“[ESG progress] is a policy issue. We need to move a few big levers and create the financial incentives for the free market to solve the problem. Price on carbon would go a very long way in giving entrepreneurs and innovators something to compete against.”
Erika Karp is founder of Cornerstone Capital Group, bringing the disciplines of finance and economics together in pursuit of a more regenerative and inclusive form of capitalism. John Streur is president and CEO of Calvert Research & Management, specializing in responsible and sustainable investing.
ESG investing has started entering the mainstreaming among investors and investing strategy, but it needs to accelerate. This requires investors to understand the value and pragmatism of adopting a truly impact-oriented approach. It is important for the dialogue around climate change to focus on reforming whole systems rather than judging an individual and their behavior. “I believe that all investing has impact. When you look at the environmental, social and governmental factors in an analytical way, you realize this is really important to be a good investor.”
Public policy enacted by government is the most important way to address the dangers of climate change. Relying on the current market to deliver solutions is insufficient. Enacting a carbon tax is one of the most effective tactics to create a market structure that incentivizes innovation around truly impactful ESG-centered growth.
LISTEN AND SUBSCRIBE
SPEAKERS
John Streur
President & Chief Executive Officer
Calvert Research & Management
Erika Karp
Founder & Chief Executive Officer
Cornerstone Capital Group
EPISODE TRANSCRIPT
John Darcie: (00:07)
Hello everyone. And welcome back to salt talks. My name is John Darcie. I'm the managing director of salt, which is a global thought leadership forum and networking platform at the intersection of finance technology and public policy. Salt talks are a digital interview series that we launched in 2020 with leading investors, creators and thinkers. And our goal on these salt talks is the same as our goal at our salt conferences, which is to provide a window into the mind of subject matter experts, as well as provide a platform for what we think are big ideas that are shaping the future. And both of our guests today, uh, are two people in the investment world that are shaping the future through their pioneering work in the field of ESG. So we're very excited to bring you this episode. ESG investing has become a huge part of the investment mandates of institutions that we work with, uh, on salt and that come to our conferences and, and tune into our salt talks.
John Darcie: (00:59)
So it's a very relevant conversation as I think we'll find out, uh, from the dialogue that we have today, uh, with Anthony. So our two guests are Erica Karp and John stroller. I'll read you a little bit about their bios before I turn it over to Anthony. Uh, Erica Karp founded cornerstone capital group to bring the disciplines of finance and economics together in pursuit of a more regenerative and inclusive form of capitalism. She's a wall street veteran of 25 plus years, and she developed a deep belief in ESG analysis as a critical input to investment decision-making over the course of her career prior to launching cornerstone, Erica was a managing director and the head of global sector research at UBS investment bank. She chair the global investment review committee served on the UBS securities research executive committee and served on the environmental and human rights committee of the UBS group.
John Darcie: (01:48)
Executive board. Erica holds an MBA in finance from Columbia university here in New York and a bachelor's in economics from the Wharton school at the university of Pennsylvania. She recently recently joined the board of directors of conscious capitalism as well. And though she works with a variety of different organizations ranging from the UN to the Clinton foundation on a variety of, of, uh, ESG and sustainable finance initiatives. Uh, John [inaudible] is the president and chief executive officer for Calvert research and management, a wholly owned subsidiary of Eaton Vance management, specializing in responsible and sustainable investing across global capital markets. John is also president and trustee of Calvert funds as well as a board director of Calvert impact capital and chair of its audit and finance committee. Uh, John began his career in the investment management industry in 1987, before joining Calvert research and management. He was president and CEO, uh, with Calvert investments is a founding member of the investor advisory group for sustainable accounting standards board SASB then a group of leading asset managers, uh, committed to improving the quality and comparability of sustainability related disclosure by corporations for by investors is also one of the eight members of the leadership council of the impact weighted global accounts initiative.
John Darcie: (03:06)
Uh, so I think these are two guests that I think better than any guests we could have on salt talks will be able to give us the lay of the land across ESG impact and sustainable finance investing. John earned his bachelor's from the university of Wisconsin, college of agriculture and life sciences. Uh, so thank you both for joining us here today. Hosting our talk is Anthony Scaramucci, the founder and managing partner of SkyBridge capital, a global alternative investment firm. He's also the chairman of salt and if you've been watching salt talks, he needs no introduction. And without further ado, I'll kick it over to you, Anthony, to conduct the interview. Um, I'm still mad at John Dorsey for telling John and Erica that I failed the bar exam because I was out water skiing in Manhasset bay. So that wasn't a nice thing to do. Okay. I'm trying to be like, I want to tell you to bring up the first impression with these people and you had a fire that in there to make me lose some of my confidence in this interview, you know, cause I'm obviously a little shy and introverted. So let's start with you, Erica. Uh, tell us about your background. Why did you become impact so passionate about impact oriented investing?
