WEBVTT - David vs Goliath: Inside Engine No. 1's Activist ETF 0:00:05.880 --> 0:00:08.440 Welcome Trillions. I'm Joel Webber and I am America. I'll 0:00:08.520 --> 0:00:16.120 run us Eric. There is this thing that happened in 0:00:16.280 --> 0:00:20.920 late May that if you're a business journalist, UM you 0:00:20.960 --> 0:00:25.680 immediately sat up and this was the results of UM 0:00:25.680 --> 0:00:30.560 an Exxon board meeting, and out of nowhere, something called 0:00:30.680 --> 0:00:34.880 Engine number one showed up and basically all of Corporate 0:00:34.920 --> 0:00:39.159 America took notice and ended up getting three board seats 0:00:39.720 --> 0:00:42.760 on x On Mobile. And it speaks to a lot 0:00:42.800 --> 0:00:45.960 of things, and we're we're thrilled about this, but a 0:00:46.000 --> 0:00:48.440 couple of the folks at Engine number one are going 0:00:48.479 --> 0:00:50.920 to join us today on trillions. What stood out to 0:00:51.000 --> 0:00:54.120 you about that moment, because it was not just about 0:00:54.520 --> 0:00:58.080 what an activist can accomplish with board seats. A couple 0:00:58.080 --> 0:01:00.520 of things. First, it's a small company who got bigger 0:01:00.560 --> 0:01:04.560 players to act. And I've always really looked at Vanguard 0:01:04.560 --> 0:01:06.399 and black Rock and some of the institution owners of 0:01:06.600 --> 0:01:08.400 having quite a bit of power. This is one of 0:01:08.440 --> 0:01:11.600 the issues we hear from from uh, you know, people 0:01:12.360 --> 0:01:15.120 about how big passive is getting and their voting power. 0:01:15.760 --> 0:01:17.280 At the same time, you've got E S, G, E 0:01:17.319 --> 0:01:20.399 T F S coming out, which essentially score stocks and 0:01:20.400 --> 0:01:23.400 then exclude maybe some of the energy stocks. I've always 0:01:23.400 --> 0:01:25.720 struggled with those. Why wouldn't you want to own the 0:01:25.760 --> 0:01:28.320 people you want to help? So I looked at this 0:01:28.400 --> 0:01:30.039 and I was like, this makes a lot of sense 0:01:30.080 --> 0:01:32.800 to me that, you know, voting and owning the shares 0:01:32.880 --> 0:01:35.480 is how you can really impact things as opposed to 0:01:35.520 --> 0:01:39.080 just not owning Exxon. Let's work with them, And so 0:01:39.319 --> 0:01:41.280 I was immediately took notice. Then they filed for an 0:01:41.280 --> 0:01:43.480 e t F and I was like, wow, this is 0:01:43.520 --> 0:01:46.880 this is interesting and it's it's a really simple et F. 0:01:46.920 --> 0:01:52.160 It's the five biggest stocks. And what I also found, uh, 0:01:52.200 --> 0:01:55.240 really intriguing was the expense ratios point oh five percent, 0:01:55.360 --> 0:01:58.360 So it's got a Vanguardian price tag and the tickers 0:01:58.400 --> 0:02:01.160 good vote, so it's got a lot of things going 0:02:01.200 --> 0:02:03.080 for it, and I think it could redefine E s 0:02:03.120 --> 0:02:05.280 G investing. You know, if your goal is to have 0:02:05.280 --> 0:02:08.320 an impact, it just seems like this, this activist type 0:02:08.320 --> 0:02:10.880 ETF would be the way to do it versus a 0:02:11.120 --> 0:02:13.519 just not owning a couple of energy stocks. So the 0:02:13.600 --> 0:02:17.359 name of that et F engine number one transformed FIVETF 0:02:17.360 --> 0:02:21.120 with the ticker vote joining us today from Engine number one, 0:02:21.240 --> 0:02:26.200 Charlie Penner and Yasmin die Bilger also joining us um 0:02:26.240 --> 0:02:31.240 from Bloomberg Intelligence ESG analysts robbed Boff and at Bloomberg News. 0:02:31.240 --> 0:02:34.840 On s G reporter Sagel Kashan So one big happy 0:02:34.880 --> 0:02:38.399 family joining us for this very very important interview, which 0:02:38.400 --> 0:02:41.760 I think of is almost the ultimate David and Goliath story, 0:02:44.240 --> 0:02:52.600 this time on Trilliance Engine number one. Charlie, Jasmine, Rob Sagel, 0:02:52.639 --> 0:02:57.880 Welcome to trillions. Thank you so so Charlie. It's almost 0:02:57.960 --> 0:03:02.200 like you were flying in delp mode um and all 0:03:02.280 --> 0:03:05.320 