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Speaker 1: Trillions.

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Speaker 2: I'm Joe Webber and I'm Eric Balchunas.

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Speaker 1: There are three letters that I know Eric Balcunis obsesses

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Speaker 1: about ETF. There's three others that have come up on

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Speaker 1: trillions before that are not your favorite, and those three

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Speaker 1: letters are ESG. Yeah.

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Speaker 3: Look, I get tagged with being anti ESG, but I'm

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Speaker 3: not anti ESG. I'm anti nasty surprise. And as analysts,

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Speaker 3: our job is to make sure you know, investors find

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Speaker 3: the right products. And to me, ESG was active management

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Speaker 3: wrapped up in this moralistic face and sold is like

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Speaker 3: how you're going to do good and do well, and

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Speaker 3: it's not clear if you're going to do either.

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Speaker 2: There's a lot to unpacked there.

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Speaker 3: And I think again, if it was sold as a

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Speaker 3: new way to be active and pay more, I'd be like,

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Speaker 3: all right, well, at least the marketing is honest. So

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Speaker 3: look the data. I think it's going to stay. This

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Speaker 3: is data that will help anybody analyzing a stock. What

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Speaker 3: I've been skeptical about, and we're going to debate on

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Speaker 3: this show, is ESG sort of taking over your portfolio

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Speaker 3: in the form of funds or ETFs, and you basically

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Speaker 3: staking your kid's education and your retirement on this sort

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Speaker 3: of ESG vision, which again is making active bets and

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Speaker 3: can underperform. So this is the thing that I think

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Speaker 3: many people just need to understand before going in. But

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Speaker 3: then there's also multiple layers of inconsistencies and things that

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Speaker 3: sort of offset each other that make it very confusing.

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Speaker 3: And now over the years, esg's gotten so much baggage,

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Speaker 3: so there's this sort of reputational issue that ESG has.

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Speaker 3: So I think ESG is at a major inflection point

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Speaker 3: right now. Some people have declared it dead. I won't

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Speaker 3: go that far, but I do think it's at a

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Speaker 3: crossroads and it may have to go on without actually

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Speaker 3: using the phrase ESG. Mike Drop, you like that, well,

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Speaker 3: let's I may have just like stolen my own thunder.

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Speaker 3: I think that's well.

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Speaker 1: Now we really get together, Okay, So joining us for

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Speaker 1: this episode two colleagues in Bloomberg Intelligence who are also

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Speaker 1: the co hosts of a new podcast called ESG Currents.

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Speaker 1: That's robbed Boff, he's the senior ESG analyst in Bloomberg Intelligence,

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Speaker 1: as well as Shahem Contractor, who's the senior ESG strategist

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Speaker 1: this time on trillions is ESG Dead Rob Shaheen, Welcome

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Speaker 1: to Atrillians. Thank you too, thanks for having us Shaheen.

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Speaker 1: You're you've been on before, Yes, well, good to have

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Speaker 1: you back. We love having returning guests. Okay, so Eric's

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Speaker 1: kind of a hater as he's laid out, but we're

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Speaker 1: gonna have you, uh do some Mortal Kombat with him

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Speaker 1: and we'll see who wins. What's happening in ESG. Now,

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Speaker 1: we've had this moment where there was a ton of

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Speaker 1: buzz that felt like all of the financial industry went there,

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Speaker 1: and then it was like the culture wars happened and

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Speaker 1: there was a ton of pushback. Where do things stand now?

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Speaker 4: So second chime into this. So I think you know,

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Speaker 4: as Eric mentioned, ESG is as at a bit of

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Speaker 4: an inflection point. We saw a lot of flows into

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Speaker 4: ESG atfs maybe till about twenty twenty one, and we're

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Speaker 4: seeing that unravel a little bit. So yes, she ETF

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Speaker 4: flows at least in the US for about a negative

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Speaker 4: two billion the first half of this year. Now, if

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Speaker 4: we get into the y, we can get into it.

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Speaker 4: I think it's concentration and all that fun stuff rather

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Speaker 4: than the backlash. But we'll get into it. I know

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Speaker 4: erics throwing his hands up in the air.

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Speaker 3: Let me get I got to jump in here. So

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Speaker 3: here's my take on it. Okay, ESG tends to be

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Speaker 3: a little overweight tech and underweight Energy. Tends to be

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Speaker 3: right because this doesn't want to own the bad I

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Speaker 3: just put my hands in quotes. The bad company is

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Speaker 3: like Exon, which we all use every day anyway. It

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Speaker 3: doesn't want to own those companies. So when Energy had

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Speaker 3: the huge rally in twenty twenty two and values stocks

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Speaker 3: did very well and growth and tech were like bad,

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Speaker 3: then ESG underperformed. And what really happened is Blackrock pulled ESGU,

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Speaker 3: which is the biggest ESG ETF in the world, out

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Speaker 3: of its own model. That's how bad it got. Its

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Speaker 3: clients must have complained, and so really what I think

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Speaker 3: happened was it underperformed, which again was our whole thing

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Speaker 3: to begin with. Was hey easy, The marketing is so

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Speaker 3: rosy and shiny on this, But this could underperform for

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Speaker 3: long stretches of time because it's making active bets.

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Speaker 4: You don't agree with that, I agree, but so I

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Speaker 4: will say that are definitely falls with the ESG funds.

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Speaker 4: This overweight deck, underwear energy. I completely think is I

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Speaker 4: wouldn't say not valid, but not necessary. I think the

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Speaker 4: reason why Black Croc pulled out it could be ESG.

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Speaker 4: It could not be ESG. I don't think we have

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Speaker 4: a definite evice, at least that's my view. I think

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Speaker 4: if we see the money come back buck, we know

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Speaker 4: it was not ESG. If the money stays out, maybe

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Speaker 4: it was ESG. I think we'll just have to wait

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Speaker 4: and watch.

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Speaker 3: Well, if the money comes out, I mean it's because

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Speaker 3: it was underperforming, because it was lagging the S and P.

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Speaker 3: Whether it's overweight tech, I mean I know that one

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Speaker 3: is overweight tech little underweight energy, and it lagged, and

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Speaker 3: so I think Blackrock pulled it out and went into

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Speaker 3: the quality ETF, which was quality stocks, and that was

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Speaker 3: the trade Blackrock decided. I'm sure it hurt them because

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Speaker 3: they were the biggest cheerleaders so to see, and that

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Speaker 3: was eight nine billion dollars. I mean, this is not

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Speaker 3: a little bit of money. They knew people would notice,

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Speaker 3: and so it was that bad.

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Speaker 4: But maybe they just wanted to move from sort of

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Speaker 4: things that resemble a cost strategy, which ESGU does in

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Speaker 4: a way. It's very sort of light in ESG to

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Speaker 4: a quality fund. I don't know. I'm just saying that

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Speaker 4: we don't know if it was allocated fort ESG rob.

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Speaker 1: What is the conversation around ESG missing.

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Speaker 5: Yes, well, I was just going to say, you know,

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Speaker 5: Shehen has talked about the greed, I'm going to talk

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Speaker 5: about the fear, the anti ESG pushback. So we've seen

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Speaker 5: a lot of politicians, you know, it tends to be

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Speaker 5: red state, blue state, but really it's more along the

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Speaker 5: lines of energy producers versus energy consumers, you know, really

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Speaker 5: pushing back on this notion about allocating capital away from

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Speaker 5: some of these high emitting sectors or you know, part

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Speaker 5: of it is also feeding into the cultural wars to

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Speaker 5: let's be honest, get themselves elected.

