Impact Investing: What It Is and How It Works ft. Pierre-Laurent Macridis (Rally Assets)

This next episode is a direct result of your feedback: multiple listeners of The Resilience Report have reached out to me over the past few months and said that you wanted to hear more about what is going in the financial space. More specifically, a number of you wanted to learn more about what positive impact can look when it comes to investing.

Well, have we got an expert for you. First of all, our next guest lives and breaths all things impact investing. And, perhaps even more importantly, he knows how to break down the concepts into digestible, jargon-free chunks.

In less than an hour, you are going to learn the difference between 3 layers of investing: responsible, ESG and then (the top tier) impact investing, how the industry has dramatically changed over the years, the way the education system is adapting to these changes, creating broader stakeholder buy-in when it comes to impact investing and more.

The guest making this audio magic happen? Pierre-Laurent Macridis.

Pierre-Laurent is Senior Associate - Private Investment Research at Rally Assets, an impact investment management and advisory firm focused on helping investors generate positive social and environmental impact alongside a financial return. In his role, Pierre-Laurent conducts private investment research for client portfolios, including deal sourcing, due diligence and post-investment monitoring activities. In addition, he anchors Rally Asset’s presence in Québec, Canada. Prior to joining Rally in 2023, Pierre-Laurent served as Associate Principal at Fondaction where he invested in emerging impact fund managers, supported the creation of the firm’s large-scale impact asset management company and managed its underlying portfolio of six impact funds.

Pierre-Laurent holds a MSc in Renewable Resources and a BCom in Economics (both from McGill University). Outside of his day to day, he also serves as VP Outreach, Diversity & inclusion, and sustainable finance on Reséau Capital’s New Generation committee, and is a founding investment committee member at Montreal Propel Impact Fund. 

Pierre-Laurent’s personal theory of change revolves around bridging the gap between the supply and demand of impact capital where it matters most, both by launching and supporting emerging impact managers as they attempt to tackle social and environmental issues at scale.

Impact investing is possibly one of the hottest topics right now, so lets empower ourselves by better understanding the topic in an accessible, educated way with the delightful and insightful Pierre-Laurent.

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[Host: Lauren Scott] Well, I honestly woke up this morning really excited for this interview because this is a topic that I personally have been wanting to learn a lot more about. More importantly, we've actually had a number of our listeners reach out too, and that's on the topic of impact investing. So, I'm so happy to have an expert on this topic today with us, Pier-Laurent. Welcome to today's episode.

[Guest: Pierre-Laurent Macridis] Thanks for having me.

To start things off, could you help us, for those listeners who weren't the ones who wrote in asking to learn more about impact investing, could you help define what that means?

Yeah, so impact investing is a type of investing that is defined by its intentionality, so what is it trying to achieve. Whereas most types of investing seek to just generate financial returns for those investors, impact investing has a double target. That second target being a positive contribution to societal outcomes, whether that be contributing to fighting climate change or tackling social inequity. The official definition of impact investing has multiple components to it.

The first part of it is intention or intentionality, meaning that you as the investor need to actively be seeking that positive outcome for it to be an impact investor. I usually also add to that, that there should be intentionality by the investee, so by the person or the company that you're investing in, to actually also seek to generate those positive environmental social outcomes.

Another part of the equation is when you're looking at intentionality, obviously what gets measured gets managed, right? And so there's a huge component of impact investing which is also what we call in the industry impact measurement and management, or IMM for short. And so you need to be managing and engaging on these kinds of impact metrics to make sure that that positive outcome is actually happening. And so that's one way that you get to demonstrate intentionality of your investment but also of the investee.

Impact investing also still remains, as the name indicates, investing, right? So there's still an objective of financial return. Often times people think that impact investing is concessionary so you have to compromise in financial returns in order to make an impact return, but that is not true. There are two, let's say, subsets or two types of conversations in the impact investing world where we talk about impact first investors on one end, which are investors which are willing to compromise on their targeted financial return in order to generate higher impact, and there's another group of people which are let's say thematic impact investors, so people that are still looking for market rate competitive returns and the double bottom line of impact return as well. And to give a little order of grandeur on that one, it is roughly two thirds of impact investors around the world which are non-concessionary and only one third which are thematic impact investors.  

The last component to impact investing, which I usually add (and which is not part of the official definition) is additionality. And so, when you are thinking about the kind of impact investing that you are doing, if you are investing in something to generate that positive impact but that impact would have already happened whether or not you were there as an investor, then yes the impact is still happening but you as an investor, you are not really generating an additional impact. And so that is usually a very key and strong concern that impact investors have as you are trying to define and scope out potential investment opportunities.

Thank you for that breakdown, that definitely helps me get a much better understanding. And I like that third component, even if it's not part of the official definition, I do see the nuance there. And speaking of nuances, is there a difference then, we're definitely hearing a lot in the media about ESG investing, is impact investing and ESG investing the same thing?

