July 7, 2025 • 58 mins
In this episode of The Blunt Dollar, I sit down with Vincent Kaufmann, CEO of the Ethos Foundation, a leading voice in sustainable finance and corporate governance in Switzerland.
With over two decades at Ethos, Vincent shares an insider perspective on why active ownership matters, the real tools investors have to drive ESG change, and the fine line between meaningful impact and greenwashing.
This is a masterclass on ESG from someone who's lived it from the inside.
🎯 How shareholder engagement can push even giants like Nestlé and Holcim to adopt real sustainability targets
📉 The hidden risks of passive investing and the concentration of voting power among the "Big Three"
🌱 Why divestment alone isn't enough, and how fixed income markets can offer more pressure than equity
🧠 Greenwashing decoded: Vincent's view on what real sustainable investing looks like (and how to spot a fake)
🇨🇭 Swiss DNA in finance: How Switzerland’s consensus-driven model shapes Ethos’ dialogue-based approach
If you're into ESG, shareholder activism, or just want to understand how investors can shape corporate behaviour without sacrificing returns, this one's for you.
Oh, and if you haven't already... subscribe to The Blunt Dollar for more raw and honest finance conversations.
New episodes drop every other week! Available on Spotify, Apple Podcasts, and wherever you get your podcasts.
And last, but not least, don't forget to follow me on LinkedIn: https://www.linkedin.com/in/ignacio-ramirez-moreno-cfa/
Enjoy the episode!
Disclaimer: This podcast is for informational and educational purposes only. It does not constitute financial, investment, or legal advice. Listeners should consult a qualified financial professional before making any financial decisions.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
We will reduce oil production by 2030 by 40% and
reinvest in renewable energy.
Speaker 2 (00:06):
Welcome everyone to a new episode of the Blunt Dollar
.
Today's guest is none otherthan Vincent Kaufmann, ceo of
the Ethos Foundation and EthosServices, one of Switzerland's
most respected voices insustainable finance and
corporate governance.
He's built a reputation notjust as an expert in ESG, but as
(00:27):
a hands-on advocate for activeownership, showing how investors
can influence real changewithout abandoning financial
rigor.
Speaker 1 (00:36):
So if you are early, enough with Megatrend thinking
about renewable energy, lowcarbon mobility.
I mean, if we really care aboutthe next generation and our
planet, we must act quicker.
Speaker 2 (00:46):
What would you say to those that became disillusioned
with ESG?
We?
Speaker 1 (00:50):
have no choice.
We need to have a systemicchange in the way we are
managing.
Speaker 2 (01:00):
This is the Blonde Dollar with Ignacio Ramirez.
This is the Blonde Dollar withIgnacio Ramírez.
Quick disclaimer the views andopinions expressed in this
podcast are those of thespeakers and do not constitute
financial, investment or legaladvice.
This content is forinformational and educational
purposes only and should not berelied upon as a substitute for
(01:21):
professional advice.
Always do your own research andconsult a qualified advisor
before making any financialdecisions.
All investments involve risk,including the potential loss of
capital.
And now let's get started withthe episode.
Welcome everyone to a newepisode of the Blunt Dollar.
Today's guest is none otherthan Vincent Kaufman, CEO of the
(01:43):
Ethos Foundation and EthosServices, one of Switzerland's
most respected voices insustainable finance and
corporate governance.
Since taking the helm in 2015,Vincent has led the efforts to
drive shareholder engagement,promote ethical investing and
push companies towards greateraccountability on climate and
governance companies towardsgreater accountability on
(02:04):
climate and governance.
Vince's journey started atEthos, actually in 2004, as a
corporate governance analyst,rising through the ranks to
oversee investments andultimately lead the entire
organization, and along the way,he's built a reputation not
just as an expert in ESG, but asa hands-on advocate for active
ownership, showing how investorscan influence real change
(02:27):
without abandoning financialrigor.
In today's conversation, we'llexplore many topics, such as why
active ownership matters morethan ever, how fiduciary duty is
evolving, the fine line betweenreal sustainable finance and
greenwashing, and what thefuture holds for corporate
engagement in a volatile world.
Vincent, it's an absolutepleasure to have you on the show
(02:50):
.
Welcome to the Blonde Dollar.
Speaker 1 (02:53):
Thank you, Ignacio.
It's a pleasure, my pleasure,to be part of the show today.
I hope we can cover all thesevery interesting and important
topics.
Thank you again for theinvitation.
Speaker 2 (03:03):
Absolutely so.
Before we dig into all of it, aquick promotional message.
The reason I'm talking to Vincetoday is because the CFA
Society of Switzerland made avery kind introduction, because
Vincent is very, very close tothem and he is a regular speaker
at the ESG CFA conferences.
(03:24):
There's an upcoming onehappening in Zurich on the 20th
of May, so if you have theopportunity to go, please make
sure to check the details online.
The topic this year is ESGUnlocked Mastering Opportunities
for Sustainable Performance.
There's going to be plenty ofamazing speakers, a great lineup
(03:44):
.
So if you're interested inanything related to ESG and
sustainability, this is theplace to be in Switzerland the
20th of May.
So, vincent, many things tocover today, but I'd like to ask
you a very simple firstquestion what is it that you're
doing?
Exactly as Ethos, I tried tosummarize it at the beginning,
but always better to hear itfrom you.
Speaker 1 (04:07):
Yeah, you did it well .
So Ethos is quite an hybridanimal.
Somehow we're kind of a pensionfund voices.
We gather actually 250 pensionfunds which give us mandate
mostly in active ownershipactivities, active ownership
(04:30):
being voting at the generalmeeting.
So we are acting as a kind of aproxy advisor, but we are also
mandated by those pension fundsto engage in dialogue, what is
called engagement, so engagingdialogue with listed companies
in Switzerland and abroad aswell, on environmental, social
(04:51):
and governance topic, and we arealso, of course, to conduct
those activities you need gooddata and that's why we are also
collecting ESG data on companies, making also ESG assessment,
esg ratings of company, andthose services actually help us
also to build up some investmentsolution like index or
(05:14):
investment fund that we arelabeling, to offer some very
highly convinced sustainabilityinvestment solution.
Speaker 2 (05:26):
So why do these pension funds outsource that
activity?
Is it because of the amount ofwork it requires?
Is it because you hold anexpertise that no one else has?
Why do they come to you?
I think it's more and more.
Speaker 1 (05:42):
Pension fund and asset owners generally in the
world are quite universal owners.
You know this is triggered aswell because they have index
portfolio.
They try to track many indexes,indices, and so they hold many,
many investments in theirportfolio in terms of listed
asset classes.
(06:02):
And, of course, in Switzerland,the pension fund world is very
fragmented.
We still have more than 1,000pension funds.
So, in terms of resources, ifyou want to do a good
stewardship job by voting allthese general meetings and
engaging dialogue with thosecompanies, you need some
resources.
So they tend to delegate thosekinds of services to their asset
(06:27):
manager or to service providerssuch as ethos to yeah, to do
this, and thanks to theirsupport, we can build a
dedicated team.
We are more than 30, we havemore than 30 analysts actually
doing the job, knowing thecompanies, engaging those.
You need to know the companybecause when you engage dialogue
, you discuss with the chair ofthe board, so you need to be
(06:49):
well informed.
You just cannot go and say well, yeah, so you need to be
prepared to get the goodquestion and to have the good
request and then, of course, tofollow up what you are asking.
It's just not asking, it's alsofollowing up to be able to
report on progress on ESG topics.
Speaker 2 (07:07):
So, before we deep dive into the ESG topics, I'd
like to take a step back andmaybe talk about you and your
career, because I think it'sreally interesting.
You joined Ethos back in 2004.
That's like 21 years ago.
It's very rare to see peoplespending so much time in the
same company, which, of course,probably means that you love
(07:29):
what you're doing, but also thatyou know what you're talking
about, because you started as acorporate governance analyst and
rose all the different layersover the years.
But maybe can you walk usthrough your journey from the
day you joined Ethos to becomingthe CEO.
Speaker 1 (07:46):
Yeah, it makes me a little bit of a dinosaur.
So when you talk about 21 yearsago, actually it started.
I was a student at theUniversity of Geneva here and
one of the teachers of financeactually was part of the board
of trustees of the EthosFoundation and at that time I
was actually writing adissertation on governance
(08:07):
corporate governance.
It was just after thebankruptcy of the Swiss airline
you know Swiss Air due tocorporate governance failure.
We had on the same time in theUS the Enron cases, worldcom,
big corporate failure due toinadequate governance.
And already as a student I wasquite interested to those topics
(08:29):
.
Studying also accountants andcorporate governance was also
key.
So when he come and said thisfoundation is looking for a
student for the proxy season tomake voting recommendation at
general meeting, I said oh,that's exactly what I'm studying
now for my dissertation.
So I jumped on the opportunityto do the internship of three
(08:51):
months during what we call busyseason, march to May, and
actually the first intern was in2003.
Then they took me again in 2004when I finished my dissertation
and, yeah, actually I love it.
It was really the early stageboth of governance, because it
(09:12):
was just a couple of two yearsafter the stock exchange
introduced the directive oninformation on corporate
governance.
So it was very new thatcompanies had to report who were
the board member, what was thecompensation member, what was
the compensation framework, whatwas the shareholder rights All
those questions were quite new.
So it was very, veryinteresting.
(09:34):
And sustainability was not evena topic at that time.
I mean, almost no companies hadany sustainability report.
So we started also engaging toask for more transparency.
So and I stayed becauseactually it's so interesting.
First job, because, if you like,analyzing a company, the
perspective of governance andsustainability is so, so, so
(09:57):
interesting because you have togo understanding the ownership
structure of a company who iscontrolling the board members,
the compensation and then goingthrough the sustainability value
chain of a company who iscontrolling the board members,
the compensation, and then goingthrough the sustainability
value chain of a company, you dounderstand the business much
better, sometimes as if you werejust looking at the financial
statement.
(10:18):
So and yeah, I got fascinated bythe topic and that's why I
stayed actually and get someopportunities to grow with the
topic and that's why I stayedactually and get some
opportunities to grow with thecompany.
But I must confess, even if I'mthe CEO since 10 years, I keep
on looking at annual report andthe progress of companies.
Yeah, and what is veryinteresting, when you go to look
(10:43):
at different sectors, you jumpfrom all-seam cement producer to
move to ABB, which is makingthe generator, then you jump to
an insurance understanding howthis is working.
So, yeah, if you're a littlebit curious about business,
about companies, I think this isa dream job.
Speaker 2 (11:02):
Nice, wow, what a story.
I think this is the dream job.
Nice, wow, what a story.
