WEBVTT - Everything Is ESG Now 0:00:05.760 --> 0:00:08.240 Wegner Trains. I'm Joel Webber and I'm Marriic Bell Tunis. 0:00:12.640 --> 0:00:14.120 We got a couple of guests and we have a 0:00:14.160 --> 0:00:16.560 theme that we've hit on before and we're gonna come 0:00:16.600 --> 0:00:19.599 back to because I think it's actually a really important one. 0:00:20.000 --> 0:00:22.079 It is there's a lot to unpack with this. There's 0:00:22.160 --> 0:00:24.079 layer upon layer. I've been in it for like the 0:00:24.079 --> 0:00:27.320 past few months and it's uh, there's so many dimensions 0:00:27.360 --> 0:00:31.480 and conflicting pieces of information and a little hypocrisy. And 0:00:31.600 --> 0:00:33.360 I were going to dive into it today and try 0:00:33.400 --> 0:00:35.159 to get further than than we did in the last one. 0:00:35.200 --> 0:00:37.040 And it's not your personality that we're talking about. We're 0:00:37.080 --> 0:00:40.959 talking about e s G. It's pretty good, like you're 0:00:41.000 --> 0:00:45.040 on today, Environmental Social Government Governance. Uh. E s G 0:00:45.880 --> 0:00:50.040 assets where are they? Uh, they're underwhelming at least in 0:00:50.120 --> 0:00:52.880 e t f S maybe about twenty billion two billion, 0:00:52.920 --> 0:00:54.960 that's about point five percent of the assets compared to 0:00:54.960 --> 0:00:56.640 the press they get. That's not a lot because it 0:00:56.680 --> 0:00:58.080 gets a lot of press. It does get a lot 0:00:58.080 --> 0:01:00.360 of press. And but there's well we want to do 0:01:00.480 --> 0:01:03.200 is breakdown into two levels today, just two things. First 0:01:03.320 --> 0:01:05.560 is looking at the high level black Rock and Vanguard 0:01:05.760 --> 0:01:07.920 have a lot of voting power. Larry Fink came out 0:01:07.959 --> 0:01:10.240 talking about wants to get more green with things, So 0:01:10.240 --> 0:01:13.280 we'll talk about Yeah, that's a huge announcement. Yeah, they're 0:01:13.280 --> 0:01:17.080 the two biggest uh for almost every SMP five under company, 0:01:17.120 --> 0:01:20.160 they're the two biggest voters. Uh. There's some stuff to 0:01:20.240 --> 0:01:22.800 unpack with that. That's like the macro level. Then we'll 0:01:22.840 --> 0:01:24.720 shift to the micro level, which is, Okay, there's all 0:01:24.720 --> 0:01:27.000 these E S G tfs, how do you make sense 0:01:27.000 --> 0:01:29.119 of them? What are the pros and cons? And we'll 0:01:29.120 --> 0:01:31.560 sort of try to go through, uh, you know, how 0:01:31.560 --> 0:01:34.040 to do due diligence on those. And to help us 0:01:34.080 --> 0:01:38.399 do that, we've got any Masa from Bloomberg News regular 0:01:38.920 --> 0:01:43.000 Graham Sinclair who's on Twitter as at E S G 0:01:43.600 --> 0:01:46.200 Architect he's been on the on the show before and 0:01:46.240 --> 0:01:49.240 the first time, or a Shahem contractor who's an analyst 0:01:49.240 --> 0:01:53.440 with Bloomberg Intelligence. This is also a big week at 0:01:53.640 --> 0:01:56.680 Bloomberg and a perfect one for this episode because we've 0:01:56.720 --> 0:02:00.480 launched a new vertical called Bloomberg Green Go to Bloomberg 0:02:00.520 --> 0:02:02.800 dot Com slash Green, which is going to be the 0:02:02.960 --> 0:02:06.040 new go to destination for all kinds of great stories 0:02:06.040 --> 0:02:09.720 about climate change, all back by data. There's some amazing 0:02:09.760 --> 0:02:12.920 stories already and the tools are just going to be sensational. 0:02:13.360 --> 0:02:16.200 You can follow us on Twitter also there at climate 0:02:18.400 --> 0:02:24.120 this time on Trilliance, everything is E S. G. Annie. 0:02:24.919 --> 0:02:27.200 How big of a deal was this black Rock announcement 0:02:27.639 --> 0:02:30.280 or what was it? What was your joke? I called 0:02:30.320 --> 0:02:35.160 it the pr coup. It definitely drew a lot more attention, 0:02:35.240 --> 0:02:39.000 even a lot more attention than usual. What was the announcement? 