🎙 Ep 33: Challenging the Nobel-prize winning theory that stands in the way of impact investing
Sir Ronald Cohen will be on the podcast + ENTER to win a sweet impact investing gift pack!
All,
Here’s what’s included in this edition of the newsletter:
ENTER TO WIN: I’m giving away a cool gift pack
Help me build out an infographic on the Canadian Impact Investing landscape
Sir Ronald Cohen will be on the podcast
Ep 33 is live! This is an episode every serious impact investor needs to hear
Open job postings in impact investing
What I’m reading/listening to
What’s on tap
🎁 Enter now to win a sweet gift pack!
I’m holding a contest where one lucky winner will score a sweet gift pack that includes:
✅ $250 gift card from Patagonia.
✅ A 60 mins 1:1 responsible investment consultation with Kind Wealth founder, David O’Leary.
✅ A copy of Moving Beyond Modern Portfolio Theory by Jon Lukomnik (Ep 33) and James Hawley.
✅A copy of Impact: Reshaping Capitalism to Drive Real Change by Sir Ronald Cohen.
HOW TO ENTER:
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💁♂️ Help me map out the Canadian impact investing landscape
I am building an infographic that maps out the lay of the land of impact investing in Canada. The infographic is designed to help viewers, in a single glance, get a handle on the major players across the impact investment landscape in Canada.
Keep in mind, this is a work in progress. There are three ways you can help:
Provide any feedback you have on how I’ve defined or organized the categories. Send to dave@davidoleary.ca.
Let me know if there are any great organizations you know of that I should make sure get added. Send to dave@davidoleary.ca.
If you represent an organization and would like to be included, please complete this form.
📢 Sir Ronald Cohen will be on the podcast
I’m pretty stoked to announce that I’m scheduled to record an episode of the podcast with Sir Ronald Cohen next week. If you’re new to impact investing and haven’t heard, Sir Ronnie (as he is affectionately known) is a preeminent international philanthropist, venture capitalist, private equity investor, and social innovator who is often referred to as the Father of impact investing. He recently published a new book called Impact: Reshaping Capitalism to Drive Real Change (read further down in the newsletter to find out how to win a copy of the book).
🎙 Ep 33 - Challenging the Nobel-prize winning theory that stands in the way of impact investing
In 1952, Harry Markowitz published a now-famous article where he proposed that investors should optimize portfolio expected return relative to volatility. Markowitz helped investors realize that by owning a diverse basket of investments, they could significantly reduce their risk without suffering a commensurate reduction in their expected return. This insight marked the birth of Modern Portfolio Theory (MPT) and, by the late 1960s would come to change how investors across the globe thought about investing. The trouble is, some of the assumptions underpinning MPT are keeping more investors from embracing ESG and impact investing.
Today's guest Jon Lukomnik joins us to discuss his new book Moving Beyond Modern Portfolio Theory: Investing That Matters. In the book, which is co-authored by James Hawley, Lukomnik and Hawley give a thorough accounting of how many of the assumptions underlying MPT are unrealistic or mistaken. For instance, MPT dictates that investors can mitigate systematic risks (the risks inherent in specific investment) through diversification but cannot influence large systemic risks (threats to the entire system) such as climate change or massive geopolitical instability. Lukomnik and Hawley argue that investors can and do affect systemic risks. For evidence, one need look no further than the 2008 financial crisis where investors fueled the rise of Mortgage-Backed Securities and other collateralized securities that eventually threatened to topple the global financial system. Similarly, MPT is wrong to assert that investors cannot mitigate systemic environmental or social risks like climate change. They can. But doing so requires investors to utilize tactics that aren't part of their traditional toolbox (e.g. shareholder engagement, policy & advocacy, etc.).
Jon is well-positioned to write this book. He is currently Managing Director of Sinclair Capital, a consultancy to institutional investors and formerly was a senior city official running New York City’s pension funds where he oversaw $80 billion in assets. He also co-founded the International Corporate Governance Network (ICGN), which now represents investors from 43 countries, overseeing some $42 trillion in assets. Jon has been a board member of public, private and not-for-profit companies. He is a three-time recipient of the NACD’s Directorship 100 award for being one of the 100 most influential people in US corporate governance. He has also been honoured by the ICGN, Ethisphere, Global Proxy Watch and others.
In this episode of the podcast, Jon and I discuss the major arguments from his book including; the importance of MPT; some of the flaws in its underlying assumptions; how the very success of MPT has further undermined the assumptions that underpin it; and why MPT apologists who argue that ESG and impact investing will underperform have it wrong. And be sure to stay tuned to the very end when Jon responds directly to a conversation from an investment podcast where the experts argue that ESG and Impact Investing is doomed to underperform.
Resources from this episode:
Moving Beyond Modern Portfolio Theory: Investing That Matters by Jon Lukomnik & James Hawley
Jon Lukomnik's firm Sinclair Capital
Ep 124 of the Rational Reminder Podcast with Professor Lubos Pastor
👀 Look who’s hiring
There are some great job postings out there in impact land these days. Here are a few I’ve come across that are open right now.
Senior Investment Associate of Impact at Sarona Asset Management (watch for an upcoming episode of the podcast with Sarona’s Serge Levert-Chiasson)
Principal, Reimagining Capitalism at Omidyar Network (how awesome does this sound!?!?!)
Strategic Partnerships Associate at Equality Fund (Check out Episode 20 to learn more about Equality Fund)
Director of Investments at Illumen Capital (I’ve been trying to get Daryn Dobson from Illumen on the podcast, it’s a great black-owned impact manager doing great work from what I can tell)
📰What I’m reading
Government of Canada seeks social finance wholesalers to spur growth of social finance market (Government of Canada)
A Lawsuit A Day Keeps The Activists Away: New Report Finds 355 Lawsuits Filed By Big Business Against Activists (Morgan Simon writing for Forbes)
Policy Corner: A partnership between the US Impact Investing Alliance and ImpactAlpha (Impact Alpha)
Malaysia’s Sovereign Wealth Fund, Khazanah Nasional Berhad, Lays Out Vision for High Impact Investing Domestically (Sovereign Wealth Fund Institute)
📆What’s on tap?
Here’s what is coming up on The Impact Investing Podcast:
🎙 Upcoming Podcast Episodes
Keith Ippel of Spring Activator joins me to discuss the work the organization does to support not only social enterprise startups and entrepreneurs but also training cohorts of impact investors.
Elizabeth Freele of Sympact (a think-tank and hands-on consultancy) joins me to discuss the opportunities for impact in the mining industry. This is an industry that many impact investors tend to opt out of entirely. But as Liz points out, the world can’t do without mining in the foreseeable future, so we need to engage these firms and direct capital to finding ways to mine more sustainably.
Bahiyah Yasmeen Robinson of VC Include joins me to discuss her work helping to get more capital into the heads of underrepresented fund managers.
Farahnaz Karim of Insaan Group (a boutique impact investment entity that allocates philanthropic capital to tackle poverty in the Global South) to discuss their work in catalytic philanthropy. The organization does this by using donations to invest in early-stage ventures that create employment and/or deliver a product or service relevant to the poor. It then re-invests all revenues from these investments in new ventures.
Serge LeVert-Chiasson of Sarona Asset Management joins me to discuss Sarona’s work investing in impact funds and other financial intermediaries across the Global South.
Sir Ronald Cohen joins me to discuss his new book Impact: Reshaping Capitalism to Drive Real Change.