Episode 09: Impact Investing After Superstorm Sandy

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MENTIONED IN THIS EPISODE

Ms. Maria Farhat Tanzola’s Website - https://advisors.ubs.com/maria.tanzola/

TRANSCRIPT

Linda Rogers: [00:00:00] My name is Linda Rogers, and this is Investing Forward.

Linda Rogers: [00:00:20] Superstorm Sandy was a hurricane that caused severe damage to the eastern United States, particularly the Jersey Shore area where it made landfall. In New Jersey alone, it left millions of people without power, destroyed hundreds of thousands of homes and caused billions of dollars in damage. While there was a strong relief effort initially, New Jersey residents were still dealing with the effects of Sandy years after the storm hit. Many were struggling to rebuild and systemic issues, such as a lack of affordable housing, were exacerbated and hindered the shore communities from moving forward. I came across the work that Impact New Jersey was doing in a New York Times article a few years ago. I'm from New Jersey and my parents live in Ocean County and were there when Sandy hit, so the article piqued my interest. Impact New Jersey was spearheaded by Ms. Maria Farhat Tanzola from UBS Private Wealth Management. She, among others, worked together to develop an impact investment that leveraged private capital, earning market-rate returns, to generate long term positive results for Jersey Shore residents. At the time Impact New Jersey was created, it was hoped that, if successful, it could be a model for rebuilding other communities affected by natural disasters. So for this episode, I'm fortunate enough to have Mr. Tanzola speak with us to reflect on her work with Impact New Jersey and to talk about if, in fact, it was a success. So let's take a listen.

Linda Rogers: [00:01:41] Mr. Tanzola, good morning. Thank you for joining us. Please go ahead and introduce yourself.

Maria Farhat Tanzola: [00:01:46] Well, I'm Maria Farhat Tanzola. I am a private wealth advisor for the ultra high net worth and for UBS Private Wealth Management. I've been here since 2012 with an accumulated 35 years plus in the private wealth business per se. I started off as a traditional private banker and as clients' needs and complexities continue to grow, so does our knowledge base. And I kind of make it so that my clients can't live without me, you know. Whatever issues they have going on, let's start with a conversation first. It doesn't necessarily mean, my relationship with them isn't necessarily to buy one particular money manager versus another or asset allocation. It's much more life driven. I work in the New York City tri-state area. I have a team of 10 based in New York City, and I have a satellite office in New Jersey where I live, and also in Naples, Florida.

Linda Rogers: [00:02:57] And you're coming to us today from New Jersey, correct. Where are you located?

Maria Farhat Tanzola: [00:03:01] I'm in Sea Girt, New Jersey. Right in the heart of the Jersey Shore.

Linda Rogers: [00:03:06] That's a beautiful area. My parents are in Jackson, New Jersey.

Maria Farhat Tanzola: [00:03:09] Wow. Yeah. That's only about 15 minutes away from here. A little closer to the water.

Linda Rogers: [00:03:15] Yes, you are. Good. Well, when managing portfolios for your clients, do you integrate impact investing into your process?

Maria Farhat Tanzola: [00:03:22] Absolutely. You know, going back to the conversations with clients and understanding what's most important to them and their values and their desires and their wishes, we always broach the conversation because sometimes people don't think about it. You know, if I were to say, how do you want to be invested? They may not say I want to be in environmentally sustainable investing. They sometimes they don't know. So client education is a big part of our conversation. And there are some clients, quite frankly, who don't have an interest. But we've come a long way in the industry and the offerings that we're able to create and provide. So we absolutely integrate that into what the priorities are for the client when we build out the investment design of what we're going to deliver.

Linda Rogers: [00:04:18] And I'm curious, how did you start learning about and recommending impact investments?