And I'm curious to hear, likeas the CEO, the direction you've
decided to take the EthersFoundation on, because I feel
like, particularly when it comesto sustainability matters, a
lot of people choose activismand try to grab headlines,
(11:22):
whilst your approach focusesmore on engagement, on influence
and on long-term change, ratherthan this public confrontation.
So how did you develop thisphilosophy around active
ownership versus a moreconfrontational model of change?
Speaker 1 (11:39):
Well, I think we need both.
At the end of the day, we alsosometimes need to use a little
bit of escalation, and we did itsometimes by putting
proposition at the generalmeeting, but it has always been
after a kind of a constructivedialogue with the companies and
most of the time, actually, wemanaged to get some good
(11:59):
agreement with companies.
The clever companies alsounderstand that when you just
pass some of the investors'expectation, it's also kind of a
free consulting, because we arepaid by investors to advocate
for better transparency, bettergovernance, better strategy in
terms of sustainability.
(12:19):
Of course, not everybody are onthe same page, so most of the
time this is really a veryconstructive dialogue which
brings wonderful results.
But you also need to be able toescalate, and I think that's the
secret of the potential success.
If a board of directors knowsthat your request can be
(12:44):
escalated via shareholderresolution or more public
confrontation because sometimeswe do go to the general meeting
just to speak out it's importantto be there as well Then I
think you find the right balance.
That's where but 90% of thetime you're right we're doing it
behind a closed door, bydiscussing and trying to get the
(13:10):
company understanding why we'remaybe fostering for more
transparency or wanting to reacha better balance in terms of
stakeholder interest.
Long-term vision in terms ofstakeholder interest long-term
vision.
Speaker 2 (13:28):
I guess where you place that cursor between super
confrontational and moreconsensual comes with years of
experience and by doing many,many cases, but I find it really
, really interesting.
I was also curious to hearabout your Swiss roots, because
obviously Switzerland has aunique financial culture.
It's well known for being solidover the years, consensus
(13:52):
driven, yet very globallyinterconnected, and I was
wondering if your Swissbackground has shaped the way
you think about finance, riskand sustainability in general
finance, risk and sustainabilityin general.
Speaker 1 (14:10):
Probably probably because I think we have a kind
of this vision, of a kind ofdirect democracy.
First, in terms of politicalvision as a Swiss institution
and we mostly are client basedour Swiss pension fund and also
in the pension fund.
When you think how is itgoverned?
You know it's half of the boardof trustees, representative of
(14:30):
employers, the other half ofemployees, so they also need to
find the right balance,compromise discussion dialogue.
And it's exactly the same withour political power in
Switzerland when you think aboutthe small cantons, the big
cantons, the big city, the both.
(14:53):
In changing the constitution,you need both agreement of the
people and the canton.
So sometimes you have bigdivergence but we always find
our way and I think you're right.
This swiftness roots, pushesreally in this dialogue, with
trying to find a good compromise.
It's certainly very differentwhen you think in the US it
(15:19):
directly goes more via classaction, legal action against
your board when you're not happy, or directly a confrontation
proxified, you want to take theseat on the board and so on.
So it's much moreconfrontational as what we are
doing here.
So I get this is yeah, theSwiss-ness is really on that
(15:44):
kind of pushing the dialogue,engagement, but again you need
also to be able to say whenenough is enough and when you
need to be a little bit morevocal and push a little bit the
barriers.
And that's where sometimes wemight be a little bit less Swiss
because we need to push alittle bit more.
(16:06):
Again, it's finding the rightbalance between both.
Speaker 2 (16:09):
Interesting, interesting yeah, placing that
cursor once again.
And I'm curious to hear how doyou find success?
Because in finance, obviously,success is often measured by
returns, but leading anorganization like Ethos seems to
require somehow a broaderdefinition.
(16:31):
So how do you personally definesuccess in your role today, and
do you think that definitionhas changed over time, or has it
always been the same?
Speaker 1 (16:45):
or has it always been the same?
I think it's being sustainable.
That is not in contradictionwith return.
On the contrary, I'm totallyconvinced.
Since 21 years we're doing thisand we see really the long term
when we come with some ideas.
Usually on the long run, historytends to give us a little bit
(17:08):
right.
If you go back in history, wewere very critical with one of
the first fight of ESOS actuallywas in 98 against a merger of
UBS and SBS at that time and wesaid it's a systemic risk for
Switzerland.
And 10 years later, when UBSalmost collapsed with a 2008
(17:31):
financial crisis, yeah, that waskind of what we somehow
predicted a little bit earlier.
And with Credit Suisse, whenyou again think about it, we
already claim back at thegeneral meeting 2011 that the
strategy was the wrong one, thatthey should have cut much more
(17:52):
faster.
So it's it's probably badexample, because here the
success was a failure ofcompanies not having really
followed what we would havethink a better solution.
So, yeah, that's where I thinksometimes our request goes on
the might be finally, on thelong term, the good one.
(18:16):
Otherwise, yeah, we need to finda way to measure the progress
of companies.
Of course, when we are askingsomething, we need to be able to
track the progress, track thesuccess.
So somehow we are very happysometimes with small success
when we ask something to acompany, like we had a recent
engagement topics on SQL AIwhich we launched back in 2020.
(18:40):
So, before GPT and so on, wesaid, yeah, as an investor, we
think we face some risk withthis fast development of AI.
We think companies shouldestablish some ethical principle
and we came with the firstethical principle in terms of AI
shareholder expectation andjust seeing some companies
(19:02):
reading your paper, implementingsome policy there and starting
reporting, and yeah, you justsay yeah, that's exactly what we
were asking and some companiestake that positively and
constructively.
So, yeah, when we see a companyprogressing, hearing, listening
and going in the direction wewere discussing, it's always the
(19:23):
kind of success we can bringback and does it have an impact
on the valuation, on the shareprice and so on.
It cannot be negative and Ithink on the long run, companies
which actually handle all thoseproblematics are better suited
to success for the long run interms of profitability.
Speaker 2 (19:45):
Yeah, I attended a conference recently, also
organized by the CFA Society,switzerland, but the one in
Geneva the ESG conference inGeneva and one of the speakers
said something that I foundinteresting.
That was thatsustainability-linked
investments are not supposed togenerate alpha over traditional
investments.
(20:05):
The idea is to generate similartype of returns but doing a
good thing for the planet at thesame time.
What do you think about thatstatement?
Hey there, quick favor to askIf you enjoy the blunt dollar,
the unfiltered takes, thestories and the laughs.
The easiest way to support theshow is by tapping that
subscribe button right now,while you're listening, and
(20:28):
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finance talk that's engaging,insightful and worth your time.
Thanks so much for being hereand let's keep these great
finance conversations going,yeah.
Speaker 1 (20:46):
I think so, but I also think when we.
I think also it's aboutanticipating where the direction
and the mega trend.
So if you are early enough withmega trend thinking about
renewable energy, low carbonmobility, all those kinds, I
mean, if we really want, if wereally care about the next
generation and our planet, wemust act much more quicker and I
(21:11):
think in 20 years it will be ano-brainer.
So I think even I would say itshould be, it should create some
alpha on the long run.
On the short run maybe not,because yeah, there is
contradiction on the market andshort-term view on the market,
but there I agree, yeah, itshould not be supposed to be
negative.
So maybe your mega trend thatyou think what will be correct
(21:34):
in 10, 15 years, might suffer alittle bit on the short run.
So that can be.
But on the mid to long run, I'mconvinced that integrating
sustainability and doublemateriality not only the ESG
risk management, but alsolooking for companies which are
proposing solutions and drivingpositive impact should really
(21:59):
outperform on the mid to longrun.
Speaker 2 (22:02):
Interesting.
So let's pivot now to a topicthat I know that is close to
your heart active ownership.
So I think, whilst I wasresearching for this podcast, I
realized that one of the coreideas behind Ethos is that
ownership isn't just passive,it's like a responsibility, and
(22:23):
that shareholders aren't justinvestors, they're stewards.
Why do you believe activeownership is one of the most
powerful tools that investorshave today?
Speaker 1 (22:33):
Because you have to understand that as an investor,
as a shareholder, you areco-owner of the companies.
So if you start thinking it'sjust as you would drive your
company, then it's totallyanother perspective.
So as an owner of a company,you have the power to drive and
(22:57):
to influence.
But then of course we invest incompanies with 100,000 or more
shareholders and of course weare very small.
So we tend to this dispersionof the shareholder base make it
less tangible that you areco-owner.
But if you go back, if you goto those general meetings,
(23:19):
physically talking to the boardof directors with your fellow
shareholders, you feel this kindof spirit that it's your, it's
your asset somehow.
So you just entrust the boardof directors, period that it's
your asset somehow.
So you just entrust the boardof directors to manage your
asset.
So they have to listen to,finally, to what your
(23:42):
perspective.
And, yeah, as a co-owner of acompany, you are potentially on
the driving seat to influencethe board's decision.
So that's where I think it'sthe most powerful tool as a
co-owner you can influence.
(24:03):
I always take the perspective ofthe capital expenditure.
If you want to reallocate thefinancial flow towards low
carbon economy, for instance, asan investor you have actually
two ways to do it.
You can effectively reallocateyour portfolio.
You can divest from fossilcompanies and reinvest in
(24:24):
renewable energy and concentrateall your holdings into a single
topic which is financially alittle bit potentially risky to
have too much concentration.
But you can also ask the boardof the fossil industry, of the
fossil company, to say OK, as aboard of directors, I would like
you actually to redrive yourcapital expenditure less toward
(24:49):
looking for new oil and gasfield but investing in renewable
energy.
So you can do it at portfoliolevel or at company level, and I
think the first step is really,as a corner, you push the board
to reallocate the capital flowon the right direction.
Speaker 2 (25:09):
That's very, very interesting and I'd like to hear
some examples of what you'resaying actually, because Ethos
obviously has played key rolesin engagement efforts with
giants like Nestle, allseam andso on, so we're talking about
big names here.
Can you maybe share exampleswhere engagement by you, eththos
(25:31):
or similar groups actuallymoved the needle inside one of
these companies?
Speaker 1 (25:37):
Yeah, I think we managed somehow.
I take one example which is nowunsuccessful.
It's BP actually, because, asan oil and gas giant, actually
based on the pressure ofinvestors back in 2020, when
BlackRock Vanguard, the big, big, big player in the asset
(25:57):
management industry, tended toactually go in that direction,
the board of BP really decidedto shift, to shift and to say we
will reduce actually our oilproduction by 2030, by 40% and
reinvest in renewable energy.
And that was really, I think,the first success stories.
(26:18):
And they submitted the climatestrategy was overwhelmingly
supported by investors and sothat was positive.
Now, three to four years later,they dropped everything, all
the climate ambition thing.
