 Wow All right, hi everybody, it works. It really works, okay So this should be fun Despite the fact that I'm moderating it so Ron pick it up for me So I'm Mark Newberg. I'm director of impact strategies for womble Carlisle, which is a law firm This is ten years later. How far we've come and where we actually are or as I subtitled it Titans of the industry and me so Every time we do this I try and get Dave chant to laugh out loud and I already did it So we're going for over indexing Let me do real quick framing then introductions and then We're going to do one slightly unusual thing before we get started, but Quick framing. This is a ten-year anniversary of so cap A lot has changed including the amount of technology incorporated into the conference And impact is different than it was when we started. So the question is how far have we come? Where are we actually? What do we think about that and what comes next? so By way of introductions, we have Ron Cordes the co-founder of the Cordes Foundation Maya Chornigal partner of the Rise fund Which you may have heard of Fran Siegel is executive director of the US Impact Investing Alliance and Dave Chen is chairman of equilibrium capital So before I ask them questions, I just want to do really quick lightning round two minutes From you, what are the issue areas you hope that we address and also am I yelling at you? I can't quite tell All right, so if you're is just raise your hand I'll call on you did not a question just an issue area so we can make sure that the conversation We have covers what you're interested in anybody Eric Okay, thank you Eric. Do you have a substantive issue area? All right Anything you hope that will cover otherwise. I'll just make up questions on the spot Yeah Speak up Okay, long-term capital anyone else Recording metrics. All right next. Okay, so that's metrics circle that one. Yep. Okay invest And same topic or different topics. Okay. Okay. Maya you're getting that question All right next anyone else. Yeah Based of the pyramid we are Moving into the Maya section of the panel All right next project finance. All right that We may get to that we may punt that and if so I'll talk with you afterwards about it Those two no yet you I Collaboration collaboration Thank you and Behind you roll of the capital markets. I guarantee we will get to that one. What are those? Professor Chen will take that. Yes Okay domestic versus emerging markets One last one anyone any final one all the way over there Okay, so let's stick a pin in that and Let me start with this friend 10 years ago We couldn't even agree on what impact was let alone whether it was an industry now You're running an industry organization How did we get here and how easy was it? How long do you have mark? Two minutes, but the timer is not running So we have a perpetual hour on the timer, so I guess we'll just get going. Yeah so 10 years ago, so it was Like mid-year or fall 2007 am I talking to allowed to Okay mid-2007 so I at that time was writing a private placement memorandum for an impact fund That's thought to be market rate addressing three segments sustainability health and wellness and medical technology and We were really early. I was telling Dave I went to Boston to visit with Cambridge Associates in like Q4 of 2007 and maybe that was right around the time that they launched their impact investing practice at the behest of a couple foundations Some of which Dave has worked with Meyer Memorial Trust Annie E. Casey Herron Foundation and Rockefeller Foundation and It was a it was a tough meeting They had not developed their Practice as yet and it was just super early days. And of course the financial crisis was nigh And We've come an extraordinary extraordinarily long way on the other hand, you know Microfinance had been going on in emerging markets since the mid 70s Community development finance shore bank was started in the 70s So sometimes I think that we feel like you know that the term was coined around 2008 and That was the beginning of impact investing but investing with values has been going on since the 18th and 19th centuries with the Lutherans and the Methodists Oh, you're going academic. Are you? Oh, you didn't ask for less than 100 years. You asked for 10 for a professor Siegel Yeah, but but things have evolved tremendously since then I feel like the ecosystem as we know it has evolved and I'm looking forward to talking about like 10 years ago if We hit if we had said this is where we'll be there is an industry association and it covers This broad spectrum of the impact economy. Would you've considered that success or not? Maybe I mean I look back and I feel like in some ways we are building the the tools and Mechanisms and players that move the capital market move money in the capital markets and the standard capital markets, so we have You know investors from retail to institutional we have Private companies and public companies CEOs who want that capital. We have the connective tissue of a range of intermediaries as well as Fund managers and then we have you know generally accepted accounting principles and all the things Morningstar and and and an S&P and all the things that allow the money to move and I think we've made tremendous progress In developing some of those mechanisms to help capital flow and I think we have a ways to go as well All right, so Ron when you first started exploring impact and what you've described as your second act after building Some of the best companies in the world and then started looking to build companies that were best for the world When you started if you had taken where we were then which is roughly 2007 2008 somewhere in there, right? And I had told you This is where we'd be right now What would you have thought were we successful were we not successful? Is it slower than you thought is it faster than you thought do you wish you had never met me back in DC way back? Well that last one is too long the question answer I thought it would be simple or two letters So having had a little time to think about it since Mark first posed this this question I actually would have thought we would have been further along and maybe it's because I'm a natural optimist that when I got in I sold my traditional investment management company in 2006 My wife Marty and I started a foundation We began impact investing in 07. We were really early at the time, you know before the field was even named appropriately But I I am disappointed in many ways that we have not had more capital moved Particularly in the private side the direct impact type of investments that we focused in and our foundation and I think as I look at the prime reason for that I don't think it's a lack of demand or I don't think it's actually a lack of supply of quality products