John Steur: (04:13)
You know, so I came to sustainability and impact in a really organic way. You know, I believe that, you know, all investing has impact, right? And so when you look at the environmental, social and governance factors in an analytical way, uh, you realize that this is really important to be a good investor. You know, when you think about revenues and costs and risk, you need to think about ESG factors. So as a director of research, I'm just trying to push people to kind of earn the right, to make an investment call. Tell me what you know that nobody else knows. And so when you go down there and you try to find out what matters around ESG factors, it's first of all, endlessly fascinating. Secondly, it gives you serious predictive insight. Thirdly, you start to realize that you can combine your investments with your values. And so, you know, I got there in a way that's really very organic. It's not about ideology. It is about values and it is about pragmatism.
John Darcie: (05:15)
Uh, same question for you, John.
Erika Karp: (05:17)
I think the, um, investing business is a business about understanding, change, understanding what's changing around us and understanding how companies are likely to navigate that change. So for us, ESG investing is about understanding a company's management of critical functions and factors that allow us as investors to do two things, understand how they're managing these risks that are changing and evolving, but also to participate and help drive positive change. A big part of what we do at Calvert is engaged with corporate to try to get them to improve their operations in ways that address these critical environmental and social risk factors. So that concept yet they to really be involved in innovation, helping to improve the system that we all participate in and drive positive change that relates to financial value creation really brings together all of the best elements of investing in participating in these capital markets. Are
John Darcie: (06:29)
We doing enough? And what I mean by that when I sit back and I look at the landscape of where we are as a society where we are in the environment, uh, we have a group of people that are in the ESG world, but should the whole world be in the ESG world, I guess is what I'm saying? I mean, are we doing enough? And if we're not doing enough, how do we do more? And that's a question for both of you. So I'll start with Erica first and then John, you can respond and add on.
John Steur: (06:57)
So the answer is no, we're not doing enough. Um, but part of it is because we need this massive consciousness raising exercise, right? So I said that all investments have impact. It's a question of knowing, is it positive or negative? And what is it? So if you have to understand kind of the magnitude of what we need to be doing, I mean, just think about climate, right? So if maybe over the past year, a $500 billion was invested in alternative energies, right? Well, we actually need that number to be about 1.5 trillion. If we're going to get anywhere near where we want to be. And we think about these other big initiatives towards water and energy and infrastructure, education broadband, we need billions, something like seven, uh, excuse me, trillion suddenly like 7 trillion to move, to have the kind of impact we need. That said there is some consciousness, but it hasn't come to the mainstream yet it's starting, but we need to move a lot more money, a lot faster. Um, so there are certain things that we need, like infrastructure, like standards, uh, for disclosure like leveraging AI, leveraging social media. So there's this, um, this fierce urgency of now that hasn't been infused into the economy yet. Um, I think we're making progress though.
Erika Karp: (08:21)
Yeah, I agree, Erica, we're not doing enough. Um, what is it, what is enough and how is this really going to play out so far? We're relying entirely on market-based solutions. Of course we believe in market-based solutions, particularly in the United States. Um, so we're following the playbook that we've used, uh, particularly since the 1980s, what can be done to change that dynamic and what are the things that are needed in order for us to do enough, um, a carbon tax, a price on carbon at the right level, um, would facilitate an even a more aggressive response, uh, from the market. Uh, Erica mentioned regulatory. We haven't yet built the market infrastructure to facilitate Anthony doing enough. Um, but we're not far from it. Uh, I think it's very encouraging to think about the fact that we're doing what we're doing without regulatory help without having built the necessary infrastructure and without having put a tax or a price on carbon.
Erika Karp: (09:30)
So what we're experiencing right now is something that is led by investors. As I said earlier, completely market-based if we can make a few policy adjustments, which I think most people in the capitalist system want to see made, I do believe that well, uh, allow us to continue to operate within market-based solutions and significantly accelerated. And I would just add one element, which is any quality. Um, we are operating way below our potential because of the massive financial and other inequalities in our system. We can begin to address that. Um, also through these solutions, I think we can improve the lives of literally billions of people across the board. Um, so in addition to the environmental concerns, the, um, inequality issues are significant.
