 Good morning. Why don't we get started? Again, my name is James Schaefer. I'm managing partner at Schaefer & Combs. Welcome to our panel today. Too big not to help financial industry players making a difference. We're very excited about this. Schaefer & Combs is a growth solutions provider for impact-driven organizations. If you'd like to understand what that exactly means feel free to look at our website Schaefercombs.com or corner me right after this. I guarantee you I have enough business cards in my pocket for every single person in the room. So thanks for joining us. Our working title for this discussion today has been Goliath as a good guy. I was sitting at a panel discussion in the audience not long ago, perhaps only six months ago, listening to a young entrepreneur who had started a sustainable apparel business and was actually doing pretty well. Had hit about a million dollars in revenue and she was sitting on the panel and kind of bemoaning how hard it was to compete in a products-based business with the huge firms. These brand names were all very well aware of and she kept using the term Goliath. And she was talking about how their actions or lack of actions were making it very hard for her to change the industry towards sustainable practices. As she dropped some brand names I recognized some of them because they work with our firm and I happened to know a little bit of behind-the-scenes information about the tens of millions of dollars some of them were spending and the time they were spending to completely transform sustainability in this big industry called apparel and textiles and footwear and and that sort of thing. So when it came time to Q&A, I was sitting in the front row, of course. I didn't challenge her point. I actually really respected what she was trying to do as a small player in a big industry but I raised my hand and I said, you know, I think that there are three primary ways you can deal with the Goliath issue. You can choose to not engage. You can get to the other side of the path when you see Goliath coming. You can engage Goliath head-on and challenge him in the fight and try to beat him in the market. That usually only works out if you're a character in a Bible story. Or, I suggested, you can invite Goliath to dinner. Maybe this is breakfast today or just water, but that's what we've tried to do. We've invited Goliath to the conversation. I don't know what the number is, but the assets under management represented on the on the stage is a number that my brain can't even get around. I happen to know that our panelists are heart and soul kind of folks and the leading thinkers on the issues we want to grapple with today. So, this is a little bit tongue-in-cheek, but that's our tee-up and we want to talk about what's going on in the major financial markets, how we understand good behavior and bad behavior, how we price those things, what that means to philanthropy, and that sort of thing. So, we're pretty excited to have this panel assembled today. This is Chad Spiller sitting to my left. Chad, you're the managing director for corporate governance and responsible investing at BlackRock. BlackRock has $4.3 trillion in assets under management. I have no idea what I just said, but that sounds like a huge number. Really excited to have your perspective today about how major investors in the world are looking at issues like environmental, social, and governance matters. So, we're looking forward to your perspective. Jackie Vanderbrug, Senior Vice President, U.S. Trust, Bank of America. Among the many things we could talk about today, I'm most excited with your views on gender and capital. In my opinion, you've emerged as a leading thinker and perhaps the most articulate spokesperson on that subject. So, I think you'll have some fresh perspective for us today. Preston Dodd, Vice President, Bernstein, Global Wealth Management, friend and colleague. I trust me that Preston will bend our perceptions of what a Wall Street firm wealth advisor is today. He's one of the most mission-driven guys I've ever met, and it's a pleasure to have him on the panel today. A familiar face to many of us, Vince Siciliano, CEO of New Resource Bank. Vince is not really a Goliath at all, but the reason we wanted to invite Vince among many is, Vince could be working at a Goliath, could very easily be a senior executive at a major bank, but has chosen to lead the charge in reinventing the business model. And we really want to hear what that looks like at New Resource Bank and other banks like it. So, what we'll do today, let's talk for 30 or 40 minutes with the panelists and see if we can get some engaging conversation going, and then let's reserve the last 15, 20, 25 minutes for some Q&A from the audience. So, start thinking about what you'd like to ask these folks. Chad, let's start with you. You're in a unique position for what is known as the world's largest investment manager. And you spend a lot of your time helping major investors. We're talking huge endowments, pension funds, et cetera. Look at environmental, social, and governance factors. In other words, things that are sometimes or almost always off the balance sheet and hard to price or value. I think perhaps the cynics amongst us think that some of that activity might be negative screen. You know, are the decisions based on which public company has clubbed the fewest baby seals in the last year. But I think that you probably have some news for us about the advancements in that type of view on the public markets. And we're looking forward to hearing your perspective. Can you tell us a little bit about your role? Thanks, everybody, for having me here. Is this working? It is. Okay, great. Thank you. So what I do at BlackRock is I have a team of 20 people and we are a central resource for all of the portfolio management groups. And there's about 100 different investment teams that comprise BlackRock. And what we've done is we've centralized the analysis of sustainability or ESG within my group. And then we share our thoughts on companies with the different investment groups for them to take into account in their investment decision-making. So that's really what ESG integration, which is my primary mandate, is about. Where the idea is that how do we layer on an additional layer of analytics to have more holistic investment decision-making? And a big component of that is long-termism. So there's been a fair number of critiques of the financial service industry that people are really too focused on short-term earnings, what's happening in the next quarter, maybe the next year. And really what my team does is we try to look at, well, what's happening in the next 5, 10, 15, 20 years? And if you think about our client base, those are really the timeframes within which they're invested. So we are investing for the teachers who are going to be retiring in 40 years from now. Or the firemen, or whatever the public pension fund is or the organization that's counting on us to manage their retirement savings. So it's really about trying to understand what are the primary sustainability factors, and we categorize them into environment, social, and