Speaker 1: You're listening to Bloomberg Business Week with Carol Messer and
Speaker 1: Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. We often
Speaker 1: talked about this data from our Bloomberg Intelligence team about
Speaker 1: how e s G may surpassed forty one trillion dollars
Speaker 1: in assets, not without challenges, Untim, we know most notable
Speaker 1: is the continued heightened scrutiny as regulators tackle the risk
Speaker 1: of greenwashing and some other issues. We've got a great
Speaker 1: guest on this. Kisa Shrine is Global Partner director of
Speaker 1: the London Stock Exchange Group. She's with us right now
Speaker 1: in the Bloomberg Interactive Broker Studio. She's also got the
Speaker 1: new book out, Gambling on Green Uncovering the balance among revenues,
Speaker 1: reputations and E s G. She's also a part of Series,
Speaker 1: which is a nonprofit sustainability advocacy organization UM that's been
Speaker 1: around for quite a lot of time before we're even
Speaker 1: talking about E s G. So it's s G is
Speaker 1: on everyone's radar at this point, Kissa, But as Carol
Speaker 1: and I've been talking about throughout the program and really
Speaker 1: over the last few months, under increased scrutiny, right now
Speaker 1: thanks to a lot of what's happening in Europe. What
Speaker 1: do investors need to underst and about how to like
Speaker 1: read through the noise when it comes to E s G.
Speaker 1: Absolutely and great to be here, Tim and Carol. The
Speaker 1: first thing we really need to think through is the
Speaker 1: types of E s G investing that we're talking about.
Speaker 1: You could be looking at values are value investing. I'll
Speaker 1: break that down a bit. So there is E s
Speaker 1: G integration, which is when investor takes their typical standard
Speaker 1: stock selection model and they just apply E s G
Speaker 1: or sustainability factors to it. And then on the other
Speaker 1: side of the spectrum there's impact investing. And I suspect
Speaker 1: that when people hear esc investing two very two very
Speaker 1: different things, think about the spectrum and they're on either end.
Speaker 1: Tell us about the difference between the two. Sure, So
Speaker 1: E s G integration you have your typical traditional stock
Speaker 1: selection process that the investment manager takes and they apply
Speaker 1: sustainability factors onto that. Then the impact impact model, which
Speaker 1: is impact investing, which is really looking for a positive
Speaker 1: social or environmental outcome. Two separate things. One is focusing
Speaker 1: on that positive environment mental social outcome and the other
Speaker 1: is just typical traditional investing with E s G susinability
Speaker 1: factors integrated can both provide returns are more importantly can impact, right,
Speaker 1: because that's I feel like smarter. Can I say that?
Speaker 1: Because I do feel like E s G is going
Speaker 1: through reckoning. So much money has come in, there's not
Speaker 1: a really clear way of measuring and the E s G,
Speaker 1: you know, umbrella different ways to measure each of those metrics,
Speaker 1: some easier than others. Impact though, is very specific, right
Speaker 1: in its intention impact, It is intentional. I feel it
Speaker 1: is intentional, is very specific, and I think that's where
Speaker 1: a lot of the confusion lies. Honestly, I think we
Speaker 1: hear the ISU investing, we think impact, but not all
Speaker 1: types of investing our impact. Okay, So what okay, So
Speaker 1: I'm just trying to talk about to phrase this. So
Speaker 1: it's all well and good to talk E s G
Speaker 1: and investing in what you believe in in a market
Speaker 1: that just seems to continue to go up, up and up.
Speaker 1: But people are running for the hills right now. And
Speaker 1: you know, with the NASDAC that's down more than thirty
Speaker 1: percent this year, hundred down. Our investors caring about E
Speaker 1: s G still So let me break it down like this,
Speaker 1: tim our investors caring about risk? Still, the answer is
Speaker 1: going to be yes, right E s she is simply
Speaker 1: about part of it is simply about risks. And let
Speaker 1: me give an example. If we talk about our investment
Speaker 1: in a piece of real estate. We can say what
Speaker 1: the investment is today, what it's going to be like
Speaker 1: in ten years, but in fifteen years what we see
Speaker 1: may be totally different than what we're seeing now. Physical
Speaker 1: climate risk is a risk, and it's real. What's going
Speaker 1: on with hurricanes tsunamis those things are happening and more
Speaker 1: and more, they're getting more and more prevalent. And so
Speaker 1: when you have investments in certain locations, you need to
Speaker 1: be mindful of how things are going to change from
Speaker 1: a physical perspective. So to answer your question, yeah, something
Speaker 1: we need to think about right now because we see
Speaker 1: these climate issues taking place right now. So I do
Speaker 1: I want to get back to I think, and this
Speaker 1: is where part of the reckoning is is that how
Speaker 1: do we measure it? Because what we're finding is that
Speaker 1: a lot of E s G investments that we would
Speaker 1: just don't sound like that they should be part of
Speaker 1: the E s G umbrella, and we hear that about
Speaker 1: big oil or so and you know so forth or
Speaker 1: that Tesla is not part of an E s G
Speaker 1: index for whatever reasons. So how do we how do
Speaker 1: we as an what is the s G? Or do
Speaker 1: we have to redefine it? You have a lot of clients,
Speaker 1: you work with them, so what do you how do
Speaker 1: you guide them or what do they we can do
Speaker 1: this better? Sure, Well, I've I've something with dozens of
Speaker 1: investors and they say, you know what E s G. Environmental, social,
Speaker 1: and governance. Those are three different things. You have governance
Speaker 1: that's about ethics of the corporation. You have social that
Speaker 1: could be what's going on inside the company or even outside.
