Speaker 1: M. This is Mesters in Business with Very Results on
Speaker 1: Bloomberg Radio. This week on the podcast, I have an
Speaker 1: extra special guest. Jennifer Grancio was there at the beginning
Speaker 1: at Barclays when the beginning of E t F S
Speaker 1: and passive indexing really took off on an institutional basis.
Speaker 1: She was one of the founding members when Blackrock bought
Speaker 1: I shares from Barclays and and really helped drive broad
Speaker 1: adoption of passive and and E t F s UH
Speaker 1: in the financial community. Today, she is the CEO of
Speaker 1: Engine Number One, which focuses on the fascinating transitions that
Speaker 1: are taking place in broad strokes across the economy. There
Speaker 1: are numerous opportunities and energy and climate and robotics and automation,
Speaker 1: and her firm helps invest in those spaces. Not quite
Speaker 1: an activist investor, but she has worked with a number
Speaker 1: of companies like Exxon and General Motors and Occidental where
Speaker 1: the input of Engine Number One drove significant changes at
Speaker 1: those companies. They're a long time investor. They're not a
Speaker 1: black hat activist where they're looking to buy stock, force
Speaker 1: an exit of the CEO and sell once the stock pops.
Speaker 1: Really fascinating story. I found it quite fascinating and I
Speaker 1: think you will as well. So, with no further ado,
Speaker 1: my interview with engine number ones Jennifer Grencio. Let's start
Speaker 1: out talking about the early part of your career. I'm
Speaker 1: really curious how you ended up in black Rock, but
Speaker 1: before that, you're working as a consultant. Yes, I think
Speaker 1: like a lot of people on Underground actually ended up.
Speaker 1: I went to Stanford thinking I was going to do
Speaker 1: genetics and science. UM didn't interns to pivoted, ended up
Speaker 1: doing international relations. Then, as you had towards the end
Speaker 1: of college, you figure you're gonna save the world, and
Speaker 1: I'm gonna go work for the World Bank. World Bank
Speaker 1: wants you to take out more student debt and get
Speaker 1: a master's degree. So, like so many other bright eyed graduates, UM,
Speaker 1: I trooped off to, you know, one of the traditional
Speaker 1: professional services professions. UM. The thing it was kind of
Speaker 1: interesting for me about consulting was this idea that you
Speaker 1: you almost apprentice with somebody that's senior, and you run
Speaker 1: around and try to help companies with problems. So seems
Speaker 1: like a good idea at the time of the time,
Speaker 1: and that's what I went off to do. So how
Speaker 1: do you go from that? How do you end up
Speaker 1: at a place like black Rock? I share seems to
Speaker 1: have been almost an accidental business line from them. I'm
Speaker 1: remembering correctly. That was a post financial crisis Barclays purchase
Speaker 1: something along exactly, yes, exactly, yeah, So if you go back,
Speaker 1: So I management consulting, moved back to California, decided I
Speaker 1: was going to be a California person, not a New Yorker.
Speaker 1: No offense to New York. Spent a lot, and so
Speaker 1: I went looking for what I thought would be the
Speaker 1: best asset management business. I focused on asset management within
Speaker 1: the consulting space, like this idea that somehow if you
Speaker 1: got portfolio construction and savings right, you help people over time. Um,
Speaker 1: And so I joined what was Barclay's at the time.
Speaker 1: The asset management business of Barkley's bank was this little
Speaker 1: firm called Barkley's Global Investors based in San Francisco. And
Speaker 1: that was not such a little firm at the time.
Speaker 1: Was now it was growing very quickly, and that business
Speaker 1: was an institutional business. So as an institutional business, we
Speaker 1: did indexing. We thought indexing was cool. Um and the
Speaker 1: eye shares in the e t F idea came from
Speaker 1: we just had a fundamental belief it was a better
Speaker 1: mouse trap. So there's something about an e t F
Speaker 1: and we could go into that another time. There's something
Speaker 1: about an e t F that's a better mouse trap
Speaker 1: than a mutual fund. And so for Barkley's Bank, we pitched,
Speaker 1: here's a great idea, let's build this e t F
Speaker 1: business in the US. And it's a way for Barkley's
Speaker 1: to build in the United States. And so we launched
Speaker 1: the business in two thousands. So we launched it right
Speaker 1: into the dot com crisis. So from the dot com
Speaker 1: crisis to the global financial crisis, what were the circumstances
Speaker 1: surrounding black Rock Santa Barclay's, Well, we'll take that little
Speaker 1: worthless business off your hands for a couple of hours. Yeah,
Speaker 1: And the interesting thing about an e t F business
Speaker 1: is that it takes a long time to build. And
Speaker 1: so to your question, around that time, going into two
Speaker 1: thousand and eight, Barclay's need in cash and the index
Speaker 1: business was starting to take off in the form of ETFs,
Speaker 1: or at least we thought that, but it was still
Speaker 1: a relatively small business. Um and So who were the
Speaker 1: other people that probably looked at that acquisition included other
Speaker 1: big indexers, big asset managers who weren't sure was indexing
Speaker 1: going to be a thing or not, because remember at
Speaker 1: the time e T S and index were synonymous. But Larry,
Speaker 1: you know, it was more forward looking, Larry being Larry
Speaker 1: Fink of black Rock, who arguably, and I know who
Speaker 1: Larry is. I just want the audience to know, arguably,
Speaker 1: the purchase of I Shares by black Rock from Barclays
Speaker 1: could be one of the great opportunistic distress purchases in
Speaker 1: the middle of a crisis. Ever in financials, what is
Speaker 1: I shares up to now? Like four trillion dollars something
Speaker 1: insane enormous. Yeah, So and they picked it up for
Speaker 1: a teeny tiny fraction of that. So what was your
Speaker 1: experience like when black Rock took over I Shares. Yeah,
Speaker 1: So we we built the ICE Shares business first within
Speaker 1: Barclays UM and we were a you know, small but
Speaker 1: mighty team doing e T s and the whole idea
Speaker 1: remember of ets, is to go and to challenge mutual
Speaker 1: funds and challenge active management. So that's a big thing
Speaker 1: to take on. And so as black Rock worked through
Speaker 1: the acquisition of all of the v g I business,
Speaker 1: including I Shares. We spent a couple of years then
Speaker 1: getting to know black Rock as a little Eye Shares
Speaker 1: team UM and talking about e t F s and
Speaker 1: fee based advice and portfolio construction and all these things
Speaker 1: that we thought were trends could take advantage of and
Speaker 1: used to build the business. UM. But then the business
Speaker 1: really just got from strength to strength after that acquisition.
Speaker 1: We came out of the financial crisis a few rocky
Speaker 1: years in the e t F industry overall, Vanguard decided
Speaker 1: to get into e t s in a serious way. UM.
Speaker 1: Black Rock and I Shares launched that core series as
Speaker 1: a competitive business, so kind of responding to what was
Speaker 1: going on in the market. And the business continue to
Speaker 1: grow and grow. And then I think from an e
Speaker 1: t F industry perspective, UM, we did some important work
Speaker 1: on trying to protect the category of e t F.
