Howard Warren Buffett, the 32-year-old grandson of Berkshire Hathaway founder Warren E. Buffett, has co-founded a permanently capitalized operating company that aims to harness business principles to drive social change, the New York Times reports.
The company, i(x) Investments, hopes to reward investors with long-term economic growth and social impact by investing in early-stage and undervalued companies working in areas such as clean energy, sustainable agriculture, and water scarcity. Co-founder and CEO Trevor Neilson, formerly the president of financial services firm G2 Investment Group and director of public affairs at the Bill & Melinda Gates Foundation, told the Times that friends and strategic partners were investing $2 million to $5 million in the firm this year and that it would look to raise $200 million from family offices, institutional investors, and big companies in 2016, with the goal of investing $100 million annually and filing for an initial public offering by 2020.
According to Neilson, the firm is close to taking its first two stakes. One of the companies it is eyeing breeds crickets as food for chickens and fish — a more ecologically sound alternative to traditional feedstocks such as corn — while the other, a company called Skywater, makes machines that turn naturally occurring humidity into drinking water. Some of the firm's investments, such as the one it is considering in solar energy financing company True Green Capital, could be as large as $100 million, said Neilson.
And while Buffett did not ask his grandfather for advice or money prior to launching i(x) Investments, and neither his father, Howard G. Buffett, nor his grandfather is an investor, it is no coincidence the firm is structured like Berkshire Hathaway. As a permanently capitalized operating company — essentially a holding company that owns independently operated companies and stakes in others — i(x) Investments will benefit from compound interest and be able to defer costly tax payments, as Berkshire has.
"A fund structure, with its finite life cycle and investors wanting to see returns, is not the right model for impact investing," said Neilson. "The world's biggest problems have to be addressed through sustained investment....There is an evolving consciousness in the world, which presents an historic opportunity for both social change and profit."