Because they are attacked nowby a short-term investor who is
asking totally the contrary, sayyou need to get the value from
(26:40):
your asset.
Your asset are oil and gas.
We don't really care aboutsaving the planet.
So, and the board actually said, okay, let's totally drop our
ambition in renewable energy.
So a success is never totallyacquired.
So at the last AGM, actually,there was a campaign of
investors who were pushing forgoing in the right direction to
(27:02):
say, okay, we would like to.
We're not very happy on theboard's decision.
We will oppose the board, there-election of the chair.
He got actually less than yeah.
I think he got around 70%support, which is already quite
a thing.
So a successful example whichactually turned out to be less
positive.
(27:22):
So question what we do next.
Do we, shall we, if we're nothappy with it?
Shall we totally divest orcontinue to make the pressure?
So that's a little bit where weneed to find the balance.
On successful engagement yeah,you mentioned Allseam.
I think we're quite happy withthe development of the company.
We asked them back in 2020 toprepare a climate report and
(27:46):
submit that climate report toshareholder vote.
They did it in 2021.
The first climate report theyhad a target of reducing by I
don't remember exactly thefigures, but their reduction
target was aligned with twodegrees.
So in our voting policy we saidwe need a 1.5 degree reduction
(28:07):
target validated by thescience-based target initiative.
So actually we refused thefirst report.
The company was not that happy.
They said you asked us toprepare a report, we submit to
the vote and you are not happy.
And then we have gooddiscussion and actually the
company reinforced their targetand one year later they come
(28:27):
with a new report.
They actually also committed toinvest for the period back then
2022, 2025, more than 500million to their low carbon and
low CO2 production technologies.
They are deploying thoseinvestments and now they are on
track to reach their target.
(28:49):
So I think it's quite apositive development if you
think about how systemic thebusiness is, because if you can
decarbonize the buildingmaterials, it also has an effect
on the CO2 emission of theportfolio of a pension fund
which also have real assets,which owns buildings, and when
(29:12):
they build buildings, I meanthey need cement.
So if you manage to push thatdecarbonization at the systemic
level, then it can have alsopositive effect on the rest of
the portfolio.
Speaker 2 (29:25):
You mentioned, while talking about BP, the word
divest, which I definitelywanted to touch upon because
obviously active ownershipsounds ideal in the best of
worlds.
You know change occurs, butsometimes I mean you know it
better than anyone dialoguedoesn't lead to real change.
You decide when it's time tostop engaging and start
(29:48):
divesting.
And how does that decisionprocess look like for those of
us that are completely outsideyour world?
Speaker 1 (29:56):
Yeah, no, no, no, it's a key question.
Actually we will make somerecommendations at one point.
Usually what is important whenyou start engagement is to have
a kind of time-bound engagement.
Usually you set five yearsperiod to be able to achieve
your ambition and so you startmeasuring, you set the time
(30:17):
bound and then you set thetarget and after five years you
need to look at what happened.
If you've tried everything likeshareholder resolution and so
on, and then you're notsuccessful, because actually
you're not alone, you have alsoother co-shareholders and
(30:38):
actually if thoseco-shareholders don't want the
company to change, then yeah,you've tried hard, and if it's
not fitting your target, theneffectively you should make the
recommendation to divest thecompany.
And that's where potentiallybest in class because the
problem of divesting a wholesector then of course you might
(31:02):
face a lot of tracking error inyour portfolio, which will
always be a big discussion forpension funds, because they will
be taken into between theirboth fiduciary duties of
delivering the return topensioneer, but also they have
fiduciary duties to address allthe risk.
So it's not an easy one.
But yeah, I think, time-boundtarget, escalating the thing,
(31:29):
trying everything you can andthen after a period say stop and
recommending to.
But it's true that divestmentwon't be very effective at the
end of the day because thecompany don't really suffer.
If you are on the secondarymarket, like if it's a listed
equity world, then you're justtrading the shares between
(31:52):
investors so the company doesn'treally see the impact on their,
on their uh cost of capital,unless everybody is selling.
So of course then the sharedrop.
But you will always find somebuyers uh on the market.
What is more important, I thinkif you make the recommendation
on the debt side when there is adebt issuance, then you have a
(32:12):
leverage.
Or if you push banks to say wewon't lend that company because
they didn't reach the target.
So I think if you fail withactive ownership, you can divest
won't be very much powerfulunless potentially you make that
public.
Public lists are always moreeffective.
(32:34):
But then pushing really on thedeny debt side, you are a fixed
income specialist, but I thinkthen you go on the primary
market and that hurts a littlebit more the cost of capital of
the company.
Speaker 2 (32:49):
And is that?
Because when you talk aboutdebt, you can see in this
perspective the specific use ofproceeds for each specific
issuance and hence, whenever thecompany comes maybe back to the
market with a similar type ofbond, the market is going to
remind them that you know theywere not doing what they did in
the last instance.
Or why do you think you see theimpact more on the fixed income
(33:13):
front than on the equity front?
Speaker 1 (33:20):
Yeah, if you are at the time of the issuance,
because that's the money flow tothe company.
Of course, if you are on thefixed income market and just
exchanging an already issuedbond, then back to the for the
listed equity.
But really, when the cost ofcapital increase because the
debt is not oversubscribed, thenthe issuer has to increase the
(33:41):
rate to make the thingattractive.
And, yeah, I think it's gotmore for the company.
So that's where I believe thatthey have more incentive to move
.
So when on the primary marketthe cost of capital is higher,
(34:03):
so the same for lending or forinsurance as well.
I think insurance can play alsoa big role.
If they stop insuring somenegative project on the
environment pipelines ordrilling or things like that, I
think that could be also abigger impact.
Speaker 2 (34:24):
I want to ask you about Exxon, because you've
referenced ExxonMobil proxybattle as a key moment in
shareholder activism, a momentthat showed that even giants can
be moved when shareholdersunite.
So what lessons did you takefrom that proxy fight about what
it takes to challenge andchange these big companies, and
(34:47):
maybe can you provide a bit ofcontext for our listeners about
this whole story?
Speaker 1 (34:52):
Yeah, it was back 21, I think on the proxy battle,
when this small investment fund,actually with a small stake,
actually make the coalition alsowith the state of I think it
was the state of New York, alsowith the state of I think it was
the state of New York to put onthe agenda for alternative
(35:16):
board members because they wereunhappy with Exxon's strategy on
climate, arguing that Exxon wasnot actually acting properly on
climate issues, actually actingproperly on climate issues.
And actually there was in theUS, if you want, when you have
such a on the nomination, it's aplurality vote, so you have a
(35:42):
number of seats at board level Idon't exactly remember how many
, but let's say eight seats andthey come up so the board come
with eight candidates.
So actually when you have thatsituation, you need only one
vote to be elected to the board.
So there was a contestedelection with an alternative
slate of candidates.
So there were actually 12candidates for the eight.
(36:04):
Maybe it was 9 and 13, just asan illustration.
And so there was a bigcoalition of investors actually
pushing for those fouralternative candidates, pushed
by the fund which was calledEngine no 1.
(36:26):
The firm which was calledEngine no 1.
And those four candidatesseemed to be at that time more
likely to move Exxon on theirtransition strategy, and three
of them actually got more votesthan the Exxon candidates.
(36:49):
So the final board consistedfrom the board candidates plus
three members, and three of theboard candidates actually didn't
get enough votes so wererejected.
So, yes, it was actually thefirst time that such a proxy
fight was held on the climatestrategy of a company, which was
(37:12):
not only climate because thoseengine.
One theory was also that thecompany could be able to
generate more revenue in thefuture.
When it diversified its revenueit never said stop drilling,
but it said you should alsoinvest more of the capex into
renewables and make thetransition.
(37:34):
Then, yeah, that was only threecandidates, that was not the
majority.
So it didn't really change, Ithink, much on Exxon, which
became actually much moreaggressive against any
proposition.
So last year actually they suedone of the shareholders who
(37:55):
wanted to file a shareholderresolution on scope three
emissions.
So follow this was sued byExxon on this topic Only three
years after they lost somehow afight on climate, and I think
they were quite pushed also onthe political shift.
(38:16):
But still, that was kind of awake-up call that investors can
actually win a fight for thosequestions.
But unfortunately I think thosecandidates at the end of the
day could not drive enoughchanges within the full board.
Speaker 2 (38:38):
Thanks for that fascinating story.
I want to tilt now to adifferent theme, ESG, and one
topic that I always like to askpeople working in your field
greenwashing, the danger oflabels.
I mean, there's been terms likesustainability, responsibility,
(39:01):
green being splashed left andright over recent years and
often they were poorly definedand I think that ambiguity often
led to confusion and, in somecases, even greenwashing.
So question, I know it's acomplicated one, but how do you
distinguish between realsustainable investing and what's
simply marketing?
Speaker 1 (39:25):
Yeah, no, very difficult one, because I think
there was some, because to makethe greenwashing it has to be
really voluntary and I thinksome of those people were
labeling things, also thinkingthey were doing something great.
Due to the lack of transparencyof companies, due to the lack
(39:46):
of norm within investment, dueto the lack of consensus on what
investors want and I think it'salso fair that everybody has
maybe different values.
For you maybe Tesla will begreen and for me Tesla won't be
green, because I think thegovernance is poor and I don't
(40:09):
want to have that in myportfolio.
So what's the alignment withwhat?
And the expectation of the endclient is also key in that
question.
So the problem is the packagingwhich was made actually, and
for long ESG was only on thesingle materiality.
(40:32):
So you look at ESG risk.
So typically companies.
Let's take Exxon again.
I think we had, or it was maybenot Exxon, but I think it was.
I don't remember but a USdrilling company actually
claimed to be net zero and thatwas actually on their annual
(40:53):
report.
It's in the Hall of Fame of myanalyst.
So on the annual report you seethe drilling machine and there
was a claim of net zero becauseactually they were powered by
renewable energy.
So renewable energy wasactually powering those drilling
machines and the company wasgoing to win that zero because
(41:14):
they were focusing on scope oneand two and just looking at how
they were, what kind of energythey were consuming to get out a
product whose climate impactwill be massive and destructive.
If you just focus on those kindof scope one and two, you could
say, oh, but that company isnet zero, she's addressing the
(41:38):
thing.
So if you don't look at theimpact of the product at the end
of the day then you can end uphaving some claim of company or
investors saying we're greenbecause they're just looking at
one side of the coin.
So double materiality is wherecertainly you will start
cleaning a little bit theexpectation gap between the end
(42:02):
client with thinking to buysomething which is green and
doing things positive to thosewho are just focusing on
reducing the ESG risk or maybefocusing too much on one of the
topic of sustainability.