I think a lot of it is still the ecosystem and the infrastructure and a lot of it has to do with the fact that the advisory industry the intermediaries have not yet fully embraced How to move capital in this space and so that's disappointing because that's the industry I came out of and where I thought I could perhaps play a role and I think I have with impact assets and some others and Trying to move advisors this direction So I'll say with that as a backdrop. I do feel like there has been a real paradigm change In the advisor space I think ten years ago when I first started talking to investment advisors many of whom hundreds of whom I knew and had Worked with about impact investing the question I would get is what? What is that many times they say oh impact investing? That's microfinance and I'd say well it is but it's also Dozens and dozens of other things, but there was just not even a basic understanding of what impact investing was Fast-forward five years. I think we went the paradigm moved from a what to a why five years ago It's like okay. I get it this field. It's more than microfinance I understand there's a whole variety of different ways to deploy capital for impact. That's great I'm starting to read about it, but my clients aren't asking for it Yeah, and inherent in that conversation was none of them or very few of them at the time We're actually trying to introduce clients to it was very reactionary I think fast-forward now to where we're at today ten years later And we've gone from what to why to have if you're at a big firm today Chances are pretty good You've had a number of clients that have brought it up chances are also pretty good You may have lost a meaningful client because you haven't been able to satisfy them And there's nothing that encourages action at one of these firms than losing a client So I really do believe the conversations are now people get what impact investing is They have begun to understand that there is indeed interest a growing interest certainly among Millennials Among women asset owners all of that is showing up in the studies that are being done And so firms are now beginning to ask in a much more serious nature How do we get engaged? How do we do this as a firm? So that's a very positive development But it's still under the umbrella that these firms the biggest firms are very bureaucratic And they are tankers that move very slowly. So it's Again, I to answer your question directly I would have thought we would have moved a lot more capital ten years ago But I'm beginning to realize that big paradigm shifts take time We're changing some fundamental kind of assumptions about the way people think about capital And that's not an easy thing to do But I think that there has been a lot of great work done by folks on this panel particularly over the last ten years That will end up bearing fruit moving forward All right, and so Dave As Ron said we're essentially we're now at the point where pretty much every institutional investor has at least heard of impact investing If not moved yet And you're in the institutional space What's been the biggest surprise to you over the last ten years and I also realize that I Met you and Ron at the same event So this is like everything coming full circle. So what's been the biggest surprise over the last ten years a? a Lot of the discussion about impact investing takes place around the high net worth and the high net worth private banking advisory and the ultra high net worth family offices and We chose a fairly different strategy in about 2010 and 11 that was going after large-scale institutional investors So think about pension plans and sovereign wealth funds, and I think the biggest surprise Well, I'll give you a little story two weeks ago sitting across the table from a portfolio manager that that allocates about thirty billion dollars in real estate for a two hundred actually not dollars twenty thirty billion euro portfolio of real estate in a 250 billion euro pension plans anyone know what the exchange rate is right now I'm trying to do math on stage. That's dangerous, and we were talking about some of our strategies and and He looked at me and he said well do you think that qualifies as impact investing? Now a few years ago I think that would have been a question that would be basically do you go in bucket a or bucket B and Bucket B would be we don't allocate there and and in this case he was asking the question Do you qualify to help me with my impact investing? Protocol and do you help me with my SDG protocol and? Your answer because you've talked about this at Socat before was what? These strategies are impactful But if you categorize impact investing as concessionary no because these are alpha generating strategies But if you're asking do they help generate a deliberate impact on society the answer is yes All right, so what's the what's the biggest surprise? Is it how long it's taken? It's is it that you're getting asked these questions? I mean, I think the biggest surprise is the fact that you have a 30 billion dollar asset allocator of a major top 20 pension plan in the world talking to you meaningfully intelligently and with a very sophisticated understanding of impact That's it. That's a difference. And I would contrast that and I would contrast that to what's happening in the RIA space and in the private wealth space this guy is not asking a question of how Why he's already thinking that he's deploying to it and he's asking Do you qualify? I'm looking for new products and new strategies to do this and that sounds like progress It is huge progress. I think the other thing that as an impact investor Fund manager that you have to really appreciate is that over the course of the last few years a almost classic Business school Market segmentation has taken place. There is the conversation around impact and in the institution Many of the same kinds of concepts are bundled and and and spoken about in a very different market segmentation Which is really sustainable finance or sustainability and and the meaningful difference is that when we talk about Impact investing there's a concept that my money can do more When you're talking to an institution, it's not about my money can do more It's about what's the risk management of these trends and what's the opportunity set of these trends? That's a very different perspective of looking at the issue. So a market segmentation in the last ten years has taken place a Way of approaching these impactful opportunity Has taken place and I think the biggest surprise is the amount of capital that these institutions are allocating to this I think that's really speaking of large allocations of capital so my you spent basically your career at the leading edge of investing in developing