Marisa Drew, Credit Suisse
“The impact investment industry reminds me of the early stages of when we were building the leveraged finance asset class in Europe. There’s a desperate need for capital that requires new forms of investable structures that can unlock institutional money in size,” says Marisa Drew, who in September moved from her role as co-head of investment banking and capital markets for EMEA at Credit Suisse to run the bank’s new impact advisory and finance department.
If there are similarities between the two sectors, Drew should know – she played a key role in developing the international leveraged finance market.
When Credit Suisse’s chief executive Tidjane Thiam asked Drew to take on the newly created department, Drew says she was initially surprised, because of her investment banking background, but then realized it made sense because of her experience in the capital markets.
“There’s a need to look at the impact investing market through a lens of creating new structures to solve problems on a larger scale than is currently happening,” she says. “Tidjane has publicly said that he considers impact investing to be strategically important to the bank.
“We both believe this sector will play a part in the future of financial markets and, in this context, it makes perfect sense that Credit Suisse wants to take a leadership position in driving this sector forward, given our history of innovation in the financial markets and our role as stewards of our clients’ capital in the private bank.”
That Drew’s role has a direct reporting line into Thiam, instead of being embedded within another division such as corporate social responsibility, suggests that the Swiss bank is taking this initiative seriously. It has not gone unnoticed by the banks’ clients and peers. Drew says that many people have called to ask what is happening.
“There’s a curiosity for sure,” says Drew. And she thinks the timing is right. The pressure is on mutual funds and pension funds to include impact investments in their portfolios. Limited partners in the private-equity sector are also pushing for change she adds. In the wealth sector, millennials are encouraging their parents to invest more sustainably and with a positive impact, while they themselves are planning how to invest their inheritance sustainably.
“Add to this the increasing wealth divide we have globally in terms of the ‘haves’ and the ‘have-nots’, and societal trends like climate change, and it’s not hard to see that the time for impact investing to fully scale up is now,” says Drew.
Drew’s role is to look across asset management, the markets business and private banking and to set the direction for impact investing within each business. She says the heads of the individual business lines have been encouraging.
“I think it’s something we all want to build out together, but up to now it’s been difficult for the business lines to take that on. I can take that off their hands and also work with them to develop their businesses along impact investment lines.”
Drew's first job has been to establish the extent to which impact finance and investing is already happening at Credit Suisse, and she says she has been excited to see how much the bank already does.
“I didn’t want to oversell something without the substance to back it up, and so I was pleased to find out how deeply impact [investing] is in the firm’s DNA.”
She points to the bank’s footprint in microfinance with impact investment firm responsAbility Investments, which is one of the leading asset managers in the sector and was co-founded by the bank 15 years ago with five other Swiss financial institutions.
Credit Suisse and responsAbility have joined efforts to structure and distribute innovative impact funds, in particular in microfinance. The bank has also developed in-house several microfinance products, including three local-currency microfinance notes.
Within the bank, Credit Suisse partners with student loan provider Prodigy Finance. That relationship began three years ago with the launch of the first-ever education note, aimed at providing financial access to higher education, particularly for students from the developing world. Six such notes have now been issued, reaching an aggregate size of $150 million.
In Asia, Credit Suisse partners with Singapore-based bank UOB in a joint impact venture investing in early-stage funding for positive impact companies.
In the environmental sector, Credit Suisse and Althelia Ecosphere launched €15 million of nature conservation notes in 2014.
Credit Suisse was also one of the founding members of the Coalition for Private Investment in Conservation (CPIC), which brings together 40 different players across conservation, including investment intermediaries, development banks, lawyers, consultants and traditional commercial banks.
The list goes on: there was the first climate-neutral real estate fund, the first green property fund focused on Switzerland and the first municipal green bond for the Canton of Geneva in Switzerland.
"I get excited about the potential of slicing and dicing risk, so that in an impact financing project ... different tiers of risk can be included to cater to different investor appetites"
“Other in-house impact products are currently under development, among which is a first-of-its-kind affordable housing note focused on emerging countries,” says Drew. “There’s a lot being done that we just haven’t talked about in a collective fashion.”
The second step in Drew’s new role is to set the direction for impact finance and investment more broadly. In asset management, for example, Drew says her ambition will be to add to the suite of opportunities for institutional investors in both environmental, social and governance (ESG) investing and impact investing.
“We want to be able to offer the best-in-class opportunities in the responsible investing space, so we’ll be working on screening and tracking, and creating bespoke investment alternatives.”
In the private bank, Drew’s team will be looking to add to its offering to allow family offices and high net-worth individuals to invest in line with their impact ambitions. This will include bespoke advisory services for impact investments and working with Credit Suisse’s foundation, NGOs and philanthropic clients to develop specific structured finance solutions.
