1 00:00:13,480 --> 00:00:16,680 Speaker 1: Hello, and welcome to a special holiday edition of What 2 00:00:16,800 --> 00:00:20,439 Speaker 1: goes Up, a Bloomberg weekly market podcast. I'm Sarah Pontac, 3 00:00:20,520 --> 00:00:23,320 Speaker 1: a reporter on the Crossset team, and I'm Mike Reagan, 4 00:00:23,440 --> 00:00:26,159 Speaker 1: a senior editor on the Markets team. And Sarah, it 5 00:00:26,239 --> 00:00:29,520 Speaker 1: is the day after Thanksgiving this podcast comes out, so 6 00:00:30,000 --> 00:00:32,360 Speaker 1: we should probably speak quietly. We don't want to wake 7 00:00:32,400 --> 00:00:35,040 Speaker 1: anyone up from a food coma if they're in. If 8 00:00:35,080 --> 00:00:37,800 Speaker 1: you ate too much turkey, UM, I can't say I 9 00:00:37,800 --> 00:00:40,280 Speaker 1: feel bad for you. Probably did Thanksgiving right, But happy 10 00:00:40,320 --> 00:00:43,639 Speaker 1: Thanksgiving to everyone. That's right, That's right. And yeah, Thanksgiving 11 00:00:43,760 --> 00:00:45,800 Speaker 1: is a time to sort of take stock of your life. 12 00:00:46,000 --> 00:00:49,599 Speaker 1: And we're not gonna focus on the week in of 13 00:00:49,680 --> 00:00:52,320 Speaker 1: markets like we normally do, because let's be honest, I 14 00:00:52,320 --> 00:00:54,560 Speaker 1: think most of us were probably more focus on that 15 00:00:54,600 --> 00:00:58,160 Speaker 1: turkey than we were on the markets. Instead, we're gonna 16 00:00:58,200 --> 00:01:01,200 Speaker 1: focus on, as the name of the show implies, what 17 00:01:01,320 --> 00:01:05,040 Speaker 1: goes up, something that unfortunately has been going up in 18 00:01:05,120 --> 00:01:08,920 Speaker 1: recent years, in in recent decades is the temperature of 19 00:01:08,959 --> 00:01:10,800 Speaker 1: the Earth. I hate to I hate to be a downer, 20 00:01:10,840 --> 00:01:13,840 Speaker 1: but we're going to talk about climate change, very touchy 21 00:01:13,840 --> 00:01:18,440 Speaker 1: subject for a lot of people. Um, Obviously, uh President 22 00:01:18,480 --> 00:01:20,280 Speaker 1: of United States is not a big believer in it. 23 00:01:20,680 --> 00:01:23,240 Speaker 1: Some people are not big believers in it. Others are 24 00:01:23,360 --> 00:01:27,120 Speaker 1: very enthusiastic believers in it and believe now is the 25 00:01:27,240 --> 00:01:30,800 Speaker 1: time to act. We're gonna save that sort of controversy 26 00:01:30,840 --> 00:01:34,480 Speaker 1: for another podcast because you know, ideally what this podcast 27 00:01:34,640 --> 00:01:38,199 Speaker 1: is about is how to invest um and climate change, 28 00:01:38,240 --> 00:01:40,959 Speaker 1: like so many other things in the world, is creating 29 00:01:41,120 --> 00:01:46,200 Speaker 1: opportunities for investments. So don't send us angry emails about it. 30 00:01:46,200 --> 00:01:49,680 Speaker 1: It's it's our job to talk about angry emails. No 31 00:01:49,880 --> 00:01:53,120 Speaker 1: angry tweets. If you have something rough to say, don't 32 00:01:53,120 --> 00:01:57,920 Speaker 1: even call our podcasts. Maybe maybe you can. You can 33 00:01:58,000 --> 00:02:00,960 Speaker 1: leave us a message and as a reminder, that number 34 00:02:01,000 --> 00:02:04,720 Speaker 1: is six or six three two four three for nine zero. 35 00:02:04,880 --> 00:02:07,280 Speaker 1: All right, So let me read something for you here 36 00:02:07,560 --> 00:02:10,440 Speaker 1: a bit of it again a downer, but here's the 37 00:02:10,480 --> 00:02:14,280 Speaker 1: take on climate change from a recent white paper by 38 00:02:14,360 --> 00:02:20,240 Speaker 1: our guest who all introduced after this. Hurricanes, typhoons, droughts, wildfires, 39 00:02:20,320 --> 00:02:24,240 Speaker 1: and other extreme weather events are causing record damage Increasingly. 40 00:02:24,480 --> 00:02:27,680 Speaker 1: Climate change is impacting the economy and our daily lives 41 00:02:27,720 --> 00:02:30,600 Speaker 1: and has come into focus as an existential threat to 42 00:02:30,639 --> 00:02:33,639 Speaker 1: the world as we know it. The author of that 43 00:02:34,400 --> 00:02:37,720 Speaker 1: very Looking on the bright Side report is with us here, 44 00:02:37,800 --> 00:02:41,600 Speaker 1: Lucas White. He's a portfolio manager with GMO. Welcome to 45 00:02:41,600 --> 00:02:44,280 Speaker 1: the show, Lucas, Thank you, thanks for having me. And 46 00:02:44,400 --> 00:02:48,480 Speaker 1: you're basically you manage a strategy at GMO that is 47 00:02:48,639 --> 00:02:53,480 Speaker 1: investing in climate change and sort of the potential winners 48 00:02:53,520 --> 00:02:56,760 Speaker 1: of climate change. Could you just walk us through, UM, 49 00:02:56,840 --> 00:03:00,600 Speaker 1: when did the strategy start? Kind Of obviously at GMO, 50 00:03:01,360 --> 00:03:03,919 Speaker 1: everything has to go through Jeremy Grantham, I assume. So 51 00:03:04,440 --> 00:03:08,640 Speaker 1: was this uh something he championed, um, and just just 52 00:03:08,680 --> 00:03:11,680 Speaker 1: tell us how it all came about. Yes, So, actually, 53 00:03:12,240 --> 00:03:15,720 Speaker 1: maybe ironically it evolved out of our natural resources strategy 54 00:03:15,800 --> 00:03:19,480 Speaker 1: that we launched back in two thousand eleven. Jeremy Grantham 55 00:03:19,480 --> 00:03:21,919 Speaker 1: has been focused on resource scarcity for a number of 56 00:03:22,000 --> 00:03:25,960 Speaker 1: years and the dynamics that that poses for the commodity markets. UH. 57 00:03:26,000 --> 00:03:28,560 Speaker 1: In other words, there's growing demand for natural resources, and 58 00:03:28,639 --> 00:03:32,320 Speaker 1: yet there's a finite supply, in particular finite supply of cheap, 59 00:03:32,360 --> 00:03:36,040 Speaker 1: easy to access UH natural resources that that is low 60 00:03:36,120 --> 00:03:39,720 Speaker 1: cost and affordable. When we went to launch that strategy, 61 00:03:40,040 --> 00:03:42,640 Speaker 1: I was involved in thinking about and researching the risks 62 00:03:43,400 --> 00:03:46,160 Speaker 1: for investing in the resources sector over a long period 63 00:03:46,200 --> 00:03:48,200 Speaker 1: of time, and I could find a lot of risks 64 00:03:48,240 --> 00:03:51,080 Speaker 1: that you could diversify away. I could find a lot 65 00:03:51,120 --> 00:03:53,280 Speaker 1: of risks that were short to medium term in nature, 66 00:03:53,280 --> 00:03:55,320 Speaker 1: and as a long term investor, you could wait out. 67 00:03:56,000 --> 00:03:58,200 Speaker 1: But there was one big risk that that kind of 68 00:03:58,200 --> 00:04:01,240 Speaker 1: stood out, and that was stranded