Warren Buffett’s Grandson Is Selling Rich Asians on Impact Investing
Veronica Chou, the 36-year-old heiress to the Chou family fortune that helped build the Michael Kors and Tommy Hilfiger brands, says there’s more to life than pursuing the latest styles in the fashion world. So Chou, who grew up working in her billionaire family’s factories and later ran a business that helped introduce global fashion brands including Ed Hardy and Madonna’s Material Girl to China, has started her own line of sustainable clothing, Everybody & Everyone. Chou says she became interested in sustainable business after seeing firsthand China’s challenge with pollution and after the birth of her children. She now steers her family’s investments into technologies that combat climate change.

Chou has become an investor in I(x) Investments, a firm co-founded by Warren Buffett’s grandson, Howard Buffett. Pursuing a belief that so-called impact investors can profitably use their private capital to do societal good, I(x) has drawn some of the world’s wealthiest families to invest together to address climate and sustainability issues.

“A lot of impact investment is driven by younger generations who want to live more sustainably,” says Chou, who was introduced to I(x) by a member of another wealthy clan on the company’s board. “Some families are still learning the ropes—they’re starting from zero. We all feel these deals we’re involved in are groundbreaking and can potentially change the way we live.”

I(x), based in Santa Monica, Calif., has brought together more than 65 families from 14 countries to make long-term investments in innovations that tackle some of the most pressing environmental and social problems, such as clean energy and affordable housing. Investors in I(x), who include Joe Gebbia, the 39-year-old newly minted billionaire co-founder of Airbnb Inc., and the Desmarais family, which built Power Corp. of Canada, benefit from an unusual company structure that exposes them early to sustainable business opportunities—some unearthed by I(x) management and others advanced by other wealthy members of the group. Then they can invest in ideas through I(x) or do side deals on their own or with other I(x) families.

A recent study of 1,700 impact investors found that assets under management grew from $502 billion in 2019 to $715 billion last year, despite the Covid-19 pandemic, according to the Global Impact Investing Network (GIIN). Impact funds and companies are now turning to Asia, to attract new socially conscious investors and as a place to invest. East and Southeast Asia is emerging as the second-fastest-growing region for impact fund allocations, after Europe, according to the GIIN survey. And the strategy has become increasingly attractive to the region’s younger or second-generation wealthy.

“There’s a new role—a new mindset—for private capital in the world,” says I(x) Chairman Trevor Neilson, who co-founded the company in 2015 with Buffett after working for the Bill & Melinda Gates Foundation and the Microsoft founder’s family office. “We have to create a circular economy that decarbonizes the way we live our lives and addresses the climate emergency. Private capital is the best way to do that at scale.”

The company, which has pitched several hundred families to date and has a valuation of about $100 million, has attracted mostly family offices—often referrals from other rich families. It says its structure works best for those that are actively seeking deals, have capital that’s liquid, and are intent on making a difference with their money. Clients become shareholders of a permanently capitalized holding company—taking a page from value investing icon Berkshire Hathaway Inc. Investors also get opportunities to put money directly into other sustainable projects I(x) takes stakes in. The model, and the company’s mission of “profit with purpose,” attracts a younger generation of investors who are often the ones pushing their families to sustainable investments, Neilson says.

About 80% of the projects I(x) invests in come from the clients themselves, he says. “The network of families is so unique,” says Angelica Fuentes, an investor whose family owns energy-sector businesses in Mexico. “They are all successful and have vetted these projects they introduce. It’s about being around like-minded people—families from around the world coming together with the understanding that we can make a difference.”

Buffett, who now takes a back-seat role in the company, helped establish a proprietary system to measure the social impact of its investments. The current portfolio includes companies working on clean water, green homes, and clean energy.

The investing platform hasn’t exited from any of its investments yet. “It’s patience capital,” Neilson says. “They’re not looking for a quick return. Most of these families have already become wealthy, and they want to stay wealthy—but they’re patient, and they want to make a difference with their money.”

One of the company’s biggest bets is focused on Asia. WasteFuel, co-founded by I(x) investor Alejandro Estrada and Neilson—and invested in by several I(x) families—is developing technology to convert 1 million tons of municipal waste into 30 million gallons of jet fuel annually. The new product would emit less carbon than conventional aviation fuel. NetJets, a private company owned by Berkshire Hathaway, will take a 20% stake and purchase 100 million gallons of the sustainable fuel over 10 years. Philippine billionaire Enrique Razon has also taken a stake.

Neilson in January left his chief executive officer duties at I(x) to lead WasteFuel as CEO and chairman. The startup wants to build a $700 million plant in the Philippines. It says the technology could be commercially viable in other Asian countries, as well as Colombia and Latin America.

Jonathan Klein, co-founder and chairman of Getty Images Inc., says he was attracted to I(x) because of its approach to climate and social change and projects such as WasteFuel. Many funds pitch themselves as investing in ESG companies, but he says most aren’t really doing what he thinks of as impact investing. “There are lots of funds out there to make you feel a little better about your portfolio,” says Klein, who’s put some of his family’s money into I(x) deals. “If you look at the companies they’re investing in, they’re not really green, they’re not really sustainable. With I(x), we are investing in companies that have measurable impact.”

To contact the author of this story:
K Oanh Ha in Hong Kong at oha3@bloomberg.net

To contact the editor responsible for this story:
James Ellis at jellis27@bloomberg.net