WEBVTT - Sustainable Business Strategies

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<v Speaker 1>You're listening to Bloomberg Business Week with Carol Messer and

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<v Speaker 1>Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. We often

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<v Speaker 1>talked about this data from our Bloomberg Intelligence team about

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<v Speaker 1>how e s G may surpassed forty one trillion dollars

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<v Speaker 1>in assets, not without challenges, Untim, we know most notable

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<v Speaker 1>is the continued heightened scrutiny as regulators tackle the risk

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<v Speaker 1>of greenwashing and some other issues. We've got a great

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<v Speaker 1>guest on this. Kisa Shrine is Global Partner director of

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<v Speaker 1>the London Stock Exchange Group. She's with us right now

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<v Speaker 1>in the Bloomberg Interactive Broker Studio. She's also got the

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<v Speaker 1>new book out, Gambling on Green Uncovering the balance among revenues,

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<v Speaker 1>reputations and E s G. She's also a part of Series,

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<v Speaker 1>which is a nonprofit sustainability advocacy organization UM that's been

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<v Speaker 1>around for quite a lot of time before we're even

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<v Speaker 1>talking about E s G. So it's s G is

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<v Speaker 1>on everyone's radar at this point, Kissa, But as Carol

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<v Speaker 1>and I've been talking about throughout the program and really

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<v Speaker 1>over the last few months, under increased scrutiny, right now

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<v Speaker 1>thanks to a lot of what's happening in Europe. What

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<v Speaker 1>do investors need to underst and about how to like

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<v Speaker 1>read through the noise when it comes to E s G.

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<v Speaker 1>Absolutely and great to be here, Tim and Carol. The

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<v Speaker 1>first thing we really need to think through is the

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<v Speaker 1>types of E s G investing that we're talking about.

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<v Speaker 1>You could be looking at values are value investing. I'll

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<v Speaker 1>break that down a bit. So there is E s

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<v Speaker 1>G integration, which is when investor takes their typical standard

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<v Speaker 1>stock selection model and they just apply E s G

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<v Speaker 1>or sustainability factors to it. And then on the other

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<v Speaker 1>side of the spectrum there's impact investing. And I suspect

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<v Speaker 1>that when people hear esc investing two very two very

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<v Speaker 1>different things, think about the spectrum and they're on either end.

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<v Speaker 1>Tell us about the difference between the two. Sure, So

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<v Speaker 1>E s G integration you have your typical traditional stock

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<v Speaker 1>selection process that the investment manager takes and they apply

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<v Speaker 1>sustainability factors onto that. Then the impact impact model, which

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<v Speaker 1>is impact investing, which is really looking for a positive

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<v Speaker 1>social or environmental outcome. Two separate things. One is focusing

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<v Speaker 1>on that positive environment mental social outcome and the other

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<v Speaker 1>is just typical traditional investing with E s G susinability

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<v Speaker 1>factors integrated can both provide returns are more importantly can impact, right,

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<v Speaker 1>because that's I feel like smarter. Can I say that?

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<v Speaker 1>Because I do feel like E s G is going

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<v Speaker 1>through reckoning. So much money has come in, there's not

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<v Speaker 1>a really clear way of measuring and the E s G,

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<v Speaker 1>you know, umbrella different ways to measure each of those metrics,

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<v Speaker 1>some easier than others. Impact though, is very specific, right

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<v Speaker 1>in its intention impact, It is intentional. I feel it

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<v Speaker 1>is intentional, is very specific, and I think that's where

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<v Speaker 1>a lot of the confusion lies. Honestly, I think we

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<v Speaker 1>hear the ISU investing, we think impact, but not all

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<v Speaker 1>types of investing our impact. Okay, So what okay, So

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<v Speaker 1>I'm just trying to talk about to phrase this. So

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<v Speaker 1>it's all well and good to talk E s G

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<v Speaker 1>and investing in what you believe in in a market

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<v Speaker 1>that just seems to continue to go up, up and up.

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<v Speaker 1>But people are running for the hills right now. And

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<v Speaker 1>you know, with the NASDAC that's down more than thirty

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<v Speaker 1>percent this year, hundred down. Our investors caring about E

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<v Speaker 1>s G still So let me break it down like this,

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<v Speaker 1>tim our investors caring about risk? Still, the answer is

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<v Speaker 1>going to be yes, right E s she is simply

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<v Speaker 1>about part of it is simply about risks. And let

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<v Speaker 1>me give an example. If we talk about our investment

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<v Speaker 1>in a piece of real estate. We can say what

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<v Speaker 1>the investment is today, what it's going to be like

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<v Speaker 1>in ten years, but in fifteen years what we see

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<v Speaker 1>may be totally different than what we're seeing now. Physical

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<v Speaker 1>climate risk is a risk, and it's real. What's going

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<v Speaker 1>on with hurricanes tsunamis those things are happening and more

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<v Speaker 1>and more, they're getting more and more prevalent. And so

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<v Speaker 1>when you have investments in certain locations, you need to

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<v Speaker 1>be mindful of how things are going to change from

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<v Speaker 1>a physical perspective. So to answer your question, yeah, something

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<v Speaker 1>we need to think about right now because we see

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<v Speaker 1>these climate issues taking place right now. So I do

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<v Speaker 1>I want to get back to I think, and this

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<v Speaker 1>is where part of the reckoning is is that how

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<v Speaker 1>do we measure it? Because what we're finding is that

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<v Speaker 1>a lot of E s G investments that we would

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<v Speaker 1>just don't sound like that they should be part of

