Nature of California Drives Impact Investment Leadership

Nature of California Drives Impact Investment Leadership

California is the recognised centre of the technology world. Silicon Valley is the birthplace and natural home of many of the world’s biggest tech companies and LA is the playground of the rich and powerful.
The high density of household famous tech brands in the West Coast and the social and environmental factors that characterise the state have coalesced to make it a leading light in the area of impact investing and using technology for a higher purpose.Climate change hits the fifth biggest economy in the world right where it hurts: the wallet. Droughts, wildfires and power crises have turned Californians into champions of environmental sustainability and that is reflected right through the whole state’s business community.

A Burning Need

When wildfires broke out in the North Bay area two years ago, Airbnb allowed users to open their listings short term for free to shelter Californians fleeing the wild fires. The move dates back to Hurricane Sandy and represents a very tangible method of aid, sanctuary, to evacuees and relief workers in disaster zones.Google-owned Waze, a community-sourced maps app, also became a critical tool for evacuees to navigate around moving wild fires as they fled danger zones.

Breaking the Gridlock with Data

Environmental startups abound in California because of the prevailing conditions. Gridlocked highways and visibly poor air quality have necessitated out of the box thinking in LA. LA has had to adopt smart city projects out of necessity: its sprawl and traffic have necessitated radical solutions to keep the city moving. LA is a founding member of the Open Mobility Foundation, a new global non-profit organization to support the development of open-sourced software that provides scalable mobility solutions for cities.

A Sustainable Type of Philanthropy

As with so many trends in culture and society, California is leading the way on investing for impact and purpose-driven business. A cadre of celebrities from Ashton Kutcher to Leonardo di Caprio are sprinkling some Hollywood glamour and business sense to what was once the preserve of philanthropists.

Impact investing is gaining a foothold globally. Year on year from 2017 to 2018, impact related assets under management doubled to $228 billion, according to Global Impact Investors Network (GIIN). And it isn’t regarded as a CSR strategy or a sideline to the main portfolio. Most impact investors expect similar, risk-adjusted returns. Impact investing is one of the fastest growing asset classes on Wall Street…Even BlackRock, the biggest asset manager in the world, is getting in on the act, using its strength to exclude certain stocks from its funds (gun manufacturers and retailers for instance), divesting from businesses which lack purpose or long term vision and playing the part of activist where it retains an interest.“Without a sense of purpose, no company, either public or private, can achieve its full potential,” wrote BlackRock’s CEO Larry Fink in a lengthy open letter to business leaders. Fink urges companies to extend their horizons beyond maximising short term gains to look at what gives them purpose and allows them to make sustainable decisions. After all, what’s the long-term point in investing in a company that will cease to exist 5-10 years from now?At 4YFN, we connect investors with the high impact businesses that will be making the difference four years from now and far beyond. Our aim is to build the startup ecosystem for a better future and LA is one of the top ecosystems in the world to do it. That’s why we are partnering with communities like Founder Institute and Techstars in LA next month and always seeking to elevate tech for good projects.

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