Investing in Environmental, Social, and Governance with Corbin Advisors SVP Robert McConnaughey - 7investing
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Investing in Environmental, Social, and Governance with Corbin Advisors SVP Robert McConnaughey

November 4, 2021 – By Samantha Bailey

Environmental, social, and governance (ESG) has been a growing trend with some investors. It’s a type of investing that’s not just about making money. ESG investors consider the impact the companies they invest in have on the planet. It’s not a strict formula. Some investors that subscribe to this philosophy focus on one or two areas over the others.

Think of ESG as a broad framework where investors buy shares of companies that they feel good about. That’s a trend some companies have leaned into, but that’s not easy either because it’s easy to come off as pandering or disingenuous.


Corbin Advisors Senior Vice President, Investor Relations Advisory and Community Impact Robert McConnaughey has a unique perspective on ESG. In his job, he advises companies on their ESG strategies. That gives him a unique perspective as he has to help his clients understand that something that seems like an expense can actually be a revenue creator.

Companies that have proactively embraced ESG have made that a clear part of their identity.  Doing that well, however, comes with challenges because it can backfire in a lot of ways and, if you’re not able to come off as sincere, you can have problems from a skeptical public.

McConnaughey joined the 7investing podcast to share his thoughts on ESG and how he advises companies when they decide to embrace this growing trend.

 

Timestamps:

3:20 Does ESG require a long-term mindset?

5:54 Are more companies talking about ESG?

8:20 How does Robert help a company shape its ESG message?

15:30 ESG and stakeholder management

17:43 Why are companies embracing ESG?

23:02 Is perception something every company has to consider?

26:50 Do we need to change how we view companies investing in ESG?

Transcript

Dan Kline  0:02

Welcome to the 7investing Podcast. My name of course is Daniel Kline. I’m being joined today by Robert McConnaughey, Senior Vice President Investor Relations, Advisory and Community Impact, that is a long title, at Corbin Advisors. Does that even fit on a business card Robert? I didn’t realize when looking at it, wow, that’s a lot of words.

Robert McConnaughey  0:20

Yeah, it’s kind of like with “McConnaughey”, when I was a mite hockey player, the name goes from your elbow to elbow, it’s now the same equivalent on my business card.

Dan Kline  0:31

I was a mite hockey player myself and to protect my family they just left my name off I was that bad of a hockey player.

We’re going to talk about ESG investing that is environmental, social and governance based investing. But before we do that, Robert, you actually relatively recently joined Corbin Advisors, right? Why don’t you take us a little bit through your background and sort of what your role is at Corbin?

Robert McConnaughey  0:56

Sure. I guess I’ll start with who Corbin is. Corbin is a strategic advisory firm, focused on helping enterprises elevate their franchise value. And at Corbin, as you said, I lead the client advisory business helping corporates tell their story. But also relevant to this conversation the community impact group advising corporates on their ESG strategy as well as nonprofits on on their strategy. And I come to that work after a professional career primarily focused as a buy side investor.

So I started off as an analyst and portfolio manager at Fidelity. After I left Fidelity, I was I was managing REIT funds there, I founded Prudential’s (NYSE: PRU) Real Estate Securities Investors Group. And decided I kind of missed being a mainstream investor and came back to Citi’s (NYSE: C) buy side, I ran growth research globally there. And I ended up at Columbia Threadneedle and I ran Columbia Threadneedle’s Equity Research Group, and was the head of equity there for 15 years. As part of that, I launched their Global Responsible Investing Group. And that experience with ESG really intrigued me. And that’s been a big part of my focus since then.

It intersects with my personal interests. I actually have a master’s in environmental management. I’ve been volunteer leader in conservation, education, economic development work. And I try to think about large scale problem solving, and the ability to take some of my professional experience and apply it to helping to fix things in the world. So I come to Corbin with a view of ESG is growing quite a lot. There’s really interesting problems to solve. But I try to wrap that in pragmatism, not as a crusader. We need to do this, I deeply believe that these are the right things to do. But I think trying to advise corporates that they need to do things out of a moral imperative, ultimately is kind of shaky ground to be on. You want it to be a moral imperative also based in practical business opportunities for them.

