Some call it Socially Responsible Investing. Some call it Sustainable Investing. Some call it Responsible or Green Investing. Some call it Impact Investing. No matter what you call it, this type of investing focuses on companies who have a positive impact on society or the planet.
Many in the financial industry have shied away from this type of investing. Why? Because their focus has been on making money. And there is a popular belief that you cannot be socially responsible AND focus on making as much money as possible.
One financial advisor I read about went so far as to say he would fire any client that came to him wanting to do “socially responsible” investing.
But is that belief true? Venture capital firm, DBL Investors, in San Francisco would disagree. DBL stands for “double bottom line,” which refers to focusing on the bottom line of making money and the bottom line of making a difference. The fund’s managing director is Nancy Pfund.
The Dealbook article – Venture Capital Firms Invest in Star-Ups With a Social Mission shares her story:
The fund’s managing director, Nancy Pfund, isn’t a household name. Yet over the last decade, she has quietly built a reputation as the go-to venture capitalist for companies looking to make a social impact.
This strategy has gained momentum in recent years. Consumer companies like Toms shoes and Warby Parker eyewear have demonstrated that altruism can also be good for business. Ms. Pfund’s own track record is a testament to investing with a social purpose. Five of the 18 companies in her first fund, which was started in 2004, have gone public, including SolarCity, Pandora Media and Tesla Motors.
‘The Tesla IPO was the seminal event for impact investing,’ Ms. Pfund said about the company’s initial public offering in 2010.
One of the keys to success is always starting with the first bottom line – making money. Because if a company isn’t successful, it’s hard for a company to have an impact. And this goes to the heart of debate. According to DBL Investments, the two bottom lines are not mutually exclusive. In fact, they go hand in hand.
When a company works on a product or service that is truly useful to society, that increases the probability of a good financial outcome,” Elon Musk said. At the same time it helps with recruiting and retaining employees. “Smart and talented people have a lot of options, and it means something if they can make money and have a positive impact on society,” he added.
Impact investing is an especially hot topic with women and Gen Y/Millennial investors. There is a HUGE opportunity for financial companies who can offer opportunities to investors to make a difference AND make money.