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.