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Venture Capitalist: Managers Need to Take More Risks in Impact Investing

Nancy Pfund of DBL Partners is bullish on impact investing, but says large institutions and money managers need to do more to further the asset class.

Speaking on a panel at The Economist’s Impact Investing conference Wednesday, Nancy Pfund, the founder and managing partner of DBL Partners, was critical of larger institutions and said their lack of aggressiveness in impact investing was holding back the asset class.

“We need more people to jump in,” Pfund said. “We’re creating the 21st century icons in this asset class.”

She singled out another panelist, Roland Lescure, chief investment officer of Caisse de dépôt et placement du Québec, a large public and private pension manager in Canada. She said that his management firm was one of the more progressive of the large managers, but it should do more to help growing companies.

“We need people, like Roland, to not sit on the sidelines and take some risks,” Pfund said.

Lescure said earlier during the conference session that his firm is focused on growing companies.

He said the Canadian market for impact investing is “one of the best” and that Caisse de dépôt et placement du Québec is interested in long-term growth and finding ways to measure value of ESG companies. Given the nature of the asset class the firm has worked closely with engineers and outside professionals to make impact investments and manage risks.

Lescure was optimistic about the asset class growth but added that “science, media, and investors all need to get together” to help impact companies and investors, many of whom are unaware of ESG factors to differentiate between companies they might choose to have in their portfolio.

The Economist’s Impact Investing conference, held Wednesday in New York, attracted hundreds of attendees interested in learning more about investing based on environmental, governance and social factors (ESG).

Matthew Bishop, the senior editor of The Economist Group, said it was nice to host a conference on a topic that had a queue to get in. Impact investing has grown from something just for idealists into an asset class many want a part of—even if only for the returns. The growth of money manager assets under management that consider ESG criteria grew from $1.4 trillion in 2012 to more than $8 trillion in 2016, according to the U.S. SFI Foundation.

Pfund was confident that more companies mindful of climate, gender issues and other ESG factors can be built. She started her venture capital firm with the goal of producing competitive returns through impact investing and has a stake in Off Grid Electric, Tesla and Advanced Microgrid Solutions, among dozens of others.

Warby Parker co-founder and co-CEO Neil Blumenthal was part of the panel and also said companies need to improve how they measure the impact they have. He used Warby Parker as an example, where a tight labor market is putting a premium on skilled employees. It’s hard to know for certain, but Blumenthal said Warby Parker’s social mission is attractive to current and future employees, as well as investors interested in the cause and the employee retention of the company.

Blumenthal isn’t the only executive starting to pay attention to hard-to-measure factors.

Many are identifying impact company policies and practices as drivers of change in investing, said David Blood, co-founder and senior partner of Generation Investment Management.

Blood said he was especially bullish on impact companies offering an alternative source of energy to carbon.

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