by Pete Danko

Earlier this month Bloomberg New Energy Finance said global clean energy investment in 2011 shot up to a record $260 billion – a 5 percent increase over 2010 and almost five times the total of $53.6 billion in 2004. Now the news and analysis service has pegged the firms and individuals who were the biggest players in making that happen. And it’s a whole different cast than the one that led the way in 2010.

“This is the seventh year we have prepared annual league tables showing the most active deal-makers in the sector,” Michael Liebreich, chief executive of Bloomberg New Energy Finance, said in a statement. “What is striking is the amount of change among the leading players, reflecting the turbulent year we have just been through in the clean energy sector.”

The leaders (see them all in this PDF) were a diverse lot, as well. Among them, Blomberg said, was the U.S. Federal Financing Bank in arranging asset finance, U.K.-based Terra Firma Capital Partners in venture capital and private equity investment, and China-based Global Law Office in the public markets.

The U.S. Federal Financing Bank was especially dominant in asset finance, providing $10.14 billion in credit in 13 deals, adding up to just shy of a 20 percent share of the market. Which might reasonably prompt this question among many readers: What or who is the U.S. Federal Financing Bank?

Well, to Fox News it’s a “Secret Government Bank That’s Financing More Solyndras.” Hmm. While it’s not widely known, “secret” seems not to be quite the right word for an institution that puts out monthly reports detailing its doings.

As the bank explains on its website, it is a government corporation that, among other activities, “borrows from Treasury and lends to Federal agencies and private borrowers that have federal guarantees.” For years, that meant being involved heavily in rural utility financing – and it still does, with around half of the bank’s $58.4 billion holdings in that category, as of Oct. 31, 2011. The post office is in for $13.1 billion, as well.

But what’s raised the ire of some conservatives is that the bank, during the Obama administration, became the lender for the companies getting money through the U.S. Department of Energy’s Advanced Technology Vehicles Manufacturing direct loan program ($5.1 billion as of Oct. 31), and also did some of the lending for the Section 1705 guaranteed loan program ($2.2 billion) for clean energy development.

Bloomberg cited the loan guarantees for the BrightSource Ivanpah concentrating solar plant and the Agua Caliente solar PV plant (which Warren Buffett recently bought into) as boosting the Federal Financing Bank to a leadership position in clean energy finance in 2011.

There was a caveat to the list of the top 20 asset financing arrangers, however: “Chinese (and other) state owned banks have also been active in this period and may have featured more prominently than shown in this table, but transparency on these deals is often limited.”

Also notable in the Bloomberg tallies was NRG Energy, the Princeton-based utility, taking the top spot in grabbing ownership stakes in projects, with $6.46 billion poured into five investments. All were in the solar sector.

The 2011 Clean Energy and EST League Tables are based on the largest database of financial transactions in these sectors, Bloomberg said. It’s white pair with the full listing of leaders is available online as a 26-page PDF.

BrightFarms, Inc., which has an innovative model to bring local foods to supermarkets, raised $4.3 million in a Series A equity financing round.

It's a great idea and taps into increasing consumer demand for locally grown foods: they finance, build and operate hydroponic greenhouse farms at supermarkets, eliminating the time, distance and cost involved in transporting food from a supply chain.

The BrightFarms model offers food that's more flavorful, safe and environmentally sustainable. Since there's no transport involved, it should result in lower prices for customers and higher margins for supermarkets.

And as the model is scaled, it would reduce the cost of agriculture and water.

There is no cost to the supermarket retailer, only an obligation to purchase the produce.

NGEN Partners led the round, which also included investments from Emil Capital Partners and BrightFarms founder Ted Caplow.

"I am delighted to join my partners in commercially deploying our vision of building-integrated agriculture. The upcoming BrightFarms projects at supermarkets build upon our prior rooftop greenhouses, extending the same principles that guided my original design for the Science Barge: local food production that is both high yield and ecologically sustainable," says Ted Caplow, BrightFarms founder and Chairman.

