 So as the field matures one of the things that is a constant drumbeat is that how do we explain Impact how do we get rig really rigorous about measuring it managing it? You can only manage what you can measure you've all heard these things And I'm sure you're trying to figure out how you do that within your own organization One of the things that's really challenging about this is that there are so many different efforts that finding one way that We can have these conversations across so many sectors and industries and issue areas Feels like a dancing task. There's amazing organizations that have done a lot of collaborative Collaborative efforts over the years to move us forward on these conversations Some of the leaders in this conversation are here with us today with some of the new Infrastructure that's really Building on what's come before and trying to knit these efforts together to help us do better in managing measuring Talking about being clear about impact. Please welcome Brian trail sad Andrew Lee Lauren Booker Allen and Michael Macalus So we may know whether we're making money with our impact investments But how do we know whether we're making a difference? Over the next 20 minutes We will talk through how the impact management project has developed a shared convention around understanding the impact that we're having at the interface between an enterprise and a project And the people and planet we seek to benefit. I'm Brian trail sad a partner at bridges fund management I'm joined by Andrew Lee from UBS Lauren Booker Allen from the Amity our network and Mike Macalus from root capital We've long talked about impact measurement in the field of impact investing But we really haven't understood it in the context of impact management The impact management project a project facilitated by bridges impact plus our advisory advisory arm and supported by the Ford Foundation Amity our diffid and a handful of asset managers like UBS and BlackRock and leading practitioners in the field like root capital Acumen fund and leapfrog has tried to ask a question of how do we understand? The information we need to measure the impact that happens at a company or a project and how does that match with the investors goals? That they outlined when they made the original investment We've been lacking a construct for thinking about this perhaps a metaphor might help If an individual investor say me Goes to a wealth advisor say Andrew and says how do I invest my generous so cap speakers fee? Whether that's in the halls of UPS is the UBS private bank or on the phone with fidelity That advisors always gonna ask me. What are my return expectations? What's my risk tolerance? What's my liquidity need? What's the time frame? How else am I invested before they can make a sensible recommendation? Impact investments have not had a similar construct for thinking about the impact Where we hope we've arrived after consultation with 700 people over the last year many of you in the room is a shared understanding that impact happens At the interface between enterprise and the people and planet we seek to benefit Impact can be both positive and negative it can be intended and unintended and what we need is a shared Understanding of how impact is measured at that enterprise level and how that can move up the value chain To the investors who've made the original allocation Impact has five fundamental dimensions. What impact are we seeking for whom how much of that impact? Do we want to have what? Contribution is the enterprise making that otherwise would not have happened and what risk is there that the impact that we're seeking to Have is not going to happen What we'd like to do is talk through how this understanding can translate into Creating portfolios of impact investments whether it's asset managers or whether it's nonprofit Impact investors like root capital so learn let me start with you the Amity our network has been a phenomenal Impact investor and contributor to the development of the field Why did you support this work? And what are your hopes for the continued development of impact management? Thanks, Brian so like many of you in this room a mid-air network has been incredibly inspired and enthused by the Incredible evolution of the impact investing sector of the past ten years I think we like everyone have been trying to embrace this big tent notion that was effectively baked into the DNA of this space Very intentionally at the beginning to ensure that we had some type of a common umbrella to ensure that everyone from pension funds to CDF High-net-worth individuals and investors in between let alone all of the entrepreneurs that were excited about this opportunity Could all have some sort of tent to live under that was intentional because we wanted to make sure that there was more capital Allocated to the space and then we could start to figure out what a a field Could look like if it turned into a movement in a marketplace But over the past few years of any our network and several others have gotten Increasingly skeptical and concerned about the big-tent nature and some of the potential risks that we could see Namely because of the influx of all of the new investors coming in And so some of the risks that we thought were hugely important were the potential Alignment between financial expectations and impact expectations for various different investors the ongoing Ideological debate about return trade-offs the Confusion around capital allocation a really opaque marketplace and the super high transaction costs that are associated with this impact matching if you will And the potential for a lot of capital to be left on the sidelines if this wasn't done right so we started to try to have a Conversation around this critical need for market segmentation because well We all know that financial risk in return are Fundamentals that have effectively had deep roots in traditional finance We had not actually thought about the core categorization of impact which is effectively what's differentiating this entire industry So we started to see it a few different efforts Some of you might have recalled the tide line piece on navigating impact investing and most recently have been big backers of the Bridges project and I think why we're super excited about the 700 folks that have already been part of this journey for developing Effectively what would be a set of shared fundamentals to help create a better characterist characterization of what impact could mean alongside Financial risk in return so that we can have that more nuanced way of thinking about the impact risk and return equation So we think that and our call to action for everyone in this audience is engage with it It's not done yet We want to make sure that as we're moving into adoption and we're thinking about how it should be iterated how we can make it More effective for investors and everyone across that value chain We need to make sure that there's constant feedback But we also know that the promises if we can figure out how to all adopt this in a mainstream manner We can effectively crack open the opportunity