Small business advocates in Illinois this year succeeded in getting the state Senate to approve a “small business bill of rights” to ensure business owners know the true interest rates on their loans – only to see the legislation die in state’s general assembly.
“Oh my god, wait,” Liesel Pritzker Simmons recalls telling proponents of the reform measure. “We know people that could help if that’s something that you’re interested in.”
Pritzker Simmons and her husband, Ian Simmons, are the principals of Blue Haven Initiative, their family office that has invested hundreds of millions of dollars in climate and clean energy, education technology, financial services and healthcare. The couple also advocates against corporate money in politics, for greater voter engagement and – notably for a wealthy family – for higher taxes on the rich.
But they have generally kept their investing activity and their policy advocacy in separate silos. No more.
Pritzker Simmons and other investors this week launched Policy-Enhanced Impact Investing, a community of family offices and other impact investors that are leaning into advocacy, lobbying and, yes, politics, as a key component of portfolio management, an effort to create favorable conditions for achieving beneficial outcomes.
“Corporate lobbying is as old as time, and usually is meant to lower the risk and enhance the balance sheet of whatever corporation is doing the lobbying. Impact investors have often stayed away from that,” Pritzker Simmons told ImpactAlpha.
“I’m not interested in enhancing the balance sheet of the things that we are investing in. I’m interested in enhancing the impact of the things that we’re investing in.”
Too political?
The supercharged political environment makes it perhaps unsurprising that investors are becoming more active in working the levers of power at the city, state and federal levels. None other than the president-elect’s son, Donald Trump Jr. has joined a venture capital firm with the explicit intention to back conservative founders targeting conservative-leaning consumers (see, “Donald Jr. turns impact investor to bet on an overlooked market: Trump voters”).
And many impact investors have long pursued policy objectives on an ad hoc basis. The Sorenson Group’s Jim Sorenson was an early advocate for Opportunity Zones, which were created by the 2017 tax bill. Sorenson collaborated with policymakers and leveraged his network to build bipartisan support for the legislation, according to a case study on the Policy-Enhanced Impact Investing website.
More recently, Sorenson has pushed for bipartisan legislation to expand financing for business conversions to employee ownership (disclosure: Sorenson Impact Foundation is an investor in ImpactAlpha).
Other impact investors active in policy work include Candide Group, Builders Vision, Lafayette Square and Sea Change Foundation.
Pritzker Simmons said family offices are particularly well suited to policy-enhancement given the sources of their capital and their ability to engage in a wider range of activities than traditional foundations and funds. They also may be better positioned than the fund managers themselves.
Surveying Blue Haven’s own managers, Pritzker Simmons said she heard that many didn’t have time or capacity to engage in policy, even when it affected their investment or impact strategies. “‘That’s not our job,’ was a lot of what we heard,” she said. She found more interest when she asked, “‘Well, what if you have LPs that could do some of that?’”
Direct action by motivated investors can also insulate managers from pushback from other stakeholders – think public pension funds in “red” states hostile to ESG investing – for getting “too political,” she said.
“We’re just at the beginning of trying to call a spade a spade. Investment portfolios can’t exist in the political vacuum and impact theses can’t exist in a political vacuum,” Pritzker Simmons said. “So let’s just be honest about that and then say, ‘Are we using all the tools in the tool belt?’ We are admitting at Blue Haven that we haven’t been and we should.”
Policy-enhanced
Pritzker Simmons said she and her husband are not shy about the fact that they are a politically engaged family, giving both directly to political campaigns and through a 501(c)(4) nonprofit. She is well-connected as well through her extended family, heirs to the Hyatt hotels fortune. Her cousins include Illinois Gov. JB Pritzker and Penny Pritzker, who served as commerce secretary under President Obama.
“What I will be very, very clear about is I am not calling JB and telling him to pass legislation that I want him to pass,” she said in the interview. “That has not happened. He is a very busy man. That’s just not going to happen.”
Through one of Blue Haven’s investees, Community Investment Management, Pritzker Simmons was introduced to the Responsible Business Lending Coalition, which was part of the effort to pass the Small Business Truth in Lending Act in Illinois and has pushed similar legislation in other states. Community Investment Management’s Jacob Haar said that without such disclosure, some borrowers had a hard time distinguishing responsible lenders from predatory scams, harming both CIM’s business and its social impact.
In Illinois alone, the Responsible Business Lending Coalition estimates that such transparency could save small business owners up to $835 million a year in unnecessary fees and interest,
Blue Haven put the coalition in touch with its political advisors, including Chicago-based Lava Strategies. “They pretty quickly were able to say, ‘You’re talking to the wrong lobbyist. You need to be talking to this person,’” Pritzker Simmons recalls (read a detailed case study).
To enhance its climate investments, Blue Haven is working with Energy Action Fund, a hub for state and local climate policies. “We think we can’t be prudent climate investors unless we are coupling it with a climate policy action agenda as well,” she says.
Energy Action Fund’s Ryan Werder said in an online panel to launch the policy-enhanced impact investing initiative that his organization makes state-level policies accessible to investors, “because it is not easy to just drop into a state and be like, ‘Where do I put my money to make the biggest impact?’”
For such campaigns, “Bringing in some extra help, some professionalized consulting to break through is so important in this work,” he said. “Sometimes, and oftentimes without that additional support of the investor community, it’s difficult to take that across the line.”
Pritzker Simmons agreed that investors have unique leverage with policymakers, particularly when they can demonstrate the positive impact their portfolio companies are having on local communities.
“Any time you have the private sector or investors knocking on their door, they take it much more seriously.”