assets for the fossil 69 00:04:01,280 --> 00:04:04,040 Speaker 1: fuel companies. Uh. And those assets could be stranded in 70 00:04:04,040 --> 00:04:06,040 Speaker 1: a number of ways. We don't know exactly how it 71 00:04:06,120 --> 00:04:08,760 Speaker 1: might happen, but it could be through carbon regulation, it 72 00:04:08,800 --> 00:04:10,960 Speaker 1: could be carbon pricing, or it could just be pure 73 00:04:11,000 --> 00:04:14,720 Speaker 1: technological disruption when and solar becomes so much cheaper than 74 00:04:14,800 --> 00:04:16,800 Speaker 1: coal and natural gas that you just don't need all 75 00:04:16,839 --> 00:04:20,440 Speaker 1: the coal and natural gas assets on your books. Um. 76 00:04:20,480 --> 00:04:23,240 Speaker 1: So when I was thinking about, now, I'm going to 77 00:04:23,360 --> 00:04:25,640 Speaker 1: launch a strategy and I'm I'm kind of the portfolio 78 00:04:25,760 --> 00:04:29,520 Speaker 1: manager for that strategy. Uh, how do I manage that 79 00:04:29,680 --> 00:04:33,360 Speaker 1: risk when the sector is seventy percent fossil fuels are 80 00:04:33,440 --> 00:04:37,039 Speaker 1: competitors are eight to nine fossil fuels running global natural 81 00:04:37,040 --> 00:04:41,040 Speaker 1: resources strategies? Um, what do you do? And we did 82 00:04:41,040 --> 00:04:43,599 Speaker 1: a few things to manage that risk. One is we 83 00:04:43,600 --> 00:04:47,960 Speaker 1: have a dramatically lower exposure to energy than our competitors 84 00:04:48,040 --> 00:04:51,560 Speaker 1: or the cap weighted sector. We're about thirty energy, so 85 00:04:51,680 --> 00:04:55,480 Speaker 1: half that of the broad market. UH. Within energy, we've 86 00:04:55,520 --> 00:04:58,440 Speaker 1: always excluded the coal companies, the tar sand companies, the 87 00:04:58,440 --> 00:05:01,560 Speaker 1: heavy oil companies, so the company these producing resources that 88 00:05:01,600 --> 00:05:05,480 Speaker 1: have the highest UH risk of having stranded assets because 89 00:05:05,480 --> 00:05:08,320 Speaker 1: they have the worst emissions profiles. UH. And the third 90 00:05:08,360 --> 00:05:11,960 Speaker 1: thing we did, which is most relevant for climate change investing, frankly, 91 00:05:12,080 --> 00:05:15,080 Speaker 1: is we've always targeted some of that energy exposure to 92 00:05:15,160 --> 00:05:18,600 Speaker 1: be too clean energy. So of that thirty energy exposure, 93 00:05:18,640 --> 00:05:21,040 Speaker 1: we have ten per cent of it is clean energy. 94 00:05:21,080 --> 00:05:24,080 Speaker 1: And so we've been investing in wind, solar, clean power 95 00:05:24,120 --> 00:05:28,000 Speaker 1: generation and the like UH since two thousand eleven. What 96 00:05:28,160 --> 00:05:31,320 Speaker 1: happened is the costs for all of these clean energy 97 00:05:31,360 --> 00:05:33,800 Speaker 1: technologies dropped in a way that really nobody could have 98 00:05:33,839 --> 00:05:36,560 Speaker 1: foreseen in a very short period of time, so that 99 00:05:36,600 --> 00:05:39,839 Speaker 1: around two thousand fifteen I started to make the case 100 00:05:39,960 --> 00:05:43,039 Speaker 1: that the opportunity set is mature enough. There are enough 101 00:05:43,040 --> 00:05:46,480 Speaker 1: companies that are making money, have been cash flow positive 102 00:05:46,600 --> 00:05:49,880 Speaker 1: and and UH generating strong earnings and have strong balance 103 00:05:49,920 --> 00:05:54,120 Speaker 1: sheets and aren't totally reliant on public policy support that 104 00:05:54,160 --> 00:05:57,560 Speaker 1: we should launch a strategy that's less focused on kind 105 00:05:57,560 --> 00:06:00,760 Speaker 1: of traditional natural resources and more focused the clean energy 106 00:06:00,800 --> 00:06:03,679 Speaker 1: transition and where we need to go with the world. 107 00:06:03,720 --> 00:06:06,839 Speaker 1: So it was really about approaching these inflection points where 108 00:06:06,839 --> 00:06:09,560 Speaker 1: at some point in the not too distant future when 109 00:06:09,760 --> 00:06:12,680 Speaker 1: solar electric vehicles other clean energy solutions are going to 110 00:06:12,760 --> 00:06:16,160 Speaker 1: be cheaper uh than their fossil fuel based uh kind 111 00:06:16,200 --> 00:06:20,119 Speaker 1: of more traditional forms. So that was something that jumped 112 00:06:20,120 --> 00:06:21,800 Speaker 1: out to me. In one of the white papers that 113 00:06:21,880 --> 00:06:24,760 Speaker 1: you did co author with Jeremy Grantham, there was a 114 00:06:24,839 --> 00:06:28,080 Speaker 1: chart that you guys included showing the price structure of 115 00:06:28,240 --> 00:06:31,520 Speaker 1: many of these types of energies and these companies, and 116 00:06:31,560 --> 00:06:35,320 Speaker 1: you see the price coming down. However, there are many 117 00:06:35,320 --> 00:06:38,479 Speaker 1: people out there who will still push back, and a 118 00:06:38,520 --> 00:06:41,960 Speaker 1: common rebuke or refrain is that it's still pretty expensive. 119 00:06:42,320 --> 00:06:44,880 Speaker 1: What is a time frame on something like this if 120 00:06:44,880 --> 00:06:49,039 Speaker 1: you really wanted to take advantage of this change going 121 00:06:49,120 --> 00:06:52,400 Speaker 1: forwards and the companies that are driving the change against 122 00:06:52,560 --> 00:06:55,919 Speaker 1: climate change? How long is the timeframe actually in a 123 00:06:55,960 --> 00:06:58,920 Speaker 1: realistic sense. Well, in some ways, wind and solar are 124 00:06:58,920 --> 00:07:02,760 Speaker 1: already the cheapest for of electricity generation. Um. The problem 125 00:07:02,839 --> 00:07:05,640 Speaker 1: is the intermittency. So our grids weren't designed to handle 126 00:07:05,680 --> 00:07:09,160 Speaker 1: intermittent generation. They were designed around the idea that we 127 00:07:09,160 --> 00:07:12,760 Speaker 1: would have centralized persistent generation, whether that be nuclear, coal, 128 00:07:12,880 --> 00:07:16,200 Speaker 1: natural gas, doesn't really matter. Uh. Then long distance transmission 129 00:07:16,240 --> 00:07:19,840 Speaker 1: to a distribution local distribution network. Well, now we have 130 00:07:19,880 --> 00:07:22,120 Speaker 1: when turbines all over the place. We have solar panels 131 00:07:22,120 --> 00:07:25,040 Speaker 1: on our rooftop. Sometimes they generate, sometimes they don't, and 132 00:07:25,040 --> 00:07:28,440 Speaker 1: the grid wasn't really designed to handle that. So when 133 00:07:28,520 --> 00:07:30,960 Speaker 1: and solar, the generation side of things is already in 134 00:07:31,000 --> 00:07:34,160 