of a sudden you shook corporate America in a really 0:03:05.360 --> 0:03:08.600 big way. You had a point zero two percent steak 0:03:09.200 --> 0:03:12.799 in x on mobile, no history of activism in oil 0:03:12.880 --> 0:03:15.200 or natural gas, and all of a sudden you had 0:03:15.200 --> 0:03:18.400 scored three board seats, which was a quarter of of 0:03:18.400 --> 0:03:21.399 of what was available. And you know, not long ago, 0:03:21.400 --> 0:03:24.640 Exxon was the world's most valuable company. So just tell me, 0:03:25.040 --> 0:03:27.160 how did you come out out of nowhere here? How 0:03:27.160 --> 0:03:32.799 did you manage to pull that off? Um? Yeah, I mean, um, 0:03:32.960 --> 0:03:37.080 the out of nowhere part. Um. I might give a little, uh, 0:03:37.360 --> 0:03:39.800 you know, backstory on so I spent fifteen years doing 0:03:40.320 --> 0:03:45.040 traditional share older activism strategy at a very successful activists 0:03:45.040 --> 0:03:48.000 from called John and Partners that does traditional activism so 0:03:48.080 --> 0:03:53.160 focused on things like capitalcation, capital structure, UH and things 0:03:53.200 --> 0:03:57.000 like that. And we had actually done a fair number 0:03:57.000 --> 0:04:00.360 of campaigns in the energy space, companies like use An 0:04:00.400 --> 0:04:05.920 Exploration and e QT and and Karen McGee, and you know, 0:04:06.320 --> 0:04:09.360 in a lot of respects, this campaign was similar because 0:04:10.080 --> 0:04:12.800 before you got to the long term picture that we 0:04:12.920 --> 0:04:15.080 viewed at Engine number one as being a failure to 0:04:15.120 --> 0:04:18.720 appropriately prepare for the long term changes face in the industry, 0:04:19.000 --> 0:04:22.000 there was just a basic bad capital allocation story which 0:04:22.080 --> 0:04:25.520 quite frankly was worse in terms of value destruction than 0:04:25.520 --> 0:04:29.120 the other companies I mentioned um So, in one respect, 0:04:29.160 --> 0:04:32.080 the very kind of basic near term components of the 0:04:32.120 --> 0:04:34.320 campaign that looked at the last ten years of value 0:04:34.360 --> 0:04:38.240 destruction and exile mobile even before COVID struck, was in 0:04:38.320 --> 0:04:40.279 some ways very familiar. I think the thing that that 0:04:40.440 --> 0:04:43.440 perhaps came out of no or was the additional element 0:04:43.600 --> 0:04:46.120 of the longer term focus on where can this company 0:04:46.160 --> 0:04:49.520 be ten twenty thirty years down the road? And I 0:04:49.600 --> 0:04:52.559 exaggerate obviously you did not come out of nowhere, because 0:04:52.600 --> 0:04:55.320 you actually had a very successful track record. And actually 0:04:55.560 --> 0:04:58.640 just take a moment and you you have tussled with 0:04:58.839 --> 0:05:01.960 big companies before or in that prior life, one being 0:05:02.000 --> 0:05:04.800 Apple for instance, Can you talk about that? Yeah? Sure, 0:05:04.880 --> 0:05:06.160 And just to be clear, you know, most of the 0:05:06.160 --> 0:05:09.240 time I spent at john OH was executing and helping 0:05:09.240 --> 0:05:11.880 textcut on other people's ideas that were in that kind 0:05:11.880 --> 0:05:15.360 of traditional activist mold. What I spent the last few 0:05:15.440 --> 0:05:19.760 years at JOHNAH doing was campaigns that that uh I 0:05:19.800 --> 0:05:24.560 had originated that were um without longer term focus. That 0:05:24.800 --> 0:05:28.320 the thinking being that, uh, you know, companies that think 0:05:28.320 --> 0:05:30.839 more long term will perform better over the long term. 0:05:30.920 --> 0:05:33.200 And if you're thinking long term, you're focused on things, 0:05:33.600 --> 0:05:36.200 in the case of Apple, like your relationship with your users. 