Investing for Good

December 2020

CEO Upkar Arora spoke with University of Waterloo’s Megan Vander Woude about his personal and professional commitment to being positively impactful.

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.

Transcript

[Meg] Hi, my name is Meg Vander Woud and I’m a writer at The University of Waterloo. Today I’m speaking with alumnus Upkar Arora about impact investing. Upkar is the CEO of Rally Assets Inc. Canada’s leading impact advisory and investment firm. Rally works with family offices, foundations and high net worth individuals to invest their capital, generate a return and create positive effects for people in the environment. He has worked for some of Canada’s most successful entrepreneurs, including Paul Reitman, Peter Monk and Jerry Schwartz. Upkar is a chartered accountant and has been recognized as a fellow with the accounting profession’s highest mark of distinction. He holds the ICD.D designation from the Institute of Corporate Directors and is a BMW foundation global responsible leader. He also received an Outstanding Alumni Achievement Award from the University of Waterloo. Welcome Upkar and thank you for speaking with me today.

[Upkar] Thank you, Meg. It’s great to be here.

[Meg] You aren’t actually just a Waterloo alumnus, you are many things in our community: an adjunct professor, a donor and also a committed volunteer. You’ve served on the Board of Governors and most recently you sat on the presidential nomination committee. Why do you care so deeply about the University of Waterloo and what impacts do you hope to make via these personal investments?

[Upkar] Well, Meg, you know, if I think about the opportunities that I’ve had in life, and the life that I enjoy now, it’s hard to believe that any of that really could have happened without a great education from the University of Waterloo. Waterloo’s reputation, as you know and we all know, is really strong in terms of academic and research excellence – be that in accounting and finance, math and computer science or environmental studies, just to name a few. That’s really given me a stellar foundation from which to build.

And then secondly, as someone who was a first-generation immigrant without the long-standing networks and relationships in Canada, the ability to participate in a co-op program at Waterloo was invaluable in securing full time jobs post-graduation. So I felt pretty fortunate to have graduated with a master’s degree from an exceptional University, two years of work experience, a full-time job and no debt. In fact, money in the bank, thanks to the generosity of others who provided scholarships and through co-p and other jobs. So in answering your question, you know, first and foremost, my contribution is really about repaying the debt of gratitude to the university for giving me that great foundation.

And thirdly was a desire to pay it forward, to make sure that future students will also have the access to the resources, the opportunities and the guidance to be able to succeed. I feel that as alumni, it’s actually our responsibility and frankly, to our benefit to invest in preserving the reputation and success of the university. Instead of kicking away the ladder once we’ve climbed it, we need to actually strengthen it, we need to shore it up, we need to build and make the rungs shorter and the base stronger and create the scaffolding so that those that come behind us can also secure the opportunities for advancement and prosperity that we had.

“It’s really a matter of trying to contribute in a way that reflects your expertise, your station in life or your lived experience”

So in terms of different ways to contribute that you outlined in your question, it’s really a matter of trying to contribute in a way that reflects your expertise, your station in life or your lived experience. At some point in your life, you’ve got more time, at some other points you’ve got more money, and sometimes your greatest contribution is really just a one-to-one mentoring role with a student. And other times it’s more of a systems or institutional role. So when you think about the last couple of things that I’ve been involved with that I think have been maybe more of that systems role. One of the ones you mentioned was really serving on the Presidential Nominating Committee. Now that was a very significant and intense time commitment, but it needed to be, because what we were doing was running a global search for the best leader for the university for the next decade. That leader in combination with the faculty and staff was really going to set the standard in the direction for what the university looks like for 10 years. And that has an impact on tens of thousands of students.

And similar to being involved in this strategic plan development, I was able to reinforce the importance of really taking a student-centric approach, which meant focusing on issues such as mental health, as well as the systemic barriers that precluded some of the students from progressing, trying to think about how we integrate programs across faculties to give students the best education and trying to reinforce the importance of that applied learning and co-op system to make sure we were graduating students that were going to make a difference in solving some of the very significant challenges we face as a society.

And then at the other end of the continuum, from the strategic to the specific, creating the course that I teach to reinforce some of the critical skills that students need for long-term success, providing students with the tools to navigate their own careers, was really a great way to develop a more personal and intimate connection with individual students in that format.

