Impact Investing in 2026: What Survives, What Scales, and What Changes with Eric Rice

Investing in emerging markets, in private markets, is challenging. What happened at BlackRock and elsewhere in the US? Is that the end of the story that impact investing is dead? I don't think so.

Nuclear renewable, it's all on the table everywhere else except in the US. China is now working on renewables for shipping. They're gonna build out a capability in maritime that the US is gonna miss out on. We missed out our two-degree or one and a half degree limit.

We're in trouble. Now it's too late and the oceans are gonna rise. We better figure out how to deal with oceans rising. Ask him about take some of the pressure off of aid because there are lots of areas that the markets can take care of.

And who knew that? I mean, as an economist, I was trained to believe that, but I didn't have a way to see that before these problems of poor people could be solved by companies and by markets. Unlock the potential of your investments to improve the world and make high performance returns. Welcome to Sustainable and Responsible Investing 360.

My name is Scott Arnell, and each week I sit down with a world-class investor to uncover their secrets of profitable ESP, impact, and socially responsible investing. Find out more at SRI360.com. Hey everyone, I'm Scott Arnell and welcome to Sustainable and Responsible Investing 360.

My guest today is Eric Rice, making his third appearance on the show and a recurring voice in this conversation. Eric is a longtime pioneer in impact investing with over two decades of experience in global public markets. First at Wellington Management and later at BlackDock, where he led one of the industry's earliest large-scale impact equity strategies. Today he's working in the private markets with Steve, the small enterprise assistance funds, where he's focusing on investing in small and medium-sized businesses solving social and environmental problems across the emerging markets.

Eric has had a front-row seat to the evolution of impact investing from its earliest days as a niche concept to its rapid institutionalization, and now through what many would describe as a period of backlash and recalibration. And that makes him uniquely positioned to help us understand where the space actually stands today. In this conversation, we unpack what I'm calling the Great Divergence, where the US is pulling back from ESG and impact language, while at the same time, Europe, Japan, and other agent investors continue to accelerate both capital allocation and regulatory support.

Eric shares his perspective from inside BlackRock during that shift in the United States and why many of the changes we're seeing today are as much politically motivated as they are financial. We also explore whether impact investing was ever meant to replace development finance, especially in light of the recent collapse in global aid budgets, and why private capital, despite its growth, still can't fill that gap. And finally, we dig into what's next from the growing role of pension funds to the maturation of impact as a discipline and why climate adaptation may be the next major frontier for investors.

Please enjoy, and as always, thank you for listening. And now this is Eric Rice with another Impact Investing update. Thank you first and foremost for being a part of this community. But it's driving me crazy that over 83% of you that listen to or watch this show regularly haven't yet subscribed to this show.

So could I ask you for a favor before we start today? If you like the show and if you like what we do here and you want to support us, the free and simple way that you can do just that is by hitting the subscribe button or following us on your podcast app. It helps this channel more than you know. Thank you and enjoy this episode.

Eric, welcome back to the show. This makes it three times you've been on, so you're officially a recurring character like a Marvel franchise, except with lower budgets and hopefully higher fiduciary standards. So the last time we spoke was May 2025, and you had just arrived at SIF, and you said you were still looking for the coffee machine, and I think your words were you were walking before running. So just a quick question: how's the running going?

Good. I think I was running from the first moment, but it's good. But investing in emerging markets in private markets is challenging. Yeah.

Yeah. So anyone who does it knows. But all good so far? Yes.

Yes. For listeners who haven't heard episodes nine or eighty-eight, the short version is Eric is a pioneer of public markets impact investing. Over 20 years at Wellington Management, then BlackRock, where his global impact fund was among the casualties of the anti-ESG backlash. But now he's at CEF, which stands for Small Enterprise Assistance Funds, doing private equity and emerging markets SMEs.

I encourage anyone listening to go to those episodes if you haven't heard them already, because they're really good and they go into a lot of depth and there's a lot of good information there. But today I wanted to do something similar to what we did last time, which is just talk about the state of impact investing. A lot's changed actually in the last year, and I'd argue we're at a more interesting inflection point than at any time since I started this podcast, that's for sure.

And then the one thing I want to update you on from my side is I finally plowed through and finished billions, that TV series you told me about, and I plowed through all seven seasons. It took me like a year because I'm not very good at watching these things. And after plowing through all that, I'm just not sure what any of it was supposed to mean. And for anyone who listening doesn't know why this even came up, you said at one point, like impact investing has become mainstream when it becomes part of the storyline of a mainstream series like billions.

And so I thought, okay, I'll have to watch that, right? And so I have to say, after going through this, that the impact investing storyline wasn't what I expected because they didn't seem to present it as a scam, which was I thought where we were going. They didn't present it either as the latest financial engineering trick to raise assets and charge fees, they presented it as something that this Mike Prince character genuinely believed in, and somehow that was worse because his sincerity was the thing that made him dangerous, you know?

And then they seem to wrap the pursuit of him pursuing the presidency of ultimate power in the language of doing good. And then the show seemed to be saying that the guy who believed his own story is more dangerous than that Bobby Axelrod character, which was like the modern Gordon Gecko predator hedge fund kind of guy. But then there was this boardroom scene when they started this impact fund. And in that boardroom scene, there's Jacqueline Novigratz, who I recognize, but then sitting alongside her was like David Einhorn from Greenlight Capital and Adam Grant and Seth Godin and Neil Blumenthal from Warrior Parker.

