Interviewing Athena Kiriacopoulou, Principal at Pebble Legacy Partners

By Justin Chow, Purposeful Finance

 

Q: I saw that all the previous companies you have worked for all have a very strong ESG and sustainability focus, so my question is how do you make your career decisions and choose the companies that you’re working for? 

In the 2014 G8 Social Impact Investment Taskforce, Asset Allocation Working Group report, it illustrates the landscape based on both investor financial objectives and impact. Because it shows the spectrum of impact investing, the range of purely financial motives helps companies deliver impactful solutions addressing UN SDGs and this does not have to apply strictly to finance. 

At Pebble Legacy Partners LLC, our search fund falls right in the middle of financial and impact. We’re an impact search fund but we are focused more on finances than just impact. If you have an impact investment fund or a nonprofit fund, these are probably going to be on the ‘far right’. When looking at career opportunities, you should spend a lot of time to decide what is important to me. The question was where I draw the line on the spectrum. 

I personally believe that impact is critical, and I am never motivated to get up every morning and do a job that does not make the world a better place. I simply have no interest in working ‘the left side’ of the line just out of personal choice. 

There are a lot of people, especially your colleagues, going into investment banking that lies more around the left side of the spectrum and that’s not a bad choice. Conversely, someone who is going into nonprofits might be on this same side and say, ‘I never want to go there’. Again, that is totally fine. 

Understand what drives you personally and knowing that there is no judgment but instead it’s just a fact. The sooner that you accept wherever you are on the spectrum, the sooner you are going to be able to find opportunities that really motivate you. 

Personal Sacrifices: Now, that’s from an impact perspective. But there is also a career perspective, and what sacrifices you’re willing to make. If you want to work around the world, and you want to move every two years, and I can tell you from experience, it’s an incredible career. But that means that you’re sacrificing other things, such as stability, routine, and the ability to really put roots down. Again, it’s neither good nor bad, just different. For some people having that stability, being able to get a mortgage on a house, build a family, place their kids through great education is a very admirable thing. And if that’s something that drives you personally, then that’s an understanding that helps you to find the boundaries. 

So this is not just with impact, but much broader, and as soon as you know the things that you want out of life, then when an opportunity crosses you, it will become glaringly obvious if it fits those criteria or not. The reason that we often struggle with what jobs to take is because we’re not clear what we want. 

Now, that struggle is good. But what happens when you’re 20 to 24, and you’re about to graduate college, and you know nothing about life. Looking back when I was 22, I thought I knew everything, I didn’t know anything. My advice is, if you know your money motivated at that age, great, go to investment banking, work on Wall Street, and make your top dollar. If you don’t know what you want to do. Prioritize learning over money. As a young millennial,  I know this is being debated and I don’t know how applicable it is to Gen Z. But this is advice I followed. 

In your 20s, go and do all the different things, explore all the different stuff. Money will come, opportunities and experience will not. It’s very easy to get stuck  once you have that big salary, the opportunity costs of going and learning something or taking two years to work in Kenya is a lot bigger than if you didn’t have that job on Wall Street. There’s the prestige of working on Wall Street and private equity. And for some people, that’s what they want. And that’s great. I love that for them. But if you’re not certain, all I can say is go do the crazy things. You can always come home. And the money. It’s easy to make money. It sounds crazy. It sounds privileged. But I promise you, especially when you’re talking to your classmates at UCLA, we come from a place where it is easy to make money. Yeah. You’ll make enough to be happy. 

I’ll tell you, the only things I’ve regretted in life is when I passed up on great adventures, because I thought I had a deadline due. And I was like, oh, I need to do this so that I can advance and get a promotion. Five years from now, it doesn’t matter. Nobody cares. A lot of my interns are ambitious and when I talk to them, they’re like oh gosh, I don’t have a, you know, this GPA and I only got an A minus, and I’m never going to be able to get a job. It’s like, honestly, if you’re going to Morgan Stanley, they do look at grades. And that’s one thing, but no one cares, it won’t matter. Learn. I’m not saying don’t do your homework, do your homework and learn, you won’t have an opportunity like this again. But don’t stress the grades, don’t stress the jobs.