So it's not the same thing, but the answer to that is yes and no. You have to think about, let's say, ESG investing as a spectrum, right, or rather I rather call it like tiers of a wedding cake. So, impact investing is the kind of top tier of that cake, so you can't do impact investing without doing ESG, but you definitely can do ESG investing without going all the way up to impact investing, right? So they are part of what's called in the industry the “responsible investing spectrum”. So if your listeners quickly Google that, they will see a spectrum that starts from responsible investing that will roughly end at impact investing.

So there are three, and even ESG investing, it's a very broad term, it's often actually broken down into its subcomponents and fields. So the first basic level, the bottom tier of that wedding cake is responsible investing, and that's what most people think about when they think about ESG investing. And there, if I use terminology used by the Impact Management Project, there, what they are trying to do, the mindset there, is using ESG factors, so environmental, social, governance factors as a risk mitigation tool, and that's about it, right? So they're going to look at a company's pollution, supply chain, board independence, you know, all of these elements as a risk mitigation and management tool. Usually also, at this stage, you'll often see, let's say, some exclusions also happening, right? So when you just hear about, this one is just excluding guns, tobacco, etc., that usually, you know, falls under that bottom tier wedding cake.

And so the next step up from that is still what people call ESG investing, it's still in the same bucket, but it's usually what people will call, let's say, sustainable investing, right? So when you're going to sustainable investing, there, you're taking ESG factors, the same factors, but instead of just looking at them as a risk mitigation perspective, you're looking at them as an opportunity, right, as a driver for growth, as a driver for success, etc., of those companies. You're investing in, top-performing ESG firms, thinking that that ESG element gives them a competitive advantage and which will generate higher returns for you, right? When you're in sustainable investing, you're going from, let's do less harm, and you're going into what's now, you're saying, Let's Do no harm, right, that's the best outcome possible that you're looking for.

When you move into impact investing, and this for me is, you know, to that earlier point, yes and no, you know, when I think about responsible versus sustainable investing, it's a constant evolution of that thinking, right? It's you're using the same factors, you're just processing them in a different way. For me, impact investing still fits under the wider ESG, let's say bucket, but you are looking at different metrics, and it's a very different, let's say, there's a paradigm shift that happens, whereas in ESG investing, you're looking at ESG factors, look basically at the operations of a company and what's immediately under their control. So for people that are a little bit familiar with greenhouse gas emissions, you know, I'll talk about, let's say, scope one and maybe scope two. With impact investing, now, you're going all the way to, let's say, that third scope, scope three-type impact, right? You're looking at what is the positive or negative impacts of the core product or service that is being rendered, right? And so with impact investing, you're going beyond, Let's Do no harm, you're trying to think, okay, let's positively contribute to solutions, let's actively do good through these investments.

And so to give you an example, very few, or rather, proportionate to the size of the market, very few investment opportunities can really be considered an impact investment. If you take ESG, some of the top-performing ESG companies are companies like a Philip Morris, right? If you think about changing the world, making the world a better place, selling cigarettes to people isn't what's the first thing that comes to mind, but if you look at a firm like that, they score very highly in terms of ESG because they use, you know, sustainable farming methods, they have short supply chains, you know, all of all of those are really good governance that they've put in place. So you could still be running a really good company, but the core product or service is not actively contributing to positive solutions or actually negatively impacting people and the environment. And so that's where the real distinction, I think, between ESG and impact investing is.

That's fascinating, and I think it explains a lot of those lists we see of “most sustainable companies” and sometimes you're surprised by who is at the top because they're not necessarily selling services that you feel like maybe have that positive social or environmental impact. Very interesting. And so we look at that top tier of the wedding cake, I love that analogy, just love cake, so that works for me. But if you look at that top tier of impact investing, who does that Impact Investing. For example, is it as basic as it, you know, we're only talking about publicly traded companies and it's individuals investing in portfolios that include those, or what, what does that even look like from an impact investing standpoint?

So, a lot of the answer to that question, I don't need to invent. There is an organization called the Global Impact Investing Network, GIIN for short, which does annual surveys of the impact investing kind of industry. They were actually one of the people that coined the name impact investing in 2008 with the Rockefeller Foundation. And so, looking at their studies, and you know, I would invite readers to look at the most recent study from 2023 on specifically called “investor demographics”, and so when you look at that study, you'll see that the vast majority of people investing in Impact are investment managers, which represent, you know, over 70% of the industry. Next up, you're going to have foundations, and so historically, if I think back, you know, 10 plus years ago, foundations were really the pillar from which impact investing started, right? And it went from that to microfinance organizations to then development finance institutions, and now it's really a much larger thing than that. So foundations and those DFIs, like we call them, used to like 10 years ago be the majority of the market, and nowadays, you know, together represent roughly 15% of that market. So there's been a huge shift in who's actually doing impact investing. Outside of that, you're still going to have, by much smaller percentages, you know, family offices, endowments, banks, etc., and the last type of investor, unfortunately, is going to be pension funds, right? So globally, pension funds are some of the last investors in impact. Quebec and Canada in general are a little bit ahead of the curve globally. So, from my prior world working at Fondaction, one of the few pension funds around the world actually pushing impact investing quite hard.

