The Two Problems with Patagonia’s “Earth is now our only shareholder”
Yvon Chouinard started Patagonia as a small business selling climbing equipment. As the company grew, he realized the environmental impact of producing outdoor gear, and he made a commitment to reduce that impact. Patagonia became a leader in sustainable practices, using recycled materials in their products and donating 1% of their sales to environmental causes. The company's dedication to environmentalism earned them a loyal following and a reputation as a responsible corporate citizen.
In September 2022, Yvon announced that instead of monetizing the enterprise value of Patagonia by offering shares of its stock to Wall Street investors (“going public”), the company was transferring 100% of its nonvoting stock to a nonprofit dedicated to defending nature - a move that could generate $100M or more per year in dividends to “the planet” and a strategy that he termed “going purpose”.
“Problem” #1: How does “the planet” spend the money?
Well it doesn’t - and I think the point is more important (and less petty) than it seems on the surface. Often in the heady worlds of global finance, philanthropy, and environmental justice, the concepts and language can be so high-minded as to give one a nosebleed, but the implications of “going purpose” are actually far more practical and emotionally satisfying than the press releases and think pieces imply. You see, nobody gives money to “the planet”. Earth can’t collect annual dividends. Rather this $100M or more annually will be given to nonprofits, NGOs, researchers, and grassroots organizations that align with Yvon’s values and beliefs about the world.
Even more accurate still, this money will flow through those organizations to the communities they serve. It will go to employees and contractors who have dedicated their lives to working for outcomes that they feel are right and fair, and this money will secure their jobs and literally buy food for their tables and clothes for their families. It will go to entrepreneurial risk-takers who are willing to sacrifice economic stability in order to realize their dreams of building an institutions that do good in the world. “Going purpose” isn’t about financial engineering or philanthropic advancement - it’s about people.
We are in the midst of a massive paradigm shift of investors, many for the first time ever, seeking to align what they say they believe about the world with what their money makes possible in it. If you happen to be rich and powerful and so inclined, there are meaningful ways to make that happen.
“Problem” #2: What if I’m not one of the most successful business people in the world and a millionaire - how do I “go purpose”?
There are a number of Impact Investment solutions on the market that are available to the “everyday investor” - those who do not meet the criteria required to be considered an Accredited Investor. The past several years have brought an explosion in the number of theme-driven mutual funds and ETFs, all seeking to meet this new global demand for investing for returns (of course, this isn’t philanthropy) but also with purpose.
The challenge however is that by their very nature as baskets of publicly traded stocks (and similar), the linkage between how my values are being lived out and my act of investing feels diffuse at best. Likewise, shifting the activities and governance of giant multinational corporations is almost an impossibly complex task (turning around the proverbial ocean liner), and the strategies pursued thus far (such as ESG) are laudable and needed but often leave a small investor feeling more than a bit dissatisfied.
By far the most natural and impactful strategy to align your values with what your money enables is to invest directly in early stage companies. Backing founders with whom you can identify and in whom you believe and startups doing the kind of good in the world that you wish to see advanced is perhaps the most direct and satisfying means of “going purpose”. That said, if you are not an Accredited Investor (i.e., “already rich”), this is a pathway largely shut off to you. Venture funds like ours at Renew Venture Capital can only accept Accredited Investors (we have to confirm every investor’s status), and similar limitations apply to startups seeking out direct investment.
That’s why we launched “Purpose Rounds” - bespoke, institutionally-sized fundraising for Women, Historically Excluded Founders, and Impact Companies - all open to both any Accredited and Non-Accredited Investors.