Discussing Impact Investing and ESG's with a BlackRock Executive | Terrence Keeley | EP 410

Tour dates 2024

• Announcement of upcoming tour in 2024.
• Will visit 51 cities in the US.
• Focus on ideas from forthcoming book.
• Excitement to connect with audience.

Coming up

• Projected global population growth to 10 billion by 2073.
• Need for more inclusive and sustainable living.

Intro

• Introduction to Terrence Keeley and his expertise in ESG investing.
• Discussion on ethical investing and the financial crisis of 2008.

The ARC experience in London: fighting doom with aspiration

• Terrence Keeley's positive experience at the ARK conference in London.
• Gratitude for the global community with a shared vision for a sustainable and inclusive future.
• Personal story about young people's reluctance to have children due to climate change fears.
• Importance of creating a positive narrative for the future.

Faith in the positive potential of the future

• Importance of having faith in a positive vision for the future.
• Criticism of environmentalist movements' anti-human stance and the impact on the poor.
• Religious beliefs and the importance of positive storytelling.

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Net Zero is not the “only thing that matters”

• Climate change is a multi-dimensional and complex problem, not solely attributed to carbon dioxide
• Oversimplifying the environmental emergency to just carbon dioxide reduction neglects other environmental issues
• This oversimplification can lead to moralization and demonization of those deemed to be against carbon dioxide reduction

Koonin, speaking on the science of climate change

• Earth has experienced five mass extinction events in the last 500 million years due to planet cooling too quickly
• Carbon dioxide impact is relatively small compared to other climate factors, and many are not fully understood
• Climate change is a complex, collective action problem with trade-offs and solutions requiring a fact-based, inclusive conversation
• Positive progress in sustainability and mindful consumer decisions offer hope for a sustainable future

Invitational change is always better than forced change

• New ways of living need to be offered as invitations rather than forced upon people
• Visionary and invitational approaches are more effective in fostering positive change compared to tendentious and accusatory approaches
• People are interested in finding ways to live in harmony with the environment but will resist if manipulated or forced

Energy stocks, mushroom bags, and the free market

• Top-down solutions in clean energy incentivization may not align with bottom-up consumer choices
• Market-driven decisions by mindful consumers provide a better mechanism for driving progress
• Consumers' changing attitudes and mindfulness will influence the future more effectively than forced government mandates

The central planning model, and why it doesn’t work

• Central planning is less efficient than decentralized market forces
• EVS and electric cars are affected by grid capacity and may be part of a larger plan to reduce automobile ownership

The Three Pillars of society

• Societies thrive with a balance of markets, good government, and community
• If any one of these pillars is missing, societies tend towards crony capitalism or inefficiencies

Paul Marshall, the disruption of markets

• Markets need to be destructive and creative to maintain efficiency
• Centralized economies are slow to adapt, leading to catastrophic readaptation
• Lessons from AI and effective altruism highlight the importance of markets and innovation

What we owe the future

• We have responsibilities to future generations
• There are trillions of human beings yet to be born, and we need to build a sustainable planet for them

The three core principles of Catholic social teaching

• Catholic Social Teaching emphasizes human dignity, subsidiarity, personal responsibility, and solidarity
• The struggle between subsidiarity and solidarity is continuous, with individuals taking personal responsibility and communities helping those in need.

Abraham, having a multigenerational ethos

• The story of Abraham embodies a multigenerational ethos emphasizing sustainability and continuity.
• Adopting an ethos focused on multigenerational implications is crucial for sustainability.
• Part of this ethos involves leaving behind material comfort and embracing sacrificial attitude for a higher purpose.

We have absolutely no right to impede the progress of developing nations

• It is not our place to dictate the development paths of countries such as China, Russia, and India.
• Advocates for laying the groundwork for a nuclear revolution in Western countries while acknowledging the transition through fossil fuels in developing nations.
• Emphasizes practical, cost-effective policies to address critical global issues like poverty, health, education, and energy insecurity.

Good intentions and horrible ideas: ESG’s

• Acknowledges the good intentions behind ESG (Environmental, Social, and Governance) principles.
• Raises concerns about the practicality and effectiveness of ESG in creating global economic growth and inclusivity.
• Advocates for working with the intentions behind ESG while emphasizing the need for practical, impactful solutions.

