Capital Series: Rebecca Carland, Builders Asset Management

Financial Services

Oct 18

This episode is part of our Capital Series hosted by MCJ partner, Jason Jacobs. This series explores a diverse range of capital sources and the individuals who drive them. From family offices and institutional LPs to private equity, government funding, and more, we take a deep dive into the world of capital and its critical role in driving innovation and progress.

Rebecca Carland serves as the Chief Investment Officer at Builders Asset Management, where she leads a growing impact-oriented team investing globally across public and private markets. Builders Asset Management is the asset management team at Builders Vision, which is Lukas Walton's family impact platform that offers versatile philanthropic and investment tools to people and organizations building a more humane and healthy planet.

Jason and Rebecca have a great discussion in this episode about Rebecca's journey to doing the work that she does, her work at Builders Asset Management, how that fits in to the overall Builders Vision umbrella, and where Builders Vision fits into the broader clean energy transition. Enjoy the show!

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*You can also reach us via email at info@mcjcollective.com, where we encourage you to share your feedback on episodes and suggestions for future topics or guests.

Episode recorded on Sept. 22 (published on Oct. 18, 2023)

In this episode, we cover:

Introduction to Builders Vision and its asset management arm
Rebecca's background and journey to impact investing
The role of market forces in driving change and the need for collaboration
Builders Vision's focus areas: renewable energy, sustainable food and agriculture, and healthy oceans
The shift from family office to impact platform
Builders Asset Management's mandate
The importance of ESG integration and standardization
The gap between venture and infrastructure investment and the need for more capital in the missing middle
Challenges and opportunities of company net-zero commitments
The launch of Builders Vision's inaugural impact report

Jason Jacobs (00:00):
Today on the MCJ Capital series, our guest is Rebecca Carland, chief investment officer at Builders Asset Management, where she leads a growing impact-oriented team investing globally across public and private markets. Builders Asset Management is the asset management team at Builders Vision, which is Lukas Walton's family impact platform that offers versatile philanthropic and investment tools to people and organizations building a more humane and healthy planet. We have a great discussion in this episode about Rebecca's journey to doing the work that she does, her work at Builders Asset Management, how that fits in to the overall Builders Vision umbrella, and where Builders Vision fits into the broader clean energy transition. We have a great discussion and I hope you enjoy it. But before we start...
Cody Simms (00:48):
I'm Cody Simms.
Yin Lu (00:49):
I'm Yin Lu.
Jason Jacobs (00:50):
And I'm Jason Jacobs. And welcome to My Climate Journey.
Yin Lu (00:56):
This show is a growing body of knowledge focused on climate change and potential solutions.
Cody Simms (01:02):
In this podcast, we traverse disciplines, industries, and opinions to better understand and make sense of the formidable problem of climate change and all the ways people like you and I can help.
Jason Jacobs (01:12):
Okay. Rebecca Carland, welcome to the show.
Rebecca Carland (01:17):
Thank you for having me.
Jason Jacobs (01:19):
Well, I was just told by you actually before we started recording that this is your very first podcast.
Rebecca Carland (01:25):
This is my first podcast, so I will remember it forever.
Jason Jacobs (01:29):
Well, we picked the Friday afternoon after Climate Week intentionally so that we could get you while you were weak. And here you go.
Rebecca Carland (01:35):
I've been warming up all week for this. That's how I like to think of it.
Jason Jacobs (01:38):
Well, that is the other side. You're well practiced as they say. But super excited for this one. As you know, I recently had your colleague, James Lindsay, on from Builders Vision, and you are part of Builders Asset Management, part of the same overall umbrella, yes?
Rebecca Carland (01:56):
That's right. So we're both part of Builders Vision. Builders Vision is our family office and impact platform founded by Lukas Walton. So we have three legs of the stool. You've met James. James is one leg. He sits with Builders Initiative, which is our philanthropic arm, but they also oversee all the endowment investments as well as what he was really focused on was they have a impact-first portfolio. And so, that's where James sit. I sit and oversee our Asset Management arm. And then you'll have to have another guest on in the future from our direct investing team, that's the third leg of the stool.
Jason Jacobs (02:30):
And is that S2G?
Cody Simms (02:32):
That's S2G.
Jason Jacobs (02:33):
Got it. Yeah, it is funny. I've gotten to know James pretty well. He actually said that he works in climate because of the show, which I just learned. But yeah, every time I talked to him about the early stage venture fund that we're raising, he comes back and says, "When are you going to do, folks, stuff?" So I know where his heart is, but excited to get to know your work as well. And it's funny because what he was saying is that the work has actually been going on long before most people knew about it.
Rebecca Carland (02:58):
Yeah, we're a family office. So most family offices are very private. They don't talk about what they're doing. Builders Vision really made the decision a few years ago to go public because we are very focused on urgent issues that are very timely, and we can't do it alone. We need to be collaborative. And so, we can't do that if we can't talk to other people about what we're trying to accomplish. So I think in going public, it's enabled us to talk about the work that we're doing. It's enabled us to talk about lessons learned, of which there have certainly been some successes. And also just to find others out there that are either like-minded and we can collaborate with, or alternatively that can learn from us and maybe we can serve as an example of being on this impact investing journey.
