We’ve got Alex Friedman, CEO and Co-Founder of Novata, joining us for an engaging conversation about the evolving world of ESG (Environmental, Social, Governance) and sustainability in private markets. With a career spanning influential roles such as CFO of the Bill and Melinda Gates Foundation and CEO of GAM Holdings, Alex shares his insights on driving sustainability and the future of private markets.
About Sustainable Intelligence
Sustainable Intelligence is an interview series from Novata that explores ESG and sustainability in the private markets. From carbon accounting to using data to create value, the series dives into the challenges and opportunities facing private market investors and company leaders as their integrate ESG across the business and respond to regulatory requirements. Each episode centers authentic dialogue, highlighting experts at the forefront of advancing ESG data collection and driving meaningful progress in the sustainability landscape. Listen to more episodes.
Conversation with Alex Friedman (Transcript)
Ella Williamson: Welcome to Sustainable Intelligence, where we discuss all things ESG and sustainability for the private markets, brought to you by Novata. I’m Ella Williamson, and I’m thrilled to be your host. Today, we’re joined by Alex Friedman, CEO and co-founder of Novata.
Alex has had a remarkable career spanning roles like CFO of the Bill and Melinda Gates Foundation, where he launched their Social Impact Fund, CIO at UBS. and CEO of GAM Holdings. Alex brings a wealth of experience in finance and social impact. And today, we’re going to explore what inspired his shift into sustainability, the top trends of 2024, and what really lies ahead. Welcome, Alex.
Alex Friedman: Thank you, Ella. It’s great to be here.
Ella: So based on that introduction, it’s clear that you’ve had an impressive career in finance. What inspired your move to sustainability? Was there a light bulb moment? And was there someone or a company that really inspired you?
Alex: There really wasn’t a light bulb moment. I’ve been focused on how you combine financial returns and non-financial returns for two decades now. And I’ve done it in the role at the Gates Foundation, but also managing large traditional investment programs and to be really candid, struggled for a long time to try to effectively do that.
And the reason is because data is hard to come by. It’s especially hard to come by when we’re talking about non-financial returns, and even more so when we’re talking about private markets, which most people don’t realize is actually the bulk of economic activity in the world. So nine out of 10 people employed globally work for private companies.
And that for me was a good reason why I thought we need there to be a neutral intermediary that is a trusted place where the world’s private companies can collect and store their data, and it will create benchmarks that will lead to shedding light on all this activity.
Ella: Fascinating. And I think that point around data, the way that I like to think about it is gaining that full picture, not just the financial side of things. So it’s amazing to hear what you’ve done over the past few years. Now, if we can move on slightly, what do you think have been the key sustainability drivers this year in 2024? And how do you see these developing and changing as we move into 2025?
Alex: I can think of three. The first is the big issues are more tangible than ever. The climate is getting hotter. It’s getting more unstable. Social cohesion is under more challenge than ever, supply chains are fragmented, trade wars are coming, tariffs are on the horizon. There’s more instability in the system than ever before, which kind of speaks to why issues of sustainability and balance are so important.
So number one. Number two, even as those issues become more important, the regulatory regimes are becoming more uncertain. We see different directions in the United States, in Europe, potentially in APAC. Number three, against that kind of contrasting dynamic, more and more of the responsibility is falling to companies themselves to navigate this. And that’s true, even if they politically are not aligned with wanting to focus on sustainability. They have to do it because often they’re in supply chains of larger companies that have their own public commitments or their own regulatory commitments. So this is an inexorable trajectory. This being sustainability, but it’s a trajectory that’s caught up in a lot of contrasting dynamics that do make it hard for all participants.
Ella: Thank you so much for that, Alex. I think, like you said, it’s a balance of the number of stakeholders that need to be involved, but also the very fragmented political system that we’re seeing at the moment.
