WEBVTT - BlackRock: More Bull on Wall Street? 0:00:00.440 --> 0:00:02.800 Larry Fink of Black Rock, chairman and CEO, joins us 0:00:02.880 --> 0:00:07.560 right now, I truly believe the purposeful companies they're going 0:00:07.640 --> 0:00:10.360 to be focusing on the long term impact on climate 0:00:10.440 --> 0:00:15.120 change and how it impacts their company. It's a total 0:00:15.200 --> 0:00:20.720 philosophical shift of what a corporations for. Everybody's calling it grainwashing, 0:00:21.079 --> 0:00:25.760 and I disagree. When you have actions that sound good 0:00:27.080 --> 0:00:30.720 but in effect they don't really amount to much in reality, 0:00:31.200 --> 0:00:42.680 it's actually more dangerous than we think. Welcome to calling 0:00:42.760 --> 0:00:48.400 bullshit the podcast about purpose washing, the gap between what 0:00:48.479 --> 0:00:52.360 companies say they stand for and what they actually do 0:00:53.040 --> 0:00:55.360 and what they would need to change to practice what 0:00:55.440 --> 0:01:00.160 they preach. I'm your host time onto you, and I've 0:01:00.160 --> 0:01:03.920 spent over a decade helping companies define what they stand for, 0:01:04.280 --> 0:01:07.560 their purpose and then help them to use that purpose 0:01:07.600 --> 0:01:12.840 to drive transformation throughout their business. Unfortunately, at a lot 0:01:12.920 --> 0:01:17.040 of companies and organizations today, there's still a pretty wide 0:01:17.040 --> 0:01:20.839 gap between word and deed. That gap has a name. 0:01:21.480 --> 0:01:26.399 We call it bullshit. But, and this is important, we 0:01:26.520 --> 0:01:30.000 believe that bullshit is a treatable disease. So when the 0:01:30.040 --> 0:01:33.600 bullshit detector lights up, we're going to explore things that 0:01:33.640 --> 0:01:41.039 a company should do to fix it. In this episode, 0:01:41.360 --> 0:01:44.920 we're going to look at black Rock, the largest investment 0:01:45.000 --> 0:01:49.200 management company in the world. They manage over nine trillion 0:01:49.280 --> 0:01:54.800 dollars in assets and their global influence is undeniable. In 0:01:54.920 --> 0:01:59.960 his annual letter to the heads of the smpanies, Larry Finn, 0:02:00.400 --> 0:02:04.160 black Rock CEO, has stated that their purpose is to 0:02:04.200 --> 0:02:08.280 help build a more equitable, financially resilient future, not just 0:02:08.400 --> 0:02:12.639 for their customers, but for the planet to That's an 0:02:12.680 --> 0:02:19.040 admirable and lofty goal, but is it true. That's exactly 0:02:19.080 --> 0:02:28.000 what we're going to explore in this episode. To really 0:02:28.080 --> 0:02:32.160 understand black Rock story, we need to understand how American 0:02:32.240 --> 0:02:36.440 business has evolved over the last several decades. So we're 0:02:36.440 --> 0:02:39.520 going to go back in time, all the way back 0:02:39.560 --> 0:02:42.680 to the end of World War Two, when the US 0:02:42.760 --> 0:02:48.240 economy began a period of rapid expansion. President Roosevelt approves 0:02:48.320 --> 0:02:51.400 legislation to provide for America's war veterans in the Peace 0:02:51.440 --> 0:02:55.720 to Come by law, federal loans, pre schooling, job insurance, 0:02:55.720 --> 0:02:59.040 and complete rehabilitation are among the benefits to short every 0:02:59.080 --> 0:03:02.640 man and woman in the The g I Bill helped 0:03:02.680 --> 0:03:07.400 a generation of returning soldiers go to college, secure good jobs, 0:03:07.560 --> 0:03:18.680 and buy homes. The manufacturing and services sector grew, and 0:03:18.760 --> 0:03:22.680 companies were eager to sell to an expanding American middle class. 