Berkeley Haas - Dean's Speaker Series | Afsaneh Beschloss Founder & CEO, RockCreek

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(audience chattering)

  • 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.

(audience applauding)

  • 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,

sometimes negatively.

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.

That’s huge.

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.

Introduce yourself.

  • 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.

  • [Afsaneh] Absolutely.

  • 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.

  • 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.

Thank you.

  • 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.

  • There is.

  • 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.

(audience applauding)