1 00:00:05,880 --> 00:00:07,640 Speaker 1: Welcome to Fear and Greed Q and A, where we 2 00:00:07,680 --> 00:00:11,440 Speaker 1: ask and answer questions about business, investing, economics, politics and more. 3 00:00:11,480 --> 00:00:15,480 Speaker 1: I'm Sean Aylmer. Is green investing still the go? A 4 00:00:15,560 --> 00:00:17,200 Speaker 1: few years ago there was a lot of hype and 5 00:00:17,320 --> 00:00:21,680 Speaker 1: enthusiasm around ethical investing. Now much of that hype seems 6 00:00:21,720 --> 00:00:25,360 Speaker 1: to have dissipated somewhat. But have investors moved on or 7 00:00:25,400 --> 00:00:27,880 Speaker 1: is it now just becoming an everyday part of the 8 00:00:27,920 --> 00:00:31,479 Speaker 1: investing landscape. Remember this is general information only. You should 9 00:00:31,520 --> 00:00:35,400 Speaker 1: seek advice Taylor to your circumstances before making investment decisions. 10 00:00:36,000 --> 00:00:40,080 Speaker 1: Googled Higgins is head of Responsible Investment and Real Assets 11 00:00:40,400 --> 00:00:43,440 Speaker 1: at Zeneth Investment Partners. Google. Welcome to Fear and Greed Q. 12 00:00:43,440 --> 00:00:44,600 Speaker 2: And A Thanks Sean. 13 00:00:44,720 --> 00:00:46,879 Speaker 1: Great to be here. So we're are we up to 14 00:00:47,200 --> 00:00:50,720 Speaker 1: with green investing? There was certainly a lot of hype 15 00:00:50,760 --> 00:00:54,720 Speaker 1: about it a couple of years ago. It has kind 16 00:00:54,720 --> 00:00:57,760 Speaker 1: of left our Maybe not you, Google, but for many 17 00:00:57,760 --> 00:00:59,520 Speaker 1: of us we don't think about it as much as 18 00:00:59,600 --> 00:01:03,720 Speaker 1: we did previously. Are people investing less in it? I'm 19 00:01:03,760 --> 00:01:05,800 Speaker 1: just interested in where it is in its cycle? 20 00:01:06,360 --> 00:01:08,760 Speaker 2: Yeah, yeah, yeah, And it's nothing like I think like 21 00:01:08,760 --> 00:01:12,360 Speaker 2: a good hype cycle to get people excited and charge 22 00:01:12,400 --> 00:01:14,280 Speaker 2: in binally and then realize it's not as simple as 23 00:01:14,319 --> 00:01:17,360 Speaker 2: everybody thought. And so, you know, and if we think 24 00:01:17,400 --> 00:01:18,800 Speaker 2: about it at that stage, you know, we're in the 25 00:01:19,040 --> 00:01:24,280 Speaker 2: classic trough of disillusionment in the hip cycle, where you know, 26 00:01:24,360 --> 00:01:26,840 Speaker 2: the things have been very quiet. There has been a 27 00:01:26,880 --> 00:01:30,120 Speaker 2: lot of pullback. But interestingly, what we see is if 28 00:01:30,120 --> 00:01:32,360 Speaker 2: you look around the world, you know, for a long 29 00:01:32,440 --> 00:01:36,600 Speaker 2: time it's sustainable investing in green investing was very strong 30 00:01:36,600 --> 00:01:38,880 Speaker 2: in Europe and that was you know, we're all heartland 31 00:01:39,000 --> 00:01:40,520 Speaker 2: was and it kind of all flowed out around the 32 00:01:40,520 --> 00:01:44,760 Speaker 2: world from there. And so now Europe is probably gone 33 00:01:44,760 --> 00:01:47,320 Speaker 2: a little bit the other way, not anywhere near as 34 00:01:47,360 --> 00:01:49,720 Speaker 2: traumatically like the US, where you know, you can't even 35 00:01:49,720 --> 00:01:53,240 Speaker 2: talk about this stuff without getting abused by somebody. So 36 00:01:54,440 --> 00:01:56,840 Speaker 2: if we think about, you know that the US is terrible, 37 00:01:57,080 --> 00:02:00,040 Speaker 2: Europe is you know, pulling