Jason Jacobs (03:49):
And what's just the rough timeline in terms of when the activities started in earnest versus when you started talking about it publicly?
Rebecca Carland (03:56):
So I should know these exact dates better. Where I sit with Builders Asset Management, Lukas has been investing for well over a decade, going back to the early 2010s. So we really have a long track record. We went public in... I believe it was in 2021 that we went public with Builders Vision. We have a website, you can look up our teams and what we do on the website. We can see everyone who works for Builders Vision on the website. So that's when we started our journey.
Jason Jacobs (04:25):
Which is a big team too, Rebecca. Surprisingly big.
Rebecca Carland (04:29):
We're at a 100 now across the three teams, yeah. And we're all getting better at learning to talk about it too. We're not communications folks. My background is investing in portfolio management, so we're all learning the skillset to talk more publicly about what we do.
Jason Jacobs (04:43):
Well, those are some of my favorite episodes to be honest, people that are doing really impactful work who aren't out on the circuit because it feels like from a learning and from a catalytic standpoint, shining a light on the people doing that work is an opportunity to educate and open the eyes of broader audiences and foster connections that might not otherwise have existed.
Rebecca Carland (05:03):
Yeah, exactly. Exactly. It's so refreshing. I come from over a decade of working in the family office and private client world. And it's just been so refreshing to be able to talk about what we do. And also, I think we all work here at Builders Vision because we are very excited about what we do. So we're excited to share the work we're doing and also talk about the partners we're working with and all the great work that our grantees, our entrepreneurs, our fund managers are doing.
Jason Jacobs (05:29):
Well, I'm dying to know all about that. But before we do... And if we had commercials, this would be a time for a commercial pause, but we don't. So before we do, I'd love to go back in the time machine and just understand a little bit about your professional journey that took you to doing the work you do, but also your climate journey that took you to doing the work you do and how those came to intersect as well.
Rebecca Carland (05:49):
Sure. I wish it was more exciting. I started my career actually on the federal government side. I worked for the Department of Justice for several years doing overseas rule of law work, primarily focused on Latin America. Went back to business school with this nebulous idea that I wanted to go into international development, economic development. I've seen firsthand on the ground this need for ownership and property drives rule of law in some ways. You need laws and regulation to protect property. So I went back to business school. I think my dream job was working for the World Bank. Talked to a bunch of folks at the World Bank who told me, "You've got the federal government experience, you've got the development on the ground experience. Now you need to go get investment banking experience. So go work on Wall Street and then come back to us in a few years."
(06:33):
So I got to business school height of the financial crisis. I recruited for investment banking. One of the banks that came onto campus also brought their investment management arm and said, "If you're interested in investment banking, a smaller subgroup, come into this room." And so that's how I stumbled into investment management. Started my career with Goldman Sachs doing private wealth management. So working with entrepreneurs, people who founded companies, sold companies, had success, worked with families and family foundations. And from there went to Cambridge Associates where I continued to work with private families. And that's where I really got into working increasingly with mission-related clients.
(07:09):
Cambridge had historically worked with so many endowments and foundations, and they were leading the charge in terms of fossil fuel-free investing. And so increasingly, I think the firm had enough resources to start to bring some of those resources to families that were interested in doing that. And a lot of families were starting to dip their toe on their family foundation side. So I had a handful of clients that were doing fossil fuel- free investing. We moved that needle towards ESG investing and ultimately towards impact investing. And I just loved working with those clients. And so more and more, that became my focus, is working with the mission and impact-oriented clients.
(07:43):
I think there's just a passion behind it. There's a learning behind it. No one knows how to do it perfectly. And it's also just this challenge of trying to combine financial returns and just good investments with also having a social benefit or a climate benefit. So I did that for several years and I've really leaned in. I won't go into all the details, but when the opportunity came about to work for this particular family office and with Lukas, who has really dedicated his resources to leaning into investing in climate and sustainability, and I know we'll talk more specifically about what that means, it was just an opportunity I jumped at.
(08:22):
Sorry for the long answer, but the last thing I'll say is just in particular, this opportunity to work for a principal and an organization that is really driving towards addressing some of these very urgent issues that we are facing as a generation, it gets you out of bed every day. There's real meaning to the work you're doing. So yeah, very happy to be sitting where I am and I feel very fortunate.
Jason Jacobs (08:43):
That was fascinating, and it led me to a ton of questions. So I almost don't know where to start, but one question I'll ask is just back to the Cambridge Associates stuff. You mentioned that they're leading in fossil free and other forms of pushing the private wealth world forward from an impact investing standpoint. Why do you think that is? Where did that come from at CA? Is it client-led or did it come from the top? I'm just curious.
Rebecca Carland (09:08):
Yeah. I don't know if I'm the one to speak authoritatively on it. Some of it preceded me. But I think because Cambridge had worked so much with endowments and foundations in particular, I do think a lot of the academic institutions were being encouraged by their student bodies to divest from fossil fuel. I think that was the movement. So you had some of the bigger universities looking at options in that space and/or supporting and helping to create some of the first options in that space. A lot of faith-based organizations similarly had values-based investing that they were looking for. I think because a lot of that clientele was working with Cambridge, they were the gorilla in the room in terms of endowments and foundation investing. I think they were in part somewhat at the forefront of helping clients to think about that.
