Episode Transcript
Speaker 1 00:00:01 Welcome to the Definitive Sustainability Perspectives podcast, where we share examples of leadership and innovation. Small entrepreneurial businesses, large mega corporations, and all types of enterprises in between are seeing a global shift in perspectives around the role of business in society. From ESG investing to sustainable finance to social impact in our communities, we're on a journey to leverage data and intelligence to make the best business decisions possible. Enjoy the podcast.
Speaker 1 00:00:36 Hello everyone, and thank you for joining the podcast. This is Kesa Shrine. Today's guest is Julia Wilkinson. Julia is founder and c e o of invest, a company that aligns asset owners and their financial intermediaries where their social and environmental values. Now, some of Julia's clients include funds, family offices, foundations, endowments, and entrepreneurs that aim to integrate impact into their models and investments. Julia has a decade of, of experience in the capital markets, including her work in the private wealth management area of Goldman Sachs, as well as four years in venture capital and private equity. She is board chair of finance for Good Brazil, a nonprofit that supports Brazil's social finance ecosystem. She's also a board member of Social Impact Movement and is on the advisory board of a Amenta Ventures. Welcome to the podcast, Julia.
Speaker 2 00:01:37 Thank you so much. Thank you for having me. Well,
Speaker 1 00:01:39 It's great to have you here, and I know that as we kick off, we talked about, um, your mom and your mom was an environmental attache to the State Department, and I'm sure that had to in some way influence your choice and career. So really curious to get an understanding of what your early experiences were, what opportunities that you saw came across that really helped you to focus in on the financial services industry, and then within the E S G impact investing, and then into this fairly niche career that you've built for yourself. Thank
Speaker 2 00:02:10 You. Yes, actually, my mom and my, both my parents had a big influence on me. They were both US diplomats and as a result, we grew up moving every three years to new countries, mostly in Latin America. And as a result, I was always kind of an outsider looking at things differently and trying to understand how things operated, observed a lot of inequality, and of course, through my mom a lot of activity around how do we resolve climate issues and sustain the rainforest, particularly in Brazil, which was our last post. So that inspired me to start thinking about innovative ways to finance and sort of, uh, in incentivize groups to invest, uh, sustainably basically. Um, that said, I didn't, I didn't really think of capital markets as the way to achieve this. At the time, my parents were both from the government. I really thought about more government and nonprofits as the tools to create social impact.
Speaker 2 00:03:02 So I went to school and really thought I would either be a diplomat, a lawyer, or, or something in between. Um, and, and, and when I graduated, I really felt that I wanted to do something very dynamic and that moved quickly. Uh, I, I, I worked on law a little bit, but I I wasn't quite inspired by that, that model, um, as an effective, for me, at least as a tool for change. So then I, I met some people who mentioned that finance was really quite dynamic and powerful tool, um, and that I should really start learning and understanding it. So, so that's really what I committed to. And I, I, I got a job at Goldman Sachs, uh, you know, a few, a few years later and worked on in private wealth management there for six years. Um, that was during the crisis as I started in 2007. So I, I went, you know, through the crisis and saw kind of how when incentives are perhaps misaligned with, with the public good or, you know, short-termism is the focus, then we have, we can end up in big sticky problems like the financial crisis that affect the entire planet, not just one piece of the planet. So
Speaker 1 00:04:00 It, during the financial crisis, were we even talking about E S G officially, was it more of a social impact leaning? I mean, how did the crisis help to shape where we are now or did it help to shape where we are now with impact investing in your opinion?
Speaker 2 00:04:16 I think it had a huge effect on shaping where we are now. Um, there was already people investing with E S G. There was, uh, you know, SRI investing, which was sort of screening out industries you didn't wanna be in. Um, and, and the concept of impact, which was coined by Rockefeller, I believe in 2007, had already emerged, but, but it wasn't mainstream. And, and that's because I think people did not really understand or believe how deeply the decisions of a few financial in intermediaries in this case could affect, uh, the global system and, and how important it is to have the right incentives in alignment between both the capital markets, the government, and the public towards social impact. So, so I think it really, uh, it reshaped that the banks had to reconsider their role in the market, um, and a lot of people started to wonder how do we better, uh, de-risk and, and increase, uh, outcomes around environment, social and governance issues.