economies and that's Ron when you were doing microfinance and people were talking to you about impact investing Oh, that's microfinance or that's developing economies and Now you're a partner in the largest impact fund that's been raised today Have the economics of impact always supported funds of this size whereas like something fundamentally changed in the industry over the last 10 years It's a it's a it's a very good question. And I think with respect to fund sizes there there are a couple of considerations one is in the early days of impact What we were doing were in many cases largely seen as experiments Which is why the family offices and and the high net worth individuals came to the table to take that risk and a lot of the work That was started was in the venture space and to do well in venture It's better. It's better to be smaller than bigger because you can stay more disciplined, you know If you're smaller the economics are tough to be frank for small funds I think that one of the The frustrations that a lot of the impact GPs had is that with fund sizes of anywhere between, you know, 20 and a hundred million It was a challenge to Do the work with the level of rigor and integrity that we all wanted to bring to the table We did that work, but we did it at huge pay cuts and you know sacrificing on Our own sort of personal well-being because we worked extremely hard, you know We flew economy all over the world And slept in you know cars overnight rather than you know a hotel room because we just had to do things Cheaply in order to do the work well as you As you look at the evolution of the of the industry in the last ten years I think what has borne out is that number one the early theses that we had which I think Dave Articulates extremely well, which is for those of us who came from an investing background there was a Very strong sense that we had that we would actually generate alpha by Approaching our work in the way that we did which is if you look at situations that enhance environmental or social Returns or social value that value would accrue back to the shareholders at the end of the day And that you had to be very thoughtful and very practiced at this work and what we've also found Over time is that these are not necessarily niche plates that there are more spaces than you can think about where Doing strategies at scale are possible. So the sizing of funds. I think was less about a definitive Condition of the industry than this was a nascent space often when you're nascent you start small once you start to prove out you you see the the patterns that are out there in the world and Slowly slowly slowly you start to build the kind of track record that makes Capital more comfortable with with coming to the table because our internal perception of risk And return which wasn't necessarily understood or shared with with external LPs Started to prove itself out and and that was that was an important part of getting to getting to larger I see you nodding is that is it that there's now almost the scientific validation of the methodology or is it just Here here returns this can be done. It's not all about Milton Friedman or what you think you said Well, I think the the big change that's taking place in Ron mentioned this And that is that when we all got started ten years ago Impact investing was more or less relegated to or defined by two or three words One was social venture capital second was microfinance and a predisposition to emerging country All right, and and what has come about is wow There's a lot of ways of generating societal and environmental impact There's a ton of quote-unquote market failures across environmental and social and in those kinds of words or opportunities to create investment vehicles that that That are impactful legitimately and and Substantively when you start to open that up it means every asset class has the opportunity to be impactful and there are asset classes when we chose as a firm to avoid venture capital and go right after the real assets categories and And real assets are things like real estate a sustainable land management and agriculture Reliable resources including water and energy well those are all categories that are measured and it's not unusual to raise of two three four billion dollar fund around that and And and so we chose purposely large categories that could have direct impact where They were large categories that institutional investors were already very comfortable allocating to and they had expectations of returns And there were known benchmarks for many of these categories of returns and so so that Allowed us then to to build products bespoke for those Categories those asset classes and for that kind of investor and then to go after investors that could allocate in 50 million dollar pieces hundred million dollar pieces. We just recently announced our our second Cloth the second egg fund the closing of that product now It's five hundred fifty million dollars and our largest single investor was a hundred million dollars So going back ten years. Yeah, go ahead Well, it just occurs to me that we're talking a lot about institutional investors and Ron was talking about wealth advisors and Kind of worth individuals and just want to make a small shout out to the retail investor I was about I was about to ask and this is sort of to me where the capital markets question from earlier comes in So what is the role of the retail investor? What are the opportunities? What do we need more of to sort of engage that? That group of potential investors So if you look at pension funds in the United States There is a move away from defined benefit to define contributions So defined benefit was our parents version of a pension where you got a defined payout in perpetuity where there was a centralized management of assets which could be Sophisticated enough and be thoughtful enough in terms of payout to take a long-term bet and a TPG rise or an equilibrium fund More and more assets are moving towards something called a fine contribution, which are 401k plans 403b plans iris and the lake and That really shifts the onus of asset allocation and perception of risk and pricing of risk and reward to the retail investor now Of course your 401k Plan administrator certainly Diligents and makes things available to you. I recently did a keynote at a defined contribution symposium that was Hosted by institutional investor and I really see that market as aggregated retail And so I talked a lot about ESG funds so public funds so index funds ETFs and mutual funds Less on the private side because that's really mostly what's available to retail investors I think there's a huge opportunity and we're starting to see some innovation around Customized ESG screens. I've been very interested