Speaker 1: So we did a lot of work with US regulators, UM,
Speaker 1: European regulators. I ran the business in Europe for a
Speaker 1: while as well. UM. Talking about the differences between a
Speaker 1: passive index fund, for example, and e t F that's
Speaker 1: got commodity exposure and E t F that's leveraged or
Speaker 1: inverse in terms of trying to protect the vehicle and
Speaker 1: protect the category. And really since then there's just been
Speaker 1: continued explosive growth. In your wildest dreams, did you ever
Speaker 1: imagine back from the sleepy early days of passive and
Speaker 1: E t F at Barclay's that would grow up to
Speaker 1: be just the dominant intellectual force and investing and reach
Speaker 1: the size it's reached. What is even after this year
Speaker 1: black Rock is something like eight trillion, nine trillion and eight. Yeah,
Speaker 1: I mean the numbers are huge. I think we did
Speaker 1: but maybe that maybe we were naive, but our view
Speaker 1: was it just it was it was a trend that
Speaker 1: was going to happen, and if you could own the
Speaker 1: trend and if you could accelerate the trend, this was
Speaker 1: a better way to invest. A better way to invest
Speaker 1: is to have a low cost solution at the core
Speaker 1: of the portfolio and then hire people that are deeply
Speaker 1: capable to deliver alpha. So I would say we thought
Speaker 1: it could be big, but you know, it's pretty amazing.
Speaker 1: So you talk about accelerating the trend, what exactly do
Speaker 1: you do to help accelerate that trend. How do you
Speaker 1: drive acceptance of both e t f s as a
Speaker 1: rapper as opposed to the traditional forty act mutual funds
Speaker 1: and passive US is more traditional stock picking, market timing,
Speaker 1: active investment. Yeah, I think we when the industry first started,
Speaker 1: So going back, you know, twenty years now, the two
Speaker 1: things were synonymous. But you know, let's let's take those
Speaker 1: one at a time. So from a passive perspective, the
Speaker 1: argument we made as an industry selling passive ETFs was
Speaker 1: you really had to take a look at what the
Speaker 1: portfolio is doing over time, total cost, total risk exposure.
Speaker 1: And when you did that, you often found that there
Speaker 1: was a way to get better long term performance and
Speaker 1: cheaper by having some index in a portfolio. So that
Speaker 1: was the story on index saying, and then we kind
Speaker 1: of kept driving that into this idea of models. So
Speaker 1: now you know, we have there's a model a huge
Speaker 1: amount of money. You know, trillions of dollars sit in
Speaker 1: models in US wealth. What does that mean? It means
Speaker 1: a big wirehouse or brokerage puts a model together this
Speaker 1: much Europe, this much US, this much small cap, and
Speaker 1: then you can use index products to fill all those allocations.
Speaker 1: And so that was the kind of the twenty year
Speaker 1: build of how did passive get so big? UM, and
Speaker 1: then E t F is a rapper. It's just it's
Speaker 1: just a great way to get the price at the
Speaker 1: moment if you're buying into the public markets. Number one,
Speaker 1: UM and number two, it's a great way to manage
Speaker 1: tax where if you buy something now and you sell
Speaker 1: it in twenty years and the market has gone up,
Speaker 1: guess what we all have to pay tax on that.
Speaker 1: But the kind of annual capital gains gift you get
Speaker 1: from a lot of mutual funds, it can be managed
Speaker 1: very astutely in the E T F rapper And that's
Speaker 1: that's great, Like that's great for all investors. Meaning if
Speaker 1: you're a mutual fun owner who's not selling, but somebody
Speaker 1: else sells and generates a capital gain that gets spread
Speaker 1: around to the other it doesn't make I mean, as
Speaker 1: somebody that's been doing ETFs for a long time, I say,
Speaker 1: it doesn't make any sense whatsoever, because there's another way
Speaker 1: to do it, and we're fine, and we're finally seeing
Speaker 1: that now we're finally seeing a lot of the big
Speaker 1: mutual fund companies start converting into E T s the flows,
Speaker 1: even in a down year like the flows have all
Speaker 1: been towards passive, towards e t F, towards low cost.
Speaker 1: It seems like a much better mass trap. I think
Speaker 1: it is. I'm not going to get much of an
Speaker 1: argument from you on that. So you mentioned Vanguard, we're
Speaker 1: talking about black Rock. Let's talk a little bit about
Speaker 1: the role of branding in the industry. How important is
Speaker 1: that when you're putting out either a low cost, passive
Speaker 1: et F at three or four BIPs or something more
Speaker 1: active or thematic on the t F side. Yeah, I mean,
Speaker 1: the role of brand is pretty critical. And if you
Speaker 1: think about in the index business, if you're managing it, well,
Speaker 1: there's not a lot of performances. Are you a tracking
Speaker 1: the index? Yes or no? And so that power of
Speaker 1: the brand is massive. And my observation in the space
Speaker 1: is that the average investor, the average retail person that's
Speaker 1: going out and investing or talking to an advisor, they
Speaker 1: don't necessarily know one product provider or investor versus another,
Speaker 1: but they definitely know who they do business with or
Speaker 1: who they buy from. So that retail brokerage brand, their
Speaker 1: advisory brand, has a huge impact them. So do your
Speaker 1: question on Vanguard like Vanguards a brokerage firm, so you
Speaker 1: kind of know Vanguard Vanguards in your form one K
Speaker 1: you've heard of Vanguard, and so for other people that
Speaker 1: enter the industry, and this is certainly what we did
Speaker 1: in the eye shares business or what we do now
Speaker 1: at engine. Number one is you really have to be
Speaker 1: clear on who are you and what is your story
Speaker 1: because the brand matters a lot. So you mentioned brokerage firms,
Speaker 1: and Vanguard does for Owen k broke Ridge, they do
Speaker 1: all sorts of obviously mutual funds and e t f s.
Speaker 1: How do you see some of the bigger custodians and
Speaker 1: actual brokers like Schwab and Fidelity In terms of et
Speaker 1: F developments, we know it's black Rock, Vanguard and State
Speaker 1: Street at the top. These guys are no slouches either,
Speaker 1: are they now? I mean, I would say if we
Speaker 1: go back and we look at the history of e
Speaker 1: t s and how they've developed, we see State Street, Vanguard,
Speaker 1: black Rock, black Rock Eye Shares as very dominant and
Speaker 1: they're going to continue to be dominant in passive period.
Speaker 1: They're they're they're big, They're so big now, Um, and
Speaker 1: we'll come back to this later. I personally think there's
Speaker 1: some problems with how big they are, but from an
Speaker 1: ease of buying decision making perspective, they're big. They're dominant.
Speaker 1: The brokerages were late to get in the game, so
Speaker 1: Fidelity and Schwab got in much later. They didn't They
Speaker 1: don't charge fees for those products, and so it makes
Speaker 1: it harder for them as a kind of a corporate
Speaker 1: organism to you know, have that be a big part
Speaker 1: of their business. And then what we're very excited about
Speaker 1: it Engine number one and what you're seeing with the
Speaker 1: mutual fund conversions, the big ones at d f A,
Speaker 1: at Franklin, Templeton, the list goes on. There are many
Speaker 1: is that we're now ready to move back to funds
Speaker 1: into the E t F structure, and that I think
Speaker 1: is very exciting. But that's new. That's a very new development.