Speaker 1: many ways and in many areas, significantly cheaper than color 135 00:07:34,240 --> 00:07:36,720 Speaker 1: natural gas. The problem is you either have to store 136 00:07:36,760 --> 00:07:39,800 Speaker 1: that energy or you have to enhance your grid and 137 00:07:39,840 --> 00:07:44,200 Speaker 1: modernize your grid and make it more sophisticated and interconnected. UH. 138 00:07:44,360 --> 00:07:46,320 Speaker 1: Our belief is that there will be secular growth for 139 00:07:46,360 --> 00:07:49,560 Speaker 1: decades and both of those areas, as trillions of dollars 140 00:07:49,600 --> 00:07:53,560 Speaker 1: need to flow into energy storage and and into modernizing 141 00:07:53,560 --> 00:07:56,320 Speaker 1: our grids. UM. Just to give you a sense, energy 142 00:07:56,360 --> 00:08:00,480 Speaker 1: storage sounds good, but it effectively doesn't really exist UH 143 00:08:00,600 --> 00:08:04,200 Speaker 1: in today's world, at least at a utility scale. About 144 00:08:04,280 --> 00:08:08,320 Speaker 1: one or two percent of energy is stored globally today 145 00:08:08,360 --> 00:08:12,559 Speaker 1: and ninety five to tent of it is pumped hydra 146 00:08:12,640 --> 00:08:15,240 Speaker 1: where you pump water up a mountain into a reservoir 147 00:08:15,560 --> 00:08:18,000 Speaker 1: and then let it flow back down and generate hydro power, 148 00:08:18,280 --> 00:08:20,280 Speaker 1: which is brilliant if you're next to a mountain with 149 00:08:20,320 --> 00:08:23,280 Speaker 1: a reservoir. But for for most people, uh, that isn't 150 00:08:23,280 --> 00:08:26,800 Speaker 1: a great solution, and it's not scalable for many locations. 151 00:08:27,080 --> 00:08:29,480 Speaker 1: Someone from Florida I can say that there are no 152 00:08:29,560 --> 00:08:34,000 Speaker 1: mountains around clearly, so be difficult exactly because how much 153 00:08:34,000 --> 00:08:36,439 Speaker 1: of a headwind or as hail wind is the government 154 00:08:36,480 --> 00:08:38,680 Speaker 1: when it comes to this strategy. I mean, obviously President 155 00:08:38,679 --> 00:08:42,440 Speaker 1: Obama was a big advocate of solar energy. President Trump, 156 00:08:42,480 --> 00:08:44,719 Speaker 1: on the other hand, is I think safe to say 157 00:08:44,760 --> 00:08:49,040 Speaker 1: basically a climate change DENI or does that cause you know, 158 00:08:49,240 --> 00:08:51,960 Speaker 1: a head wind of the strategy? Where is it? The economics, 159 00:08:52,000 --> 00:08:55,360 Speaker 1: as you say, are getting so clear on the side 160 00:08:55,360 --> 00:08:58,720 Speaker 1: of clear energy that it doesn't really matter who is 161 00:08:58,880 --> 00:09:01,920 Speaker 1: controlling Congress or who's in the White House. I think 162 00:09:01,920 --> 00:09:04,720 Speaker 1: with every passing year it matters less and less because 163 00:09:04,720 --> 00:09:07,520 Speaker 1: the economics are just becoming more and more compelling. Uh. 164 00:09:07,679 --> 00:09:09,760 Speaker 1: That said, there's no doubt about it. You want public 165 00:09:09,800 --> 00:09:14,040 Speaker 1: policy support behind you. There's nothing but upside from having that. 166 00:09:14,280 --> 00:09:18,720 Speaker 1: The federal government of the United States is one government entity, though, 167 00:09:18,760 --> 00:09:20,960 Speaker 1: and people make too much of an issue of it, 168 00:09:20,960 --> 00:09:24,400 Speaker 1: in my opinion. With with Donald Trump announcing that we're 169 00:09:24,400 --> 00:09:26,600 Speaker 1: going to pull out of the Paris Agreement, there's been 170 00:09:26,600 --> 00:09:28,680 Speaker 1: some wavering and it's not entirely clear where that's going 171 00:09:28,720 --> 00:09:32,800 Speaker 1: to go. But even if the US government does, city states, businesses, 172 00:09:32,880 --> 00:09:36,120 Speaker 1: universities around the country banded together and said that they're 173 00:09:36,120 --> 00:09:38,120 Speaker 1: going to abide by the terms of the Paris Agreement 174 00:09:38,160 --> 00:09:40,800 Speaker 1: and make sure that the United States does regardless of 175 00:09:40,840 --> 00:09:45,480 Speaker 1: what the federal government does. In California is, you know, 176 00:09:45,559 --> 00:09:48,240 Speaker 1: the world leader in my opinion when it comes to 177 00:09:48,280 --> 00:09:51,880 Speaker 1: clean energy. If California were its own country, it would 178 00:09:51,880 --> 00:09:55,160 Speaker 1: be something like the sixth or seventh biggest economy in 179 00:09:55,160 --> 00:09:58,680 Speaker 1: the world. So it's not kind of small potatoes. So 180 00:09:59,240 --> 00:10:02,840 Speaker 1: I think it's great to have US federal government support. 181 00:10:03,400 --> 00:10:05,720 Speaker 1: But every other government on Earth, for the most part, 182 00:10:05,800 --> 00:10:08,240 Speaker 1: has signed onto the Paris Agreement and is committed to it, 183 00:10:08,280 --> 00:10:11,520 Speaker 1: and has really recommitted in the wake of the unit 184 00:10:11,720 --> 00:10:15,200 Speaker 1: United States announcing that we may pull out. So in 185 00:10:15,240 --> 00:10:17,760 Speaker 1: the long term, I really think Uh, it's it's not 186 00:10:17,800 --> 00:10:20,559 Speaker 1: going to be a moving factor. Over the last few weeks, 187 00:10:20,600 --> 00:10:24,080 Speaker 1: the US has formally begun to withdraw itself out of 188 00:10:24,120 --> 00:10:27,199 Speaker 1: the Paris Climate Agreement. I'm looking at the top holdings 189 00:10:27,360 --> 00:10:30,440 Speaker 1: in your strategy though, and the top four I see 190 00:10:30,520 --> 00:10:33,360 Speaker 1: right here are still US companies, So maybe it matters 191 00:10:33,360 --> 00:10:36,440 Speaker 1: more what corporations themselves are doing. From your perspective, though, 192 00:10:36,440 --> 00:10:38,680 Speaker 1: when you guys are looking at companies across the globe 193 00:10:38,720 --> 00:10:42,280 Speaker 1: doing your research, where do you really find companies at 194 00:10:42,280 --> 00:10:44,560 Speaker 1: the forefront of this change? Where does it look like 195 00:10:44,600 --> 00:10:47,720 Speaker 1: there is the most opportunity. Well, most of the companies 196 00:10:47,760 --> 00:10:50,599 Speaker 1: that we have in our universe are global companies and 197 00:10:50,600 --> 00:10:54,200 Speaker 1: they're serving a global marketplace. The only times you really 198 00:10:54,240 --> 00:10:57,400 Speaker 1: see regional things for the most part is is China 199 00:10:57,720 --> 00:10:59,640 Speaker 1: does have kind of its own wind market. There's the 200 00:10:59,720 --> 00:11:01,880 Speaker 1: Chinese is