This episode features an interview with Maarika Paul, Executive Vice President and Chief Financial and Operations Officer at Caisse de Dépôt et Placement du Québec (CDPQ), one of North America’s leading long-term institutional investors, with net assets totalling CA$365.5 billion and investments in more than 75 countries. They manage funds primarily for public and parapublic pension and insurance plans. Maarika is a Fellow Chartered Accountant and a Chartered Business Valuator with more than 30 years of experience in financial management. She began her career at audit and tax services firm KPMG, where she worked for 10 years. She then worked at BCE from 1994 to 2011, where her responsibilities included performance evaluation of BCE subsidiaries, financial planning, mergers and acquisitions and investor relations. Maarika was also Senior Vice-President, Corporate Communications and, subsequently, Senior Vice-President, Corporate Services. She is a member of CDPQ’s Executive Committee and of the Board of Directors of Ivanhoé Cambridge, the institution’s global real estate subsidiary and holds a Bachelor of Business Administration in Accounting from McGill University. On this episode, Maarika addresses overcoming adversity as a woman in finance, deploying new investment strategies for CDPQ with net assets totalling over CA$365.5 billion, and discusses the implementation of AI and augmentation for financial analyses in the future.
This episode features an interview with Maarika Paul, Executive Vice President and Chief Financial and Operations Officer at Caisse de Dépôt et Placement du Québec (CDPQ), one of North America’s leading long-term institutional investors, with net assets totalling CA$365.5 billion and investments in more than 75 countries. They manage funds primarily for public and parapublic pension and insurance plans.
Maarika is a Fellow Chartered Accountant and a Chartered Business Valuator with more than 30 years of experience in financial management. She began her career at audit and tax services firm KPMG, where she worked for 10 years. She then worked at BCE from 1994 to 2011, where her responsibilities included performance evaluation of BCE subsidiaries, financial planning, mergers and acquisitions and investor relations. Maarika was also Senior Vice-President, Corporate Communications and, subsequently, Senior Vice-President, Corporate Services. She is a member of CDPQ’s Executive Committee and of the Board of Directors of Ivanhoé Cambridge, the institution’s global real estate subsidiary and holds a Bachelor of Business Administration in Accounting from McGill University.
On this episode, Maarika addresses overcoming adversity as a woman in finance, deploying new investment strategies for CDPQ with net assets totalling over CA$365.5 billion, and discusses the implementation of AI and augmentation for financial analyses in the future.
Quotes
*“When I was young, I was a really shy person. Going out, and like most people, you know, if you want, you need to go out and talk in front of an audience, et cetera, that was really tough. And so I always had to push myself along the way, and I think it's particularly true for a lot of women in roles where they kind of go, you know, I'll just kind of keep on the sidelines and be a little bit quiet. You have to push yourself out there. So was that a personal challenge for me? Yes. I think I've kind of got over that, I actually enjoy doing sessions like this with you and sharing experiences and so on. But that I think was a personal challenge for me. Just pushing myself to be more out there.”
*”People need to know what their roles are, to be clear about what their roles are, to understand how they contribute to the overall organization. And that means being able to communicate regularly on what our goals are, how we're advancing on them and how their part fits into that. And that allows our people to feel valued, to feel recognized. And, that's a big part of what drives folks. And for people who manage others, it's also taking the time to understand what drives everybody. Because what drives you, Daniel, may not be what drives me. I may give you a huge raise, but that's not really what you're looking for. I mean, you'll take it. You won't say no, but you may actually want different recognition and other people are the total opposite. So it's really understanding, having that personal interaction with people, I think that's really important for us, for example, as well, it's being able to ensure alignment and closeness around our offices globally. That was one of our big challenges.”
Time Stamps
*[02:53] Maarika’s path into finance
*[06:56] Unforeseen obstacles in Maarika’s career
*[09:53] Segment: Cash Crossroads
*[13:31] Deploying new strategies when investing
*[19:53] A CFO’s thoughts on inflation
*[21:27] New tech and automation in financial reporting
*[24:40] Segment: The Playbook
*[30:41] Environmental, Social, and Governance (ESG) in financial analysis
*[38:28] Segment: The Report from the Future
*[43:52] Implementing a Chief Liquidity Officer?
