Season 2: Episode 06 - Helping organizations expand their impact investing footprint with Rehana Nathoo of Spectrum Impact
LISTEN TO THE FULL EPISODE
SUBSCRIBE
Download and subscribe wherever you get your podcasts.
LINKS MENTIONED IN THIS VIDEO
https://www.linkedin.com/in/rehananathoo/
Transcript:
Linda Rogers: [00:00:00] My name is Linda Rogers and this is Investing Forward.
Linda Rogers: [00:00:30] If you work at an organization that wants to start its impact investing strategy, but you don't know where to get started or you don't know if what you're currently doing is working, this episode is for you. My guest, Rehana Nathoo, founded a consulting firm that does just that - from helping you maximize your impact, meet your financial expectations, and work towards scale. Rehana has worked for some heavy hitters in the industry - The Case Foundation, where she led the impact investing portfolio, The Rockefeller Foundation, and the Bank of New York Mellon where she supported the design of the firm's Social Finance program and the prototype for their first impact investing fund.
Linda Rogers: [00:01:09] She has since founded Spectrum Impact, whose singular focus is to help organizations expand their impact investing footprint. This is the bottleneck that we have talked a lot about on this show on the individual investor side - investors are interested in impact investing, there's plenty of opportunities, but they aren't sure how to bridge that gap. Rehana tackles that same bottleneck but for organizations. So I was really curious to hear about her process and how I can learn from her experience and how things have evolved since she has been in the role. She's filling an enormous need as an educator, activator, connector, among other things, so you will really enjoy her perspective.
Linda Rogers: [00:01:50] Nice to meet you. Thank you for joining us. Go ahead and tell us about yourself.
Rehana Nathoo: [00:01:54] Hi, my name is Rehana Nathoo and I am the founder and CEO of Spectrum Impact.
Rehana Nathoo, Founder and CEO of Spectrum Impact
Linda Rogers: [00:01:59] Yes. Okay. And tell me just a little bit about your background, kind of where you are, where you've lived, and things like that.
Rehana Nathoo: [00:02:08] That's right. How much time do we have? Where I've lived is a fun one. So I'm originally from Toronto, Ontario, born and raised. I moved to the US for graduate school, spent some time in New Jersey, and then, spent almost a decade in New York working in the impact investing sector, about five years ago started Spectrum, and quite simply, we are a boutique consulting firm. We help Allocators figure out how the heck they're going to get involved in the investment world of people and planet. And the goal really of our work is to try and get investors of all kinds to think a little bit more holistically about the impact of their investments and then hopefully over time change some of those behaviors. We are a small team - we're 3 people and we're all spread out all over the place. And the benefit, quite frankly, of this work is that it feels like a bit of a culmination of some of the other parts and places of my career. I've had a chance to spend some time in East Africa. I've been all over the United States. It's, this is an opportunity to bring all of those pieces together. Our clients are all over the place, and I do my best to try and stay on the ground as much as possible. But I think once you have the travel bug, that's it. You're off to the races, you're on all the planes that you could possibly get on.
Linda Rogers: [00:03:26] Yeah, we have some things in common. So I'm from New Jersey and I lived in New York. And a little fun fact I saw on your Calendly appointment that we both have 917 area code numbers on our cell phone, which just made me chuckle because you don't see it that often. And if you're from New York, you just know it kind of like dates you. It means you got your cell phone like early 2000. So I was there 2004 - 2006. So we probably overlapped a little bit and didn't even know.
Rehana Nathoo: [00:03:53] I'm never getting rid of it. Now that we're in New Orleans I stick out like a sore thumb and I don't even care. I am holding on to that baby for as long as I possibly can. I won't do it.
Linda Rogers: [00:04:04] Good. Well, I love that we have that connection. So tell me more about Spectrum Impact.