Dan Kline  2:57

So we’re long term investors at 7investing, we are buy and hold. We’ve existed for about a year and a half. And we’ve actually never issued a sell. It’s not that we never will. It’s just that history shows us that even when we’re wrong, selling has proven to not be the right case, when you’re a buy and hold investor. Does ESG investing require that mindset? Because let’s look at Amazon a company that has devoted itself to some ESG principles. If you were a short term investor, there were periods where you would have missed out. Is this an area where if you’re going to make an ESG pledge, where you might have quarters that don’t look that great? Or, is it sort of by nature, a long term investing mindset?

Robert McConnaughey  3:44

I do think it is a long term investing mindset. But I would also say that ESG investors come to ESG investing through a lot of different lenses. What problem are they trying to solve? How are they trying to reflect their values in their investments? And there’s a spectrum, if I blow up ESG investing into the broader sense of ESG impact responsible investing. There are people that are doing forms of structured philanthropy, where they’re lending and they get their money back at no return. Out to venture capitalists who are investing in early stage green investing that are quite focused on premium returns.

So in terms of how the ESG elements of it play out, that absolutely has to play out over time. But most ESG investors, I think, come to this hoping to also think about how does ESG investing fit into their strategies in terms of returns and risk in their broader portfolio? So, yes, ESG, I think really is aligned with sort of long-termism in terms of how do you really change things. But if you want a portfolio of ESG names, and one of those stocks gets too expensive and you can buy on another stock that you think has better value and solve similar problems, that might be a good decision for your portfolio more from an investment standpoint than an ESG standpoint.

And not all ESG strategies are straight up and to the right. There are definitely bumps in the road, we try to take a long term perspective that we’re looking for progress versus perfection at any point in time. But you do trust and verify, and you’re constantly looking at management’s change directions and strategies change. And your assessment of an ESG strategy might change along the way as well.

Dan Kline  5:32

Is ESG something being talked about in more corporate boardrooms? I mean, it used to be kind of an anomaly that a company would sort of think of the greater good, and now is it like a mix of public pressure, slash, maybe we just know a little bit more. Are more companies just either having to or choosing to talk about this?

Robert McConnaughey  5:51

I think it’s become extremely mainstream. You would be very unusual in the large to mega cap multinational companies, if you didn’t have an ESG program in place. Our surveys of companies that we’re working with, our last survey had 79% of companies had an ESG program in place. And my guess is the next time we run that it will be well into the into the 80’s. So I think it’s an unusual company that doesn’t have some sort of ESG program in place. How far along they are in that journey varies widely?

Dan Kline  6:23

Does it matter if it’s a sort of honest belief to do better, or if it is a corporate reality of, and I’ll give a terrible example here, but Keurig (NASDAQ: KDP) a company that’s gone in and out of being public, and they’re part of a bigger company now with Dr. Pepper. But their commitment to getting rid of waste by 2000-whatever is borne out of public relations, like does it matter if that’s what’s happening? Or does there need to be some sincerity for it to actually make a real difference?

Robert McConnaughey  6:56

I like to think that things are born out of sincerity. I guess back to the point of pragmatism. I think even the most dyed in the wool, environmental activists, for example, should take comfort in companies that are not just doing things out of the goodness of their heart. But they’re doing things that also align with their business goals. I think that’s ultimately much more durable, when it serves their business interests, as well as something that they believe in.