Philippe Maurice could end upbeing positive because they take
(42:24):
care of their value chain andthey remove child labor in the
plantation and they have highhuman rights standards within
the supply chain.
Their products will be negative.
So again, the definition of whatyou expect from the investment
is key to say whether you'regreening or not.
(42:48):
So I think the legislation orthe development in the EU is
very important, because thereyou can start making the
difference between an Article 9SFDR where you really have the
intentionality to invest insomething which will trigger a
positive change on the topic onlight climate change on the
topic on light climate.
For this you need a goodreporting from the company, and
(43:16):
that's why the taxonomy is veryimportant, because now, with
taxonomy, you can define whatpercentage of revenues from each
company can be considered greenor not.
And so for investors, you starthaving a good information, make
an informed decision and startbuilding a portfolio with a high
level of standard.
And then you can also report toyour investors on your fund how
(43:37):
many companies can qualify asbeing positive, neutral or
negative.
So transparency from companiesand from investors are key.
In order to label correctly afund, you should be able to come
up to a kind of a NutriScore atthe end of the day for the food
(43:58):
to say okay, this fund can beconsidered for this criteria to
be positive or not.
Speaker 2 (44:05):
Let's pause there for a second.
Like transparency, because youkeep talking about it and you've
said in the past that it's thenew battleground for sustainable
finance, because without it,everything else just is becoming
a facade.
So can you specify why istransparency so critical for
sustainable investing tofunction?
(44:26):
Really?
Hey there, quick ad break.
Do you work in the financeindustry and have a genuinely
interesting story to share?
I'm always on the hunt forgreat guests who bring raw,
unfiltered insights to the table.
Or maybe you know someone witha story worth telling?
Please put us in touch.
You can reach out to medirectly via LinkedIn.
I'd love to hear from you.
(44:47):
And now back to the show.
Speaker 1 (44:54):
Yeah, it's like financial statement.
If you don't have any financialstatement, you cannot make an
informed investment decision.
Ok, so for me, currently theESG world, the sustainability
world, is really at thebeginning, because we're not
able to assess correctly theperformance, the sustainability
(45:14):
performance, of a company.
Because maybe a company is verytransparent and publish all the
indicators, like employeeturnovers, all their emission,
all their functional stress andeverything, but then you need to
be able to compare that totheir industry peers.
So if half of the companiesdoes not publish, let's say, the
lost time, injury rate of theworkforce, how can you as an
(45:39):
investor say this company ispresenting a risk higher than it
appears because it's nothandling health and safety
correctly within its workforce?
And that, yeah, it's likemaking a decision on investment
without knowing the net incomeof a company.
So you're a financial analyst?
(46:00):
Yeah, of course.
And currently if you read asustainability report, look at a
sustainability report of aSwiss company where the standard
is quite low.
It's then difficult to compareto the European peers, where now
, with the CSRD, you starthaving very, very comprehensive
reporting.
So I think here investor has tohave to fight a little bit more
(46:23):
against this trend, because thecompany's lobbying world is now
pushing really hard againstthose bureaucracy papers and so
on.
Speaker 2 (46:37):
So let's talk about those double standards, because
I think that's also very, veryinteresting.
I feel there's like thisgrowing tension in ESG.
Some companies are held, orsome countries or regions, to
very high standards, whilstothers slip through because
they're in either popularsectors or have good PR or
whatnot.
So how do you think about thesedouble standards in ESG
(46:57):
scrutiny?
Speaker 1 (47:01):
Yeah, no, it's not good.
I mean we should end up havingsome high standard like we have
with.
Again, with a financialstatement you have US GAAP or
IFRS, but the listed companyactually has to publish those
kinds of financial informationand then you can again compare.
So maybe you have to make somerestatement as a financial
(47:22):
analyst to be able to comparethe income statement and balance
sheet of a US GAAP companyversus an IFRS.
But still it's converging.
There is some ground principleswhich are converging.
So we really need to go on thesame direction.
And I think this is all of ISSB.
So the standard for the IFRS,but for sustainability, and with
(47:47):
the European standard actuallythey tend to converge.
The big difference is that oneis pushing for double
materiality with the taxonomyand so on, while ISSB is more
pushing on the financialmateriality of the indicators.
But then if you create a bestpractice somehow for investor
(48:12):
and good example of goodreporting, then it's up to the
investor to say to their companylook, I prefer my European
peers because they actuallypublish everything there.
I hope we will push a littlebit the standard with best
practices and trying toinfluence laggards toward those
(48:34):
companies which are moreregulated.
Do you think we will?
Speaker 2 (48:39):
ever get like a global framework, or is that
impossible?
Speaker 1 (48:43):
No, I think we could.
We have already.
In terms of CO2 emission, wehave the GHG protocol with scope
1, 2 and all the categories ofscope 3.
This is a GHG protocol.
This is a single standard, aworldwide standard.
All companies are reportingtheir CO2 emission in accordance
with the GHG protocol.
(49:03):
So now some of them say wedon't publish a scope three
emission, but they all have thesame methodology actually to
capture and report thoseemissions.
But maybe some of them are notobliged to report on this.
But as a manager of thosecompanies, I think they should
absolutely measure.
(49:23):
The question is do you publish?
But like employee turnover, doyou know any CEO of a company
who does not know the employeeturnover?
Of course they know it becausethey need to track that.
That's also part of how youmanage a company.
But then the question is do youpublish or not that information
?
Speaker 2 (49:44):
Interesting.
Yeah, wow, yeah.
Lots to digest there.
Maybe one last questionregarding ESG.
I feel there's a growing numberof investors, particularly in
the last couple of years afterthe greenwashing stories emerged
, that became a little bitskeptical about ESG.
Speaker 1 (50:05):
Sorry, it got cut because of my ending wrong.
Oh, no, worries.
Speaker 2 (50:11):
No worries, I'll start the question again.
I'll edit that afterwards, noworries.
So I have a question about theperception of ESG.
I feel over the last couple ofyears there's been a growing
number of investors that becamea little bit skeptical about ESG
on the back of somegreenwashing stories and so on,
(50:33):
or even some that see it asvague or ineffective.
So what would you say to thosethat became disillusioned with
ESG, maybe especially to thoseyounger generations or more
idealistic investors?
Speaker 1 (50:51):
No, look, we have no choice.
We have no choice.
We need to have a systemicchange in the way we are
managing our planet.
So, overconsumption, overuse ofresources we will face major,
major issues if we continue onthis hyper-consumption thing.
(51:18):
We are actually totally, um,yeah, dependent on those growth,
infinite growth.
We try to have a financialinfinite growth with limited
resources and, of course,innovation will help.
Hopefully we see thatinnovation will help us.
(51:38):
But we need to find the rightagain, where you put the right
limit between infinite growthand limited resources.
So, yeah, what you don'tmeasure, you don't manage.
So, using the planet resources,you need really to act.
(52:03):
So you know you will havescarcity, scarcity in resources.
So start now as a company, tothink about circular economy,
recycling and all those things.
So maybe nowadays it's not,maybe buying the resources is
less costly than potentiallyrecycled, but on the mid to long
(52:25):
run, you know that yourinvestment will have the payback
of the investment.
So we have to keep the belief,because the reality is that we
cannot sustain this model.
Speaker 2 (52:40):
Wow Again, I'm truly enjoying this conversation.
I had so many questions for you, but we're almost getting close
to the end of the conversation,so I need to be very selective
about what I asked you in thoselast couple of minutes.
Maybe let's talk about thefuture.
A couple of things.
(53:01):
One is, I think, the rise ofpassive ownership and the risk
associated to it.
Speaker 1 (53:06):
I'd like to ask you about what concerns you the most
about the growing concentrationof ownership in the hands of
these large passive investors atthe moment these large passive
investors at the moment, yeah,it's a little bit too big to
vote, too big to be too powerfulat one point and too
influential and, yeah, that'sreally, I think, a big systemic
(53:31):
risk for the system.
When you have three to fourasset managers controlling 20 to
25 to 30% of the capital ofmost listed companies worldwide,
then, yeah, their potentialinfluence becomes very, very
risky.
That's where I think the trendis here and the consolidation
(53:56):
will continue because, yeah, Ithink the cost of replication
(54:20):
and so on, they have activelymanaging their voting rights.
Typically, because it's notbecause you're passive in terms
of investment that you should bepassive in terms of voting.
On the contrary, I thinkpassive investors must be very
active owners because they areuniversal, universal owner and
they are captive to theinvestment.
(54:41):
If you want to track the index,you cannot just sell, so you
need to be able to influencesomehow your investment.
So I think we should evolvesomehow that the final
beneficial owner, the assetowner which delegates management
to those big, big, big firms,should actually be able to
(55:04):
recover the voting right at somepoint.
You know what we call the votethrough or the split voting, so
allowing your end investor tomake some recommendation that
could a little bit, at least interms of voting, dilute their
(55:24):
power, because then in terms ofinvestment decision, of course
it's also risky when everybody'spassive, you also create some
market inefficiency somehow,because then active investor,
especially in the mid and smallcap world, you know whereas a
broker are not that many, so youcan really be quite with a very
(55:49):
small stake in the mid andsmall cap, you can really take
some power and in front of you,if you have only passive
investors, they don't reallydiscriminate on the investment
case.
This is also something, I think, which is quite risky.
Speaker 2 (56:04):
Maybe one last question, talking specifically
about the next gen.
What advice would you give tothose starting their career who
wants to make a meaningfuldifference in the finance
industry?
What would you tell them?
Speaker 1 (56:20):
Yeah, to refuse the statute code, to really be
innovative, to demonstrate that.
Yeah, to be vocal towards theolder generation and I'm putting
myself in the older generationbecause I'm not that old, but
when I see the young coming,maybe they are also at ESOS and
(56:44):
so they have quite strong valuebut they are pushing us as the
management team to do more, likeour own climate strategy at
ESOS.
They are pushing, say we arenot ambitious enough, we should
do more.
And yeah, of course, as a CEO,I say, come on, we are just best
in class.
But no, we can always do more.
(57:04):
And maybe when they come andtell me we should do more, but
then I think about it and say,yeah, they're right, we should
do more.
We have to be an example aswell.
So for the young generation,just be constructive, not
aggressive, with your managementteam, but come up with a
proposition, a good example frompeers.
(57:27):
If you say, okay, I've seenthis bank is doing this, I think
it would be a good idea for us.
Can I dig a little bit on thatproject?
Yeah, come with innovation.
Idea, just not idea, but alsosolution.
That's sometimes something Isee also with the young.
Don't come only with problem.
Come with problem, but alsowith a solution.
Speaker 2 (57:49):
Yeah, that's particularly useful when you're
still talking to a CIO.
That's always a great tip.
Well, vincent, thank you somuch.
It's been an absolute pleasureto have you on the show.