back for the moment. But 38 00:02:00,120 --> 00:02:04,240 Speaker 2: Australia interestingly has kind of held its ground. It hasn't 39 00:02:04,280 --> 00:02:08,040 Speaker 2: gone into massive outflows like these other jurisdictions. It certainly 40 00:02:08,120 --> 00:02:11,160 Speaker 2: hasn't been getting rivers of money pouring into it, but 41 00:02:11,440 --> 00:02:14,320 Speaker 2: it's just kind of holding steady. And it's still doing that, 42 00:02:14,360 --> 00:02:17,799 Speaker 2: which we think is actually quite interesting because we'd like 43 00:02:17,880 --> 00:02:20,880 Speaker 2: to think it suggests that people are still interested, they're 44 00:02:20,919 --> 00:02:24,480 Speaker 2: not abandoning it. Is it evolving quickly? I think that 45 00:02:24,600 --> 00:02:27,160 Speaker 2: is very definitely the thing. And where it will evolve 46 00:02:27,240 --> 00:02:30,000 Speaker 2: too is going to be the interesting question. But yeah, 47 00:02:30,040 --> 00:02:32,720 Speaker 2: for the moment, I think it's still a thing. But 48 00:02:32,800 --> 00:02:36,360 Speaker 2: as you sort of alluded to before, maybe it's less 49 00:02:36,919 --> 00:02:39,440 Speaker 2: it's the new thing, but it's starting to get absorbed 50 00:02:39,560 --> 00:02:42,359 Speaker 2: into activities much more broadly and generally. 51 00:02:43,000 --> 00:02:47,639 Speaker 1: So presumably the investment thesis for responsible investing or green investing, 52 00:02:47,720 --> 00:02:52,520 Speaker 1: or whichever variety you'd like, hasn't changed. Notwithstanding there's all 53 00:02:52,560 --> 00:02:56,240 Speaker 1: sorts of rule changes out of the US, and certainly 54 00:02:56,320 --> 00:02:59,919 Speaker 1: under Joe Biden they were greener than under Donald Trump, 55 00:03:00,520 --> 00:03:03,799 Speaker 1: and deliberation day, tariffs and the influence of the US 56 00:03:03,880 --> 00:03:06,600 Speaker 1: has but presumably the fundamental thesis hasn't changed. 57 00:03:07,200 --> 00:03:09,960 Speaker 2: No, that's exactly right. I think. You know, interestingly, in 58 00:03:10,000 --> 00:03:13,000 Speaker 2: the US, where we have this thing now where you 59 00:03:13,040 --> 00:03:15,160 Speaker 2: know you can do it, just don't talk about it, 60 00:03:15,919 --> 00:03:19,440 Speaker 2: we're seeing a lot of anecdotal evidence to say, you know, 61 00:03:20,240 --> 00:03:22,880 Speaker 2: if the thesis hasn't changed and you're still looking for ultimately, 62 00:03:22,919 --> 00:03:26,919 Speaker 2: what's material when you look at an investment proposition. Why 63 00:03:27,000 --> 00:03:29,480 Speaker 2: would you stop doing that if you've decided it's material. 64 00:03:29,800 --> 00:03:34,160 Speaker 2: And even with the latest US bill that's come out, 65 00:03:34,160 --> 00:03:36,560 Speaker 2: which effectively, you know, if you look at the headline, 66 00:03:36,560 --> 00:03:39,200 Speaker 2: it's banning ESG, but then you look at what the 67 00:03:39,240 --> 00:03:42,760 Speaker 2: bill says. The bill says it's producery's job to take 68 00:03:43,160 --> 00:03:45,880 Speaker 2: notice of things that are material, and that's exactly what 69 00:03:46,240 --> 00:03:49,520 Speaker 2: ESG is. You know, it is about what's material, And 70 00:03:49,560 --> 00:03:51,520 Speaker 2: so I think you know that thesis is very definitely 71 00:03:51,600 --> 00:03:54,640 Speaker 2: still intact. I think where a lot of the confusion 72 00:03:54,760 --> 00:03:56,960 Speaker 2: goes is is that you get a lot of people 73 00:03:57,320 --> 