*[45:02] Maarika on AI replacing people in the future
*[47:10] Viewing competitor CFOs as industry peers
Sponsor
The Invisible Vault is powered by the team at Kyriba, the global leader in cloud treasury and finance solutions, empowering CFOs and their teams to transform how they activate liquidity as a dynamic, real-time vehicle for growth and value creation. To learn more visit www.kyriba.com
Links
Connect with Maarika on LinkedIn
Connect with Daniel on LinkedIn
Maarika Paul:
I think the next generation, and we talked about this before was they need to be adepts of technology because technology's going to change the way we work. And so the next generation needs to understand how AI, for example, artificial intelligence, automation, can make their lives and their organization's lives easier, so that they can focus on creating more value and impact.
Narrator:
Hello and welcome to the Invisible Vault. This episode features an interview with Maarika Paul. She's the executive vice president, chief financial and operations officer at CDPQ. Maarika's responsible for overseeing accounting, treasury, and internal audit activities, as well as valuation activities, monitoring financial performance and applying financial governance and taxation best practices.
Narrator:
Prior to CDPQ, she spent more than 16 years at BCE in a variety of leadership roles, including in senior vice president of corporate services. At BCE, she focused on communication strategies, mergers, and acquisitions, and ESG among other responsibilities. On this episode, Maarika discusses adapting to market volatility, setting ESG targets and improving operational efficiency through automation. But before we get into it, here's a brief word from our sponsor.
Speaker 3:
The Invisible Vault is powered by the team at Kyriba, the global leader in cloud treasury and finance solutions, empowering CFOs and their teams to transform how they activate liquidity as a dynamic real-time vehicle for growth and value creation. To learn more, visit kyriba.com.
Daniel Shaffer:
Hi, I'm Daniel Shaffer, head of communications at Kyriba and the executive producer of the Invisible Vault. Today. I have the distinct pleasure to speak with Maarika Paul. Maarika, welcome to the Invisible Vault.
Maarika Paul:
Thank you, Daniel. Pleasure to be with you today.
Daniel Shaffer:
Wow. I have so many questions about your views of the market. I'd want to talk to you about what practices and tools are critical for CFOs to navigate today's liquidity challenges, but let's start with you, your journey to CFO. How does that sound?
Maarika Paul:
Sounds good. Ready for your questions.
Daniel Shaffer:
Excellent. Can you tell us why finance? What led you down that path?
Maarika Paul:
Sure, Daniel. Well, I got involved in finance because my mother who came to Canada after the Second World War, she left Estonia at that time. And she always told me to make sure that I was independent and that to her meant including financially independent and not have to rely on anybody. And so that drove all my thinking along the way. And so I figured at one point that finance was the way to go. Even though at the very young age, I loved learning languages and I thought one day it'd be nice to be a diplomat at the United Nations.
Maarika Paul:
Not that I knew what they did, but it seemed like a cool job. But anyways, that's not what I did. I ended up doing my CPA designation. And as you mentioned, spent 10 years at a big four accounting firm. First, working in audit, then in corporate finance, doing M&A and business valuations and that experience in fact taught me how to continually adapt to change with new mandates all the time.
Maarika Paul:
I spent two stints working down in Australia and then also the importance of dealing with everyone as a client. And that's been a lot of my thinking along the years. And then when I moved on to BCE after 10 years at KPMG, I did a variety of roles at BCE and each of those, when I think about it in retrospect helped me prepare for the role of CFO.
Maarika Paul:
And first off, more technical roles in performance analysis and budgeting and corporate mergers, including between Bell Canada and Ameritech in the late '90s. And so that was a lot of technical work. I then took over investor relations and later financial communications. And that helped me understand the importance of understanding all aspects of a business, because when you're in IR, you're dealing with investors all the time and you have to be able to tell the story and understand the markets on a daily basis.
Maarika Paul:
And then also being able to communicate key messages clearly, succinctly to both investors, media, different stakeholders, so that I learned in those roles. And then I was asked to take on the role of chief of staff to the CEO. And that helped me gain an understanding around governance and the politics of a large organization and learning how to focus and prioritize issues as well as influencing and managing different stakeholders.
Maarika Paul:
And then finally, my last role at BCE was EBP of corporate services and that included real estate and fleet operations of Bell Canada. And that was quite different because it was managing very large teams and learning how to delegate and manage numerous issues without actually being an expert in all of them. And that's really tough because often you want to get into the details, but when you manage a whole slew of portfolios, you can't know everything about everything. So you have to be able to hire the right people, trust them, give them the space to do stuff and know just enough how far to go into each of those things.