And if we're thinking about the scale of this industry, it sounds like there is a great shift in terms of who's doing the investments, in the sense that this is becoming more mainstream. Do you have a sense as to how large the impact investing sector is, whether maybe Canadian numbers or on a global scale?

Yeah, so if I take the global scale, again referencing the GIIN studies, in October 2022, so it's a little over a year ago now, the GIIN published their Sizing the Market report. At the time, they estimated that the global impact investing industry is roughly $1.2 trillion US, so much larger than people realize it is. And for context on that number, I had to estimate where we're at today, I would probably say somewhere around $1.5 trillion. It's an incredibly rapidly growing market. So I've been tracking impact investing for well over 10 years now, roughly, and every 2 years, at the time the GIIN would publish their report of here's the size of the market, who's investing, you know, all of that, and for a very long time, every 2 years, the size of the market doubled. So it's a market that has gone from, you know, a couple hundred million, you know, 10 years ago, to today being, you know, 1, you know, 1.2 to $1.5 trillion, depending on when you're looking at, right? And so it's incredibly, you know, grown, and so it's also become a much larger, more, let's say, institutional space as I was mentioning earlier, like who's doing impact investing. There originally was a lot, let's say, foundations, and then later on, development finance institutions, and that was the first, let's say, big growth spurt for the industry, right? But now, you're seeing like huge asset managers, you know, BlackRock has an impact investing team. Nuveen, which is a TIA company, which, you know, have huge, let's say, listed equities impact investing vehicles that, you know, retail investors can invest in, right? So it is rapidly growing, and it continues to grow incredibly rapidly.

And as part of this progress, and I think it's so natural when we're talking about environmental and social considerations, that people can become very passionate about the topics, and sometimes there's emotion that comes with it. And to balance that out, and I think definitely to go get greater stakeholder buy-in, you need to bring it back to the data and back to the facts. And in your role, you're deeply involved in research, so which really to me feels like a critical part of getting that broader engagement. So could you share more about what you do in your role specifically?

Yeah, so I joined Rally Assets, in the past year, this past summer. And so in joining the firm, what I focus on is, so I'm a Senior Associate in the Private Investment Research team. And so what I look at there is basically all of the private investment opportunities that we're looking to invest in. I will, me and my team, will have a say in kind taking a look at and conducting due diligence on. And so what private versus public, I think that distinction is pretty clear, but within the private space, that could be everything from a direct investing private equity opportunity to primarily what I do nowadays, or let's say, fund investments. So investing in funds across the country, but also internationally. And so as part of that process, you know, I help source opportunities, although that isn't too hard nowadays given the current fundraising environment. So source opportunities, engage with managers, conduct due diligence on investment opportunities, present them to our internal decision-making and external decision-making stages, depending on if it's for a client for Realized Capital Partners or what have you. And then assuming that the investment has been approved, you know, finalizing the deal, so doing all the legals, negotiations, and all that. And then post-investment monitoring engagement. So once you make an investment, at least once a quarter, generally, we'll be speaking with managers that we've invested in, getting an update on where the fund is at, or where the product, the opportunity that we've invested in is at, what their performance is, both from a financial and impact perspective, and then just kind of engaging with them, seeing if there's any, let's say, value-add activities that we might be able to do in order to support them in their growth, and also in their generation of impact.

This all sounds like really important, really exciting work. But is there a project in particular that you're really excited about that you're working on right now?

Yeah, well, it's the whole reason why I left my former employer to join Rally in the past year. For the people who aren't aware, for roughly the past decade or so, the Canadian government had been debating, actively discussing the creation of what is now called the Social Finance Fund. So the Social Finance Fund is a $755 million fund by the federal government to catalyze the social finance and, basically, impact investing industry across the country. It took quite a while, like many government initiatives do, but ultimately, the fund was launched two years ago, and then the first batch of what are called wholesaler recipients of that capital were selected, and that investment from the government was closed a little earlier in the summer of 2023.

Rally Assets is one of three current recipients of that Social Finance Fund capital. The other two being Bowen Capital on the West Coast in Vancouver, and then Cap Finance here in Quebec, in my hometown of Montreal. I joined to work on that, the Social Finance Fund. Realized Capital Partners specifically has an emerging impact manager focus. We'll do other types of investment as well, but our goal is to support the emergence of new leading impact investors across the entire country.