Website: brightfarms.com/

Photo by BrightFarms

Warren Buffett is getting into the solar business by buying one of the world's largest solar PV plants - the $2 billion Topaz project under development in southern California.

Buffet's utility, MidAmerican Energy Holdings, is making the acquisition - the 550 megawatt (MW) project is being developed by First Solar using its thin-film solar panels. First Solar will also operate the plant after it comes online in early 2015.

First Solar was unable to get a Dept of Energy (DOE) loan gurantee for the project.

Topaz "demonstrates that solar energy is a commercially viable technology without the support of governmental loan guarantees," says Greg Abel, MidAmerican CEO. "The utility will seek to add more assets of this type to its unregulated portfolio."

"The reason for the move from wind to solar is very simple," says Gerard Reid, an analyst with Jefferies told Bloomberg. "Tax credits for wind in the U.S. expire at the end of next year, while solar ones run till 2015."

He notes that solar is a much safer bet than wind because there's less maintenance and weather risk.

MidAmerican, on the other hand, says the Topaz purchase is a "strategic move" that builds on its experience with wind energy, reports Bloomberg. The company has become one of the larger wind producers - it owns over a dozen US wind farms that produce at least 1.5 gigawatts of electricity. It also has a stake in Chinese electric car manufacturer BYD.

Photo by Forbes

Smith Electric Vehicles, which recently unveiled the first electric school bus, has filed for an IPO, hoping to raise $125 million.

It will trade under the ticker (SMTH).

Smith produces electric vehicles (EVs) for commercial uses - vans, buses and trucks - for companies and municipalities. It sold 320 vehicles over the past year and says it has written letters of interest for 2200 vehicles.

Frito-Lay says it's building the largest fleet of commercial electric trucks in North America. It plans to roll out 155 trucks this year - all designed by Smith Electric.

And Duane Reade, the largest NYC drug store chain, is conducting a pilot with Smith to electrify its truck fleet.

Smith is based in Kansas City, Missouri where it has an assembly plant, and has another plant in Newcastle, UK. Today, they announced a third manufacturing plant in NY State, where it will produce the Newton electric truck starting next year.

Smith is second EV manufacturer to go public after Tesla (Nasdaq: TSLA), which makes cars for the retail market.

Investors will need confidence in the future of electrified transportation because Smith isn't profitable. Although it's landed some high-profile clients, the company operates at a loss, with $37.6 million in revenue for the first half of 2011. They reported revenues of $35.6 million for 2010.

Smith had a net loss of nearly $21.3 million for the first half of 2011, compared with a loss of almost $30.3 million for 2010.

Smith raised $58 million in equity funding this year, in one of the larger rounds. The company was formed in January 2009, and its senior management team has been in place only six months.

However, California-based Fisker Automotive and Coda Automotive, raise more, $150 million and $76 million respectively. Fisker makes luxury plug-ins and Coda makes EVs for the retail market.

Last week, the EV industry in Europe got a boost by a €220 million loan from the European Investment Bank to fund Nissan's development of new production lines for the LEAF in the U.K.

China also announced plans to stimulate electric vehicle purchases, including 25 major pilot cities that will offer a variety of incentives from reduced tolls, parking fees, and utility bills. China is also building out an EV charging structure with more than 6000 stations by year end.

Photo by Smith Electric Vehicles

Better Place, which is developing a worldwide electric car battery charging infrastructure, raised another $200 million in a Series C round (later stage funding), bringing its total to $750 million.

Better Place owns and operates networks of stations where electric vehicle drivers can quickly swap their battery for a fully charged one, eliminating the charging process. It also plans to offer batteries charged using renewable energy, wherever possible.

In 2010, five of the six largest venture capital fundraising rounds went to cleantech companies, and Better Place, with a $350 million raise was the largest. It even raised more than Twitter's $200 million round.

The company's first commercial nationwide electric car networks launch in Israel and Denmark early next year, to be followed by Australia later in the year, starting in Canberra.

