- Good afternoon and welcome
to today’s Dean’s Speaker Series on Sustainable Futures.
I am Michele de Nevers.
I’m the executive director of the Sustainability
and Climate Change Office here at Berkeley Haas,
and I am thrilled to introduce two
of the women leaders whom I most admire.
Today’s guest speaker in the Dean’s Speaker Series
is Afsaneh Beschloss.
Afsaneh is the founder and the CEO of RockCreek,
which is an investment firm
among the largest woman-headed investment firms anywhere.
Afsaneh has been named among the most powerful women
in banking by American Banker.
And her firm, RockCreek, manages over $15 billion in assets
and believes that integrating inclusion
and sustainability from the very beginning
is the soundest way to generate long-term value.
Prior to starting RockCreek,
Afsaneh was a managing director
and partner at the Carlyle Group,
and before that, she was the treasurer
and chief investment officer at the World Bank,
which is where we met.
Afsaneh and I joined the World Bank
in their Young Professional Program
at exactly the same time a few years ago,
early in our careers.
[Afsaneh] I was gonna say, you don’t have to say the year.
I’m not going to. (laughs)
You would’ve thought that I joined a lot sooner.
But anyway, we joined at the same time.
So Afsaneh has advised governments,
central banks and regulatory agencies
on global public policy and financial policy,
as well as energy.
She’s actually quite an energy expert.
She recently gave a talk as part
of the UN climate negotiations in Sharm el-Sheikh,
where she spoke about accelerating finance
towards mitigation and adaptation.
Here at Haas, as you know,
we are keenly aware of the role of investment
in the climate and sustainability transition.
In 2008, Haas launched the first student-managed
Socially Responsible Investment Fund,
and today our Sustainable and Impact Finance initiative
is educating the next generation of leaders
to utilize finance and investment
to drive positive global change.
In fact, on March 22nd, 2023,
the Sustainable and Impact Finance initiative
is organizing its first inaugural conference
on mobilizing climate finance to achieve net zero by 2050.
So we are delighted to have Afsaneh with us today
to explore these issues.
Leading the conversation today is Ann Harrison,
the 15th dean of the Haas School of Business.
Ann Harrison is a renowned economist
and has dedicated her career to researching inclusive
and sustainable policies in development economics,
international trade and global markets.
She now brings this focus to higher education
here at the greatest public university in the world,
go bears, and the number one public business school.
Ann Harrison also worked at the World Bank,
which is also where we met.
And so you can see that the World Bank
has been a launchpad for powerful women
in economics and finance.
So please join me in a warm welcome
for Afsaneh and Ann Harrison, thank you.
- So I’m going to start out, Afsaneh.
Thank you, again, for joining us today.
So you and I, we both started our careers at the World Bank.
And now I see that you have founded and are leading
a very successful investment management company.
I’m leading a top 10 business school.
If we look around, we have other World Bank,
former World Bank colleagues
who are doing amazing things, also women.
So the World Trade Organization
is led by a former World Bank woman.
The IMF is led by one, the London School of Economics,
the Fletcher School.
So what is it about the World Bank that really fosters
and creates strong women leaders?
That’s my first question.
And then my second question is maybe you could tell us
a little bit about the path that led you
from an energy economist at the World Bank
to leading the World Bank Treasury
to where you are today as the founder of your own firm.
- So thank you, Ann, and thank you, Michele,
for your very kind invitation to be together today.
It is really, seriously, a true honor to be on
with the two of you and to, you know,
be with your great audience of really incredible students.
So as Michele said, we go back a long way
and as Ann said, we have all worked in an institution
that you hear about sometimes positively,
You hear a lot about the bureaucracy.
But on the positive side, it’s one of the very few places
where women have been able to actually just do fine.
And in the finance part of the bank where I worked,
as well as energy, and other parts
on the developments and policy side
where Michele worked and also Ann worked,
we had probably a lot of women role models.
I think one of them
is that there were other senior women around us.
Number two, because we worked in a very diverse environment.
You can imagine the World Bank is a very, very global place
and very international and we are all very different
with very different backgrounds.
Being different was not, you know,
did not stand out, let’s put it this way.
And I think your student body is similarly very diverse.
So in my own case, I had my first two,
I should say bosses happened to have been women.
It’s not like I sought out to work with them,
but I worked with DeAnne Julius,
who is very renowned in energy,
and Jessica Einhorn actually became also afterwards,
also treasurer of the World Bank and was dean of SAIS
among other people that Ann just mentioned.
And, you know, it made it sort of possible
to think of myself in the same terms.
So it was not uncommon for those of us
who worked around other women who were, you know,
just great in terms of their expertise
but also great in terms of mentoring
and sharing that expertise to flourish.
The other thing I would say is what Ann just said.
I mean, look at what she has done herself.
She has had a renowned career
before she joined the World Bank
and then at the World Bank she did an incredible job.
But then now in doing this role,
which is in education and working at, you know, at the,
as I agree with you, the best business school in the world,
she is bringing that same energy and dynamic spirit
to the men and women of Berkeley Haas.
And similarly, Michele, who I was very fortunate,
I should say, I’m one of three sisters, so is she.