governance that drive financial value over the long term. Our overarching philosophy is that we start by looking at the governance. So who are the leaders of these companies? And how are they qualified to lead these companies over the long term? Are they taking short-term risks at the potential risk of long-term value declining? And are they thinking about their impacts on the environment and society, and how that can be both an opportunity and a risk for the long-term value of the companies? What's the role of standardization? It sounds like you guys are kind of out on the bleeding edge and trying to turn these observations into actionable analysis. Are you doing that heavy lift by yourself, or have third parties emerge to help standardize how we look at things like environmental, social, and governance considerations? Standards are critical in any kind of analysis in the sense that you need to have comparable data to be able to compare across companies. So one of the big industry initiatives that we're actively involved in is SASB, the Sustainability Accounting Standards Board, which is really going sector by sector to try to understand what are the most material sustainability factors for each of these sectors as it relates to financial performance. And then what my team is doing is then we're taking those factors and we're engaging with the companies that we're invested in to say, okay, human capital for the financial industry has been listed as one of the primary drivers of long-term success. So help us understand Financial Company A. What are you doing with regards to human capital, and how are you training your employees, and how are you ensuring that there's good work-life balance, and what kind of retention rates do you have? So it's really looking at each of these individual factors, applying them to the particular sector where it's most relevant, engaging with those companies, and then writing research that goes back to the portfolio managers that buy or sell those companies so that they can determine this company compared to this other company has a better track record in the long run. Yeah, that's really interesting to me. I think in the social category, and this will be a segue to Jackie here in just a moment, would be the extent to which public companies are leveling the playing field for women in management and women in leadership positions. When you're communicating your findings on a particular company or category of companies to your clients, are these primary considerations for them? In other words, where in the phone call is your part of the agenda? Is this decision-making, driving information, or is it an afterthought? You know, it's changing over time. It used to be more of a nice to have, and I think what we're starting to see is for some clients in particular, public pension funds, insurance companies, universities, they're really starting to move this up into the piece of the conversation that they have right after they talk about financial performance. There's still other clients that maybe don't have as much interest in it, and they don't see the value yet, so it's an evolving. Thanks for that. That's really fascinating to me because when we talk about moving the needle, which is a phrase we all probably use a little too much, I think Chad's in a position with his advice and the advice of his team and their findings to really move the needle. We're talking about billions of dollars in the public markets. Jackie, you're a senior officer for a major private bank and wealth advisory, and you could have really incisive commentary on any number of subjects we could cover today, but there's something I want to shine a light on. You wrote a, or co-authored a piece in Stanford Social Innovation Review very recently about gender and capital, and there are a couple of moments in that essay where you just hit me over the head. I think when we talk about investing in women or empowering women, to me it's something that I have felt intuitively for a while, but have had trouble putting into words. It seems like really a binary view on something that is multivariate requires systems thinking and has an awful lot of layers to it. So this would fall in the ass of ESG or maybe beyond in Chad's world, but how can you unpack that gender and capital issue for us and help us understand just how multivariate it is? So thanks so much and you're so kind to have read that and to actually pick up on the nuance of it, right? Because I do think that oftentimes when we get to the place of people say, well invest in women, I mean one oftentimes that turns out to be very small philanthropic checks, which is not what we're talking about at all here. But we've shifted the conversation to talk about gender because that brings men into the conversation, right? It talks about, and it's a socially constructed variable that is different in different locations and it's different in different industries. But there's a lot of research. So this started really about returns, right? So it goes exactly back to Chad and my thesis is that just as if a decade ago people who said, well, you know, I want to understand the environmental aspect of my portfolio was told, yeah, you can't do that. We don't have those metrics. You're going to lose money. Now people who are asking that question for gender are somewhat being told that, but it's shifting and it's shifting pretty quickly. So then you have to ask why. And the answer to why is because as Chad said, this is non-financial but increasingly understood as a compelling part of long term value. If you look at the fact that women are now the majority of undergraduate masters and PhD graduates in the U.S. And then you ask Chad's question about what are you doing in talent, attraction, retention, advancement. If you overlay the fact that diverse teams make better decisions at all levels of the company, it's an obvious question, right? If you look at the fact that women in emerging markets, their incomes are rising 40% faster than men. And you look at your then consumer base and who's making decisions and you ask if you're not, if you're not asking the question of a company, who's on your design team? How do we know? How are you doing that product testing? You run the risk of having everything from drug recalls because you didn't do the sex disaggregated testing, you know, in that process. You know, other situations where what has been done to products is pink and shrink as opposed to really thinking about it from a gender inclusive process. So, I mean, a little story here at U.S. Trust. We worked with the Women's Foundation of California located here, fabulous leading women's foundation. They had an RFP out for wealth management. So how are we going to deal with our endowment? They had no idea that they could align their values with their investments and not only not give up return but actually seek alpha. So we have a product we call the Women and Girls Equality Strategy. We co-developed it with them using their values, actually using some of their research, the basic economic security tables, to understand what it takes for women to be able