Capitalism At Its Best
Heidi is the President of New Island Capital, a 100% mission-focused investment advisor. New Island oversees a multi-asset class strategy that strives to achieve risk-adjusted returns while creating positive impact within four thematic areas: Sustainable Agriculture, Communities, Alternative Energy and Environment. Previously, Heidi was an Acumen Fund Fellow working with D.light Design India as Head of Business Development and Marketing. D.light is a social enterprise operating throughout the globe to eradicate kerosene through the design, manufacturing and distribution of solar-powered LED lights. Before Acumen Fund, Heidi was a Director at Pacific Community Ventures, a founding member of AOL Time Warner Ventures, and an Investment Banking Analyst at Credit Suisse First Boston. Heidi earned an AB from Princeton and an MBA from the Graduate School of Business at Stanford University.
At the Pacific Community Ventures annual conference on impact investing this past Tuesday, Executive Director Beth Sirull pointed to the leverage that PCV creates with its donations: $3,300 in grants helps create one quality job – a living wage, access to health insurance, and access to retirement savings and/or job training for an individual living in California’s lower income neighborhoods. If there’s one thing that I learned during my time at PCV, it’s the lasting and transformative effect a quality job can have on a low-income household. Stable and beneficial employment can help families climb out of medical debt, pull together a deposit to get into a cleaner or safer apartment, or even begin to consider college as a real possibility. A lot of attention gets paid in the impact investing space to the families living at the bottom of the pyramid, but there are real needs and opportunities to leverage private sector tools and the entrepreneurial spirit to serve the six million people that are living below the poverty line ($23,000 a year for a family of four or roughly $11 an hour) in California, for example. It’s easy to forget about these households when the press spends a lot more time talking about all the wealth swirling around San Francisco's tech gilded age.
While the growing issue of income inequality at home can be seen as a “capitalism at its worst,” Beth encouraged us to instead consider what’s happening with the small businesses that PCV works with – and the Silicon Valley luminaries that volunteer to advise them – as capitalism working at its “very very best.” You could feel the resounding, “Yes, please!” from the packed room of 300+ conference attendees. When the panel of speakers was asked for the number one barrier that could be lifted in order to bring domestic impact investing (another example of capitalism at its best) to the forefront, the answers ranged from broad policy changes to the very personal.
Susan MacCormac, co-chair of the Clean Technology and Private Equity and Venture Investment Practice at Morrison Foerster, chanted, ‘ERISA, ERISA, ERISA.’ If the rules governing the selection of investments for public pension funds (tightened further by the “rigid rule” in 2008) could be broadened a bit, it could have a transformative effect on the impact investing landscape in this country. One could argue that the teachers, police officers, and firefighters that are the participants in these funds might actually value “community” and be desirous of investments that embraced their financial goals and reflected their career choices to serve the public and make the world a better, safer place.
Kathlyn Mead from the California Endowment raised the topic of Social Impact Bonds / Pay for Success bonds that have recently been launched in Utah, Massachusetts and New York. While critics of these tools argue that they provide equity-like risk in exchange for debt-like returns (and in the upside case at that), nobody can argue with Kathlyn’s broader point that the government is by far the largest social investor out there and shouldn’t those bodies be held to higher standards when it comes to contracting with partners that can deliver positive and measurable results?
Julie Hanna, serial tech entrepreneur and investor and now dynamo board chair at Kiva, and I talked about the need for a mindset shift and mindfulness. When you sit down with your financial advisor--or even just log on to check on your 401k--obviously your savings goals and risk profile are up for discussion, but have you ever tried bringing your personal values into the conversation? You might not get as crazy a look as you’d think in response. Wealth advisers that I have talked with recently tell me that they are getting more and more clients asking about values-aligned options for their portfolios. A groundswell of interest (and track records) will be necessary to make this happen at scale, but I love that regular people just asking the question – and meaning it--are starting to get the ball rolling. A great example of a new retail option out there is TIAA-CREF’s new Social Choice Bond Fund. Whether mutual funds are your thing or not, this cool new product doesn’t just make use of “do no evil” ESG screens, but proactively allocates 10% of its assets towards holdings that are generating positive social or environmental benefits, like solar farms, waterfront restoration projects, and community health facilities. All this and tracking, if not beating, the benchmark so far.
Image credit: Eva Daneva/Shutterstock
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