0:02:39.120 --> 0:02:41.720 So the announcement that happened was Larry Fink came out 0:02:41.760 --> 0:02:45.000 with his annual Letters to See letter to CEOs, and 0:02:45.160 --> 0:02:48.360 he generally uses this as a way to come up 0:02:48.360 --> 0:02:50.200 with some big message for the year. In the past, 0:02:50.240 --> 0:02:53.760 he said you should pursue purpose and profits at the 0:02:53.760 --> 0:02:57.680 same time. This year he decided to go big with 0:02:57.760 --> 0:03:01.280 this message on climate change, and he told CEOs that 0:03:01.440 --> 0:03:03.639 every single business is going to be affected by climate 0:03:03.720 --> 0:03:06.520 change and they should all be really thinking about that theme. 0:03:07.040 --> 0:03:11.280 And alongside that message, he put out this note to 0:03:11.400 --> 0:03:14.600 clients that laid out exactly how black Rock will address 0:03:14.639 --> 0:03:17.160 climate change in its own business, and that includes both 0:03:17.200 --> 0:03:20.040 active and passive products. Let's break this down real quick. 0:03:20.080 --> 0:03:22.239 What really is going on here? Of course there's a 0:03:22.320 --> 0:03:25.239 nice letter, he cares he's been under pressure a little bit. 0:03:25.760 --> 0:03:29.960 But what are they actually doing that will is real. 0:03:30.960 --> 0:03:32.960 So they laid out a couple of things that they 0:03:32.960 --> 0:03:36.760 will do that our concrete in their active funds they will, oh, 0:03:36.920 --> 0:03:41.360 they will divest from thermal coal producers for example. So 0:03:41.400 --> 0:03:43.920 that's one step on the passive side, though, it's where 0:03:43.920 --> 0:03:46.480 it gets a lot more tricky, really tricky because as 0:03:46.520 --> 0:03:50.080 an index provider and player like, they basically have to 0:03:50.160 --> 0:03:52.240 do what the index tells them to do. Yeah, and 0:03:52.280 --> 0:03:55.840 this has always been black Rocks kind of push back 0:03:56.080 --> 0:03:59.640 on M E. S G themes. They've said, well, we 0:03:59.680 --> 0:04:02.520 can only do so much because we're a provider of 0:04:02.560 --> 0:04:06.120 passive products. We don't dictate what's in an index. And 0:04:06.160 --> 0:04:09.760 we're a fiduciary. So when a client tells us to, 0:04:10.000 --> 0:04:11.600 you know, put a certain amount of money in an 0:04:11.640 --> 0:04:14.200 S and P five hundred tracking fund, we have to 0:04:14.280 --> 0:04:17.960 do that. We can't play around with, uh, what's in 0:04:18.000 --> 0:04:21.160 that index. So so this is a company that has 0:04:21.200 --> 0:04:23.520 two thirds of its au M in passive products, it 0:04:23.640 --> 0:04:27.240 does have some ideas for what to do on the 0:04:27.240 --> 0:04:29.320 passive product side when it comes to E S G. 0:04:29.680 --> 0:04:32.120 So they're going to double their lineup of M E 0:04:32.320 --> 0:04:34.080 S G E T F s for example, to A 0:04:34.400 --> 0:04:37.400 D and fifty products. The question is will the investor 0:04:37.440 --> 0:04:40.000 money follow? And that's really what we're gonna hit in 0:04:40.040 --> 0:04:42.440 the second is there's now going to be hundreds of 0:04:42.480 --> 0:04:44.760 E S G T F s. Um Let's go to 0:04:44.760 --> 0:04:47.000 the active divestment and I want to bring in Shaheen. 0:04:47.360 --> 0:04:51.760 Shaheen talked about you analyze the coal companies like Peabody, 0:04:51.800 --> 0:04:53.599 there's a couple of them that black Rock is going 0:04:53.600 --> 0:04:56.680 to pull out of in their active mutual funds. Can 0:04:56.720 --> 0:04:58.960 you talk about exactly what we're talking about here in 0:04:59.040 --> 0:05:02.239 terms of their ownership, what percentage that is active? Of course, 0:05:02.240 --> 0:05:04.960 so this message that black Rock puts across, first of all, 0:05:05.080 --> 0:05:08.000 is a strong message, but it has very limited impact 0:05:08.000 --> 0:05:09.720 because at the end of the day, as you mentioned, 0:05:09.760 --> 0:05:12.880 black Rock is a large passive investor. So about if 0:05:12.920 --> 0:05:16.400 you actually look at the data about of black Rock's 0:05:16.440 --> 0:05:19.240 holdings and coal companies are passively hell, so these will 0:05:19.279 --> 0:05:22.360 remain untouched just in