Invest­ing to max­i­mize prof­its is hard enough. Invest­ing to max­i­mize prof­its and drive pos­i­tive social impact is a chal­lenge of another order.

The field of impact invest­ing has been grow­ing rapidly. When Nancy Pfund ’82 launched DBL Part­ners, a dou­ble bot­tom line ven­ture cap­i­tal firm, in 2008, the idea of envi­ron­men­tal, social, and gov­er­nance cri­te­ria shap­ing invest­ment or busi­ness deci­sions faced a lot of skep­ti­cism. But it’s hard to argue with results. The firm’s invest­ments in Tesla, Pan­dora, SolarCity, and other com­pa­nies have borne out her con­vic­tion that invest­ments can suc­ceed on finan­cial and social dimen­sions at the same time.

We spoke with Pfund about how to deal with the uncer­tain­ties and trade­offs that inevitably occur when you try to put val­ues into prac­tice. “You can’t expect any com­pany to do every­thing per­fectly,” she said. “You want as many pos­i­tive out­comes as pos­si­ble.” She told us about a fraught deci­sion early in the his­tory of Tesla, when DBL’s goals seemed to col­lide. 
I’m dri­ven by belief in equity, inclu­sion, and sus­tain­abil­ity. I believe in using evidence-​​based deci­sion mak­ing to take the pol­i­tics out of the crit­i­cal prob­lems of our era, such as cli­mate change. I believe in get­ting our indus­trial, com­mer­cial, and social fab­ric to look more like the peo­ple in our soci­ety today as opposed to a more homo­ge­neous 20th-​​century profile.

DBL Part­ners aims to develop great, inno­v­a­tive com­pa­nies that achieve a broader social pur­pose. We infuse our invest­ment deci­sions with an under­ly­ing val­ues equa­tion. We expect that will, increas­ingly, become the norm. For that to hap­pen, the values-​​based approach needs a seat at the table. It needs to be there when deci­sions are made about hir­ing, where to locate a plant, or how aggres­sive to be on cli­mate goals.

You can’t expect any com­pany to do every­thing per­fectly and achieve all the social and finan­cial met­rics. That’s not real­is­tic. There isn’t a per­fect option any­where, but as you build an impact port­fo­lio you can begin to cover more and more of the bases.  Going through the inevitable choices and trade­offs is a nuanced process. It’s a prob­ing process. You want as many pos­i­tive out­comes as pos­si­ble, but a val­ues approach spans across all aspects, processes, and impacts of an orga­ni­za­tion. Some­thing that involved is going to have fail­ures and imperfections.

One of the most vivid mem­o­ries of my career is a board call in the early days of our invest­ment in Tesla. Our mis­sion, with that fund, was to develop job cre­ation oppor­tu­ni­ties in the Bay Area for peo­ple of lower income. From that per­spec­tive, we worked with com­pany exec­u­tives to find sites for a Tesla car plant in the Bay Area. Many peo­ple argued Cal­i­for­nia is too expen­sive, the reg­u­la­tions were too severe for man­u­fac­tur­ing, there’s not enough hous­ing for workers—a litany of objec­tions. We lis­tened to those con­cerns, but we man­aged to iden­tify a site in an under­de­vel­oped part of Con­tra Costa County, east of San Fran­cisco, that was sorely in need of jobs. Again, work­ing with the com­pany, we nego­ti­ated a pack­age of eco­nomic devel­op­ment incen­tives and had board approval. At the very last minute, the state of New Mex­ico came in and offered some­thing even more competitive.

On that call, the conun­drum was that A) we had just spent months work­ing on get­ting a local site just to be bested by an out­side offer; B) at that time, our fund’s man­date was not to cre­ate jobs in New Mex­ico; and C) I was a board observer and our oblig­a­tion was to do what was right for the com­pany, not nec­es­sar­ily what was right for our fund.

Per­son­ally, it was dev­as­tat­ing to set aside our mis­sion for the Bay Area, but it was obvi­ous what we had to do; the pri­or­ity was to make the com­pany successful.

In the end, that offer didn’t turn out to be as great as it ini­tially appeared. Tesla began a whole new search which led back to the Bay Area when Tesla acquired Toyota’s shut­tered plant in Fre­mont, Cal­i­for­nia, and turned it into the huge fac­tory that we know today.

At this point, hav­ing done it for a long time, our exper­tise in these areas of eco­nomic devel­op­ment, com­mu­nity engage­ment, and pol­icy, rep­re­sent a big part of our value-​​add when we invest in a new com­pany. The exec­u­tives know that we’re going to help them as a thought part­ner to try some new things that push them into other dimen­sions of impact. While after 15 years we do have a play­book of sorts, it’s a very bespoke, col­lab­o­ra­tive, cre­ative process. There is always some­thing new, and that, to me, is one of the best parts of the practice.