And we bonded quickly when we both joined the bank
at about the same time and have commiserated
and been excited through our lives
about many of our, you know, life experiences.
So let me just stop there before I go on
to sort of how I got into what I got, if I may, Ann.
But I don’t know if there was anything else on that
that I could say or you may want to jump in
or Michele may want to jump in.
- No, no, we just love to hear a little bit
about your journey as an entrepreneur now.
leading the company, RockCreek.
- Thank you so much.
Thank you for that.
So very quickly,
you asked about the journey a little earlier.
I was born in an emerging market, Iran,
and I came to the US and when I was 16
as a exchange student, lived in Concord, Mass.
And when I was there, I already had an interest in energy
because I grew in a country where, you know,
which was an oil producer and had the largest,
second largest reserves of natural gas.
Natural gas being a big topic these days of course.
And fast forward, I went on to England
to do my undergraduate postgraduate.
And when I was at Oxford doing my postgraduate work,
I worked with one of my professors
also started the Oxford Energy Institute while I was there.
And it was a very oil and gas-based place at the time.
But his advice to me was a lot of the men know about oil,
very few people are natural gas experts.
It’s a cleaner fuel.
You’re starting your life in economics as an economist,
why don’t you learn something
about cleaner fuels like natural gas?
So that was kind of unusual at the time
and it is very similar to all of you
who live in the Bay Area,
where there’s so much venture going on around you,
where, you know, there’s a lot of innovation.
So believe it or not, I know it sounds hard
to think that natural gas at that time
was an innovation to work on.
And fast forward, I went to J.P. Morgan
and did a couple of years there
and learned a lot about many of the things
that you’re learning in your course
like accounting and corporate finance
and all those good skills that one needs
in order to be able to do other things.
Because if you’re trained as an economist in England,
believe it or not,
you don’t take any other courses than economics.
And I was passionate about working
on economic development like Michele and Ann.
So I ended up at the World Bank
in the Young Professional Program where I met Michele.
And I initially worked on health briefly
as a young professional, but energy had been,
as I mentioned, something I was very excited about.
So I went on to the energy department.
And as a young person,
I mean, probably not very different in age
than some of you in, you know,
who are listening to us today.
I said to my boss then, DeAnne Julius,
“We should really do more on natural gas.”
And she said, “Well, why don’t you do it?”
So I went on later on to create this group
and brought in everybody from the private sector
because one of the things we’ve learned
is that in order to, you know,
there’s so much that a multilateral can do,
but you really need to leverage its resources
if you’re going to succeed,
otherwise the money is not well spent.
So we leveraged resources.
Every dollar that we brought,
the private sector brought $10
because these were good projects at the time.
And a lot of them was moving countries away
from coal to natural gas.
Again, a topic that is very, very topical right now
in Europe, in Indonesia, in South Africa,
in many other countries.
So that was sort of the early, early story, Ann,
and then as solar and wind technology started
to get more developed, we started doing those
and we were pioneering investing in solar and wind.
And to be quite honest, they were not quite economic yet.
So we got special grants from a lot of the Nordic countries
to work on this in a number of countries
that were well-suited for doing solar and wind.
And it was really quite spectacular
to be investing in Latin America, in Africa and in Asia
in these cleaner forms of energy in the early days
and doing environmental studies.
And a lot of what we’re talking about today
in terms of impactful investments we were doing then
and trying to do the measurements
because that was the other thing.
Are we actually helping, you know,
on the environmental side?
So some of what we are using today was probably developed
at that time with my colleagues and I,
as we worked on these.
So it was a very, very exciting time.
- Thank you for that.
That’s really inspirational to me
to hear what a pioneer you are.
So I understand, so you were the first, you were the pioneer
to lead the World Bank’s investments in clean energy,
and wind and solar with the goal,
also in infrastructure to reduce emission.
So let’s move to right now.
Right now, what’s exciting to you in climate tech
and in renewable energy specifically?
- So Ann, I think a lot of really two or three areas.
One is obviously investing in climate tech
in some of the new technologies
and we’re doing a fair bit of that
and a lot of that is happening, again, in your zip code,
but is really happening all over the world,
including in some emerging markets as well.
So we are investing in new technologies
that are affecting aviation.
I like to call it air, land and water,
because a lot of what we have all worked on traditionally
is like on energy on land and have food and ag
but there’s also a lot going on with aviation fuels
and as we speak, we’re doing some early investments
on alternatives to aviation fuels.
There’s a lot of work going on on water, as you know,
because that is such an important source
of both resources but also getting destroyed very fast
by many in the world.
So we are doing the early stage.
Where we also are spending a lot of time, Ann,
is also on bringing existing, you know,
technology on solar but scaling it.
Because as you know with the new Inflation Act,
there’s a lot of wind behind investing in cleaner energy.
And I think President Biden’s, you know,
efforts to get this as the largest bill
that is going to help us move in this direction
is very, very powerful.
So what we’re doing is to look
at specifically scaling solar,
both residential but also what we call community
because the community-based solar
is very much even more economic
and you sort of bring it into a community
rather than individually, which is, as we all know,
I don’t know if any of you have tried
to bring solar power into your own home.
There’s a shortage of contractors
and shortage of experts on this,
believe it or not, as we speak.
