A yogurt maker wants to change the world

NEW YORK (Fortune) -- On April 26, when the shareholders of French food giant Danone congregate in Paris for their annual meeting, they will have a unique proposal to consider: setting up a mutual fund to channel investment into Danone's nonprofit social ventures in developing countries.

Unlike Danone's regular business units - which produce yogurt, water, and cookies - the ones receiving investments through the proposed new fund, to be called "danone.communities," will aim for "maximization of social objectives and not that of profit," according to the proposed resolution.

Danone initially hopes to raise $135 million and promises it will return a guaranteed rate comparable to a money-market account - about 3% to 4% annually, says Emmanuel Faber, Danone's president of Asia-Pacific operations and the brains behind the project. The company's management says it is confident the measure will pass. The fund is to be managed separately by bank Crédit Agricole, and be open to the French public as well as institutional investors.

Additional returns will be used to build nonprofit Danone factories and other ventures to provide low-cost nutrition in countries such as Bangladesh, Indonesia, and Madagascar, Faber told FORTUNE on a visit to New York ahead of the annual meeting. "The thesis behind the project is, as much as you can have conscious consumers," who are concerned about organics and sustainable development, "the same could apply to investors," Faber said. "If we offer them an investment experience that goes beyond the numbers, to see how [an actual project] works, we believe we can attract people who are willing to receive less money, to get more than just getting money out of their investment."

Danone's primary project to be funded by the new offering is a "social business enterprise" in Bangladesh, a joint venture with Grameen Bank, the organization built by Nobel Peace Prize winner Muhammad Yunus. Their rural factory about 140 miles northwest of Dhaka, launched last November, has recently started producing low-cost, fortified yogurt for sale in rural communities. It uses Grameen's microcredit network of small business owners to both furnish milk and sell the final product.

The "danone.communities" fund would help build two more such factories in Bangladesh, and start new ventures in other countries. Shareholders in the fund give up higher financial returns in exchange for "social" returns, as measured by three metrics: improved nutrition as measured by the nonprofit Global Alliance for Improved Nutrition (GAIN); reduced poverty, according to ten measures developed by Grameen Bank; and profitability of the venture, with the aim of being cash-sustainable after two years. Third-year profits would be plowed back into the venture or into new ones. "The reason why you invest is because you want to have a special bond with a project of that fund," Faber said.

At least some in the corporate responsibility field applaud Danone's effort. "It's a massive step forward for innovation," said Diane Osgood, vice president for strategy at Business for Social Responsibility, a non-profit organization of companies dedicated to socially responsible business practices. "Other companies will be interested in this. Many companies are seeking to form alliances to create environmental and social good, and new ways to deliver products."

Danone shareholders will be given the option to forego annual stock dividends and instead put them into shares of the mutual fund. More than 30% of Danone's employees have chosen to put a portion of their profit sharing into the fund, according to Danone spokesman Laurent Sacchi. Danone has already been approached by several organizations seeking capital from Danone's new investment vehicle, Faber said, noting that the projects ultimately chosen will have a "strong social impact" in terms of being able to improve nutrition in developing countries.