 

 

Q: What does learn from discovering opportunities in investment firms during your early 20s?

Personal Sacrifice: Get out of your comfort zone when seeking jobs that you might not be fully qualified for. Saying yes to projects that terrify you. At the same time, be completely open and ask for help. Take those hard projects and jobs, but also ask the dumb questions, seek support, and build a network of mentorship. You are not going to grow unless you try and do something you think you can’t. 

Comfort zones: View your comfort zone as a circle. It is never a static size. Your comfort zone grows every time you step out of your comfort zone and return. When you push the boundaries of your comfort, you are saying, ‘okay, I didn’t die, your comfort zone grows’. However, your comfort zone starts to shrink if you never push outside of it. This is a malleable zone that represents your entire life. 

You would be filled with happiness when you get a job, do not leave the two square mile radius of your house, and go to the same restaurant every week. However, your comfort zone gets much smaller. Whereas you are constantly expanding your comfort zone if you do something that scares you every day.

 

 

Q: That is great advice, now let’s move on to talk about the circular economy and the search fund that you started: Pebble Legacy Partners?

A circular economy is one that keeps materials, products, and services in circulation for as long as possible. It is a change to the more traditional model in resource mining, production, and waste. Instead, it tries to recapture waste to create new products and minimizes materials making production more resource efficient. Under the Sustainable Materials Management (SMM) umbrella, a circular economy demonstrates continuity by reducing the negative lifecycle impacts of materials, including climate impacts, reducing the use of harmful materials, and decoupling material use from economic growth and meeting society’s needs.The circular economy has the potential to protect the environment, improve economics, and elevate social justice. Sustainability from its foundation requires social equity as the extracting, using, and disposing of resources often affect vulnerable communities disproportionately. 

Source: https://www.epa.gov/recyclingstrategy/what-circular-economy

 

 

Q: What do you believe are the biggest misunderstanding of the waste infrastructures? 

I believe there are two main misunderstandings that professionals have about the circular economy. 

First, with a circular economy, people often think that finding a purpose for waste, asking ‘how do we divert this waste from the landfill?’ But we need a paradigm shift in our thought-process.

What I always advise my clients at Phenix Recycling is that we should stop calling it ‘waste’ and should start calling it ‘leakage’. Throughout a business’s normal operations and supply chain, you have leakages in energy, resources, and materials. Waste is a leakage and when you start to see it that way, you create a business case for going back to the design board and redesigning the waste out of the system. This mindset shift will help business processes stop leaking “waste”. 

Of course, some things are inevitably going to come at the end of your supply chain. For example, if you look at a safari resort in the middle of the Serengeti National Park (a geographical region in Tanzania, Africa) that has high-end clients, they’re going to be serving a lot of wine which comes in a wine bottle. You cannot design out a wine bottle because it must be packaged, but you can design in a reusable and returnable form of the same bottle. 

Source: Zero Waste Hierarchy of Highest and Best Use 8.0 | Zero Waste International Alliance

 

 

Q: What might be an example of a waste infrastructure that falls under the circular ecosystem?

In a Philadelphia bar, you can build waste infrastructure where you return the wine bottles, but the wine you are getting is probably a global product bought from Chile or France. If you already bought this bottle, you are not going to ship bottles back to its original location.

There are technical ways of designing the wine bottle, but practically, you are going to have this wine bottle on hand. In the case where this wine bottle is already given to you, there’s not much you can do other than recycle it. Recycling is not necessarily so much within a circular economy, but it should be your last ditch. That is an example where the circular economy does have a product at the end where you must recycle it. 

Source: The Lifecycle of a Wine Bottle, From Sand to the Economy of Recycling | Wine Enthusiast Magazine

 

Within the circular economy, it’s about reframing, taking a step back, and understanding what the problem is. It’s not about tackling the result, but the whole supply chain process and how it all works together. 

