 More and more capital for a just and sustainable world sounds like a good idea So this panel I'm very excited for there were two huge announcements in the impact investing world this year from Bain capital and from black rock these major financial institutions are making big commitments to impact investing But I think that's raised a lot of confusion from folks in the field trying to understand what that means and what we can Expect what the timelines are we thought you might want to hear from them directly So we've got Brian trail stad from bridges ventures interviewing Deval Patrick of Bain capital and Deborah windshield from black rock Please welcome them Good morning I'm Brian trail said a partner at bridges ventures, and it's a delight to be here to talk about impact investing going mainstream When I was at acumen fund in 2009 we were thrilled at the prospect of raising a hundred million dollars to invest in Emerging markets business is serving the base of the pyramid. We thought that was real scale Today, I'm proud to be part of a fund manager bridges ventures, which manages roughly a billion dollars Investing funds in real estate growth equity and social sector entirely dedicated to impact and sustainable investment But sitting on stage next to a seventy five billion dollar asset manager Bain capital and a four point seven trillion That is trillion with a T asset manager in black rock. It puts scale in perspective So so no two better people to talk about impact investing going mainstream then governor Deval Patrick at Bain capital and Deborah windshield from black rock So welcome. Thank you Let me start with you governor Patrick You had a distinguished career in public service. You were the governor of Massachusetts. You were a senior executive in corporate America After leaving the state house in January of this year you could have done anything Why did you choose impact investing? Well, first of all, can I just make clear? I am not responsible for all seventy five billion We're we're just standing up a new a new fund But I would say sort of philosophically that I feel fortunate to have like most people want in search of Meaning in their lives to understand that for me to have meaning in my life I had a meeting in my work and The jobs I have I have had in the main have been very meaningful and I wanted that to To continue your colleague and my mentor Ronald Cohen introduced me to this field starting with social impact impact bonds when I was in office and And migrating if you will to impact investing was natural Very serendipitous that the platform happens to be Bain capital and huge fun and opportunity in that but that's a longer story Debra how about you you were I started your career in investment banking You were the CFO of the Metropolitan Museum of Art You were then the president of the Robin Hood Foundation. How did you come to to Black Rock and impact investing? Well, I would say with a lot of luck I really can't believe that I'm having the opportunity to bring all this together at Black Rock. I Started I went to business school Already with an eye on how do you bring together? discipline and analytics to social impact and Being a a classic humanities major in college. I knew nothing about business or analytics So after business school, I went into finance really with the intention of how do you learn to think about? businesses in a more disciplined and sort of outcome oriented way and then Never left or didn't leave for a very long time and then at the Met It was a great opportunity to help a mission-driven organization Align its mission with financial in outcome And as everybody in this room knows even if you're mission-driven you have to have a model that's sustainable Going to Robin Hood was an incredible education around metrics And how do you use metrics to measure things that are very difficult to measure like poverty fighting? And I think it's without lens in that background that I have the opportunity to come to a Black Rock and look at What is very traditional? Investment management and think about how can you balance two objectives at the same time? Now Black Rock is about as mainstream as it gets with roughly 6% of the world's professionally managed capital And yet it's still a relatively entrepreneurial firm Can you tell us the story of how impact investing within Black Rock got launched and what your focus is right now? Yeah, I love how it got launched and it was one of the reasons that I was drawn so much to Black Rock we had the whole area of engagement and Responsible investing is very deep in Black Rock's DNA. It's been one of the largest sort of engagement firms in many years it has a group that's been of 20 people who just spend time looking at ESG factors and thinking about how to vote our proxies But in addition to that there was a group of Millennials at Black Rock who had been on their own Researching impact investing understanding the field put together a business plan went to our leadership and presented it and got the sponsorship of our senior leaders to think about this in a more organized sort of business Platform way and that's when I came in so really building on the back of an initiative that was very grassroots even at Black Rock And today high-level some of the thoughts about where you're heading. Sure. I We look at this business we look at this sector Very broadly we have tremendous respect and admiration for so many firms I know you know we we were just talking about who've been doing this for a long time You know we come at it in a different way We we you know it's a very large ecosystem and we think there's an opportunity