Living Economies (BALLE), SVN Europe, and the American Sustainable Business Council (ASBC). But Solomon’s personal business model began to emerge most clearly in the early 1990s. He was spending more and more time in B.C., where he had been invited to consult to the Rubbermaid heiress Carol Newell, and the two found immediate common cause. Newell liked Solomon’s approach so much that she hired him to help deploy her $14-million inheritance. The pair started Renewal Partners and went hunting for the best ways to make that money work.

Their first investment was in a small but promising organic food store in Kitsilano called Capers—an incredible success that was bought out within a couple of years by Boulder-based Alfalfa’s Markets, digested by Wild Oats and, in 2007, swallowed whole by grocery giant Whole Foods. The second investment was an organic juice company: Happy Planet, which was started in 1994 by West Vancouver high school buddies Randal Ius and Gregor Robertson on the strength of funds from friends and family. “We’d grown fast out of the gate, but in 1996 we needed to build a bigger juice plant,” Robertson recalls. They had tentative agreements to supply Starbucks, Costco and Overwaitea, but they had to be able to produce much higher numbers in order to make good. “But at the time—even today—financing can be tough for young rapidly growing industries. It’s a high-risk realm.” Renewal came to the rescue, and Solomon found another kindred spirit. “We became friends talking about business,” Robertson says, adding, “When I shifted into politics, we had even more to talk about.”

Renewal’s success started getting noticed by others in the SRI/ESG investment community. Don Shaffer from RSF Social Finance says today that Solomon and Newell did something that had never been done before, especially not in such a regionally specific way: they poured all of their joint capital into “investments, loans and gifts to try to create a socially just and economically sustainable society.” Many people have since adopted that approach, says Shaffer, and now “work off Joel and Carol’s playbook.” In addition to investing through Renewal Partners, Solomon and Newell also collaborated on the provision of grants and support to environmental and social justice groups, a process that Newell had initiated in 1992 with a charity she dubbed the Endswell Foundation. In the next 18 years, they disbursed more than 700 grants, totalling $20 million, before folding Endswell into Tides Canada in 2010, a national charitable organization that Newell initiated in 2000 as a larger platform for raising and distributing philanthropic support in the social and environmental sector. (Tides alone has since supported more than 2,500 projects, with grants in excess of $158 million.)

Renewal’s combination of benevolence and good strategic judgment earned an increasing amount of influence, with Solomon finding a chair at just about every table where an environmental or social justice issue was being negotiated. Among the highest-profile efforts was the Great Bear Rainforest campaign, in which leading environmental groups including Endswell, Greenpeace, ForestEthics, the Rain-forest Action Network and the Sierra Club joined with First Nations, the provincial and federal governments and a group of forestry companies to protect 14,000 square kilometres of mid-coast temperate rainforest. A critical part of the process was finding $120 million in funding to cover costs and ensure the forest’s preservation. The federal and provincial governments both chipped in $30 million, leaving a $60-million tab for private donors, which Solomon and the other ENGO leaders raised and delivered. (In an updated “final” agreement announced in the first week of February, the protected area will more than double to 31,000 square kilometres, nearly half the coastal forest area under negotiation. Managed logging will be restricted to an area of 5,500 square kilometres, and the protection, including a joint provincial government/First Nations management regime, will be embedded in provincial legislation.)

One of the other activists at the table in the very early days of the Great Bear negotiations was Paul Richardson, then as counsel for an international philanthropic consortium and later as president and, ultimately, chair of Ecojustice. Richardson says that even before he met Solomon, he was casting around for “something more” than he was getting from his Toronto law practice. He and Solomon clicked, and Renewal’s broad reach and social purpose was just what Richardson was after; he also found that their skill sets complemented one another perfectly. “Joel’s the big-picture guy; I’m the detail person. But we both cared about the same things.” In 2003, he joined Renewal Partners as vice-president (he’s now president and CEO). 

The two men quickly realized that they had an opportunity to extend their reach—and extend the opportunity to other investors—by founding Renewal2, a venture capital fund that would invest in established but early-stage “small” businesses (those with annual revenues between $1 million and $20 million). They launched straight into the 2008 recession and, though it took them two and a half years, Renewal2 still raised $35 million, which they then invested in 11 companies, screened for their capacity to have a positive triple-bottom-line impact (environmental, social and economic) and, critically, to succeed. Within its first three years, Renewal2 was reporting a net internal rate of return in the mid-teens.

