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Liqian Ma

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2020-06-11

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2020-06-11

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1. “And so I think that transparency is a big piece of how you differentiate the serious, intentional practitioners versus those who are really trying to put on a facade.”

   2020-06-11 · Capital Allocators · Sustainable Investing 2: Liqian Ma – Allocator Perspective (Capital Allocators, EP.140) · IDENTIFIED FROM THE TRANSCRIPT · source

2. “Changing their investment processes? Are they building up real organizational muscle memory to analyze and act on, again, what we were talking about earlier, the signals, right? Material risks and opportunities that could actually affect investment outcomes. And this process is a journey, right? Some firms are earlier in their evolution, and I think you have to be transparent when you're talking to your clients and your investors on, hey, this is where we are, but this is where we intend to go. And that is perfectly fine and permissible. And we respect that. But I think it's different to say this is our ESG strategy. And we put a lot of thought into it, and this is the way it's going to be for the foreseeable future. I think you have to keep an open mind and know that the whole industry is still pretty early, and there are always more best practices to learn.”

   2020-06-11 · Capital Allocators · Sustainable Investing 2: Liqian Ma – Allocator Perspective (Capital Allocators, EP.140) · IDENTIFIED FROM THE TRANSCRIPT · source

3. “Yeah, so greenwashing and social washing are very related in that it's really about putting on a facade of caring about these issues. And you may genuinely care about these issues but may not know how to translate that intention into practice. So I think there are different shades of greenwashing. There's the one that is more just saying that oh, this is a really strong growth area for the market and let's lean in, let's put some labeling on what we do. Let's sign on to various platforms and memberships to signal that we are motivated by sustainability and an impact. But I think you have to look more deeply at what the firms and organizations are actually doing internally to understand, okay, are they actually”

   2020-06-11 · Capital Allocators · Sustainable Investing 2: Liqian Ma – Allocator Perspective (Capital Allocators, EP.140) · IDENTIFIED FROM THE TRANSCRIPT · source

4. “Climate change technologies because they've been in, let's say, a large industrial organization trying to find innovative solutions. And with some of the bureaucracies that are inherent in larger organizations, they found it challenged to implement. But in a smaller, more nimble format, they can actually execute and fulfill their theses in a much more effective way.”

   2020-06-11 · Capital Allocators · Sustainable Investing 2: Liqian Ma – Allocator Perspective (Capital Allocators, EP.140) · IDENTIFIED FROM THE TRANSCRIPT · source

5. “Yeah, it's really interesting and it kind of goes into our sourcing for our platform at Cambridge Associates. I think one common theme we're seeing is well-established investment managers who spin out of larger platforms and they are tackling a, let's say, a smaller cap part of the market. They're focused on a more inefficient part of the market and they are taking their institutional investment approach and their knowledge base into that more targeted area. We're actually also seeing some, especially in the private side, some operationally focused managers who have spun out of industry, of strategics, and even some family offices who have been very active in certain areas like environmental sustainability and clean energy to start new funds focused on, let's say, resource efficiency.”

   2020-06-11 · Capital Allocators · Sustainable Investing 2: Liqian Ma – Allocator Perspective (Capital Allocators, EP.140) · IDENTIFIED FROM THE TRANSCRIPT · source

6. “Are channeling their existing mentalities and best practices, and others are coming at this fairly with a kind of new and enlightened sense of, wow, we have to act now and we have to act urgently and they're applying all their talent to go into it.”

   2020-06-11 · Capital Allocators · Sustainable Investing 2: Liqian Ma – Allocator Perspective (Capital Allocators, EP.140) · IDENTIFIED FROM THE TRANSCRIPT · source

7. “Some of it is they grow up, they find that there are these dire challenges facing the planet, facing society, and they have that mentality baked into their being, to their DNA, and they want to do everything in their power to create market-driven solution to address those challenges. Others perhaps come out of it through, let's say, traditional industry, through traditional investing, and they have come around to the fact that, wow, these are real systemic issues. And what I've been doing before as an entrepreneur, as an investor, as they look at the world going forward, right? Some of those frameworks are less relevant or are not as current to the times that we are living in. And they're focusing further on these, again, real world solutions to these challenges. And so you see a combination.”

