David Yeh’s career spans Wall Street, global venture capital and the White House. Yeh integrates his unique insights on business, innovation and government to develop impact solutions that often address critical needs in energy, infrastructure/real assets and sustainability. He founded Capitol Hill to work with global asset managers, high net worth families and game changing startups to develop mission-driven investment and business solutions.
Christopher P. Skroupa: What does the future of impact investing look like? What does the 21st century company need to know?
David Yeh: From my experience, impacting investing is in the in process of mainstreaming. I’m seeing the transition from an emerging asset class populated by boutique funds to most significant asset manager making impact investing an integrated part of their strategy. In the long-term, impact investing will no longer be a separate niche or strategy. Sustainability, responsible ownership and explicit diligence on a company’s impact on stakeholders and society will be part of the standard investment processes.
Companies raising capital need to know that being a sustainable company will become a part of their license to operate, as well as their larger public and professional reputation of what it means to be a well-run and respected company. It will not be restricted to “do gooders.”
Skroupa: How has the value of impacting investing changed for the 21st century company in the last five years?
Yeh: Impact investing is both a generational macro trend and becoming the norm for the finance mainstream. It has become part of finance vocabulary, transitioning from the world of ESG and philanthropy. Many of the largest investors in the world have begun to study and incorporate it.
Nine out of ten of the largest US asset companies have begun to proactively adopt impact investing. This includes blue chip investors such as BlackRock, Goldman Sachs, and J.P. Morgan Chase. Moreover, trillions of dollars in wealth is being transferred to millennials over the next twenty years. The next generation of leadership at family offices will often be millennials who are committed to investing their resources with a lens of impact and sustainability.
This is just the tip of the iceberg. A number of high profile funds, such as TPG RISE, with limited partners such as Richard Branson, Reid Hoffman and Bain Double Impact helmed by former Governor of Massachusetts Deval Patrick have been launched. Impact investing is no longer restricted to foundations and nonprofits. More importantly, these icons of Wall Street are being driven by their own clients demanding impact products.
To see the sector’s potential, we need to define impact investing a bit more clearly. At best, many business people associate it with just cleantech and venture capital. At worst, many traditional investors see it as niche market for the do-gooder fringe that does not make money. In reality, I view impact investing as taking a value based approach to investing that considers the critical trends of our age, such as climate change or a global population that will approach 10 billion in our lifetime, which are often labeled as only sustainability concerns. The impact investor can be viewed as a first mover in the next set of global economic drivers that often have their roots in sustainability. Think more Warren Buffett with his wind investments at Mid-American, than hippies with an MBA.
Impact investing is as broad as our global economy – it touches all sectors, stages, asset classes, geographies and many industries beyond clean energy. It is represented by successes, such as Tesla, (which is now worth more than Ford or GM),the hundred billion dollar plus green bond market, sustainable food and agriculture, economic development, pay for success innovation for education and child welfare programs and large emerging market opportunities such as meeting the basic needs of healthcare, communications, mobility, and even financial services for the emerging billions of consumers from Asia and Africa.
To answer your question; impact investing is essential for the 21st century company, both for asset managers and companies raising capital. In my view, for investors, integrating sustainability into your investment strategy can lead to generating differentiated, and often deeper, investing insight, along with more robust due diligence. This is the basis for long-term alpha. For CEOs of companies raising money in Wall Street or Silicon Valley, sustainability will be part of how your firm’s business strategy and overall prospects will be measured.
Skroupa: Can you talk about what you’re working on in impact investing?
Yeh: At Capitol Hill, our job is to connect the dots between “Wall Street” to “the White House” to “Silicon Valley” in order to develop impact investments and business solutions. Connectivity between Wall Street, Silicon Valley and the White House is limited, and business professionals who are fluent in all three spheres are even more so. In our experience, we see that opportunities in many of our nation’s regulated and largest industries, such as energy, water, finance and infrastructure, are being overlooked.
A rare mix of policy, finance and innovation insight is necessary to identify and execute on it. With a background in all three, Capitol Hill identifies, invests and de-risk large opportunities that mainstream businesses do not see. We are often a first mover in porting innovative business practices, and brokering partnerships between the capitals of finance, policy, and innovation. For example, we are using our unique approach to develop new impact investment markets in infrastructure, create impact products for the hedge fund community, and innovate on the utility business model. Many of our solutions incorporate public-private partnerships that arbitrage the risk between perceived and actual factors of partnering with the public sector.