David vs Goliath: Inside Engine No. 1's Activist ETF

on x On Mobile. And it speaks to a lot of things, and we're we're thrilled about this, but a couple of the folks at Engine number one are going to join us today on trillions. What stood out to you about that moment, because it was not just about what an activist can accomplish with board seats. A couple of things. First, it's a small company who got bigger players to act. And I've always really looked at Vanguard and black Rock and some of the institution owners of

having quite a bit of power. This is one of the issues we hear from from uh, you know, people about how big passive is getting and their voting power. At the same time, you've got E S, G, E T F S coming out, which essentially score stocks and then exclude maybe some of the energy stocks. I've always struggled with those. Why wouldn't you want to own the

people you want to help? So I looked at this and I was like, this makes a lot of sense to me that, you know, voting and owning the shares is how you can really impact things as opposed to just not owning Exxon. Let's work with them, And so I was immediately took notice. Then they filed for an e t F and I was like, wow, this is this is interesting and it's it's a really simple et F.

It's the five biggest stocks. And what I also found, uh, really intriguing was the expense ratios point oh five percent, So it's got a Vanguardian price tag and the tickers good vote, so it's got a lot of things going for it, and I think it could redefine E s G investing. You know, if your goal is to have an impact, it just seems like this, this activist type ETF would be the way to do it versus a

just not owning a couple of energy stocks. So the name of that et F engine number one transformed FIVETF with the ticker vote joining us today from Engine number one, Charlie Penner and Yasmin die Bilger also joining us um from Bloomberg Intelligence ESG analysts robbed Boff and at Bloomberg News. On s G reporter Sagel Kashan So one big happy family joining us for this very very important interview, which I think of is almost the ultimate David and Goliath story,

this time on Trilliance Engine number one. Charlie, Jasmine, Rob Sagel, Welcome to trillions. Thank you so so Charlie. It's almost like you were flying in delp mode um and all of a sudden you shook corporate America in a really big way. You had a point zero two percent steak in x on mobile, no history of activism in oil or natural gas, and all of a sudden you had scored three board seats, which was a quarter of of of what was available. And you know, not long ago,

Exxon was the world's most valuable company. So just tell me, how did you come out out of nowhere here? How did you manage to pull that off? Um? Yeah, I mean, um, the out of nowhere part. Um. I might give a little, uh, you know, backstory on so I spent fifteen years doing traditional share older activism strategy at a very successful activists from called John and Partners that does traditional activism so focused on things like capitalcation, capital structure, UH and things

like that. And we had actually done a fair number of campaigns in the energy space, companies like use An Exploration and e QT and and Karen McGee, and you know, in a lot of respects, this campaign was similar because before you got to the long term picture that we viewed at Engine number one as being a failure to appropriately prepare for the long term changes face in the industry, there was just a basic bad capital allocation story which

quite frankly was worse in terms of value destruction than the other companies I mentioned um So, in one respect, the very kind of basic near term components of the campaign that looked at the last ten years of value destruction and exile mobile even before COVID struck, was in some ways very familiar. I think the thing that that perhaps came out of no or was the additional element of the longer term focus on where can this company

be ten twenty thirty years down the road? And I exaggerate obviously you did not come out of nowhere, because you actually had a very successful track record. And actually just take a moment and you you have tussled with big companies before or in that prior life, one being Apple for instance, Can you talk about that? Yeah? Sure, And just to be clear, you know, most of the time I spent at john OH was executing and helping textcut on other people's ideas that were in that kind

of traditional activist mold. What I spent the last few years at JOHNAH doing was campaigns that that uh I had originated that were um without longer term focus. That the thinking being that, uh, you know, companies that think more long term will perform better over the long term. And if you're thinking long term, you're focused on things, in the case of Apple, like your relationship with your users.

And you know, at that time in eighteen UM it was really the kind of beginning stages of the tech lash, and even though Apple hadn't really kind of come under that type of scrutiny yet, it didn't take a lot of looking around the corner when you looked at really the spike and negative mental health outcomes for the heaviest young users of the phone in terms of things like UM depression and loneliness and suicide risk factors and sleep deprivation, and the basic thinking was in in you know, this

is something I'm still trying to do today. Is basically if you look at positive impacts and long term value creation potential as being two sides of the same coin.

