The ESG Experience podcast episode #06
Improving diversity & inclusion across the portfolio ft. Alisa Mall
In this episode of The ESG Experience, hosts Helee Lev and Ryan Nelson are joined by Alisa Mall, Managing Director at Foresite Capital, to discuss the state of diversity & inclusion in the investment management industry and examine strategies and best practices for improving diversity & inclusion across portfolios.
Subscribe to The ESG Experience on your favorite podcast provider & never miss an update!
Read the transcript of this episode below:
Helee Lev: Hello, and welcome to the sixth episode of The ESG Experience podcast brought to you by Goby, the ESG platform. I am Helee Lev, Goby’s Chief Revenue Officer.
Ryan Nelson: And I’m Ryan Nelson, Goby’s CEO, and we’re your hosts for this podcast.
Helee: Whether you are an ESG expert or just dipping your toes in the ESG universe to understand how it can help with engaging stakeholders, mitigating risks, and attracting investors, this podcast is for you. Together, we navigate the alphabet soup of ESG, discuss ideas, review strategies, and share industry news and trends. In today’s episode, we’ll be discussing D, E, and I; Diversity, Equity, and Inclusion. And to help us really dive into this topic, we’re very pleased and honored to be joined by Alisa Mall, Managing Director at Foresite Capital.
Alisa is responsible for corporate development, long-term capital strategy, investor relations and ESG engagement. She joined the team in November 2020. Prior to her tenure at Foresite, Alisa was the Carnegie Corporation of New York’s Managing Director of Investments for 12 years where she was primarily responsible for the management of Carnegie’s real estate and national resources portfolio. Prior to that, she was the Director in Equity Capital Markets Group at Tishman Speyer. So, a plethora of experience and we’re also excited for perspectives from the real estate side, the LP side, as well as the GP side. So, welcome, Alisa; happy to have you joining us today.
Alisa Mall: Thanks, Helee. Thanks, Ryan. I’m very happy to be here and to be talking about these topics which I think are near and dear to my heart, and increasingly important for all of the stakeholders that you referenced.
Helee: For sure. And I think you and I are warm because we’ve already done a webinar together so we should just hit the ground running.
Alisa: Very excited.
Ryan: Good. Well, yes. I also welcome you, and very much appreciate you taking the time to have this conversation today. So, I will start with, let’s put maybe the easy one out there. How do you define ESG? You’ve got, I think, other things on your plate from your bio and what you’re doing at Foresite so this is a component of it, but how do you define ESG? How does it fit into the work you’re doing? Is it a day-to-day thing? A month-to-month thing? Tell us a little bit about that.
Alisa: Sure. Well, I think there’s the generally accepted definition of ESG as environmental, social and corporate governance, but I have to say it was actually, in part, in some of the conversations that I had with Helee and Goby that helped me think about this. We think about it now at Foresite as an overarching framework around how to run our firm, engage with our portfolio companies and our investors in a way that is ethical, socially responsible and holds us to a high standard of governance.
In terms of fitting into our work, I would say it touches everything we do. I mean, in some ways, tangentially. What we are just learning is how we should be measuring it, how we should be framing it and articulating it and communicating it to all of our various stakeholders. The “E,” the environmental piece, isn’t as relevant, I would say, to our work as the biotech and life sciences firm. So, that’s not a huge focus area, but the “S” and the “G” are really incorporated into everything that we do.
Helee: Yeah. And I remember when we spoke last time, the general consensus from the group, yourself included, was almost that the “G” is like table stakes. Your LPs depend on you guys to have sound governance strategies. It’s not necessarily a focus area, but it is kind of wrapped into this. And I love how you say that it’s overarching or just kind of woven through and through the DNA of Foresite and what you’re doing. Because having been in this space my whole career, it wasn’t always like that, right? Like ESG sustainability used to be this cute little thing off to the side, but now it’s kind of forefront, as you said, and it’s woven its way or made its way into the top priorities. So, that being said, how is Foresite looking at it? Let’s say in the next 12, 24, 36 months. Like what are your priorities and how are you guys thinking about the next couple years?
Alisa: So, one of my mandates and one of the reasons that Foresite brought me on was to think about how to weave ESG into what we do. And as I said, I do think it touches everything we do, but it was never formalized. And as a firm focused on the transformation of healthcare, obviously there is significant impact angled to what we do...