And then also of course, you know,
working on scaling a lot of what is going
on the electric vehicles.
We’re working on that across the board on vehicles,
as well as larger trucks.
So I think both on terms of early tech,
as well as existing, we’re looking at battery storage
of course, you know, that’s a very, very big area.
Problem with that is that we’re still,
a lot of the new technologies that are going on
have still not been incorporated
into existing batteries that we’re using
and we are looking at that.
I think I was looking at some numbers
and just since January, 2021,
there has been more than close to 100 billion raised
for just climate-focused funds from almost 132 firms.
So that is sort of a large number.
And again, I think given where you’re living,
you’re probably seeing a lot of that going on around you.
- Thank you, thank you so much for that.
So now I wanna shift a little bit to think,
talking about venture capital.
So we know that here in the Bay Area
that venture capital has been absolutely critical
in the explosive growth of tech,
but let’s just think about the role of venture capital
in a broader sense.
We’re now thinking about venture capital
in much many other fields,
whether it’s agriculture or social impact, for example.
So I was just wondering what do you see
as the role of venture capital
in sort of the ecosystem in general?
- So Ann, it’s really interesting
because if you read a lot about venture capital,
obviously, it’s been the fastest growing area of investment
in the last few years and we saw the huge numbers
in terms of performance, particularly the last two years,
the not so good numbers in 2022,
which is normal because anything that does incredibly well,
like, is up 40, 50, 60% in one year
is not going to continue on that front.
But it’s still, in my mind,
the most exciting because at the end of the day
where returns will come from is innovation,
where returns will come from
is how we’re going to be living in the future.
And again, I think your student body
should be telling me what we should be looking at,
but it seems to me that the big themes for investors
is how do we invest in cheap energy
but cheap energy now happens to be clean energy,
so that makes it easier.
How do we get sick less?
Well, we need, you know, cleaner water,
better sources of food and healthier food.
So that takes us to food tech,
and we are investing in food and ag
because there is a lot going on as we speak,
not in terms of just producing more but better quality
and one of the projects we’re investing as we speak
is also how do you reduce water, for example.
And that’s with the venture firm
because look at almond and pistachios
and other goods in California.
The company we’re investing in is trying
to reduce the water need by about a third.
So venture firms are at the, you know,
I think the numbers I’ve seen is something, like,
about 2 trillion of venture invested so far,
I don’t know if that number is right or not,
your students and you would know better, in the US.
And the rest of the world is behind the US
but starting to invest a lot more in Asia.
Europe is behind, but trying to do more.
And I think that will change over time.
But here you are where you are sitting
in the middle of the sort of center of innovation
and venture will continue.
And as you very correctly said,
I really liked what you said
because most people when they think venture
or investing in venture or a lot of endowments,
foundations that you know very well around the Valley,
have been investing in tech that is related to software.
And I think the future as we speak
and in the future and some of what we’re doing at RockCreek
is investing, of course, you know,
we’ll continue doing that, no question about software,
but it’s also a lot in the themes of sustainability
and impact in health, education, and climate.
That will be very exciting.
- Thank you.
And now let’s turn to the company that you founded
and that you are heading, RockCreek.
So tell us a little bit about major trends
and exciting new investment opportunities
that you are seeing at RockCreek in venture capital.
- So thank you for asking me that.
I’m always excited to talk about RockCreek.
So I started RockCreek in about 2003, 2004,
and we really do two kinds of businesses.
One is we will work with endowment foundations,
become their chief investment officer
and allocate their assets
based on what our views are on the markets
and then choose funds or companies to invest in,
public and private.
So all the way from venture,
early growth and late stage, as well as private equity,
real estates and public markets.
On the other side of our business,
we’re doing direct investments in climate,
in food and ag, in health, in education, et cetera.
So those are sort of the two ends
and we are investing very globally,
US, Europe and a lot in emerging markets.
So what is interesting and what I would say, Ann,
has changed a lot is when we started RockCreek,
we wanted to do more in impactful investments,
but it was sometimes hard to convince our clients
who are endowment foundations, pension plans,
about these areas.
And something changed just before COVID
and particularly during COVID.
And what has been super exciting for me
and for our team here at RockCreek
is how our clients have basically hired RockCreek
because they are excited about these areas.
Some of the things that you asked me about earlier.
So we’re getting new clients who are joining us,
but very mission-driven but mission-driven
with a return objective.
So they’re all looking at market returns
and at the same time,
they expect to do no damage if they can
and hopefully do some good
as far as impactful investments are concerned.
I should mention also,
I chair the investment committee at Rockefeller Foundation,
and Doris Duke Foundation and National Geographic,
as well as World Resources Institute.
Different in terms of their sustainability goals,
but I can tell you that not just in my day job,
but in my, you know, life as a non-profit trustee,
I’m seeing the same trends as I just mentioned,
where a lot of foundations are looking
at increasing the share of impactful investments
in their total investments.
And I don’t know how exactly the Berkeley Endowment
is managed, but I wouldn’t be surprised
if they’re looking at more impactful investments as well.
But I can also talk about some examples
if that’s of interest.
- Well, maybe we can talk about that in the next question.
So I wanted to ask a little bit
about ESG in particular, right?