The basic argument at Apple was that if your goal has apples to move from being valued like a hardware company h to being valued like a subscription based recurring revenues company, and you want to do everything possible to keep people feeling safe and secure within the ecosystem, um, you'd want to do things to partner with families to give them really more dynamic control over the phones, which you have to combine for a lot of other things

like good parenting and discussions and things. Um. And fortunately for us, Apple very quickly said this makes sense. And you know, they called Tim Cooke was on the phone the next day with with their biggest shareholders saying what do you think of us? And they said, yeah, why wouldn't you do this? It makes sense? And um, the controls were really well received. They need to do more

to market them. Quite frankly, Google actually, which copied a lot of what Apple did, has done a better time marketing it, but it was a good first step and and I think kind of hopefully, you know, validated the case a little bit that focusing on these things isn't just about you know, positive impact, it's just kind of

good business sense to it the long term. Well. And McDonald's was another one that that you had at that moment in time too, And I guess that's gonna be an interesting segue here, because when you engage with companies like this, sometimes it's public and sometimes it's not talked about the way that you dealt with McDonald's at that Yeah, and that was actually one that previously had not named the company, but the New York Times, I guess spoke

to some other people and figured it out. That was actually the year after the Apple campaign, and the basic idea again there was to try to kind of marry the long term value creation argument with the positive impact argument.

In that case, you know, um, at least prior to the pandemic, McDonald's was a company that loses about two percent of its customers every year, and to make up for that, you know, they've been doing things like selling you know, cheesy bacon on the fries and don't sticks with breakfasts and stuff like that, which you know find but isn't necessarily i think by their own emission in

great long term value creation strategy. So you know, one of the reasons that they've been losing customers, and again this is all pre pandemic is people looking for either healthier or flexitarian choices where they're not looking to eliminate meat, but want to be able to reduce the intake of meat in a growing number of cases for environmental reasons.

So the basic idea was they can both have a you know, positive impact on reducing their deforestation in methane emissions and also appeal to customers who maybe have given up on McDonald's, particularly families with younger kids who may not feel great about you know, kind of taking in there. Again, that's one where there's there's more work to be done. But they did introduce partnership with Beyond met in Canada, which you know, it was marketing in a certain way

that maybe could be approved upon going forward. And the now they have this mick plant uh concept that that you know what, we'll see what develops with that. But yeah, that was the one that followed Apple, which which brings

us sort of two Engine number one. So how did that come into being, because it's actually almost born at the beginning of the pandemic, right, Yeah, So I had met the founder of Engine number one, Chris James, after the Apple campaign, and he at that time was formulating his thinking about what would eventually become Engine number one, and very much, very much focused on, uh, the idea that you know, companies over time have to internalize their

externalities in terms of their evaluation, and that the investments that they make in their people, in their customers, in the society around them, and in their communities, uh, in the environment. Ultimately, if you take a long term time prize and approach, you can't reflect and value. So you know, he had a lot of ideas, one of which ultimately the CTF. But what I was trying to do it at Jonah fit very well into his kind of grander vision.

So we kept talking and yeah, I joined Engine number one, you know, late last year, which feels like a longer time ago than it was. But yeah, um yes, but let me bring you into this. Um. Uh, you and I met when you were at JP Morgan. You were

an et F person. You're one of the first guests on this on this podcast actually so, and then now you're here, and I guess, can you bridge everything Charlie saying, because this is a new world for a lot of ETF investors, they're not even used to hearing stuff like this, and you're gonna basically take some of this activism that Charlie just went over several examples of and democratize it in the E t F. Can you talk about the

process to do that? Yeah? Sure, And maybe just taking a step back since he referenced my time at JP Morgan and one of the things I learned that I was one of the early employees in JP Morgan's ETS business. I joined when that firm had one E t F and five million dollars. And when you look at the market dynamics of ETS, one of the things you see is, Wow,

the space is crowded and it's concentrated. And so you sort of asked them actual questions, how does a new entrant come into the space and and really think it's going to crack the code and grow? Um, you know, JP Morgan was obviously very successful at doing that. I left when they had about sixty billion dollars, but in my thinking of coming here, it's sort of what you were hitting on, Eric, when I was thinking about what is the value proposition of an engine number one type

