The following is a conversation with Liesel Pritzker Simmons and Ian Simmons, Co-Founders of the Blue Haven Initiative, and Denver Frederick, the Host of The Business of Giving.
Liesel Pritzker Simmons & Ian Simmons, Co-Founders of Blue Haven Initiative
Denver: Blue Haven Initiative is an innovative family office dedicated to putting wealth, to work for competitive returns and positive social and environmental change. And it’s a pleasure to have with us the Co-Founders of Blue Haven, Liesel Pritzker Simmons and Ian Simmons.
Welcome to The Business of Giving, Liesel and Ian!
Liesel: Thank you.
Ian: Good to be here.
Denver: Let’s start by talking about your journey. What first got each of you interested in impact investing? Starting with you, Liesel.
Liesel: Sure. So I got interested in impact investing because I have a portfolio to manage. I’m a third generation of the Pritzker family. So we’re a family that has a lot of different businesses, and I am lucky enough to be an inheritor of some of the fruits of that labor. I was 21 years old when I got control over this portfolio. And long story short, here we are 15 years later. And now, the family office that I’ve set up with Ian in the meantime, Blue Haven Initiative, is one of the first single-family offices that is 100% dedicated to impact investing.
So that’s how I got the actual assets to invest, but what really got me interested in this space was I’m a steward of these assets. I’m next generation. I didn’t make them myself. So I feel maybe a little bit of extra pressure to make sure that I know exactly what I’m invested in. I know what it’s doing in the world, and it’s doing things that I think my family would be proud of. And so that’s the work of Blue Haven and that’s the work of our portfolio.
We look across asset classes. We look across different industries and sectors and different funds strategies, and also direct investments into companies. But we want to make sure that everything is having some kind of social and environmental positive impact alongside its expected financial return.
Denver: How about you, Ian?
Ian: Well, my family has been involved in what we now call impact investing for many generations as entrepreneurs, as executives, as professionals, as philanthropists, as investors. And then also when it came time for me to steward assets that I inherited, I was also interested in deploying those assets into solutions and doing impact investing. So I really grew up around examples of successes in impact investing and knew that there was a better way to invest.
I think that businesses and markets, when used for the right things, can be incredible at scaling impact.
Denver: Liesel, how has your view of returns evolved since recasting your portfolio for impact?
Liesel: I think that’s a good question. One of the things also, even to your first one around what really drew me to impact investing is I think that businesses and markets, when used for the right things, can be incredible at scaling impact. They can be very good at that. The innovation economy, deploying climate change solutions, things like that. Actually, markets can be really good at scaling. There are some things, however, that they’re not so great at scaling. And I think equitable access to excellent education, for example, markets have really, really struggled at, and maybe they shouldn’t have a place in there at all.
So I think my idea of financial return and impact return has just become more complex as we’ve started to look as investors across the total package of tools that we have available. Sometimes things don’t make sense if you’re expecting a venture-like return. Sometimes things are going to be really risky but have an infrastructure-like return. So that’s OK. Maybe we’ll use our philanthropic portfolio to do some of that investing as well.
We just try to think creatively about: What is the problem? Is it a market problem, or does it have a market solution? And if so, then let’s look over on the investment side. If not, maybe it’s a philanthropic play; maybe it’s a policy play. But we are lucky enough to have all of those sorts of tools to work with; so let’s use the right one for the right job.
Denver: You have been at this long enough, Liesel, to see the field evolve. Are we getting better at measuring social impact?
Liesel: I think so. I would say yes. There are some exciting — there’s measuring outputs and outcomes, which are a little bit harder, but we get a lot of help from the incredible work of development economics, so much so actually, three development economists who really brought kind of randomized control trials into the impact space won the Nobel Prize last year for economics. So we’re starting to really see that getting adopted, more people really getting good at what happened and why it happened. So I think investors are learning from that space and trying to say, “OK, If we know that this intervention has this kind of outcome, how do we maybe create a business that can help to scale that without having to retest it every single time?” So I think we are getting better at that.