Maarika Paul:
So I think each of us in finance has to ensure that we're strategic partners to our business. And I think all these different roles helped join the dots to finally create the CFO role.
Daniel Shaffer:
That is an incredible result. Your mother was a strong woman.
Maarika Paul:
She was.
Daniel Shaffer:
I would like to know what was along your path. Were there any personal challenges that created maybe an unforeseen obstacle? Whether it be your interest in finance in general, or maybe an interest in international business, as you were saying, you thought one day it would be fun to be a diplomat.
Maarika Paul:
Well, if you come back to obstacles, I think I've been pretty lucky in my career in that I haven't run into people sometimes talk about glass ceilings and they talk about certain things like that. I haven't been subject to that. Partly I think you also create the environment that you operate in. I've always felt that your best calling card is always to deliver on the mandates that we give you, be open to new opportunities. Self-awareness is a really important characteristic in executives. I see it all the time.
Maarika Paul:
I head up talent management as well and it's a big part of how people are, being open to change, being open to new opportunities, learning from everything, treating people the way that they want to be treated and so on. And so in terms of challenges, personal challenges, I think when I was young, I was a really shy person, going out and like most people, if you need to go out and talk in front of an audience, et cetera, that was really tough.
Maarika Paul:
And so I always had to push myself along the way and I think it's particularly true for a lot of women in roles where they go, I'll just keep on the sidelines and be a little bit quiet. You have to push yourself out there. So was that a personal challenge for me? Yes. I think I've got over that. I actually enjoy doing sessions like this with you and sharing experiences and so on. But that I think was a personal challenge for me, just pushing myself to be more out there.
Daniel Shaffer:
Great advice. The idea of being open to change and really prepared to adapt is what I'm hearing from you. And I can only imagine what a tremendous value that is as a CFO for such a company as CDPQ. Not only is it something that is pertinent today, given the kind of geopolitical strive we're seeing, but there's always something that creates an obstacle in the road from a financial perspective, that's an inhibitor or an enabler of growth, depending on, as you said, how you show up, how you perceive it, how you react to it. That's a great segue for us Maarika. Our next section is called Cash Crossroads.
Speaker 5:
Show me the money.
Speaker 6:
Hear this Katie? Money, cash money.
Speaker 7:
When do we talk about money?
Daniel Shaffer:
And in this section, we really like to understand your views as a CFO, not necessarily for CDBQ, but what are you doing today that you weren't doing two to three years ago? What's changed?
Maarika Paul:
Well, some things have changed and others haven't in fact. You talk about the last couple of years, obviously the pandemic brought about some changes in our operations and businesses across the globe. And what it allowed us to do in fact was to test out things that we put in place, contingency plans, trying to understand how we dealt with issues like liquidity. In an asset management firm, that's one of the biggest risks we have is liquidity.
Maarika Paul:
And we certainly learned about that during the last financial crisis. And so when we looked at ourselves the last couple of years, when the pandemic hit and when the markets took a slight downturn and so on, for us, we didn't have a liquidity challenge compared to peers. We had billions of dollars of reserves and for us, one of the biggest challenges was in fact to identify opportunities as markets have a downturn that also creates opportunities.
Maarika Paul:
And so the way we had been building up a program to actually manage our liquidity was to follow it on a regular basis, be sure that we had enough liquidity to cover all of our various payments, be it on derivatives, be it on debt, et cetera, but also create a liquidity reserve to take advantage of opportunities. And so we were able to actually capitalize on that at the beginning of the pandemic.
Maarika Paul:
So that was a bit different. One of the things we did do differently and was to further improve our liquidity management was to make sure that we track liquidity on a daily basis, very closely with our risk teams to be aware, further defined roles, responsibilities, et cetera. So in terms of that, I'd say that was one of the changes. Some of it didn't change, but we further refined what we were doing. We were also able to test out things like all our technology planning, that our technology teams and our chief technology officer had been putting in place.
Maarika Paul:
All of a sudden we were working from 1200 mini offices around the globe and was our cybersecurity up to snuff? Did things work as they were supposed to? We actually saw that they did, but that again required some changes and we're still putting some of those into effect in fact, further creating solidifying or procedures practices around cyber.
Daniel Shaffer:
I imagine you had a great experience getting to know your head of IT even better ...
