This Issue Brief offers an overview of how one such investor evolved from a traditional, finance-only focus to an investment approach called impact investing. It is important to note that when Stuart [Rudick] began investing for social impact with financial returns it was a fringe idea, and prudent investors like Stuart have been critical to evolving these investment strategies and bringing the idea of impact investing into the mainstream.
How did you begin engaging in impact investing? What were the first steps you took?
Graduating from Boulder in 1980, I moved to San Francisco and was hired by a local brokerage company, Davis, Skaggs and Co. As a regional, family-owned firm, they provided me the flexibility to focus my investments on areas of my personal interest and passion. I started researching and investing in water remediation companies, recycling companies and energy efficient companies in the early 1980s. While a partner at Bear Stearns in the mid 1980s, I funded private companies focused on building businesses with positive social impact. Examples are the first environmental magazine (Buzzworm), agriculture technologies reducing water and pesticide use (Esselborn Farms) and the first venture fund focused on investing in environmental technology solutions (Global Environment Fund).
What are some of the things that you wish you had known when you first began?
Regardless of the idea, technology or product need, the key to a successful business and successful investing is the management team leading a company. The key reason companies fail in achieving their vision and potential is due to the failings of senior management. I have learned the value and importance of investing in people, not just products, ideas or technologies.
What differences do you see between a traditional investment process and an impact investment process?
Ultimately, one is investing in the founders and their team, whether it is a conventional or social impact investment. This is the determinant of success. The process of doing due diligence, understanding the competitive landscape, and getting to know management is fundamental to making any investment. Evaluating an impact investment also requires taking into consideration how any socially rewarding efforts may impact the IRR to the investor.
Impact investing ... conveys the optimism and intentionality of participants in this field for the possibilities that investment capital can unlock.