What is the next wave of impact investing? What terminology will most resonate with new institutional investors entering the game? Will new fund managers dedicate resources to both investing and impact? These are all questions we think about as DBL Partners enters its second decade of double bottom line investing.

Similarly, authors Paul Brest, Ronald Gilson, and Mark Wolfson raise provocative questions in their recent article. The authors put forth a claim in the industry: When must the investments be concessionary, sacrificing some financial return for social value? DBL believes that there does not have to be a sacrifice between achieving top-tier financial returns and positive social and environmental impacts. In 2013, DBL put forth the term “impact-oriented venture capital” (Impact VC) in a Federal Reserve Bank of San Francisco working paper. DBL has a strong conviction that Impact VC—active, not passive fund management—creates positive societal and environmental impacts while generating strong financial returns that allows the field to scale. DBL has proven out the thesis that the first and second bottom lines are not mutually exclusive, but are in fact are mutually reinforcing. Pitchbook ranked DBL’s Fund I, the Bay Area Equity Fund, performance second out of 25 funds under $250 million through 2015.

The authors present the notion that in order for an investment to have social impact it must meet both ‘enterprise impact’ (the investee business must produce the investor’s intended social outcome) and ‘additionality or social value-added.’ We believe that these concepts may be too prescriptive. Innovative, disruptive startups are in a constant cycle of re-evaluating all aspects of their business—the mission, product, business model, and intended positive societal outcomes to name a few. As such, a prescriptive approach to enterprise impact could be limiting, and ultimately, could be detrimental to a growing company in terms of its ability to scale—both in terms of financial and social outcomes. For example, DBL first invested in SolarCity in 2007 when the company had just 60 employees. Today, SolarCity employs more than 13,000 people, the majority of which are solar installers. Had DBL been too prescriptive in its outcomes to SolarCity the company may not have wanted DBL as a partner, and the company may not have created the positive social and environmental impacts at the scale that it has today.

DBL’s approach to creating social value is to strategically design high impact programs across its portfolio of companies. Whether it’s working with Revolution Foods on financial education and employee training programs, or working with the California Public Utilities Commission on diversity initiatives, or forging partnerships with the U.S. Department of Labor on workforce development programs, the impact work is about leveraging both financial capital and human capital to achieve greater impact not just for society but for the competitive strength of its portfolio companies. DBL is also committed to reporting on the impact outcomes and issues in a “Double Bottom Line Report” to its limited partners. The most recent data for the reporting period ending December 31, 2015 showed that DBL’s portfolio of companies, across the three funds, employ more than 40,000 people nationwide. The reports include comprehensive quantitative metrics (e.g. jobs created since DBL’s investment, benefits offered, diversity in management) and qualitative summaries on social and environmental impacts.

Signs that a double bottom line approach to venture capital is gaining favor are all around us. On Jan. 27, 2015, The New York Times published a column by David Brooks about impact investing called “How to Leave a Mark”—a significant piece for the industry that is transitioning from being a cottage industry to part of the mainstream. Then, in July 2015 Goldman Sachs & Co. announced they would acquire impact intermediary Imprint Capital, and in late 2015 BlackRock and Bain Capital announced the creation of impact investing funds. Earlier this year, Harvard Business School wrote a case study on DBL for a new class on impact investing. Now, even the Pope is getting involved. DBL will participate in a November 2016 conference at the Vatican to explore an Enabling Access to Social Entrepreneurship (EASE) investment fund. We see a new wave of impact investing quickly approaching and appreciate the authors helping us to stay authentic as they spur a lively discussion on this ever evolving field!

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