Gino Borges:

Today, I’d like to welcome Annie Chen, Principal and Chair of RS Group Asia, a Hong Kong-based family office dedicated to 100% impact. Inspired by Jed Emerson’s Blended Value concept, she recently launched SFI which stands for Sustainable Finance Initiative to educate and connect investors and entrepreneurs in the impact investing space. Annie was born and raised in Hong Kong and attended Columbia Law School. She spent time in San Francisco as a tax lawyer before joining her siblings and managing the family office back in Hong Kong.

Annie Chen:

Thank you, Gino, for having me. It’s a pleasure to join you.

Gino Borges:

It’s a pleasure to have you, and we feel fortunate to have your voice as part of this series. Usually, I begin with where people began their impact journey, but obviously it’s a very unique opportunity to speak with somebody directly from Hong Kong. In the West, we’re very familiar with what’s happening in Hong Kong. Can you explain the personal journey and relationship potentially between what’s currently happening in Hong Kong and then how you’re navigating it as an impact player?

Annie Chen:

That’s a big question. When I first started, it was almost implied that I was working towards some goal or set of targets, but the goals back then were quite simple. It came out of a reorganizing of the family wealth structure of which I had to take responsibility for my share of the assets and I was struggling with what that meant. Having been used to dealing with a pot of assets along with my siblings, I now had both the responsibility and the opportunity to just manage my own on my own.

It was a big burden in the sense that the experience of working in the family office prior to that point was actually a very frustrating one. Having to negotiate and figure out how to work with my four other siblings and not always being able to agree on how to proceed. Then, I got to a point where all of a sudden, I could really call the shots. At that point, it was like operating under a feeling of “I do have the freedom to choose my own approach, but how do I really feel about this?” As I mentioned in the impact report that we put out three years ago now, there was certainly a great feeling of guilt associated by having inherited wealth that I didn’t actually personally earn.

I found out that it’s not all that unusual. But, I was very fortunate in that we had, at that point, a family office executive who was very helpful. Not that she knew much more about sustainable investing, but she was very supportive of what I was trying to do. I was basically thinking originally that I would give most of it away and that’s how I would deal with that guilt. But I also understood that, you don’t just do that, right? It’s a process. You have to figure out how to do it. In the meantime, there are assets to be managed and investments to be managed. Out of some initial conversations, I realized that at least I wanted these investments to be deployed in a way that is not creating more problems for the world.:

Through attending some conferences, et cetera, I got interested in impact investing, although back then in Asia, it wasn’t so much that term. The focus was more on how do you support social enterprises. What can they do as opposed to straight philanthropy? But over time, the pieces started falling together. I still think to this day that probably one of the smartest things that I did was understanding what I didn’t know and what I wasn’t good at and reaching out to advisors who were experienced to help me along the way. Very quickly, I found myself a financial advisor who was very focused on sustainable investing.

As you mentioned, I also met Jed [Emerson] along the way. I came across his writings and felt very much inspired by his whole blended value concept as a way to look at value generation which made a lot of sense to me. I reached out to him. I also found myself an advisor who helped me along on the philanthropic journey as well. That’s how it all started. That was back in 2009/2010, and it wasn’t until some years along the way when we’re getting closer to refining our portfolio approach that we realized that maybe there’s something here that we can share with others who might want to do the same thing so they don’t need to completely reinvent the wheel.

It’s important to remind ourselves that this whole notion of sustainable investing and impact investing really still is very nascent in Asia. I’m sure a few people who I’ve gotten interested in these practices have been trying to do it on their own, but it certainly isn’t the trend and there isn’t that feeling that it’s anywhere near mainstream, the way that, particularly if you’re situated in the US, you would’ve begun to feel at least in the last few years. In that sense, it started out being a very personally driven thing. Not that I had a destination as such, but I did believe in it enough that I wanted to contribute towards growing this space in Asia rather than simply just doing it for myself.

Gino Borges:

I really want to understand why you think it hasn’t grabbed on in Asian culture. Can you articulate what you think structurally, ideologically, or culturally may be happening? Climate change and wealth inequality are global conversations at this point. Why hasn’t it been connected to capital in Asian cultures?

