Guest Column by Drummond Pike
Principal, Equilibrium Capital Group
Sometime in the late 80’s, I met Amory Lovins. What a character, replete with calculators, gizmos and pens stuffed into his pockets. Amory was, and is, one of the most unique voices on energy policy I’d ever heard.
He talked about something called “negawatts.” Now, for a budding philanthropoid (one who helps philanthropists dole out largess) interested in stopping the proliferation of coal plants supplied by strip-mining, it sounded like just the thing. Finance energy efficiency by rewarding conservation the same way builders of new plants are rewarded. It seemed like the right idea for the times.
The foundation I’d started, Tides, was small at the time but had committed itself to serving the niche of donors committed to environmental and social betterment in their communities. In building our “brand” we committed early to the first generation of social, or “impact,” investing: screen out the bad stuff (nukes, tobacco, South Africa) and stare down the portfolio managers who whined about limiting their sandbox and how it would inevitably lead to diminished returns. Impact investing had a definable second generation with the emergence of E-S-G or “mission” investing where one invests in companies that proactively pursue positive environmental, social, and corporate governance practices. With this in mind, we pushed our asset managers (Walden in Boston) to develop their small cap Innovations Fund, which has turned out to be remarkably successful in recent market cycles.
But still something was missing, and that was the connection between macro-economic trends we are seeing and opportunities to invest that take advantage of them. Enter Impact Investing 3.0.
When last we left Amory 20+ years ago, he was detailing to a rapt audience how to create incentives that would inspire the utilities sector to focus on conservation. So, how well have we done? Anyone have “Negawatt, Inc” in their portfolio?
Sadly, no. It doesn’t exist. For all the sense it makes, for all the wars we’ve fought to preserve ready access to oil, for all the political games played in Washington, no one has figured out this simple strategy.
Until now. Impact 3.0 firms like Portland-based Equilibrium Capital Group are emerging to build out this strategy: Think about the emerging “sustainable” economy, consider who the winners and losers will be in the changing landscape, and then back the right folks pursuing the right strategies that will succeed in our resource-shy world. It just makes sense.
I decided to leave Tides several years ago figuring 35 years is about all anyone should give a single job. But by now, my commitment to proactive investing was cemented and something like Equilibrium Capital Group seemed the logical next step. That one of their central interests is in developing the “negawatt” strategy sealed the deal.
I don’t know if Equiilbrium Capital Group’s company, EnergyRM, will be able to solve the thorny question of how to value saved energy, thereby unleashing the financing conservation needs, but I think it holds tremendous promise. At least my friend Amory will be happy that someone is working on it (at last). And, if I’m right, this kind of approach is exactly what thoughtful, long-term investors are looking for.
About the columnist: Drummond Pike, founder of The Tides Organizations, joined Equilibrium Capital Group as Principal in 2011. Pike is known for his groundbreaking work in creating innovative ways to find and provide funds to socially and environmentally important movements. His work provided investors with next generation investment options in specific areas of their interest. Pike is a leading expert in development and management of donor advised funds and is recognized internationally for his philanthropic body of work.