At a moment of unprecedented attention, investment and opportunity for the emerging field of ESG, leaders are asking: Who is best preparing their organization for the society of the future? Who is innovating today to meet decades-long environmental and social goals? Who is setting standards that catalyze their industry’s change for the better? Who is defining what bold and aspirational look like — and how best to advance that work in practice?
Enter NationSwell’s ESG Next, an exemplary group of investors, executives, authors, philanthropists, social sector leaders, academics, and field builders who are helping to shape business as a force for social and environmental progress, advancing — and even pioneering — the most forward-thinking and effective programs, initiatives, technologies, methodologies, practices, and approaches.
For this installment, NationSwell interviewed Lata Reddy, Senior Vice President, Prudential Financial Chair, The Prudential Foundation, about the importance of place-based impact, the power of anchor institutions, the next frontier for ESG measurement, and the importance of tried-and-true approaches alongside newer, more disruptive technologies.
Greg Behrman, NationSwell CEO + Founder: Tell us about how your personal and professional journey led you to ESG work.
Lata Reddy, Senior Vice President, Prudential Financial Chair, The Prudential Foundation: While I was finishing my first year of law school, I had the life-changing opportunity to work and intern with Bryan Stevenson, who is now Executive Director of the Equal Justice Initiative. I was in Atlanta at the time, and Brian was a young lawyer right out of law school. I spent the next couple of years working with the organization he was working with, which represented people on death row and people who had been incarcerated.
During the experience, I had the opportunity to speak with those on death row and learned how their experiences were so indicative of structural racism. It raised my consciousness and helped me understand, even as a law student, how the legal realm played a role in perpetuating these inequities, and that one day I could use my experience to address these historic and systemic injustices.
Behrman, NationSwell: How is the work you’ve been leading unique in the social impact and the sustainability field? What distinguishes you from others working in ESG?
Reddy, Prudential: Prudential started this work early, we take more risks with our capital than others do, and we stay in the work longer.
Our organization has been ahead of the curve in that we’ve thought about the work we do from an impact lens for over 50 years. Our ethos was formed in Newark, New Jersey. It’s where we were founded almost 150 years ago, and it’s where we’ve stayed, where our headquarters are to this day.
We’ve learned so much while operating in a community that has ridden so many waves of this country’s history — and that includes the good, the bad, and the ugly. We’ve had the opportunity to engage in the community of Newark, which is our front yard, backyard, all around.
Early on, the company bundled our resources together. It started with philanthropy, other cash giving and corporate contributions, employee volunteerism, and impact investing — long before anyone was calling it impact investing. We were spending the capital anyway, so we wanted to make sure we did it in a way that maximized impact. It morphed over the years, and we grew exponentially: about two years back, we had reached a billion dollars in impact assets under management on the impact investing side. And that, by the way, was all Prudential balance sheet money, so our own capital that we had invested in that way. We had doubled the size of our philanthropy, which for us is $35 million annually, and our total cash giving is more than that.
We do it in a place-based way in Newark, and we continue to be deeply engaged in a broader set of issues because we know that these systems are interacting with each other; through Prudential’s deep history and commitment to Newark residents, we’ve helped redefine the place of an anchor institution in its community. That effort has been transformative. We now have a larger set of institutions working together in a very concerted way, and so I think there’s a lot of stickiness to that and people are really taking to that, which is exciting to see.
It is a function of being the kind of corporation we are. We’re in the business of managing risk and pooling risk, and thinking about it over the long term. I think we all need to be taking more risks, and I would argue that it’s imperative for us as businesses to engage a broader set of stakeholders, and the only way we’re going to do that is through nontraditional stakeholders, and that inherently will involve a little bit of risk. It’s informed risk, or it can be, and you can mitigate the risk. So there’s the business imperative which is clearly a moral imperative for us to do more with our capital.
Behrman, NationSwell: What initiatives are you leading that exemplify your approach?
Reddy, Prudential: Somebody once said to me, and I love this phrase, people live their lives horizontally, not vertically. Systems interact, and you have to think holistically about a place.