to be primary breadwinners with children and be economically secure. Then looked at things like which companies enable that to happen? How are they doing that? What happens? I believe that those are going to be longer term players. I have to say, this is a relatively new strategy, but last year it outperformed the S&P 1500 by 360 basis points. So we're pretty excited about the direction that it's going. You know, for me, though, again, back to the multivariate, because this is okay, public equities. But I think it's a question more broadly. So at Bank of America, we have invested, for instance, through the Calvert Foundation in their Women Investing in Women initiative. And that new win-win 2.0, if you don't know, check it out. But it's looking at energy entrepreneurs in sub-Saharan Africa. Again, looking at that through a gender lens, not only in terms of the entrepreneur, but to your systems level piece throughout the whole supply chain. So let's look at the design teams, let's look at the distribution teams, let's look at the marketing materials, et cetera. And I see previous conversations, or the SSIR article, but whether you're talking about the products and services and moving beyond pink and shrink, you're talking about the value team, you're talking about the entrepreneur, understanding gender makes a difference. I want to read a quote from the piece. This is becoming required reading in our office. It's just a fantastic essay. We must engage trillions of dollars of investment capital to capture the gains that come from paying attention to the systemic problem of devaluing women. So you're really geeky because you like to read that. I love that. This is just a fantastic quote. There's a lot in here. We could say, oh, we're talking about social upside, which is another way of saying we're talking about a lot of feel good. Stop littering and good things will happen, we promise. Invest in women. But you go far beyond that. You're talking about investing, I think, in the financial upside of realizing this untapped potential. So if the heart of investment theory, not to nerd out too much, is a concept of net present value, to what extent have you been able to actually get this notion of the future financial upside of investing in women and evening the playing field in different sectors into the investment thesis itself, into the investment profile, or is that a struggle? It's an ongoing process. I think it's going back to what Chad was saying. It doesn't turn overnight. Large organizations don't turn overnight and there's an ongoing sense of making sure that we have the data. That's apples to apples. There's not as much mandatory disclosure as one might think in some of these areas. So you're combing through and understanding both policies and results and understanding that impact on a long-term basis as opposed to short-term. So I think it is coming around and you're hearing it in the news, right? Whether it's the World Bank or it's what Sally Kraschek and PACS are doing or it's the Barclays Index, there's just a lot of different things that are happening that are starting to acknowledge what the research is doing. So in my sense, we're catching up to where the research has been. That's great. That makes a lot of sense. Preston Dodd, in addition to being the only wealth advisor I know who spent three years with Teach for America teaching in Intercity LA, you also sit in a really interesting seat. On a day-to-day basis, you are speaking with high-net-worth individuals and families and ultra-high-net-worth individuals and families and you're giving them advice, a lot of which has to do with philanthropy. In a unique way, you and your colleagues have the ability to change a metric in the United States that hasn't moved in probably 70 years. And that is how much of our economy is philanthropy. It's been frozen. If you represent philanthropy as a percentage of GDP, it's been about 2%, at least since the 1950s. So the good news is that's a lot of money. We're a philanthropic culture. In recent years, that's over $300 billion. But it raises some questions. 70% of that money is coming from individuals, a lot of whom you talk to on a day-by-day basis. The fact that we're frozen at 2% of GDP, does that mean that these givers are at their capacity? Is there anything you can do in your advice with them? Is there any data-driven analysis that you can show them that increases their philanthropic giving? And what happens when you do? So it's a pleasure to be here. And thanks to James and Shaefer and Combs for hosting today. And I think to the question about philanthropy and the 2% of GDP and that trend over time, if you look at some of the macro trends that we'll be seeing in the coming years, there will be the largest amount of wealth transfer between generations in the next few decades that we've ever seen for any country. I think coupled with that, we see an emerging value system among the millennial generation that as they receive these funds, they are perhaps thinking about the use of that and the use of their own charitable intent and their relationship with society and community and the impact that they're having in slightly different ways. So if you think about estimates anywhere from $50 to $60 trillion of wealth transfer, cash from a small sliver of that in estimates, I've seen numbers about 6, 6.2 trillion, will go to charitable causes. We can see the needle move there. I think we're seeing a shift in value systems among younger generations. There's a Deloitte study I like to cite about the purpose of business and responses from millennials from over 20 countries around the world, millennials defined as someone born after 1982. The response was that the purpose of business is to improve society and that number response came out ahead of profit. And so from that perspective, I think we'll start to see something of a shift and then I think that in terms of the ability to come together in situations like this and think about what I like to call with clients their personal impact capital. How are they using in either it can be a day-to-day situation or it can be a situation where they're thinking about the capital that they have that may go to a 501C3 charity or it may go to an investment that would be more along the lines of what we're calling impact investing or if you think about something like water and you say, gosh, well Coca-Cola is a large user of water and emerging markets and frontier markets around the world. As a shareholder at Coca-Cola, what could I say? What can I advocate that the investor relations folks at Coca-Cola should hear so it's part of their policies and to Coca-Cola's credit they've been looking at this since about 2004 at least. So I think that as you see the back to the needle moving in ways what we like to do and what I like to do at Alliance Bernstein is work with the clients individually. I work with individuals, couples, in some cases nonprofits and foundations. We're looking at the portfolios and then hopefully aligning really to me the expression of their values with what's held in the portfolios. And so back to the personal impact capital, as they