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Jed Emerson is the impact investment guy
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Jed Emerson is the impact investment guy
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Jed Emerson is the impact investment guy
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Woodrow Wilson said: “If you want to make enemies, try to change something.”
9 April 2015

Jed Emerson is the impact investment guy

Interview by Danny Almagor
Photography by Theo Stroomer

Danny Almagor on Jed Emerson

Everything we do, every decision we make has an impact. That includes where we put our money. Impact investing is an investment philosophy that seeks to maximise the positive impact we have—on the environment, on society— while still bringing in the bucks. It is, as Jed Emerson describes it, a matter of aligning your investment decisions with your values.

And Jed should know. In 2011 he wrote the original book on impact investing with colleague Antony Bugg-Levine, Impact Investing: Transforming How We Make Money While Making a Difference. It defines and charts the growth of the industry for people on all sides of the equation—investors, funders and social entrepreneurs—and puts a lot of the ideas he’s been exploring since the early ’90s into context.

Although the term “impact investing” is relatively new, the movement is not,
 and Jed has been one of the pioneers of this thinking for more than 20 years, having coined the term “blended value” while immersed in the business side of social work. He started his career working with troubled youths and has ended up advising some of the wealthiest families in the world about how to invest their money for positive change. In the end, he sees all of it—business, investment, advocacy—as the same type of work. It’s just about helping people express and fulfil their best selves.

I first met Jed a couple of years ago when he was touring Australia talking about impact investing to bankers, investors, philanthropists and politicians, and his philosophy was like a shining light for me. It validated so many of the ideas I had about integrating the things I care about with the work I do and where I put my money. I realised that if we viewed business and money, which are such powerful forces, through a new lens—if we applied a moral filter to them—we could change the world for the better in a massive way. That philosophy and many of Jed’s ideas still guide my work today.

Not long ago I was lucky enough to visit Jed at his home in the Colorado Rockies, and see him in his natural environment. Propped up next to his books and articles about impact and social justice was his collection of guitars and
 a photo of a young Jed Emerson with long hair, rocking it out on his electric guitar. We feasted on some American ribs before heading out on a long hike through the mountains where we discussed the Gross National Happiness Index in Bhutan. Who would ever guess this down to earth guy is responsible for moving billions of dollars into businesses that are changing the world?

This story originally ran in issue #42 of Dumbo Feather

DANNY ALMAGOR: I’m completely inspired by your ideas around combining profit with purpose. You’re the impact investment guy! How has that come to be?

JED EMERSON: Well, my background is in social work and community development. I started in seventh grade as a tutor in Spanish Harlem, and ended up in San Francisco as the founding director of the Larkin Street Youth Centre, which works with homeless youth and teenage prostitutes. And we did great work. It’s now a multi-service centre for homeless youth in San Francisco. But I reached a stage where I felt charitable giving should be done on the basis of performance and social impact, rather than politics, perception and persuasion, which is what I’d grown accustomed to doing. You see, I was a very good public speaker—my father and grandfather were both Presbyterian ministers—so I could stand up and make people cry about homeless youth, and they would write me cheques. When people came to me I’d ask, “What’s your interest area?” They might say, “Pregnant teens.” And I’d say, “Well, we have a something for that.” Or they’d say, “We’re interested in adolescent substance abuse.” “We have something for that.”

“You name it, we’ve got it.”

You’re always doing that kind of thing. But at the end of the day it was the same program—you just shape it to accommodate different interests.This was the problem with traditional philanthropy and non-profit funding in the ’80s—it wasn’t tied to deep strategy or performance. You raised money and were given contracts on the basis of what you said you would do, not what you actually did. Around this time I was introduced to a financier named George Roberts who challenged me to develop more of an investor’s mindset with philanthropy. He realised that when he looked at the philanthropic opportunities available to him at that time, the late 1980s, it was solely charitable giving. His challenge to me was to work together to create an investment approach to philanthropy.

What did he see in you? I mean, you’ve come from the non-profit area and he’s this hardcore investor.

