

A little while ago I heard almost identical stories from friends on opposite sides of the world on the same day. Both are members of investment committees – one at a pension fund, the other at a private equity firm. Both told me that they had discovered the power of quiet questions. By asking simple questions about something much deeper than the numbers on a spreadsheet, they had enabled their colleagues to have powerful conversations about their deep feelings about potential investments; about who they really were and what they wanted their organisation to be; about identity. And in each case the identity that emerged was one that did not want to pursue investments that would have been highly questionable in terms of ethics or values.
Here are their stories – in their own words. And what questions can you ask your colleagues to enable them to talk about things that matter deeply to them – ‘beyond the spreadsheet’?
Story 1 – Melbourne, Australia
I see on the investment committee agenda a new item, to invest in an agriculture fund run by an international asset manager with a poor reputation on ethics and sustainability. I feel my stomach turn already, then I read the proposal and see that it is a beef cattle fund and will include live exports. This cannot be happening, what on earth is the investment team thinking? Do they understand the fund’s ESG policy in any way? How can this be an opportunity that we are even contemplating? If we have spare capacity to allocate into unlisted opportunities, our policy states a preference towards sustainable and low carbon credentials. This opportunity in the beef fund flies in the face of our policy, our beliefs. Frankly, I am red-faced cross as I make my way to the committee meeting.
This is not the first time I have felt strong emotions, shock and disbelief in investment committee discussions. But this time I confronted the situation in a less combative way. Normally, I would argue very forcefully against an opportunity such as this, firmly state my views and opinion and try to force people to agree with me (and usually succeed). I usually leave those meetings feeling exhausted and worn out. Even though I might have ‘won’ the debate, it always felt like I had somehow lost something else.
This time round, without planning or pre-meditation, I held back on my view, I spoke in a normal speaking voice, actually quite friendly by all accounts. I asked the person who brought the idea forward to explain his rationale, how it fitted with our ESG policy, why we were no longer considering some of the low carbon funds we had discussed before. He stumbled, it wasn’t a strong response, the committee looked unconvinced. Good, and so far all I had done was ask a question.
Next question, to everyone around the table, ‘how do you feel about live cattle exports’? Pause, quiet, some space to think. People started to speak, saying that they did not like the idea of that at all, it was not a good thing for the fund to be associated with, it didn’t really sit well with our ESG policy, isn’t there something else we can look at instead?
Bingo. I still had not stated my opinion, only asked questions, then listened. I left the meeting feeling invigorated, and I think everyone felt better for having been asked for their view and having the time and space to express it.I learnt from this experience, to try to hang back and ask the tough questions, listen and give everyone space. In the event that this still doesn’t end well, another tactic I have employed is to delay and ask for more analysis, critical evaluation, drag it out and give people more time to think and raise their concerns. If all that fails, I eat humble pie and accept the world is full of compromises – but wish there didn’t have to be so many.
Story 2 – New York, US
Three things to remember: investment shops in any asset class live to make investments; investment ideas can quickly take on a life of their own; Excel spreadsheets are too easy to use and can make almost any deal look attractive.
A deal team is asked by a partner to look at a company in financial distress that can be had for almost nothing, but with a minimum amount of capital infusion can have more than a fighting chance of becoming a premier player in its industry and command a healthy premium upon exit. The team has misgivings about the company and the industry, including the service the company sells, and whether its business model serves the target customer base and the larger society. But the team does not voice its concerns openly and continues to diligence the idea, creating models that show the potential for growth at the company once it is stabilized.
As the team proceeds through diligence, private conversations are had between team members and others in the firm regarding their misgivings. Nonetheless, the team moves the process along at the behest of a senior partner. The deal is scheduled for firm-wide discussion before the Investment Committee meeting where the partners will make the decision on the investment.
At the meeting, before the deal team presents its investment case, I ask whether the firm really wants to be associated with a company, any company, in this industry. I say that I do not, noting that I do not have any problem with the investment case on the numbers, and ask for others for their views.
What ensues is a healthy, if sometimes heated, discussion about what the company does and if it is something that the folks around the table want to be part of. The debate never gets into the numbers on the Excel spreadsheet. The discussion is about the type of investment firm that folks around the table want to be part of. Partners engage in the discussion, but do not lead it, allowing for a free and open discussion. The meeting ends and partners meet to discuss what to do next. They decide to kill the deal, but note that the discussion was a healthy one. They decide to establish a protocol to ensure that discussions on whether or not a prospective deal is in keeping with the ethos of the firm take place at the start of the investment process.
Rob Lake is the founder of Authentic Investor, an initiative to support people to integrate their personal values and their work in investment and finance more fully.