Speaker 1: So let's talk a little bit about Engine number one. First.
Speaker 1: How did you get there from black Rock? What led
Speaker 1: that transition? Yeah, so I left black Rocks very large.
Speaker 1: I wanted to do a little bit more innovation, and
Speaker 1: I think sometimes the biggest firms are great, but they
Speaker 1: can't always lead from an inner vation or change perspective UM.
Speaker 1: So I spent a couple of years, I built an
Speaker 1: advisory firm UM and took a couple of years. I decided,
Speaker 1: you know what what was the next move? And I
Speaker 1: had some great did some great work with a number
Speaker 1: of large wealth in r A firms that were going
Speaker 1: through an M and A or selling themselves process. UM
Speaker 1: did some work on impact investing. Actually led me to
Speaker 1: Ethic and joined the Mankind Board. But decided I was
Speaker 1: I I was definitely going to be a builder, that
Speaker 1: there was this opportunity to do something different than traditional
Speaker 1: mutual fund and passive e T f U, and so
Speaker 1: I started looking for what would be the thing I
Speaker 1: wanted to build with partners UM. And then I met
Speaker 1: Chris James and did you launch engine number one or
Speaker 1: did you join him when it was already existing? We
Speaker 1: launched it together. But Chris is going back, you know,
Speaker 1: before we started the firm. So Chris James is our
Speaker 1: founder at and TO number one. And Chris's background is
Speaker 1: hedge fund and private fund investments, and what he's really
Speaker 1: known for is he's known for taking an extremely long
Speaker 1: view on something and doing the work UNTI let's say,
Speaker 1: where's the opportunity as you go through a huge train,
Speaker 1: information or transition. So Chris was hard at work on
Speaker 1: this and wanted to reach into the wealth space. So
Speaker 1: rather than just doing products that were private and you
Speaker 1: could help institutions invest, um, what could we do that
Speaker 1: was broad and into the wealth space. UM? So I
Speaker 1: joined him to collaborate given my background on that side
Speaker 1: of the business, and the idea of Engine number one
Speaker 1: is just to help people benefit from these huge transitions
Speaker 1: and transformations that are very much not the backwards looking look.
Speaker 1: Google and Amazon got great. You know, our portfolios have
Speaker 1: a lot of growth in tech great. There's a lot
Speaker 1: of money to be made in the energy transition, transportation, agriculture,
Speaker 1: and so really the idea of the firm is to
Speaker 1: be able to look forward, find miss pricing, and make
Speaker 1: money as we go through these huge changes. The firm's
Speaker 1: name is intriguing. Where does Engine number one come from?
Speaker 1: The first firehouse in San Francisco is actually a couple
Speaker 1: of blocks from our office. UM. And in talking about
Speaker 1: what we were trying to do, which is maybe it's grandios,
Speaker 1: but if you think about it, like capitalism works, and
Speaker 1: what we were agitated about is we saw the market
Speaker 1: you have E s G over here very small. We
Speaker 1: think old school E s G is not does not work.
Speaker 1: We have a strong view on that. And come back
Speaker 1: to that indexing. Too many shares are locked up in indexes.
Speaker 1: Index don't vote their shares. And then maybe most important
Speaker 1: of all, we're going to need a general motors and
Speaker 1: afford to actually be able to do this huge transition
Speaker 1: from internal combustion to battery electric vehicles. And so you know,
Speaker 1: actually the firehouse is the center of the community, right
Speaker 1: and if you think about how a community survives, the
Speaker 1: firehouse is the center the community takes care of itself.
Speaker 1: A well run business really should be as simple as
Speaker 1: sort of taking care of the environment. It's in being
Speaker 1: aware of it. And in public markets that means you
Speaker 1: also have to be able to adapt and manage their change.
Speaker 1: So tell us a little bit about the strategies you
Speaker 1: guys employ. What are your key focuses? How do you
Speaker 1: deploy capital? Yeah, we as a business, we run an
Speaker 1: all its business and then we run the e t
Speaker 1: F platform. So that if you think about it, very simply,
Speaker 1: these huge ideas about transition and transformation and how to
Speaker 1: make money are very common across what we do, but
Speaker 1: we have two businesses and UM, the big ideas are
Speaker 1: these transitions and transformations and how do you take advantage.
Speaker 1: And so when we look at public companies, we look
Speaker 1: at every single company and we look at what their
Speaker 1: path is through time. So I think this is one
Speaker 1: of the problems with a lot of investment strategies right now,
Speaker 1: as they're looking too short term UM. And then we
Speaker 1: build the impact or externality data, we just build it
Speaker 1: into the financial model, right because the data is out there,
Speaker 1: particularly on governance, particularly on environmental issues. And when we
Speaker 1: do that in these sectors that are in transition. Let's
Speaker 1: take energy for example, if you're an oil and gas
Speaker 1: company and you don't account for the emissions that you're
Speaker 1: dealing with and you don't decrease them over time, you're
Speaker 1: gonna have a problem. And we saw this when we
Speaker 1: started building the business that a lot of these companies
Speaker 1: were heading towards zero terminal value. So let's take X
Speaker 1: on for sample, where if you take X on and
Speaker 1: X and keeps doing long dated fossil fuel projects and
Speaker 1: has no plan to reduce emissions at any point in time,
Speaker 1: and has no plans to develop a green business. Well,
Speaker 1: that's not very good for x on stock when we
Speaker 1: get to seven or ten years out, and so we
Speaker 1: see a lot of these opportunities where like it's just math.
Speaker 1: The capitalist system is supposed to have the company government
Speaker 1: itself so that it's making money through time, it has
Speaker 1: a longer duration of business, and it has a higher value.
Speaker 1: And that's the kind of the way that we work
Speaker 1: in everything that we do. So you mentioned environmental issues
Speaker 1: and impact, you mentioned governance. This sounds a lot like
Speaker 1: two thirds of E s G. Yeah, we think the
Speaker 1: way people use that label is a little bit problematic.
Speaker 1: So people often use that label looking backwards. Flesh that
Speaker 1: out a little more. When when I hear someone mentioned
Speaker 1: E s G, I typically think of an investor. And
Speaker 1: for the most part, as we go through this generational
Speaker 1: wealth TRANSFERM you do surveys of investors husband passed away,
Speaker 1: the wife tends to be much more empathetic with issues
Speaker 1: of equality and environmental concerns, and the next generation is
Speaker 1: much more concerned. So it seems like there is a
Speaker 1: desire to express those beliefs in their portfolios. Why does
Speaker 1: that not work with the s J. Yeah, I mean
Speaker 1: our I guess our view on that would be you
Speaker 1: can always express values in a portfolio. But if you're
Speaker 1: going to express values in a portfolio, say that I
Speaker 1: am expressing my values in the portfolio, which is different
Speaker 1: than the core concept of managing money over time is
Speaker 1: generally for the person that's doing the managing is to
Speaker 1: be a fiduciary and drive good outcomes and strong returns,
Speaker 1: and for in general for the investor is to drive
Speaker 1: returns over time um. And so the way we think
Speaker 1: about it is, really you can do that, and any
Speaker 1: business that is going to survive over time time has
Speaker 1: to be sustainable, has to address or basically cover their
Speaker 1: impacts right after the cost of capital so that they
Speaker 1: can be profitable over time. So instead of thinking E
Speaker 1: s G means its values based I don't like the company,
Speaker 1: they're bad, I'm going to screen amount of my portfolio.