I think he was amused by me quite frankly. [Laughs]. I’ve always been passionate and excitable. And he would invite me to these lunches, you know, on the top floor of an office building in downtown San Francisco. We’d sit there and I would not shut up about what I was finding, my experiences, this idea of being able to take business practice and apply it towards community impact. And at different points in the lunch he would stop me and try to make me eat because I couldn’t slow down. He was amused that

This story originally ran in issue #42 of Dumbo Feather

This story originally ran in issue #42 of Dumbo Feather

I was coming out of traditional social work with homeless youth and teen prostitutes and exploring this whole business side of the equation that hadn’t been defined.

I don’t think he was patronising. But I think I was extremely different from the other people he dealt with. And he was intrigued by the ideas that I had around creating social enterprise and managing philanthropy by drawing on investment principles and practice—to use business to drive community change. Today, many people use these ideas and tools, but in the late ’80s that idea was just beginning to surface.

And that’s how you came to work together?

Yeah. We set up a fund in 1990 called the Homeless Economic Development Fund. We wanted to invest in self-employment for homeless women and change the job placement system so it would be more accessible to formerly homeless people. And he said, “Just go out and execute it. Let’s meet once a quarter, and I’ll hold you accountable for what you do with my money.” [Laughs]. It was a very different kind of process. After he approved the creation of the fund I went into a meeting with him with a very thick notebook full of different grants that I wanted to develop. I started walking him through them when he stopped me and said, “Look, as far as I’m concerned, you’re a fund manager. And your job is to decide how to allocate the capital. My job is to hold you accountable for performance. I don’t know anything about these organisations. I don’t know if they should get $100,000 or $100 million, but it’s your job to figure that out. Then we can talk about what it means to be successful in that context.” It was a very different conversation, and a very different way to think about philanthropy.

Yeah! Because traditional philanthropy so often tries to micromanage its impact— every donation has heaps of strings attached. What an incredible shift in thinking.

Right. So that’s how the whole conversation started. I basically spent a decade running this fund, using philanthropy to help non-profits operate local, small- scale businesses that could offer formerly homeless people employment opportunities to help with their transition back to mainstream living. So we were right in the middle of what became this whole conversation around for-profit companies being run not only for financial returns, but to create social impact, and non-profit organisations using business to create social change. In the mid-to-late ’90s I began doing more and more writing and speaking, really promoting the ideas and practices that I was finding.

What was the changing mood in the ’90s? Why were investors who were traditionally driven by profit suddenly looking for social impact opportunities?

In the ’90s you started seeing folks both within non-profit and for-profit communities confronting the limitations of what could be achieved through their particular way of thinking. You had entrepreneurs starting companies like The Body Shop and Ben & Jerry’s with a different vision of the role that business should play, and you had former social workers such as myself who were frustrated with the limits of traditional non-profit organisations. We were looking for ways to sustain impact without always having to fundraise or be politically strategic. You also began to see the first waves of people cashing out from Silicon Valley and other parts of the country—people who had made their money and built their companies with a start-up and venture mentality. As these folks approached their philanthropy they felt that the same thinking they applied to create their wealth should be used to create their community impact. Writing a cheque and then waiting for a report a year later or

running a company without a passionate vision of changing markets and communities—of changing the world—simply did not make sense.

And the seed for impact investing was planted. It’s interesting because a lot of people might see impact investing as just another form of philanthropy. But you’ve actually gone way past that notion.

That’s right. I’m interested in how we apply capital to optimise performance. What I mean by this is that traditionally people have been asked to either make money in the for-profit sector or give it away in the non-profit sector. This approach asks you to split up—to bifurcate—how you live and how you operate in the world. But when I think of my resources or capital I don’t think of two buckets—one for doing good and one for making money. I simply ask myself, What are the total resources I have to create the greatest value I can? When I define that value it’s both in terms of financial return and social/environmental impact. So I think of value as blended.

What does that look like?

It looks different for each investor. In the traditional sense, all your money is put into investments with the single goal of making more money—of pursuing financial return. But impact investors seek to make not only an appropriate financial return, but to generate a measureable level of social and/or environmental impact as well. You don’t look at your money as sitting in two buckets, but rather one bucket. Your goal is to invest across a continuum of strategies—non-profit and for-profit—in order to generate the best overall performance you can.

You don’t invest in a for-profit company to make tonnes of money so you can then give your money away to a non-profit to make up for all the “bad” things you did to make the money in the first place.