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Speaker 6: You know, we do see a lot of noise being made.

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Speaker 5: Now, whether that's impacting ESG, I don't think that's the case.

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Speaker 5: I think the reasons you guys have talked about performance

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Speaker 5: and some of the nuts and bolts of the financials

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Speaker 5: are really what's driving it. But there is definitely a

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Speaker 5: lot of noise out there that maybe hasn't affected how

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Speaker 5: ESG funds are run, but definitely how they market themselves

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Speaker 5: and how they talk about it. So, for example, you know,

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Speaker 5: black Rock barely uses the phrase ESG anymore, and it's reports.

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Speaker 5: They'll talk about the actual issues, they'll talk about the

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Speaker 5: carbon transition, they'll talk about diversity, but you know they

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Speaker 5: won't actually use the phrase ESG.

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Speaker 1: Well, what's interesting to me about the black Rock thing,

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Speaker 1: I guess is, obviously I think it was a huge priority.

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Speaker 1: They got attacked hard. How much of this of them

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Speaker 1: not using the phrase ESG anymore has to do with

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Speaker 1: that versus them just moving on and prioritizing new Yeah,

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Speaker 1: so I think.

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Speaker 3: They're connected but disconnected. I think the returns are why

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Speaker 3: they pulled money out of ESGU in their own portfolio.

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Speaker 3: My guess is they I think Blackrock put ESGU in

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Speaker 3: the core when tech was doing a little better and

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Speaker 3: it was like it didn't disturb anything. But when it

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Speaker 3: started in performing, my guess is their advisor clients were like, heit,

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Speaker 3: wait a second, why.

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Speaker 2: Is ESU in here?

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Speaker 3: I didn't ask for it, and it's underperforming, it's dragging.

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Speaker 3: And they thought, also, this trade isn't working, and they

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Speaker 3: went to something that's working. I see this do this

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Speaker 3: other funds all the time. It's not like anything personal.

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Speaker 3: That's my whole point. The returns aren't personal. And the

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Speaker 3: case of Larry Fink and ESG them coming out with

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Speaker 3: ESG putting in the portfolio was all part of that

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Speaker 3: big push about four years ago cheerleading ESG. The political

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Speaker 3: blowback I think was more than he thought. I think

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Speaker 3: he was like overwhelmed and probably thought to himself, I

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Speaker 3: thought I was saying good things here. But you have

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Speaker 3: to understand that's a whole thing about Larry Fink, the

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Speaker 3: leader of Blackrock, who controls ten trillion dollars and a

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Speaker 3: lot of that is voting shares of US stocks. Not

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Speaker 3: all of the millions of investors in Blackrock feel exactly

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Speaker 3: the way he does. So as an asset manager, you're

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Speaker 3: almost like a president, where you're always going to piss

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Speaker 3: off like half the people.

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Speaker 2: And so I think that's what happened.

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Speaker 3: He didn't realize this was completely political to a lot

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Speaker 3: of people, and he kind of stepped into that political realm,

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Speaker 3: which asset managers are not used to doing. And I

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Speaker 3: think it was a little too much. I think they

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Speaker 3: got some pensions and institutional investors down South pulled money out,

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Speaker 3: and I think that's when it started to become like

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Speaker 3: real and they took a few steps back, only to

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Speaker 3: get hit harder from the left. And I think they

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Speaker 3: get hit from both sides regularly and you can't win.

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Speaker 3: And so Vanguard is really I think probably set the

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Speaker 3: better model of just day and the hell out of that.

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Speaker 3: And they're out in Malvern, so protesters can't go there

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Speaker 3: because the schoogle's a pain to get to. But Black

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Speaker 3: Rock gets protesters at their office all the time, although

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Speaker 3: now they move to Chelsea Peers where it's much harder

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Speaker 3: to get to, so probably less. It's not it's such all,

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Speaker 3: but yeah, but if you're like a I don't know,

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Speaker 3: twenty four year old protester, you probably it's it's just

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Speaker 3: not some like fifty second Street's right off the subway.

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Speaker 3: You get out protests and you can make like your

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Speaker 3: sushi dinner or whatever. But going to Chelsea Peers that's

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Speaker 3: a pain. That's a whole day activity. Go into vout Malvern,

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Speaker 3: that's like a I mean, they might not even make it.

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Speaker 6: You can you can do some bowling afterwards.

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Speaker 3: Though, let's be that's true. It's a good place to go.

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Speaker 3: I like it out there, just say it's it's not easy.

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Speaker 3: It's like five long blocks.

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Speaker 1: Okay, stream, what's the future of ESG having had this

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Speaker 1: thing happen the cultural war? Is there an investing pisis

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Speaker 1: there that works and that we're gonna hear more of

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Speaker 1: Because ultimately this comes down to data. And if people

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Speaker 1: look in the data and find stuff they value, aren't

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Speaker 1: they going to double down? Yeah?

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Speaker 4: So I think what I'm hearing right now at least,

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Speaker 4: and I'll speak to the short term view first, and

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Speaker 4: the US is people are continuing to do what they do,

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Speaker 4: but they're not expressing it as loudly as they were.

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Speaker 4: That's what I'm hearing from massive managers. Europe is a

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Speaker 4: whole different ballgame. People continue to do what they do,

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Speaker 4: they're probably expressing it even more. So That's that's sort

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Speaker 4: of the short term view. I think the long term

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Speaker 4: view really depends on this political pushback.

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Speaker 3: I got to jump in this whole. Everybody always brings

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Speaker 3: up Europe. Okay, we got to address the europe issues.

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Speaker 1: You know, your Erican thoughts.

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Speaker 2: Yeah, I always hear this.

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Speaker 3: They're like, oh yeah, it's kind of petered out in

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Speaker 3: the US, but Europe they love it, you know, and

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Speaker 3: I agree two things on Europe though. A when you

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Speaker 3: invest in a fund in Europe and they carve out

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Speaker 3: a stock or two, it's less dangerous because here in

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Speaker 3: the US we have so much innovation and you can't

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Speaker 3: miss out on a Tesla or an Amazon, or your

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Speaker 3: returns are going to be a lot lower. There are

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Speaker 3: no companies like that over in Europe. Pretty much, it's

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Speaker 3: less dangerous to do it. Second, there's a lot of

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Speaker 3: people who has the retirement already covered, so they don't really.

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Speaker 2: Care that much about their end results.

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Speaker 3: Yeah it's here, We're like, we don't think so securities

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Speaker 3: can be there, so our retirement is major. So at

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Speaker 3: the end of the day, I think returns will trump

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Speaker 3: that whole ESG thing for ninety five percent of people.

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Speaker 4: So I think the reason why Europe is doubling down

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Speaker 4: is actually because of its pension funds. Right, Like you

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Speaker 4: may say like they don't miss out on things and

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Speaker 4: all that stuff, but their pension funds have been doing

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Speaker 4: it for a long time and they just shove it

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Speaker 4: down people's throats whether they like it or not, and

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Speaker 4: just one point on the return. So you know, even

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Speaker 4: if Blackrock pulled the SEO out because of performance. Even

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Speaker 4: if right, it's not like an ESG ETF world by

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Speaker 4: seeing mass outflows from other funds. It's a very concentrated outflow,

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Speaker 4: so it's not like there's a mass uprising. I think

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Speaker 4: that's that's my point.