to look across all asset classes the public markets the private markets and really bring some definition Transparency some measurement to a lot of areas of asset classes that don't really have anything in this in this area And so you know using very clear definitions helping clients both institutional and retail think about the motivations What is it? They'd like to achieve and what are some potentialist solutions some of which I hope Black Rock offers And I think many of which many people in this firm in this room will be offering as well So I think that's how we feel this whole area can be more mainstream by getting clients and investors Comfortable how do you define this world? What are the different segments? What's available in the public markets? That's liquid. What great opportunities might be more accessible now in the private markets So that's the approach we're taking great and governor when you first started having conversations with the partners at Bain What motivated them to think about raising an impact investment fund? Existing limits had been asking, you know, I was I had friends at at Bain capital And I was just in sort of soundboarding with them ideas that I that I had Frankly in very other very different spaces and and one of the senior partners lean forward and said actually We've been trying to figure out how to get into impact investing for a few years now And they were having a conversation at the time about acquiring an impact fund of funds From a bank that was having for a variety of reasons to divest itself They asked if I was interested in coming in helping with that and I said actually no because I'm interested in direct investing and One thing led to another and they said okay, let's do impact. Let's do direct investing come in and help us build the build the business and we've resolved now to essentially do a private equity fund that would do investments growth capital and control investments in lower middle market firms in North America operating in three areas and sustainability in health and wellness and in something we're calling neighborhood revitalization And we'll look forward to to rolling that out formally probably first quarter next year. We're busy Putting the team together now great. What were some of the biggest arguments? Against the idea or internal debate about either the strategy or whether this was a good idea Any arguments against I think we were we found ourselves very aligned on a couple of things And I realized there's a range of view in this room But that first of all that a competitive market-based private equity style return was important to deliver And while I respect that there are folks along the spectrum there at at Bain Capital and personally I think that's important for a whole host of whole host of reasons we were focused very much on deal flow where were the real opportunities to come to scale Because a part of mainstreaming I think from our perspective is how do you help a mission-driven enterprise? Which is also a for-profit enterprise Demonstrate that it can operate at at scale and with all of the considerations that entrepreneurs Always have about eggs exits and liquidity and for themselves and their and their investors But also how you have mission lock and can you find someone in a secondary market? Which I think frankly does not exist in the space today Who is going to be as respectful of the mission as as of the of the financials? So I think we're actually quite aligned and we've worked in an iterative process to wear what the size of the first one should be and what the speed with which we should be trying thoughtfully to Deploy those assets and what the timing of the second and third funds might be And Debra so much of impact investing is private capital venture capital private equity And yet black rocket is a leader in public equity fixed income I'm just curious how you're thinking you've talked a little bit about this But how you're deploying these capabilities and how you see Impact investing moving to the mainstream from institutional investors only towards individual the retail investor I think one of the ways that we're hoping we can help sort of broaden the market for These kinds of investments is just clarity about what it is We're offering so first of all we're looking across all asset classes, and we're looking at them in three ways We're you know, we're called black rock impact, but it's really about sustainable investing And we have a long history of business in screens You know just excluding companies or industries because of values or missions of clients. We have a pretty deep Existing practice around ESG and we think there are a lot of opportunities to help clients marry ESG Considerations how companies operate with financial return and then that last category of impact where we very much view it is Here's your financial outcome. Here's your impact outcome Measurement reporting transparency and taking that model and bringing that across asset classes So for example, we're about to launch a product or maybe we did just launch it this week. It's been a blurry week That's a public equity product, but that incorporates impact reporting So, you know to us having that kind of product that can be scalable Liquid mainstream very clear impact reporting so that not just institutional but retail clients can really understand what it is They're getting we think taking that lens of Reporting whether it's in green bonds or infrastructure Some private a lot of public is just something that we can bring to the sector that hopefully will continue to create We think there's a lot of interest in