WEBVTT - Has ethical investing taken a hit? 0:00:04.240 --> 0:00:08.440 The world seems more politically polarized than ever. Ethical funds 0:00:08.440 --> 0:00:12.799 in major markets recorded record outflows earlier this year. Amid 0:00:12.880 --> 0:00:17.680 rhetoric about woke capitalism, rapidly rising defense spending has some 0:00:17.840 --> 0:00:21.320 reconsidering companies that were once too hot to touch. At 0:00:21.320 --> 0:00:24.280 the same time, some are taking an even longer view 0:00:24.600 --> 0:00:28.720 and doubling down on sustainability, calling out asset managers that 0:00:28.760 --> 0:00:32.600 don't vote with environmental concerns in mind. So, if funds 0:00:32.600 --> 0:00:35.199 are being forced to choose, how might your money be 0:00:35.320 --> 0:00:39.040 taking sides too? This week, we're talking with a fund 0:00:39.159 --> 0:00:41.760 manager taking the high road with key We say the 0:00:41.840 --> 0:00:45.640 contributions and managed assets before we hear more of that. 0:00:46.080 --> 0:00:49.239 Some important information you should always consider when investing. 0:00:49.440 --> 0:00:52.040 Investing involves the risk you might lose the money you 0:00:52.040 --> 0:00:55.360 start with. We recommend talking to a licensed financial advisor. 0:00:56.080 --> 0:00:59.880 We also recommend reading product disclosure documents before deciding to invest. 0:01:00.200 --> 0:01:02.720 Everything you're about to see and here is current at the. 0:01:02.640 --> 0:01:03.400 Time of recording. 0:01:03.600 --> 0:01:04.760 Welcome John Berry. 0:01:05.400 --> 0:01:06.640 Thank you, great to be here. 0:01:06.760 --> 0:01:07.960 Yeah, great to have you here. 0:01:08.400 --> 0:01:12.559 Look, the world seems very divided right now. Is money 0:01:12.560 --> 0:01:13.920 taking sides as well? 0:01:14.760 --> 0:01:18.119 Yeah? Look, you're right, we're in a really complex polarized 0:01:18.160 --> 0:01:21.520 world at the moment. And I think historically people saw 0:01:21.600 --> 0:01:24.120 money just as an investing is just money is a 0:01:24.120 --> 0:01:28.320 store of value, money is a medium of exchange. But 0:01:28.400 --> 0:01:30.920 now people are coming to realize, actually, how you invest 0:01:30.959 --> 0:01:34.280 your money as well will real world impacts and it 0:01:34.319 --> 0:01:36.160 really matters for the choices you make and where you 0:01:36.280 --> 0:01:37.760 invest or where you don't invest. 0:01:38.120 --> 0:01:42.160 Right, quick reminder, what is EESG ESG? 0:01:42.680 --> 0:01:47.319 ESG is an acronym that stands for environmental, social and governance, 0:01:47.920 --> 0:01:50.560 and so we can take these factors into account with 0:01:50.600 --> 0:01:54.040 how we invest. Historically, it's sort of conventional thinking around 0:01:54.240 --> 0:01:58.080 ESG is, how is it going to impact the future 0:01:58.080 --> 0:02:01.080 cash flows of a company company has governed well or 0:02:01.120 --> 0:02:03.440 governed poorly? What does that mean for the future value 0:02:03.440 --> 0:02:05.240 of the company. What does it mean for future cash flow? 0:02:05.520 --> 0:02:07.639 Am I going to make more money out of the company? 0:02:07.680 --> 0:02:10.400 Am I going to manage risk by taking ESG into account? 0:02:10.760 --> 0:02:14.440 And that's kind of different to ethical investing. Ethel Investing says, yes, 0:02:14.440 --> 0:02:16.080 that's true, you've got to take this into account to 0:02:16.160 --> 0:02:18.920 manage risk and make more money. But ethical investing is 0:02:18.919 --> 0:02:21.480 also let's put a values overlay on it, and what 0:02:21.600 --> 0:02:24.160 are values we want to take into account with investing 0:02:24.520 --> 0:02:28.200 around environmental issues or social issues, regardless of the cash 0:02:28.240 --> 0:02:29.520 flow impact on a company. 