Rehana Nathoo: [00:04:10] Yeah. So our, the genesis of this work really was by the time I started the firm, I had spent more than a decade building strategies at really large organizations, and those organizations really differed in their focus but were quite similar in their structure. It included family foundations, family offices, wealth management, investment management, big multilateral organizations. And I think what I discovered in that process was that the things that didn't work when it came to actually executing these big, ambitious programs were very, very similar. And that was an illuminating and disappointing finding, particularly when you're younger in your career and you have the audacity to think that you're going to go out and do big things at the very early part of your career. There was, I had a lot of energy, and I was, I think, underwhelmed with some of the systemic barriers in this space. And so Spectrum really came out of some of that realization and frustration. And I think I was feeling like I could do more to honor my own personal commitment to help scale the field. That's something that I found very personally important. And so building a consulting firm where we work with clients for 6 to 8 months, we do whatever we can to embed ourselves. We ask really tough questions about what is really your risk tolerance in this particular domain. Why do you care about theme X versus theme Y? Do you even have the people to execute this at scale? Asking those tough questions started to lead to much more resource-smart and right-sized strategies.
Rehana Nathoo: [00:05:51] And so we kind of were testing a hypothesis in the early days of Spectrum Impact that luckily ended up being true. But I think that really is the name of our game. We like to come in and ask some of the unobvious questions about what it means to do impact and then build strategies that are first and foremost investment strategies, but investment strategies that are right-sized for the uniqueness of whatever allocator we're talking to. I would say that we are definitely a strategy consulting firm, but we are also part adviser and part therapist, and part pal, and part client. And we wear a lot of hats. And over the last 5 years, I have marveled at how difficult it's actually been for me to get consistent in my language around who we work with. It kind of feels more and more that as this work grows, we're working with everybody, which is, as you well know, running your own business, it's actually a very scary sensation. It's not a very comforting sensation. I feel like we're yeah, we're getting bigger and so it's actually becoming a little bit more random, which is a funny place to be in.
Linda Rogers: [00:06:57] No, I love it. Do you, so you said you really work with everyone at this point and it's growing, it's evolving, but do you have a typical client? And kind of coupled with that, I'm curious, what challenge are they coming to you with?
Rehana Nathoo: [00:07:11] Yeah. So what they have in common is twofold. They are definitely deploying capital in the market with market rate expectations. So we don't have a lot of folks on our roster that are doing very concessionary catalytic work and it's where I started my career, so I have incredible respect for it. It's a little bit different from how our model works. And then the second thing is they're not converted, but they're impact aware. I spend a lot of my formal career trying to convince big stakeholders that doing impact investing or sustainability or ESG integration was the right thing to do. These folks are a little bit different. They are aware of the domain and interested and yes, skeptical, but I don't have to do the whole like welcome to the world. And that's interesting for me. That's a little bit different than what I used to do. I think across those two pieces of commonality, they look a lot like single-family offices, third-party fund managers, and then some - this really amazing group of square peg round hole, which includes helping enterprises get their B Corp certification, helping nonprofits stand up their first impact funds for the first time. So it feels boxed, boxed, and then totally random, which seems to be the theme of the year. But I think being interested in impact and then also really being an investment player is certainly what they have in common.
Rehana Nathoo: [00:08:37] In terms of challenges, I think there's one that's client-focused and then there's one that I've been experiencing sort of at a personal/professional level. I think at the client level, we have to remind our clients that, that the work that we do is first and foremost within the investment paradigm. So if the solution that we're talking about isn't viable in an investment context, it won't be viable in an impact context. And I think we're so excited about the ability to generate some of the returns we want in service of the values that we care about, that we forget sometimes that at the end of the day, it's still an investment strategy and investment is not one size fits all. It's not going to work for everything. So that's always a tough conversation, even when we're talking about asset managers with billions of dollars of AUM, it actually doesn't matter. We it's kind of funny how often we have to go through that adventure and exploration together. And then the other one is, you and I were chatting about this before, but trying to be, for everyone's benefit, trying to be much more thoughtful about who the perfect client is. And if not the perfect client, who's the right client and getting better and better at telling clients, you know, we're actually the wrong provider for you. There's this beautiful community of independent consultants and freelancers and small business community owners, present company included, that together we can all sort of I think, partner to provide service in this area. And so we are trying to get better at about you know - it's not us but you need to go and talk to so-and-so. You need to go and talk to Linda. You need to be able to do that stuff. I think that's a personal and professional, but trying to get a little bit better at doing that.