Annie Chen:

If you look across Asia, it is very diverse. We’re not one country; we’re not even a few countries. We are a collection of many countries, all of whom are at different points in the developmental path. Looking at the growth of impact investing from a bit of distance, I was tracking that because that’s where the most was happening as I was starting my own learning journey. It took a lot of lessons particularly from the US, and also, given my own familiarity with the US, that’s where I tended to look. The context is different, right? For North America, we’re talking about developed countries already in a very robust ecosystem. If you want to engage in impact investing, the ingredients are there. What’s missing would be how do you understand impact? How do you measure? How do you capture? However, in Asia, I’d say broadly, we need to look at the different developmental points of the various countries. Impact as it’s particularly understood in the Western context doesn’t necessarily resonate. People think of a lot of developmental needs here. We still have a very poor rural population. How do you improve their livelihoods? Or, how do countries develop economically? What are those needs? In terms of the investor class, the profiles are also quite different. I would imagine the more sophisticated private investors are probably the owners of these conglomerates who have the means to invest and to not only invest for financial returns, but to have the space to even think about the impact dimension. Whereas most people don’t have the idle money to invest. Not all of the jurisdictions have maybe well-developed pension systems either. There’s a real range of possibilities in Asia. It’s difficult to capture it just in a broad brush. But I would say many different factors contribute to a slower pace of development.

If I have to overgeneralize, I would say that economic development is still the focus for most people, whether government or the private sector. They tend to think that impact investing is a luxury that you only start doing once you’ve reached a certain standard of living or reached a certain level of development. But of course, we can argue that, well in fact, no. In fact, this is where you really need to start thinking about: what is economic development for? Use that mindset to bring in the impact element. But I think that’s also part of the  context and also the language that doesn’t necessarily appeal. I could go into a lot more different things that I’ve observed that might’ve contributed to the slower pace of development, of sustainable impact investing in Asia. That’s the general context. But one side observation that I might make is, in Asia, it’s not unusual for there to be these huge conglomerates that are held in relatively a small number of families. I’ve met a number of NexGen’s from some of these families and the millennials get the impact side of things. But I suspect that for their parents who were the wealth creators that they would think of impact, not so much as impact, but what I’m doing is not only good for me, but it’s good for my country because it’s helping our economic development overall. It’s their pathway to this wealth creation. Now, it’s understood globally that it could be generating some not so good consequences. Think about Palm Oil producing or mining activities. If they start questioning the way that they generated their wealth, it’s uncomfortable psychologically.

Gino Borges:

Take us through how your family created its wealth. What was life like before you inherited wealth?

Annie Chen:

My parents’ generation were the wealth creators. My father and his brother co-founded a real property development company in Hong Kong. That’s how a lot of wealth was created back then in the 70s and 80s. My father left the business and retired in the 90s. Since that point in time, even though we still have some shareholdings in the listed company, we’re not involved in the management as such. We were simply focused on managing our own liquid portfolio. What was life like before I inherited? I was working for the broader family office that my parents set up. I was working with my siblings. Prior to that I was working as a tax lawyer. So, given my professional background, I did a lot of individual tax planning and estate planning. There was a natural transfer of my skills over to the family office side. I was taking care of mostly the tax and legal structure side of things. Back then, I just accepted that what people with wealth do is find ways to preserve their wealth whether it’s from the hands of the tax authorities, legitimately of course, or just conserve it and grow it if you can. That was a default thing that nobody questioned.

It was in the course of partly having to work with my siblings, not always seeing eye to eye, and then questioning we were disagreeing about, a lot of lessons learned from that. Even though there were some painful periods back then when I then started focusing on my own assets, they became useful. I’m not particularly interested in the process of investing, myself. I wasn’t trained in that, and I wasn’t personally interested in it. I like to joke with people that if you gave me $100 to invest, I probably would lose all of it. I’m such a bad person when it comes to making money. But, I had to learn at least some of the aspects associated with investing. It helped when I was starting my own journey towards creating a more sustainable portfolio. At least, I knew what I didn’t know. I sought help where I could. To conclude, I think my previous experience has informed how I started my own journey.

Gino Borges:

Why did you, amongst the five siblings, decided to be more intentional rather than one dimensional with the finance? What was it that allowed you to move beyond that default of the dominant financial paradigm?

Annie Chen:

I don’t know how much of it was the guilt factor. I wouldn’t say that all of my siblings felt the same level of guilt or question about having so much as I did. That’s one thing. The other thing is that my original plan to deal with this skill was to give it all away which meant that I was thinking more about philanthropy in a reasonable way. And, my family, starting with my parents and my oldest sister who used to run our family foundation, were pretty philanthropic. It’s also in the course of thinking about what does philanthropy mean? How do you do it in a reasonably impactful way? That all influenced how I think about some of the possibilities that are open to you if you actually are philanthropically-oriented. The “aha” moment I would say was really coming across Jed’s writing on Blended Value and realizing that there is this false dichotomy. Doing philanthropy and investing are two different things, but they’re on the same spectrum. I don’t ignore the fact that the world, the external environment also changed. When I was growing up, and also certainly for my older siblings, I don’t think they spent most of their life thinking that having money is a bad thing. In fact, it’s the dominant understanding. This is what growth means. This is what having a better life means: to accumulate more wealth. Nobody questioned that. Particularly in a place like Hong Kong, we’re known as self-starters. You attach a lot of positive feelings to people who are able to create something from nothing and even great wealth from nothing. That was the dominant and unquestioned mindset. From a philanthropic side, I was also starting to realize that there are also a lot of ills in the world. Moreover, it’s also realizing that in the creation of wealth that there are all sorts of problems resulting from a single-minded pursuit of wealth and profit. It was also that realization that made me both tempered and to question the assumption that investing just simply to create more is a good thing.