Speaker 1 00:05:13 So in term, you mentioned the financial intermediaries, and I know that's a large, large part of your work and who you work with, um, in terms of how you can really get up to speed, whether you are, um, a wealth manager, whether you are working with an endowment or a foundation. The E s G world is changing quickly, you know, standards are being built. We're talking about impact investing here. How can those who focus on, um, supporting investors in as a financial intermediary, how can they go about updating themselves on trends and really understanding the basis of E S G and impact investing and understanding where the trends are moving forward? What, what can they do in that respect?
Speaker 2 00:05:52 Well, I think it starts with, uh, you know, basically understanding and, and accepting that this is a really exciting new way of investing that is becoming more and more, not, not something you think about on the side, but key to every financial decision. Um, so, so just sort of taking that leap of, of understanding and, and moving away from traditional financial theory, um, is the first important step. And then, uh, really starting to research some of the themes that people are talking about. The sustainable development goals are a great place to start. That those goals were defined after 10 years of research and speaking to stakeholders across the world about what, what makes sense, what we need to do to build a sustainable future. So, so thinking about that is a great start, but it's also a very personal journey because, uh, impact investing really is about aligning our personal values, uh, with our reason and decision making around investing, um, as well as thinking about those for the collective.
Speaker 2 00:06:45 So I think part of it is also a personal journey to think, sit down and think about what do you care about and how do you wanna see that reflected in your investment portfolio and in the world? And then that, then that will really inspire you to get deeper into, you know, you can research, um, you can use the Global Impact Investing Network as a great resource. They have tons of, of, you know, publications on the subject. You can come to intermediaries like myself, who can, you know, literally work with you from day one till integration on every single step of the way. Um, and, and you can also, you know, participate and engage in, in some of the market research that Refinitiv and other companies are putting out on the subject.
Speaker 1 00:07:20 So let me, let me, um, play the advocate role here. You talk about understanding your own values and aligning those with some of the goals that you have from a financial perspective. If you're a wealth manager and you really think that, or you can prove that returns that you've been seeing over the past five, 10 years have been excellent and there's really no need to boost, um, you know, the e s G component or look at impact investing, what would you say to that manager who says to you, well, Julia, my returns are just fine. You know, my, the portfolios I manage, they're doing just fine without E S G. In fact, we can help the environment. We can go and donate money and give to charity. Why do we have to incorporate a portfolio, um, and incorporate E S G into the portfolio? If they make that point to you, what would be your answer? My
Speaker 2 00:08:06 Answer would be that, that more and more data points to the fact that investing with E S G and Impact frameworks can actually de-risk a portfolio and outperform the market in the long run. So if you're fiduciary, whose responsibility is to, uh, both manage assets towards maximizing return and also reducing risk, as well as, uh, you know, as the business rounded table recently pointed out, engaging all the stakeholders along the value chain, then your, your responsibility is to integrate E S G, especially as more and more information points to its role and outperformance on top of that, if you wanna maintain and grow your client base, uh, the next generation of millennials and women who are also receiving a large asset transfer as they've broken glass ceilings over the past several decades, they wanna invest with these principles. They wanna engage on these subjects. So I think it's a great way to add value to your current client base as well as a tool to recruit new clients, attract better talent as well. Young people wanna work with Impact. So how are you gonna get the best financial analysts on the market? We'll talk to them about these principles, for example. Okay,
Speaker 1 00:09:11 Great. So the way that we're going now, the demographics are really pushing this, and you mentioned the Business Roundtable, which happened in August of 2019. Jamie Diamond, lots of other CEOs who said that we need to move the needle in terms of how we approach and, um, look at investing and how we have a social impact. So really important, let's get back to the work that you do in terms of educating these financial intermediaries. So once they say, okay, you won me over, Julie, I am interested, I do want to learn more because my clients are asking about this, or I just need to in, in integrate this, what is your process? How do you go about training or teaching or really bringing all of these people up to speed because there is a huge engine behind a family office or an endowment, right? You have attorneys, you have wealth managers, it's, it's a great engine, right? Correct.
Speaker 2 00:09:57 Yeah. Correct. Yeah, there's a whole slew of people that touch the final asset owner who also influence their decisions and are, it's really important for everyone to be aligned and on the same page, just like at, you know, a big company when they've decided to integrate E S G, and they have to, you know, think about it, both from the C-suite level all the way down to the employees, the supply chains, everybody needs to be on board to really make it effective and truly integrate it. So the same thing goes with the family and the family office and all of the people that touch them. Um, so, so I, I do a series of things to, to touch on this one, um, is that we're working on a symposium workshop series for the financial intermediaries themselves to help them understand these topics and be able to speak about them fluently.