wind market, and then the global wind market 201 00:11:02,480 --> 00:11:06,199 Speaker 1: excluding China. So you do see a few um kind 202 00:11:06,240 --> 00:11:11,120 Speaker 1: of domestically oriented opportunities here and there, But ninety nine 203 00:11:11,160 --> 00:11:13,160 Speaker 1: percent of the companies that we look at are really 204 00:11:13,360 --> 00:11:16,040 Speaker 1: in the global marketplace. So whether they're domiciled in the 205 00:11:16,120 --> 00:11:19,800 Speaker 1: US or in Europe or Asia, or or South America, 206 00:11:19,880 --> 00:11:24,080 Speaker 1: doesn't matter all that much. Uh. Most of the opportunities 207 00:11:24,120 --> 00:11:27,199 Speaker 1: that we see are outside the US, so our strategy 208 00:11:27,280 --> 00:11:30,160 Speaker 1: since inception has been about a quarter to a third 209 00:11:30,200 --> 00:11:33,160 Speaker 1: in the United States, UH and and the rest outside 210 00:11:33,200 --> 00:11:36,400 Speaker 1: the United States, including UH you typically about twenty and 211 00:11:36,440 --> 00:11:39,280 Speaker 1: emerging markets. So we're seeing opportunities all around the world, 212 00:11:39,559 --> 00:11:41,800 Speaker 1: both in terms of where the companies are domiciled, but 213 00:11:41,840 --> 00:11:44,440 Speaker 1: also in terms of the markets that you're selling into. 214 00:11:44,679 --> 00:11:47,240 Speaker 1: So Sarah beat me to that. List of the top 215 00:11:47,240 --> 00:11:49,000 Speaker 1: holding is always one of the my favorite things to 216 00:11:49,040 --> 00:11:51,839 Speaker 1: look at when looking at a funder strategy like this, 217 00:11:52,240 --> 00:11:56,559 Speaker 1: and UH several of them, um are pretty obvious. Solar 218 00:11:56,720 --> 00:12:00,000 Speaker 1: Edge was a top holding as of the end of September, 219 00:12:00,040 --> 00:12:04,559 Speaker 1: I believe, obviously makes equipment for the solar industry. Vestas 220 00:12:04,600 --> 00:12:09,560 Speaker 1: the Danish wind energy company, Renewable Energy Group another clean 221 00:12:09,679 --> 00:12:12,120 Speaker 1: energy group in the US. A couple of surprises to 222 00:12:12,160 --> 00:12:13,920 Speaker 1: me at least, so, so I'm curious if you could 223 00:12:14,040 --> 00:12:18,240 Speaker 1: help us explain how these are climate change plays. Freeport 224 00:12:18,320 --> 00:12:21,920 Speaker 1: mcmaran the minor I'm assuming it's the metals used in 225 00:12:22,040 --> 00:12:25,640 Speaker 1: solar equipment, is that is that the main reason that's there. Yes, 226 00:12:25,679 --> 00:12:28,360 Speaker 1: a copper is at the heart of clean energy. When 227 00:12:28,360 --> 00:12:31,680 Speaker 1: you look at wind and solar because of the distributed nature, 228 00:12:31,720 --> 00:12:34,880 Speaker 1: you now have wind, a series of wind turbines, you 229 00:12:34,960 --> 00:12:38,560 Speaker 1: have hundreds of or thousands of solar panels. That's a 230 00:12:38,559 --> 00:12:41,080 Speaker 1: lot of wiring and a lot of connectivity that you 231 00:12:41,120 --> 00:12:44,560 Speaker 1: need to operate. So wind and solar projects, UH we 232 00:12:44,679 --> 00:12:47,160 Speaker 1: use about four to twelve times as much copper, depending 233 00:12:47,160 --> 00:12:49,520 Speaker 1: on the specifics of the project relative to a color 234 00:12:49,600 --> 00:12:52,880 Speaker 1: natural gas power plant. Electric vehicles use three to four 235 00:12:52,920 --> 00:12:56,480 Speaker 1: times as much copper as an internal combustion engine vehicle. 236 00:12:56,760 --> 00:13:00,520 Speaker 1: Electric buses, for example, UH uses something like eight hundred 237 00:13:00,520 --> 00:13:03,840 Speaker 1: pounds of copper. UH. We also need to overhaul our 238 00:13:03,880 --> 00:13:07,280 Speaker 1: electric grids, as we've been talking about. That's incredibly comper intensive, 239 00:13:07,679 --> 00:13:13,720 Speaker 1: energy efficient electrical components, appliances, etcetera, etcetera. We needed an 240 00:13:13,760 --> 00:13:17,040 Speaker 1: electric vehicle charging infrastructure, and just copper is at the 241 00:13:17,080 --> 00:13:20,199 Speaker 1: heart of clean energy. It's brilliant. They want to get 242 00:13:20,240 --> 00:13:22,640 Speaker 1: off of fossil fuels. I'm on board, even though I 243 00:13:22,679 --> 00:13:26,360 Speaker 1: run a natural resources strategy. I'm I'm with it, you know, 244 00:13:26,400 --> 00:13:28,040 Speaker 1: I'm with the program. We need to get rid of 245 00:13:28,080 --> 00:13:31,920 Speaker 1: fossil fuels over some period of time. But you're just 246 00:13:32,040 --> 00:13:34,880 Speaker 1: moving the burden from one set of materials to another 247 00:13:34,880 --> 00:13:38,720 Speaker 1: set of materials. There is no magical kind of clean 248 00:13:38,920 --> 00:13:41,959 Speaker 1: free energy out there that doesn't rely on materials. You're 249 00:13:42,000 --> 00:13:46,240 Speaker 1: just moving the burden to copp or, lithium, nickel, cobalt, vanadium, 250 00:13:46,720 --> 00:13:49,880 Speaker 1: and other clean energy materials. So for listeners out there 251 00:13:49,920 --> 00:13:53,040 Speaker 1: that are sort of environmentally minded, uh, you look at 252 00:13:53,080 --> 00:13:56,200 Speaker 1: a company like a heavy mining company like that, and 253 00:13:56,280 --> 00:14:00,520 Speaker 1: you don't really think of a great environmentally friendly company. 254 00:14:00,600 --> 00:14:04,480 Speaker 1: But it's so crucial in the future of of solar 255 00:14:04,520 --> 00:14:07,560 Speaker 1: and wind and climate change that I guess the pros 256 00:14:07,600 --> 00:14:10,880 Speaker 1: of it outweigh the negatives. Yeah, I mean, Jeremy always 257 00:14:10,880 --> 00:14:14,560 Speaker 1: says that if you get climate wrong, nothing else matters. Uh. 258 00:14:14,600 --> 00:14:19,080 Speaker 1: And so the local environmental impact of mining operations is 259 00:14:19,120 --> 00:14:22,920 Speaker 1: an ideal. The labor issues aren't ideal. These aren't things 260 00:14:22,920 --> 00:14:25,720 Speaker 1: that you love as an investor or a human being. 