Sustainable Investing: Investing with Purpose and Impact

Episode Transcript
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(00:51):
Aloha. Welcome Inspired Money Maker. Thanks for tuning in. If
this is your first time here, welcome. If you're returning welcome back
to Inspired Money, where we explore how money can be more than just
a number on a statement. It can be a powerful tool for
change. Lately, more and more investors are not just asking,
what's my return? They're asking, what's my impact?

(01:14):
And that's where sustainable investing comes in.
Aligning your financial goals with your personal values so
your dollars work for you and for the causes that you care about.
We'll look at the full spectrum from avoiding industries that do not
match your ethics to actively backing innovations in clean
energy, sustainable agriculture and beyond. We'll talk

(01:37):
about real world trade offs, the tools to measure impact,
and yes, whether sustainable investments can actually outperform
traditional ones. After decades of federal action to
curb climate risks, the U.S. Environmental Protection
Agency now proposes to strip its own power to
regulate greenhouse gases. So where do we go from here?

(01:59):
Stay tuned because we have an incredible panel ready to share their
insights. Before we introduce today's experts, I want to thank
today's sponsor. This episode of Inspired Money is brought to you by my
financial advisory firm, Runnymede Capital Management, where
investing is never one size fits all. For over 30
years, we've worked closely with clients like you to understand

(02:21):
your goals, objectives and values. Then we create a
customized portfolio designed to align with what matters to you. Whether
that's pursuing growth, protecting your wealth, or investing in a
way that reflects your principles. At Runnymede, we specialize in
both investment management and financial planning, providing a
comprehensive strategy tailored to your needs. Our team

(02:43):
combines rigorous research with forward looking with a forward looking
approach to help you achieve your financial goals. With peace of
mind. If you're ready for a personal, thoughtful approach to money management,
visit
runnymede.com.
Runnymede Capital Management, invest with purpose, plan with

(03:04):
confidence. As with all investments, your capital is at risk.
Past performance does not guarantee future results. And
consulting with a qualified financial advisor can go a long way to
determine what's right for you. Now, let's meet today's expert
panelists. Our first guest is Andrew Behar,
a trailblazer in values aligned investing.

(03:26):
As CEO of As You Sow, he's taken shareholder
advocacy to new heights, holding companies accountable on
climate, social justice and corporate governance. A former
entrepreneur and inventor with five patents to his name,
Andrew literally writes the guidebook on making your money Matter,
author of "The Shareholders Action Guide" and a purposeful

(03:50):
50 change maker. Andrew, welcome back to Inspired Money.
Hi. Thank you for inviting me back. Next, we
welcome in Marilyn Waite, Managing Director of the Climate
Finance Fund. She's steering billions toward a low
carbon future. She's worked across four continents in clean
energy, sustainable investment and climate policy,

(04:12):
authored sustainability at work, and is one of the most
respected voices linking global finance to
real climate solutions. Marilyn, welcome.
Hi Andy. Thanks for having me. We have Jennifer
Coombs who is shaping the very language of sustainable investing.
As Head of Content and Development at US SIF,

(04:35):
the Sustainable Investment Forum, she's created the
first US professional credential in sustainable finance,
the Chartered SRI Counselor designation. She's
a two time TEDx speaker, 40 under 40 honoree
and passionate educator. Jennifer's on a mission to arm the next
generation of financial leaders with ESG

(04:57):
expertise. Welcome Jen.
Thanks Andy. Good to be here. And rounding out our panel
today we have Ioannis Ioannou, Associate
Professor at London Business School and one of the world's most cited
experts on corporate sustainability. His award winning
research and work with boards, CEOs and global institutions

(05:19):
redefine what it means to lead responsibly, making him a
sought after advisor to companies shaping the future of business.
Ioannis, so glad that you're here. Thank you very much for having me,
Andy, pleasure to be here With this panel of
experts. We are in for an informative,
inspiring conversation. Let's get right into it with segment

(05:42):
one. Sustainable investing takes many forms, each
with distinct strategies and trade offs. Negative screening avoids
industries that conflict with ethical standards like fossil fuels or
tobacco, ensuring investments align with specific values.
Positive screening takes a different approach, selecting companies that lead in
environmental, social and governance performance within their industries.

(06:05):
Thematic investing focuses on broader trends, channeling capital
into areas like renewable energy or sustainable agriculture.
Impact investing goes a step further, targeting measurable social or
environmental outcomes alongside financial returns. While these
strategies offer ways to align investments with personal or institutional
values, they come with trade offs. Exclusionary

(06:26):
approaches may limit diversification. While impact investments
can face challenges in measurement and scalability. Understanding
these frameworks helps investors make informed decisions about where
financial goals and sustainability priorities intersect.

(06:48):
Andrew, give us some context of where we are today. From the
withdrawal of the US from the Global Paris
Agreement to the EPA, launching the biggest
deregulatory action in US History. Where do investors
stand when deciding about sustainable investing
strategies? Well, I think first you got to separate a lot

(07:08):
of the rhetoric from what's actually going on. You know, you're hearing
from the Administration that, for instance, people do not want
diversity in their, in their companies.
And yet we had 24 votes of 99%
of shareholders telling executives and
boards, we want you to continue diversity in the workforce

(07:31):
because we know it leads to outperformance. A diverse
team is going to outperform. And so
you got this contradiction where you got this narrative voice
from the right that is so loud, the megaphone is so loud. That is
just contradicting what we're seeing in real terms, which is
that investors actually want greater diversity at their companies.

(07:54):
And then you're seeing the companies, like you read,
just as a report, just whatever, an article a couple
days ago that they use the word DEI program
slashed. And I wrote to my team, I said, what is this slash? This just
sounds like some sort of summer slasher movie. And they're like, no.
Well, a few companies have renamed, like JP Morgan. They don't call it

(08:16):
DEI anymore. Diversity, Equity, Inclusion. They call it Diversity
Opportunity and Inclusion. But they're still doing it because they know they want to
outperform on climate.
Similarly, you're seeing a lot of companies, there's executive orders that they're
trying to stay within, and yet they also know that climate risk
is investing risk, climate risk is supply chain risk.

(08:38):
And so the better management teams are addressing these
risks, even though they're being told, ignore risk.
Marilyn, you worked on multiple continents. You're outside
of the U.S. do you agree with that assessment? And do you
think impact investing is reaching sufficient
scale to shift capital flows meaningfully?

(09:03):
Thanks, Andy. I absolutely concur with what the other Andy just
said. There's no stopping
sustainable investing now. There is a spectrum when it comes to
investing that seeks financial returns only, all the way
to investing that seeks environmental and social impact
returns only. Right. Which is traditional philanthropy. And in between

(09:25):
both of those ends, we have responsible investing,
sustainable investing, ESG, integration and impact
investing. And so we really have to clarify what is the
thesis of the investor or lender that they are pursuing. But we
have impact investing, which is really seeking that environmental
and social impact first. And then looking at the returns,

(09:47):
that's over US$1.5 trillion right now. Then
we have, let's say a bit further, sustainable,
sustainable investing, which is still seeking those
impactful impacts, but in a less first
way, they're seeking after they seek their financial returns. Well, that's
between 3 to 4 trillion. Now, when you look at overall

(10:10):
environmental, social and governance integration and investing, well,
that's over 50 trillion. And so that's far from being
niche. That is mainstream, that is roughly a third of global
assets under management. And so when we look across the spectrum and we look at
the trends, there's no stopping this because it just makes good sense, it makes
fiduciary sense, and it makes return sense. Thank you for

(10:32):
that perspective. Jenny,
as creator of the Chartered SRI Counselor Credential,
how do you help investors navigate the complexities of various
sustainable investing approaches? Well, so
there's a few things I'm known for, using a lot of
analogies and metaphors to try and simplify