Maarika Paul:
Absolutely-
Daniel Shaffer:
... ensuring your practices, your people, your technologies were secure. And it seemed in that moment, as you were saying, you didn't have the challenge of being in a liquidity deficit position. But in fact, you had the opportunity to maybe stress test where you could grow. And you talked a little bit about technology there and some new practices. Do you find that you'll be deploying any of those practices to understand your opportunities going forward? That maybe you didn't have to worry about just a few years ago?
Maarika Paul:
Well, when you talk about technology, one of the things that we have done, and I give credit to our CTO on that, we obviously invest in operating companies, we invest in public companies, also private entities, but particularly on the private side, in our private equity practice, we've built up a team that actually goes in and analyzes the technology practices of the companies that we invest in because we believe that technology is a big area of growth. It also brings its challenges.
Maarika Paul:
So we have both an offensive and defensive analysis that we do of the companies that we invest in, A, as part of our own due diligence process, but also as part of the work that our operating partners do with our companies to ensure that they're able to grow and keep up with changes in technology. So we'll send in a team to actually take a look at what's happening on the defensive security side, but also what companies are doing offensively to take advantage of technology in their particular operations. So that's a new twist over the last couple of years, we've built up that practice.
Daniel Shaffer:
Oh, that's fascinating. I would imagine your ability to understand and predict where the success of a company lies, does have a lot to do with where you invest, not only because of the protection of your own assets, but that fiduciary responsibility, you may have to ensure others who are investing have the same kind of protections. So it goes a step further for you. When you're looking at technology, I wonder if we could even dive in a little bit more. Some of the technologies that you're mentioning, are they what you invest in, in particular, or are they the technologies that you use as a company to help your finance teams achieve the goals that they're setting out for the year or years to come?
Maarika Paul:
Both. I mean, we're looking at the companies that we invest in, obviously, regardless of, they're not necessarily things or services that we use, but there are an occasion, there are companies that we've invested in fact, that we then discover that they have a really great product. And we incorporate that into the sum of the work that we've been doing. We spent a lot of time in fact, over the last four years. We started this before the pandemic came around. We hadn't updated our general ledger and financial reporting systems in over 20 years. And so, A, they were becoming decrepit if one would say. They aren't being supported by the suppliers anymore.
Maarika Paul:
And we took that opportunity actually to re-look through the whole processes of our financial reporting systems. And it took us a while because there were a lot of things that over time, over 20 years, you add on stuff, you make changes, et cetera. And those things, then sometimes they bring their own challenges and you add on stuff and it just gets complicated into a big spaghetti.
Maarika Paul:
So we decided to undo all of that, solve all the issues that have been created and then implement a whole new process. We had probably about 60 applications, all told in our financial reporting process. We're down to 10 key applications now. And so that was a whole lot of work. And the final implementation stage of that took place remotely over the last two years. Just as we got into the pandemic, we were ready to start the build out of these new processes and systems. And so we did all of that remotely. We actually thought it would be a huge challenge at the beginning and it was, but we actually discovered that a lot of things that we actually was probably a lot easier for people to do remotely working from home because as you know, when you put in new systems, et cetera, there are periods when one group or one team does some testing and others do testing at a different time.
Maarika Paul:
And this allowed people the flexibility, to be on call more often, but be in their homes while being on call. So it actually, at the end, turned out to be a pretty smooth operation. But that's an example of where we've made technological changes in our own operations, in addition to the stuff we look at for the companies we invest in.
Daniel Shaffer:
Yeah. That's great. We're hearing very similar stories around the world with clients that we work with. This digital transformation process is one that especially now with COVID and the pandemic and people just trying to have a better understanding of their liquidity and what it is that they can do, whether they could take an offensive move as you're saying yourself, or do they have to step back and be a little bit more on the protective and defensive side before they can really optimize their opportunities through their operations.
Daniel Shaffer:
In fact, I just spoke with a analyst over at IDC who said that, that convergence that you're sharing, 60 down to 10 applications is not uncommon. And in fact, we heard even a larger number in the hundreds down to a small double digit number. One of the areas that people are concerned about today are how inflation is going to impact their finances. And I think inflation really changes the game, whether you're in that offensive or defensive position, what are your thoughts as a CFO? What would you guide other CFOs to start thinking about as inflation becomes a reality?
Maarika Paul:
Well, we obviously manage our portfolios, looking at some of that and because we're asset managers, I mean, one of the advantages we have is this ability to diversify our holding. And so we do have assets. Obviously, we'll make rotations in our fixed income portfolios to take inflation to consideration, but we also have asset classes that are more sheltered, shall we say, not immune to, but have better ability to deal with inflation such as real estate, depending again, on what causes the inflation. If inflation can be passed on through rents, if there's continued growth, it depends if the inflation also leads to a complete halt in growth, well then that creates another issue, as well as infrastructure.