261 00:14:26,160 --> 00:14:28,720 Speaker 1: But the reality is we need these materials. Mining is 262 00:14:28,760 --> 00:14:33,240 Speaker 1: a dirty game. Uh. We we obviously evaluate the environmental 263 00:14:33,280 --> 00:14:35,760 Speaker 1: impact and the E s G profiles of the companies 264 00:14:35,760 --> 00:14:37,840 Speaker 1: that we invest in and make sure that we're comfortable, 265 00:14:38,040 --> 00:14:40,040 Speaker 1: and if we're not comfortable, we won't invest in in 266 00:14:40,080 --> 00:14:43,840 Speaker 1: those mining companies. But generally speaking, you're, in my opinion, 267 00:14:43,880 --> 00:14:46,320 Speaker 1: putting your head in the sand. If you say, oh, 268 00:14:46,400 --> 00:14:48,480 Speaker 1: I want clean energy, but I don't want to be 269 00:14:48,520 --> 00:14:51,640 Speaker 1: involved in the mining industry. Well, if you don't believe 270 00:14:51,640 --> 00:14:54,280 Speaker 1: in copper mining or you think it's bad, Uh, first 271 00:14:54,280 --> 00:14:56,840 Speaker 1: of all, you're condemning one point two billion people or 272 00:14:56,880 --> 00:14:59,880 Speaker 1: so who don't have access to electricity to very low 273 00:15:00,360 --> 00:15:04,080 Speaker 1: uh standard of living, very low quality of life because you, 274 00:15:04,600 --> 00:15:07,080 Speaker 1: uh don't think that copper miners should be out there. 275 00:15:07,200 --> 00:15:09,440 Speaker 1: And I don't see anybody going and ripping the copper 276 00:15:09,480 --> 00:15:11,920 Speaker 1: out of their walls in their house and throwing it 277 00:15:11,960 --> 00:15:15,280 Speaker 1: back into the global market because they don't believe in it. 278 00:15:15,960 --> 00:15:19,920 Speaker 1: The other I think it's the fourth top holding a 279 00:15:19,960 --> 00:15:24,360 Speaker 1: little less than four percent mosaic, basically a fertilizer company. Right, 280 00:15:24,640 --> 00:15:27,720 Speaker 1: walk us through how that fits into the strategy. Yes, So, 281 00:15:28,320 --> 00:15:31,080 Speaker 1: in terms of our strategy, we look at companies that 282 00:15:31,120 --> 00:15:33,400 Speaker 1: are helping to mitigate climate change, but we also look 283 00:15:33,440 --> 00:15:35,160 Speaker 1: at companies that are going to help the world adapt 284 00:15:35,200 --> 00:15:38,240 Speaker 1: to climate change. The two big things on the adaptation 285 00:15:38,320 --> 00:15:42,000 Speaker 1: side of things are our food and water. Agricultural productivity 286 00:15:42,040 --> 00:15:45,040 Speaker 1: is incredibly impacted by a world or in a world 287 00:15:45,080 --> 00:15:50,080 Speaker 1: of climate change, you have droughts, floods, extreme temperature events 288 00:15:50,080 --> 00:15:52,960 Speaker 1: which are death for crops because it's not just that 289 00:15:53,040 --> 00:15:55,920 Speaker 1: the average global temperature has risen, it's that there used 290 00:15:55,920 --> 00:15:58,760 Speaker 1: to be a normal distribution around a lower average temperature, 291 00:15:59,000 --> 00:16:02,400 Speaker 1: and now there's a skewed distribution around a higher average temperature. 292 00:16:02,640 --> 00:16:05,600 Speaker 1: In that skew is towards the extremely hot days. Uh, 293 00:16:05,720 --> 00:16:08,680 Speaker 1: you have extreme downpours which wash away your soil nutrients. 294 00:16:08,720 --> 00:16:12,000 Speaker 1: You're basically taking farming which go talk to farmers. You're 295 00:16:12,000 --> 00:16:13,680 Speaker 1: not going to find a farmer who says, oh, it 296 00:16:13,760 --> 00:16:15,800 Speaker 1: used to be so easy to farm, but now it's 297 00:16:15,800 --> 00:16:18,400 Speaker 1: starting to get difficult. It's always been a difficult game. 298 00:16:18,720 --> 00:16:21,760 Speaker 1: Now you're making it much much more difficult. So companies 299 00:16:21,800 --> 00:16:26,000 Speaker 1: focused on keeping agricultural productivity as high as possible, whether 300 00:16:26,040 --> 00:16:31,479 Speaker 1: that be irrigation, drought resistance, seeds, precision agriculture, machinery and equipment, 301 00:16:31,720 --> 00:16:35,760 Speaker 1: or fertilizers which is where mosaic comes into play, are 302 00:16:35,800 --> 00:16:54,280 Speaker 1: all within scope for our strategy. So you mentioned in 303 00:16:54,280 --> 00:16:56,720 Speaker 1: an acronym earlier E s G. And essentially what you're 304 00:16:56,720 --> 00:17:01,720 Speaker 1: talking about is people who are investing in environmental, social 305 00:17:01,720 --> 00:17:05,360 Speaker 1: and governance issues well against ones that would be a problem, 306 00:17:05,480 --> 00:17:09,760 Speaker 1: And lately the exchange traded fund environment that industry has 307 00:17:09,760 --> 00:17:12,240 Speaker 1: really latched onto it, on pace for a record year 308 00:17:12,280 --> 00:17:15,440 Speaker 1: of inflows into so called E s G funds. UM. 309 00:17:15,480 --> 00:17:18,119 Speaker 1: But I think you've made it very clear in the past, 310 00:17:18,200 --> 00:17:20,439 Speaker 1: and you also alluded to it in your answer that 311 00:17:20,520 --> 00:17:22,960 Speaker 1: what you guys are doing is different than E s G. 312 00:17:23,280 --> 00:17:26,119 Speaker 1: So can you explain to us the difference in what 313 00:17:26,320 --> 00:17:29,320 Speaker 1: E s G investors do versus what you guys do 314 00:17:29,400 --> 00:17:33,840 Speaker 1: and investing for climate change? Yeah, that's an interesting question. 315 00:17:34,520 --> 00:17:36,879 Speaker 1: I would argue that our strategy is in the s 316 00:17:36,920 --> 00:17:39,920 Speaker 1: G strategy, but not because of its focus on climate 317 00:17:40,000 --> 00:17:42,840 Speaker 1: change as as kind of the area that we're investing in, 318 00:17:43,119 --> 00:17:46,439 Speaker 1: but because we are considering E s G issues E 319 00:17:46,640 --> 00:17:50,280 Speaker 1: s G risks uh in, and we're integrating those issues 320 00:17:50,320 --> 00:17:53,560 Speaker 1: in those risks holistically in our investment process. And to me, 321 00:17:53,680 --> 00:17:56,520 Speaker 1: that's the spirit of E s G in our industry. 322 00:17:56,560 --> 00:17:59,720 Speaker 1: I think E s G has gotten mistaken for sounding 323 00:17:59,800 --> 00:18:04,919 Speaker 1: good moral and ethical investing avoiding controversy, But to me, 324 00:18:05,000 --> 00:18:06,560 Speaker 1: that's not the spirit of E s G, or at 325 00:18:06,600 --> 00:18:09,040 Speaker 1: least it shouldn't be uh and so I think we 326 00:18:09,119 --> 00:18:12,200 Speaker 1: are running an E s G strategy from the perspective 327 00:18:12,240 --> 00:18:15,719 Speaker 1: of we are incorporating E s G risks and concerns 328 00:18:15,920 --> 00:18:18,760 Speaker 1: in positioning the strategy. Uh, it's not E s G 329 00:18:18,880 --> 00:18:20,960 Speaker 1: if your definition of E s G is sounding good 330 00:18:21,000 --> 00:18:24,760 Speaker 1: to everybody and avoiding controversy at all costs. So I 331 00:18:24,800 --> 00:18:27,400 Speaker 1: noticed that the benchmark for the strategy is actually the 332 00:18:27,520 --> 00:18:30,920 Speaker 1: m s c I All Country World Index. Um, that's 333 00:18:30,920 --> 00:18:33,200 Speaker 1: a pretty broad group. I assume there was no sort 334 00:18:33,240 --> 00:18:37,639 Speaker 1: of benchmark. Uh, that's just dedicated to climate change. To 335 00:18:38,080 --> 00:18:41,359 Speaker 1: the benchmark. The fund to HSBC did have a climate 336 00:18:41,400 --> 00:18:44,399 Speaker 1: change index. They discontinued it in two thousand sixteen as 337 00:18:44,440 --> 00:18:47,320 Speaker 1: part of a broader dismantling of their index line, so 338 00:18:47,359 --> 00:18:51,160 Speaker 1: it wasn't specific to their climate change strategy. But other 339 00:18:51,240 --> 00:18:54,800 Speaker 1: than that, there are a few other environmental type indexes 340 00:18:54,800 --> 00:18:58,240 Speaker 1: out there, But there's so much, um, so much of 341 00:18:58,240 --> 00:19:01,240 Speaker 1: a gap between what their reppersenting and what we're doing 342 00:19:01,280 --> 00:19:04,600 Speaker 1: that they wouldn't be a good benchmark for what we're doing. 