In biases with impact investing, a lot of people confuse Environmental, Social, and Governance (ESG), Corporate Social Responsibilities (CSR), and impact with each other. I am constantly explaining the difference that an ESG company is not necessarily an impact company. 

ESG is a framework for measuring your risk, it is not an attempt to improve that. ESG is a snapshot of what we’re doing on these different things at a certain point in time. You can use that to create a strategy, but it is not inherently a strategy. It’s about understanding what value is in ESG investments.

 

 

Q: What issues are you looking at right now? What are you reading up on, and what is the newest news in this space?

My challenge now is identifying industries that fit in that part of the impact spectrum (refer to fig 1 above) and fits the search fund criteria. I have been [researching the] mapping industries to open myself up to other opportunities and industries that can create significant impact. I am trying to read about every industry to understand if it fits my criteria.

In terms of finance, you should read The Outsiders by Will Thorndike. He’s a popular search fund investor. This book is the antidote to all of Steve Jobs autobiographies that talks about unicorns, massive valuations, and the fear-of-missing-out that comes with it. 

The Outsiders talks about CEOs who have been vastly successful but are not unicorn founders. Because what we’ll find is that there’s a pattern in what these other CEOs do to create huge value above and beyond their market [price]. So far, I have been enjoying this book because most of the CEOs have never ever heard of it, and they’re all humble, frugal and incredibly smart CEOs. 

Two more books about impact in business. Firstly, Ice cream social: the struggle for the soul of Ben and Jerry’s, by Brad Edmondson. This book is all about impact in business. It shares about Ben and Jerry’s struggle to reconcile their social desires with business needs. Secondly, Let my people go surfing by the founder of Patagonia, Yvon Chouinard. This book is the Bible of responsible business leadership. This book talks about him struggling because he hates calling himself a businessman, but he’s the founder of the widely successful Patagonia. He believe this is not who he is, [talking more] about his values and how he runs that company. 

Interviewing Daniel Blake, Managing Director at University Impact

 

Introduction

Daniel is a managing director and entrepreneur with over 12 years of work experience across two US states and multiple industries. Daniel co-founded EcoScraps Inc, a food waste management and garden manufacturing company, while in college.

In 2017, he served as a Senior Advisor for John Curtis, Congressman of the 3rd District of Utah. In the same year, he co-founded University Impact to fund ventures and businesses that are solving complex social problems, hosting a donor-advised fund that offers traditional grants and impact investments. Daniel has also worked for the BYU Ballard Social Impact Center as a Board of Advisor member, running philanthropic funds from donors dedicated to students.

 

Briefly walk us through your career, what professional experience did you have leading up to your current position at UI? Highlight some of the most impactful experiences that led you to impact investing.

I started my undergrad at Brigham Young University studying English and started EcoScraps Inc, a food recycling startup that turned food waste into lawn and garden products. I started it in my college dorm room with a couple of friends. We successfully grew the company, building a strong national presence and bringing our products into over 15,000 different locations. I eventually left BYU to be the full-time CEO of the company. We were eventually acquired by Scotts Miracle-Gro at the end of 2014. Over four and a half years, I grew EcoScraps Inc into one of the largest food waste recycling and garden products brands in the US as we raised money from both impact-oriented foundations and traditional investors. 

The experience introduced me to social entrepreneurship, the idea that you use business to solve complicated social and environmental problems. Being an entrepreneur and receiving different types of investments and working for Scotts Miracle-Gro also introduced me to the world of impact investing. 

I decided to leave and help lead a project with the United Nations World Food Program to work towards no food insecurity (SDG 2, UN) with national and global actors achieving this goal (SDG 17, UN). 

Source: Corporate strategy | World Food Program

After two and a half years of developing sustainable agriculture in refugee camps, this international experience led me to get involved in politics in Iran and work as the campaign manager for Congressman John Curtis, the US representative for Utah’s 3rd congressional district. 

I then decided to take these experiences in international markets to co-found University Impact. Instead of being pigeonholed by a specific type of financing, UI is unique in that we use a wide array of financial instruments to fund social enterprises in the way that benefits them most. This allows us to keep impact the number one priority. 