for a more efficient marketplace with more capital flowing Great. Thanks, and Andrew at UBS you've used the convention to demonstrate how a traditionally managed portfolio can migrate towards a portfolio of Sustainable and impact investments. Can you tell us first why UBS is doing this and second? What were some of the insights from that experience? Sure. Thanks, Brian Look, I think it's driven by two things We have client demand which is definitely there and it's not just from the expected groups You might think of millennials next-gen entrepreneurs. It's really from a broad base set of our clients It's people who have been with us for 40 years And that's what's really exciting to see that people who haven't necessarily traditionally engaged with the concept of Incorporating impact into investment portfolios are really engaging We have a significant number of client conversations that involve some sort of discussion on how can we involve a sustainable angle or an impact angle I mean, I think it derives really from people's realization, you know, what all of you in this room know That in our investments all of the ones that we make have effects on people on planet both positive and negative And there's an increasing realization that we need to as an investors take that into account Now I sit in the chief investment office and you know, we have a rigorous approach to financial risk and return We look at volatility liquidity on all of your other traditional concern We developed capital markets assumptions for our traditional asset classes All of which goes into our existing investment process now when thinking about how to incorporate impact into that investment process in an effective way There is no construct that has existed for us to be able to do that And so the impact management project framework was incredibly helpful for us Both from the start of the process to the finish of the process as we started to develop these portfolios Taking us from our traditional construct of no impact considerations through to something. That's a little bit more aspirational Where you know 100% of the exposures of the building blocks in those portfolios Incorporate some form of impact consideration And having that or what are steps towards a more rigorous framework that matches up against our approach with on the financial risk and return side Is incredibly important to us? And so whether it's the intentions that we talk about or the five dimensions that you described Brian all the way to the investor Contribution making sure that we set out from the beginning What are investors really looking for or what are our clients really looking for and taking that all the way through the process to how do we change the building blocks from traditional asset classes or investments through to ones that have that think about or consider impact All the way through to the solution in the implementation side And then as Lauren mentioned iteratively back to make sure that at the end of the journey We've achieved what we set out to do that framework is incredibly important to us Great and Mike at the other end of the spectrum of capital and from a fund manager a nonprofit fund manager that lends Directly to businesses that assist smallholder farmers you looked across a portfolio about 600 transactions and a billion dollars What did you guys learn in coming up with the efficient impact frontier and what are some of the lessons from this project for you guys? Absolutely So the efficient impact financial frontier. It's a kind of a technical term, but it's very simple It just means a portfolio that offers the most of the particular type of impact that you care about relative to the risk and return You're taking it's based on the concept of the efficient frontier from mainstream finance So in mainstream finance a portfolio in the efficient frontier offers the most return for their risk And what we're doing is extending that two-dimensional framework to include these new dimensions of impact The reason it matters is that if you've been involved in impact investing for any amount of time You're familiar with these debates about trade-offs between impact and return and mainstreaming and market rate versus non market rate and so forth And those are not really the best questions to be asked What the concept of the efficient impact financial frontier does is it gives us a Much better question a more productive and actionable question to ask which is this this portfolio in front of me Offer the most of the specific type of impact I care about relative to the risk and return that I'm taking Or could I get the same impact with better financial performance elsewhere by her vice versa? So it sounds simple. Why aren't more folks? No The fact is people have been talking about this for a long time. It's not a new idea Leaders in this room have been talking about this. So we're standing on the shoulders of Giants Yeah, I think that impact management is a barrier I think that the second barrier which is underappreciated is getting impact management out of its silo and integrated Into financial management so that it can be useful and I think the message of this work for the community is it's possible You can do this It's not just aspirational And it's been a transformative experience for new capital both in terms of how we select investments and getting us past our internal debate about impact versus financial sustainability and then communicating with our donors investors about the role that their capital is playing in unlocking impact And learn I know the immediate our network has been working with a number of the giving pledge families Curious how you think that this Construct the impact management approach will be helpful to bring them into impact investing. Yeah, so I'm in our network. We've actually supported about a hundred and fifty families around the world with their impact investing journeys and You know like everyone in this room families have various different motivations that Effectively bring them to the space of impact investing very different motivations very different Expectations some are there because they really want to figure out how they can better align their portfolios with their ask with their Values some are thinking how can I actually leverage this to catalyze more impact? And you know think about this from a philanthropic perspective some think that it's a tool for multi-generational wealth stewardship and some genuinely believe in the Much of the data that's coming around on about long-term outperformance as it relates to impact opportunities So we see these tools as effectively really important educational and empowerment tools Namely because I think everyone knows in this room that even though we've seen an influx of investors Families have truly been at the frontier of pushing this movement forward And this has been very often in the absence of data and strong and rigorous frameworks And so having you know the Tim framework and the efficient Portfolio impact opportunities for them to actually articulate what it is that they want to see what's possible as Mike