And one of the things we emphasize is that well, integrated, thoughtful ESG programs are not just to serve a slice of investors out there. They really can benefit your customers, serve you in terms of attracting and retaining the right employees, help you with regulators, there’s really a wide array of stakeholders that can benefit from a thoughtful program. And that’s I think what we see, is the companies that do approach this as just a, hey, we’re hearing more about this, we need to do something to keep the hippies at bay. Ultimately are kind of unsatisfied with their programs. If it’s hollow and on substantive, then it just becomes a cost and a hassle and it doesn’t really help you very much. The companies that really think about how does this influence our business? How can we do it in an authentic way that’s consistent with our mission and values? Ultimately, it becomes a value for those companies that can really help to increase sales, attract the right employees, and appeal to a broader investor base.

Dan Kline  8:19

How do you help a company figure out what it should do? And also sort of get the right attention? Because obviously, there are some times where you want that press release to say, “we made a big donation”, or “we’ve gone solar”, or whatever it is. There’s other times where you want the public to discover that you’re doing right, sort of how do you balance those plans and sort of match the business needs? Because obviously, something like solar might be an investment upfront, but a long term benefit, which can be tricky, with quarter to quarter public companies?

Robert McConnaughey  8:48

Sure, there’s a concept that this section in this area is fraught with lots of taxonomies. So there’s lots of words that get tossed around. But but an important one is this concept of materiality. Materiality, meaning, what is most relevant to your business, and there are ESG rating agencies that will say, here’s what we deemed to be material to your sector. But we try to think about that more broadly that for any corporate management, what is important to you in terms of stakeholder care? What do your customers care about, about the environment, what do your employees care about what the regulator’s care about? And going through a thorough process to not say, what do you perceive is good or green or sort of nice in the world, but what’s particularly relevant to your business and your range of stakeholders. And let’s go through a thorough process to really optimize how you will invest in those things.

And again, progress not perfection. These companies are measured quarter to quarter, you do have to deliver a return on your investments. So we don’t think of this as absolutism, that this is good or this is bad. But it’s what’s material to you? What are your goals to move forward and improve on those metrics? And how do you ultimately make that a part of your corporate strategy? Rather than, the term is “greenwashing”, how do you just sort of virtue signal, and put things out there that are, again, sort of ultimately hollow window dressing. We think that those might fool some people for a little while, but ultimately, aren’t very durable assets to build on

Dan Kline  10:22

Are consumers driving change? And I’ll point out, you mentioned greenwashing. And I just want to throw this out there. Can I please have a plastic straw back like? Or could you put in a straw washing station? I’m totally cool carrying a straw someplace. And places like Starbucks (NASDAQ: SBUX) have been really innovative with their little sippy cups and the drinks that are meant to be to be consumed that way. But like, there do seem to be a lot of things that have negative consumer impact, like the paper straws, which is basically like a rolling up a piece of paper and having a drink. It doesn’t work, but sort of how do you balance those things and sort of figure out the piece of it. Like any consumer could tell you, that doesn’t work. But here’s how we could make it work. Here’s what I would do to bring a metal straw or a glass straw with me. Like how do you sort of balance all those priorities and make it not just something, that look, I don’t think straws were the problem. Like we throw away a lot of plastic cups. It doesn’t seem like straws were the issue. I’m sorry to be silly here. But I think that’s a palatable example.

Robert McConnaughey  11:19

I think it’s a great point, plastic waste is a real issue. But I think lots of people would recognize when you stand back and really study plastic waste, thinking about a new way of solving the straw issue is part of that puzzle. But the thought that like, well, now we have paper straws, we’re virtuous, and we’re going to keep doing everything else that we did that’s harmful for the environment, is not a really well researched and thoughtful strategy.

So you asked about the consumer. I think when you step back from some of the language around this, in our politically polarized world, most people would like to buy products that are healthier for them, that don’t harm the environment, and are produced ethically, they’re not made in sweatshops. But there’s the academic term for this is “intention-action gap”. So when you poll people, they all say like, oh, of course, I would pay more for those products that are ethically produced. When they actually get to the store and there’s the cheap bacon cheeseburger, the rubber hits the road, and maybe people make a different decision.