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<v Speaker 1>the E s G umbrella, and we hear that about

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<v Speaker 1>big oil or so and you know so forth or

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<v Speaker 1>that Tesla is not part of an E s G

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<v Speaker 1>index for whatever reasons. So how do we how do

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<v Speaker 1>we as an what is the s G? Or do

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<v Speaker 1>we have to redefine it? You have a lot of clients,

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<v Speaker 1>you work with them, so what do you how do

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<v Speaker 1>you guide them or what do they we can do

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<v Speaker 1>this better? Sure, Well, I've I've something with dozens of

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<v Speaker 1>investors and they say, you know what E s G. Environmental, social,

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<v Speaker 1>and governance. Those are three different things. You have governance

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<v Speaker 1>that's about ethics of the corporation. You have social that

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<v Speaker 1>could be what's going on inside the company or even outside.

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<v Speaker 1>And then you have environment, which we consider climate in

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<v Speaker 1>many cases. So first of all, we need to think

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<v Speaker 1>about how those things are interrelated. And I love talking

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<v Speaker 1>about the story of what we saw with the pandemic.

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<v Speaker 1>Right during the pandemic, we heard a lot about these

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<v Speaker 1>underlying health issues. Well, if we trace this back and

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<v Speaker 1>look at who had to live in certain locations that

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<v Speaker 1>may have been near industries that were pumping things into

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<v Speaker 1>water or pumping things into the air, and we had

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<v Speaker 1>to drink the water and breathe the air. We see

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<v Speaker 1>many underserved communities as a result of redlining, which is

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<v Speaker 1>that it's a practice now that we should not be doing,

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<v Speaker 1>but it was legal back in the day. And we

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<v Speaker 1>see that people are forced to live in these areas,

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<v Speaker 1>so they developed illnesses and they had these underlying conditions

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<v Speaker 1>that were then you know, really made major during the pandemic.

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<v Speaker 1>So those are the sorts of things when we talk

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<v Speaker 1>about how climate is related to social and then the

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<v Speaker 1>ethics part, well, what can companies do to make sure

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<v Speaker 1>that doesn't happen, that the water that they use, that

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<v Speaker 1>they manage it well, that they recycle and reuse. Well,

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<v Speaker 1>that's how the governance peace play. So first of all,

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<v Speaker 1>we need to look at them and see really how

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<v Speaker 1>the inter relationship works. And then from there you talk

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<v Speaker 1>about measurement. As you can see with climate, there is

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<v Speaker 1>a lot of conversation about standards and those things are

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<v Speaker 1>being measured. With social is not that easy. I was

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<v Speaker 1>talking with Michael Postner, who was um u S assistant

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<v Speaker 1>secretary under a President Obama, and he was talking about

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<v Speaker 1>just the variety of social pieces and just how there's

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<v Speaker 1>really no way to measure worker engagement along with what's

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<v Speaker 1>going on with your consumers and how your consumers are

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<v Speaker 1>using your product, is the product safe for them? How

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<v Speaker 1>can you put all that into one bucket? And it's

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<v Speaker 1>very challenging. Well until though, I would go back to

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<v Speaker 1>one of the things I like to put out there,

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<v Speaker 1>Until a company is penalized for not hitting E S

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<v Speaker 1>G metrics in some way. So what we talk about

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<v Speaker 1>earnings all the time, So we look at top and

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<v Speaker 1>bottom line, we look at margins, and unless there's an

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<v Speaker 1>E S G metric where you are financially going to

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<v Speaker 1>be penalized, So what Because ultimately it's going to come

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<v Speaker 1>down to performance like in a sex do you know

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<v Speaker 1>what I mean? Like, so, do we have to get

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<v Speaker 1>to that point where there's some kind of measurement that

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<v Speaker 1>when a company reports, you know you're going to be

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<v Speaker 1>rewarded by investors or not if you don't do well.

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<v Speaker 1>So we talked about measurement. There are a couple of

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<v Speaker 1>different things we can look at. We can look at

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<v Speaker 1>about thirty regulators as well as consumers. Regulators really want

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<v Speaker 1>to be able to make sure that the things that

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<v Speaker 1>are important to consumers and the things that should be legalized,

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<v Speaker 1>that things are carried through consumers. They have the last

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<v Speaker 1>word if they're not buying your product because they don't

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<v Speaker 1>feel that it's in the best interests of the environment,

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<v Speaker 1>of the people who work there, are of themselves, they're

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<v Speaker 1>not going to purchase the products. So when we look

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<v Speaker 1>at measuring, we really see that consumers are doing a

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<v Speaker 1>great job of bringing that reckoning to bear this product.

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<v Speaker 1>This company is ethical, is sustainable, and we want to

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<v Speaker 1>do business there. But it's tricky, like I think about

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<v Speaker 1>in this environment with high prices and consumers are having

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<v Speaker 1>a difficult time that maybe they're going to say, Okay,

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<v Speaker 1>I'm gonna turn my you know, turn away from a

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<v Speaker 1>company doing I'm not going to turn away from a

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<v Speaker 1>company doing bad because they have a cheaper like it's

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<v Speaker 1>you know what I'm saying. They're not turning away, not

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<v Speaker 1>turning away at all, all right, but we will continue

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<v Speaker 1>this in the future. UM, so much fun to have

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<v Speaker 1>you here. Ke's issuing Global Partner Director of the London

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<v Speaker 1>Stock Exchange Group at Sarah's uh and her book Gambling

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<v Speaker 1>on Green check it out. Have a great night, everybody,