Speaker 1: We don't think that's a great way to manage your
Speaker 1: core portfolio over time. We think the better way is
Speaker 1: you simply have to engage with the companies to make
Speaker 1: sure that their most material impacts. That's financial data, right,
Speaker 1: that's risk data. If you don't manage your emissions as
Speaker 1: an oil and gas company, and so let's build that
Speaker 1: into just investing to make returns as opposed to this
Speaker 1: special class which you know it values based in E
Speaker 1: s G. Tends to kind of infer value over performance,
Speaker 1: right or divesting from companies that you don't like, and
Speaker 1: that's we don't think that's a great way to invest.
Speaker 1: So let me push back a little bit on the
Speaker 1: low carbon strategy. It seems like it's uh half of
Speaker 1: the economic equation because p pool seem to be approaching
Speaker 1: entities like x on Mobile and others, the suppliers of
Speaker 1: the carbon based fuel. What is that doing if you're
Speaker 1: ignoring the other half, the consumers? So every other company
Speaker 1: that is not a carbon energy producer is likely to
Speaker 1: be a carbon energy consumer. They're running factories, they're shipping goods,
Speaker 1: they're having offices. Why focus on one half of the
Speaker 1: equation and not the other? Yeah, I mean, I think
Speaker 1: that's the right question, and we focus on both. And
Speaker 1: so let's take for a minute the energy industry and
Speaker 1: then the transportation or auto industry. That's an example of
Speaker 1: that kind of handshake or handlock. Right, So in the
Speaker 1: case of the car companies, that's consumption. So if we're
Speaker 1: consumers and we're driving cars, which we still do when
Speaker 1: people are planning to do in the future. The car
Speaker 1: company can switch from encouraging the behavior of driving internal
Speaker 1: combustion engines which have very high emissions, or the car
Speaker 1: company can know that the consumer demand is shifting a
Speaker 1: little bit and they can build a car that is
Speaker 1: an awesome battery electric, reasonably priced vehicle, and then they
Speaker 1: can capture that shift in demand, and that's really good
Speaker 1: for the car company. So we actually, we ad percent
Speaker 1: believe that this has to primarily be driven on the
Speaker 1: consumer demand sign and on the first piece of that.
Speaker 1: So if I'm a consumer, i buy a car, you've
Speaker 1: got to start with the car company. However, if you
Speaker 1: look at global emissions, you know percent of that today
Speaker 1: comes from the energy companies. So at the same time,
Speaker 1: in parallel, there's still an opportunity to work with those
Speaker 1: companies on as battery electric comes up, as fossil fuel
Speaker 1: comes down, how do those companies make a lot of
Speaker 1: money nine or ten years from now as we go
Speaker 1: through that transition. Explain that thirty because again it's that
Speaker 1: someone's a buyer, someone's a seller. They're not burning thirty
Speaker 1: percent of the fossil fuels, they're selling it to consumers
Speaker 1: who who are burning it. Like though there are some
Speaker 1: low carbon ETFs, I just don't understand. It's why the
Speaker 1: war on drugs failed. If you're only gonna interdict the
Speaker 1: supply but ignore the demands, you're not going to be successful. Yeah,
Speaker 1: that's right, I mean, And we think from an investment perspective,
Speaker 1: if you want to solve this problem on how do
Speaker 1: you take emissions down? We think that problem can be
Speaker 1: solved and you can make money by owning the people
Speaker 1: that are gonna win. So you asked before, like what
Speaker 1: do we do? What strategies do we run? In the
Speaker 1: e t F business are active team it's it's effectively
Speaker 1: hedge fund investors. So they're very concentrated portfolios. We believe
Speaker 1: we're right. It's a handful of names, like under thirty
Speaker 1: names today in the portfolio um tickers net z, so
Speaker 1: Climate Transform, Climate net z. And what that portfolio holds
Speaker 1: is it holds companies that have emissions. But we believe
Speaker 1: that the companies in the portfolio are the companies that
Speaker 1: have the right strategy to if I'm an energy company,
Speaker 1: I'm producing energy. There's demand for energy. That's what I do.
Speaker 1: But I'll tell you my emissions, I'll do methane, third
Speaker 1: party monitoring, I'll do all the right things, so that
Speaker 1: from a social license to operate perspective, I'm at the
Speaker 1: top of my peer group. And in all cases they
Speaker 1: have a strategy, whereas fossil fuel demand to clients not
Speaker 1: today but in seven ten years, they have a strategy
Speaker 1: to actually make money and still have value. So we're
Speaker 1: picking the top best performing energy companies. We're not seeing
Speaker 1: energies bad energies essential and we need that energy in
Speaker 1: the transition. And the portfolio then also holds the car
Speaker 1: companies that we think when so let's talk about a
Speaker 1: couple of names. So a couple of energy names from
Speaker 1: net Z and a couple of car companies from that six. Yeah,
Speaker 1: and so one of the names we had in the portfolio,
Speaker 1: which is actually so highly valued it goes in and
Speaker 1: out depending on if it's overvalued. It's an active fund
Speaker 1: um is Occidental and Oxy And that's an example. They
Speaker 1: were really the leader in the space that they had
Speaker 1: started to develop greener businesses so that as fossil use
Speaker 1: comes down, they have another business in their competitive that's
Speaker 1: great for long term value of the company. And what
Speaker 1: are their green businesses, things like solar and wind or
Speaker 1: they have a range of things that they do in
Speaker 1: that space. But think of it as committing early to
Speaker 1: find ways to make money, having people on staff on
Speaker 1: the board that know how to run green businesses, and
Speaker 1: then from a um from an emissions perspective, also, they
Speaker 1: were very early on telling us being very transparent on
Speaker 1: Scope one and two and agreeing to oil gas methane
Speaker 1: partnership emissions with third party monitoring of emissions, which we
Speaker 1: think is critical because again methane emissions leaking, that's probably
Speaker 1: the biggest thing, especially with natural gas, but with pretty
Speaker 1: any any form of carbon that's capture your carbon um
Speaker 1: removal from the ground, that's a big risk. Methane is
Speaker 1: even worse than CEO two and and that's right, and
Speaker 1: that's some of the active ownership work we did in
Speaker 1: that portfolio. Or Canoko and Devon are companies that we
Speaker 1: worked with to join the methane third party verification partnership
Speaker 1: this past summer. And that's when we talk about Engine
Speaker 1: number one as active owners it's not always you know,
Speaker 1: the black hat activist. We actually haven't done that other
Speaker 1: than excellent. But the ability to really understand their business
Speaker 1: and go in and work with them on actually having
Speaker 1: the methane verified is a big deal because then people
Speaker 1: understand what you're doing in that part of the business
Speaker 1: and it gives you license to operate because we need
Speaker 1: we need that energy source. What are the car companies
Speaker 1: that are in netzy UM General Motors is in net
Speaker 1: z Ford has been. It goes in and out of
Speaker 1: the portfolio based on how they're doing managing some of
Speaker 1: their supply chain constraint issues. And then UM Tesla's in
Speaker 1: the portfolio, but GM's at a much larger weight than Tesla,
Speaker 1: and then Tesla went out of the portfolio for governance
Speaker 1: reasons because Twitter. Because of Twitter. So if you think
Speaker 1: about so the way that we manage that portfolio, basically
Speaker 1: what net z is is you're holding some of the
Speaker 1: biggest emitters and you're holding this one point eight metric
Speaker 1: tons of emissions a year, so not low carbon, high carbon,
Speaker 1: and then what we expect is that those companies are
Speaker 1: going to take that number down to less than half
Speaker 1: within a decade. And so if you care about impact
Speaker 1: or sustainability, yeah, that's great, that's a huge win. You're
Speaker 1: holding the company's watching them, they're taking amission is down.