0:03:22.800 --> 0:03:26.440 How many dreams can your shape in a minute? As 0:03:26.600 --> 0:03:34.560 the people have done. There were a few other factors 0:03:34.600 --> 0:03:40.880 behind that post war economic boom. First, many business leaders 0:03:40.920 --> 0:03:45.080 believed that they had wider responsibilities to people and communities, 0:03:45.280 --> 0:03:49.960 not just their shareholders. And second, the effective tax rates 0:03:49.960 --> 0:03:54.000 on individuals and corporations were higher, which meant that all 0:03:54.080 --> 0:03:59.200 of that wealth was being redistributed more efficiently. In the 0:04:00.120 --> 0:04:03.640 ds CEOs, we're only making about twenty times more than 0:04:03.680 --> 0:04:08.960 a typical worker, by that was three hundred and fifty 0:04:09.080 --> 0:04:13.320 times more. And back in the fifties, union membership was 0:04:13.400 --> 0:04:18.440 high and upward mobility was real for many Americans. And 0:04:18.600 --> 0:04:26.440 then in it all came to a screeching halt. Gives 0:04:26.440 --> 0:04:29.400 me the great pro pleasure to present to you today, 0:04:29.560 --> 0:04:35.360 Professor Milton Friedman, the world renowned economist Milton Friedman, published 0:04:35.360 --> 0:04:38.159 an essay in The New York Times that had a 0:04:38.320 --> 0:04:43.240 colossal impact on American business. He introduced the concept of 0:04:43.320 --> 0:04:48.000 neoliberalism that rejected the idea that companies should have a 0:04:48.160 --> 0:04:52.920 social conscience. In Ohio, an old man failed to pay 0:04:52.960 --> 0:04:55.239 his electric billity you may be familiar with the case, 0:04:55.800 --> 0:04:58.800 and the electric company turned off the electricity and he died. 0:04:59.120 --> 0:05:02.760 Who was respons Let's suppose that the electric company or 0:05:02.800 --> 0:05:06.280 to follow the practice of never turning off anybody's electricity. 0:05:06.560 --> 0:05:09.839 Who would pay the costs? The responsibility really lies not 0:05:09.920 --> 0:05:12.720 on the electric company for turning it off, but on 0:05:12.800 --> 0:05:17.080 those of this man's neighbors and friends and associates who 0:05:17.160 --> 0:05:20.040 are not charitable enough to enable him as an individual 0:05:20.520 --> 0:05:25.000 to make the electric bill. Friedman believed that a business 0:05:25.000 --> 0:05:30.160 had only one social responsibility to make money or its shareholders. 0:05:30.720 --> 0:05:34.720 To him, an executive that wanted their company to eliminate 0:05:34.720 --> 0:05:40.640 discrimination or avoid pollution was and I quote, preaching pure 0:05:41.080 --> 0:05:47.240 unadulterated socialism. Humanist capitalism, which said you had responsibilities to 0:05:47.320 --> 0:05:53.279 your workers and your community was out predatory capitalism. The 0:05:53.440 --> 0:05:57.560 dog eat dog short term approach to success was in 0:05:58.920 --> 0:06:03.119 the point is, ladies and gentlemen, that greed is good. 0:06:04.640 --> 0:06:08.839 In pursuit of ever larger profits, corporate leaders began to 0:06:09.000 --> 0:06:14.360 hack away at internal costs. Greed is right, Greed works 0:06:15.040 --> 0:06:20.240 paying the lowest possible wages, providing less training, less paid 0:06:20.240 --> 0:06:24.800 time off, or none at all. Greed clarifies cuts through 0:06:25.000 --> 0:06:31.320 and captions es of the evolutionary spirit. But the really 0:06:31.360 --> 0:06:36.760 bad behavior happened at the regulatory level. Corporations lobbied relentlessly 0:06:36.920 --> 0:06:40.720 to lower the corporate tax rate and weaken environmental protections, 0:06:41.080 --> 0:06:44.520 which is why humans are now facing the existential crisis 0:06:44.560 --> 0:06:53.240 of climate change. Okay, so where does black Rock fit 0:06:53.279 --> 0:06:57.080 into all of this? More precisely, where does black Rock 0:06:57.200 --> 0:07:01.200 CEO Larry Fink fit into all of this? Back in 0:07:01.240 --> 0:07:04.479 the height of the predatory capitalism days of the late 0:07:04.560 --> 0:07:08.560 nineteen eighties, Larry and seven other finance executives had an 0:07:08.600 --> 0:07:13.600 idea to create a risk reduced asset management company, or 0:07:13.680 --> 0:07:17.520 in plain English, a safer place for rich people and 0:07:17.600 --> 0:07:22.280 big institutions to park and grow their money. At first, 0:07:22.800 --> 0:07:26.440 pursuing Freedman's doctrine, black Rock just wanted to get as 0:07:26.440 --> 0:07:30.840 big as possible, and they did, eventually becoming the largest 0:07:30.880 --> 0:07:37.840 investment manager in the world. But then Larry Fink did 0:07:37.920 --> 0:07:44.200 something really freaking bizarre. He started talking about the responsibilities 0:07:44.200 --> 0:07:47.240 that business has had to help solve the big issues 0:07:47.280 --> 0:07:52.280 in the world. He was advocating that businesses become purpose led, 0:07:52.760 --> 0:07:56.600 an idea that was seemingly at odds with Freedman's philosophy 0:07:56.760 --> 0:07:59.560 that had taken the Western world by storm. Back in 0:07:59.680 --> 0:08:03.679 ninety seventy, black Rock chairman and CEO Larry Fink sending 0:08:03.720 --> 0:08:06.400 a letter to the CEOs of the SMP five companies, 0:08:06.640 --> 0:08:10.280 warning them not only about activism and short termism, but 0:08:10.280 --> 0:08:13.440 also calling on them to focus more on long term growth. 