The Strategic Approach to Innovative Investing
Karen R. Wawrzaszek, CFP®, CTFA is a Senior Client Advisor and a Managing Director of Rockefeller & Co. In her role, she advises non-profit organizations, multi-generational families and family offices on wealth strategies, as well as financial and investment planning. Karen serves a member of the firm’s asset allocation and investment policy committees. She has an expertise in impact investing and holistic financial planning serving as a firm-wide resource. Karen has nearly two decades of wealth management experience with a focus on investment management, trust and estate planning and philanthropic management. Prior to joining Rockefeller & Co., Inc. in 2015, Karen was a Managing Director and Head of Pitcairn’s Washington DC office where she also led the firm’s impact investing initiatives. Previously she held senior roles at U.S. Trust, Laird Norton Tyee and Citi Private Bank. Karen received her B.A. degree in Finance at Wichita State University and has earned the Certified Trust Financial Advisors and CERTIFIED FINANCIAL PLANNER™ designations. Karen is a Board member of the Washington Area Women’s Foundation and serves on the Board of Trustees for the Shakespeare Theatre Company. Karen has a passion for public education reform and is an active community volunteer with City Bridge Foundation. She is also a member of the Family Firm Institute and serves on both the Washington DC and the Northern Virginia Estate Planning Councils.
Mariela M. Vargova, Ph.D., is a Senior Vice President and Senior Sustainability Analyst for the Sustainability and Impact Investing team. She focuses on the integration of environmental, social and governance factors in the investment process, and is responsible for corporate engagement strategies and external collaborations. Prior to joining Rockefeller & Co. in 2005, Mariela had an extensive academic experience in the social sciences, and before that she worked in Eastern Europe on a non-governmental project for the Open Society Institute. Currently, Mariela sits on the Principles for Responsible Investments (PRI) Investor Engagements Advisory Committee. She has been actively involved with US SIF: The Forum for Sustainable and Responsible Investment. She is a member of the New York Society of Security Analysts (NYSSA) and the International Corporate Governance Network (ICGN). Mariela holds an M.A. in Political Science from Sofia University, Bulgaria, and an M.A. and a Ph. D. in Political Science from the New School for Social Research, New York.
Christopher P. Skroupa: Let’s start with you, Karen. How do you work with families or foundations on their ESG and impact investment goals?
Karen Wawrzaszek: As a wealth advisor for more than 20 years, I have spent the last 10 years helping families incorporate impact investing and ESG strategies into their portfolios. A lot of this work focuses on educating clients in understanding the full picture of potential ESG investments.
In working with our wealth advisory clients — multi-generational families, foundations, and endowments — I find that developing a taxonomy helps them to identify where on the spectrum ESG investments can fit into their long-term goals.
Skroupa: Okay, so considering those long-term goals, are families engaging you for specific impact sector investments or are they looking to Rockefeller & Co. for best thinking guidance on where to invest capital?
Wawrzaszek: It is a combination of both. At Rockefeller & Co., families come to us because of our reputation and investment experience, inclusive of ESG investing. There are clients who learned about ESG on their own — either through friends or media — and approach our wealth team to learn more about potential opportunities and then seek our guidance on how best to implement those within their overall investment goals.
Our experience and long history in ESG investing helps us educate our clients and determine how best to incorporate ESG within their investment goals and strategy.
Skroupa: I see. So, sort of to look at the counter to these different kinds of strategies, what do you feel the barriers for investors are when it comes to impact investing?
Wawrzaszek: On the foundation or endowment side, the main hurdle faced by clients is a lack of education or awareness surrounding the rules for permissible investments. Often times, the misconception starts when a foundation or endowment tries to determine whether the fiduciary language in their investment policy statements and governance documents allows for assets to be allocated towards impact investments. The Department of Labor has since clarified the rules around impact investing for non-profits which has provided greater flexibility with respect to ESG investments.
Skroupa: I see. So beyond these evolving regulations, we’ve seen a number of trends, particularly in alignment with the UN’s Sustainable Development Goals (SDGs). So what are your thoughts about the new SDGs as they relate to individual investor decisions?
Wawrzaszek: We are supportive of the UN Sustainable Development Goals, since they allow for a common language within this space. The SDGs provide a common benchmarking process that provides the industry with a tool to measure potential investment outcomes. They also help families and foundations identify definable measures to help progress their ESG investment goals.
Skroupa: That’s excellent, Karen. Now moving over to you Mariela, would you be able to discuss the importance of the Rockefeller & Co. legacy in the development of the current ESG and impact investment services that you offer as a company?
Mariela Vargova: At Rockefeller & Co., we have a long history in sustainability and impact investing. Over the past three decades, we have invested in the global public markets with a sustainability mindset and have sought positive impact on companies in environmental, social and governance performance.
In a way, we have helped shape the industry through participating in many collaborations and organizations that support sustainable investing in capital markets.
Skroupa: That’s excellent. Do you believe that the field has done enough to prove that these investments are not concessionary. So, for example, do you think we’re still in a position of defending returns?
Vargova: We believe that sustainable investments today can bring potentially positive financial results and positive social impact. When sustainable practices are embedded into the business strategy of a company and in a cultural mindset of a corporation, we believe they benefit productivity and increase competitive advantage.
In seeking positives for added value and results, our work in sustainable investments is supported by academic studies that highlight the correlation between good sustainability disclosure and practices in corporations with their stock performance over time. We believe that investing with a sustainability mindset has made the case for investing in good businesses, which integrate issues of environmental, social and governance performance with business strategy in a long-term manner. We believe that approach is to the benefit of all stakeholders, including shareholders.
Skroupa: So as a firm with an asset management division, in what ways does Rockefeller & Co. engage a corporation to advance key ESG and impact investment initiatives?
Vargova: Today, the practice of ESG investing has two main components. The first one is systematic integration of ESG issues into the investment process and the second is active ownership or, as we call it today, active stewardship. In fact, engaging corporations in seeking a positive impact on their environmental, social and governance practices falls under our activity of active stewardship. This is a concept that was highlighted in 2010 by the UK Stewardship Code, which enhanced the role of institutional investors in monetary investing in companies.
We engage with the board of directors and senior management of companies in seeking to enhance and improve the quantitative level of integrating ESG issues with cultural incentives, business risks and long-term strategy. This demonstrates to our clients that we know our companies and that we are pursuing a positive impact on improving their corporate culture and business.
Skroupa: That’s really interesting. So as a signer to the UN’s Principles for Responsible Investments (PRI), how have you seen Rockefeller & Co.’s investment approach shape going into the 21st century?
Vargova: We consider ourselves as leaders in responsible investing. Rockefeller Asset Management signed the Principles for Responsible Investment in the summer of 2012, which enhanced our commitment to ESG investing and active ownership. We have also been leaders in many corporate dialogues through the Principles for Responsible Investment. For example, we engage with other institutional investors in the retail sector and human capital management, and have made significant progress with several companies on improving their disclosures on human capital management metrics, which we consider material to business performance. Also, we have been actively involved in sustainable stock exchange initiatives, which is led by the PRI. We seek to be proactive in collaborative investor engagements.
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