Speaker 1: But if you want to make money, you're holding the
Speaker 1: companies that are providing energy but doing it in a
Speaker 1: way that they have a social license to operate. And
Speaker 1: then so to come back to your test, like example,
Speaker 1: all of it starts with governance. And so if a
Speaker 1: public company is going to make money over years and years,
Speaker 1: it's it's all about governance and do you understand your markets?
Speaker 1: Do you understand how things change? And so if you're
Speaker 1: running Tesla and you have a huge job to do
Speaker 1: in terms of scaling that business, but you're also doing
Speaker 1: other things at the same time and saying you don't
Speaker 1: time to run Tesla, well that's kind of a governance issue.
Speaker 1: So when I look at the acquisition of Twitter, which
Speaker 1: started out as a lark forty four billion, the market
Speaker 1: drops wild over payment. The bigger issue is if you
Speaker 1: think about who's Tesla buyers, they seem to not be
Speaker 1: the people who Ellen is playing too on Twitter. And
Speaker 1: in fact, as much as there are a lot of
Speaker 1: fan boys, and I think you have to give Elon
Speaker 1: full credit for moving the entire auto wind industry to
Speaker 1: e v S. I think all the legacy makers looked
Speaker 1: at him and said, we can't let Ellen do to
Speaker 1: us what Bezos did to the book industry and the
Speaker 1: booksellers and a dozen other industries. But it seems like
Speaker 1: he's alienating that core middle left, all those liberals we're
Speaker 1: gonna own on Twitter. He seems to be chasing away
Speaker 1: a lot of his future buyers of Tesla's He may
Speaker 1: be that's good news for GM, though, So okay, we're
Speaker 1: covered on that one. You don't care and to say
Speaker 1: nothing about valuation issues and other sort of things, I'm
Speaker 1: assuming this isn't strictly UH s G checklist you look
Speaker 1: at We look at the usual things, and that that's
Speaker 1: maybe our main point, which is the people people get
Speaker 1: in our industry in particular, they get stuck in old frameworks,
Speaker 1: right and E t F is an index fund UH
Speaker 1: and activist is somebody that comes in short term and
Speaker 1: fires the CEO. So I think we need to be
Speaker 1: careful of those quart of short ways and short hand
Speaker 1: ways of thinking in investments. Our point of view is
Speaker 1: that there's a lot of data available now, we have
Speaker 1: a huge amount of data. Take the climate and environmental
Speaker 1: related issues. We have a lot of data on carbon
Speaker 1: and we can estimate carbon prices, and so in a
Speaker 1: basic fundamental financial model, you can start with your old
Speaker 1: traditional financial model, but you can add in we do this,
Speaker 1: we can add in the monetization of those emissions, and
Speaker 1: then as you build out your financial model, you can
Speaker 1: look at how the company reduces them over time. And
Speaker 1: we just we see those as purely financial metrics, right
Speaker 1: that those a large, large externality for a company is
Speaker 1: a risk or financial measure. It's not some separate e
Speaker 1: s g. Dot bubble rating system. It's just it's their numbers,
Speaker 1: it's math. It should go into the long term valuation
Speaker 1: of the business. Let's talk about the x On situation.
Speaker 1: You accumulated a relatively small number of shares and then
Speaker 1: reached out to management. Tell us about the process and
Speaker 1: how they reacted to your overture. Yeah, so from a
Speaker 1: team perspective, we we've started by making an economic case.
Speaker 1: So we did the work on here's what we would
Speaker 1: do differently, Here's how we think the value of the
Speaker 1: business would be higher if we did this. And these
Speaker 1: suggestions on what we would do differently included disclosure of
Speaker 1: emissions it included better capital allocation decisions between this sort
Speaker 1: of short term energy transition period and we don't know
Speaker 1: when it's going to be thanks to you know, putting
Speaker 1: in the Ukraine longer than we thought a year ago,
Speaker 1: but at some point we're going to start to really
Speaker 1: pivot into an energy transition. And so what what is
Speaker 1: what's your best thinking x on as a company on
Speaker 1: what your business looks like, in your capability at a
Speaker 1: board level to extend the duration of the business, do
Speaker 1: things that may be renewable or whatever they may be.
Speaker 1: What is it that you can do that's in that area,
Speaker 1: um And so those were the things that we requested.
Speaker 1: They were receptive to that, and they were not receptive
Speaker 1: to that, But those are the things that were requested,
Speaker 1: which is usually how these things start. So point two
Speaker 1: percent of outstanding shares doesn't exactly put the fear of
Speaker 1: God into them. Why a toe in the water and
Speaker 1: not a more substantial stake x on. Going back to
Speaker 1: when we started the proxy campaign, there they were giants,
Speaker 1: but also there were a giant in terms of the
Speaker 1: big asset managers had not been able to get them
Speaker 1: to pivot from a governance perspective, so there were known
Speaker 1: concerns about governance. A lot of the big investors take
Speaker 1: a slower approach to work with management. Not caused too
Speaker 1: much change request changes UM and there just hadn't been
Speaker 1: any progress in this case. So we were able to
Speaker 1: have conversations and the team did a huge amount of
Speaker 1: work with investors and passive investors and active investors walking
Speaker 1: through our economic case. If these things happen, better governance,
Speaker 1: better economic performance, and that we think is what allowed
Speaker 1: us to rally support and as we were rallying support
Speaker 1: UM as you as you see in this situation, I'm
Speaker 1: sure Exxon was talking to some of those investors as well.
Speaker 1: And so as we went through the campaign process, we
Speaker 1: saw some of these changes on changes in capital allocation
Speaker 1: decisions UM and intention to launch a green business. So
Speaker 1: some of these changes started even before the proxy vote
Speaker 1: where new directors were directly elected onto the board. So
Speaker 1: we talk a lot about specific companies. How do you
Speaker 1: look at the macro environment and geopolitics? You mentioned Putin's
Speaker 1: invasion of the Russian invasion of Ukraine. Arguably that's going
Speaker 1: to accelerate the greening of Europe in particular, and the
Speaker 1: move to alternative energy sources not dependent on Russia, which
Speaker 1: is old carbon. Yeah, and I think this is some extent.
