Serving high net worth individuals, foundations and institutions 

In this episode of his Impact Investing podcast, David O’Leary speaks with Upkar Arora, our CEO. Upkar outlines Rally’s journey to becoming a full-service provider, discusses the idea of progress not perfection, explains how Rally measures impact and holds a mirror up to the wider industry.

This recording is distributed for general informational and educational purposes only and is not intended to constitute financial, legal, tax, accounting or investment advice. The information contained herein is does not constitute a solicitation, recommendation, endorsement or offer to buy or sell any security or other financial instrument. The information, opinions and views contained in it have not been tailored to the investment objectives of any one individual or organization, are current only as of the date of the recording and are subject to change at any time without prior notice. Any reference to an investment’s past or potential performance is not, and should not be construed as, a recommendation to purchase the investment or as a guarantee of any specific outcome.

Transcription – Excerpts

[David] You are listening to the Impact Investing Podcast. I’m your host, David O’Leary. Today’s guest is Upkar Aurora, who is CEO of Rally Assets, which is an impact investment advisory firm that’s looking to mobilize all forms of capital to accelerate social progress.

Tell us a little bit about Rally Assets.

[Upkar] Rally Assets in its predecessor forum was called Purpose Capital. And it’s been around, really, as one of the initial leaders in the impact investing space almost 10 years ago. And then back late last year, we decided to embark on a different strategy, which meant that we needed to evolve. And as a result of that evolution strategy, we decided to change the name of the company to more fully reflect the direction we were going in. Moving from what we’ve traditionally done, consulting or advisory, into asset management. And moving into the public markets where previously our focus had been primarily private markets.

When we first started out, we were really focused on two things. One is just sort of the education and awareness of what was impact investing, what did it mean? And then the second part is how do we develop a strategy for engaging in impact investing. As you can probably guess, the organizations that were most interested in that were actually organizations were that were predisposed to being philanthropic. They were already doing granting, they were focused on social issues. They were trying to think about systemic challenges. And they were trying to look at impact investing; essentially, catalyzing more capital in different ways to make more significant change. And certainly our early work was really to those organizations, often foundations in terms of educating and awareness, developing a strategy trying to get a deeper dive into what is impact, how do we measure it, and then ultimately providing some alternatives for how that could take place, the implementation side.

As we move forward we’re really focusing on those parties that wish to invest their capital in alignment with their values, which means how to invest in anywhere from ESG, responsible investing, social investing, or ultimately impact investing alternatives.

[David] That’s helpful. What’s interesting to me, and I’m interested to hear your perspective from Rally’s perspective, is just who you speak to in this space. I’m curious what you see and hear as an organization, from those who are like this. Investors who are making impact investments are really on the vanguard, right? Are there major themes or trends among the impact investors that Rally has worked with?

[Upkar] What we are seeing from a macro standpoint, in terms of where people want to invest, we’re seeing ultimately, this concept of a massive intergenerational wealth transfer. There is a greater orientation to those parties, those cohorts wanting to invest in alignment with their values, having a different perspective, than the generation that created the wealth as they start to begin to receive that wealth. And research has shown that whether it’s in that cohort of millennials, or actually, as women start to have more influence and more power and more decision making about where to invest dollars, they tend to invest more in alignment with social purpose or values, and actually, for the longer term, so we’re seeing that trend become magnified over the last little while. And then if we look to where people are putting their money, we’re seeing a fundamental change in terms of how people perceive corporations. We’re seeing greater traction, greater focus and greater scrutiny about how firms behave, and the need for firms to operate in a different way than they were operating 20 or 30, or 40, or 50 years ago. So what are those major changes? Well, first of all, the changes first and foremost are moving from a concept of organizations’ need to be in business for the purpose of profit generation, for the benefit of shareholders, where we see that change to stakeholders, we’ve seen an orientation to moving towards from short term to long term, we’ve seen elements of the importance of how you treat people, whether it’s your employees, your customers, your suppliers, being integral to an organization’s long term sustainability.

And we’ve seen certainly greater focus over the last five or seven years as a result of the focus on climate change the importance of what are we doing as relates to the planet and the externalities, the negative externalities are the consequences of our actions with respect to the planet that we all need to survive and thrive on. And so all those things are happening in that segment of the markets or organizations are being forced to become a little bit more thoughtful and deliberate about how they behave. And at the same time, we’re seeing the parties with capital putting money into organizations that are behaving more responsibly, or thinking through some of the implications of their actions in a much broader context, the context and the terminology that you and I have both seen as a double bottom line or triple bottom line when thinking about what are those organizations generating, and it has to be more than short-term maximization of profit for shareholders. And so those macro trends are sort of creating a confluence of the parties with capital, of the parties needing capital are actually changing the dynamics of how we view the goal of investment, how we view capitalism per se and constant players that we would never have Imagined 15 years ago to come out very, very deliberately and say No, needs to be more than profit. It needs to be thoughtful about the implications to people and to the planet and to have a purpose.