0:02:30.080 --> 0:02:33.840 Right, So, when mornings Star reported last year that there 0:02:33.919 --> 0:02:38.200 was a net drop in ESG funds, that there have 0:02:38.280 --> 0:02:40.240 been a client and just the number of funds operating 0:02:40.240 --> 0:02:41.840 out there from I think six hundred and forty six 0:02:41.880 --> 0:02:45.560 to five hundred and eighty seven. Does that suggest that 0:02:45.600 --> 0:02:48.440 there's some natural attrition going on, that these funds are 0:02:48.480 --> 0:02:51.520 just simply expiring or changing their shape or whatever, or 0:02:51.560 --> 0:02:54.400 that there's been some kind of political climate change around 0:02:54.560 --> 0:02:55.519 how appealing they are. 0:02:56.160 --> 0:02:58.079 Yeah, I think there's a few things going on there. 0:02:58.080 --> 0:03:02.760 One is around labeling, particularly in Europe, where some managers 0:03:02.760 --> 0:03:05.119 may have been using the sustainable label and perhaps when 0:03:05.200 --> 0:03:07.920 so sustainable so they were under the rules in the 0:03:08.080 --> 0:03:10.799 EU have relabeled them. So a lot of the disappeared 0:03:10.800 --> 0:03:14.560 because of the labeling issue. In part, Yes, there are 0:03:15.440 --> 0:03:18.920 very complex geopolitical factors at play in and that is 0:03:18.960 --> 0:03:23.600 influencing investment thinking. But the key thing I think is 0:03:23.960 --> 0:03:27.040 which also comes out of morning Star data, is New 0:03:27.120 --> 0:03:30.320 Zealand is unique in that every quarter for the last 0:03:30.320 --> 0:03:35.640 three years we've had positive inflows and sustainable funds. That's 0:03:35.680 --> 0:03:37.600 quite unique in the world. Even Europe is happening. It 0:03:37.680 --> 0:03:40.160 ab outflows one quarter, but there is. You know, this 0:03:40.240 --> 0:03:43.360 is more than a fad, It is actually a real thing. 0:03:43.440 --> 0:03:46.240 This moved towards sustainable investing or ethical investing. 0:03:46.680 --> 0:03:48.840 Are we late to the party? Are we mad? 0:03:49.160 --> 0:03:51.640 Are we just doing it in our own ways? What's 0:03:51.680 --> 0:03:52.880 the explanation for that? 0:03:54.080 --> 0:03:57.040 I think it's in my mind it's because New Zealanders 0:03:57.040 --> 0:04:01.320 are really starting to understand and here deeply about environmental 0:04:01.400 --> 0:04:04.320 and social issues. So when you look at what New 0:04:04.400 --> 0:04:08.040 Zealanders want or don't want in their investing, the research 0:04:08.080 --> 0:04:11.840 done by Mindful Money says that more than eighty percent 0:04:11.880 --> 0:04:17.120 of Newsealanders don't want environmental degradation, don't want human rights abuses, weapons, 0:04:17.279 --> 0:04:20.520 or factory farming, for example, a whole collection of issues. 0:04:20.520 --> 0:04:22.520 More than eighty percent of New Zealanders don't want them, 0:04:22.560 --> 0:04:26.160 and they're investing. And that number has been very high 0:04:26.160 --> 0:04:29.039 for for the last few years. So I think New Zealanders. 0:04:29.160 --> 0:04:32.440 New Zealanders care quite deeply about how the money is invested. 0:04:32.720 --> 0:04:35.400 If we took a bit about Pathfinder, and for those 0:04:35.440 --> 0:04:37.640 that haven't heard of it, don't know it, what exactly 0:04:38.040 --> 0:04:40.000 are you and how do you stand out from the 0:04:40.000 --> 0:04:40.680 rest of the crowd. 0:04:41.480 --> 0:04:44.400 So, Pathfinder, we're a fund manager, we have a key saver, 0:04:44.560 --> 0:04:47.640 we have managed funds, and our mission as a business 0:04:47.760 --> 0:04:51.240 is to generate individual wealth and collective well being by 0:04:51.240 --> 0:04:54.040 investing ethically. So we believe in this idea of ruality. 0:04:55.320 --> 0:04:57.760 This is not philanthropy, ethical investing. We had to make 0:04:57.800 --> 0:04:59.919 money for our investors. We believe you can do it 0:05:00.000 --> 0:05:02.520 in a way that not only avoids harm but also 0:05:02.520 --> 0:05:05.600 as positive benefits of the world. And I suppose that's 0:05:05.600 --> 0:05:07.800 probably you know, we've been doing this for over a decade, 0:05:08.240 --> 0:05:10.720 and that probably is what differentiates us from other managers, 0:05:10.800 --> 0:05:13.960 is that deep belief in purpose and trying to bring 0:05:14.000 --> 0:05:16.239 that investment process into life. 0:05:16.440 --> 0:05:20.560 If you look at your phone, a TV screen, anything 0:05:20.640 --> 0:05:22.719 like that, at the moment, the pictures we're seeing are 0:05:22.720 --> 0:05:27.240 pretty horrific. We're seeing what feels like nightly reports on 0:05:27.279 --> 0:05:32.200 conflicts from two extremely volatile regions in the world, and 0:05:32.400 --> 0:05:35.240 the feeling that goodness, it's all just getting. 