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Speaker 1: I'll give you it's one example.

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Speaker 2: The flows are out of ESGU, which is good news

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Speaker 2: for you.

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Speaker 3: But when the media jumped on this train two years ago,

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Speaker 3: most of the inflows for ESGU correct.

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Speaker 1: So that's a separate problem orchestrated all this, to be honest.

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Speaker 4: That's a separate problem of concentration risk, which I know

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Speaker 4: you've mentioned before. So positive flows have slowed, but it's

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Speaker 4: not like negative flows are increasing at a pace that

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Speaker 4: signals some kind of exodus.

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Speaker 3: I just said that, but the shoving it down your throat,

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Speaker 3: I agree. That's why I think Europe and US are different,

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Speaker 3: and US is more of a meritocracy, consumer oriented market,

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Speaker 3: and I think more of a natural place to judge

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Speaker 3: if ESG sentiment is real versus a pension who has

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Speaker 3: to do because the government. I feel like I was

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Speaker 3: at an SEC conference in DCA, which I went over

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Speaker 3: two months ago, and a Virginia professor said something very interesting.

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Speaker 3: She said, the demand for change, especially on climate is

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Speaker 3: is so big that the supply of regulation is so small,

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Speaker 3: and so that demand just is finding wants to be

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Speaker 3: satisfied somewhere, and so it should be satisfied on the

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Speaker 3: regulatory front, but it's not. So it goes to the

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Speaker 3: asset management world, where you could argue this is not

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Speaker 3: the right place for it, whereas the regulatory front is

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Speaker 3: the way to move forward on many of these issues. So,

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Speaker 3: in other words, regulation in the US that tells you

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Speaker 3: how much you can pollute or emissions and a lot

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Speaker 3: of harder standards is the way to solve this problem.

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Speaker 3: Not oh, I own a little less Exxon than the

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Speaker 3: S and P. I'm going to change the world.

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Speaker 5: Yeah, now that's an interesting question. I think certainly there's

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Speaker 5: a lot more politics in it in the States, whereas

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Speaker 5: in Europe kind of most of the continent is on

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Speaker 5: board with the fact that climate change is an issue

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Speaker 5: that needs a whole of government approach, and that includes

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Speaker 5: both regulating energy policy as well as regulating the funds industry.

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Speaker 6: But in the States it's a bit more.

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Speaker 5: There's a lot more of a lively debate on what

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Speaker 5: can be done Interestingly enough, plug here, we did have

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Speaker 5: the co head of the Congressional Sustainable Investing Caucus on

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Speaker 5: our podcast ESG Currents who discussed this very issue, and

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Speaker 5: basically it was that there's a lot of it's a

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Speaker 5: lot more difficult to get, particularly in our divide of Congress,

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Speaker 5: to get the sticks in there than it is the carrot.

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Speaker 5: So that's why you saw legislation like the Inflation Reduction

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Speaker 5: Act which really incentivize going green and carbon reduction policies.

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Speaker 5: But again, I would say part of what's behind ESG

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Speaker 5: investing is to take advantage of that to find the

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Speaker 5: businesses that will make money in the long term in

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Speaker 5: a world. So I'm not disagreeing with you that you know,

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Speaker 5: it really takes government action to do most of the change,

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Speaker 5: But I would say that as an investor, you kind

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Speaker 5: of want to pay attention to these government actions and see,

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Speaker 5: you know, how how can I make money off of this?

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Speaker 4: I think I would agree. So, Eric, your point is

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Speaker 4: that they should fall on the regulators to push it

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Speaker 4: through and not asset managers in a way.

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Speaker 3: And really speaking, yes, I feel like your role as

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Speaker 3: a voter and as a consumer are way stronger in

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Speaker 3: this climate issue than whether you sell s and P

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Speaker 3: five hundred and buy something that has almost the same

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Speaker 3: stocks but like one percent x on instead of two percent, right,

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Speaker 3: So that just seems so pointless to me.

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Speaker 4: So I would say that you know, there are facets

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Speaker 4: of climate change that don't wait for regulation, right, Like

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Speaker 4: say you have physical risk of a mind has a

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Speaker 4: risk of flooding, like that is not in fact by

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Speaker 4: regulation if regulators come, and what are they gonna ask

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Speaker 4: acid managers to incorporate? So I think that that is where,

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Speaker 4: like Rob said, people are seeking opportunities, are trying to

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Speaker 4: mitigate risk using these things like floods don't wait for regulation.

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Speaker 5: So I think also behind your question is really one

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Speaker 5: of the biggest issues getting to the heart of this

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Speaker 5: debate is that ESG is not one single strategy. There's

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Speaker 5: kind of two different phases of it. As I like

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Speaker 5: to call three three, there actually are three. So one

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Speaker 5: is an inclusion which is the.

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Speaker 6: Church not the.

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Speaker 1: Like it.

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Speaker 2: There are three are three SG one two three.

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Speaker 5: But there's also three types of strategy. There's the exclusionary strategy,

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Speaker 5: which is really where sustainable investing started from the old

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Speaker 5: church pension funds. It said don't invest in gambling, don't

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Speaker 5: invest in tobacco, et cetera. And then you have what's

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Speaker 5: called ESG impact, which is, you know, let's invest in Tesla,

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Speaker 5: let's really divest from Exxon to drive capital. And then

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Speaker 5: there's really the heart of what we consider ESG integration,

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Speaker 5: which is not so much how how am I going

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Speaker 5: to change the world with my investments, but the world's changing.

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Speaker 5: How can I shape my investment investments to to benefit.

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Speaker 1: All of that?

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Speaker 6: So those are really two different things.

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Speaker 2: One let me come back to you on that.

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Speaker 3: So this idea of like, oh, I have the S

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Speaker 3: and P five hundred, but I don't want to miss

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Speaker 3: out on regulation that could hurt some companies or something

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Speaker 3: that could benefit But that's sort of the point of

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Speaker 3: an index fund, right, active will sort that out. Active

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Speaker 3: managers will and I always said ESG data here to

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Speaker 3: stay Active management using ESG data here to stay active

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Speaker 3: will be like, well, this company is a massive risk

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Speaker 3: with this new regulation. They'll sell it, the price will

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Speaker 3: go down, and it will fall as a waiting in

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Speaker 3: the SMP. My point is, as an index fund investor,

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Speaker 3: I'm kind of getting that ESG injection. If active deems

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Speaker 3: it the thing to do, and I think that's sort

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Speaker 3: of why it's difficult for esgtfs to dislodge. The core

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Speaker 3: is a the core is cheaper, and most passive investors,

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Speaker 3: I think, understand that you're getting active's. Active is driving

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Speaker 3: the car you're following, and ESG decisions will go into

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Speaker 3: active management's decisions, and so a company that has a

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Speaker 3: huge risk will probably get trickled down and get kicked

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Speaker 3: out of the SMP at some point.

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Speaker 4: I would agree with that in a way. It's I

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Speaker 4: do think passive the word of bass when it comes

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Speaker 4: to ESG. You know things like lowcubin where it's like

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Speaker 4: a very index base you just take out the highest carbon.

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Speaker 4: Emto is that it's a little easier. But when it

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Speaker 4: comes to these complicated things, I agree.