Linda Rogers: [00:10:16] No, I definitely hear you there. Okay. So your process, you said, was 6 to 8 months, which is pretty long. Just tell me more about it. I mean, I don't know if you have it kind of staged out by month / by week.
Rehana Nathoo: [00:10:30] Yeah. And I think this will probably be familiar to you and anybody else out there that's created their own thing - it's changed a lot over the last 5 years. What it started as is very different from what it is today. I think there's basically three large or big phases that we think about. The first one is something that we call our objective setting workshop, and it is for all intents and purposes, Discovery. What we have learned from the past is that unless we have commitment from our clients for their senior leadership and or but often and their Board or IC to participate in those workshops, we will actually pass on the client. We have learned the hard way, quite frankly, that stakeholder engagement in the Discovery process at every single level is absolutely critical to doing this work effectively. And it's primarily because, you know, when a global pandemic happens or you have to cut staff or you have to cut budget, it is always the thing that people feel less connected to that goes first. And these strategies are 5, 10, 15, 50 year plays, they don't happen overnight and they certainly don't happen quarterly. So if we can do that, if we can build a little buy-in from the top to the bottom, that for us has often resulted in a much better long-term outcome. So Discovery starts. Discovery is more therapy than I expected when I started this business. It's a lot of - what are you scared about? What are you excited about? What are your people excited about? What are your shareholders excited about? What are they scared about? So that Discovery process is absolutely within the framework of let's land on an investment strategy that makes sense, but it requires so much emotional and personal, I think, conversation which I had not at all anticipated when I started this work. Once we get there, we do then the opposite, which is a very cold, very rational right-sizing of the investment opportunities to what they need. So the first part ends up being incredible connection with these folks. And then we move I think to the other end of the spectrum, no pun intended, and talk about, okay, let's just have like a risk-return conversation in each of these asset classes. Boom, boom, boom. Here's where we focus. So there is then an overlay that happens to really make sure we're matching the right investment methodologies to the strategy that they want. And then the third part of the phase is always around impact measurement and management. And we are not a firm that specializes in that. Particularly, there are incredible peers and colleagues of mine that do that work. It's magic, actually. It's beautiful. It's like painting. But that's not our area of expertise. But we are very adamant, we try to be, that we will not build anything net new in this space without layering impact measurement and management on top of it. And I think that's actually a responsibility of the intermediaries in our work. And so what we end up doing is using third-party frameworks that are ubiquitous, free, available, tech-forward, data-forward like the Iris+ indicators or IMP, and then build the framework for something for our clients. And then if they want to do more, we'll connect them with actual impact measurement and management experts in the space that can give them the next level of sophistication.
Linda Rogers: [00:13:43] Got it. Okay. So and it's very similar to the financial planning process. Like you said, we have that Discovery meeting and then it moves into just a fire hose of data and return information. So that's kind of bad that we do that, but that's the way it works! And you're covering everything - public companies, private, venture, right? Are you just kind of doing a scan so it really can be what the client needs? Because that's a lot of work and a lot of knowledge and help that you offer if that's the case.
