Interviewer: Christopher Skroupa, Founder & CEO of Skytop Strategies
Speaking with: Kate Shattuck, Co-Leader, Impact Investing at Korn Ferry
Christopher Skroupa: Over the course of a ten year economic boom, what has driven impact investing?
Kate Shattuck: A value shift. Institutional investors and Wall Street leadership have come to embrace the underlying assertion that companies must create value for their shareholders AND non-financial stakeholders, responsibly. If a company creates profits but at the cost of long term sustainability, like the environment or pay equity, the assertion is that the company will have a challenge creating long term value for all stakeholders, employees and shareholders.
Skroupa: Is this due to ESG investing?
Shattuck: Over the course of this boom we have seen sustained growth in the field of ESG and impact investing. This is due to positive awareness in corporate governance. Boards must be transparent and have the expertise to address the issues faced by a company, it’s market or it’s stakeholders. Good governance also addresses the need for E (environmental) and S (social) considerations in value creation. Companies must be thoughtful about their supply chain and invest in their employees. Likewise, global companies must adopt acceptable standards for operating in developing countries or challenged communities, fighting against short termism.
Skroupa: What is the future of ESG?
Shattuck: ESG will move away from serving as a discrete investment strategy and is likely to integrate into due diligence of all asset classes: public equity, fixed income and private investments. In short, it will integrate into buy, sell or hold considerations across individual and institutional investors. Also, employees and other stakeholders will continue to be more vocal about the ESG policies of companies.
Skroupa: How does impact investing relate to this?
Shattuck: Impact investing is an outgrowth of ESG–a next generation development. Impact investors are committed to a more proactive approach, measuring social change as a key consideration to evaluating performance. The challenge here is that there is more than one definition to impact investing – defining social change is very specific and personal to each individual or organization. That said, impact investing is about intentionally delivering a financial ROI alongside a measurable social return.
Skroupa: How does talent fit into impact investing and how it’s unfolding?
Shattuck: Impact investing is not a nascent strategy. From the Quakers to faith-based investors, values-based investing has been happening for decades, if not centuries. However, it’s definitions are new and consumers have a new voice. Technology is creating radical transparency about supply chains and pay practices, allowing for more detailed analytics and reporting. There is great talent, both on the experienced hire and emerging leader level. We are finding the highest talent demand is for a proven leader with a fundamental understanding of finance and deal experience. Technical skills are a must. Even more important are personal attributes: tenacity, agility, creativity are essential, as many of the impact structures are new and different. Partners on impact projects come from government, nonprofit and the private sector. Family offices can be more creative and bespoke. As a result, a person’s skills, attributes and culture fit all play an important part in hiring and succession.