Episode #4 of the Raise Green podcast series features Joel Solomon, an esteemed expert in impact investing! Joel is a founding partner at Renewal Funds, Canada’s largest mission-oriented venture capital fund, with over 20 years in the industry. Joel joins co-founders Franz Hochstrasser and Matt Moroney. “Raise Green” is a 7 episode podcast series exploring the climate crises through the minds of local leaders and global experts. Listen to the approximately 30 minute Episode #4 here on Spotify.
We embrace the term “impact investing” for funding that generates positive social and environmental outcomes. For a while, these investments weren’t taken seriously, since the dominant paradigm has been to maximize returns regardless of the cost. But as social and environmental problems have become increasingly apparent, and as existing impact investments have proven their financial viability, and in many cases their superior financial performance, its popularity has grown at a promising rate.
There was $20.9 billion of sustainable investing during the first half of 2020, which is comparable to the rate in 2019. Even more impressively, the 2019 investment flow was four times the previous record. This steady growth, in spite of an administration that actively undermines it, represents a shift in heart and mind for investors. That is to say, people increasingly want their investments to be affiliated with less harm and more good.
Joel describes how it has taken a couple decades for this mindset to come to prominence, but now it’s an unstoppable concept. What started as a marginalized “burr in the sock” for the incumbent system has the increasing potential to erode the status quo. Even the biggest players in the industry have to adapt to emerging trends.
Franz points out that, by all indications, the emerging generation of millennial investors will continue to accelerate this trend. In turn, there’s the potential to shift the future of capital deployment and how it’s allocated around the world. This poses an opportunity to re-establish standards and accountability, after the era of “the only goal of money is to make more money.” Joel imagines an enlightenment of sorts, where we foster a period of financial innovation by re-thinking money and its uses.
Raise Green is one of the companies that’s striving to catalyze this shift in consciousness, and Matt believes we’re close to that turnover period. Private-sector businesses and finance can be a tremendously powerful force for improving both communities and the planet, and the role of the small players is to continue demonstrating and reinforcing this trend. As momentum builds, larger firms will be obligated to understand and follow, and as pressure mounts, they might even realize that being on the front end of the trend would be beneficial to them.
With compounding economic, pandemic, social justice, and climate crises, we’re in a period where people feel the need to act, which is why impact investing is being taken more seriously. In the past, regulators have expressed skepticism about ESG labels, which is the metric that’s supposed to assure that the funds go towards benevolent purposes. Legislating good and bad is surely subjective, and Joel admits it’s a dynamic issue. It’s more about overall direction, which divides into measurable and subjective components.
Within his own firm, Joel ensures that his portfolios have enough examples that are simple enough for people to understand and approve of. These are funds that are measurably beneficial by standards and qualities we can all agree on, such as cleaning up pollution. This in turn builds their investors’ trust when the firm handles more subjective, complicated cases that aren’t as easily quantified.
In a way it’s an art form, where standards and agreeable qualities are established, and then subjective creativity delivers unique outcomes from there.
Matt has always believed that blending art and science achieves the best possible outcomes. Relying on one perspective misses other important pieces. Joel agrees, seeking to provide an overall model, based on integrity, honesty, self-reflection, and being eager for challenges and improvement. These are noticeably human qualities, and they provide an important parallel: finance and the economy aren’t an abstract thing, they’re about people. By humanizing investments, we can improve their character in the same way we might to do ourselves.
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