0:08:13.960 --> 0:08:19.240 And when Larry talks, CEOs listen. And suddenly he was 0:08:19.320 --> 0:08:22.480 saying stuff that would make Milton Friedman sit up in 0:08:22.560 --> 0:08:27.120 his grave. We are interested in long term results, not 0:08:27.280 --> 0:08:30.360 short term results. Larry started talking about the need for 0:08:30.400 --> 0:08:34.320 companies to take care of stakeholders and not just shareholders, 0:08:34.360 --> 0:08:36.920 and he began hammering c e o s to take 0:08:36.920 --> 0:08:40.559 a role in actively addressing climate change. Big news from 0:08:40.559 --> 0:08:44.280 black Rock this morning, the world's largest asset manager now 0:08:44.280 --> 0:08:48.160 announcing the firm will make investment decisions with environmental sustainability 0:08:48.160 --> 0:08:53.480 at its core. And finally, in Larry led a coalition 0:08:53.520 --> 0:08:56.920 of CEOs of nearly two hundred of the world's largest 0:08:56.920 --> 0:09:02.040 corporations called the Business Roundtable, to publish a letter redefining 0:09:02.280 --> 0:09:06.320 the true purpose of a corporation. You've effectively suggested that 0:09:06.360 --> 0:09:09.360 it's not just profit that you're after as an investor, 0:09:09.559 --> 0:09:11.360 but that to get to that profit, you think that 0:09:11.400 --> 0:09:13.959 these companies need to have a social purpose, which is 0:09:14.000 --> 0:09:16.080 a little bit stepping out. Well, no, I don't think 0:09:16.080 --> 0:09:19.520 it's stepping out. I think I'm actually reconfirming what Milton 0:09:19.600 --> 0:09:23.040 Friedman said. If you read his whole essay that everyone 0:09:23.080 --> 0:09:25.680 talks about, he talks about that you need to be 0:09:25.679 --> 0:09:28.360 connected in your community. I believe the companies that have 0:09:28.480 --> 0:09:31.720 purpose are the best companies in the world because it 0:09:31.880 --> 0:09:37.240 unites their employees, it connects the clients, it brings the 0:09:37.400 --> 0:09:42.360 organization onto a common plane. Look, I love that Larry 0:09:42.400 --> 0:09:46.040 think is saying this stuff and putting videos like this 0:09:46.320 --> 0:09:49.920 on the black Rock website. We contribute to a more 0:09:49.960 --> 0:09:56.280 inclusive and resilient economy that benefits more people. This is 0:09:56.280 --> 0:09:58.959 how we remain true to our purpose of helping more 0:09:59.000 --> 0:10:04.440 and more people experienced financial well being. But what we 0:10:04.520 --> 0:10:07.000 need to get to the bottom of is does he 0:10:07.120 --> 0:10:10.320 really mean it or is it just a bunch of bs. 0:10:16.320 --> 0:10:21.360 So let's start digging for more context on how investors 0:10:21.720 --> 0:10:25.960 and investment managers like black Rock can push companies to 0:10:26.000 --> 0:10:29.840 clean up their act. I called up Andrew Behar. He's 0:10:29.880 --> 0:10:33.920 the CEO of a nonprofit called As You Sow, which 0:10:33.960 --> 0:10:39.080 supports shareholder advocacy. That's s ow, like the proverb as 0:10:39.120 --> 0:10:42.880 you sow, so show you reap. He's also written a 0:10:42.920 --> 0:10:47.360 book called The Shareholders Action Guide, Unleash Your Hidden Powers 0:10:47.400 --> 0:10:53.920 to Hold Corporations Accountable. Andrew, thank you so much for 0:10:54.000 --> 0:10:57.520 being here. My pleasure. We're here to talk about black Rock, 0:10:57.840 --> 0:11:01.079 but having read your book, I wanted to start out 0:11:01.120 --> 0:11:04.360 today talking about the work you're doing at As You 0:11:04.400 --> 0:11:07.600 Sell Sure. So as You Say is at a five 0:11:07.600 --> 0:11:11.280 O one C three nonprofit. We're found when you focus 0:11:11.320 --> 0:11:16.160 on