Speaker 0:
So hello. And welcome to the latest in the in conversation series, Uh, that the Impact Investing Institute likes to put out for everybody interested in the impact investing space. I'm Elizabeth Cawley. I'm chair of the Impact Investing Institute, and today I'm absolutely delighted,

Speaker 0:
uh, to be reconnected with an old friend, actually her nick ring, who is the chief executive of Columbia Thread needle for em. So I'm really delighted that Nick's with us because we're going to talk about the social Bond fund where Colombia thread needed were pioneers. And Nick is going to explain for those who may not be aware of what that is, very briefly what that is. And later we're also, um, Collab

Speaker 0:
partners with a number of others on a just transition finance challenge. And I will be describing exactly what that is later as well. So, Nick, welcome. Uh, I'm particularly glad that we're having a conversation today because Columbia Thread Neagle has been a pioneer in social bonds and social bond investing. In fact, I think you launched the very first Social Bond fund in 2014,

Speaker 0:
and I just wondered if you could share with people who will be dialling into this that a bit about that experience and maybe some of the key hurdles that, um, people might be experiencing now. Absolutely.

Speaker 1:
I'd be. I'd be delighted. And thank you for giving me the opportunity to be here.

Speaker 1:
Um, so before, maybe I answer that question about the barriers, Maybe it would be helpful to spend a minute or so just in terms of what we mean by the social bond product and the social bonds themselves within that. So our social bond fund was was launched with a specific intention of being able to deliver both a positive financial return

Speaker 1:
for our clients, but also a positive social impact. Uh, and that social impact would come from buying very specific types of fixed income securities, namely social bonds. And in order for a bond to qualify as a social bond, it would have to have very specific purposes in mind and through the

Speaker 1:
delivery of those services, create a positive social impact. Uh, and there are a number of criteria, uh, or factors that we would look at there, but mainly they related to the the deployment of capital to have a social impact around a number of different areas such as housing and property education, uh, community services, those kinds of things. So if we could see that the money was going to be very specifically applied

Speaker 1:
to one of those types of outcomes and that we could measure and then report on that income, then we would consider that for inclusion as a social bond and as a social bond within this portfolio, that is

Speaker 0:
very clear. So we're talking about the use of the proceeds around specific social outcomes. Thank you.

Speaker 1:
Absolutely. For us. At that point, this was really a step of innovation. Um, there were no social bond products, and in fact, at that point,

Speaker 1:
there wasn't even a lot of discussion about it because there wasn't the demand. And I think in our industry, maybe wrongly, we wait for the demand and then we try and deliver against it. And here we were seeing that there was something that needed to be done, something we wanted to to support. Um, and yet the concept wasn't the one that people were comfortable with, So we had to start internally with that, trying to share the vision and trying to make sure that everyone understood

Speaker 1:
what it was we were trying to achieve. Um, that took a certain amount of time. Uh, and in order to do that, we had to leverage off our internal mechanisms of communications and and the various committee structures that we have

Speaker 1:
having got through that hurdle. Uh, it was then a matter of really trying to narrow down on exactly what it was we were trying to deliver. And this capability or this product has a lot of very different features, things that we'd never seen before. And I guess the key thing I would focus in on there was that one of the things that we really had to think about a lot was validating the impact.

Speaker 1:
How could we measure that? How could we measure that independently? So that's where we started thinking about utilising a third party or an entity outside of our own organisation who could validate, uh, the work that we were doing and and, more importantly, the impact it was having in society. And then the third piece, which came straight off the back the second piece was around. How did we provide useful, informative reporting

Speaker 1:
that allowed people to feel that they understood what was going on, and they could feel comfortable that we were deploying their capital in a way consistent with what we said we were going to be doing

Speaker 0:
and talking about how people responded. I mean, this was innovative for clients as well, wasn't it? So what was the reaction you got? When When you started talking about this with them?