Speaker 2 00:10:41 Um, as the Global Impact Investing network pointed out, one of the big obstacles to this integration across the market is that people who are mid-market, mid uh, level professionals who have been in the industry a long time, they don't know how to speak about this. They're not necessarily educated on impact investing in E S G, and therefore they're not talking about it and they're not engaging their clients on it. They may even be discouraging their clients because they may be misinformed on, you know, is it a risk, risk off return? Uh, you know, are you, are you adding risk and reducing turn return by doing these type of strategies? There's still a big gap in an understanding that that's not the case, right? Um, so, so one thing that we're working on is the symposium where we are developing content and bringing best in class asset managers from around the world to talk in Miami, which is kind of a behind on the impact investment scene and, but has a huge amount of private wealth.
Speaker 2 00:11:30 It's one of the biggest capitals of private wealth, uh, in Latin America, in the United States. So, so we're gonna, you know, encourage, um, people to understand how to do this acro asset classes by doing that. But then on top of that, you know, on the one, one-to-one work that I do as a consultant is I sit with, uh, you know, both the family and their stakeholders, align them to these personal values that I mentioned we have to go through and an exercise to, to, to nail down, right, what are the values that unify the family that you wanna leave a legacy around. Um, the foundation is the same idea. Like if you're a foundation and your endowment is invested traditionally, how do you wanna align your endowment to your mission? Um, these topics take time and, and require everyone to be on board. But then, uh, once you've decided on the mission, you can reflect on how you can express that through, uh, a portfolio by, by using real world evidence-based investment strategies.
Speaker 2 00:12:20 So you obviously want that to be, um, focused on real world goals, like the sustainable development goals or, or a p potential framework for how you can invest. And then you have to get your, then I would sit down with our, with the team, family office lawyers, accountants, and sort of get them on board to this mission, understanding what it is, what they're trying to do across the portfolio, across potentially even generations, right? Because sometimes we're talking about generational transfer wealth and Sure. And how you, how you express that for decades. Um, and then, and really get the staff up to date, right? They have to understand the right targets and benchmarks, what data provider to use, right? Both on the e s G side, which would be, could be anything from Refinitiv or some of the competitors in the space, or maybe it's a combination of all of these determining then, you know, who is gonna be in charge of E S G and the investment committee and how is that gonna be, uh, sort of integrated over time because you're not necessarily gonna do this, uh, you know, in the first and rebalance your entire portfolio in day one, but you might have benchmarks and, and, and, and, and, uh, target for how quickly you're gonna execute this.
Speaker 1 00:13:28 So, and if you're taking this approach, what's the proper, um, a u m? So do you look at a certain amount that the, that the wealth manager is, um, hazard management, or how do you go about, is there a proper amount or how do you go about looking at it from that standpoint? Well, for me,
Speaker 2 00:13:44 Uh, the high net worth and ultra high net worth, uh, would be a target for this type of transition, although this can be done for retail investors as well. Um, so the target is 20 to 20 million to, you know, several billion dollars, um, under management. Uh, that way they can, you know, execute this both in every asset class, venture capital, private equity, fixed income, uh, public markets and, and really do things thoughtfully. Often they have a very professional team that they're already working with, a family office that perhaps, you know, is, is, is very well trained and, and, and really just requires a little bit of restructuring to understand and integrate these concepts. But that is big money, and these people have a big impact on the economy. They may not be institutional, uh, necessarily, but their wealth is is semis institutional.