Better Place is installing networks in Hawaii, Northern California, Ontario, Canada, Southern China, and Japan, and says it will use the proceeds from this latest funding round to expand further into Western Europe.

By the end of the year, Better Place will have demonstrated its solution across four continents including locations in Europe, the Middle East, the U.S., Australia, China and Japan, with each project providing unique insights into these markets.

"We've worked hard over the past four years to engineer and build a technology solution that competes with oil-based transportation," says Shai Agassi, Founder and CEO. "We are entering the next phase of growth for our company where we prove that our solution works, that it's in demand, and that it scales, as we begin to push into new markets and attract new investors and new partners. I believe that our investors should be applauded for having the vision to finance the future of transportation."

General Electric, which has a joint venture with Better Place, and UBS AG invested for the first time along with existing shareholders, including Israel Corp., HSBC Group, Morgan Stanley Investment Management, VantagePoint Capital Partners and others.

"With this round, our shareholder base now includes the world's largest banks, blue chip asset managers and leading industrial holding companies," says Idan Ofer, Chairman, Better Place. "Our Board and investor base are committed to leveraging their vast networks, experience, and diverse set of skills to accelerate the global adoption of electric cars."

Launch in Denmark, Israel

Better Place will launch initial commercial service to a select group of customers in Israel and Denmark in the first quarter of 2012, expanding to full commercial operations over the following months.

In Denmark, Better Place has agreements with 50 of the country's 98 municipalities, covering 69 percent of the population to deploy its infrastructure and transition fleets.

Earlier this year, Better Place opened a visitor center where people can order Renault's Fluence Z.E. electric car ($38,300)and subscribe for "mobility services." It costs $556 a month for unlimited mileage, for example, but much less for people who drive less. The subscription incudes a home charger, electricity use as well as unlimited access to public charging stations.

Better Place and partner DONG Energy are working to leverage Denmark's 20 percent energy production from wind turbines to charge the electric vehicles with clean energy.

In Israel, over 400 corporations, representing a potential 80,000 employee cars, have signed letters of intent to begin switching their fleets to Better Place as the cars and the service become available.

In Australia, it has agreements with Renault, GE, Lend Lease, and the Royal Automobile Club of Victoria for the introduction of electric cars and the rapid deployment of an electric car network.

By the end of 2013, Better Place says it will have the largest electric car network in the world in Australia, rivaling other competitive efforts underway in the U.S. and China.

Photo by Better Place/flickr/Creative Commons

by Pete Danko

After a worrisome second quarter, cleantech venture capital bounced back in the recently concluded third quarter, according to Ernst & Young. The accounting firm, again crunching data from Dow Jones VentureSource, said U.S. VC investment in cleantech companies increased 73 percent, to $1.1 billion, compared to the year-ago quarter, and that the number of deals jumped 36 percent.

The energy storage sector drove activity, raising $421 million. Within the sector, fuel cells led the charge, totaling $225.5 million in investment. Bloom Energy accounted for a good chunk of that change, raising $150 million.

“Confidence in cleantech investing continues despite the challenging investment market,” Jay Spencer, Ernst & Young’s Americas Cleantech director, said in a statement. Spencer said the hot quarter for energy storage “reflects a growing corporate focus on proactively managing their energy mix.”

Regionally, California, as is typically the case, was the top spot for cleantech investment. In fact, more than half the capital invested in cleantech in the third quarter – $583 million – went to California. Massachusetts was next at $170.4 million. Other big movers among the states were Pennsylvania and Oregon, Ernst & Young said; those states saw investments more than triple since the third quarter last year 2010, “bringing their Q3 2011 investment levels to $85.4 million and $73.5 million, respectively.”

Oregon-based electric motorcycle manufacturer Brammo raised $28 million in a Series B round to to accelerate development of its electric powertrain technology.

Polaris Industries is the lead investor - a leading company making all-terrain vehicles, snowmobiles, motorcycles and road-legal electric vehicles. Existing investor Alpine Energy and new investor NorthPort Investments also participated.

