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Maddi Heckman:
Hello, this is Maddi Heckman with Markets Group, and I'm
joined today by Rob Roy, SVP, chief investment officer, and co-head of
sustainability at AdventHealth. Rob, thanks so much for joining us today.
Rob Roy:
Thank you for having me, Maddi.
Heckman:
Well, let's jump right in if it works for you, and I'd
love for you to tell us all a little bit more about how your oversight of the
organization's investment strategy, retirement business, and sustainability
initiatives are all intertwined.
Roy:
Sure. I'm happy to spend time on that. I've had the
pleasure of working in AdventHealth since 1998, and over time, the way that
I've tackled different problems has led to a breadth of responsibility that
today goes beyond investment and also includes our retirement business and
sustainability for the firm. All of these are elements that people don't often
think of when they think of healthcare, but there's many parts of the industry
that support what we always think of, that front line healthcare worker. And
all of these elements link together through the same mission that the
organization is pursuing. For us, it's the pursuit of whole person care. Our
mission statement is extending the healing ministry of Christ, which means to
care for and love people in the best way that we can.
And so to do that well, we need an investment portfolio
that helps to support the financials for the firm. And so our team pursues
excellence in that space, bringing the technical knowledge that we have from
capital markets and portfolio construction and trading for the purpose of
supporting that front line ministry that we're doing.
The same is true of the retirement business. We have
nearly 100,000 employees and more than 150,000 people in our retirement plans.
We take care of people through people. And so by bringing expertise to helping
manage the retirement portfolio, we're taking care of those front line workers
all the way back to the corporate office and the backroom staff that our team
is and support when we do that. And then finally, I'm really happy to say that
as of about two years ago, maybe a little bit more, our board decided that
having a robust framework for all of our sustainability efforts is one of the
biggest items that we ought be focused on.
It's made the top 10 list for our board, and I had the
great pleasure of being asked to co-lead that with Marisa
Farabaugh, who is our senior vice president, chief supply chain officer. She
runs another big part of the business, and the two of us have been working to
improve our environmental footprint for the overall organization because it's
pretty difficult to say that we are focused on providing full-person care and
taking care of the individual while at the same time there's a number of ways
that we're either polluting, we're not working in the best possible way.
So focusing on how we do our work and finding these
opportunities to clean up the environment, to deal with supply chain issues and
how our financing and all of these interesting ways that you can see that
applied. How we do that work is as important as that kind of frontline work
that you think about. And when we do it well, there's another dimension of
benefit or blessing that we can bring to the communities in which we operate.
So that's how I think about tying all of those things together that are among
plenty.
Heckman:
Rob, in our last meeting, you shared a bit with me about
transformational projects that have had a significant impact on the community
or the environment. Can you share one of those with us today?
Roy:
Sure, I'm happy to. As we dug into our environmental
sustainability, the first leg of that was to understand what the issues were
because neither Marisa or I were environmental experts in some way. We were
chosen because they liked the way that we think and frameworks, and they know
that we'll take things apart in an analytical way and then try to find the best
way forward. And because we're both finance-focused, we would do it in a very
cost-conscious or financially-focused way. So once we understood what the
issues were, then we wanted to measure. So we went about, we did all of our
greenhouse gas measurement using Scope 1, 2, and 3. We then looked at that and
said, "Wow, these numbers are really big. If we're a healthcare company,
we're going to have to do something about transforming this. And so what are
the ways that we could possibly act to transform that?"
It turns out for health systems, one of the biggest
environmental impacts is what we call Scope 2, which means it's mostly
purchased electricity. And the way that you get your electricity, you're
basically taking responsibility for however your utilities are creating that
electricity. So in some regions of the country, there's more coal. In other
regions, there might be more renewables or there might be more gas, but there's
an opportunity to source your power in a more renewable way. And so we started to
look into how do these power purchasing agreements work? What are the technical
details? What's the marketplace look like for them? What are the financials?
Physically, how do they work? And as we dug into it, it became to us that we
have an opportunity to transform the power that we're consuming. Today,
AdventHealth consumes more than a terawatt hour of power, which means that's
more than 100,000 homes in the United States is the power footprint.
We went then to our partners, and in this case, we use the
relationships that we have, especially in our investment portfolio, to say,
"Look, of all these investment partners, we know that you're probably all
doing things in renewable power. We're trying to do things. Where can we
connect together and find deals?" And so with one of our partners,
Brookfield, we were able to find a very competitive wind farm deal. Marisa and
I had the privilege of going out there. You may have seen the pictures on
LinkedIn. We actually went out to West Texas. We climbed the wind turbines.
It's frightening, but sort of exciting to see those things up close. And we
have now signed two power purchase agreements, one with Brookfield, which was
for an existing wind farm that is as of January 1st of this year, supplying a
little bit more than 40% of our total power now. And we've signed another
development agreement with NextEra to provide or to develop about 3,000 acres
of solar-powered electricity. We believe that'll come online at the end of '25.
And so in the first two years of being focused on
environmental sustainability, we've had the privilege to learn a lot and put in
place two big power purchase agreements, which are going to bring AdventHealth
to 100% renewable electricity by 2026. And we believe those deals will be
financially accretive to the organization. They both today model the positive
net present values. So we're pretty excited about that.