How WWII brought forth ESG’s

• Provides historical context for the emergence of ESG, tracing it back to the United Nations' Declaration of Human Rights and the sustainable development goals after World War II.
• Describes the significant economic transformation and global prosperity since the end of World War II.
• Highlights the origins of ESG in response to environmental, social, and governance factors identified as presenting material risks to financial stability.

What half of the world's market share is being spent on

• 6,000 signatories to the United Nations principles for responsible investment manage 120 trillion dollars in assets
• ESG rules are being applied with unintended consequences and have not always been beneficial
• Criticism of ESG as an investment movement lies in the misguided application of ESG criteria, resulting in the exclusion of certain stocks without necessarily solving environmental or social issues
• ESG investing is compared to historically unsuccessful socially responsible investing in areas such as avoiding sin stocks and the slave trade

Balancing positive effect with profitable investment

• Ethical principles are considered to be an ill-posed solution for irresponsible investing as investors are already motivated to invest wisely
• The imposition of a top-down ideological framework compromises investment and market strategies of companies
• The conflict between ESG attitude and free market principles is argued to be deeply rooted and the concept of ESG investing is criticized as falsely premised
• The focus is shifted to impact investing with examples such as affordable housing and opportunities for underrepresented entrepreneurs that genuinely address inclusivity and sustainability

A 1.6 percent change makes a huge impact

• Allocating 1.6% of institutional assets to impact investing could potentially achieve the United Nations sustainable development goals by 2030
• The $3.5 trillion needed for this allocation would significantly contribute to filling the gap for private capital
• Specific investment areas like affordable housing are highlighted, with equity returns for investors estimated to be between 16-18% annually

Affordable housing, and how to build generational wealth

• Affordable housing is identified as a key area for investment, with equity returns ranging from 16-18% annually
• Emphasis on creating greater access to home ownership for those burdened with student loans and facing down payment challenges
• Examples are shared to highlight the potential for double bottom-line opportunities that offer both financial returns and positive social impact

Do your homework, investments with impact

• Sufficient judgment is needed when investing in impact strategies.
• It's important to verify the true impact and additionality of the investment, ensuring it creates a solution that would not happen without it.
• Various organizations are implementing impactful initiatives, such as improving FICO scores, providing education, and addressing homelessness and recidivism.
• Programs have been successful in helping individuals gain independence and purpose through mentorship and educational support.

How to get involved as a citizen or an investor

• Terrence Keeley's website, www.6.com, showcases a range of investment possibilities and includes a curated Town Square for sharing ideas and initiatives for social issues.
• Exemplars of Hope, a global initiative, offers opportunities for volunteerism and support for impactful programs.
• Interested individuals can volunteer to teach ethics or contribute to programs that promote solidarity and civility.

“Do not invest in B Corporations if you want to retire”

• B Corporations operate with strict ethical and environmental rules, but investing in them may not lead to a successful retirement due to underperformance.
• Investing requires careful consideration to generate a return and align with one's moral beliefs and values.
• Poorly invested money can have damaging consequences, so wise and ethical investment choices are essential.

You need more than a social security card

• Being mindful about financial health is important due to increasing life expectancy
• Long-term investment approach is recommended, such as putting money in the stock market and forgetting about it until retirement
• Advises against trying to beat the market and recommends low-fee index funds
• Volunteering and community involvement is emphasized as valuable

Larry Fink does not say ESG anymore

• The speaker, Terrence Keeley, was a senior executive at BlackRock and wrote a critical book on ESG
• BlackRock initially opposed publishing the book but Larry Fink ultimately wrote the forward, though not in full agreement with its contents
• Larry Fink no longer uses the term ESG, considering it overly politicized and not conveying the right message

The one question your financial advisor should ask you

• Focus on impact investing and double bottom line for asset owners to achieve their goals
• The importance of a financial advisor understanding and aligning with clients' goals
• Advises against using ESG funds, emphasizing the importance of tailored, efficient, and high probability portfolio solutions to achieve clients' goals