Maarika Paul:
Infrastructure is another asset class that allows us in fact, to protect our depositors and our assets from erosion that's caused by inflation, in fact, but it's been something that has been on the minds of most people for some time now and we're seeing it being exacerbated, et cetera. And so it's certainly something that we keep a close eye on.
Daniel Shaffer:
And just to finish up on this section of Cash Crossroads, Maarika, I'm wondering if the technologies, the upgrades in your financial reporting and maybe some automation into GL, I don't mean to put words into your repertoire of technological innovation and investments, but just curious if that new technology has helped you make those shifts in a more agile way.
Maarika Paul:
Oh, for sure. I mean, part of the reason for doing a lot of what we're doing is that these processes allow us to basically automate things, be it reconciliations or controls or various tasks that are often repetitive, that have little value-add in some ways, but are essential obviously to a financial operation. To automate those, to make them more agile and allow our people to spend more time on things that actually bring greater value-add such as analysis and understanding new issues that come across or solving larger problems as opposed to the daily reconciliation process as I mentioned before.
Maarika Paul:
So we've done a lot of that. What it's allowed us to do in fact is for example, reduce the timeframe that we produce, our financial information in. We made the first progress. I was just told this morning that we've reduced for our February close, we've cut off a day in the time it takes us to close the month.
Maarika Paul:
And so we expect to continue that. And when unexpected things come, like last year end, we had subsequent events that came around. Well, we produce over 70 financial statements at year end. And so to do that, when you have automated things and you all of a sudden have the subsequent event arrives, you can do that in a matter of hours as opposed to what used to take days to do. So we've done it on the financial side. We're doing it as well in a lot of our operations, for example, in our capital markets operations, public market processes, a large chunk of that is straight through processing. So that cuts out errors, allows us to operate faster.
Maarika Paul:
And we're identifying more and more opportunities of robotic process automation for conciliations, for reading contracts, for natural language recognition, things like that as well. So that's a big push for us. In fact, one of the objectives we've set for us to do more and more of that, and we're doing it as well on the investment side where we're trying to look at streamlining our processes and cutting out what's not necessary and where possible using automation.
Daniel Shaffer:
Technology is a huge differentiator, especially for high performance companies and companies that have high volume, as it sounds your company does. And even with someone like yourself who wears many hats, technology provides those benefits. And one of the benefits that we'll talk about in our next section called The Playbook.
Speaker 8:
You hand me an idea that I can shock the world with.
Speaker 9:
I got one more page in my playbook.
Speaker 10:
I get out there and do it.
Daniel Shaffer:
It's really around people. And when you talk about automation and really giving your teams the opportunity to work on more strategic work, more of the analysis. And as you said earlier, part of your operational methodology is to do a lot of upfront understanding of the companies that you invest in. And given that, and I should say, potentially those companies that you would work with, you do have automation that reveals additional time for your teams to do that analysis.
Daniel Shaffer:
Beyond the bottom line, it really does sound like you have a investment in your people and whether your KPIs are 2% growth or 10% growth, there's some KPI that really doesn't measure up when you're talking about the happiness of how somebody comes to work and what they really get excited about when they can dig in and accelerate their own career. What are the things that you're finding, Maarika, that are important to your teams, if you think about people, beyond automating manual tasks, as you were saying?
Maarika Paul:
Well, first off people want, and I think that's one of the things that CDPQ, provides is the opportunity to do interesting work. We invest globally in all of the asset classes that you can imagine, be it capital markets, private equity, infrastructure, real estate, fixed income. We invest across all of those asset classes. We do deals in all sorts of areas. And one of the things that people tell us, who join us is that they've never had as many opportunities to do really exciting transactions.
Maarika Paul:
So that's number one. Just keeping people motivated by that. The other thing that's really important for people and some of this seems like apple pie, but it is important is people need to know what their roles are, to be clear about what their roles are, to understand how they contribute to the overall organization. And that means being able to communicate regularly on what our goals are, how we're advancing on them and how their part fits into that.
Maarika Paul:
And that allows our people to feel valued, to feel recognized. And that's a big part of what drives folks. And for people who manage others, it's also taking the time to understand what drives everybody, because what drives you Daniel, may not be what drives me. And so I may give you a huge raise, but that's not really what you were looking for. I mean, you'll take it. You won't say no, but you may actually want different recognition.
