The dominant model of capitalism practiced today is more than two centuries old. Our problems have changed and so too must our response. The moment calls for profound change, for a new approach that asks the question: how can we reach our financial goals while also doing measurable good?
This is the call-to-arms that Sir Ronald Cohen, chairman of the Global Steering Group for Impact Investment, issued when he created the organization. Capricorn Investment Group (CIG) has been answering that challenge since Canadian IT entrepreneur Jeff Skoll founded the firm in 2001. Known best for his role as president of eBay from 1996 to 1998, Skoll’s business plan took them from internet start-up to industry titan before he cashed out and moved on to new projects a few years later.
As an investor, Skoll was keen to find an asset manager whose values aligned with his own ethical stance and he realized it was easier to build one than find. From there, Capricorn Investment Group was founded on the premise of socially responsible investing. Managing Principal Ion Yadigaroglu and Managing Director Alan Chang shared how things evolved as their team tackled what impact investing meant in the real world.
“The earliest years of the firm had limited ambitions around impact, but as time went on, we began to rethink how we would invest,” Yadigaroglu said in the 2010 interview. “This started with very simple things, like becoming more informed about what stocks were in the portfolio. We didn’t want to invest in companies that had real ethical problems, so we bought data about company sustainability and incorporated that information into our thinking.”
According to a 2019 Harvard Business Review article entitled Calculating the value of impact investing, researchers defined this sustainable strategy as “directing capital to ventures that are expected to yield social and environmental benefits as well as profits.”
This might be easier said than done but Capricorn has found a way – the firm directly oversees $5 billion in client assets and manages another $3.5 billion in partnership with other organizations. However, defining success in an industry where the biggest number often wins isn’t going to be a walk in the financial park. Researchers Chris Addy, Maya Chorengel, Mariah Collins and Michael Etzel highlight that measures now exist to help quantify the Je ne sais quoi nature of social benefit. By using a metric like their proposed impact multiple of money (IMM), it’s possible to reimagine that success in terms beyond the bottom line.
When CIG was still finding its legs, their work with the Skoll Foundation – the philanthropic arm of the billionaire’s empire – was often characterized by more conservative ideas about investment. “Early on, when the foundation would ask about our investing, we’d say, ‘our job is to invest money, your job is to give it away.’” Yadigaroglu recalled. “But the foundation wasn’t satisfied with this conventional answer, and they pushed us to think more about the positive and negative impacts of our investments.”
This has required the firm to think critically about their investment strategies. Longer-term timelines of five, ten and fifteen years are needed for those truly committed to impact investing. This might account for why the company has made 53 investments of $2.4 billion since their first venture with Tesla in 2006 and only 10 exits since then. Tesla, Yammer and SunEdison are amongst their most notable exits.
Capricorn invests public equity, fixed income, private equity, and real assets markets across the globe and their portfolio companies include those in electronics, solar, analytics, software, renewable energy and others.