So they had one actual impact investing practitioner and four people from tangential worlds, I guess lending credibility. What was this whole thing? Okay, Scott, you should have issued a warning, a spoiler alert, because for for your guests, as for me, we might not have finished the series. I stalled out, I don't know, at season whatever, when the presentation of impact investing was just plain silly.

They they had no idea what they were talking about. At least they got some real players in there in the boardroom scene that you described. But otherwise, they were just talking about it as this sexy new area, period, that they didn't understand. And they might have gotten some advisor, but it wasn't a very good advisor to explain it.

So I don't know what they ultimately did with it. I don't know who's more dangerous than who. But I do think the main point is that it's it's in the public dialogue in a way that was unimaginable four or five years ago. And for good or for bad, it's there, and people are thinking about what is this thing?

And and that brings us around to what you started to ask about the status of impact investing. You know, is it is it a disaster is what happened at BlackRock and elsewhere in the US? Is that the end of the story that that impact investing is dead? I don't think so, but mostly in the US at scale, it is.

And we can talk about what remains and what's what's thriving and what's not. All right. The first topic I've titled the Divergence US retreats versus the rest of the world acceleration. And so I want to start with Larry Fink, because uh I think what's happened with Larry Fink's annual letter is actually the perfect barometer for where we are.

In 2020, this is the guy who wrote, and I'm paraphrasing, but something like climate change was a defining factor in companies' long-term prospects, that we were on the edge of a fundamental reshaping of finance. And then that letter effectively moved markets, it moved the entire conversation quite a lot. But his 2026 letter, published just recently, doesn't contain a single mention of the word climate, neither did his letter last year, and he swapped energy transition for energy abundance, and then he wrote that solar complements other sources rather than replacing them, which is the exact opposite of what energy transition he once championed actually means.

And then the other week I read in the FTE, you know, they described his letters as essentially like a marketing exercise designed to harvest headlines on the hot topic de jour. And I say that with no judgment because I understand how complex this is for someone running 14 plus trillion dollars. But but Eric, you lived through this at BlackRock. Your fun was one of the casualties.

When you read that 2026 letter, what went through your mind? There's nothing new about this. I mean, the last three years has been on a steady path toward this point, and it's about almost nothing more than making sure that Larry lives up to his fiduciary duty, which is to save the company. I mean, the company was under complete assault from I think it's 14 red states that BlackRock managed for the red states was important, but not at BlackRock scale.

But the noise that all that made for BlackRock resulted in other funds hemerging assets. And any responsible CEO has to recognize that. And he had to backpedal somewhat from that. Maybe he had to backpedal as much as he did.

I mean, there were a lot of moves that they made, the whole elimination of the term ESG. I mean, you can understand why if the administration or if these attorneys general were saying that their lawsuit was based on the falsehood of ESG, that you stopped using the term. And if there was not enough representation of other voices, well, great. So they had to get the CEO of Saudi Aramco on BlackRock's board, but it wasn't the image that Larry had had in 2020.

And and of course, I mean, some months after I left, they started closing out all the impact and most of the sustainability funds that BlackRock ran. And you know what? It worked. They got the private control of the assets in Panama.

You know, the the Panama Canal assets. It worked. The administration gave them an enormous pat on the back, and the company stayed in doing well. It's disappointing from the perspective of impact for sure.

And there's a lot less activity at BlackRock and at some other places that weren't blacklisted. BlackRock was the only U.S. firm that was blacklisted by the Red States, but and sued by the Red States.

No, sorry. State Street and Vanguard, I think, were sued. They were sued, but in terms of being blacklisted and sued as repetitively, BlackRock stood out. But there were nine other firms in Europe that were also blacklisted, and they didn't backtrack, but they were in the same position.

They weren't at the same risk. So this is one story, but then I've dug up some other numbers here. Brazil's Security Commission has mandated that by 2026 all listed companies must publish reports aligned with the ISB standards. Over 30 jurisdictions in Asia are advancing mandatory disclosure regimes.

So it seems like the regulatory picture is pretty openly bifurcated. And so my question for you is is capital actually migrating? Because I've had a few people on recently, like Michelle Giddens or Yasimin Saltaklami, and they've mentioned that they have had US investors coming to Europe seeking sustainable investment opportunities. Are you seeing this?

Is this still something that's anecdotal? To me, it's anecdotal, but I mean you hear it so uniformly that it has to be real. And then when one goes to Europe, the discussion is all the same impact discussion that it was before. And institutions, big and small, are investing heavily in the same areas as before.

And of course, the governments are supportive of every source of energy, maybe not coal, but every other source of energy, oil and gas as well. But nuclear, renewable, it's all on the table everywhere else except in the US. And in the US, where it's less visible in the private markets, there's plenty going on. Plenty of innovation in renewables of every type.

So it's the big ticket, high profile manifestation of climate change that's disappeared. And and in fact, it's also anything that would be called impact investing at the scale we were doing it. Because after all, ours was across social sectors too. And I'm sure that you know devices for to make the lives of old people better was not really what the administration or the attorneys general were were trying to attack.