(10:55):
some of these complex topics. And one thing
that I like to do is look at the
environment that we're currently in and break it down into something that's a little bit
more relatable. So one metaphor that I like to use, and
apologies, I relate this to food. And if
everybody's hungry at this hour, it's

(11:17):
lunchtime here. That's the reason I bring that up. I look at the
strategies. If we're going back to the concept of strategies in this
scenario, look at sustainable investing like a cake,
and look at ESG criteria, which has been a little
bit divisive in the US
specifically as the eggs, flour and sugar that go into

(11:39):
baking that cake. So lately you've seen the
attention taken away from the final product,
the sustainable investing strategy, and placed more on the
ingredients themselves, which doesn't make a whole lot of sense.
So at the same time, when we consider strategies, you know,
the arrangement of those ingredients, we result in

(12:03):
something, you know, when you rearrange those ingredients, you can
result into a completely different cake. You can have a values based
approach, an integration based approach. As we know,
there's, you know, different cakes can result from the
rearrangement of different ingredients. So just as much
we can use different ESG criteria to arrive at different

(12:24):
strategies, but in the end, they're all different. To
each their own. But we still want to have
a sustainable investing strategy. In the end,
I always welcome cake analogies. So thank you for that.
You're welcome. Ioannis, what does your research reveal
about the comparative long term impact of

(12:48):
various ESG strategies? Yeah, that's a great
question, Andy, and one has been asked several times in the
past. So let me first draw an important distinction
that we need to keep in mind. When we talk about performance. There's
clearly the firm level performance, in other words, whether
particular firm is outperforming its competitors within its

(13:10):
given context, usually the industry. And then we have the
question of whether particular investment
strategies actually outperform particular
indices or other types of investment strategies. And in my experience,
a lot of times when we talk about outperformance, people confuse the two, right?
Because they tell you, for instance, oh, you know, a sustainable portfolio

(13:31):
doesn't outperform because it might already be priced in. And
it's like that's supposed to be an
argument against sustainability because. And then I ask them, well,
is the price of Apple already pricing in its innovation
potential? Well, yeah, probably. Does that mean that Apple needs
to stop innovating or stop doing what they're doing? Of course not.

(13:53):
So we have to be absolutely clear that this is different
on the firm level. I think we have sufficient evidence that
to the extent that sustainability and responsibility
is strategically and truly embedded in the
organization, then yes, those companies do perform
better. And in my mind is rather logical, right? If you have

(14:16):
all of these rapidly shifting demands and expectations on the
environmental and social front, and then suddenly you have a company
that does better stakeholder management, addressing those
risks and potentially exploiting the available opportunities, I mean,
why wouldn't you expect them to do better? So at the firm
level, there's in my view, at least sufficient evidence to say

(14:38):
done right? At least outperformance. Now, at the level of the
portfolio, however, the results get more mixed because
even though as we in a sense talk about these
classifications, right, from ESG integration to impact investing
to exclusions and so on and so forth, some clearly in
their actual application, these differ quite a

(15:00):
bit, right? Different companies may have different exclusion criteria,
different companies may use different data for their ESG integration
strategies. So I would say that at that level the results
are mostly mixed because we do not have clear
enough definitions and even we had definitions, we don't have
identical implementation of those particular

(15:23):
strategies across the board in order to be able to compare
apples with apples. So a lot of the times you end up having too much
noise and therefore you get too much noise in the outcomes. What
I would say is that the, perhaps the more robust part of the
evidence is that it's the downside is the shielding of the downside
is the better management of the risk more so perhaps on the

(15:45):
outperformance, at least at the portfolio level and
across these different strategies. Marilyn,
your thoughts? As a investment person.
I think the last point mentioned about
how sustainable, how sustainability as a, as a lens,

(16:07):
as a filter, as a means to collect data and
analyze that data, actually protect against the downside is
helpful and is accurate. We found that
during the 2020 market downturns,
those both at the firm level and at the investment
portfolio level, those portfolios and firms

(16:30):
were more resilient and did stay the course
versus those that did not have that thesis at all. And we're ignoring
sustainability and ESG metrics. They, they, they were hit
harder. And so I think it is important to, to look at both
the upside and the protection against the downside.
Andrew, are there any trade offs or challenges that

(16:53):
you've seen investors face?
We're in a very unique moment in time where we have always
been moving toward greater disclosure so that
investors have more information to make better decisions. And what we're

(17:16):
seeing now is a concerted effort to suppress information.
So there's been laws have been passed in 18 states that have literally
made it illegal to assess risk and have
made it so that companies that are disclosing are going to be,
could, could be liable for some litigation. Whereas
investors are saying, hey, we, we want to have this disclosure so we can

(17:38):
differentiate the leaders from the laggards. So when you have
this just the companies are between a rock and a hard
place of wanting to disclose because they want to
differentiate themselves as being better management teams, as being
addressing risk, so they will be overweighted in portfolios. And
yet the federal government saying, if you do that, we're going to harm you,

(18:00):
we're going to punish you. So this is active data
suppression, information suppression, in order to try
to just put their finger on the scale of the free markets. I mean, what
Marilyn was saying is this idea of this shift from an
extractive economy to a regenerative economy. This is, the
market forces are very strong moving that direction. I mean,

(18:23):
it is a powerful push that they need to
really try to stop the free markets. I mean, they're,
they're really actively trying to halt the free markets. So it's a very unique
moment in time right now for investors because
you got to make, you got to make the right call. And you're trying to
make the right call. And yet, you know, we, we engage hundreds of companies,

(18:45):
we sit down with management teams and they're calling us and saying,
like, what should we do? And we're saying, well, if there's an executive order that
says you're going to lose your federal contract if you have
diversity, which is not defined, that could be if you have a woman or a
person of color on your board, we don't know. But it's being challenged
through litigation, what's a company, should they disclose right

(19:07):
now? And we're saying right now you should probably try not to harm the
company. We got to wait for this stuff to move through the courts. So we're
in this limbo period. Anybody else
want to weigh in? Well, I'll just weigh in and say,
you know, in order to be competitive,
economically competitive as a country, as a sub national government,

(19:30):
as a firm, as an
investment manager, whatever level we want to take it, this
lens is absolutely needed. And so
we're seeing the growth, we're seeing the returns, and
we're seeing the global majority move in this direction.
Over half of the companies listed in China are reporting

(19:53):
using GRI. That's the Global Reporting initiative. That's the gold standard for
comprehensive sustainability reporting across all the
environmental, social and governance metrics you can think of. So
this is again, not a niche and the entire world
is moving in that direction. Sustainability reporting is now
part of what's required in Nigeria and Indonesia, South

(20:16):
Africa, all of these high growth,
really important economies across the globe. So
I think there is a strategic choice right now. And do you want to be
a leader and be economically viable, or do you want to just,
you know, inflict harm on yourself and your own economy and your own people?
And that's the choice, I think, right now, before the

(20:39):
US government. If I may add to that,
Andy, I think especially what Marilyn was saying about the global picture
is absolutely fundamental, right? Because I do think that in the US we
have this phenomenon where clearly the vibes are
louder than the reality, right? So Trump's
election was not the by a margin, largest

(21:01):
election victory. The vibes were more than the numbers. I think,
therefore, we should be careful when we talk about this sort of the
backlash or what is happening in the US with respect to
DEI ESG sustainability, to differentiate, as
Andy said at the beginning, between the vibes and the actual
reality on the ground. Because truth of the matter is, of course, as we all

(21:23):
know, the election of anyone is not changing any of the
underlying fundamentals, especially when it comes to the
environmental and social issues. That's point number one. And point
number two, I'm sorry to say this, but there's a whole wide
wonderful world outside the US that is not
looking at the issues in the way that the US Administration is looking at

