Game Changers 2020 Essay Series: When Faced With Times Like These, Turn to Impact Investing

When Faced With Times Like These, Turn to Impact Investing

Silicon Valley Leadership Group
By Nancy Pfund, Managing Partner, DBL Partners
October 30, 2019

At present, in a time when truth and trans­paren­cy seem ever-elu­sive, when divi­sive­ness appears a way of life, and social and envi­ron­men­tal threats loom large, a bright spot has emerged. That bright spot – Impact Invest­ing – curates both finan­cial and social return, accepts no sac­ri­fice between the two, and even asserts that the com­bined focus is addi­tive.

In our impact invest­ing work at DBL, we have been able to work with entre­pre­neurs who don’t just want to build badass com­pa­nies. They want to bid adieu to bad oper­a­tors, to out­dat­ed solu­tions, and ush­er in a new age of inno­va­tion and busi­ness built for 21st cen­tu­ry needs. These entre­pre­neurs are pio­neer­ing in many fields get­ting fos­sil fuels out of cars, get­ting junk food out of school lunch­es, get­ting the coal and gas out of elec­tric­i­ty, get­ting opaque prac­tices that cost too much out of farm­ing, focus­ing on reuse to get the waste out of appar­el and fine goods, to name just a few Impact investing’s reach extends even to space, where new and cheap­er satel­lite views of our plan­et can cre­ate new tools that point us toward bet­ter solu­tions.

As these impact com­pa­nies grow, they cre­ate jobs for a diverse array of work­ers and attract the admi­ra­tion of the new gen­er­a­tion.

The jobs that arise from build­ing elec­tric cars, installing solar pan­els, or stream­lin­ing crop mar­ket­ing depend on recent tech­no­log­i­cal advances, but are not just for those that know how to code. This is an inte­gral part of impact invest­ing: to democ­ra­tize access to qual­i­ty jobs across geo­gra­phies, racial iden­ti­ties, and gen­der. The “it com­pa­nies” of the future will be the com­pa­nies that crush it finan­cial­ly while solv­ing prob­lems that mat­ter, and their work­forces will be more inclu­sive. At DBL for exam­ple, some 64 per­cent of our found­ing lead­er­ship teams of start­up entre­pre­neurs include women, com­pared to an aver­age of 2 per­cent, accord­ing to the lat­est Pitch­Book data.

Impact invest­ing has skep­tics on both sides – those who feel it’s not impact­ful enough and those who think the finan­cial returns aren’t strong enough.

And yet, it con­tin­ues to attract large amounts of cap­i­tal, cat­alyze new funds from both new and estab­lished firms, and bring in the best and bright­est tal­ent from busi­ness schools and more tra­di­tion­al com­pa­nies all over the world. Ear­ly returns from com­pa­nies like Tes­la, Rev­o­lu­tion Foods, and Farmer’s Busi­ness Net­work are encour­ag­ing on both the finan­cial return and impact fronts and are already cre­at­ing whole new sec­tors in which to invest.

It is def­i­nite­ly not your grandfather’s invest­ment port­fo­lio any­more, just as it is not your grandfather’s set of prob­lems that vex us.

Our most press­ing chal­lenges to solve, from cli­mate change to income inequal­i­ty to polar­iza­tion, are dis­tinct­ly mod­ern, in need of mod­ern approach­es. This is the pow­er of impact. Not a ton­ic for every­thing that ails us, but a tool whose time is now.

Octo­ber 25, 2019 — Sil­i­con Val­ley Lead­er­ship Group