Impact investing is a relatively new financial strategy whose time has come. Simply put, it is making investments in companies that can deliver top-tier returns and whose business enables social, environmental and economic benefits. It’s a strategy that harnesses both the positive power of enterprise and improves the human condition. By connecting healthy financial performance and positive social change, impact investing allows us to simultaneously accomplish the best of both worlds. My firm, DBL Partners, was founded on this principle, and stands for Double Bottom Line.
Since taking office, President Obama has been encouraging American business leaders, who understand that increasing environmental protections is good for the future of our planet and their bottom line, to help invest in solutions that restore natural resources. He signed an important Presidential Memorandum in November to more quickly mitigate the impacts on natural resources from development and to incentivize private investment in our land, water and wildlife. The Memorandum establishes “the predictability and incentives needed to encourage private investment and strong protections for the environment that will lead to bigger markets and more conservation success,” and increases the probability of protecting places that are too special to lose.
In December, the White House took another bold step by launching the new Natural Resource Investment Center. In the face of record drought and climate change, the Center is intended to encourage investment in critical water infrastructure and cultivate more efficient water allocation. Most recently the Administration announced another Presidential Memorandum that directs federal agencies to coordinate on the ground in watersheds and enhance data collection, monitoring and sharing ensuring the government becomes an even better partner for the private sector.
As a venture capitalist and impact investor, I strongly encourage continued efforts to leverage federal funding to attract new private investment in conservation. The president is astute to perceive that the private sector is hungry for these opportunities. The Natural Resource Investment Center encourages innovative approaches to closing the gap between water supply and demand in the West -- addressing drought while restoring our rivers and protecting recreational opportunities and wildlife habitat in the process.
An excellent report, “LIQUID ASSETS: Investing for Impact in the Colorado River Basin,” provides great detail on just how private investment can help to provide innovative water-conserving solutions. The report asserts that as our water challenges have increased due to natural and demographic factors, there has been a surge in interest among investors, policymakers, and water managers alike in the potential use of market-based mechanisms to manage the issues around water scarcity and security, and to facilitate the entry of private capital into the management and financing of water resource solutions.
The report also points out that, to date, there are scant examples of successful private investments that have helped to address growing water scarcity issues. Thus, there remains a great deal of untapped opportunity for business innovators in the drought-stricken Colorado River basin, making investments that would improve the long-term sustainability of agricultural communities, the financing of water supply and water infrastructure in growth communities, the numerous environmental challenges resulting from altered stream flows, groundwater depletion, and declining landscape health.
The potential impact investments to finance water resource solutions, generate related environmental benefits, and create a financial return, are there for the asking. On a very positive note, the report predicts the role for private capital in finding solutions to meet Colorado River basin shortages will likely be very significant.
These report findings firmly support Obama’s vision to bring private investments into natural resource management. I, too, agree that we can no longer do without the innovative, fresh thinking and resources of the private sector to help solve many of the water challenges in the West, as well a host of other social and environmental challenges. Fostering new public/private partnerships and innovative solutions is a much-needed action to best protect the rivers and lands that sustain our lives economically, environmentally and socially.
Poet Ralph Waldo Emerson famously said, “One of the most beautiful compensations in life is that no person can help another without helping themselves.” Similarly, involving the private sector in proactive investment to protect our lives and livelihoods is good for business and the economy, and is in everyone’s best interest. The president’s action to bring about fruitful public/private relationships deserves our support. It’s a great step toward finding the new solutions we need to protect our planet today and for future generations.
Pfund is founder of the venture capital firm DBL Partners which invests in companies looking to make positive social change, environmental improvements, and strong financial returns. Pfund is also co-chair of the Conservation for Economic Growth Coalition.