We’re also getting better on the flip side, on the public market side, at looking at what kinds of ESG or environmental social governance criteria are actually material to financial performance. And there’s a wonderful professor at Harvard Business School who does a lot of work on this, George Serafeim, at which kinds of disclosure and levers around ESG actually lead to outperformance of share price financially.
So we are getting better at it, but there’s still a ways to go. Disclosure and data collection is very noisy, to say the least, but as more money is crowding into the space, we’re starting to, I think, differentiate it a little bit more.
Denver: Ian, as Liza was referencing, there are some domains where market and investments are the most effective and others where philanthropy does the best job. But there are still others where policy change is the place to spend your time and energy. What would some of those areas be?
Ian: A good example is putting a price on carbon, where it takes setting the rules of the market to determine that energy producers shouldn’t be polluting unnecessarily, and that we should put a price on carbon to create an efficient market for energy and not have future generations pay that price. So that’s a good example where it actually takes a policy shift to ensure that the market is operating efficiently.
Another example is taxation. Investors need to be taxed to ensure that we’re building roads and bridges and the internet and educating kids. And so these things that are important for the common good and for our society and markets to succeed are being properly invested in.
Denver: How would you look at education?
Ian: Education is a great example of where it can benefit from some market forces, but at its root is something that society decides together what to do about it and how to value it. So we can’t pretend just to let education go to market forces because it works on too long of a time horizon, and it benefits so many people when people are properly educated. And to create real economic opportunity that’s equal, we also need to invest in education, and that has a positive benefit for the whole economy.
So again, it’s like the foundation for a house. You need to keep tending to these things and not just assume that they’re there. So you have to keep ensuring, checking your foundation, keep repairing it, keep renewing it to ensure that your house is in good condition and in a position to weather the storm.
Denver: Like you and your daughters are doing with your garden, right?
Ian: That’s exactly right. I’ve got to teach them how to check foundations as well.
One of the successes of the United States is investment in high school education a hundred years ago and then in higher education going back a hundred years as well. It’s time for us to renew that commitment and ensure true equity of opportunity education to ensure we have a strong economy and also because it’s the right thing to do.
Denver: I want to stick with public policy for a second, Ian. What policies could help create an environment for impact investing and private capital for good? What are some of the changes you would like to see?
Ian: Proper investment in renewables, not just in terms of a carbon tax but R&D as well as implementation of solutions. Upgrading building standards and providing funding to upgrade building standards, for instance. There’s so much to do in clean energy that is going to be great for the economy and great for racial justice and equity in our country and countries around the world. It’s just a win-win-win, and it’s time to double down in doing that.
Proper taxation is important to create opportunities for investing in things like education. When you have a well-educated workforce, it means that you’re much more able to start great businesses of all kinds. One of the successes of the United States is investment in high school education a hundred years ago and then in higher education going back a hundred years as well. It’s time for us to renew that commitment and ensure true equity of opportunity education to ensure we have a strong economy and also because it’s the right thing to do.
Denver: And I know, Liesel, climate change is on the top of mind for you as well. What are some of the things you’re doing in that arena with your portfolio?
Liesel: Just one thing to follow up on your previous question. There’s just sort of hot-off-the-press released, a new report exactly on this, on what US policy could help to promote impact investing. And so, the US Alliance for Impact Investing is just releasing that report, just very recently, authored by, I think, a previous guest on this show, Fran Seegull.
Denver: Yes.
Liesel: So in terms of climate change, when we started to build out the Blue Haven portfolio, we were really looking at: We’ve got a large portfolio; We’ve got lots of asset classes; We want to be diversified, not just in terms of asset class, but also in terms of industries and themes and sectors that we touch. And so, when we started to build the portfolio, we didn’t have an explicit focus on climate change. But over the years, what we have found is that both, just because there are great opportunities in the space, diversified across the globe and in lots of asset classes… When we look at our portfolio diversification, we have a lot of climate change investments. And so, starting about three years ago, we were like, “You know what? Let’s lean into that a little bit further.”