We all know ESG stands
for environmental, social, governance factors
in investments mostly in public markets.
So I know that you were an early adopter of ESG investing.
And I’m curious, can you tell us a little bit more
about the specific framework that you use
when you make these investments decisions
since so many, so much can go
into an ESG investment portfolio.
And also not just tell us perhaps a little bit
about your framework, but also do you apply that lens
to your whole portfolio or just to certain funds?
- So Ann, just in terms of history, again,
when Michele and I were at the World Bank,
which is a few years before you joined,
this word ESG started creeping into our language then.
And if you invested in emerging markets, you would know,
and both of you know very well that governance
is extremely important to invest
in a company that does not have good governance
or is not improving its governance
is probably a recipe for a disaster, right?
So the G of ESG was very, very big
when we started investing.
And this is like going back to a long time ago.
And then environmental was also early at the bank,
as I mentioned, because the bank
was getting involved earlier on cleaner energy
became a big thing.
So you would do environmental assessments of your projects.
And then social indicators were also important
in terms of looking at all kinds of health indicators
from child mortality
to education and indicators.
So all of those, I think the three of us were very fortunate
because as those indicators were developed,
we were sort of part of the dialogue.
And I think you yourself were very involved
in that in your time at the bank.
So that was sort of historically.
And fast forward to today,
whole industries are getting developed,
and there are many people who are measuring these.
And what we decided to do at RockCreek
is we realized that there is almost like religions,
like religious, you cannot get everyone to agree.
So there’s some people who use one system of ESG.
There’s Bloomberg Sustainalytics.
There is MSCI.
There are many others.
And frankly, they lead to very different results.
And what we do in RockCreek is we have created
like a system that will use any
of these external systems,
but then we also have our own ratings
and try to apply those.
And ours are much simpler and more streamlined, I would say.
So I think the big issue
that you and I were talking about a little earlier about ESG
before we started in the more formal conversation
is that there is a lot of greenwashing going on
and it is reducing the faith of people in the whole subject.
And what we need to do is to make it simpler,
more easy to adopt and more easy to regulate
and incorporate it into our daily life
because I think your students know better than anyone else.
You know, they’re choosing the place they live,
their transport mode, what they’re wearing,
what they’re eating very much based on environment
compared to their parents.
- Thank you.
I totally agree with you that,
that the systems need to be more streamlined
and much more clear and transparent.
And so that would be a longer conversation
that I’m sure we would all love to have.
But in the interest of time,
I’m going to move on to a totally different area.
So you’re the founder and CEO of RockCreek,
it’s one of the largest diverse-owned investment companies
in the world with over 15 billion
in assets under management.
Now, if you look at the percentage of minority-owned
and women-owned firms and private equity, it is very low,
even though it’s larger
than in all the other asset classes.
So there are only 4.5%
of minority-owned companies
and 1.6% of companies
that do private equity
are run by women, which is incredible.
So you’re in that 1.6%.
Tell us a little bit about some of the biggest challenges
that you faced as an Iranian immigrant woman
in setting up your fund.
- So first of all, Ann,
let me just tell you that one good news,
maybe it was the training at the World Bank,
was we learned not to take no for an answer.
So I think being, you know,
I think the polite word for it is resilience
is very important if you’re building anything, right?
Whether you’re building a technical company
or you’re building an investment firm or anything else.
And if you truly believe that what you’re doing
is something you’re excited about,
that you’re going to do some good,
not just for your own team but for the broader world
and the people you’re serving,
I think it just makes it that much more fun
to do even on days where, you know, it’s hard
because you go into a meeting and you realize
that because you look different,
you’re not taken as seriously as somebody
who looks less different in that environment.
I have to tell you that while things have changed
and they’re a little better today,
they’re not completely, you know, perfect.
I would say that even now, even at our size,
even though we’ve been around for a long time,
I find that it’s still, you know,
not as difficult maybe as when I started out,
but certainly not as easy as it should be.
And one of the things we do at RockCreek,
we invest in a lot of new talent.
So believe it or not, the first five million
to a firm called Bridgewater,
that a lot of your audience has heard of,
came from the team at the World Bank.
So we’ve been early in terms of finding new talent.
And new talent could be diverse or not diverse,
but two or three findings that we have.
Number one, we did a study with IFC,
which looked at private equity and venture investors
and we looked at emerging markets
because believe it or not, again,
this data does not exist in the US.
You cannot get data on gender
or any other kind of diversity
from Blackstone or Carlyle or KKR or any of those firms.
But IFC required anyone that they invested in
to keep this data.
So we had data of over 700 firms over 20 years
and sat down with IFC and with Oliver Wyman,
went through the data and found the following three things.
And we could only do gender because obviously,
there’s racial diversification since it’s, you know,
all regions in emerging markets.
So number one, more women GPs
in emerging markets than the US.
Number two, gender balance team,
and balance is really important
because you want balance, right, in a team.
And by that we meant 30% of one gender represented led
to 20% higher return.
And if you talk to Mary Meeker, you know,
who’s in the Valley or any of the other women
who have done really well, they will tell you that,
you know, having a diverse team means
that they look at a broader set of investments
and they will question different things
and they will look at risk management differently.
So 20% is huge.
