ADISA Video: How to Approach Impact Investing

In an interview with ADISA board member Greg Mausz, Paulina Stannard, head of Impact at CI Private Wealth explains how values and capital should align.

“I think terminology can be kind of distracting, but the overarching theme here is that every investment is an impact investment,” said Stannard. “No different from the traditional side, or traditional investments. Every investment has a financial return, could be positive or negative or zero, but it has one and it’s no different on the impact front.”

In this interview, Stannard explains how investments in affordable housing should be considered impact investing for a variety of reasons, including its target of low-income communities who are typically priced out.

“The fact of the matter is aligning your activities and your dollars with your values, that transcends all party lines, faiths and demographics,” said Stannard.

Video Transcript

Greag Mausz   00:10

Welcome to another edition of Focus on Alternatives, brought to you by ADISA, the Alternative and Direct Investment Securities Association. For more information about alternative investments, please visit adisa.org and check out the resource library. My name is Greg Mausz, I am your host today. I’m joined by Paul Stannard, she is the head of Impact at CI Private Wealth. Thank you for joining us here today.

Paulina Stannard   00:36

Thanks for having me.

Greag Mausz   00:37

So, can we start just with the basics? What is impact investing?

Paulina Stannard   00:42

Sure, it’s a great question. I think terminology can be kind of distracting, but the overarching theme here is that every investment is an impact investment. No different from the traditional side, or traditional investments. Every investment has a financial return, could be positive or negative or zero, but it has one and it’s no different on the impact front. And the other really important piece here is that we’re not talking about an asset class. This is a philosophy. So, I call it values aligned capital, but whatever term you use, this is about deploying capital in line with a client’s values.

Greag Mausz   01:19

That makes a lot of sense. And I like that values aligned capital. Can, can you continue to unpack that more and talk about the full scope of what that means for advisors?

Paulina Stannard   01:28

Yeah. So, it’s really a spectrum, if you think about it as traditional investments on one end, solely pursuing financial return and philanthropy on the other end solely pursuing social and environmental return. What we’re talking about here is anything in between, which means that to some degree they’re going after both of those pieces of return. And really the way advisors and asset managers should think about their role is everything on that spectrum are tools in their toolkit, ESG impact, investments and philanthropy. And so, for advisors, as they’re thinking about constructing client portfolios, this is no different from what they’re already doing today in terms of understanding what their clients care about, what drives them, and then building a comprehensive financial solution around that. Just the difference is it’s a slightly more personal process, going a little bit deeper, and that often ends up translating to, you know deeper engagement with multiple generations and frankly, stickier relationships. And then on the asset manager front, again, this is not that different from what, alternative investment managers are doing today. They’re looking for gaps, commercial gaps, in the marketplace and trying to find a way to solve those while seeking Alpha. It just so happens that right now the opportunity set largely lends itself to social and environmental issues going on in the world, and there’s a tremendous opportunity to monetize those and also positively influence people and planet.

Greag Mausz   03:01

I really resonate with what you’re saying, but there are some advisors out there and some investors out there that say, eh, this is not for me. Probably for a variety of different reasons, but what would you say first to the advisor if they’re de determining what, how to engage here? And then what about the advisor to the investor? If the investor’s like, eh, I don’t really care.

Paulina Stannard   03:25

I’d say it would be a missed opportunity regardless of the seat that you’re in to not be prioritizing this. So, for advisors, I mean, the headline is, the opportunity set is wider and greater than they might realize. So, I think the politicization of ESG has led some advisors to sort of laser focus on a subset of their client base who might be interested in this. But the fact of the matter is aligning your activities and your dollars with your values, that transcends all party lines, faiths, and demographics. And so, shift my recommendation, be shifting the narrative to be about values really opens it up to be accessible and resonate with everyone. And, on the asset manager front, I mean, look, we know that investment capital is needed in order to solve the world’s problems. Governments and nonprofits cannot do it alone.

Greag Mausz   04:21

And can you just give a few examples there of where those public-private partnerships are coming together in the investment world?

Paulina Stannard   04:29

Sure. Yeah, so affordable housing is one that I think people have been investing in for decades, and I think they might not have necessarily thought of it as an impact investment. But it’s intentionally targeting low-income communities who, especially in many metropolitan areas, just are priced out. And the partnership between government and private capital is there’s government subsidies to incent some of these investment managers and real estate developers to go in and build affordable housing while making a very attractive return.

Greag Mausz   05:04

Right. So, I’m an advisor. I, I want to take the first step. You’re obviously an expert in this. What do you recommend?

Paulina Stannard   05:14

So, I think my biggest learning and really the, what I’m laser focused on is bridging the gap between these two worlds that sort of think they’re on different pages but aren’t. One is this investor base that look all else equal, want to make a positive difference in the world with their wealth and the investment community who want to make money and they have the expertise to build those solutions. The what’s missing is the translation between those two and the education. So, in terms of next steps, really education is the key piece. But at the same time, don’t overthink it and be, don’t be intimidated by it because this is an ever-evolving community and ecosystem. We’re learning every single day. So just start to get your hands dirty, focus on low hanging fruit and over time you’ll get more comfortable with it and more educated in the process.

Greag Mausz   06:09

Makes complete sense. You can tiptoe into this, begin engaging the clients, begin making some minor tweaks, and then just build from there.

Paulina Stannard   06:16

Absolutely.

Greag Mausz   06:17

Thank you so much for taking the time to talk with us about this.

Paulina Stannard   06:20

Thanks for having me.

Greag Mausz   06:21

And thank you for watching. For more information about alternative investments and impact investing, please visit adisa.org. Thank you.

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