Rehana Nathoo: [00:14:15] Yeah, it is. I mean, it is everything. My investment background is exclusively on the private side. I haven't spent a lot of time on the public side in terms of formal training. I think over the course of my career I have learned I think a lot of my public markets colleagues got very quickly, which is that the impact investing in the private markets and the ESG integration in the public markets are actually two fundamentally different beasts. You come at it the same way, and your desired outcome is very similar. The process is phenomenally different. And so in the process of Discovery, I would say that's the first point where the fork in the road appears. If it's a client that's really interested in a public market allocation or public markets products or trying to find managers in that space, we start talking a lot more about ESG in their investment outcomes. And then ESG as process. So that engagement starts to become a lot more of what questions do you ask when you do due diligence? Under what domains? Under what themes? Who's asking the questions? When you get answers, how are you validating them? How do you check performance? That public markets orientation really lends, I think, to a very exciting domain, which is being an ESG investor, as much as you invest in sustainability. On the private markets, it's more of an outcomes-based exercise although integration in the investment process is still very valid. In the private markets work, once we drill down on a particular theme, our scans, thankfully, can be a little bit evergreen, right? So we end up doing a lot of work in gender-lens investing. And so the managers that we've identified in partnership with incredible organizations in the space that have been scanning for years, like the folks over at Project SAGE or the scans that Veris does, we get to use that and we use that into our work and then we refresh our own lists. On the public side, it actually ends up being way more customized, which I don't think is what people are prepared for. They think the private markets is where all the customization and ad hoc happens. Public markets is where all of the copy-paste happens. And in our experience, it's been the opposite because everyone's process is different how they actually invest.
Linda Rogers: [00:16:28] Yeah, that is a huge value that you can kind of get the more targeted because it can be overwhelming and just I love that you kind of filter that right out on the top and then take them to where they need to go.
Rehana Nathoo: [00:16:39] Yeah. Yeah. I mean, and you know this firsthand, too. It's. Everybody walks in the door thinking that they are different. And I don't mean that as a complaint. I actually think it's the reason we all get out of bed in the morning. It's very much the human experience. It's fantastic. But we all think that we're doing something unprecedented, unique, first time ever. And so and you have to approach that delicately. I think when a client comes in with unbridled enthusiasm and actual resources, it's hard to say, okay, well, this exists, you don't really want to go there, but you also don't want to duplicate for no reason. And so the balance between familiar and exciting, I think is a difficult needle to thread sometimes.
Linda Rogers: [00:17:19] Yes. No. Perfectly said. So how has your organization kind of evolved? You've been in business for five years, so I know how that is, right? At least every year you're kind of looking and doing your goal setting and seeing what worked, what didn't, and just even some of the things you mentioned, quite frankly, I didn't know you did. Helping with B Corp certification like that stuff. That is not an easy thing to get. So I would love to just hear how it's evolved, kind of where you started to where you are today.
Rehana Nathoo: [00:17:50] That's a brilliant question and I think as you know well, when you're running the business, the reflection time is the thing that disappears first. You're like, I don't, I do not have time for that. Today we have stuff to do. And you just and then all of a sudden, 5 years later, you're like, oh, it's been 5 years. Cool. Um, but, but actually, I do appreciate the question because I think that reflection is really important. I think some of the answer to that for me has been as much personal as it has been professional. I think the way that we talk about and I'm sure this is reflective, I think of your even your own journey, but we talk about entrepreneurship as an endeavor where if you scale, you've won and if you don't scale, you've failed. It's so binary. And it took me a while to realize that in the world of professional services, there's a whole middle ground. There is a successful, thriving middle ground where you still only work with 7 to 10 clients a year and you still only have a team of three and you can take a Friday off when you want if the workload allows it. And it took me more than a minute to learn that. We moved from New York, where we thought we were going to spend our entire lives, to New Orleans during the pandemic, which it's not lost on me, that North to South cliche was a real thing during the pandemic, but we did it. We were one of those. And I have to remind myself sometimes that that was an intentional choice to have a very specific kind of lifestyle and that the freedom and the benefit of running your own firm is that you can also choose for your work to match that lifestyle. So I have to do this thing, I think at least annually, where I have to redefine scale for myself and more specifically, success. And sometimes my type-A New York nature comes out and I think, oh God, this is not good enough. Let's grow, grow, grow. And then I'm reminded of where I live and who I am now versus 5 years ago and that that's not why I pursued this business. I wanted to have really high impact in a very deep way. And I think for that to work, this is a low volume, slow, but meaningful kind of business for me. We have peers in the space that have absolutely amazed at the scale and the growth. They're raising rounds. They have teams of 50 people. It's actually so beautiful to see. And I think I have to take a moment every year where I say, am I ready for that? Do I want to do that? Do I not want to do that? I also think that you develop your own confidence with your own voice. I think over the course of your journey, I had the great benefit of coming to this, building this firm after a lot of really great experiences. It's not like I came brand new and it doesn't matter. It still took 2 to 3 years to feel like I was the expert in the room and not fully right, because you're always learning, but enough so that you can actually ask people to pay you. And it just it took, you know, really, truly it wasn't until year 3 where it started to feel like I had earned, I think, the voice and the presence that I felt compelled to sort of communicate. And I think that's going to keep happening. I think there's going to be moments where I lose the faith and then I'm going to come back and say, Oh, no, wait, that's not the vision. So it's um, I think the learnings are personal in a way that they then inform the professional, but they feel kind of personal first.