(21:45):
it. For instance, in Europe and in the UK,
it's a matter of priorities. We had the draggery poured out. We know
that we're lagging behind in terms of competition, in terms of
productivity, in terms of wage growth. So for us here,
the conversation, it's more about priorities rather
than an underlying ideological war. If we go outside

(22:07):
the Anglo-Saxon world and we go to Asia, for instance, in
my view for China, this is 100% competitive issue.
The US is leaving a massive competitive gap,
a leadership gap. And of course China, whether it is green technologies
or electric vehicles, you name it, of course they're going to jump at the
opportunity. Meanwhile, regions of the world like the

(22:29):
Middle East, they see it as a differentiation, necessity
away from the traditional way they were making their money through
fossil fuels. Whereas for Africa and even Latin
America, in some respect it's a matter of justice. Right? It's a
matter of a just transition and therefore sustainable
development with the help of those that have created the

(22:52):
problem. So we need to, as investors, keep in mind all
of these different underlying trends and motivations that are
fundamentally different across different parts of the world.
And that's precisely where geopolitics makes investment. We're entering,
we have entered, in my view, an era where it's the
era of regionalism. And as we look at our investment, we

(23:14):
necessarily, and at least for the foreseeable future, have a very
regional lens in terms of understanding everything,
including sustainability and ESG.
You know, I just want to push back slightly because of, you
know, in Europe and I agree, I mean what I said before about that this
is the market forces are massively moving towards

(23:36):
sustainability and justice, but the forces
pushing back on that. Look at what happened with CSRD in, in
Europe. So that's a reporting standard that was first of all pushed back two
years instead of having it apply to, I think it's
like 80,000 companies, it's only going to be applying to like
10,000. So they've reduced the number. And also

(23:58):
the disclosure is only going to go to tier one as opposed to
it was originally supposed to go all the way down to the supply chain to
the source materials. So you've got a real now,
yeah, it's better than it's. It's still
good. But what was intended was so much
more comprehensive so that literally the market forces,

(24:22):
investors could overweight the companies based on disclosure
based on good data. So again, data suppression,
delaying this is happening across the world.
And so it's something to be very aware of as an investor.
So can I respond to Andy? Because I was involved very much
CSRD (Corporate Sustainability Reporting Directive), ESRS (European Sustainability Reporting Standards). I was on the board

(24:43):
of the institution that created the sustainability standards
or recommended the standards for the European Union. And I will say there is
a bit of a Global North, Global South divide. And again, the Global South is
the most of the world's population, the global majority, where most of the economic growth
is, where also most of the emissions growth is if
you have a pollution or a climate perspective. And that

(25:05):
is where I see the leadership. The first central bank in the world
to do anything tangible for climate change was the People's
Bank of China, China's central bank. And they created
a premium rate or a
preferential rate for all of their banks who were doing
environmentally friendly projects. A huge, I mean, but you're talking about

(25:27):
4% versus you know, 1.5, 1.7% if it's
a green labeled solution or project.
So I think the Global South is leading on this,
is leaning in on this and you know, that is
critical for supply chains for investors and
so on. What we need to have happen now is for Global North

(25:50):
investors to wake up to that reality and to
properly allocate investments to the Global
South. I'll give you one example. In 2019,
the Jamaican stock exchange was the highest returning stock exchange in
the world. Almost every year it's an emerging market
Global South country stock exchange that is the highest returning. So if

(26:12):
you are in the Global North and your retirement funds are
equivalent and you are not exposed, you're missing out
on that alpha. Very little if
any of the typical Global North investors allocate to the Global South.
And that I think is a crime both from a pure financial
perspective and from a sustainability perspective.

(26:34):
Performance talks! Let's go to segment two.
Sustainable investing relies on measurable data to assess impact
and accountability. ESG metrics track a company's performance
in environmental, social and governance areas, helping
investors evaluate risks and opportunities. Reporting
frameworks like the Global Reporting Initiative offer broad

(26:56):
sustainability disclosures, while the Sustainability Accounting
Standards Board focuses on industry specific financial
materiality. The United Nations Sustainable Development Goals
provide a global benchmark for aligning business activities with social
and environmental priorities. Transparency is critical,
ensuring investors can verify claims, compare performance and

(27:18):
hold companies accountable. Challenges persist, including
inconsistent data, lack of standardization and difficulty in
quantifying certain impacts. Reliable ESG data sources include
sustainability reports, rating agencies and industry organizations.
Establishing clear measurement tools strengthens credibility, helping
investors differentiate between meaningful impact and marketing driven

(27:40):
greenwashing.
Jennifer, what are the most effective tools investors can use to
ensure impact claims are genuine and measurable?
This is, this is a good question because

(28:00):
throughout the industry there really are
tools that are emerging still as
being refined. Most data providers are
still looking for ways to refine their
existing offerings to the broader public. I would say
that the invention of ESG ratings and

(28:23):
scores were both a blessing and a curse for our industry
because on the one hand it got so many firms using
the data and talking about sustainability and impact than
it had in the past. But on the other hand, it caused some
complacency among those that use the data
purely for the headline number and not the substance behind

(28:45):
it. So, in other words, it's not understood
that the ESG scores and the data can be used to identify
symptoms of a problem, but they can't
outright diagnose what the problem is. It takes that
analysis to thoroughly identify and
diagnose what a problem is, because much of the time the

(29:08):
issue is really related to something that it takes
years to manifest as an actual
disaster that's going to happen in the future. And
many of the data providers today will, you know, have all these
indications that something will very likely happen at
some point in the very far future. Now, it's one thing for

(29:31):
a fund manager to diagnose what a problem is
and then walk away, as in divesting from
something. It's another thing to diagnose the problem and then treat
that problem so it doesn't become a bigger issue or turn into a
disaster for stakeholders or shareholders down the road.
So fund managers who work with organization like,

(29:53):
like Andy's, As You Sow, are really true sustainable
funds because they set themselves apart from the rest. So
that's a tall order for many. But we'll, you know,
continue to see greed washing in the near term until we see
some that find a way to refine those tools.
Andrew, during this period of limbo

(30:15):
that we're in, and you're somebody deeply invested in
transparency, how do you evaluate the reliability of
corporate ESG disclosures?
Well, I mean, As You Sow publishes between 6 and 10 original
reports every year, so we, we develop our own key performance
indicators and we have our research teams actually

(30:39):
dive into the data, talking to the companies, putting
out surveys, you know, of course, looking at whatever sustainability
reports they're putting out. Sustainability reports are getting a little thinner
right now, we're finding, but ultimately it comes down to
relationships. And this is one of the things about the quality of data, because you
look at, you know, some of the big data houses, the MSCIs, the (Morningstar) Sustainalytics,

(31:00):
and they're using AI and just scraping up massive
amounts of data. But they're scraping up a lot of garbage. And a lot of
companies, for instance, on climate change, their disclosures are not
only inaccurate, they are intentionally misleading. And
so once they gather them up, they put them in their database. And now because
it's in a database, it's supposedly fact. So what I would say is

(31:22):
you should be looking at what are your data sources.
We've actually a whole bunch of asset managers and
folks approached us and said we want to actually license
As You Sow data for portfolio management. We actually spun
off a for profit group called As You Know, asyouknow.com,
that gathers not only our data, but data from all these other

(31:44):
nonprofits and aggregates them into a database that's
very high quality data and licenses it out. And then we
distribute the license fees back to the nonprofits and we all
use it to maintain the data and actually expand the coverage. And
we're able to look at like racial justice and DEI data on 3,000
companies every quarter because we have our team doing

(32:07):
it, we have humans doing it. So data
quality is very, very important and people should be very careful about
the data that they're using and what they're assuming
is fact. And to get, I would say you want to get
multiple sources and then compare and say what's really going on.

(32:27):
Marilyn, you spoke about sustainable development, you spoke
about Sustainability Accounting Standards Board.
How do frameworks like that or Sustainable Development
Goals, how, how do they influence your approach to
aligning capital with measurable climate solutions?
So I think I spoke about GRI, the Global Reporting Initiative.