Heckman:
Wow, amazing. Rob, where are you generating innovation for
you and your team?
Roy:
I think curiosity for us is the biggest fuel for
innovation. If you're constantly trying to learn and you're putting yourself in
connection with smart people, you're going to find new ideas constantly. And so
I think that's a bit of who I am. If I talk to people close to me, they'll say,
"Man, you just never stop wanting to learn something." And so I think
I've created a bit of a culture around our teams that we're always trying to
learn, we're always trying to get better. That's probably the fuel part.
The spark comes from the fact that over time we've
transformed from just running investments or just sort of being on this
investment island, which supports an operating business, but it's very separate
than the healthcare. There's been this bridge that's kind of been built so that
now we're in that conversation. We know what the business is trying to do to
transform, and we've said, and we now have the buy-in for it, it's like,
"Hey, look. Our team has such an interesting and unique perspective having
spent our whole lives in capital markets, dealing with investment managers and
GPs and traveling the world and building just this unique set of relationships,
if you involve us in strategy discussions and trying to understand what the
company's doing, every once in a while we're going to find these
transformational ideas that we can bring across to the operating
business."
So the spark, I think between that good culture of always
being hungry to learn and giving us the fertile opportunity to find ideas
within our world that we could help transform our operating business, I think
that was the spark that's starting to turn some of these ideas into reality.
Heckman:
Okay. So Rob, in our last meeting, you also shared with me
your perspective on the role of the CIO and how your role of CIO is a bit
different than maybe someone else's. It would be great to have you share your
thoughts behind why it's so critical for CIOs to have a seat at the table and
what levers can be pulled to get them there.
Roy:
Yeah. The first part of that is easier for me to answer,
and I think I've touched a bit on it in my previous answer, which is just when
you look at a senior management team, everybody brings relatively unique
backgrounds and insights. When you're building the best teams. The reason why
you want diversity in your teams is because you want the most well-rounded
perspective on every issue so that collectively you can get to the right
answer. That is why you want to do it that way. So when you look at your senior
management team, while everyone has a unique perspective, from an industry
perspective, probably nobody else on that team has spent their entire career on
or around Wall Street or global capital markets. So your relationships are
unique, the way that you think about things is unique. Most of the other people
on that team are going to have some sort of medical, administrative,
accounting, operational, finance, legal, branding, HR. You're the only person
that has that unique perspective. And so getting that perspective into the room
should add some value.
Now, I'd say a lot of times if I'm sitting around, I
probably have nothing to add where I've got more questions and I've got ideas.
But every once in a while, you're going to come up with something that nobody
else could have done. And that is a huge advantage to your organization if you
can get into that position. The second part of your question is harder because
each organization has a unique culture, and I don't know how to get you a seat
at the table, but as our CEO, Terry Shaw, said many times, if you want to get
promoted, solve people's problems. Notice the issues that are trying to be
worked on, be proactive about finding solutions for them and bring those
forward. I would think that that would be probably the most common way to get a
seat at the table, is to start showing up proactively with potential solutions
to issues that you know are being wrestled with at the organizational level.
Heckman:
That's great advice. I love that. So Rob, what's next and
new and exciting? What initiative do you have on the horizon or in the pipeline
for AdventHealth?
Roy:
Yeah, on the investment side, we are in a relatively
unique position. I know in talking to my peers over the last few weeks that
many are struggling with portfolio composition, especially around private
markets. We began our private markets program much later, just over the last
few years. And so we're really in the phase of increasing allocations and
commitments, and I know that that's a very different thing. So we're excited
about doing that at a time that is a little bit more opportunistic for us. To
do that well, we have to continue to build the team. I think we have 13 people
on the investment team today, and we'll be growing now so that we support those
efforts well.
On the sustainability side, look, I mean, it's a journey
of a lifetime. I was overjoyed that as an organization, we dedicated ourselves
to it a couple of years ago. I was slightly mystified, but also pleased that I
was selected to help with it. I was very clear that I had no idea what I was
doing, but we would figure it out. We've learned a lot. We've, I think, begun
to accomplish quite a bit, but the road ahead of us is so much longer than the
road that we've traveled. And so while we've been focused a lot on emissions,
we really haven't started to build out our efforts on waste and water. Even
within the emission space, we have some really exciting initiatives for this
year. One is to put together a solid plan for how we're going to reduce the
energy use intensity across all of our facilities. Another one that's really
exciting is to tackle the way that we use anesthetic gases.
Most people wouldn't think of it right away, but
anesthetic gases, many of them are thousands of times more potent than CO2.
They're not terribly expensive, and they're not harmful in the immediate moment
when they're vented. And so most places just sort of use these things and don't
think about it. But we're going to be going through a transformation process or
leading a transformational process with our anesthesiologists and
anesthesiology groups that we work with externally to together come up with a
great plan for how we can reduce the impact on our communities through things
like that. It will just keep going. The roadway will be out in front of us
probably for a long time.
Heckman:
Well, Rob, thank you so much for your time today. Thank
you for being here and sharing your thoughts with our listeners. We really
appreciate it.
Roy:
It's been a pleasure, Maddi. Thank you for reaching out.
Happy to participate.