0:05:36.440 --> 0:05:42.200 And you know, at that time in eighteen UM it 0:05:42.320 --> 0:05:45.640 was really the kind of beginning stages of the tech lash, 0:05:45.720 --> 0:05:49.440 and even though Apple hadn't really kind of come under 0:05:49.480 --> 0:05:51.240 that type of scrutiny yet, it didn't take a lot 0:05:51.240 --> 0:05:54.200 of looking around the corner when you looked at really 0:05:54.279 --> 0:05:57.520 the spike and negative mental health outcomes for the heaviest 0:05:57.560 --> 0:06:00.240 young users of the phone in terms of things like 0:06:00.600 --> 0:06:05.240 UM depression and loneliness and suicide risk factors and sleep deprivation, 0:06:05.839 --> 0:06:08.360 and the basic thinking was in in you know, this 0:06:08.440 --> 0:06:11.080 is something I'm still trying to do today. Is basically 0:06:11.120 --> 0:06:14.800 if you look at positive impacts and long term value 0:06:14.839 --> 0:06:17.279 creation potential as being two sides of the same coin. 0:06:17.880 --> 0:06:20.760 The basic argument at Apple was that if your goal 0:06:21.320 --> 0:06:23.960 has apples to move from being valued like a hardware 0:06:24.000 --> 0:06:27.440 company h to being valued like a subscription based recurring 0:06:27.480 --> 0:06:30.160 revenues company, and you want to do everything possible to 0:06:30.240 --> 0:06:33.960 keep people feeling safe and secure within the ecosystem, um, 0:06:34.000 --> 0:06:36.359 you'd want to do things to partner with families to 0:06:36.520 --> 0:06:39.320 give them really more dynamic control over the phones, which 0:06:39.720 --> 0:06:41.200 you have to combine for a lot of other things 0:06:41.279 --> 0:06:45.440 like good parenting and discussions and things. Um. And fortunately 0:06:45.440 --> 0:06:49.280 for us, Apple very quickly said this makes sense. And 0:06:49.640 --> 0:06:51.760 you know, they called Tim Cooke was on the phone 0:06:51.760 --> 0:06:54.080 the next day with with their biggest shareholders saying what 0:06:54.080 --> 0:06:56.240 do you think of us? And they said, yeah, why 0:06:56.279 --> 0:06:58.919 wouldn't you do this? It makes sense? And um, the 0:06:58.960 --> 0:07:01.040 controls were really well received. They need to do more 0:07:01.080 --> 0:07:04.719 to market them. Quite frankly, Google actually, which copied a 0:07:04.720 --> 0:07:06.760 lot of what Apple did, has done a better time 0:07:06.839 --> 0:07:09.239 marketing it, but it was a good first step and 0:07:09.240 --> 0:07:12.920 and I think kind of hopefully, you know, validated the 0:07:12.920 --> 0:07:15.920 case a little bit that focusing on these things isn't 0:07:15.960 --> 0:07:18.360 just about you know, positive impact, it's just kind of 0:07:18.400 --> 0:07:20.960 good business sense to it the long term. Well. And 0:07:21.320 --> 0:07:24.680 McDonald's was another one that that you had at that 0:07:24.720 --> 0:07:27.400 moment in time too, And I guess that's gonna be 0:07:27.400 --> 0:07:30.880 an interesting segue here, because when you engage with companies 0:07:30.920 --> 0:07:35.000 like this, sometimes it's public and sometimes it's not talked 0:07:35.000 --> 0:07:38.640 about the way that you dealt with McDonald's at that Yeah, 0:07:38.680 --> 0:07:41.960 and that was actually one that previously had not named 0:07:41.960 --> 0:07:44.720 the company, but the New York Times, I guess spoke 0:07:44.760 --> 0:07:46.840 to some other people and figured it out. That was 0:07:46.880 --> 0:07:50.520 actually the year after the Apple campaign, and the basic 0:07:50.600 --> 0:07:52.720 idea again there was to try to kind of marry 0:07:52.760 --> 0:07:58.280 the long term value creation argument with the positive impact argument. 0:07:58.720 --> 0:08:01.440 In that case, you know, um, at least prior to 0:08:02.960 --> 0:08:06.040 the pandemic, McDonald's was a company that loses about two 0:08:06.080 --> 0:08:09.200 percent of its customers every year, and to make up 0:08:09.240 --> 0:08:11.920 for that, you know, they've been doing things like selling 0:08:12.160 --> 0:08:14.960 you know, cheesy bacon on the fries and don't sticks 0:08:14.960 --> 0:08:17.080 with breakfasts and stuff like that, which you know find 0:08:17.160 --> 0:08:19.280 but isn't necessarily i think by their own emission in 0:08:19.320 --> 0:08:22.400 great long term value creation strategy. So you know, one 0:08:22.440 --> 0:08:24.920 of the reasons that they've been losing customers, and again 0:08:25.160 --> 0:08:29.080 this is all pre pandemic is people looking for either 0:08:29.120 --> 0:08:33.319 healthier or flexitarian choices where they're not looking to eliminate meat, 0:08:33.320 --> 0:08:35.439 but want to be able to reduce the intake of 0:08:35.520 --> 0:08:38.679 meat in a growing number of cases for environmental reasons. 