(09:52):
And I know Cambridge has come a long, long way on its journey. So it started with exclusionary divestment at Cambridge and elsewhere across the industry, and it's developed so much. This was probably over a decade ago when I was working with clients who were looking to divest. I would say now we've come to a point 10, 15 years later where the divestment is almost like a measure of last resort now. What I'm seeing and where we sit and just across industry is investors really leaning in and saying, "We can't just divest from the bad stuff. Someone else out there will buy it. We've really got to lean in and think about how can we own the stuff that maybe is very high emitting and help them to lower their emissions, help them to decarbonize." So there's really been that journey over time, I think, as clients have both gotten educated about how to address the problem. And also I just think there's so much more demand and product out there now than there was, so you can actually think about investing in that way.
Jason Jacobs (10:48):
This is more of a general question, and maybe it's more of an existential one almost. But given the world that you've come from where you've hit this private wealth and investing and impact and markets from so many different angles, when you think about the theory of change as far as the energy and broader transition, what role do market forces play and in what ways will they be enough and where are the gaps?
Rebecca Carland (11:16):
I don't have the answer to all that question, but-
Jason Jacobs (11:18):
I don't either, to be clear.
Rebecca Carland (11:20):
At Builders Vision, our mandate is to shift markets and minds for good. So it's a tall order. But we really do believe that the power of financial market to affect change is real and that we need to really lean into this very systemic level change if we want to address the issue areas that we seek to address. We focus on three interconnected trillion dollar sectors. So we're very focused on renewable energy, which you mentioned, along with sustainable food and agriculture and healthy oceans. We think these are all ecosystems that we need to lean into helping be healthier, more resilient in order to just accelerate this transition towards a lower carbon economy, healthier solutions for both humankind and our planet. And I think we can only do that if we get the power of capital markets behind us.
(12:21):
And I think we're there coming out of Climate Week, I will say. I don't want to get too political, and I sit here in Washington, DC, but there's been a lot of backlash against ESG investing. But I just think that as someone who is a fiduciary of assets, my job is to think about risk and opportunity. And I think what we're doing every day is we are considering the risks. If you are a long-term investor, what's happening with our climate is to me a very obvious long-term risk that we have to think about. And then I also just think there's so much opportunity in this space to lean in and deliver solutions. So I think, again, just one of our goals with Builders Vision is to catalyze as much capital into these areas as we can, and we can do that not by just singing to the choir and the people that are already out there who already recognize the urgent need and are investing in this space, but we want to talk to the traditional asset allocators, asset managers, and get them excited about this opportunity as well.
PART 1 OF 4 ENDS [00:13:04]
Jason Jacobs (13:20):
And you mentioned that, and I may be paraphrasing a bit, but that this is a dream role for you. What was the pitch when you initially heard about it?
Rebecca Carland (13:29):
Well, I think Builders Vision, it is not just a family office, and we're actually moving away from even calling ourselves family office. It is an impact platform. And I think one of the things that is so unique about Builders Vision is I mentioned we have the three legs of the stool and we work very collaboratively together. We are not in any way siloed. We together have sat down and over the course of several months, years have set for ourselves as an organization what are our near term interim outcomes that we're driving towards with our capital and our longer term outcomes that we're driving towards with our capital. And then as we see opportunities come across, we're able to collectively look at those opportunities and say, how do we address this opportunity? Is it through philanthropic grant? Is it through impact-first investing? Is it through investing at scale with capital that can really help to accelerate the commercialization and implementation of a solution?
(14:29):
So what I love about Builders Vision is just the people who work here are passionate about what they do. We are highly, highly collaborative. We have a partnership model to working together towards what's the best home in our organization for this opportunity and how do we accelerate. We have a saying here, we can do things from NGO to IPO and beyond. We can see things, we can scale things, and then our hope is to spin them off into the market. I have never come across an organization or an opportunity where you can do that. So just the flexibility, we actually have in our values on our website, and you may have to bleep this out on your podcast.
Jason Jacobs (15:10):
Nope. You can swear.
Rebecca Carland (15:11):
Lukas has given us a mandate to try crazy shit. So we're here to try some crazy shit and see if some other people want to come along with us.
Jason Jacobs (15:19):
I really want to meet Lukas at some point because from talking to James and now from talking to you, he just sounds like an awesome guy.
Rebecca Carland (15:27):
It's great. I have worked for wonderful families and principals, but Lukas just really has a vision. He is an involved asset owner, and he has built a really great team. So yes, I think all of us that work here for Builders Vision are very happy and honored to do so.
Jason Jacobs (15:44):
Now, I want to definitely leave time to get into actually the Builders Asset Management mandate and your purview and work and criteria and things like that. But we just keep striking on things that are interesting to me, I apologize. But you mentioned that you're moving away from the term family office. When I was at Climate Week, another big prominent, what looks on paper, like you might call it a family office, said that they intentionally don't refer to themselves as a family office because family office in climate is a bit of a dirty word and that they are more institutional grade in terms of how they run the firm. Why are you looking to move away, and how do you react to what I just said?
