WEBVTT

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We love to engage
on the issues of the day.

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We love it.

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We comment on the news,

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we post our views on social media,

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we march, we protest ...

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But who among us is working on solutions,

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big solutions to big issues,

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like gun violence,

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mistreatment of workers,

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flood, famine, drought?

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Who is on it?

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Boom!

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These guys.

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(Laughter)

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What? You were hoping for Peter Parker?

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The Avengers?

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You don't expect this beacon of diversity,

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these good-looking, nicely dressed dudes
just oozing charisma to solve the issues?

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Well good, because they're actually
not going to solve the issues.

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But before you dismiss them,

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let me say, they're not going
to solve the issues,

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but they will show us how.

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So who are they?

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They're activist investors:

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Carl Icahn, Dan Loeb,
Paul Singer, Barry Rosenstein.

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These are the modern-day
OGs of Wall Street.

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(Laughter)

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These are scary dudes.

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I don't mean Green Goblin scary.

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I mean real scary.

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The fear they strike in the hearts
of a company's CEO and board

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when they enter its stock

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is the same fear you feel
when you hear a bear outside your tent,

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and it's dark,

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and you're sitting there
with a mouthful of Doritos --

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(Laughter)

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that just moments ago,

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you had snuck out of the tent
to pull down from the bear hang,

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because you had the munchies.

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That fear.

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And in that moment, you are praying,

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"Oh Lord, please let this bear
be passing through."

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That bear is not passing through!

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That bear made a detour for you.

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Bears like Doritos!

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(Laughter)

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Activists like money.

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Some activists also like Doritos,
but they definitely want money.

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And the way they make money,
the way they create value,

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is by getting management of corporations

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to make changes.

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Now, some will argue
that the changes they create,

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the value they create,
is too short-term in nature.

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And others will say the tactics
they use are egregious.

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I agree.

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Long, drawn-out lawsuits,

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public smear campaigns --

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there is no need for that.

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But I must say, there's
a small handful of activists,

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very small,

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that go to great lengths
to be constructive and collaborative.

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And overall, we have to give credit
where credit is due.

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As a group, they have managed
to catalyze large-scale change

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in large corporations,

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and that's no small feat.

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Now, imagine a world

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where all investors were working
with management to make change,

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not just to make more money,

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but to improve
the environment and society.

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Imagine what a greener
and better world this would be.

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Now, why? Why would an investor bother?

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And at first, blush I'm with you:
Why would an investor care?

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Because if doing well on ESG issues --

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environmental, social
and governance issues --

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was just an act of good
corporate citizenship,

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then I agree, investors would not care.

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But the good news,

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and perhaps the saving grace
for our collective futures,

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is that it's so much more than
an act of good corporate citizenship.

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It's good business.

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There's now enough evidence
that shows a clear correlation

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between ESG performance
and financial performance.

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Companies that do good
for the environment and society

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also do well financially.

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And some of the best
companies are catching on.

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Like Adidas:

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Adidas is cleaning up the ocean
and making money in the process.

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Adidas teamed up with an organization
called Parley for the Oceans.

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Parley goes out and collects
plastic waste from the ocean.

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Adidas uses the plastic waste
to make shoes.

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Shoes made with plastic from the ocean:

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good for the environment
and good for business.

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Because if you know that rapidly growing
consumer segment known as hipsters --

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and I know you know hipsters --

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then you know that a hipster faced with
the choice between a no-name shoe

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and an Adidas made with
plastic from the ocean

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will pick the Adidas every day
of the week and twice on Sunday,

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and then walk around like it's no big deal

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but look for every opportunity
to talk about them.

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Like, in an Uber Pool.

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(Laughter)

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"Hey, I noticed you looking at my feet."

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"What? Dude, no, I'm just making slides.
I'm a consultant. I make slides.

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I'm making PowerPoint slides,
I'm not looking --"

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"No, it's fine.

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I get why you'd be looking.

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The plastic on my shoe
must be bothering you.

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Well, let me talk about it
for the rest of this ride.

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You see, the plastic on my shoe
is from the ocean,

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on my feet, not in your fish,

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being walked on, not being munched on.

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Happy feet. Happy fish. Happy ocean.

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Doing my part. I got eco-shoes.
I got eco-shoes.

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You need some eco-shoes?"

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And so on, just cornering him.
We've all been there.

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"Hey, pass me your cell phone.
I'll give you a discount code.

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Let me give you a discount code."

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We've all been --

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Folks, I have jumped out
of moving Uber Pools.

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(Laughter)

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Just, moving, highway, I'm out. I'm out.

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But we've got to forgive the hipsters,
we need to love the hipsters.

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We need hipsters,
and we need companies like Adidas,

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and what we need most is for investors
to convince other companies

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to behave like Adidas.

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And herein lies the challenge.

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There's a growing group of investors,
call them "conscious investors."

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Conscious investors care about ESG issues.

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And they talk a lot about
engaging management on ESG issues.

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But they don't actually get
management to make changes

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that will improve
the environment and society.

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And this is where conscious investors
can take a page from the playbook

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of the activist investors,

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because the activist investors have no
issues getting management to make changes.

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They have no issues turning up the heat.

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Take Paul Singer.

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He's an old-school Wall Street OG,

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now in his 70s, loves Doritos,
loves making money.

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Argentina owed Paul 600 million dollars

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and would not pay.

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Big mistake.

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You can't take money from an OG
and not pay it back.

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Paul went to war with Argentina.

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I am not inventing.

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This is big. This was huge.

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This was bigger than Tyson vs Holyfield,

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Ali vs Foreman.

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This was man vs country.

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Paul Singer started going around the world
trying to seize up Argentinian assets.