Or education for for poorer kids or better education for them was was not the woke problem that was identified. We never were woke. We never were even ESG. But we You're talking about your particular generalized planet vers planet and people fund was perfectly fine investing in new and safe nuclear, in certain kinds of hydropower.

It was a political thing that turned out to be really effective where they had leverage. And for companies like the biggest fund managers in the US, where they manage a lot of generic funds, generic SP 500 tracking funds. If there's a lot of noise, then you lose their flows and no one could afford to lose those big flows. And so the big guys had to move away from it.

Right. But you did, and the last time we talked, you brought up a research study that had analyzed something like 150 impact funds, and that actually only like about 10 actually were substantively involved in what we would call measuring impact and delivering impact. So there was some of this going on. Some of what going on.

The criticism was that people are being forced into funds, or that these funds are actually just marketing. That's not really necessarily impact by the definition of impact. I agree. And if it had been the case that there were only the true impact funds, and I think the study that that you're mentioning uh identified 10 or so funds that were actually doing what we would consider to be impact, then no one would have cared about it.

And and what Larry was criticized for and highly public about was ESG writ large, and that was many, many billions or tens of billions of dollars of investment. And we just got swept up in that. But because we didn't have a view about coal. It was a lot of ignorance on the attorneys general's part about what we do, what any of us do.

And there was a lot of exaggerated advertising about all these other funds, about what they were doing or not doing, and how they were incorporating environmental, social, and governance goals. And you know, the whole idea that ESG per se is a bad thing. I was not a proponent or an active ESG investor, but for goodness sake, any decent investor thinks that the governance of the companies they invest in matters and always has. And and also it has to be the case that any investor who was invested in Volkswagen when they got caught in their emissions scandal should have been paying attention to what it did in terms of the E.

All those things matter for returns, and and everyone cared about it for returns. But that message got lost in the political fray. I think when we spoke, you mentioned Europeans were taking up some of the slack and that Australia and Asia were getting more interested and active. Is that still the trajectory, or is this divergence widened even further?

It's solidified. It's US, rest of the world, as with so many things. The US is going this alone, and everyone else in the world is advancing in the way they had been. And in fact, I was thinking about this morning that China is now working renewables for shipping.

They're gonna build out a capability and maritime that the US is gonna miss out on. And as with EV, they're gonna be leaders because we're giving it to them for a silly political reason. So that leads us to the great vocabulary purge, which might be the biggest story in the space right now. So everyone's scrubbing ESG and DEI from websites, annual reports, proxy filings.

Groups are no longer shouting about ESG from the rooftops in the US. But the reports suggest that they're still quietly working towards emissions reduction and engagement targets behind closed doors. So my question to you is is this cosmetic rebranding or is it substantive retreat? So the scrubbing is definitely real, but it's not as real as it seems.

It's a lot of rebranding. The companies that are maintaining their commitment to these things are benefiting from it. I mean, BlackRec itself has lost quite a number of mandates from Europe because it's now on the other side of the issue. And Europeans have pulled many billions of dollars, I don't know, it looks like tens of billions of dollars from companies in the US that are complying with anti-ESG or whatever you would want to call this this pressure because they have mandates themselves.

Mandates for alignment with climate change criteria. So there's a lot going on. I mean, it it it is a mess. It's not just naming, and as before, people are working on naming.

To try to protect themselves in one direction or the other. But the reality is we're moving inexorably in the right direction, in the direction of more attention to climate risk, to climate mitigation. And interestingly, climate resilience is on the okay side of the political divide, that BlackRock is investing in climate resilience. Everyone's invested in climate resilience.

So that's a good thing because somehow that wasn't tagged along with everything else. And energy transition, I don't know how it's different from any of what we've talked about, but energy transition is the code word for environment that's not in trouble. That's not a bad word. So everybody's doing that too.

Let me steal in both sides of this. Going back to our very first conversation, you've been really clear about this, and you even referred to it when we first started that impact and ESG are fundamentally two different things. And you told me that impact is what a company does in your mind, and ESG is how it operates. I've had some people push back to me and describe it in a different way, which gets back to all the different definitions that we have.

But you've mentioned you were collateral damage in a political fight that had nothing to do with what you were actually doing. So make the case that impact and messing's deliberate avoidance of the ESG label from the beginning is actually proving prescient because in my mind, I don't think people are scrubbing impact from their names. I think it's more the ESG and D. I is what they're scrubbing from their sites.

I don't think impact has fundamentally a bad name in the same way that ESG does. I don't think so. I think I think we were seen as being the green complex of BlackRock. But I think everybody knew that we were something different.

It just happened that our funds, that the impact funds, that we got identified by the red states as being in this woke care category. Because we just weren't, you know, we were investing in schools and their curricula and in health solutions and all sorts of things. And we happened to also invest in EVs and I mean EVs, like Tesla early on, before it had its problems with Elon, but but we invested in various EVs, which are not on the bad list for some reason, because that is a solution to a problem.

We were all about solutions. And if you're asking what companies do, what I mean is what they make, what they exist for. And in each case, in each theme, we identified what the problems were and what companies were working toward those solutions. But at what point does the rebranding stop being cosmetic and start being a genuine change in what firms are actually doing with their capital?