Brammo has developed innovative battery and powertrain technology, being used in the urban commuter Enertia, sports motorcycle Empulse and others. This same EV technology has potential in other vehicles including low speed vehicle markets.

Polaris, which still uses four-stroke engines, wants an inside line to electric vehicle technology. The company will be a key strategic partner, bringing opportunities to broaden the range of markets for Brammo Electric Vehicle drivetrain technology and expertise.

"Brammo and its partners are combining forces to gain dominance in the EV powersports market. We now have the ability to maintain our high standards of quality while we innovate and commercialize at speed. Polaris is the clear leader in powersports and our manufacturing partner, Flextronics, is a global leader in electronics manufacturing. Our products are the synthesis of powersports and electronics," says Craig Bramscher, Brammo founder and CEO.

Besides using an electric motor, Brammo's vehicles incorporate recycled materials and uses just 10 percent of the material required to make a car.

by Peter Asmus

The word “Solyndra”–the name of a solar company based in Fremont, California that recently filed for bankruptcy – has now become synonymous with government boondoggle. Critics of the Obama Administration’s clean energy program claim that the bankruptcy of Solyndra proves that solar energy doesn’t work, and that government efforts to develop alternative energy sources are doomed to fail. The Solyndra affair took a new twist on Oct. 14, when The Wall Street Journal reported that RockPort Capital, a primary Solyndra investor, helped promote the company to the Pentagon for a $1 million U.S. Navy pilot program.

Let’s make one thing clear: All energy sources receive government support. In fact, renewable investment pales in comparison to the amount of government spending on fossil energy. The oil and natural gas industry has enjoyed a century of federal support averaging $4.86 billion in subsidy spending each year, according to a report released last month by DLB Investors.

That’s 13 times the average annual expenditure on all renewables, including wind power, the leader in terms of total capacity new renewable capacity additions.

As a country we’re not investing nearly as much as Europe or China in renewable power, and yet this new booming clean tech energy sector is delivering strong returns on those taxpayer dollars. That’s true for the loan guarantee program that’s under fire.

Solyndra represented only a small fraction – 2.8 percent – of the total loan guarantee portfolio, leaving plenty of room for further defaults without taxpayer losses. Let’s put this bankruptcy in proper context. What will the $2.5 billion that the loan guarantee program will cost the U.S. government provide in terms of returns to the economy? It has already generated almost $19 billion in private capital flowing to retool our energy economy and create thousands of jobs during a recession. These guarantees are not government handouts. They only become liabilities in the rare occurrence of a company failure, such as is the case with Solyndra.

Solar power, with its ability to create energy independence at consumer homes, businesses and even in places where there is no grid in the developing world, is the ultimate of how to give power to the people. In the first half of 2011, renewable energy sources, including solar, generated 18 percent more power than the U.S. nuclear fleet, a clear sign of just how far this sector has come over the past decade.

What is especially appealing about solar photovoltaics (PV) are the employment statistics. By some estimates, solar PV creates 10 or even 20 times as many jobs as equivalent investments in nuclear, coal or natural gas. In fact, more than 100,000 people are working with solar in the U.S. today. That’s more than the number of Americans working in coal mining. And those solar jobs grew by nearly 7 percent since last year, a welcome bright spot in an overall economy that only increased employment by 0.7 percent.

Ironically enough, Solyndra is a sign of solar power’s success — not failure – since costs for the technology have dropped by a whopping 75 percent over the last three years. Those cost reductions, driven in part by China’s government investments designed to drive down manufacturing costs of traditional solar PV products, left Solyndra’s novel and relatively expensive product unable to compete. Even the conservative Institute for Electrical Energy Engineers now predicts solar power will be the world’s cheapest source of power over the long-term due to its modularity and the fact that the best-performing panels today are only 20 percent efficient.

In other words, future innovation can radically increase performance, since efficiency can be targeted at that 80 percent of the potential solar resource that is currently lost in the power conversion process.