0:08:38.679 --> 0:08:41.360 So the basic idea was they can both have a 0:08:42.400 --> 0:08:46.439 you know, positive impact on reducing their deforestation in methane 0:08:46.440 --> 0:08:50.960 emissions and also appeal to customers who maybe have given 0:08:51.000 --> 0:08:54.760 up on McDonald's, particularly families with younger kids who may 0:08:54.760 --> 0:08:57.640 not feel great about you know, kind of taking in there. Again, 0:08:57.720 --> 0:08:59.720 that's one where there's there's more work to be done. 0:08:59.760 --> 0:09:03.240 But they did introduce partnership with Beyond met in Canada, 0:09:03.360 --> 0:09:05.679 which you know, it was marketing in a certain way 0:09:05.720 --> 0:09:07.559 that maybe could be approved upon going forward. And the 0:09:07.640 --> 0:09:11.760 now they have this mick plant uh concept that that 0:09:11.840 --> 0:09:14.000 you know what, we'll see what develops with that. But yeah, 0:09:14.000 --> 0:09:16.760 that was the one that followed Apple, which which brings 0:09:16.840 --> 0:09:19.760 us sort of two Engine number one. So how did 0:09:19.800 --> 0:09:22.880 that come into being, because it's actually almost born at 0:09:22.880 --> 0:09:25.680 the beginning of the pandemic, right, Yeah, So I had 0:09:25.720 --> 0:09:29.400 met the founder of Engine number one, Chris James, after 0:09:29.520 --> 0:09:32.640 the Apple campaign, and he at that time was formulating 0:09:32.679 --> 0:09:35.960 his thinking about what would eventually become Engine number one, 0:09:36.520 --> 0:09:40.480 and very much, very much focused on, uh, the idea 0:09:40.720 --> 0:09:43.600 that you know, companies over time have to internalize their 0:09:43.600 --> 0:09:47.800 externalities in terms of their evaluation, and that the investments 0:09:47.800 --> 0:09:52.400 that they make in their people, in their customers, in 0:09:52.480 --> 0:09:56.480 the society around them, and in their communities, uh, in 0:09:56.760 --> 0:09:59.600 the environment. Ultimately, if you take a long term time 0:09:59.640 --> 0:10:03.320 prize and approach, you can't reflect and value. So you know, 0:10:03.400 --> 0:10:06.880 he had a lot of ideas, one of which ultimately 0:10:07.280 --> 0:10:10.080 the CTF. But what I was trying to do it 0:10:10.240 --> 0:10:13.960 at Jonah fit very well into his kind of grander vision. 0:10:14.080 --> 0:10:19.120 So we kept talking and yeah, I joined Engine number one, 0:10:19.960 --> 0:10:22.240 you know, late last year, which feels like a longer 0:10:22.280 --> 0:10:25.520 time ago than it was. But yeah, um yes, but 0:10:25.679 --> 0:10:28.320 let me bring you into this. Um. Uh, you and 0:10:28.360 --> 0:10:30.800 I met when you were at JP Morgan. You were 0:10:30.960 --> 0:10:33.200 an et F person. You're one of the first guests 0:10:33.240 --> 0:10:37.400 on this on this podcast actually so, and then now 0:10:37.440 --> 0:10:41.040 you're here, and I guess, can you bridge everything Charlie saying, 0:10:41.080 --> 0:10:42.520 because this is a new world for a lot of 0:10:42.600 --> 0:10:45.240 ETF investors, they're not even used to hearing stuff like this, 0:10:46.000 --> 0:10:49.240 and you're gonna basically take some of this activism that 0:10:49.320 --> 0:10:52.040 Charlie just went over several examples of and democratize it 0:10:52.559 --> 0:10:54.040 in the E t F. Can you talk about the 0:10:54.080 --> 0:10:57.600 process to do that? Yeah? Sure, And maybe just taking 0:10:57.600 --> 0:11:00.360 a step back since he referenced my time at JP 0:11:00.440 --> 0:11:02.120 Morgan and one of the things I learned that I 0:11:02.160 --> 0:11:05.760 was one of the early employees in JP Morgan's ETS business. 