ninety just you know, eat for 0:05:22.480 --> 0:05:25.000 mutual fund data, so not it's inceditional money that could 0:05:25.080 --> 0:05:29.800 change things, but still largely undoutched Graham E s g 0:05:30.000 --> 0:05:32.640 is your whole world? What did you think of Larry 0:05:32.680 --> 0:05:37.039 Fink's message? I'd start very quickly by getting back a 0:05:37.120 --> 0:05:41.120 year and a fantastic interview at Davos, where Larry Fink 0:05:41.200 --> 0:05:42.840 was kind of grilled when he came out with his 0:05:42.960 --> 0:05:46.279 purpose letter, and remembering too, for your audience, he had 0:05:46.279 --> 0:05:48.720 already done three years before that where you focus along 0:05:48.760 --> 0:05:52.839 on a lot on long term investing. So I just 0:05:52.839 --> 0:05:56.159 saw that as the next logical step, although given some 0:05:56.240 --> 0:05:59.760 of his comments from January at all surprised on haw 0:05:59.800 --> 0:06:03.520 far it come. Subsequently, yesterday there was a great interviewer 0:06:03.520 --> 0:06:06.520 on Bloomberg Live. We unpacked some of his reasoning. You 0:06:06.600 --> 0:06:08.479 went fishing in Alaska and a whole bunch of stuff 0:06:08.480 --> 0:06:12.279 happened in December. For me, very quickly, I need to 0:06:12.320 --> 0:06:14.440 drill down to the footnotes and look at the details. 0:06:14.440 --> 0:06:17.039 I'm checking the receipts. Yeah. First of all, it's the 0:06:17.080 --> 0:06:19.720 distinction between the passive and active sides of their business. No, 0:06:19.800 --> 0:06:22.360 don't get me wrong. According to their self reporting a 0:06:22.400 --> 0:06:24.680 hundred billion and active last year, they've got a decent 0:06:24.720 --> 0:06:27.039 sized business. An you wanted to love that business, but 0:06:27.120 --> 0:06:29.600 it's still the smaller part of what black Rock is 0:06:29.640 --> 0:06:33.679 famous for. Um sercondly, if you look at the line items, 0:06:33.920 --> 0:06:38.200 it's thermal coal, but it's or more in revenue. So 0:06:38.360 --> 0:06:41.040 there's enough wiggle room there for businesses that are kind 0:06:41.040 --> 0:06:44.080 of changing the shape of their business. For me, the 0:06:44.120 --> 0:06:48.000 bigger part of what they're saying, including comments by their 0:06:48.080 --> 0:06:51.080 vice chairman and and other people who are representing them, 0:06:51.600 --> 0:06:56.720 is that these words around finance has fundamentally changed. Climate 0:06:56.839 --> 0:07:00.200 risk is on a par with every other thematic sick 0:07:00.240 --> 0:07:02.320 and concept that we're going to be looking at. So 0:07:02.360 --> 0:07:05.960 I think philosophically, as a house to be sending those 0:07:06.000 --> 0:07:09.440 messages is almost more important than saying them will call 0:07:09.440 --> 0:07:13.520 it or ten or eighty or what have you. And Annie, 0:07:13.600 --> 0:07:16.320 let's talk about if you are holding a shares or 0:07:16.400 --> 0:07:19.840 Vanguard Passive fund. You're going to hold Exxon, but you're 0:07:19.880 --> 0:07:21.600 gonna hold Apple, You're gonna hold all of it. Right. 0:07:22.120 --> 0:07:25.560 You wrote something before the black Rock article about Vanguard 0:07:25.600 --> 0:07:28.400 and black Rock and voting. They are going to have 0:07:28.480 --> 0:07:31.480 some some power in their voting, and can you talk 0:07:31.520 --> 0:07:34.239 a little bit about any plans they have to change 0:07:34.280 --> 0:07:36.200 how they vote on some of these issues that come 0:07:36.240 --> 0:07:39.120 up with these companies. That's right. We wrote in our 0:07:39.160 --> 0:07:44.120 story last year that the scrutiny around the voting practices 0:07:44.200 --> 0:07:47.800 of black Rock and Vanguard has really stepped up in 0:07:47.840 --> 0:07:50.560 the past couple of years. And you see nonprofits like 0:07:50.640 --> 0:07:55.600 Majority Action running analyzes showing that UM they tend to 0:07:55.680 --> 0:07:59.480 vote relative to their asset management peers. They tend to 0:07:59.600 --> 0:08:04.000 vote more in line with management at UM. Fossil fuel companies, 0:08:04.040 --> 0:08:07.960 for instance, tend to vote against shareholder proposals that are 0:08:07.960 --> 0:08:11.880 around UM climate change type issues. So the big question, 0:08:11.960 --> 0:08:15.200 while the activist community has been happy that you have 0:08:15.280 --> 0:08:18.840 this symbolic message coming from Larry think, the big question 0:08:19.040 --> 0:08:24.160 is will they change their voting practices accordingly. And we'll 0:08:24.200 --> 0:08:26.800 have to wait for the next proxy season to really 0:08:26.960 --> 0:08:30.000 see how it will affect their voting practices. And what 0:08:30.080 --> 0:08:34.520 about the investor reaction, because that's obviously going to be, 0:08:35.240 --> 0:08:37.120 you know, the one that they're you know, black Rock 0:08:37.200 --> 0:08:41.120 is gonna really be listening to Yeah, and not everybody 0:08:41.160 --> 0:08:43.480 lives in Manhattan and agrees on all these issues, right, 0:08:43.800 --> 0:08:47.120 take guns for example, yet or Berkeley. UM. There's a 0:08:47.160 --> 0:08:49.560 couple of little hot spots there, phone places to go, 0:08:49.600 --> 0:08:51.439 but not everybody lives there. Their investors are all over. 0:08:51.480 --> 0:08:54.079 They get investors in Texas, Alabama. That's a really good point, 0:08:54.200 --> 0:08:56.800 right Like you, if you're black Rock, you basically are 0:08:56.800 --> 0:08:59.960 trying to create like this massive vanilla product that every 0:09:00.040 --> 0:09:01.880 but he can use you like the president in a way, 0:09:01.920 --> 0:09:04.720 you have to take in all these constituents, a certain president, 0:09:04.720 --> 0:09:08.520 a certain type of president. But so how does it 0:09:11.640 --> 0:09:15.000 That's true? Black Rock has just by virtue of being 0:09:15.040 --> 0:09:17.720 black Rock, it has so many different kinds of clients. 0:09:17.760 --> 0:09:20.840 And you're absolutely right, not every type of client is 0:09:20.840 --> 0:09:22.800 going to be happy with this message that Think is 0:09:22.800 --> 0:09:27.760 even sending or even changes behavior accordingly. So that comes 0:09:27.800 --> 0:09:30.000 back to the idea that there's only so much black 0:09:30.080 --> 0:09:33.040 Rock can do, especially when it comes to index products. 0:09:33.040 --> 0:09:36.280 They can offer all kinds of index products that have E. 0:09:36.480 --> 0:09:40.240 S G values. The question will be whether investors respond 0:09:40.280 --> 0:09:43.360 to that. And um, you know, Think has said that 0:09:43.400 --> 0:09:47.680 they did this, they came up with this, these changes 0:09:47.920 --> 0:09:51.200 related to climate change as a result of client interest. 0:09:51.440 --> 0:09:54.000 But we still have to see to what extend the 0:09:54.000 --> 0:09:57.600 assets follow That was really interested in the comments when 0:09:57.600 --> 0:10:00.320 he did the blue book, Clive interview from Davos. He 0:10:00.400 --> 0:10:04.679 said maybe ten maybe of his investor base, and he 0:10:04.880 --> 0:10:08.640 mentioned clearly global investor base. We're asking these questions. So 0:10:08.679 --> 0:10:11.400 this clearly demand, you know, when one in five clients 0:10:11.400 --> 0:10:13.480 are saying, hey, what do we do? And to be clear, 0:10:13.520 --> 0:10:15.760 they didn't say you must do a B or C. 0:10:16.040 --> 0:10:18.720 They said this is a big ticket item. You know, 0:10:18.880 --> 0:10:23.439 in my view, climate change is overshadows all other business 0:10:23.440 --> 0:10:26.760 strategies for the foreseeable future. But these investors were saying, 0:10:27.040 --> 0:10:30.640 you're black Rock, You're the experts and an investment especially 0:10:30.640 --> 0:10:32.760 you've been telling us about long term investment and corporate 0:10:32.800 --> 0:10:35.120 governance and purpose and so on. We've got this big 0:10:35.120 --> 0:10:38.280 ticket item. We need help. You're on go to vendor. 