[Meg]  You’re clearly passionate about the student experience and you also give back to students as a donor through the Upkar Arora Social Impact Leadership Scholarship. This scholarship is a little bit different from others in that it doesn’t just award students for their academic achievements, but also for their contributions to social innovation. Why was that so important to you?

[Upkar] You know, when I think about when I went to school and when I set up this award I realized there was a lot of awards for people who got good marks, but actually very few who recognized good citizens and good leaders. There’s something as basic as recognizing people who took time out to volunteer and to support a friend in need or to stand up and speak out on really important issues of social justice. So the criteria that I really embedded in this scholarship focused on people who have demonstrated civic or community leadership in areas designed to improve society or the environment focusing on those communities and those people who were either at-risk or low income, or, actually the award was designated to someone who could demonstrate social innovation that would help those communities. You know, now that it’s been a few years since I set up that award, seeing the quality of the students and the backgrounds, and the work that they’ve done has really given me a great deal of pride as to the contribution that these students are making, all by maintaining a great academic track record.

“What we’re finding is that impact investing is actually stepping out of the periphery, where it was 7,8,9 years ago, and actually moving into the mainstream”

[Meg] Yeah, that’s great and a really important thing to recognize in our students. I’d love to talk more about your work at Rally Assets as well. There’s been a lot of talk in the media recently about ESG and impact investing. First of all, can you explain for our alumni what impact investing is and what all these different terms mean? And secondly, your background doesn’t really lead people to think you might work in this area. So why have you chosen to focus your time there?

[Upkar] Meg, you’re certainly right, there’s now a lot of terms that are thrown out when we talk about investing terms like responsible or sustainable or ESG or ethical impact. You know, the terminology can be quite confusing. It was very confusing when I first entered the space as well. But you know, generally, I’d say that impact investing now there’s become a standardized definition, and it focuses on investing with the intention of generating a measurable social or environmental impact, along with a financial return. Our firm Rally Assets has really been the market leader in impact investing for the last 10 years. In fact, just earlier this year, in June of 2020, we launched the first-of-its-kind impact fund in Canada, targeted at accredited investors that really delivers responsible investing for those investors who want to generate returns and social or environmental benefit. It’s a multi-asset-class fund consisting of public and private debt and public and private equity.

We are seeing way more interest today or the last few months or the last six to nine months of interest in impact investing than we’ve seen in our 10-year history. And in fact, we expect this interest to deepen and accelerate in the years ahead. What we’re finding is that impact investing is actually stepping out of the periphery, where it was 7,8,9 years ago, and actually moving into the mainstream.

In terms of answering your question, in terms of why impact investing, you know, after spending a lot of time in the corporate sector, it really might seem strange and I’m running and own a firm on this topic of impact investing. For me, it was actually looking for a way to integrate two very distinct, separate parts of my life, which we’re running in parallel. One was focused on working within our traditional capitalist system, helping businesses maximize profit for shareholders. And the second part was dedicating more and more time outside of those businesses to try to address some of the pervasive and systemic social and environmental issues we were seeing – issues like income inequality, racism, climate change. And so with age and a bit of success, I started to have more freedom to pursue initiatives or activities that were more meaningful or purposeful to me, and made a difference in society.

And when I thought about what skills or expertise I could bring to the table that had accumulated over 35 years, I concluded that impact investing was a great way to integrate those two parts of my life. I also concluded that business today wields a ton of power, has a ton of influence, and significantly more resources than some of the public sector or NGOs or charities so they need to be part of the solution in building a better society. What impact investing does, really, is use market-based solutions or approaches, works with businesses rather than an opposition to them, and encourages businesses to focus on what is called a double or triple bottom line. If we can get businesses focused on this, there is a huge opportunity because the United Nations 2030 Sustainable Development Goals of which there are 17 really require a significant amount of capital measured in the trillions of dollars that cannot be funded by governments or individuals or foundations alone. So business has a critical role to end poverty, protect the planet, and really try to ensure prosperity for all by 2030.

“Business today wields a ton of power, has a ton of influence, and significantly more resources than some of the public sector or NGOs or charities so they need to be part of the solution in building a better society”

[Meg] This sounds very timely, especially in the midst of pandemic. Has COVID-19 impacted this approach to investing?

