Sally and Wayne are looking for ways to improve peoples’ lives in developing countries by addressing basic needs like healthcare, education, and poverty alleviation. They’re exploring sustainable finance, and making their first investments, but they are doing so with a dose of scepticism because they’re yet to be convinced that sustainable investing can deliver all of the results that it promises.
Sally Tsai and Wayne Chang want to use their capital to have a positive impact on the world, but they’re still exploring the best way to do that. They are learning about sustainable investing, and making their first allocations, but they remain open minded to other methods that may be more effective.
Sally, 35, spent more than half of her life in the United States, and graduated from her medical residency there. She practiced family medicine in California until 2017, when her husband Wayne, 37, completed his doctorate in finance and business economics. Both of them were eager to be closer to their families in Taiwan, so they packed their bags and moved home.
As they established a new life in Taiwan Sally found her purpose in their family office.
“I volunteered as a doctor in Haiti and saw that creating sustainable solutions to poverty requires tools beyond grants and volunteers. I realised that I could potentially mobilise my own family’s investment capital to contribute to poverty alleviation”
The Carve Out
Sally’s family wealth came from her father, the founder of the largest athletic footwear manufacturer in the world. Sally’s parents are generously philanthropic on an ad hoc basis, but she saw an opportunity to do it in a more structured way while still leveraging the flexibility afforded by the family’s private approach.
The family agreed to carve out a small percentage of their assets for Sally to manage in a way that maximises impact through both investing and philanthropy. They named it Affinity Impact, and gave her three to five years to build a portfolio and prove her ideas to the family. Their plan is to invest sustainably, and use the returns to give grants to projects they believe in. Sally asked Wayne, who also teaches finance at Minerva Schools, an international university programme, to help her set up the portfolio.
“I’m her main cheerleader, advisor, and supporter. I see my job as helping her achieve the vision she has for this carve out,” Wayne says.
"There are a lot of social and environmental issues that are pressing, and our standard capitalistic system is flawed in many ways, so I welcome the opportunity to engage in sustainable investing to see if it can offer some solutions that capitalism lacks. We are very open minded, but perhaps a bit sceptical of where this journey will take us. I come from a more academic finance approach, and there is still a very limited amount of research into the effectiveness of sustainable investing."
Affinity Impact takes a broad approach to sustainable investing, and is considering everything from negative and positive screening and thematic investing to direct contributions and impact investments with very little financial return.
“One reason that we focused this carve out on sustainable investing, and not just philanthropy, is that the carve out itself needs to be sustainable. The returns from investing go towards grants, and if the investments can also do some social good, we’re willing to take a lower return,”
An Agnostic Approach
There is a natural and healthy tension in their approach, and between their personal styles. Sally has the dream and vision, while Wayne takes a more quantitative approach.
“As a doctor I always wanted to bring more heart into my work. But now, working on this, I don’t want to do it just led by my heart. It has to be rational, evidence-based and quantifiable,” says Sally. “As more evidence comes in, we will change our decisions based on that evidence. That is true to my scientific approach as a doctor.”
Wayne is examining how to best achieve their primary goal, which is to maximise their social impact, whether that be through philanthropic grants funded via traditional investing, or purely through sustainable finance strategies. Neither of them is satisfied with good intentions, and they are determined to remain method agnostic in order to generate the best results.
“I have told Wayne that if, in his research, he finds that sustainable investing is not going to deliver the impact that we hoped for, then we will just do traditional investing and give out grants. I’m willing to pivot if he can prove this, but for the moment we think there is a case for sustainable investing.”
Wayne’s assessment of the sustainable finance industry is that the facts, measurements and the evidence-based thinking are still in their preliminary stages, but that committed investors must be willing to engage despite this situation in order to grow the industry.
He points to the lack of consistent data sets and benchmarks across market participants that translate social and environmental impact into a common metric, which would allow for easier comparison between investments.
“In traditional finance you can take different approaches, but in the end, you measure success equally by how much money you make. There’s nothing like that in sustainable investing,” he says. “There are multiples of capital metrics, which are beginning to feel like a science, so that’s a positive trend, but we are still years away from a holistic language and approach.”
One of the flaws of traditional investing is that the market does not internalise all externalities, leaving it to society to bear the costs of environmental and social degradation.
“Sustainable investing can address these externalities,” says Wayne. “Our concern is that it needs to be a bit more precise. Not all of it makes sense, so we’re searching for the segment of it that is the most appropriate for us.”
Embracing the Community
Wayne points out that many people working in sustainable finance come to the industry through a “problem lens”. They care about a problem, and are seeking to deploy capital to address that problem, resulting in a different language and approach than is used in traditional finance.
“When I first encountered the industry, I was struck by its fuzziness and the lack of more rigorous quantitative approaches, and that has kept me a bit more sceptical,”
Wayne and Sally joined Toniic, which they find helpful and educational. However, it does not have the same Asian regional focus they have. Initially RS Group helped guide them in more regional-specific exploration, and now they are becoming more involved with the SFi community.
“We have been very impressed and attracted by the generosity of the sustainable investment community. People are willing to share ideas and knowledge and there’s far less competition than in traditional finance,” says Wayne.
They are only investing in funds at the moment, as they do not feel they have the capacity and risk appetite for direct investments. Their first investment was in a LeapFrog fund.
“It’s not an all or nothing approach. We are looking for the right tools for the job. We don’t want to be wedded to a single type or style of investment,” says Wayne.
Sally and Wayne share a passion for meditation, and they frequently spend time in silent retreats, which has helped focus their intentions as investors.
“Meditation makes me think about my own intentions, of how my ego is trying to interfere. We want to stay open minded and unbiased, and if your identity becomes tied to doing good then there is some unhealthy ego tied to it. We need to be self-reflective and clear about why we are doing this”