Linda Rogers: [00:21:11] Yeah, no, I like that it's purpose-driven and it's very much how do you define success? It's not how many employees you have, how many hours you worked. It's, you know, that impact and however else you could define it. But what's something that you have exciting coming down the road? It could be personally, professionally - just something that you're looking forward to.
Rehana Nathoo: [00:21:32] Yeah, what a great question. I, weirdly enough, we are hitting our first break at the end of June this whole year. We will have, we currently do not have a client in July. And as hilarious as this sounds, I'm so looking forward to it. That hasn't happened in the last 5 years and we when my husband and I left New York, we promised each other that we weren't really ready to say goodbye, so one month a year, we would go back. And then the pandemic happened and nobody was going anywhere. And so we're going to return mid-July to mid-August. We're going to be back in New York, in the Lower East Side, which is our place, our home, our spot. And so in the off chance that the workload is light, I'm actually very excited to be back in New York with a light workload. I'm going to read, I'm going to write, I'm going to run every day. It's a very weird thing to be excited about, but it just, this is the first time we've had a truly empty plate in 5 years, so I'm going to try to embrace it. I know myself, so I'm sure I will lose faith in the in various moments. But what's next? But I'm going to try and embrace that.
Linda Rogers: [00:22:34] Good for you. You need to refresh. So let yourself have that. You deserve it. What's the best way for people to stay in touch with you?
Rehana Nathoo: [00:22:41] Yeah, we have a whole bunch - this was really important to us - we have created a ton of totally free resources on our website: www.Spectrum-Impact.com. There are toolkits, strategy guides, Impact Investing 101’s, videos, and it was very important to us that that remain free. So you don't even have to give us your email address, you just download it. So that's one way that you can get a little bit of knowledge and information. And then if you are looking to get in touch, the best way to do that is to connect with me on LinkedIn or Twitter, and I would just welcome anyone and anything that is germane to this space. We have a lot of fun connecting with other intermediaries in the space like yourself. Like this is the most fun part of the job. It's actually, the client work is great, but finding out what other people are doing in this space is actually the most fun. So I welcome any and all outreach.
Linda Rogers: [00:23:34] Wonderful. Well, thank you so much for joining us.
Rehana Nathoo: [00:23:37] Thank you so much, Linda. I appreciate it.
Linda Rogers: [00:23:39] There was so much that Rehana said that connected with me and I hope that you feel the same. She is certainly someone to watch in this space. So I will link to Spectrum Impact's website on www.InvestingForwardPodcast.com and that is where you can find her newsletter sign up, and a lot of great resources.
Linda Rogers: [00:23:56] My name is Linda Rogers and this is Investing Forward. If you liked what you heard, leave us a rating, subscribe and stay tuned for next time.
Linda Rogers: [00:25:01] 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 and ongoing impact-focused investment management 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.