If I think about the finance industry in Canada over the past 20 years, it's reminiscent of the early 2000s when venture capital and the whole industry didn't really exist in Canada (it was really US investors investing opportunistically here). What catalyzed that industry was a program called VCAP, The Venture Capital Action Plan, now called VICCI. It was designed to invest and develop local managers and local talent in Canada, investing in Canada. Now, 20 years later, we have tons of these VC organizations and other types of investors across the country. You look at Cycle Capital, Novacap, all these different funds exist, but you can trace their lineage back to a VCAP.

So similar to that, the way I see our mandate and what gets me really excited with the work that we're doing now is, for me, this is the VCAP of the impact investing industry in Canada. We're the first generation there to invest in all of these new managers, and hopefully, that's something that we'll be able to continuously do for years and years to come in order to support the growth of the entire industry. So 20 years from now, when I'll have a little bit of white hair at that point, it'll be exciting to see some of the managers that we invest in today which will be at their fund fours, fund fives, and really scaling and growing the impact investing industry in Canada. So that's the thing I'm incredibly excited about and super privileged to be a part of.

That does sound extremely exciting for the industry and for the country. I think that is a huge, huge step. And you were mentioning you've been in impact investing for a decade, and it sounds like a decade ago it was pretty niche. So what originally made you become interested in this area, and were you always passionate about impact investing specifically, or was it more the sustainability side, and it just overlapped? I would love to hear more about that.

Yeah, so I've been actively working in the impact investing space for closer to six, seven years. Before that, I was a student, doing my masters and undergrad, but I was still completely passionate, involved about impact investing. But really, what was the trigger for me? Going into university as a teenager, I was already passionate about the intersection of business, finance, and sustainability, right? And where my biggest focus was on climate change. So that's how I came into this whole sustainability space. I had already known about ESG investing, but for the reasons that I mentioned earlier, the distinctions between ESG and impact, I just felt, didn't go far enough, right?

And so, you know, me describing my first year of university, really frustrated with ESG investing and trying to look for other things. And that's when, like, kind of, let's say, pivotal moment happened almost exactly 10 years ago. I got to meet Jonathan Glencross, an ex-McGill alumni. He's a couple of years older than me. He had launched the McGill Green Fund a couple of years prior that I later on got involved in during my studies, and he had left, graduated McGill, and was one of the founders of what at the time was called Purpose Capital, but that then got rebranded to Rally Assets in 2018. He's the one that kind of talked to me about impact investing at a random sustainability alumni event, and the second I heard him describe to me impact investing, I was like, that's it, that's what I've been looking for. And since then, my entire career, everything that I think about all the time I want to work on, etc., has been impact investing. And so, to yes, I'm super excited also to be working on the Social Finance Fund, but for me also, coming to work at Rally was a little bit, you know, closing the circle of that kind of 10-year journey of impact investing that indirectly started with Rally, and now I'm privileged to be working with them.

A little bit of a sidebar question to that, is impact investing now taught in schools, or is this still a little bit fringe? I'm just curious as to how mainstream it's become in the educational stream.

So unfortunately, way back when, there wasn't anything related to sustainable finance, right? And really, I can tip my hat to quite a few people. My would especially call out an organization called Regeneration, which is kind of a student-led organization founded by a bunch of people, including one of my friends called Maxim Lacatte, who are pushing for sustainability and including sustainable finance education being integrated in Business Schools across the country. And so, they've been doing terrific work, a lot of lobbying, a lot of pushing, a lot of all that. And so, I wouldn't say as a direct result of their work, but they definitely influenced that. We started seeing, I would say since 2019, quite a few, let's say, sustainability courses and sustainable finance courses, more specifically, popping up at different universities. I can't speak for the rest of Canada, but here in Quebec, one of the real big predecessors, like from a university education perspective, has been Concordia University. But for quite some time, that was the only one, right? And now, you know, you started to see sustainable finance courses pop up at McGill, at HEC, at Laval, like here in Quebec. Again, I can't speak about outside of the province, but it's become a lot more mainstream. It's not yet to the point of being, let's say, a core finance class, right? It's still an elective, but the fact that these classes even exist, you know, five years ago, I wouldn't have even imagined that that would have been a possibility. So, incredibly excited to see that pop up and now trying to push that to be more mainstream and more common to everyone involved.

One thing that might change that is, you know, I'm hearing rumblings internally where I'm working as to regulations maybe changing and what is required in terms of financial reporting at the end of the year. And there are a lot of people, I think, in the space that are unsure as to what's coming up. So, do you think that the regulatory landscape might actually have an impact on impact investing?