You seek to invest on an integrated basis, to generate the greatest overall value for yourself as an investor that isn’t at the cost of the planet or your neighbour down the block. How you actually do this, the specific types of investments you make, will differ from investor to investor simply because we all have different objectives. However, the fundamental idea of integration is consistent.

Which means you have a lot more money to make an impact with. I mean, if someone is giving away thousands of dollars to charity, then they probably have millions invested commercially. Impact investing tries to access the millions of dollars, not just the thousands they are donating.

And it’s also a fundamental shift in how we understand the nature of the exchange. So in traditional philanthropy it’s a transaction. You make the grant and give your money away to somebody. Whereas if you take an investment mindset, when you allocate the capital is when the fun begins. You’re actually engaged as an investor, you’re focused not on the transaction but on the value created by the transaction. This is why I think more and more people have said, “My life and the value I want to create in my life is about a lot more than how much money I can give away before I’m dead.” [Laughs]. And it opens up a whole other conversation for families and individuals who control wealth about the purpose and nature of capital, about the purpose of life.

For me it’s a no-brainer. Everyone should be doing this. But you speak to lots of people who aren’t. What do you think is stopping them? Why wouldn’t everyone just invest for positive change?

Well it’s a no-brainer if you view your life on an integrated basis. But many people wear different hats. And they operate in a world that says, “Who I am in my nine-to-five life is different from who I am in the evening and weekends and with my family.” There’s that saying, “It’s not personal, it’s business”—the idea that somehow you can separate these aspects of who you are. I think increasingly the next generation are coming to the conversation saying, “The idea that you would spend your life doing whatever it takes to make money to do what you actually want to do with your life makes no sense.” We’ll see more people wanting to pursue a life that is more immediately connected with what they care about, with their values, their vision, and this gives them an opportunity to basically operate on a more integrated and holistic basis as opposed to somehow thinking that how they invest is disconnected from their community, from the things that they care about.

When did that awareness kick in for you? I think as a young person raised in the backwash of When did you realise the system was broken?

the 1960s I knew that the system was broken from the beginning. What has changed is the sophistication of my critique on that system and the strategies that I am implementing to address the breakdown of that system today. When I was working with street kids we had a very good critique of what was wrong around the homeless service system and why kids remained on the street, but we weren’t really paying attention to where the money that drove that system came from.

I’m always disappointed when I hear non-profit people who are so convinced of the righteousness of their cause that they don’t care about the source of the philanthropic capital they’re drawing on to address their cause.

I’ve heard non-profit executives say the only problem with tainted money is there “taint enough of it.” Right? “I’m working for children so I don’t care if the money that I’m taking comes from somebody who’s invested in South East Asian factories that are employing children.”

Yeah. That’s crazy.

In the past five years we’ve finally had two parts of a related conversation come together. One has been about using capital to create change in the world and address social and environmental issues. The other has been the recognition that investors who care solely about financial performance will under-perform in the long term if they’re not thinking about how other factors such as social and environmental issues will affect their businesses and ability to operate. As you connect those two parts, you suddenly have business people saying, “Just because something’s not represented on my balance sheet doesn’t mean it’s not a liability to my firm. And I need to pay attention to climate change, to water, to pandemics, to workforce skill development and education.” There’s a host of things that people are recognising will affect sustainable economics. And those people are now coming together with folks who are saying, “We can structure capital to actually make a better world.”It’s a nice time in history. You mentioned you have a background in social justice, and that your father and grandfather were ministers. But did anyone have business experience? Where did that come from?

It’s a nice time in history. You mentioned you have a background in social justice, and that your father and grandfather were ministers. But did anyone have business experience? Where did that come from?

Honestly, I have one great, great grandfather who had a grocery store and that’s about it. [Laughs]. It’s interesting—when I started working with George I had my Masters in social work and I had that history. And we were working with non-profits running businesses and I realised I didn’t have the skill set that I needed to work with the folks I was trying to help. I started taking business classes on Saturdays and would meet with the grantees on Monday morning. I would take things that I learned on the weekend and apply them to the situations we were working with during the week. I ended up going back, getting an MBA, and taking that MBA through the lens of social enterprise, philanthropy and impact investing. Because I wanted to apply everything I learned to my context. So I never really learned business in the traditional sense of going to a Goldman Sachs for 10 years and making a lot of money and then deciding to take my skills into the social sector. I learned business skills in the social sector.