(32:51):
And there, you know, they are comprehensive across
sustainability. And I would
say they're really important because they provide not only the overall framework,
but the specific key performance
indicators, the specific
measurements that are required for a vast number

(33:13):
of sustainability attributes. You know, within.
There's something that we supported at the very beginning of its,
of its life almost, which is PCAF, the Partnership for Carbon
Accounting Financials. Now that is one slice of the pie, but a really important
one, which is standardizing the methodology to account
for emissions for financial institutions. So if you're a bank or asset manager,

(33:37):
what are you financing in terms of greenhouse gas emissions?
So for your mortgages, for your auto loans, for other financial
asset classes, what's the number behind that and how
is that number shifting over the years? And are you creating new products? Are you
creating, for example, an EV auto loan product that will
attract more customers so you can actually begin to change

(33:59):
and shift what that number looks like in your portfolio? And
so that is something that is bringing
accountability to the financial sector in a way
that would not exist, I don't think, without that kind of measurement and
disclosure. And GRI, the Global Reporting Initiative,
takes things like that times a thousand across a

(34:21):
number of
ESG areas, including water and land use and
a plethora human rights, a plethora of very important
sustainability issues.
Ioannis, have you noticed, have you observed any notable gaps
between reported ESG performance and actual corporate

(34:44):
behavior in your studies. So if
you allow me, Andy, to take a step back, I have a slightly different
approach towards ESG data, if you allow me to share it and then
I'll answer your question as well. Because yes, of course, inevitably
there is usually a gap for several
reasons, of course, greenwashing is one, green hashing is another,

(35:05):
but also the underlying complexity of the issues,
plus the fact that these issues evolve very quickly on the ground. So
the measure, unless it's a real time measure, sometimes cannot
fully capture what may be happening. But what
I want to highlight a bit, and I've written an op-ed about this
recently that got a bit of a backlash, but I'm going to say it anyway,

(35:27):
I think that everything that we've been discussing is
absolutely brilliant. If, you know, if we look at the
evolution, the development, the
quality of this ESG data in the last 10 years,
the progress we have achieved has been absolutely amazing,

(35:48):
especially if we consider how complex
the underlying issues are that we are trying to. to measure.
Right? Having said that, though, and we have laws and
regulations and reporting standards and voluntary and mandatory and so on
and so forth. My argument though is that those are
necessary conditions. In other words, that level of

(36:10):
transparency is necessary, but it is not
sufficient. Why is that the case? Because
I wrote in my op-ed that we have developed a robust
technical infrastructure, whether it's reporting standards,
acronyms, associations, even laws and regulations.

(36:31):
But at some point, and this is a reflective sort of moment, but
at some point I think that we ended up
only talking about reporting, only talking about
disclosure, as opposed to understanding the
underlying strategic action or behavior that you asked
me about. And that did create a gap. But that

(36:52):
gap ended up being fatal for us. Why? Because what did
we miss? We missed the narrative infrastructure
telling the story, the evidence and data driven. But
still the story of how that level of
corporate action and accountability actually
addressed the issues actually spoke to the problems

(37:14):
of the relevant communities, whether it's local communities,
indigenous people, trade unions, the employees and so
on. And guess what? Because we left that gap,
the other side came in and occupied and
redefined for us. Without us, what we
do, ESG and sustainability is about taking away your

(37:36):
SUVs, you're not going to be able to eat meat anymore, you're going to lose
your jobs, and so on and so forth. And it was, and it's the
"Drill Baby, Drill" storyline that, by the way,
it's also fact and evidence free. And if you're fact and evidence
free, it's very easy to create a story. So
my argument is that in order to align, right, the two,

(37:59):
we need to, and perhaps this is a moment of reckoning of the entire
movement, right? We need to understand what is the narrative
story that we are going to marry with the robust
technical infrastructure in order to ultimately have that impact.
And in this case, by the way, and I hope we get to discuss
this, in this case, impact does not mean, in my humble

(38:22):
opinion, being profitable or
creating alpha within the current system. I
think having an impact goes back to what Andrew was saying. It's about
reinforcing those market forces that are moving
towards sustainability, that are moving towards regeneration in
a way that ultimately changes the system in a

(38:45):
way that ultimately aligns at least this version of capitalism
that we have to function within the planetary
boundaries and recognizing the social inequalities that we
face. So for me, that's what we need to be
doing as we think about not only aligning corporate
action with disclosure, but rather aligning

(39:07):
corporate action with the ultimate destination,
which is a system that works within its limits and telling
a positive narrative story based on that evidence
that creates this alliance of all of these
stakeholders that ultimately can move the system. Because investors and companies
alone, even sometimes with regulators, they cannot move the system

(39:29):
unless you bring the big mass of people and
constituents with you. I think if I could jump
in, I think what we're talking about here is time horizon.
And I agree with everything you're saying. But if you look at a longer
time horizon, and most investors do, most investors are in a
pension fund or retirement fund. I mean, it's the vast majority of

(39:53):
a totally collapsed ecosystem. A collapsed
economy is not going to be good for anybody long
term. But we're sort of stuck
in this Milton Friedman macroeconomic idea of
externalize your costs, abuse your employees, just try
to squeeze every nickel out of the system in the short

(40:16):
term, as opposed to like a Joseph Stiglitz
macroeconomic theory which says you got to look long term, let
capitalism serve all the people and not just a few oligarchs.
And so that's, I think, the moment that we're in. But if
you. Again, it's really looking at time horizon. And
I believe the vast majority of investors really care about

(40:38):
long term. And that's, I think maybe that's part of the
narrative you're looking for. Or. Yeah. Oh, I agree. And I
guess I would add to what you just said is that
some of the structural forces in the current system
prevent the long term thinking. Right. And I'm saying
that, you know, this is the sort of the political economy that we need

(41:01):
to shift that narrative because ultimately capitalism, both
versions that you described are narratives, right? These are man made systems.
They depend on laws and regulations and our understanding of what is
value and what is valuable. So if we need to start changing those
fundamentals, ultimately change the system because of course it's the long
term. But the question is, how do we get there, right? Especially

(41:23):
as you rightly described, you face so many
inertia towards the current system, but forced inertia. I
mean, you've got oil companies that want us to continue to drill even though there's
no demand for their product, even though the internal combustion engine will be
obsolete in a matter of, you know, a few weeks. It's like
it's. That's what it is. It's. Yep, yep.

(41:46):
Thank you. I love the time horizon. And this
is not a situation where companies are checking a
box. Are you ESG focused? Yes or no?
It is a continuum and it's got to be action
focused. What are you doing to move
things forward? Let's go to segment three.

(42:09):
Sustainable investing has shown competitive financial performance
compared to traditional approaches. Companies with strong
environmental, social and governance practices often demonstrate
resilience during market downturns and may outperform over the long
term. ESG factors contribute to risk management by
identifying vulnerabilities such as climate risks, regulatory

(42:30):
shifts and reputational concerns. Sustainable
funds also benefit from increasing investor demand, driving capital
toward companies prioritizing sustainability. Financial
upsides include innovation, efficiency and access to new markets.
However, challenges exist, including greenwashing and evolving
ESG standards. Investors can assess performance using

(42:52):
ESG ratings, fund comparisons and financial analysis from
reputable sources. While sustainable investments do not
guarantee higher returns, data indicates they can enhance portfolio
stability and long term value. Careful evaluation is
essential to distinguish between genuine ESG performance and marketing
driven claims.