And so, what that has looked like for us is, yes, we have participated in some kind of innovation plays that often seem to be where people go to on climate tech, cleantech VC, which we think is exciting, and we have supported a number of early-stage innovation plays. Third Derivative out of Rocky Mountain Institute… Prime Coalition is another one that we’ve been supporting for a long time. They look at sort of hard tech, cleantech solutions, which are not as sexy as a SAS play in climate tech but probably are going to have a bigger impact.
So we have done some of that, but where we’re really, really looking is where are there more opportunities for next-generation climate innovation project finance. We’re big fans of private credit and restructure, generally speaking. We like that as a family office. And so, after you have funded the innovation, and you actually need to then build a plant that nobody really knows how to finance yet for this new technology, no one’s exactly sure what the offtake agreement is going to look like. That’s where we’re particularly leaning in now and looking at a couple of different opportunities there.
But we also think it’s a fun place for family offices to play because we do have slightly more flexible capital. We do things that look a little bit strange and are oddly sized for other kinds of investors. So that’s where we’re looking at now, sort of on the deployment side.
I see our philanthropy as the liquid that fills in the gaps.
Denver: Liesel, how do you think about your philanthropy and your concessionary investments in the context of your overall strategy and impact?
Liesel: So we really do, I’d say, start with our day job as investors and try to be as thoughtful as we can on the investment side. So to me, I see our philanthropy as the liquid that fills in the gaps.
Denver: That’s a nice metaphor. I like that.
Liesel: That’s always how I think about it. It’s like we’re building the structures of this portfolio, and then there are gaps and things that don’t connect, and that’s where the philanthropy can come in.
A lot of our philanthropy is actually around sort of like eco — to use the liquid metaphor again — plumbing. How do you connect things together and get information flowing between two silos? And so that is also a little bit tricky to quantify, but that’s often what we play. So lots of networks. How do we get other investors involved? How do we talk across different silos and gather power together?… is where I’d say we spend some time in our philanthropy.
…what we basically tried to do was look for organizations that were made for this moment and fund them.
Denver: Anything in your philanthropy in particular during this pandemic that you’ve been doing, Liesel?
Liesel: This has been a really, really interesting moment. But on the pandemic side, there have been a number of different and interesting funds that have popped up in relation to COVID and funding things like that, and we have funded a few of those. There’s one called Open Road Alliance Fund, which–
Denver: They’re great.
Liesel: They’re terrific.
Denver: They were made for this moment.
Liesel: That’s exactly right. So what we basically tried to do was look for organizations that were made for this moment and fund them. So Open Road Alliance, for those that don’t know, is a fund that provides bridge loans to companies who are in a moment of crisis — not like the business is tanking because it’s a bad business, but there has been an event — and they’re very good at identifying a good-use case for the type of bridge loan that they offer, and they’ve been doing this for years. And so, they work with high-impact companies that just need this little band-aid for a minute in order to live on forever. So we funded them.
And then the other thing that we funded as we were looking around for great opportunities was GiveDirectly.
…sometimes giving people cash is the best option. Actually, a lot of the time it is.
Denver: Great organization.
Liesel: I’ve been a big fan of theirs for a long time. And so they do unconditional cash transfers. They do it in a highly efficient way using technology. But also, what they’re extremely good at is identifying and finding families who just need a little cash.
And so we partnered with them to do a program in the US as well as in Kenya because again, with something like COVID, you’re looking around for all these clever, interesting investment things. And at the end of the day, we looked at each other, and we were like, “Maybe we just give people money?” It’ll probably be the most effective.
We were talking earlier about randomized control trials. One of the things that GiveDirectly is really militant about is measuring their impact. Whatever intervention you’re thinking of doing, whether it’s training farmers on inputs or a water sanitation plan or things like that, is it better than just giving people cash? Because sometimes giving people cash is the best option. Actually, a lot of the time it is.