0:11:05.840 --> 0:11:08.679 I joined when that firm had one E t F 0:11:08.720 --> 0:11:11.719 and five million dollars. And when you look at the 0:11:11.760 --> 0:11:15.720 market dynamics of ETS, one of the things you see is, Wow, 0:11:15.800 --> 0:11:19.199 the space is crowded and it's concentrated. And so you 0:11:19.320 --> 0:11:21.320 sort of asked them actual questions, how does a new 0:11:21.480 --> 0:11:23.880 entrant come into the space and and really think it's 0:11:23.880 --> 0:11:26.520 going to crack the code and grow? Um, you know, 0:11:26.600 --> 0:11:29.240 JP Morgan was obviously very successful at doing that. I 0:11:29.320 --> 0:11:32.160 left when they had about sixty billion dollars, but in 0:11:32.200 --> 0:11:34.960 my thinking of coming here, it's sort of what you 0:11:35.000 --> 0:11:37.000 were hitting on, Eric, when I was thinking about what 0:11:37.160 --> 0:11:40.880 is the value proposition of an engine number one type 0:11:40.920 --> 0:11:45.200 provider in the ETS space? And from my perspective, it 0:11:45.280 --> 0:11:48.760 was a couple of things. The first is this idea 0:11:48.880 --> 0:11:53.080 of being purpose built, so engine number one focuses only 0:11:53.120 --> 0:11:56.719 on impact. And I think that that sort of focused 0:11:56.800 --> 0:12:00.560 mission statement, focused products that that we could drive off 0:12:00.600 --> 0:12:03.440 of it UM was something that was actually quite unique 0:12:03.440 --> 0:12:07.280 in the market for this particular spaces sustainability. And I 0:12:07.320 --> 0:12:09.840 think secondly, you know a lot of the things that 0:12:10.000 --> 0:12:12.720 people talk about the sustainable investing world. You look at 0:12:12.720 --> 0:12:15.320 it and you think, wow, it's growing quite a lot, 0:12:15.360 --> 0:12:17.600 but it's still a drop in the bucket of all 0:12:18.000 --> 0:12:21.040 the E T F bascets out there. So my hypothesis 0:12:21.080 --> 0:12:24.440 was something was holding that space back a little bit UM. 0:12:24.440 --> 0:12:26.920 And I think it really was a combination of or 0:12:27.080 --> 0:12:30.840 is a combination of one investors really feeling this quandary 0:12:30.880 --> 0:12:33.960 between can I invest in alignment with my values and 0:12:34.000 --> 0:12:37.320 the financial tradeoff that you have to make UM and 0:12:37.440 --> 0:12:41.080 to this all feel like being tangible, there being a 0:12:41.160 --> 0:12:44.120 real so what to what they're doing UM and so 0:12:44.200 --> 0:12:46.040 I think that's where the engine number one E t 0:12:46.200 --> 0:12:49.000 F business really fits well into the broader framework is 0:12:49.360 --> 0:12:53.240 Charlie was talking about it. It's the ability to harness 0:12:53.320 --> 0:12:56.960 the power of all investors, be it the largest investors 0:12:56.960 --> 0:12:58.520 in the country, all the way down to the self 0:12:58.520 --> 0:13:02.400 directed investor, give them a voice and a vote um 0:13:02.559 --> 0:13:05.839 pun intended, and really a seat at the table on 0:13:05.880 --> 0:13:09.000 some of these really important topics. And I think that 0:13:09.320 --> 0:13:18.120 value proposition is really unique. And so let's just really 0:13:18.320 --> 0:13:20.720 just for one second stop here and just contrast this 0:13:20.800 --> 0:13:23.400 with E s G t F s UM. E s 0:13:23.400 --> 0:13:25.280 G t F s are going out scoring a bunch 0:13:25.280 --> 0:13:28.920 of stocks and they all all have their different methodologies. 