00:03:59,720 Speaker 2: who are sort of conflating the difference between ESG and 74 00:03:59,720 --> 00:04:02,840 Speaker 2: stability and because you know, particularly in finance, we love 75 00:04:02,880 --> 00:04:05,400 Speaker 2: to throw around all these terms and have nobody agree 76 00:04:05,440 --> 00:04:10,240 Speaker 2: on what they mean. Unhelpful. But you know, ESG and sustainability, 77 00:04:10,240 --> 00:04:13,240 Speaker 2: like we think it's important to sort of articulate that 78 00:04:13,280 --> 00:04:16,160 Speaker 2: their linked concepts, but they're not substitutable concepts. And so 79 00:04:16,680 --> 00:04:19,520 Speaker 2: all ESG is is just how do you think about 80 00:04:19,640 --> 00:04:23,440 Speaker 2: risks and opportunities that affect an investment's value? Like it's 81 00:04:23,480 --> 00:04:26,440 Speaker 2: that simple. It's not even that new because we've been 82 00:04:26,480 --> 00:04:29,040 Speaker 2: doing that for decades, you know, thinking about well, what 83 00:04:29,120 --> 00:04:31,560 Speaker 2: is going to influence the value of this company or 84 00:04:31,560 --> 00:04:34,240 Speaker 2: of that security. So that's all that ESG is. It's 85 00:04:34,279 --> 00:04:37,320 Speaker 2: just looking at things in those ES and G pillars 86 00:04:37,800 --> 00:04:42,320 Speaker 2: that might change value. But that is the opposite side 87 00:04:42,360 --> 00:04:45,440 Speaker 2: of how do we think about sustainability, And so the 88 00:04:45,480 --> 00:04:46,880 Speaker 2: easiest way to think of it is like, you know, 89 00:04:47,160 --> 00:04:50,200 Speaker 2: ESG is the world's impact on a company, but sustainability 90 00:04:50,279 --> 00:04:53,240 Speaker 2: is a company's impact on the world. And so you know, 91 00:04:53,279 --> 00:04:56,159 Speaker 2: you can get into a circle because if you're a 92 00:04:56,240 --> 00:04:59,799 Speaker 2: mining company and you pollute something, well, that's your impact 93 00:04:59,839 --> 00:05:01,760 Speaker 2: on the world. That's probably going to come back around 94 00:05:01,800 --> 00:05:04,800 Speaker 2: the circle and bite you on the ESG aspect, which 95 00:05:04,839 --> 00:05:07,479 Speaker 2: is you get fined a billion dollars. And so you 96 00:05:07,520 --> 00:05:10,400 Speaker 2: know they are related but not quite the same thing. 97 00:05:10,680 --> 00:05:13,640 Speaker 2: And so when we talk about that in looking at funds, 98 00:05:13,720 --> 00:05:16,400 Speaker 2: I think and any sort of investment, really you've kind 99 00:05:16,400 --> 00:05:18,039 Speaker 2: of got to separate, well, what is just sort of 100 00:05:18,080 --> 00:05:21,240 Speaker 2: looking at factors that might influence value, as opposed to 101 00:05:21,560 --> 00:05:24,440 Speaker 2: how do we look at that and what is that 102 00:05:24,600 --> 00:05:28,880 Speaker 2: investment doing in sustainability? Because if you were trying to 103 00:05:29,000 --> 00:05:33,280 Speaker 2: look out does ESG outperform traditional investing, which has been 104 00:05:33,320 --> 00:05:35,400 Speaker 2: one of these arguments has been made for a long time. 105 00:05:36,040 --> 00:05:37,600 Speaker 2: We would kind of look at that and go, well, 106 00:05:38,800 --> 00:05:40,919 Speaker 2: if we've just sort of accepted the fact that most 107 00:05:40,960 --> 00:05:44,560 Speaker 2: investment managers will think about ESG as a decision making tool, 108 00:05:44,760 --> 00:05:48,160 Speaker 2: like that's not a factor that outperforms, But companies who 109 00:05:48,160 --> 00:05:51,560 Speaker 2: are using that in conjunction with thinking about sustainability, that 110 00:05:51,760 --> 00:05:54,599 Speaker 2: is where differences start to occur and you start to 111 00:05:54,600 --> 00:05:56,160 Speaker 2: see this performance differential. 