And then thirdly, if you have a diverse team,
like, you know, in this case it was gender,
you’re more likely to also invest
in underlying women on companies.
So all in all, I think that was a really interesting result
and we have huge databases at RockCreek
that we’ve been keeping.
And what I would love is if you have students
who are interested in internships or later on joining,
we’re looking for really innovative,
high-energy dynamic students who are interested
in looking at this data more intelligently,
improving it, and then using it in investment decisions.
Because believe it or not, in the venture area,
there’s very little use of technology per se and data.
There’s a lot of information on specific,
you know, industries on data,
but looking at trends and using that in investing
is not as common and it’s one of the things
that we are trying to improve.
Last but not least, I’ll just say one thing,
which I think is very positive,
which is unlike private equity, as you said,
broader category of private investments
where it is very hard to start a new firm,
venture is probably one of the easier places
to start with a small amount of capital.
So if you can raise smaller amounts in venture,
which is also an area where you can be very impactful,
you can start much more easily.
In private equity, if you don’t have in buyouts,
you know, several billion,
you probably won’t be taken seriously.
And so it’s been really exciting for us to do more
on the venture side, but I would also, you know,
let your students know that definitely one
of the more open areas for women and men
and diverse communities is venture today.
- That’s really, really wonderful to hear.
Students who are here in the room, did you all hear that?
There’s a real role for a more quantitative approach
to venture capital and here we have the CEO
of a big company that’s encouraging you
to work with RockCreek.
So that’s great.
So I’m gonna shift the conversation a little bit more now
to the goal to reach net zero emissions globally.
What do you see as the role of private companies
in catalyzing the transition
to net zero emissions and sustainability?
And do you feel that the private sector
and financial institutions are leading the way
or can lead the way to net zero emissions?
- So Ann, I find that the interesting thing
is that first of all the audience in your room
is the strongest group that is pushing
and it’s the new, you know,
younger generation that is really pushing the most,
and they’re the future consumers.
So companies are listening to who their existing consumers
and the future consumers are.
And so they are hearing
that they need to be much more impactful
and to be much more thoughtful about emission specifically,
which is something which is a little bit easier
to measure as they develop their product
or as they refine the systems
for production of existing goods.
So I think that is very much the case
and what you’re finding is that some companies
and really, the best companies see
that it is more cost-effective,
less risky to move in this direction
and they also don’t want to get stuck with stranded assets.
So whether they’re insurance companies,
whether they’re financial companies
or they’re running other kinds of businesses,
they are looking at this much more effectively.
In practice, it was only really at the end of last year
and the beginning of this year where in the banking sector,
if you look at the numbers, just at banks,
the amount going into renewable energy
and into traditional oil and gas became equalized.
So they’re still investing in oil and gas and coal.
They have not said they won’t.
And there was, as you remember,
in the last COP meeting in COP26,
there was a whole set of financial institutions
that signed up for GFANZ.
But in practice, some have backtracked
and some have not done very much on that front.
Nonetheless, I think what we need to do
is with the people in the room, again,
and your students at Berkeley and other universities
really improve measurement
so that we can hold people responsible
and introduce simple rules again to boardrooms
to hold their management more responsible.
I think we’re moving in the right direction
and if anything, I would say the younger people,
followed by corporations, followed by governments,
and followed by international organizations.
So COP is talking a lot,
but I wish that they will achieve more and implement more,
followed by governments, followed by, you know,
corporations and young people would be the direction
that you would see more happening versus less.
- So that’s exciting.
There’s a real role for our community
to really make a difference in this area.
So along the lines of disclosure,
I wanna ask you about a specific proposal.
The Securities and Exchange Commission,
which regulates financial markets,
has a proposed climate risk rule that would mandate
that companies describe on Form 10-K
their strategy towards climate risk.
And I’m just curious,
what do you think about the proposal
by the SEC to mandate disclosure in this area?
- I think I’m very excited
that they’re asking for disclosure.
I think we were, you know,
like many others involved in giving comments to the SEC,
some of them we saw in their new ruling,
some we did not see.
But in terms of moving towards more information,
I think it’s good for investors to see what’s, you know,
a company’s doing.
Again, if you’re investing in a company,
you don’t want to get stuck with stranded assets
in five years or 10 years.
So it’s good risk management to do that.
I think the one thing that I would encourage, you know,
regulators to do though is to be careful
because the larger companies have diversity officers,
they have teams of diversity officers, they have teams
of impact and sustainability officers.
So they can, when they report,
they can make a pretty report, let’s put it this way,
versus other companies who might be much more effective
in reducing emissions but they do not have the, you know,
impact officers and sustainability officers
to produce the beautiful reports.
So you need to make the rules
to be such that people who are, you know,
obviously, the Fortune 500 are doing a lot
and doing it better, but also smaller companies
are also moving in this direction,
not just the larger companies.
So I would try to simplify and one other thing
is that I think one unintended sort of experience
that we’ve seen is some
of the smaller asset management firms
who have got dinged by regulators because again,
while they are very impactful,
they just don’t have the resources
to report on it preferably.
And I think you have to be very careful if I’m,
you know, if I was in the shoes of the regulators
to differentiate between that versus a lot of people
who are greenwashing but are very effective in reporting.