John Darcie: (10:26)
So I, I just started reading this, uh, which is, uh, bill gates, his new book on how to avoid a climate disaster. And so I guess my, my question to both of you again, same sort of question is Mr. Gates is obviously a brilliant guy. The book is very well written. There's a lot of practical solutions in here. Um, but we seem to have lots of forks in our roads in terms of going towards a more sustainable climate environment, more ESG, if you will. And I think some of the critics of Mr. Gates would say, well, he's got a portfolio of homes. That's second to none, very large in scale, a fleet of private planes. He owns the four seasons hotel complex among other things. Uh, is he the right guy to be writing about climate change? And so then the question is, what do we do? Uh, do we sit in a small room that has, uh, um, solar panels on the top of it? Um, how do you, how do you reconcile billionaires that are writing about climate change that are flying around on private planes, et cetera? What do you say to people?
John Steur: (11:35)
So I got to tell you, I have no issue with this because there is no such thing as perfection. Everything is on a scale of, you know, good, not good, whatever we don't have to be judgmental. And what I would say is if we can bring transparency and an honest dialogue to this, we're fine. It's okay to have your toys as it were, but it's better to be, you know, transparent, talk about your toys and figure out how we can get your choice to be better. Right. And so what no, but
John Darcie: (12:07)
Eric, I mean, should I be living like Teddy Kaczynski? You remember the unit bomber and like a small shack somewhere in the middle of nowhere, not using that much energy, having an outhouse,
John Steur: (12:18)
I would have to. All right, again, I go back to this issue of transparency. There's a lot of stuff that people don't realize that we have to get, get out there first. Um, there's this stupid notion that using ESG analysis, um, is in some way, giving you, um, concessionary returns false to the notion that ESG analysis is, uh, against a fiduciary duty, totally false, right. Three, that you have to be a purist. That is not the case either. If we're trying to move kind of the, the quantum of the capital markets, right? So we can, you know, have our lifestyles try not to be judgemental ideological, but let's make progress. And the single most important thing we need to understand, not that this is simple, but we have to have systems change. Everything relies on everything else. We can't get to climate. If we don't talk about a women's economic empowerment, we can't talk about a broadband.
John Steur: (13:22)
Unless we talk about data privacy and human rights, we can't talk about, you know, one of these sustainable development goals that the UN has put out without talking about the complexity and the interrelationships. So this is complex. There's no such thing as perfection transparency should allow us to be nonjudgmental and have system change to get, for instance, to a circular economy one day where there won't even be a concept of waste. And by the way, I should tell you, I am a little bit of a nihilist. So in terms of a climate crisis, unfortunately we're already there. There's a lot of bad stuff that's already baked in. That doesn't mean, you know, we will wipe out, you know, humanity, uh, probably, but, um, there's a lot of work to do.
Erika Karp: (14:13)
I, um, if you don't mind me, Anthony, I would, um, take a little different position. I don't think bill gates is the guy who's going to solve climate change. Uh, I think it would be better if the bill gates and even the Anthony, um, DiCaprio's of the world, stop, stop talking about it. Um, it's not about what an individual says or does, and it really doesn't matter what you do with your air travel and those types of things. Um, so getting the liberal left out of the picture, staff talking about it, this is a policy issue. We need to move a few big levers and create the, um, financial incentives for the free markets to solve the problem. As I said, earlier, price on carbon would go a very, very long way to giving us something for entrepreneurs and innovators to compete against it's policy makers right now that are needed more than, you know, rich, famous people talking about the problem and telling us about their pet solution. So I think, um, I'm going to stop there. Uh, I've got another book for you, by the way. I see your in your library, the new climate war by Michael Mann came out about the same time as gates' book. He's a professor I'm not getting the kind of publicity that gates is getting be more consistent with my thinking.
John Darcie: (15:42)
All right, well, well maybe we'll get him on assault dog. I'd love, love to meet him. Love to talk to him. It'll also force me to read the book. Uh, we, we, I will point out that we did invite Mr. Gates on assault talk, but, you know, cause I have a little bit of a roguish personality. I'm somewhat unpredictable. I would say that the chances of him coming out assault talk are 0.0, but one can hope, but let's continue on this. Cause think this is important for me. And I'll start with you, John, are corporations stepping up to the plate and adapting better ESG frameworks, John? Or is it lip service?
Erika Karp: (16:16)
I think there's a little bit of both. Um, so I think companies for a long time at the operational level at big, quite a bit attention to how they use resources, operational efficiency, but it's all been based on economics. Um, so to the extent that fossil fuels have been cheaper than renewables, those are the decisions they've made to the extent that it was much more profitable to pursue a product line or service that had negative impact on the environment. That's what they've, they've pursued. Um, that's a very, very slow change to, uh, to think about happening. So while companies are providing us more information about how they're managing these very risky activities, um, and they are doing a better job of managing those, they're not really making the big changes needed to protect the environment and to create a better, more sustainable future for, for all of us. Do we have any, it's a little bit of both, they're doing a much better job managing these risks, but they're still involved in a big, big way. An actual change is very slow to come.