Maarika Paul:
And other people are the total opposite. So it's really understanding and having that personal interaction with people. I think that's really important. For us, for example, as well, it's being able to ensure alignment and closeness around our offices globally. That was one of our big challenges. We've got offices in Europe, in Paris, in London, in Sydney, Australia, over in Singapore, down in Latin America, New York.
Maarika Paul:
We've got offices across the globe and just making sure that we have alignment and understanding and relationships between the people in our head office, in Montreal and in each of our satellite offices, that's really critical as well so that people understand what's going on. So one of the things that we did during the pandemic in fact was every week, our CEO, I think actually every two weeks, our CEO would do an update call with everybody. And that was new because we didn't do that before the pandemic. And the number of people that actually tuned into that was amazing. One of the things we learned from this in fact was it will continue that conversation. So that's important.
Maarika Paul:
And I think the other thing, and this for me has been a pillar of my career is the importance of keeping things, simple. Simplifying things. People in general, don't like complexity, but it creeps into every organization. And one of my former bosses used to tell me there were two types of people in this world. Simplifiers and complexifiers, and you didn't want to be in the second group.
Maarika Paul:
And I think that's true because when you can explain things simply when you can engage people simply, it also means that you understand what you're talking about, you understand your organization, et cetera. So that's a key element, I think, as well of keeping people motivated.
Daniel Shaffer:
Keeping it simple and doing things that are meaningful.
Maarika Paul:
Absolutely-
Daniel Shaffer:
Two areas that you're sharing with us here on the Invisible Vault Podcast that are also easy to understand. With all of the strife and the complexity around us, especially as we're so hyper connected, having something that we believe in as a employer or a curator of our environment is also important. And I think you shared with me, Maarika, that ESG is one of the top areas that you're championing at your company. Can you tell us a little bit about how that's factoring in not only to your HR program, but to your stakeholder value overall?
Maarika Paul:
Sure. I'll give you a little bit of background of how we got involved in ESG. And I mean, we've always to some level been involved because obviously we hold positions in companies, so we have a whole proxy voting department and for them ESG and governance has always been a big issue. Go back tens of years on that. But in 2017, our CEO started on a new priority at the time and we were leaders on that, climate change, the E part of ESG.
Maarika Paul:
And we were one of the first asset managers and one of the first companies globally, in fact, to indicate that this was a priority for us, to actually set out ambitious targets on carbon intensity, how much we were going to reduce carbon intensity and how we were going to increase our green assets. And so the reasoning behind, it wasn't just because everybody was going to become greener and that was the nice thing to do.
Maarika Paul:
For us, it was obviously it was about the right thing to do to protect the environment for the long term and protect our communities for the long term. But it was also about making sure that our investment teams saw opportunities in a changing world. So it wasn't just about let's reduce carbon, but it was also about let's look for new opportunities in a world that's changing.
Maarika Paul:
And because there are a lot of new companies that didn't exist a while ago because they're focused on new businesses, different ways that are less carbon-intense. And we felt that we couldn't just say all this stuff. So we set clear targets that we said we would measure. We gave carbon budgets to each of our investment teams, similar to the risk budgets that we give our investment teams.
Maarika Paul:
We gave them carbon budgets. And then the most innovative thing I think that we did and it wasn't easy at the beginning was we tied the variable compensation of all of our employees to reaching those climate targets. And in 2017, that was pretty new. There was nobody else doing that. And at the beginning people were worried, "What's going to happen? What if we can't meet the targets?" And this and that, but people got on board and as you said, it's a purpose that was important, especially to our younger employees, people who grew up with recycling and things that ... My kids grew up that way, they're in their late 20s now, but they grew up where, yeah, you had a compost pile and you had a recycling pile in which didn't exist when I was young, except I must say that my mother always had a compost corner in our garden.
Maarika Paul:
So that was very important. And so now we've gone a step further and we've embedded these ESG goals into our investment decision-making process. So whenever a decision or an investment opportunity is presented to our investment risk committee, there has to be an evaluation of the various ESG factors that go into it, climate being one of them. And so we have over the last couple of years exceeded our initial targets. Last fall, we set more ambitious ones at the end of the year, including a new $10 billion transition envelope that we set up to help companies who have serious plans to become greener because you can't just go from not being green to being green overnight. It takes time.