provider in the ETS space? And from my perspective, it was a couple of things. The first is this idea of being purpose built, so engine number one focuses only on impact. And I think that that sort of focused mission statement, focused products that that we could drive off of it UM was something that was actually quite unique in the market for this particular spaces sustainability. And I think secondly, you know a lot of the things that

people talk about the sustainable investing world. You look at it and you think, wow, it's growing quite a lot, but it's still a drop in the bucket of all the E T F bascets out there. So my hypothesis was something was holding that space back a little bit UM.

And I think it really was a combination of or is a combination of one investors really feeling this quandary between can I invest in alignment with my values and the financial tradeoff that you have to make UM and to this all feel like being tangible, there being a real so what to what they're doing UM and so I think that's where the engine number one E t F business really fits well into the broader framework is

Charlie was talking about it. It's the ability to harness the power of all investors, be it the largest investors in the country, all the way down to the self directed investor, give them a voice and a vote um pun intended, and really a seat at the table on some of these really important topics. And I think that value proposition is really unique. And so let's just really just for one second stop here and just contrast this

with E s G t F s UM. E s G t F s are going out scoring a bunch of stocks and they all all have their different methodologies. Typically they won't own an exon or they'll own it in a sale a smaller uh you know, waiting. Can you talk a little bit about trying to position this. I'm trying to pretend you're in a meeting with an advisor or an investor. How are you explaining this versus say, the onslaught of now on s gtfs out there. Yeah,

I think this is the really important point. There's not a lot of product development in the space, but to your point, they all sort of look and feel the same. It's either excluding or rewaiting based on some some E s G data point. They're basically E s G by what they own, but not what they do. And I think there's this real question you sort of have to ask yourself about what's the theory of change behind putting

your money in one of those products? What changes if I were to move my entire savings account from the SMP five to something that slightly relighted stocks based on scores. And I think that's maybe one of the things that

holds back the end investor. I'm not sure that that type of strategy is very real to them, So that the premise of vote was actually quite simple on the investment side, as you said, it really was if you have market cap, and you like market cap and like the price of market cap, you can keep all of those things. UM. But where we're really going to drive value is the work we do as active owners, which from our perspective, really spans a very broad spectrum of things.

It's the votes we cast, it's the collaborative engagements that we run in a small subset. It's also the work that Charlie's doing. UM On the more activism side, and that's really where what we're doing is different. And my personal opinion is that we're solving those challenges I mentioned. One, we're not introducing a financial trade off. Again, most people, virtually every investor has market cap in their portfolio, and so we're saying, if you like that, you can keep

it the same. But two, we're allowing this to come to life with real tangible examples of how we're voting shares and hoping to change companies. Charlie, when Chris described the strategy for you early on and was like, hey, I've got this idea to marry activism within within E t F, what was your what was your first reaction

to that? I mean it was described a little more broadly and and it's probably worth mentioning, you know, kind of that, Um, you know, engine number one is multifacet I mean there's the E t F, there's a more traditional, uh you know, more concentrated portfolio. There'll be additional I believe E t F or some private investment stuff. So it was really presented as and what was really interesting about it was the idea that all these different businesses

would kind of be synergistic with each other. So you know the the Jasmin said. The idea I think really behind engine number one is systemic change. So one way you can bring about systemic changes through these kind of targeted activist campaigns. Right, you spend a year of your life and probably take off another ten on the back end, you know, running a campaign like the Exxon campaign. But another thing you can do is, hopefully over time, as the t F hopefully grows, is you kind of change

the voting landscape is. As you know you were mentioning before the the unintended consequence of these e s CHI funds that are just focusing on the good actors is less accountability for folks who are companies. Maybe you should

be doing things differently. And if you can grow this thing and also have an influence on on the overall kind of voting proclivities of other funds as well, um, you can bring create greater accountability not just to a handful of companies a year we're going to be the subject of activist campaigns, but actually to the entire market.