think about the use of capital beyond just check writing, the time, the network, the influences that they have that can be brought to bear that will follow in essence that check hopefully their time and network to start moving the needle in ways that are positive depending on where their values lie. So those are individual conversations. I mean the firm manages about half a trillion dollars but in terms of working with clients on an individual basis to understand their situation and value systems, that's one of the things I love because I'm working with those families and these topics come up. I mean ultimately money is going to go to the government, to the kids or the charity. So from the perspective of their values and how they're thinking about the impact in their community, these are the kinds of conversations that we're having. I have an interesting question that I think connects some preceding questions with Chad and with Jackie. We have this ongoing struggle to value or price the good things and the bad things that are happening off balance sheets. As we improve however, and I want to talk a little bit more about this later, do you see that as a countervailing force to philanthropic giving? Is philanthropic giving based on our inability to price or value things that are happening in for-profit businesses? I think that it's a much broader question and it would be great to talk about it throughout the day. In terms of my initial thoughts for that, I think that traditionally we have seen a mentality and I've seen this in some situations with multi-generational families where there has been a mindset of making money and then maybe giving it away. But it was bifurcated, it was siloed. And I think that back to the value system that I alluded to before, there's more of a shift now in thinking and mentality to generalize about what is the corporation doing while it's making its money? What are my investments doing that may either help or hinder some of the things that I believe in personally? And I believe transparency on all fronts, I'm on the advisory council board along with Chad at SASB, I think increased transparency in some of these issues is important. So I think those lines are starting to blur and I think the access to information will help. So I think moving forward we'll see less of the either or where I'm going to make my money and then I'll give it away or if I invest in this I won't get the same return as if I invest in that. I think those conversations are changing, which is exciting to me. That's great. Thank you. We're going to revisit that theme here in a moment. Last but not least, Vince, your reputation precedes you. You are known as a high-caliber professional who lives his values at work and I think everybody in the sector really appreciates the work you're doing at New Resource Bank. The first perspective I think you bring today and we want to hear from you is that while you have the ability to be a senior executive at a major bank or at a Goliath, if you will, you've chosen to almost rebuild the model. New Resource Bank and other banks like it have decided to reinvent banking and have a very different view on what banking can look like at a community level, at a regional level, and a global level. Can you tell us a little bit about that and also help us stress test it a little bit? At the end of the day, if I'm walking in and I need to open a checking account for $5,000, how's the New Resource Bank experience different for me? How's it different for your shareholders? How's it different for small business owners who need growth capital, et cetera? Tell us a little bit about that. Well, thank you for having me here today and when I saw this title about Goliaths, which were not, I thought, that must make me David. And as you alluded to in the biblical story, David slew the Goliath and became king of the land. So I don't know that that's going to happen here today. We only have an hour. I do hope that what I really like is the conversation about moving the needle and assuming positive intent with this group up here is really very easy to do. So we're all trying to move the needle and hopefully some of our ideas and thinking can be helpful to others. So I guess three sort of three comments. One will be about our general strategy. One will be about this issue of the marketplace and how it views things. And the third will be, OK, so what about returns and how do you look at success? In terms of general strategy, I think there's a group of us, by the way. There are about 30 banks around the world that are all what we call values-based banks and we work together in a group called the Global Alliance for Banking on Values. And you can Google them and they have some great materials which I'll comment on briefly. But if we talk about what sets us apart, we are a community bank, but we're a community of values. It's not necessarily a geography, a geographic community. It's a values community that goes all over the world. And at the heart of our strategy is this idea that the triple bottom line, that everyone is familiar with, is really part of our DNA. And so the way we look at it is that we see that we believe that community resources can bring well-being to the community and the planet. So there's a lot packed into that, community resources. So part of what we believe in is really the real economy, meaning that the real economy of people and goods and services as opposed to the global financial economy, which hedges and speculates and securitizes and does a lot of other things that really aren't real for most of us. So being in the real economy, being triple bottom line focused, having a long-term, resilient kind of focus and very transparent and inclusive governance would be some of the key things there. So it's a somewhat different strategy and mind you growth and profitability are still essential, but they are a means goal. They're not the end goal. The end goal is what I said about achieving well-being for the community and the planet. So that leads to a different process of decision-making, different kinds of investments and loans. We could talk a little bit about that, who we lend to, how we think about doing that, and then I think, you know, different results for the community and the planet. And I think a core issue for me is how we view the marketplace. So you've already had some illusion, some references to the fact that, you know, we all know this. The marketplace does not price many externalities and it certainly doesn't price the future. And I like what you had to say about looking way out there. In fact, both of you have talked about longer-term and future. I like to ask the question, you know, if I offered you $1,000 today or $5 million in 100 years, which would you choose? And we don't have time to really go through that exercise, but most people end up saying, I'll take the $1,000 today. And when you ask why, it's because, well, I won't be around in 100 years. But what about your grandchildren or your great-grandchildren? Will they be around? Oh, yeah. And how important are they to you? Oh, they're priceless. So I put a priceless value on my