corporate accountability from the viewpoint of shareholders. So we 0:11:16.240 --> 0:11:22.880 engage major companies generally SMPI companies as shareholders and we 0:11:23.000 --> 0:11:26.760 bring to them a message around really around material risk 0:11:27.400 --> 0:11:30.199 and as shareholders we want to see them improve. We're 0:11:30.240 --> 0:11:34.680 advocating on behalf of the company creating more environmental, social 0:11:34.720 --> 0:11:38.000 and governance policies and practices. So can you talk a 0:11:38.040 --> 0:11:42.200 little bit more about how shareholder advocacy works, like what 0:11:42.320 --> 0:11:47.920 the primary mechanism is SURE So the SEC has a 0:11:48.040 --> 0:11:54.000 rule called fourteen A eight, which says that shareholders that 0:11:54.120 --> 0:11:56.439 have a certain amount of shares for a certain amount 0:11:56.480 --> 0:12:01.920 of time have legal standing to ask the companies certain things. 0:12:02.000 --> 0:12:06.880 For example, as shareholders, as you so, approached Young Brands, 0:12:07.240 --> 0:12:10.280 the parent company of Taco Bell, Long John Silver's, and 0:12:10.320 --> 0:12:13.960 Pizza Hut, to advocate for the reduction of plastic in 0:12:14.000 --> 0:12:17.960 their restaurants that ultimately ended up in the ocean. So 0:12:18.000 --> 0:12:21.400 we went to the company and said, our brand, Young 0:12:21.440 --> 0:12:25.840 Brands is being associated with the destruction of the ocean ecosystem, 0:12:25.880 --> 0:12:29.920 and we have a solution. It's a really very simple 0:12:30.000 --> 0:12:33.319 solution that's going to actually cost us a lot less 0:12:33.640 --> 0:12:39.280 than this negative brand association. And we suggested this and 0:12:39.400 --> 0:12:42.920 the companies they said, okay, well think about it. We escalated, 0:12:42.960 --> 0:12:45.960 We filed the shareholder resolution. If you're not familiar with 0:12:46.040 --> 0:12:50.040 that term. A shareholder resolution is a document a shareholder 0:12:50.040 --> 0:12:54.160 can file six months before a company's annual meeting, which 0:12:54.200 --> 0:12:57.360 is then put to a vote. There's a whereas clause 0:12:57.400 --> 0:13:02.120 which says, whereas the company continues to use styrofoam, and 0:13:02.120 --> 0:13:04.120 the styrofoam is finding its way into the ocean, and 0:13:04.160 --> 0:13:08.320 it's causing this destruction, whereas we have all this evidence 0:13:08.360 --> 0:13:12.679 and there's footnotes about what this destruction is doing. Therefore, 0:13:12.920 --> 0:13:17.559 it's resolved that the company will write a report about 0:13:17.679 --> 0:13:23.239 how this plastic use is impacting the ocean and potentially 0:13:23.240 --> 0:13:26.240 having a negative impact to our brand, which is a 0:13:26.320 --> 0:13:30.400 material issue for shareholders. These resolutions for change can be 0:13:30.520 --> 0:13:33.679 a big pain in the butt for companies like young brands, 0:13:34.280 --> 0:13:37.520 so there's a real incentive to settle the issue before 0:13:37.559 --> 0:13:40.520 a vote. So then what happens is the company then 0:13:40.520 --> 0:13:42.240 has a conversation with you and they say we'd like 0:13:42.280 --> 0:13:44.880 you to withdraw, and you say, well, we'll withdraw if 0:13:44.920 --> 0:13:49.640 you will pledge to change this practice. And sometimes the 0:13:49.679 --> 0:13:52.040 company says okay, and sometimes they say no. And if 0:13:52.040 --> 0:13:55.000 they say no, you talk to press about it, You 0:13:55.080 --> 0:13:57.960 talk to other investors about it to get a better 0:13:58.040 --> 0:14:01.719 understanding of the potential impact to the shareholder. Advocacy can 0:14:01.800 --> 0:14:05.480 have in one alone, as you so met with a 0:14:05.600 --> 0:14:09.640 hundred and eighty eight companies to discuss pressing global issues 0:14:10.080 --> 0:14:14.680 climate change, ocean plastics, toxins and the food system, antibiotics 0:14:14.679 --> 0:14:19.720 and meet racial justice, diversity, equity, inclusion, egregious CEO pay 0:14:19.760 --> 0:14:24.680 all these different issues, and one point seven trillion dollars 0:14:24.680 --> 0:14:28.000 of assets were voted yes. And as you so, resolutions right. 