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At one point, he tried to seize
an Argentinian navy vessel

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off the coast of Ghana.

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He tried to take over a 350-foot ship

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while big navy officers
with big guns were on the ship.

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He got the police in Ghana
to show up with a crane

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and threaten to board the ship,

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and it wasn't until
the navy officers drew their weapons

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that they called off the operation.

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That's what I call turning up the heat.

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Now, you may say

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Paul lost the battle.

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And I'll say, Paul won the war,

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because Paul didn't get paid one time,

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he got paid 20 times
his original investment.

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Then you have Barry Rosenstein.

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His fund, Jana Partners,

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started stealth-mode buying up
stock in Whole Foods,

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at a time when Whole Foods was struggling.

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They got to eight percent, came out,

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and pushed Whole Foods
to sell itself to Amazon,

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and not because Barry wanted
same-day delivery of his organic Doritos.

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(Laughter)

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He wanted to make some money.

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Now, the CEO of Whole Foods,
John Mackey, and the board

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did not want to sell themselves to Amazon,

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because that would be
the prime example of selling out.

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But in the end, they caved.

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Why? Because Barry turned up the heat,

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and he made 300 million
dollars in the process.

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And he did not leave
a very nice impression on John.

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You're not going to see
John and Barry just hugging it out

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at the Whole Foods café.

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Let's take a very different example now:

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the Chicago Teachers' Pension Fund,

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a $10 billion conscious investor.

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They recently came out hard
against private prisons in the US,

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and good for them.

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As a new parent, I tell you,
I am troubled by devastating images

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of young children being ripped
out of the arms of their parents

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at the US border

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and being placed in private
detention facilities that did too little

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to help the kids maintain
contact with their parents.

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So what did the Chicago teachers do?

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Did they get management to make changes?

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Did they turn up the heat?

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Did they look management
in the eye and say,

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"This is no way to run a business.

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There's a different way
to do things. Let me show you"?

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No. They just sold their stock.

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Selling did nothing.

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It's not like management
woke up the next day

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and had an epiphany and said,

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"Gosh, the teachers sold their stock.
We'd better be nice to the kids."

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No. That didn't happen.

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And despite a decade
of several high-profile divestitures

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in private prison stock in the US,

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the stock has continued to climb.

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The stock over that same period
has outperformed the market.

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And the biggest issue is,

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we went from a set of conscious
investors owning the stock

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to it potentially being owned by investors
who don't care about these issues

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and don't care what you think
about these issues.

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And this is my issue
with conscious investors.

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Their MO is to divest

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or divert money into ESG-focused funds.

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You can't divest your way
to a greener world.

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You can divest your way
to a greener portfolio,

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not to a greener world.

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So what's it going to take?

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What's it going to take
to flip the script,

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to get conscious investors to go
from divesting to engaging,

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to go from talking about engaging
to actually working with management

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to make changes that will improve
their ESG performance?

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Because there's a lot suggesting
they should and they could.

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They should, given the clear correlation
between ESG performance

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and financial performance.

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They could because the activists
have shown us they could.

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A shareholder can drive
change in a company.

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The difference is, Paul and Barry
do what they do to make money.

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The conscious investors would do it
to improve society and the environment

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and make money in the process

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and do it a little more
collaboratively and constructively.

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And they have the backing
of the some of the largest investors.

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Vanguard and BlackRock --
together, they manage trillions.

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They've been increasingly vocal
about the importance of ESG.

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The CEO of BlackRock has been
increasingly vocal in his annual letters

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about this issue.

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Even Jana Partners, the same OGs
that John called "greedy bastards,"

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recently co-wrote an open letter
to the board of Apple,

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saying, "Hey, your smartphones
are addictive for children.

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Fix it."

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Apple is working on it.

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So what it's going to take
is some pressure.

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It's going to take some pressure
on conscious investors

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to, in turn, put some pressure
on management

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to make changes that will improve
the environment and society.

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And where do they start?

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They start by picking an issue
that matters to them

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and taking a stand on it.

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Take a stand on an issue
that lines up with your purpose:

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water preservation,
labor rights, diversity.

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As long as it lines up
with your purpose, you are golden.

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And the biggest unlock?

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Get the senior-most investment
professionals focused on this.

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Today, when an activist
shows up to a campaign,

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it's the senior investment professional
talking to the CEO and the board

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and everyone hears about it.

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When a conscious investor shows up
to talk about an ESG issue,

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it's some junior person
in the risk department

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talking to some junior person
in the investor relations department,

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and nobody hears about it,
and that needs to change.

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And it's not some massive leap.

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Today, when a company
underperforms financially,

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who is on the hook?

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The senior investment professional.

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So what do they do?

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They drop everything
and work with management,

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collaboratively and constructively,

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to make changes to improve
the company's financial performance.

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The same should be true when the company
underperforms on ESG issues.

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And yes, that requires standardization
on how we measure ESG,

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but we're on it.

NOTE Paragraph

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So folks, here's my call to action:

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it's your money.

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It's your pension fund,

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it's your sovereign wealth fund.

00:12:36.748 --> 00:12:38.395
it's your university's endowment.

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It's your money.

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And it's your right to have your money
managed in line with your values.

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So use your voice

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and trust that it matters.

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It was your voice that got the investors
more conscious in the first place.

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You protested for years,

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because you didn't feel right
about your money being invested

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in companies whose values
don't line up with yours.

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It's time to use that voice again.

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But this time, instead of
pushing them to divest,

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push them to engage, truly engage,
truly work with management

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to make changes that will improve
their ESG performance.

NOTE Paragraph

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You made them aware of the issues.

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You can now focus them on fixing them.

NOTE Paragraph

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Thank you.

NOTE Paragraph

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(Applause)