Maria Farhat Tanzola: [00:04:24] Well, there's a little bit of a story there. I don't I didn't live where I live now, but where I lived at the time, back in 2012, we were right on a quite a large body of water called Barnegat Bay. And across from us was a beautiful view of a barrier island. And I always said to myself, well, if a storm's going to hit, it's got to get all of those houses on the barrier island before it comes to me. And sure enough, Hurricane Sandy, Superstorm Sandy came and devastated our area, including my home. And I had always integrated philanthropy as a as a big part of my life and a big part of my business and very, quite frequently had events with both clients and prospective clients to talk about what's important to them and how to be philanthropic in a meaningful way and post Hurricane Sandy, about a year later, I had gathered a group of people together who had been very giving in the recovery. And the conversation just evolved from there is OK, we can write checks to so and so and so and so and so and help people with housing needs and whatever it is that they needed during that devastating recovery. And the topic evolved out of that evening of how can we make an impact or how can we how can we just stop writing, not necessarily stop writing checks, but how can we do more that will be meaningful because we anticipate that the recovery is going to be years and years and years. So writing a check for $100,000 to the Red Cross or to Habitat for Humanity or any of those organizations that people were so generous to, then that money gets dispersed and it's gone. So how do we do this differently so that we can be part of a longer term solution? And that's how the impact investing and Impact New Jersey dame to be.

Linda Rogers: [00:06:41] Great, and can you share more about how you created the fund to meet the client's impact objectives while earning a market rate return?

Maria Farhat Tanzola: [00:06:50] Yeah, sustainable investing has kind of gotten a little bit of a bad reputation from years and years back that you had to give up financial performance in order to do well or do good while you're doing well or do well when you're doing good. So in this particular case, the priority of the client was to be able to support affordable housing in the New Jersey areas and New York as well, but specifically Hurricane Sandy devastated areas. So we were able to identify two investment management partners, two other firms, that do fixed income investments in the affordable housing space. And they were also able to agree to deploy those investments in a geographical area. So we were able to say we need your fixed income investments, but we require the strategy to fund investments that affected and assisted in affordable housing access in the New York, New Jersey area. So giving them that structure, they accepted the charge. And back then, in 2014, when we were building this, interest rates were low for fixed income, not quite as low as they are today, but they were not the kind of investments that you would run after for a return. And they had a core, this client had a core sum of money that they wanted to invest in the overall impact strategy. So the good news is that UBS, as a firm, as an asset manager, has been involved in sustainable investment strategies for over 25 years. We're now the world's largest financial firm in sustainable investing. And our asset management folks had already built a global sustainable equity portfolio that already had a long track record. We were able to share the details, the underlying strategy, to clients very specifically, including the holdings. It's, as I said, it's global. It's got right now about a 40% international tilt. It has large cap, mega cap, small cap, mid-cap. And for those of you who don't know what caps are, the capitalization of companies that we're investing in. So smaller companies, medium companies and large companies, I guess is a better way of saying it. So that strategy was our equity portion. So we're investing in a sustainable strategy, we're investing in environmental, social, and governance impact. And that particular equity strategy has done remarkably well and has exceeded the MSCI World Index, which is its comparable benchmark throughout the history that the strategy has been in place, since 1997. So what we agreed upon with the client was to put 50% of the sum of assets that they wanted to deploy with this in this global sustainable equity strategy that was managed by UBS. And then we put 50% in the two fixed income managers that had agreed to the parameters of affordable housing, housing in general in the New York, New Jersey area. That way we have the return of the equity performance to supplement the moderate return of the fixed income performance and we're able to take the growth from the equity portfolio and then re-deploy it to the fixed income side.

Linda Rogers: [00:11:05] Ok, and I think I read - was one of the fixed income managers, Calvert?

Maria Farhat Tanzola: [00:11:08] Yes.

Linda Rogers: [00:11:09] Yes. OK, well, we've had Calvert on the podcast talking about the Calvert Community Investment Note, and that is a note that you can purchase for as little as $20 and it gives you access to an impact investment where you are financing high impact projects, funds and organizations that do focus on affordable housing, community development and green bonds. So you were able to enlist them to do what they are already doing, but just have them focus on affordable housing and in the particular area that you designated.