0:13:29.000 --> 0:13:31.480 Typically they won't own an exon or they'll own it 0:13:31.520 --> 0:13:35.600 in a sale a smaller uh you know, waiting. Can 0:13:35.640 --> 0:13:37.840 you talk a little bit about trying to position this. 0:13:38.080 --> 0:13:40.120 I'm trying to pretend you're in a meeting with an 0:13:40.120 --> 0:13:44.080 advisor or an investor. How are you explaining this versus say, 0:13:44.120 --> 0:13:49.040 the onslaught of now on s gtfs out there. Yeah, 0:13:49.120 --> 0:13:51.520 I think this is the really important point. There's not 0:13:51.520 --> 0:13:54.200 a lot of product development in the space, but to 0:13:54.280 --> 0:13:56.760 your point, they all sort of look and feel the same. 0:13:56.840 --> 0:14:00.960 It's either excluding or rewaiting based on some some E 0:14:01.160 --> 0:14:04.600 s G data point. They're basically E s G by 0:14:04.640 --> 0:14:07.880 what they own, but not what they do. And I 0:14:07.920 --> 0:14:10.520 think there's this real question you sort of have to 0:14:10.559 --> 0:14:14.000 ask yourself about what's the theory of change behind putting 0:14:14.160 --> 0:14:16.720 your money in one of those products? What changes if 0:14:16.720 --> 0:14:20.080 I were to move my entire savings account from the 0:14:20.200 --> 0:14:23.960 SMP five to something that slightly relighted stocks based on scores. 0:14:24.280 --> 0:14:25.880 And I think that's maybe one of the things that 0:14:25.920 --> 0:14:29.280 holds back the end investor. I'm not sure that that 0:14:29.360 --> 0:14:31.200 type of strategy is very real to them, So that 0:14:31.320 --> 0:14:33.800 the premise of vote was actually quite simple on the 0:14:33.840 --> 0:14:37.280 investment side, as you said, it really was if you 0:14:37.360 --> 0:14:39.960 have market cap, and you like market cap and like 0:14:40.040 --> 0:14:41.960 the price of market cap, you can keep all of 0:14:42.000 --> 0:14:44.720 those things. UM. But where we're really going to drive 0:14:44.840 --> 0:14:47.720 value is the work we do as active owners, which 0:14:47.800 --> 0:14:51.520 from our perspective, really spans a very broad spectrum of things. 0:14:51.600 --> 0:14:55.360 It's the votes we cast, it's the collaborative engagements that 0:14:55.400 --> 0:14:58.440 we run in a small subset. It's also the work 0:14:58.440 --> 0:15:01.960 that Charlie's doing. UM On the more activism side, and 0:15:02.040 --> 0:15:05.840 that's really where what we're doing is different. And my 0:15:05.960 --> 0:15:09.400 personal opinion is that we're solving those challenges I mentioned. One, 0:15:09.920 --> 0:15:13.280 we're not introducing a financial trade off. Again, most people, 0:15:13.400 --> 0:15:16.840 virtually every investor has market cap in their portfolio, and 0:15:16.880 --> 0:15:18.520 so we're saying, if you like that, you can keep 0:15:18.520 --> 0:15:20.960 it the same. But two, we're allowing this to come 0:15:21.000 --> 0:15:25.720 to life with real tangible examples of how we're voting 0:15:25.720 --> 0:15:30.760 shares and hoping to change companies. Charlie, when Chris described 0:15:30.800 --> 0:15:33.480 the strategy for you early on and was like, hey, 0:15:33.520 --> 0:15:36.440 I've got this idea to marry activism within within E 0:15:36.520 --> 0:15:40.680 t F, what was your what was your first reaction 0:15:40.720 --> 0:15:45.400 to that? I mean it was described a little more 0:15:45.960 --> 0:15:48.920 broadly and and it's probably worth mentioning, you know, kind 0:15:48.920 --> 0:15:53.960 of that, Um, you know, engine number one is multifacet 0:15:54.000 --> 0:15:57.160 I mean there's the E t F, there's a more traditional, 0:15:57.880 --> 0:16:03.040 uh you know, more concentrated portfolio. There'll be additional I 0:16:03.080 --> 0:16:06.280 believe E t F or some private investment stuff. So 0:16:06.320 --> 0:16:10.400 it was really presented as and what was really interesting 0:16:10.440 --> 0:16:13.000 about it was the idea that all these different businesses 0:16:13.400 --> 0:16:18.760 would kind of be synergistic with each other. So you 0:16:18.760 --> 0:16:23.320 know the the Jasmin said. The idea I think really 0:16:23.320 --> 0:16:27.480 behind engine number one is systemic change. So one way 0:16:27.480 --> 0:16:29.800 you can bring about systemic changes through these kind of 0:16:29.840 --> 0:16:32.800 targeted activist campaigns. Right, you spend a year of your 0:16:32.840 --> 0:16:35.000 life and probably take off another ten on the back end, 0:16:35.440 --> 0:16:38.520 you know, running a campaign like the Exxon campaign. But 0:16:38.600 --> 0:16:42.320 another thing you can do is, hopefully over time, as 0:16:42.360 --> 0:16:46.520 the t F