John Darcie: (17:27)
Is it a drop in a bucket Eric Erica, or do you think it's,
John Steur: (17:31)
I think it's more than a drop in the bucket and there's certain pieces of infrastructure that we've needed to help. So I was, um, uh, a founding board member of the Salisbury, the sustainability accounting standards board. And that is about having, you know, trying to get standards for corporate disclosure of material ESG factors. That that is very helpful, but setting standards take a long time, but again, getting good data comparable and projectable data, um, is an important thing because that goes into, uh, the ratings and the indices and then the products that are created. So we have a long way, not a drop in the bucket, but it's helpful. And then what you're starting to see is that the leading corporations are figuring out how to truly, um, um, change or adopt their business models around ESG issues. They are starting to align compensation around ESG issues.
John Steur: (18:27)
They are starting to ask questions that are specific to industries, to companies around the risks and reward opportunities. So you ask different questions of, let's say a hotel or an airline industry. Um, then you ask of a, um, uh, mining, uh, or shipping company or, you know, a technology company. So understanding how to zero in on what matters, what is material is really critical. And in fact, there's been some good research, uh, uh, George, Sarah from as an example, um, put out a piece that talked about, um, the fact that companies who give us data on issues around sustainability that are not material to their economic outcomes, actually underperform rather than not putting any data out whatsoever. So we want companies to report on the stuff that matters. Um, and, and again, it's, it's still early days, um, but it's, it is more than a drop in the bucket. So,
John Darcie: (19:28)
So John last year, uh, we saw according to the financial times is not my information, but I read it in the financial times, a 17% reduction in carbon emissions. You'll correct me if that's accurate or not, but that's what I read, uh, is that sustainable? Uh, obviously it came from the pandemic, uh, or we smarter now or who are working more efficiently or are we going to be on our Airbus three eighties, the middle of the pandemic breaks and traveling around the world? Uh, is there anything that the world's learned from the pandemic that can make our societies more sustainable and more energy efficient?
Erika Karp: (20:10)
Well, I certainly think the pandemic makes very real these risks, right? So we all know that really bad things can happen if we don't attend to risks associated with all of these behaviors and certainly the, uh, the storm in Texas and what happened with the Texas grid, uh, it just makes it very, very real and we can see it happening. Um, so I do think it, it, it does make a difference, but the carbon reduction number is simply because of the economic slowdown due to the pandemic. And as soon as things bounce back, um, those numbers will go right back up. And as we bring of millions of people online into the industrial society in China and India, those energy systems are still primarily driven by coal and fossil fuel. Even though they're also deploying a lotta renewables, you know, the, the, the concept of bringing all these people out of poverty and into the industrial society, we can't change the energy system fast enough with the current policies to keep up with that growth in the industrialized world. So dropping the bucket, those numbers don't bounce right back. Um, and we haven't done nearly enough. So
John Darcie: (21:24)
Erica, I've got you in charge of everything. Okay. You, you look like somebody that would like to be a Georgia. Everything has to do why by the way. So that's not a, it's not an attack, it's just an observation. And so now you're the czar and, uh, let's go with what John is saying about public policy and, uh, I've already ordered the book, new climate war by Michael. How did he say his last name? Mark and Michael. Okay. So I just, I just, I used my Amazon, which is going to burn up a cardboard now and they're going to start their engines and they're going to have that book to me tomorrow. I'm going to open up the cardboard and plastic and throw it in the garbage. I'm going to have the book sitting here next to these other books. And because it's about the climate and I'm Catholic and feeling guilty about my consumption, I'll be reading it, but you're now the czar of all of this. And so go ahead. What are we doing from a policy perspective to move people towards what you and John are doing?
John Steur: (22:25)
Well, um, big question and, um, I definitely don't run stuff anymore. I'll give you a little headline. Cornerstone is going to be merging with Paston. Uh, so that's a new headline for you, John. You're smiling. I'm glad in any case, we're I to be running stuff. I think John is right first carbon price. You know, I think that that comes first. It's the biggest, it's the biggest impact we can have initially. Um, secondly, you know, I talk about a more regenerative and inclusive economy that inclusiveness critically important because the kind of income inequality and wealth and economy inequality we have is growth killing, right? So that inclusiveness is key. What I would do, and coincidentally, what we have done, uh, at cornerstone pat stone, is that we've created a framework where we think about the idea of access. All right. So a single common denominator to get to these huge global challenges I would argue is access, right?