112 00:05:56,640 --> 00:05:59,560 Speaker 1: So when you're a head of responsible investing and realize 113 00:05:59,560 --> 00:06:03,320 Speaker 1: it's as you are googled what what does responsible investing mean? 114 00:06:03,400 --> 00:06:07,720 Speaker 1: Does that mean thinking about both sustainability and ensuring that 115 00:06:08,200 --> 00:06:11,520 Speaker 1: in your framework, ESG plays a key role in how 116 00:06:11,560 --> 00:06:12,400 Speaker 1: you value a company. 117 00:06:13,120 --> 00:06:17,120 Speaker 2: Yeah, exactly. I mean the separation is less about companies 118 00:06:17,240 --> 00:06:19,040 Speaker 2: because we don't invest in companies. We only look at 119 00:06:19,080 --> 00:06:21,960 Speaker 2: funds for clients. But we're looking about how do those 120 00:06:22,000 --> 00:06:24,640 Speaker 2: fund managers think about it, and so we want to 121 00:06:24,720 --> 00:06:29,239 Speaker 2: understand it is the X, Y and Z equities fund, 122 00:06:30,120 --> 00:06:33,320 Speaker 2: is it just really using ESG as an investment tool 123 00:06:33,760 --> 00:06:36,680 Speaker 2: or is it going past that and using that plus 124 00:06:36,720 --> 00:06:39,240 Speaker 2: thinking about sustainability, and so we just want to know 125 00:06:39,720 --> 00:06:41,880 Speaker 2: where the buck stops for those guys. And so if 126 00:06:41,880 --> 00:06:45,200 Speaker 2: you're putting funds in different buckets thinking about well, okay, 127 00:06:45,200 --> 00:06:47,680 Speaker 2: that's an ESG fund, and that's an ESG fund, ah, 128 00:06:47,680 --> 00:06:51,360 Speaker 2: this is an ESG plus sustainability, and so that way 129 00:06:51,400 --> 00:06:54,680 Speaker 2: you can look more around what are they doing. And 130 00:06:54,720 --> 00:06:57,400 Speaker 2: so I think particularly like if you're not looking at 131 00:06:57,400 --> 00:06:59,920 Speaker 2: a fund manager and understanding how they think about ESG, 132 00:07:00,320 --> 00:07:02,560 Speaker 2: it's a bit like looking at a fund manager and 133 00:07:02,600 --> 00:07:05,080 Speaker 2: deciding it's not worth thinking about how they think about 134 00:07:05,120 --> 00:07:08,760 Speaker 2: investment analysis. It's just kind of embedded in the whole thing. 135 00:07:09,200 --> 00:07:13,000 Speaker 1: Okay, so what about sustainable was I'm going to narrow 136 00:07:13,000 --> 00:07:16,840 Speaker 1: my original question way down now, and so it's sustainable 137 00:07:16,920 --> 00:07:22,239 Speaker 1: investing and investing in products be renewable those sorts of things. 138 00:07:23,240 --> 00:07:25,240 Speaker 1: Obviously is a big part of that, but is a 139 00:07:25,280 --> 00:07:28,360 Speaker 1: big part of oil and gas as well. So with 140 00:07:28,680 --> 00:07:33,280 Speaker 1: the more sustainable and renewables as a good example, do 141 00:07:33,360 --> 00:07:35,680 Speaker 1: you think people have gone off that sort of investing 142 00:07:35,840 --> 00:07:38,240 Speaker 1: or is it it'll come back around? 