I think that in the US, tension farms will continue to be squeamish about what the federal government could do to them if they're invested in, say, farm like the fund we had, just because it was on the red state bad list. But you know what? Those funds don't exist. So it's not really, I mean, anymore.

Not not just ours, but there are others that don't exist unless they're really on the down low. So it's it's no longer an issue in asset management because it's mostly gone away. And because the reach of the US doesn't go to the funds in Europe, you're still able to invest in those funds from the U.S.

And people do. They're thriving. Let's do another art tier question. I guess I'm just wondering how much you've been getting tarred and feathered like that and smeared in with the rest really does change the allocation of capital going into those things.

So I guess you're saying in some cases it has, but in some cases, but it hasn't because it's still there's still investment. The pensions is a particular case because the Department of Labor holds sway over the pensions of big corporates in the U.S. So it's a particular risk.

But as for endowments and foundations doing what they did before and doing what they'll do now, I think I don't think well you'll have to ask them, but I don't think that's really changed. And and both for EST and for their impact investing. All right. Let me move on to another topic is the USAI collapse and impact capital filling the gap.

So the elephant in the room is made with the soul here is God. I'm a former Foreign Service officer. So to watch USAID be not just dismantled but hacked to death was for all its flaws, was a tragedy in my eyes. It was an agency with a 63-year history budget in 2023, it represented 28% of global official development assistance.

And the Lancet study projects that global aid cuts could lead to over 9 million additional deaths by 2030. And it seems by some other numbers I've seen that this isn't just the US, it's also the UK, France, and Germany have all cut aid budgets simultaneously for the first time in almost 30 years. As you mentioned, you spent your early career at the World Bank, you joined the Foreign Service because you wanted to do development work. So this must hit differently for you than someone like me.

So what's your honest reaction to what's happened here? As with many things, there were there were some excesses. There were some areas in which USAID was spending money that were probably not sensible. For what large institution is that not the case?

And the decision to throw the baby out with the bathwater is how we handled it. It's a shame. I think the baby was much bigger than the bathwater and much more desirable. And I don't know where we lost the belief in our soft power, the soft power of those bags of rice in uh humanitarian crises that say USAID so that people know why they're getting fed, or the soft power of having infrastructure projects that give people livelihoods.

I mean, we've we've lost so much of that, has lost so much of its credibility and its its favorable opinion by doing that. So so yes, it's sad to me that we would throw that out in a moment. It's also that it was done so disruptively, but we see that in cultural spending, we see that in everything else, that the contracts didn't just get phased out, they got flashed in an instant so that existing contracts were nullified. And you know, you had people who were in the field who had to find their way home the next day with their families.

It was Wild West. The tension I want to explore is at the International Conference on Financing for Development, impact investing and Gin Zyrus Plus system were prominently featured in official conclusions, which of course will guide development finance priorities for the next decade. And there seems to be this growing narrative that impact capital can fill this gap now, but I don't know. In my experience, asking private capital to substitute for tens of billions and government aid is a bit like asking a rowing boat to do the work of an aircraft carrier.

Is impact investing being asked to do a job it was never designed for? Yeah, right. Your instinct's right in two ways. One is that it's so much money that compared to impact investing, impact investing in development is still a baby.

And so what the IFC does, happily the IFC is still doing that, and what the World Bank does and what the bilaterals do is still big, even without the U.S. There's the other 70, what is it, 72% that you know, that still is there. There's some cutbacks in the UK in particular, but most of the money is still there and still needed.

But the second way they're different is that a lot of the money that comes from the official investors or lenders is concessional. And if what you're trying to do is to get water supply in rural Bangladesh, I, as an impact investor who needs to earn a return, who has a fiduciary duty to my investors or my limited partners can invest in that. I mean, there's a great organization, water.org, which if you do a project like that, they promise you a 2% return with a whole lot of risk.

And that's just that's great, but it's not a commercial return. It's something in between philanthropy and impact investing. In fact, it's sometimes referred to as impact philanthropy. And so these official funders are more like that, or else they're completely grants or concessional lending.

And that can't be picked up by what are mostly commercial basis impact investors. Trevor Burrus, Jr. You're at CIF now launching a fund focused on ag and food SMEs in emerging Europe. So I'm I'm advising two funds.

That one is, I mean, they're both strictly commercial. I mean, everything that CIF does is commercially oriented. And so it's intended to modernize agriculture in the poorer parts of Europe so that A, those industries are less polluting, and B, they are more efficient and can export to the richer parts of Europe. And that's a commercial proposition.

The other fund that I'm advising to is assistive technology. So that's technology for people with disabilities or older people. And those are fully commercial. Those are propositions, those are needs that are underserved, but those are things that the private sector can respond to.

So that's where impact investing has a full role. And actually, it's interesting to see the aid agencies wanting to get involved more and more in supporting that kind of investment that's more market-oriented. So it's totally commercial what you're doing. So then tell me, what have you seen?

How does the collapse of USAID change the landscape for what you are doing practically? Have you seen an impact? I think right now, since it's just happened, you know, start less than a year ago, I think people are still scrambling to figure out what it means. And so, like the remaining U.