Rebecca Carland (16:19):
Well, when we're offline, I want to be like, "Oh, who's that? I should talk to them."
Jason Jacobs (16:22):
Offline, I can tell you, not on the show.
Rebecca Carland (16:24):
I think impact platform first and foremost, because I really think first and foremost what we're thinking about is addressing the issues that we've been mandated to address rather than typical family office. How do I protect and grow this nest egg for future generations? Now that said, my mandate, where I sit on the Asset Management side, is we are not concessionary. We have a mandate to achieve financial returns, market or above market rate returns. But we actually think that's part of the challenge, is we want to prove out that you can do this type of investing without being concessionary.
(17:05):
In fact, if you look at the portfolio that's been invested for over a decade, our ESG global equity managers have outperformed our traditional managers. Our venture impact managers have outperformed our traditional venture managers. So we have a little bit of the proof in the pudding, and I think our focus is first and foremost on the impact that we are having in the world. So I think that's why we are better defined as an impact platform rather than a family office. Our mandate does not focus on an individual or a family. We are fueled by the passion and the resources of an individual in a family who is really dedicated as resources to impact. So I think that's by definition why we are more impact platform than family office.
Jason Jacobs (17:54):
You mentioned that there are some key areas for focus, I think you said renewables, food and ag, and oceans. Is that across the Builders Vision sub platforms or is that specific to Builders Asset Management?
Rebecca Carland (18:08):
No, that is across Builders Vision. So our entire organization, where I sit, where James sits, S2G Ventures, we all share these same goals. And that's the beauty of our organization, is we are all driving towards the same outcomes. Now, it creates opportunities and challenges. It is, I would say I look over my shoulder and it's probably easier for James to invest in oceans in a very pure play way. We're very focused on healthier and more resilient oceans. So you can do that with grant making. You can certainly do that with field building investments, a lot of the work that James is helping to oversee. How do we protect and restore marine and coastal habitats?
(18:49):
I'll be honest, it's been harder to find investments in oceans at scale and meeting our financial return mandate for the portfolio I oversee. But what we do is, inside of Builders Vision, we can inform each other. I can sit down with James and say, "I'm not finding those opportunities. Tell me what you're seeing." And if those opportunities don't exist for me to invest in today out of my portfolio, how do we create them? What's the white space? What's the void? And how can we lean in and fill that void and or use our capital to catalyze others to come in with us to fill that void? So we all share the focus on energy, oceans, and food and agriculture, but we're using different tools across the different teams to address those areas. But driving towards shared outcomes.
Jason Jacobs (19:37):
And this is a clarifying question, and feel free not to answer it if I'm not allowed to ask it, but just so that I understand. So the Lukas family assets, I know it's not called a family office, but is this the entity for those assets in their entirety or is this a side thing with a subset of the assets and then there's another thing that's more focused on regular stuff?
Rebecca Carland (19:56):
I think what I can say is this impact platform is fueled by Lukas Walton. This platform for Builders Vision is solely Lukas as a single Walton family member who's behind this.
Yin Lu (20:18):
Hey, everyone. I'm Yin, a partner at MCJ Collective, here to take a quick minute to tell you about our MCJ membership community, which was born out of a collective thirst for peer-to-peer learning and doing that goes beyond just listening to the podcast. We started in 2019 and have grown to thousands of members globally. Each week, we're inspired by people who join with different backgrounds and points of view. What we all share is a deep curiosity to learn and a bias to action around ways to accelerate solutions to climate change. Some awesome initiatives have come out of the community. A number of founding teams have met, several nonprofits have been established, and a bunch of hiring has been done. Many early stage investments have been made as well as ongoing events and programming like monthly women in climate meetups, idea jam sessions for early stage founders, climate book club, art workshops, and more. Whether you've been in the climate space for a while or just embarking on your journey, having a community to support you is important. If you want to learn more, head over to mcjcollective.com and click on the members tab at the top. Thanks, and enjoy the rest of the show.
Jason Jacobs (21:18):
And when it comes to portfolio construction at the family level, is it a meaningful piece of the overall pie?
Rebecca Carland (21:26):
I'm not sure what you're asking, but-
Jason Jacobs (21:29):
I think what I'm asking is... So I'm a little guppy, but when I have my financial advisor, they look at our stuff in its entirety and then they allocate for a balanced portfolio and whatever other criteria I have, I just didn't know if Builders is that or if it is one of those legs in the stool.
Rebecca Carland (21:47):
I would say Lukas has allocated a substantial portion of his resources to building Builders Vision.
Jason Jacobs (21:55):
Okay, great. Now, in terms of Builders Asset Management, what is the mandate of Builders Asset Management?