Speaker 1 00:14:31 That is indeed big money, Julie. Indeed. Big money. Yeah. So when we, when we think about the questions that we need to ask, because if we're dealing with that am amount or any amount of money for that, um, from that perspective, we wanna make sure that we're asking, um, the right questions when we are engaging, when we're thinking about getting into a relationship with a wealth manager, right? So if you, um, are meeting with a new potential wealth manager, if you, um, are with an endowment, or if you're meeting with anyone in that asset management space, if this is a new relationship, what are Julia's top five questions that you would recommend to ask, um, a wealth manager or to ask someone at one of these offices to make sure that first of all, they're a good fit, and then secondly, they really take your impact investment and your ESG investing goals seriously. So what are some key questions that you would need to ask them as a high net worth investor to ensure that you're matched with the right person and that they really take your plans seriously around impact investing? That's
Speaker 2 00:15:25 A great question. Um, well, certainly they have to understand and, and have buy-in, uh, the concept, the concept that they can invest with impact and not necessarily think of that as pure philanthropy. So that, and that they can do that across asset classes. So my first question would be, you know, are you truly committed to, uh, potentially transforming the impact of your entire wealth portfolio? Um, and if so, you know, are, are you willing to, you know, potentially open up your com the kimono, so to speak, and really dig into what your personal values are, how your family looks at those values? Um, you know, what, whether you're willing to then take this to your family office and change their whole model and, and really put in the time, money, and effort to make the transition. Uh, are you really committed to the impact goals that you then select?
Speaker 2 00:16:18 Like, are you gonna measure towards them if it turns out that you're doing well on the financial side, but perhaps the impact is not really what you expected? Are you, you know, willing to commit to making some shifts and, and rebalancing at these moments, or putting pressure on the managers in your portfolio or the direct investments that you have to, to shift their strategy as well to, to commit to their underlying impact? These are important questions and, and that doesn't necessarily mean I wouldn't take on a client because some of these things, you know, are, they're not, uh, uncompromisable and they could change over time. As people start to understand this better because it is a process, um, then, then, you know, these things can change and, and, and we can work on them together. Um, often I also ask, how engaged are your next gens in the family office or how engaged is your grant?
Speaker 2 00:17:03 And if you're talking about foundation, how great engaged are your grant makers in your, what you're investing in on the endowment side? Probably not at all because often these things are completely separated. Um, but, but how do you kind of bring teams together around, around making a big impact? Is talking about these issues engaging next gens in this conversation? Cuz that's what they wanna do is invest with impact. So that's a great way to get them more excited about the family wealth and managing it. Um, and on the foundation side, it it makes sense that the grant makers and the investors are sort of aligned. Um, it means that you're probably gonna come out with better, uh, an impact on society that you can then report to your donors across your entire structure. And sometimes endowments are huge compared to what the grant making author, uh, uh, grant making side has, has, um, in their capital pool. Usually, you know, you're only making about a 5% distribution a year, whereas an endowment can be billions of dollars.
Speaker 1 00:17:58 Right. Great. And so if you're looking at succession planning specifically looking at that, is there a certain approach that we would need to look at in terms of how we would approach succession planning if E S G and impact investing is a priority for us? So is would it be different than any other way of investing if you have impact investing top of mind, but you're very, um, focused on succession planning?
Speaker 2 00:18:20 Well, yeah, in some, in some ways, yes. It might be that you could even include language in the trust agreement. Usually, you know, succession planning has some kind of trust structure behind it. Uh, so it can include language around, you know, uh, restrictions as to what the portfolio can and can't invest in. Um, it can, that could be perhaps changeable cause the world will change, maybe the impact targets exactly will change. So it said, you know, maybe every year this is revisited every five years, but, but that it has to be integrated into the legal structure is an alternative as well, part of the language, and that the directors have to, you know, both report back on the impact of the portfolio with data as well as the financial performance. And, and that's the responsibility then as trustees
Speaker 1 00:19:02 And as again, as you're going through this interview process, if you're thinking about looking at a new wealth manager, is it incumbent upon the investor to talk to everyone who's in that ecosystem? So talk to the wealth manager as well as the attorney as well as the tax person. Do we really need to have to engage all of those players?
Speaker 2 00:19:20 Um, yes, I believe so because in my experience, sometimes the asset owner has committed to impact investing and they'll either, and perhaps even willing to do this at the portfolio level, which means every, you know, screening every single asset class, but maybe the family office because they have not been educated on the subject will say, that doesn't make sense. Let's monitor, you know, invest just like we always have. Also, it creates more work for them. They have to learn something new, they have to implement perhaps a more challenging benchmark that they have to, you know, then understand they have to measure things that they've never thought about before. Um, and so that's what I really try to do is help them translate these concepts. You know, I've worked in all sides of this story in some way. Both, uh, you know, both from, in different aspects of finance, but as well as, uh, on different sides of the coin of government and other aspects. So I can speak many different languages, um, both literal and social.
