 After a non-stock this morning a few people have come up to me and said that was so brave and I thought it was pretty brave to put Sami up here in High Heels last night But I think it's worth noting that Really, SoCAP is not here to advance or protect a particular point of view or a particular way of being on stage That what we're trying to do is promote discussion To bring together a marketplace that is full of opinions that are oftentimes directly in opposition to each other So as we shift gears into this next segment of our afternoon main stage I want to remember that when Bain Capital first announced their double impact fund in 2015 some people thought that was brave for me to put them on this stage But I knew that they had to be part of this conversation Mainstream finance is not separate from the impact finance conversation or at least it shouldn't be and so I'm so excited that today We welcome Warren Veldmanis who is the managing director at Bain double impact He's going to kick off this last section of our afternoon Which has a range of voices in the mainstream financial community who are now very active in impact. So please welcome Warren Well, thank you Lindsay And good afternoon ladies and gentlemen I'm going to tell you a story that will shock you in Boston where I work There are two communities of similar size similar population You can walk from one to the other in a matter of minutes One is called back bay The other is called Roxbury One is rich The other is poor Now take a moment and make a mental note what you think the life expectancy difference is between these two neighborhoods in the same city in America in 2018 Now most people guess Somewhere between five and 15 years the real answer is 33 years It gets worse If you want healthy communities if you want Roxbury to become a healthy community you can't just start with health care. In fact health care ranks fourth a Distant fourth behind behavior genetics and social and environmental factors when it comes to health outcomes But in terms of behavior healthy food and access to gyms won't do it Good education vocational training and living wage jobs won't do it either Civic institutions public safety Transport and housing drug treatment None of these things in isolation will solve the problem that Roxbury has It will take a combination of all of these things to solve a problem as serious as the one that Roxbury faces add to that our problem with climate change an aging population the issues related to Artificial intelligence and bioengineering and It's no wonder that people out there are scared It's no wonder that our political system is confused We impact investors sure have our work cut out for us But we are confused too Just look at the word salad that we use to describe ourselves Now Bono says that impact investing is a bunch of bad deals done by good people now. I happen to think That you too is a bunch of good songs done by arrogant people But Bono is not alone a prominent venture capitalist compares impact investing to a houseboat Not a great house and not a great boat I prefer to think of impact investing as an eco-friendly sailboat with one too many captains on board Trying to each trying to steer it in a slightly different direction because the truth is we impact investors don't agree on much Neither the destination nor how to get there Now my partner Deval Patrick likes to say It's possible to have an economy that is both robust and humane Perhaps that's the destination that we should all be shooting for but we are a long way from cracking that code in fact capitalism today is in the fight of its life Less than one fifth the Millennials today identify as Capitalists and unless we were able to make our young people Proud of a system that's generated so much prosperity over the past 400 years This system could well be doomed Now Churchill said That to improve is to change and therefore to be perfect is to change often Now our capitalist system is far from perfect, but it is also far from changeless In fact, it's changed a lot over the past 400 years and mostly for the better don't forget that The first impact investors were those who boycotted Sugar made with slave labor about 150 years ago and capitalism has many moral victories to its credit since then and a system that was first designed to foster Trading of spices The pooling of capital to support these kinds of ventures has now become the dominant system of the modern world It has brought us our iPhones our flat screen TVs our Xboxes and Burger King Prosperity that could hardly have been imagined by our ancestors and so what's the problem? Well, the problem is short-termism something that my partner Mike O'Leary and I like to call fiduciary absolutism fiduciary absolutism is The cancer that makes company think companies think in terms of quarterly earnings instead of long-term prosperity fiduciary absolutism came from three things first an Economic boom that happened in the 50s that brought cars and fridges and televisions to houses across America second the existential threat posed by an expansionist communist Soviet regime during the Cold War and third an economic profit who taught that our economic boom was related solely to corporations going after profits increasingly his Message of fiduciary duty came to mean short-term profits And so we ended up with fiduciary absolutism and those who questioned it those who questioned the potential for Reform of capitalist excess sounded a lot like they were advocating a slippery slope to socialism and so we preferred The image of Gordon gecko and his mantra that greed is good So what happens when corporations operating in a system of fiduciary absolutism with this backdrop Are faced with social problems? That they can't ignore well, I Like to look back to the Super Bowl commercials for clues If you were watching the Super Bowl back in January you would have seen that Budweiser isn't really a beer company It's a disaster relief organization Supplying water to hurricane victims and Hyundai isn't really a car company. It's a pediatric cancer care business And so on now if you think these are cynical ads remember that it's fiduciary duty That requires even the most enlightened CEOs to behave in this way Now our modern culture likes villains and heroes. So who is the villain behind this fiduciary absolutism? Well It's not some distant hidden monopoly man The real victim the real villain of this story is Us More than half of Americans own stocks today. I bet you just about everyone in this room Owns shares of companies. We used to hold a share on average for about seven years today It's less than seven months I bet most of the folks who own shares in this room couldn't name half of the companies that they own I bet you don't vote in proxy elections And I bet you don't have the faintest idea what most of the corporations that you own are offdoing on your behalf We have a problem as owners If we treated the houses that we own the way we treat the corporations that we own they'd be a mess and We willfully look away from this mess Because we believe that is the price that we have to pay for capitalist Prosperity we have a problem as