0:14:28.200 --> 0:14:30.080 And one of the things that you pointed out in 0:14:30.120 --> 0:14:32.000 your book was that there was a time when it 0:14:32.040 --> 0:14:34.960 was pretty rare for shareholder resolutions to even get ten 0:14:35.040 --> 0:14:39.680 percent of the vote. Today you said that they routinely 0:14:40.000 --> 0:14:43.960 get twenty thirty even of the vote. So it seems 0:14:44.000 --> 0:14:47.200 like this is picking up momentum. Would that be accurate? 0:14:47.720 --> 0:14:52.600 The institutional share owners are voting much more frequently and 0:14:52.680 --> 0:14:57.960 also much more for the resolutions and against management than 0:14:58.000 --> 0:15:00.160 ever before. It kind of leads us into the a 0:15:00.200 --> 0:15:03.680 black Rock conversation. Just this year, black Rock increased from 0:15:03.680 --> 0:15:09.480 a sevent voting against management to So when black Rock flexes, 0:15:09.520 --> 0:15:13.880 its power really ripples through the system. And the question 0:15:13.920 --> 0:15:16.520 I always have is why don't you use it more often? Like, 0:15:16.640 --> 0:15:20.680 for instance, Larry Fink's letters points out that there is 0:15:21.040 --> 0:15:24.640 every company should have a climate transition plan that is 0:15:24.680 --> 0:15:28.520 aligned with Paris that is a five percent emissions reduction 0:15:28.600 --> 0:15:30.240 every year for the next ten years. I mean, he 0:15:30.280 --> 0:15:32.600 puts it in his letter, but then he stopped short 0:15:33.080 --> 0:15:36.360 and never says or will vote against your board or 0:15:37.040 --> 0:15:39.680 will drop you from our managed funds. If he did that, 0:15:39.960 --> 0:15:43.440 every company would have a Paris compliant transition plan overnight. 0:15:43.720 --> 0:15:46.160 But why should any other CEO listen to what Larry 0:15:46.160 --> 0:15:49.320 Fink has to say? What's special about Larry Fink? They 0:15:49.360 --> 0:15:55.040 owned about seven to twelve percent of every company. Uh. 0:15:55.200 --> 0:15:58.760 In case he didn't catch that, Andrew just said black 0:15:58.880 --> 0:16:04.440 Rock owns a out seven of every company. He also 0:16:04.520 --> 0:16:07.800 goes on to say that historically black Rock doesn't share 0:16:07.800 --> 0:16:11.840 what they learn with other shareholder advocates. So on the 0:16:11.880 --> 0:16:15.160 one hand, it seems like there's problematic behavior on black 0:16:15.240 --> 0:16:19.760 Rock's part from a shareholder advocacy standpoint. On the other hand, 0:16:20.280 --> 0:16:24.720 there's also some good behavior, specifically what Larry Fink is 0:16:24.720 --> 0:16:29.760 addressing in his letters. And I've read his letters going 0:16:29.800 --> 0:16:33.840 back to and I guess it's a fascinating read to 0:16:33.880 --> 0:16:36.880 read them in sequence, because it feels like you're watching 0:16:36.920 --> 0:16:40.840 the progression of Larry Fink's thinking. He starts out talking 0:16:40.960 --> 0:16:43.440 mostly about the need for ceo s to make the 0:16:43.480 --> 0:16:47.800 mental shift from thinking quarter to quarter to thinking longer term, 0:16:47.840 --> 0:16:51.920 and that struck me as in itself a pretty unusual 0:16:53.000 --> 0:16:57.920 stance for someone in finance. Would you call that accurate, 0:16:58.160 --> 0:17:01.880 people truly understand finance, and they acknowledge that. They acknowledge 0:17:01.920 --> 0:17:05.200 that it's true that really this whole idea of short 0:17:05.320 --> 0:17:09.840 termism is an antiquated myth that needs to be overturned. 0:17:09.840 --> 0:17:12.679 And when Larry Think says it, well, there's a lot 0:17:12.720 --> 0:17:15.040 of gravitasks behind when he puts it in a letter. 