Speaker 1: You can't control what is the moment in time where
Speaker 1: the energy transition happens. Right, However, now, right, aren't we
Speaker 1: more or less in the midst of this today? We're
Speaker 1: in that. We are in the transition absolutely, But we
Speaker 1: think that if you wanted to not use fossil or
Speaker 1: carbon intensive now, it wouldn't possibly work. We're not ready
Speaker 1: to be transitioned. We are in the transition um. And
Speaker 1: so the way we think about it is we have
Speaker 1: to be very savvy about where do you have a
Speaker 1: brown business, Where can that brown business be gray? Where
Speaker 1: does it start to use green techniques. Natural gas is
Speaker 1: a great example. We need natural gas, So how do
Speaker 1: you move natural gas in a way where you're looking
Speaker 1: at methane? You don't have methane leagues, you're using green
Speaker 1: energy and electric sources to process the natural gas. There
Speaker 1: are a lot of things we can do even while
Speaker 1: we're using fossil, to be cleaner and to put the
Speaker 1: people that are cleaner and doing fossil in a better
Speaker 1: position to sell versus their competitor. Because we are seeing
Speaker 1: these changes, and we do have a lot of people
Speaker 1: looking at carbon footprint as they're buying or investing in companies.
Speaker 1: So my colleague met Levine mentioned your win and now
Speaker 1: says when they see you coming, you are no longer
Speaker 1: presenting as a scrappy small startup. You're bringing some receipts
Speaker 1: to the table. Hey, excellent, knuckle down there. Now, let's
Speaker 1: you and I have a conversation. How has that changed
Speaker 1: since that win? Yeah, we really started when we started
Speaker 1: with Exxon effectively, and so I wouldn't say we had
Speaker 1: um it was the next day. It was a sea
Speaker 1: change in a positive way. I would say it's complicated
Speaker 1: because after you've done that, the board in the CEO
Speaker 1: are a little bit worried about what our intentions are
Speaker 1: UM And it takes time to build those relationships. And
Speaker 1: Chris does a lot of this work directly with the
Speaker 1: CEOs and the companies that are in the portfolios. UM
Speaker 1: And it takes time to build trust. But our relationship
Speaker 1: with them is, you know, basically having modeled their business
Speaker 1: ourselves and modeled all their competitor businesses and have gone
Speaker 1: to kind of up and down the supply chains. And
Speaker 1: once we get to know each other. We're giving them
Speaker 1: what they find is actually some very helpful point of view.
Speaker 1: And if I like at your business, I think this,
Speaker 1: you know, consumer demand is going to flip sooner you're
Speaker 1: gonna miss it? Or what's you know? How organized are
Speaker 1: you on supply chain? What are your bottlenecks? And so
Speaker 1: it's become really very constructive with a lot of the
Speaker 1: companies that we work with. It sounds like you're early
Speaker 1: training in the consultant world. It wasn't for naught. This
Speaker 1: is almost a hybrid between activists investing and consultants and
Speaker 1: just investing right. High quality investing means you really have
Speaker 1: to understand, um what a company's strategy is and what
Speaker 1: the what are the what are the bottlenecks, what are
Speaker 1: the places where they may miss If you understand those,
Speaker 1: you can make those faster, shorter, better, less risk. Then
Speaker 1: that's really positive for being more sure that the company
Speaker 1: increases in value. So let's talk a little bit about
Speaker 1: your toolbox. You mentioned proxy voting, you mentioned modeling. What
Speaker 1: else does engine number one bring to the table as
Speaker 1: ways to get management to see the world from your perspective? Yeah,
Speaker 1: And part of it is that the data science work
Speaker 1: that we do around the sizing of emissions, comparative emissions,
Speaker 1: monetization of emissions. So we call that our total value
Speaker 1: approach to looking at the externalities of these companies. So
Speaker 1: we bring that we've done the modeling, all the fundamental
Speaker 1: work that we do, and then this very active engagement
Speaker 1: where we want to stay engaged and if there's something
Speaker 1: that's part of where the ALTS business came from, if
Speaker 1: there's something in the private markets that could work differently
Speaker 1: to help a big public company move can we make connections,
Speaker 1: can we help that move along? And then proxy voting
Speaker 1: is important. So most of what we do is this
Speaker 1: kind of very intense active engagement, and we're active owners
Speaker 1: of the company, not always an activist in the traditional meaning.
Speaker 1: UM we also launched an index product, so you know,
Speaker 1: our view is that you really have to hold these
Speaker 1: companies if you want to own the winners over time,
Speaker 1: and if you want to drive change, you also have
Speaker 1: to hold the companies. You can't divest UM And we
Speaker 1: see a problem in the dominance of the current index
Speaker 1: providers is that they're big and it's complicated to vote
Speaker 1: shares because you have people on different sides of every issue.
Speaker 1: So we while we're at it, put a new index
Speaker 1: product out in the market that tickers vote, which is
Speaker 1: pretty simple. It's literally an index we've with the shares
Speaker 1: in line without economic outcomes, and we post them as
Speaker 1: soon as we vote, So a little option for people
Speaker 1: that still want to use index instead of actives. That's
Speaker 1: really interesting. We've talked about x on so far and
Speaker 1: Tesla and Ford tell us about your involvement in General Motors.
Speaker 1: What attracted you to the company and what sort of
Speaker 1: positioning do you have with him? Yeah, it's General Motors
Speaker 1: and General Motors. It's going to take some time, right,
Speaker 1: So General Motors has been in the portfolio since we launched,
Speaker 1: since we launched net Z and still is and has
Speaker 1: stayed there. And when we work with General Motors, it's
Speaker 1: a lot of our work has been about how do
Speaker 1: we accelerate the transition to battery electric vehicles for them
Speaker 1: as a manufacturer, and not for an ideological reason, purely
Speaker 1: because we think the consumer demand is shifting more quickly.
Speaker 1: That's where the and so this is again this is
Speaker 1: an economic argument for us and working with General Motors,
Speaker 1: that the faster you get to all battery electric which
Speaker 1: means you need to build the battery plants. You need
Speaker 1: to build them bigger, you need to build them faster,
Speaker 1: you need supply agreements locked up for the rare metals,
Speaker 1: and then you need to work on bringing the cost
Speaker 1: of batteries down because as all of that happens, GM
Speaker 1: makes eight to nine million cars a year, and so
Speaker 1: if those cars are all battery electric vehicles, uh, and
Speaker 1: the battery cost comes down, you know what's testas multiple? Right,
Speaker 1: they can have the opportunity to go from where the
Speaker 1: GM multiple is today, which is very low, very depressed
Speaker 1: value stock, all the way up to what producing vivs
Speaker 1: at scale is going to look like. And that's a
Speaker 1: huge value creation opportunity. Let's talk about what's going on
Speaker 1: in in the world of E S G and greenwashing
Speaker 1: and woke is um. There's so many things happening here
Speaker 1: and I think people don't really use these buzzwords appropriately.