And it doesn't have to be a massive, you know, soul sucking exercise like X, and it can be the smaller kind of shareholder engagements and votes that that really, you know, change the kind of everyday discourse that people are having about environmental and social and long term drivers have valued at the biggest companies still hit um to each other. You mentioned systemic change. A lot of the s G issues UM timate change or racism here in

the US, these are huge systemic issues. A number of people have said, you have said, like divestment campaigns, ets, no carbon funds, all of these sort of like products are not really enough to address these issues on the time frame that we need, especially with climate change. Um So how do you sort of like react to that, you know, when it comes to like e t s addressing something like climate change in the next ten years. And yeah, I I we would agree with those people.

It's kind of the founding principle, which is, if you are looking to bring about change within a time frame that is soon enough to be consequential, divestment in most cases is not going to do that. You know, companies like Examobile are not hurting for capital. So look, it's not to knock anybody's investment choices. You know, everyone can make their own decisions, but our our opinion is that you can't just ignore the companies that are most in

need of change. Uh, And it doesn't to us feel great just not to be invested in then we'd rather be invested in them, be able to give investors in need to have broad market exposure at a very low price, and be able to you know, again through the vote, through collaborative engagement, and in the subset of cases, through

an activist approach imposed. We hope greater accountability on the market to deal with with those issues, which again we think are are as long as you have a long term time rise in which we think most investors do, really fundamental of long term value drivers for these companies. You are answering these these questions the right way. Maybe just one thing, I just to add on to what Charlie was saying there on the voting side, just to underscore the point a little bit. I think most investors

don't know how their shares are being voted. And I think that that's actually one of the sleeping giants in this room. If you think about it. You know, the average scent P five hundred fund um has has if you look historically at voting track records, has voted against let's call it, se of environmental and social shareholder proposals

over the last five to ten years. And I think a investors don't know that, and be they also don't necessarily know they have a choice in that, and that maybe be he sort of speaks to the power of harnising all investors here. There's trillions of dollars behind that, right, if we could actually just provide a layer of transparency to that and provide an alternative that in of itself may actually have some pretty profound impact and change. And so, you know, I guess the e t F is named

that way for a reason. I do think that the voting part actually has the potential to be really interesting and transformational. You know, Vanguard and black Rock are passive owners and or Index one and they own they're the top two owners of most companies out there. Um, they own about eight percent nine percent of every company pretty much. And you talked about this voting record. Now we in

the industry week, they're starting to get more transparent. They'll they'll tell you how they voted a lot of times with management. And I don't know. If I'm not in there, I don't I can't grade them myself. I'm not really that involved. But I guess could you talk a little bit about this idea. I use the metaphor of a tug boat that engine number one, even though engines are

train Um. I like the name by the way. I use the metaphor of a tug boat, where you know, maybe you guys are able to tug these bigger owners into a direction. They might not go on their own. They might not propose this or be the catalyst for some of these, but they'd be willing to go along with that. So can you talk about that relationship and and moving them towards your side on these issues. I guess what Eric's trying to say was, was tugboat number

one ever in the name conversation? No, but it probably should have been. You know, it's probably not too late. Um. You know, I think that the way I think about at least is you have to be meeting a market need.

So if you think about you know, the early two thousands, you know, the kind of modern wave of shareholder activism, you know, it was meeting a market need, which was that challenging companies were the CEO was an empire builder, or the board paid management as if they were top performers when they're actually you know, bottom UH quartile performers. And it wasn't institutional investors didn't care about those issues.

But if you're voting you know, ten thousand proxies a year and you're engaging with hundreds or thousands of companies every year, and you have, you know, a full time job, you're not going to take off six months or a year to do kind of a deep dive into those

companies UM and and make these types of proposals. So in the same way that you know, the traditional UH and still very successful activist funds like like JOHNA and others UM Meta market need you know, I think funds like black Rock and Vandguard and others are absolutely sincere when they when they talk about the need for companies to have a plan for for the energy transition and to deal with other important issues. But it is not

their business model. They don't have the time and whatever other kind of um, you know, personality traits or or deep facts that you need to take kind of an activist approach. And so if we can offer hopefully compelling arguments and good candidates that you know, we've spent the better part of a year of trying to find I don't used as really pushing them in any particular direction.