0:10:38.559 --> 0:10:41.520 What's the plan here? Are you going to do for us? Exactly? Well, 0:10:41.559 --> 0:10:44.559 I mean, let's just how much does this really matter 0:10:45.120 --> 0:10:48.480 black Rock whether they buy the stock of this peabody 0:10:48.640 --> 0:10:51.679 or sell it isn't really what what's going to get 0:10:51.760 --> 0:10:55.680 changes consumers demanding or changing their ways and not demanding 0:10:55.679 --> 0:10:59.560 oil based products or coal and or regulation. Aren't those 0:10:59.640 --> 0:11:01.839 really the way things? Because let's say you don't, let's 0:11:01.840 --> 0:11:04.880 say black Rock divest from Peabody isn't another investor going 0:11:04.920 --> 0:11:07.120 to maybe make out on that because now the stocks 0:11:07.200 --> 0:11:10.960 undervalued because of this artificial reason they're selling. Look, they'll 0:11:10.960 --> 0:11:15.080 definitely be pricing pressures. There's some commentations already appointed to 0:11:15.120 --> 0:11:18.000 the diversions between oil price and the price of the 0:11:18.080 --> 0:11:21.640 energy sector as the first inklings of the long term 0:11:21.800 --> 0:11:24.000 amount of money out there. There's institutional money out there. 0:11:24.360 --> 0:11:26.680 They're not so keen to hear the story about hey, 0:11:26.679 --> 0:11:29.000 they'll be oil forever and we're the best producer. We'll 0:11:29.040 --> 0:11:33.240 find you another field and executed most efficiently. So there's 0:11:33.280 --> 0:11:36.720 already you know, at the margin. Yes, it will matter 0:11:37.040 --> 0:11:40.360 when a significant investor says, we've got all these opportunities, 0:11:40.559 --> 0:11:43.080 you're over here. You've got too many complications, you've got 0:11:43.080 --> 0:11:45.360 too much baggage and too many issues. I'm going to 0:11:45.480 --> 0:11:48.960 put overweight in this sector. Yeah, but again that just 0:11:49.040 --> 0:11:50.760 makes the price the stock go down. They can still 0:11:50.760 --> 0:11:52.480 make a ton of money because people can still keep 0:11:52.480 --> 0:11:55.160 demanding oil flying all over the place, Like, isn't that 0:11:55.200 --> 0:11:57.000 the route? Isn't if we're gonna do a root canal here, 0:11:57.000 --> 0:11:59.840 don't we need to get to demand? Oh? Absolutely, but 0:12:00.480 --> 0:12:04.600 don't divorce investor demand from consumer demand. There's all these pieces, 0:12:04.760 --> 0:12:08.040 these all stakeholders in the community. So when the regulators say, well, 0:12:08.120 --> 0:12:10.640 you can no longer pollute here, then that's going to 0:12:10.840 --> 0:12:13.160 change the cost of doing business. When you've got consumers 0:12:13.160 --> 0:12:15.280 are saying I don't like this product and it's got 0:12:15.280 --> 0:12:16.839 too much sugar, and it's got too much salt, and 0:12:16.880 --> 0:12:19.840 it's got too much hydrocarbons in it. Change your product mix, 0:12:20.200 --> 0:12:22.559 then they'll change it. But the voice of the investor 0:12:22.679 --> 0:12:26.040 is a very significant, long term strategic voice. So one 0:12:26.160 --> 0:12:29.320 comment at a board meeting from an investor is worth 0:12:29.480 --> 0:12:32.080 I don't know how many thousands of consumer investors, but 0:12:32.120 --> 0:12:33.880 it does remind me of a question I asked in 0:12:33.920 --> 0:12:37.400 two thousand four, two thousand five of Hannah Jones, who's 0:12:37.400 --> 0:12:39.360 sending up sustainability at Nike. I know one of your 0:12:39.360 --> 0:12:42.839 favorite sustainability topics, Eric, and I asked that fundamental question, 0:12:42.840 --> 0:12:46.120 are you more afraid of the activist consumer or the 0:12:46.160 --> 0:12:52.360 activist investor? And the answer was, I'm going to say investor. No. Unfortunately, 0:12:53.280 --> 0:12:56.719 the activist consumer who triggers all the other parts of 0:12:56.760 --> 0:12:59.920 the puzzle. Right, So the so, for example, as you're 0:13:00.040 --> 0:13:03.760 that set up, I almost debate. Yeah, you're very good. 0:13:04.880 --> 0:13:08.000 We've done that before. They're talking about table stakes. I'm 0:13:08.040 --> 0:13:10.520 here to play. It's a land worth. We spoke about 0:13:10.640 --> 0:13:13.800 NGOs and the influence they have right as you saw. Awesome, 0:13:13.960 --> 0:13:17.920 small little ngo out on the West coast, San Francisco, underpaid. 