in the rise of robo investors whether it be at Aspiration or open invest or swell Investing that are doing like super customized things at very low minimums for retail investors But I also think that there's an opportunity to democratize access to privates You might have a publicly traded affordable housing fund There may be different ways to get access to donor advice funds and others So I see just to kind of hold the fort down around the retail investor and the average investor I think that there's a lot of innovation that we've seen over the last 10 years and much more to be done so wrong two questions in one one this is sort of your old world of Building products for advisors who can then go to whether it's high network or retail investors To does ESG count as impact if we're having a public markets conversation does ESG count as part of the impact conversation? So let me answer the second one first and it's been an evolution for me actually because when we first as a foundation got into impact investing We looked at it entirely on the direct impact private side Frankly, that's where that's where all the fun stuff was right that the opportunity to whether it was in our case Women and girls is a big part of our portfolio So investing in women-owned businesses and microfinance, etc And it wasn't actually until we had Our millennial leadership join our foundation team in 2014 that they began to ask the question of why aren't we a hundred percent invested? Impact and we among other foundations made the commitment in 2014 and that actually involved us moving the public side So I've come to the conclusion that this private and public side, you know People think maybe we're at odds with each other it's all part of the same continuum and the way I look at it is Any investment that you make has impact and that impact is going to be across a scale from positive to negative on The public side it's possible to really have what I consider collective impact as opposed to direct impact Because your dollars aren't necessarily as accretive as they are on the private side But combined with other dollars particularly with the right investment managers who can influence corporate behavior Those dollars in ESG can really have collective impact And so I look at it all as being part of the same equation We encourage other asset owners and foundations to think about how to go a hundred percent impact And that doesn't mean you have to invest a hundred percent in private deals But it means you have some allocation across both public and private Now having said that I forgot your first question. Well, I didn't really mean it anyway, so it doesn't matter No, what's the what's the role of the capital markets? I mean did or let me rephrase What's the role of? Investment advisors the the client base that you used to serve in your old role So I think there's a if we're going to get to the asset owners there's an incredibly important role for the intermediaries and Said for years that with respect to impact investing these gatekeepers were often arbitrarily keeping the gates closed Can I ask you one question because I realized that over the last ten years one of the things that's been consistent is we say The role of intermediaries and then we never really get to defining what an intermediary is Can you give me your definition of an intermediary? So I would say an intermediary is a person or a company that stands between the actual investor and Whatever that investment is an individual deal a product of fund, etc So for most of at least in the US those Intermediaries consists of a series of brokerage firms and wealth management firms Who you know do I think a noble service if done correctly helping people plan for retirement, etc And manage their assets and those are the folks that need to be engaged For there to be a real movement of capital into impact investing and I think I had originally thought that they could be Motivated directly by this opportunity and I've now come to the conclusion that that motivation has to come from client Interest and it's coming from client interest clients are going to their advisor and saying I know people that are doing this I've been reading about it. I'd like to get engaged I'd like my capital to have more impact and again, that's causing the industry to kind of move from that what Why to what to how? my so From your position now what where where did the capital markets come in retail investors aren't investing in The rise fund or the rise from two or three or four Are they investing in companies that come out of the rise portfolio and go public is it just you're looking at Private equity, so there's never an opportunity. What's the how do you think about the role of the capital markets and what you're doing now? I I think I mean a lot of a lot of how I see the capital markets is linked to The rise fund being a growth equity fund where exits are going to come, you know, partially from IPOs which will give You know retail investors an opportunity to own stocks of impact companies It also comes in the form of debt financing I think that over the course of the last few years. We've seen a number of efforts By groups such as Wellington black rock a few others who have tried to construct effectively public company Funds that are an amalgamation of what what they would define as impact company So the challenge is is that their definition of an impact company may be different from yours the way Wellington's product looks Is very different from from black rocks product, but I think that You know on the one hand capital markets are going to continue to play a traditional role in Funding and providing capital to companies that are impactful But that the leading edge of that will likely come from the mainstream rather than from the impact side meaning that a Lot of the impact funds are still, you know venture funds and they're not You know, they're not in the in the companies long enough now For those come most in most cases to go to go public. Although, you know, I'll site my own Experience at at Elevar where you know from our first fund which invested in seven companies two companies went public Which is so that you know, maybe I'm I'm underselling the opportunity But I think over indexing over indexing on success, but I I do see a demand From Investors and I think it's going to grow with the millennials should be investing in companies for whom they know and understand The values and the good that is being produced for the world And I think over time we're going to see and seed more of those companies And so there there is a there is an organic path towards growing sort of what I'll call capital markets Activity in these kinds of companies And there's also a couple of examples now where laureate