S. agencies, like USDFC, the Development Finance Corporation, didn't have a head for many months at the beginning of the administration. It just got ahead toward the end of last year. And the staff there is just figuring out what the role of the agency is.

And so it's funded, but it's not yet spending. And it's a hard moment to talk about what this is going to be, because as far as we know so far, it's just about funding overseas minerals for the U.S. economy, which is very different from funding the needs of poor people, say, or development in these other countries.

But but those things are evolving. That was a number one, that was a thing that could be identified from the precepts of the of the current administration. But those other things are coming around too. And those will be out there and there will be funding for those other commercial-oriented needs.

But we don't know entirely yet. To be determined. Yeah. From another segment.

Now I want to shift gears and talk about pension funds moving into impact. And this would be kind of the good news segment of the show, because we need some. But Japan's government pension investment fund, the GPIF, which is the largest pension fund on the planet, I think it's $1.8 trillion, formally revised its investment principles last year to incorporate impact investing.

And they renamed their ESG report, a sustainability investment report. So there was a little switcheroo there. Their president said the fund will consider making investments with consideration for the effects that investee companies have on society and the environment. So, in other words, I guess to you and me that would be the impact that they're having.

And this triggered at least four other Japanese pension funds to start updating their investment policies. And meanwhile, the UK established the Office for the Impact Economy in November last year. So if the world's biggest pension fund is moving in impact and a G7 government is creating a dedicated office for it, that kind of seems or feels seismic, or am I overstating that? You're not.

And I'm I'm smiling as I'm hearing you say this, because Japan holds a special place for me in many ways, but in impact investing, the Japanese banks were our largest and among our earliest investors in the first public markets fund we did in impact. But and that was almost 15 years ago. And in those days, most of the reaction you heard in, not surprisingly, in Japan was impact. What's impact?

And then once we explained it to them, they were they were readily able to understand it. And they rebranded our fund as the better world fund. I remember seeing a full-page ad in the Nikkei newspaper that showed two hands lovingly holding the world and to advertise the better world fund. So they got it and they they marketed it to a very welcoming audience of retirees and of wealth owners in the country.

And so it's, you know, we were talking about brands. It's not all about marketing. And two other stories quickly. One is since since there wasn't much land-ground impact, there was one company that did get this.

It's they took dilapidated houses in rural areas where they were depopulated, the towns were disappearing, villages were disappearing. And for a very low price, they would buy it from the kids of the original owners who now live in Tokyo or Osaka. They had a system for rehabilitating these buildings. And by doing that, they provided first-time homeowners a possibility of owning a home and revived some of these villages.

When I met with the CEO and I described why that was impact and what I would care about besides their return, he found that intriguing, but completely foreign. And I'll tell you now, when you look at their impact report, they understand what they're doing beyond just their return. Similarly, a global pharmaceutical company in Japan, I didn't know them at all, but we were invested in them. And the CFO linked into me.

And he sent me this text that I got in the middle of the night because it's Japanese time, and said, I just learned that we're an impact company. That changes everything I think about my company and my career. This is a CFO, all excited about his company being a solution to big problems. And they are that.

They definitely are that. And so it's interesting that sort of free from politics, and it's just about doing the right thing and earning a return while doing the right thing, which is, after all, what impact investing is supposed to be. Simple. So that's Japan.

I think it's really moving ahead. And I think you're right about Europe and always clearer and clearer regulations and standards, and more and more money going into these initiatives. And so, really, it's only the US that makes me sad about impact investing. And that'll change.

So there's one detail, though, that caught my eye. The GPIF said explicitly that it does not make investments solely for the purpose of creating impact. That doing so would deviate from its fiduciary duty to the sole benefit of the insureds. So it sounds to me like they're trying to walk a very careful line, you know?

I don't think we know from finance that if you have markets of some thousands of companies, you're never going to own all the companies in the index, right? You're owning a representative sample and you're maximizing your return in doing so. So if you're going to own the index, or if you're going to have a fund, you're not going to own the index. You're going to own the ones that will give you the best return.

And you may as well invest in a subset that is doing good instead of doing bad for the economy. I don't know how GPIF is defining their investment process. But I think it's completely in reason to think that they are uh maximizing returns subject to only only that major subset. I mean, only not half, but close to half of the index that is aligned with a better world.

But when a $1.8 trillion pension fund says it's doing an impact, what does that mean for fund managers and deal flow on the ground? It depends on how they do it. I mean, I I don't know.

They can't do that much in private markets, for instance. So they're going to find a way that they will do it in public markets. And I hope that given that Japan embraced our approach 15 years ago, that that's what they have in mind. They know that it's possible to do that.

And it just means investing in that segment, that significant subset of the index. You're not going to be buying coal companies, but they don't need to be. You're going to be inviting investing in the innovators of things that are productive, productive in a social and environmental sense. I don't know many pension funds at any level who've taken this step with this kind of level of explicitness.

In fact, I'm not sure I know any of this scale. Is this the beginning of some kind of a wave, or do you think GPIF is an outlier? I think it's a slow, let's call it a swell rather than a wave. But I I think that it depends on how they're defining it.

And I think that it is an enormous step forward. And in fact, they're coming up from behind compared to a lot of European pension funds who have these kind of standards already. So let's let's see what the definitions are. But I think that it's a very big important indicator.

