Can a company pursue profits and social good at the same time?
Just ask Howard W. Buffett (grandson of Berkshire Hathaway founder Warren Buffett) and Trevor Neilson, who together have co-founded i(x) Investments, a holding company built to “proactively address global, national, and local problems while simultaneously making a profit.”
The newly launched venture will make long-term investments in companies that address “the pillars of human needs,” a wide-ranging category that includes clean energy, access to water and food, technology, communications, health and housing.
Commerce should have a conscience. Profit should have a purpose.
“I’m looking for that sweet spot,” Buffett told The New York Times, describing the company’s ethos. “How do we improve society through these investments? How can we be creative with capital to address some of the greatest human needs?”
Neilson and Buffett hope to answer those questions by ramping up to around $100 million a year in what they’re calling “impact investments.” The company is currently collecting money from “friends and strategic partners,” setting 2020 as a target for an initial public offering, reports the Times.
In a Huffington Post blog published earlier this year, Neilson argued i(x) Investments’ aim is not only a moral win — it’s a sound financial strategy as well.
“The research is clear,” he wrote. “Companies that do good in the world return more profits to their shareholders than their counterparts — those who do harm.”
A factory the dumps toxic materials into the river down the road may profit in the short run but in the long run will destroy not only its reputation but also the health & livelihood of the employees; and customers who live nearby.
An apparel company that pays workers a tiny wage and forces them to work in slave-like conditions might make a faster profit in one year but over the long run will pay the price for their short-term, myopic thinking.
A meat producer who abuses the animals that it farms may make more money than its competitors due to its lower cost, until the public finds out about what it has done.
i(x) Investments isn’t alone in seeing impact investments as a savvy bet. A 2010 JP Morgan Chase report found the market for impact investments had reached “a significant turning point” and was poised to go mainstream.
In 2014, a company called LeapFrog Investments — partially backed by another notable name in investing, George Soros — raised $400 million for socially responsible investments in Asia and Africa.
“Commerce should have a conscience. Profit should have a purpose,” Neilson added in his blog. “It’s just not enough to only be ‘less bad,’ but it is essential to be ‘actively good.'”