David Chen ’84 has tapped into something revolutionary.
As co-founder and principal of Equilibrium Capital Group, a Portland, Ore., and San Francisco, Calif.-based impact-investment firm, Chen invests in what he calls “Maslow’s hierarchy of needs” — energy, land, water, agriculture and real estate — to generate returns while addressing some of the world’s most pressing societal and environmental issues.
“These are not sacrificial, concessionary investment strategies,” Chen says.
“Given the challenges that we have in our world — driven by population growth, climate change and the global consumption of natural resources — we would argue that these are huge, new risk categories and significant opportunities for value creation and value preservation.”
Chen’s firm uses financial instruments to improve the long-term health of farmlands, create sustainable food sources, build sustainable commercial real estate, generate renewable energy, capture carbon and more — all while achieving returns that appeal to mainstream investors.
Founded in 2008, Equilibrium was one of the first players in the impact-investing space. Today, the industry has gained tremendous momentum — a shift Chen attributes to institutional investors’ realization that sustainability is an economic issue and not just about doing the right thing. Also, in funding real assets, investors have come back to a core principal of finance: the importance of cultivating and preserving assets to match long-term obligations.
Chen says he feels a “responsibility and duty” to continue building the sector by developing, supporting and recruiting the next generation of investment professionals. To that end, he teaches a course on impact investing at Kellogg and helped launch the International Impact Investing Challenge (now called the Morgan Stanley Sustainable Investing Challenge) in 2011.
“Twenty- and 30-somethings are at the height of their ability to make a difference in the investment world,” he says. “We can give them permission to harness their willingness to think differently and create new investment vehicles that deliver returns from impact.”
Chen serves as an example for students by proving the viability of impact investing. “We can build a financial services platform that delivers returns to investors and makes a difference,” he says. “We’re capable of using capital markets to change the world in a positive way.”