Most definitely, but oftentimes when people think about regulations in the industry, they think of it as like two opposing things, whereas really, it's hand in glove. They're supposed to be working together, and they do work very closely together. The impact investing industry in Canada has been pushing the government very hard for regulation, right, for quite some time. You're even seeing that in the US, despite everything going on there, you still see that push for regulation and standardization coming. And so, you know, shout out on that end here in Canada to Senator Galvez and that kind of whole team and policymakers really pushing for that piece. So, it's a matter of time before that comes online here in Canada rather than an if question.

If we look at kind of looking to Europe, as a European myself, Europe has put in place, let's say, these kind of industry standardization elements. You have what's called the SFDR, the Sustainable Finance Disclosure and Reporting standard, which has these definitions for what is impact investing, what is sustainable investing, you know, that's, I mentioned before, you know, in our lingo, they called them SFDR Article 7, 8, 9 type thing, but basically, that's what it comes out to, with all of the reporting requirements that come to it. It is still new, that has happened only in the past couple of years, it's still being implemented, revised, adapted, etc. You're also seeing stuff like the EU taxonomy that's kind of popping up there. And all of these are, let's say, European specific initiatives that, being said, Europe is one of the largest financial markets in the world and is having that much larger, let's say, impact in terms of that regulation that's happening.

And so, in impact investing, we're not yet, I would say, on a global stage and having that consistent regulation across the board, right, in terms of what reporting is expected, etc. But if I take a step just before that layer, just below on the wedding cake, right, the sustainable investing part, well, that is already starting to see global standardization happening, right? So you have the ISSB, the International Sustainability Standards Board, which some of your listeners might previously have known as the SASB standards, Sustainable Accounting Standards Board, that got merged up into the ISSB. That is exactly that. They are putting in place a global policy and a global framework for sustainability reporting. And so, we are seeing that come online. And as that becomes more of a requirement, to that earlier question about education and training, it is becoming more and more important. And from an anecdotal perspective, when I start seeing, let's say, job listings and job openings, and people that are reaching out to me, or people that I know for job opportunities, they more and more have that knowledge. Okay, do you know about ISSB, do you know about all these other reporting standards is becoming a key factor, which people aren't being trained for in school yet. So that's kind of that dichotomy that we're starting to see. It's not yet at the impact level, but a lot of people in the industry are pushing hard for that as well.

And one area I would love your thoughts on is really around, I guess, the idea of ESG, and sometimes, and I would say it's amplified in specific geographic markets, but it can be polarizing. And yet, I think at the end of the day, we all want a better place for the next generation. We want to live in a healthy environment. So, over the years, in working in this space, whether it's while you're a student or now in the professional space, have you found any ways to help kind of reach across the aisle and bring everybody into this overall movement?

Yeah, it’s funny. I was having this exact debate with one of my mentees recently. I think a large part of that is you need to understand where people are coming from, right? It might sound like a very large tangent, but I promise I'll circle back. It's hard when you take, for example, large systemic approaches in order to understand this debate, right? And so, oftentimes, for example, when people think about climate change, or just to say greenhouse gas emissions, and I'll focus down on that, but if you purely focus down on that, you're missing out on the whole wider rest of the system, right? And that becomes very important. So if I take that example, one stat that comes to mind, and I forget the exact numbers, but ballpark that, but roughly, you know, 40, 50, 60% of people in Canada and the US would be in deep financial trouble if they missed one paycheck, right? So their financial viability is kind of limited. And so, and that's the case, especially in industries and countries, you know, let's say in coal mining, in all these fossil fuel extraction companies, that is a huge part of the economy, right? And so, for those people, you know, telling them, "Your entire industry and your entire way of living needs to stop existing," right, if you just stop the conversation there, obviously, they're going to fight back against it, right? 'Cause they still need to put food on the table, they still have these whole industries, towns, communities built around that. And so what becomes important is talking about a just transition, right? You need to take these people, need to be able to support them in that transition, right? Supporting their salaries, their incomes, their families, their, you know, healthcare, all of that. And you need to also proactively train them in order to get these new jobs and new opportunities in, let's say, the green economy that exists, right? And so, oftentimes, when you're working in situations where that transition of people isn't clear, isn't being supported, isn't being done for various reasons, then it's very hard to tell someone, "Your entire industry needs to stop existing, and you need to transition to these jobs," but you're not supporting them in that transition. And that's where you're going to start getting a lot of, let's say, political backlash and pushback against, you know, ESG, 'cause it's seen as people saying, "This should not exist, this should exist" but then dumping the responsibility of doing that just transition on everyone else. And so that's where I think a lot of the pushback comes from, right, is you don't have a, there's a lack of understanding, polarization, which is always a key issue in every, let's say, political topic, uh, nowadays. But even if you dig into the crux of it, to the people that actually do want to transition, like you mentioned, I don't think anyone wants to say, you know, "We want climate change, and we want biodiversity loss, and we want," no one will say that. It's all about how do we get there, and how do we get there by bringing the most amount of people along with us, right? Because the crazy thing is, on one end, we have all of these highly qualified people in all of these jobs, and on the other hand, we have this green economy with huge shortages of labor and skillset, right? So it's crazy, and it's all about that transition piece, and that's where I think a lot of the challenge is. The other component that people will say, but, you know, other, let's say, elements of that debate from the whole, let's say, anti-ESG, anti-impact investing debate, is about, let's say, financial returns and fiduciary duty, and all that. All of those, I think, from a rational perspective, can easily be broken down, demonstrated against, etc. So that's why I'm not giving that answer. I'm thinking, really, I think it's the transition piece, which is really the irrational piece, that is the human element of the whole equation, that is often times forgotten. And that's the thing, I think, that really people need to think about, and solve, and everything else will then be able to move on from there.