0:05:34.920 --> 0:05:35.800 Worse and worse. 0:05:36.680 --> 0:05:40.720 How on earth does a fund manager like yourselves a 0:05:40.800 --> 0:05:42.240 pathwind to try and navigate that? 0:05:43.279 --> 0:05:46.520 Yeah, look, You're right, it is tough, and for many 0:05:46.560 --> 0:05:49.440 people there's a sensitive spare and a loss of hope 0:05:49.440 --> 0:05:54.400 and seeing the conflict is very personal seeing it. And 0:05:54.480 --> 0:05:59.240 for us we don't focus on a particular conflict and 0:05:59.360 --> 0:06:02.360 the to sides of the conflict and the politics of 0:06:02.400 --> 0:06:04.840 the conflict. We just focus on the use of weapons, 0:06:05.440 --> 0:06:07.839 and we want to avoid weapons. And you mentioned Gaza 0:06:07.920 --> 0:06:11.680 and Ukraine. You know, there's also Democratic Republic of Congo, 0:06:11.720 --> 0:06:15.279 there's Saddan, there's Momar. Weapons are being used all around 0:06:15.279 --> 0:06:18.440 the globe and tragically, it's not a new thing. If 0:06:18.440 --> 0:06:20.920 we look at the last thousand years of human history, 0:06:21.240 --> 0:06:23.359 there haven't been very long periods of peace in the 0:06:23.400 --> 0:06:26.640 world in this conflict. At the moment, the challenge is 0:06:27.760 --> 0:06:30.480 technology is getting cheaper and more novel and its use 0:06:30.480 --> 0:06:34.240 as a weapon. It's more accessible, and so as a 0:06:34.279 --> 0:06:38.000 fund manager, we need to think deeply about avoiding weapons 0:06:38.000 --> 0:06:39.880 and not being part of the economy of war. 0:06:40.120 --> 0:06:42.160 But it's getting harder to do that surely. And at 0:06:42.160 --> 0:06:45.800 the same time some are saying, well, you need to 0:06:45.839 --> 0:06:51.960 balance this argument, you know, obviously between responsible portfolios and 0:06:52.040 --> 0:06:55.840 delivering strong returns, but also the importance of defense and 0:06:55.880 --> 0:06:58.520 the challenge is posed by the ways that you defend yourself. 0:06:58.600 --> 0:07:03.760 Yeah, yeah, so the challenges you don't get to choose 0:07:03.760 --> 0:07:07.720 of the weapons used for defense, and for that reason, 0:07:07.920 --> 0:07:10.480 we'd rather not invest in weapons companies that make weapons 0:07:10.760 --> 0:07:13.320 if they can be used for offense or defense. And 0:07:13.360 --> 0:07:17.200 what I'd say around the returns is, yes, weapons companies 0:07:17.240 --> 0:07:20.400 have had strong returns in the last twelve months. Weapons 0:07:20.400 --> 0:07:22.320 companies in the S and P five hundred, they are 0:07:22.720 --> 0:07:25.960 part of the industrial sector. They make up two percent 0:07:25.960 --> 0:07:28.080 of the market, so it's a roundly small part of 0:07:28.080 --> 0:07:32.840 the market, and an investor is happy having weapons probably 0:07:32.840 --> 0:07:36.440 also has fossil fuels in their portfolio. Fossil fuels are 0:07:36.440 --> 0:07:38.400 almost three percent of the S and B five hundred. 0:07:38.720 --> 0:07:41.520 Fossil fuels have done terribly in the last twelve months. 0:07:41.880 --> 0:07:44.000 So yes, weapons have done well in the last twelve months. 0:07:44.040 --> 0:07:47.040 You've probably also got fossil fuels in the portfolio that haven't. 0:07:47.080 --> 0:07:49.800 They do kind of balance each other out. But you know, 0:07:49.840 --> 0:07:53.440 for us, we can't mitigate the fact when we don't 0:07:53.440 --> 0:07:55.480 have weapons companies, we've missed out on that return from 0:07:55.480 --> 0:07:58.040 the weapons companies. But that is our choice as an 0:07:58.040 --> 0:08:00.680 ethical investor, is not to have thosempanies in there. 