And Japan may be behind Europe in this, but all of Asia, with all of its assets and fast growing assets, is further behind, for the most part, is further behind Japan. So there's a lot more to go. And so I think we will, yeah, I think it will be, maybe it will become a wave if it's only a swell right now. Now I want to move to the next segment, which I call in show me the numbers moment.

So there's a related trend I want to unpack. The data from US CIF shows the primary drivers behind sustainability and Are now firmly rooted in investment fundamentals, client demand, risk management, and long-term returns, not impact for impact's sake. And some numbers that jumped out at me was fewer respondents prioritize delivering positive impact compared with the previous year. And asset managers are appropriate approaching climate and biodiversity with a focus on measurable effects on cash flows, valuations, and the cost of capital.

So I want to steel man both sides again. Is this maturation meaning you know the field's growing up and speaking the language of capital markets that it always should have been speaking? Or is this dilution and the field losing its soul in order to get comfortable sitting at the big tables? I don't think it's the latter.

But I tell you, when we started 15 years ago, we had a universe of 300 companies in the public markets that we considered to meet the standards of an impact investment. And by the time we were at BlackRock, that number was more like I don't remember, but I think 800, 900. There were so many choices that you had to make in public equities of a certain scale. So there are many smaller companies, but of big public public companies, there were almost a thousand you could invest in.

So at this point, you really can do it right. If you had too small a universe, you can't you have to be invested in, you know, a significant fraction of them. But now you're only investing in those that really have the metrics of performance. And that's great.

I don't think, I don't think anyone's faking it. It's just a standard maturation. And it speaks well for the industry. I think it's good.

And I think one of the reasons I thought people fudged it and would put stuff in their would put investments in their funds that didn't really look like impact investing to me was because they didn't have enough of a universe to invest in. Now there's a plentiful universe. I mean, the whole expansion of energy storage and modular nuclear that are part of the range of things that an impact investor would invest in rather than just not always commercial wind power. Now wind power and solar are all commercial.

And there's a full range of other sorts of renewable or otherwise green investment on the planet side. And so I think when I look at what funds are investing in, there's just a lot more, and it's a lot more credible. So the industry's growing up. Yeah, I think so.

I don't see anything bad about it. You can you Scott, you'll probably have an example that will make me think, oh, well, I was kidding myself. But I don't that comes to mind. You know, I always take the opposite side where I just feel like there were people taking advantage of things, and that actually, I don't know if you want to call this a purge, but this pushback has that, you know, rather large pushback has been good overall, I think, because it's pushing the people who weren't serious about this out, and I think it's forcing the industry to mature.

And like I always say, this is that no one had to ever stand up and create a whole bunch of decks to convince people that getting high returns is a good thing, you know? And that's the basis I think if this is actually something that's a better way to invest, then we should articulate that in a way that people understand that this is a more responsible and better way to invest, and that includes financially, because in the long term, you have real risks there that aren't being quantified if you're investing in the old ways.

So it sounds like you're going a step further than I'm comfortable with. So I know that. Which brings me to my next one. I don't think it's a better way to invest.

I mean, I I don't think, for instance, if you wanted to invest in healthcare for rich people, that's fine. That's a need too. But you can invest in healthcare for underserved populations and make money also. I don't think you make more money one way versus the other.

And my inclination is if I'm gonna invest in healthcare for the 300 million in the US rather than the 50 million who are who are well off, that's probably a better proposition. But maybe it's not. Both are good in terms in financial terms, and I have more interest in the the mass services that are less provided. So it's not good or bad.

It's all about choice. And impact investing should give choice, and the returns should be similar. I mean, I had a decade of what we refer to as alpha returns, returns over the index, and great, but my old fund at Wellington has had subsequently, since we left, the last five or six years of returns under the index, a negative, negative relative return. That's not good.

I knew it was always critical that we have that we provide alpha, or we wouldn't have the growth if we wanted. So, you know. Yeah, but no one fund, whether it's an absolute return fund, is always exceeding the market, right? But you know, markets go up and down, things change.

You want to be able to see overall that those returns look like the returns of conventional or non-impact funds. And I think we have that. I think that is the truth of the data that's been shown for the last decade. And I'm I'm relieved that that's the case.

And the point I was going to make is that you've always been taking the position that you don't need promise of superior returns to justify impact. You've said the last time you want to be invested in these good things. If you want to do that, join us. But not because you get a superior return.

We're professional investors, we're going to give you comparable returns. And that was what you said the last time. I looked at the transcript. Has that message gotten easier or harder to deliver in 2026?

So 23 and 24 were terrible years for everything around earlier stage companies and companies invested in green technology. And yeah, those are the two areas. And so those were big areas for impact investing. So we had, after all these years of doing well, we had two bad years.

And so 2026 is coming just on the heels of that really bad period. So what does it look like now? I don't know. I don't know if the messaging is harder or easier, but I think if we get back to something like normal, where the returns on average look like the returns of the non-impact funds, I think it will get easier.

Has there been any conscious shift in how CIF positions itself to LPs? You know, is financial materiality the way you lead the conversation now with impact as a secondary? So SIF is different because the investors there are guide in the wool, save the world, emerging markets investors. So if I'm talking there to a Dutch pension fund, I don't have to convince them.