education was the first benefit corporation that went public Etsy a bee Corporation is public now. We have some Public companies subsidiaries like Ben and Jerry's that has a bee certification and Kathy Clark mentioned earlier today That Natura, which is a Brazilian publicly traded Brazilian company just acquired body shot so And that she said that that was the first time that a Bee corp had acquired a non-bee corp And so I think we're starting to see some infiltration in 10 years ago This was almost the exact inverse when Unilever acquired Ben and Jerry's that was like that was roughly 10 years 12 somewhere it might have been about 10 years ago and that was seen as kind of a An impact fail I taught this like an impact failure where a bunch of jobs got you know in Vermont went away and a lot of the sustainable Supply chain went away, and I almost think that it's been fascinating It's almost like an impact turnaround where the impact kind of leaked out of Ben and Jerry's and now it's been Re-invigorated and almost kind of is bubbling up To Unilever and Paul Pullman is doing some interesting stuff So I think we start seeing some more activity in the public and the public markets, and I make the distinction between Like what Wellington is doing and others they're investing in the what like these companies are impactful I'll be them public versus the how which I think is ESG is very much about the Practices of a public company and so you know piggybacking off of Ron's sort of you know set of questions I think that there is some trans slow transformation happening in the public markets Dave are there are there yet, or will there be? Public sustainable real assets Mutual funds is there a role for the capital markets in sustainable real assets or not sure Is that a good outcome or not? It doesn't matter I think I think you're asking you know a couple things one is will the capital markets take illiquid assets and convert them into ETFs and and other more liquid forms. Yes you know I think there's something that but I'm gonna answer a question you didn't ask and and and You know if you look at what's happened in the last ten years And maybe I'm being way too optimistic, but many of the issues and opportunities that we've talked about actually I think have shown a jumping of the chasm into the mainstream and and you know, I think about things as profoundly impactful as GPIF which most people in this room have never heard of GPIF as the pension plan for the Japanese public employees That's a trillion dollars All right, and the CIO of the pension plan was asked about two years ago on a panel at the Milken Institute Hey, what's the role of? Climate change in your portfolio thinking of a trillion dollars a trillion dollars not trillion in Exaggerated terms by trillion and that's what his responsibility is and he said well in a very Japanese way He sort of gave a profound answer and he said What good is a pension check when it's a hundred and seventeen degrees Fahrenheit outside All right, and and since the time that he talked about that he has basically pushed GPIF into a very strong ESG and sustainability oriented track and so This is the largest pool of capital in Japan and the rest of the capital pool is following What GPIF said Right now that doesn't necessarily mean they know what to do with it But they are no longer asking the question gosh, should we yeah, all right, and these are profound changes I mean these are profound all right And so one of the things that I think that we don't talk about in this field at all is We assume that as we hit the mainstream. This is just goodness All right. Well, I think there's two things that we have to consider as we hit the mainstream one is the bars been raised All right, it's I don't I don't need to be Pejorative in any way, but it's it's one thing to raise a twenty million dollar fund It's another one to sit down and try to raise a two billion dollar fine All right, and and you're managing two billion in the form of for the record He's pointing at Maya not Maya and and and we're managing two billion across a family of funds All right, and the stakes are just higher the expectations are higher All right, and I think if there's one thing that we see across this sector is the Games changed and the game is now much. We're not part of cute fuzzy furry forest animal with big eyes Okay, that we get the pen like your socks like my socks But but we're now part of the capital markets Which means you left the little kid table at Thanksgiving and you went to the big people Okay, and so you'd expect it to act like a big person for those of you looking for a tweetable moment. It is just happy Impact investing at the big people table. So I think that's one thing I think the flip side of this is that as we hit mainstream Greenwashing what are the right guard rails? How do you actually define this stuff not in a very theoretical sense? So I again, I don't mean to sound critical But for the last ten years we've talked about metrics almost in a theoretical construct because there was nothing to measure Right and today. We're now starting to see the first frameworks that actually are very professional framework Capital markets oriented like TCFD that most people in the impact space probably haven't heard of All right, explain TCFD is is is basically a framework that speaks about Very narrowly climate change in the language of risk and opportunity so that a portfolio manager can actually start to think about their Portfolio and fund managers can actually start talking about it that way okay The SDGs are probably one of the biggest shocks of the last couple of years Okay, which is who the hell would have ever thought that that that that global 500 CEOs would actually be talking about SDGs on their quarterly conference calls and that portfolio managers would be that portfolio owners would be asking How do you help my SDG? Do you remember were there how many panels were there last year here on the SDGs? They're not I mean that's that's like that happened in So the metrics conversation Ron What do you when you think about? Metrics for your portfolio. What are you trying to matter you trying to measure everything? Do you have a set of narrow things that you're looking for? When people ask you for advice on metrics, what do you say other than that advice is worth what you pay for it? So I would say that if we're particularly looking at our private impact portfolio whether it's direct deals or funds I would first say that Metrics are hard metrics it is still more art than science and that is not withstanding some really great work that's being led by a lot of Organizations including the gym and b-labs etc But it's these things are still hard to measure So I remember seven years ago an impact assets