Gino Borges:

How do you know when enough is enough when it comes to money in your own life? How does it translate over to the family office when making decisions on how to move money and allocate money?

Annie Chen:

That’s an interesting word. “Enoughness.” Let me switch back to what was in our impact report. We have this portfolio that’s diversified and this is how we invested, tried to invest sustainably, with an eye on impact as well. How did we set our financial targets? When you talk about the “enoughness” of it instead of saying, how do we get market rate returns or maximize market rate returns? Our question to ourselves was what is a reasonable target for us. What is the minimum that we need to generate in the form of profits and growth in order to sustain ourselves, or at least not to be losing capital before we figured out what we want to do with capital? We arrived at a target rate of return across the entire portfolio, and that included budgets for sustaining our own team. We’ll have to pay salaries, and we have to pay expenses. We also have a grant budget for philanthropic giving. I also needed to provide for myself and my family. Factoring all of those things gave us a target, a financial target to work towards. I’m happy to say that we were able to do it. It’s also out of this thought process of pinning down a return target that I realized that this whole thing about market return is a weird thing. What is market to you may not be market to me.

Gino Borges:

One response to that might be, well, it’s one thing to have that approach. If you have your family office at $100 million and generate 4% return, you can run your family office and pay salaries with the 4 million versus let’s say that somebody is like, not $100 million, but let’s add 1 million.

Annie Chen:

It’s also something that we thought about too. I’m not even $1 million. If you think about the normal person who might have a little bit of savings to invest that they can invest in plus maybe most of their savings and their pension. I absolutely take that point. I absolutely feel that it may sound to some people as a somewhat privileged thing to say. But, it depends on the context. If you’re just an investor, you may not be supporting a team. We do support a team. We have advisors. Also, I’m not by nature a very extreme person.

In this process, I learned how to be a lot more comfortable, or at least, a lot less guilt-ridden or negative about what I have and understanding that context. Where I ended up in life, I’m luckier than a whole lot of other people, but within that context, what are reasonable things for me to do? That isn’t simply about my own personal happiness, but some contribution goes to the greater good. This is how I’ve chosen to do it. At the next level though, going forward I think I’m going to focus a lot more on that question of “enoughness” more directly head on.

At the beginning, I was simply answering the question of “how do I discharge my responsibility as a responsible wealth owner given that my parents left me this bucket of wealth or these assets?” Now that I’ve become much more comfortable in my own skin, I think I need to face the next set of questions: “how much is enough?” and “how much do I want to dedicate towards more impact or the greater good as opposed to my own needs?” I’m looking forward to answering those questions in the coming months.

Gino Borges:

Did the transferring of your family’s assets take place because of a passing of your mother and father? What issues were brought up as a result of that transition occurring?

Annie Chen:

In our situation, it was a bit unusual, particularly in an Asian or Chinese context. A lot of families don’t trigger a transfer of wealth until somebody in the previous generation passed on. My father for some reason decided when he retired that, he was going to set aside some assets for our generation while he retained some. That became the reason for creating a family office and a reason for having my generation, all of the siblings, involved in co-managing. Maybe that was his way of saying we’re not involved in the original family business anymore. That was left to the other branch of the family.

We decided to co-manage our assets and make that the common enterprise. Then, the dis-aggregation came out of the fact that that it was difficult trying to work as a group. First of all, between the five of us, there’s a pretty significant age gap. Between the oldest and the youngest, we’re about 16 years apart, almost a generation. I didn’t realize it back then. I thought we just have different viewpoints, and that’s also true. The other factor was that at different life stages, your view of things is different; your needs are different. It was particularly challenging for us to come to a consensus. My way of approaching things now with sustainable and impact investing would sit well with some of my other siblings. What happened needed to happen, I guess.

Gino Borges:

Did all five of you reach the consensus that you all needed to go to? The irony is that you guys did develop consensus to go your own way.