John Steur: (23:31)
So the whole world needs access to clean energy, to water, to education, healthcare, capital, um, access is where it's at. So I think what we have to do, if we're going to use the private sector, so we're gonna have for policy going to have, um, uh, carbon pricing, uh, for the private sector, we're going to have disclosure. And particularly, we're going to start thinking about what is a company doing to give access to the system. So SDG the sustainable development goals, number 17 is about, um, uh, collaboration. And I think that's, what's so critical. So companies need to understand what's their contribution. What is the true cost of, um, of what they're creating? I E those externalities, um, that, that they're giving out. And by the way, I don't know how we're going to answer this one. And it's partly why I am I not as us, but if the, um, if the emerging world has consumption patterns that are like the Western world, honestly, I don't think there's anything we can do to recover from that. Um, meaning, you know, is humanity kind of not long for this planet, honestly, it's possible. Um, but I think those are the couple of things we can do to get public sector, private sector. Um, moving forward,
John Darcie: (24:54)
John, are you as pessimistic?
Erika Karp: (24:57)
Um, probably not as I don't know about pessimistic, but, um, you know, the incentive that got us here is money. Um, and I think the incentive that will get us out of this is money plus data. There's two things I would do. Uh, yes, I, I put a global carbon tax on things and I allow it to ask light and use that tool, which is just an amazingly powerful tool, um, to create change at the pace we need to see change and work within the system. We've got the second tool that I think is going to become more powerful than money is data information, uh, mean we need to, and we are doing it. And this is the other piece that's changing that I think can facilitate the kind of change we need at the speed. We need check out impact weighted accounts initiative. We're running it out of Harvard business school.
Erika Karp: (25:55)
Sarah FIM is, uh, is overseeing the project. Serani Cohn, great venture cap player out of the UK is a senior advisor to the project. I'm advisor to it. We're creating the data and need it to understand the impact so that we can have information that's investor useful. It can sit next to the data on the income statement and people can understand the trades they need to make, to work within this incentive system. So, you know, I don't think we're going to get there without using the same incentive tools that got us where we are the profit motive. That's why we need the carbon tax. Second. We need to understand how powerful information is becoming, and we need to use that to the full extent. I think Erica, that's the only way we're going to deal with it. Given what you observed, um, Asia and the rest of the world, coming into the industrial. Ultimately they're going to want the same things that everybody else has and they deserve them, right? We need to be able to adjust the energy system so we can do all that. Let those, everybody in the world have access and do it in a way that won't destroy the planet. We need the, we need the capital incentive and we need the data.
John Darcie: (27:17)
Well, I have to, I have to invite my colleague, John Dorsey into the conversation because we've got too many baby boomers in this conversation. So baby boomers are just planning that next generation us baby boomers have had a frat party with the, with the world. We now want the millennials to live on Sunday morning in that frat house with the bond smell and the beer stain rugs and so forth. So go ahead, young millennial fire away at these baby boomers that are destroying your planet. You guys are always talking trash about, you know, millennials and gen Z, but we're the ones that have to clean up your mess. You're exactly right. Thank you for being self-aware about that fact, Anthony, but, uh, you know, we've talked a lot about the E we've talked a lot about environmental. That's only one third of the puzzle. If you're talking about ESG, I want to talk about the S for a second.
John Darcie: (28:09)
And obviously in the wake of the George Floyd murder, uh, we had sort of an explosion in awareness about the systemic racism that exists in our society. And there's been, you know, more corporate engagement on ways that we can sort of root out the systemic nature of that racism. You know, maybe the idea that we're going to eradicate racism is probably a fool's errand, but we can do more to chip away at sort of the cycle of racism, racism that exists in our society. But we're gonna start with you Erica, on the, the S piece of it. So what are companies doing or what can they do to address issues related to racism and discrimination in our society? Uh, where do you think where you see things heading? Are you optimistic about that? And what can we do in addition,
John Steur: (28:51)
Actually, I am optimistic about this. I'm optimistic about kind of social justice, generally speaking, and that goes to the consciousness issues. So whether it's gender, whether it's race, um, these are critically important for, for, for productivity. Um, and, and even beyond the moral issue, it's a, it's a, it's a functional issue in business. But the thing about, um, racial equity, I think we have to start by acknowledging, um, you know, that white privilege is something that most of us don't think enough about, you know, face it, America was built on white supremacy to some degree. So we really have to start thinking if I, what is that? Who am I, what do I want to be? And arguably moving towards kind of a, you know, a truly multicultural, thoughtful organization, let's talk about companies is a continuum. You know, it starts with organizations that you can see are flat out racist, and then it moves to an organization more of kind of compliance, right?