and Fran Segal was with us then when we created the impact assets 50 database of investment managers and We tried to come up with the first publicly available database of investment managers who were in the impact investment space We had hundreds of managers apply Because they they'd heard about this space and they wanted to be in it and it was Jed Emerson Who was part of our strategy team who kind of helped us develop the concept of a firm's impact capacity? Right and this idea that a firm was committed to impact by being committed to measuring it by being Transparent about it and that was the starting point and a lot of good work has happened since with the gears and some other things but I would say that we don't get hung up on We don't get overly hung up on the metrics We want to understand what these firms are doing what we want to understand that whether it's an individual company or a Fund that they have a thesis for impact of what they're trying to accomplish that They've got a way of measuring that impact and that they're transparent about the measurement And we realize that some of those measurements are going to be more difficult and some are going to be easy So Ron's measuring it on the private side Foundation and essentially family office You're measuring it in a large private equity What's the difference? I think that the base intent is the same which is we want to be able to Demonstrate and manage Our understanding of the impact that we hope the companies we invest in are creating and you know the old adage If you don't if you don't measure you can't you can't manage towards it at our level We created a very deep methodology that really speaks to the analytical Underpinnings of a private equity firm. So we couldn't be intuitive. We couldn't be fuzzy about our approach to impact You know from an sec perspective when a when an investment opportunity comes to the table How do we know within TPG whether it's a it's a deal that goes to the rise fund versus a deal That just goes to TPG growth you cannot be fuzzy with the sec you have to tell them You're not cherry-picking deals as you want for each fund you have to have a methodology and so we built a very deep framework that Importantly links to the UN SDGs as our definition of impact that looks at academic research third-party research in real calibration by by mostly academics people like J pal on what impact has been created by the products and services delivered by Healthcare interventions or financial services intervention and then we score that and we we use that as our deep methodology And I think the one beauty of the rice fund is that because of its size we were able to bring Resources to the table to do this work that again Back to your small fund question a 20 million dollar impact fund doesn't have the Resourcing to do and so we had an army of people with bridge span and internally At TPG and you know with all of our mild mild firm do this work and it is very dynamic It still is more of an art although we are trying to make it more scientific and more analytical And and that's how we're pushing our approach forward But as the impact economy has grown it sort of proved the action It's really hard to scale an economy if you keep asking people to do things for free And so it starts looking like an industry all right, so we've got 15 minutes left We're gonna do some audience questions. There are microphones over there So raise your hand a might raise your hand a microphone will come to you and then we'll have questions Hi, thank you so much My name is Melanie. I'm from empowerment works and I have a broader question about Regulations and our whole movement considering what happened at Standing Rock with dapple and the legal frameworks that allow a lot of bad impact investing or really Extractive investing how can our how has this movement been working or succeeded in any way of Leveling the playing field to make all investments More conscious and less harmful Dave let me you and In what I think one of the places to look to is sort of the EU and what it's done on data collection and reporting, but more broadly You've worn a ton of hats and seen the industry from a bunch of different perspectives woods Has anything happened of a regulatory nature that's been positive over the past ten years? Yeah, I mean, I think there's at least three pieces of work Legislation that I think and legislation that I think people should be absolutely aware of that. I think frankly There are monstrous changes and they're incredibly geeky and minute But they're incredibly monstrous in terms of their impact one was at risk of clarification All right, I mean that was just huge and it's like three changed overnight and no one and I joke that it took them two Years the right three sentences, okay But but they're incredibly important sentences and the three sentences basically amount to you're a fiduciary of a corporate pension plan You don't get to get off the hook. You're still obligated. However Many things like ESG kinds of principles. They couldn't use the word climate change. Okay are Material changes and if they're material you get to consider those as part of your fiduciary duty All right, so Arissa was hugely important. I don't think we should Underestimate the importance of the benefit corporation laws Especially the fact that it got passed in Delaware I'm on the board of directors of B corp and there was no way that we thought this thing would pass any time this decade in Delaware All right, and I remember when it first came across my desk in government trying to figure out where to root it and and it isn't about the B and it isn't about You know the kinds of things that we think about that are very marketing and green oriented It's about fundamentally that the fiduciary can choose the protection of the law if in fact they make a decision Weighing not just the shareholder But the environment their employees in their community and seek the protection of the law in making that decision That's a monstrous rollback of Revlon All right, and and and then the third is the IRS Clarifications that took place a few years ago with again with regard to fiduciary duty and what's in balance and out of balance So so a lot's actually changed in this country and I would say just it wasn't just two years and you can go back to 2010 when we first kicked off the impact investing policy process in the federal government The IRS thing and the ERISA thing were part of the very first Convening that we had and it took until the very tail end of the previous administration to get it done regulations not easy regulation is not easy and both of these Bearings on fiduciary duty came out in Q4 of 2015. So while they were Small language additions or tweaks. They were very hard one