I want them to understand that I'm a professional investor and therefore they should get a good return. But underlying all that, they care about it being a fund that's going to be aligned with their social goals. So it's different there, but it's probably not different at Wellington or BlackRock. They want financial return and they will question that.

And they'll want to know the fund manager and what that record is. All right, let's move on to climate adaptation as the new investment frontier. Morningstar's 2026 outlook identifies climate adaptation as one of the top sustainable investing trends to watch. And the numbers are starting to get real.

Boston Consulting Group estimates the adaptation and resilience market could reach between half a trillion and $1.3 trillion by 2030. World Economic Forum report showed that every dollar invested in climate resilience yields more than $10 in economic benefits and natural catastrophe protection. Now, I recently ran an episode with Alina Trina on climate adaptation VC in Southeast Asia and was one of our top velocity performers in terms of downloads, which tells me the audience is hungry for this.

But Morningstar also flagged that adaptation faces multiple challenges, uncertain cash flow, long time horizons, fragmented markets, lack of standardized disclosures. So is climate adaptation genuinely becoming investable at any scale? Or are we still in the this is interesting but early phase? Oh, it's good that you mentioned Alina because you had asked me to be ready with which of your recent podcasts I really liked.

And I I did like hers. And this whole climate mitigation, adaptation, resilience, all that. I thought it was interesting. I mean, really interesting.

And I think she's one of these investors who questions everything. So she was talking about questioning the 2%, 20% model. I like that investment structure. She questions it all, she is really focused on investing, being catalytic, all great stuff.

Now, that doesn't speak to the question of whether it's gone mainstream, because I don't think it has. I think that it's going to become more and more so. And some of that is because it's a little late in the game to be finding solutions. We missed our 2% or 2 degree or one and a half degree, whatever you want to rely on limit.

We're in trouble. And so it's now it's too late and the oceans are going to rise. We better figure out how to deal with oceans rising. Yeah.

How to adopt. Um how to deal with millions of refugees coming from elsewhere. So it's naturally going to be higher profile now. But the question of investability, I think, is still yet to prove itself.

And it's sort of like when we started impact investing, and you could do onshore, it wasn't even a term onshore or offshore. You could do wind, you could do solar, and there weren't all these other flavors of renewables or green energy. And now they're in lots, and now they're all the users of green energy, like electric vehicles and the Chinese electric maritime investment. And so it's going to become a thicker market.

It's going to become a more interesting market, but I don't know when. If I'm right, agricultural productivity is about 40% of Western European levels. You told me the last time we spoke that climate adaptation isn't abstract there. It's about whether or not crops out actually survive.

How does adaptation intersect with what you're building? So in Eastern Europe, the efficiency is much, much lower than elsewhere, by the way. So it's low-hanging fruit, no pun intended. Um and so it's very investable.

And there are things like just companies that take greenhouses, you know, in southern parts of Europe where the vegetables swelter and then they shrivel and die and give them automated watering and fertilizer. So the climate in those greenhouses is always appropriate. And the crops do well. It doesn't take much.

And it pays for itself. I think, I think it pays for itself in 18 months. So it's fantastic returns, and you can find it lots of ways. And is that impact investing or has huge impact and it has environmental as well as social and economic benefit?

It's just a good investment. And that's one example of so many things that are like that. But insurance costs that are driven by climate risk are outpacing almost every other cost for commercial operations. At some point, does the economics of adaptation just simply override the politics, regardless of what anyone calls it?

Trevor Burrus, Jr. Already happening in a big way. But whether it's investable to asset owners is a question. I mean, it's investable to homeowners who have no choice but to protect their property from wildfires.

And it may come to be an investable thing for the insurers, but right now it's mostly just a headache and mostly a concern that they'll be regulated away from being able to respond to it. But it it's entering into every aspect of our economy. We can't avoid it. And there'll be great investable opportunities.

They're just, like I say, they're in different niches. There'll be undoubtedly insurance companies that come up with clever ways to incorporate this, better ways than just shutting down in certain western states and not offering their product, which is one solution for individual companies, but it's not a social solution. All right, Eric, we covered a lot of ground here. I want to close with some quicker questions.

I usually call them rapid fire, and then I let you talk for 10 minutes. So let's see how disciplined we can be. But looking at everything we've discussed today, US retreat, the vocabulary purge, USAID gone, pension funds moving in, financial materiality shift, climate adaptation emerging. If you had to place a single bet on where impact investing will be most transformed five years from now, you know, what's your bet?

So I think I'm the most transformed in climate, only because we've had such a big setback in the last year and a half. And in if you give me a five-year horizon, it's gonna be just zooming out of the gates, even in the US. And the US has so much of the technology, and then the rest of the world will continue to be pushing those frontiers. Any particular aspect of the climate investment that you see as being vastly the winner in that space?

Oh, when you say winner, do you mean for the investors in it? Either attracting capital or providing the best opportunities from investors. Well, I can speak about attracting capital. I think that infrastructure in so many different domains will be gratified.

And we're we're seeing it now. We're seeing it in transportation, we're seeing it in energy, in industry, and so we're gonna see it in in virtually every domain. And the way to know that is to see that it's happening everywhere else in the world except the US. You've been in the space long enough to have seen the hype cycle, the backlash cycle, and now whatever the hell you call the current cycle.