Speaker 1: And then you have environment, which we consider climate in
Speaker 1: many cases. So first of all, we need to think
Speaker 1: about how those things are interrelated. And I love talking
Speaker 1: about the story of what we saw with the pandemic.
Speaker 1: Right during the pandemic, we heard a lot about these
Speaker 1: underlying health issues. Well, if we trace this back and
Speaker 1: look at who had to live in certain locations that
Speaker 1: may have been near industries that were pumping things into
Speaker 1: water or pumping things into the air, and we had
Speaker 1: to drink the water and breathe the air. We see
Speaker 1: many underserved communities as a result of redlining, which is
Speaker 1: that it's a practice now that we should not be doing,
Speaker 1: but it was legal back in the day. And we
Speaker 1: see that people are forced to live in these areas,
Speaker 1: so they developed illnesses and they had these underlying conditions
Speaker 1: that were then you know, really made major during the pandemic.
Speaker 1: So those are the sorts of things when we talk
Speaker 1: about how climate is related to social and then the
Speaker 1: ethics part, well, what can companies do to make sure
Speaker 1: that doesn't happen, that the water that they use, that
Speaker 1: they manage it well, that they recycle and reuse. Well,
Speaker 1: that's how the governance peace play. So first of all,
Speaker 1: we need to look at them and see really how
Speaker 1: the inter relationship works. And then from there you talk
Speaker 1: about measurement. As you can see with climate, there is
Speaker 1: a lot of conversation about standards and those things are
Speaker 1: being measured. With social is not that easy. I was
Speaker 1: talking with Michael Postner, who was um u S assistant
Speaker 1: secretary under a President Obama, and he was talking about
Speaker 1: just the variety of social pieces and just how there's
Speaker 1: really no way to measure worker engagement along with what's
Speaker 1: going on with your consumers and how your consumers are
Speaker 1: using your product, is the product safe for them? How
Speaker 1: can you put all that into one bucket? And it's
Speaker 1: very challenging. Well until though, I would go back to
Speaker 1: one of the things I like to put out there,
Speaker 1: Until a company is penalized for not hitting E S
Speaker 1: G metrics in some way. So what we talk about
Speaker 1: earnings all the time, So we look at top and
Speaker 1: bottom line, we look at margins, and unless there's an
Speaker 1: E S G metric where you are financially going to
Speaker 1: be penalized, So what Because ultimately it's going to come
Speaker 1: down to performance like in a sex do you know
Speaker 1: what I mean? Like, so, do we have to get
Speaker 1: to that point where there's some kind of measurement that
Speaker 1: when a company reports, you know you're going to be
Speaker 1: rewarded by investors or not if you don't do well.
Speaker 1: So we talked about measurement. There are a couple of
Speaker 1: different things we can look at. We can look at
Speaker 1: about thirty regulators as well as consumers. Regulators really want
Speaker 1: to be able to make sure that the things that
Speaker 1: are important to consumers and the things that should be legalized,
Speaker 1: that things are carried through consumers. They have the last
Speaker 1: word if they're not buying your product because they don't
Speaker 1: feel that it's in the best interests of the environment,
Speaker 1: of the people who work there, are of themselves, they're
Speaker 1: not going to purchase the products. So when we look
Speaker 1: at measuring, we really see that consumers are doing a
Speaker 1: great job of bringing that reckoning to bear this product.
Speaker 1: This company is ethical, is sustainable, and we want to
Speaker 1: do business there. But it's tricky, like I think about
Speaker 1: in this environment with high prices and consumers are having
Speaker 1: a difficult time that maybe they're going to say, Okay,
Speaker 1: I'm gonna turn my you know, turn away from a
Speaker 1: company doing I'm not going to turn away from a
Speaker 1: company doing bad because they have a cheaper like it's
Speaker 1: you know what I'm saying. They're not turning away, not
Speaker 1: turning away at all, all right, but we will continue
Speaker 1: this in the future. UM, so much fun to have
Speaker 1: you here. Ke's issuing Global Partner Director of the London
Speaker 1: Stock Exchange Group at Sarah's uh and her book Gambling
Speaker 1: on Green check it out. Have a great night, everybody,