one thing and that's something that took the reform to 10 years One of the things the alliance which I run is is working on is trying to put some of those policies into action Because we have talked in our field so much about a risk of reform for a long time and now that's passed How can we help catalyze more flows of capital into impact and give Pension from fiduciaries and foundation fiduciaries the comforts that they need to allocate capital for impact So I'm just saying like writing the regulations and passing, you know passing tax credits. That's one thing but actually Moving policy into action is something Different and important So, all right, let's go to the next question Where's the microphone right there, thank you. I just had one quick question in I just heard like I love hearing all of this stuff about how the progress of impact nesting where it's gonna On the next decade what's been on my mind is do you see any place you speak up? Oh, yeah Do you see any way where any ways that impact investing could go beyond the mark or what? Places we should avoid going into into the future any danger zones for impact investing in general as as a sector Risk Maya, do you see risks anywhere? Yeah, I went to law school But yeah, I was no, I think I think I think they're they're too they're two risks That I'd like to speak about one is In this whole effort that we've been Working on to segment the market there there still is fuzziness There's fuzziness around whether certain funds and certain strategies are what I'll call market rate return or not and sometimes I think there's naivete on the part of fund managers who think that they can Deliver a market rate return and think that there's a sort of silver bullet about impact investing and they actually don't know How to do it so one very big existential risk is where we're loose about segmenting the market and We have managers at the table who have all of the optimism and the good Intention in the world, but don't actually have the skills to identify What kind of capital is appropriate for what segment and whether? You know whether whether they can achieve that I think the second risk is is on impact measurement If we keep going for a lot longer without being crisp about how we identify impact how we monitor impact how we manage towards impact and how we Understand whether we've delivered the impact we Intended this will all Flow away. I think all of us want to live in a world where Impact is no longer Such a thing and it's just part of the capital markets and that the understanding of risk in Portfolio management and portfolio theory incorporates social and environmental costs, which it does not do well today That's sort of a lot of the work that we want to do But if we do not figure out how to describe and explain the social and environmental Value, you know the value of externalities and if we don't you know deliver on that We'll have egg on our face Did you did I understand you right to say that optimism alone is not a business plan? Ron here's another thing that I think we've been talking about as an industry for like the last ten years and doesn't always get Defined what does market rate me? 11.3% is it different by asset class completely? Yeah, so so I think that I mean in investing there's this concept of an efficient frontier that for every level of risk that you're willing to take There's an appropriate level of return that you should receive So I think that's lost on many investors who look at market rate and think it should be a particular number or a range And it really ranges you know the market rate today on cash is pretty close to zero Where the market rate on early-stage venture investments in the emerging markets is double-digit so That's so that's a long way of saying there is not a simple answer to market rate It really depends upon what investment you're looking at Yeah, I just worry a little bit about this kind of Slaveish devotion to this idea of market rate and risk adjuster rates of return When in actuality if you look at their history of returns of certain asset classes including venture capital There hasn't really been a risk premium Above the cap above the public market So from mid 1990s to mid 2000s venture capital is an asset class underperform the S&P and early stage Which is opposed to deliver even a premium above the overall asset class underperformed and so I Always I feel sometimes when we speak with gatekeepers that there's a double standard that somehow is impact investors We are a fund managers. We're expect to action expect it to Have premium rates of return for the risk as well as you know this very precise measure of impact And I just I think it's like a double standard and That that can be frustrating for fund managers Dave. How do you fix it? I? Won't add anything at all to it to what's been said about market rate and all that I will say that there's another dimension of market segmentation that has taken place And and as much as there's a segmentation of institutional retail High net worth. There's also I think an increasing sophistication around the language of what form of capital are you? So there is going to be distinctly a set of fund managers that are going to be Positioning their product as market rate appropriate to their asset class and appropriate to the risk level There are some they're going to position the fact that they will outperform because they're spotting inefficiencies in the market There's that but I think one of the things that's most interesting is No, sorry to dev Schwartz at that are through the other day and she's a good friend of ours and You know and the sophistication that they're coming to is there is a inefficient frontier All right, which is that in an early stage of a market all right? And not necessarily an early-stage company. It's very careful not not early stage but early stage of a market Stormwater utility and credit trading is an early-stage market And they acknowledge that early-stage markets need the help of folks that will run into that breach All right, and that challenge and help make it happen so that the proper capital markets can then become efficient All right, that's a very sophisticated way of understanding. What's their role? I'm gonna play a role that no one else will play and that is critically important for the capital markets to take shape That's what happened with microfinance exactly. So everybody likes to think of of the Nobel Prize and And Muhammad Eunice and and they forget the prior 30 years of toiling in quiet desperation And subsidy where it was a heavily subsidized field and you were a pioneer in the Market transition period so you got the ride on top of 30 years of toiling in quiet desperation Yeah, all right, but that's the role you play Right, and