Years ago, Prudential wanted to redefine what it means to be an anchor institution in Newark. So we did that by casting a wider net: We brought in cultural organizations, other corporations, universities; really, all facets of the community writ large. It was a core group of about six, and it’s grown since then. We commissioned some research to look at opportunities for us as anchors, to do some fact-finding around small businesses, like what would a procurement initiative look like, and the realization that if we just allocate an additional percentage of our spend to Newark businesses, we can exponentially impact the local economy.
And then it grew to a hiring initiative around hiring local Newark residents, and then living initiatives — meaning, how do we get more of our employees to live in the city and have that take hold? That approach is what we’re still managing today. It started about five years ago or so, and we’ve had some great success working with Mayor Ras Baraka; we’ve actually helped him achieve some of his goals around making sure that 2,020 Newark residents had jobs at anchor institutions by 2020, which we did — and we well surpassed that number.
That success also impacted Gov. Phil Murphy and his work with the CEO collective that our CEO is part of, especially as we looked at post-Covid recovery strategies for the state of New Jersey. So some of what we did in Newark is now a part of the state’s strategy, so we were able to grow it there.
Berhman, NationSwell: What’s your take on ESG as a framework, what’s your read on this moment? How do you make sense of the field, where are we, and where we’re going?
Reddy, Prudential: This all began with negative screening. Many of us remember the time when the prevailing sentiment was, “First, do no harm.” We avoided investing in programs, initiatives, or really anything that had the potential to cause harm.
Now, it’s moved more into a conversation where we’re mitigating risk against Environmental, Social, and Governance factors. That’s an important shift, but I’ve still yet to hear very many conversations about impact — especially around proactively and affirmatively trying to create impact in whatever we do.
I’m hoping the shifts that brought us to this current moment will accelerate us towards that. We’ve certainly talked about it in the impact investing space, where there’s an intention to create impact alongside financial returns, so I’m hoping that other players in the social impact and sustainability field will think about it as well.
Behrman, NationSwell: What are your aspirations for the field? Where do you think it’s going, and what will drive its progress, its evolution?
Reddy, Prudential: For me, the next frontier is tying it to business value, like how do we measure the impact we’re creating in a way that’s also demonstrating business value? I believe deeply you can create business value by going after societal impact, but it’s on us to prove that out. And the more we can prove it, the more baked in to our business strategy it will be. Our field will evolve when businesses make it core to what they do, rather than something they keep on the sidelines.
Behrman: How has your leadership evolved?
Reddy, Prudential: One lesson I’ve learned, which I think every leader learns, is that you can never overcommunicate. Try to communicate the same message in different ways because it will resonate with different people at different times in different ways. It’s an obvious but important one. The other thing is, leaders look around corners — that’s our job, and we get paid for it. But doubling back to bring people along is usually necessary in helping people to move forward. Helping people to see it on their own so that they have the buy-in and taking the necessary time to do that is really important as well.
I’ve found that having a “true north” for what you’re trying to get to is what has helped cut through the noise, this audience today, the messaging, so that at the core, it’s the same, and it’s based on what you believe and what you’re trying to execute against. And then on the margins you can modulate to the particular audience.
My true north is about leveling the playing field. That’s what I think about when I think about my personal purpose.
Behrman, NationSwell: What is one thing you think folks are really missing? Anything you would move people a couple degrees over on?
Reddy, Prudential: I think in some ways people are often looking for the next shiny object, the next innovation, the next disruption. That’s very intellectually exciting, but when you talk about a specific place, it’s quite often the tried and true. It’s building authentic relationships. It’s engaging the very people who know best about what’s needed, it’s about an asset framing — so not talking about the problems, but framing it all through what a community has, and the opportunities to make that even better.
Behrman, NationSwell: Who are some leaders you really admire in the space?
Reddy, Prudential: Paul Polman, author of “Net Positive” and former CEO of Unilever. I think he’s done so much for this notion of purpose, and really having purpose as a core part of your business as your brand. Under Ajay Banga’s leadership, Mastercard did some really great work, and they were very clear about the purpose, clear about the fact that change needs to be brought about through business. When you have the vision and the clarity, everything else just falls into place.
To learn more about how our ESG Next honorees are shaping business as a force for social and environmental good, visit the series hub.