Tina Castro and Lisa Richter run Avivar Capital, a registered investment adviser that works with institutional, public and private clients on developing and managing impact investing strategies, portfolios and funds.
After getting to know each other professionally, the duo joined forces by merging their previous firms in 2015 and launching Avivar Capital in North Hollywood, which now has $514 million in assets under management. Areas of focus for the firm include access to healthy food, sustainable food systems, small and microbusinesses, innovative housing and place-based impact investing.
What drew you into impact investing and how does Avivar Capital’s work align with your interests?
Castro: Coming from a family of Cuban refugees who worked tirelessly to create opportunities for us and others, my family’s example fuels my drive. Starting without a finance background, I became an analyst at Goldman Sachs, earned an MBA and found my calling in impact investing, using the capital markets to create opportunity for all through our work at Avivar Capital.
Richter: My parents met when working at a county hospital. Dinner conversation revolved around the challenges of low-income patients, including a tragic shortage of medical care until it was often too late for a cure. Today, we would call this a systemic barrier to opportunity, and I came to understand that barriers in access to capital are among the most crippling for overlooked entrepreneurs, households and communities.
I wanted to help take down those barriers and harness the capital markets as a force for good. Avivar is fortunate to support a broad range of institutional and family investors who share such a commitment to allocating capital to create a more just, healthy and sustainable world.
What are your investment criteria/requirements for the companies and funds you advise?
Castro: Avivar looks for investment opportunities that demonstrate strong alignment with our clients’ social, environmental and financial goals. This includes a clear impact thesis that demonstrates how the investment will help to solve a problem or increase access to opportunity and/or environmental resiliency.
As an SEC registered investment adviser, Avivar also looks for an investment thesis that confirms the financial viability of the investment in terms of our clients’ risk-return preferences.
Richter: We typically seek investments that incorporate innovations that contribute to problem solving, often while also offering the potential for scalability through attracting co-investors and strategic partners. Finally, we look for investees with a commitment to transparency and accountability, including a willingness to report measurable social and/or environmental outcomes from their work, along with financial results.
I read that you all operate under a “lifecycle framework” when it comes to investing. Can you elaborate on what that means to you and the benefits it provides to the companies you work with?
Castro: Avivar’s impact investing lifecycle framework is a comprehensive approach that reflects the high-level tasks investors typically manage as they move from idea to action. This framework complements an investor’s broader social or philanthropic strategy and supports building an impact investing strategy over time.
It involves four stages including planning, formalizing an investment policy, establishing process and procedures, and implementing portfolio management. (This means) operationalizing the impact investing strategy, including sourcing, (providing diligence), structuring, closing, monitoring and reporting on the social impact as well as financial performance of investments.
By incorporating education and coaching throughout the lifecycle, we help investors gain comfort with the range of opportunities that fit their impact priorities and risk-return preferences. This approach not only enhances the investor’s confidence but also ensures that the organizations we work with receive the necessary support to achieve their impact and financial goals.
Richter: In addition to working with individual investors on these tasks, we often facilitate cohorts of investors with shared priorities, such as investing to improve the quality of life in a particular geography or to make progress on maternal health outcomes nationwide.
How does your firm strike the balance between profitability and social good?
Castro: Striking the balance between profitability and social good is at the core of our ethos as a company. We believe that financial returns and positive social and environmental outcomes are not mutually exclusive. Our investment strategies are designed to address social challenges while achieving an investor’s targeted returns.
We further believe that investing in people – our team, the entrepreneurs and communities we work with, and the next generation of impact investors – and helping to grow the impact investing field are fundamental to value creation and profitability.
Richter: At the same time, we recognize that our society faces some intractable problems – such as addressing the nation’s crisis in the supply of affordable housing or helping communities to rebuild after disasters – that can only be fully solved with some amount of investments that require investors to take additional risk and/or accept less than market rate returns for their risk.
We believe that if all investors might allocate a very modest portion of their portfolios to such catalytic investments – even 1% to 2% of their holdings – our society could greatly accelerate problem solving, while triggering minimal if any reductions in overall investor returns.
Tell me about a challenge one of your portfolio companies has faced. How did you help them navigate through this problem?
Richter: One promising social enterprise focused on providing affordable health care solutions in underserved communities experienced a cash crunch when venture capital markets tightened in recent years. We worked with management to refine the business model and identify additional investors.
Additionally, we provided support in areas such as impact measurement and reporting, ensuring that the company could effectively communicate its social impact to stakeholders.
What does the future of impact investing look like to you?
Castro: Â Impact investing offers investors a critical means for advancing their values in challenging policy environments.
Innovations in technology and data analytics will play a crucial role in enhancing impact measurement and reporting, making it easier for investors to track and demonstrate the social and environmental outcomes of their investments. Greater collaboration between public, private and philanthropic sectors will lead to more comprehensive and scalable solutions to global challenges.
Richter: This includes retooling how we build communities to ensure resiliency to increasingly frequent extreme weather events – a process in which Avivar is intensely engaged with Los Angeles impact investors in response to the Eaton and Palisades fires.
Castro: Ultimately, we believe that impact investing will become a mainstream approach to investing, as the long-term results demonstrate the economic benefits of allocating capital to ensure that everyone has access to opportunity in safe and thriving communities.
