Values Proposition: Nancy Pfund ’82 on Tradeoffs in Impact Investing

Investing to maximize profits is hard enough. Investing to maximize profits and drive positive social impact is a challenge of another order.

The field of impact investing has been growing rapidly. When Nancy Pfund ’82 launched DBL Partners, a double bottom line venture capital firm, in 2008, the idea of environmental, social, and governance criteria shaping investment or business decisions faced a lot of skepticism. But it’s hard to argue with results. The firm’s investments in Tesla, Pandora, SolarCity, and other companies have borne out her conviction that investments can succeed on financial and social dimensions at the same time.

We spoke with Pfund about how to deal with the uncertainties and tradeoffs that inevitably occur when you try to put values into practice. “You can’t expect any company to do everything perfectly,” she said. “You want as many positive outcomes as possible.” She told us about a fraught decision early in the history of Tesla, when DBL’s goals seemed to collide.

I’m driven by belief in equity, inclusion, and sustainability. I believe in using evidence-based decision making to take the politics out of the critical problems of our era, such as climate change. I believe in getting our industrial, commercial, and social fabric to look more like the people in our society today as opposed to a more homogeneous 20th-century profile.

DBL Partners aims to develop great, innovative companies that achieve a broader social purpose. We infuse our investment decisions with an underlying values equation. We expect that will, increasingly, become the norm. For that to happen, the values-based approach needs a seat at the table. It needs to be there when decisions are made about hiring, where to locate a plant, or how aggressive to be on climate goals.

You can’t expect any company to do everything perfectly and achieve all the social and financial metrics. That’s not realistic. There isn’t a perfect option anywhere, but as you build an impact portfolio you can begin to cover more and more of the bases. Going through the inevitable choices and tradeoffs is a nuanced process. It’s a probing process. You want as many positive outcomes as possible, but a values approach spans across all aspects, processes, and impacts of an organization. Something that involved is going to have failures and imperfections.

One of the most vivid memories of my career is a board call in the early days of our investment in Tesla. Our mission, with that fund, was to develop job creation opportunities in the Bay Area for people of lower income. From that perspective, we worked with company executives to find sites for a Tesla car plant in the Bay Area. Many people argued California is too expensive, the regulations were too severe for manufacturing, there’s not enough housing for workers—a litany of objections. We listened to those concerns, but we managed to identify a site in an underdeveloped part of Contra Costa County, east of San Francisco, that was sorely in need of jobs. Again, working with the company, we negotiated a package of economic development incentives and had board approval. At the very last minute, the state of New Mexico came in and offered something even more competitive.

On that call, the conundrum was that A) we had just spent months working on getting a local site just to be bested by an outside offer; B) at that time, our fund’s mandate was not to create jobs in New Mexico; and C) I was a board observer and our obligation was to do what was right for the company, not necessarily what was right for our fund.

Personally, it was devastating to set aside our mission for the Bay Area, but it was obvious what we had to do; the priority was to make the company successful.

In the end, that offer didn’t turn out to be as great as it initially appeared. Tesla began a whole new search which led back to the Bay Area when Tesla acquired Toyota’s shuttered plant in Fremont, California, and turned it into the huge factory that we know today.

At this point, having done it for a long time, our expertise in these areas of economic development, community engagement, and policy, represent a big part of our value-add when we invest in a new company. The executives know that we’re going to help them as a thought partner to try some new things that push them into other dimensions of impact. While after 15 years we do have a playbook of sorts, it’s a very bespoke, collaborative, creative process. There is always something new, and that, to me, is one of the best parts of the practice.