0:17:15.200 --> 0:17:19.320 So hopefully that's starting to sink in that actually what 0:17:19.359 --> 0:17:24.080 investors want to invest in his companies who disclose honestly, 0:17:24.320 --> 0:17:27.320 tell us exactly where you are, layout a trajectory for 0:17:27.400 --> 0:17:29.840 where you want to go, and then tell us as 0:17:29.840 --> 0:17:33.080 you're hitting your six month, one year to year milestones, 0:17:33.359 --> 0:17:35.159 and if you don't hit your milestones, tell us what 0:17:35.240 --> 0:17:39.560 course corrections you're gonna make. Investors will reward that we're 0:17:39.600 --> 0:17:42.240 tossing out Milton Freedom. Uncle Milton's going under the bus. 0:17:42.640 --> 0:17:47.919 It's a total philosophical shift of what a corporations for now. 0:17:48.080 --> 0:17:52.159 What's happened since then is everybody's calling it grainwashing, and 0:17:52.280 --> 0:17:55.240 I disagree. It's a philosophical shift that's going to take 0:17:55.320 --> 0:17:57.760 some time to implement. And I believe that there we're 0:17:57.800 --> 0:18:03.040 seeing is the actual emergence of a new economy, A 0:18:03.119 --> 0:18:07.040 regenerative economy based on justice and sustainability, that's replacing our 0:18:07.080 --> 0:18:11.360 current economy that's based on extraction and destruction. We're right 0:18:11.400 --> 0:18:15.240 at this inflection point, right now, this minute, and that's 0:18:15.280 --> 0:18:18.800 why people feel so much turbulence. They don't quite know 0:18:18.880 --> 0:18:21.199 what to do with it. It's because we're just in 0:18:21.240 --> 0:18:25.399 this birthing cycle and birth or messy. You actually wrote 0:18:25.520 --> 0:18:31.120 a I found incredibly smart and very entertaining letter as 0:18:31.160 --> 0:18:35.320 a response to Larry Fink's letters to c E O S. 0:18:35.720 --> 0:18:37.920 Could you talk a little bit about what you said 0:18:37.960 --> 0:18:40.920 in that letter and why you said it? Sure, so 0:18:41.320 --> 0:18:44.119 you know, I read his letters, and I in my mind, 0:18:44.359 --> 0:18:46.600 I think if only Larry had sent this to me 0:18:46.720 --> 0:18:49.239 before he published it, I would have marked it up 0:18:49.280 --> 0:18:52.560 for him and he would do much better. So I 0:18:52.600 --> 0:18:56.440 took his letter. I literally put it into word. I 0:18:56.480 --> 0:18:58.880 did exactly what I would have done if Larry had said, Hey, Andy, 0:18:58.920 --> 0:19:02.000 can you mark this up for me? I finished the 0:19:02.080 --> 0:19:07.920 sentences when he says companies should have a climate transition plan, 0:19:07.960 --> 0:19:11.560 to report against it every year and have emission reduction 0:19:11.760 --> 0:19:17.399 by I added, or we'll vote against your board and 0:19:17.400 --> 0:19:19.520 if you don't get it done. In a year, we'll 0:19:19.520 --> 0:19:23.640 remove you from our managed funds. Right. I just concluded 0:19:23.880 --> 0:19:27.400 his sentences by adding action. I thought he brilliantly laid 0:19:27.440 --> 0:19:29.840 out the problem, and so I just helped him a 0:19:29.880 --> 0:19:35.760 little bit. Oh, I thought it was great, Andrew. We 0:19:35.880 --> 0:19:39.320 have a thing on calling bullshit called the BS scale, 0:19:39.600 --> 0:19:43.200 So on a scale of zero to one, zero being 0:19:43.400 --> 0:19:47.159 zero bullshit, which means the company means everything it says, 0:19:47.760 --> 0:19:52.280 and on being just complete BS. Where would you rate 0:19:52.359 --> 0:20:00.520 Black Rock getting better? Larry's letters have been instrumental in 0:20:00.680 --> 0:20:05.080 just awareness that climate change is this investing risk to 0:20:05.119 --> 0:20:10.120 the entire system. They've been instrumental in actually this whole 0:20:10.119 --> 0:20:14.480 idea of stakeholder capitalism. So I have to commend him 0:20:14.520 --> 0:20:19.120 for what he's done. My problem is he didn't finish 0:20:19.160 --> 0:20:23.320 the sentence with or we're going to vote against your board. 0:20:23.920 --> 0:20:25.959 And if he did that, if he said and we're 0:20:26.000 --> 0:20:29.479 going to use our power, then I would give him 0:20:29.840 --> 0:20:34.520 square a zero. That's what we need. So I don't 0:20:34.520 --> 0:20:36.639 have an exact number for you, but I'd say it's 0:20:36.640 --> 0:20:40.200 a work in process, and they could do a lot more, 0:20:40.320 --> 0:20:43.959 and they have the power to really make incredible change. 