0:08:00.880 --> 0:08:03.600 How then do you price or look at a company 0:08:03.600 --> 0:08:07.400 that's got mixed imperatives, A company like Boeing, for example, 0:08:07.520 --> 0:08:11.160 that has an entire defense component to its earnings and 0:08:11.280 --> 0:08:18.000 yet also handles a lot of civilian aviation, provides humanitarian support. 0:08:18.040 --> 0:08:19.360 I suppose if you look at the kind of the 0:08:19.440 --> 0:08:22.040 uses that some of the technologies put to, I mean, 0:08:22.040 --> 0:08:25.160 there'll be lots of other examples that you could probably 0:08:25.440 --> 0:08:28.320 potentially open a rocket lab or you know, even companies 0:08:28.360 --> 0:08:31.880 like Ventia or Downers that are supplying they're contracting to 0:08:32.000 --> 0:08:35.160 defense services to provide you know, base support, but at 0:08:35.160 --> 0:08:38.400 the same time they're also possibly taking care of your. 0:08:38.360 --> 0:08:43.320 Local public park. Where do you try to do you 0:08:43.360 --> 0:08:44.800 try and draw the line there? 0:08:45.040 --> 0:08:48.960 It's complex and so on the controversial weapons side, land mines, 0:08:49.040 --> 0:08:52.080 cluster munitions, zero tolerance, one of the best that all 0:08:52.679 --> 0:08:56.120 conventional military weapons. The challenge there is you're not just 0:08:56.160 --> 0:08:59.959 talking about a Lockheed Martin that designs and as symbols ware. 0:09:00.520 --> 0:09:03.160 You're actually talking about hundreds of not thousands, of companies 0:09:03.160 --> 0:09:05.640 and behind them that provide individual components that go into 0:09:05.640 --> 0:09:08.360 the weapon. It's what we say, is any company that 0:09:09.480 --> 0:09:12.480 generates more than five percent of revenue from selling into 0:09:12.520 --> 0:09:15.600 weapon systems, we won't invest in. So that if they're 0:09:15.640 --> 0:09:18.679 part of the componentry of building a weapon. Then on 0:09:18.720 --> 0:09:20.960 top of that, you've got companies that provide services to 0:09:21.000 --> 0:09:23.439 military as well. So we found we were invested in 0:09:23.520 --> 0:09:27.079 a company that trained pilots not only for civilian purposes, 0:09:27.080 --> 0:09:30.000 but train military pilots, not a weapon, but they're getting 0:09:30.000 --> 0:09:34.640 revenue from military. We wouldn't invest in a military plane. 0:09:35.080 --> 0:09:37.320 Why would we invest in the company that trains build 0:09:37.320 --> 0:09:40.240 a flight. So we set a limit of fifty percent there, 0:09:40.280 --> 0:09:43.120 and we said, okay, if they're providing services to military, 0:09:43.440 --> 0:09:46.120 if the core business is built around that, so more 0:09:46.160 --> 0:09:48.880 than fifty percent revenue, we won't invest. So it's sort 0:09:48.880 --> 0:09:50.920 of a scale of what the company is doing and 0:09:50.960 --> 0:09:52.960 how much revenue they're running from that activity. 0:09:53.240 --> 0:09:55.880 Is a lot of that freely available for the information 0:09:56.000 --> 0:09:57.680 to make those decisions. 0:09:58.000 --> 0:10:01.839 Obviously enormous amounts of data. So we actually subscribe to 0:10:01.920 --> 0:10:04.720 data from a couple of offshore providers that will draw 0:10:04.800 --> 0:10:09.520 down into listed companies and where does the revenue come from? 0:10:09.720 --> 0:10:12.160 And so yes, I mean you can find articles on 0:10:12.200 --> 0:10:14.760 companies all over the place. But you know, you can't 0:10:14.800 --> 0:10:17.760 individually search each company. You need aggregated data, and. 0:10:17.720 --> 0:10:19.640 I guess sort of really drilling, and particularly I suppose 0:10:19.679 --> 0:10:22.520 I'm just thinking, because we're still talking about the defense sector, 0:10:23.040 --> 0:10:27.360 a lot of that is inherently protected. It's kept confidential 0:10:27.400 --> 0:10:30.000 for various reasons. It's quite opaque to try and get 0:10:30.000 --> 0:10:33.360 your head around. So I imagine that that's another potential 