[Upkar] What the COVID 19 pandemic has done is, it’s really shone a light on how that capitalist system that I talked about was already under pressure, revealing how deeply and significantly flawed it was. COVID-19 magnified some of the fundamental issues that were lying just beneath the surface like income inequality and systemic racism, but we really hadn’t adequately addressed. In fact, it took the pandemic to highlight the system and the people within that really did not have any capacity, any resilience to absorb an unexpected shock like COVID-19.

Unfortunately, what we’ve seen as a result of COVID-19 is that the impacts of the pandemic are very disproportionately borne by women and by racialized people and those who live in poor neighborhoods, compounding those problems. So you know, while governments and charities have really stepped up in terms of dealing with the short-term crisis, there has definitely been a greater need for more resources, charities are able to raise less donation dollars, their investment returns are lower because we’ve now got a lower interest rate environment. So some of the progress in dealing with some of these issues has certainly stalled. And all that does as it relates to impact investing is really reinforced the need and importance for investors to step up and invest in funds that will contribute to solving some of those social and environmental issues that have just been amplified and exacerbated by the pandemic.

[Meg] What are some examples of companies that Rally does invest in and how did those investments then help to solve global issues and climate health and equity?

[Upkar] We look at probably hundreds of companies, we start off with actually a base of thousands of companies. We look at hundreds of public companies and private funds. But let me give you a couple examples of the kind of investments that our Rally funds have made. And now while we do a lot of diligence, both financial and impact due diligence on each company, I’m just going to highlight some of the reasons why we really find some of these companies or funds attractive.

When we think about a private equity impact investment, one of the ones I’d highlight is the Deetken Ilu Women’s Empowerment Fund, which is actually a Canadian fund, but what they do is focus on advancing gender equality in Latin America. And for that fund it means investing in growth stage sustainable enterprises with the goal to support women’s empowerment across all business activities, renewable energy, women’s entrepreneurship, healthcare, affordable housing, and trying to provide small and medium enterprises with financing to grow their operations.

And then at the other end of the continuum a public company that we really like is Adidas, which would be known to most of the people in the audience. Now Adidas, you may not know, has a long history of market leading sustainability practices with process improvements that reduce waste, water use, emissions and preserve natural capital. But you know, there’s still a fundamental problem because 90% of shoes still end up in landfills at the end of their lives. So to address this issue, what Adidas has done, it’s committed to developing a fully recyclable shoe and polyester. Given that it’s the second largest shoe manufacturer in the world if they are successful in implementing this transformative strategy, it would be a game changer for the industry. We already know the company’s made great progress so far towards this goal. It’s based on seeing the release of their 100% recyclable shoe pilot that they’ve launched. And they’re targeting a full scale market launch in 2021. So there’s a great public company that’s doing wonderful things in terms of preserving natural capital and enhancing the continuation of our scarce resources.

“Choose humanity above all to find meaning in your life”

[Meg] Yeah, that’s really interesting to see the different sides of the spectrum. And Adidas is something that people may not expect.

Something that we always try to ask alumni at the end of every interview we do is, If you could go back to the day you graduated, what advice would you give to your younger self?

[Upkar] Meg, well I’ve had a lot of time to think about that question because in 2018, I delivered the commencement address for the graduating class and school of Accounting and Finance. So I’m actually going to pick up the three points I really tried to reinforce to the graduating students there.

The first one is really defining success in your own way, on your own terms, to help you design a life that’s meaningful to you, and not living by someone else’s expectation or definition.

The second is really important and it’s really a pattern that I tried to observe in my own life, is that life is not a straight line. You need to look around and explore the possibilities. And for students graduating, they’ve got a significant number of career paths in front of them. And most of them are stressed out about the fact they don’t know which one they’re going to choose and what lies ahead. And my advice to students in that position is that there is no universal right path and you can’t see all the opportunities. What you have to focus on is really what’s the path that’s right for you, and try things to open yourself up to different possibilities that you couldn’t have imagined.

And the third and the final point I’d like to reinforce it with the students I teach and the advice I would give is, really, choose humanity above all to find meaning in your life. And what that really means is to think about how you can apply your gifts – you know, the time that you have, the talents, the expertise, the education, and the determination to do something that is bigger than yourself, to create a better world, a more just world and a more sustainable world. And that will be the path to a more meaningful and purposeful life.

[Meg] That’s great. Thank you so much Upkar for speaking with us today. It was a pleasure.

[Upkar] Pleasure for me as well Meg.