Doing good and doing well

Make money by helping underserved communities? It took Bobby Turner years to convince big investment funds such a thing was possible.

Despite partnering with basketball legend Earvin “Magic” Johnson, it took two and a half years to raise $300 million to build movie theaters, coffee shops and other real estate in downtown Los Angeles and other urban areas. Skeptics thought investing in racial-minority communities would mean less profit.

But today, sustainable investing is so hot on Wall Street that investors are rushing into funds that consider the environment, social issues and corporate governance in their strategies. Since launching Turner Impact Capital in 2014, Turner has raised about $1.5 billion to build charter schools, medical centers and housing for low- and moderate-income households.

When did you start trying to marry profits with purpose in your investment career?

In my mid 30s, I thought that if you want to create durable, sustainable changes, then you had to harness market forces. Doing good and doing well needn’t be exclusive. Using business as a force for good is not bad. I think a lot of people think it is.

Back then, there was (also) a belief that anytime you superimpose a social metric on financial investments, you will sacrifice yield. Most investors are trained and taught that profits and purpose don’t play nicely in the sand box.

And now?

For 25 years now, I’ve been able to prove that investing in social change didn’t come at a sacrifice in yield. It can generate better risk-adjusted returns because it’s not based on speculation. (He said his first fund with Johnson returned an annualized 10.7% after fees.)

The reality is most investors are speculators. They are trying to create demand. If you’re building a hotel, you’re hoping people will like your hotel. If you’re building condos, you’re hoping people buy it. Everybody is speculating.

But impact investing is not based on speculation. We’re not trying to create demand, we’re focusing on opportunities where the underlying demands are large, growing and unmet.

Is it encouraging to see how popular sustainable investing has become?

I think the bottleneck today is the lack of qualified managers that have a track record of being both a fiduciary to investors as well as a fiduciary to communities of neglect. There’s a tsunami of capital pouring into this space and a confusion about what impact investing is. There are truly a lot of charlatans running around with a Cirque Du Soleil moral flexibility peddling product that they should not

Today it’s so fashionable to talk about DEI — diversity, equity and inclusion — and everybody seems to be using it as a “check the box” or reaction to shareholder pressure. I candidly believe that diversity for diversity’s sake is a mistake, is negligence.