I think there's there's sincere when they say they care about these issues, but we're meeting a market need, which is employing a dedication of time in a particular set of resources and skills that hopefully can be helpful in

giving them a choice. You know, most of the time they don't have a real choice, uh, in situations and with companies like Exxon when it actually comes time to casting your vote, and if we can offer them something, if we do a good job, it helps kind of move the ball forward in a way that's consistent with their goals, as opposed to pushing them in in in some new direction. Hi, Rob here, I just wanted to

chime in with a follow up question. I mean, obviously Black Rock and Vanguard have been mentioning for years they're interested in climate change, you know, Liar fank Of has written that letter, um. But more recently, in the last year or so, social issues have become more and more important, and you obviously mentioned the Apple campaign earlier. I'm just wondering that are there any opportunities on the social side,

particularly around diversity, inclusion or equality. Absolutely, Yeah, I think that you know, UM and the social can be more difficult to quantify, but you know, whether it's UM diversity inclusion, whether it's human capital management, whether it's responsible technological development UM, these are playing a massive role in things like income inequality, which is a massive drag on economic growth, on weakening of democratic small d institutions around the world, which is

a threat to the very system of capitalism that we we all operate within. UH. And so yeah, absolutely, I think I think the the S and sh H can be just as impactful. You know, you're probably stirring with a longer spoon, quite frankly, because you're not really getting so much into issues of like they said, cap allocation and things that were more kind of meat and potatoes

in the x ON campaign. But I think they absolutely can drive a great deal of long term value and also destroy long a lot long term value if you don't answer those types of questions correctly. YEA touching on what Joel and both UH and what world could our glass about x ON? That campaign was largely based on the financialism company, how you push for change on E S G issues when the company isn't doing so well on S issues? But financially are performing well, yeah, you

still have to root in the financials. I mean, look, we are not adding a whole lot of value if we can't by some means quantify you know what we're talking about. But you know it can be certainly a lot more difficult. I mean even you know, any campaign that we're going to be doing is not going to have the you know, ability to break it down as cleanly as you know. For example, in a trial actus campaign, if you're pushing for a share of back, you can

say what the new denominator is going to be. Or you are asking a company to spin off and under performing division and you can say, here's what Spinko is going to trade down here or remain coal trade and you can kind of needly quantify listening. So even on the environmental side, um, you know, we could say what we thought the impact of better capitalllocation, more discipline and

consistent capitalllocation policies would be. But in terms of you know, the longer term, you know, giving the marketing reason to think that even in a decarbonizing world of lower oil and gas demanded, EXA Mobile still have a reason for being in in twenty or thirty years. That's pretty difficult to quantify um. You know, on the social front, I mean, take you know, the Apple campaign, it's difficult to say exactly what the precise impact of you know, better more

dynamic controls for parents would be. But that's also kind of the nature of uh, that business. I mean, what they're doing on the privacy front, what they're doing on augmented reality, what they're doing on an emojis and group face and you know, they don't break those things out into separate kind of menu items that people pay more for. So in some ways that's kind of the nature of

that business. But at the end of the day, you still have to be able to break it down into either revenue growth you know, hopefully in the case of fast food companies that that offer more plant based protein substitutes as time go on to to meet growing customer demands. You have to be able to translate it into profitability.

Certainly with human capital management, there are a lot of companies that have shown that by investing more in people, you actually increase basic metrics like sales per square foot

and need but dot per square foot. So you know, look, we we have to be able to make for for at least for the activist campaigns, arguments that will appeal not just to E s G focused investors and and stakeholders, but to uh uh, you know, basic long term investors, and that will require at some point talking about how it impacts revenues or profitability or the multiple or some other metric that people look at, you know, when they're

valuing these companies. One thing to maybe add on that, because we've now that we've been in market for a couple of weeks now on an index, on one of the questions we get a lot is but wait, what what is the value proposition here from an economic side if your basic premise is to track an index and therefore, you know why you even need an economic argument behind what you're doing if you're not going to take by

definition and outsized position UM. And you know, it's something it's something that I've actually thought quite a lot about UM as I think about this new product where we're actually specifically trying to be market categoriented. I mean at a high level, of course, the entire firm has places in its portfolio where it leads into concentration. When we have a strong economic view, so you know, I think point one is an engine. Number one ties the impact

we're doing to economic value. But to you know, we're only ever going to be as successful as the investors we can bring along with us. And as Charlie was mentioning, you know the the e t F. You know, even if we're wildly successful and ten billion dollars a hundred billion dollars, you can extrapolate how big that product could grow, you still need to actually build a coalition of people around you and make reasonable shareholder arguments for what you're doing.

