Neeraj Aggarwal started his profession in asset administration working for Macquarie Group and Rothschild & Co. However in 2014, he took a job as program director on the Michael & Susan Dell Basis. There he established a $60 million affect investing platform and later led the Rebuild Texas Fund, which supplied assist to 2 million victims within the aftermath of Hurricane Harvey in 2017.
Seven years on the basis fueled Aggarwal’s ardour for making a distinction. So, when he returned to Australia in 2022, he prioritized working with a workforce with “true credibility” within the affect funding house. Aggarwal joined Australian Affect Investments as affiliate director in February 2022.
Right here he talks about his function on the Sydney agency, what it takes to achieve the evolving area of affect evaluation, and why “affect DNA” is high of his listing in relation to recruiting candidates.
Shannon Houde: Affect investing has advanced rather a lot. How do you outline it?
Neeraj Aggarwal: The definition of affect investing is now so broad, it takes on many alternative interpretations relying on who you discuss to. I feel the most effective definition is from the World Affect Investing Community. They are saying that affect investments are made with the intention to generate measurable social and environmental affect alongside monetary returns. So, what separates it from philanthropy is that expectation of a monetary return again to the investor.
There [also] must be tangible and measurable affect. There’s quite a lot of greenwashing, or affect washing, with funds or firms saying that “we’re producing affect” or “we’re sustainable” [without measuring their impact]. However what actually defines affect investing is that measurability. Does the corporate or the fund have a measurement framework in place? Does it measure its outputs? Do the outputs hyperlink to outcomes, and are the outcomes linked to a idea of change?
What actually defines affect investing is that measurability.
The diploma of affect can fluctuate between totally different investments; it is not essentially a binary classification. In reality, the business now makes use of one thing referred to as the Affect Spectrum, which has three lessons of affect. The primary, A, is to keep away from hurt; B is to profit individuals; and C is to contribute to options. A part of what I do on a day-to-day foundation is undergo funding portfolios, and assess belongings in keeping with A, B, and C.
Houde: Inform us a bit extra about what you do on a day-to-day foundation.
Aggarwal: I work with purchasers and assessment their whole funding portfolios — not solely the small portion that is likely to be allotted in the direction of affect investing. From that portfolio affect evaluation, I produce a visible for our purchasers that exhibits them their market danger and ESG publicity and prompts them into motion.
Second, I conduct due diligence on non-public market funding alternatives. That includes evaluating funds and direct investments for affect, danger and return, in social and environmental investments.
For instance, I’m engaged on one proper now referred to as the Vitality Transition Fund, which invests in applied sciences that may allow the transition to internet zero. We’re going deep and understanding the belongings that make up that fund. We’re understanding the chance profile; we’re digging into the monetary mannequin and understanding the return profile. We’re interviewing the workforce and business consultants to know whether or not the fund can validate their affect and in addition doing desktop analysis to know how business practitioners and lecturers are fascinated about the transition. We’ll produce a full, complete due diligence report, which our purchasers will then use to make their funding selections.
Houde: What are a number of the greatest obstacles you’ve confronted in progressing your profession?
Aggarwal: Affect investing continues to be very new. The time period itself is barely 15 or 16 years outdated. So, the truth is that almost all organizations with their fund managers or conventional establishments are nonetheless attempting to determine what affect investing is. They’ve all obtained their very own definitions for it and after they’re hiring somebody, they do not at all times know exactly what they’re searching for.
However it’s a chance as nicely since you get to outline the function for your self. That’s what I ended up doing. To seek out the job you need, that matches your flexibility, that matches your talent set and your values, you should be crystal clear about exactly what you’re searching for.
Houde: For many who are occupied with entering into the affect funding house, is it potential to take action with no monetary background?
Aggarwal: Sure, completely there are alternatives. There are two halves to the function — funding and material data. To be in a front-office funding function, you could have to have that monetary background. However I’ve additionally seen individuals overcome an absence of funding background with their business or subject-matter data. With the Vitality Transition Fund, for instance, neither of the leaders have an funding background; however they’ve an enormous quantity of expertise in battery storage and hydropower applied sciences.
It’s why you wished to enter into the affect sector and your lived expertise.
On the asset proprietor’s aspect, my aspect, we solely have two members of the workforce with an funding background. My colleague, who leads due diligence, began off as a sports activities scientist, then labored as a wealth adviser and progressively constructed up his talent base and has transitioned to main funding analysis.
A fund has many extra roles inside it as nicely. Relying on the dimensions, it could have an effect measurement and administration function devoted to measuring the fund’s affect. It could have an investor relations function, which is not as technical. And there might also be founders, with startup experience or expertise. A non-public fairness fund would possibly search for individuals with consulting backgrounds, business experience, or individuals who have expertise working inside company companies.
The affect aspect attracts upon lots of the parts of the usual funding diligence course of, however, frankly, that may be discovered in case you’re working with the appropriate chief. What’s more durable to study is affect DNA. That’s the very first thing that we have a look at in hiring.
Houde: What do you imply by affect DNA? And the way would somebody know if they’ve it?
Aggarwal: Affect DNA is about authenticity. It’s why you wished to enter into the affect sector and your lived expertise. For me, it took a very long time to seek out my story. After I was in college, I interned for a rural growth heart at a Ladies’s World Improvement Centre in north India. I actually wished to do this work, however I did not have the talent set essential to make a distinction. Coming again to Australia and dealing in funding banking was a solution to construct up that talent set.
However the seed was planted in 2006, working in rural India. My religion comes into it as nicely. I am a Hindu and a part of my religion focuses on service and that’s actually core to how I take into consideration this work, and the way I get impressed and motivated by it.
That’s my story. However totally different individuals have a distinct journey. Loads have been via a sure expertise that pertains to affect. For instance, I’m working with a founder proper now who has a psychological well being challenge, which is why he’s devoting his time and power in the direction of a selected enterprise. I am working with one other founder who has lived expertise of alcohol dependency and is engaged on an alcohol detox program and convention referred to as Clear Slate Clinic. The best way she tells her story is phenomenal.
It is arduous to quantify, nevertheless it’s about digging deep and saying, “Why do I wish to do that work? Who am I attempting to serve? What am I attempting to serve?”