143 00:07:39,720 --> 00:07:42,480 Speaker 2: I think as we sort of touched on before, it's 144 00:07:42,480 --> 00:07:44,600 Speaker 2: still there. It's just not as hyped as it was. 145 00:07:45,680 --> 00:07:50,320 Speaker 2: There are undoubtedly managers who've exited the landscape, funds that 146 00:07:50,360 --> 00:07:54,360 Speaker 2: have shut down, investors who have pulled back. It's definitely 147 00:07:54,360 --> 00:07:57,400 Speaker 2: a thing. But is it going to go away? Well, 148 00:07:57,400 --> 00:07:59,280 Speaker 2: I don't think it can afford to. Like, there's just 149 00:07:59,320 --> 00:08:05,200 Speaker 2: too many risk factors littlone opportunity factors out there that 150 00:08:05,240 --> 00:08:08,200 Speaker 2: are aligned to this way of thinking to ignore it. 151 00:08:08,920 --> 00:08:12,640 Speaker 2: You know, if you are looking to invest in renewables, 152 00:08:12,880 --> 00:08:17,280 Speaker 2: you know, you might sort of get the rose colored 153 00:08:17,280 --> 00:08:19,600 Speaker 2: glasses and all the opportunities, but you've also got to 154 00:08:19,600 --> 00:08:23,720 Speaker 2: think about all the ESG risks. You know, renewables don't 155 00:08:23,760 --> 00:08:26,720 Speaker 2: have a zero environmental footprint. You know, you have to 156 00:08:26,760 --> 00:08:29,400 Speaker 2: think about those aspects. I mean, another really interesting one 157 00:08:29,440 --> 00:08:33,360 Speaker 2: is defense. You know, how does ESG investing in defense 158 00:08:33,440 --> 00:08:36,800 Speaker 2: get on? So, like defense ETFs have been going bananas 159 00:08:37,280 --> 00:08:41,079 Speaker 2: last year, like arritory jam was. Yeah, Like they returned 160 00:08:41,080 --> 00:08:43,959 Speaker 2: fifty six percent on average last year against the broader 161 00:08:43,960 --> 00:08:47,480 Speaker 2: global equities market of fifteen you know, and yet they're 162 00:08:47,520 --> 00:08:50,440 Speaker 2: all issued by fund managers who say that they are 163 00:08:50,480 --> 00:08:53,240 Speaker 2: responsible investors. Like that's the interesting one. So where does 164 00:08:53,280 --> 00:08:56,920 Speaker 2: this you know, pull pull out? And so we would say, 165 00:08:56,920 --> 00:08:59,720 Speaker 2: look if you're going to invest in defense, you need 166 00:08:59,760 --> 00:09:02,720 Speaker 2: to think about the ESG factors because they're really serious 167 00:09:02,760 --> 00:09:07,120 Speaker 2: in there. But don't confuse ESG with morals. This is 168 00:09:07,160 --> 00:09:09,319 Speaker 2: this sort of argument where you know, not everything that's 169 00:09:09,840 --> 00:09:12,360 Speaker 2: green is good, and not everything that's good is sustainable, 170 00:09:12,600 --> 00:09:15,760 Speaker 2: like these are all sort of niches in the different market, 171 00:09:16,160 --> 00:09:19,800 Speaker 2: and you know, there are a lot of arguments to say, well, 172 00:09:19,880 --> 00:09:23,480 Speaker 2: investments in defense is perhaps the right thing to do. 173 00:09:23,600 --> 00:09:24,960 Speaker 2: Of course, you can look at the other side of 174 00:09:24,960 --> 00:09:27,280 Speaker 2: the argument and say, well, you know, the only people 175 00:09:27,480 --> 00:09:30,600 Speaker 2: who will win are those who are using weapons, regardless 176 00:09:30,640 --> 00:09:32,680 Speaker 2: of which side they're on. But that is more an 177 00:09:32,720 --> 00:09:36,000 Speaker 2: ethical and moral argument rather than an ESG argument, if 178 00:09:36,000 --> 00:09:40,160 Speaker 2: that makes sense. So I think it's still very definitely 179 00:09:40,160 --> 00:09:41,480 Speaker 2: going to be a thing. I just don't think it 180 00:09:41,559 --> 00:09:44,400 Speaker 2: was hyped so much that everything was ESG and it's 181 00:09:44,440 --> 00:09:47,880 Speaker 2: not that simple. But I think also like one of 182 00:09:47,920 --> 00:09:49,840 Speaker 2: the other things that we're not really talking about all 183 00:09:49,880 --> 00:09:52,840 Speaker 2: that much at the moment is the impact of mandatory 184 00:09:52,840 --> 00:09:55,520 Speaker 2: climate reporting, because that is a thing here now in Australia, 185 00:09:55,559 --> 00:09:58,559 Speaker 2: And so twenty twenty six is the first year when 186 00:09:58,600 --> 00:10:00,800 Speaker 2: a whole sway of the economy has actually got a 187 00:10:00,840 --> 00:10:05,480 Speaker 2: report on climate emissions, and you know, for people who 188 00:10:06,240 --> 00:10:09,120 Speaker 2: do investing professionally for a living, like, we all know 189 00:10:09,200 --> 00:10:12,240 Speaker 2: that data moves markets, and with a big influx of 190 00:10:12,320 --> 00:10:14,960 Speaker 2: data coming in from this year, how is the market 191 00:10:15,040 --> 00:10:17,400 Speaker 2: suddenly maybe going to realize that this is something a 192 00:10:17,440 --> 00:10:19,240 Speaker 2: bit more material that we need to be thinking about. 193 00:10:19,440 --> 00:10:21,640 Speaker 2: And we're going to have to wait and see obviously 194 00:10:21,640 --> 00:10:23,400 Speaker 2: on that, but you know, maybe that is going to 195 00:10:23,400 --> 00:10:26,040 Speaker 2: bring the spotlight back and around on this side. 196 00:10:26,480 --> 00:10:28,480 Speaker 1: I mean this comes to your point, which you've written 197 00:10:28,520 --> 00:10:31,559 Speaker 1: that responsible investing is growing up, not winding down, And 198 00:10:31,600 --> 00:10:34,360 Speaker 1: I think everything you're talking about is that's what it's about. 199 00:10:34,400 --> 00:10:35,840 Speaker 1: That the whole sect is maturing. 200 00:10:36,280 --> 00:10:38,600 Speaker 2: I think so. I think so, And it needed to mature, 201 00:10:38,720 --> 00:10:43,520 Speaker 2: right Like there was some very wild suppositions getting thrown 202 00:10:43,559 --> 00:10:45,760 Speaker 2: around in the early days in the sort of the 203 00:10:45,760 --> 00:10:49,120 Speaker 2: peak hype, and you know sometimes I just had had 204 00:10:49,160 --> 00:10:51,640 Speaker 2: to sit there and roll my eyes and go, well, 205 00:10:51,720 --> 00:10:53,600 Speaker 2: you know this is not going to work because you 206 00:10:53,640 --> 00:10:56,160 Speaker 2: don't even know how it works. And you're trying to 207 00:10:56,360 --> 00:10:58,320 Speaker 2: explain to me how you're going to add value and 208 00:10:58,400 --> 00:11:01,600 Speaker 2: you don't know how it works. So you know, maturity 209 00:11:01,320 --> 00:11:04,240 Speaker 2: in all things. I think is good and men very 210 00:11:04,280 --> 00:11:07,120 Speaker 2: rarely is there any sort of idea where the first 211 00:11:07,800 --> 00:11:10,960 Speaker 2: iteration is a great example. These things need to evolve 212 00:11:10,960 --> 00:11:11,400 Speaker 2: over time. 213 00:11:11,760 --> 00:11:13,360 Speaker 1: Google, thanks for talking to Fear and greed. 214 00:11:13,600 --> 00:11:15,439 Speaker 2: Not a problem. Thanks Sean, that was googled. 215 00:11:15,520 --> 00:11:18,760 Speaker 1: Higgins, head of Responsible Investment and Real Assets at Thenith 216 00:11:18,800 --> 00:11:22,120 Speaker 1: Investment Partners. Remember to seek advice Taylor to you before 217 00:11:22,200 --> 00:11:24,920 Speaker 1: making any investment decisions. I'm Sean Elmer, and this is 218 00:11:24,960 --> 00:11:27,600 Speaker 1: fear and greed Q and Day