Rebecca Carland (22:02):
So Builders Asset Management, we are the Asset Management leg of the stool. So probably within Builders Vision, we're your most traditional fully allocated portfolio. We are investing globally, across primarily via funds and co-investments, across public and private markets. Our mandate is twofold, I would say. One is to achieve financial return. We are the growth engine for Builders Vision. We support a lot of the work that is happening in our ecosystem. We are the liquidity provider for a lot of what's happening in our system. So we're very focused on long-term returns and growth and liquidity and risk management.
(22:46):
The second piece of our mandate, however, is to be as impact oriented and aligned with the BV mission as possible without compromising on our financial returns or liquidity. So when we're looking at investments, we are trying to shift as much of the Builders Asset Management portfolio into what I would call proactive ESG and or impact aligned strategies as we can. We're not at a hundred percent yet, but we have billions inside Builders Asset Management that are invested in proactive ESG and impact strategies. Our goal is to get to 100%, but again, we're going to do it in a way that we're not compromising on financial return. But I also think there's value in some of the traditional investments that we have. It allows us to engage in conversations with managers that aren't branded ESG, aren't branded impact, but kind of ask them how they're thinking about it, how they're incorporating it into their risk analysis, their opportunity set. And we've seen some of those managers really come along on the journey with us.
(23:55):
We spend a lot of time looking under the hood at what we own. So if we're in a traditional buyout fund, we are going to look under the hood at what that buyout fund is owning. We don't want to be investing in and owning things that are going against what we're trying to accomplish with our impact investing, our impact mandate. So we have a minimum threshold of, every investment in our portfolio must meet the do-no-harm threshold. So some organizations would actually call their entire portfolio impact because they're meeting that do-no-harm. We don't. We differentiate between traditional meet no harm versus proactive ESG. And that's why I say people are proactively incorporating ESG into the strategy or impact.
(24:38):
The last thing I'll say, and then I'll shut up, is we don't take a carve out approach. I've been places, I've taken the carve out approach. We're traditional financial first investors over here. We have this carve out over here that's doing impact. And oh, isn't it cute when it generates financial return? No. We are completely integrating our ESG and impact investments into this multi- billion dollar portfolio. And then myself and my team are being held accountable for the total return of the portfolio. So every investment that we do has to first and foremost just be a good investment. We are investors first and foremost at heart, and all of us came from backgrounds where at some point we weren't doing just impact, we were doing more traditional investments. So we hold the bar high, but we think that's part of our role of helping to build the field, is to prove out that these are institutional level investments that can generate the returns for an institutional like portfolio.
Jason Jacobs (25:34):
So coming out of Climate Week, I can't help but notice that ESG is a hot button, word of sorts, a lightning rod. And in fact, again, I'm being slightly cryptic without naming names, but we talked to a very large bank and their impact team who said that from the top of the bank, because it's such a lightning rod word, that word is laying low. They're trying not to use that word too much. So I'd love to hear just what your perspective is on the critiques of ESG at the public level and how fair they are. And then similarly, when you look at privates, which is the world that I live in, small high growth, venture backed technology as an example, how relevant is ESG when you're looking at companies that are hatching from zero?
PART 2 OF 4 ENDS [00:26:04]
Rebecca Carland (26:15):
Yeah. One thing I picked up on Climate Week, I don't know if you picked up on this as well. I feel like many organizations are rebranding ESG and instead calling it sustainability, which is interesting because I think they're different things perhaps, but maybe it's part of this political environment where it's more safe if we use the word sustainability versus ESG. So that was an interesting observation I had. But I think on the ESG front, it's obviously been for some, I think, a very disheartening time. Most of us who are investors did not sign up to be part of a political battle around what we're doing. I live in Washington DC. I've lived in Washington DC for over 20 years. I've worked in the federal government. My immediate reaction is, this too shall pass. I think some of it's noise, but it's loud and it's having impact, and so it can't be ignored. And I am glad to see that there are some voices and some coalitions coming out against it. The other thing I feel coming out of Climate Week is just, I have to believe global leadership is moving towards a world where we do think about and incorporate ESG, both as risk and opportunity where we are thinking about sustainability and decarbonization. Europe is ahead of us in actually regulating and requiring companies to be on this path. And then as I mentioned before, so I won't fully repeat it, but I just think as fiduciaries, it's a risk if we're long-term investors. I think some of the ESG battles, it's very focused on the short term and it's not really thinking about, if you are an investor as a 10 plus year time horizon, then you have to be taking some of these risks into consideration because it is a risk to your financial returns and it's also an opportunity set.
(27:58):
So I came out of Climate Week feeling motivated by that. Feeling that this is the direction we're going and hopefully a lot of what we're going through right now is a loud and vocal, political theater, if you will for a bit, leading up into an election year. But it is probably putting the brakes on some things for now. And I know some people at the top of some of the banks are laying low this year, but I haven't seen people really scrap what they're doing. I think people know what they're doing is the right thing to do, and so we're going to keep doing it.
Jason Jacobs (28:31):
And I've heard people say that there's no one uniform definition of ESG. Do you agree with that? And when you think about the definition at BV, do you have your own recipe? And if so, what does that look like?