0:10:33.400 --> 0:10:36.160 has it if you're considering investing in it, even if 0:10:36.160 --> 0:10:38.199 you think it's worthwhile, right that it's very difficult to 0:10:38.200 --> 0:10:40.840 get a clear picture sometimes of what that company is doing, 0:10:40.920 --> 0:10:43.000 who its customers are, what its prospects are. 0:10:43.480 --> 0:10:45.120 Yeah, that's true of a lot of companies that are 0:10:46.000 --> 0:10:48.000 if you think of global corporates, they've got operations all 0:10:48.000 --> 0:10:50.440 over the place, they have different business divisions, you know, 0:10:50.600 --> 0:10:55.320 things like weapons or animal testing. They're often not really 0:10:55.320 --> 0:10:58.720 forthcoming on explaining it and making and making it the 0:10:58.760 --> 0:11:02.320 information really really available. So we're relying on specialist data 0:11:02.320 --> 0:11:03.520 sources to help us with that. 0:11:04.040 --> 0:11:07.280 Okay, it sounds like quite a journey that you have 0:11:07.320 --> 0:11:09.319 to go on to really get it right and make 0:11:09.360 --> 0:11:13.560 sure that whatever is in your portfolio meets those meets 0:11:13.640 --> 0:11:14.320 that labeling you. 0:11:14.720 --> 0:11:17.640 Yeah, and we're not saying we're perfect all the time 0:11:17.679 --> 0:11:20.439 and the other challenges. The world is changing at a 0:11:20.480 --> 0:11:22.760 really fast paced and the question of what is a 0:11:22.760 --> 0:11:25.200 weapon is actually quite a hard one to answer because 0:11:25.400 --> 0:11:27.200 traditionally you just think of a weapon as a tank 0:11:27.280 --> 0:11:29.840 and or a jet fighter or a gun, but now 0:11:29.840 --> 0:11:33.120 it's also AI and data centers and data processing are 0:11:33.160 --> 0:11:36.200 being weaponized. You know, is that a weapon? And you know, 0:11:36.240 --> 0:11:38.479 so the boundaries are getting much more complicated. 0:11:38.640 --> 0:11:40.640 I guess if you're looking at some of the more 0:11:40.679 --> 0:11:42.640 kind of hope graphic companies like Palenteer, I don't know 0:11:42.640 --> 0:11:44.440 if I'm going to get in a lot of grief 0:11:44.480 --> 0:11:47.400 here with the people naming names, but there are companies 0:11:47.440 --> 0:11:51.040 that obviously have defense applications that are in the intellect 0:11:51.640 --> 0:11:55.200 in the IT space, you know, but also have tremendous 0:11:55.240 --> 0:11:58.959 cybersecurity applications that're they're there to protect people in lots 0:11:58.960 --> 0:12:01.120 of different ways. How do you make a decision about 0:12:01.120 --> 0:12:02.880 that kind of thing, that simple five. 0:12:02.760 --> 0:12:05.560 Percent sound of the five percent revenue threshold. And then 0:12:05.720 --> 0:12:09.040 you've got other companies as well that may produce something 0:12:09.040 --> 0:12:12.960 for civilian purposes and that gets repurposed or weaponized and 0:12:13.000 --> 0:12:18.680 you know, good example is Caterpillar bulldozers. The Norwegian Sovereign 0:12:18.720 --> 0:12:21.040 Wealth Fund, the largest sovereign wealth funder the world are 0:12:21.080 --> 0:12:24.440 ustollar two billion, two trillion, sorry, two trillion dollar fund. 0:12:24.600 --> 0:12:28.040 Massive fund divested from Caterpillar a week ago on the 0:12:28.080 --> 0:12:32.520 basis that their equipment was being used in Gaza for 0:12:32.720 --> 0:12:36.719 demolition effect being weaponized and the company was not doing 0:12:36.800 --> 0:12:39.240 enough to stop that. You know, pathfinder, We actually divested 0:12:39.280 --> 0:12:43.280 Caterpillar in November twenty twenty three, but large investors like 0:12:43.800 --> 0:12:46.720 in norwayia going down that pathway as well. 0:12:47.000 --> 0:12:49.000 I guess if we look at a different kind of 0:12:50.240 --> 0:12:53.320 conflict in the political climate, literally around climate, you're seeing 0:12:53.960 --> 0:12:57.280 a lot of talk about countries looking at the Paris 0:12:57.280 --> 0:13:00.240 Accord and whether they want to renegotiate. 