owners So where do you look to solve a problem like this one? It would be nice if there was some force outside of the capitalist economy that we could look to but the truth is if we are Going to reform capitalism we have to look to the private sector Government and charity both have important roles to play, but they're just too small We require the full-throated support of the private sector if we're going to solve the problems that we have in front of us And so within the private sector where do we look? If you step back and look at the US economy There's about little under 40 trillion dollars of equity value spread across private and public companies Most of that is in public companies today of the private money a little less than two trillion is held by private equity investors of which a Very small portion today less than half of a percent is being run by impact investors like ourselves So to put that in geographic terms if the US economy was the landmass of the United States Impact investors wouldn't only be smaller than my home state of Maine They would be smaller than the county I live in in Maine Which is one of 16 counties in the state? So we are very small today and we impact investors will not solve Roxbury's problems alone Now I hesitated to say that impact investing won't solve the world's problems at this the burning man of impact investing conferences Lest I be chased from the stage in a hurl of organic tomatoes But I hesitated for another reason because we impact investors are on to something Only capitalists can reform capitalism and impact investors whether we like it or not are capitalists Capitalists are reluctant heroes But we impact investors can help show our brethren the way from inside the tent of capitalism I for one came to impact investing about two years ago and I was deeply skeptical when I arrived at my new post But today every day I see evidence inside of my companies that our little experiment is working It turns out that when you treat workers well, they do better work When they believe in your mission, they are more committed when customers believe you have their best interests at heart They are more loyal than if they think you're trying to trick them and so It is my firm conviction that impact investing can be a superior form of Investing not just for the world but also for investors So how do we communicate these insights around impact economics to the rest of the world so it can scale? How do we communicate this notion that we can have our kale salad and eat it too? Well on the subject of salads before I showed you the word salad of impact investing I'd like to propose a new definition of impact investing that I think will cut through some of the the blizzard of terminology That confuses so many people The impact definition that we use inside of our firm is the laboratory in which capitalists work to reform capitalism Now this lab has been operating now for about a decade and what do we have to show for it? Well, it turns out that we have a lot to show for it But we are singularly poor at communicating our insights to the larger economy and so There's a parlor game that I like to bore my friends with at dinner parties, which I call what if impact investors owned the economy? now in all seriousness Isn't this the right definition of success for our industry? Isn't growing out of the niche that we currently occupy to actually become standard business practice the appropriate definition of success for impact investing? So let's try for a minute to play this game I'll start you off with a couple of ideas, and I hope you'll continue this on your own time First of all What problem should we be trying to solve? Well, if you believe as I do that our biggest problem is fiduciary Absolutism and absentee ownership you should start with purposeful ownership as your starting point What this means is each and every company Should be thinking about what good it is trying to do in society and not only thinking about it But it should be writing it down in the form of a clear mission statement and incorporating it into its corporate charter And if you think this has happened already because many corporations out there have mission statements Try spending half an hour reading the corporate mission statements of fortune 500 companies online I think you'll find it as depressing as I did second What tools can we use to make sure that these missions are being supported the first and most important my view is professional governance one of the really good things about private equity is that Board roles are not ceremonial positions. They are an integral part of our jobs In fact, they're probably the single most important part of our jobs Why is it that public companies appoint either? ceremonial figureheads or buddies of the CEO to the most important roles inside of their companies is My firm view that we need professional governance more widely across our economy Second pay alignment at our first investment. We not only wrote our mission into our charter We started aligning executive compensation Against that mission specifically against that mission and guess what happened Not only are we doing a better job at our mission, but we're also more profitable as an entity and finally Proper treatment of workers our friends at the not-for-profit called just capital did a large-scale survey of Americans and asked them what they thought the most important elements of corporate social responsibility were and The most important thing that came back was proper treatment of workers Now this isn't charity. This is a win-win when you actually go off and you treat your workers properly You get a lot of things in return Now when Walmart goes out and announces that it's going to increase its wages. It gets hammered in the stock market I think that that's a tragedy both for for workers But more importantly for Walmart shareholders and then finally, how will we know whether we've succeeded? Put simply we will know we've succeeded when these strategies generate long-term profitability The best advertisement for impact investing will be the first top quartile rated private equity fund pursuing the strategy But the hour is later than we think and our problems are urgent So I would encourage all of you to have this debate have this debate tonight I've put forth my five P's as I called them undoubtedly. These aren't the right list But it's an important debate to start having if we want to avoid the future envisaged by the New Yorker This is a picture of a man in a ripped-up suit sitting around a fire with a burnt-out Cityscape behind him and he's talking to three children and it says yes The planet got destroyed, but for a beautiful moment in time. We created a lot of value for shareholders Now mice my remarks were titled Impact investing why bother so in closing. I'll come back to that my favorite quote is from Teddy Roosevelt when he said Far and away the best prize that life has to offer is the chance to work hard at work worth doing Closing a life expectancy gap of 33 years is worth work worth doing And avoiding that image that I just showed you in the cartoon is certainly worth the bother. Thank you