Maria Farhat Tanzola: [00:11:42] Correct, and they had also been doing this for a very long time and have been very successful, both from a financial perspective as well as an impact perspective. I guess it's a good time to throw in - so with this group of philanthropists that we're at that initial dinner meeting where this came to be, many of them had worked with a CDFI, which is a community development financial institution, in New Jersey, who had really taken the lead in Sandy recovery. And as it turns out, they had been introduced to Calvert and we kind of helped that process along. And Calvert worked specifically with the organization, which is called New Jersey Community Capital, to identify ways where they could fund those projects. Calvert could fund projects with New Jersey Community Capital to also bring the impact more local to the Sandy affected recovery. So that was really very cool to be able to have multiple we had many layers of organizations and people that kind of all came together and said, well, we can work with you and we can work with you. And and that's how it came to be. It's still a very strong relationship.

Linda Rogers: [00:13:15] That's great. And that synergy that happened at that event or that meeting, is that something that you've been able to continue to foster and grow? Or was this project really just designed for Sandy? Tell me a little bit about what you have planned next for Impact New Jersey.

Maria Farhat Tanzola: [00:13:28] Well, it was really exciting. I mean, it took a long time to build this and make the connections and identify how it would all be structured and make sure it was going to accomplish what the client was looking for at the time. And then, of course, we knew it was a commitment of several years to make sure everybody was on the same page of what the goal was. But it was really kind of neat once we built it. And unfortunately, other things were happening across the country, whether they were floods or political or wildfires or all sorts of needs, that this was able to be duplicated. We could just take this recipe that we made and now apply it to Houston for their floods or as another example or the wildfires in California. So I, I can't even count how many hours of conversations I had with people all across the country trying to figure out how to do it and how to bring it to their philanthropic community to launch it. This particular strategy, I actually just had a meeting with my client a few weeks ago to talk about, you know, is Sandy recovery, you never want to say completed, but where are we? It's now it was October 2012, so we're at the 9 year point almost. What do we do now? And the good news is that recovery, I would say, as a human being and a resident of the community, not as an expert, we're probably 85 to 90% there. However, whether it's because of coronavirus or because of a lagging economy or whatever reason, there's still, there was pre-Sandy and there still continues to be a significant lack of affordable housing in the area in New York and New Jersey. So at this point, we're continuing to rebalance and redeploy and keep the same strategy in place. And Community Capital Management is the other fixed income manager. And they they were just awarded this past year, asset manager of the year with sustainable and impact investing. And affordable housing has been a huge part of what they do. And they also have continued delivering on the impact each year. It's kind of too much to do quarterly, but each year we measure, we receive reports, from both of those fixed income managers, impact reports, not - we get financial reports everyday, but the actual impact reports telling us how many housing units were created or how many mortgage loans were made or what projects are they working on with other organizations within our community and our our geographic space. So each year we're able to actually see in black and white the impact which has become was a great priority for this particular client. And 9 years ago, when we started the fund and by the time we built it, it was funded in 2015, each year, it's gotten a little easier. You know, in the beginning it was like impact performance - what's that? You know, it's it's fine to have a feel good, but we want to actually see the impact and the impact was in this case, more important to the client than the financial performance. Although the financial performance of the equity strategy has helped to supplement the fixed income investments.

Linda Rogers: [00:17:40] In reflecting on your work with Impact New Jersey, would you consider it a success or is there anything you would have done differently?

Maria Farhat Tanzola: [00:17:47] I, I would absolutely say it's been a success. It's accomplished every goal that this particular client wanted. Again, it was a tremendous collaboration of so many different levels of investment managers and investment resources and community leaders. In retrospect, I don't think I would have done anything differently. I can reflect on the challenges at the time. Once we built it, as I said, it was a very exciting time and there were a lot of other communities that were looking to duplicate it. The challenge was education, helping people understand. I mean, I met with hundreds of large, what I would call more institutional investors, to join in, and they struggled with understanding. It was it was it doesn't seem like a hard concept to explain, but but it was. I think now, six years later, we've come a long way specifically in the sustainable investing world and impact investing. So it's not that I could have done anything different. You know, do I wish it had been a little easier back then? Yes. And then then we could have had more investment dollars to make more of an impact. So it's not really a regret or something I would have done differently. It's more of a learning experience.