great-grandchildren, but the net present value of priceless is just about zero. They really don't have a seat at the table according to, you know, classic investment analysis. So the market can't handle externalities, can't handle the future, and what we need is, you know, conscious leadership and conscious thinking, and I think that's why we're all in this room. In fact, maybe the way to summarize that, I heard Frida Capor say yesterday, we are all impact investors, whether we acknowledge it or not, whether we recognize the positive, negative, or neutral impacts we're having, we're all impact investors. So let me just comment briefly about, so what does success look like? We have in the audience Stephanie Mead here who works with me at the bank as director of our sustainability and marketing, and we've been working on defining that better. So we've built this pyramid, and at the bottom of the pyramid is, you know, we need to be a healthy, viable, sustainable, vibrant bank. So there are a lot of classic financial measures there. But as we go up the pyramid, we want to measure our outcomes, our impacts, and the impacts that our clients have. And so coming up with another whole set of, I don't have a slide that I can put up for everybody, but coming up with another whole set of measures that have to do with the kinds of target markets we're involved in, the jobs that we support, the carbon footprint, greenhouse gases avoided, loans to disadvantaged sectors, women-owned businesses, we're really now tracking a whole lot of other values as well. So again, you know, if we don't make money, no profit, no purpose, you know, no margin, no mission, so we have to be successful. The success measures have to include financial stability kinds of metrics as well. But there's another whole layer of metrics that are really the mission ones that are what drive us. So I think that probably gives you an overview of who we are and how we look at things. Yeah, it's great. And it also tees up some themes for here in a moment. Let's bring it down to earth. Let's say that I'm a small business owner and I have bootstrapped my way through a couple years of heartache and success and everything in between. And I'm over the hump. I've hit cash break even, but I need growth capital. I need a quarter of a million dollars, I think, according to my business plan. I might be a little light on collateral. I don't have that much equity in my home. But I've got, I'm very serious about my triple bottom line approach. I take great care of the people who work in my organization. I'm very sensitive to environmental concerns. And I'm a good business person. I'm running a tight ship. How will my experience be different when I talk to a new Resource Bank loan officer than if I go to the big brand name across the street? Well, I hope in several ways. One is that, you know, first of all, there's a values alignment between us. But that just gets us to the table together. That doesn't make us, that doesn't get us the business or necessarily you the loan. It really question is what's the value added that we're going to bring to that dialogue? So for a lot of small businesses that have a hard time getting loans at bigger banks, especially in the sectors we work in, which are organic food and clean energy and nonprofits, for example, we bring an expertise about your business, which is far deeper than other banks may have. So where other banks might see this amount, this giant amount of risk when they look at you, we'll be able to parse that down and say, well, we get what it's like to be a small business. We get what it's like to be an organic startup and selling to Costco or Whole Foods. We understand your supply chain considerations. So that big bundle of risk becomes a much smaller bundle of risk. Gary Groff is one of our senior marketing guys. He does a lot of that in the organic food area in particular. And so we'll end up analyzing that risk differently and structuring something that we think can help. But let's be clear. It's cash flow that pays back debt. You know, we're not a venture lender. So we don't, in the end, see ourselves as taking any more risk than any other bank. We just think we understand it differently. We target differently. So that's a competitive advantage for a new resource bank, is that you have a clear view of risk for some of your borrowers. In the target markets we work in, we think we really understand that risk well. And we have a network of like-minded, similar businesses that we try to bring together as a community for that new borrower. That's great. I know we all want to learn more about that. Let's be a little bit sensitive to time. I want to ask a question of the entire panel and hear some comments and some back and forth. And then let's reserve our final 15 minutes for some Q&A from our guests. This concept of pricing values that often or almost always live off the balance sheet and off the PNL, I think relates to every perspective represented on the panel today. Is there a sense in which our accounting system is just so far outmoded and that as we try to establish the net present value of positive and negative externalities that will happen in the future, we're just falling so short. And so we continue to give philanthropically, which is not a bad thing. We develop in a silo perhaps proprietary approaches to pricing and valuing environmental or social or governance factors. But is it time for a new, generally accepted accounting principles that takes a stab at pricing these off balance sheet items? Chad? Well, I think that's one of the primary objectives of SASB is to start to think through how we can account for sustainability factors. But I wouldn't... I'm of the opinion that we don't need to wait for that. That inherently qualitatively and through a lot of academic research, we know that some of these things have an impact on value. And one of the things, for example, that we've developed internally through some of our own research is that we happen to know that companies that have boards of directors where the boards are overcommitted. So each director sits on a high number of other public company boards that those companies tend to underperform. So we don't necessarily need to wait for SASB or other kinds of ways to price and sustainability. There's already enough research out there that we can start to leverage to engage with companies to say, we think that you'd be better off if you asked some of your directors to step down from some other boards or brought in some new directors that had more time to commit to leading this company. So I think there's still a fair amount of qualitative research and also sort of plain old common sense sometimes that we can start to use to try to make companies better and that the financial communities drive to try to quantify everything, especially when it comes to sustainability can actually work against us that these are very complicated factors. What our scientific active team does, and these are PhDs in physics and math, they have a really hard time trying to isolate any one individual factor that can be a driver. So when we do get one like overboarded