The “Social” Component of ESG Investing

April 18, 2022

In this episode of Engaging Alternatives Spotlight, Elana Margulies-Snyderman, Senior Manager, Publications, EisnerAmper, speaks with Eleni D. Janis​, Managing Partner and Chief Investment Officer of Equivico, a New York City-based woman-owned impact investment management firm launched with support from the National Community Reinvestment Coalition (NCRC) that focuses on the “S” or “Social” component of ESG investing, exclusively on economic inclusion and high-volume responsible lending to small businesses including but not limited to women, people of color, veteran-owned businesses and those in low income areas. She shares her views on the importance of focusing on the social component of ESG investing, including the greatest opportunities and challenges in the space, her experience being a woman in investment management, what the firm is doing to champion DEI and more.


Transcript

Elana Margulies-Snyderman:Hello, and welcome to the EisnerAmper podcast series. I'm your host, Elana Margulies-Snyderman. And with me today is Eleni Janis, Managing Partner and Chief Investment Officer of Equivico a New York city based woman owned impact investment management firm launched with support from the National Community Reinvestment Coalition, or NCRC, that focuses on the S or social component of ESG investing, exclusively on economic inclusion and high volume responsible lending to small businesses including, but not limited to women, people of color, veteran own businesses, and those in low income areas. Today, Eleni will share with us her views on the importance of focusing on the social component of ESG investing, including the greatest opportunities and challenges in the space, her experience being a woman in investment management, what the firm is doing to champion DEI and more. Hi Eleni, thanks for being with me today.
Eleni Janis:Hello, Elana. Pleasure being here.

EMS:
So Eleni, tell us a little about Equivico by NCRC and how you got to where you are today.
EJ:Absolutely. Equivico, which stands for equality and victory for all, is investment management firm focused on impact, social impact as you described. Everyone on our team from our seed investor who started this with me, the National Community Investment Coalition, a nonprofit in Washington, DC, to people on our board of advisors who include Governor Paterson, former governor of New York state, and several others, to everyone on our team. We are a team of people who are seasoned in finding opportunity in underserved geographies, communities, and businesses. And really deeply understand why are they underserved? What is it that they are lacking access to, to succeed?

And that's exactly what we are funding and what we are investing in. And we'll talk more about our strategy. But ultimately we know that women owned businesses or people of color who start a high tech startup, or a small business at the corner of your house, face certain challenges in succeeding that have nothing to do with their credit worthiness or their ability to build a solid business. And when you invest and we're looking to invest in those opportunities and people so that we can mobilize more economic inclusion and mobility while we're also returning competitively for our investors.
EMS:That's very inspirational, everything you're doing. And Eleni, to kick things off further, I would like you to share your experience previously investing in underserved businesses.
EJ:Absolutely. Deploying capital for economic development is something I have done in my entire career from working in government, the tech sector in Washington, DC. So from designing policy to designing venture capital strategies has been the focus of my work based on a deep understanding of data, both economics as well as market research, to understand where gaps are. Where gaps are in different industries, as well as specific challenges that entrepreneurs of color or women or businesses in lower income areas may face. Whether that is access to banking, basic banking services, or access to credit, which is what we do today. For example, before Equivico, I was a Vice President at the New York City Economic Development Corporation, and there I administered a portfolio of 18 incubators and accelerators.

I advised and helped design initiatives, venture capital initiatives, including bringing together a cohort of venture capital firms along with capital from the city to invest in tech companies founded by women and people of color, along with other initiatives, whether that was in life sciences or debt solutions for nonprofit organizations or in managing small businesses. It's been in my DNA as well, so to speak in my career DNA, but it's also true for my partners at the National Community Reinvestment Coalition who have worked with banks for 30 years to deploy capital for housing and small business lending in communities across the country. Hey have 600 nonprofit organizations across all states directing and helping inform banks as well as public policy to bring capital for those purposes in the communities. And that is my experience, not to mention the experience of Mark Rambler, for example, on our board of advisors, who was the CEO, former president rather, and founder of a great online lender.
EMS:Oh, very inspirational everything you've been doing. So for the purpose of this podcast, obviously you're focusing on the S or social component with your current investing strategy. So I wanted to ask you basically your thoughts on why you chose to focus on the S?
EJ:Absolutely. I chose to focus on the S for a range of reasons. I have been an innovator and entrepreneur throughout my entire career. Even when I worked in government, I started or helped start two new departments. And I would say that I've had this strong record at identifying opportunity, new market opportunities early enough, and developing solutions that tap that opportunity. And so in the case of S, part of the reason is because there is in this growing ESG market, the socioeconomic component is definitely lagging behind. There is a lot more to be done on the energy space and governance as well, but there is more attention going to those areas. Socioeconomic, for me, changing the economic equation in the country is a fundamental means to creating more equality, to reducing that path or decreasing rather the base of increasing poverty in which we are today.