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Speaker 3: You just talked about a company like the Exxon, and

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Speaker 3: I would call those suppliers of things that are bad

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Speaker 3: or whatever. But what about the user? So I look

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Speaker 3: at a company like Apple. It's in like every ESG ETF.

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Speaker 3: But we all know Apple has the phones made in

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Speaker 3: China and then all those parts and the phones get

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Speaker 3: shipped all over the world. I mean, they have to

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Speaker 3: be one of the biggest users or consumers of what

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Speaker 3: Exon makes, yet they're in the fund. In fact, you

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Speaker 3: start looking at the whole SMP, the whole thing runs

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Speaker 3: on fossil fuels. Like, I just feel like the demand

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Speaker 3: the supply side these oil companies kind of get a

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Speaker 3: bad rap. It's almost like the movie Traffic where you're

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Speaker 3: just blaming the people running the drugs in for Mexico,

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Speaker 3: but like the kid's daughter is using them, she's in

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Speaker 3: the demand side, and it's like, well, hey, why don't

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Speaker 3: we focus on the demand and the supply should take

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Speaker 3: care of itself.

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Speaker 1: Just fact check apple huge commitment to renewables.

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Speaker 4: By the way, so al add that Apple is in

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Speaker 4: many ESG funds, but is on average underweight in all

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Speaker 4: these ESG funds, at least in the ones you've analyzed. Sorry,

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Speaker 4: would not answering your question.

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Speaker 5: I would I would wait in here, You're you're talking

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Speaker 5: about kind of to geek out here. Something that's called

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Speaker 5: scope one versus scope two versus scope three. Emission Scope

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Speaker 5: one is basically you know everything you burn from the

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Speaker 5: engine in your car. Scope two is basically what you're

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Speaker 5: outsourcing to the public utility. So the emissions from the

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Speaker 5: power plant. And then scope three is every product I

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Speaker 5: make or every supplier, what's their emission, so up and

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Speaker 5: down the supply chain. So you're really talking about Apple

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Speaker 5: scope three or sorry, Exxon scope three emissions are being Apple.

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Speaker 5: And I don't disagree with you that there is a

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Speaker 5: lot of emphasis on getting Apple to cut or Exxon.

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Speaker 5: I keep mixing the two up, getting Exxon to cut

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Speaker 5: their Scope three emissions, when really a lot more responsibility

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Speaker 5: should probably fall on the consumers to reduce their missions

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Speaker 5: by investing, as Joel said, in renewables, or maybe reducing

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Speaker 5: the plastic content everyone buying a Tesla, things like that.

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Speaker 5: So that said, there are certain things that Exon can control.

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Speaker 5: They can make you know the Exon I used to

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Speaker 5: cover Exon as in equity analysts. You know, they do

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Speaker 5: have a very large chemicals business. They can innovate, they

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Speaker 5: can make the same fuel with less emissions. So it's

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Speaker 5: kind of a mix of both that Exon can do.

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Speaker 1: Okay, I want to just bring these back to companies.

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Speaker 1: There are a couple companies that have come up already

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Speaker 1: and we should just like talk about how they fit

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Speaker 1: into the ESG puzzle. I think let's start with Tesla

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Speaker 1: is Tesla ESG.

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Speaker 3: Ooh, if you want to make I already see the

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Speaker 3: smoke come out of their ears. I was go say,

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Speaker 3: if you want to make smoke come out of an

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Speaker 3: ESG analyst years, ask them that question, and you.

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Speaker 1: Guys, I just did it.

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Speaker 2: They're like, oh, it's like looking at the devil name.

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Speaker 1: Why is it right? Well, environmental obviously is electric, so

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Speaker 1: reduces Okay, you don't know, No, no, I do know.

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Speaker 3: I have I have a.

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Speaker 6: Role.

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Speaker 1: But on the also, like you know, on the S

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Speaker 1: and the G side, let's talk about those things.

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Speaker 4: So I would say Tesla because if its governance issues,

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Speaker 4: which ROUB can talk to more social I don't think

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Speaker 4: it fits in an ESG fund. I think it maybe

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Speaker 4: fits more into like an impact or an environmental theme. Eric,

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Speaker 4: you put this really well. A company's products don't make

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Speaker 4: you ESG right that way. I can say every clean

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Speaker 4: energy stock is an ESG stock, but I would I'd

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Speaker 4: have to say it has to fit the theme and

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Speaker 4: not a huge point.

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Speaker 3: And where ESG analysts like you guys. I will always

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Speaker 3: tell you, guys, you got to get out and educate,

433
00:21:44,920 --> 00:21:47,520
Speaker 3: because most people do. You just think of Tesla and

434
00:21:47,560 --> 00:21:51,440
Speaker 3: they think clean energy evs, or they think pepsi and

435
00:21:51,440 --> 00:21:53,639
Speaker 3: they think sugary drinks bad. But pepsi is in a

436
00:21:53,680 --> 00:21:56,679
Speaker 3: lot of ESG funds. What they make has nothing to

437
00:21:56,680 --> 00:21:58,600
Speaker 3: do with the ESG scores. In other words, a company

438
00:21:58,600 --> 00:22:01,600
Speaker 3: could cure cancer with a pill, but yet they had

439
00:22:01,640 --> 00:22:03,800
Speaker 3: they could be not in any ESGTF.

440
00:22:04,320 --> 00:22:06,479
Speaker 5: Yeah, and I've heard this a lot lately that you know,

441
00:22:07,119 --> 00:22:09,960
Speaker 5: with the war in Ukraine, people are saying, oh, well,

442
00:22:10,040 --> 00:22:13,640
Speaker 5: weapons manufacturers are now alsodden ESG, when that's not really true.

443
00:22:13,680 --> 00:22:16,280
Speaker 5: You can no one said they weren't ESG. You know,

444
00:22:16,320 --> 00:22:19,359
Speaker 5: there's certain steps they can take in their process that

445
00:22:19,440 --> 00:22:21,960
Speaker 5: make them better at ESG or worse than ESG. But

446
00:22:22,000 --> 00:22:25,880
Speaker 5: you can't just say all weapons manufacturers are not ESG, right,

447
00:22:25,960 --> 00:22:30,640
Speaker 5: just like you can't say all ev manufacturers are ESG.

448
00:22:30,720 --> 00:22:33,400
Speaker 5: It's it's really more about process than it is outcomes.

449
00:22:33,400 --> 00:22:38,000
Speaker 5: So you know you're a Philly guy. I trust the process, right, nice?

450
00:22:38,040 --> 00:22:40,560
Speaker 2: Try No, that's right, Okay, I get it.

451
00:22:40,560 --> 00:22:42,800
Speaker 1: But Tesla on the government side, this button not up?

452
00:22:43,080 --> 00:22:45,359
Speaker 1: Why does it look a little suspect in that?

453
00:22:45,840 --> 00:22:48,760
Speaker 5: Well, you know you've seen anytime you have your CEO

454
00:22:49,160 --> 00:22:52,240
Speaker 5: tweeting on a public platform, thinking of taking the company

455
00:22:52,240 --> 00:22:55,399
Speaker 5: public or private at four twenty funding secured when it

456
00:22:55,440 --> 00:22:58,240
Speaker 5: is not in fact secure. That's really not good governance

457
00:22:58,280 --> 00:23:01,440
Speaker 5: when you have you know, your CEO kind of committing

458
00:23:01,480 --> 00:23:04,440
Speaker 5: what was basically a securities law violation.