In capital markets, Drew says her team will be looking to create innovative financing solutions geared to both institutional and private clients. She points, for example, to developing blended finance or securitization structures.
“I get excited about the potential of slicing and dicing risk, so that in an impact financing project, for example, grant money could take the highest risk and different tiers of risk can be included to cater to different investor appetites,” says Drew.
She says such creative structures would be one way to “crack the impact investment code”.
Drew says: “It’s not revolutionary. We’ve done it in many sectors before.”
For example, the bank arranged $750 million of senior secured SPV notes for a subsidiary of Liberty Global (UPC) in February 2012 that sat side by side with bank debt and allowed institutional investors for the first time to sit pari passu with secured bank debt, attracting a new class of secured investors. This is now a standard market structure, but then it was a true “first”.
“These structures became mainstream, but they were small, edgy and niche at the time. At heart, these were driven out of responding to issuers’ needs while having investor appeal. When I think of impact finance, that’s where I think we are heading. I think there is a strong need for capital markets expertise.”
Some things are already being done. Drew highlights the success of social bonds such as Social Finance’s pay-for-success programme aimed at creating permanent supportive housing for a homeless population in Denver – saving the city millions of dollars a year and providing a long-term solution for at-risk communities.
“It’s not hard to see that kind of solution can be scaled up,” she says, and such deals are woven into the fabric of Credit Suisse, she adds. Collaboration will be key. “We’re looking to partner up, and feel that is the best way to come up with solutions that can begin to tackle this annual $3 trillion-plus gap in social and environmental finance that the UN has highlighted.”
It must have been a wrench for Drew to leave the investment bank – and not an easy decision for the bank to move her away from a market on which she’d certainly made her own impact.
On leaving Wharton Business School, Drew joined Merrill Lynch’s leverage finance and restructuring group in North America. It was a young business, but the explosion of mobile telephony and cable licenses in particular made it ripe for rapid growth.
“It was apparent there wasn’t enough equity in the world at any reasonable cost of capital to finance the owners of these new licences, and thus there had to be some sort of debt layer which was flexible enough to allow for early-stage companies to reinvest most of their cashflows into building their business (versus for servicing debt). Leveraged finance was forgiving capital in that sense and worked perfectly for the telecoms boom,” says Drew.
From there she went on to putting together leveraged finance deals in emerging markets, helping to build one of the first mobile networks in Colombia and raising capital for the first cable operator in eastern Europe before the Berlin Wall came down.
“When you think about how impact investments are about getting capital to where it can be deployed in a way that can meaningfully change an economy, then you can see the fundamental similarity with the early days of the leveraged finance market,” says Drew.
"From nothing 17 years ago when I moved to Europe, we now have a thriving $600 billion leveraged finance market. It's something I'm proud to have been part of."
In 1999, Drew moved to Europe to help build a leverage finance business for Merrill Lynch there.
“There was a lack of clear definition of what high yield was at the time and a negative bias that it was kind of a fringe market – similar to what impact investing has witnessed,” says Drew. “European issuers initially thought junk bonds were bad; it took a lot of effort to educate people around the power of leverage to generate shareholder returns and efficient capital provision.
“At that stage, both issuers and investors had yet to fully embrace leveraged finance, and the deals getting done were small and highly concentrated in one industry sector, and liquidity in the market was limited.” The lack of diversity in the leveraged finance sector became acutely apparent in the early 2000s – it had been largely comprised of telecoms and media.
The concentrated risk hit investors hard when the telecoms bubble burst in 2000. Drew was offered an opportunity to help rebuild the sector in a leadership role, and in 2003 she joined Credit Suisse to head up its expansion in leveraged finance for corporates. Ultimately she took over equity and debt capital markets and structured products, initially for the EMEA region and then globally, finally assuming leadership for European investment banking in 2013.
Rebuilding leveraged finance in 2003 was to be another challenge in growing a new market – one driven out of necessity. Drew’s role, therefore, was to diversify the asset class across sectors and geographies to create a broader, deeper and more liquid market.
“From nothing 17 years ago when I moved to Europe, we now have a thriving $600 billion leveraged finance market. Whole new industries like the cable sector emerged from that growth. It’s something I’m proud to have been part of,” she says.
Willingness and momentum
Now she has a new challenge and, she hopes, a new opportunity to create a market. Drew says she has been pleasantly surprised at how open the finance industry and other sectors have been when it comes to working together.
“At nearly every meeting I’ve had so far, people have recommended another three people to meet. I’m engaging actively with non-profits, foundations, peer banks and other financial institutions.”
That is certainly a change from the more competitive capital markets environment she is used to and Drew says it’s encouraging: “I’m new to the impact investment industry of course, but it feels like there is a lot of willingness and momentum to bring this to scale. And personally I’m excited to be part of another challenge.”