0:20:45.040 --> 0:20:47.640 So what is the one thing Andrew that Black Rock 0:20:47.960 --> 0:20:52.880 needs to do or change to better align its actions 0:20:53.119 --> 0:20:56.600 with the purpose that Larry is talking about. They need 0:20:56.680 --> 0:21:01.399 to stand with the other shareholders, stand with entire shareholder 0:21:01.440 --> 0:21:06.320 advocacy community. Two vote with us. We spent a lot 0:21:06.359 --> 0:21:09.359 of time and energy on this, and yet generally black 0:21:09.480 --> 0:21:11.560 Rock says, well, we met with the company and we're cool. 0:21:13.000 --> 0:21:17.080 Trust the shareholder advacy community support us. That would be 0:21:17.119 --> 0:21:19.639 a shift in where we're heading and the speed at 0:21:19.640 --> 0:21:22.960 which we could get there. Andrew, thank you so much 0:21:22.960 --> 0:21:30.080 for being here today. Thank you very much. Folks. It 0:21:30.320 --> 0:21:34.320 is time to make the call. Is black Rock really 0:21:34.359 --> 0:21:38.040 taking action to contribute to a more equitable, financially resilient 0:21:38.119 --> 0:21:41.720 future for all? Based on what I've heard so far, 0:21:42.600 --> 0:21:47.680 I'm calling a qualified bs. I think there's some bullshit here, 0:21:48.160 --> 0:21:53.720 but there are also some really positive signs. So what 0:21:53.840 --> 0:21:58.320 should Larry do now? Up next, we'll hear some solutions 0:21:58.320 --> 0:22:02.720 from some experts in in packed investing, including a black 0:22:02.840 --> 0:22:15.960 Rock insider and whistle blower. All Right, before the break, 0:22:16.280 --> 0:22:20.439 I called a qualified bullshit. There's still a gap between 0:22:20.440 --> 0:22:23.480 what Larry think is saying Black Rock stands for and 0:22:23.560 --> 0:22:26.639 the actions they're taking. So what should Larry and his 0:22:26.760 --> 0:22:31.359 leadership team do about that. In this podcast, we don't 0:22:31.440 --> 0:22:34.280 just curse the darkness. We also like to light a 0:22:34.320 --> 0:22:38.439 few candles. So I've invited to impact investing experts to 0:22:38.480 --> 0:22:42.200 propose some concrete things that black Rock could change to 0:22:42.359 --> 0:22:49.960 actually do their story around sustainable investing. First up, I'd 0:22:50.000 --> 0:22:53.000 like to welcome Matthew weatherly White. Matthew is a co 0:22:53.119 --> 0:22:56.000 founder and former managing director of the cap Rock Group, 0:22:56.119 --> 0:22:59.600 a multi family office based in Boise, Idaho, advising over 0:22:59.680 --> 0:23:03.080 three billion dollars, roughly a third of which has been 0:23:03.080 --> 0:23:06.639 deployed with an eye toward impact investing, which they define 0:23:06.680 --> 0:23:12.119 as pursuing positive financial return while simultaneously creating durable, measurable 0:23:12.200 --> 0:23:15.719 social and environmental value. Welcome Matthew. It's great to have 0:23:15.760 --> 0:23:18.040 you here. Thanks for asking me to join this conversation. 0:23:18.040 --> 0:23:22.760 I'm totally excited. We are also joined by Tarik Fancy. 0:23:22.880 --> 0:23:26.479 Tarik has held multiple positions in finance at firms like 0:23:26.520 --> 0:23:30.719 Credit Suites, First Boston, MHR Fund Management, and the Canada 0:23:30.800 --> 0:23:35.840 Pension Plan Investment Board, and in seventeen, Tarik joined black Rock, 0:23:36.040 --> 0:23:39.560 where he was the Chief Investment Officer for Sustainable Investing. 0:23:40.400 --> 0:23:42.359 I actually loved that he has this in his bio, 0:23:42.400 --> 0:23:44.640 so I'm just gonna read it. After trying to make 0:23:44.640 --> 0:23:47.320 Wall Street more green from the inside, he realized that 0:23:47.359 --> 0:23:50.600 there was no real social impact happening, rather just a 0:23:50.640 --> 0:23:54.119 bunch of marketing tak Thank you so much for joining 0:23:54.200 --> 0:23:57.840 us today. Glad to be here. Okay, so let's get 0:23:57.920 --> 0:24:01.120 right into some ideas for black Rock. Matthew in two 0:24:01.160 --> 0:24:04.080 minutes or less. What's the number one thing black Rock 0:24:04.160 --> 0:24:06.920 should do to better do their story? I think that 0:24:06.960 --> 0:24:10.720 you teetered up beautifully. There's this gap between what Larry 0:24:10.760 --> 0:24:14.040 Think is saying very publicly in his annual letters and 0:24:14.720 --> 0:24:17.560 what black Rock appears to be doing, and that really 0:24:17.560 --> 0:24:24.119 begs the question. Is that gap structural, institutional, or operational? 0:24:25.040 --> 0:24:28.760 And I think it's a little bit of all three. Right. 