(43:17):
Ioannis, what empirical evidence most persuasively
supports ESG outperformance theories?
So, and as we were discussing earlier, I think that,
you know, we have at this point in time, decades, literally
decades of studies and thousands of studies that at the firm
level that, that one way or another do confirm

(43:40):
the outperformance. However, I need to caveat this in
many ways because people treat this question about does it or does it not
outperform as sort of the holy grail of, of
sustainability. And for me that's a mistake. So first of all, one needs to
understand that what we do at business schools in management more broadly
is social science. It's not physics, it's not that

(44:02):
we are uncovering a law of the universe that applies forever
and under all conditions and under all time period. No, we're dealing with
humans, we're dealing with social context, laws, regulations, the
sentiment of the market changes. So we need to take all of
those into its account. And by the way, this question about
outperformance, I mean it cannot be

(44:23):
framed in simple terms. For example, we spend the entire
70s and 80s, you know, what academia was doing at the time,
reacting to what was happening in the markets. They were saying, does
diversification pay? Right? I'm not sure. Some of you may even
remember those debates, right? And guess what, it's social
science. It's yes, it's no, it's maybe it's U shaped, is otherwise

(44:45):
shaped, you know, and then people said wait a second, we should
be more sophisticated, right? What kind of diversification
related or unrelated. And now we're talking about the product level
or the resource level. So after we pose that
big question, we need to become more sophisticated in ultimately in
social science, of course it's going to be contingent and contingent on what?

(45:08):
Well, in this case it's about, well, did you, for instance, if you are
a business, did you work on material ESG issues or not? Because
that's going to make a difference, for instance, right? So
where those material factors sufficient, sufficiently integrated
into the commercial side of the business, for instance. And I think that
we are, in other words, what, what are the

(45:30):
pathways through which a sustainability commitment
actually translates into performance and then potentially
outperformance. And that's what we are currently understanding even
better. For instance, does sustainability afford you preferential
access to financial capital? Does it afford you preferential access
to human capital? Does it enhance your social license to operate? Can

(45:52):
it deepen your customer relationships? And does it allow
you to retain, engage and have more productive
employees? For me, that's the questions we should be looking at. And clearly
not all, all of those mechanisms are going to be
relevant for all companies. For some companies, they might create value
through human capital, other companies might create value through

(46:14):
the social license to operate. So what we should be asking is
not the general, and that's the whole idea of investing in
this space. In my view, that's why not just the ESG
data sets, but going and visiting these companies and telling them,
articulate to me, how is it that your so called
sustainability commitment is enhancing your business model? And tell me

(46:36):
the precise mechanism through which that happens, then as an investor
I can say, well that makes sense in that industry that's better or worse than
competitors and then make that call. And the last thing I'm going to
mention is that I'm not the finance expert per se, but I do follow
the finance literature in terms of understanding how is
it that this different investment strategies

(46:59):
fare in the long term? I think it's still early days, but the
noise in, noise out concerns me a little bit precisely because
we might have theoretically good definitions, but we have a
huge diversity of implementation variants
in this strategy. So it's very hard for me at least to make a
blanket statement about which strategies would always

(47:21):
and forever, so to speak, outperform because the underlying
data has changed, the underlying exclusion criteria might be different,
and so on and so forth. Marilyn, what signals
do you look for to identify climate aligned investments with
strong return on return on investment
potential? So I do think we have to break this

(47:43):
down by asset class. There's something that we backed an
open access free of charge database called
ClimateSolutionsDocs.com and it has for most of
the world's economy, Global North, Global South,
the list, you know, for all listed equities that are available in all the different
stock exchanges. What are the listed companies that

(48:05):
are proposing climate solutions both from a pure play perspective
and from a, you know, revenue filter
exclusionary perspective. So this does that company have more than 50% of the revenue coming
from that climate solution? And that I think, you know, for the
listed equity space that's just very clear. And the methodology is, you know,
is open access, people can drill down and I

(48:28):
think that will be different. For example the fixed income space and
bonds. So there's various sustainability
guidelines for bonds, green bonds, social bonds, sustainability linked bonds.
And I think, you know, different economies will issue different kinds of
bonds, whether they allow for project based bonds like in the US or only
government based bonds or general obligation

(48:51):
bonds. And I think that it's, you know,
comparing a government issued bond to a
firm issued bond, corporate bond is very different and the
valuation criteria has to be different. It's just
apples and oranges. And so are we looking at a venture capital
fund? A venture capital fund for climate cannot be 10 years.

(49:13):
It needs capital, especially if it's focused on deep tech.
So you have to take an asset class by asset class and there's various
resources out there to help bring that through. On the
banking side, if you're choosing a bank or credit union, you know, there are some
basic exclusionary criteria. For example, does that institutions back the
fossil fuel industry? Have they signed up to the

(49:36):
Fossil Fuel Non-Proliferation Treaty? Are they disclosing
their financial emissions finance emissions via
PCAF? All of these are concrete
ways of deciding
whether a bank or a credit union is aligned and is
supporting climate action. There are a number of databases being B

(49:58):
Lab has one for B Corp Certified banks, for example,
in the US there's Green America that has a database as well. So
the tools are out there and most of them are open access.
Thank you for sharing those resources. Jennifer, you
worked with training financial advisors. How do you train

(50:18):
advisors to manage client expectations around
ESG financial returns? Yeah, that's a tough
one because most of the time you've got this is a valid
concern, right? Many advisors don't want to
risk having their clients be

(50:39):
upset with them obviously from having
expectations of returns quelled by
disappointing returns from their,
you know, sustainable investing being not what
it's supposed to be or what it potentially could
be. I say that, you know, education goes a long way in

(51:01):
this space. But also taking a look at
some of the or understanding also that they're not
alone in this, you know, issue
of fears there that this is a common problem across
many generational issues. Morgan Stanley has
conducted many

(51:24):
studies over the course of the years.
Actually since 2015, every two years they've conducted a study
of millennial investors to see that this is actually a concern
even among them and has perpetually become
a concern among them regarding returns.
But what Ioannis mentioned that

(51:46):
this has been a concern actually back to the 70s
regarding performance. There's actually been a
meta analysis that was conducted back in 2015 that
took a look at over 2,000 separate independent
studies on performance and noted that with over
90% confidence there was this

(52:08):
overwhelmingly positive correlation between use of
sustainable investing strategies and non
negative is what they noted financial returns. Now
we know that correlation doesn't equal causation. So
all that tells us is that there's a strong positive
relationship between the two things. But we don't know in what

(52:31):
direction those two things flow. So what I tell
advisors is that you need to
tell your clients that there is this strong
positive relationship that should be conveyed to clients.
But to make mention that, and it helps to know that you're
smart in this instance to note that the

(52:53):
returns, it's just to note that the returns
imply that there could be
a good use of sustainable investing strategies. At the same time, it
could also imply that the use of a sustainable investing strategy
also leads to good returns. What I would argue is that it
doesn't really matter what direction you're moving in because the end

(53:16):
result is still the same. It's good. We've
known for almost 200 years at this point that using
good corporate social responsibility will help companies
last for decades. And just
ESG is another repurposing of that
concept. But more broadly, and so

(53:39):
good companies mean good returns is really that simple.
And so having that knowledge, to be able to convey that to their
clients is really powerful. Andrew, in
your experience, what role does shareholder advocacy play in
unlocking financial returns alongside social
returns? Well, I mean

(54:01):
shareholder advocacy is really, you know,
it's really about oversight. I mean the, the board has oversight of management,
shareholders have oversight of the board. That is how capitalism
works. That's how property rights work when you own a share of
stock. And so by having good oversight, by having
just more brains in the room and a diverse set of

(54:24):
brains, you can generally foresee a
lot of risk that might not be seen by a smaller group. So
I think ultimately shareholders are there to help their companies.
When we do research and we say, you know, we find a company is a
leader and one's a laggard and we sit down with the laggards and say, look,
this is your direct competitor and they're just doing better than you on

(54:46):
whatever the issue may be. It could be regenerative
agriculture, it could be racial justice, it could be climate change.
We're offering them a solution. We're saying, look, this is what they're doing. Here's the
ROI, here's the return on investment, the cost of, of
matching them or doing better than them is less than
if you do nothing, you're going to have potential harm.