said Is going to be really important because they can take that to their advisors and guess what advisors? This is an opportunity for you as well Namely because I think we all know that very often advisors tend to be the bottleneck that prevent a lot of families from being able to Really actively engage in the space So I also encourage advisors to look at this as a really a really interesting opportunity to be impact enablers if you will Right you pointed to advisors is potentially a weak link in the chain But Mike as you think about the chain from the smallholder that borrows from the company that you invest in to route through to the investors in route back up to the clients that may be Part of part of UBS is private bank. Where's the weakest link on that chain from your perspective? I Think that there's weaknesses at each point. I think that you can use increasingly big data That's more available to identify areas of poverty and environmental degradation I think learning about which businesses are having an impact is harder. I think that Each each participant in the value chain has to be transparent about what value they're adding along the way What is their contribution? But ultimately I think it is the asset owners and the providers of concessionary capital in particular Who will have to drive change in increasing transparency? I think they have such an important role to play and Being the moral heart of this market and demanding impact management And in providing the support for organizations that are those first adopters of these new practices Andrew do you see similar bottlenecks or what's your perspective? I would actually frame it differently I think I see The the weakest link in the investment value chain is the fact that we have an investment value chain in the first place You know in an ideal state We have us as allocators or end investors investing directly into the enterprise where the benefit is happening But the reality is that we have limitations on our knowledge You know knowledge our skills our understanding of impact our geographic understanding And so we have to have skilled specialists in an intermediary and therefore we have an investment value chain And that I think is actually what makes impact management so hard is that we set intentions We set objectives and making sure that those translate all the way through and then iterate back is a really tough thing so I think we can mitigate it through the use of you know guidelines through the use of Philosophy philosophical alignment and really you know frameworks like the impact management project frankly to get us All on the same page so we're talking about the same language right so when I talked to a fund manager and that fund manager is trying to explain How he's fulfilling or she is fulfilling the objectives that we're trying to achieve You know something inevitably gets lost in translation along that value chain So I think the frameworks that help us establish conventions in common language are really helpful to getting us to a better place We're not good. It's not gonna be perfect, but it gets us to a better place And we were just at the WEF meeting in NYC where another TLA was on everyone's lips this the SDGs TLA three letter acronym SDGs the sustainable development goals. What does the Sort of promotion of the sustainable development goals mean for the impact investing community and for you as an asset manager You know so for us, I think the SDGs are a helpful framework For guiding some of the outcomes. They're you know self identified or they're identified by the field They're they're they're predefined And they can provide us with a guide to at least the what portion of those questions the what of the five dimensions I do worry a little bit about the SDGs using being used more as a marketing tool than as an investment guide to what we should Be focusing on We've personally, you know adopted the SDGs as being helpful We've identified six that are particularly helpful for private wealth to focus on But but yeah, no, I see it as a helpful framework in conjunction with establishing the what of the impact management project Sort of nearing the end of our time and I want to ask each of you the question of we'll know the practice of impact management is widespread when Dot dot dot so maybe I'll start with you and Mike and work down the line Sure so for me I think the practice of impact management is widespread when many or most investors have integrated impact management Into financial management and it sounds technical. I realize but I mean I think I and most of us got into this business for Social justice and equality of opportunity and the opportunity that we have here is to embed those values into the formulas of financial markets Because we can embed those those objectives into the formulas that determine what investments and loans we do We can move to a new form of capitalism that serves everybody without losing to the rigor that's sort of associated with the previous Version of financial markets, and I think that's the opportunity that we have that we have here Yeah, I think there's two things so first a Greater market segmentation and clarity around risk return and impact I don't want to belabor that point But I would love to see that across impact opportunities across asset classes throughout the investment value chain I think very often, you know, we're still hearing well This is a language challenge That was the same thing we heard 10 years ago And I imagine it's going to be the same thing we hear for the next few years But I think temp has the possibility of really helping us move beyond that so that we're all speaking as Clara Barbie Often talks about this golden thread so that we can effectively and the second point of this Is just have a much more efficient marketplace where capital that was previously sitting on the sideline is really excited to engage in impact For me, I think it's when my team and I are out of jobs Because it'll mean that frankly impact management and the philosophy of that management will have been fully incorporated into you know Throughout this investment value chain from the people internally who work with us on product development Our distribution people our external fund partners Everyone will have incorporated it and therefore there won't be any need for us It will be fully integrated into our approach to an investment process and how all of our partners enable the solutions for us That's great. Well, we want to invite all of you who have not yet participated in the impact management project It has been a collaborative effort of the field to define what the practice is We are continuing with the support of Ford Omidyar diffid and others to drive from a conceptual understanding Into practical application so that CIOs can build portfolios so that fund managers can report Inefficient ways and enterprises have the tools to understand the impacts that they're having both positive and negative Intended and unintended on the people and planet we seek to help But thank you for your time and thank each of you for your participation