Rebecca Carland (28:44):
Yeah. Well, it's certainly I think a just argument that there is a lack of definition and there's a lack of standardization both in how we define, measure, report on ESG and impact. I was heartened to hear this past week also in New York at Climate Week, it does seem like we are coming to a point where a lot of the different governing bodies, both Europe and North America are starting to coordinate and collaborate a little bit more. They recognize this lack of standardization as a real roadblock to continuing to move forward. And I think there are a lot of exciting things that are coming out around standardization of how we can define, measure and report on ESG and impact. I have to do some more reading up on this myself, but I think going into '2024, I think the snowball is accelerating. I think we're getting there. So I think that's heartening. What was the second part of your question?
Jason Jacobs (29:42):
Just if your recipe differs at all from the recipes of others. How so?
Rebecca Carland (29:48):
We think of it as, I've talked about, there's definitely that scale of going from exclusion and divestment to proactive integration. So we really think about, there are some things that we just choose to maybe screen out of our portfolio. Then you move into ESG integration, ESG as risk measures. So we have managers doing that, thinking about ESG. And then we have the proactive ESG managers who are very proactively out there seeking out companies that meet these ESG requirements and also actively engaging with companies to help move the needle and improve them on the spectrum of ESG. And I think for us, the ESG lives in the public markets across both equities and fixed income.
(30:39):
We get into impact more in the private markets where we can really measure thematically aligned impact, where you are actually building companies, solutions, products that are addressing a problem or a need. And you can quantify and measure that in some way. I think the last thing I'll say is, I've said this a few times, but we get asked a lot, is ESG a risk or is it an opportunity metric? And I think it's both. And I think it's important even with our traditional non ESG managers, we do look at how they're incorporating ESG. We do look at do they have a diverse board? How are they thinking about and incorporating diversity into their practices? How are they thinking about climate and other environmental risks? So I think we do hold all of our managers to that standard or at least want to engage with them to understand how they're thinking about it because it informs our understanding of their strategy and decision-making process.
Jason Jacobs (31:34):
And to give you a sense of where I'm coming from, I guess as a caveat for whatever questions I'm about to ask, I started as an entrepreneur and then learned how to be an angel investor, and now, in the process of becoming a more professional investor, but specific to the venture capital asset class, so early stage privates, and you have a purview much larger than that. And that's the caveat of saying, I don't even know the best questions to ask. So one question is just, what does that purview look like? How do those allocations tend to look and how much have those, even if the dollar amounts have changed with the changing macro, have the allocation stayed fixed from a percentage standpoint or are they moving in one direction or another? And is that even a reasonable question for all the caveats I just mentioned?
Rebecca Carland (32:15):
Well, I think I'm going to answer your question or I'm going to talk about what I want to talk about. But actually, what I think is unique at Builders, one of the things I've tried to do with Builders Asset Management is venture, God bless, has been one of the first areas to really lean in to impact and venture is helping to source, seed, commercialize the solutions and products that we need.
(32:38):
In-house, I mentioned we have our S2G. They are essentially a ventured early growth manager. They're doing direct investing across our three thematic verticals, food and agriculture, energy and oceans. So internally, we have a lot of exposure to that early stage venture to early growth. We also have in our Builders' Asset Management portfolio, several strategic relationships with managers in the venture space that are also investing across those thematic areas. What we've tried to do though is can we, the Builders' Asset Management portfolio, because we are uniquely positioned within Builders' Vision to invest and lean into the later stage growth to buyout and beyond. That's where we see a dearth of capital. One of my colleagues just published a paper called The Missing Middle, and it's about this gap between venture solutions that are proven solutions and the infrastructure build out. We have a lot of capital going into both of those areas, but what we're lacking-
Jason Jacobs (33:42):
Now, you're sounding like James, Rebecca.
Rebecca Carland (33:44):
Oh, oh. Did he already talk about this? Okay. The missing middle.
Jason Jacobs (33:47):
No, no. Remember my joke before about FOAKs? So first of a kind. So anyways, yeah.
Rebecca Carland (33:53):
Oh yes. Yes. But this is the problem. It's how do you get the later stage growth and buyout managers to lean into the space because we need more capital to help adopt, accelerate and scale the implementation of these solutions. So with Builders Asset Management, that is an area in the private markets in particular that we are really leaning into and we are sourcing and looking for opportunities in that space. And to the extent we don't find opportunities in that space, we are willing to help build opportunities in that space, whether that's seeding or anchoring or we have talked internally about, do we help build something from the ground up? I think we're builders. That's part of our mandate, is find the white space, identify it, and then catalyze capital to come into it if it helps drive towards the solution.
(34:42):
So the other piece I think we at Builders Asset Management lean into in the public space, even passive index capital, you can direct it in a way that encourages and rewards corporate behaviors that are aligned with what we're trying to do. We have recently joined the Asset Owners Advisory Board for the Transition Pathway Initiative. It's an independent research organization. It's philanthropically backed. It sits on the campus of the London School of Economics. But they're essentially looking into how are companies tracking in terms of their commitments to targets that came out of the Paris Accords, and are they making commitments and are they tracking towards those commitments? And it's forward-looking, and that's one of the things we really like about it. And companies are in different places along the journey, but if the commitment's there and the intent is there, those are the companies we want to back.