This is not a trend, this is actually a change fundamentally, in how we approach investing, how companies are run, how they need to attract, engage and retain people and how they need to deliver to a broader set of constituents more than just shareholders in isolation.

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Buckminster Fuller’s got a quote about how if we really want to change the system, we have to basically abandon that system and create a brand new one. I actually choose to believe that we need to work within the system and outside of the system to try to get more change happening. Because if we marginalize the sector that could have the potential for the greatest impact, it will be a very long time before we actually achieve the kind of scale that we’re looking for.  

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[Upkar] And, you know, I think you’ve seen it, we’ve both seen stories about how a pension fund wakes up one day and realizes they’re invested in Bushmaster, which killed 26 People in Sandy Hook, not realizing that where their money’s gone is perpetuating, it’s an important maybe segue into thinking about some of those organizations that ultimately are trying to do things in a positive way. I don’t know what their capital is doing. But even if you think about foundations, or other institutions, or other parties that grant money, so let’s take an example do you actually invest in whenre you give money as a philanthropist? If you’re a foundation or an individual? Do you invest in certain causes, and then your assets, your other 97% of funds, or 100%, of where you’re investing is actually perpetuating the issue you’re trying to solve through your granting? So how do we try to make those a little bit more coherent in some way, so that you can amplify impact, we’re not saying don’t give, but give it away. And your investment is not compounding the problem you’re trying to solve and given away, we can change the root cause, the systemic issues, not just the operational short-term nature of the issues that you’re using your grant dollars to do. So I think there’s lots of opportunities within those parties, clients pools of capital, to make significant inroads and develop the track record over time to attract the larger institutional pools of capital that are more risk averse,

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[David] I love what you say about sort of making sure that you’re not counteracting the good that you’re doing by the investment you’re making, or the other way as your investments are supporting the good that you’re doing with your philanthropic dollars

How do you think about measuring your impact and being able to report on that. This is an area that I think the entire industry grapples with, especially because you’re trying to quantify sometimes very unrelated impacts, in a way that is sort of easy to communicate and relatable across gics, comparing an impact on education versus healthcare versus anything else. And I’m curious, how you sort of tackle that and think about it.

[Upkar] So I think the way we’re thinking about it is we’re trying to do the following. As you know, there has become an evolution towards the overarching framework of the Sustainable Development Goals as a framing mechanism of what areas we want to focus on, what areas we want to have impact on. So we’re trying to stay responsive to that these people are using that as a way to describe where their focus is, where their energies are going.

The other thing we’re looking at is actually developing, and have worked on developing our own impact measurement framework, where we would actually start to develop a methodology that would incorporate a number of factors that would be much more robust and much more disciplined and rigorous relative to other datasets that are out there. So you can certainly do some screening with datasets like MSCI, we can use some Bloomberg data. But I don’t think those start to capture some of the deeper impacts that we’re trying to capture. Some of the measures use things like percentage of revenue contribution from doing good or, you know, in a certain thematic area. So we’re trying to get a little bit deeper and under behind that, and then develop a framework that says we are able to create a dashboard across certain key indicators that give us a sense of whether this organization is in fact meeting the impact requirements that we believe is necessary to justify an investment. So now would be a proprietary process. But what it is going to do is integrate and create connection points to both the SDGs, the impact measurement frameworks, and other frameworks out there to make sure that we can relate what we’re doing to what other parties are doing, to try to create some degree of consistency in the approach, how we go about measuring and waiting and specific factors might be unique to us. But they still ultimately need to demonstrate in a way that we aren’t having impact. Now, what I’ve just said, is actually quite complicated. And in the for profit world, we’ve got one measure, which is profitability that defines and everyone focuses on maybe a single measure whether it’s PE ratio for valuation or something else. We don’t have that capability at this time. And we want to integrate return and impact metrics. So already, it’s more complicated. And impact is not defined universally the same way. So we’ve got those challenges. But I do think through greater rigor, discipline and consistency, greater connection to the other frameworks out there, we can start to develop more consistency in terminology, and start to portray impact in a way that investors can understand. Having said that, the caveats are, there is still a lot of data we’d love to have that is not available. They’re starting to become more disclosure, as you know, on the TCFD, climate change disclosure requirements, SASB etc. But there isn’t a high level of disclosure and certainly impact areas that we are going to see more of over the time, that consistency, relevance timeliness event disclosure may be problematic. So we’re trying to think about, again, coming back to the earlier comment about rigor, discipline, quality, authenticity, progress, not perfection, building it, and refining it as we go.

[David] I would sort of echo your concerns around the simplicity of a single rating and duty to extend that and think about what’s happening now. And you’ve seen it as well in the ESG world is that it happened in CSR that the companies with the highest CSR ratings actually had policies and procedures and checklists and so forth. But those weren’t the companies that were actually doing anything necessarily about the real implications of their business operations, right. So there is a concern about the simpler you make it, the easier it is to game the system if you don’t look behind what they’re really doing versus what they’re saying they’re doing. It’s problematic.