Afsaneh Mashayekhi Beschloss, RockCreek Founder & CEO, explains why climate change has become a big investment opportunity during the pandemic.

Video Transcript

JARED BLIKRE: Is climate change a potentially big investment opportunity? For that, we're going to be joined by Afsaneh Beschloss. And she is the Rock Creek founder and CEO. Also I want to note that you were previously Treasurer and Chief Investment Officer of the World Bank.

So I know, at your firm, Rock Creek, you manage about $14 billion in green initiatives on behalf of foundations, endowments, universities, and pensions. So what do you like in this space? I know it's a very broad space. But what do you-- what do you like in the space right now?

AFSANEH MASHAYEKHI BESCHLOSS: So Jared, I think, having invested in renewable energy since-- I won't give you too much detail, but at least since the late '80s, this is probably one of the most interesting times to be looking at this area as you well know. It's gone through different cycles where it was not a particularly interesting area for people. In fact, we had a climate summit recently.

And Britt Harris was one of-- is the CEO/CIO of the largest public engagement in the country said the last 10 years were still hydrocarbons, the next 10 years are renewables. And when you hear that, you realize that-- the impetus for investing across renewable energy, whether you're looking at solar, wind, whether you're looking at other forms of energy efficiency and technology that will improve our use of energy, it is becoming much more mainstream today.

AKIKO FUJITA: Afsaneh, what is the conversation that you were having with some of these foundations, universities, in terms of where they want to put their money behind? Obviously you're investing on behalf of them. But we've seen a real growth here in conscious investing and why, specifically, they're looking at the ESG space. Talk me through some of those conversations and how you've seen that evolve.

AFSANEH MASHAYEKHI BESCHLOSS: So Akiko, I think what is happening is that you would see, in universities specifically, right, or in many foundations, you would have people on the scientific side who were talking about climate change. On the endowment side, you did not have necessarily the same conversations until recently. What has changed-- and I think COVID expedited it and augmented the speed of change on ESG investing-- is if we look in the last 15, 16, 17 months, whether you're talking about education and the intersection of education with technology, whether you're talking about health sector and all the developments in biotech, whether you're looking at affordable housing, and then specifically, of course, on climate-change-related investments, these are all areas that have exceeded, in terms of returns, the traditional form of investing.

So what you have had is, whether you're investing just in ETFs or you're investing in private investment, the returns, across the board, on many ESG areas have been equally competitive if not exceeding traditional investments. And that's why your endowments and foundations are now not listening just to the scientists, but also looking at the highest return potential and much more interested in these areas.

AKIKO FUJITA: Beyond ESG, I'd love to get your take on emerging markets, which I know you've been focused on for some time. I read a recent interview where you said you can't not invest in China. And yet there's a lot of talk over the last few months among longtime China bulls who've said that the environment has shifted because the risk isn't necessarily on the west and the regulation anymore for Chinese companies, it's about what's happening internally, particularly with some of the high-growth names. I wonder how you're watching that discussion play out and whether your thesis on China has shifted at all.

AFSANEH MASHAYEKHI BESCHLOSS: So Akiko, I look at it a little differently. I've been involved in the China dialogue probably since the 1990s, again, as you kindly suggested at the World Bank where we were investing across the board, but including with companies in the energy sector and renewables, but also broadly working with them in the finance area and in startups and other areas. The very interesting thing that is very important to look at historically is that China, over the last 20 years, had the highest growth rate of any country any time in history.

Now, looking forward, putting aside geopolitics, putting aside all the other conversations and some of the points you just mentioned, we don't think, at Rock Creek, that the next 10 years or the next 20 years will be the same growth rates in China as the last 20 years. You just cannot have that same path. So that is one factor that is important. Two, there will be a lot of shifts. Again, putting, for a second, the geopolitics and the regulatory conversations that are going on.

The point is that the population in China now requires more education, more health, more-- you have an aging population with major issues related to that. So the government, as you see, is really concentrating on maybe bringing in more equitable type of services across a bigger set of population. That might mean not the same rate of return as you saw before.

Now, if you add to that the geopolitics that are going on, you see very much that China is huge and, you know, one of the biggest markets and biggest sources of growth in the economy. It still will be very important. And so you will-- you know, it will be a very delicate balance.