What's the thing that worries you most about the trajectory of impact investing right now? Well, I guess I guess fear, but it's not fear of impact investing or even of ESG investing, but concern about returns, concern that investing in emerging markets is super risky. Even it has risk, and therefore you get a bigger return in many cases. I think um it's fear about unknown technologies, concern that the returns won't be there.

And that doesn't fix itself until there's more proof of concept. And that'll come only with time. But unknown technologies, I mean, that's what the entire tech VC world is about, no? Yeah.

But I've always said that people are more ready to invest in the sexy thing at home, call it AI, for example, than the powerful economic forces that are not at home, that are further away, that things for as we head toward needing to provide goods and services for people to live healthy long lives. You know, if you have a 30-year-old analyst, he or she, usually he is not thinking about what old people need. And guess what? Population is moving more and more toward old people and their needs, and they do have the wherewithal to spend on it, and that thing will become a bigger and bigger investment imperative.

And what gives you the most trajectory of impact investing? I guess that that Europe wasn't killed off by this, and your story about Japan is a good one too, that it's it's still plugging away despite the barriers, and that we're still seeing the for renewable energy fall, and we're still seeing innovations in healthcare that are going to make our lives better. So I'm a huge technology optimist. And if you are one, then you can't help but be excited about what's coming.

The last time you told me that Sir Ronald Cohen's book, it's titled Impact Reshaping Capitalism to drive real change, was going to stay relevant for a long time. And I joke that maybe Netflix should turn that into a series. Is that still the case? Or have we moved at all closer from billions to the trillions he talks about for impact?

So the thing about Ronnie is that when he first says something, I, who'm a fan, kind of roll my eyes and think, oh my God, he's going too far now. And then a couple of years later, I realize, nope, he is right at the beginning of this new wave. And I think that's true here, because his his the discussion is book is about mainstreaming. It's about every company having to be aware of its carbon footprint, of impact beyond just financial returns.

And lo and behold, companies are doing this. I mean, the the companies that you think of as being the most mainstream and mainline kind of companies are now taking moves to make sure they are the companies of tomorrow. And so it is going mainstream. Also, we can see that measurement of impact is getting better and getting less burdensome for the companies.

And that's another thing that that Ronnie talks about in his book, is that we have to have systems that are usable. And he and collings have put forward some of them. We're still not there yet. It'll get more streamwear and more usable.

But you need that out there so that people can tell when there's company A and company B, and they make the same product, but one is a polluter and one is a good employer. You know, you can tell those things. Well, before we wrap. You mentioned about the different SRI 360 episodes you listened to over the last year that caught your attention.

Were there any others that surprised you, provoked you, or you vehemently disagreed with? I didn't think he hear anything I vehemently disagreed with. But what I found really interesting was the one with Nick Hurd. I mean, you know, in some sense, any time there's this life well lived, public service and a long career in different parts of finance, including impact.

I mean, that's catnip for someone like me. And also to have hung out with the giants of the first days of impact investing, like Ronnie Cohen, but but many others. That's encouraging, inspiring, and you want to keep that kind of person in the mix for as long as possible so that you get their wealth and experience. I constantly tussle with my producers because they're saying get into the meat and all this stuff.

And I always take the long interview approach where I really want to find out how they got to it, where they're at, and what were the things. And some of these stories are phenomenal of the early days. And you know, Michelle Giddens, you know, great story, and she was like, Oh, I could never talk that long. And it was a really super uh interesting story, and Rocus Momart's and there's so many of these, and like you say, Sir Ronald Cohen.

I mean, they were there in the early days, they're the ones who made it happen. And interestingly, since nobody knew what this thing was gonna be, I mean, true for me too, people how do they get there accidentally? And and impact investing, whatever it was called early on, opens their eyes and and to a realization that you can do things differently. We used to have aid and finance, and now we have impact investing, which is very different, and which, interestingly, along the lines you you were asking me about, takes some of the pressure off of aid because there are lots of areas that the markets can take care of.

And who knew that? I mean, as an economist, I was trained to believe that, but I didn't really have a way to see that before that these problems of poor people could be solved by companies and by markets, and now we know they can be. I think it's great to have the time for people to actually talk through how they got there and actually fully talk through these concepts, you know, because so much of the financial media is like machine gun, give it to me before we got a break for sponsor here or something like that.

So all right, anything else that we wanted to talk about before we wrap up here? I look forward to the future episodes. Eric, yeah, thanks for coming back on and doing this again in three episodes in. Maybe we'll do this more regularly.

Just like Larry Fink's letter, except you'll actually mention climate change. Maybe I will. All right, if people want to follow all the great things you're doing at Seif, just tell everyone about your websites or where's the best way to follow what you guys are doing? It's CIF.

com. It's easy. Well, because French people will say, oh, C I F, you know. Okay, so it's seaf.

com. And uh if anyone wants to reach out and connect with you, where's the best way to do it? Or how's the best way to do it? By LinkedIn.

We'll flash your URL and put it in the show notes. Okay. All right. Thanks again, Eric, for coming on.

That's a luck. Take care. Thanks, everybody. Goodbye.

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