There are a lot of our listeners who want to be part of that transition, and a lot of our listeners, I think, are also entrepreneurs, or like I like to call them, ecopreneurs, and they're just getting started. A lot of our listeners have also done career changes recently to try and have that positive environmental and social impact. If they're just getting started but want to think about scaling eventually and need to think about maybe going and getting funding at a certain point, are there pieces that from day one, an entrepreneur can start thinking about in terms of being able to go seek support from, perhaps, impact investing, maybe it's that tier down, but that they can already start building that infrastructure to be able to scale through funding?

So what I think is, to answer your question, what happens often is that people start by thinking about what are the tools, what are the resources, what are the frameworks that I need to use, right, the software I need to use. And I think that that's the wrong way to start. If you're focusing on if you're trying to measure something and engage something, but you don't know why you're doing it or why you're measuring it, then you're not going to get any kind of quality information or engagement piece out of that, right?

And so, what the most important thing is, and the first thing that I would recommend people to start working on before even building their industry, going out fundraising, is thinking about what we call in the business a theory of change. And so, the theory of change can be applied to anything, right? It's not just for a company, you can apply it to yourself, to your career, to your life in general. It's think of it as like your impact business plan, right? So think about how, all that does components of a business plan, you take, for example, a resource that could point people towards the five dimensions of the Impact Management Project, so who, what, how, when, how much, right? Those are the five elements. So who are you trying to impact? That could be the environment, that could be a certain, you know, at-need community. Now, what are you doing in order to impact them? How are you making sure that the impact happens? Now, how much? What are the risks associated with that, right? And it's coming with that, let's say, holistic approach to thinking about the impact that you're trying to have, and that will be a North Star to everything else sustainability-related that you're going to do, right?

So for me, as an investor, as an impact investor, that's one of the first things that I look at, and I try to understand when looking at an investment opportunity. I need to understand what impact you're trying to accomplish and how does this business, or does this fund, is one of the best solutions in order to address that problem. And so, oftentimes, what we'll see, and this is something that kind of pulls me away from investing in an opportunity, is that people just came up with an investment opportunity and then tried to tack on sustainability to it. But what real impact, and what real impact investing is, is the other way around, is you're using business, finance, whatever the tool that you're using, as a tool in order to generate that impact. But the impact is the intention; it is the objective, right? And you're trying to do that in a sustainable way. And oftentimes, when people think about sustainability, they think about just environmental sustainability, maybe they think a little bit more, and they think about social sustainability. But financial sustainability of a project is incredibly important, right? You could, so that's where your, let's say, more traditional business plan fits in, is you could say, okay, I'm going to do this amazing project that looks great on paper, but if it's not financially sustainable, it's going to peter out after, you know, once you run out of money, and then your long-term impact isn't happening, right? So if you really are an impact investor, you're also thinking about that finance piece of that financial sustainability. So what is the most impact that I can have in a sustainable way over time? Because having 0 impact over, you know, the 20 plus years of your business is going to be way more than higher impact per dollar, let's say, for one year, but then your company goes bankrupt, right? Right. And so that's also kind of key part of that consideration, where you start tying into your theory of change and your impact thesis into that business plan, into that business model.

To your point, actually, just that nuance between financial impact versus social, environmental. It seems to me, at least, that it might be easier, on that first, to measure success or classic success with sales, revenue, or expense, or, you know, just what does your balance sheet look like? How do you measure social, environmental impact? And this might be a much broader can of worms that we're opening, but is there a way that you can quantify that impact?

Yeah, the... we could be talking about this one for hours.

Maybe for those who are not deep in the space, that high level, Cliff's Notes!