both the retail and the institutional markets but Increasingly provide a framework that makes clients and investors more comfortable taking these opportunities to their investment Committees or just talking about them among themselves in a way that they can start to think about in a mainstream way And when we say mainstream, it's having holdings that can be in your core portfolio It's not that sort of two to three percent of the of your portfolio that maybe you're allocating to niche investments We think that what's going to help move these conversations is allowing Investors to talk about it in their mainstream holdings. That's going to start to change I think what we're all going to be able to start to encounter in that conversation with investors Well and building on that and asking both of you, you know, some would argue and this is San Francisco after all That this is not impact investing going mainstream that this is impact investing selling out So how do you defend against that potential critique and specifically define impact as central to your strategy? How do you keep the bar high? Either of you. Well, I'd start first, but I'm you know Given my last job. I'm accustomed to being criticized no matter what I do If I walked on water I used to say somebody would say Patrick can't swim So I'm I look people there are lots of different ways to be engaged in impact Investing I don't I want to make clear that from our perspective the impact is not secondary we screen for impact Theoretically first and then the financials and when I talk about scale, I'm not just talking about scaling the Financials I'm talking about scaling the impact. What is it? We do from this baseline to get us there and bang capitals Custom has been to be a very Activist investor very engaged in helping to build the company and our anticipation is we'd be engaged on both of those fronts or all of those fronts going forward second thing I'd say is that You know in a way You could see I and I do see impact investing as the natural Extension of or maybe the the articulation of a return to long-term value We have a very short-term focused economy in the United States and in many parts of the world where we're managing quarter-to-quarter and Sometimes getting those short-term returns. I think without regard to the long-term Impact on the enterprise frankly. I think that has infected our politics as well where we govern very much, you know Election cycle to election cycle or news cycle to news cycle and not generation to generation If you think about the long-term value of an enterprise That depends on more than one bottom line Yes, the financial bottom line, but also environmental stewardship the relationship with the community the relationship With employees and and a whole host of things that we think of Sometimes I think mistakenly in our short-term economy as secondary to the money So, you know, we very much about we want to be very much about about long-term value and I think in that in that respect the the the impact investing field and and the patient capital or long-term Value traditional investors are already aligned. They may not know it Yeah, I'd like to echo what Deval just said because you know black rock has always been very much about the long-term Investing we have a CEO Larry Fink who I think is known globally for really reinforcing that long-term approach to investing and in hand-in-hand with that is black Rocks History of speaking to companies about their ES and G behavior, you know, what are they doing on the environment social governance because we have to vote all these shares We need me need to make sure that they're behaving in a responsible way So we do think that having this model very much like Bain of what is the financial impact? let's be very clear about what that return is and What is the non-financial or you know sort of the other impact that every investment in every company and every project is Creating good or bad in terms of your question about Is this impact light or you know, what is it greenwashing I think what we can do Is as I was saying before be very clear about with every product and every opportunity What we're offering if it's a screen all we're doing is removing Objectionable companies or industries that a client doesn't want in their portfolio We're not calling that impact, but we do think there's an element of responsible investing from a client's perspective That's a solution we can offer when we're talking about ESG products where we're looking at how a company behaves We think that is also an element of responsible investing We're not calling that impact even though our name I know is black rock impact But you know, we're gonna be very clear with clients. This is what you're achieving This is what you're accomplishing and when we're talking about impact We're talking about it in a way that I think is much more consistent with the way that it's been defined But quite honestly, you know to create something that gives broad access to lots of investors globally And this there's global demand for this It's gonna look different and as long as we can be clear about what it is We're putting on the table knowing that it might be It might have some characteristics that are similar to traditional impact, but also differences I think that's our obligation, you know, not to just put this all under this rubric or umbrella of impact But be very clear what the trade-offs are and what it is we can deliver at scale and when you know as Deval said, I don't manage or have anything to do with most of those trillions But what black rock Must do whenever it offers something it