Discussion on Impact Investing
Q&A with Impact Investing Leader Beth Stelluto Dunaier
Thursday, January 28, 2021 from Sonoma, CA
Beth Stelluto Dunaier joined Marin Sonoma Impact Ventures as an Advisor in October 2020.
She has spent the past decade as a leader in the impact investment movement where she has helped pioneer the concept of individuals using their donor-advised funds (DAFs) to make mission-driven investments. After serving as a senior executive at Charles Schwab and other financial services organizations, Beth joined ImpactAssets as the Chief Growth Officer in 2014. She is now an active social enterprise angel investor and executive coach and mentor and resides in the city of Sonoma.
We sat down with Beth to talk about the evolution of the impact investment space and her more recent efforts to promote the North Bay community.
ZK: Tell us about your transition from the more traditional financial services world to the impact investment space. What motivated you to make that change?
BSD: When I think back about my time at Schwab, one of the things that was so powerful to me was this core belief that we were the custodians of our clients’ dreams. That ethos permeated all of our work. As I advanced in my career and began to think more about my broader contributions, they centered around making the world around me a better place. To me, this means more equity, more economic opportunity, and improving the planet itself. I wanted to focus my energy on doing that through investments.
During my career, I had my financial services work life in one column and my philanthropic interests related to the environment, social justice, and women's empowerment in another column. Impact investing allowed me to bring those two worlds together. Looking back, I spent my career preparing for this.
ZK: You now work with a lot of mission-driven founders. What stands out to you about this group?
BSD: Mission-driven founders are committed to creating commercially viable, successful companies, and that's no different than any founder. But they’re also committed to building companies that improve this world in some way. I would love to see a world where we don't talk about impact investing, because only companies that are making real improvements to the world are the ones that succeed. I do think the world is moving there. Founders of social enterprises couldn't conceive of creating a company that wasn't driving a purpose in addition to commercial success. It's in their DNA.
ZK: I think that last point is critical. In our experience, early stage ventures die not when a revenue or fundraising target is missed or when the startup has a bad quarter. They die when founders quit. And if the founders you are working with are obsessed to the point where their venture is part of their life’s purpose, they’re going to power through those moments when someone without the mission element might throw in the towel.
BSD: I've definitely noticed that as a difference. The drive to find commercial success is similar, but if you are doing something that is truly aligned with your own personal value structure, as you said, you’re going to be more committed to it. And that certainly is an incentive to keep going when the going gets really tough.
Image Source: The San Francisco Foundation
ZK: Can you talk about the concept of using a donor-advised-fund (DAF) to make an impact investment?
BSD: For those who may not know, a donor-advised fund is what I like to call a “foundation for the rest of us.” Individuals with as little as $5,000 can open a charitable account with a DAF sponsor. The DAF holds and invests that money until you designate where you’d like to make grants to a non-profit. You do need to keep in mind that any returns earned on those investments accrue back to your DAF, either for reinvestment, or ultimately to grant – not to you.
If you think of a DAF more broadly as a vehicle to enable your charitable objectives, then yes, impact investments make a lot of sense, because people typically make charitable donations in areas aligned with their own values. Impact investing from your DAF then allows your investments, not just your grants, to further your charitable purpose.
As an example, if your interest is in education, in addition to using your DAF to make a grant to a non-profit helping with STEM education in high schools, you might also invest some of your principal in a startup reimagining the way math and science is taught in schools.
ZK: So, traditionally, dollars sitting in a DAF prior to being granted have not been invested with an eye toward impact?
BSD: Exactly. The dollars were generally invested in broad based mutual funds or ETFs across standard asset allocations. But then people started looking at actual foundations with large endowments who are required to give at least 5% every year to further their charitable purpose and began to wake up and say, “Wait, only 5% of what we’re doing is furthering our charitable purpose? What about the 95% sitting in the endowment?”
This broad movement started with some forward-looking foundations and DAFs (such as ImpactAssets – where I used to work) looking at how their investments as well as their grants could further their charitable purpose, and the trend allows for some real innovation with respect to risk and return to support both for-profit companies and non-profits working to further your mission.
ZK: This makes so much sense and certainly is a big-deal for mission-driven entrepreneurs looking for capital.
You live in the city of Sonoma – can you tell us more about the potential you see in this community to build a more vibrant entrepreneurial ecosystem?
BSD: Sonoma, the city and county, is an incredible place to live, and this has attracted a number of people who have entrepreneurial interests. As I think about my circle of friends here, there are many successful entrepreneurs in the group. One thing they have in common is that they were able to launch their businesses with early capital sourced from friends and family.
So here we are, in this little slice of heaven, with a community we adore in many ways, but that also has some very real issues around inequality and economic opportunity. I feel strongly that anyone with a great idea along with the skills and perseverance to launch a new company should be able to do so, not just those with friends or family to financially support a new venture.
Access to capital is a key component to launching a business, whether it’s micro-finance loans for local small businesses to venture financing for startups with the potential to become the county’s next large employers. By creating more economic opportunity and supporting local entrepreneurs, we can address some of the disparities.
ZK: Yes – the reality we talk about is that we need long-term community investment in diversified sectors to really seed the next generation of prosperity for the North Bay community. And it’s no longer acceptable for us to assume that what has worked here in the past will necessarily be the ticket to our future, especially given the impact that climate change is having on our local economy.
BSD: If we can harness the entrepreneurial spirit in our community and better support those men and women launching their own businesses, the future of our entire community will be that much brighter.
Zachary Kushel is Founder & Managing Partner of Marin Sonoma Impact Ventures.
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