   2020-06-11 · Capital Allocators · Sustainable Investing 2: Liqian Ma – Allocator Perspective (Capital Allocators, EP.140) · IDENTIFIED FROM THE TRANSCRIPT · source

8. “I would say that it's really probing them on their sector expertise if they're investing in certain areas of the market. Are they really well networked in those particular industries to both source and add value to deals both pre-investment and post-investment? Just like when we do diligence and assess any manager with more limited track record, it's their ability to attract the best deals given their expertise and their networks and given their specialization, their ability to really pull levers after they invest in a company to enhance the operational outcomes of that business. So in many ways it is the same framework and the same tools, but you're right in that certainly there are many managers who are newer and we have To really dig in on their underlying capabilities and their sector theses.”

   2020-06-11 · Capital Allocators · Sustainable Investing 2: Liqian Ma – Allocator Perspective (Capital Allocators, EP.140) · IDENTIFIED FROM THE TRANSCRIPT · source

9. “We've been actually fortunate to find managers who have been tested through cycles and who have been able to layer in thoughtful sustainability lens. But of course there are many more emerging managers as well, both in the public side as well as in the private side. And of course, we're seeing some newcomers in the hedge fund arena as well. And for those,”

   2020-06-11 · Capital Allocators · Sustainable Investing 2: Liqian Ma – Allocator Perspective (Capital Allocators, EP.140) · IDENTIFIED FROM THE TRANSCRIPT · source

10. “So, I want to pull apart those two pieces. So, the first that kind of notion that this is more or less the same type of manager selection process, one of the differences, I would think, is that the space is, let's call it newer compared to, say, traditional long-only equity investing that's been around forever. Where do you find a manager that has a track record in a space that hasn't really been around?”

    2020-06-11 · Capital Allocators · Sustainable Investing 2: Liqian Ma – Allocator Perspective (Capital Allocators, EP.140) · IDENTIFIED FROM THE TRANSCRIPT · source

11. “More quote unquote traditional managers. And it's the same underwriting process, the same approval process. What I would say that we're trying to be a little bit more intentional about when engaging with sustainable managers is really probing them on the impact thesis and how they are both measuring and reporting on the impact. And let's just be real, right? Every investment that you make has some impact. And I think that what's really important for investors that invest in these impact funds and opportunities is you have to be really clear about what the impact thesis is, how the manager will be held accountable to achieving that outcome and reporting that over time.”

    2020-06-11 · Capital Allocators · Sustainable Investing 2: Liqian Ma – Allocator Perspective (Capital Allocators, EP.140) · IDENTIFIED FROM THE TRANSCRIPT · source

12. “It is really the same process how we underwrite and do diligence on sustainable or impact managers. You have to start with the fundamentals in assessing the quality of the team and the organization, their investment process and their strategy, how consistent is it, right? How much work that have they really put in to define their thesis and validate that thesis over time? And of course, we look at the track record and the performance, right? Even if it's a very young firm, we have to see are there early signals that their thesis is playing out the way they intended? And if not, how have they learned those lessons, like what we were talking about earlier to achieve future success going forward? So it's fundamentally the same process. And when we go through a diligence process at Cambridge, really there isn't any visible difference between a sustainable manager and a”

    2020-06-11 · Capital Allocators · Sustainable Investing 2: Liqian Ma – Allocator Perspective (Capital Allocators, EP.140) · IDENTIFIED FROM THE TRANSCRIPT · source

13. “I don't have a clear bias. I would say that I have worked more in the private markets at Cambridge Associates with clients. So my familiarity with private market opportunities is certainly higher. But we have clients that are approaching full portfolios across different asset classes. We're finding really strong high conviction opportunities in global equities, for example, that have very high concentration and high sustainability oriented approaches. And they have added a lot of value to portfolios because, again, they're focused on that durable cash flow piece. They're focused on differentiated intellectual property that can withstand cycles.”