So in terms of how people are acting on that, one of the examples I like to point to is Walmart (NYSE: WMT), which is not always perceived as a real corporate do-gooder. But Walmart is nothing if not extremely practical. And I think they very well understand their customers, that customers want choice. And there are lots of customers that want organic food, they do care about how things are produced. And Walmart wants those products on their shelves. Walmart also wants those products on their shelves to reflect their commitment to everyday low prices.

So again, the simple example is food. People might like organic or ethically produced food, they want it to taste good, they don’t want it to look funny. They want it to be reasonably priced. And if you can meet those other things, I think people, definitely that closes that intention-action gap. I will act responsibly when things fit my other needs. But there are some early adopters that will only shop at their farmers market on things that were raised in complete purity.

But where you really drive action and significant change in the world, is when you actually start to get the mainstream folks that say these are accessible to me, I know where to find them at the store, they’re affordable, and it’s better for the planet. So is there lots of marketing involved with this false claims? Absolutely. But I do think the direction of travel is in a positive light, because the consumer does demand it. But it doesn’t stand in isolation from their other needs of cost and convenience and those sorts of things.

Dan Kline  13:55

My cup is made of ivory. So I am of course a terrible example. No, that is a joke, though it might have been made in a sweatshop we don’t know that answer. I’m not sure if the people at discount mugs necessarily are using the best ethically sourced.

But isn’t Walmart kind of the best example here? A company that has sort of done the right thing in a lot of areas because its had to. And I’ll point to things like going to a $15 minimum wage, offering college tuition. Those aren’t really things Walmart said let’s be progressive and do, they just kind of became table stakes for hiring employees, for putting items on its shelves? Isn’t that sort of more the model most companies are going to follow? Like what do I need to be doing and how do I do it the right way? More so than how can I be two steps ahead of everybody else?

Robert McConnaughey  14:46

You know, if you think about the concept of brands and what’s really driving the US economy these days, I’m sure you see it in your investing work. The Graham and Dodd approach of “let’s buy things that are cheap price-to-book” is hard to do these days. The US economy is more and more driven by ideas, by software, and the bulk of the S&P 500 are intangible assets. It’s close to 85% plus are intangible assets these days versus the old days where there’s lots of stuff. And if you think about what are intangible assets, your brand, your relationships with customers, that goes to this concept of stakeholder management. How are you maintaining good relationships with your customers, with the society around you? And ESG doesn’t solve all of those problems, but ESG can be a valuable tool in that conversation.

So, Walmart, as an example, when Walmart does something, it has a big ripple effect. We have a number of clients that we’ve worked with in things like trucking and logistics. So lots of these companies are sort of heartland type companies that you might not think of naturally as big ESG participants. But Walmart has a program, for example, they’re going to report their ESG metrics on their emissions, not just what they do in their stores, but what their whole supply chain does. So Walmart has named this “Project Gigaton”, that they’re trying to reduce a gigaton of greenhouse gas emissions. And they turn the dial a little bit every year on their vendors, just like they do with costs and other things. They say next year, we need to raise the bar on emissions. And when they drop that pebble, it creates big ripples.

One of the things that’s interesting though as we get into the weeds with these companies, one of the other things that we’re reading about with all the supply chain disruptions in the world, it’s hard to find truckers these days. There’s demographic changes out there, there’s labor shortages. And these companies, when you get into what’s material to you, we’re not just forcing something on you. How do we think about your problems with employees, your challenges with customers? One of the things they realized that maybe less apparent is on the social part of ESG. They’re trying to attract a new generation of truckers, it’s not just old white guys that they need going forward. Their sales approach, how do they interact with customers, their customers are not just old white guys anymore, and they need their staff to match up culturally, with the folks they’re facing off against.

So concepts around diversity, for example, are not again, just a, we’re going to do this because it’s the right thing to do. It’s a very practical thing for them to change and go forward and evolve their company to attract and retain the talent they need to be successful in business.

