You're listening to Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. We often talked about this data from our Bloomberg Intelligence team about how e s G may surpassed forty one trillion dollars in assets, not without challenges, Untim, we know most notable is the continued heightened scrutiny as regulators tackle the risk of greenwashing and some other issues. We've got a great guest on this. Kisa Shrine is Global Partner director of
the London Stock Exchange Group. She's with us right now
in the Bloomberg Interactive Broker Studio. She's also got the new book out, Gambling on Green Uncovering the balance among revenues, reputations and E s G. She's also a part of Series, which is a nonprofit sustainability advocacy organization UM that's been around for quite a lot of time before we're even talking about E s G. So it's s G is on everyone's radar at this point, Kissa, But as Carol and I've been talking about throughout the program and really
over the last few months, under increased scrutiny, right now thanks to a lot of what's happening in Europe. What do investors need to underst and about how to like read through the noise when it comes to E s G. Absolutely and great to be here, Tim and Carol. The first thing we really need to think through is the types of E s G investing that we're talking about. You could be looking at values are value investing. I'll
break that down a bit. So there is E s G integration, which is when investor takes their typical standard stock selection model and they just apply E s G or sustainability factors to it. And then on the other side of the spectrum there's impact investing. And I suspect that when people hear esc investing two very two very different things, think about the spectrum and they're on either end.
Tell us about the difference between the two. Sure, So E s G integration you have your typical traditional stock selection process that the investment manager takes and they apply sustainability factors onto that. Then the impact impact model, which is impact investing, which is really looking for a positive
social or environmental outcome. Two separate things. One is focusing on that positive environment mental social outcome and the other is just typical traditional investing with E s G susinability factors integrated can both provide returns are more importantly can impact, right, because that's I feel like smarter. Can I say that? Because I do feel like E s G is going
through reckoning. So much money has come in, there's not a really clear way of measuring and the E s G, you know, umbrella different ways to measure each of those metrics, some easier than others. Impact though, is very specific, right in its intention impact, It is intentional. I feel it is intentional, is very specific, and I think that's where a lot of the confusion lies. Honestly, I think we hear the ISU investing, we think impact, but not all
types of investing our impact. Okay, So what okay, So I'm just trying to talk about to phrase this. So it's all well and good to talk E s G and investing in what you believe in in a market that just seems to continue to go up, up and up. But people are running for the hills right now. And you know, with the NASDAC that's down more than thirty percent this year, hundred down. Our investors caring about E s G still So let me break it down like this,
tim our investors caring about risk? Still, the answer is going to be yes, right E s she is simply about part of it is simply about risks. And let me give an example. If we talk about our investment in a piece of real estate. We can say what the investment is today, what it's going to be like in ten years, but in fifteen years what we see may be totally different than what we're seeing now. Physical
climate risk is a risk, and it's real. What's going on with hurricanes tsunamis those things are happening and more and more, they're getting more and more prevalent. And so when you have investments in certain locations, you need to be mindful of how things are going to change from a physical perspective. So to answer your question, yeah, something we need to think about right now because we see
these climate issues taking place right now. So I do I want to get back to I think, and this is where part of the reckoning is is that how do we measure it? Because what we're finding is that a lot of E s G investments that we would just don't sound like that they should be part of the E s G umbrella, and we hear that about big oil or so and you know so forth or that Tesla is not part of an E s G index for whatever reasons. So how do we how do we as an what is the s G? Or do
we have to redefine it? You have a lot of clients, you work with them, so what do you how do you guide them or what do they we can do this better? Sure, Well, I've I've something with dozens of investors and they say, you know what E s G. Environmental, social, and governance. Those are three different things. You have governance that's about ethics of the corporation. You have social that could be what's going on inside the company or even outside.
And then you have environment, which we consider climate in many cases. So first of all, we need to think about how those things are interrelated. And I love talking about the story of what we saw with the pandemic. Right during the pandemic, we heard a lot about these underlying health issues. Well, if we trace this back and look at who had to live in certain locations that may have been near industries that were pumping things into water or pumping things into the air, and we had
to drink the water and breathe the air. We see many underserved communities as a result of redlining, which is that it's a practice now that we should not be doing, but it was legal back in the day. And we see that people are forced to live in these areas, so they developed illnesses and they had these underlying conditions that were then you know, really made major during the pandemic.
So those are the sorts of things when we talk about how climate is related to social and then the ethics part, well, what can companies do to make sure that doesn't happen, that the water that they use, that they manage it well, that they recycle and reuse. Well, that's how the governance peace play. So first of all, we need to look at them and see really how the inter relationship works. And then from there you talk
about measurement. As you can see with climate, there is a lot of conversation about standards and those things are being measured. With social is not that easy. I was talking with Michael Postner, who was um u S assistant secretary under a President Obama, and he was talking about just the variety of social pieces and just how there's really no way to measure worker engagement along with what's going on with your consumers and how your consumers are
using your product, is the product safe for them? How can you put all that into one bucket? And it's very challenging. Well until though, I would go back to one of the things I like to put out there, Until a company is penalized for not hitting E S
G metrics in some way. So what we talk about earnings all the time, So we look at top and bottom line, we look at margins, and unless there's an E S G metric where you are financially going to be penalized, So what Because ultimately it's going to come down to performance like in a sex do you know what I mean? Like, so, do we have to get to that point where there's some kind of measurement that when a company reports, you know you're going to be rewarded by investors or not if you don't do well.
So we talked about measurement. There are a couple of different things we can look at. We can look at about thirty regulators as well as consumers. Regulators really want to be able to make sure that the things that are important to consumers and the things that should be legalized,
that things are carried through consumers. They have the last word if they're not buying your product because they don't feel that it's in the best interests of the environment, of the people who work there, are of themselves, they're not going to purchase the products. So when we look at measuring, we really see that consumers are doing a great job of bringing that reckoning to bear this product. This company is ethical, is sustainable, and we want to
do business there. But it's tricky, like I think about in this environment with high prices and consumers are having a difficult time that maybe they're going to say, Okay, I'm gonna turn my you know, turn away from a company doing I'm not going to turn away from a company doing bad because they have a cheaper like it's you know what I'm saying. They're not turning away, not turning away at all, all right, but we will continue this in the future. UM, so much fun to have
you here. Ke's issuing Global Partner Director of the London Stock Exchange Group at Sarah's uh and her book Gambling on Green check it out. Have a great night, everybody,