(55:10):
And so we're just helping the companies to reduce
long term risk for all stakeholders to increase
a long term sustainable growth. And again, it's this time
horizon thing, we're also getting them to say, look at
the long term term. We looked at your stock, you know,
we look at who owns the stock, we're looking at your, at the

(55:33):
actual Data set and 85% of your investors are
pension funds, are long term holders, 15% are day traders. Are you
going to make your most important strategic decisions based on that
small 15% or are you going to actually listen to
the folks who care about you? And I think
that's why we have really good relationships with the companies. I mean a lot of

(55:54):
people, they or the press, they like to think likely to say,
you know, oh, the resolution, it failed or it
passed. There is no pass fail. These are non binding resolutions
when we even escalate. And that's another thing people don't realize,
you know, we engage a couple hundred companies every year. Most of them say, thank
you for taking the time and the effort to come and talk to us.

(56:17):
You've helped us become a better company. Then there's the
ones who are really, who are really resistant to us and say, we don't want
to hear from you. Those are the ones that we file the resolutions with. So
what you're seeing, if you're only. And most people perceive us as
just filing of these resolutions, that's a very small
percentage. And those are the most resistant companies. And then once

(56:40):
we file, most of them say, hey, if you, you know what, you're right.
This is a really good point. If you withdraw, we'll go do it.
And we say, cool, they'll do that. So again, you've got another small
subset that actually go to a vote. They're the ones who are just saying,
no, we don't want to listen to our shareholders. And we're like, but we're here
to help you. We're your friends. And so there's a

(57:00):
perception that it's like this, but it's actually, it's this because
we own the companies. We are the companies. And so
it's very collaborative when the vast majority
of it is incredibly collaborative. Very encouraging.
Just thank you for that background and the collaboration.
Let's move to segment four. Greenwashing

(57:22):
misleads investors by presenting a company as more sustainable than it
truly is. Tactics range from vague claims and
selective reporting to inconsistent practices that do not align with public
commitments. Red flags include a lack of data,
unverifiable ESG claims, and discrepancies between market marketing
and operations. Corporate accountability depends on strong

(57:44):
governance, independent oversight, and transparent reporting.
Investors can research fund legitimacy by analyzing ESG
ratings, reviewing sustainability reports, and verifying
claims through third party assessments. Tools for accountability include
shareholder engagement, proxy voting, and shareholder resolutions
that push for better ESG performance. Legal action action can also

(58:06):
be taken in cases of fraudulent claims. Ethical dilemmas arise
when balancing financial goals with sustainability priorities.
Careful scrutiny is necessary to differentiate meaningful
corporate responsibility from misleading marketing strategies in ESG
investing.

(58:28):
Andrew, As You Sow has been mentioned several times on this
podcast since you were on last time, how can everyday
investors better scrutinize fund labels to ensure
alignment with their values? When you say fund labels, you're talking about
mutual funds and ETFs. Yeah. So we have a platform
called Invest Your Values. You can go there. It's, it's open to the public.

(58:50):
It's free. Investyourvalues.org and what we do
is we look at 6,000 mutual funds every month because they change
their holdings. And what we developed this in 2015 because
what we found is there are all these people who wanted to divest fossil fuels.
They wanted to get away from the risk, the climate risk,
and yet nobody knew what they owned. So people came to us and said, I

(59:12):
want to divest, but I don't have a clue. I mean,
there's 100 million people with $10 trillion in 401(k) plans.
Don't have a clue. They're in the Vanguard fund and they got
no idea. It's got bunch of Vanguards in it. They don't know that
it's actually as an index that holds the entire
extractive economy. So what we did is we just put up this

(59:34):
site and what it does, it looks at every mutual fund or the big
ones, and it says, okay, what's inside of it?
And it identifies these are fossil fuel companies, these are oil companies, these are
utilities. And now, you know, these
are private prisons. And we believe private prisons are
really a proxy for racial justice. It's a

(59:56):
manifestation of racist policy.
We look at all these just different issues, gender
equality, we look at weapons. We found that school
teachers didn't want to have assault weapons in their portfolio after
these massive school shootings. Well, now they could go to a site and they could
see. Now the problem is when you're in a 401(k) plan,

(01:00:18):
there's not a lot you can do about changing it because essentially they're all the
same. I mean, we also have on that site, you can look inside the
401(k) plans. I think we're up to about 70 companies. We'll eventually get the
whole S&P 500. But you can look inside Amazon if you're an
Amazon employee and see exactly what's inside. And we're down
to the. If, you know, we get, we go really

(01:00:41):
deep and again we update it once a month because the holdings change.
But we also looking at how much, what percentage of it and
who's in the what are called the QDIA or the
default option. And most people are in this default option, these
indexes. And by the way, there's this new executive
order that just got put out a couple of weeks ago saying we need more

(01:01:01):
risk in our 401(k) plans. We want to add private equity and we want
to add crypto. And so this is a really
dangerous thing. There's a, there's a so much risk in your 401(k)
plan right now because you're so heavily invested in fossil fuels,
heavily invested in the extractive economy that's in the process of
winding down. And now they want to add more with even

(01:01:24):
less transparency. Because you're in private equity, you don't
know there's no rules about disclosure. So we're about
to enter this. Like, let's add more risk to all
everybody's portfolio. I kind of, I don't
know whether I answer your question, but we try to help people just know
what you own so you can then decide what you want to be invested in.

(01:01:46):
Because your money, it really defines
the future. And just if I keep going a little bit. There's also
this issue around proxy voting. When you are in a 401(k) plan,
you're handing off your right to vote. You have
a right to decide who's on the board of directors of every company. And

(01:02:07):
you've handed that to Vanguard. Vanguard votes 100% of the time with management.
BlackRock votes 98% of the time with management. And
so what we're doing is we're trying to get people to become aware of this
to demand what's called pass through voting, which means
you get to say, I want my fractional shares to be voted in this
way. Now the big asset managers have offered some

(01:02:29):
options. Again, not to pick on Vanguard, but they have offered five
options in their voters choice. Four of them are identical. Four of them are
vote with management 100% of the time. They have one called Glass
Lewis ESG, which is a little better. But even that one,
it supports board directors. I think it's
85% of the time. It endorses CEO pay packages about

(01:02:52):
90% of the time it's better on the shareholder resolutions.
But if you want to vote against the board and you're in a
401(k) plan, even with pass through, there's
not a lot of options. Now we're trying to get them to expand that
to actually offer a truly sustainable voting
option. We call it as you vote. We publish this

(01:03:14):
every year and I believe State Street is now incorporating
that. That's great. Thank you for the
resources and that background information. Jennifer, what
red flag should investors and advisors look for when
analyzing fund sustainability claims? Oh,
this is a good one. So actually before coming into

(01:03:36):
this role, I worked for an ESG data provider
that was known for being 100% transparent
with how the scores are calculated. In fact, that's why I chose to
to work for them specifically. And one issue that
I encountered with some of the fund managers that would come to us
is this fear of looking bad

(01:04:00):
when they have a fund that they are very proud of that
they've constructed regarding sustainability. And one thing
that Ioannis brought up previously, I think a few questions
ago, and this stuck with me, was the difference between
returns and impact scores. And
I think they conflate the two just a little bit so you could have a

(01:04:22):
fun with the fantastic returns. And one that is
very different regarding impact. And when they want to have,
you know, showcasing both things at the same time, if
you see a fund that, you know, great returns, everything like that,
they want at the same time to showcase an impact
score, that's also equally something to be proud