I look forward to see you inthe ESG conference in Zurich on
the 20th of May, organized bythe CFA Swiss Society.
(58:10):
It's been absolutely amazing.
I took many, many notes duringthe conversation.
I hope our listeners enjoyedthis conversation and learned as
much as I did, and I wish youall the best at Ethos and here's
to another 21 years for youahead.
Speaker 1 (58:26):
Thank you, ignacio, thank you to everyone, bye-bye.
Speaker 2 (58:29):
The Blunt Dollar is written, produced, hosted and
edited by me, Ignacio Ramirez.
Everything you hear concept,script, sound, design and
production come straight from mydesk and, occasionally, my
kitchen table.
Thank you so much for listeningand join me in the next episode
of the Blunt Dollar for moreraw, honest finance
conversations.
We will reduce oil production by 2030 by 40% and
reinvest in renewable energy.
Speaker 2 (00:06):
Welcome everyone to a new episode of the Blunt Dollar
.
Today's guest is none otherthan Vincent Kaufmann, ceo of
the Ethos Foundation and EthosServices, one of Switzerland's
most respected voices insustainable finance and
corporate governance.
He's built a reputation notjust as an expert in ESG, but as
(00:27):
a hands-on advocate for activeownership, showing how investors
can influence real changewithout abandoning financial
rigor.
Speaker 1 (00:36):
So if you are early, enough with Megatrend thinking
about renewable energy, lowcarbon mobility.
I mean, if we really care aboutthe next generation and our
planet, we must act quicker.
Speaker 2 (00:46):
What would you say to those that became disillusioned
with ESG?
We?
Speaker 1 (00:50):
have no choice.
We need to have a systemicchange in the way we are
managing.
Speaker 2 (01:00):
This is the Blonde Dollar with Ignacio Ramirez.
This is the Blonde Dollar withIgnacio Ramírez.
Quick disclaimer the views andopinions expressed in this
podcast are those of thespeakers and do not constitute
financial, investment or legaladvice.
This content is forinformational and educational
purposes only and should not berelied upon as a substitute for
(01:21):
professional advice.
Always do your own research andconsult a qualified advisor
before making any financialdecisions.
All investments involve risk,including the potential loss of
capital.
And now let's get started withthe episode.
Welcome everyone to a newepisode of the Blunt Dollar.
Today's guest is none otherthan Vincent Kaufman, CEO of the
(01:43):
Ethos Foundation and EthosServices, one of Switzerland's
most respected voices insustainable finance and
corporate governance.
Since taking the helm in 2015,Vincent has led the efforts to
drive shareholder engagement,promote ethical investing and
push companies towards greateraccountability on climate and
governance companies towardsgreater accountability on
(02:04):
climate and governance.
Vince's journey started atEthos, actually in 2004, as a
corporate governance analyst,rising through the ranks to
oversee investments andultimately lead the entire
organization, and along the way,he's built a reputation not
just as an expert in ESG, but asa hands-on advocate for active
ownership, showing how investorscan influence real change
(02:27):
without abandoning financialrigor.
In today's conversation, we'llexplore many topics, such as why
active ownership matters morethan ever, how fiduciary duty is
evolving, the fine line betweenreal sustainable finance and
greenwashing, and what thefuture holds for corporate
engagement in a volatile world.
Vincent, it's an absolutepleasure to have you on the show
(02:50):
.
Welcome to the Blonde Dollar.
Speaker 1 (02:53):
Thank you, Ignacio.
It's a pleasure, my pleasure,to be part of the show today.
I hope we can cover all thesevery interesting and important
topics.
Thank you again for theinvitation.
Speaker 2 (03:03):
Absolutely so.
Before we dig into all of it, aquick promotional message.
The reason I'm talking to Vincetoday is because the CFA
Society of Switzerland made avery kind introduction, because
Vincent is very, very close tothem and he is a regular speaker
at the ESG CFA conferences.
(03:24):
There's an upcoming onehappening in Zurich on the 20th
of May, so if you have theopportunity to go, please make
sure to check the details online.
The topic this year is ESGUnlocked Mastering Opportunities
for Sustainable Performance.
There's going to be plenty ofamazing speakers, a great lineup
(03:44):
.
So if you're interested inanything related to ESG and
sustainability, this is theplace to be in Switzerland the
20th of May.
So, vincent, many things tocover today, but I'd like to ask
you a very simple firstquestion what is it that you're
doing?
Exactly as Ethos, I tried tosummarize it at the beginning,
but always better to hear itfrom you.
Speaker 1 (04:07):
Yeah, you did it well .
So Ethos is quite an hybridanimal.
Somehow we're kind of a pensionfund voices.
We gather actually 250 pensionfunds which give us mandate
mostly in active ownershipactivities, active ownership
(04:30):
being voting at the generalmeeting.
So we are acting as a kind of aproxy advisor, but we are also
mandated by those pension fundsto engage in dialogue, what is
called engagement, so engagingdialogue with listed companies
in Switzerland and abroad aswell, on environmental, social
(04:51):
and governance topic, and we arealso, of course, to conduct
those activities you need gooddata and that's why we are also
collecting ESG data on companies, making also ESG assessment,
esg ratings of company, andthose services actually help us
also to build up some investmentsolution like index or
(05:14):
investment fund that we arelabeling, to offer some very
highly convinced sustainabilityinvestment solution.
Speaker 2 (05:26):
So why do these pension funds outsource that
activity?
Is it because of the amount ofwork it requires?
Is it because you hold anexpertise that no one else has?
Why do they come to you?
I think it's more and more.
Speaker 1 (05:42):
Pension fund and asset owners generally in the
world are quite universal owners.
You know this is triggered aswell because they have index
portfolio.
They try to track many indexes,indices, and so they hold many,
many investments in theirportfolio in terms of listed
asset classes.
(06:02):
And, of course, in Switzerland,the pension fund world is very
fragmented.
We still have more than 1,000pension funds.
So, in terms of resources, ifyou want to do a good
stewardship job by voting allthese general meetings and
engaging dialogue with thosecompanies, you need some
resources.
So they tend to delegate thosekinds of services to their asset
(06:27):
manager or to service providerssuch as ethos to yeah, to do
this, and thanks to theirsupport, we can build a
dedicated team.
We are more than 30, we havemore than 30 analysts actually
doing the job, knowing thecompanies, engaging those.
You need to know the companybecause when you engage dialogue
, you discuss with the chair ofthe board, so you need to be
(06:49):
well informed.
You just cannot go and say well, yeah, so you need to be
prepared to get the goodquestion and to have the good
request and then, of course, tofollow up what you are asking.
It's just not asking, it's alsofollowing up to be able to
report on progress on ESG topics.
Speaker 2 (07:07):
So, before we deep dive into the ESG topics, I'd
like to take a step back andmaybe talk about you and your
career, because I think it'sreally interesting.
You joined Ethos back in 2004.
That's like 21 years ago.
It's very rare to see peoplespending so much time in the
same company, which, of course,probably means that you love
(07:29):
what you're doing, but also thatyou know what you're talking
about, because you started as acorporate governance analyst and
rose all the different layersover the years.
But maybe can you walk usthrough your journey from the
day you joined Ethos to becomingthe CEO.
Speaker 1 (07:46):
Yeah, it makes me a little bit of a dinosaur.
So when you talk about 21 yearsago, actually it started.
I was a student at theUniversity of Geneva here and
one of the teachers of financeactually was part of the board
of trustees of the EthosFoundation and at that time I
was actually writing adissertation on governance
(08:07):
corporate governance.
It was just after thebankruptcy of the Swiss airline
you know Swiss Air due tocorporate governance failure.
We had on the same time in theUS the Enron cases, worldcom,
big corporate failure due toinadequate governance.
And already as a student I wasquite interested to those topics
(08:29):
.
Studying also accountants andcorporate governance was also
key.
So when he come and said thisfoundation is looking for a
student for the proxy season tomake voting recommendation at
general meeting, I said oh,that's exactly what I'm studying
now for my dissertation.
So I jumped on the opportunityto do the internship of three
(08:51):
months during what we call busyseason, march to May, and
actually the first intern was in2003.
Then they took me again in 2004when I finished my dissertation
and, yeah, actually I love it.
It was really the early stageboth of governance, because it
(09:12):
was just a couple of two yearsafter the stock exchange
introduced the directive oninformation on corporate
governance.
So it was very new thatcompanies had to report who were
the board member, what was thecompensation member, what was
the compensation framework, whatwas the shareholder rights All
those questions were quite new.
So it was very, veryinteresting.
(09:34):
And sustainability was not evena topic at that time.
I mean, almost no companies hadany sustainability report.
So we started also engaging toask for more transparency.
So and I stayed becauseactually it's so interesting.
First job, because, if you like,analyzing a company, the
perspective of governance andsustainability is so, so, so
(09:57):
interesting because you have togo understanding the ownership
structure of a company who iscontrolling the board members,
the compensation and then goingthrough the sustainability value
chain of a company who iscontrolling the board members,
the compensation, and then goingthrough the sustainability
value chain of a company, you dounderstand the business much
better, sometimes as if you werejust looking at the financial
statement.
(10:18):
So and yeah, I got fascinated bythe topic and that's why I
stayed actually and get someopportunities to grow with the
topic and that's why I stayedactually and get some
opportunities to grow with thecompany.
But I must confess, even if I'mthe CEO since 10 years, I keep
on looking at annual report andthe progress of companies.
Yeah, and what is veryinteresting, when you go to look
(10:43):
at different sectors, you jumpfrom all-seam cement producer to
move to ABB, which is makingthe generator, then you jump to
an insurance understanding howthis is working.
So, yeah, if you're a littlebit curious about business,
about companies, I think this isa dream job.
Speaker 2 (11:02):
Nice, wow, what a story.
I think this is the dream job.
Nice, wow, what a story.
And I'm curious to hear, likeas the CEO, the direction you've
decided to take the EthersFoundation on, because I feel
like, particularly when it comesto sustainability matters, a
lot of people choose activismand try to grab headlines,
(11:22):
whilst your approach focusesmore on engagement, on influence
and on long-term change, ratherthan this public confrontation.
So how did you develop thisphilosophy around active
ownership versus a moreconfrontational model of change?
Speaker 1 (11:39):
Well, I think we need both.
At the end of the day, we alsosometimes need to use a little
bit of escalation, and we did itsometimes by putting
proposition at the generalmeeting, but it has always been
after a kind of a constructivedialogue with the companies and
most of the time, actually, wemanaged to get some good
(11:59):
agreement with companies.
The clever companies alsounderstand that when you just
pass some of the investors'expectation, it's also kind of a
free consulting, because we arepaid by investors to advocate
for better transparency, bettergovernance, better strategy in
terms of sustainability.