Speaker 1 00:20:12 I know you try label, so you are literally I can <laugh> Yeah,
Speaker 2 00:20:15 But also to try and sort of, uh, make this more fun for everyone. And that's where the buy-in comes in, right? Everyone needs to be on board so that this can be fun and meaningful for them too. Um, but yes, the FA family office can be an obstacle perhaps. Uh, and a lawyer is really worried, more worried about r de-risking something. So they might, might not be well informed about, uh, that this is not necessarily a risky concept that they're, um, that, so they're not gonna discourage necessarily their client from doing this and their accountant as well. Their accountant may not be well informed on the subject and not really understand how to report on this. So, so these are, these are important subjects also, we talk a lot about how in the financial industry itself, um, these things will, these things need to change as well around reporting rather than it just being financial performance that we will report on the annual statement of the court of the statement, also have impact performance and the incentives of the financial industry should be tied to that too. Like rather than just getting a bonus based on your financial performance, what about the impact performance that you're reporting on? How can you link incentives and performance to that?
Speaker 1 00:21:16 Hmm. So incentives are important as well as really understanding the language of the different parties who are a part of that overall ecosystem. So Julia, in terms of the big idea, what is the big idea around foundations, endowments, trends that you might see coming down the pipeline later in the coming months or even the coming coming years that we might not know about at this point? What's the big idea around this industry?
Speaker 2 00:21:40 Well, one big idea that I am excited by is around investing in sustainable smart cities. And why? Because urbanization continues to be on the rise. Um, and while cities are great, you know, places to get new jobs and, and meet new people and have wonderful opportunities, which is why a lot of young people are attracted to cities, um, they al also with urbanization come many challenges. You know, we see a, a huge rise in energy consumption when people move to cities which account for a large portion of the global emissions, um, traffic waste, affordable housing shortages. And actually when we move to cities, you tend to actually have a more sedentary lifestyle so people end up getting more chronic diseases. So interestingly enough, all of this, uh, is, are problems, but they also are opening up opportunities, especially as how, uh, as technology around, uh, you know, iot and 5G really takes off and it empowers us to have these smart cities and then
Speaker 1 00:22:38 It Internet of things.
Speaker 2 00:22:39 Yeah, internet of things. Um, and, and you see a, a rise and, and decrease in price and renewables and microgrids, which will lead us to be able to have a more, uh, distributed energy system. You know, cities will be both generating and consuming energy in a very different way than they are now. Uh, we'll see shifts in transportation to an mobility and, and in and cloud technology. Were giving us Ari a rise to have, you know, very smart and interconnected cities and there's huge investment opportunities in this space, both on the technology side in, in, in, in some of these, uh, renewable energy and, and, and opportunities in, in investing in the startups that are redesigning transportation, for example, but also, you know, in, in, in changing cities to be more circular, you know, reducing waste, uh, creating systems where we can reuse and repurpose waste is very important. There's lots of opportunities there. Managing clean and efficient energy consumption and improving health outcomes. Uh, these are all hugely investible opportunities across asset classes and very exciting.
Speaker 1 00:23:38 And, and that's interesting too. You talk about investing in these startups and I know that you are an investor, an advisor. How do you go about finding opportunities to invest in these types of startups? If you are interested in smart cities and if that is something that you think is a big idea as you do, how can you go about finding opportunities to invest?
Speaker 2 00:23:54 Oh, there's so many exciting ways to do that. You can join an angel investing network. Um, I personally, um, go and meet people all the time and anytime anyone asks me for mentorship or advice, obviously when I can fit it into my schedule, I do. And so I offer myself at many co-working spaces, you know, once, once every quarter or so. Um, and one of, uh, of often I will meet potential investee this way, but also, you know, reading about interesting deal flow on the internet, for example, on Impact Alpha or some of my favorite impact newspapers, um, is another great way. Or just, you know, just participating in these emerging ecosystems, you know, going to pitch competitions, offering yourself as a judge if you're from the financial service industry, that's a great way to meet people and also find exciting opportunities in the space.
Speaker 1 00:24:40 Wonderful. Great. Well, everything from understanding who's in the ecosystem, who you're investing with, not just that wealth manager, but the ecosystem talking, the language, understanding, um, the big ideas that are coming up such as smart cities, and really being open and attuned to what's going on in the ESG space and ensuring that the values, um, your values align with e s G as a step. Those things are all very important. And Julia, thank you so much for sharing them with us and for joining us today.
Speaker 2 00:25:06 Thank you. This has been great.
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