(01:04:45):
of. Now, if they, you know, are
labeled as a sustainable fund and they come and they
have a sustainable score,
that's something ridiculously high on
whatever scale it happens to be, they
sometimes will. The fund manager I'm referring to, they, in this

(01:05:06):
case will, you know,
sometimes try and tout
their score if it's above or near a hundred
percent in whatever, you know, range or
scale they happen to be comparing that to. I will note that
in this particular data provider that I worked for, it is

(01:05:30):
impossible to get a 100% score in
any. In this system. It just is. No company or fund
will ever come close to that. And it frustrated many
fund managers that would come to us and want to, you know, understand why
they couldn't get to this point. So, you know, it's.
It's just a, a fact of life that you could see that

(01:05:52):
there's something to be used to strive for in terms
of fixing and, and working towards sustainability
and recognizing that there's never going to be a fund that is just
completely perfect. Now, I know that investors will look at that and say,
well, I, I want to invest in something that's perfect,
that is completely sustainable, and that's challenging for them

(01:06:16):
to comprehend. Now, when you change the scale in
some capacity, maybe that gets them to
maybe lessen their stance a little bit. But on the one hand, it's
the red flag. There is just perfect score.
Funds regarding sustainability are just going to be

(01:06:36):
difficult to come across, you know, more
broadly speaking. And it just exacerbates the greenwashing argument
even further. So I'd say that this is just
something that we need to address more broadly as an industry.
Ioannis, when it comes to corporate accountability and greenwashing,

(01:06:56):
do ESG rating methodologies need an overhaul? Why or
why not? Yeah, great question. Let me
start by saying that again, a little bit of an unconventional
view, but there's always silver lining. I think that
greenwashing, of course, with all its negatives and so on, it does
contain a signal. And for me, the signal is that these

(01:07:19):
companies or these funds feel sufficient to
pressure to lie to us about what they're doing.
Because indifference is the enemy, right? Because
if these issues that we are talking about here today did not matter,
none of these folks would feel the pressure to lie to us about
what they're doing. So there's a silver lining. So I use greenwashing almost

(01:07:41):
as a measure of, you know, is there sufficient pressure at
this point for these folks to appear to be
responsible or sustainable? Now, having said that,
I want to bring in another dimension that I hope it also answers your question,
Andy. I tend to believe that
precisely for the reasons that Andy and Jennifer were

(01:08:02):
just describing. In other words, all of these
pathologies in the current system of asset
management in terms of really,
you know, linking people's
preferences, values and objectives
ultimately to their pension savings, their savings, or the

(01:08:24):
way they invest their money. Exactly. Because of all those pathologies, I
would dare say that this industry is ready for
disruption. Someone may come in and
do these a lot better and a lot cheaper
and more accurately, meaning closer to
the values of the people, ultimately the people that hold the

(01:08:46):
money. And I think that we are already seeing that, especially
if you see all of these, you know, FinTech, the proliferation
of FinTech, but also the engagement of the younger
generation in terms of their demands and expectations,
wanting to know, in the same way that they want to know what it is
that they are consuming and what they are buying and what are the

(01:09:08):
companies they're buying for. I think that we see that trend as well. We see
the younger generations wanting to know the banks and the financial
institutions and the savings account wanting to know how they do this and
in fact use that as a lever to express those values. If
we are being honest, the truth is, the honest truth is
that the current structure of the asset management industry,

(01:09:31):
it is not designed to actually
reflect the values, the preferences of
individuals. It doesn't even have the capacity to do so. It's
just too expensive for them, right? And therefore that's
why we're even now speaking about, you know, as Andy was mentioning earlier,
how do we, you know, allow the people to express their preferences when it comes

(01:09:53):
to voting and what's in their portfolio? Because these systems were
never designed to sell to, to, to, sorry, to serve that
level of an investor. And that leaves a huge gap. And
we already see, and I have already seen FinTechs
and other companies talking already about asset management
as a service. Asset management is something that works in the cloud.

(01:10:15):
It's a lot more cheaper. It's a lot cheaper, right? So
we see even the evolution of quant investing with the integration of
AI, of blockchain and so on, which dramatically
brings down the cost. And I think what we need to realize in my
conversations, at least with the industry, is that this is not just an ESG
issue, this is not just a sustainability issue. Because once you

(01:10:38):
crack the code in terms of reflecting
people's preferences and values, it could be any,
right? You might have different ones than me. I mean, even within
sustainability, I may care more about the environment, you may care more
about social issues and so on and so forth. So ultimately this industry
is ready for disruption, for that sort of those

(01:11:00):
actors that will be able to get us to that level
of reflecting those values. And therefore, to answer directly your
question, I think that once we get that apparatus in place and
that infrastructure is ready to reflect our values, I
would dare say that that infrastructure would also be a new
level of transparency with respect to all the issues we discussed.

(01:11:23):
What's in my portfolio, how am I voting, how are my
views expressed on voting and so on, necessarily, because that's the
whole point of this. So, you know,
the technology is there. I mean the technology exists. It's just a matter
of there's so much fear and defense of the status quo.
Looking at the indexes that were forced into. Everyone is forced

(01:11:46):
into all the pension schemes across in the UK, all
across the world. These are all being forced into forcing
our money to support the existing infrastructure, the
status quo. And if you think the world is perfect right now,
well, that's what you're invested in. We're all invested in our own destruction
with and we have no choice yet. The technology exists to give

(01:12:09):
us absolute total freedom to actually
shape it according to our values and to then send our
message to the boards or directors of all the companies of what our values are.
This is not a technology issue. This is the
old system. The extractive economy that is winding down that I keep
referring to is just clawing and scratching and trying to change the laws. I

(01:12:30):
mean, the US is desperately
terrified of actually having freedom of choice.
Yeah, yeah, let's bring it home and go to the last segment.
Sustainable investing is evolving with advancements in data analytics,
regulatory shifts and changing investor priorities. Climate
risk modeling is improving, offering more precise assessments of physical

(01:12:54):
and transition risks. AI driven ESG analytics
enhance data accuracy by processing large volumes of
unstructured information, identifying trends and automating
reporting. Regulatory changes are also shaping the space,
with governments implementing stricter ESG disclosure requirements
and frameworks to improve transparency. Greenwashing

(01:13:16):
regulations are becoming more rigorous, ensuring companies substantiate
their sustainability claims. Investor demand continues to grow,
pushing companies and fund managers to integrate ESG factors
into decision making. Impact investing is also shifting,
with a stronger emphasis on measurable outcomes and accountability.
As data improves and regulatory standards tighten,

(01:13:38):
sustainable investing is expected to become more structured and
mainstream, influencing corporate behavior and capital allocation in
the coming decade.
Andrew, what's your vision for the evolution of values aligned
investing for the next 10, 20 years? Will there be a

(01:14:00):
revolution? I think there'll be an evolution.
I think that the mass of people are
realizing my money is my power and I
don't like the direction that we're going right now, that we are
ignoring risk, that I mean, just
climate change, just, you know, social justice, all these

(01:14:23):
issues that people actually are shaping
a vision of what the world could be and they realize that
if you capitalize that vision,
that's what becomes reality and that your
values can actually become manifest. And people
are realizing this. It's. And technology is now

(01:14:44):
catching up. I mean, there's new startups that will allow you to
customize your proxy voting, for instance, down to the
T. And I mean, we do it. What's interesting is we offer this thing called
My Money, My Vote at no cost people. And it's for people who
just own shares directly of companies. They get
a proxy ballot into their inbox and they

(01:15:07):
look at it and go like, I don't know what to do. And they just
don't vote. So literally throwing away their mail in ballots, they
can opt into a sustainable policy
that we, we put forward. And
you can, with one click, you can now vote all of your,
you know, all of your ballots with, again, with one

(01:15:29):
click. And instead of getting this email saying time to vote, you get an email
that said thank you for voting. And you open it up and says, any adjustments
you want to make, any customizations, you know, if you,
you know, like we're voting against any CEO pay package where a person makes
more than what the average worker makes in a century. We think that that's
adequate. But you might say, you know what? I think they should make more.