(12:19):
Of course, not everybody are onthe same page, so most of the
time this is really a veryconstructive dialogue which
brings wonderful results.
But you also need to be able toescalate, and I think that's the
secret of the potential success.
If a board of directors knowsthat your request can be
(12:44):
escalated via shareholderresolution or more public
confrontation because sometimeswe do go to the general meeting
just to speak out it's importantto be there as well Then I
think you find the right balance.
That's where but 90% of thetime you're right we're doing it
behind a closed door, bydiscussing and trying to get the
(13:10):
company understanding why we'remaybe fostering for more
transparency or wanting to reacha better balance in terms of
stakeholder interest.
Long-term vision in terms ofstakeholder interest long-term
vision.
Speaker 2 (13:28):
I guess where you place that cursor between super
confrontational and moreconsensual comes with years of
experience and by doing many,many cases, but I find it really
, really interesting.
I was also curious to hearabout your Swiss roots, because
obviously Switzerland has aunique financial culture.
It's well known for being solidover the years, consensus
(13:52):
driven, yet very globallyinterconnected, and I was
wondering if your Swissbackground has shaped the way
you think about finance, riskand sustainability in general
finance, risk and sustainabilityin general.
Speaker 1 (14:10):
Probably probably because I think we have a kind
of this vision, of a kind ofdirect democracy.
First, in terms of politicalvision as a Swiss institution
and we mostly are client basedour Swiss pension fund and also
in the pension fund.
When you think how is itgoverned?
You know it's half of the boardof trustees, representative of
(14:30):
employers, the other half ofemployees, so they also need to
find the right balance,compromise discussion dialogue.
And it's exactly the same withour political power in
Switzerland when you think aboutthe small cantons, the big
cantons, the big city, the both.
(14:53):
In changing the constitution,you need both agreement of the
people and the canton.
So sometimes you have bigdivergence but we always find
our way and I think you're right.
This swiftness roots, pushesreally in this dialogue, with
trying to find a good compromise.
It's certainly very differentwhen you think in the US it
(15:19):
directly goes more via classaction, legal action against
your board when you're not happy, or directly a confrontation
proxified, you want to take theseat on the board and so on.
So it's much moreconfrontational as what we are
doing here.
So I get this is yeah, theSwiss-ness is really on that
(15:44):
kind of pushing the dialogue,engagement, but again you need
also to be able to say whenenough is enough and when you
need to be a little bit morevocal and push a little bit the
barriers.
And that's where sometimes wemight be a little bit less Swiss
because we need to push alittle bit more.
(16:06):
Again, it's finding the rightbalance between both.
Speaker 2 (16:09):
Interesting, interesting yeah, placing that
cursor once again.
And I'm curious to hear how doyou find success?
Because in finance, obviously,success is often measured by
returns, but leading anorganization like Ethos seems to
require somehow a broaderdefinition.
(16:31):
So how do you personally definesuccess in your role today, and
do you think that definitionhas changed over time, or has it
always been the same?
Speaker 1 (16:45):
or has it always been the same?
I think it's being sustainable.
That is not in contradictionwith return.
On the contrary, I'm totallyconvinced.
Since 21 years we're doing thisand we see really the long term
when we come with some ideas.
Usually on the long run, historytends to give us a little bit
(17:08):
right.
If you go back in history, wewere very critical with one of
the first fight of ESOS actuallywas in 98 against a merger of
UBS and SBS at that time and wesaid it's a systemic risk for
Switzerland.
And 10 years later, when UBSalmost collapsed with a 2008
(17:31):
financial crisis, yeah, that waskind of what we somehow
predicted a little bit earlier.
And with Credit Suisse, whenyou again think about it, we
already claim back at thegeneral meeting 2011 that the
strategy was the wrong one, thatthey should have cut much more
(17:52):
faster.
So it's it's probably badexample, because here the
success was a failure ofcompanies not having really
followed what we would havethink a better solution.
So, yeah, that's where I thinksometimes our request goes on
the might be finally, on thelong term, the good one.
(18:16):
Otherwise, yeah, we need to finda way to measure the progress
of companies.
Of course, when we are askingsomething, we need to be able to
track the progress, track thesuccess.
So somehow we are very happysometimes with small success
when we ask something to acompany, like we had a recent
engagement topics on SQL AIwhich we launched back in 2020.
(18:40):
So, before GPT and so on, wesaid, yeah, as an investor, we
think we face some risk withthis fast development of AI.
We think companies shouldestablish some ethical principle
and we came with the firstethical principle in terms of AI
shareholder expectation andjust seeing some companies
(19:02):
reading your paper, implementingsome policy there and starting
reporting, and yeah, you justsay yeah, that's exactly what we
were asking and some companiestake that positively and
constructively.
So, yeah, when we see a companyprogressing, hearing, listening
and going in the direction wewere discussing, it's always the
(19:23):
kind of success we can bringback and does it have an impact
on the valuation, on the shareprice and so on.
It cannot be negative and Ithink on the long run, companies
which actually handle all thoseproblematics are better suited
to success for the long run interms of profitability.
Speaker 2 (19:45):
Yeah, I attended a conference recently, also
organized by the CFA Society,switzerland, but the one in
Geneva the ESG conference inGeneva and one of the speakers
said something that I foundinteresting.
That was thatsustainability-linked
investments are not supposed togenerate alpha over traditional
investments.
(20:05):
The idea is to generate similartype of returns but doing a
good thing for the planet at thesame time.
What do you think about thatstatement?
Hey there, quick favor to askIf you enjoy the blunt dollar,
the unfiltered takes, thestories and the laughs.
The easiest way to support theshow is by tapping that
subscribe button right now,while you're listening, and
(20:28):
here's my promise If you do,I'll keep bringing you honest
conversations, freshperspectives and the kind of
finance talk that's engaging,insightful and worth your time.
Thanks so much for being hereand let's keep these great
finance conversations going,yeah.
Speaker 1 (20:46):
I think so, but I also think when we.
I think also it's aboutanticipating where the direction
and the mega trend.
So if you are early enough withmega trend thinking about
renewable energy, low carbonmobility, all those kinds, I
mean, if we really want, if wereally care about the next
generation and our planet, wemust act much more quicker and I
(21:11):
think in 20 years it will be ano-brainer.
So I think even I would say itshould be, it should create some
alpha on the long run.
On the short run maybe not,because yeah, there is
contradiction on the market andshort-term view on the market,
but there I agree, yeah, itshould not be supposed to be
negative.
So maybe your mega trend thatyou think what will be correct
(21:34):
in 10, 15 years, might suffer alittle bit on the short run.
So that can be.
But on the mid to long run, I'mconvinced that integrating
sustainability and doublemateriality not only the ESG
risk management, but alsolooking for companies which are
proposing solutions and drivingpositive impact should really
(21:59):
outperform on the mid to longrun.
Speaker 2 (22:02):
Interesting.
So let's pivot now to a topicthat I know that is close to
your heart active ownership.
So I think, whilst I wasresearching for this podcast, I
realized that one of the coreideas behind Ethos is that
ownership isn't just passive,it's like a responsibility, and
(22:23):
that shareholders aren't justinvestors, they're stewards.
Why do you believe activeownership is one of the most
powerful tools that investorshave today?
Speaker 1 (22:33):
Because you have to understand that as an investor,
as a shareholder, you areco-owner of the companies.
So if you start thinking it'sjust as you would drive your
company, then it's totallyanother perspective.
So as an owner of a company,you have the power to drive and
(22:57):
to influence.
But then of course we invest incompanies with 100,000 or more
shareholders and of course weare very small.
So we tend to this dispersionof the shareholder base make it
less tangible that you areco-owner.
But if you go back, if you goto those general meetings,
(23:19):
physically talking to the boardof directors with your fellow
shareholders, you feel this kindof spirit that it's your, it's
your asset somehow.
So you just entrust the boardof directors, period that it's
your asset somehow.
So you just entrust the boardof directors to manage your
asset.
So they have to listen to,finally, to what your
(23:42):
perspective.
And, yeah, as a co-owner of acompany, you are potentially on
the driving seat to influencethe board's decision.
So that's where I think it'sthe most powerful tool as a
co-owner you can influence.
(24:03):
I always take the perspective ofthe capital expenditure.
If you want to reallocate thefinancial flow towards low
carbon economy, for instance, asan investor you have actually
two ways to do it.
You can effectively reallocateyour portfolio.
You can divest from fossilcompanies and reinvest in
(24:24):
renewable energy and concentrateall your holdings into a single
topic which is financially alittle bit potentially risky to
have too much concentration.
But you can also ask the boardof the fossil industry, of the
fossil company, to say OK, as aboard of directors, I would like
you actually to redrive yourcapital expenditure less toward
(24:49):
looking for new oil and gasfield but investing in renewable
energy.
So you can do it at portfoliolevel or at company level, and I
think the first step is really,as a corner, you push the board
to reallocate the capital flowon the right direction.
Speaker 2 (25:09):
That's very, very interesting and I'd like to hear
some examples of what you'resaying actually, because Ethos
obviously has played key rolesin engagement efforts with
giants like Nestle, allseam andso on, so we're talking about
big names here.
Can you maybe share exampleswhere engagement by you, eththos
(25:31):
or similar groups actuallymoved the needle inside one of
these companies?
Speaker 1 (25:37):
Yeah, I think we managed somehow.
I take one example which is nowunsuccessful.
It's BP actually, because, asan oil and gas giant, actually
based on the pressure ofinvestors back in 2020, when
BlackRock Vanguard, the big, big, big player in the asset
(25:57):
management industry, tended toactually go in that direction,
the board of BP really decidedto shift, to shift and to say we
will reduce actually our oilproduction by 2030, by 40% and
reinvest in renewable energy.
And that was really, I think,the first success stories.
(26:18):
And they submitted the climatestrategy was overwhelmingly
supported by investors and sothat was positive.
Now, three to four years later,they dropped everything, all
the climate ambition thing.
Because they are attacked nowby a short-term investor who is
asking totally the contrary, sayyou need to get the value from
(26:40):
your asset.
Your asset are oil and gas.
We don't really care aboutsaving the planet.
So, and the board actually said, okay, let's totally drop our
ambition in renewable energy.
So a success is never totallyacquired.
So at the last AGM, actually,there was a campaign of
investors who were pushing forgoing in the right direction to
(27:02):
say, okay, we would like to.
We're not very happy on theboard's decision.
We will oppose the board, there-election of the chair.
He got actually less than yeah.
I think he got around 70%support, which is already quite
a thing.
So a successful example whichactually turned out to be less
positive.
(27:22):
So question what we do next.
Do we, shall we, if we're nothappy with it?
Shall we totally divest orcontinue to make the pressure?
