Placeholder Image

Subtitles section Play video

  • We love to engage on the issues of the day.

  • We love it.

  • We comment on the news,

  • we post our views on social media,

  • we march, we protest ...

  • But who among us is working on solutions,

  • big solutions to big issues,

  • like gun violence,

  • mistreatment of workers,

  • flood, famine, drought?

  • Who is on it?

  • Boom!

  • These guys.

  • (Laughter)

  • What? You were hoping for Peter Parker?

  • The Avengers?

  • You don't expect this beacon of diversity,

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

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

  • But before you dismiss them,

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

  • but they will show us how.

  • So who are they?

  • They're activist investors:

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

  • These are the modern-day OGs of Wall Street.

  • (Laughter)

  • These are scary dudes.

  • I don't mean Green Goblin scary.

  • I mean real scary.

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

  • when they enter its stock

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

  • and it's dark,

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

  • (Laughter)

  • that just moments ago,

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

  • because you had the munchies.

  • That fear.

  • And in that moment, you are praying,

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

  • That bear is not passing through!

  • That bear made a detour for you.

  • Bears like Doritos!

  • (Laughter)

  • Activists like money.

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

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

  • is by getting management of corporations

  • to make changes.

  • Now, some will argue that the changes they create,

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

  • And others will say the tactics they use are egregious.

  • I agree.

  • Long, drawn-out lawsuits,

  • public smear campaigns --

  • there is no need for that.

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

  • very small,

  • that go to great lengths to be constructive and collaborative.

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

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

  • in large corporations,

  • and that's no small feat.

  • Now, imagine a world

  • where all investors were working with management to make change,

  • not just to make more money,

  • but to improve the environment and society.

  • Imagine what a greener and better world this would be.

  • Now, why? Why would an investor bother?

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

  • Because if doing well on ESG issues --

  • environmental, social and governance issues --

  • was just an act of good corporate citizenship,

  • then I agree, investors would not care.

  • But the good news,

  • and perhaps the saving grace for our collective futures,

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

  • It's good business.

  • There's now enough evidence that shows a clear correlation

  • between ESG performance and financial performance.

  • Companies that do good for the environment and society

  • also do well financially.

  • And some of the best companies are catching on.

  • Like Adidas:

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

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

  • Parley goes out and collects plastic waste from the ocean.

  • Adidas uses the plastic waste to make shoes.

  • Shoes made with plastic from the ocean:

  • good for the environment and good for business.

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

  • and I know you know hipsters --

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

  • and an Adidas made with plastic from the ocean

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

  • and then walk around like it's no big deal

  • but look for every opportunity to talk about them.

  • Like, in an Uber Pool.

  • (Laughter)

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

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

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

  • "No, it's fine.

  • I get why you'd be looking.

  • The plastic on my shoe must be bothering you.

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

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

  • on my feet, not in your fish,

  • being walked on, not being munched on.

  • Happy feet. Happy fish. Happy ocean.

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

  • You need some eco-shoes?"

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

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

  • Let me give you a discount code."

  • We've all been --

  • Folks, I have jumped out of moving Uber Pools.

  • (Laughter)

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

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

  • We need hipsters, and we need companies like Adidas,

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

  • to behave like Adidas.

  • And herein lies the challenge.

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

  • Conscious investors care about ESG issues.

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

  • But they don't actually get management to make changes

  • that will improve the environment and society.

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

  • of the activist investors,

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

  • They have no issues turning up the heat.

  • Take Paul Singer.

  • He's an old-school Wall Street OG,

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

  • Argentina owed Paul 600 million dollars

  • and would not pay.

  • Big mistake.

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

  • Paul went to war with Argentina.

  • I am not inventing.

  • This is big. This was huge.

  • This was bigger than Tyson vs Holyfield,

  • Ali vs Foreman.

  • This was man vs country.

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

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

  • off the coast of Ghana.

  • He tried to take over a 350-foot ship

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

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

  • and threaten to board the ship,

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

  • that they called off the operation.

  • That's what I call turning up the heat.

  • Now, you may say

  • Paul lost the battle.

  • And I'll say, Paul won the war,

  • because Paul didn't get paid one time,

  • he got paid 20 times his original investment.

  • Then you have Barry Rosenstein.

  • His fund, Jana Partners,

  • started stealth-mode buying up stock in Whole Foods,

  • at a time when Whole Foods was struggling.

  • They got to eight percent, came out,

  • and pushed Whole Foods to sell itself to Amazon,

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

  • (Laughter)

  • He wanted to make some money.

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

  • did not want to sell themselves to Amazon,

  • because that would be the prime example of selling out.

  • But in the end, they caved.

  • Why? Because Barry turned up the heat,

  • and he made 300 million dollars in the process.

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

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

  • at the Whole Foods café.

  • Let's take a very different example now:

  • the Chicago Teachers' Pension Fund,

  • a $10 billion conscious investor.

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

  • and good for them.

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

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

  • at the US border

  • and being placed in private detention facilities that did too little

  • to help the kids maintain contact with their parents.

  • So what did the Chicago teachers do?

  • Did they get management to make changes?

  • Did they turn up the heat?

  • Did they look management in the eye and say,

  • "This is no way to run a business.

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

  • No. They just sold their stock.

  • Selling did nothing.

  • It's not like management woke up the next day

  • and had an epiphany and said,

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

  • No. That didn't happen.

  • And despite a decade of several high-profile divestitures

  • in private prison stock in the US,

  • the stock has continued to climb.

  • The stock over that same period has outperformed the market.

  • And the biggest issue is,

  • we went from a set of conscious investors owning the stock

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

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

  • And this is my issue with conscious investors.

  • Their MO is to divest

  • or divert money into ESG-focused funds.

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

  • You can divest your way to a greener portfolio,

  • not to a greener world.

  • So what's it going to take?

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

  • to get conscious investors to go from divesting to engaging,

  • to go from talking about engaging to actually working with management

  • to make changes that will improve their ESG performance?

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

  • They should, given the clear correlation between ESG performance

  • and financial performance.

  • They could because the activists have shown us they could.

  • A shareholder can drive change in a company.

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

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

  • and make money in the process

  • and do it a little more collaboratively and constructively.

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

  • Vanguard and BlackRock -- together, they manage trillions.

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

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

  • about this issue.

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

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

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

  • Fix it."

  • Apple is working on it.

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

  • It's going to take some pressure on conscious investors

  • to, in turn, put some pressure on management

  • to make changes that will improve the environment and society.

  • And where do they start?

  • They start by picking an issue that matters to them

  • and taking a stand on it.

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

  • water preservation, labor rights, diversity.