So socioeconomic investments for me are those that then create jobs that can help grow the middle class. That can help people who are born in low income areas or families to raise up the ladder and move up the middle class. There is a lot of opportunity there. It's harder to have that opportunity, we can talk about why that is. And one of the reasons being that it is harder to measure, it is also harder to develop solutions for that. Our solutions, for example, that focuses on financing small businesses in an innovative way is one that directly helps sustain jobs, create jobs for the middle class and for people who are rising to the middle class. And we can measure that. We will be measuring exactly where the impact is that we want to have and we will be having.
EMS:Oh, very interesting. And I know you just touched on some of the opportunities. And maybe on the other hand, what are some of the challenges that you're up against with this, or some things that maybe keep you up at night?
EJ:Absolutely. You know, one of the challenges I would say is perception, for example, of small businesses or perception of any opportunity that isn't a common one in investing or in an industry, takes effort to educate. Sometimes it's lack of awareness and information regarding a certain industry or investment opportunity. Other times it's actually a misperception of that industry. For example, with respect to small businesses and small business lending, small business lending can be a successful and competitive investment strategy if you know how to do it. And if you can work, whether you underwrite yourself or work with very good underwriters. If you know, if you understand what a small business is and how to finance it or work with people who know how to do that, you can successfully finance those business and return very good returns for your investors. But that takes deep understanding.

And it takes, in my case, an education and building awareness among audiences who are not exposed to small businesses. And if anything, they may actually have the wrong perception, which is fine. It's fine only to the extent that education is part of what I find ESG investors must do and will do. And it's a way of moving forward together. We all need to learn, different individuals and institutions need different types of knowledge. I do find that my role always has been, and it will continue to be, to share the knowledge I have so that we can help others. That is one of the challenges that we face.

Other than that, there is certainly, because of that as an impact investment fund, there is a lot of attention to the opportunity that we offer at the table. It is still though institutions are building up and growing their ESG strategies internally, and with the respect to their asset allocation. So we have, and we are moving along with our investors, obviously time is of the essence. And we try to move along the base of our investors, or at least potential investors. At the same time, I'll say that we have had some major institutions supporting us. And that shows both not only the quality of the work we do, but rather the quality of opportunity in the space we're in.
EMS:Absolutely. That's great that you're getting such good momentum. Eleni, to shift gears a little bit, you know, being a woman owned firm, you clearly incorporate DEI into your firm's remit. So I wanted to ask you what else you're doing to champion DEI besides at the portfolio level? Anything else you're doing, I'd love to hear.
EJ:Yes, absolutely. We do have the fortune to be able to tackle goals of increasing diversity and inclusion along different aspects of our firm, obviously in the portfolio level, as you pointed out and we have discussed. In addition to that, everything, and maybe even to dive deeper into our portfolio, it isn't only the targeting of businesses that we seek to finance. It is also how we do it at the firm level. And personally, we have a deep understanding of bias, systemic bias, implicit individual bias. And that is something that actually informs the way that the underwriters that we choose to support or the way that we market our products. Internally in the firm as we are a woman owned firm, in addition to that, achieving diversity of race and gender is a top priority and we have achieved it. And obviously we are growing so we will continue to do so. For me, being an immigrant and having lived almost all of my adult life in the United States, is something that I have certainly experienced.

And I understand what it means to bring together an inclusion of thought as well as background, and what those differences really mean when it comes to designing a product. What does it mean to be asked different questions? Because we do ask different questions based on our experience. So that is a top priority for us. We have most of our team is female and, but we have wonderful, absolutely, very critical men in critical roles as well in our company. And we have diversity across race and gender. We've also, and that's maybe more of my personal time for now, but in the future we spend time as a team as well mentoring. Mentoring, whether it is the next generation of talent through programs that other organizations offer. While we already actually have launched the mentoring and pre consulting program for small businesses, which is another way in which we closed the opportunity gap for underserved communities, to advance diversity and inclusion.

I mentioned knowledge before. Knowledge is very critical. Capital is definitely king, but it's also true that having access to knowledge through your network, through potential mentors, is something that every entrepreneur knows it is critical. One of the things that my firm is doing is to have launched and continue in the future this mentoring program for mostly women and businesses owned by people of color so that we can connect experts in their fields, the people who we know that tend to have a lack of access to that insight, but also actually businesses across the country. So I know that if I'm in New York, I have access to a lot more people and expertise here than a farm, a successful actually farm that we are working with in Hawaii. But that is a gap that must be bridged and definitely in today's age and habit of being on Zoom or working virtually, it is an opportunity that we are leveraging
EMS:Great Eleni. We've covered a lot of ground today. So I wanted to see if you have any final thoughts to share with us today.
EJ:Thank you. This was great. My final thoughts are to ask good questions, both to ask good questions with true intentions, both as investors and asset allocators. I find for all of us, there is no bad question to ask and it's okay to ask any question and be comfortable answering it. This field is so new, to some extent, at least new to some, that it will take patience and a lot of collaboration. As long as there is honesty on both sides, hopefully we can land to a place where more capital flows into businesses and opportunities that everyone can believe in, and also profit from, both the owners of the business, but also the investors, the asset allocators.
EMS:Absolutely. Well, Eleni, I wanted to thank you so much for sharing your perspective with our listeners. And thank you for listening to the EisnerAmper podcast series. Visit eisneramper.com for more information on this and a host of other topics. And join us for our next EisnerAmper podcast when we get down to business.

Transcribed by Rev.com

About Elana Margulies-Snyderman

Elana Margulies-Snyderman is an investment industry reporter and writer who develops articles, opinion pieces and original research designed to help illuminate the most challenging issues confronting fund managers and executives.


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