I think that one of the most interesting Sophistications that's taken place in this field is for us to understand the time dimension There's this there's this very very naive notion today. I will declare this to be a market Okay, boom now start trading. That's not a power that you have. No, it is. It's a power known as now start trading Okay, and and there's this like 20 years of stuff that happens to happen before that well Someone's got to pay for that right and there's no way that you can have an efficient capital market before that Set of rules takes place. All right. So speaking of time dimension last question quick Eric We got well, all right Person we don't know yeah Right no behind Eric. Go ahead. Yeah with the microphone holding the microphone. Yes. Yes. Yes. I appreciate it Quick question Loud loud and fast. Can you hear me now? Okay. So with Ron you mentioned with the intermediaries Being very slow to move my question is I guess they're moving when the retail Side of the business has the demand they asked for it So then you see the intermediaries slowly moving with investment vehicles that are impactful So how can you increase the demand from the public? For wanting those types of vehicles. What are some solutions to increasing that knowledge? Getting that message out to the everyday average common person. Do you have any you think there's any solutions out there for that? Yeah, let me put it just hold hold that thought Eric 15 seconds now In the last 10 years, I'm just wondering what's been one of your most Funnest memories working in the impact investing space. Well, I met you that was good Okay More more demand, which is really 10 years from now On the movement building, so Ten years from now one of the things we're working on is Is bottom-up movement building which I think is what you're talking about So our theory of change at the alliance is at the intersection of some top-down levers like policy and moving Institutional pots of capital like these guys have been talking about and bottom-up movement building We can get to a tipping point and so I think part of it is happening with the wealth transfer to women and millennials who are Proportionately interested in impact. I think Millennials as a generation of which I am not one Has a demand and expectation for transparency through technology and kind of low marginal costs and I think that Moving toward a place where you have impact transparency That's something that we're working towards impact invest impact transparency as an investor right So that we're not prescriptive about what impact you might seek but To at least know what you're investing in whether it be a public security or a Private market investment and so I think that the confluence of you know the proliferation of technology the demand for transparency And the rely rise of the Millennials will it will happen all right, so Let's let's end on this 30 seconds each Ten years from now. Where are we? wrong Back back here. It's okay So just to close on Fran's comment, which Demographics the demographics for impact investing are incredibly favorable Because the millennial generation is really ten years from now the millennial generation will control Significantly more capital than it controls today And every indication is that a good deal of that capital will be invested for impact that will propel the other Industry players to begin to move in this direction This is more of a wish but Ten years from now. It'll be 20 27 We're almost on the cusp of 2030, which is the sustainable development goals and we've we've hit we've hit We've hit the targets In ten years, I hope that we have moved Closer to pricing positive and negative externalities into the public capital markets So that now it's a source of alpha, but I hope that we move to a place where it's actually not a source of alpha anymore It's just that that environmental and social risk and reward is priced into the into the the capital markets I'll answer your question by answering his what was the biggest smile in those last ten years I Think two things one is the incredible Enthusiasm and I think success of the sustainable investment challenge Which was a challenge contest to leading b-schools around the world Just to and be school students to invent investment vehicles and that had an intentional impact and Every year it's inspirational After well that's entire panel has been drug in by me and one form or another to judge or to sponsor This thing over the last six or seven years and that's been a that's been an incredible source to see the energy enthusiasm of Basically 28 year olds and and what they are willing to do and invent to change the world All right and several of these products that they have invented have now seen the light of day and it's inspiring All right, so now we have a you know 6070 business schools from around the world engaged in this in this activity. That's wonderful I think another thing that brought a great smile was we had this harebrained idea and one of the sponsors is in the room Here to convene Leading not leading instructors Professors from around the world that were teaching classes in impact investing in sustainable finance And we did that this summer at Kellogg and we thought oh geez, you know, maybe we'll get 12 people to show up We ended up finding well over a hundred classes that were legitimate in Being taught around the world and they're still coming in and we were able to convene 50 You know professors from around the world to talk about how they're teaching and what they're teaching and how they're teaching Students in this and the enthusiasm that students have in this And I think the most interesting indicator there is that if we had convened or tried to convene something like this three years ago I would say that if we were even able to get 50 three four years ago almost every one of them would have been an adjunct and This it shocked me this summer. We had 50 some odd Participants and half of them were ten-year track professors real professors And and and that spoke volumes about how this is entering the dialogue at leading schools around the world That that makes me smile and and that also gives me hope for what the revolution from within will cause in ten years So let me Close but say in ten years. I hope we're back here. I hope it's As big or bigger I hope the community nature of what so cap has been which is a place where friends find each other every year And it's on the calendar continues I hope deals get done and I hope that impact and investing Have continued to move closer together to be essentially the same thing where smart investing is And I hope that you'll all be back here with me on a panel How old we are and how much the next generation is doing so thank you everybody