459
00:23:05,240 --> 00:23:07,040
Speaker 6: Similarly, you know it was generated.

460
00:23:07,200 --> 00:23:09,560
Speaker 3: Well, hold on though, now, but how does that make

461
00:23:09,600 --> 00:23:10,320
Speaker 3: it into the data?

462
00:23:10,880 --> 00:23:12,480
Speaker 2: Like when you go in to G That was.

463
00:23:12,480 --> 00:23:15,480
Speaker 1: What I was gonna ask. Yeah, so it looks bad. Yeah,

464
00:23:15,520 --> 00:23:17,880
Speaker 1: like how do you as an analyst classify that? Well?

465
00:23:17,880 --> 00:23:21,440
Speaker 5: I think certainly finds data. There was a fine Ironically,

466
00:23:21,800 --> 00:23:23,399
Speaker 5: one of the things that the sec made him do

467
00:23:23,520 --> 00:23:26,200
Speaker 5: was step away from the CEO chair and so now

468
00:23:26,240 --> 00:23:29,359
Speaker 5: having a joint CEO or having a separate CEO and

469
00:23:29,440 --> 00:23:32,439
Speaker 5: chairman is actually positive for ESG. So there's some positive

470
00:23:32,440 --> 00:23:35,359
Speaker 5: outcomes from that, but there's other things. Relations on the board.

471
00:23:35,359 --> 00:23:38,080
Speaker 5: His brother's on the board. That's usually not common among

472
00:23:38,160 --> 00:23:43,480
Speaker 5: public companies. You know, basically, the data will show you

473
00:23:43,520 --> 00:23:46,760
Speaker 5: that Elon Musk as the CEO and chairman, has a

474
00:23:46,840 --> 00:23:48,840
Speaker 5: very large amount of power of control this company. You,

475
00:23:48,880 --> 00:23:51,480
Speaker 5: as a fundamental analyst, the need to say, all right,

476
00:23:52,119 --> 00:23:54,160
Speaker 5: what's he doing with this power? Is he a good leader.

477
00:23:54,240 --> 00:23:55,520
Speaker 5: Is he a bad leader? I mean, he's done a

478
00:23:55,560 --> 00:23:58,280
Speaker 5: lot of good things to you know, improve the value

479
00:23:58,280 --> 00:24:00,360
Speaker 5: of Tesla over the years, but then he also get

480
00:24:00,359 --> 00:24:03,120
Speaker 5: his foot in his mouth and you know, maybe being

481
00:24:03,160 --> 00:24:05,480
Speaker 5: on the board of four other companies or chairman of

482
00:24:05,520 --> 00:24:08,840
Speaker 5: four other companies, maybe that's pulling his attention away to

483
00:24:08,840 --> 00:24:12,760
Speaker 5: too many spots. So there's it's a mix of fundamental

484
00:24:12,880 --> 00:24:15,760
Speaker 5: and quantitative data you can use to determine you know, hey,

485
00:24:15,840 --> 00:24:17,280
Speaker 5: their governance is not great.

486
00:24:18,440 --> 00:24:20,480
Speaker 1: Eric, what's your next favorite company to talk about?

487
00:24:21,920 --> 00:24:22,320
Speaker 2: Easily?

488
00:24:22,320 --> 00:24:26,880
Speaker 3: Berkshire Hathaway, which is in none like ESG hates Warren Buffett.

489
00:24:27,080 --> 00:24:29,480
Speaker 3: And I think the reason that comes up. And by

490
00:24:29,480 --> 00:24:31,080
Speaker 3: the way, you guys are sports for dealing with all

491
00:24:31,119 --> 00:24:32,840
Speaker 3: my stuff here. And I remember when I wrote a

492
00:24:32,880 --> 00:24:36,240
Speaker 3: piece about this and Shaheen I worked with her for

493
00:24:36,280 --> 00:24:39,560
Speaker 3: so many years, and she puts up with me. The

494
00:24:39,600 --> 00:24:42,679
Speaker 3: piece was about Berkshire, and she was like, yeah, so

495
00:24:42,720 --> 00:24:44,240
Speaker 3: what he all these violations?

496
00:24:44,280 --> 00:24:44,840
Speaker 2: He's not in it.

497
00:24:44,880 --> 00:24:47,840
Speaker 3: But I'm like, Shaheen, to a normal person, I know

498
00:24:47,880 --> 00:24:50,800
Speaker 3: you're in the ESG world, but a normal person, this

499
00:24:50,840 --> 00:24:53,320
Speaker 3: is a shocker. Warren Buffett's going to donate more money

500
00:24:53,320 --> 00:24:56,040
Speaker 3: than any person probably in the history of the world,

501
00:24:56,680 --> 00:24:59,000
Speaker 3: and how many people is he going to help? And

502
00:24:59,080 --> 00:25:01,960
Speaker 3: Berkshire people don't necessarily think about. I know they have

503
00:25:02,000 --> 00:25:04,080
Speaker 3: a couple of coal plants, but what he gets dinged

504
00:25:04,119 --> 00:25:07,240
Speaker 3: on is not reporting. And also the board is like,

505
00:25:07,680 --> 00:25:10,320
Speaker 3: not independent, it's mostly Warren Buffett. But most people are like,

506
00:25:10,359 --> 00:25:12,560
Speaker 3: I'm happy to have Warren Buffett run that company. So

507
00:25:13,160 --> 00:25:15,960
Speaker 3: this is a shocker. And Warren Buffett the greatest active

508
00:25:15,960 --> 00:25:19,439
Speaker 3: manager probably ever to live, according to almost everybody, and

509
00:25:19,480 --> 00:25:22,719
Speaker 3: you're not getting his active management if you buy an ESGT. Again,

510
00:25:23,400 --> 00:25:26,960
Speaker 3: I think not having Exxon probably people get. But there's

511
00:25:27,040 --> 00:25:29,360
Speaker 3: shockers in there. And I think Berkshire is a great example.

512
00:25:29,520 --> 00:25:31,480
Speaker 5: I mean, going back to the prior example, I mean,

513
00:25:32,200 --> 00:25:34,960
Speaker 5: bad governance in and of itself shouldn't be a deal breaker.

514
00:25:35,040 --> 00:25:37,920
Speaker 5: It just should raise more red flag. So you're putting

515
00:25:38,000 --> 00:25:40,240
Speaker 5: an an order amount of trust in the leader of

516
00:25:40,280 --> 00:25:43,720
Speaker 5: this company. Now, do you trust Warren Buffett? Most people

517
00:25:43,720 --> 00:25:46,439
Speaker 5: would say yes. In terms of the disclosure, I think

518
00:25:46,480 --> 00:25:50,840
Speaker 5: it's definitely. You know, you can't manage what you can't measure,

519
00:25:50,880 --> 00:25:53,120
Speaker 5: and I think that's what throws some people off. Now

520
00:25:53,119 --> 00:25:54,920
Speaker 5: the excuse Berkshire always gives is that you know, we

521
00:25:54,960 --> 00:25:57,960
Speaker 5: own a lot of disparate businesses, so you know, we

522
00:25:58,040 --> 00:25:59,680
Speaker 5: want to let them do their own thing. We don't

523
00:25:59,680 --> 00:26:02,000
Speaker 5: want to have to then aggregate this into a company report.