Alisa: But because, and you guys are more aware of this than anyone, because ESG was not really top of mind for people in a, I would say, structured kind of way, it was challenging when I got to the firm to think about how to put some meat around it and put some teeth to it. So, one of the first things that I did was created a formal policy that was beyond just like, “We don’t support child labor.” Like an actual policy...
Helee: Yeah. Yeah.
Alisa: And then trying to figure out where to focus. So, once that was decided, we, as I said, felt like the biggest area where we could have impact was the “S” piece. As you mentioned, Helee, like the “G” piece in the way we work with portfolio companies, in the way we make investments, and coming from being an LP for 12 years, we do just expect our GPs to have sort of good governance in how they think about managing relationships with portfolio companies and managing the investment process, but the “S” piece was a giant pull. And life sciences is very not diverse. And coming from a background in real assets which is similarly not very diverse, I could appreciate the extent of the problem. I shouldn’t say problem, the extent of the challenge and the opportunity, and this was a big part of my work at Carnegie where I oversaw all of our diversity and inclusion efforts.
And so, the first thing that we did at Foresite once we had a policy in place was, there was so much to tackle, how do you think about measuring? How do you think about framing? How can we kind of hit the ground running and have an immediate impact? So, what we decided to do was focus on the “S” piece and we created, in collaboration or coalition with other life sciences firms, something called “Project Mosaic” which really focuses on diversity, equity and inclusion in life sciences. And we set up...
Alisa: What we call “The Ships” so with a focus on mentorship, scholarship, and internships. And so, through that, we’ve created like we work with the National Venture Capital Association that has something called “Venture University.” They’ve always had a track for Venture Capital. They never had a life sciences track so we worked with them to create a life sciences track. We sponsored it and had 19 students go through, or are going through currently, this Venture University Life Sciences track so that was the scholarship piece.
We hired some interns from something called “Project Onramp” which works in life sciences and brings people from historically underrepresented groups into the industry. And now, we’re working on some more formalized mentorship opportunities, but those were never initiatives that the firm had focused on. Like I think everybody thought that would be a nice to have, but it really does take somebody spearheading it. It takes an advocate, and it takes somebody taking ownership of it and this is true of all of the, I think, components of ESG. Somebody’s got to own it...
Alisa: And take accountability for it. So, we are still, I would say, in the fairly early stages and some of what I’ve talked about with you, Helee, and where maybe Goby could come into play for us is figuring out what we still haven’t tackled, and I think remains daunting is, how do we measure? How do we communicate what we’ve done besides the qualitative? So, in a more quantifiable way that is digestible for our investors, and I think would be very powerful for portfolio companies as well.
Helee: For sure. And you guys are definitely not alone there in that you’re doing all the right things and you kind of like you can rattle them off and you can talk about them. And by the way, you joined the firm like last November and it’s July, so I mean that’s amazing and kudos to you for what you’ve done in such a short time and what you’ve put into motion...
Alisa: Thank you.
Helee: But yeah, that is the next natural evolution is actually measuring it, quantifying it and more so than just bullet points of achievements. And yeah, that’s exactly what we’re working with our customers to do.
Ryan: I’ll tell you I’m a sucker for the motivating power of things like Project Mosaic and focusing on The Ships; clever things like that to kind of put a wrapper on an initiative and then you start getting into really how to drive it by telling a story with something like that. I love doing that. We wanted to talk, focusing within ESG kind of within that umbrella, a little bit on the diversity and inclusion or diversity, equity and inclusion, D and I or D, E, and I. Before we jump in, I have a question about that for you. But before we jump in, given the breadth of our audience, would you mind just giving us a quick insight on GP versus LP that you mentioned? What is a GP? What is an LP?
Alisa: Oh, sorry. A GP is...
Helee: Like when Ryan’s mom is listening to this podcast, she’s going to want you to...
Ryan: Problems with everything I do. So...
Alisa: Same with my mom; my mom will say the same thing. The GP is a General Partner that runs an investment firm or is an asset manager. An LP stands for Limited Partner and often limited partners take the shape of foundations, which is my background, university endowments, insurance company pension plans, state and municipal pension plans, family offices. So, they give their money to the GP to invest. I think the limited comes from they don’t have. As an LP, you don’t have a whole lot of power in terms of how things are managed or run, but you are a partner in whatever the investment endeavor is.