And I hope that your students are learning the difference
between those two and hopefully with their values,
we’ll get better reporting in future in companies.
- Thank you for that insight
on the differential regulatory impacts
on large versus small companies.
Now I wanna ask you a little bit
about a backlash against ESG.
So we’ve heard, and I’m guessing
that you may have personal experience with this,
that some politicians are divesting from companies
whom they think aren’t investing enough in fossil fuels.
So what do you think are the best ways
to get critics of ESG investing on board?
- This is such an interesting situation right now
because you all are in California where, you know,
there has been a lot of investments in cleaner fuels
and just broadly sustainable energy.
And the other states that have been talking about,
like you said Ann,
not holding it against the oil and gas industry.
I should tell you,
I was in one of the most interesting meetings
in May of this year in Texas
with people who had, you know, roles in universities,
very big endowments.
They were secretaries of energy from both parties.
There were people from all kinds of venues.
Anyways, I can’t talk about details about that
but let me just tell you that a lot of the biggest CEOs
who own oil and gas,
their biggest investments now are in renewable energy.
So while the politicians in some of these states
are talking about oil and gas, in practice,
a lot of the business people
are investing in renewable energy
because that’s where they see the future, right?
And if anything, they complain about how permitting
for renewable energy is slow.
I found that really interesting
to see the disconnect between the two.
And again, I think as the audience
for this conversation is thinking about this,
what you see is not quite what is happening.
And I think what it shows me
is that we need a lot more communication
between the politicians and the business people
from both sides of the aisle
and not being political about it
but being completely business like,
solar energy and wind energy.
I think Texas is the biggest producer
of wind energy, aren’t they?
You would know better,
but they might be ahead of you in California,
on solar, they might be number two.
So I think I would look at what the numbers are
versus what the politicians are stating.
- Thank you, that’s brilliant.
I think it’s so interesting that CEOs in Texas
of oil and gas companies are actually putting their bets
on wind and energy.
That’s great to hear.
So this is my last question
and then I’m going to turn it over to Michele
and those of you in the room who would like to ask questions
that maybe I haven’t covered.
So my last question is many of our students, really,
are excited about the huge potential
of sustainable finance.
So we’re curious, what do you look for in new hires,
other than the fact that you have a Haas MBA,
which is an amazing thing.
And also not just what do you look for,
but where do you think are some
of the really exciting opportunities for our students
who may wanna have an impact in sustainable finance?
- I think this is really the time
where if this is your interest,
that is where the largest growth is
in terms of jobs opportunities.
And, you know, you are very fortunate
to be coming out of Haas and with this kind of background.
Most companies are looking for young people
who have both quantitative skills and qualitative skills
but also have this passion around sustainability.
And if you can bring those three things together,
I think you basically are unique
because a lot of people who have qualitative experience
around life and some people who have,
you know, just quantitative experience.
But if you bring the three, quantitative,
qualitative, and sustainability together,
I think you are very unique.
And whether you’re looking at it from, again,
we talked about venture companies,
but the underlying companies that the venture companies
are investing in need the same skills, right?
And not just the venture firms
but private equity firms are all hiring people,
banks are all hiring people
who have this kind of background.
And then there’s also the non-profits
and non-profits are trying to straddle
to do more impactful investments with returns in their,
not in their foundation endowment,
but also in the rest of their businesses.
So you’re entering this job market at this very time
where certain things are going down like just pure,
you know, you see Amazon letting 10,000 people go off
or Twitter, you know, going through,
it’s various interesting changes.
And tech in general, you know, when it comes to software,
goes through a lot of transition
but the areas we talked about,
today’s sustainability is the growth area.
And if you’re looking, just go look at the Inflation Act
and see where it is driving resources to
and that gives you a really good indication also
of where resources are going in the next five, 10 years.
- Thank you so much.
And now I’m going to let Michele take over.
I think this is a great opportunity.
If you have questions,
you can go to the mic and please identify yourselves.
- Ann, it’s great to be with you
and look forward to seeing you soon.
Yes, I look forward to seeing you too.
Thank you so much, Afsaneh.
We have students lining up to ask questions
but I’m going to take advantage of my position
of standing in front of this microphone
to ask the first question.
And that is of your asset owners, whose assets you invest,
and in your firm, people talk about fossil fuel companies
becoming stranded assets.
Do you think that your asset owners
and other investors actually believe that?
Do they actually think we maybe should withdraw
from fossil fuel companies
because they’re gonna become stranded?
Because one doesn’t really see that happening.
- So I think there’s plenty of people who are invested,
as you said, in oil and gas.
And particularly, natural gas is a very complicated,
politically charged question right now
because as Europe is going through its crisis
and they’re short of natural gas.
The question is, you know,
should US and the rest of Europe produce more natural gas
or other places, Africa,
to push into replacing the Russian sources
in the short run as Europe is developing
its own solar and wind and potentially, modular nuclear,
or other forms of nuclear.
So that conversation is very, very hot as we speak
and probably around 10 trillion of investments
will go into just Europe over the next,
you know, decade or so
in revamping their whole energy sector,
which was very based on, as you know, Russian natural gas.