0:13:18.200 --> 0:13:21.280 They do a ton of research. They tracked proxy voting. 0:13:21.480 --> 0:13:26.000 They've been tracking Vanguard and Black Rock of the proxy season. 0:13:26.320 --> 0:13:31.120 February the report will come out. They've basically called those 0:13:31.160 --> 0:13:36.040 big fund houses outliers and being so poor at voting 0:13:36.040 --> 0:13:38.520 their proxies. Now, some people will argue, yeah, we have 0:13:38.559 --> 0:13:41.600 conversations behind the curtain and we have cups of tea 0:13:41.640 --> 0:13:43.600 over here, but it doesn't really matter what the no. 0:13:43.800 --> 0:13:45.559 It matters at the end of the day, a vote 0:13:45.559 --> 0:13:49.360 goes through and if Vanguard or State Street or black 0:13:49.640 --> 0:13:52.120 one of the huge houses, especially in the passive side, 0:13:52.400 --> 0:13:56.000 aren't voting those proxies to deal with in this case, 0:13:56.000 --> 0:13:59.040 they're looking at executive pay, which is way out of whack, 0:13:59.520 --> 0:14:02.400 and then then we've got a big problem systemically to 0:14:02.520 --> 0:14:05.520 land with. In Davos. Of course, it's going to be awkward. 0:14:05.880 --> 0:14:09.080 You have Larry Fink speaking and his colleagues and so on. 0:14:09.480 --> 0:14:12.000 He's probably gonna be shaking hands with the cfs a 0:14:12.080 --> 0:14:14.360 hundred biggest companies in the world. It's gonna be a 0:14:14.400 --> 0:14:18.080 little awkward. And he says about that pay package last year, 0:14:18.160 --> 0:14:20.720 you know, we really need to dial that down. But 0:14:21.080 --> 0:14:23.360 that's the role of the investor. And you know, I 0:14:23.400 --> 0:14:27.040 don't know if you disagree on executive pay, but it's 0:14:27.080 --> 0:14:30.000 clearly out of kilter without companies. That's been one of 0:14:30.040 --> 0:14:33.120 the other things that has been, uh you know, a 0:14:33.160 --> 0:14:39.120 talking point about how passive let society down. I guess right, well, 0:14:39.320 --> 0:14:41.360 let me rip off of this with what Droll said, 0:14:41.400 --> 0:14:44.120 because as somebody who has tried been tracking passive and 0:14:44.240 --> 0:14:48.440 is so sensitive to how brutal investors are about driving 0:14:48.440 --> 0:14:51.080 their cost down. Everybody wants all their investments for like 0:14:51.120 --> 0:14:54.560 three or four basis points now, I mean, and now 0:14:54.560 --> 0:14:56.320 they want all this on top of it, the media 0:14:56.400 --> 0:14:58.120 is dumping on them. I kind of feel a little 0:14:58.120 --> 0:15:00.600 for them because how much And they build out a 0:15:00.640 --> 0:15:03.119 corporate governance team that could look through all these statements 0:15:03.120 --> 0:15:06.320 and vote in certain meticulous ways that are aligned with 0:15:06.320 --> 0:15:09.440 their investor when they're being squeezed to compete with Vanguard 0:15:09.560 --> 0:15:11.520 or vanguard itself at two three basis points. I mean, 0:15:11.560 --> 0:15:13.640 there's just not that much money. Yeah, there's not a 0:15:13.640 --> 0:15:16.560 lot of wiggle room there. And black Rock really does 0:15:16.760 --> 0:15:20.640 promote its stewardship team as part of its whole effort 0:15:20.680 --> 0:15:23.360 to like engage with companies. They say behind the scenes, 0:15:23.840 --> 0:15:27.840 they say, this is the biggest stewardship team anywhere. It's 0:15:27.880 --> 0:15:32.479 forty five people for you know, thousands of companies worldwide. 