Speaker 1:
Uh, positive, but I I think that the phrase I would use is a slow burn. Um, so everyone was comfortable with the concept. Everyone was interested and not just within the UK. We actually had quite a lot of interest quite early on from Continental Europe and even interestingly from the United States. But that interest did not lead

Speaker 1:
in those early days into significant allocations of of capital. And I can't really nail why that didn't happen. Other than what you said, it was quite innovative. And I think people wanted to see

Speaker 1:
well, you know, is this really gonna work out? And and and is there a real substance behind this? Even though Columbia thread Needle was a very credible manager of fixed income portfolios and very well known as well. But for all of that, that wasn't enough. People wanted to see the build up of a track record. And of course, with these capabilities, what's critically important is is the dual features the trying to deliver a positive financial return for the client,

Speaker 1:
but also a positive impact for society. And I think people wanted to see both

Speaker 1:
before they were willing to commit. Uh, what's been wonderful is to see how that commitment has started to grow and grow and snowball. And now we run over in dollar terms over a billion dollars across a range of social bond capabilities that we have very

Speaker 0:
interesting what you say. I mean, it's it's over a billion now. It's one seen as one of the success stories in the industry, and you've been true to label all the way through in terms of the commitment to social impact. Um,

Speaker 0:
the measurement of that is always tricky, isn't it? And I know that, uh, Columbia three for disclosure for everybody, uh, was one of the supporters of the Impact Investing Institute right from the beginning, because we we had such common ideas. How do you think you're now helping the industry to develop. And how do you see your role now moving the the wider discussion on?

Speaker 1:
I think we have an ongoing and long term commitment to this. So from our perspective, it is thinking about this as a long term journey. Um, and in order to do that, we have to make sure that we understand what's important to us in society in terms of that journey, and then breaking it down into sort of bite size pieces that we then work out. How can we articulate that

Speaker 1:
and then work with our partners and with our key stakeholders, such as the, uh, Impact Investing Institute, to in order to get even more support around those points? Because I think the reality is what we've understood, even as a market leader and even as someone who has shown that innovation can pay both for from a societal perspective but also, from my own perspective that our voice is not enough. Uh, and therefore it's about identifying those key elements where there is commonality

Speaker 1:
and then utilising our partners as well as our own voice to try and continue to take this message forward and to understand that as the world is on a journey. We're on a journey and we need to be responsive to that, both individually and collectively.

Speaker 0:
And I think I mean absolutely. And you were one of our key partners when we were engaging with the UK Treasury and Debt Management office as we had that dialogue around green guilds and the fact that we could have social co benefits with those green guilds in terms of skills, jobs and community impact. You were an amazing partner there, and hopefully that also increased the investable universe for your funds as we went.

Speaker 1:
Absolutely. I mean, there's I I remember sitting down with

Speaker 1:
portfolio manager and at the time in which we launched this product, I was directly involved because I ran the product function at Columbia at the time, um, sitting down with the manager and and talking about the virtuous circle that we could create here, uh, in terms of being able to raise capital, use that capital to support Green Guilt type issue and then obviously see the benefit of that coming through society, um, and

Speaker 1:
to to sort of articulate that before the launch and then be able to drive that through and then see as we did through that partnership with yourselves, Uh, and and the engagement that we had with government that came to fruition and was so exciting. And now, of course, we've seen subsequent, uh, traction in this space, uh, and it and it uh uh, expanding. And so, from my perspective that that's been sort of the perfect example of what we hoped to achieve and then what we have managed to

Speaker 0:
achieve

Speaker 0:
for some people, one of the hesitations is the fact that you can get an investment return as well as a social impact. How have you actually found evidencing that over the years? So

Speaker 1:
I think that's certainly been a challenge. Um, we have to build that into all aspects of both the

Speaker 1:
investment process and then the actual kind of administration around the product itself. So from our perspective, it started off by saying, What are the questions that we need to ask of an issuer then trying to then obviously make sure that we could validate

Speaker 1:
that the output that came was consistent with what was was laid out, and that's involved having to to follow up from a due diligence perspective, post issuance, and and those are things which in some ways are consistent with an overall investment process. Whenever you you buy a bond, regardless of whether it be a green guilt, regardless of whether it's in a in A in a social bond format, you always want to make sure that the issue is continuing to deliver here.