And it’s in this context that you developed the concept of “blended value,” which is at the heart of everything we’ve been talking about—taking an integrated approach to investment.

Yeah. My first piece of research was called “The Blended Value Map,” and we spent about four or five months just interviewing people and reflecting on what was happening in this conversation. I had a number of people say, “You should start the Blended Value Institute to promote these ideas and practices. We’ll give you grants to start this.” And my response was, “What do I do when the grant runs out?” Then I’m in trouble. ‘Cause I’m on that treadmill. The other thing is that a fundamental part of my work has been creating new organisations, but we need to rethink the nature of an organisation. The idea of creating a new centre was less appealing to me than trying to slot in behind some of these people who I felt were already trying to advance new thinking and practice.

So now you work with wealthy private individuals and families, helping guide them on this impact investing journey, helping them create blended value.

I ended up accidentally falling into work helping asset owners to invest through a blended values lens, and for the last five years that’s been the focus of my work. It’s been a really interesting journey. I especially like it because principals (asset owners) have an ability to act. And they can operate on an integrated basis in a way that an institutional foundation or a company cannot. You can find a dynamic decision-making process and ability to be responsive, and an ability to think in an integrated way because it’s a family. So it’s an economic unit and a social unit at the same time.

What does success mean to you?

I think for me personally success has meant things making sense in a way that they didn’t 10 or 20 years ago. I think partly the reason I went on this path was because of a real dissonance with what I was trying to do and what I saw in the world. On a professional level, the fact that ideas from 20 years ago are now centre stage and part of a meaningful conversation is a full measure of success. I mean there’s a lot yet to be done. But we’ve made progress.

You’re speaking from your ranch in the Rockies, and I know you love being there. Is that where a lot of your inspiration comes from? The outdoors, the ranch?

Yes. You might not believe this but I’m not an extrovert. And so even though I give lots of talks and get very excited—I can be very animated—I find it very draining at the same time.

And so to have a place where I can turn off the computer and sit with a book and simply read and think is really important. We’re literally at the end of a dirt road on the way into the Indian Peaks Wilderness area. You can just walk out the door and into the Colorado Rockies. It’s a phenomenal thing to do. And then I also play music. I have lots of guitars and amplifiers and I can play very loud and be very expressive without bothering anybody. So it works well.

I get it—you’re a rock ‘n’ roll mountain man using business to change the world. That is hardcore.


What have been some of the struggles?

It’s hard. I think of myself as a very nice and friendly guy. And somehow I developed a reputation as being very provocative. Not pushy, but just arrogant, and kind of, “I know what’s right, what’s wrong with you people ‘cause you’re not doing this.”

Woodrow Wilson said: “If you want to make enemies, try to change something.” And I think that’s it. You’re going in and you’re breaking eggs to make the omelette.

And in that process you have to be really aware of the threat that you represent to others both professionally and personally. Over the years I haven’t been as sensitive to that as I could have been. And so I’ve been very confrontational with people, not taking the time to really stop and hear more about where they’re coming from and why—even if I disagree with what they’re doing and how they’re thinking about these issues and practices. And I think I created more friction for myself than I needed to by having a “bad attitude.”

[Laughs]. I can learn a lot from what you just said there.

But you can also reach an age where you forgive yourself for these things. You just say, “I did the best I could at the time and I had ideas that I was super passionate about. I had a vision about what we should be doing. And I wanted to do everything I could to deliver that. If I offended people in the process, I’m sorry for that.” They tended to be people in power, anyway. So I take comfort in the fact that at least the people I was trying to “afflict” were the powerful! [Laughs]. I’m going to try

I’m going to try practising a bit of that. But I always feel like I’m not doing enough. How do you deal with never being able to do enough? Do you feel that as well?