0:12:59.520 --> 0:13:00.520 That or out of it. 0:13:00.600 --> 0:13:03.720 The US has I think maybe Eritrea and Yemen and 0:13:03.720 --> 0:13:08.040 a couple of others have too. New Zealand's discussing this now. 0:13:08.440 --> 0:13:11.120 I don't know how seriously it's being raised in the 0:13:11.120 --> 0:13:16.120 political debate. What sort of uncertainty does that create? 0:13:17.040 --> 0:13:20.160 Yeah, you're right, it has been floated recently. Should New 0:13:20.240 --> 0:13:24.200 Zealand renegotiate to withdraw? You know what I've seen is 0:13:24.600 --> 0:13:26.600 and again we need certainty of the rules on what 0:13:26.800 --> 0:13:29.440 is applying it into the future so businesses can plan 0:13:29.640 --> 0:13:33.719 can plan around that. I've seen farmers advocates and our 0:13:33.720 --> 0:13:36.760 Prime minister say we'd be mad to pull out of Paris. 0:13:37.200 --> 0:13:39.480 And the reason for that are on economic grounds is 0:13:39.800 --> 0:13:42.600 there would be retaliation against New Zealand. It has baked 0:13:42.640 --> 0:13:45.800 into our trade agreements with the European Union. There would 0:13:45.840 --> 0:13:48.240 be problems for US selling product in the European Union 0:13:48.520 --> 0:13:51.000 if we pulled out. It makes no economic sense to 0:13:51.000 --> 0:13:54.800 do that, let alone putting aside the climate argument. Just 0:13:54.880 --> 0:13:57.120 on economic grounds, it would not be good for New Zealand. 0:13:57.400 --> 0:13:59.160 But again, you've seen a lot of this kind of 0:13:59.679 --> 0:14:02.960 sovereign risk effect I suppose. I mean here they're talking 0:14:02.960 --> 0:14:04.959 about it with regards to whether or not some of 0:14:05.040 --> 0:14:08.960 those big power generating companies that are on a renewables 0:14:09.000 --> 0:14:11.679 path but also are still using a bit of coal 0:14:12.600 --> 0:14:14.439 may or may not be broken up. You look in 0:14:14.520 --> 0:14:20.600 the States, all kinds of measures to support green technology 0:14:20.640 --> 0:14:22.800 and solar and so on were sort of pushed aside. 0:14:23.200 --> 0:14:26.120 And that one big, beautiful built act makes it really 0:14:26.160 --> 0:14:29.600 complicated to make a decision about what is actually a 0:14:29.640 --> 0:14:35.040 safe investment, even if you're trying to invest sustainably, responsibly, ethically, 0:14:35.040 --> 0:14:35.920 however you want to put it. 0:14:36.400 --> 0:14:39.360 Yeah, look on that front of you, right, the one 0:14:39.440 --> 0:14:45.240 big beautiful act. You know, it was hard on renewables companies, 0:14:45.240 --> 0:14:48.080 the renewable sector, but the reality is the world is 0:14:48.120 --> 0:14:51.120 transitioning to a lower carbon future. And so you know, 0:14:51.200 --> 0:14:54.479 we can't turn off fossil fuels today and expect civilization 0:14:54.560 --> 0:14:57.960 to function. But we have to recognize we are transitioning, 0:14:58.400 --> 0:15:03.040 and we have to realicate cap all to renewables in 0:15:03.080 --> 0:15:06.920 lower carbon future, and those companies are going to thrive 0:15:07.200 --> 0:15:10.080 long term. That's where the money's going to be made. 0:15:10.760 --> 0:15:15.680 There is investment going into fossil fuels globally. You know, 0:15:15.720 --> 0:15:17.760 I would question the sanity of a lot of that 0:15:17.880 --> 0:15:21.520 investment given on a ten twenty year horizon. A lot 0:15:21.600 --> 0:15:24.680 of those assets may have no value as we decarbonize, 0:15:24.720 --> 0:15:26.440 They may not be as useful as they are now. 0:15:26.640 --> 0:15:28.120 They may have a short time horizon. 0:15:28.400 --> 0:15:30.080 So is that the sort of a time horizon that 0:15:30.520 --> 0:15:32.680 pathfinder uses ten twenty years? 0:15:33.320 --> 0:15:38.360 Well with our setting our vision for the future. So 0:15:38.760 --> 0:15:41.120 our vision is to fund the transformation to a better world. 0:15:41.560 --> 0:15:43.840 We were thinking one hundred years future when we describe 0:15:43.840 --> 0:15:45.520 the world, and one hundred years we want and what that 0:15:45.560 --> 0:15:50.000 means for distribution of wealth, what it means for ecosystems. 