    2020-06-11 · Capital Allocators · Sustainable Investing 2: Liqian Ma – Allocator Perspective (Capital Allocators, EP.140) · IDENTIFIED FROM THE TRANSCRIPT · source

14. “That we've seen. So, of course, it's very time periods dependent. It is subject to style favorability, whether it's growth or value, quality, private versus public. And you have to maintain conviction in your thesis because you do have to take a long-term view and abide by that thesis over time.”

    2020-06-11 · Capital Allocators · Sustainable Investing 2: Liqian Ma – Allocator Perspective (Capital Allocators, EP.140) · IDENTIFIED FROM THE TRANSCRIPT · source

15. “Discard the entire approach because of any early mistakes, but rather really incorporate those lessons learned and not have a A-B test, if you will, from the very beginning. And as we know, especially in private markets, it takes time for your thesis to be proven out and be validated, often many years for a full cycle to reflect this thesis or this investment opportunity. So I do think that embedding the early lessons learned into your approach as you go is a really important best practice for any institution, any family moving in this direction. And there are many, right, if you're, and we're seeing this environment, the sustainable managers who are focused on high quality durable cash flows have stayed really resilient in the market volatility.”

    2020-06-11 · Capital Allocators · Sustainable Investing 2: Liqian Ma – Allocator Perspective (Capital Allocators, EP.140) · IDENTIFIED FROM THE TRANSCRIPT · source

16. “Would say this is the same with any area of investing where you're going into either a new or asset class or you're picking a new manager, there are bound to be successes and bound to be mistakes and failures. And I think what's really important is to not”

    2020-06-11 · Capital Allocators · Sustainable Investing 2: Liqian Ma – Allocator Perspective (Capital Allocators, EP.140) · IDENTIFIED FROM THE TRANSCRIPT · source

17. “So inevitably, when someone gets started, you said they're not as informed as they may be down the road. What happens in those instances where the first step creates this divide between returns and mission in that maybe the performance of whatever they invest in isn't quite as good. Maybe they didn't pick the right manager. They didn't go about it the right way. But it's not quite as good as what they might have achieved elsewhere in the capital markets. How does that tension get resolved in the early going?”

    2020-06-11 · Capital Allocators · Sustainable Investing 2: Liqian Ma – Allocator Perspective (Capital Allocators, EP.140) · IDENTIFIED FROM THE TRANSCRIPT · source

18. “And the best practices until you actually start doing it in some capacity. And we find that those clients who start off with an eye towards fully integrating the portfolio sustainability lens, but are pragmatic in how they start and how they evolve that approach. I think that approach works really well because you're learning as you go and you layer in high conviction managers and you build upon those high conviction managers. You find more of them through your expanded networks. And before you know it, you can have a larger and larger part of your portfolio that reflect the original intention, which is to embed sustainability into the portfolio.”

    2020-06-11 · Capital Allocators · Sustainable Investing 2: Liqian Ma – Allocator Perspective (Capital Allocators, EP.140) · IDENTIFIED FROM THE TRANSCRIPT · source

19. “So, I think as in any type of vesting, it's easy to have a plan from the get-go and then try to implement that plan. And we all know that it never goes the way you originally intend to or plan to. So our advice to clients is you have to be adaptive. And yes, it's very important to have the compass kind of set from the beginning, but you also have to iterate. And you also have to experiment a little bit and start in a certain direction. Let's say you feel like you have very high conviction in this theme around, let's say, water and agricultural efficiency, or you have a very strong thesis around education and workforce development, right? Let's find some high conviction investment opportunities and managers that really fit into those themes and start to learn, right? Because you don't really learn about these issue areas.”