Maarika Paul:
And we saw that companies actually needed funding to get through that transition period. So we set that up to do that. And so that was the E side. And we've also focused on social and governance issues such as targeting women and diversity representation through our organization and our portfolio companies, making sure that we nominate people of diverse backgrounds to the boards of companies.
Maarika Paul:
We even created a fund called 25³ which is basically a 250 million, it's a small fund, but that we set up to target investment in companies that made a commitment over a five-year period to ensure that 25% of their management team of their board and of their stakeholders came from diverse backgrounds.
Maarika Paul:
And so that is getting off the ground, but that was another innovative thing that we did to push diversity. And then I think the last because you can't do too many things, but the last thing that we focused on was fair taxation. We established a directive related to low tax jurisdictions to evaluate our investments.
Maarika Paul:
And so we run all of our investments through filters to make sure that the companies that we invest in have an effective tax rate of at least 15%. And you heard a lot about that over the last year, as it was adopted globally. We look at whether a tax advantage exists by being located in a low tax jurisdiction. Because it doesn't always mean that because you're in a low tax jurisdiction, doesn't mean that there's a tax advantage.
Maarika Paul:
So we look at that and we look at whether we have the influence to change locations and so on. And so when we run all of our investments through these filters, we review them at the investment risk committee and we make decisions and we work with management to make sure that they respect these guidelines and make changes over time. And worse comes to worse, in some cases we will divest if we can't get companies to where we want them, because again, we believe communities, et cetera, as much as they need diversity and they need a safe environment and fair social programs and so on. And so that's our way of contributing to that.
Daniel Shaffer:
Well, you said you were trying not to do too much, but that sure sounds like a lot. Hat's off to you and the company for taking on those initiatives. And it seems like the core of those initiatives are really about funding and finance and giving that financial energy to a proposition to inspire people to do better. And even in some cases, as you said, with a $10 billion fund to put aside resources for companies who need time to also be educated in how to work on the ESG programs that are meaningful to them, but they don't know how to get into it yet. That's quite a lot and very impressive. And in our next section, we call it The Report From The Future.
Speaker 11:
Roads? Where we're going we don't need roads.
Speaker 12:
I see the future.
Speaker 13:
The future is the finish line.
Speaker 14:
I always believe that the world is what we make of it.
Daniel Shaffer:
I'm hearing myself ask the question before I ask it about what is the next generation of finance leaders need to become a CFO? I feel in many ways you've answered that question. My initial thought of course, was the focus around finance. And what I'm hearing you say is there's a lot more to the role of the CFO than just the financial technical measures that one might assume right away is the function of a CFO. In your experience in the evolution of your own role, but as you're seeing your peers grow, could you help us in thinking about what is the next generation of finance leaders really need to become a CFO?
Maarika Paul:
I think the next generation and we talked about this before was they need to be adepts of technology because technology's going to change the way we work. And so the next generation needs to understand how AI, for example, artificial intelligence, automation can make their lives and their organization's lives easier so that they can focus on creating more value and impact.
Maarika Paul:
And we did a lot of work over our head of HR and head of technology. Worked on a project over the last year where we looked at all of the different types of work streams that our people undertake to identify what the [foreign language 00:36:19] in fact, the careers of tomorrow will be like and what they have in common and what skills do we need to imprint in our people.
Maarika Paul:
And so what comes out very often is this ability to work with technology, to translate and put into practice ideas that people have. So people with a finance background, but with a strong programming background, for example, ability to work both sides, that is key. So we're hiring, we're coaching people to be able to do that, creating new opportunities from them. And certain universities are creating programs, in fact, that will help us to do that. I think people also, as I mentioned before, they need to be simplifiers, because if you can't explain it simply, you don't understand it enough and then you can't move it along.
Maarika Paul:
They also need to be good communicators. Finance people typically have not been good communicators, but it's at the heart of everything that we do. You need it to align people, you need it to understand what needs to happen, you need to be able to identify and share issues. I'll give you an example. We had a team in the finance group, our performance analysis team. They were fantastic at producing all sorts of analysis and presentations and they keep turning them out and they'd email them to people and people would get them, but when you get a whole bunch of emails every day, you tend to perhaps not do as much with them as you'd want.
Maarika Paul:
And so one of the challenges that I gave them and the head of that group was, "Okay, now I want you to go out and actually take your super analysis and present it to various teams and influence them on how they operate, on how they make decisions, et cetera." And that allowed them to be impactful, and again, it was your question before about how do you retain people? Well, when people saw that, what they were doing was actually having an impact on the decisions that were being made in the organization, wow, you feel good at the end of the day then.