Ryan: Right. And that makes Carnegie, your previous organization, an LP.
Alisa: That is correct.
Ryan: Awesome. And you oversaw the foundation’s diversity and inclusion efforts, and specifically we’re trying to advance diversity investment teams in firms.
Ryan: We talked a lot about Foresite, and all the awesome things you guys are doing and maybe tell us a little bit about what it was like from that LP perspective at Carnegie.
Alisa: Yeah. So just to clarify, I oversaw it from the investment perspective, not on the grant-making side...
Alisa: But at Carnegie, we were very committed. We, ourselves, had a diverse investment team and our chief investment officer is a dear friend of mine, Kim Lue, who is now Colombia University’s CEO and CIO, felt very strongly about this. We decided that we wanted to really make a commitment as an institution and as a team to advance diversity within asset management firms. So, Carnegie is not a huge organization. It has about 4 billion dollars of assets under management. And so, we knew that we were never going to be able to move the needle in a significant way in terms of dollars, but what we knew we could do was be very vocal and do a series of things to create access for diverse teams to other forms of institutional capital. So, we created a number of policies.
One, any diverse manager and managers and GPs, another word for GP, we had an open-door policy. So, they could come meet with us, pitch us on their fund or investment opportunity and we would try and be as constructive and give as much feedback as possible. We might or might not proceed with an investment, but we committed to being a resource to managers from that community.
The other thing that we did, and this was one of my initiatives, was it was sort of like speed dating. And what we did was we would host like between 10 and as many as 20 peer institutions so other endowments, foundations and family offices that tended to be the investor set that was kind of in our network. We would host them at Carnegie, and we invited asset managers or GPs from all different asset classes. We would have seven at any given time, and we would do like speed dating. So, those GPS, those diverse GPs, would have access to all this capital and in a very efficient way and be able to meet a lot of prospective investors in a warm as opposed to sending a cold email over the Transom with their presentation and hopes to get a response. This was a face-to-face meeting. It really was, I had done speed dating many, many, many moons ago, and it really was, I mean it was kind of a riff on that. We had 20-minute sessions. I rang a bell and people circulated around the room, but it was very effective.
Alisa: It gave diverse managers relationships and introductions that would have been very hard for them to probably replicate on their own.
Helee: I love that. Did you ever go to the AGC event in Boston similar? It’s a giant ballroom with tiny tables and it’s the same idea. You might have 30 meetings in one day, but it’s to match the capital with the investment side, but...
Alisa: I didn’t, but same concept.
Helee: Yeah. I’ll tell you more about it, but it’s without your flavor of the diversity piece of it and trying to help those folks kind of get meetings that they might not otherwise get.
Helee: So, I love that. I love that you did that.
Alisa: Yeah. It was great actually and it has been rewarding to see a number of the firms that we hosted went on to raise funds, had often investors that we had helped facilitate an intro, and it’s just great to see some impact from it.
Alisa: But it was really our belief at Carnegie, and I continue to believe this and I believe this at Foresite too, as we think about hiring and recruitment, that we felt for our portfolio at Carnegie that to be a top performer and to really outperform from an investment perspective, you needed a diversity of perspectives. And you needed investment managers that viewed the world through a variety of different lenses and didn’t all share the same background and experience set, particularly as the world evolves.
Helee: Yup. It’s so true and it’s so well said. There should be representation, like you said, within the LP, within the GP, within the Board of Directors. And it’s not, to me, it’s not lip service. Like it’s real thing. There are financial impacts, and I’m happy that the focus is, not finally there, I think it was a long time, gradually over time, but definitely magnified, in my opinion, in the last 12 months. So, shifting gears a little bit. So this past February, Foresite raised its fifth fund totaling almost a billion of commitments. So, congratulations on that. Mazel tov, as my people say. That’s amazing.
Alisa: My people too.
Helee: Yeah, our people. So, how would you say that’s different from other funds? And I might also ask you, with the perspective of ESG, is the thought process. So, say like you came to Foresite this past November, you were driving these amazing initiatives and really putting a focus on ESG and moving the needle for your firm. Is it the kind of thing where you’re going to say, “All right. So, from this fifth fund and out, this is where it really matters, and this is where we’re really going to implement these things and track.” Are you going back at all retroactively to the prior funds or is it all about this fifth fund and beyond? So, maybe you could talk about, yeah. Like this particular fund, how it’s different and then how far back retroactively the ESG efforts might go? Or if it really just is kind of from this day forward type thing with regards to the investments and the funds?