Denver: Yes, absolutely. They were on the show, and I remember their president said that they look at giving cash as almost an index fund that you can mark all the other international development and humanitarian organizations against, “Can you do better than just giving cash?” And that then becomes the index fund, which I thought was a wonderful way to describe it.
Liesel: Oh, it’s so good. And the other part that I love about that is that it’s also like wildly subversive and radical, saying to some somebody fancy pants up at the UN who’s been working in development all of their lives saying, “Actually, no. You should just be cutting checks, and then get out of people’s way. Don’t teach a man to fish. Don’t give him a fish. Give him money. Maybe he wants a lamb chop,” like it’s better.
And so that was one of the things we did during this, too, is just say, “You know what? They already do this. Their intervention, the thing that they are the best at the world in, this is a perfect moment in time to give an infusion of cash to families that need it. And so let’s just do that instead of trying to get too clever.”
Denver: And one of their most interesting studies I recall was that if you give people money, what they’re going to do is they’re going to go out and buy cigarettes and alcohol. And it turns out that consumption of both of them went down once they were given the money, which was completely counterintuitive to those fancy pants experts you were just talking to.
Liesel: Yes. Exactly.
Denver: Ian, you both have said you believe there is a responsibility that comes with being a wealth holder, and particularly today. Talk a little bit more about that, if you would.
Ian: Well, one thing that’s happened in the last 50 years in the United States is an extreme concentration of wealth where the top 0.1% own pretty much the same about as the bottom 90% in this country. And with that wealth is not only financial security and the ability to drive the investment climate but also political power. You’re in a position to advocate for policy and get together with other investors and business owners and help make that happen. And that concentration of economic power has in fact combined with a concentration of political power and meant that the rules of the game have become increasingly unfair for working families across this country.
So there’s a question of: What do we do then? Do we throw up our hands and say, “Hey, we’re wealthy. Therefore, we shouldn’t participate at all in politics or in advocating for change?” Or are there ethical ways of trying to work together with people advocating for equity as well as our own ability to advocate for our own future generations and be part of the solution? And so where we’ve come down on that is to ensure that as part of our family office approach, we really lean into policy and try to do that in a way that is ethical and proactive.
So an example of that would be the wealth tax, where that would directly affect us. We would pay more in taxes if a moderate wealth tax passed, say, for example, 2% or 3%. And the thing with a policy like that is it’s already extremely popular. So it’s actually, according to a polling through the last couple of years and even more recently, in battleground Senate states, even in Mississippi and in Kentucky, the wealth tax is favored 2-to-1. It’s favored by a majority of Republicans. So where the political environment is out of sync is that the officeholders in the Senate and the White House have been opposed to it, although notably, Donald Trump came out in favor of a wealth tax about 20 years ago.
But it’s part of being part of the solution. Yes, we do need more revenue to fund solutions that we know work. So many philanthropists have funded early childhood interventions, and we know they work. We know that doing pre-K is a good thing for the economy for the long-term and ensuring more equitable outcomes. It should be scaled across the country.
To pay for that, you can use debt financing, but over time, you are getting to actually pay for these things as well. And so having some increased revenue in the form of a wealth tax to pay for universal childcare, to pay for universal broadband, these kinds of things that do require funding… So that’s an area where we thought, “Hey, a majority of the population’s already in favor. Economists think this is good for the long-term health of the country.”
Denver: Is it practical? Because that’s the biggest criticism you hear, is that it’s not practical. How would you address that?
Ian: Well, I think a lot of folks who say it’s not practical haven’t actually talked with bankers or insurance executives who analyze wealth all the time. So, JP Morgan would be out of a job if they couldn’t analyze someone’s assets; the insurance industry would be pretty much devastated by not being able to do any kind of assessment, and the IRS wouldn’t clearly be able to account for people’s estates.
