Neeraj Aggarwal began his career in asset management working for Macquarie Group and Rothschild & Co. But in 2014, he took a job as program director at the Michael & Susan Dell Foundation. There he established a $60 million impact investing platform and later led the Rebuild Texas Fund, which provided aid to 2 million victims in the aftermath of Hurricane Harvey in 2017.
Seven years at the foundation fueled Aggarwal’s passion for making a difference. So, when he returned to Australia in 2022, he prioritized working with a team with “true credibility” in the impact investment space. Aggarwal joined Australian Impact Investments as associate director in February 2022.
Here he talks about his role at the Sydney firm, what it takes to succeed in the evolving field of impact assessment, and why “impact DNA” is top of his list when it comes to recruiting candidates.
Shannon Houde: Impact investing has evolved a lot. How do you define it?
Neeraj Aggarwal: The definition of impact investing is now so broad, it takes on many different interpretations depending on who you talk to. I think the best definition is from the Global Impact Investing Network. They say that impact investments are made with the intention to generate measurable social and environmental impact alongside financial returns. So, what separates it from philanthropy is that expectation of a financial return back to the investor.
There [also] needs to be tangible and measurable impact. There’s a lot of greenwashing, or impact washing, with funds or companies saying that “we’re generating impact” or “we’re sustainable” [without measuring their impact]. But what really defines impact investing is that measurability. Does the company or the fund have a measurement framework in place? Does it measure its outputs? Do the outputs link to outcomes, and are the outcomes linked to a theory of change?
What really defines impact investing is that measurability.
The degree of impact can vary between different investments; it isn’t necessarily a binary classification. In fact, the industry now uses something called the Impact Spectrum, which has three classes of impact. The first, A, is to avoid harm; B is to benefit people; and C is to contribute to solutions. Part of what I do on a day-to-day basis is go through investment portfolios, and assess assets according to A, B, and C.
Houde: Tell us a bit more about what you do on a day-to-day basis.
Aggarwal: I work with clients and review their entire investment portfolios — not only the small portion that might be allocated towards impact investing. From that portfolio impact analysis, I produce a visual for our clients that shows them their market risk and ESG exposure and prompts them into action.
Second, I conduct due diligence on private market investment opportunities. That involves evaluating funds and direct investments for impact, risk and return, in social and environmental investments.
For example, I’m working on one right now called the Energy Transition Fund, which invests in technologies that will enable the transition to net zero. We’re going deep and understanding the assets that make up that fund. We’re understanding the risk profile; we’re digging into the financial model and understanding the return profile. We’re interviewing the team and industry consultants to understand whether the fund can validate their impact and also doing desktop research to understand how industry practitioners and academics are thinking about the transition. We’ll produce a full, comprehensive due diligence report, which our clients will then use to make their investment decisions.
Houde: What are some of the biggest obstacles you’ve faced in progressing your career?
Aggarwal: Impact investing is still very new. The term itself is only 15 or 16 years old. So, the reality is that most organizations with their fund managers or traditional institutions are still trying to figure out what impact investing is. They’ve all got their own definitions for it and when they’re hiring someone, they don’t always know precisely what they’re looking for.
But it’s an opportunity as well because you get to define the role for yourself. That’s what I ended up doing. To find the job you want, that fits your flexibility, that fits your skill set and your values, you must be crystal clear about precisely what you’re looking for.
Houde: For those who are interested in getting into the impact investment space, is it possible to do so without a financial background?
Aggarwal: Yes, absolutely there are opportunities. There are two halves to the role — investment and subject matter knowledge. To be in a front-office investment role, you may need to have that financial background. But I’ve also seen people overcome a lack of investment background with their industry or subject-matter knowledge. With the Energy Transition Fund, for example, neither of the leaders have an investment background; but they have a huge amount of experience in battery storage and hydropower technologies.
It’s why you wanted to enter into the impact sector and your lived experience.
On the asset owner’s side, my side, we only have two members of the team with an investment background. My colleague, who leads due diligence, started off as a sports scientist, then worked as a wealth adviser and progressively built up his skill base and has transitioned to leading investment research.
A fund has many additional roles within it as well. Depending on the size, it may have an impact measurement and management role dedicated to measuring the fund’s impact. It may have an investor relations role, which isn’t as technical. And there may also be founders, with startup expertise or experience. A private equity fund might look for people with consulting backgrounds, industry expertise, or people who have experience working within corporate businesses.
The impact side draws upon many of the components of the standard investment diligence process, but, frankly, that can be learned if you’re working with the right leader. What’s harder to learn is impact DNA. That’s the first thing that we look at in hiring.
Houde: What do you mean by impact DNA? And how would someone know if they have it?
Aggarwal: Impact DNA is about authenticity. It’s why you wanted to enter into the impact sector and your lived experience. For me, it took a long time to find my story. When I was in university, I interned for a rural development center at a Women’s World Development Centre in north India. I really wanted to do that work, but I didn’t have the skill set necessary to make a difference. Coming back to Australia and working in investment banking was a way to build up that skill set.
But the seed was planted in 2006, working in rural India. My faith comes into it as well. I’m a Hindu and part of my faith focuses on service and that’s really core to how I think about this work, and how I get inspired and motivated by it.
That’s my story. But different people have a different journey. A lot have been through a certain experience that relates to impact. For example, I’m working with a founder right now who has a mental health issue, which is why he’s devoting his time and energy towards a particular venture. I’m working with another founder who has lived experience of alcohol dependency and is working on an alcohol detox program and conference called Clean Slate Clinic. The way she tells her story is phenomenal.
It’s hard to quantify, but it’s about digging deep and saying, “Why do I want to do this work? Who am I trying to serve? What am I trying to serve?”