So to your to your point of, are companies doing all of this just out of a moral imperative, or do they do it because they have to? It’s sort of both, but I don’t think that we should just sneeze at, they’re doing it because they have to.  The reason they’re doing it because they have to is ultimately customers are demanding it. If government regulation is driving it, ultimately, government is a function of what do people want to do. Those people were elected, someone is choosing to drive priorities that make this an issue, not for everybody, but for enough people that it does matter for your business.

So again, it goes back to how we’re trying to advise companies, we don’t tell them, you have to do this, because it’s the right thing to do. We try to align, how do you do these things in a way that’s practical for your business and becomes a real asset for you. And surprisingly, I think there’s a lot of opportunities for that.

Dan Kline  18:22

So I’m going to ask this as carefully as I can, because we are not partisan or political. Because basically, you say the tiniest thing it’s going to alienate one side of your audience or the other. But let’s say Walmart and Amazon (NASDAQ: AMZN) say we want to use 50% electric trucks by 2030. The government has to be involved there, right? Like there’s an infrastructure. We’re okay, Tesla’s (NASDAQ: TSLA) building out a charger network, but the ability to have a national charging network that’s going to allow some of those things to happen, that could modernize our ability to ship things. There has to be a government role in this right? And is that super challenging in our, as you use, the word polarized? We do not have a compromise-heavy government at the moment. I’m saying this as carefully as I possibly can.

Robert McConnaughey  19:10

No, absolutely. These things will come in the US and around the world in dribs and drabs. But you see some language people say, well, ESG is a failure because it can’t solve everything. And I’d say almost every really large scale problem that are solved usually by some combination of government, free enterprise business and changing perceptions of individuals out there. Not by any one of those things, it has to be a combination of the all of the above.

So the example you cited of electric vehicles. What we’re already seeing is a lot of this is happening in spots and what will happen will be a large city, and this is happening and some European cities. They’ll say no large traditional combustion engine trucks are going to deliver the last mile. So vans, medium duty trucks within our cities. And electric works pretty well on short haul, within-city works today. You can make the numbers pencil out on that. The costs and the mileage limits for very long haul trucking, and this is a bigger issue the United States, don’t pencil out quite yet. So there’s a lot of work there on hydrogen, how do you make that happen?

This will be an evolution over time, and I think you will, perhaps you will see broad stroke things that the government will say, across the board, medium duty trucks are going to be electrified, maybe that would happen. I think what you’re more likely to see is individual states or cities will mandate things that will allow scale for some of the manufacturers to grow and reduce their costs. Others will get on board and things will grow in a more evolutionary sense. And then it starts to become more in reach, where you can get those more broad strokes sorts of things. But most major change, and we’ve seen it with some of the green energy, requires, again, a combination of all of the above.

So ultimately I think solving some of these problems is expensive. And I have arguments with some of my more conservative friends that have a negative feeling towards ESG. And looking at it as just costs imposed by do gooders on free enterprise. And I think if you think of it the other way, I think most people would recognize that, going back a few years smog was a problem. And so how do you deal with that? Do you want that just to be a function of government regulation? Or do you want the free enterprise system to come up with better cheap solutions to innovate around that? The latter feels like a fairly conservative, free enterprise concepts to me, and it’s usually not one or the other.

But I think you do want to create the right incentives to unleash free enterprise to solve these problems. If people have a profit motive and they take a run at things, there’s plenty of green energy companies that have failed out there. It’s not a guarantee that you just hang a shingle and say, we’re green and you’re going to succeed. But that’s what we want. That’s how the system works and how it generates innovation in any field, and solving these big problems, again, is going to require all hands on deck.

