Skip to content
Home » Risk Built the United States. It’s Time to Bring Risk to Social Impact Investing

Risk Built the United States. It’s Time to Bring Risk to Social Impact Investing

An interview with our founders

With the launch of our new website, we thought it was time to check in with our two founders, Rupal Patel and Karlo Marcelo. The following comments explore the driving motivations behind Good Scout Capital and what we think is missing in impact investing.

Karlo Marcelo: When we started researching this firm, we found that screeners were driving impact investing. Fund managers essentially created options for investors to keep capital out of harmful industries like fossil fuels. This is one way the market can learn about what impact means, but it’s just a tiny step. Moreover, many investors don’t have a clear sense of what the metrics of these screeners follow. As a result, there is suspicion about what the fund managers are selling.

These problems are being addressed with the rising popularity of environmental, social, and corporate governance (ESG) standards. When it comes to the environment side of things, for example, the metrics are more precise. But there hasn’t been enough of a meaningful shift regarding social standards.

With Good Scout Capital, we want to go deeper. We need to get past the “signaling” products by going straight to the bottom line. What is the core fissure in America? Labor and the ownership class. Why not address that fissure direction through meaningful metrics? And that’s how we began focusing on growing wealth and income through investments in scalable small and medium businesses, in our inaugural Scout Fund Alpha. By sharing the pie better, we can expand the pie larger. With the American dream as the primary metric, we can meaningfully create real social impact investing.

Rupal Patel: The trends in ESG and impact investing are encouraging, but there is a core tension in current investment strategies. At its core, ESG is a reactive approach instead of a proactive one because its primary goal is to “do no harm.” This is a good thing for environmental issues, and that’s why we have seen how impact investing and the environment are a great match. We believe that wealth and income inequality and impact investing could also be a great match if we refocused the profit structure of investing. That starts with clear efforts to put the American dream back into investing.

Karlo Marcelo: Sounds like a lofty goal but it’s remarkably straightforward and the capital stack exists to make it happen. The best way to revitalize the vision of the American dream back into the economy and investing space is through risk. Risk is a critical part of capitalism. The freedom to take risks is a crucial part of the American dream. We have taken risks on the environment and in technology with great results, but we haven’t done it well regarding labor and income inequality. Imagine the consequences if we apply the same risk mentality that exists in technology investing to the issue of wealth and income inequality. We can take risks on small and medium-sized entrepreneurs. We can take risks by giving workers profit-sharing opportunities too. Capitalism thrives on risk. Let’s apply that same rigor in risk around wealth and income inequality.

Rupal Patel: Our approach to investing is held together with deep gratitude for what our ancestors did to get us to this place. Landing in America is a beacon of hope. We have lived it. We are children of immigrants. My dad came to this country with eight dollars in his pocket, and my sister and I completed our graduate school degrees debt-free. There are very few places in this world where something like this could happen on the scale that it had. Recognizing our roots gives us the motivation to reinvigorate the American dream. We don’t have to reinvent the world; we just need to focus the strength of our system on more sectors to grow the pie larger.

By: Good Scout Capital. Los Angeles, California.