Maarika Paul:
But that came down to being able to simply communicate things, you may have done a 10-page analysis, but what are the three key things that you need to remember? What do I need to do with that? That's what we've worked on, on the last couple of years. So that's really important in being able to impact and influence people. So to me, those are the three key elements that I would see in the next generation of finance leaders.
Daniel Shaffer:
That makes a lot of sense. And a common theme that I hear throughout your career, the ability to really react to change, simplify the complex and be a great communicator. Technology is such an enabler of all those things. You touched on machine learning, you talked about RPA, AI, and it seems in the future, we may have to deal with other types of ways to transact in finance, whether it's a digital currency or the currencies that we're using today. Maybe a new currency, or maybe a new blockchain that will be transacting upon.
Daniel Shaffer:
With all of the new roles that a CFO is undertaking. Do you think there'll ever be a chief liquidity officer? Somebody who maybe their primary function is to oversee and optimize liquidity.
Maarika Paul:
In our organization, I mean, we have a treasury group and that's their prime role. So it's not a chief liquidity officer, but their primary role is to make sure together with our risk team, to identify what our liquidity needs are, to ensure that we have liquidity in place, that we have diverse sources of liquidity for when we need it. So they're always out in the market looking at how to raise liquidity, be it through debt issues, through commercial paper issues, through other transactions, et cetera. So I'm not sure that we need a chief liquidity officer, but we certainly have a liquidity team in our treasury group assisted by our risk department, absolutely.
Daniel Shaffer:
Fantastic. Another quick question. Do you think artificial intelligence will replace people?
Maarika Paul:
No. I think it's going to free people up to do different things. And it'll help do other things. Because when I look at artificial intelligence, we've been doing again through our technology teams and our CTO, we've started, I would say the last three, four years, we've been running pilots and so on, on including AI into our investment decision-making processes.
Maarika Paul:
And particularly on our fixed income side and our capital market side, helping identify opportunities where we can use data to identify, it's not going to take over what people do. It's just going to augment and allow you to better predict outcomes to consider scenarios, because often AI works is you're going to move from an analysis that's descriptive from what to diagnostic and why it happened to then being able to go be predictive and eventually perhaps to prescriptive in how we get somewhere.
Maarika Paul:
And we're dabbling in this together with certain other energies around the globe. But I don't think it's going to replace people, but it's going to help them produce a couple more basis points of value, et cetera. And that's a big deal for us when you're managing 400 billion, just a couple of basis points makes a big difference.
Daniel Shaffer:
Sure, absolutely. Well, last question for you today, Maarika, and this has been a tremendous pleasure and a real learning experience, I hope for all of our listeners on the Invisible Vault Podcast. And in your spare time, I look forward to the book that you'll write, because I think-
Maarika Paul:
I don't think I'm going to write a book.
Daniel Shaffer:
... your guidance on leadership in this short hour has been tremendously deep. When you look to your peers for someone as accomplished as you are, are you seeing other CFOs as competitors or as collaborators.
Maarika Paul:
To be perfectly honest, I think CFOs in our industry are really peers. For example, in Canada, the large pension asset managers and pension funds, they're known as the maple eight and we have a monthly call with the CFOs of those organizations. And so we share on best practices and we talk about issues that we have. And I'd say even on the investment side, sometimes we're competitors on deals and sometimes we're partners. So it's a bit of both, but I would like to think that we're peers and we work on common initiatives. Right now, we're working on things like accounting for sustainability, together with other peers in the industry, we're working on the International Sustainability Standards Board, ISSB, which is a new entity that the IFRS is setting about, I'm involved in that. And so, no, I think we see ourselves as peers, more than competitors.
Daniel Shaffer:
Fantastic. Thank you Maarika. This concludes this session of the Invisible Vault Podcast. We would really look forward to finding an opportunity to share ideas with you again. Thank you for joining us today.
Maarika Paul:
Thank you, Daniel.
Narrator:
Thank you for listening to the Invisible Vault. If you're enjoying the show, please take a moment to subscribe, rate and review and share it with someone who you think might enjoy it. The Invisible Vault is powered by the team at Kyriba, the global leader in cloud treasury and finance solutions, empowering CFOs and their teams to transform how they activate liquidity as a dynamic real-time vehicle for growth and value creation. To learn more, visit kyriba.com.