Dan Kline  22:24

Well to quote a noted philosopher, “it is not easy being green”. That was not a great joke. As we start to wrap up here. Is ESG part of an overall “be less evil” perception for most companies. Because I think the reality is, it’s really tricky. What because you can look at a Walmart and see all the things wrong. But you can also go wait a minute, Walmart, like democratized an awful lot of products for an awful lot of people and made them accessible. You can look at an Amazon and say, geez, conditions in their warehouse are rumored to be not good. But I can get all sorts of items, and how many hundreds of 1000’s of six figure jobs have they created? So it’s not sort of all black or all white for anything? Is this just something that every company has to think about? Is perception on every level from how they operate to sort of how they treat their employees?

Robert McConnaughey  23:22

Yes, I mean, I think all those things, like you said, are, if you want to attract and retain employees these days, most businesses in the United States are trying to climb the ladder. The cliche that software’s eating the world. They want to attract the best and the brightest engineers to do the data analysis. So they know their customers better, so they can deliver better solutions. If you want to attract and retain those sorts of people, you better have a culture that’s going to attract them. Those kinds of people tend to care about how you treat your employees, what’s your company’s footprint is in the world?

One of the things that we advise companies is if you approach your ESG, just as a risk mitigation exercise to be less evil, as you said, you’re going to be less successful than you are, if you think of it in terms of how do we really make this an asset, a benefit to us in dealing with all of our different stakeholders? Absolutely, it’s really important to avoid unnecessary regulatory risk, for example. So risk mitigation can be an important part of why you’re doing ESG. But ultimately, we really emphasize, we do ESG focused investor presentations for people. But we emphasize out of doing ESG investor presentations, that you also want to take those materials and messages and drive them into your sales channels to your customers. Into your recruiting channels in terms of going on campus and attracting the next generation of engineers.

If you take just a “let’s be less evil” approach, then that doesn’t work. But I do think it’s important to realize that there are things in this world that we need like cement that is energy intensive to build. Now there’s lots of really interesting things going on as to how can you make that less energy intensive? How can you capture carbon processes from that, and do it in a way that’s affordable?

So doing necessary things, not de-industrializing the world to get to some sort of green nirvana, that puts lots of people out of work is important. Making steady progress along the way. And it is a matter of optimizing, where do we want to go in terms of environmental progress, social justice issues? And how do we make that palatable to the general public along the way?

One of the clearest examples of that, there are people that feel the urgency of climate action, demands a very aggressive carbon tax. The challenge that you have, and you saw it last year in France with some of the strikes is, if you do something that’s too wrenching to society, you can get a real backlash. There’s a point of, how do you do things in a way that’s optimizing for steady progress going forward on these issues. And I think that’s particularly for corporations that, as you said, have to manage perceptions quarter to quarter, we’re trying to help them find that steady path towards really tangible and significant longer term gains, but in a way that they can deliver to all their stakeholders, including to the bottom line consistently along the way, as well.

Dan Kline  26:27

So I view ESG. And this is probably gonna be the last question, a lot like healthcare. Where I personally can go see my personal trainer three times a week, I can get preventative care, I can do all the things in the short term that costs money, that aren’t necessarily fun to do. Or I could do nothing, grow to 700 pounds, and then eventually have a big bill. Now, for me that choice is obvious. If I’m a CEO trying to hold on to my job, that choice is not that obvious, because quarter by quarter results matter.

Do we need a functional change in how we view companies, because I think with your Amazons of the world, we’ve been willing to accept when they say we’re making investments, we haven’t even been that willing on say, on Netflix (NASDAQ: NFLX), if they say we’re going to gain 30 million subscribers in the year, and they gained 28 million in the first quarter and five in the second, in the third quarter, we say, geez, why are the numbers so bad when they’ve already hit their goals? How do we change perception in the investing world? Do we need to get rid of quarterly reporting? Do we need to de emphasize it? Do we need to train the media? I’m not really sure what the answer is here.