524
00:26:02,280 --> 00:26:04,600
Speaker 5: But it does cause a lot of issues. So you know,

525
00:26:04,640 --> 00:26:06,760
Speaker 5: for example, if I were to ask you what do

526
00:26:07,920 --> 00:26:09,640
Speaker 5: most Berkshire I wouldn't call them employees.

527
00:26:09,680 --> 00:26:15,440
Speaker 6: Most Berkshire workers do. What's the biggest unit in terms

528
00:26:15,440 --> 00:26:21,920
Speaker 6: of number of workers by far at Berkshire Dairy Queen.

529
00:26:24,440 --> 00:26:26,200
Speaker 2: I would never have guessed that. That's a good question.

530
00:26:26,320 --> 00:26:29,520
Speaker 5: Yeah, And you know, if you look at Dairy Queen

531
00:26:29,560 --> 00:26:31,920
Speaker 5: from an employer, it's I mean, you think of Berkshire

532
00:26:31,920 --> 00:26:35,360
Speaker 5: Hathaway as this fancy name Warren Buffett, big money guy.

533
00:26:35,480 --> 00:26:38,280
Speaker 5: There's a lot of people working under the Berkshire Hathaway

534
00:26:38,280 --> 00:26:40,479
Speaker 5: and Bulla that are not really making a living wage.

535
00:26:40,560 --> 00:26:44,080
Speaker 5: So that's definitely something that's worth asking questions about. And

536
00:26:44,119 --> 00:26:45,760
Speaker 5: you can't really see that without the data.

537
00:26:45,840 --> 00:26:48,600
Speaker 3: See, I think you guys should go on an educational

538
00:26:48,640 --> 00:26:52,040
Speaker 3: tour or webinars and take one or two companies and

539
00:26:52,160 --> 00:26:55,520
Speaker 3: just explain why they are or not ESG. Here's the e,

540
00:26:55,720 --> 00:26:58,399
Speaker 3: here's the metrics, here's the s and the G. I

541
00:26:58,400 --> 00:27:00,440
Speaker 3: think it'd be wonderful. Most people don't any of.

542
00:27:00,400 --> 00:27:05,120
Speaker 1: This, Okay, So I asked about teslaing on Berkshire.

543
00:27:05,280 --> 00:27:10,000
Speaker 4: Yeah, so, Eric, your point on Berkshire and philanthropy. So

544
00:27:10,080 --> 00:27:12,959
Speaker 4: I mean I've told you this. I would separate philanthropy

545
00:27:13,040 --> 00:27:14,920
Speaker 4: and ESG. So I would ask you the question, does

546
00:27:15,640 --> 00:27:19,760
Speaker 4: one buffet's philanthropic nature? Do you think it impacts there

547
00:27:19,800 --> 00:27:22,280
Speaker 4: risen opportunities when evaluating Berkshire had Toway.

548
00:27:22,400 --> 00:27:25,280
Speaker 3: So this is where ESG is trying to make something

549
00:27:25,880 --> 00:27:29,360
Speaker 3: subjective objective. Most people have a subjective feeling about that.

550
00:27:29,480 --> 00:27:32,399
Speaker 3: Same with Elon Musk, and they would say, if his

551
00:27:32,560 --> 00:27:36,640
Speaker 3: evs will actually save the world, I'm willing to overlook

552
00:27:36,640 --> 00:27:39,320
Speaker 3: everything else because the e should be hyped up big time.

553
00:27:39,359 --> 00:27:40,879
Speaker 2: But that's in someone's brain.

554
00:27:41,080 --> 00:27:44,760
Speaker 3: You as a quantitative es J analyist, of course, the

555
00:27:44,800 --> 00:27:47,120
Speaker 3: answer is no, but it should be separated.

556
00:27:47,200 --> 00:27:50,080
Speaker 4: I'm trying to separate the impact on world thing like

557
00:27:50,119 --> 00:27:55,160
Speaker 4: if Berkshire's philanche Brey doesn't impact theresent opportunities of the company,

558
00:27:55,160 --> 00:27:57,639
Speaker 4: then I would say it shouldn't matter when considering it.

559
00:27:57,680 --> 00:27:59,080
Speaker 2: For you, I get your point.

560
00:27:59,160 --> 00:28:00,320
Speaker 4: I get your point, but this.

561
00:28:00,280 --> 00:28:01,560
Speaker 3: Is where you and I when we first had that

562
00:28:01,560 --> 00:28:04,920
Speaker 3: conversation like five years ago. I'm like the normal people,

563
00:28:05,359 --> 00:28:07,479
Speaker 3: they just have an image and what you guys are

564
00:28:07,480 --> 00:28:09,400
Speaker 3: trying to do is something that most of the times

565
00:28:09,480 --> 00:28:10,440
Speaker 3: differs from that image.

566
00:28:10,440 --> 00:28:11,920
Speaker 2: Therefore there's a educational gap.

567
00:28:12,160 --> 00:28:15,240
Speaker 5: Yeah, and I mean Tesla also is very consumer facing.

568
00:28:15,240 --> 00:28:17,240
Speaker 5: There's a lot of people that have been turned off

569
00:28:17,240 --> 00:28:19,800
Speaker 5: by Elin Musk's antics that say, I'll never buy a Tesla.

570
00:28:20,040 --> 00:28:21,840
Speaker 5: I'll wait to see what the other manufacturers have with

571
00:28:21,880 --> 00:28:24,520
Speaker 5: the EV. Now maybe they're just kidding themselves and they

572
00:28:24,600 --> 00:28:27,360
Speaker 5: don't really want a Tesla to begin with, but you're

573
00:28:27,400 --> 00:28:29,880
Speaker 5: hearing that more and more. Whereas something like Berkshire Hathaway

574
00:28:30,240 --> 00:28:32,080
Speaker 5: other than as I just mentioned, Dairy Queen, I don't

575
00:28:32,119 --> 00:28:35,360
Speaker 5: think anyone's walking into Dairy Queen thinking what's Warren Buffett doing?

576
00:28:35,400 --> 00:28:37,440
Speaker 5: And am I gonna buy my Blizzard.

577
00:28:37,040 --> 00:28:37,399
Speaker 6: Off of this?

578
00:28:37,600 --> 00:28:40,920
Speaker 5: But you know, it can have that feedback loop with

579
00:28:40,960 --> 00:28:43,480
Speaker 5: the consumer facing business where you do have someone who's

580
00:28:43,560 --> 00:28:46,360
Speaker 5: very big in philanthropy and who's known as either a

581
00:28:46,400 --> 00:28:48,560
Speaker 5: very good person or a very bad person, you know,

582
00:28:48,640 --> 00:28:50,440
Speaker 5: and that can impact a consumer's decision.

583
00:28:50,440 --> 00:28:51,000
Speaker 6: Absolutely.

584
00:28:59,200 --> 00:29:02,240
Speaker 3: This brings up another a huge problem with ESG funds

585
00:29:02,280 --> 00:29:05,920
Speaker 3: again not ESG concept. Maybe that context. There's the baby

586
00:29:06,000 --> 00:29:09,200
Speaker 3: and there's the bath water, right you know that phrase

587
00:29:09,640 --> 00:29:11,560
Speaker 3: I do. Don't throw the baby out with the bathwater.