directors, we go for it. We really, we put that into our proxy voting guidelines, we change our policies, we start to engage with the companies on it. So really in the governance space, we've started to find the ability to quantify these factors as it relates to long-term viability of companies. It's been much harder in the environmental and social space. We have seen lots of good research on diversity and that boards that are more diverse have a higher chance of succeeding over the long run. So that's another big topic that we engage with companies on. So they may not necessarily be making their way into the financial models, but they are certainly making their way into our policies and into our engagements. Thanks. Go ahead, Preston. To piggyback on that, our analysts for firms have been around for about 50 years and the analysts when they're just by nature of how they've looked at industries, how they've looked at companies. What's interesting is we look back on that. Many of these factors in terms of good management, in some cases environmental, what is now called environmental, but resource efficiency. There's an alignment that becomes a win-win when a company is using resources more efficiently when the management teams are in some ways now as we marry this data that we've had with the new standards that are being used in public discussions. These are things that we've been looking at anyway because the research is now confirming that the increased diversity or the better use of environmental resources or governance issues or better working conditions and supply chains over time are going to lend a better return for the investors. It's just now that these things are being articulated in different ways and hopefully articulated more broadly. I think to the question of standards, if we get to the point that we can all agree on a scoreboard that requires quarterly disclosures, which is what Zazby's trying to do and other organizations are trying to do so that there's increased transparency there, then what we can start to see is an additional scale so that the large institutions will know that there's an apple-to-apple comparison where they're looking and individual investors can do the same thing. Whereas before, these may have been the domain of the firms themselves and the analysts and it wasn't as widely distributed, but I think this has been happening for a while and I think the research is marrying with a lot of the common sense things that we've seen in providing better returns over decades, not just that quarter. That's a great point. I want to connect that with Chad's comments and ask Jackie a question. I think that I'm really convinced that we as a commercial society struggle with this matter of pricing value that's off our traditional financial statements. I think Chad made a great point about the successes, recent successes are using this sort of regression analysis approach on the governance side of things. So that's the G of ESG, but on the E and the S, on the S in specific Jackie, do you think that our failure to price the positive externalities of investing in women and leveling the playing field is perhaps the best example of the failure of our accounting system or is that premise faulty? I don't know if I'd say the best example. I think it's a great example. I mean, I think you're correct I mean, there's huge tectonic plates shifting in the world and so one of them is the rising economic power of women and I think we're all guilty of the pattern recognition aspects, right? You see what you're used to seeing and if you don't challenge yourself to see differently you're going to miss the huge changes in social status, right? When I say to people that over 50% of the small and medium business jobs in the US created in the next five years are going to be created by women-owned businesses most of them say really? I didn't have any idea. Over 50% of the entrepreneurs in Brazil right now are women. The credit gap for women-led businesses estimated by McKinsey to be somewhere between $240 billion and $300 billion globally, right? So that's a huge market. But in the same way that those tectonic plates are shifting the environmental ones are shifting too, right? Let's talk water and then let's talk about how those come together because if you, the FAO has said if you increase the resources water, seed, et cetera fertilizer to women farmers you're going to increase their yields by 20 to 30% and decrease the number of people living in poverty that also has a huge water implication, right? Because we're not going into deforestation there's just all kinds of pieces so to me they're interrelated I don't tend to think of the gender opportunity as more or less than the environmental opportunity or the governance opportunity or whatever there's fascinating research also I'll say actually done right here at Berkeley that companies that have more women on their board actually perform stronger on other ESG factors, right? So they're more likely to have addressed carbon issues in terms of how their strategic plan they're more likely to have long-term plays around financial disclosure and other pieces so there are a lot of these correlations that in some sense it's back to yes we need to do the reduction analysis but some of it's common sense, right? Diverse teams make ask different questions different questions lead you to say what's happening in the world that we might have missed That's great Vince if I'm you I'm sitting there thinking we've been doing this from day one and I think that that's something I've learned from you about New Resource Bank is that we view the real economy as you put it people, planet and profit from day one that's how you built the bank your fellow banks and the network are trying to do the same thing you talked about defining success earlier let's look 50 years in the future if your model of building this view on value from the ground up succeeds and pervades and expands and starts affecting the bigger financial institutions on earth what does that look like to us? Great question so let me take it from a little different viewpoint my answer and that would be that if we look at if we say a big part of the issue is our economic system which for all its strengths and weaknesses does not price properly the future does not bring in externalities and basically we're all saying here so what we should just do it that's called conscious leadership the problem with the system is it has really emerged as the center of our lives and what I mean by that is we define ourselves we define our success, our personal sense of success and self-worth, significance it's all wrapped up in the marketplace in our performance in the marketplace and our accomplishments in the marketplace and the approval of others and I think that's at the root of a lot of this as long as we are marketplace defined it's very hard to reform the marketplace we have to step out of that economy of the marketplace and step into something that I'm calling the economy of well-being where our well-being is not defined by our accomplishments and the approval of others it's defined by our own core values