0:15:50.880 --> 0:15:52.880 How fast that transition had happened. Well, it needs to 0:15:52.920 --> 0:15:58.000 happen faster, run and slower to keep within the boundaries 0:15:58.000 --> 0:16:01.800 that the planet can cope with. But you know, it's 0:16:01.840 --> 0:16:03.560 not going to happen within years. It's going to be 0:16:03.560 --> 0:16:04.280 within decades. 0:16:04.480 --> 0:16:08.600 There's also been some researcher I think recently around people's 0:16:08.920 --> 0:16:11.200 appetite for this kind of thing. Something like forty nine 0:16:11.280 --> 0:16:15.280 percent of investors that mindful money we're talking to saying, hey, look, 0:16:15.320 --> 0:16:18.440 we would consider a switch to ethical in five years. 0:16:19.160 --> 0:16:20.120 What does that even mean? 0:16:20.160 --> 0:16:22.440 I mean, like, surely if you think something is worthwhile, 0:16:22.520 --> 0:16:24.280 you're going to get into it now. 0:16:24.560 --> 0:16:25.440 And if you're saying in. 0:16:25.360 --> 0:16:27.760 Five years that's like we should catch up for a coffee, 0:16:28.000 --> 0:16:30.280 It's like it's not going to happen. How real is 0:16:30.320 --> 0:16:31.040 that appetite? 0:16:31.080 --> 0:16:34.920 You think? So with that was actually within the next 0:16:34.960 --> 0:16:38.920 five years, So not in you know, in five years time, 0:16:38.960 --> 0:16:41.120 but within the next five years. And I think that 0:16:41.280 --> 0:16:45.120 just reflects you know, people are time poor at the moment, 0:16:45.160 --> 0:16:47.200 they realize they need to do a lot of research 0:16:47.240 --> 0:16:49.120 to weigh up the options, and they know it's it's 0:16:49.240 --> 0:16:52.360 complex and nuance and at the moment when it comes 0:16:52.360 --> 0:16:56.680 to money in mortgages, household budgets probably take priority over 0:16:57.600 --> 0:16:59.600 thinking about am I going to move my KBI savers? 0:16:59.640 --> 0:17:02.040 Another part of for example, it's something on their radar, 0:17:02.120 --> 0:17:04.320 but it may not be an immediate priority. So I 0:17:04.359 --> 0:17:07.440 think part of it is about time. Part of it 0:17:07.600 --> 0:17:10.119 is not knowing where to get the right research and 0:17:10.200 --> 0:17:13.600 trusting the research because it's quite a big decision to 0:17:13.680 --> 0:17:15.960 make to move in line with your values. And I 0:17:16.160 --> 0:17:18.479 just encourage people to go to the website which did 0:17:18.520 --> 0:17:23.199 the research, which is mindful money dot nz independent. They 0:17:23.280 --> 0:17:25.040 do all the thinking for you in terms of the 0:17:25.240 --> 0:17:28.840 transparency of beholdings, what may be in a keep savior 0:17:28.880 --> 0:17:32.440 that's good or bad, and providing returns and feed information 0:17:32.480 --> 0:17:34.760 as well. So they've done the thinking and provided the 0:17:34.840 --> 0:17:37.080 data there. I just encouraged people to visit that website 0:17:37.160 --> 0:17:40.760 to accelerate the five years to something closer to now. 0:17:41.320 --> 0:17:44.000 You mentioned trust's an important thing, and you mentioned labeling 0:17:44.040 --> 0:17:45.760 that's an important thing too. I just wanted to mention 0:17:46.200 --> 0:17:48.200 you had a few words with the regulator of the 0:17:48.280 --> 0:17:51.720 FMA last year around an issue that they'd picked up. Yeah, 0:17:52.440 --> 0:17:55.159 and I comparaphrase it or you can talk, but basically 0:17:55.200 --> 0:17:58.280 they'd said, how yours was a completely ethical product, and 0:17:58.359 --> 0:18:00.040 then there was a bit of a reference to a 0:18:00.080 --> 0:18:03.399 couple of particular companies that were in the portfolio that 0:18:03.560 --> 0:18:07.479 had engaged in limited animal testing. Yeah, and also there 0:18:07.560 --> 0:18:10.320 was an exception or carve out for Contact because although 0:18:10.400 --> 0:18:13.080 it was thermal coal, you felt it was on a track, 0:18:13.160 --> 0:18:14.760 but you hadn't kind of made that super clear. 