588
00:29:12,240 --> 00:29:14,880
Speaker 3: A lot of times you have to throw them both

589
00:29:14,880 --> 00:29:17,080
Speaker 3: out together or keep them both in ESG. You can't

590
00:29:17,160 --> 00:29:19,360
Speaker 3: unbundle a stock. You can't keep the E for TESLA

591
00:29:19,360 --> 00:29:21,320
Speaker 3: and then throw out the S ANDNG And this is

592
00:29:21,400 --> 00:29:25,320
Speaker 3: again another unfortunate problem. If you could slice up the company,

593
00:29:25,360 --> 00:29:28,320
Speaker 3: I think ESG would be sharper and better, but you can't.

594
00:29:28,800 --> 00:29:31,160
Speaker 3: Same with PEPSI look what they make and they're in

595
00:29:31,160 --> 00:29:34,040
Speaker 3: like the S and PHT, SGTF, and most people is

596
00:29:34,080 --> 00:29:34,840
Speaker 3: just stunned by that.

597
00:29:35,360 --> 00:29:39,000
Speaker 1: Okay, for you two in the ESG space, blow our

598
00:29:39,040 --> 00:29:43,080
Speaker 1: minds with an ESG inside about a different company that

599
00:29:43,120 --> 00:29:44,160
Speaker 1: we haven't talked about yet.

600
00:29:44,880 --> 00:29:48,120
Speaker 4: I can go. So I covered the resource intensive sector

601
00:29:48,400 --> 00:29:53,040
Speaker 4: sectors AGI says, thinks, steal cement, et cetera. And most

602
00:29:53,080 --> 00:29:55,600
Speaker 4: of these just get excluded from ESG funds just because

603
00:29:55,640 --> 00:30:00,920
Speaker 4: they carbon intensive. So I like companies like as I say,

604
00:30:00,920 --> 00:30:03,560
Speaker 4: B there is steel manufacturer based in Europe and they

605
00:30:03,600 --> 00:30:06,560
Speaker 4: have one of the most ambitious carbon reduction goals and

606
00:30:06,680 --> 00:30:09,120
Speaker 4: I think the cost angle comes in with the EU

607
00:30:09,200 --> 00:30:12,080
Speaker 4: emission shading scheme, which is the carbon markets, which actually

608
00:30:12,160 --> 00:30:14,760
Speaker 4: puts a cost in a company. So I think that

609
00:30:14,960 --> 00:30:19,560
Speaker 4: dynamic of carbon costs versus how much you mitigate is interesting.

610
00:30:20,720 --> 00:30:23,480
Speaker 5: I have one that will kind of blow your mind

611
00:30:23,560 --> 00:30:26,840
Speaker 5: in that it's considered very It's considered favorably by some

612
00:30:27,200 --> 00:30:29,720
Speaker 5: ISG raiders, but for the wrong reasons. I would say

613
00:30:29,880 --> 00:30:34,240
Speaker 5: British American tobacco is always considered among UK stocks. It's

614
00:30:34,400 --> 00:30:37,000
Speaker 5: very highly rated on ISG. But part of that is

615
00:30:37,600 --> 00:30:40,400
Speaker 5: because they're shoehorning it. They're not, as you say, slicing

616
00:30:40,480 --> 00:30:42,240
Speaker 5: up the E from the S and the G. They're

617
00:30:42,280 --> 00:30:45,120
Speaker 5: trying to shoehorn it, which in my opinion is ESG

618
00:30:45,280 --> 00:30:48,160
Speaker 5: not done right, and that trying to look at an environment.

619
00:30:48,200 --> 00:30:50,720
Speaker 5: I mean, they're an agricultural company, right, they're growing tobacco.

620
00:30:51,120 --> 00:30:53,280
Speaker 5: They take very good care of the land, but that's

621
00:30:53,480 --> 00:30:55,480
Speaker 5: not really where the risk comes from. Like, no one's

622
00:30:55,520 --> 00:30:57,959
Speaker 5: going to say, oh no, what is grown tobacco going

623
00:30:58,000 --> 00:31:00,040
Speaker 5: to do for all this land? They're looking at what

624
00:31:00,040 --> 00:31:02,680
Speaker 5: are the social risks of British American tobacco. So when

625
00:31:02,680 --> 00:31:06,320
Speaker 5: it's not done right, you'll definitely see some surprises. You

626
00:31:06,400 --> 00:31:08,280
Speaker 5: really need to focus on kind of what are the

627
00:31:08,280 --> 00:31:12,760
Speaker 5: most material risks. You know, just like any stock, you know,

628
00:31:12,840 --> 00:31:15,520
Speaker 5: they have their pros and their cons, but what's really

629
00:31:15,560 --> 00:31:18,320
Speaker 5: going to move the needle incrementally?

630
00:31:18,960 --> 00:31:23,600
Speaker 3: And do you think the acronym ESG should go away

631
00:31:23,720 --> 00:31:27,120
Speaker 3: and you start to unbundle it slowly over time, or

632
00:31:27,360 --> 00:31:29,400
Speaker 3: do you want to dig in and fight for ESG

633
00:31:29,640 --> 00:31:32,000
Speaker 3: the acronym because obviously, again Larry Fink hasn't uttered the

634
00:31:32,040 --> 00:31:35,120
Speaker 3: phrase in like a year and a lot of the

635
00:31:35,120 --> 00:31:37,840
Speaker 3: there was one ETF that a pension fund was in

636
00:31:38,320 --> 00:31:40,560
Speaker 3: where the one that said ESG they sold and they

637
00:31:40,560 --> 00:31:43,760
Speaker 3: bought the one called Climate Transition. And again we haven't

638
00:31:43,760 --> 00:31:46,400
Speaker 3: seen an ESG in the name ETF filed or launched

639
00:31:46,440 --> 00:31:49,320
Speaker 3: in a long time. It feels as though the industry

640
00:31:49,360 --> 00:31:51,120
Speaker 3: is trying to phase out of the phrase, even if

641
00:31:51,160 --> 00:31:53,959
Speaker 3: they are trying to provide some investment opportunities. Are you

642
00:31:54,040 --> 00:31:56,200
Speaker 3: guys personally, do you think you should dig in and

643
00:31:56,240 --> 00:31:58,920
Speaker 3: fight for ESG and defend it or move on and

644
00:31:58,920 --> 00:32:01,080
Speaker 3: try to think of a new term or just not

645
00:32:01,160 --> 00:32:03,120
Speaker 3: even a term at all.

646
00:32:03,640 --> 00:32:05,400
Speaker 5: I dig in and fight for it because I think

647
00:32:05,440 --> 00:32:10,280
Speaker 5: it does. It does kind of highlight the data. There's environmental, social,

648
00:32:10,280 --> 00:32:12,880
Speaker 5: and governance data, whereas I think other names that's gone

649
00:32:12,880 --> 00:32:18,160
Speaker 5: by over history, socially responsible investing, corporate responsibility. You know,

650
00:32:18,760 --> 00:32:21,560
Speaker 5: nothing gets me more worked up than when I read

651
00:32:21,600 --> 00:32:24,920
Speaker 5: even Bloomberg stories that just conflate ESG with do good

652
00:32:24,920 --> 00:32:30,040
Speaker 5: investing or you know, philanthropy with ESG. Right, I think

653
00:32:30,120 --> 00:32:32,280
Speaker 5: it should be data driven and it needs to be

654
00:32:32,320 --> 00:32:36,000
Speaker 5: refocused on that. I think the problem is that it's

655
00:32:36,120 --> 00:32:39,280
Speaker 5: very Also having the three acronyms in this day and

656
00:32:39,320 --> 00:32:42,080
Speaker 5: age has been very easy to politicize, right, The three

657
00:32:42,160 --> 00:32:45,040
Speaker 5: letters just it's very easy to pick on, and I

658
00:32:45,040 --> 00:32:46,640
Speaker 5: think we need to move away from that and maybe

659
00:32:46,640 --> 00:32:49,280
Speaker 5: focus on the data. But I don't think any other

660
00:32:49,360 --> 00:32:52,560
Speaker 5: choices sustainable investing are as helpful.