(01:15:50):
You can, you can slide the dial, literally, it's like dragging a little
dial and shift it to whatever you want. So people are
realizing, whoa. And, and so using,
gathering that that's a lot of power that people are
throwing away because they didn't even know they had it. I mean that's the thing.
People abdicate their power without even knowing they have power.

(01:16:12):
And now if they, when they become empowered, it's, it
shifts, it shifts the whole dynamic.
So definitely Google As You Vote, it'll
send you to asyousow.org and you can find those resources.
Jennifer, how is US SIF preparing investors for
new standards and evolving definitions of sustainable

(01:16:35):
investing? Yeah, I will say, to
be fair to financial advisors and many professionals, I feel like the,
the industry hasn't made it easy to adopt good practices
when it comes to sustainable investing. I feel like we've said,
you know, it's not as easy as here's some square pegs,
here's some square holes. We basically said here's

(01:16:58):
some square pegs. Now go find some holes that they might fit in and
let them do as they will. But we really
need to give some context and some best practices to help
people understand and you know, there will be mistakes
made, but we need to help them understand that they need to be unafraid
of this industry. It really is important and for all of the reasons

(01:17:21):
that Andrew just highlighted as well. So US SIF is
actually putting together a three part roadmap series
for financial advisors. The first part is set
to release on September 3rd. It's free to download
and so I really hope that you will go do that.
Ussif.org and really

(01:17:42):
this is designed around financial advisors
specifically. But really anyone can benefit from this, especially if you
are a client working with an advisor. This can certainly help you as
well. And there really are three types
of advisors. Those that don't need convincing, who are already in
this space, those that will never be on board.

(01:18:05):
Obviously I won't waste my time with those, but those that are deemed to be
what I deem the movable middle, who can be swayed one way
or the other and really need the right resources and support. That's my mission
for the next few, few years, is to bring as many new people into the
field as possible. And I feel like this
series will be one good

(01:18:26):
step to do that. So hopefully that be
good for you. Ioannis, you mentioned FinTech. How will
AI or how can AI and machine learning reshape
ESG assessment in capital markets?
I think fundamentally, and if so, first of all, as we were just
discussing, it actually enables new business models. And

(01:18:49):
that's over and above all the other things that we discuss in terms
of, for instance, it can actually help us with finding
greenwashing in reports, right? It can audit these reports. It can actually
an AI can audit the data gathering effort
of another AI. And we already see startups that do this. So
not only do they give you a score on any ESG dimension, but they give

(01:19:13):
you a quality of that score so you can
calibrate how reliable or unreliable that
score is. So I think that everything, in other words,
from portfolio construction to data quality and
audit, all the way to business models for FinTechs and
everything in between, I think AI has a huge potential

(01:19:34):
to fundamentally change the asset management industry.
But we need to also, of course, be careful when we talk about, you know,
these technologies. There is, as I'm sure all of you know, a huge
discussion in terms of, well, what is the environmental
cost that we are paying for these technologies? Right.
So in other words, you know, what is the energy usage,

(01:19:57):
what is the water usage and what is the impact of
data centers on the local communities? And one thing that we
should not forget, by the way, and it's very important, is that we
are in a very privileged part of the world. There are hundreds of
millions of people that do not have access to
electricity. And there's almost, I think the last estimates, they show

(01:20:19):
there's at least there's billions of people that are not
connected to the Internet. So we need to be acutely
aware that using these technologies, without
accounting for the fact that a large part of the population
and large part of the world is not able to access these technologies,
might actually increase rather than decrease

(01:20:42):
some of these inequalities. So as always with new technologies,
it will come down to the type of governance and
guardrails that we put around its adoption to make
sure that we do not worsen. And in an ideal
scenario, we actually improve upon some of these
inequalities, especially when it comes to how do we integrate

(01:21:03):
ESG. And previously we also talked about the gap between the
Global North and the Global South. Perhaps these technologies can
help us elevate the level of transparency and
the sheer volume of data that we can
process so that we are more inclusive in that respect
of our investment strategies.

(01:21:26):
Andrew, any closing thought?
Yeah, I just think we're at this, I mean, a really
incredible moment in time where we are in this great
transformation. I mean, I think this is a transformation
like the scale of the Industrial Revolution. And what you're
seeing is the pushback is so intense that

(01:21:50):
it's, you know, it's become like part of the political landscape and
it's, and it's global, it's across the world. But ultimately, I think the
market forces will, will win out. I think that,
that you can, you know, push back. It's, it's like it's a ripple
that's become a wave that's becoming a tsunami and that people
want, have a vision of the future. They know that it's connected to their money

(01:22:12):
and that, that this is
something I, I actually, I know people are very pessimistic right now. I'm actually
very optimistic when that this, this
is inevitable, that this is what the market forces are actually doing.
Because as you know, as was said earlier, we got to look
at the whole, the whole globe. It's not just the United States. The US Is

(01:22:35):
isolating itself and that, that is ultimately going to lead to, you
know, the downfall of, you know, well, empires do come and
empires do go, but I think the global economy is
going to look out for itself. And so
it gives me hope. Well, thank you. Thank you,
Andrew, Ioannis, Jenny and

(01:22:57):
Marilyn, appreciate our incredible panel
for such insightful perspectives on sustainable investing
and I think a very optimistic view, very
inspiring view. One of my favorite takeaways from today's
conversation is how impact investing isn't just about
doing good. It's about making your financial goals and your

(01:23:19):
values work together to create real, measurable change.
And the balance of purpose and performance is truly where the future
of investing lies. Now let's inspire
you to do one action item to move the needle this week.
Take a moment to review your own portfolio or investment
choices and ask yourself, how well do they align with

(01:23:42):
your personal values? Even small shifts can make a
big impact over time. If you haven't explored sustainable
investing before, start by researching one company or
fund that prioritizes environmental or social
responsibility. Many free resources were
shared on the program today. If you found today's episode valuable,

(01:24:03):
please subscribe, share it with your friends or family and
leave us a review to help others discover this important
conversation. A few things before we part ways. Let's connect on
LinkedIn Find me by searching for Advisor Andy
Inspired Money is created and produced by me and Bradley Jon
Eaglefeather. Bradley's behind the scenes during the live stream and

(01:24:25):
edited our segments. Chad Lawrence does our graphics,
animations and editing. Last but not least, I want to
give a big shout out to our amazing guests who have shared their time
with us so generously. Go follow their work and keep learning from the
best. Andrew Behar is CEO of As You Sow and
author of "The Shareholders Action Guide." Explore

(01:24:47):
his impactful shareholder advocacy
at asyousow.org. Marilyn
Waite, who dropped off I think after the
around the fourth segment. She leads the Climate Finance Fund and
authored "Sustainability at Work." Discover her insights and work at marilynwaite.com
Jennifer Coombs

(01:25:10):
heads Content and Development at US SIF and created
the Chartered SRI Counselor Credential. Learn
about her work and US SIF at ussif.com and
finally, Ioannis
Ioannou is Associate Professor at
London Business School sharing ground groundbreaking research on

(01:25:30):
corporate sustainability. You can find his work and courses at
ioannou.us or at
the London Business School website. Anything that
our panelists want to share or plug specifically?
Keep an eye out for US SIF's

(01:25:53):
videos and campaigns ahead. And thank you
inspired money makers for joining us today and inspiring us
to invest with purpose and impact. Inspired Money returns
next week Thursday. That's August 21st
at 1pm Eastern. Our topic will be the Science of
Happiness and Financial well being. It's it'll be a great

(01:26:15):
discussion. Until next time, do something that
scares you because that's where the magic happens. Thanks everyone.

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