Speaker 1: Let's start out with greenwashing. Tell us your view of
Speaker 1: it and why it's problematic. Well, I think if you
Speaker 1: can do everything from scratch. I get this a lot
Speaker 1: from people that run large asset management companies. You're like, gosh,
Speaker 1: I wish, I wish I could just start every thing
Speaker 1: from scratch again in this environment. So I think the
Speaker 1: reality is if you're running a strategy and you you
Speaker 1: don't care or you don't have risk metrics on let's
Speaker 1: say the environment in your strategy, it's very hard to
Speaker 1: fit them on top. And I think a lot of
Speaker 1: people get caught in that from a greenwashing perspective. So
Speaker 1: if what we what we do is we start from scratch,
Speaker 1: we think about these material impact things as financial data,
Speaker 1: and it's just part of our process and so there's
Speaker 1: no greenwashing there. But for people that we're investing in
Speaker 1: something and now want to take advantage of a moment
Speaker 1: in time, or people that are investing and actually don't
Speaker 1: really understand how environmental risks fatter into the portfolio, I
Speaker 1: do think you just have to take a time out
Speaker 1: and and go back to basics and better articulate what
Speaker 1: the strategy is and what you're actually doing to the market.
Speaker 1: And if it's not a green strategy, you kind of
Speaker 1: have to say that. It seems like a lot of
Speaker 1: this is just spin on the hot buzzword of the day. Well,
Speaker 1: a lot of our society right now is spin on
Speaker 1: the buzzword of the day. So I think we need
Speaker 1: to be very careful about that when it comes to investing.
Speaker 1: So let's talk about woke ism. You're describing E s
Speaker 1: G As sort of a risk management tool to filter
Speaker 1: out certain potential problems down the road. But if I
Speaker 1: pick up the Wall Street Journal or the New York
Speaker 1: Post and flipped to the editorial section, all I hear
Speaker 1: is woke capitalism. And this is what Disney is doing,
Speaker 1: and this is what Apple is doing, and this is
Speaker 1: what Nike is doing. Is this really woke capitalism? Tell
Speaker 1: us what's happening in that space? Yeah, I think we
Speaker 1: have to remember what capitalism is. And and then I'm
Speaker 1: not sure what we mean by woke, which is part
Speaker 1: of the problem. So capitalism is meant to be you
Speaker 1: in public markets, can you know put that in the
Speaker 1: private markets as well. It's meant to be you have
Speaker 1: a set of financial shareholders, you have other stakeholders. You're
Speaker 1: making money for the shareholders over time. That's that's the
Speaker 1: definition of capitalism. Um, it's really hard to make money
Speaker 1: for shareholders, the financial shareholders over time. If you've and
Speaker 1: treat your workers well, or you destroy the community in
Speaker 1: which you live, that's just kind of good business or
Speaker 1: doing business the right way. I think we sometimes get
Speaker 1: confused when we talk about values um or practices and
Speaker 1: you can't link it directly back to financial returns. So listen.
Speaker 1: When it comes to climate, we feel like we can
Speaker 1: do a pretty good job with the data is out
Speaker 1: there to link how a company handles climate and environment
Speaker 1: with how they perform as a stock over time. You know,
Speaker 1: there's not enough data on the social side. The research
Speaker 1: is spotty. I really hope there's better data. I hope
Speaker 1: the research gets better. I hope we have causality there.
Speaker 1: But I think as investors we have to be careful
Speaker 1: where we're talking about um. If the company has less emissions,
Speaker 1: they get credit for trying to do the right thing
Speaker 1: and the stock price goes up. That's capitalism UM. Where
Speaker 1: from a values based perspective, we want to ask a
Speaker 1: company to do something that's a little bit different. So
Speaker 1: I think that distinction is really important. And there's pretty
Speaker 1: robust in on governance. If if you if you elevate
Speaker 1: women to senior members, if you have people on your
Speaker 1: board that are diverse, those companies historically have outperformed the
Speaker 1: companies that have not. Yeah, and and let's talk the
Speaker 1: board for a minute is another one that it's very
Speaker 1: hard to reduce into one stat So if you think
Speaker 1: about all the research that's been done on boards and
Speaker 1: an end to number one. We do a lot of
Speaker 1: work with academics, so we're always trying to look for
Speaker 1: these places where we've got data and causality and we
Speaker 1: can link it to economic outcomes, um and when it
Speaker 1: comes to boards, but a lot of the research would
Speaker 1: tell us is if a board is deeply non diverse.
Speaker 1: The first, if you had one diverse person or thinker,
Speaker 1: they may actually have worse performance. But if a board
Speaker 1: starts to have multiple varieties of diversity and the board
Speaker 1: listens to the diverse points of view, those are the
Speaker 1: boards where we get the real outperformance. And then remember
Speaker 1: it's a board, so it's not just diversity of thought.
Speaker 1: It has to be diversity of capability because as these
Speaker 1: companies go through change, you know, you need other CEOs
Speaker 1: that have been successful through change. You need you know,
Speaker 1: if you're being an old school media company, you need
Speaker 1: people on the board that are successful for with where
Speaker 1: the puck is going. So I think we have to
Speaker 1: look for both of those kinds of diversity and boards
Speaker 1: that listen to each other, have diversity and have that
Speaker 1: important diversity of capability. Absolutely, those are going to be
Speaker 1: the highest performing ones. So we talked about X and
Speaker 1: we talked about GM and Ford and Tesla. What other
Speaker 1: companies are you looking at as being on the cutting
Speaker 1: edge of change to take advantage of this transitional moment. Yeah,
Speaker 1: I mean one of the things we're excited about. I
Speaker 1: can't talk about the product because we're not through the
Speaker 1: sec with it yet although it's in filing. But from
Speaker 1: a theme perspective, we're super excited for for the U S.
Speaker 1: From a US competitiveness perspective, what happened during COVID is
Speaker 1: supply chains were two global, too fragile and they broke.
Speaker 1: And so what we're already seeing and we're going to
Speaker 1: see a lot more of this in the next few years,
Speaker 1: is we're seeing a huge resurgence of manufacturing jobs in
Speaker 1: the US and it's going to be great for a
Speaker 1: lot of these communities. So we see UM semiconductor plan,
Speaker 1: so we see battery plants Michigan, Tennessee, Kentucky, Arizona, Texas exactly.
Speaker 1: So it's happening already there's a huge increase in manufacturing.
Speaker 1: And then as that happens, if you build a manufacturing plant,
Speaker 1: there's a huge job multiplier. You have people come in
Speaker 1: to build a plant, the people work in the plant,
Speaker 1: and people work to move goods in and out of
Speaker 1: a plant. UM, and we're going to see a huge,
Speaker 1: huge growth. We believe in railroads. So if you're going
Speaker 1: to increase manufacturing in the U in the North America,
Speaker 1: guess what. You don't need to ship things overseas. You
Speaker 1: need better and more effective UM Railroad continued to strengthen
Speaker 1: the lines and the movement of goods around the US.
Speaker 1: UM and then automation. So good and bad is we have?