We are special in that we combine impact investing and philanthropic capital. On top of what traditional venture funds use, we also use grants, recoverable grants, credit guarantees, direct loans, direct equity investments, and other fund investments.

I would say my experiences as a 22-year-old helped shape my perspective on the role that business should play in society. That is the reason why I continue to work with university students is to give them hands-on experiences and expose them to incredible organizations that are solving complicated social and environmental problems. My goal is for students to add their perspective on what role business and finance should play in society. 

 

What do you think is the most valuable contribution University Impact has had to social entrepreneurship? Could you share more about the social versus financial return expectations for University Impact?

One of the reasons that University Impact often teams with students is to encourage them to be involved in social entrepreneurship and impact investing at the beginning of their careers. Impact Investing as an industry is odd in that people join at the end of their careers, so the learning lifecycle of people in the industry is short. If University Impact wants to solve complex problems, we need people working on these problems at the beginning of their careers. 

University Impact is different from a traditional venture or private equity fund where we are not limited by specific returns. Operating in a private equity fund means achieving certain financial benchmarks that a team has promised to its investors. 

Since the source of capital for University Impact is philanthropic organizations, there is less pressure on our team to deliver a specific financial return. There is a tremendous amount of flexibility in adjusting what those returns are going to be based on, be it impact or financial metrics. University Impact teams often challenge how traditional venture capital companies should think about financial returns. 

University Impact aims to find the most appropriate financing method for each company. It might be a grant with greater risk if you get a negative return or a recoverable grant which has a 0% interest loan. We also follow the principle that a grant could be anywhere from 2-3% interest to 15-16% interest depending on the company’s overall risk profile. Our teams also make equity investments targeting up to 30% return. 

Impact investments are not always the most appropriate solution. Sometimes a company does need a traditional grant so offering a recoverable grant would be irresponsible. The company should be self-sustaining and be able to pay back a loan at whatever amount it may be.

This approach is backward for most investors who start with the business, look at their returns, and figure out if the investment will help them generate a high percentage return on capital. University Impact is more focused on solving meaningful social or environmental problems and finding the most appropriate way of funding them. 

 

There are a lot of criteria that businesses have to hit to guarantee whether they receive financing. What are some of the challenges in deciding which companies you invest in?

Deciding which company you invest in depends on the problem that these organizations are trying to solve. For example, conservation efforts often result in great solutions, however, the company’s business model is not one where investors have confidence in purchasing their products or services.

Investors have to be careful when they see a business model where the company is heavily reliant on donations. There are often nonprofits that exist because people are willing to give them grant funding because they are great at marketing their products and services, even though they have ineffective solutions.  

In this scenario, the first thing to look at is whether someone is willing to pay for the product or service. When you’re dealing with the poorest of the poor, you’re dealing with very disadvantaged communities that often can’t afford the product or service. A recoverable grant might be the most appropriate form of financing if investors are willing to pay for a portion of the product or the service. 

In the case where consumers are willing to pay for the product or the service, you should at least consider a loan. When taking a look at an equity investment, what you need to look at is whether you can take the company public, or if a strategic buyer would acquire the company. Without either of these happening, you will never get a positive return from an equity investment. 

For instance, in addressing sub-Saharan African companies that request a long-term loan, we will study their business model and ask who is the beneficiary of the product or service, and if they can afford it, to decide the type of financing. Ted Talk: Andrew Mwenda: Aid for Africa?

 

How do you see the impact of investing in space growing in the next 10 years? 

I have no idea where the industry is going to be in 10 years. To answer this question differently, figuring out the definition is probably the single biggest challenge that the industry needs to solve.

I do not view the current impact investing process as perfect and work has to be done before we bring impact investing to scale. If you look at impact investing from the company’s perspective, many are still trying to find product market fit. There is no agreed-upon definition of what impact investing is, so there are impact investing firms that say they are impact investors, but their actions say otherwise. 