    2020-06-11 · Capital Allocators · Sustainable Investing 2: Liqian Ma – Allocator Perspective (Capital Allocators, EP.140) · IDENTIFIED FROM THE TRANSCRIPT · source

20. “So once you've worked with someone and there's some definition of the purpose and the priorities, and now you're going to start to implement. What have you seen as the path that any sort of individual client takes from the interest to something that's part of their portfolio over time?”

    2020-06-11 · Capital Allocators · Sustainable Investing 2: Liqian Ma – Allocator Perspective (Capital Allocators, EP.140) · IDENTIFIED FROM THE TRANSCRIPT · source

21. “All work holistically. And finally, the principles, which are the defining characters for how you build a portfolio, how much illiquidity risk can you tolerate, was the comfort level of the organization in going to certain asset classes or certain regions.”

    2020-06-11 · Capital Allocators · Sustainable Investing 2: Liqian Ma – Allocator Perspective (Capital Allocators, EP.140) · IDENTIFIED FROM THE TRANSCRIPT · source

22. “The well being of a certain community, right? Let's say it's a region. How do we have a holistic strategy around sustainability and impact that would make sense for that particular mission? So just like any early conversation with a client, you're talking about not just your risk and return objectives, but also your impact objectives. And so we have a framework at Cambridge Associates where we call it the three P's. So it's purpose, priorities, and principles. First, you have to understand again the purpose of the organization or the entity that you're working with through a lot of engaged discussion. And then priorities is where you have to map the purpose to certain themes, whether it's more environmentally focused or socially focused around education or workforce development, for example. But of course, we all know that they're interlinked and we have to find the overlap and the intersections to make it.”

    2020-06-11 · Capital Allocators · Sustainable Investing 2: Liqian Ma – Allocator Perspective (Capital Allocators, EP.140) · IDENTIFIED FROM THE TRANSCRIPT · source

23. “This is where having worked with so many clients who have done this in some way, there are some really early movers in the field that we've been very fortunate to have worked with and helped along the way. And obviously some newcomers, right? And seeing the best practices instituted throughout that time, seeing kind of the pitfalls as well, we can really have an engaged conversation with that, let's say 151st client that's asking the questions, that's expressing interest to really say, okay, what are you truly in terms of your mission? What are you about as an organization or as a family? What is the true north of your organization, whether you are a climate change or environmental focused foundation, which would make it pretty easy to then craft a portfolio around that core mission? Or if you are a foundation that's trying to prioritize”

    2020-06-11 · Capital Allocators · Sustainable Investing 2: Liqian Ma – Allocator Perspective (Capital Allocators, EP.140) · IDENTIFIED FROM THE TRANSCRIPT · source

24. “When the 151st client comes to you and says, wow, this is really interesting. I'm excited. I want to incorporate this into what I'm doing. How do you take that and turn it into an actionable strategy for that client?”

    2020-06-11 · Capital Allocators · Sustainable Investing 2: Liqian Ma – Allocator Perspective (Capital Allocators, EP.140) · IDENTIFIED FROM THE TRANSCRIPT · source

25. “Stakeholders like students, faculty, donors, also engaging with the investment teams and the investors to add in these issues and risk factors into their decision making. So I think all of those factors are leading to groundswell of interest, as you talked about. And we're seeing across the board at Cambridge Associates, we now have over 150 clients embedding and implementing broadly sustainable investing in some fashion and we're only seeing that number grow over time.”

    2020-06-11 · Capital Allocators · Sustainable Investing 2: Liqian Ma – Allocator Perspective (Capital Allocators, EP.140) · IDENTIFIED FROM THE TRANSCRIPT · source

26. “Next few decades and into perpetuity, and how do we enhance value along the way by having this lens around systemic risk? And I think people are gaining awareness of those issues. And I think that they're also perhaps frustrated by some lack of progress, whether it's by government or traditional philanthropy, even though I think we have made in many corners of the world progress in terms of policy and in civil society making sure that we're moving the right path. But I think there's always more to be done. And asset owners realize that markets can be a very powerful tool to effect change. Whether it's asset owners on the family side, you have next generation family members agitating for change and embedding these layers of sustainability into investing. Or you have, in terms of endowments foundations, you have”

