APRIL 9, 2022

Gabriela Herculano on How Capital Markets Can Be a Source of Good

Get to know Gaby Herculano, the CEO and co-founder of iCLIMA Earth—which hopes to mitigate climate change and social injustice through ESG Investing—and find out why women investors are better for the planet. 

As we celebrate Earth Month this April, here’s a wonderful example of putting one’s money where their mouth is: ESG investing! ESG stands for Environment, Social, and Governance, which means investing in companies that care about the kind of impact they have on the environment, on diverse socio-economic groups, and on how the organization is led and run. With over 25 years of experience in finance and energy, Gaby Herculano of iCLIMA Earth and her team of purpose-driven financial professionals believe that partnering with companies that do good helps us get closer to our goal of saving our planet.

What is your WHY for climate investing? 

We believe that capital markets can and should be a source of good. There is no way we can decarbonize the planet if we don’t invest in the right solutions and capital markets are an integral part of that process, but we are not going to elevate the discussion and help capital flow into the relevant solutions if we don’t showcase the solutions. 

Gaby is the co-founder of iCLIMA Earth, a female-led fintech firm.

What was your journey like? 

Both Shaila [Leekha, co-founder] and I have a background in “hardcore finance” if you will. Before getting our MBAs at Wharton, we worked at Wall Street firms, and after Business School, we were together at GA Capital. So when we started iCLIMA, we brought with us that background. In my case, public equity markets and in her case, the government and private sector because Shaila also worked at the International Finance Corporation. We started iCLIMA leveraging all that experience of working at pretty larger organizations.

We wanted to start a business that would have the freedom to operate in a different way. We wanted to shift the narrative in impact investing, in climate change investing, and we had this conviction and belief that we could be nimble, we could be faster, and we could potentially do things that very big institutions cannot.

“We have a sole focus: companies that can decarbonize the planet.” iCLIMA Earth's Gaby Herculano and Shaila Leekha make use of their expertise in “hardcore finance” to make the Earth a better place. | Photo courtesy of iCLIMA Earth

Can a beginner invest in ESG?

Well, yes! I write a weekly column for Nasdaq, and for beginners who are interested in ESG, they can refer to this article: Why We Need to be More Precise with ESG Definitions. The key thing is to look through, and try to understand these 4 points: What is the purpose? What is the metric? Does it negatively screen? Is it holistic ESG?

The problem when you don’t do a tremendous amount of homework is you may end up with products that “greenwash.” There are lots of funds that tell that story of ESG scorecards, companies that score really high. But you’d be surprised, if you scrub through, you see a lot of oil and gas names. There are products out there that label themselves as low-carbon or zero-net but they are not so explicit in saying that they don’t negatively screen. That really does a disservice to the efforts to mitigate climate change.

We can put climate change finance funds in two categories. On one side you have: “I am going to include and I am going to engage, and I will hope for some transformation” and on the other side you have: “Let’s exclude and focus on the innovation and focus on the solutions.” I do believe that most of the investors that believe that their dollar would have a positive impact on the environmental impact, do not expect their money to be invested in oil and gas. 

What were the biggest discoveries that you wish you knew earlier? 

That we put so much effort into the methodology, we wanted to be as robust, as thoughtful, and stand out, and to be completely rules-based and data-driven. We still do, but we see competitors with products that are not thoughtful, not spot-on, yet getting more locations. So what we learned is that ultimately, not-so-good products with very good distribution capabilities get investors’ attention. We should be more focused on nailing that distribution and we are confident that we will.

GENDER BIAS IN THE INDUSTRY: HAS IT EVOLVED THROUGH TIME?

It is a male-dominated industry. Whether we are in banking, private equity, or energy, it’s male-dominated and engineer-dominated. I don’t think we’ve ever felt discriminated against per se, but it is too the case that I often get into my new role as CEO of the company, and I get into the room with portfolio managers who are mostly men. I do expect that to change dramatically. Women care a great deal about sustainability and ESG. We see a very big representation of incredible women in key roles in sustainability.

Here’s a book that I strongly recommend by Mauro Guillén, one of our Wharton professors: 2030: How Today’s Biggest Trends Will Collide and Reshape the Future of Everything. One of his predictions is that women by 2030 will hold half of the wealth of the planet. That would change things. That’s when the financial industry will change in a material way because a lot of that wealth will be managed by women and for women. 2030 is around the corner, so I think we are at the beginning of a path towards very different demographics. 

Guillén's book predicts good things for women in business. | St. Martin's Press

What would you say are the advantages of a woman investor? 

We’re very much motivated by that idea of impact, the commitment to doing something beautiful and better. We’re not chasing a return, we’re not chasing a unicorn. it’s about believing in what we are doing. I do think that there is causation here with female investors. They’re very truthful in their inner motivations—they would do something if they really believe in that. It’s not transactional. I think it’s fair to say that female investors or startup founders care much more about impact. 

What advice would you give women who want to get into the FinTech space? 

One, network, network, network. Know everybody in the space, talk to them, look at the people who are doing what you are trying to do that have been there. Leverage other people’s mistakes. Entrepreneurs would say that we need to learn a lot about mistakes. You need to make mistakes but try really hard. That’s advice number 2. Talk to people, network, so you do try to minimize those mistakes. 

Women with purpose. Gaby and Shaila recently interviewed VEERAH’s founder and chief warrior Stacey Chang on their podcast! | SparkNetwork

Which fashion item you own, empowers you the most? 

Having been in banking on Wall Street, I still have a lot of clothes that are high-end designer clothes. These days, I am a bit embarrassed to overdress and wear some of that stuff because the planet is burning, our house is burning, and it kind of feels that it doesn’t go well with going to a meeting talking about mitigating climate change, if I am wearing Prada and Chanel or Gucci. So what really empowers me are vegan shoes. Vegan shoes made by VEERAH that I am very proud to tell people, “Yes, they look fantastic and they are vegan!” I do mean that.

Visit iclima.earth to learn more about the work that Gaby and Shaila do, and check out Gaby's column on nasdaq.com to keep up with her weekly insights.