Linda Rogers: [00:19:34] Great. Is there anything else that you'd like to share?

Maria Farhat Tanzola: [00:19:37] It's enjoyable. I appreciate you reaching out. It's enjoyable to reflect now that so many years have passed by and to know that this all started with a conversation about how do we help our community. And as I said, it took a long time and a lot of conversations and a lot of introductions and even just getting through the logistics and the compliance and how are we going to do this and how are we going to build it. But it's a very, it was exciting at the time and it's even more rewarding now 6 years later. And the clients that helped us create this are actually now also thinking, well, OK, what else can we do now that we built the recipe, right? Now, what else can we do? What other impacts can we make? And what's really, really cool is that you can duplicate it with so many other different topics now, with the help of partners such as Calvert and Community Capital Management and then, of course, our own expertise on the equity side.

Linda Rogers: [00:20:47] Good. And what's the best way for people to stay in touch with you?

Maria Farhat Tanzola: [00:20:50] Well, I've got my - if you search, Maria Tanzola UBS, you'll find my own website. Also, I'm, as I said, I'm a partner in the team with UBS in the private wealth division that we call True North Partners, but I'm pretty easy to find. My email is maria.tanzola@ubs.com and my phone number in my office is 732-223-7851.

Linda Rogers: [00:21:19] Wonderful. Thank you again for joining us today and I look forward to staying in touch.

Maria Farhat Tanzola: [00:21:23] I really appreciate your interest as well. Thank you, Linda.

Linda Rogers: [00:21:27] I continue to be inspired by so many of my guests, like Ms. Tanzola, that innovate, educate and really push the boundaries of what is possible for her clients that want to invest for impact. As she said, it wasn't easy or even as accepted as it is today to invest for impact when she created this model, but she was able to demonstrate what a successful partnership looks like. I do believe this model will be replicated in other communities and I look forward to learning about and sharing those stories as well. If you want to learn more about Calvert, check out Episode 4 and to learn more about CDFIs, which were also mentioned on today's episode, check out Episode 7. See you next time.

Linda Rogers: [00:22:06] My name is Linda Rogers. You were listening to Investing Forward. If you liked what you heard, leave us a rating, subscribe, and stay tuned for next time.

Linda Rogers: [00:23:28] Linda Rogers is the owner of Planning Within Reach, a registered investment advisor, Planning Within Reach produces the podcast and makes it available on its website and through other distribution channels. Linda Rogers and any guest on the podcast are providing their own views and opinions and are not necessarily the views and opinions of planning within reach. Nothing on the podcast should be construed as a solicitation or offer or recommendation to buy or sell any security investment. Advisory services are only provided to investors who become planning within reach clients pursuant to a written investment management agreement. Clients of planning within reach may hold positions in securities discussed in this podcast. Past performance is no guarantee of future results. All investments involve risk and may lose money. The Investing Forward podcast is for informational purposes only and should not be relied on for any investment decisions. Consult with a financial advisor, accountant, attorney, or conduct your own due diligence.

Linda Rogers, CFP®, EA, MSBA is the owner and founder of Planning Within Reach, LLC (PWR). Originally from New Jersey, Linda services clients throughout San Diego county and nationwide. She leads the design of PWR's investment portfolios which utilize broad, low-cost investments that integrate environmentally, socially, and governance (ESG) factors.

Planning Within Reach, LLC (PWR) is a fee-only and fiduciary wealth management firm offering one-time comprehensive financial planning, ongoing impact-focused investment management and tax preparation services in San Diego and nationwide. PWR is a woman-owned firm that specializes in busy professionals and impact investors. Planning Within Reach, LLC and their advisors do not receive commissions and do not hold any insurance licenses or brokerage relationships.