John Steur: (29:59)
And then it moves towards an organization that is a learning and accepting entity. And then it moves towards a place where you really have, you know, everyone in, at the table in terms of decision-making in positions of authority. And that's how you move organizations forward. It's a continuum. And the idea of accelerating that continuum now, I think is, is very encouraging what's going on. And so for instance, we will do, um, pieces of, of investment research on investing, um, for racial equity. And you really can move your money in such a way that you are accelerating, uh, that continuum. So I am quite optimistic about progress, but it starts with a consciousness. And I think that, you know, George Floyd's murder in front of our eyes, you know, I really think it was a pivotal moment, um, that of, of, of self-reflection. Um, so I am positive on what we can do here.
John Steur: (30:59)
Um, and again, it goes racial equity and gender equity, and not even thinking about gender as, as women's economic empowerment, but it's, it's, you know, old genders, um, LGBTQ eye, all of it. Um, and then when it comes to, um, issues of education and healthcare and all kinds of people of color in the, in the BiPAP world, what's happened with COVID shines and incredibly powerful light on the impact of, um, uh, of, to everyone much, much greater disproportionate impact of people of color. So thank God we're a learning, um, society, or at least I hope we are John.
John Darcie: (31:42)
So I want to go to you on that one. I've I've seen you speak and write very empathetically about just the human side of the issues that Eric had just spoke about. And I think we all want to make sure that, you know, we have a level of equality in our country where people feel like they have access to the same, uh, you know, American dream that everybody else does. But from a practical perspective, you've talked a lot about market forces and how do we communicate to people, uh, about the importance of investing in diverse teams and investing in companies that are going to drive that diversity for? So from a practical basis, how does, how diverse boards and diverse organizations drive better returns? Is that a, is that a fact that's backed up by empirical data and what type of companies can help drive that change as well?
Erika Karp: (32:26)
Yeah, that's backed by empirical data. Uh we've by the way, at Calvert, I want to tell you what we're doing and what we've done since, um, that terrible day, uh, in may. Um, we, we said, we'd do something about it. We've gone after the 100 largest companies in the United States, and we've asked them to disclose their EEO one survey data. This is the demographic information about who has what job within that company, what level and, uh, gender and rates. This is information that these companies have to provide to the EEOC, but they take great pains to keep secret. You can't even get it with a foyer request. So we've asked these companies to disclose it. So as investors, we want to know the answer to your question, which of these companies have diverse teams, which of these companies have recreated a workplace where black people, women, people of color can have jobs throughout the organization.
Erika Karp: (33:24)
We need the data. Uh, we think we've got about half of the companies agreeing, um, to release that data and make that public. That's a first step. Let's get transparency, let's get the data out there. So investors can see it. And people who want to work at great companies who create a diverse workforce, know where they are. They know what's happening. I think we have filed about, um, up to, I'm going to say 20 shareholder resolutions, ready to go to proxy against these teams. Um, I think we've been able to successfully negotiate agreements with about half of the companies we have filed on, as they've also now agreed to disclose this information. So I think you have to take action to make management and boards aware of how serious we are, how important this, um, information is to everybody, investors and employees. I think, I think that action is useful.
Erika Karp: (34:22)
It's helpful. You asked about, um, you know, does a diverse team, is there a case to say a diverse team is better, makes better decisions? Let's just build the business case for this in the us white males have actually been declining in terms of the percentage of the overall workforce. Women are increasing. People of color are increasing in terms of the percentage of the workforce. So if you're an employer, you need to be able to create a great work environment. So you can work across the entire labor market. Additionally, educational attainment by women and by people of color across the board is increasing. Um, so your highly skilled portion of a labor pool is becoming more diverse running a company. If you're only good at putting white males into senior management positions and that all you can do, you're actually not that good. We want management teams that can create a great work environment, get the best out of all people in participate across the board.
Erika Karp: (35:26)
And yes, getting different points of view, hearing different voices really works. Look at Calvert, 56% women over 50% people of color doing well against our investments across the world. We invest in emerging markets, developed markets equity and debt, great track record. We've got a diverse team and we've also done the research to show that across large companies globally diversity works and is, is, and really matters. So we'll have to say there, John, I appreciate the question. Um, things are changing, but we've got to really push these companies hard. Uh, and we needed as investors, right? This is about driving value. This is about improving companies, getting them to adjust to what's changing. Our demographics are changing. Companies are dragging their heels in terms of building the processes. And I just want to close on a really important point. People matter more than ever, uh, book value doesn't matter. Um, what matters today? This is, uh, an idea economy. We've heard it. We know it. We've transitioned from industrial manufacturing to intellectual capital and ideas. It's all about people and bringing the right people together to make it happen, really differentiates companies. So super important point all the way around.