our community, our sense of purpose and it's not about competition which tends to compare and make one higher and one lower and I'm better than you and create fear and pride and all of that but rather it's about collaboration it's about generosity it's about service so a different set of values that I can root myself in and then I work with the marketplace I use the marketplace but I'm not used by the marketplace so that would be my vision for where we are in 50 years is a whole different sense of well-being of which we all operate out of Well said I think that's a great segue to our audience we would love to hear some questions I think we have a microphone to make its way around please address your question to the panelists you'd like to hear from front row my favorite kind yes hi I'm Adair Morse I'm a Berkeley faculty in finance my question is somehow I think that maybe we're doing it to service by putting too many things under the word impact investment and here's my thought we have the pension funds that are going to BlackRock and then we have wealthy people we're trying to do what you much described as impact strategies in governance or in gender where these are financial strategies using the ideas of governance or gender that's very different in my view than strategies where we're not cutting down trees in Brazil that's an externality that someone will internalize in your valuation but it may not be internalized by the shareholder of that company the reason why we should care is that CalPERS cares the pension funds cares and so in order to mobilize more money to go into impact strategies doesn't it make sense to start drawing a line of where something is an impact strategies and something is something with externalities for philanthropy or combinations that was sort of a broad question hopefully you got the question yeah I mean we narrowly define impact with the measurement component the ability to say as a result of this investment what was our positive impact so we reduced greenhouse gas emissions by x amount or we created this many jobs I do think that with the rise in impact investing as a topic of interest there is a broader definition that's being used and I think keeping the focus for when you talk about positive impact the ability to measure what it is that you've had the impact is part of the way to address the concern that you're raising because I don't think that negative screening for example is that a positive impact investment avoiding tobacco yeah these are different tools in the toolkit that we all have to align our values with our investment portfolios but to me impact investing is different in the sense that you have a goal that you are trying to achieve some sort of positive impact and the ability to measure that as a result of your investment is to me what defines an impact investment Hi Joanne Fodiatis from Business Development Bank of Canada and I have two questions the first one is we're talking about value alignments for small businesses I was wondering in addition to having the specific expertise to help certain industries if you also have more flexibility in the repayment terms lower personal guarantees or a longer amortization period and my second question is what do you think is the role of banks to be supporting this movement for me I thought you were asking her sorry in terms of terms and conditions I mean I think we try to be as innovative as we can I find that there are a lot of sort of norms out there in the industry and they don't necessarily have to be there and so is there a way that we can still remember in the end of the day it's about managing the total basket of risks of all kinds and cash flow and never having to be in a situation where you're having to foreclose on someone or force them out of business so I think we break out of the box and we'll do a lot of different things and if that means longer terms sometimes that works very well in the end I don't know if people appreciate but at the end of the day the return that we have on our balance sheet is less than 1% the idea is to hit 1% but our return is probably about a half percent so what that means is and yes we have leverage so if we are leveraged 10 to 1 that's 10 times a half is 5% return on equity still not a great number so there's very little room wiggle room in terms of rate and really where all the wiggle room comes has to do with other elements of structure like term or other conditions the first part of your question I'm not sure I got the second part of your question what are banks' roles there's a vacuum in the marketplace right now especially for younger companies you didn't ask me if you came and borrowed you wanted to borrow 50,000 or 100,000 he picked 250 it's very hard for us to lend about 250,000 because the quality of information isn't good the risk levels are much different the smaller younger companies have much more hands on coaching about accounting and financial planning and vision and strategy and everything you can think of and we do some of that in fact I'm a big fan of the business canvas model if you know that model it's a great way to help someone really understand their business but in the end we don't have the resources to do that so we send people to you know inner city advisors or Pacific community ventures out of the capacity and I see our role is to help build that capacity and help fill that hole in the marketplace which crowdfunding may also help to some degree with as well so that's still I think the biggest gap in the system thank you my question you both have spoken about well you all have talked about increasing demand driving some of the interest in the big and smaller financial sector towards impact investing but and there have been two good stories about returns but what other tools do you have in the toolkit to create institutional change will a portfolio manager adopt or buy into a company just on the basis of you showing that there are positive returns or can you also start to integrate social returns into the conversation to drive change in your industries thanks so I think that the question about the social returns probably would be answered in two ways and I think for me in working with the client if I understand specifically the values because this is going to be more of an individual conversation I think if you're talking about a pension fund it's going to be more of a top down this is an individual conversation so I can understand the values that can understand if there are things that should not be in the portfolio or if there are certain values that an organization or an individual wants to reflect actually I'm starting to see in some of the RFPs from endowments or foundations or nonprofits these questions being asked which I didn't see three years ago as recently as three years I wasn't getting those questions so I think that's a good trend that is being asked I think from an individual level in the social that is being asked I think and then you get into the areas of standards so what do you mean by that what outcome are you looking for and I think that's where the industry needs to catch up so that we're all saying the