Alisa: When you say how is this fund different, do you mean from peers in the industry or from prior Foresite vehicles?
Helee: I probably...
Ryan: Whichever you’re most interested to share.
Alisa: Okay. So, I would say one of the things that is different about Foresite, and I wouldn’t go so far as to say it’s unique, but it is, I think, a differentiator is that Foresite Invest is a full life cycle investor. So, we invest from early stage incubation all the way through the public company stage and part of that is...
Helee: Oh wow.
Alisa: Because our founder and CEO, Jim Tananbaum, was an entrepreneur, built and sold two companies and I think brings to Foresite the perspective of an entrepreneur and understanding that a really good entrepreneur’s need for support doesn’t end at Series B or Series C or at the crossover IPO round. A relationship with a VC funder can go through the full life cycle of a firm and can be very powerful. So, I think that’s a differentiated piece. And as it relates to ESG, I think that it’s a way, because we do things at the very early stage and Foresite actually has an incubation arm called “Foresite Labs” which is a true incubator. When you’re building a company from the outside which is just one piece of our business, we certainly invest in later rounds and in syndicates where we maybe have a board seat, but don’t have undue influence. But in the early stages, when you’re building a company from scratch, you have a lot of influence over what that company is going to look like, both in terms of the composition of the executive team, strategic, and I think, that is something that some of the work we’re doing in ESG can come to bear in a much more meaningful way than say like an investment where we come in in like the Series C round or whatever or one of many.
Helee: For sure.
Alisa: With respect to backward-looking versus forward-looking, one of the things that was very interesting about Fund V in particular was we had a couple of investors come in, and this relates to ESG, who viewed Foresite as an impact fund which it is not by any traditional measure an impact fund. But the nature of all of our investments, and this is true of any life sciences biotech investment manager, is that all of the investments, in theory, should have a positive and hopefully transformative effect on patient outcomes, human health, access to healthcare, reduction in cost in healthcare. So, one of the things that we started doing, and we are doing it backward looking and we are trying to figure out how it can be woven into our investment process and I guess apply prospectively is measuring some of the qualitative impact and the social impact of some of these investments which I would say ties in less again to the “E,” but definitely to the “S” and to some extent, the “G” if you think about how we’re going to apply it prospectively in terms of underwriting investments, but that is new as of this fund. And we hired a consulting firm to help us figure out how to do this because like ESG, it’s daunting to figure
out how you measure some of these qualitative aspects of impact.
Alisa: We are applying it to the portfolio backward-looking. Going forward, I suspect that any of the policies and things that we develop are going to be more forward-looking because I do think at some point, it’s harder to kind of go back. And what exists in the portfolio, particularly because of the type of investor we are, as many of these companies mature, as I referenced earlier, as they grow up and get lots more investors involved and syndicates, the influence that you’re able to have, I think diminishes a little bit over time.
Alisa: If that makes sense.
Ryan: Yeah. I really like your point about influencing portfolio companies or investments, especially in the early stages. You can really help them to set themselves up. While we service GPs, that could be VCs, private equity, and a lot of times, it feels like what’s driving their focus on ESG are the limited partners and their requests. But I think they, some of the more clever ones, focus on the fact that hey, but companies are coming in, they want help. What help do they want? They want to figure out how to run their company. They want help on cybersecurity. They need capital, of course. And ESG is another one of those things that I think you’re going to see young companies, entrepreneurial companies saying, “Can you help us with this? It is important to us,” and we need to set those things earlier. So, I think that...
Alisa: I think it’s the tool that you can bring to your portfolio companies. Like if you can help them think it through...
Alisa: As they figure out ways for their funding and as they hopefully end up going through an IPO process or whatever it is. If they had somebody in the early stages really helping them think through these things and implement structures around it, it’s very valuable.
Ryan: Yes, we love the reach that our GP customers have because we’re influencing not only what they’re doing as a firm, but all of their portfolio companies. You mentioned, you talked a little bit about Foresite, of course. Your focus, I believe, is like 100% healthcare and life sciences. That’s awesome that it’s throughout like the whole journey of a company if I got that right. But maybe, I think we’d be interested in particular ESG considerations or risks around healthcare. We focus on industry-specific things a little bit. What do you know about that or I guess what’s interesting there that those organizations face?