hopefully grows, is you kind of change 0:16:46.560 --> 0:16:49.320 the voting landscape is. As you know you were mentioning 0:16:49.360 --> 0:16:53.360 before the the unintended consequence of these e s CHI 0:16:53.480 --> 0:16:55.480 funds that are just focusing on the good actors is 0:16:55.560 --> 0:16:58.840 less accountability for folks who are companies. Maybe you should 0:16:58.840 --> 0:17:01.960 be doing things differently. And if you can grow this 0:17:02.000 --> 0:17:05.320 thing and also have an influence on on the overall 0:17:05.400 --> 0:17:10.200 kind of voting proclivities of other funds as well, um, 0:17:10.240 --> 0:17:12.560 you can bring create greater accountability not just to a 0:17:12.600 --> 0:17:14.240 handful of companies a year we're going to be the 0:17:14.240 --> 0:17:18.199 subject of activist campaigns, but actually to the entire market. 0:17:18.240 --> 0:17:21.800 And it doesn't have to be a massive, you know, 0:17:21.880 --> 0:17:24.960 soul sucking exercise like X, and it can be the 0:17:25.040 --> 0:17:28.600 smaller kind of shareholder engagements and votes that that really, 0:17:29.080 --> 0:17:32.560 you know, change the kind of everyday discourse that people 0:17:32.600 --> 0:17:37.160 are having about environmental and social and long term drivers 0:17:37.160 --> 0:17:42.119 have valued at the biggest companies still hit um to 0:17:42.160 --> 0:17:45.000 each other. You mentioned systemic change. A lot of the 0:17:45.200 --> 0:17:49.359 s G issues UM timate change or racism here in 0:17:49.400 --> 0:17:53.280 the US, these are huge systemic issues. A number of 0:17:53.280 --> 0:17:56.680 people have said, you have said, like divestment campaigns, ets, 0:17:56.880 --> 0:17:59.720 no carbon funds, all of these sort of like products 0:18:00.080 --> 0:18:03.159 are not really enough to address these issues on the 0:18:03.200 --> 0:18:06.120 time frame that we need, especially with climate change. Um 0:18:06.200 --> 0:18:08.160 So how do you sort of like react to that, 0:18:08.280 --> 0:18:09.879 you know, when it comes to like e t s 0:18:10.400 --> 0:18:12.960 addressing something like climate change in the next ten years. 0:18:13.119 --> 0:18:15.800 And yeah, I I we would agree with those people. 0:18:15.840 --> 0:18:18.240 It's kind of the founding principle, which is, if you 0:18:18.720 --> 0:18:24.080 are looking to bring about change within a time frame 0:18:24.160 --> 0:18:28.040 that is soon enough to be consequential, divestment in most 0:18:28.080 --> 0:18:31.400 cases is not going to do that. You know, companies 0:18:31.440 --> 0:18:37.160 like Examobile are not hurting for capital. So look, it's 0:18:37.160 --> 0:18:39.399 not to knock anybody's investment choices. You know, everyone can 0:18:39.440 --> 0:18:41.600 make their own decisions, but our our opinion is that 0:18:42.080 --> 0:18:45.040 you can't just ignore the companies that are most in 0:18:45.080 --> 0:18:49.000 need of change. Uh, And it doesn't to us feel 0:18:49.000 --> 0:18:50.679 great just not to be invested in then we'd rather 0:18:50.720 --> 0:18:54.399 be invested in them, be able to give investors in 0:18:54.440 --> 0:18:57.399 need to have broad market exposure at a very low price, 0:18:57.760 --> 0:19:00.320 and be able to you know, again through the vote, 0:19:00.560 --> 0:19:03.200 through collaborative engagement, and in the subset of cases, through 0:19:03.240 --> 0:19:06.520 an activist approach imposed. We hope greater accountability on the 0:19:06.560 --> 0:19:09.040 market to deal with with those issues, which again we 0:19:09.080 --> 0:19:11.240 think are are as long as you have a long 0:19:11.359 --> 0:19:13.640 term time rise in which we think most investors do, 0:19:14.600 --> 0:19:19.120 really fundamental of long term value drivers for these companies. 