{"id":2425,"date":"2019-09-09T10:16:30","date_gmt":"2019-09-09T14:16:30","guid":{"rendered":"http:\/\/blogs.bard.edu\/mba\/?p=2425"},"modified":"2019-09-10T15:15:40","modified_gmt":"2019-09-10T19:15:40","slug":"optimizing-capitalism-for-impact-by-emma-jenkins-and-katie-ellman","status":"publish","type":"post","link":"https:\/\/blogs.bard.edu\/mba\/2019\/09\/09\/optimizing-capitalism-for-impact-by-emma-jenkins-and-katie-ellman\/","title":{"rendered":"Optimizing Capitalism for Impact–by Emma Jenkins and Katie Ellman"},"content":{"rendered":"
\"\"<\/a>
Matthew Weatherly-White, Caprock Co-Founder and Managing Director<\/figcaption><\/figure>\n

A full five years ago, the CAPROCK Group<\/a> surpassed $1 billion in impact-oriented assets under management. In the process, the firm committed its own resources to field building. It seeded and anchored first-time funds. It developed iPAR<\/a>, a tool that helps clients understand the impact they\u2019re catalyzing across their portfolio. And it\u2019s repeatedly demonstrated that it\u2019s possible to generate market rate returns by investing for impact.<\/p>\n

Matthew Weatherly-White, Caprock Co-Founder and Managing Director, is the principal architect of the multi-family office\u2019s impact investing platform. He serves as a strategic advisor to several impact investing funds, and he was recently honored as an industry pioneer.<\/p>\n

Weatherly-White spoke with Bard MBA student Emma Jenkins about Caprock\u2019s history in the field, how Caprock became a founding B Corp, and what he sees as the future for capitalism.<\/p>\n

The following Q&A is an edited excerpt from the Bard MBA\u2019s September 6th <\/em>The Impact Report<\/em><\/a> podcast. The Impact Report brings together students and faculty in <\/em>Bard\u2019s MBA in Sustainability<\/em><\/a> program with leaders in business, sustainability and social entrepreneurship.<\/em><\/p>\n

Reprinted from GreenBiz.<\/em><\/p>\n

 <\/p>\n

JENKINS: CAPROCK IS A FOUNDING B CORP. IN FACT, YOU BECAME A B CORP EVEN BEFORE YOU STARTED IMPACT INVESTING. CAN YOU TELL US MORE ABOUT THAT?<\/p>\n

We launched in 2005 and we didn\u2019t really start doing impact investing until late 2007. The politicization of terms like \u201csustainability\u201d and \u201cenvironmental stewardship\u201d is so profound, and the fear that B Corp would start talking about things like gay marriage or abortion rights was so entrenched, that as a group we couldn\u2019t get there. Eventually we got over that hump and became a founding B Corp in 2006. That pre-dated our commitment in impact investing.<\/p>\n

On many levels, Caprock is an exemplar of the kinds of businesses that need to become sustainable and responsible. We don\u2019t self-identify as a responsible company, we\u2019re not out there pounding the pavement, saying, \u201cHey everybody, be like us.\u201d We\u2019re the opposite\u2014we\u2019re sort of invisible in that world.<\/p>\n

We\u2019re such a conventional firm, and yet we map so well to the way B Lab thinks about sustainable business. We believe that every employee should have healthcare, that we should provide coverage for our employees. We believe that every employee should have skin in the game, that every employee should have equity ownership in the business. These are just core beliefs.<\/p>\n

 <\/p>\n

JENKINS: WHAT IS CAPROCK’S BUSINESS MODEL?<\/p>\n

When we first agreed internally to start dedicating resources to an impact investing platform, that agreement rested on four critical pillars:<\/p>\n

(1) We wanted to build portfolios that, from a risk perspective, credit perspective, duration perspective, geographic and thematic exposure perspective, and most important, financial return perspective, replicated our conventional portfolios. We felt that, if we couldn\u2019t do that, then in some way we\u2019d be potentially guilty of malpractice. We had to see a replication of our existing investment strategy in the impact world.<\/p>\n

(2) We needed to demonstrate that there was market appetite for this investment strategy, so we needed to land one or two large clients to validate the commitment of resources.<\/p>\n

(3) We needed to be able to participate in a way that allowed us to structure the funds so they\u2019d start looking like investments we\u2019d want to make because we knew that the absorptive capacity really wasn\u2019t there at the time.<\/p>\n

(4) We needed to be able to, at some point, deliver consolidated impact performance reports of the same quality as our consolidated financial performance reports.<\/p>\n

 <\/p>\n

JENKINS: HOW DID YOU START OUT CHOOSING YOUR IMPACT INVESTMENTS?<\/p>\n

It\u2019s a little bit humorous in hindsight, but initially, if you slapped the label impact on it we were probably going to look at it. In fact, you were probably going to come to us because we were so forward by saying, \u201cHey we want to build this discipline, we want to be investing in first funds, we\u2019re not afraid of innovative strategies.\u201d<\/p>\n

So we saw everything. We spent a lot of time with these teams developing term sheets and investment strategies and helping them with their reporting and thinking through the metrics they\u2019d be tracking. It was a pretty big commitment from our side to create the absorptive capacity for the capital that we fully expected to flow . . . eventually.<\/p>\n

Which gets us to how we make the investment selection. Initially, we built two totally different investment teams. We had our traditional investment team, and we built out our impact investing team. We thought that it was going to be a really different discipline\u2014that somehow impact investing was going to be this weird beast that was going to require really unique specific skill sets to really understand and do well.<\/p>\n

Every investment had to have on the front end an impact component that we assessed for viability. We\u2019d then turn it over to financial due diligence\u2014we wanted to make sure it was a reasonable investment and that the strategy was coherent. Then we\u2019d layer on a pretty rigorous impact assessment from a geographical and thematic perspective that would allow us to put a framework around all of the metrics that we wanted them to track and report.<\/p>\n

 <\/p>\n

JENKINS: WHAT’S YOUR VISION FOR THE FUTURE OF CAPITALISM?<\/p>\n

The metaphor that I would use is that capitalism is an operating system\u2014it wasn\u2019t handed to us carved in stone tablets. It\u2019s much like a smartphone. You might not understand how a smartphone actually works, but we all understand the need for periodic upgrades. It\u2019s an operating system challenge.<\/p>\n

I think the more we understand about climate change, the current political environment notwithstanding, more indefensible it becomes to continue to use the operating system of capitalism as if the negative consequences of climate change don\u2019t exist. The question is not, is capitalism good or bad, or, is it an inexorable wealth concentration mechanism? Those are not the right questions. The question is, to what end do we seek to orient this optimization machine?<\/p>\n

Right now, it\u2019s optimized for one thing: financial profit. Why not optimize it for environmental sustainability, or gender and race inclusion? There\u2019s no reason that it can\u2019t be. Those are metrics that are just as viable as free cash flows.<\/p>\n","protected":false},"excerpt":{"rendered":"

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