343 00:19:05,160 --> 00:19:07,480 Speaker 1: Benchmarking to the All Country World Index is kind of 344 00:19:07,480 --> 00:19:09,119 Speaker 1: throwing our hands in the air a little bit and 345 00:19:09,160 --> 00:19:11,480 Speaker 1: saying this isn't a good benchmark for what we're doing 346 00:19:11,520 --> 00:19:14,240 Speaker 1: in the short to medium term. But our goal is 347 00:19:14,280 --> 00:19:16,959 Speaker 1: to perform better than than the broad equity market over 348 00:19:17,000 --> 00:19:19,920 Speaker 1: a long period of time. UH and and AQUA. The 349 00:19:19,960 --> 00:19:23,399 Speaker 1: All Country World Index is the most commonly accepted global 350 00:19:23,400 --> 00:19:26,520 Speaker 1: equity benchmark when it comes to climate change. I also 351 00:19:26,520 --> 00:19:28,800 Speaker 1: found interesting in your primer when you think about other 352 00:19:28,880 --> 00:19:31,840 Speaker 1: reasons to think about climate change as a way to 353 00:19:31,880 --> 00:19:37,439 Speaker 1: find opportunity to invest. One was actually inflation protection. And yes, now, 354 00:19:37,760 --> 00:19:39,959 Speaker 1: many people when you think about the economy and you 355 00:19:39,960 --> 00:19:42,320 Speaker 1: think about what we're going through, people talk about the 356 00:19:42,359 --> 00:19:45,919 Speaker 1: lack of inflation. Um, so can you break down how 357 00:19:46,080 --> 00:19:50,440 Speaker 1: actually a strategy like this can provide protection against inflation 358 00:19:50,800 --> 00:19:54,400 Speaker 1: even if we are in a low inflation environment. Yes. So, 359 00:19:54,880 --> 00:19:58,359 Speaker 1: one thing I'll say is that energy historically has been 360 00:19:58,400 --> 00:20:01,040 Speaker 1: a very difficult thing to give up. Investment gets talked 361 00:20:01,080 --> 00:20:03,760 Speaker 1: a lot about in our industry these days, divesting from 362 00:20:03,800 --> 00:20:06,960 Speaker 1: oil and gas and coal and fossil fuels and whatnot. Uh. 363 00:20:07,000 --> 00:20:10,200 Speaker 1: The problem with divesting for many investors is that historically 364 00:20:10,280 --> 00:20:13,440 Speaker 1: energy companies have outperformed the broad equity market. They've given 365 00:20:13,480 --> 00:20:16,919 Speaker 1: you diversification. There have been whole decades UH, in the 366 00:20:17,000 --> 00:20:19,360 Speaker 1: nineteen seventies and then two thousand and two thousand and ten, 367 00:20:19,640 --> 00:20:22,000 Speaker 1: where the broad equity market was down in real terms, 368 00:20:22,240 --> 00:20:24,520 Speaker 1: and yet energy companies were up over a hundred percent 369 00:20:24,520 --> 00:20:27,159 Speaker 1: in real terms. That's the kind of diversification that you 370 00:20:27,200 --> 00:20:30,680 Speaker 1: want in your portfolio. UH and and certainly in the seventies, 371 00:20:30,720 --> 00:20:34,080 Speaker 1: that's a huge inflationary period. UH and energy companies didn't 372 00:20:34,119 --> 00:20:36,600 Speaker 1: just protect you in that period, but you actually grew 373 00:20:36,600 --> 00:20:40,000 Speaker 1: your purchasing power investing in those energy companies because once 374 00:20:40,000 --> 00:20:42,480 Speaker 1: again they were up well over REEL. So it's a 375 00:20:42,520 --> 00:20:45,560 Speaker 1: tough thing to give up. But when you invest in 376 00:20:45,680 --> 00:20:49,480 Speaker 1: clean energy solutions that compete with fossil fuel solutions, you 377 00:20:49,520 --> 00:20:52,879 Speaker 1: get indirect exposure to fossil fuel prices. So if coal 378 00:20:52,920 --> 00:20:55,359 Speaker 1: and natural gas go through the roof, wind and solar 379 00:20:55,400 --> 00:20:57,880 Speaker 1: become much more competitive, much more economic, in the world, 380 00:20:58,240 --> 00:21:03,040 Speaker 1: mobilizes much more quickly to to rotate to them. UH. Similarly, 381 00:21:03,040 --> 00:21:05,960 Speaker 1: with electric vehicles, there's a connection between oil prices and 382 00:21:06,000 --> 00:21:09,000 Speaker 1: electric vehicle sales that we've seen in the US over 383 00:21:09,040 --> 00:21:12,600 Speaker 1: the last few years. So because of that indirect exposure 384 00:21:12,640 --> 00:21:15,760 Speaker 1: that you get to fossil fuel prices, investing UH in 385 00:21:15,920 --> 00:21:19,160 Speaker 1: clean energy solutions, then more direct investments that we're making 386 00:21:19,400 --> 00:21:25,120 Speaker 1: into clean energy materials, agriculture, water infrastructure, other real asset 387 00:21:25,200 --> 00:21:29,359 Speaker 1: type businesses. We think our strategy would do well in 388 00:21:29,400 --> 00:21:33,400 Speaker 1: a world where inflation was driven by commodity price rise. Now, 389 00:21:33,400 --> 00:21:36,840 Speaker 1: if if inflation is driven by global trade wars or 390 00:21:36,880 --> 00:21:40,959 Speaker 1: something like that, or or massive money printing, uh, you know, 391 00:21:41,000 --> 00:21:43,400 Speaker 1: it's not as clear that our strategy would would give 392 00:21:43,400 --> 00:21:46,560 Speaker 1: you a lot of inflation protection. But in the developed markets, 393 00:21:46,600 --> 00:21:50,360 Speaker 1: at least historically, most inflationary periods have been driven by 394 00:21:50,359 --> 00:21:54,040 Speaker 1: commodity prices rising. Just to get back to those top 395 00:21:54,040 --> 00:21:56,639 Speaker 1: holdings for a little bit. Uh. And I'm fascinated by 396 00:21:56,640 --> 00:21:59,199 Speaker 1: this because one thing you cannot accuse the strategy of 397 00:21:59,240 --> 00:22:02,080 Speaker 1: being is a closet index or you know, it's it's 398 00:22:02,119 --> 00:22:08,400 Speaker 1: definitely you know, taking a stance on the stocks it picks. Um. 399 00:22:08,480 --> 00:22:10,320 Speaker 1: So if you were to sort of blindfold me and 400 00:22:10,359 --> 00:22:12,560 Speaker 1: say what would you think would be one of the 401 00:22:12,600 --> 00:22:16,880 Speaker 1: top weights in a climate change strategy, I would say, well, 402 00:22:16,880 --> 00:22:19,480 Speaker 1: maybe Tesla would be there. I'm just curious, I don't 403 00:22:19,480 --> 00:22:21,720 Speaker 1: see Tesla in the top holdings. Is it anywhere in 404 00:22:21,760 --> 00:22:25,679 Speaker 1: the fund um? And if not, kind of what is 405 00:22:26,280 --> 00:22:29,520 Speaker 1: what you see as far as the transportation space. Um, 406 00:22:30,040 --> 00:22:31,600 Speaker 1: you know, a lot of the holdings seemed to be 407 00:22:31,760 --> 00:22:36,879 Speaker 1: very much energy infrastructure rather than transportation. Um. Is there 408 00:22:36,960 --> 00:22:39,760 Speaker 1: is there something in the fund to reflect sort of 409 00:22:40,680 --> 00:22:44,400 Speaker 1: the future of automobiles. Yes, so there's a lot there. 410 00:22:44,800 --> 00:22:49,960 Speaker 1: Let's say, let's start with Tesla. So Tesla, if you 411 00:22:50,000 --> 00:22:56,560 Speaker 1: invest in Tesla, you're paying outrageous valuations for the automobile 412 00:22:56,600 --> 00:23:00,720 Speaker 1: manufacturing industry. Uh and and increasingly, a play on Tesla 413 00:23:00,800 --> 00:23:02,600 Speaker 1: won't be a play on electric vehicles. That will be 414 00:23:02,640 --> 00:23:08,000 Speaker 1: a play on vehicle manufacturing because over the next five years, Mercedes, 415 00:23:08,359 --> 00:23:13,040 Speaker 1: BMW even four and GM, which are pretty dopey auto manufacturers, 416 00:23:13,040 --> 00:23:15,040 Speaker 1: are going to be coming out with their electric vehicle lines. 417 00:23:15,119 --> 00:23:18,040 Speaker 1: Every single auto manufacturer on Earth is going to be 418 00:23:18,160 --> 00:23:20,919 Speaker 1: rolling out electric vehicle line. So Tesla is not going 419 00:23:20,960 --> 00:23:23,240 Speaker 1: to be the only game in town. So you're paying 420 00:23:23,280 --> 00:23:26,360 Speaker 1: a huge multiple in an industry that's an extremely low 421 00:23:26,440 --> 00:23:30,080 Speaker 1: multiple industry. The big auto manufacturers are five six seven 422 00:23:30,119 --> 00:23:33,600 Speaker 1: times earnings generally speaking. Then you have Tesla, which, if 423 00:23:33,640 --> 00:23:35,719 Speaker 1: they made money for long enough to measure their pe 424 00:23:35,720 --> 00:23:38,720 Speaker 1: would be you know, extremely expensive, like a hundred or 425 00:23:39,240 --> 00:23:42,399 Speaker 1: two hundred or whatever it would be. Um, this is 426 00:23:42,440 --> 00:23:45,280 Speaker 1: kind of what I suspected the answer would be. So yeah, yeah, 427 00:23:45,280 --> 00:23:47,560 Speaker 1: So it's very expensive and you're playing a very uncertain 428 00:23:47,600 --> 00:23:52,280 Speaker 1: market share game. Uh, you have all these other manufacturers 429 00:23:52,320 --> 00:23:54,720 Speaker 1: coming along, and Tesla, in the grand scheme of the 430 00:23:54,960 --> 00:23:58,480 Speaker 1: global automobile market, barely sells any vehicles. Well, how many 431 00:23:58,520 --> 00:23:59,879 Speaker 1: are they going to sell when they have a lot 432 00:23:59,880 --> 00:24:03,480 Speaker 1: of competition. It's a it's a huge question mark. So 433 00:24:03,840 --> 00:24:07,240 Speaker 1: it's highly speculative. I wouldn't even consider investing in Tesla 434 00:24:07,280 --> 00:24:10,560 Speaker 1: and investment. It's really speculation at this point and in 435 00:24:10,600 --> 00:24:13,480 Speaker 1: the maturity of their business and the market. And the 436 00:24:13,520 --> 00:24:16,080 Speaker 1: third thing I'll say is that you guys haven't given 437 00:24:16,080 --> 00:24:19,240 Speaker 1: me any pot, which is unfortunate. But Elon Musk is 438 00:24:19,280 --> 00:24:21,879 Speaker 1: like smoking pot on podcasts and talk about s g 439 00:24:22,960 --> 00:24:26,440 Speaker 1: risks and concerns. There's a huge governance risk there. He's 440 00:24:26,480 --> 00:24:29,520 Speaker 1: not the most stable, uh figure to have running your 441 00:24:29,560 --> 00:24:33,280 Speaker 1: company and being the leader for your company. So we 442 00:24:33,640 --> 00:24:36,080 Speaker 1: we have pot available for the guests, and I think 443 00:24:36,080 --> 00:24:39,399 Speaker 1: we'll have to producer. Yeah, I don't think we can 444 00:24:39,400 --> 00:24:42,480 Speaker 1: give an answer on that unfortunately. Um, this would also 445 00:24:42,600 --> 00:24:45,840 Speaker 1: probably be a stretch and a bit speculative. But lately 446 00:24:45,920 --> 00:24:49,320 Speaker 1: when people think about the alternative meat space, somehow people 447 00:24:49,400 --> 00:24:53,000 Speaker 1: bring that back into the climate conversation and sustainability. Does 448 00:24:53,080 --> 00:24:55,399 Speaker 1: that ever come up in conversations when you were thinking 449 00:24:55,440 --> 00:25:00,520 Speaker 1: about investing in changes going forwards as it relates to 450 00:25:00,600 --> 00:25:04,280 Speaker 1: climate change or trying to combat that. Yes, certainly. We 451 00:25:04,280 --> 00:25:10,000 Speaker 1: we consider the alternative protein sources so impossible, Uh, foods 452 00:25:10,080 --> 00:25:14,320 Speaker 1: and and um, there are a couple others. Uh, they're 453 00:25:14,359 --> 00:25:17,080 Speaker 1: so expensive right now they trade at fifty times sales, 454 00:25:17,160 --> 00:25:21,080 Speaker 1: not fifty times earnings, fifty times sales. It's very difficult 455 00:25:21,119 --> 00:25:23,639 Speaker 1: for a value investor. And and at my company and 456 00:25:23,800 --> 00:25:28,280 Speaker 1: in my group, we're we're pretty focused on value and valuation. Uh, 457 00:25:28,320 --> 00:25:31,760 Speaker 1: it's very difficult to get comfortable with those kinds of 458 00:25:31,760 --> 00:25:35,000 Speaker 1: of lofty valuation levels. Well, it's an interesting point you 459 00:25:35,040 --> 00:25:38,640 Speaker 1: bring up, though, that these sort of uh combating climate 460 00:25:39,480 --> 00:25:42,400 Speaker 1: change plays, the real obvious ones tend tend to really 461 00:25:42,440 --> 00:25:45,680 Speaker 1: do draw in a lot of investor interest to the 462 00:25:45,720 --> 00:25:49,159 Speaker 1: point where you know you're not interested in fighting climate 463 00:25:49,200 --> 00:25:54,320 Speaker 1: change at any price. It sounds like reasonable reasonably valued equities. Um. Uh, 464 00:25:54,640 --> 00:25:58,280 Speaker 1: is that is that's a fair summary of your strategy. Yeah, 465 00:25:58,320 --> 00:26:01,400 Speaker 1: we're looking for company that are treading at a discount 466 00:26:01,440 --> 00:26:03,920 Speaker 1: to the market, that look cheaper than the average company 467 00:26:03,960 --> 00:26:07,320 Speaker 1: out there, but are still exposed to decades of secular growth. 