0:19:19.119 --> 0:19:22.960 You are answering these these questions the right way. Maybe 0:19:23.000 --> 0:19:24.640 just one thing, I just to add on to what 0:19:24.760 --> 0:19:26.639 Charlie was saying there on the voting side, just to 0:19:26.800 --> 0:19:30.200 underscore the point a little bit. I think most investors 0:19:30.760 --> 0:19:34.000 don't know how their shares are being voted. And I 0:19:34.040 --> 0:19:36.080 think that that's actually one of the sleeping giants in 0:19:36.119 --> 0:19:38.359 this room. If you think about it. You know, the 0:19:38.480 --> 0:19:41.639 average scent P five hundred fund um has has if 0:19:41.680 --> 0:19:44.479 you look historically at voting track records, has voted against 0:19:44.560 --> 0:19:49.960 let's call it, se of environmental and social shareholder proposals 0:19:50.000 --> 0:19:52.720 over the last five to ten years. And I think 0:19:52.760 --> 0:19:55.440 a investors don't know that, and be they also don't 0:19:55.440 --> 0:19:58.800 necessarily know they have a choice in that, and that 0:19:58.880 --> 0:20:01.639 maybe be he sort of speaks to the power of 0:20:01.760 --> 0:20:05.280 harnising all investors here. There's trillions of dollars behind that, right, 0:20:05.320 --> 0:20:08.399 if we could actually just provide a layer of transparency 0:20:08.440 --> 0:20:12.320 to that and provide an alternative that in of itself 0:20:12.480 --> 0:20:16.640 may actually have some pretty profound impact and change. And so, 0:20:17.119 --> 0:20:18.840 you know, I guess the e t F is named 0:20:18.880 --> 0:20:21.240 that way for a reason. I do think that the 0:20:21.320 --> 0:20:24.400 voting part actually has the potential to be really interesting 0:20:24.440 --> 0:20:29.280 and transformational. You know, Vanguard and black Rock are passive 0:20:29.320 --> 0:20:32.200 owners and or Index one and they own they're the 0:20:32.240 --> 0:20:34.919 top two owners of most companies out there. Um, they 0:20:34.960 --> 0:20:38.080 own about eight percent nine percent of every company pretty much. 0:20:38.560 --> 0:20:40.840 And you talked about this voting record. Now we in 0:20:40.840 --> 0:20:43.160 the industry week, they're starting to get more transparent. They'll 0:20:43.200 --> 0:20:45.200 they'll tell you how they voted a lot of times 0:20:45.200 --> 0:20:47.200 with management. And I don't know. If I'm not in there, 0:20:47.200 --> 0:20:49.960 I don't I can't grade them myself. I'm not really 0:20:50.000 --> 0:20:52.560 that involved. But I guess could you talk a little 0:20:52.600 --> 0:20:55.119 bit about this idea. I use the metaphor of a 0:20:55.160 --> 0:20:58.040 tug boat that engine number one, even though engines are 0:20:58.080 --> 0:21:00.720 train Um. I like the name by the way. I 0:21:00.840 --> 0:21:03.679 use the metaphor of a tug boat, where you know, 0:21:03.800 --> 0:21:06.879 maybe you guys are able to tug these bigger owners 0:21:07.320 --> 0:21:09.400 into a direction. They might not go on their own. 0:21:09.880 --> 0:21:13.240 They might not propose this or be the catalyst for 0:21:13.280 --> 0:21:15.160 some of these, but they'd be willing to go along 0:21:15.200 --> 0:21:18.760 with that. So can you talk about that relationship and 0:21:18.760 --> 0:21:21.520 and moving them towards your side on these issues. I 0:21:21.520 --> 0:21:24.520 guess what Eric's trying to say was, was tugboat number 0:21:24.520 --> 0:21:27.280 one ever in the name conversation? No, but it probably 0:21:27.320 --> 0:21:31.359 should have been. You know, it's probably not too late. Um. 0:21:31.400 --> 0:21:34.040 You know, I think that the way I think about 0:21:34.160 --> 0:21:37.040 at least is you have to be meeting a market need. 0:21:37.600 --> 0:21:42.000 So if you think about you know, the early two thousands, 0:21:42.520 --> 0:21:46.200 you know, the kind of modern wave of shareholder activism, 0:21:46.240 --> 0:21:48.320 you know, it was meeting a market need, which was 0:21:48.400 --> 0:21:52.360 that challenging companies were the CEO was an empire builder, 0:21:52.800 --> 0:21:55.600 or the board paid management as if they were top 0:21:55.640 --> 0:21:59.560 performers when they're actually you know, bottom UH quartile performers. 0:22:00.040 --> 0:22:04.480 And it wasn't institutional investors didn't care about those issues. 0:22:04.520 --> 0:22:07.320