(35:41):
So we're really trying to think about ways across different asset classes to either fill a white space or use our capital in ways that is encouraging behaviors. Not to say, we'll just invest in the cleanest. We don't think you accomplish much that way. We want to help drive that transition.
Jason Jacobs (35:57):
And at the public level, is it mostly funds or are you doing individual stock investing as well?
Rebecca Carland (36:03):
So we do them primarily via funds. I mentioned we have a lot of passive index exposure. We're a taxable portfolio. So we're very focused on tax efficiency and cost. And as I mentioned, risk management and liquidity as well. But we really are trying to find the partners that we can work with to make even our passive dollars work for us in ways that are helping to drive towards this transition that we're focused on.
Jason Jacobs (36:28):
And when you look at the big ambitious net-zero commitments that so many companies are making, how do you feel about those in the aggregate? And then how do you feel about those with more of a trained eye as you look at different companies in terms of which ones are serious and which ones aren't?
Rebecca Carland (36:43):
Net-zero movement, I think it is a positive thing. I think everybody jumped on the bandwagon because they had to. I think now, companies are realizing the challenge in some cases, and the resource commitment it takes to actually measure, quantify, report out on what is required of them in order to comply with this net-zero. And so I think you now have this bit of pulling back from some of the corporations and asset owners too, in terms of their net-zero commitments, which is unfortunate. I think what's needed is just more tools to help companies get there. From what I observe is, it's burdensome and it's onerous, but it's necessary. We all benefit from more transparency, more disclosure, more accountability. We as asset owners can use that data to engage with companies to drive them towards the outcomes that we all are seeking.
(37:39):
But I do think it's a lot of companies are trying to figure it out on their own. And this is where I do think there is a heartening amount of international collaboration coming in terms of what to quantify, how to quantify, how to report set of standards. But I think it's been challenging. And I think look, coming out of '2020, companies had to just survive too. And this fell lower on the priority deck, but I'm not giving up on the net-zero.
(38:04):
It's interesting. We debate a lot internally. Should we, whether it's just BV or Builders' Asset Management, commit to net-zero? So far we've taken the tack of really engaging with our managers and our portfolio companies on how they're doing it. We are going to be publishing our first impact report for Builders' Vision. It's coming out in October. We acknowledge that we are still very early in our journey, but we do believe that measuring and reporting and being held accountable for our work is very important. We also think it's important to show the success, to share the amazing work that's happening across all of our partners. So this report, it aggregates information from all of our grantees, all of our entrepreneurs, all of our fund managers, and we are so thankful to all of them that reported all of this data to us so we could aggregate and see collectively, how are we doing? And we're trying to get better at tracking the underlying emissions of our portfolios or how much plastics are being produced and how much waste is being produced, but we know we can get better at it.
PART 3 OF 4 ENDS [00:39:04]
Jason Jacobs (39:13):
When you think about the future, it's great that there are families that are stepping up and building these platforms and really aligning impact and returns and putting real dollars and resources to work in showing, and in your case, actually showing and not even telling until recently. Is that like kindling where ultimately in order to make the real change, the big traditional financial players need to get in the game en masse? If so, what do you think is stopping them and how do we get them in the game faster?
Rebecca Carland (39:47):
Well, it's interesting. I do think some of the big players are getting into this space. We are seeing some of the bigger private investment managers launch their climate funds. I think sometimes we question the authenticity or it's just asset gathering, but honestly, the silver lining is they see that there's assets to be had there. Let's look at the positive side of things. I think what needs to happen eventually is just we stop bifurcating impact and climate is over here, and then traditional investing is over here. I think there just needs to be more of a, this is good investing and it's not a separate segment of investing. I think that it's happening in some places. We do have, again, some of those traditional managers in venture private equity buyout, and they have a smattering under the hood of companies that could also fit into a venture energy or a food and ag fund. That's really promising. That's great because they just saw the financial opportunity that this solution or product brings.
(40:51):
I think that's part of the thing and that's why we take this approach of not bifurcating the traditional and the impact of putting it together and holding our impact managers to the same standards that we hold our traditional managers to. I think a lot has been done in recent years to bring the cost down of investing in renewable energy, and so all of a sudden you do start to get all these solutions and products that are coming out that traditional energy managers see as financial returning opportunities, and energy is so much further along than the other two thematic areas we invest in, oceans and food and ag. I think a big part of that is regulation. Some of what we're trying to do requires not just capital, but it does require regulation rules and requirements that will force some of this to happen.
(41:39):
The IRA has been huge for energy and I think will be huge for energy and they will bleed into some of these other sectors as well. Things like that do really help. SEC coming out with rules, things like that are going to continue to accelerate the opportunity set to invest in this space.
Jason Jacobs (41:56):
Well then the obvious question is, does BV have a policy or a government relations arm? Why or why not?
Rebecca Carland (42:03):
We don't. It's interesting, when we think about our toolkit, it's not just capital. We are very focused on partnering with all of our partners, using our ability to provide either sector expertise, strategy expertise, make connections, introductions, relationships, just help augment the work that our partners are doing.