That kind of success exerts its own kind of gravitational pull, and Renewal’s results started to attract the attention of other money managers—some who were exclusively focused on social responsible investing and some who were, and are, just trying to build strength in a diverse asset mix. In the latter category falls David Wolf, who runs BSW Wealth Partners—a Colorado firm that manages US$800 million in assets, principally for wealthy individuals and families. The fund has been around since 1992, at which time the interest in SRI or impact investing was, Wolf says, “negligible.” Today, he says, one third of BSW’s clients (representing half BSW’s total assets) want to know that their wealth is being directed into organizations and investments that have a significant chance of generating a positive social and environmental impact—as well as a positive return. But when you’re managing as much money as BSW, it’s difficult to dig down into every investment to protect against the dangers of greenwash. “So we don’t make private equity investments. We find, vet and invest in funds that have outstanding managers.”
Wolf got sold on Renewal around 2010 or 2011, when both BSW and Renewal were invested in a company that was going through a rough patch. “I was so impressed by the energy and professionalism they brought to that company,” he says. “Paul and Joel transformed a likely failure into something that, while not a home run, was still the best possible outcome.” That’s not usually the way it goes: in the venture capital world, he notes, the expectation is that in every portfolio of 10 companies, four will fail, four will wind up among the walking dead, and two will make all the money. In fact, because the walking dead can themselves consume a huge amount of time and money, some investors are happy to trigger a quick failure just to limit the liability.

Renewal rejects that model—in part because it can, says Richardson. First, Renewal’s funds are set up on a 10-year term, so investments “should be great for the investor over the long-term, but they don’t have to have hockey-stick returns in the short-term.” He goes on: “In a world where eight die and two fly, you have to look for winners that will make up for the whole 10. We look for growth that is good but not necessarily stratospheric. And of 18 companies we have invested in, only one has actually failed—and we may still be able to find value even in that one. So, we may be less likely to find the new Twitter, but we’ve less heartache along the way.”

Wolf missed Renewal2, but when Solomon and Richardson started raising money for a new fund in 2013, BSW Wealth Partners stepped in as one of the biggest investors. It’s helped explain why Renewal3 overshot its fundraising goal of $50 million—Solomon and Richardson raised more than $63 million in less than a year. They now have 150 investors and $98 million under management, and they are promising the same returns (mid- to high teens) for Renewal3 that they have reported for Renewal2.

Picking through the clippings, listening to investors and looking at the financials, you can’t help concluding that the Renewal team is all business. But talking to Joel Solomon, you’re reminded that the corporate mission is also deeply personal. In his early 20s, as a rising star in the Nashville real estate development business—with an imminent opportunity to follow his father to Washington, D.C., to work for the Jimmy Carter administration—Solomon got a diagnosis of polycystic kidney disease, the same condition that was even then limiting the life expectancy of his father.

“The doctor said, ‘You could die in two years or live a long time, and there’s really nothing you can do about it.’” In the face of such news, Solomon says he “ran away,” soon after landing in an organic gardening training institute in California. It was a nice fit, philosophically as well as physically. “I figured, if I am a better person—if I am a happier, healthier person—my odds are better. And even if I don’t live longer, I will have had a happier life.”

It’s what turned him from development and politics to organics and philanthropy. And it worked like a charm. He managed his condition admirably until around 2005, when it started to become obvious that he wouldn’t survive without a kidney transplant. So he sat down and sent out an email to his 500 closest friends and associates, looking for a match and a willing donor.

Shivon Robinsong stepped up. She’d been a close friend since 1981 and was the co-founder of Hollyhock Retreat on Cortes Island, where Solomon is now chair of the board and his now wife, Dana Bass Solomon, is CEO.

And the result was better than he could ever have hoped. Now Solomon says he feels 10 years younger, and he smiles with a look that evinces joy, surprise and the sort of gratitude that reads like humility. In his early 60s, he revels in the knowledge that he appears to have beaten the curse that claimed his father at age 63. Joel W. Solomon the younger is now blessed with a “normal” case of mortality: he’s still going to die—as are we all—but the spectre is no longer marking his every step.

It is, perhaps, another metaphor. In a world where eight die and two fly, Solomon’s genetics were going to trump his inheritance—something he thought about for years when he was reporting 12 or 14 times a year to the blood clinic in the Downtown Eastside, just around the corner from his home. “I was a significant percentage of the affluent clients at the clinic. And I couldn’t help notice—we were all just trying to stay alive.”