Speaker 1:
Some of those aspects were harder to measure. Um, and I think part of the dialogue has been working with issuers to get them to understand the importance of being able to measure and validate that impact. And actually, if we are not comfortable with that, if we don't think there's sufficient evidence and that's going to have an impact on whether we want to buy the issue in the first place. And so again, it's about thinking through all of the process, from the initial engagement

Speaker 1:
through to the monitoring through to the documentation of that through to the delivery of that, uh, measurement of impact for our end investors and making sure that they can understand it in simple terms

Speaker 0:
as well. And this goes back to some of what you were saying at the beginning about rethinking your processes because a lot of people think, Oh, Bonds, buy and hold, It's fine. Obviously, you're in a different interest rate environment now, But you

Speaker 0:
you're talking about active engagement.

Speaker 1:
That's exactly right. So and and and the key words there is as we go through. So it starts with that initial engagement and then all the way through in terms of OK, are they delivering? How can they validate that? And I think this is an important theme that we're seeing. And in fact, maybe we got a head off with this particular capability

Speaker 1:
that in the past it was sufficient just to to tell someone, you know, So the club said, Well, tell me now let's show me. Um, I really want to see the empirical evidence and and that has proven to be quite a long journey for us. And the issue is, uh, in in this space such that there is that that

Speaker 1:
level of detail and level of information such that people can feel they're getting both the positive financial return and the positive social impact.

Speaker 0:
And of course, this is a market that is global. I mean, we've talked a lot about the the green guilt in the UK. But you're also working with us at the Institute on the Just Transition Finance Challenge. And before I ask you about why and what you're getting out of it, I think probably I ought to explain briefly, you know, but many people what you may not know

Speaker 0:
the just transition finance challenges, as you know, is very much around thinking that in a transition to net zero, we need to achieve the environmental or climate actions we need to achieve the social, economic sort of sharing and fairness actions. But the third action is around community voice. And when we looked at this a few years

Speaker 0:
ago, it's amazing how few investment vehicles actually combine even environmental and social, let alone the idea of bringing communities and societies along. You decided to be one of the challenge partners, one of 20 asset owners and managers in the world. Why did you do that? And what have you got out of the challenge thus far?

Speaker 1:
So I think we we wanted to be a part of it because we we always want to be part of the the voice that's that's driving the dialogue. We're very committed uh to this space. And so that commitment gives rise to a lot of thoughts. And we want to be able to leverage that thought for benefit not just for ourselves, but obviously for the wider community in which we operate in. So that was one of the reasons. But there's a more practical reason that as we look forward and think about the transition

Speaker 1:
that we are going through that our industries are going through, clearly there are going to be consequences to to that transition. That transition is focused on the immediate urgency of where we are from. A a climate impact perspective. But the consequences of this this transition can have wide ranging social, uh uh impact, as well as environmental impact and how one measures those things and how one creates

Speaker 1:
the balance between the positive impact to the climate of a transition action versus the potentially negative impact from a socioeconomic or or or or other perspective

Speaker 1:
is one that we need to apply some kind of consistent approach to and having a framework to be able to do that. And so for us being involved in in in in this challenge allows us to feel one we can contribute and hopefully come up with a framework that allows us and all the other sort of counter parties involved in this space to be able to be more definitive in terms of balancing those tradeoffs and making the right decisions. Uh, as a result of that. And

Speaker 1:
and And, uh, I was talking to a to to one of my colleagues around this and it was interesting that obviously, the reason we're doing

Speaker 1:
the whole point about climate change is to protect the planet. But we're protecting the planet. Why? For the benefit of nature and all of us. So if we don't understand

Speaker 1:
the implications to all of us of this transition, we could end up actually not where we ended up where where we want to end up where we end up with with a, uh, achieving our our climate goals, but with huge socioeconomic issues. Uh uh uh, that affect multiple generations. And so, trying to bring all of this together

Speaker 1:
now in a framework in a practical sense, I think will allow us and many others involved, uh, to to feel that they've got a much more robust and consistent application

Speaker 0:
and I have to say it's been great working with you and and the others involved in the challenge because, as you say, we've come out with a framework of criteria that are practical and we haven't invented our own. We've actually, with your help, looked at what's