661
00:32:53,960 --> 00:32:57,360
Speaker 4: Would I would agree. I think ESG is sort of

662
00:32:57,400 --> 00:33:02,360
Speaker 4: the non financial indicator world environmental social incovenance. And I

663
00:33:02,360 --> 00:33:04,479
Speaker 4: have to say, if you want to unbundle it, unbundled it,

664
00:33:04,520 --> 00:33:06,600
Speaker 4: call yourself any fund, a nice fun of chief fund.

665
00:33:06,600 --> 00:33:08,320
Speaker 4: If you want to focus on all three together, called

666
00:33:08,360 --> 00:33:11,720
Speaker 4: yoursephony SG fund. I find all this argument about terminology

667
00:33:11,840 --> 00:33:13,000
Speaker 4: just a waste of people's time.

668
00:33:13,400 --> 00:33:17,400
Speaker 3: Okay, looking forward the inflection point, here's my theory on

669
00:33:17,440 --> 00:33:18,160
Speaker 3: what's going to happen.

670
00:33:19,000 --> 00:33:23,680
Speaker 2: You guys can basically both time in ESG. The phrase

671
00:33:23,720 --> 00:33:27,080
Speaker 2: will slowly get phased out and it won't be uttered

672
00:33:27,120 --> 00:33:27,520
Speaker 2: as much.

673
00:33:28,240 --> 00:33:29,560
Speaker 3: And what people are going to do is they're going

674
00:33:29,560 --> 00:33:31,640
Speaker 3: to keep their SMP five hundred ETF in the core.

675
00:33:32,120 --> 00:33:34,840
Speaker 3: They're not selling it for an exclusionary ESG fund. But

676
00:33:34,880 --> 00:33:37,320
Speaker 3: what they are going to look to do is pepperon

677
00:33:38,240 --> 00:33:40,240
Speaker 3: something like a clean energy ETF or a solar stock

678
00:33:40,280 --> 00:33:43,040
Speaker 3: ETF or uranium minors. I call it hot sauce, but

679
00:33:43,160 --> 00:33:47,239
Speaker 3: it's a thematic play. It's thematic ESG. That way, you're

680
00:33:47,280 --> 00:33:49,040
Speaker 3: getting a bunch of stocks that aren't connected to your

681
00:33:49,080 --> 00:33:51,360
Speaker 3: S and P. You don't have to sell your cheap SMP,

682
00:33:52,040 --> 00:33:54,080
Speaker 3: and you can give money to the stocks that are

683
00:33:54,080 --> 00:33:57,320
Speaker 3: actually moving forward in this regard as opposed to penalizing

684
00:33:57,360 --> 00:34:01,640
Speaker 3: stocks that you probably are a customer of. And there's

685
00:34:01,640 --> 00:34:04,320
Speaker 3: all kinds of inconsistencies. It feels like we're going to

686
00:34:04,360 --> 00:34:06,480
Speaker 3: move to that world where ESG is is more part

687
00:34:06,520 --> 00:34:09,080
Speaker 3: of the hot sauce bucket than of the core thoughts.

688
00:34:10,480 --> 00:34:12,160
Speaker 4: I think people are going to do both. I mean

689
00:34:12,680 --> 00:34:16,160
Speaker 4: ESG being part of hot source is more than traumatics, right, climate, gender,

690
00:34:16,200 --> 00:34:19,719
Speaker 4: et cetera. I see people doing both. I think they're

691
00:34:19,719 --> 00:34:22,040
Speaker 4: going to keep doing both. For example, see a foundation

692
00:34:22,160 --> 00:34:25,439
Speaker 4: as one hundred percent sustainable investment objective across this board

693
00:34:25,480 --> 00:34:28,000
Speaker 4: for you, it really doesn't have a choice to hold code, right,

694
00:34:28,360 --> 00:34:33,200
Speaker 4: So I think depending on what your investor focuses, it depends.

695
00:34:33,640 --> 00:34:36,000
Speaker 5: And I would agree, I do think that kind of

696
00:34:36,080 --> 00:34:37,319
Speaker 5: one of the things we need to see is an

697
00:34:37,719 --> 00:34:39,920
Speaker 5: adjustment for the fee structure.

698
00:34:39,960 --> 00:34:40,080
Speaker 4: Right.

699
00:34:40,080 --> 00:34:41,600
Speaker 5: You guys talk about the rights of the bottom all

700
00:34:41,600 --> 00:34:44,200
Speaker 5: the time. There's a lot of ESG funds out there

701
00:34:44,200 --> 00:34:46,960
Speaker 5: that are let's call them ESG light or kind of

702
00:34:47,000 --> 00:34:50,720
Speaker 5: just make small tweaks but charge a much higher management fee.

703
00:34:51,160 --> 00:34:53,279
Speaker 5: If there's an actual mark to market of that where

704
00:34:53,360 --> 00:34:56,160
Speaker 5: you know it's a small ESG tweak and maybe you

705
00:34:56,160 --> 00:34:58,719
Speaker 5: know it'll add one basis point if that to that

706
00:34:58,920 --> 00:35:01,680
Speaker 5: or it'll just be a standard US to business. You know,

707
00:35:01,760 --> 00:35:03,920
Speaker 5: that's what how ESG can re enter the core and

708
00:35:03,960 --> 00:35:06,719
Speaker 5: that'll be normal. It's just you know, it's not worth

709
00:35:06,719 --> 00:35:08,880
Speaker 5: it anymore to have a higher feed fund that's not

710
00:35:08,920 --> 00:35:12,560
Speaker 5: really doing much for you, either performance wise or ESGIs of.

711
00:35:12,480 --> 00:35:14,799
Speaker 1: Course, if you're interested in any of this, please check

712
00:35:14,800 --> 00:35:18,840
Speaker 1: out ESG Currents. Rob Saheen thanks for joining us on Trillions.

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00:35:19,600 --> 00:35:20,480
Speaker 4: Thank you, thank you.

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00:35:24,760 --> 00:35:27,759
Speaker 1: Thanks for listening to Trillions until next time. You can

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00:35:27,760 --> 00:35:32,640
Speaker 1: find us on the Bloomberg Terminal, Bloomberg dot com, Apple Podcasts, Spotify,

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00:35:33,239 --> 00:35:35,680
Speaker 1: or wherever else you'd like to listen. We'd love to

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00:35:35,719 --> 00:35:39,080
Speaker 1: hear from you. We're on Twitter. I'm at Joel Webber Show.

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00:35:39,480 --> 00:35:44,120
Speaker 1: He's at Eric Baulchuna's. This episode of Trillions was produced

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00:35:44,120 --> 00:35:52,960
Speaker 1: by Magnets Hendrickson. Bye