Speaker 1: You know, we have less, we have less birth rate
Speaker 1: and less people coming to the U s and we're
Speaker 1: going to have a huge number of quality jobs. And
Speaker 1: so companies like Rockwell Automation that high quality jobs and
Speaker 1: brand new factories with automation to assist in the manufacturing.
Speaker 1: It's going to be pretty awesome from an investment theme perspective.
Speaker 1: So Rockwell just isn't terrifying us with YouTube videos of
Speaker 1: robots that are coming to kill long Now that the
Speaker 1: the high quality worker, the high quality, blue collar if
Speaker 1: you will, workers and all these new plants, they're not
Speaker 1: going to be enough of them, and they're gonna be
Speaker 1: happy the robots are there to help them. Really quite interesting.
Speaker 1: So let's talk a little bit about some of the
Speaker 1: political pushback to the sort of investing you do. Maybe
Speaker 1: Florida is the best example, passing laws to punish a
Speaker 1: specific company, Disney, who objected to Florida's anti lgbt que
Speaker 1: sort of UM legislation. Is the environment changing for this
Speaker 1: sort of um proxy voning and criticism and working with
Speaker 1: companies or is Florida just Florida and you know it's
Speaker 1: kind of a one off um Listen. I think companies,
Speaker 1: companies have consumers, and so if I'm a company, if
Speaker 1: I'm Disney, and I have consumers, and I feel like
Speaker 1: my company needs to stand for something because it allows
Speaker 1: me to serve my consumers and my consumers to say
Speaker 1: my brand has value. That's something that Disney is going
Speaker 1: to have to push for. So I think, first of all,
Speaker 1: and when it comes to public companies, some of them
Speaker 1: have one audience, some of them have another audience, and
Speaker 1: they may need to behave in ways to make their
Speaker 1: audience feel good so they can be in business and
Speaker 1: sell their product. Um. I think separately, if we talk
Speaker 1: about proxy voting, successful proxy votes should be economic. So
Speaker 1: back to the kind of fiduciary concept we were talking
Speaker 1: about earlier. So if a proxy vote says, you know,
Speaker 1: can you please disclose more information about your workforce? That's
Speaker 1: helpful to investors. Great. That often makes sense to us.
Speaker 1: If the proxy vote says I don't like this thing
Speaker 1: you do, please don't do it, but there's no economic causality,
Speaker 1: I think it's hard for that to be a proxy
Speaker 1: voting issue versus a values based conversation with the company.
Speaker 1: So our belief is proxy votes matter. We should all
Speaker 1: use our vote, but proxy voting is a tool to
Speaker 1: drive kind of long term economic performance with companies. Sometimes
Speaker 1: there are just value based issues that that shouldn't be
Speaker 1: tackled through proxy votes. I know I only have you
Speaker 1: for a limited amount of time, So let's jump to
Speaker 1: our favorite questions that we ask all of our guests,
Speaker 1: starting with tell us about your early mentors who helped
Speaker 1: to shape your career. Yeah, it's funny, I don't have
Speaker 1: a lot of mentors. Where it was that one guiding
Speaker 1: light I found that I picked up a little bits
Speaker 1: and pieces from different people. So Um, Condi. Rice was
Speaker 1: a provost when I was at Stanford, and so it
Speaker 1: was that inspiration that sort of sent me off down
Speaker 1: the international relations path. There was just a level of
Speaker 1: smarts and confidence that I really appreciated that I picked
Speaker 1: up from her. Um and then a professor in business
Speaker 1: school who said, women can definitely have it all, but
Speaker 1: you're kidding yourself if you think you can have it
Speaker 1: all at the same time. So like pace yourself, like
Speaker 1: go go after it, but pace yourself. You can't literally
Speaker 1: do it all at the same time, which is good advice.
Speaker 1: And then I think there are a lot of people
Speaker 1: for me where I learned one or two lessons from
Speaker 1: different people, and now I do a lot of mentoring
Speaker 1: of other people. And that that is my overarching suggestion
Speaker 1: on this is you gotta ask a lot of questions
Speaker 1: and you don't always have to have a lifetime relationship
Speaker 1: with everyone. But get any any nugget you can get
Speaker 1: and run with it. I like it. Let's talk about books.
Speaker 1: What are some of your favorites and what are you
Speaker 1: reading currently? So Um and my angel, who is actually
Speaker 1: a favorite of mine, I find it relaxing and and
Speaker 1: out of my you know, it's so different than what
Speaker 1: I do every day, and kind of American and lyrical. Um,
Speaker 1: Harry Potter, we have a younger one of our kids
Speaker 1: is younger. So working our way through Harry Potter and
Speaker 1: then um the Daniel Kahneman thinking fast and acting slow.
Speaker 1: I read that last year. I like that a lot
Speaker 1: because it's you got to remember sometimes how our brains work,
Speaker 1: and the fact that we rushed to things and we
Speaker 1: shortcut and we group things, and so I find that
Speaker 1: helpful sometimes and just being calm about how else could
Speaker 1: we solve a problem or why is somebody reacting the
Speaker 1: way that they do. What sort of advice would you
Speaker 1: give to a recent college graduate who is interested in
Speaker 1: a career in either impact E S G activists, what
Speaker 1: if we want to call it type investing or E
Speaker 1: T F and passive investment. Well, first I'd say those
Speaker 1: are great areas to go into. You should go into it,
Speaker 1: and definitely, UM, learn how to invest, learn how to
Speaker 1: be investor. Don't stick to one fat or one mouse trap.
Speaker 1: If you can learn how to be an investor or
Speaker 1: how investors think, UM, that will serve you so well
Speaker 1: in our business um, and I guess too. New to
Speaker 1: new graduates, I would say, don't don't give up hope.
Speaker 1: It's gonna be a bad job market. So take those internships,
Speaker 1: be a little bit scrappy, and just learn from whatever
Speaker 1: that first job is two years in, because you'll pick
Speaker 1: up a phenomenal amount of information and if it's not
Speaker 1: what you love, great, then go do something else after it.
Speaker 1: But it's it's a great it's a great place to
Speaker 1: build a career. Really interesting. And our final question, what
Speaker 1: do you know about the world of investing today that
Speaker 1: you wish you knew thirty or so years ago. I
Speaker 1: think it's that the overall portfolio construction matters, right, So
Speaker 1: so as an investor, thinking about when you build, like
Speaker 1: when we build an ento number one, we build products
Speaker 1: where we put strategies out into the market. Um, the
Speaker 1: more you can make them balanced and with some duration.
Speaker 1: So if somebody puts something in the portfolio, they sort
Speaker 1: of understand what it's going to do and what the
Speaker 1: return stream looks like and what the risk looks like.
Speaker 1: As we're investing and then selling to other people. I
Speaker 1: think that ability to build products that are durable and
Speaker 1: it's clear what they do is really really important. It
Speaker 1: lets you build your brand, it lets you build trust investors,
Speaker 1: really really interesting. Thank you Jennifer for being so generous
Speaker 1: with your time. We have been speaking with Jennifer Grancio.
Speaker 1: Sheet is the CEO of Engine Number one. If you
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