Want the perspective of an institutional money manager?
In Ep 31, I sit down with Andrew Parry of Newton Investment Management to discuss how he sees tries to infuse real impact in public market investing
Here’s what’s included in this edition of the newsletter:
The launch of episode 31 + new guest scheduled
An event invitation from Sara Wolfe (my guest from episode 22)
An exciting job posting from Jon Shell at Social Capital Partners (my guest from episode 25)
What I’m reading/listening to
What’s on tap
🎙 Episode 31 is live!
I have spent well over two decades working in the investment management industry. For the vast majority of that time, ESG and responsible investing toiled in obscurity and dismissed as the pursuit of impractical idealists. However, in recent years we reached a tipping point and the industry is racing to get in on the action by overhauling its marketing and sometimes even its investment processes.
These days you would be hard-pressed to find an investment manager that isn’t claiming to be incorporating ESG considerations into its processes. And there are plenty of investment managers quick to claim to be doing impact investing.
The trouble is, there’s a big difference between making investments that have an impact (all investments have some impact) and doing legitimate impact investing. The reason so few large money managers are doing real impact investing is because it’s harder, more time-consuming, often offers less liquidity, and doesn’t have the necessary scale.
In this episode of the podcast, I sit down with Andrew Parry, Head of Sustainable Investing and Newton Investment Management out of London, U.K. With roughly $60 billion in assets under management, Newton is a boutique investment management business that is one of eight asset managers owned by BNY Mellon Investment Management. Under Andrew’s leadership, the firm has put responsible and impact investing at the heart of its philosophy and approach.
Andrew has spent his career in investment management across a variety of respected asset managers including Hermes, Lazard Brothers, and Julius Baer, and Baring Asset Management. Parry is also a member of the CFA UK’s Committee for Diversity & Inclusion.
During the episode, we discuss how Andrew sees ESG investing versus impact investing, how he weaves an SDG focus into the firm’s investment process and product creation, the change in demand for responsible investments in recent years, and why he views every business as a de facto social enterprise. We also get into the age-old debate of whether responsible investing leads to lower future returns. And be sure to stay tuned to the very end where Andrew discusses his outlook for the investment industry headed over the next decade
Resources from this episode:
Newton Investment Management’s Website
Newton’s Statement of Purpose
Follow Andrew on LinkedIn
💥New Podcast Guest Scheduled
I’m excited to share that I got in touch with Jon Lukomnik, co-author of a book I mentioned in a previous issue of this newsletter: Moving Beyond Modern Portfolio Theory: Investing That Matters. In the book, the authors highlight the limitations of the dominant financial theory that underpins how professionals investors make investment decisions. The authors articulate a phenomenon that I myself have felt and have had a difficult time putting words to. I’ve started reading their book in preparation for our episode recording in early July. I think it will be a fascinating discussion! Scroll down to the “What I’m listening to/reading” section for an article Jon published recently covering some of the concepts from his book.
Don’t forget to check out the crowdfunding page of Geenees! This social enterprise is in the business of granting wishing to families in need. Listen in to Co-Founder Libi Berenson’s inspiration behind this venture and how you can make an investment for as little as $250 to help grow this impactful business.
🗓 Upcoming Events
Tuesday, June 15, 2021 from 11am - 3pm ET
Summer Virtual Celebration
This event is being put on my the Indigenous Innovation Initiative (I3). You’ll remember them from episode 22 of the podcast where my guest Sara Wolfe (who heads the I3) came on to discuss their important work.
Each component of this celebration will acknowledge, amplify and tell the story of Indigenous innovation leadership in Canada. This event will also be the launch of the Indigenous Innovation Initiative (I3) Paddles UP! fundraising campaign.
Recently, the I3 team have published an op-ed in the Toronto Star about Indigenous Innovation with Peter Singer. We were also proud to share the announcement of the first ten innovators in a press conference on May 5th with Minister Maryam Monsef of Government of Canada’s Department of Women and Gender Equality.
If you have not done so already, you can register for the event by clicking here, or simply reply to this email to let us know you are able to join. We look forward to having you join us.
Bill Young and Jon Shell (guests of episode #1 and #25) at Social Capital Partners are hiring for a critical role to help them advance the concept that Jon came on the podcast to discuss: Employee Ownership Trusts. In their words:
“We need a public policy entrepreneur to be our Director of Policy and Public Affairs and lead our efforts to grow employee ownership in Canada. If you're successful you will change the lives of thousands of Canadians.
The door is open after the Federal government expressed a commitment to employee ownership in the 2021 budget. Employee Ownership Trusts would lead to a new wave of companies selling to their employees, as has happened in the US and the UK (https://bit.ly/3u4VjHb). This is how we re-balance the economy, and create real wealth-building opportunities for workers.
But it won't happen on its own. We need you to work with government, build a non-partisan coalition of supporters and increase public awareness to create the conditions for the important regulations we need. You will have both independence and support.
This is a chance to drive real policy change that will matter to people for decades to come. I hope you'll consider it.
📰What I’m reading/listening to
The Impact Of Sin Stock Exclusion On Portfolio Performance (Larry Swedroe, Seeking Alpha)
I think this argument suffers from the same fallacy that other traditional finance guys (it’s always guys) fail to acknowledge: their financial models/theories are ignoring externalities (e.g. climate change and wealth inequality) that create very real systematic risks that eventually will come home to roost as systemic market risks with real financial costs. Still, I think it’s important to read views that oppose my own. That’s why I try to stay on top of articles and arguments like this one from Larry Swedroe.
Examining the limits of modern portfolio theory (Jon Lukomnik and James P. Hawley, top1000funds.com)
In a previous issue of this newsletter I mentioned a book on this topic by these same authors that raises great points about the limitations of Modern Portfolio Theory. This article is a great read and serves as a great response to the previous article by Larry Swedroe. As mentioned above, I’m super excited that Jon Lukomnik will be an upcoming guest on the podcast!
How to Fix the Gates Foundation (Alex Friedman and Julie Sunderland)
📆What’s on tap?
Here’s what is coming up on The Impact Investing Podcast:
🎙 Upcoming Podcast Episodes
Art activist Benjamin Von Wong joins me to discuss the power of art in driving impact at scale. Ben does incredible art installations that are at once beautiful and frightening! Click on his name, it links to his site where you can see his work.
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.
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.
Jon Lukomnik of Sinclair Capital LLC (a boutique strategic consultancy focused on corporate governance and institutional investing issues) join me to discuss his new book Moving Beyond Modern Portfolio Theory: Investing That Matters. In the book, the authors argue that Modern Portfolio Theory (MPT) — a fundamental framework that underpins much of our current investment theory — is broken, or rather, was never completely cogent in the first place. They argue that while aspects of it are useful it is becoming increasingly clear that it is divorced from reality. The authors propose a new framework to adjust our thinking so that we can marry the useful aspects of MPT (diversification and risk-adjusted returns) in the context of the real economy and a focus on total returns (which includes social and environmental returns).
👋Upcoming Clubhouse Conversations
A series of conversations on financial feminism (Dates: TBD)
A discussion with Joy Anderson of the Criterion Institute’s new paper, Disrupting Fields: Addressing Power Dynamics in the Fields of Climate Finance and Gender Lens Investing (Date: TBD)
See more by visiting www.kindwealth.club