The real story, the one that the outraged headlines about the Solyndra “scandal” aren’t telling, is that those same record cost reductions have helped make solar power one of the fastest growing industries in America – and our federal and state governments have been absolutely instrumental to that American success story. Solar energy is booming and we’d be fools to pull the plug on this clean energy source based on a single, expectable company failure. Today’s investments in solar power will insure that the U.S. captures its fair share of this clean tech bonanza.

Photo by Lawrence Jackson/Wikimedia

Clean energy investments reached an all time high in the third quarter.

Financing for wind and solar farms, and mergers and acquisitions surged, despite the unfolding European financial crisis and a slump in clean energy share prices on the world's stock markets.

Led by utility-scale wind and solar projects, investors poured $45.5 billion into clean energy projects, 16 percent more than Q3 2010, according to Bloomberg New Energy Finance.

The total includes project financing, equity raises on public markets, venture capital and private equity fund investments.

Project finance dominated Q3 - venture capital (VC) and private equity (PE) was slow at $2.2 billion - down 27 percent from Q2, but 55 percent higher, however, than Q3 2010.

The biggest VC/ PE deals were in the US - $175 million for biofuel company Sundrop Fuels and $150 million for fuel cell developer Bloom Energy.

Utility-Scale Projects Lead

Indeed, wind and solar projects accounted for $41.8 billion of the total. Investments in offshore wind in the Europe's North Sea alone reached $6.3 billion for three large projects totalling 1 GW of power.

There were also big financings for solar PV, solar thermal and biofuel projects in the US, for a geothermal installation in Indonesia, and for onshore wind projects in Brazil and China.

The largest solar financing was $1.6 billion for the High Plains Ranch in the US.

Public Markets Horrendous

In contrast, clean energy stocks on the public markets have nosedived down, falling 35 percent in Q3.

Just $1.4 billion entered public stocks, down 62 percent from Q2 and 71 percent from Q3 2010. Companies found it very difficult to launch IPOs or secondary issues in these conditions. Chinese solar company Beijing Jingyuntong Technology (SHA:601908), was among the few IPOs, raising $394.8 million on Shanghai's market.

"Over the past three years we have seen extraordinary falls in the prices of clean energy equipment - wind turbines and solar photovoltaic panels. This has driven up installation rates and asset investment levels, but there is still not enough demand to soak up significant over-supply, so prices and margins have remain under pressure and manufacturers' share prices are being crushed.

The industry has swung between being a buyer's market and a seller's market several times in recent years: right now, you would love to be a developer with access to funding, but not a supplier. Eventually things will come back into balance. Of course the furor in the US over the failure of Solyndra hasn't helped clean energy share prices," explains Michael Liebreich, Bloomberg New Energy Finance CEO.

Solar PV modules have fallen in price by a third since autumn 2010, and by 70 percent since the middle of 2008, while wind turbine prices have fallen 20 percent since 2009. These moves make renewable energy technologies much more cost-competitive with fossil-fuels, but it's painful for supply chains.

M&A

Q3 also set a record in merger and acquisitions in clean energy. M&A, including corporate and project acquisitions and refinancings, reached $25.9 billion, up 31 percent from Q2 and 59 percent from Q3 2010.

Among the big acquisition deals: EDF bought the remaining 50 percent of its renewable energy arm, EDF Energies Nouvelles, for $7.9 billion and Toshiba acquired Swiss electronic-metering company Landis+Gyr for $2.3 billion.

The acquisitions are partially driven by consolidation and partially because of utilities and industrial groups taking advantage of low valuations for clean energy companies that will grow rapidly over the medium and long term, says Liebreich.

Photo by Rodrigo Amorim/flickr/Creative Commons

Fixed income investments play an important role in investment portfolios, generating regular income with reduced risk as compared to equities, although not immune from it of course. Within the family of fixed income investments there are four categories where you can seek to be more HIP, with the potential for both positive human impact and profit:

Each of these different categories of fixed income investments have their own traditional and evolving characteristics, and each of them have the opportunity to enhance human impact and potential profit.