needs to be scalable and we need to be realistic about You know what we can offer, but I do think that having this opportunity to direct such significant capital to opportunities where these issues are being articulated and you know responsible investing and outcome oriented Conversations are happening is just a trend that's good for everyone And do either of you guys have a house view on some of the industry standards like the sustainable accounting standards board or Gears are those things that are part of what you're thinking about putting together Yeah, we love it all, you know we at black rock We're working on our own standards and at the same time we're looking at industry standards And if there's an industry standard that can be as rigorous as we think is needed We'll jump over to the industry standard, you know from our point of view the most valuable thing We can do is help create broad standards. What is green? You know what is you know when you talk about carbon intensity? What are we talking about? What is the measurement scope one scope two scope three, you know just always pushing back? I think the SAS be is fantastic work anything that drives clear reporting and measurement is good for everyone So we're um, you know, I think I don't want to lump it all together But we think every initiative that the industry is Undertaking to try to drive to that kind of clarity. It's fantastic Brian our intention is to measure at the enterprise level at the level of our buckets if you will and also at the at the fund level and We've gotten two kinds of feedback and talking to many of you in this room and in the in the field one is Please please please use a measure that's already in common use rather than inventing one of Your own so that there is some ability Thank you to the six of you I spoke There's some so that there is some ability to to Compare yeah with others who are doing comparable kinds of things on the private side and the second is to Is What is the second I forgot to say I'm having a Very moment what the first one is so good. It's so good. Trump's a second. Yeah, it does trump the second But the second is about not turning the enterprises in which we invest into data collection Right enterprises let them to have their business and run their their business. So let's get the data we can And that is meaningful and that actually gives us insights into the into the movement on on the impact Side without being so burdensome about that about the detail that it becomes a distraction So go ahead. No, no, so I was gonna say I think we are we are trending toward gears iris as Measures very excited about sasby. There's a there's a gap Kind of thing coming in this in this field sounds like black rock and others are gonna have a lot to do with helping to To shape that and that'll be good. Yeah, I think that you know, you hope it's coming together We look at something like green bonds where there are a lot of conversations And we're just pushing for the largest issuers to get around something that we can all adopt when we look at Infrastructure and we want metrics there. We're like, let's try to use whatever we can create In the green bond sector and use that in infrastructure So I think that there's the more commonality even across asset classes and the greater the Simplicity which I think is something you were also driving up the data You want it to be meaningful, but you don't want it to be so complex that no one can understand it or use it So we think it's that intersection that you know is really what we're all we're driving toward right and finally develop Let me let me close with you You have a pretty long perspective of not only how markets evolve in this country But also of how movements can catalyze and have catalyzed change in this country Is impact investing a market or a movement and where do you see this market slash movement heading over the next decade? Well, I think it's both and I think that's not unusual in markets You know the the most interesting thing is talking to Endowment CIOs about their hesitation around impact investing When they are when you know, I asked them were you around when this new idea called private equity was invented and they said Yeah, we were around and we did that and somehow or other they figured out that could work I think I think conscious capitalism is a powerful idea And I think the notion that and an important and timely idea And I think it will grow and it will be up to those of us in this room and rooms like it to spread the word and not and not feel quite so Jealous and I say that lovingly but quite so so jealous about how how great we feel About what we're doing in this room. We have to we have to proselytize a little bit About the importance of aligning our values with with financial value if the planet is to be saved if if Communities are to be uplifted and frankly if capitalism itself is to is survived is to survive So my view is back to what I was saying earlier. We've got to move to a more long-term way of thinking about Economic value and when you think about it that way social and environmental value are very much aligned right well, that's very well said and and hopefully the The large crowd here understands that these conversations are now happening within mainstream institutions And so the conversation that we've been part of over the last decade is in fact now around the partnership table at Bain And in the senior leadership at BlackRock so I want to thank you both for taking the time and welcome you to the impact Investing industry and we look forward to seeing you around at many so caps to come. Thank you