0:24:29.640 --> 0:24:31.480 If I were already think, I would do one really 0:24:31.520 --> 0:24:35.639 simple thing. I would change the new client form to 0:24:35.840 --> 0:24:43.840 require investors to opt out sustainable and impact investing and 0:24:43.920 --> 0:24:48.320 instead opt in, because I think if you make it 0:24:48.440 --> 0:24:51.480 that explicit, rather than forcing people to opt into a 0:24:51.520 --> 0:24:59.320 more inclusive, regenerative, equitable style of investing, if insaid, you 0:24:59.320 --> 0:25:01.760 make people opt doubt, I think the proportion of people 0:25:01.800 --> 0:25:04.600 who would choose to opt in to that sort of 0:25:04.600 --> 0:25:07.639 the negative shadow world of investing, which is now the 0:25:07.920 --> 0:25:11.080 ubiquitous approach. Right, everybody does that because everybody is being 0:25:11.119 --> 0:25:15.359 asked to opt into sustainable impact investing. I think the 0:25:15.440 --> 0:25:19.040 messaging alone would give Larry Fink so much power, so 0:25:19.119 --> 0:25:23.000 much sort of political capital to force change within the 0:25:23.080 --> 0:25:30.560 organization that that institutional operational hesitation slash resistance slash intractability. 0:25:31.080 --> 0:25:32.880 I think it would sort of collapse by on its 0:25:32.920 --> 0:25:36.600 own weight. When you look at organ donation for example, 0:25:37.160 --> 0:25:40.320 and the percentage of people that opt into organisation donation 0:25:40.440 --> 0:25:44.160 versus opt out of organization. It depends entirely upon how 0:25:44.200 --> 0:25:46.239 the form is structured. And if you have to opt in, 0:25:46.280 --> 0:25:50.080 it's like the people who are signing it opt into 0:25:50.080 --> 0:25:52.720 how the organs donated. But if you make them opt out, 0:25:52.760 --> 0:25:57.240 it's like eight. So just change the default setting. Essentially, 0:25:57.400 --> 0:26:00.760 it's one of those really simple, really deceptive them guessing 0:26:00.760 --> 0:26:03.200 that teople will say totally not possible. But I feel 0:26:03.240 --> 0:26:07.080 like there's one thing I would do. Yeah, No, I 0:26:07.080 --> 0:26:11.399 think that's a super cool idea. Reframe the whole conversation. Matthew. 0:26:11.480 --> 0:26:14.240 That was great, Thank you, Okay, Taric, your turn in 0:26:14.280 --> 0:26:16.960 two minutes or less. What's your idea to get black 0:26:17.040 --> 0:26:21.200 Rocks actions better aligned with their stated purpose? Well, I mean, 0:26:21.200 --> 0:26:23.560 I obviously know black Rock from the inside. I know 0:26:23.880 --> 0:26:26.160 Larry personally and worked firm, and I think he's extremely 0:26:26.200 --> 0:26:29.320 intelligent and talented. What I think he should do is 0:26:29.600 --> 0:26:32.600 actually be honest about the limitations of what business and 0:26:32.640 --> 0:26:37.239 financial markets can do without government regulation. And what do 0:26:37.280 --> 0:26:40.240 I mean by that. I don't think that the financial 0:26:40.280 --> 0:26:42.960 markets right now are structured in any kind of way 0:26:42.960 --> 0:26:46.560 where they can address the climate threat because people are 0:26:46.600 --> 0:26:48.760 still able to pollute and they don't pay the cost 0:26:48.800 --> 0:26:51.960 of that pollution. The biggest issues surround the fact that 0:26:52.000 --> 0:26:56.040 the entire system is structured to chase yield and profitability. 0:26:56.440 --> 0:26:59.399 That's not just black Rock, that's every single firm, including 0:26:59.400 --> 0:27:01.280 all the ones up worked at. And that's not a 0:27:01.320 --> 0:27:04.080 bad thing. I'm not disparaging it. I'm being realistic about 0:27:04.080 --> 0:27:06.760 a system that has been built with a chain of 0:27:06.920 --> 0:27:11.040 legal and financial obligations that Larry himself can't intervene in, 0:27:11.600 --> 0:27:14.640 and they're all around chasing profit. I think the most 0:27:14.640 --> 0:27:17.159 important thing you can do is actually look and say, listen, 0:27:17.920 --> 0:27:20.159 you know, we business leaders will lead as much as 0:27:20.240 --> 0:27:23.240 we can, but we need referees. Just like a competitive 0:27:23.240 --> 0:27:27.560 sports game has competition and there are rules and people 0:27:27.600 --> 0:27:30.800 compete on a playing field. Well, right now, the idea 0:27:30.840 --> 0:27:32.560