The ranks of ‘impact alpha’ fund managers expand, along with client demand and the talent pipeline

by Dennis Price, Amy Cortese and David Bank | Impact Alpha | Impact Investing | February 1, 2024

ImpactAlpha, Feb. 1 – Cost efficiences plus improved customer experiences plus carbon reduction in large markets equals high impact and high returns. That’s the equation that has led San Francisco-based DBL Partners to companies like Tesla, SpaceX, SolarCity and PowerLight.

“What investors are seeing is the ability to create a new economy that is not extractive, that is more just, that addresses the needs of the 21st century,” says Nancy Pfund of DBL, which raised its $600 million fourth fund in 2021. In doing so, she told ImpactAlpha, “you can build big companies that will grow and become profitable and become great investments.”

DBL is a pioneer among the ranks of investors that believe delivering outsized impact can drive outsized financial returns or, we daresay, impact alpha.

Impact Capital Managers, a network of fund managers seeking “superior returns and meaningful impact” now counts more than 115 members with combined assets of over $100 billion (up from two-dozen managers with $5 billion in assets in 2018 when the network was launched). New members include Tokyo-based GLIN Impact Capital, Atlanta-based O15 Capital Partners and Chicago’s Copia Group.

DBL’s recent investments include tiny home startup Pallet, electric roasting company Bellwether Coffee, and Rain, which fights wildfires with autonomous aircraft. Few companies can be an “A plus” and both financial return and impact, says Pfund, whose bets included Juicero, the premium juicing startup that shut down in 2018. “But across the portfolio, you get that performance.”

Pfund, along with Mark Berryman of Caprock Group and Adrianna Alterman of the Salesforce Ventures Impact Fund will be celebrated at Impact Capital Managers’ “Evening of Impact” tonight in Manhattan.

The winners of ICM’s Impact Awards, says ICM executive director Marieke Spence, show “how impact investing has evolved, from niche to the mainstream.” The ability of the recipients “to deliver both impact and financial return is clear.”

Next week, ICM and Tideline will outline seven levers for generating impact alpha in a report, “New frontiers in value creation,” and a webinar.

Client demand

Berryman sees hundreds of impact fund managers as head of impact investing at Caprock Group, the $8.9 billion Boise-based multi-family office and registered investment advisor.

“Investing for impact across asset classes is doable. It’s simple,” he told ImpactAlpha. Berryman is working to correct what he calls misnomers, not only that impact means investors won’t get a financial return, but also that it’s complicated. “

“It’s so much easier than you think,” he says. “We all have a job to simplify it, make it less complex and have data to support how you can invest for impact across asset classes in a very actionable, simple manner.”

Some of the firm’s 300 families are all-in on impact, but most are earlier in their journeys. Caprock has an in-house vehicle – like a fund of funds but with no fees or carries – that combines up to a dozen impact themes.

“They actually can make one allocation and they can get emerging markets, they can get education, they can get climate technology, early stage and late stage,” he says. “After a year or two of exposure into 10 to 12 innovative and best-in-breed funds, they’re like ‘Okay, now I want to go heavy in my portfolio allocation in emerging markets or affordable housing.’”

Caprock itself is embarking on an acquisition strategy in the consolidating market for RIAs and multi-family offices. Recent years have seen the absorption of Cornerstone, Trillium Asset Management and Imprint Capital. The private equity firm TA Associates took a stake in Caprock in 2021. The firm’s new M&A team is looking to be a consolidator itself. 

Folks who have noticed have wondered whether the targets will be other impact-focused advisors. “And the answer is no,” Berryman says. “We’re looking more from a geographic and client type perspective, because we’ll bring in the impact for a new partner of ours over time.”

Talent pipeline 

Global youth are at the forefront of climate activism. That passion is also driving many into careers in impact investing. Alterman, ICM’s “emerging leader” awardee, is helping the network carve out programming and events for hundreds of other non-partner level impact leaders. Alterman, a principal with the Salesforce Ventures Impact Fund, co-launched ICM’s emerging leaders affinity committee after she attended an ICM event with a senior colleague and realized that the same networking and peer-learning experiences could be beneficial for up-and-coming professionals like herself. 

“From our vantage point, demand for impact-oriented roles, particularly in investing, is strong and growing,” says Spence, noting the role that programs like Turner MIINT and the Mosaic Fellow program play. “We see this trending earlier in the career lifecycle as awareness of the role of business and investing becomes more mainstream.”

“When I graduated college, impact investing, as a term, was just kind of entering the consciousness,” Alterman tells ImpactAlpha. She got her feet wet at MaRS, the Canadian  entrepreneurship center, and Amplify Capital, an early stage impact VC firm, before earning an MBA from Yale. She started at Salesforce Ventures, the enterprise software maker’s corporate VC arm, in 2019 as it was standing up a dedicated impact fund. The fund was conceived by chief impact officer Suzanne DiBianca, who had created Salesforce.org, the software maker’s charitable arm. “Her view was, it shouldn’t be only philanthropic. It shouldn’t be this thing on the side,” says Alterman. “It should also be directly integrated into the business.”

What started as a $50 million fund has grown to an evergreen fund that invests in enterprise software companies working across climate, workforce development, health and inclusion. The fund has notched two exits, in the form of acquisitions, and a handful of portfolio companies are prepping for IPOs in the next few years. Portfolio companies include Pano AI, a San Francisco-based startup using AI to aid wildfire detection, and Amini, a climate data provider in Africa. 

“Once we layer on the enterprise software lens, we have a pretty broad mandate to invest across stages and geographies and sectors,” says Alterman.