same thing we go around the room and talk about impact and we might get a different definition slightly every time we go around I think to the other question about the portfolio managers as I alluded to this has been incorporated for a while into a product of a well-run company is that over time there are indicators of in associations with the positive financial outcome that we think also go into management and other types of practices that a well-run company has and so in finding those measures when we're looking have we defined that specifically around ESG and social I think those are words that we used in different ways before and now we're coalescing as we get the standards this will come and we hopefully will be talking about it the same way so that on a quarterly basis be it us or BlackRock or CalPERS or whoever it is can be asking some of these same questions Jackie did you want to add to that I'm not sure if we're getting to your question that's what I'm concerned about you just looking at your face do you want to clarify okay okay so that's helpful so we do a lot of research and most of it's public it's called wealth and worth and what we hear from our clients and this is high net worth clients over 51% of them say that the environmental and social impacts of their investments are important to them that scales significantly by age not surprisingly right over 71% of millennials will say they will take higher risk they will take a lower return now saying that that over 50% only less than a quarter have done anything about it right so there's a how do you answer a survey and how much do you push your financial advisor and so forth we sort of see three categories right so we do see a category that's completely values led they have been in this they maybe were negative screeners to begin with and they feel like it is their duty and again that they value the future right they're saying I'm not in this and it doesn't matter it's priceless on the other side an increasing number of folks saying actually the way that I see the world this is risk avoidance and it's alpha so I'm in it because I think this is smart the vast majority in the middle saying actually if you can at US Trust construct a portfolio for me that aligns with my values where I'm not giving up anything because of the way you do portfolio construction because of your analysis because you're doing both the ESG and fundamental analysis I'm in right like if this is an opportunity without a cost if you are you know the we are not looking to ethically lose you money really important and for us as a fiduciary advisor there's a whole bunch of requirements around that so that any of the strategies that end up on our platform any of the ESG strategies go through the exact same due diligence that any other strategy goes through so there's not two classes here okay so you said basically if I can have my cake you need it too if I can have the same return I'm going to get into the other investment then great I'm in an opportunity without a cost and so you know what troubles me about that is that we're really saying in the end we're boiling it all down to one measure of return you know I've got to have that whatever internal rate of return all the other returns that we talk about don't really matter in the end as long as I'm boiling it down to one financial indicator and that puts an awful lot of confidence in that financial indicator and it does ignore all the other arguments that what about all those externalities and long range and all the rest of it so I'm troubled by that and I understand that I've heard that a lot but I don't feel like it's the it's the answer it's the I want to do good but I want to do well so as long as I'm doing equally well I'll do good so totally hear your trouble I will say two things I think that we have undervalued the risk component here right so people talk about return return return many of our clients are non-profits and they are looking for consistent returns because this is not their retirement money they actually have a yearly budget that they need to meet right and so we look at what we're doing with them there's a whole bunch of different factors there and often times the ESG strategies have stripped out some of the risk in a different way and people don't value that right that that that oh if you're investing in low income housing it's different in terms of what the demand is and the risk return profile there and so the benchmark the traditional benchmark it's not the one you should be using as an example it is difficult again as a trust firm in the regulatory environment that we're in to allow a client to say because we're discretionary asset managers to say yes this matters and you don't have to look at return on this investment which I believe actually as individuals we often do right we invest in all kinds of things to your point I am not my portfolio I'm a whole lot of other things and I invest in ways that you know the behavioral economists would tell us I shouldn't well we said a keyword for you Sherry and for most of our clients they're boards and they are boards of underfunded pension funds and so for us to put in front of them an investment that says there's lots of really good environmental and social components to this investment but you're going to have to accept less return that's not a winning sales pitch so unfortunately we are in this position of having to come up with cake and eat it to types of investment strategies and fortunately we've been finding some of those infrastructure debt green bonds where you do have the same risk return profile but you also have positive impact so our strategy is to really focus on that because for our the overwhelming majority of our clients are fiduciaries for other people and to overcome that hurdle of fiduciary duty it's a tough sell if you're going to have to give up return go ahead Vance so mind you I you know we don't tell our shareholders you're going to take a lower return and in fact the global alliance looked at the 10 year performance of the major multinational banks and the values based banks and the data showed that during the 10 years terms of ROA ROE variability of returns and what not the values based banks actually held up better so I'm not arguing that it's always going to be lower return I guess I'm arguing that in the end the vocabulary we have boils it all down to an internal rate of return in dollar terms and as long as that is what the fiduciary world wants then we are cutting off a range of investments which kind of goes to your question really could and should be made because of just that we're discounting all the other potential returns and I get the fiduciary argument right as we get to the heart of it I think SoCAP is going to throw us out of here but that's the beauty of SoCAP the conversation continues we're right at it here we're talking about making change from inside a major long term system or making change from the outside feel free to continue the conversation with any of our panelists thank you for joining us today for too big not to help financial industry players making a difference have a great day