The Durham, NC-based venture capital firm SJF has been a leader of what might be called the “alpha in impact” wing of the impact investing market, or “how you can drive unique financial value that is driven by and integral with the impact of the companies,” as SJF’s David Kirkpatrick puts it on the latest episode of ImpactAlpha’s Agents of Impact podcast.
The firm, which invests across climate, education, health and the circular economy, has had exits with portfolio companies such as the egg producer Vital Farms and Nextracker, which helps solar developers optimize system performance.
With mainstream VC firms crowding its space, Kirkpatrick says SJF is pushing to deliver additional value.
“Our goal is to say, if it was 6x financial return, can we do more during that five-year holding period to make it a 12x impact return?” he asks. “Like having a deeper impact on, for example, low-income beneficiaries, or having a more substantial supply chain impact with our climate companies.”
Metrics dashboard
SJF launched 25 years ago as the Sustainable Jobs Fund and still asks portfolio companies not only how many jobs are being created, but what kind of benefits they are providing and what’s the ratio of pay between the highest- and lowest-paid employees.
The firm’s new impact website tallies 14,249 jobs created since SJF’s initial investment, 90% of which have retirement plans. SJF also asks portfolio companies to track three key impact indicators. Optoro, for example, diverted more than 8 million tons of waste; SchooLinks served more than 872,000 students in free and reduced-price school lunch programs.
“I think it’s important to help them track what’s actually actionable,” says Kelsey Jarrett, SJF’s director of impact.
Impact outperformance
The typical impact investment thesis posits that business and impact success are “collinear” and part of the DNA of a company. In a guest post on ImpactAlpha, Kirkpatrick and Jarret ask, “Can we drive deeper impact to ‘bend the curve?’”
As a test case, the VC firm conducted a series of studies with impact measurement firm 60 Decibels to help portfolio companies establish a baseline, set benchmarks and augment impact over time. One study of portfolio company Posigen revealed that many customers had used savings generated by switching to their solar product to purchase basic needs like fuel and groceries.
That “enabled SJF to proactively identify areas where portfolio companies may benefit from added support.”