A high level, I think, again, people overcomplicate things, right? If you're doing that theory of change, as part of that theory of change, you're understanding what are the key levers that you're trying to influence, and so just measure those, right? I've seen opportunities or funds that say that they measure everything. Realistically, think about what are the two or three key metrics that are driving that environmental, social impact that you're looking for, and measure those. You don't need all these super fancy methods and processes, etc. If you're at least doing that, you're already way ahead of everyone else, right? And then you can add on, you can make it more fancy, more detailed, etc. In terms of like what metrics, if you're looking for inspiration and like, let's say, some standards, etc., that you can look at, right, you have the whole ESG suite, you know, B Corp, all that, ISSB, all those forums. But I'm looking at impact specifically, one of the, let's say, best tools out there, let's say, just from a pure metric perspective, is again, by the Global Impact Investing Network, I definitely am a big fan, it's called IRIS+, all right? And so, IRIS Plus, it's free, it's open-source, like, it's out there, anyone can go create an account and look at all the metrics there. That is rapidly becoming, let's say, the standard, let's say, library of metrics and how to measure them that people can use. That being said, that's just a metric, right? That's going to tell you, tons of CO2 reduced, and here are some recommendations on how to measure it, right?

If you're trying to design a wider, more holistic approach, I can definitely reference a partner of ours, and a good friend of ours, but also in my prior job, I would have said the same thing, called the Common Approach to Impact Measurements, which is a Canadian initiative looking to standardize and also make it a lot easier for people to understand how to actually implement impact measurements in their business, in their funds, that kind of really dumbs down, streamlines, and synthesizes all of the alphabet soup, if you're thinking SASB, ISSB, TCFD, all these soups, all that, condense into one place that's super easy to understand, and also giving recommendations for, you know, what software, etc., you might want to use for that. So, if I do recommend the one-stop shop for people to rapidly get up to speed on how to do that, the Common Approach to Impact Measurement would be the place that I would recommend people to look at first, especially here in Canada, in the Canadian context.

Those are all super actionable tips, so thank you for that. And I would be remiss to not also talk about what you do outside of your day-to-day. You are deeply involved, and you mentioned it quickly, but you're deeply involved in mentoring. That's actually how you and I met originally; we were both mentoring university students, and you take that to a whole new level. So, could you speak a bit more about what you do in that mentor role, and if some of our listeners are thinking of becoming a mentor, would you encourage them to do so as well?

Well, the answer to the second part of that question, definitely. I think everyone can learn from being a mentor. For me, mentorship is something deeply personal and very important to me. Whether they knew it or not, because a lot of people I didn't officially ask to be my mentor, they just ended up being a mentor in an informal way. I've done the exercise and kind of traced my 11 plus years here in Canada and a little bit before that, what are the steps that led me to where I'm at today. I'm doing the dream job that I love. I could tie that back to six specific people and mentors that kind of got me every step along that way, that really had that pivotal moment for me. And so that, for me, was kind of also part of thinking of, okay, I've received help, whether they knew it or not, so I need to pay that forward, right? I need to support the next generation of people, people take my learning, and if I can help accelerate people's learning and understanding to transition into impact, into sustainability, then that will have a demonstrably larger impact than I will ever be able to achieve with my own life, right? So if I can get two other people to get into impact investing, they'll be more than I will ever achieve, right? And so that was always a little bit my thinking.

To that earlier point about the theory of change, I do have my own personal theory of change, right? And part of that is about capacity building and ecosystem building across the country. And so, initially, I started, I'd say, mentoring people, let's say, on an informal basis, on a one-on-one basis, "Hey, I meet someone, hey, I want to help them out" type thing. And I've been doing that for, you know, 7 or 8 years now, at this point. And then, growing from that, you know, I now have some of my former mentees that work in the industry, that are on the other side of deals for me, which is a little bit odd, but it's always nice to see. And so, as I started doing that more and more, my thinking was always, my goal in pretty much everything I do is to work myself into retirement. And so that means build systems, build infrastructure, so that it's no longer dependent on me. You know, tomorrow I win the lottery, I run away to the Bahamas, this impact will continue to happen despite my absence. It's a better analogy than getting hit by a bus. And so, it's that's kind of what my thinking is.

And so, for years prior, in the past couple of years now, right now, I'm on the New Generation Committee of Reseau Capital, before that, I was also, let's say, a founding member of the Committee Jeune, the Youth Committee of Finance Montreal, as well. So anyone that has known me for the past 6, 7 years would have heard me trying to pitch and set up, let's say, a formal mentorship program for people in the finance industry, especially for those interested in sustainable finance. And ultimately, I couldn't do that with Comite Jeune, but I've been able to launch that now in Reseau Capital. And so we're now at our third iteration, the student mentorship program, and we're about to launch, hopefully, fingers crossed, the young professionals mentorship program. And the goal there was always to bring in more other mentors, teach them how to be good mentors, and attract a bunch of mentees in that program. And so now we're at our third cohort, we're now, I think, a little over a hundred different mentees that we've had a part of the program, all interested in private equity, venture capital, just the alternative investment industry here in Quebec. And that has been a huge impact.

