The Time Is Now: Interview with Tracy Gray

Tracy Gray, Founder & Managing Partner of The 22 Fund spoke with Confluence Philanthropy’s Vice President of Programs and Climate Solutions Director, Jason K. Babbie following the 12th Annual Practitioners Gathering. This interview has been edited.

You’ve said we cannot separate race and communities of color from addressing climate change because these are the most impacted people. How would you define Climate Justice as the founder of a VC investment management firm?

Let me just say that when I think about climate and any kind of investing that we do at The 22 Fund, I have never separated race, gender, economics, and climate. We call ourselves holistic investors because we never want to silo the kind of impact we have.

We at The 22 Fund chose to invest in manufacturing’s export capacity as a strategy because it produces all the impacts we want to have happen at the same time. For example, manufacturing is a fairly dirty sector, so we are investing in either clean technologies that other manufacturers can use, or we invest in a business where The 22Fundis a value-add by using our experience with Cleantech and Climate Tech to help existing manufacturing become more sustainable. A company being more sustainable will help their bottom line because the company is more efficient with its resources and will have more money to expand. In addition, a majority of the companies that export are run by People of Color and a significant number of manufacturing workers are People of Color. When you combine manufacturing and exporting, the workers are more likely to have health care, the jobs pay $94,000 a year on average, and they can create jobs faster. So that is why we don’t ever separate climate from jobs, race, and the economy.

How do you define a successful investment? What will have changed as a result of that investment?

Just like The 22 Fund does not separate the kind of impacts that we want to have, we do not separate returns from impacts. We are not concessionary. So, we don’t want to have just high returns or high impacts. I actually believe it is very difficult to have either on its own because of the type of investment strategy we utilize.

A successful investment means we hit our ROI targets and our impact targets together. As a result of the investment, we will have cleaner manufacturing, more jobs of the future that are high paying with healthcare, upskilling workers in manufacturing, and more women and People of Color will have access to capital to grow their companies. Everything changes.

Do you see any underlying or unexplored assumptions around concessionary or market-rate capital returns, particularly as it relates to the intersection of climate and justice?

I’m fundamentally against tradeoffs or concessions for myself because the market or financial system will automatically push concessionary first. The finance industry will think it can be done through the foundations and grants. We need capital going to climate justice, just like we need capital going to women and People of Color in Tech. An entrepreneur can’t grow a company on grants alone. We can’t have the impact that we want to have globally with grants alone. So, I want more of the finance industry to see that you can have great returns when you are investing to make the world better.

We have to move three times the amount of money into climate than we’ve been doing. We can’t just do that through grants. It has to come from all the money that is flowing out there.

There is so much extra money flowing for Tech in Silicon Valley. The valuations are so high because investors don’t know what to do with all that money, so they are doubling down on white men. The majority of investment capital is going to white men, instead of moving it to women and People of Color entrepreneurs. There aren’t enough white men to absorb all that capital. That is why I don’t think of concessions. It is not necessary to do what I want to do, and I can show that there is so much opportunity.

How do we have a more compassionate and kinder world, if so much money is going to one segment of the population, while so much of the population is struggling? How does that look like the world we want to have? We can’t just rely on foundations, charity, and philanthropic dollars to address that. We have to move market-rate capital to a majority of the population in the world in order to have the world we want to see.

We often talk about Sustainable Development Goals (SDGs). The United Nations has said that increasing women’s wealth has the greatest impact on most of the SDGs. That should be our focus. And it has to be centered on women of color, in whatever way that gets defined, particularly in the global south. It will look different in different countries around the world. But we need to move this capital to reflect the world that we want to see. A world that is more compassionate and has more equity.

This is just logic. So, when people go against evidence and logic to sustain status quo, I just don’t understand it. And so, the whole thing needs to change. We need to challenge ourselves in the impact investing community to truly build the equitable society that gets discussed at conferences like Confluence’s Practitioners Gathering.