468 00:26:07,840 --> 00:26:11,520 Speaker 1: It may sound counterintuitive, but you can find companies, wind companies, 469 00:26:11,520 --> 00:26:15,399 Speaker 1: solar companies, companies in the automobile manufacturing industry who may 470 00:26:15,440 --> 00:26:18,520 Speaker 1: not be the manufacturers, but they're producing the lithium ion 471 00:26:18,560 --> 00:26:21,840 Speaker 1: batteries that go into the electric vehicles, or they're um 472 00:26:21,880 --> 00:26:25,880 Speaker 1: working on energy efficient or gas efficient UH internal combustion 473 00:26:25,920 --> 00:26:29,800 Speaker 1: engines and rotating their business towards the electric vehicle market 474 00:26:29,800 --> 00:26:32,560 Speaker 1: and electric vehicle power trains. Could you give us a 475 00:26:32,560 --> 00:26:35,760 Speaker 1: few names in that space, so companies like Borg Warner, Delphi, 476 00:26:36,320 --> 00:26:38,320 Speaker 1: et cetera. There are one or two others that we 477 00:26:38,359 --> 00:26:41,480 Speaker 1: look at. UH. These are companies that we think are 478 00:26:42,200 --> 00:26:45,200 Speaker 1: are kind of exposed to electric vehicle growth, but you're 479 00:26:45,240 --> 00:26:47,120 Speaker 1: not playing the same market share game that you are 480 00:26:47,119 --> 00:26:49,520 Speaker 1: when you invest in a Tesla or a b y D. 481 00:26:50,080 --> 00:26:55,040 Speaker 1: Going back to your question earlier about the transportation market, 482 00:26:55,040 --> 00:26:57,040 Speaker 1: how else we invest in it? You can also invest 483 00:26:57,080 --> 00:27:00,560 Speaker 1: in in kind of railroads UH and and railroad companies 484 00:27:00,960 --> 00:27:03,399 Speaker 1: h and there are other ways of investing in transportation 485 00:27:03,520 --> 00:27:07,119 Speaker 1: beyond just the the obviously obvious Tesla's and b I 486 00:27:07,200 --> 00:27:09,120 Speaker 1: d s of the world, by D being the Chinese 487 00:27:09,359 --> 00:27:13,960 Speaker 1: electric vehicle manufacturer. Uh. To be honest, though, we don't 488 00:27:14,000 --> 00:27:17,119 Speaker 1: see much hype and hysteria beyond the areas that you 489 00:27:17,160 --> 00:27:20,760 Speaker 1: guys are mentioning. So the news that's where we tend 490 00:27:20,760 --> 00:27:25,320 Speaker 1: to latch onto. Exactly. The the kind of plant based 491 00:27:25,359 --> 00:27:30,520 Speaker 1: meat replacements are are kind of uh really really, you 492 00:27:30,560 --> 00:27:32,960 Speaker 1: see a lot of hype and hysteria there. You certainly 493 00:27:33,000 --> 00:27:36,240 Speaker 1: see it in the electric vehicle manufacturers themselves. But you 494 00:27:36,280 --> 00:27:40,040 Speaker 1: move beyond that, uh, and you can find companies. Let's 495 00:27:40,040 --> 00:27:43,479 Speaker 1: put it this way, investors are not very comfortable and 496 00:27:43,680 --> 00:27:46,600 Speaker 1: optimistic about solar and wind. A lot of early investors 497 00:27:46,600 --> 00:27:48,919 Speaker 1: in the solar and wind markets have been burned. There 498 00:27:49,000 --> 00:27:51,720 Speaker 1: was a real bubble there about a decade ago and exactly, 499 00:27:51,880 --> 00:27:55,159 Speaker 1: and investors have a long memory for losses, right, for 500 00:27:55,240 --> 00:27:58,480 Speaker 1: getting burned. Uh. So you find companies. In the last 501 00:27:58,560 --> 00:28:00,720 Speaker 1: year we were able to buy invest Us Wind Systems, 502 00:28:00,720 --> 00:28:03,600 Speaker 1: in our opinion, the biggest best wind turbine manufacturer in 503 00:28:03,600 --> 00:28:07,040 Speaker 1: the world for thirteen times. Learnings trailing or forward, whichever 504 00:28:07,080 --> 00:28:10,000 Speaker 1: way you looked at it, at thirteen times earnings, you 505 00:28:10,040 --> 00:28:14,120 Speaker 1: don't have to bake in growth expectations at all. Dest 506 00:28:14,119 --> 00:28:17,360 Speaker 1: This could never grow, uh for the rest of its life, 507 00:28:17,359 --> 00:28:20,200 Speaker 1: and you're gonna generate a strong earnings or cash flow 508 00:28:20,280 --> 00:28:23,600 Speaker 1: yield from owning that company if it grows. And we 509 00:28:23,680 --> 00:28:26,400 Speaker 1: know that it's exposed to decades of secular growth. So 510 00:28:26,640 --> 00:28:29,120 Speaker 1: it's hard for me to imagine, not impossible, but very 511 00:28:29,119 --> 00:28:31,320 Speaker 1: hard for me to imagine a world where ten years 512 00:28:31,320 --> 00:28:34,159 Speaker 1: from now Investus isn't making more money than it is today. 513 00:28:34,640 --> 00:28:37,160 Speaker 1: So if you believe there's going to be growth, then 514 00:28:37,240 --> 00:28:40,400 Speaker 1: at thirteen times earnings, it's a no brainer. Well, sir, 515 00:28:40,560 --> 00:28:43,440 Speaker 1: you're mentioning beyond meat has gotten me hungry. I think 516 00:28:43,440 --> 00:28:47,600 Speaker 1: it's time for a leftover turkey sandwich. Uh. And that's 517 00:28:47,600 --> 00:28:49,680 Speaker 1: about all the time we have for this week. Lucas White. 518 00:28:49,680 --> 00:28:51,720 Speaker 1: Great to have you, really fascinating stuff. Thanks for coming 519 00:28:51,720 --> 00:29:01,440 Speaker 1: on the show, Thanks for having me, Thank you what 520 00:29:01,600 --> 00:29:04,320 Speaker 1: goes out We'll be back next week. Until then, you 521 00:29:04,360 --> 00:29:06,800 Speaker 1: can find us on the Bloomberg Terminal website and app 522 00:29:07,240 --> 00:29:10,040 Speaker 1: or wherever you get your podcasts. We'd love it if 523 00:29:10,040 --> 00:29:11,880 Speaker 1: you took the time to rate interview the show on 524 00:29:11,960 --> 00:29:15,160 Speaker 1: Apple podcast so more listeners can find us, and you 525 00:29:15,200 --> 00:29:17,920 Speaker 1: can find us on Twitter, follow me at at Sara 526 00:29:18,000 --> 00:29:21,120 Speaker 1: pont sec and Mike is at Reaganonymous. You can also 527 00:29:21,120 --> 00:29:25,240 Speaker 1: follow Bloomberg podcast at podcasts. What Goes Up is produced 528 00:29:25,240 --> 00:29:28,720 Speaker 1: by tober Foreheads. The head of Bloomberg Podcast is Francesco Levie. 529 00:29:29,000 --> 00:29:30,680 Speaker 1: Thanks for listening, See you next time.