(42:24):
I do think that advocacy and communication is another component of what we do right now. We do it in a way that is communication and engagement. We talk very openly about what we do. We attend strategic convenings of investors. We speak and we listen and we engage with our managers and our portfolio companies to push forward the things that we care about.
Jason Jacobs (43:32):
Well, we're running up on time a bit, or at least getting close, but I wanted to just come back to one thing you said before about the gap between venture and infrastructure. There's a bunch of different ways to address that. There's some different explorations, if not actual shots on goal and motion, some of which are hybrid venture and debt, some of which are more philanthropic in nature or more concessionary in nature. Do you have a bias in terms of the best way to address that? Do you have a clear vision in terms of what you'd like to see? I guess relatedly, do you think it's going to be one thing or is it going to be some of a bunch of different things that end up ultimately building a bridge?
Rebecca Carland (44:08):
Well, we're always trying to figure it out, and this is where I talk with my colleagues on the Builders Initiative side, both the team that is investing that endowment and the team that is overseeing our grant to think about, okay, we'll look at solutions and think about is this a grant? Is this a program related investment? That would be out of our Builders Initiative side of the house. Or is this something we're exploring where Builders Asset Management could come in as potentially first commercial capital, particularly if something has been de-risked by philanthropy or if you're looking in emerging markets by DFIs, Development Finance Institutions. We're trying to get smarter on that space. Where and how do we play in this missing middle? Obviously finding solutions that are out there and supporting them with capital, seeding or anchoring, folks that are out there that are trying to launch things in that space.
(45:01):
The next step is the what's next, what more is needed? I think we're figuring that out, but that's the beauty of our ecosystem is we have the tools for both myself and say, the head of our foundation to sit down and look at an opportunity for a white space and say, "How do we address this? Is it you? Is it me? Or is it some combination of us together?"
Jason Jacobs (45:21):
We have a wide variety of listeners on the show, so they could be executives in big companies with net zero commitments, they could be exited founders who are looking to build something in climate and don't know where to start, they could be climate VCs or generalist VCs or climate private equity or generalist private equity that are looking to deploy more capital in this direction, et cetera, et cetera. Speak to those people for a minute. What's one takeaway you want them to leave here with today and something to think about?
Rebecca Carland (45:47):
I think that my takeaway is I love investing in this space. I think it's just constant learning and it's constant collaboration. None of us can do this alone. By being here with you today in this podcast I think one of ours is just to raise awareness of what we're trying to do. Please reach out to whichever one of us is the best point of contact. We want to learn from and/or engage with others.
(46:10):
I really do believe that what we're doing and how we're looking at what we're investing in is both good prudent risk management, and I also just believe in the opportunity set. I think to turn your eye from it is actually just risk your fiduciary duty and also to turn a blind eye to an opportunity set. I think it was maybe the state treasurer from Oregon who said, "It's like fighting gravity. Not engaging in this space just seems like you're turning a blind eye."
(46:44):
I think it's the excitement. I think it's the need for collaboration, the need for learning, and we are here to learn. We approach everything with a beginner's mindset. We are a learner's mindset, and we want to engage with others that are either like-minded and looking for partnership or that want to engage in a conversation and help inform our perspective in a way that we're not already thinking about.
Jason Jacobs (47:04):
Well, that could be a great point to end on, but I'll ask you anyways. Is there anything I didn't ask that I should have, or any parting words beyond the parting words that you just said?
Rebecca Carland (47:13):
No, I think maybe I'll just end with, I think with the timing that we're speaking is aligning well with the launch of our inaugural impact report, which I mentioned. We're very proud of it, and I think it's just a great way to celebrate and showcase the work we're doing, the work our partners are doing. I'd encourage people to take a look at that. That talks much more in depth about what we're doing. I'm sure upon reading it, there are folks out there that just have so many suggestions for different opportunities and ways that we can engage and try to accelerate the work we're doing. The problems we address are really urgent. We call it the decisive decade. We think we have a window of time to address some of these issues, so we are very humble about how do we do it and who do we partner with to do it.
Jason Jacobs (47:59):
Well, I love what you're doing. It's very exciting. I also really love the diverse but really collaborative approach because for a systems problem like this, it feels to me like it's the only way.
(48:10):
Thanks for all the work you're doing. Looking forward to finding more ways to work with you and BV across the entities you have today. If I had to guess, maybe even additional entities down the road. Thanks for sharing it with me and with listeners.
Rebecca Carland (48:23):
Great. Thank you so much, Jason. It was a lot of fun.
Jason Jacobs (48:25):
Thanks again for joining us on the My Climate Journey podcast.
Cody Simms (48:29):
At MCJ Collective, we're all about powering collective innovation for climate solutions by breaking down silos and unleashing problem solving capacity.
Jason Jacobs (48:38):
If you'd like to learn more about MCJ Collective, visit us at mcjcollective.com. If you have a guest suggestion, let us know that via Twitter @mcjpod.
Yin Lu (48:51):
For weekly climate op-eds, jobs, community events, and investment announcements from our MCJ venture funds, be sure to subscribe to our newsletter on our website.
Cody Simms (49:01):
Thanks, and see you next episode.
PART 4 OF 4 ENDS [00:49:12]