So the short term versus the longer term conversations
are really important when it comes to hydrocarbons
versus clean energy.
And as you see in a lot of developed countries,
oil and gas, particularly natural gas is getting resources.
I would say, Michele, though,
that in a lot of oil companies,
you’ll see that they’re renaming themselves,
they’re changing their names from oil and gas
to energy companies, right?
And their R and D groups and their groups
that are investing in new technologies
are increasing and getting more resources.
So you should follow where the money is going
in those companies.
And I think, you know, more and more,
you’re seeing the money going towards investing
in new technologies rather than the old oil and gas.
They’re not giving up on the existing oil and gas
but they’re not spending a lot on exploration production
or exploration, really, because some of these
and a lot of the cleaner energy is just cheaper.
[Michele] Yeah, yeah, that’s really interesting.
It’s not just stranded
because people believe they should not,
you know, use coal or they should not use oil.
It’s more because, you know,
if you get solar that is cheaper,
that’s where the power generation will come from.
That’s where the utilities will go
to source their energy for power.
- Yeah, that’s really interesting.
I get a different picture reading the FT energy section
but okay, we have a student.
Remember to introduce yourself, please.
- Hi, thanks for coming here today.
My name is Charlie, a first year MBA student,
and I wanted to ask about nuclear energy.
So you mentioned IRA, right?
I think there’s roughly half a billion earmarked
for nuclear energy specifically in the US
and I’m wondering what your view is
on both fission and fusion’s role
in the future of energy throughout the world,
what we should be doing today,
what we’ve seen with all of the recent investments
in fusion over the last two, three years
where it’s, you know, tripled
and just kind of curious what your thoughts are around it.
- So I have to tell you first my prejudice
was not positive about nuclear.
I’ll tell you what I’ve learned more in recently
and I continue to learn.
The reason I was not positive was around two reasons.
One is the waste management aspects that we all know.
Where do you keep the waste?
And how do you deal with the waste?
And the other one was we have seen the accidents
around nuclear energy around locations
in Japan or the US or elsewhere,
where you have very highly skilled technicians.
And everything that I learned when I did try
to learn about nuclear power plants
and went to visit them was the quality
of the technical staff who run these
is not just designing them
but the actual running them is really important.
So, so long as you have high quality trained people
to do it, it’s fine and otherwise,
it’s not fine and it’s very dangerous
to the environment around them.
And that was why I always felt
since that could not be confirmed,
especially if you went out of the, you know,
G7 countries, the more developed countries,
then maybe it’s better not to look at it.
More recently, we’re all hearing about
and some of these IRAs going
into what is called modular nuclear, which is smaller.
So think of these community solar plants
where you get solar plants
to go to solar energy for communities.
Similar idea with nuclear where there is less wastage,
there is less possibility of anything dangerous happening.
It doesn’t need the same kind of technical know-how.
There are few US companies
that are developing this technology.
They still have not really been used
in any scale or anything.
So I think we should definitely watch
to see how that is going.
And I think it will be very interesting both,
like you said, to watch the technology on fusion
and fission and see what is getting used
in scale versus not scale.
In terms of the bigger nuclear,
as you know in places like Germany,
they had a rule not to touch it,
but even there, they’re looking at it
as one of the many alternatives.
So just depends on how fast some of the other things
like green hydrogen or other forms of innovation move
and how cheap they become.
So people will look at the cost of nuclear,
which is not cheap, by the way,
versus the costs of the renewable energy
as is known right now and new sources of renewable energy
that are getting developed.
So nuclear, I think will, you know,
people will continue to look at it
but I think most people still don’t want
to have the very large-scale nuclear plants
next to their houses.
[Student] Awesome, thank you.
[Michele] Thank you.
- Hi, I’m a second year MBA,
also an exchange student from London Business School.
My background is mainly been in the clean energy space
from a financial advisory point of view.
Thank you for your talk today.
My question was around the investment side
in terms of ESG integration.
So I think we’ve talked about particularly how ESG factors
into selecting these investments.
So we talked about accelerating the renewable energy space
and other clean tech.
I guess on the other side of ESG integration
beyond impact measurement,
where we’re talking about, like, adding value.
Could you talk to a few examples where your fund
has added value from an ESG perspective,
particularly maybe later state kind of more akin
to like private equity?
- So I mean, one of the things we look at
in all of these is obviously looking
if it’s a clean energy technology
or if it’s, you know, a renewable source of energy.
Obviously, we look at the carbon emissions
and that is sort of the, I don’t wanna say straightforward,
but a little bit easier to measure, right?
I think the other things in terms of value
that are harder to measure
is, let’s say, job creation, right?
How many jobs have we created?
And for some of our clients, that really matters.
So in terms of value,
what are you adding beyond the emissions?
And there we do measure if we are creating new jobs
that did not exist before,
what kind of training programs we are providing.
And so I think that is important.
We look at the value if some of the places
where we’re investing is more economically backward areas
that do not have the same, you know, situation as others.
We’re looking at some solar plants as we speak
in Georgia and elsewhere on blighted agriculture land
where there is no alternative to either using it
for agriculture or anything else.
And as solar comes in, it’ll really reduce energy costs
for population that it will make, you know,
it will be meaningful, as well as using this land
that could not have been used.