0:15:32.920 --> 0:15:35.440 So that's where you get critics that say, how can 0:15:35.480 --> 0:15:40.600 you possibly meaningfully tackle these issues behind the scenes with 0:15:40.720 --> 0:15:43.760 so many companies to cover, um, you know, even with 0:15:44.520 --> 0:15:47.800 a team that big. So that's something that they've come 0:15:47.840 --> 0:15:51.960 under fire with on the activist side. But back on 0:15:52.000 --> 0:15:55.160 the pr side, I would really say that Fink has 0:15:55.160 --> 0:15:58.360 been followed around by activists and and there's been this 0:15:58.440 --> 0:16:01.800 increasing drumbeat of adgetation. So I think that as far 0:16:01.800 --> 0:16:04.720 as this message goes that he sent it will at 0:16:04.800 --> 0:16:09.040 least help, uh, you know, offer an olive branch to 0:16:09.200 --> 0:16:12.920 those kinds of protesters who are you know, are showing 0:16:13.000 --> 0:16:16.800 up outside is speaking engagements outside Black Rock offices. And 0:16:16.840 --> 0:16:19.320 I think that by sending this message, black Rock is 0:16:19.360 --> 0:16:21.960 at least trying to say hey, like, we're trying to 0:16:21.960 --> 0:16:24.160 be on your side, and that feels to me more 0:16:24.760 --> 0:16:29.600 like activist consumers than activist investors. Right, So Graham, maybe 0:16:29.720 --> 0:16:32.720 maybe you're ouno upthing there. Okay, So another place that 0:16:33.320 --> 0:16:36.760 pressure could come down is on the index providers. Any 0:16:36.840 --> 0:16:39.960 what about that? That's right? One other piece of the 0:16:40.040 --> 0:16:44.640 passive um plan that think laid out for climate change 0:16:45.000 --> 0:16:48.360 is to pressure the index providers. Those are like the 0:16:48.480 --> 0:16:50.960 m s c I s of the world to create 0:16:51.080 --> 0:16:54.560 black Rock basically basically almost licenses. Yes, there are a 0:16:54.600 --> 0:16:56.680 customer of m s c I s. They use those 0:16:56.800 --> 0:17:00.960 M s c I indexes for their index products, and 0:17:00.960 --> 0:17:03.320 and this is where they said they'll they'll start to 0:17:03.360 --> 0:17:06.840 apply more pressure to the index ers to create more 0:17:06.920 --> 0:17:10.520 sustainable UM indexes, which would allow them to make more 0:17:10.560 --> 0:17:13.000 sustainable products. Does that also mean that there might be 0:17:13.040 --> 0:17:15.920 more self indexing, because that's another place that black Rock 0:17:15.960 --> 0:17:17.560 could say, Hey, we can just do this ourselves, we 0:17:17.560 --> 0:17:20.000 don't even need you. That will be really interesting to watch. 0:17:20.040 --> 0:17:24.240 They've always raised like there could be problems with self indexing. 0:17:24.280 --> 0:17:26.000 We don't. We don't want to go too far down 0:17:26.040 --> 0:17:29.200 that road necessarily, but it will be an interesting pope 0:17:29.280 --> 0:17:32.439 to watch, yeah, exactly like it will. It will be 0:17:32.480 --> 0:17:35.399 really interesting to see if if they decided to pursue 0:17:35.400 --> 0:17:38.480 that more if the index providers don't fall in line. Well, 0:17:38.760 --> 0:17:39.879 you know, M s c I, S and P. They 0:17:39.920 --> 0:17:42.679 have a whole suite of different types of E s 0:17:42.720 --> 0:17:45.480 G indexes. That's not really the issue. The issue is 0:17:45.680 --> 0:17:47.800 the main indexes, like the SMP five hundred. Do you 0:17:47.960 --> 0:17:50.439 ever change that because that's beta and I think a 0:17:50.440 --> 0:17:53.040 lot of people probably won't don't want that changed, but 0:17:53.119 --> 0:17:55.280 they're good news is there are options. You could just 0:17:55.359 --> 0:17:58.800 use something that's a little like barely um it's like 0:17:58.840 --> 0:18:00.720 the SMP with a little less fall so fuel, and 0:18:00.720 --> 0:18:02.840 then you keep going into waves till you're down to 0:18:02.920 --> 0:18:06.360 maybe something that's really aggressively E s G. But I mean, 0:18:06.440 --> 0:18:09.320 one thing that's really interesting is back when M S 0:18:09.359 --> 0:18:12.280 C I and the index providers were trying to come 0:18:12.280 --> 0:18:18.280 down and exclude UM dual class shares UH share companies 0:18:18.280 --> 0:18:21.440 with dual class shares from indexes, black Rock actually came 0:18:21.440 --> 0:18:24.159 out and said, it's not on the index providers to 0:18:24.320 --> 0:18:28.680 say what the investable universe should be. And so this 0:18:28.760 --> 0:18:30.760 seems like a bit of a reversal in that way. 0:18:31.760 --> 0:18:34.320 So just one point to add on sort of investorsis 0:18:34.359 --> 0:18:38.240 consumer demand is don't