    2020-06-11 · Capital Allocators · Sustainable Investing 2: Liqian Ma – Allocator Perspective (Capital Allocators, EP.140) · IDENTIFIED FROM THE TRANSCRIPT · source

27. “Yeah, I think we are in a moment where There is just so much interest and awareness driven by the systemic challenges that we face as a planet, as society, and of course in this current crisis from a health perspective, right? There are these large systemic risks that one has to take into consideration. And I would say that the issues of climate change, of inequality are real and deep challenges that will face us not in just the next few quarters or years, but I would say for our next few generations. And if we don't act urgently and prudently, right, we are talking about long-term asset pools for universities, for foundations, for multi-generational families, for long-term oriented pensions. We're not just looking at the returns for the next three to five years. We're looking at how do we preserve value for the next.”

    2020-06-11 · Capital Allocators · Sustainable Investing 2: Liqian Ma – Allocator Perspective (Capital Allocators, EP.140) · IDENTIFIED FROM THE TRANSCRIPT · source

28. “Not relevant. And what you're really trying to do is just take those additional signals and find the ones that are material to financial returns and risk metrics and embedding that into your view and how you navigate is all in the details and very skill dependent, right? Some people can take that wider aperture and in practice add a ton of value to portfolios and some, and we'll talk about this maybe later on, say that they're looking at the world in a sustainable way, but may not be able to translate that into true value added in terms of results. So I think it's just a wider lens to allow investors to navigate risks and opportunities.”

    2020-06-11 · Capital Allocators · Sustainable Investing 2: Liqian Ma – Allocator Perspective (Capital Allocators, EP.140) · IDENTIFIED FROM THE TRANSCRIPT · source

29. “I bet Ted, if you asked every person on the show in the series, you would probably get a slightly different answer or a very nuanced answer. My view of this is let's start with sustainable investing, which I think is the broadest way to define it. Take the traditional investing framework. You're looking at the world. You're trying to analyze certain factors, metrics, usually financial factors, right? What sustainable investing really allows you to do is take a little bit of a wider aperture. let's say a wide angle lens and you're trying to capture more information, more material information that's not historically embedded in traditional investment analysis, whether that's analysis on environmental externalities, carbon emissions, the effects you have on local communities, employees, on vendors and suppliers. You're taking all of that information and some of it is relevant. Some of it is”

    2020-06-11 · Capital Allocators · Sustainable Investing 2: Liqian Ma – Allocator Perspective (Capital Allocators, EP.140) · IDENTIFIED FROM THE TRANSCRIPT · source

30. “Drive long term financial returns, but also embedding in there a very strong lens on sustainable growth and sustainable planet and society. So that led me to Cambridge Associates right after business school where Cambridge Associates for the past almost nine years. And it's just a very special place. We don't sell any products. We work with our clients solely to help them with their financial objectives and long-term returns. But we're really lucky in doing, especially, is working with very mission-aligned philanthropic organizations and families to help them do more good in the world. So it's a really special place and I feel very fortunate to be in this position.”

    2020-06-11 · Capital Allocators · Sustainable Investing 2: Liqian Ma – Allocator Perspective (Capital Allocators, EP.140) · IDENTIFIED FROM THE TRANSCRIPT · source

31. “Yeah, so after college, I ended up working on Wall Street in both the boom and bus time of the financial crisis leading up to the financial crisis. So 06 to 09, and really seeing the excesses during the boom times and seeing the despair and the irrational behavior right after the crisis just made me realize that, wow, like markets are highly inefficient. They are not pricing in externalities and these systemic risks. There's a lot of just excessive risk taking and misaligned incentives. And that experience has also guided me towards pursuing a path where I feel like I can be very aligned with the clients, with other stakeholders and colleagues in achieving a common purpose, which is ultimately to”

    2020-06-11 · Capital Allocators · Sustainable Investing 2: Liqian Ma – Allocator Perspective (Capital Allocators, EP.140) · IDENTIFIED FROM THE TRANSCRIPT · source