So those are some of the places, but I’m not sure
if that’s answering your question exactly.
- Yeah, I think it does answer it to some extent.
So it sounds like it’s mainly impact measurement tracking
and then kind of socially in terms of job,
increasing jobs and reporting on that.
Okay, thank you.
[Michele] Thank you. - [Afsaneh] Thank you.
Hi, Afsaneh, thank you so much
for coming to guest speak for us at Haas.
I’m Jennifer Yen,
I’m a senior undergrad student here
and I have two questions.
So first one, what do you think as the end goal of ESG?
Basically, how does it play out in maybe 10 or 20 years
in the US or in the developing countries?
I think second question is,
you mentioned about addressing the greenwashing issues
about some, like, ESG funds.
And what do you think are some good criteria
that come into the ESG investment process
that make sure that our investments
are actually making the impact that we want?
- Thank you, Jennifer, for these great questions.
I’ll tell you my hope and dream
is that we won’t have these terms like ESG,
that you and your friends in your class and others
in your position will make sure
that everything we’re doing is good for the environment,
it’s got good governance,
it’s, you know, you are running diverse boards,
diverse companies and you are trying to not,
you know, when I look at S, for example,
we are in a very highly
inflationary environment right now, right?
Every time you open the newspapers people will say,
“Oh, wages are going up.”
By the way, we know that wages have gone up less,
a lot less than inflation has in the last 12 months, right?
But they will talk about how the labor market is tight
and as wages go up, that will be highly inflationary.
However, there is not scenario where you say,
well, wages could go up a little bit more,
at least to meet inflation, but profits could come down.
It means that some of the stakeholders will make less money,
i.e., the shareholders in the company,
but they’ll still make profit.
The labor will get paid more decent wage
and as you’re coming out of this inflationary period,
actually, they won’t be hit with big debt
and they will consume more,
which means we will have more economic growth.
And so when we talk about the S,
to me it’s a very practical, real thing, you know?
And so when I hear many economies talking about wages
creating inflation is spiraled
but they don’t talk about profit margins,
I think there’s something wrong in that conversation
because all of these end up, you know,
to be inflationary and you have to have productivity,
capital, labor and technology
and all these other costs and profit margins,
all look at it as one, not, you know, individually.
So the reason I say that
is I think we’re still sort of moving out of a world,
where having a decent wage was not something
that people thought about.
And I think as we move to a world
where people believe in truly paying people a decent wage
and to have, you know, your environment be,
everywhere, be the environment you want around yourself,
where your breathing air and you have clean water to drink
for everybody and you have good governance,
i.e., people hire people like you and me
and others in your audience,
then I think companies will not use,
hopefully use the term ESG.
So I’m sorry to be a little long-winded on that,
but hopefully the term ESG will go away
because we don’t need it.
That would be if we’re really successful.
And it sort of brings you to the greenwashing subject
and I’ll be faster on that
because I think on the greenwashing,
I think you just have to hold people up
to what they’re doing.
And the more you can measure what is getting done
versus their reports, you know,
and holding people responsible to a few factors.
You know, what did you do for emissions yourself
in your own company?
What did you do on diversity internally?
What did you do on, but specifically with greenwashing,
which is about the environment,
the two or three factors that are important
on the environmental side, holding them responsible,
I think, will be the best way to deal with that
versus letting them just say,
we are moving towards improving, you know, our emissions,
which is just too fuzzy.
So I think that would be my answer.
- Thank you.
So really helpful.
- Do we have one more question?
Do you have time, Afsaneh, for one more question?
- [Afsaneh] I can do one more question, yes,
if there is one more.
Hello, my name is Joseph, I’m a second year MBA.
And I have a question
about kind of managing VC expectations.
So climate tech startups
have different looking economies of scale,
different looking economics than tech companies,
but there has been so much tech and VC relation
that’s been going on.
As a climate tech startup,
how should you manage those VC expectations
a little bit differently,
given that you’re going to have higher capital costs
than a more traditional software-based tech startup?
- I think, so great question.
I think that is why there are a lot
of climate tech venture firms that are getting created,
that are specialized just in climate tech.
So I think they obviously will be much more sensitive
to what you’re saying versus the more general venture firms
that are investing across the board
and they’re looking at everything at the same time.
So obviously, the two will look
at the cost of capital differently, right?
Because if you’re investing in climate tech,
you’re looking across different investments
across that sector,
and looking at what is sort of your best ideas.
The other thing is that if you look at the other companies,
you know, the broader larger venture firms
that invest across areas,
they already have a lot in software, right?
So they’re trying to diversify.
No question they’ll look at the cost of capital,
and in general, the cost of capital has gone up from zero.
So there’s that issue, which is affecting everything.
But I don’t think that will be the issue
in terms of investing in climate
just because they also see where money is going
and they will follow money, so.
- Great, thank you so much.
Thanks, everybody, for your questions.
And Afsaneh, thank you so much for joining us today.
I know that there’s a huge amount of appreciation
among our students.
I expect to see you flooded with letters saying,
“How can I come work for you?
Sounds like such an interesting firm.”
So thank you very much.
We really appreciate having you with us.
- Thank you, Michele.
Really, really thank you.