John Darcie: (36:56)
Thank you for that. John is very well said. I think that's one of the unique characteristics of both Calvert and Erica cornerstone and everything you've done throughout your career is being able to apply these principles that can be somewhat subjective or a morphous, uh, on the surface, but really digging down and quantifying the benefit. Erica, when you talk to people about the return benefits of ESG, uh, how do you think about that at cornerstone?
John Steur: (37:20)
Well, I mean, we, again, we're very pragmatic. So if you look at the research and, you know, we did a meta-study of like 1200 other studies, but when you look at the research, um, in integrating ESG factors into analysis, it is unequivocal that you do either as well, or frankly, better, uh, with companies over the long-term when you're looking for, uh, the key factors in ESG. So th the research is unequivocal and think about it. Why would you not want more information rather than less? Right. So what we do like to see for our part is, um, we like to make sure that our asset managers are analyzing companies as deeply as they should be understanding the intersectionality. So it really does take a skilled manager to integrate those ESG factors. And, and again, it's not easy and there's a lot of bad data out there still.
John Steur: (38:18)
So any single ESG factor is not enough to make an investment decision upon, right? You take a factor in ESG factor rating, anything else? It's a starting point for inquiry, but again, all the research shows and it's a little different, different asset classes, but it's pretty unequivocal that you can do better with ESG analysis. Now, what's really interesting is that in some quarters in the past, um, it has been seen as kind of a risk mitigation strategy. That's just simply not the case that said we have seen sustainable strategies outperform in down markets. What if we look at what's been going on in the past year, we've actually seen ESG strategies so-called out before me and the up markets too. Right? And so in our view, um, sustainability, um, is a proxy for quality, for good governance for innovation and for resilience. And that's actually how we've seen these companies and these managers perform recently and again, innovation and the way the market is.
John Steur: (39:30)
So bifurcated now in terms of what forms well and what doesn't right. Innovation is so critical. So we argue that sustainability is again, a proxy for that. And by the way, I should say that in the E and the S and the G that G governance is first among equals. If a company is not analyzing the impact of the E and the S um, themselves, well, they're not well-governed by definition. And so when we do this analysis, the manager selection, diligence, you know, it is a really critical kind of holistic effort. And just because a manager labels themselves as sustainable or impact, that's not what we're looking for at all. Um, it's quite the opposite because about 91% of the products that are called sustainable that have been introduced over the past year are simply relabeling a different strategy that existed. That's not enough in our view. This is why we need these skilled managers.
John Darcie: (40:32)
I have a little more time. I want to ask you each one more question. And John, uh, again, reading and watching a lot of stuff that you've put out there, you talk about infrastructure. So when people hear the word infrastructure, they think about fixing our potholes and fixing our airport. So LaGuardia doesn't look like you're flying into a third world country or, or other physical infrastructure, but I think the pandemic is crystallized in people's minds, even more than need to ramp up our investment in digital infrastructure. What would that do? Uh, you know, you could look at it through an ESG lens, but what would that do for our country, from an environmental, from a societal perspective and our ability to improve governance, frankly, if we invested very heavily in giving everybody fast internet and access to tools in the United States,
Erika Karp: (41:17)
Well, it matters you bet. And, um, I think two things to think about, um, the kind of infrastructure that you're talking about, uh, to the extent that is a use the term transparency earlier to the extent that we can create transparency. It really helps you get the facts. It helps you get to the truth. Um, it eliminates the potential for greenwashing. It puts reality sort of in everybody's, um, the Palm of everybody's hand. So if we can build, um, an information system, they can create transparency and people can really understand what we're doing, why it matters and where the solutions are. Uh, I think we'll be much more likely to get to the economic structure that we need to make these changes, but you also talked about, um, kind of equality, right, getting that big broadband pipe, uh, getting access to that information to everybody.
Erika Karp: (42:17)
Um, and this is an area that is extremely important for us to, um, solve the inequality challenges that we have. We know that any quality in one form starts because of lack of access to opportunity, um, access to learning, access, to information, access to finance, um, in, if we can use our knowledge in our growing ability to manage and distribute real information and data and democratize that entirely, I think we can make significant progress towards, um, giving everybody the opportunity to be included in this capitalist system in this society. Uh, so it's a, it's an important step, but I would just go back to what I said earlier. Um, even though companies have become overwhelmingly powerful relative to government and relative to all of our other governing institutions, like the big NGOs, even though that's happened, we need government to come through for us, not necessarily with big fiscal spending plans or, um, pulling the levers on the monetary system, we need real regulation that will be helpful to create the incentives within our capitalist system. So we can solve these problems. In addition to building that digital infrastructure that we're talking about, we need the government to play its role into sure that the information is accurate, it's helpful, and that we get the incentive structures aligned. So your generation can have the great opportunities that ours has had. Absolutely.