And so, the deal that I do personally with every single one of my mentees is that they promise me that if I mentor them, that down the road, once they're up and running in their career and they're comfortable, they will mentor at least two other people. And so that's the way that I try to have that, you know, larger impact than I would ever be able just doing my own job on my own side.

The impact investing pyramid scheme, but I love it, I love it.

And the good thing with that is you learn a lot by doing it, right? And so oftentimes, as a mentor, the first question that people ask me is like, like you just asked me, like, "Why do you do it?" Right? Yeah. Part of it is having that wider impact and seeing that impact out there. Once you've been doing it for years, the one thing that I love seeing is, you know, way back when (6-7 years ago), I was on every single panel, all of the time, because they had no one else to talk about impact investing for them on those panels. Now, to see some of my former mentees be on those panels for me, so again, working yourself into retirement, I have less speaking engagements, which is a nice thing.

But really, the fun part of it is it's challenging, it's hard. They will ask you questions that you didn't think to answer, right? Or they're going to challenge you. Like I said, last night, I was meeting with one of my mentees, and we debated about exactly that earlier topic about how do we move that needle, what are all of the systemic dynamics outside of just focusing on greenhouse gas emissions, right? And that whole debate started from, "Why isn't nuclear energy more widespread?" Right? And that's how the whole discussion, like two-hour conversation, started, just on that one simple question. That is incredibly like rewarding to be able to have those conversations. And I feel that in our professional career, you know, I have the privilege, and especially in investing, we tend to be that type of people that ask these types of questions at one another all the time, when quite a few other jobs, that isn't always the case, right? People just go in, do a job, and they don't get to have these, let's say, existential, systems thinking debates with people for hours on end. So that's one way to do that and to learn and to adapt, right, to always be exposed to new ways of thinking and debating and challenging yourself. It's helped me grow immensely over the years doing that, and in a way, also helping them grow. And people think you need to be, you know, 50 years old and super established and knowing exactly everything that you say. I call baloney on that, that's not true. What's the most important thing to do there with mentorship is some of the best debates, the best questions I've ever had, was when the answer, you know, to a question being asked to me is like, "I don't know, but let's go figure it out together," right? And those have been the best learning opportunities for both me and the mentees that I've worked with. So you don't need to be a rocket scientist, you don't need to have 20 years of experience to be a good mentor. Now, we have mentors in our student mentorship program which are, you know, 24, 25, just entry-level, like analysts, or one or two years of experience, like, in the industry, are incredibly helpful. And on the contrary, the fact that there is that proximity in age actually makes them better mentors, I've found, to, let's say, undergraduate students, etc. So, very rewarding experience, definitely recommend it to anyone that remotely is interested. If you're thinking about, "Maybe I should become a mentor," then the answer is definitely yes.

You are so inspiring, Pierre-Laurent. It's amazing talking to you. I think you and I can probably keep on going for hours and hours and hours. Maybe we'll have a second episode, but I do want to be mindful of your time. We do like to wrap every episode up with the same question, which is, what do you think it will take for businesses and leaders to be resilient going forward?

I think the answer to that question is a proverb: "If you want to go fast, go alone; if you want to go far, go together." Oftentimes, you see business leaders so focused on their day-to-day and their own business and their own world that they end up kind of isolating themselves, right? If you really want to be resilient, you need to be exposed to other ways of thinking, you need to be exposed to other trends that you might not be able to see in your own, let's say, industry or bubble. And so, speaking with other people, collaborating with other people, even if it's not just for a business transaction, just getting to know other people in the space who are thinking about similar things, and more importantly, also, the diversity of thought is the most important part of that equation.

So don't just go to your local industry group and meet with other executives in the exact same field, dealing with the exact same stuff as you. Go to other executives in completely different fields, right? Talk with them about what challenges they are facing, understand their world, their view on the world, what's happening, what are macroeconomic trends that might affect you, how do you manage them, right? And those are the best opportunities to learn. So even as an investor, that's something, in my previous job at Fondaction, that invested in kind of across industries, across asset classes, across Quebec, that was something I think that they did really well, was just kind of bringing together these CEOs, etc., from completely different industries, bringing them together, you know, once or twice a year, just to have these conversations. And that was something that we always found incredibly rewarding, and we always got very good feedback. So if you don't have the privilege of having an investor that does that for you, go out there and do that proactively yourself. You will be much the wiser and much more resilient in your work that you do as a result.

Well, thank you once again. This has been amazing. Your passion is so contagious. I love it. I can see why your mentees probably love working with you, as do your colleagues. So thank you so much.

Well, thank you so much for having me.