So that's a little bit where weneed to find the balance.
On successful engagement yeah,you mentioned Allseam.
I think we're quite happy withthe development of the company.
We asked them back in 2020 toprepare a climate report and
(27:46):
submit that climate report toshareholder vote.
They did it in 2021.
The first climate report theyhad a target of reducing by I
don't remember exactly thefigures, but their reduction
target was aligned with twodegrees.
So in our voting policy we saidwe need a 1.5 degree reduction
(28:07):
target validated by thescience-based target initiative.
So actually we refused thefirst report.
The company was not that happy.
They said you asked us toprepare a report, we submit to
the vote and you are not happy.
And then we have gooddiscussion and actually the
company reinforced their targetand one year later they come
(28:27):
with a new report.
They actually also committed toinvest for the period back then
2022, 2025, more than 500million to their low carbon and
low CO2 production technologies.
They are deploying thoseinvestments and now they are on
track to reach their target.
(28:49):
So I think it's quite apositive development if you
think about how systemic thebusiness is, because if you can
decarbonize the buildingmaterials, it also has an effect
on the CO2 emission of theportfolio of a pension fund
which also have real assets,which owns buildings, and when
(29:12):
they build buildings, I meanthey need cement.
So if you manage to push thatdecarbonization at the systemic
level, then it can have alsopositive effect on the rest of
the portfolio.
Speaker 2 (29:25):
You mentioned, while talking about BP, the word
divest, which I definitelywanted to touch upon because
obviously active ownershipsounds ideal in the best of
worlds.
You know change occurs, butsometimes I mean you know it
better than anyone dialoguedoesn't lead to real change.
You decide when it's time tostop engaging and start
(29:48):
divesting.
And how does that decisionprocess look like for those of
us that are completely outsideyour world?
Speaker 1 (29:56):
Yeah, no, no, no, it's a key question.
Actually we will make somerecommendations at one point.
Usually what is important whenyou start engagement is to have
a kind of time-bound engagement.
Usually you set five yearsperiod to be able to achieve
your ambition and so you startmeasuring, you set the time
(30:17):
bound and then you set thetarget and after five years you
need to look at what happened.
If you've tried everything likeshareholder resolution and so
on, and then you're notsuccessful, because actually
you're not alone, you have alsoother co-shareholders and
(30:38):
actually if thoseco-shareholders don't want the
company to change, then yeah,you've tried hard, and if it's
not fitting your target, theneffectively you should make the
recommendation to divest thecompany.
And that's where potentiallybest in class because the
problem of divesting a wholesector then of course you might
(31:02):
face a lot of tracking error inyour portfolio, which will
always be a big discussion forpension funds, because they will
be taken into between theirboth fiduciary duties of
delivering the return topensioneer, but also they have
fiduciary duties to address allthe risk.
So it's not an easy one.
But yeah, I think, time-boundtarget, escalating the thing,
(31:29):
trying everything you can andthen after a period say stop and
recommending to.
But it's true that divestmentwon't be very effective at the
end of the day because thecompany don't really suffer.
If you are on the secondarymarket, like if it's a listed
equity world, then you're justtrading the shares between
(31:52):
investors so the company doesn'treally see the impact on their,
on their uh cost of capital,unless everybody is selling.
So of course then the sharedrop.
But you will always find somebuyers uh on the market.
What is more important, I thinkif you make the recommendation
on the debt side when there is adebt issuance, then you have a
(32:12):
leverage.
Or if you push banks to say wewon't lend that company because
they didn't reach the target.
So I think if you fail withactive ownership, you can divest
won't be very much powerfulunless potentially you make that
public.
Public lists are always moreeffective.
(32:34):
But then pushing really on thedeny debt side, you are a fixed
income specialist, but I thinkthen you go on the primary
market and that hurts a littlebit more the cost of capital of
the company.
Speaker 2 (32:49):
And is that?
Because when you talk aboutdebt, you can see in this
perspective the specific use ofproceeds for each specific
issuance and hence, whenever thecompany comes maybe back to the
market with a similar type ofbond, the market is going to
remind them that you know theywere not doing what they did in
the last instance.
Or why do you think you see theimpact more on the fixed income
(33:13):
front than on the equity front?
Speaker 1 (33:20):
Yeah, if you are at the time of the issuance,
because that's the money flow tothe company.
Of course, if you are on thefixed income market and just
exchanging an already issuedbond, then back to the for the
listed equity.
But really, when the cost ofcapital increase because the
debt is not oversubscribed, thenthe issuer has to increase the
(33:41):
rate to make the thingattractive.
And, yeah, I think it's gotmore for the company.
So that's where I believe thatthey have more incentive to move
.
So when on the primary marketthe cost of capital is higher,
(34:03):
so the same for lending or forinsurance as well.
I think insurance can play alsoa big role.
If they stop insuring somenegative project on the
environment pipelines ordrilling or things like that, I
think that could be also abigger impact.
Speaker 2 (34:24):
I want to ask you about Exxon, because you've
referenced ExxonMobil proxybattle as a key moment in
shareholder activism, a momentthat showed that even giants can
be moved when shareholdersunite.
So what lessons did you takefrom that proxy fight about what
it takes to challenge andchange these big companies, and
(34:47):
maybe can you provide a bit ofcontext for our listeners about
this whole story?
Speaker 1 (34:52):
Yeah, it was back 21, I think on the proxy battle,
when this small investment fund,actually with a small stake,
actually make the coalition alsowith the state of I think it
was the state of New York, alsowith the state of I think it was
the state of New York to put onthe agenda for alternative
(35:16):
board members because they wereunhappy with Exxon's strategy on
climate, arguing that Exxon wasnot actually acting properly on
climate issues, actually actingproperly on climate issues.
And actually there was in theUS, if you want, when you have
such a on the nomination, it's aplurality vote, so you have a
(35:42):
number of seats at board level Idon't exactly remember how many
, but let's say eight seats andthey come up so the board come
with eight candidates.
So actually when you have thatsituation, you need only one
vote to be elected to the board.
So there was a contestedelection with an alternative
slate of candidates.
So there were actually 12candidates for the eight.
(36:04):
Maybe it was 9 and 13, just asan illustration.
And so there was a bigcoalition of investors actually
pushing for those fouralternative candidates, pushed
by the fund which was calledEngine no 1.
(36:26):
The firm which was calledEngine no 1.
And those four candidatesseemed to be at that time more
likely to move Exxon on theirtransition strategy, and three
of them actually got more votesthan the Exxon candidates.
(36:49):
So the final board consistedfrom the board candidates plus
three members, and three of theboard candidates actually didn't
get enough votes so wererejected.
So, yes, it was actually thefirst time that such a proxy
fight was held on the climatestrategy of a company, which was
(37:12):
not only climate because thoseengine.
One theory was also that thecompany could be able to
generate more revenue in thefuture.
When it diversified its revenueit never said stop drilling,
but it said you should alsoinvest more of the capex into
renewables and make thetransition.
(37:34):
Then, yeah, that was only threecandidates, that was not the
majority.
So it didn't really change, Ithink, much on Exxon, which
became actually much moreaggressive against any
proposition.
So last year actually they suedone of the shareholders who
(37:55):
wanted to file a shareholderresolution on scope three
emissions.
So follow this was sued byExxon on this topic Only three
years after they lost somehow afight on climate, and I think
they were quite pushed also onthe political shift.
(38:16):
But still, that was kind of awake-up call that investors can
actually win a fight for thosequestions.
But unfortunately I think thosecandidates at the end of the
day could not drive enoughchanges within the full board.
Speaker 2 (38:38):
Thanks for that fascinating story.
I want to tilt now to adifferent theme, ESG, and one
topic that I always like to askpeople working in your field
greenwashing, the danger oflabels.
I mean, there's been terms likesustainability, responsibility,
(39:01):
green being splashed left andright over recent years and
often they were poorly definedand I think that ambiguity often
led to confusion and, in somecases, even greenwashing.
So question, I know it's acomplicated one, but how do you
distinguish between realsustainable investing and what's
simply marketing?
Speaker 1 (39:25):
Yeah, no, very difficult one, because I think
there was some, because to makethe greenwashing it has to be
really voluntary and I thinksome of those people were
labeling things, also thinkingthey were doing something great.
Due to the lack of transparencyof companies, due to the lack
(39:46):
of norm within investment, dueto the lack of consensus on what
investors want and I think it'salso fair that everybody has
maybe different values.
For you maybe Tesla will begreen and for me Tesla won't be
green, because I think thegovernance is poor and I don't
(40:09):
want to have that in myportfolio.
So what's the alignment withwhat?
And the expectation of the endclient is also key in that
question.
So the problem is the packagingwhich was made actually, and
for long ESG was only on thesingle materiality.
(40:32):
So you look at ESG risk.
So typically companies.
Let's take Exxon again.
I think we had, or it was maybenot Exxon, but I think it was.
I don't remember but a USdrilling company actually
claimed to be net zero and thatwas actually on their annual
(40:53):
report.
It's in the Hall of Fame of myanalyst.
So on the annual report you seethe drilling machine and there
was a claim of net zero becauseactually they were powered by
renewable energy.
So renewable energy wasactually powering those drilling
machines and the company wasgoing to win that zero because
(41:14):
they were focusing on scope oneand two and just looking at how
they were, what kind of energythey were consuming to get out a
product whose climate impactwill be massive and destructive.
If you just focus on those kindof scope one and two, you could
say, oh, but that company isnet zero, she's addressing the
(41:38):
thing.
So if you don't look at theimpact of the product at the end
of the day then you can end uphaving some claim of company or
investors saying we're greenbecause they're just looking at
one side of the coin.
So double materiality is wherecertainly you will start
cleaning a little bit theexpectation gap between the end
(42:02):
client with thinking to buysomething which is green and
doing things positive to thosewho are just focusing on
reducing the ESG risk or maybefocusing too much on one of the
topic of sustainability.
Philippe Maurice could end upbeing positive because they take
(42:24):
care of their value chain andthey remove child labor in the
plantation and they have highhuman rights standards within
the supply chain.
Their products will be negative.
So again, the definition of whatyou expect from the investment
is key to say whether you'regreening or not.
(42:48):
So I think the legislation orthe development in the EU is
very important, because thereyou can start making the
difference between an Article 9SFDR where you really have the
intentionality to invest insomething which will trigger a
positive change on the topic onlight climate change on the
topic on light climate.
For this you need a goodreporting from the company, and
(43:16):
that's why the taxonomy is veryimportant, because now, with
taxonomy, you can define whatpercentage of revenues from each
company can be considered greenor not.
And so for investors, you starthaving a good information, make
an informed decision and startbuilding a portfolio with a high
level of standard.