0:18:14.920 --> 0:18:17.760 Is that what was the problem? Yeah? Look, please then 0:18:17.840 --> 0:18:21.000 thank you for raising that. If you think about investing, 0:18:21.040 --> 0:18:22.760 there's sort of three sides to what we do. There's 0:18:23.160 --> 0:18:26.240 the policy of how we invest in our ethical approach, 0:18:26.760 --> 0:18:30.240 there's our portfolio of what we're actually invested in. And 0:18:30.760 --> 0:18:32.960 the third limb is how we talk about it and 0:18:33.040 --> 0:18:35.920 how we tell people about it. And we let ourselves 0:18:35.960 --> 0:18:37.720 down with how we talked about it and tell people 0:18:37.760 --> 0:18:40.000 about it. And the example you gave was Contact. Our 0:18:40.359 --> 0:18:46.439 investment policy says we won't invest in fossiphuel expiration production 0:18:46.880 --> 0:18:50.840 or companies that burn coal to produce electricity. We made 0:18:50.880 --> 0:18:53.760 an exemption for contact energy on the basis that it 0:18:54.480 --> 0:18:57.800 generates power through burning fossil fuels. However, they have a 0:18:57.880 --> 0:19:01.920 pathway to net zero and its credible pathway. They're regarded 0:19:01.960 --> 0:19:06.040 as a leader in the world around decalbanization. In our 0:19:06.160 --> 0:19:09.720 advertising we explain we don't invest in possibil companies. We 0:19:09.760 --> 0:19:13.600 should have said either mentioned the contact a little less 0:19:13.640 --> 0:19:16.000 as a little astracts and mentioned contact, or we should 0:19:16.000 --> 0:19:20.440 have just said FOSSi fuel extraction and production. But we 0:19:20.560 --> 0:19:24.320 had that exception for FOSSi fuel. Similarly, with animal testing, 0:19:24.720 --> 0:19:26.639 we ran some advertizing it said we don't invest in 0:19:26.680 --> 0:19:29.520 companies that test on animals. We have granted a small 0:19:29.600 --> 0:19:33.080 number of exceptions, and often there in what we call 0:19:33.119 --> 0:19:38.240 the transformational bucket, which is a company that's producing synthetic skin, 0:19:39.400 --> 0:19:41.720 but unfortunately, to prove so this is going to do 0:19:41.720 --> 0:19:43.560 away with the use of animal products in the future, 0:19:44.000 --> 0:19:45.800 but to prove the product works, I need to test 0:19:45.840 --> 0:19:48.159 it on animals. So we've granted them an exception on 0:19:48.200 --> 0:19:51.160 the basis that their product is transformational and we'll change 0:19:51.200 --> 0:19:53.000 that category and the use of animal products. 0:19:53.280 --> 0:19:55.960 So that's a long horizon approach rather than just sort 0:19:55.960 --> 0:19:57.480 of looking at the immediate movements. 0:19:57.640 --> 0:19:59.480 Yeah, and like you said, we should have mentioned that 0:19:59.640 --> 0:20:02.719 at the strengthen talked about that in our advertising. 0:20:02.520 --> 0:20:06.560 As an ethical fund manager to suspect that your investors 0:20:06.600 --> 0:20:09.119 aren't just looking for return. They want you to vocalize 0:20:09.160 --> 0:20:10.720 that and the kind of votes that you make or 0:20:10.760 --> 0:20:12.639 the kind of communications you have with the company, and. 0:20:12.640 --> 0:20:14.800 The way we talk to companies, the way we invest 0:20:15.160 --> 0:20:18.280 And that's a challenge from the perspective of there is 0:20:18.320 --> 0:20:21.360 no perfect company. So every company you invest in has 0:20:22.359 --> 0:20:25.040 both got attributes and bad attributes, and you need to 0:20:25.080 --> 0:20:26.879 make trade offs between the two. And I'll give you 0:20:26.920 --> 0:20:32.440 an example of Tesla. So Tesla we invested in years 0:20:32.440 --> 0:20:35.480 ago because we love the mission of Elon Musk to 0:20:35.600 --> 0:20:38.440 essentially drive decarbonization not just the car you have in 0:20:38.440 --> 0:20:41.880 the garage, but of transport. And so he was leading 0:20:41.960 --> 0:20:45.320 in the transport in the decombanization, electrification space. 0:20:45.280 --> 0:20:48.320 And apouting batteries in just about every driveway. Right, So 0:20:48.560 --> 0:20:50.159