He's done high-level political battle against the Keystone XL oil pipeline project, personally lobbying President Barack Obama on the issue. His political action group, NextGen Climate Action, has waged campaigns against political candidates it sees as unfriendly to the environment and pushed new laws to fund alternative energy sources.
And he's teamed with New York City Mayor Mike Bloomberg and former Treasury Secretary Hank Paulson to study the economic cost of climate change.
(Read more: Battle of the billionaires erupts over Keystone)
Steyer isn't the only former hedge funder to devote significant resources to philanthropy.
George Soros of Soros Fund Management is famous for giving billions of dollars away. Paul Tudor Jones of Tudor Investment founded mega New York City charity Robin Hood. Chris Hohn ran his Children's Investment Fund in part to benefit the charity he created with his wife bearing the same name.
And a dozen prominent hedge fund managers like Ray Dalio of Bridgewater Associates and Seth Klarman of Baupost Group have committed to give away a majority of their wealth by signing the Giving Pledge.
What's rarer are the former professional investors who leave their hedge funds to work for nonprofit causes full time. A select group that did are now doing innovative non-profit work, often by applying some of their investing skills to drive change for social good.
"We're seeing a powerful trend toward investors who want to do more than just write checks to causes they care about--they want to get more directly involved to drive better results, faster," said Susan Wolf Ditkoff, co-head of the philanthropy practice at The Bridgespan Group, a Bain & Co.-offshoot that advises non-profits and philanthropists.
A recent Bridgespan report found that more people are retiring from business careers at younger ages to become full-time philanthropists or social entrepreneurs.
"Getting actively engaged with both time and resources is a terrific win for society, as long as it's done well," Ditkoff said. "Plus, the earlier a philanthropist gets started, the more time they have to learn and improve."
A new type of profit
Marci Spector is one of the young people who made the jump.
Spector, now 34, learned how to evaluate the health of companies and their leadership teams while working as a healthcare analyst at hedge fund firm Perry Capital from 2004 to 2006.
She left to get a master's degree from the Harvard School of Public Health and joined New Profit in 2008, a non-profit. The Boston-based group works like a venture capital firm for other non-profits--like Teach for America and charter school group KIPP--by investing in them and helping them scale.
Always fascinated by healthcare, Spector loved her time at Perry and is quick to note how the financial education it provided helps her evaluate potential grantees at New Profit. Spector is comfortable poring over the financial documents of non-profits, much like she did a company's balance sheet at Perry.
She also got good at evaluating the leaders of healthcare companies, especially in face-to-face meetings. She learned to look for a chief executive's ability to attract and retain top talent, both on their executive teams and boards. She now does the same in looking at the heads of nonprofits and whether they can drive growth and quality at the same time.
"It's a direct parallel to the for-profit space," Spector said.
How to judge charities
Another example of young career changers are Holden Karnofsky and Elie Hassenfeld.
The pair co-founded GiveWell in 2007 at just 25 after working together as investment analysts at Bridgewater, the largest hedge fund firm in the world at $150 billion today.
Karnofsky, Hassenfeld and other young Bridgewater colleagues were looking to give small amounts to charity but found there were virtually no resources to compare the effectiveness of nonprofits.
Karnofsky and Hassenfeld decided to build it themselves. Backed by co-workers--including a significant donation from young Bridgewater co-chief investment officer Greg Jensen--GiveWell is now a well-received website that evaluates charities and recommends a select group of highly effective groups.
Bridgewater's mantra of transparency in investing decisions is easily seen at GiveWell. The site features a section on mistakes, which echoes Bridgewater's penchant for self and peer reflection on things that went wrong. And there is a detailed rationale behind the group's evaluations, another hallmark of Dalio's hedge fund firm.
"One of the things we are trying to bring to the charitable sector is a more open discussion of what has gone well and what has gone poorly," said Hassenfeld, now 32. "A big problem in charity is unless someone is literally trying to scam you out of your money, you can't say they screwed up because they're a good person who is trying to do good things."
Others who jumped
Arguably the best-known career changer, John Arnold, is also trying to change philanthropy. Arnold retired from managing $3 billion Centaurus Advisors in 2012 at just 38 years old.
He is now devoted to the philanthropy he started with his wife, the Laura and John Arnold Foundation. One of their major efforts is to make the match-making process between donors and charities more effective and transparent. Their effort to that end is the Giving Library website, launched last year.
The Arnold Foundation is also making bold, long-term bets on transforming the pension system; understanding the causes of obesity; and changing the criminal justice system, among others. Arnold declined to be interviewed for this piece.
A recent career changer is Jonathan Wood, the former president and chief operating officer of $2.8 billion Whitebox Advisors. Wood stepped down this year to devote himself full time to Charity Aware, the Minneapolis-based charity he founded in 2012 with his wife.
Wood said he left the hedge fund firm because the charity needed his full attention to succeed. " I concluded that this was my calling in life," Wood said.
Charity Aware's mission--to get teenagers more involved in volunteer work--is purposefully specific, much like how a hedge fund looks for unique investment ideas.
"Like investing and more specifically hedge funds I think you need to have a unique definable niche," Wood said. "The approach that you take needs to be measurable and you have to deliver measurable results that differentiates you from others. Alpha exits even in the nonprofit world."
Of course, former investors' desire to measure results have limits.
"Too often philanthropists do go overboard; they focus so tightly on narrow strategies and linear ideas of how the world 'should' work that they miss the forest through the trees," said Bridgespan's Ditkoff.
"If we had one piece of advice, it would be to make sure that what you're measuring matters to the outcomes--because you can literally measure hundreds of metrics--and that you have a clear plan and resources to act on that information to improve real outcomes for real people."
Regardless, changing the world is all about have a clear vision, just like at a hedge fund, according to Steyer of Farallon, .
"The simplest way to think about an organization is that you need to establish a mission, develop a strategy that comes out of that mission, and then execute that strategy," Steyer said in comparing his environmental and investing work.
"From purely an investment standpoint, if you don't have a good strategy then you don't know what you're doing. I see this as extremely similar."