Spotting the next Tesla. Mobilizing foundation endowments. Bridging the “pioneer gap.” And looking around the corner as billions, and eventually trillions, of dollars of institutional capital shift toward positive social and environmental impact.
Over the past nine months the Returns on Investment team has been exploring how impact happens. We've interviewed investors and entrepreneurs like Nancy Pfund of DBL Partners, which recently raised a $400 million second fund for cleantech and job-creating investments, and Emily Stone of Uncommon Cacao, who is raising incomes of cacao farmers in Central America by going beyond fair trade chocolate.
And our regular roundtable has debated everything from infrastructure investing for impact to whether Donald Trump's seawall at his Irish golf course counts as an impact investing (yes, Trump wants to build a wall!). Among the panelists, Imogen Rose-Smith, senior writer at Institutional Investor, slays impact myths as well as hedge fund hypocrisies, while David Bank, editor of ImpactAlpha, blue skies the impact opportunities. Host Brian Walsh, head of impact at the New York financial technology firm Liquidnet, keeps the peace and the discussion lively.
With a dozen-and-a-half episodes in the can (and the crew juggling summer vacations) we're taking a look back at the first batch of Returns on Investment podcasts, arranged thematically. Have a listen.
Meet the Entrepreneurs
Raising smallholder farmers income. Emily Stone of Uncommon Cacao is working to get more money into the hands of farmers by creating a new supply chain for high quality beans. Uncommon Cacao was one of the first enterprises to take advantage of a new financing structure called the “Variable Payment Obligation,” (formerly known as a “demand dividend”) that lets entrepreneurs return investors' capital as their businesses grow. Listen now.
Converting Waste into Energy. Working in Mexico and Latin America, Alex Eaton and Sistema Biobolsa have introduced biodigester technology that helps farmers turn animal manure into cooking fuel and high-quality fertilizer. That reduces smoke from open fires, increases farm yields, keeps waste out of water sources and reduces greenhouse gases. Getting indigenous farmers to embrace the “not intuitive” technology required some good storytelling. Listen now.
Bridging the pioneer gap. Cathy Clark of the Case Initiative on Impact Investing at Duke University, offers a way out of the “valley of death” that dooms many promising social ventures. Initial funding for a social enterprise may come from grant makers who are interested primarily in the impact of the business. The seed stage investor, however, “is less interested in that data than in your unit model and if you’re going to have a business that’s investable,” says Clark. Listen now.
Finding the Alpha in Impact
Nancy Pfund and DBL Partners. Last year they closed their third fund, and with $400 million in capital, investors would be wise to keep an eye on what they do with it. DBL was an early investor in both Tesla and Solar City, and Pfund sees plenty more investable opportunities in clean tech. “The quality of entrepreneurs in our deal flow compared to the very early days is just night and day,” says Pfund. “It’s just a great time to have dry powder.” Listen now.
Erika Karp and Cornerstone Capital. Karp's journey towards sustainable investing was a natural progression from her work as managing director and head of global sector research at UBS Investment Bank. She's finds investment advantages in ESG – environmental, social, and governance – indicators. Listen in as we get a crash course in asking “the right questions” from one of the leading ESG investors in the field. Listen now.
Infrastructure for impact. Our roads, sewers and power grid are all in disrepair. Green infrastructure (sometimes financed by green bonds) can create jobs now and lay the basis for future prosperity. In our roundtable discussion on impact infrastructure investing, Imogen imagines a structure that empowers impact investors, institutional investors, and community leaders to facilitate important local projects. Listen now.
From laggards to leaders. Long-term asset holders like pension funds are beginning to embrace sustainability as a fundamental investment thesis, argues Dave Chen, CEO of Equilibrium Capital. “It is no longer about goodness and the imperative,” Chen says in the interview. “It now becomes an issue of, ‘Am I managing my assets in accordance with my desire for them to be a long-term hold? A long-term productive asset? A long-term resilient asset?'” Listen now.
Creating New Foundations
Un-Foundations. Mark Zuckerberg's announcement that he would be creating an LLC instead of a philanthropic foundation was both lauded and decried. In this episode we dissect the debate over the potentially $45 billion pledge made by Facebook founder Mark Zuckerberg and his wife, Priscilla Chan. Listen now.
All In. For Clara Miller, president of the F.B. Heron Foundation, the process of aligning it's $300 million endowment began with a humble realization. Despite the efforts of Heron and many other foundations, poverty had gotten worse. In our interview Miller shares the personal journey that informed Heron's commitment to go all in for impact.“We’re in breach of our fiduciary responsibility unless we use 100 percent of our assets for mission,” Miller says in the podcast. Listen now.
Getting off their assets. Other foundations seem to be heading in a similar direction. Reflecting on this year's Mission Investors Exchange gathering, our regular panelists, Imogen Rose-Smith, Brian Walsh, and David Bank, ask the question: what can $800 billion in foundation endowments do if invested toward mission? Listen now.
Thanks for listening, and keep your eyes and ears out for new episodes of Returns on Investment, now on a device near you.