So we actually do measure wealth all the time. There are fine point details to work out about how you exactly would do it this way, but that’s the part of the work that needs to be done. So we’re helping fund some policy work to work out some of the kinks on this, but these are minor quibbles rather than a big strategic issue with the wealth tax.
Denver: Ian, I’d be curious, how do the two of you work together? Do you divide and conquer and break up interests? Or how does that all come down?
Ian: Yes, it really starts with our law, our approach that is intergenerational. We really do think in terms of: How will future generations be affected by what we do? How do we create a better world for our children but also families across the world? What are the little things we can do to improve things? And having that long view means that both of us share the importance of working on things that take a while but can make a big difference. So the unsexy, persistent projects that, if they pay off, would have big benefit are really interesting to us; so that really helps.
And then given that we both have an interest in, and practice and experience on the investment side and on the philanthropy side and on the policy side, so really, in terms of the actual time we spend, sometimes it’s a bit of a divide and conquer. So sometimes I’m spending more time on one piece of it, and Liesel’s spending more time in another piece of it. But it’s so much fun coming home to the dinner table at night and talking about what we’ve done that day and figuring out where we want to go next together. So it’s been “align together, and then divide and conquer.”
Denver: We don’t come home to dinner anymore. We just change rooms.
Liesel: I know.
Denver: That’s pretty much the way it is. So Liesel, what happens when you have a conflict? How about when you’re not having a meeting of minds? How do you resolve those?
Liesel: We’re very lucky that we have built an incredible team around us, and Blue Haven is a, it’s really, really a team sport. It’s not the Simmons family office; it’s Blue Haven. It’s been built by anyone that’s ever worked for us.
And so, I would say a huge part of it is also empowering our managing directors and our associates and our analysts to like “You guys tell us what we should be doing. We’re not the smartest people in the room. You tell us.” Our investment committees… and we have advisors both on the philanthropic side as well, and so that helps a lot. So it’s not just the two of us quibbling about, “Oh, we should do this grant or that grant.” So I would say putting some governance and some infrastructure in place really helps out.
But for the most part, we’re fairly aligned in our strategic vision. Ian is a lot more up to speed on the importance and role of government. I would say this is one thing that he’s been working on his entire career. But the impact investing space, like what I always think is funny is so we’re in the middle of SOCAP right now where we’d be at multiple cocktail parties. And for a few years, it’s like, “OK. Yes, we’re Blue Haven. Yes, we do investing,” and then Ian would start to talk about his youth voting work, the tax policy work, why these things are really important, and you sort of get from the VC crowd like, “OK. All right. That’s OK.” And then 2016 hit, and everyone was like, “Hang on. Ian, Ian, Ian. So wait. So tell me more about your stuff. Tell me why…” And he’s like, “Yes. You think?”
Denver: You don’t have to go all of a sudden.
Liesel: No. Exactly. Actually these things, “Oh, are you saying that something that’s happening in our political world is now an existential threat to your adorable climate plan?” It’s a big deal. And that again, as he says, we need to keep building that foundation of democracy in order for any of these things to really take hold and flourish.
And so, I would say though, we’ve, over the last few years in particular, really leaned into that part of our work as a family office, and that’s really led by Ian. I was much more, “The private sector can do it all,” but I’ve really learned my lesson over the last few years.
Putting the democracy first and the foundations for democracy first while also working on challenges like climate and education, I think, is the way to go.
Denver: No. I think a lot of people believe that impact investing and philanthropy can only be as effective as the ecosystem in which it is operating, and that is created by and large by the government.
So, Ian, being the one having these conversations at SOCAP and other places, how can investors and leaders jumpstart constructive dialogues about the challenging issues of the day? Because that is the issue of the day. People can’t talk to each other. What have you learned about that? What can we do to have some fruitful conversation without attacking one another?
Ian: I think it’s worth affirming some basic values that not everyone shares, but I think in these circles, many people do share — that we should be aspiring for a society where everyone counts, and everyone has a role to play, and we’re valuing everyone.