Now I know that Novata has experienced tremendous growth and expansion into new markets in recent years. You’re now covering the US, EMEA, APAC, all of these regions have different regulations and frameworks. So we understand that things are getting very complicated. But what would you say really unites global markets in terms of sustainability and ultimately risk management?
Alex: Yeah, there’s a very interesting analogy in my view to the way the accounting industry developed. If you go back to the pre depression era in the 1920s, for example, in the U.S. and Europe, companies tended to report whatever they wanted. They reported sometimes revenue, sometimes number of widgets made, number of employees. You had the depression. You had a giant financial reset, the development of gap accounting and IFRS in Europe, and a standardization that took place that eventually supercharged the capital markets because investors had confidence in the data that they were getting and they were able to make long-term investment decisions against it. But that transition took decades. We’re at the very beginning of that transition when it comes to critical non-financial data.
What I believe will unite all of these kind of fragmented regimes that we’re seeing across the regulatory landscape is, in essence, the core of double materiality. And it will take a while to get there, but the two dimensions to double materiality will be, can you collect information about your own company and the effect of your activities on your stakeholders, number one? Then can you explain how all that activity affects the broader community and what you’re going to do about improving your impact on the broader community? If you boil it all down, that’s what all of our various kind of communities and societies will ultimately care about. And that transition, like the transition to GAAP accounting, will take a long time, but I think it will result in standardization of some form.
Ella: Do you think that could really take a couple of decades to get there?
Alex: Undoubtedly, I think it’s already taken decades just to get to where we are, and arguably this is a harder transition than to standardize financial reporting. You know, look at CSRD and the efforts out of the European Union. Hundreds of non-financial metrics are at play. And for most companies, they have never collected this information before, so they have to learn how to collect it, develop muscles around that. Then there needs to be third parties that can store it. And as we know, since we’re in this, that’s a very complicated process. Even sophisticated counterparties are struggling today. And it will take a long time.
Ella: Thanks for that, Alex. And based on your experience leading Novata over the last three years, what is the one key thing you’ve learnt in this process?
Alex: Well, it’s something I knew intellectually beforehand, but I’ve had to relearn it, which is your last point, everything takes longer than one might like. It’s a brick by brick journey, building a company. And there’s no shortcut around that if you want to build a good foundation, so to speak. For me, the other thing I’ve learned is just how much fun it can be if you surround yourself with great people. And I feel so fortunate that at Novata, we have amazing people who are in this for the mission, but who are also clear eyed and determined and resilient. It’s been an awesome experience.
Ella: And I know we all can’t wait to see where the journey takes us next year and beyond. So thank you for leading us and showing us such an amazing vision. Now we know that ESG has been a bit of a buzzword and has had different uptakes over the last few years. If you could change the name of ESG to a different word, what would it be and why?
Alex: It’s such a great question. There are words in all languages, which it doesn’t really matter what the word is, you know what you’re talking about. ESG for me has a somewhat of an analogy to it in that ESG is just an acronym for many dimensions that make up the world we live in beyond just financial returns. And the world is not a set of, you know, currency symbols. The world as we know is multidimensional. So what would I call it? I’d call it probably resilience, something like that. And resilience is something that in any culture people would recognize whether there’s a word for it or not. It’s can you get knocked down and get back up again?
Can you build an organization that can navigate the winds of change and do it in a way that people still want to work there and work with it? Your stakeholders still want to be part of it. You look at the kind of Mittelstand, the kind of midsize private companies that make up the backbone of much of the European economy, like in Germany or Switzerland, there are companies that have been around for hundreds of years.
And the reason they’re around for hundreds of years is they’re incredibly resilient. They’re in balance with their supply chains, with their customers, with the communities they operate in, with their employees. That balance is a form of resilience. So for me, I guess use that word resilience.
Ella: So it’s much more than those three letters. It’s more about the meaning and I love the way that it can be bigger. So Alex, thank you so much for all your time today and all your insights. It’s been fantastic talking to you. Until next time, let’s keep building sustainable intelligence together. Find out more at novata.com.
