“Empathy for others became my most valuable lens”
Interview with Hedda Pahlson-Moller, Venture Partner at Ananda Impact Ventures
You immersed yourself in the impact sector since its infancy, in various roles from impact investor to catalyser to advocate to educator. What is the impact that you are trying to achieve?
Like so many people who entered the impact economy I wanted to play a part in a systems change of integrating values in finance and business. It seemed obvious and self-evident. If I look back at the roots of my journey, I recognize inclusion as a common theme in my activities.
I grew up as a Swedish immigrant in the US and it gave me valuable perspective of the sensitivity to issues related to integration. Empathy for others became my most valuable lens, especially with the eyes of a child who was very different… a tomboy, terribly curious and enthusiastic and eager to be accepted. I experienced that when diversity is not valued, social fabric is torn and deep rifts appear; but when it works well and is celebrated and integrated, the results are powerful and remarkable.
So your impact driver traces back to your childhood.
Yes, my passion for DEI (Diversity, Equity and Inclusion) came from a very personal longing to feel rooted and connected. I picked up from my mother a strong conviction that everyone should have access to a functioning social welfare system. She became a social worker and psychotherapist to address the gaps in the US system. She is still there today and refuses to leave so I suppose I picked up her stubbornness to play my part in fixing flawed systems, even if my tools are different. Being fascinated with different languages, cultures and perspectives also drives my activities and interests.
In the past decades, the impact ecosystem has been going through some waves of evolution. Did you ever have a moment when you felt that nothing is moving forward? I clearly remember that there were times when I was so deeply absorbed in what seemed like a bubble of impact investing and venture philanthropy that I mired myself in endless circle of self-doubt and questioning — how do i really know I am not creating negative impact? How will I be able to measure dignity? I recognize that sense of analysis paralysis in many people who begin their journey and have ‘FOBO — Fear of Better Options’. We must continue to move forward through our questioning. The impact ecosystem as such has been growing and evolving. I try to play my part in working with decision-makers and investors primarily in the mainstream finance world, and facilitate their transition towards the impact imperative, even if it is in incremental changes. At the EVPA conference last year, you said that many people want to be part of the impact movement and that we should inspire them to join, rather than doing finger-wagging. Which stakeholder group is still underrepresented, but would strongly move the needle if we managed to crowd them in? At TIIME.org, we began working with social entrepreneurs and early-stage impact investors who provided the inspiration and drive of the impact economy, disrupting the status quo. It was a difficult decision to shift our approach to reach out to mainstream finance and business actors, such as large funds and Board directors with strategic influence. If you take the inspiration, credibility and network from the impact sector and bring it to the mainstream corporate world, you will be able to shift capital in significant ways. I think that social entrepreneurs still have a very critical role to play: any of them who survives, thrives and creates a success story demonstrates to others that purpose and profit are not mutually exclusive. The more of these stories we have, the more we can redefine what the new economy should look like. We have all been overwhelmed with messaging around the ‘shareholder doctrine’ and obsession with profits, but we need to unlearn some lessons and work towards longer-term horizons with beneficiaries and wider stakeholders in focus. COVID-19 is making many societal problems very transparent and even more pressing than ever. Which changes in the impact space do you perceive as a consequence of the pandemic? There are many movements driving impact investing, such as the sense of urgency around climate change, millennials questioning values, and an increasing number of women coming into wealth and power and with a different set of requirements for their investment decisions. The pandemic creates both a concrete urgency as well as the immediate requirement to rethink how we are interacting and functioning as a society, how we invest and how we build businesses. It touches everyone, even if in different ways. Moreover, while we imagine that it is possible to self-isolate from COVID, we obviously do not have that option with climate change. If we look at how it touches social enterprises, what is your long-term strategy to make your portfolio COVID-resilient? I realized that now is the time more than ever to mobilize capital to the organizations that represent the values and aspirations we need to rebuild. I have to double down on the projects that I believe in and invest a lot of extra time and effort to support their resilience. Those business models that represent the values of inclusion and environmental responsibility will be more future-proof than others. I have committed 100% of my assets to impact in the TONIIC network, so I need to expedite my own transition and do so across asset classes. Speaking of 100% impact, what would be your top tips to investors who would like to reach this goal? For beginners in impact investing, I think the first step is getting out of their heads and into their hearts. The best way to achieve this is by finding an issue that is truly personal to them, something specific and important — like social justice, access to health care or plastic pollution. If you identify projects that avoid harm or that create solutions to these very personal issues, you are ready to start building an impact investment strategy. In other words: Investors have to forget about analytics and asset allocation. Absolutely. I do not talk about impact investing as an asset class, but rather as an overarching strategy. You have to open minds to the fact that we are all fundamentally emotional creatures. We need to get to the core of what touches us deeply and then work together towards a theory of change, followed by an asset allocation with negative and positive screening. Most people associate impact investing with direct investments. But you can apply your values across asset classes, from real assets to public equity. By becoming part of the impact community and getting inspired, investors can make one step after the other towards a values-aligned portfolio. Another big step is embracing gender aspects. You are a passionate advocate for gender-smart investing. Why should this be key in any investment strategy? Gender issues are diversity issues. If you subscribe to the basic concept that anyone who is excluded from the workforce for whatever reason is wasted human capital, then you have a simple driver to embrace diversity in your investment portfolio. And yet, if we struggle to address the status quo for 50% of the world’s population, how do we approach minority issues? There are enough compelling data out there that make the case for gender inclusion. We have seen enormous improvements in this respect, but there is still a USD 300 billion funding gap for women entrepreneurs. That is an undervalued asset! We have a lot of work to do on gender-smart approaches to investing. What do these women entrepreneurs need most from investors, in your view? I think the most important aspect investors should acknowledge is the systemic challenges that women entrepreneurs are facing — same issue for LGBTI. We need to learn to celebrate differences (gender positive!) and create a supportive environment by adapting our approach to entrepreneurs that have different motivations and backgrounds — there is no one size fits all. You have the opportunity to bring this gender lens to Ananda in your new role as a venture partner. How did you get to know them and what drove you to take on this role? I met Johannes and Florian over 10 years ago at various events and gatherings. We initially connected as being slightly oddball impact investors where neither of investment pals or philanthropy friends really knew what to make of our approach. Our unusual, impact-first, early-stage investment model (as well as our slightly offbeat sense of humour) and entrepreneurial mindset was regarded with some scepticism. Over the years, we built friendship, respect and appreciation for one another. I feel that the time is right to get more deeply involved with deploying capital, rather than sitting in the ivory tower of board seats. I have never been a venture partner before, but I am really looking forward to joining this innovative team. What makes Ananda unique in your eyes? First of all, I very much like the people. Their hearts are in the right places, they’re intelligent, experienced, competent and work well together as a team. My professional respect comes from the fact that they are very focused, strategic and smart in a sense that they didn’t raise huge funds right away. It is a huge validation for our field to have a firm that is on the fourth consecutive fund and demonstrates that impact investing is a very viable strategy. What would you like to contribute to Ananda and the team? I hope I can give them a new perspective in terms of trends as well as bring new investors and new investees aboard. I would also like to challenge their thinking, for example by bringing best practices on impact measurement and management from my own activities. I think there is a very healthy and courageous willingness on both sides to learn and disrupt each other’s comfort zones a bit. I would also love to see that our collaboration helps our field to grow, get stronger and inspire others to join. Speaking of stronger: If you had the power to make one major change for this field, what would it be? To create consensus around the taxonomy and impact measurement and management approach. This would help considerably to benchmark projects, dispel confusion, and bring many more people to our impact space.
Interview by Christina Moehrle