Q&A: Social Finance board members Doug Henderson and Liz Lempres
Notes on impact investing and nonprofit stewardship
Doug Henderson, a senior advisor at Oak Hill Investors, and Liz Lempres, a senior partner emeritus at McKinsey and Co., recently joined the board of directors at Social Finance. We spoke with them about why they’re getting involved with the organization, how they view nonprofit stewardship, and where they see impact investing going in the years ahead.
Why did you join the Social Finance board?
Henderson: In 2018, I was a fellow in the Advanced Leadership Initiative (ALI) at Harvard. One of my courses focused on impact investing across the public and private markets — Tracy Palandjian came in to discuss Social Finance. With my investment background in the fixed income and equity markets, I’d long been excited by the potential of impact investing and was intrigued by the organization’s work creating scalable financing tools for impact.
So after meeting Tracy, I kept in touch with her. One thing led to another and after meeting a few board members, I joined mid 2019. It’s been great to work with the board, as well as Tracy and her team.
Lempres: I’ve been aware of and admired Social Finance’s work for several years because I’m inspired by the idea of applying analytical and investment principles to solve important social issues.
After speaking with Tracy and several long-term board members, it was clear that this was a dedicated group committed to long-term impact. I believe that capitalism can play an important role in solving social issues — Social Finance is a leader in making that happen, which is very exciting as a businessperson.
Doug, can you tell us about your career at Goldman Sachs and Oak Hill Advisors?
Henderson: I’ve always been involved in the capital markets, investing in the credit markets, advising companies in structuring and financing merger and acquisition (M&A) transactions, or helping private equity firms structure and finance leveraged buyouts. What I’ve always loved about the credit markets is that they represent a good marriage of the equity and fixed income markets. There is always a credit story behind a company — you’re not just looking at trading levels on a screen. Like equities, you really have to try to understand a company’s business and the underlying drivers of its profitability.
I spent 13 years at Goldman Sachs, almost all of it in London running various businesses, and then five years running the European business of Oak Hill Advisors, a firm focused on alternative investments. Each experience gave me a better understanding of the international markets and an appreciation of the nuanced differences of doing business in other countries and cultures.
Doug, you mentioned the Harvard ALI. What drew you to this opportunity and impact-driven work more broadly?
Henderson: I first heard about the Harvard ALI from two friends who had gone through the program and found it to be incredibly gratifying. Both had retired from their Wall Street professions and pivoted to take on senior roles in the nonprofit sector.
I was ready to retire from a full-time role at Oak Hill Advisors and spend my time in a more focused way on social impact. I had read books like “The Purpose of Capital,” by Jed Emerson and was thinking critically about how money could be invested to achieve social good and not just to make more money.
“I’d long been excited by the potential of impact investing and was intrigued by the organization’s work creating scalable financing tools for impact.” — Doug Henderson
My ALI year was a great opportunity to step back from my professional life and pause for personal reflection. As a fellow, you pursue areas of interest in social impact across Harvard graduate schools and the broader community. I was in this unique, collegiate environment with 47 like-minded people who’d had successful public- and private-sector careers. People left their egos at the door. I ended up with a group of friends for life.
Liz, you started your career as an engineer at IBM and then GE. What did you learn from those early experiences and how have they affected your approach to problem solving?
Lempres: My engineering education and early professional experiences were great training in problem solving. You learn to ask yourself questions like, “What are the most important issues? How do you structure the analysis? How do you manage lots of data? How do you solve a problem when you have very little data?” Perhaps even more importantly, I learned at both GE and IBM that problem solving is extremely powerful when it can be applied to real world issues in a practical and cost-effective way.
Both companies are very customer centric. Engineering wasn’t just about solving a problem, it was about fixing what was broken or making things better to improve a real person’s experience.
Liz, in addition to your professional experience at GE, IBM, and then McKinsey, you bring rich governance know-how to Social Finance, as you’ve served on boards across different organization types. What makes board service rewarding?
Lempres: Boards are interesting organisms. In my experience, no two are exactly alike and the way any individual board operates changes over time depending on any number of factors, including the pressing issues at hand, and changes in membership or leadership. At peak performance, boards leverage different experiences and perspectives to help leadership develop winning strategies and to productively challenge the senior team — emphasis on productively — to look beyond day-to-day issues and short-term challenges to build truly great organizations. That’s a pretty lofty and satisfying goal if board members can really play a role in achieving it!
Boards are also a great learning opportunity, as you’re constantly faced with new issues. I learn a lot from other board members too. I almost always assess issues in a new way after hearing the views of fellow board members.
Doug, what excites you the most about Social Finance and impact investing field?
Henderson: Both Social Finance and the impact investing field have been grown rapidly the past decade — and they aren’t slowing down. Through my time at Goldman Sachs and Oak Hill, I’ve seen first hand the growing emphasis on environmental, social, and corporate governance (ESG) from institutional investors, along with an increasing interest in financial mechanisms like green bonds.
On the other side of the impact investing spectrum, I feel like Social Finance is really innovating and driving impact with Pay for Success (PFS). Strategies like the career impact bond (CIB) are new and nowhere near their potential yet. They stand to offer a variable and attractive alternative to traditional funding for social services. Furthermore, thanks to their competitive returns for impact investors, these strategies are scalable.
“I learned at both GE and IBM that problem solving is extremely powerful when it can be applied to real world issues in a practical and cost-effective way.” — Liz Lempres
More and more institutional investors are seeking opportunities to invest in equity and fixed-income instruments that provide a financial return while also yielding social good and stewardship. Investment instruments that drive impact, like Social Finance’s social impact bonds (SIBs) and CIBs, will be a growing part of how investors will want to diversify their portfolios over time. I think that in the next decade we will see even more growth in the impact investing sector than in the last 10 years.
Liz, as the field grows, Social Finance grows too. You bring deep experience in organizational development to the Social Finance board. What do you think is most critical for a growing, mid-sized, mission-driven organization?
Lempres: I’m a deep believer in the importance of talent and people development in any organization, particularly in a knowledge-based firm like Social Finance. One of the challenges we’ll likely face over the next few years is developing clearer approaches to things like career pathways, organizational design, and rewards systems (both financial and,increasingly important, nonfinancial), while retaining the entrepreneurialism and diverse opportunities for rapid professional growth that make Social Finance such an interesting place to work today. We’ll also likely need to develop new skills to continue to deliver innovative solutions and effective processes to gain scale as we grow.
But whatever we do, I’ve no doubt that mission will remain at the core of our value proposition to attract very talented people, to guide our organizational decisions, and to make deep impact.