An Earth Day item on TBED financial investment strategies

Which should be more valuable for an economic development minded investment program?

• Company A, which yields a 2x return on investment and has a technology that reduces carbon emissions and energy use,
• Company B, which returns 12x to investors through an impressive IPO but contributes more to climate change, or
• Company C, which returns 3x and the climate impacts of its technology and production process aren’t as easily measured so remain unknown.

The answer, however quickly you made a selection, depends on your mindset. With another Earth Day slipping behind us, perhaps this unscientific poll would yield more Company A supporters than if we had we asked this a few weeks ago.

For most VCs, most financial analysts, most economists, and most market-oriented media, the answer most likely is rapidly decided as a firm B. If they have any concerns about the environmental or social impacts of their choice, they might counter with a statement about how the much larger proceeds gained by investing in company B than the others can then be directed toward addressing public good and other externalities.

Is the economic development-minded nonprofit or public investment program manager adding more firms to their portfolio that look like Company A than Companies B or C?  Right now, that’s extremely difficult to tell on a large scale. NAICS, or federal classification of R&D or investments by climate-related technologies and industrial sectors, is nonexistent. Efforts by large impact fund index measures and even smaller data aggregators like Pitchbook remain too inconsistent and spotty in their tags and filters to be terribly useful.

It remains to the public and nonprofit TBED investment program staff and boards to focus on their own actions: their own investment criteria, their own due diligence process, and their own measures of success. It may be up to policymakers and stakeholders to demand they do so.