Could investing in a gym where people can live a healthy lifestyle be an impact investment? I would say it might be a good investment, but it is not an impact investment. It is a normal investment that has some fancy wrapping paper so that it fits this very ambiguous definition of what an impact is.

I have no idea if the industry as a whole is going to coalesce on problems that impact investing should address because of the tension around this form of investment. Another problem seems to be the conflict between two priorities of focusing on impact or financial returns.

I believe the industry needs to be specific about what the priority is. Many firms like University Impact are optimizing for impact and still making a substantial amount of money. However, we need to be careful about optimizing for impact and losing money as the industry grows. 

There is a tremendous amount of money going into impact investing going into ESG. ESG has now become very politicized, with an example being Florida state banning their state funds from investing in ESG strategies. Unfortunately, ESG also suffers from a lack of definition with people criticizing that the definition is always changing and anyone gets to create their own definition. 

 

Do you think that the United Nations SDGs provide some level of foundational definition?

The United Nations SDGs do a great job of putting some guidelines on how people interpret the name of the SDG goals. The UN’s SDG subgoals are very specific on what it means to target SDGs, such as how much money residents make if they are or are not poor (SDG 1, UN). Companies often do not dive into the specific metrics underneath any of the individual SDG goals and use SDGs broadly to claim that they are impact-focused. 

The magic of investing in SDG goals is having a single metric that you are going after in the complex world of impact investing. If you have so many different metrics, you need to determine which one you care about like economic development, poverty, or climate change.

 

While we’re on this topic of defining what impact is for industry, I like to hear more about defining the impact for organizations focused on economic mobility. What are strategies or business models you have used or seen that are likely to solve economic mobility?

When attempting to solve economic mobility issues, it is important to understand that it is heavily affected by the location. For instance, in South Africa, [the unemployment rate hovers around 28 percent among workers aged 35 to 44 years, which is considered the largest share of labor force participation in the country.]  

(South Africa: unemployment rate by age group 2022 | Statista)

(South Africa: labor force rate by age group 2022 | Statista)

If you are looking at an unemployment rate above 25 % for a country, you would make the assumption there are no jobs and a lack of economic activity. However, the real issue is often that these job openings do exist, but only highly skilled technical positions and people simply do not have the skills to fill these job openings. 

I would ask companies about what type of jobs are needed for their business model. Most entrepreneurs and investors always answer with highly skilled positions, and in cases like South Africa, this is not the right answer. Then, look at the people’s current skill set and the natural progression they could take to acquire new skills. Finally, look at the quality of meaningful work where the needed skills match the skill sets that that population has. 

A second problem behind advancing economic mobility in developing markets is the ownership of assets. Middle-class families need to be able to buy a house, own equity, or have a revenue share of the company they work at. For example, when you look at the middle class in the United States, it’s being squeezed despite the tremendous amount of economic growth because people only have their income and no assets. For instance, Amazon is generating an immense amount of wealth but very little is shared throughout the company. 

I would advocate for employee-centric companies that support and invest in their employees and allow them to own a portion of the company. For example, Clif Bar recently reorganized and gave ownership to all employees (Inside Clif Bar’s Rocky Road to its Sale and a Possible $580 Million Employee Payout). Reorganizations like this should be talked about as much as the news from the impact investing world. Looking at different ways to support an individual’s access to assets is an incredible way of helping them accumulate wealth and generate economic mobility.

 

When making investments, I gauge the risk of the investment by breaking it into two parts: what the likelihood of the event happening is and the consequence if it does happen. This approach is brought up in the University Impact due diligence process as our associates talk about the likelihood of an event happening. We can start to quantify that likelihood and calculate a range of metrics that supports investment, and this makes it easier for our teams to specify what the consequences are if the outcome does happen.

 Being able to quantify the likelihood and understanding the consequence of investment also makes it easier to specify mitigating factors. The University Impact team focuses on the most important sections of the impact assessment. This determines whether we succeed or fail. Almost every problem is going to have a couple of frameworks associated with it. However, this framework is always one of the places that I would start with before I try to solve a problem.