And that works across multiple issues. In climate, making sure that communities, regardless of their economic status, have a future… everywhere in the country, not just in places where we have relatives or where we work. And it also holds true for things like voting to ensure that everyone is able to show up and participate, and encourage everyone to do that regardless of their political affiliation. There is some work to do as a country to re-establish or renew our commitment to this, the idea of all of us in America counting, and by extension, all of us in the world counting.
And it sounds like five years ago, if I’d been talking that way, people might have been saying this is just froofy stuff, but I think we’ve seen the importance of starting from the principle that we should be aspiring together to create a culture where we all count and where future generations count, too. And that requires real work. So those are, starting from a position of values, is important.
And then I think it does come to finding specific challenges where we can put those in practice. Climate’s a great one. Political equality is a great one. We do a lot of work to try to encourage a culture where all young people are encouraged to step up as voters.
And this isn’t just a thing that government can write into policy, or that’s helpful. It’s also a thing schools can do. So imagine a world where young people started voting at 16 in public high schools and were taught how to vote, and that was part of what you did at that age. And if colleges took upon the responsibility to make sure all young people were showing up to vote who could and didn’t just see it as an extracurricular activity.
So putting the democracy first and the foundations for democracy first, while also working on challenges like climate and education, I think is the way to go. It’s a bit of a both-and approach is what’s needed now and will be for generations to come. Hopefully, the lesson learned in the past several years is we cannot take your democracy for granted. So no matter what issue we work on philanthropically as our pet issue, whether it’s environmental, education, or the arts, we should be doing something in our philanthropic and our civic work, and sometimes even in our investment work, to strengthen democracy and work towards a more democratic society where we can solve these problems better and faster.
So that’s one of the big, big lessons I hope is a takeaway, is people should create a spot in their time and in their financial portfolio, no matter what their other specific issue is, to also work on the fundamental hard question of how we solve problems together… and keep getting better at that.
Denver: Absolutely. Let me close with this for the both of you. This set of crises has accelerated almost all fields. And I think developments that were taking 5 or 10 years, now, we’re seeing in maybe one or two. Do you think that’s going to be true for impact investing? And if so, where do you believe those great advances are going to be? I’ll start with you, Liesel.
Liesel: Yes. I think that impact investing is… it’s definitely very popular. ESG. You’re seeing basically every financial institution has addressed impact investing or ESG in some way going forward, and so I think that’s very promising. Where I think there can be some exciting work done is on disclosure measurement and getting those feedback loops to be shorter between investors and constituents, or beneficiaries. And so how is your investment impacting the communities that it is serving, and how do we get that information quickly and reliably? That’s where I would like to see it go.
Denver: And Ian, with this pandemic and these issues around racial equity, where do you see it all going?
Ian: I see more muscle needing to be built around creating stronger public-private partnerships to accelerate solutions. We’ve talked about climate a bunch, but another one that would matter in this area is education. And another one that would matter is on the health side, and another is on housing.
So housing is way too expensive for most people in this country, and yet is the foundation for a healthy family and a good society. And yes, there’s a whole affordable housing tax credit structure, but the whole system really isn’t working for most Americans. So there’s a lot of work to be done to structure public-private partnerships to accelerate investment solutions and government solutions alongside philanthropic ones.
Denver: Well, Liesel, if any listeners should be interested in learning more about your strategy and approach. Tell us a little bit about your website.
Liesel: Sure. Well, you can learn more about us at www.bluehaveninitiative.com, or you can follow us on Twitter, or me and Ian on Twitter. I’m @LieselPritzker and he’s @i_simmons. Is that right? And so, that’s how you can find us.
Ian: I’m just @isimmons.
Denver: Maybe you’ll pick up a follower, Ian. I want to thank you, both of you for being here today for a really interesting and enlightening conversation. It was just a pleasure to have you on the show.
Liesel: Thank you.
Ian: Thank you so much.
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