So um, I do feel like even the index side of the argument actually still has a very it's stronger when you tie it to an economic value proposition. One of the things that we have noticed this and I'm not sure if you have a prepared to answer for this, but people love the SMP five hundred. There's just something about that brand name. And we have the Bloomberg five hundred, and I think that's actually better they were SMP is way too late to take In Tesla, it's basically actively

managed fun in a way. Here's a more beta, a real beta index you guys track in the morning Star one. Yeah, there's people are really hooked on this index, How do you try to dislodge somebody who has like an IVV or a voo tracking the SMP five hundred with this. Yeah, I think that's a really good question, because, I mean, the intentional design behind this product as we're trying to simplify the investment decision as much as possible. So if you have something you like as much as we can,

you should try to keep it. You know, at a high level, the morning Star index that we're tracking is is exposure to the largest five companies waited by market cap in the US. So it sounds very similar and it is very similar from a long term tracking error perspective. So I do think we've met the objective of actually having a very similar exposure. But I'll also say morning Star as a partner, um it's a fabulous partner for us.

I think what they're doing in the index space is actually quite disruptive in some sense, maybe similar to how we're thinking about ourselves and the world we operate in. UM. So I also have the added benefit of, you know, a like minded partner with us. But in effect, you know, now that I've been in market a couple of weeks

talking to investors. I do think that while they're all these small nuanced differences between standard US equity large cap index is, they're they're essentially very similar, and most investors, UM don't really see much of the difference. Hey throw up here again, UM, just on on the UH the management fee five basis points. Obviously that helps attract a u M. That obviously puts more muscle behind your campaigns. But then is it sustainable to to run these activist

campaigns with that? You know, I heard the Exon campaign. I think it was twelve and a half million dollars. Is it sustainable to keep running campaigns like that with just five basis points? Yeah? And and again this is UM, you know, it's it's a it's UM important to keep in mind as I mentioned, you know earlier that you know, engine number one now has an ETF, but it has other strategies as well, including as I mentioned, more concentrated portfolio.

So UM, we are bringing more UH to the financial picture than just the five picks five BIPs that DTF is is bring. UM. But yeah, I don't think it'll make a lot of sense to have a solely an e t F that that's charging five bits and be running multiple, you know, twelve nine dollar campaigns every year,

but that's not what we're doing. Maybe just to add to that, I mean, I think there is a very intentional choice with having our first e t F and we plan on having more ets be the one that we chose to launch, which is that it's what, like I said, what most people have in their portfolios. So you know, this type of product that speaks to a wide range of investor both from institutional and self directed, and it's sort of a standard part of everyone's portfolio.

Gives us access and breath in an investor base, which I think is really valuable to the firm. UM. So it's Charlie mentioned this is one of multiple strategies we run, but I also think it's got a really interesting strategic angle for for the broader firm. You know, I just want to ask one quick question, yes, which is we just did an episode about tickers and how how people

claim good tickers? How did you get vote? It blows my mind and it makes me so happy, and I saw that you had done that, UM that section or session I sakers are so important. People who aren't E t F people don't necessarily gravitate too much work. But as someone who's built so many ets in my life,

it is so important to get the right ticker. And when we got vote, it was just it was just one of those amazing moments because it says what it's I mean, it's really basically the way we think about the product is like your voice, take your seat at the table, and like we're pushing on an open door and we use the word vote. So um, really we're really lucky to have grab grab that one. You know.