Alisa: Well, certainly, some of the things that all investment firms think about in terms of cybersecurity, sound financial practices, general corporate governance which I think applies to any industry and any investment manager. Wait, sorry. My screen, there we go.
Ryan: Oh, yeah. Diverse management groups and diverse boards and things like that. Yeah. Well, I guess that’s what’s kind of interesting or what your answer to the question is, there are these common denominators that are a nice starting point and then at some point, you kind of get a little bit industry specific perhaps about what the ESG considerations might be.
Alisa: Well, I think there are some specific, with respect to “S,” most of this I think falls in “S” and “G”, but when you’re investing in therapeutics and healthcare companies, and obviously, the FDA manages a lot of this and this why you go through clinical trials and Stages 1, 2 and 3, but there are implications to human life that you have to think about that are like very fundamental, right? I mean talk about table stakes. Like you have to be I think pretty sharp on the science and any adverse effects that certain therapeutics may or may not have. So, that is all part of a general diligence process that I think is specific and unique to life sciences and healthcare companies.
And then as we talked about, with respect to diversity, because the people particularly like at the intersection of technology and life sciences like the true biotech world, I think the community is fairly small. That’s my observation and again, I’m new to it, but it’s a fairly small community and I think you have a lot of networks that feed off of each other. And I think to really diversify boards and executive teams, and this is true of any industry, but you have to push yourself beyond the 10 people that you know from your Ph.D. program or from your post-doc or whatever. And I think that’s a challenge in this industry. And because it is, many of the roles that companies are looking for are highly specific and highly technical. They want a chief medical officer that is like the best chemist or whatever it is. You don’t have a huge, huge pool to choose from. And I work...
Alisa: I’m now starting to work a lot on some recruitment efforts, and I see the challenges of how do you put together a diverse slate of candidates or think more broadly beyond your team’s own network of like the same sort of five people that share...
Alisa: Share very similar demographics. That’s a challenge. And I think in like buyouts or hedge funds, you have a larger talent pool that isn’t so highly specialized so you can make advancements more quickly on that front. I think that is unique to biotech employees.
Helee: That makes sense. And in talking through just some of the risks or considerations as you did, and you might have brought this up on the webinar, have you guys ever walked away from a deal because of a material ESG consideration? Like it was all going well, you’re almost done, deal almost got done, but then some sort of ESG-related risk...
Alisa: I don’t know.
Helee: Spoiled the whole thing?
Alisa: I don’t know. I’d have to find out. I mean I know we’ve walked away from a lot of deals. What I think is actually probably interesting is there probably are examples, but I would bet you that our team didn’t think about it. Like they wouldn’t know to put an ESG label on it, right?
Alisa: Like there would be something that was either ethically questionable that would raise...
Alisa: From governance issues. And again, I don’t have specific examples in mind, but in prior jobs, I can think of things. And I don’t think that because ESG, and you certainly see this in your business, has really just emerged to the forefront of people’s minds I think in the last couple of years, I don’t think people would have even have thought to put an ESG consideration label on it, but that’s most certainly what it was.
Helee: Yeah, it totally makes sense. It just wasn’t flagged as such.
Alisa: Right, exactly.
Helee: Yeah. It really makes sense. All right. So, you talked a bit about, and it’s funny because I have experienced similar things coming up through real estate, real assets, and now working with a lot of private equity customers. So, as you said, it’s very vanilla and it’s very male and that’s just kind of how it has been. Now, as you say, ESG is coming more to the forefront and we’re talking with a lot of firms and folks about their ESG. It seems that for whatever the reason, there are a lot women that are the ones taking the charge or leading ESG. Have you seen that that’s consistent? Obviously in your case, it’s you, right? Taking the charge for your firm. And if that is the case and you agree, why do you think that is? There is like no right answer, just total opinion.
