After spending nearly two years in the early 1990s scouting Washington's Willapa Bay for entrepreneurs with plausible ideas for sustainable businesses, Alana Probst of Ecotrust found more than a dozen. But few local financial institutions were willing to make high-risk loans, and the chances of turning those ideas into reality seemed dim.
It would take an
unusual bank, Probst realized, to jump-start a sustainable economy
in Willapa Bay.
The bank that came to mind was
Chicago's Shorebank Corp. Founded in 1972 by four socially minded
bankers - two black and two white - Shorebank was the nation's
first community development bank. Although it had never focused
before on what Ecotrust calls "nature-based lending," it had
transformed Chicago's South Shore neighborhood from a depressed
black neighborhood to one with a thriving middle class. Even
better, the bank was profitable.
genius lies in its structure, says Ted Wolf of Ecotrust. "Shorebank
realized it wasn't enough to open just a bank," he says. "It needed
other credit resources."
structure is that of a bank holding company, with affiliates such
as a venture capital fund, a for-profit real estate company and a
community development nonprofit.
Most of the
bank's loans in Chicago go to local "ma and pa rehabbers' such as
ambitious janitors who dream of owning and managing their own
apartment building, says Susan Grosky of Shorebank. Such clients
might not have enough collateral for a standard bank loan, she
says, but they do have talent and energy. And if a particular
venture is still too risky for the bank, its affiliates can step in
to offer nonbank credit or advice.
managers warn it won't work everywhere, Shorebank's model has since
been duplicated in places as diverse as Russia, Kansas City,
Cleveland, Detroit and Michigan's rural upper peninsula. Now, the
innovative bank has come to northwestern Washington.
In 1992, Ecotrust teamed up with the Chicago
bank to form Willapa Bay's ShoreTrust, "the First Environmental
Bancorporation." Its first affiliate was a nonprofit trading group
based in Ilwaco, Wash., that offers both marketing help and nonbank
credit from a $2.5 million revolving loan
Much of that money is already in
circulation. One loan went to a family-operated sawmill that mills
sustainably logged red alder. Another loan helps a company in
Oregon's Willamette Valley turn that red alder into furniture
marketed as a "green" product. Other loans have focused on seafood
businesses or environmental cleanups.
that, unlike socially responsible investment funds, the trading
group doesn't require the companies to which it loans money to meet
strict environmental guidelines known as a "screen." Instead,
ShoreTrust tries to brainstorm with companies to find sustainable
solutions. "It's not about separating the good from the bad from
the ugly," says Wolf. "It's more about beginning a conversation. We
say, "Let's work together to get over these hurdles."
The next affiliate scheduled to open is a
for-profit bank, which will start lending this summer. Chicago's
Shorebank has already raised $7 million for the bank through a
special investment fund called "EcoDeposits." Willapa Bay's
ShoreTrust expects to raise an additional $12 million in capital
for the bank, the trading group and a for-profit real estate
company through a public stock offering.
final affiliate will be the real estate group. Wolf says it will
combine the nonprofit functions of a land trust with the for-profit
motivations of a responsible commercial real estate company.
Although Ecotrust is pleased by the fit between
Shorebank and Willapa Bay's needs, Wolf says it's too soon to tell
whether the Chicago model will work for nature-based lending in
If the company does succeed, it
could change the way rural banks view lending opportunities.
"ShoreTrust is trying to demonstrate an idea that's off the
charts," says Wolf.
For more information about
ShoreTrust, contact Ted Wolf, president of Ecotrust, at