Robert McConnaughey  27:36

Well, this is an interesting question. And I do think one of, you’ve mentioned Amazon a couple of times, and I go back to it. Amazon’s never really cared too much about their quarter to quarter reporting. And Amazon seems to have done pretty well in the markets. So the market is definitely willing to invest in long term growth stories where you’re constantly reinvesting and not just delivering cash back to shareholders. So whether it’s ESG, or whether it’s an industrial company, trying to go from just making machines to making smart machines that connect to the internet of things and make better decisions for their customers. You can choose to just grind it out, be the low cost producer, and not invest in that next level of customer service. That has not served companies very well sticking with a cash producing buggy whip company.

You have to invest in something for the future, or you get eaten. And particularly in the US, I think we’re an economy of ideas. If you’re just a low cost manufacturer of stuff in a globalized economy, there’s going to be people around the world that can make stuff cheaper than you can. The US economy has been really successful in making the best and most innovative solutions in the world. And I think ESG fits into that in terms of how do you invest in things that elevate your brand, invest in your relationships with customers and solve big problems?

And this is a big market. I do think there’s no question that the world is investing significantly in decarbonizing its economy. The world is thinking very hard about, and not to be too political, you just see populism around the world, on both ends of the political spectrum. People are questioning the nature of markets, government, etc. And if corporations do not act wisely, and in concert with societies around them, there will be a cost at some point. It’s the 700 pound guiding piece.

And that’s where boards come in. That’s where activist shareholders come in. But there’s just no question that the direction of travel is that this has gone from being viewed as just a cost that’s imposed on people, to done right implemented this is a real opportunity. We poll investors and 56% of the investors that we poll say that ESG is associated with long term outperformance of businesses. It’s again, not a cost, but long term outperformance.

And we also see that when we poll companies that they believe that long term implementation of these strategies is good for their franchise value. And I think that is the truth. Yes, there may be some near term investment, but just like any sort of innovation, it has to be viewed and you have to generate returns on it. If you don’t implement it well, then it’s just a cost. If you get a real return on it in terms of serving your customers effectively, attracting retaining the right employees, reducing regulatory risk, then that’s a positive asset in a world filled with intangible assets these days.

Dan Kline  30:38

Robert McConnaughey, thank you for illuminating, for sharing a lot in an area that I think a lot of us try to be responsible investors. But then it does become a lot like when you go to the store, and you’re looking to buy a 65 inch television and one costs $289 and one cost $690. And you’re like, well, like that $289 one like, yeah, it’s probably made by oompa loompa’s in a slave factory somewhere. But boy, it’s a lot cheaper.

So I thank you for giving us the levels of this. Is there anything else we’re missing? As I’m going to assume that most of us are semi-responsible people. We’re trying to invest in good for the most part, though, I have a few investor friends that will invest in companies that they know aren’t good, and then use the proceeds to do good themselves. That’s a viable strategy as well. But what are we missing as investors to close this out?

Robert McConnaughey  31:30

No, I think I’ll just riff off of what you just said. These are big business opportunities to your point of the person who comes up with environmentally responsible straw that doesn’t fall apart when you’re trying to like drink your drink driving down the highway. Straws are a nice feature. I think people enjoy them for a reason. And there’s no reason you can’t make a product there that is environmentally productive. I think most people would recognize that plastics are an issue in terms of their lack of recyclability. So I know some investors that are not ESG investors that are spending a lot of time trying to figure out who’s going to solve chemical recycling or other ways to use plastic more effectively.

And I say that in the sense of, these are big problems, and the people that solve them effectively, entrepreneurially will make a lot of money. So this is not a trade-off. I think it’s really important for people to see that this is not a trade-off question of, “I want to do good in the world or I want to make money”. Certainly in the last five years ESG funds have outperformed the broader market. Now they’ve tended to be more tech heavy, more innovation heavy and basic materials and energy have underperformed. But I think the question of whether you can invest in ESG or try to make money, I think that argument is closed. I think you can do both. And there are significant opportunities to lean into innovation and do good in the world.

Dan Kline  32:55

Robert McConnaughey, thank you for doing this. I am sure we will revisit it again. This has been the 7investing Podcast. We are 7investing, empowering you to invest in your future.

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