Fixed-Income Mutual Funds

Established in 2000, the Domini Social Bond Fund (DSBFX) is a mutual fund of intermediate-term, investment-grade bonds from government and corporations, with the intended human impact to boost home ownership (http://www.domini.com/). Hence, the fund holds many Fannie Mae and Freddie Mac loans. In addition, the fund seeks to support corporations serving underserved communities by providing access to banking, improved education and health care or redeveloping deteriorating areas.

Up to 10 percent of this fund goes directly to community-focused investments, which may carry higher credit risk and default. Like Domini’s equity indexes, this fund has tended to underperform the benchmark in up markets, but do better financially in down markets. While not 100 percent HIP because of this financial performance, each component of the fund can be rated for its human impact.

Another fixed income mutual fund that allocates a subset of its portfolio to high-impact fixed income, specifically microfinance, is the equity fund Pax World Women’s Fund (PXWEX). Up to five percent of the fund goes to microfinance loans that support women entrepreneurs around the world while seeking to generate positive financial return. This is a very HIP approach and adds higher impact and potential profit for a small fund allocation (http://www.paxworld.com/).

Pooled Loan Funds

RSF Social Finance CEO Don Shaffer advocates that today’s financial investments, many of which are “complex, opaque, and anonymous,” need to move to being “direct, transparent and personal.” RSF Social Finance (formerly Rudolf Steiner Foundation), based in San Francisco, is a nonprofit financial services organization that offers investing, lending, and giving options for its clients. Shaffer said in September 2009 that RSF’s assets under management increased 10 percent over the previous year, with few redemptions from investors, unlike many other financial management firms.

Among its offerings for investors, RSF manages two loan funds, one is accessible to all investors (RSF Social Investment Fund) and another is mainly targeted at high net worth investors (RSF Mezzanine Fund). As with the more HIP banks discussed in the previous feature, RSF’s purposeful drive is to make loans to organizations that “improve the well-being of society and the environment.”

In the loan-process evaluation, RSF highly values firms with sustainable design of products, a fair-trade production system, and even a “capital structure and existing financial partners that reflect commitment to social good and environmental sustainability.” Everyday investors can put in as little as $1000 to the Social Investment Fund, and the financial returns have been steady over time with low risk of default. Since 1984, the total amount of loans made to enterprises, both for-profit and non-profit, has been approximately $200 million.

RSF offers an innovative fund that seeks to deliver human impact and profit. The capital invested in its portfolio can vary among debt, warrants, revenue participation streams, and fee notes. The intent is to help growth companies that are cash-flow positive increase their impact and overall scale, seeking an attractive financial return as well. The criteria for companies is posted here: http://rsfsocialfinance.org/services/lending/borrower-criteria/

Microfinance Funds

“We believe that microfinance is a financially scalable and sustainable model that can provide both attractive returns for investors, as well as significant social impact by improving the lives of clients it reaches,” says Jim Bunch, then director of microfinance investments for eBay founder Pierre Omidyar’s investment company, Omidyar Network, which has a core focus in microfinance. (Note: Author Paul Herman worked at Omidyar Network as an investment strategist in 2005-2006.)

Microfinance, which offers loans with interest to micro-entrepreneurs around the world, can be a big financial market that enables positive impact. While approximately $25 billion in capital for microfinance is actively deployed today, Deutsche Bank estimates that the total capital needed to serve all available micro-entrepreneurs to work themselves out of poverty could be $250 billion.

These quantifiable results include more equal access to capital for women and low-income citizens, the increase in education and literacy among them, and healthier lives lived through increased access to clean water and affordable health care.

Blue Orchard Finance and Dexia were one of the first microfinance-focused funds for professional investors. In 1998, the partners raised $40 million to reinvest in microfinance institutions in Asia, Africa, and Latin America. Since its launch, the Dexia Micro-Credit Fund (DMCF) has been advised by Blue Orchard, based in Geneva and New York. The fund has served 100 microfinance institutions (both for-profit and nonprofit) across 34 countries with more than $500 million in loans, and these low-income entrepreneurs pay back 98 percent of the time. Additionally, Dexia’s 3 percent share of the 9 million entrepreneurs supported is estimated at 300,000 people who have built a new income and asset base (http://www.blueorchard.com/jahia/Jahia/pid/463).