And then you can also report toyour investors on your fund how
(43:37):
many companies can qualify asbeing positive, neutral or
negative.
So transparency from companiesand from investors are key.
In order to label correctly afund, you should be able to come
up to a kind of a NutriScore atthe end of the day for the food
(43:58):
to say okay, this fund can beconsidered for this criteria to
be positive or not.
Speaker 2 (44:05):
Let's pause there for a second.
Like transparency, because youkeep talking about it and you've
said in the past that it's thenew battleground for sustainable
finance, because without it,everything else just is becoming
a facade.
So can you specify why istransparency so critical for
sustainable investing tofunction?
(44:26):
Really?
Hey there, quick ad break.
Do you work in the financeindustry and have a genuinely
interesting story to share?
I'm always on the hunt forgreat guests who bring raw,
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Or maybe you know someone witha story worth telling?
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You can reach out to medirectly via LinkedIn.
I'd love to hear from you.
(44:47):
And now back to the show.
Speaker 1 (44:54):
Yeah, it's like financial statement.
If you don't have any financialstatement, you cannot make an
informed investment decision.
Ok, so for me, currently theESG world, the sustainability
world, is really at thebeginning, because we're not
able to assess correctly theperformance, the sustainability
(45:14):
performance, of a company.
Because maybe a company is verytransparent and publish all the
indicators, like employeeturnovers, all their emission,
all their functional stress andeverything, but then you need to
be able to compare that totheir industry peers.
So if half of the companiesdoes not publish, let's say, the
lost time, injury rate of theworkforce, how can you as an
(45:39):
investor say this company ispresenting a risk higher than it
appears because it's nothandling health and safety
correctly within its workforce?
And that, yeah, it's likemaking a decision on investment
without knowing the net incomeof a company.
So you're a financial analyst?
(46:00):
Yeah, of course.
And currently if you read asustainability report, look at a
sustainability report of aSwiss company where the standard
is quite low.
It's then difficult to compareto the European peers, where now
, with the CSRD, you starthaving very, very comprehensive
reporting.
So I think here investor has tohave to fight a little bit more
(46:23):
against this trend, because thecompany's lobbying world is now
pushing really hard againstthose bureaucracy papers and so
on.
Speaker 2 (46:37):
So let's talk about those double standards, because
I think that's also very, veryinteresting.
I feel there's like thisgrowing tension in ESG.
Some companies are held, orsome countries or regions, to
very high standards, whilstothers slip through because
they're in either popularsectors or have good PR or
whatnot.
So how do you think about thesedouble standards in ESG
(46:57):
scrutiny?
Speaker 1 (47:01):
Yeah, no, it's not good.
I mean we should end up havingsome high standard like we have
with.
Again, with a financialstatement you have US GAAP or
IFRS, but the listed companyactually has to publish those
kinds of financial informationand then you can again compare.
So maybe you have to make somerestatement as a financial
(47:22):
analyst to be able to comparethe income statement and balance
sheet of a US GAAP companyversus an IFRS.
But still it's converging.
There is some ground principleswhich are converging.
So we really need to go on thesame direction.
And I think this is all of ISSB.
So the standard for the IFRS,but for sustainability, and with
(47:47):
the European standard actuallythey tend to converge.
The big difference is that oneis pushing for double
materiality with the taxonomyand so on, while ISSB is more
pushing on the financialmateriality of the indicators.
But then if you create a bestpractice somehow for investor
(48:12):
and good example of goodreporting, then it's up to the
investor to say to their companylook, I prefer my European
peers because they actuallypublish everything there.
I hope we will push a littlebit the standard with best
practices and trying toinfluence laggards toward those
(48:34):
companies which are moreregulated.
Do you think we will?
Speaker 2 (48:39):
ever get like a global framework, or is that
impossible?
Speaker 1 (48:43):
No, I think we could.
We have already.
In terms of CO2 emission, wehave the GHG protocol with scope
1, 2 and all the categories ofscope 3.
This is a GHG protocol.
This is a single standard, aworldwide standard.
All companies are reportingtheir CO2 emission in accordance
with the GHG protocol.
(49:03):
So now some of them say wedon't publish a scope three
emission, but they all have thesame methodology actually to
capture and report thoseemissions.
But maybe some of them are notobliged to report on this.
But as a manager of thosecompanies, I think they should
absolutely measure.
(49:23):
The question is do you publish?
But like employee turnover, doyou know any CEO of a company
who does not know the employeeturnover?
Of course they know it becausethey need to track that.
That's also part of how youmanage a company.
But then the question is do youpublish or not that information
?
Speaker 2 (49:44):
Interesting.
Yeah, wow, yeah.
Lots to digest there.
Maybe one last questionregarding ESG.
I feel there's a growing numberof investors, particularly in
the last couple of years afterthe greenwashing stories emerged
, that became a little bitskeptical about ESG.
Speaker 1 (50:05):
Sorry, it got cut because of my ending wrong.
Oh, no, worries.
Speaker 2 (50:11):
No worries, I'll start the question again.
I'll edit that afterwards, noworries.
So I have a question about theperception of ESG.
I feel over the last couple ofyears there's been a growing
number of investors that becamea little bit skeptical about ESG
on the back of somegreenwashing stories and so on,
(50:33):
or even some that see it asvague or ineffective.
So what would you say to thosethat became disillusioned with
ESG, maybe especially to thoseyounger generations or more
idealistic investors?
Speaker 1 (50:51):
No, look, we have no choice.
We have no choice.
We need to have a systemicchange in the way we are
managing our planet.
So, overconsumption, overuse ofresources we will face major,
major issues if we continue onthis hyper-consumption thing.
(51:18):
We are actually totally, um,yeah, dependent on those growth,
infinite growth.
We try to have a financialinfinite growth with limited
resources and, of course,innovation will help.
Hopefully we see thatinnovation will help us.
(51:38):
But we need to find the rightagain, where you put the right
limit between infinite growthand limited resources.
So, yeah, what you don'tmeasure, you don't manage.
So, using the planet resources,you need really to act.
(52:03):
So you know you will havescarcity, scarcity in resources.
So start now as a company, tothink about circular economy,
recycling and all those things.
So maybe nowadays it's not,maybe buying the resources is
less costly than potentiallyrecycled, but on the mid to long
(52:25):
run, you know that yourinvestment will have the payback
of the investment.
So we have to keep the belief,because the reality is that we
cannot sustain this model.
Speaker 2 (52:40):
Wow Again, I'm truly enjoying this conversation.
I had so many questions for you, but we're almost getting close
to the end of the conversation,so I need to be very selective
about what I asked you in thoselast couple of minutes.
Maybe let's talk about thefuture.
A couple of things.
(53:01):
One is, I think, the rise ofpassive ownership and the risk
associated to it.
Speaker 1 (53:06):
I'd like to ask you about what concerns you the most
about the growing concentrationof ownership in the hands of
these large passive investors atthe moment these large passive
investors at the moment, yeah,it's a little bit too big to
vote, too big to be too powerfulat one point and too
influential and, yeah, that'sreally, I think, a big systemic
(53:31):
risk for the system.
When you have three to fourasset managers controlling 20 to
25 to 30% of the capital ofmost listed companies worldwide,
then, yeah, their potentialinfluence becomes very, very
risky.
That's where I think the trendis here and the consolidation
(53:56):
will continue because, yeah, Ithink the cost of replication
(54:20):
and so on, they have activelymanaging their voting rights.
Typically, because it's notbecause you're passive in terms
of investment that you should bepassive in terms of voting.
On the contrary, I thinkpassive investors must be very
active owners because they areuniversal, universal owner and
they are captive to theinvestment.
(54:41):
If you want to track the index,you cannot just sell, so you
need to be able to influencesomehow your investment.
So I think we should evolvesomehow that the final
beneficial owner, the assetowner which delegates management
to those big, big, big firms,should actually be able to
(55:04):
recover the voting right at somepoint.
You know what we call the votethrough or the split voting, so
allowing your end investor tomake some recommendation that
could a little bit, at least interms of voting, dilute their
(55:24):
power, because then in terms ofinvestment decision, of course
it's also risky when everybody'spassive, you also create some
market inefficiency somehow,because then active investor,
especially in the mid and smallcap world, you know whereas a
broker are not that many, so youcan really be quite with a very
(55:49):
small stake in the mid andsmall cap, you can really take
some power and in front of you,if you have only passive
investors, they don't reallydiscriminate on the investment
case.
This is also something, I think, which is quite risky.
Speaker 2 (56:04):
Maybe one last question, talking specifically
about the next gen.
What advice would you give tothose starting their career who
wants to make a meaningfuldifference in the finance
industry?
What would you tell them?
Speaker 1 (56:20):
Yeah, to refuse the statute code, to really be
innovative, to demonstrate that.
Yeah, to be vocal towards theolder generation and I'm putting
myself in the older generationbecause I'm not that old, but
when I see the young coming,maybe they are also at ESOS and
(56:44):
so they have quite strong valuebut they are pushing us as the
management team to do more, likeour own climate strategy at
ESOS.
They are pushing, say we arenot ambitious enough, we should
do more.
And yeah, of course, as a CEO,I say, come on, we are just best
in class.
But no, we can always do more.
(57:04):
And maybe when they come andtell me we should do more, but
then I think about it and say,yeah, they're right, we should
do more.
We have to be an example aswell.
So for the young generation,just be constructive, not
aggressive, with your managementteam, but come up with a
proposition, a good example frompeers.
(57:27):
If you say, okay, I've seenthis bank is doing this, I think
it would be a good idea for us.
Can I dig a little bit on thatproject?
Yeah, come with innovation.
Idea, just not idea, but alsosolution.
That's sometimes something Isee also with the young.
Don't come only with problem.
Come with problem, but alsowith a solution.
Speaker 2 (57:49):
Yeah, that's particularly useful when you're
still talking to a CIO.
That's always a great tip.
Well, vincent, thank you somuch.
It's been an absolute pleasureto have you on the show.
I look forward to see you inthe ESG conference in Zurich on
the 20th of May, organized bythe CFA Swiss Society.
(58:10):
It's been absolutely amazing.
I took many, many notes duringthe conversation.
I hope our listeners enjoyedthis conversation and learned as
much as I did, and I wish youall the best at Ethos and here's
to another 21 years for youahead.
Speaker 1 (58:26):
Thank you, ignacio, thank you to everyone, bye-bye.
Speaker 2 (58:29):
The Blunt Dollar is written, produced, hosted and
edited by me, Ignacio Ramirez.
Everything you hear concept,script, sound, design and
production come straight from mydesk and, occasionally, my
kitchen table.
Thank you so much for listeningand join me in the next episode
of the Blunt Dollar for moreraw, honest finance
conversations.
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