Alisa: I love this question. It’s a little thorny because I think you’re right. So, my sense is, I think in instances where women have taken the initiative and the lead on this which I have seen now in a number of cases, and I am not demonizing men, I love men, but I think women generally recognize the value of what is perceived as some of these softer areas. It’s less hard numbers, less quantitative. It’s less about what the obvious direct, say, investment result of something will be. It’s some of these more qualitative metrics and issues that actually really do fundamentally impact I think a firm’s longevity, a firm’s ability to outperform and to differentiate itself, but they’re not so easy to wrap your arms around right away. I think it’s like sort of a more nuanced, just like lots of shades of grey around some of these concepts.
And, again, I feel like all my guy friends and my husband would be annoyed at me that I’m, Ryan, I hope you’re not annoyed with me...
Alisa: But I do feel like women naturally can grasp and navigate those waters with a little more ease than men. I mean I see it at Foresite. Some of these concepts, for example, like unconscious bias trading, even the notion of recognizing and seeing your biases and thinking about how does that affect my investment judgement, I think, often, it’s just easier for women to navigate those. So, I think you’ve seen that a lot of firms, women taking the initiative to say, “We need an ESG policy. This is important. I’ll take ownership of it.” And then, that’s like the positive view.
I think a slightly less positive view is, and I’m sure you’ve both heard of this, this notion of the pink ghetto that women at many financial firms get often relegated to roles that are less about sort of direct P&L or direct investments. They are legal counsel, they are investor relations, they are now you have this whole world of ESG. They get moved into positions where softer skills are required and really valued. Things like HR...
Alisa: So, I think there’s that component of it too. So, I think both exist.
Ryan: Yeah. I appreciate and loving that question and taking it on and whatever it will cost to save space or whatever. Like if you’re going to talk ESG, authority or not, we’ve got to take it on and not...
Alisa: It’s not just a podcast that like our parents may all listen to, at least.
Ryan: Oh, yeah. I know, but some of them you know we were making observations and assumptions. And are we demonizing or not or whatever? I hope no one feels that way yet. You’ve got to take these questions on and not tiptoe around them. I mean we’re only getting at the surface in this short conversation, but yeah. Happy to take on the conversations and not go
stay away from corny questions or discussions. We would get nowhere if we do that, but...
Alisa: Yeah. I mean, candidly, I think there are a lot of investment managers who reference this, Ryan, who really don’t care about ESG. They’re only doing it in response to their limited partners’ requests. And I think it’s...
Helee: Some are super vocal about it too.
Helee: It’s like oh just to get on a call, they’re like, “We’ve committed to this, we’ve hired you to do this, but I just want you to know that I still kind of think it’s bullshit and I’m only doing it to check a box.” Like..
Helee: Like some of them are really upfront about it which is always comical.
Alisa: But I think it’s going to be an evolution. Like you know change happens at the margins and incrementally and I think it’s going to take time. And if you look at, I mean I’m sure you see this at Goby, I’m sure there has been an explosion in your business over the last couple years. I mean that’s actually pretty dramatic change in a short period of time, in like a very short period of time if you think about it. So, while I think there’s a lot of people who still think it’s bullshit and do it to check the box, I think that will continue to change especially as they start to see positive outcomes within their own portfolios and at their firms and in their ability to hire and attract and retain people. So, chip them away.
Helee: I think so too. We saw it happen in real assets over the last decade. It’s going to happen here. Like we saw the same cycle, the same thing. It’s where PE and VC are now. That’s what real assets was doing a decade ago. So...
Ryan: And we saw exactly that for 80% of people 10 years ago were telling us they’re doing it for marketing purposes...
Eighty percent of them might say something like, “We really don’t care.” And we’ve just seen that come down to where it’s now the other way like it’s 80% saying, “Hey, I want this to be more than point chasing or more than a marketing thing. I want it to be meaningful.” So, you’ve seen it flip flop which I think is really nice and I think it’s just going to keep happening. So, we’re super excited about it from a big grand perspective and for the work that we get to do and I appreciate what you’re doing and having this conversation and it’s very important.
Helee: Excellent. Well, thank you so much for joining us today on The ESG Experience podcast. Our next episode is going to focus on assessing the environmental and social impacts of business in supply chains and we will be joined by special guest, Christine Robinson, senior manager of sustainability at Deloitte. So, make sure you tune in. Thanks to our loyal subscribers, hundreds of thousands of listeners and Ryan’s mom for continuing to listen and support our podcast. And if you want to continue the conversation between episodes, do follow us on your favorite social media channel at #esgexperience.