Annie Chen:

Yes, to some extent. There are still some joint initiatives. For example, we still have a family foundation that we’re all involved in. We’re still supported by the larger family office in terms of back office staff, office space, execution. There’s still a joint enterprise there. But looking back, none of it was by design. The dis-aggregation was something that needed to happen. It was probably a good thing. But, it doesn’t mean that the original family office went away. Part of my time is still spent on managing the broader family office.

Gino Borges:

What was it like taking the first step in saying that “I want to do things differently but I don’t know how I’m going to do it or where I’m going to end up at?”

Annie Chen:

What mattered to me was having the right people around me to work with. It wasn’t simply, “Oh, I don’t have the skill, so I’m going to go look for someone who has this skill or this particular experience.” We also needed to start with the same values. That really has allowed our team to grow and to progress in the way that we did. We’re a group of very likeminded people. We’re very different as individuals, but in terms of fundamental values we’re very similar and that’s what keeps us together and working so well as a team. That’s super important. It’s unusual in Hong Kong. Particularly, people don’t like to get or pay for advice, certainly as far as individual asset owners are involved. But like I said, I personally feel that one of the best things I ever did was to go find advisors who helped me clarify my thinking and who I trusted and respected to work together towards developing something that made sense.

Gino Borges:

That makes a lot of sense in terms of surrounding yourself with people that you trust, are qualified, and just feel good about working around.

Annie Chen:

Absolutely. I never thought that I would have a second career. Launching my RS Group and my own wealth management or investment management exercise became a second career for me, and a much more enjoyable one. It’s been a period of both personal growth and a lot of excitement because we were doing something that we actually really had to learn, really had to grapple with, and we had to think about. It’s not as if there were off-the-shelf or easy answers. We needed to think about how we wanted to achieve this. There are any number of ways to approach it. We do a lot of talking amongst ourselves to really probe our motivations for doing something. It’s really been very fun, a very positive experience for me, and a period of great personal growth as well.

Gino Borges:

How do you go about managing and balancing your life? Obviously, it can be all consuming; you can spend as much time as you want there with that particular intention. Just curious how you navigate this larger reality that in a world with lots of possibilities, lots of other potential interests, and then also knowing you have other family members that long for your attention.

Annie Chen:

I started close to a decade ago. My husband is a university professor, so he has his own career. I have two kids. When I first started on this, my kids were still in their early to mid-teens. That’s where having advisors who helped clarify the way forward was very helpful. I also hired my first staff about 10 years ago. That came out of the fact that I had other family responsibilities. But also, I was realizing that I can only process so much as one individual. I was doing so much reading back then. That was also a period when impact investing was really starting to grow. There’s no shortage of reports and articles available to read online. There was so much; I was trying to figure out how to organize this information. That’s when having experienced people who’ve already done a lot of their own thought work to come in as advisors really, really helped, whether it was Jed who was very much tapped into the growth of this whole impact investing space, or our financial advisor who sits in Zurich. He had been involved not only at advising clients, but also as part of the advocacy effort around sustainable investing in Europe. Having these people who are really thought leaders in their own areas come in and help us fast-track our thinking was very helpful. I’ve lost track of your question.

Gino Borges:

It’s just in terms of balancing the multiple interests, stakeholders, given a finite amount of time.

Annie Chen:

I probably went through a period where I was quite busy because there’s no shortcut to it. At the end of the day, if I look a little bit at other private investors that I know in Asia, the people who have been able to really do more are people who have committed to spend time to learn about it and to not just talk and think, but also to act. Going back to one of your first questions: “why hasn’t impact investing kind of, like, grown as quickly in Asia?” I don’t know about other parts of Asia, but in Hong Kong, everybody’s busy. I’ve encountered a lot of “impact investors” who are three years later still talking about being interested in impact investing but haven’t really made much progress.

They say they’re interested, but their other responsibilities have taken precedence. Or, their interest is really only that deep. But, there’s really no shortage of ways to get involved if you really want to. You’ve got to do the learning yourself because no other person can understand what you are looking for in terms of impact and what you personally want to define as important in terms of impact. Without spending the time to think about those questions, it’s not simply impact in terms of “how do I measure it?” Rather, impact investing ultimately is about the world that you want to be part of and take part in creating. If you don’t spend time thinking about what that vision is, looking at only more short-term targets, you’re never going to become a well-rounded impact investor.

Gino Borges:

That was a nice summary of everything that you’ve shared at many different levels today. I want to thank you again.

Annie Chen:

It’s been a very enjoyable conversation. I want to thank you also for hosting these fireside chats. You are trying to capture an unusual kind of side to it, a more personal side, and I thank you for that effort. I look forward to going through all of the other interviews that you’ve had so far and more to come.