underestimate the impact that an investor 0:18:38.359 --> 0:18:40.600 has on a company's cost of capital. I mean, that's 0:18:40.600 --> 0:18:43.520 what's happened to Cool. It's this mix of demand pressure 0:18:43.520 --> 0:18:46.320 but also investors in short as saying they're not going 0:18:46.359 --> 0:18:55.920 to underte such assets. You guys, I'd like to pick 0:18:56.000 --> 0:18:59.680 up on what Annie was speaking about around the black 0:18:59.760 --> 0:19:03.400 Rock announcement. There's much to be admired about it. It's 0:19:03.440 --> 0:19:06.560 signaling it's important. They're going to make internal changes. That's great. 0:19:06.720 --> 0:19:10.080 They've got forty five heads. Larry actually promised to think 0:19:10.119 --> 0:19:12.879 I promised in January last year, there'll be seventy one. 0:19:12.920 --> 0:19:15.760 They're still hiring, you know, throw your resume there. But 0:19:15.880 --> 0:19:19.840 on I think the comment around the indexes, uh, that's 0:19:19.840 --> 0:19:22.960 a bit soft because, as Eric pointed out earlier, indexes 0:19:22.960 --> 0:19:25.520 will build you whatever you want. That's my business. I mean, 0:19:25.640 --> 0:19:28.160 st architect, someone walks through the door, they say, build 0:19:28.160 --> 0:19:30.880 me an index. The shape of the strategy that looks 0:19:30.920 --> 0:19:32.600 like this, I'm going to figure it out right now. 0:19:32.600 --> 0:19:35.840 I'm working at Harvard on an Arctic strategy. How we're 0:19:35.840 --> 0:19:38.119 going to build an Arctic strategy using five sectors in 0:19:38.160 --> 0:19:44.439 the geography. So the comment on the indexes index construction vendors, 0:19:44.480 --> 0:19:47.440 I don't really buy that, but it is very, very 0:19:47.440 --> 0:19:51.920 significant that a major player is saying this is core 0:19:52.000 --> 0:19:54.560 to what we're doing and it's going to affect what 0:19:54.600 --> 0:19:56.720 we're doing across the house. Now, how do we check that? 0:19:57.119 --> 0:19:59.639 As any suggested at the end of the proxy season, 0:19:59.680 --> 0:20:03.040 don't you worry every NGO that's tracking this and any 0:20:03.119 --> 0:20:05.080 cynic like some of the people in the room here 0:20:05.440 --> 0:20:08.080 again and be saying so what so how did it 0:20:08.160 --> 0:20:09.879 play out? And then there's also going to be the 0:20:09.880 --> 0:20:12.200 aspect of what happens in the marketplace. I don't know 0:20:12.200 --> 0:20:14.359 if you saw the news about a quick spike and 0:20:14.359 --> 0:20:16.640 the E t F inflows the day after the day 0:20:16.640 --> 0:20:18.360 of the announcement, I don't know if it was time. 0:20:18.600 --> 0:20:21.280 If there's a partner going in with money, well, I 0:20:21.359 --> 0:20:23.560 know what happened there. Yeah, this wasn't a bunch of 0:20:23.600 --> 0:20:26.120 millennials who got excited about Larry Fink's letter and all 0:20:26.160 --> 0:20:28.119 bought into E s G because they were excited. Was 0:20:28.119 --> 0:20:30.480 the balance sheet money? Well, black Rock has E t 0:20:30.600 --> 0:20:33.159 F models and they just put E S G E 0:20:33.240 --> 0:20:35.240 t F s into the emerging markets and the U 0:20:35.359 --> 0:20:39.120 S slug and that right, there was billion dollars. So 0:20:39.960 --> 0:20:43.040 that's black Rocks doing it still counts, but that's not different. 0:20:43.080 --> 0:20:45.600 That's different. That said, we did look, there was about 0:20:45.600 --> 0:20:47.159 twenty E S G T F that have taken in 0:20:47.200 --> 0:20:50.240 money this month. So there's the grassroots is there. It's 0:20:50.280 --> 0:20:53.320 just tiny little piece of grass. Black Rock moving in 0:20:53.320 --> 0:20:57.920 that kind of money is Mortalizer, Intertalizer. So here's why strategic. 0:20:57.960 --> 0:20:59.879 It's a whole new field. Frankly, more than that is 0:21:00.320 --> 0:21:03.280 because one of the promises about a hundred and fifteen 0:21:04.280 --> 0:21:06.919 a t S is that basically cloning you want it? 0:21:07.119 --> 0:21:09.399 Do you want it green or brown? So that is 0:21:09.440 --> 0:21:11.679