32. “And I remember going to school first grade and being told that I was part of the free lunch program. And some people had to pay a quarter and other people had to pay $1.10. So that was really my first real Understanding and glimpse into the hierarchies and the segmentation in a very clear way that I was a free lunch kid. Eventually when my dad got a raise, I was a quarter kid, meaning I paid a quarter for my lunches. But I always wanted to be that $10 kid. I want to earn and pay for my own lunch. And ultimately that gave me more motivation to try to really embed into my work a view of the social and income inequality framework that is very relevant to what we do today.”

    2020-06-11 · Capital Allocators · Sustainable Investing 2: Liqian Ma – Allocator Perspective (Capital Allocators, EP.140) · IDENTIFIED FROM THE TRANSCRIPT · source

33. “On coal mine drainage and filming the acid mine drainage, which is all like orange streams, you can see in people's backyards. And people who I was friends with in high school didn't even know that this was happening in their backyards. So making that awareness known to my local community was also a very important step in my journey to what I do now. Now on the social side, it's funny because I did get some view on social inequality after moving to the US as a first generation immigrant and both my parents were actually professional musicians back in China but when they moved to the US they quickly realized that it wasn't a very practical profession. So my father worked in”

    2020-06-11 · Capital Allocators · Sustainable Investing 2: Liqian Ma – Allocator Perspective (Capital Allocators, EP.140) · IDENTIFIED FROM THE TRANSCRIPT · source

34. “Use the coal to cook our dinner. So I actually depended on coal for survival. But as I've gone back to visit family every few years, just seeing the environmental degradation from the massive increase in the use of coal and other fossil fuels and just seeing the degradation and seeing the health effects on society has made me realize that, wow, like there is a cost to all of this development, which obviously has taken a lot of people out of poverty and really expanded the middle class, but it all does come at a cost. And so that was one of the major reasons why I was really focused on the environmental issues of our time. And even in high school, I went to boarding school in Northeast and Pennsylvania here in the US, another coal hotbed in the US, at least back in the day. And I actually, for one of my Earth Day projects, made a video documentary.”

    2020-06-11 · Capital Allocators · Sustainable Investing 2: Liqian Ma – Allocator Perspective (Capital Allocators, EP.140) · IDENTIFIED FROM THE TRANSCRIPT · source

35. “Motivation for really getting into the environmental sustainability area is actually related to coal. I grew up in China, mainland China, in the early to mid-80s. And at the time, coal was a rationed commodity by the central government. And obviously living in what is now a small city in China of only 1.4 million people, which in the US would be probably the seven or eighth largest city in the US, we were dependent on coal for survival, both for heating, electricity, but also for cooking our food. And I actually remember going to our rationed warehouse, allocated warehouse from the government with my grandfather retrieving our coal, taking it back to our apartment, and my grandmother would actually”

    2020-06-11 · Capital Allocators · Sustainable Investing 2: Liqian Ma – Allocator Perspective (Capital Allocators, EP.140) · IDENTIFIED FROM THE TRANSCRIPT · source

36. “My guest on today's show is Lishin Ma, the head of impact investing research at Cambridge Associates. Lishian developed an early interest in the climate, growing up in a coal-dependent city in China. He began focusing on sustainable investing over a decade ago and leads Cambridge Associates' work with its 150 clients focused on the space. Our conversation provides an allocator's overview of sustainable investing. We start with Lishin's path and turn to how interested investors go about creating and implementing sustainable investment strategies. Along the way, we touch on manager selection, portfolio integration, investment opportunities and risks, and the implementation of sustainable investing concepts across the rest of Cambridge Associates' activities. I want to take a quick sec and remind you of our premium service and free mailing list. You can support”

    2020-06-11 · Capital Allocators · Sustainable Investing 2: Liqian Ma – Allocator Perspective (Capital Allocators, EP.140) · IDENTIFIED FROM THE TRANSCRIPT · source