In kicking off the discussion, Dune Thorne of Brown Advisory noted the common threads connecting the panelists’ ideas: 1) We need to break down the notion that you need to give up financial returns in order to create impact, when in fact that is not the case; and 2) Sustainable investing means something different for each of us, and we all need to honor and recognize the fact that the essential first step for all investors interested in impact is to determine what’s most important to them. Only then can they hope to begin identifying the specific opportunities that best fit their priorities.
Victoria Fram, managing director at Village Capital, and Seth Miller of Fearless Ventures, see meaningful opportunities for impact in the private investment space, and both believe strongly that impact starts with the leaders of the companies they are backing. One of the distinctive aspects of Village Capital’s model is that the entrepreneurs play a large role in determining where capital flows. Village Capital organizes and trains cohorts of entrepreneurs, and asks those entrepreneurs to choose the most investment-ready ideas from their group. Village Capital then invests in the ventures selected by the cohort. Victoria talked about some of the breakthrough results this approach has produced. Whereas the broader early-stage funding market directs less than 10% of dollars to female founders, with the Village Capital process, that number is close to 40%. Similarly, less than 1% of venture dollars currently flow to founders of color, while at Village Capital that figure is near 20%. Seth also talked about his organization’s belief in combining traditional venture capital investing principles with focused CEO coaching. He espouses a leadership philosophy that focuses on creating value all along a company’s value chain and within its community, believing that such leaders will innovate faster, execute more efficiently, attract top talent and ultimately outperform peers.
Karina Funk, who co-manages Brown Advisory’s Large-Cap Sustainable Growth strategy with David Powell, talked about why investing for impact in the public equity markets is not only viable but essential to achieve the change that many want to see in the world. One reason is the scale of large global enterprises; the footprint of these firms means that they can have a material impact on society and the environment. Therefore, the investment community’s decisions to direct capital to certain firms and away from others also has a material impact. She noted that the size of the challenges we face as a global society requires that we mobilize public capital if we want to solve them. For example, she observed that recent UN figures estimate that $11-12 trillion dollars per year will be required to eliminate extreme poverty by 2030, but we can’t expect more than $3-4 trillion at the very most to come from a combination of philanthropy and private investment. To close that huge gap, we need capital from public markets. With that said, she and David Powell do not invest indiscriminately in companies solely due to the impact that company is making, and she noted that they have a healthy pipeline of companies with highly attractive fundamental businesses as well as positive impact profiles.
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