For Julie Wallace, taking on the Head of Impact role at Leapfrog Investments allowed her to return to her roots, while also defining the next decade of her career.
She had spent the past 14 years working at big, global bank, Standard Chartered before making the switch to Leapfrog, a niche, private equity impact investor.
It was a major pivot, from publicly listed banking, to private market impact; but for Julie it was also a return to her formative days where she worked in international development across countries of Africa, as well as in trade and diplomacy in the region.
OnImpact spoke with Julie about her immediate priorities at the firm, how Leapfrog builds close bonds with institutional investors, as well as progress in deepening the impact reporting that is made available to the public.
From Public Bank to Private Impact
Julie had been global head of sustainability and community engagement when she left Standard Chartered. There was a focus on climate change issues, and the emerging challenge of financed emissions. She was able to steer the climate imperative to be a central corporate issue, rather than a subset of CSR.
“It was a great experience, I loved being there, because my drive has always been to take a global perspective. And Africa, South Asia, Asia, and the Middle East, these are markets where I really want to do my career work and contribute to international trade, collaboration and economic development.” Julie says.
“We did a lot of work on the corporate strategy. What’s great is that you’re finding a lot of the larger corporates are shifting the work into the business. Which is where we want it to move, you don’t want sustainability in a large company to be run by a CSR team sitting on the side, you want it fully embedded. And as that started to happen, I thought, okay, I’ve got 10 to 20 years left to work, what am I going to work on, what do I want to focus on? And my drivers were really; I love working on climate issues, as well as social economic development, emerging markets, and growth markets, those are really my drivers.”
A global bank will always force broad analysis, with less emphasis on going into great depth. Moving to Leapfrog offered the promise of a more focussed approach, and a chance to go deep on impact.
“At Leapfrog I really love the fact that impact is essential, it is central. It is the core of what Leapfrog does. So our team is integrated right into that heart of LeapFrog. And it’s that shared vision and collaboration and commitment to impact that I saw as a really good opportunity to learn, to be central to the work of an organisation. But also, to go back to some of those markets that really are where I want to spend my energy and time and career.” Julie says.
Specialised ‘Speedboats’ for Impact Analysis
The evolution of impact measurement and management has involved so-called ‘non-financial factors’ prove themselves to be anything but. The most progressive approach to impact investing involves integrating these factors into the core analysis process.
“So we have profit with purpose analysts that are embedded in each deal team, we call the deal teams ‘speedboats’. Having our impact team members embedded with deal teams means we are doing the ESG and impact screening from the very beginning, alongside the business team.” Julie says.
“80 to 90% of their job should be focussed on their specific specialised speedboat. The ESG due diligence, that’s reviewing the impact thesis from the beginning, and it’s the ongoing engagement with portfolio companies to make sure they’re delivering against the environmental and social action plans and our impact targets.”
Leapfrog has impact specialists embedded in each deal team, but they also have a central, strategic team that plans and manages the broader impact thesis and theory of change.
“Then we have a central team, which is essentially just me at the moment, but it’s being built out with one or two more people. And we’re looking at global frameworks for Leapfrog around impact and ESG, that are tailored for financial services and healthcare.” Julie says.
Impact Priorities In the New Role
For Julie, there’s a steep learning curve to recalibrate her strategic approach from a big bank to a niche PE fund. The impact space is moving fast, and there’s plenty to get up to speed on.
“I’ve just been learning, really learning about our theory of change, learning about our structure, reviewing our frameworks, and there are a lot of frameworks out there on impact and sustainability. So doing a review of those frameworks.” Julie says.
“Also, we published our inaugural Health and Wealth Index on the emerging consumer. We presented it at the GIIN in October, and we presented it at our LEAP conference in London.”
Leapfrog is also working on developing its climate investing approach, a thematic they’ve not previously focussed on. This is where Julie has a rich background.
“We’ve been looking at our climate strategy, and how we integrate climate throughout our investments. But as a starting point, we just want to make sure that we’re working with our portfolio companies on their climate strategy and their climate plans.” Julie says.
“We put out a climate policy earlier this year, which is on our website. So I’ve been spending some time thinking about that, thinking how we can support our portfolio companies, understanding what companies are already doing on climate. So that will be a piece of work we continue to progress.”
Introducing Institutional Investors to Impact
Investing in Leapfrog funds is reserved for only sophisticated institutional investors, which is an impressive feat given some historical hesitancy of super funds, pensions and insurance companies to embrace the fundamental connections of profit and purpose.
The firm has a well-earned reputation as being a ‘safe pair of hands’, but as Julie explains, it simply comes down to the people.
“From what I’m observing and learning, there are two real drivers. One, it’s the people, they’ve built a partnership, and the hiring process, to only take on people who are both qualified and experienced, but who also 100% stand behind this profit-with-purpose ambition. That’s really the key right there. So much time in most big companies you spend time explaining why we need this focus on sustainability, or social impact, or climate. But you don’t have to explain that at Leapfrog, because that’s the reason people join. That sort of philosophy and approach and commitment and focus is very clear.” Julie says.
“I think the second factor is the business model, it’s the strategy of investing in companies that are serving emerging consumers with essential services, and then adding value to those companies. So I think those two things together, allow leapfrog to be very authentic in this space. You see it from the outside, but then you come in and you start learning more about the portfolio companies, you start meeting colleagues. And that alignment is really clear.”
Deepening Impact Reporting
Leapfrog has been an impact investing pioneer, but it can be hard to get any detailed look at their impact reports. They release an annual tally of ‘emerging consumers’ served, but they don’t go into the wonky details about their impact on beneficiaries, and their methodologies.
These are the academic details that impact professionals crave. And while it’s likely Leapfrog offers deep insights to their investor partners, the sector would benefit from a closer look behind the curtain.
“We do have some deeper level reporting that we share with LPs. And trust me, I know reporting well, coming from a publicly listed company. But this is something that I want to look at to see how we can share more.” Julie says.
“We did do a survey with 60 Decibels earlier this year, that was our Health and Wealth index. They do telephone-based surveys. For this project the sample size was over 4000 people; 2000 financial services, and 2000 health care. We have a lot of data, we have a lot of information from our portfolio companies. We’re looking at ways with which we can measure with a bit more depth of impact, and how we analyse the data that we have, to demonstrate more around these impacts. Working with portfolio companies is key there too.” Julie says.
Of course measuring impact is not easy, and the industry is evolving processes through trial and error. A focus on climate change issues lends itself to more quantitative data, which can be easier to collate and glean insights from. But when looking at social impacts, the outcomes are far more qualitative. Offering solutions, and helping build norms in this area, would benefit all players.