Today’s fund serves borrowers that are 43 percent rural and 52 percent women. The fund’s top five countries for loans placed are Bosnia-Herzegovina, Colombia, Ecuador, Ukraine, and Georgia. Annual returns on this fund, which are available in U.S. Dollars, Euros, and Swiss Francs, have ranged from 3 percent to 6 percent annually. But the management fees of 2 percent and potential loads of up to 4 percent offset the financial returns. Blue Orchard has partnered with Deutsche Bank, Citigroup, Credit Suisse, and Bank of New York-Mellon on subsequent investment funds, and won a Financial Times award in 2008 for the best sustainable investment deal with Morgan Stanley.

A listing of microfinance institutions (MFIs) worldwide can be found at www.MixMarket.org. This information hub tracks the performance details, both financial and social, of microfinance funds worldwide, both for-profit and nonprofit. MixMarket.org also tracks the total number of micro-borrowers and value of microfinance loans around the world. “Microfinance is an ingenious idea because, in a way, it acts as the Federal Reserve for entrepreneurs globally,” says Jim Torrey, a professional investment fund manager and adviser to Washington D.C. based MicroVest. “If you look at the numbers, they are really extraordinary—the number of jobs created and people helped. I love the fact that microfinance is not a handout, but enables individuals to take ownership of their lives and become independent and entrepreneurs.”

Peer-to-Peer Loans

When banks give loans, they evaluate customers based on the likelihood of repayment. What if you could apply for a loan and be evaluated not only on opportunities for repayment, but the propensity for human impact?

Prosper Marketplace Inc. (http://www.prosper.com/), created by eLoan co-founder Chris Larsen does just that. Prosper Marketplace offers U.S. investors the chance to lend money directly to American borrowers. Since 2006 it has served more than 860,000 members and facilitated $180 million in loans (as of October 2009). Loan-seekers post their names, photos, and purpose for the money, which is limited to $25,000. Everyday citizens can become lenders to offer capital in amounts as low as $25, which are aggregated among multiple lenders and act as a syndication of that loan.

Lenders can view validated credit scores (which need to be above 640) of those borrowers. Prosper uses a range of data to create an additional “Prosper rating” so the marketplace supports informed decisions. Borrowers finance everything from startup ventures, including those with human impact, to the refinancing of school loans, or recovery from financial disasters, including the cost of health care treatments. The yield to investors (the interest rate less the average default rate) in September 2009 ranged from 7 percent to 13 percent, depending on the risks assessed. Prosper lenders can also automate the process by purchasing a portfolio that matches their risk profile, and trade “notes” of previously funded loans.

As we move through multiple asset classes in a portfolio, the next feature will discuss the venture capital and private equity firms actively seeking human impact and profit. These VC and PE investments fuel the progress of sustainably focused companies, inventors, and investors who are helping solve many of our most pressing problems, as well as transform traditional business priorities to include human, social and environmental impacts while seeking profit.

Photo by Ben Fredericson/flickr/Creative Commons

R. Paul Herman is CEO and founder of HIP Investor Inc. [http://www.HIPinvestor.com] Herman is the author of “The HIP Investor: Make Bigger Profits by Building a Better World,” [ http://bit.ly/HIPinvestorBook ] published by John Wiley & Sons in 2010. Herman is a registered representative of HIP Investor Inc., an investment adviser registered in California, Washington and Illinois.

NOTE: This feature, excerpted and adapted from the HIP book, is not an offer of securities nor a solicitation. The information presented is for information and education purposes, and is NOT an investment recommendation. Past performance is not indicative of future results. All investing risks loss of principal. The author and his clients may invest in the companies mentioned above, including in the HIP 100 Index portfolio. Details and full disclosures are at www.HIPinvestor.com