We spoke with Michaela Edwards, Partner at Capricorn Investment, about the firm’s mission to show that impact and superior risk-adjusted returns aren't mutually exclusive outcomes
We spoke with Michaela Edwards, Partner at Capricorn Investment, about the firm’s mission to show that impact and superior risk-adjusted returns aren't mutually exclusive outcomes
Capricorn Investment Group was started almost 20 years ago. What sets your approach to impact investing apart from others?
The short answer is experience, innovation, and amplification. Since our inception, our focus has been to deploy capital into effective solutions with the broader mission of proving that outsized returns can be achieved by investing in assets that address the most pressing global problems.
Our philosophy involves combining the growth and innovation of a capitalist society with the desire to solve problems and improve our world. If we as investors collectively set our mandate to be both profitable and impactful, entrepreneurs will respond by innovating, and those ideas best positioned for impact will win out.
With this philosophy in mind, we look to be a catalyst, enabling the flow of institutional capital toward sustainability-driven investments. By providing venture capital to clean technology companies, and by seeding and anchoring asset managers with a sustainability focus, we hope to prove to the broader industry that investments that aim to do good can also perform well.
Is there a particular segment of impact that Capricorn focuses on?
We manage multi-asset-class portfolios for families, foundations, and institutional investors who seek to have investment decisions made through the lens of financial, social, and environmental returns.
To address urgent issues like climate change, technological and business model innovation that can rapidly scale needs to be identified. Our Technology Impact Fund and Growth Funds, for example, have supported founders developing next-generation technology including electrified aviation and advanced battery technology for ocean and space exploration. As the fund has invested in companies with these goals, it has also looked to those that aim to replace the need to mine and refine certain precious materials. For instance, one such company is developing processes for recycling lithium-ion batteries from electric vehicles, smartphones, and other electronic devices, into pure commercial-grade raw material.
Furthermore, we invested in a company at a seed round to support their vision for scientific discovery and climate understanding through global planetary monitoring. Their network of satellites gathers daily images of the earth, providing invaluable data monitoring insights on everything from climate change to industrial activity. The data can also be used by NGOs and journalists who monitor illegal fishing and deforestation.
How has impact investing evolved during Capricorn’s tenure? Given these changes in the market, how has Capricorn evolved to meet these changes?
Impact investing is still emerging into the mainstream from its niche status, pushed along in part by institutional investors realizing that impact investing can be additive to investment returns. As such, there has been an observable movement of capital into impact strategies, most notably into strategies that focus on climate change and social inequality. Preqin data shows that in 2020 a record $51bn flowed into mission-aligned strategies focusing on these issues.
Moving forward, we believe that this movement of capital toward impact solutions can be transformative for the asset management industry. There's an opportunity to create a new generation of asset management firms that authentically integrate sustainability in their investment processes, generate superior risk-adjusted financial returns, and provide lasting environmental or social impact. Capricorn has recently launched a private equity partnership toward this effort to seed and anchor those asset management companies that have highly innovative approaches to addressing these challenges.
About Michaela Edwards
Michaela Edwards is a Partner at Capricorn Investment Group. Prior to this she spent nine years as a Senior Portfolio Manager with Norges Bank Investment Management, where she incubated and managed a $2bn global environmental portfolio. She was previously a research analyst for Russell Investments in London and New York. Michaela is a CFA charter holder and received an MSc in Investment Management from Cass Business School, London and her Bachelor’s Degree in International Business from Oslo University College.