Speaker 0:
out there already and said You can use this information if you're already using this particular measurement framework or data. It fits into the overall just transition criteria. And that's with an absolute focus on practicality, guided by people who actually own or run money and with a client benefit at the heart of it. So I think it's been amazing. And thanks to you, we've got these, um,

Speaker 0:
criteria that are being tested rigorously through consultation processes, and we'll go live later this year. So for those who are watching this at an unknown time later this year, I mean sort of end of May

Speaker 1:
and we we are so excited and in fact, just a point to to emphasise there that that you mentioned is that utilising

Speaker 1:
existing information, existing data to help support these mechanisms is critically important because there are so many factors. There are so many things involved in our business in the world, so much complexity where you can leverage of what you already have, rather than having to continue to create something new, you're making it more efficient, more effective and therefore, ultimately, hopefully a better proposition.

Speaker 0:
So 2014, you started to get involved in this even before I did, which was 2016 when we started both of us, it was still very new, and you you'd be talking to people. And there was a lot of resistance, partly because people didn't think you could get investment return whilst also having an impact. Now I think the the market has largely moved on. We've still got regional and asset class differences and mindsets. But

Speaker 0:
as we start to see the thought of impact investing and true long term sustainable investing become significantly mainstream, what do you think you have to do A to stay on the leading edge of that, but B to influence it so that we do this with integrity?

Speaker 1:
That's a great question. Um,

Speaker 1:
I think it's about staying true to those core values that that we have, Um and but then, to understand that the world does move on and you need to always map the real world to those values and make sure that they're practical and that they resonate because I think that's that's a thing that that we're seeing more and more is that element of authenticity.

Speaker 1:
Um, and so for us, it's You're right. We started this journey very early, so I think we can look in the mirror and say we are truly authentic because we're not just doing a me, too. Um, so from my perspective, it is about continuing to assess where the world is going and how we can utilise our values, but also our insights, uh, our insights in this space both as as as somebody who's very committed

Speaker 1:
to the to supporting the transition, but also someone who's a very credible and established and global asset manager, and bring all of those factors together

Speaker 1:
to try and ensure that we're continuing to meet the changing needs of our clients within a changing world in which our clients

Speaker 0:
operate. I think that's so well said, How are your clients shaping that thinking? Because obviously they've moved on possibly even faster than parts of the industry have.

Speaker 1:
Absolutely, and that that's absolutely fascinating. So for us, uh, you know, here in AMIA, um, we're at the forefront, I think, from a global perspective. And within Amir, I have clients in the UK. I have clients in the Netherlands, I have clients in the Nordics and

Speaker 1:
that the themes are the same, but the level of progression of thinking is a little bit different. So what we're seeing is is that we're seeing some clients who are really trying to embrace this and and in fact, their understanding

Speaker 1:
their importance within the over overall value chain of utilising their capital support this journey. So I would say that our clients are becoming much more vocal generally, but some are not just being vocal, but they're trying to be thought leaders. And they're coming to us saying OK, so what? What's your thinking about natural capital? You know, we really need to start thinking about biodiversity and and these are things that we would get to.

Speaker 1:
But it's interesting that when we hear our clients start to talk about it, we realise that maybe we need to shift our prioritisation Not necessarily our thinking, because our thinking is is what we are. It is who we are. But that order of of prioritisation can be shifted by the clients, and also clients bring aspects that we don't see

Speaker 1:
as an asset owner. So we welcome that dialogue. And for us, our clients are our partners in many respects. And so that partnership discussion, I think, is helpful to them and helpful to us. So the more vocal our clients can be on this, the more thoughtful, the better it is for us and for them.

Speaker 0:
Nick. That's an outstanding way to finish this conversation. I love ending on the client and and beginning with purpose. It's just fantastic. Thank you so much. Um, I've thoroughly enjoyed this conversation with Nick Ring, who is the chief executive. And, as you will hear, a passionate leader, very, very insightful person and an authentic person around impact investing social bonds with social purpose. Thank you so much, Nick.

Speaker 1:
Lovely pleasure to be here. Thank you. Thank you.