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The Greatest Economic Opportunity of our Lifetimes: Investing to Solve Social and Environmental Challenges

Tripp Baird December 16, 2020

Widespread Disruption Creates Openings for Purpose-Driven Innovators to Reinvent Status Quo

When times are stable and prosperous, calls for change are often harder to hear. While the struggles of 2020 are not by any means welcome, they have added more voices to a chorus recognizing the inequities upon which our current model of capitalism is built and the environmental and social damage it continues to perpetuate. The great challenges of our time are creating enormous, meaningful disruption—and disruption creates opportunity. 

Because we, as impact investors, believe the solutions to our large, intractable social and environmental challenges present the greatest economic opportunities of our lifetime, we spend our time at the emerging growth stages of the capital markets, partnering with entrepreneurial disruptors whose businesses fundamentally help address societal challenges such that as they scale, they also scale societal benefit. Disruption creates opportunities for more nimble, visionary teams and investment firms to carve out market share from incumbents, creating positive impact while scaling their businesses to solve problems. (Review the Builders Fund Impact Report to see what this looks in action for our team and portfolio.)

Traditional Medicinals, a Builders Fund I portfolio company, prioritizes the ecosystems and community systems that produce the herbs in its line of teas. Understanding our impact up and down our supply chain is a critical component of adopting a systems mindset. Photo by Traditional Medicinals.

We believe that capitalism must be part of the solution if we are to fix the significant and intractable social and environmental challenges we face today. For that to occur, we must get back to investing in and building scalable and purpose-driven businesses, which improve the world instead of simply extracting wealth over the short-term for shareholders. We believe that long-term shareholder value is optimized when companies take a holistic, systems-based approach, seeking to create shared value across their corporate “ecosystems” with all stakeholders. 

This long-term shareholder and stakeholder value can only be realized with a systems-responsible approach to company building through investments in high-growth “companies that matter.” Extractive, short-term profit seeking, which harms those least able to protect themselves and destroys the commons, must end. It will require a holistic view of our role as investors, acknowledging that there is not a single or universally agreed upon definition of impact. We must all transparently examine and share the work we have been doing, using the tools that are available to us with the belief than intent matters greatly, and that we are on a journey from what has been (unsustainable, extractive, short-term) to what we must become (regenerative, responsible, shared value-generating, long-term)—together.

Adopting a Systems Mindset

We must begin thinking and acting more systemically: Businesses operate within a larger economic system, which exists within and through our global social systems, which all function within a shared natural ecosystem. The dominant capitalist model has ignored that it is embedded in these larger systems, and that decisions which ignore the dynamic and interdependent nature of those relationships can have dire consequences. If we want to drive course correction on any of our significant and intractable global challenges, we need to pursue root causes with a systems mindset. This is a stark and important reminder that social and environmental devastation are symptoms, not the root cause. The root cause is our disconnection — from each other and from the systems of the planet. The issue is with our perception and our understanding of reality. 

Builders Fund II portfolio company PosiGen, the nation’s leading provider of renewable energy and efficiency solutions for low-to-moderate income households, is scaling its business model so everyone can access climate action and renewable energy solutions.

Dr. Noel Nannup, an Aboriginal Nyoongar Elder from Western Australia, summarized that work perfectly: “All we need to do is to have a piece of the path to the future. And that’s ours. And we polish that and we hone that. And we place that in the pathway that we are building. And as we build that pathway it changes us as the builders of that path and it also shapes the destination that we are going to.” 

We, as investors must continue learning, evolving our thinking, and working to not let perfection be the enemy of good. We must also remain unwavering in our commitment to creating economic, social, and environmental value through our work and to supporting outcomes that incorporate more than just short-term wealth creation. In the midst of these multiple intersecting dramas — a pandemic, a reckoning with racial injustice, an economic crisis, a political crisis — we believe that, as a society, we have to transform in our capacity to take on big problems in a more meaningful way. We are going to have to build frameworks of thinking about, measuring and approaching social and economic systems that go beyond the simplistic monetary and short-term, profit-driven ways we have come to revere in Western society. 

We are going to have to adjust our ways of relating to time horizons to be more long-term and generational, and as Jaqueline Novogratz so eloquently lays out in her recent book, Manifesto for a Moral Revolution, we are going to have to reintroduce a moral imagination to capitalism that has been sorely lacking. We hope our work, and the work of our colleagues in the impact community, will help us all to build more just and regenerative systems of engagement with the complex and dynamically interdependent systems of the world. We believe that if we can collectively begin to shift our dominant social paradigms to this worldview, the prospect of flourishing on this planet in its truest sense might just become a possibility.

Opening photo: Companies like MPOWERD exist to solve global inequities while helping to address the climate crisis. By investing in companies building scalable solutions to our global problems, we can turn disruption into opportunity. Photo by MPOWERD.

Impact Funds / Impact Investing / Impact Management
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