John Darcie: (44:07)
Erica, how do you look at technology FinTech, decentralized finance, and ways that we can use technology to improve what John is talking about, the transparency and the reliability of data and information?
John Steur: (44:20)
Hmm. Well, I mean, like Joan said critically important, and I have to say something and I think Anthony liked this, but, um, Winston Churchill said that we build our buildings and thereafter they build us, right. He's standing in front of parliament after over too easily. And I think that's really, really interesting because what that says is, you know, it, it shapes us when we put an infrastructure in place, it really does shape us. And again, I like, and John likes to use that term access, but, you know, if people don't have access to good data, high-speed data, it, it changes everything, access to health, access, to education, access, to good jobs. It's so critically important that we build this infrastructure. And when we think about technology and the infrastructure around technology, we do have to think about the system, right? I mean, we haven't had a proper public dialogue yet about data privacy.
John Steur: (45:22)
We really haven't, you know, we've just scratched it and we have to have that discussion again, it's about infrastructure. And if we want to bring that discussion over to the investment decisions in the public markets, well, we have to start thinking about companies and here is where we go back to governance. And then we have to think about which business models, which companies engender trust, right? Because the idea of trust in the context of data privacy and an it infrastructure critically important. So the reason I talk about that is just because this is so integral to everything we want to do and, you know, for, for, for cornerstone, well now pat stone for pat stone to think about, you know, our access impact framework to measure impact, well, the idea of, of measuring access, we need AI to do that. And ultimately we need quantum computing to do that. And if the us is spending a tiny fraction on developing quantum computing versus China and the rest of the world, we are screwed in terms of infrastructure. So it's kind of, you know, it's kind of everything.
John Darcie: (46:32)
Yeah. Yeah. Well, I can tell you firsthand from our salt conferences, so many, uh, large investment allocators that come to our conference and engage in our salts ox, ESG impact sustainability is at the forefront of their minds. So in terms of themes that we cover at our events and on our, on our talks, you know, ESG, pervades, everything that we do. So we're very hopeful that we can have you guys at one of our live events here in the near future, as soon as it's safe, uh, to do so, uh, hopefully later this year, but thank you so much again for joining us, Anthony, you have a final parting word for, uh, John and Erica, before we let them go mute. This is, this is why the millennial took over the conversation. John has, Anthony doesn't even know how to unmute a computer muted it because my kids are coming through the door and I've had those moments on live television in which I was trying to avoid Mr.
John Darcie: (47:22)
Millennial, but in all serious to continue the great work and continue raising the awareness of what is going on. And, and frankly, you talk about the situation TA Nehisi coats, uh, wrote an amazing book last year. You said in 1860, the property value of all of the slaves was 3 billion us dollars, and that was 18 $60. And of course that was the largest amount of property in the society at that time. So I just want you to take that and digest that for a moment in terms of understanding where the issues and where the consequences are, not just for the United States, but for the world, as we push more awareness and we push more progress, uh, as it relates to the social and racial justice and also, uh, the environment, you know, and we have to do this, whether we like it or not, if we love our children and our grandchildren and our potential children, we have to continue to do this.
John Darcie: (48:27)
So I appreciate everything you guys are doing. And thank you very much for joining us on salt talks. And, uh, and since there's a lots of white males in the employment population, John, I'm sure you're updating your resume. I just want to make sure that you keep that fresh. I, I'm not going to pretend to be persecuted as a, a white Anglo-Saxon male in our society. So I appreciate your continued employment. Okay. Just want to make sure, keep you on your toes Darcie. Absolutely. Thanks again, guys, for joining us and thank you everybody for tuning into today's salt. Talk on ESG investing. Just a reminder. If you missed any part of this episode or any of our previous episodes, you can access our entire archive of salt talks on our website and our YouTube channel. It's salt.org backslash talks, and our YouTube channel is called salt tube. We're also on social media. Please follow us on Twitter is where we're most active at salt conference, but we're also on Instagram, LinkedIn, and Facebook as well. Please tell your friends about salt talks. We love growing our community and providing people access to these educational resources. Uh, everything's for free again on our website and our YouTube channel. And on behalf of Anthony and the entire salt team. This is John Darcie signing off from salt talks for today. We hope to see you back here. So.