I do. I think part of my problem is that there was a time, maybe 10 years ago, when I felt I had to be everywhere. I had to go to every conference, I had to write as much as I could. I had to promote these ideas because this is what we had to do. And I remember the first time I opened a Twitter account—because my wife had given me an iPad and I just started playing with this thing—I logged on and started searching for some of the stuff I cared about. I was literally stunned to see these streams of conversation around things I was trying to advance. The fact is I didn’t know any of these people. [Laughs]. Right? These were people on the other side of the world. And I think there was a point where I realised, We truly are in a parade. It is not about the individual charismatic social entrepreneur. It’s about the parade of entrepreneurs who are advancing this work. It’s not about the Bill Gates with the big bucks. It’s about the smaller investors who are moving capital in very meaningful and high impact ways. And it made me realise that I can relax. Because this has now been unleashed by virtue of thousands of people promoting these ideas and advancing discussions about what that means for them in their community. That’s really phenomenal.

It’s empowering in the sense that you don’t have to be rich and powerful to be part of this.

That’s right! You don’t. I’ve always felt I have every right to be in this conversation, to be driving this, to challenge what’s happening and the current practices. I’ve never felt that because I didn’t have a lot of money I couldn’t promote these ideas. Today, individuals can engage in crowdfunding to finance social enterprises and for-profits with a social mission, they can form cooperatives. These tools enable those with greater wealth—however defined—to invest in the communities and ventures and dreams of those with less wealth who at the same time can access resources more easily to launch their own ventures that improve the prospects of their communities and families.

What would you say are the biggest issues we’re facing at the moment?

I think certainly there are challenges today and there will continue to be challenges in the future, but if we think about our challenges more as a whole, rather than separate entities, we can tackle them more effectively.

Taking an integrated approach to world issues lets us connect with people in ways we haven’t been able to in the past.

The whole conversation about human-centred design, around social entrepreneurship, around how we use the economy to drive social and environmental impacts is what we should focus on, rather than simply assuming that if the economics are good, the social will take care of itself. I don’t think that’s necessarily the case.

Everyone talks about changing the world, but it’s so much harder to change ourselves.

This is the issue. I think it’s important to have a degree of humility as we engage in this work. I’m struck when I listen to myself with the level of self-confidence that it sounds like I have. [Laughs]. And I think sometimes we need to dial it back a little, even though we are passionate about the ideas that we’re advancing.

Yeah. For me it always comes down to what you said earlier—the idea of being a whole, integrated person. And we talk a lot about the idea of being “100 percent” or “all in.” What does that mean to you?

In an investment sense, it’s everything we’ve been talking about. It’s investing with your values and your capital. I hear growing numbers of people speaking about the democratisation of impact investing—making it more accessible to people at all income levels—and the opportunity we have to bring new investment products to market that allow school teachers and firemen to invest in the same way Bill Gates could if he was an impact investor. This can be done through pensions, through child savings accounts, through a variety of mechanisms that we have out there now. So giving 100 percent is different for each individual—it depends on what your values are and how you invest.

You co-wrote one of the key books on impact investing a few years ago, defining the concept and state of play. What comes next in that journey?

A couple of things. Ours was the first book on impact investing and it presented a big vision and it had lots of stories and anecdotes and really walked people through them. It was a very thoughtful book. And much of what we talked about in that book is now well ingrained. What is next is moving from a vision to understanding the skills, the practice, the techniques of what it takes to be successful in impact investing. I’m publishing the next book with some colleagues. It focuses on 12 of the highest performing impact investing funds and asks, “What is it about the way these funds are constituted, the leadership, what they have done that has made for success?” We need to move away from the hype and promise of what impact investing is to a more crisp analysis of what impact investing is doing. That’s the next step.

And for you personally? More time at the ranch?

Yeah, exactly. My wife Mia always laughs because my commitment is to do less public speaking, less pontificating and more on execution with a small set of families that really want to put this work into practice. But I’m still going to conferences and giving talks, I’m still writing books. So I am trying to be more efficient and effective in the conversation.

We have to go easy on ourselves and each other as we move forward with this and get more clarity around what we’re trying to do. We don’t want to be in a situation where the revolution eats its children.

I think there’s real promise and real possibility. And we will have failures along the way. Funds and different strategies will blow up in our faces. But we have to simply take that knowledge and experience and use it to help this grow. Because at the end of the day, we know what we’re working towards is the right direction. It’s simply a question of finding the right set of vehicles and leaders to get us there.

And as you say, “Hold on to your hat.”


Danny Almagor

Danny Almagor is the founder and CEO of Small Giants, an impact investment company that supports and nurtures businesses dedicated to making the world a more just and sustainable place.

Photography by Theo Stroomer

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