Interesting talking about vote and voting rights, you do have uh, some companies in in the S and P or among the five largest, particularly tech companies, which we talked about earlier, where you don't have that one share, one vote. How do you work with those companies where maybe the power of voting isn't all there is it is for some other companies. Yeah, Um, well, it's certainly more of a challenge. Um, I think you know it. It though it's still goes

back to um having to make compelling economic arguments. So I mean, if you look at Apple, you know it might have well have been a you know, a dual share class company right at the time. I think the market cap was nine billion dollars. And even with with California State Teachers Retirement System joining us, we have like a billion dollar position. So can you you know, take them to a vote at the annual meeting and and toss people off the board. No, but you can still

make uh, you know, compelling long term arguments. And it's it's ironic. Actually, some of the tech companies I won't name names who justify high low vote structure by saying, well, we want to look out for our long term uh you know, value creation interests. You might argue or taking

an overly short term approach to their business model. Um, but if you can, you know, make a compelling argument that they can you know, be more valuable over the long term by answering some of these questions differently and and and get shareholders to concur you know, you can still get things done. But you're right, You're you're missing in those cases the ultimate hammer, which is putting different people on the board if if they don't come along.

But I feel I still think in a lot of situations it can be worth trying, and I think will be worth trying as time goes on. Here um sechel here again, um one for you, Charlie, people in the space who've been doing this for like many decades or talking again about structural change and talking policy and things like that. Are you planning to do any sort of like lobbying or anything like that if you want to sort of push full systemic change. UM? Well, UM, you

know I think that, UM, it's you know, never say never. Um. And certainly things that impact UH investor rights and and you know, board accountability, you know, so on there within a purview and that's something that you know, even uh, you know before coming to Engine number one was something that that yeah, I've worked on from time to time, but I would say that, you know, we do recognize that a lot of these issues, UH are issues that that will play out in a complex global system, and

in many cases the regulatory environment will have a heavy impact on those It's one of the reasons why, for example, on the XO mobile board, we thought it was important to have somebody like Andy Karsner, who, in addition to being a galaxy brain type when it comes to the energy transition, you also spend time as Assistant Secretary of Energy UH and has UH stayed in that kind of milieu,

including with the current administration. So we understand that that that in a lot of these cases, the regulatory and the technological as well as the investor community focuses will all kind of intersect. Would that ever lead to getting involved in in kind of non investor related policy lobbying efforts. It's not something I think currently being contemplated, but I guess never said ever if if it made sense. But you know, we recognize that our lane is really making

arguments that will appeal to investors. Uh. And and you know, I think in most cases that is that's a separate lane from what's going on with with policy makers. So let's talk about that lane and just going forward. Charlie, how do you decide what you're going to engage in and what you're not going to engage in? And how are you looking through that lens? How is engine number one looking at the future? Uh? Well, you know, first thing is you've got to make sure that you have

a path to victory. I mean, I know, I know a lot of people looked at the excellent campaign and thought that, um, you know, we were taking a flyer, but we really weren't. Um if if I didn't think and if if um you know if if everyone looking at it didn't see a clear path to victory, and that means you know, counting potential votes. Um, it's not a great use of a year of your life, you know, if there's no way to win. Um. So you know

the gating item as always can you be successful? And then after that, uh, you look at you know, the value creation opportunity, you look at the impact opportunity, and again there should for a good campaign will be joined at the hip and then you wait against other opportunities that you're looking at. Me. You don't have a infinite number of campaigns that you can pursue every year. Uh, and so you try to, you know, make the ones that are most compelling from a value creation and uh,

you know kind of narrative perspective, tape precedence. So if you think about this in years of your life, how long of a lift do you have ahead of you? God, it's such a grim question and kind of claim my mortality and we're not gonna be how long we'll be sitting at this ask? Uh, we invited you on a podcast, but you can also lay down on like like a

couch if you need to. Um, I honestly just kind of I think just think from campaign to campaign, and there's lots of other ideas that that we're working on now that I think, um, and they're not all x ON type ideas in the sense that they will require taking things to a vote. I mean, most most activist situations you don't get resolved constructively and usually privately. Uh So hopefully they'll be a fair number of those, more

certainly more of those than than campaigns like XSON. But you know, as long as as we can keep coming up with with good ideas that we think will be compelling to people, you know, no plan to stop doing it, um Cecil Harry again. UM So I'm not gonna ask you what your next campaign is, but I know you're not going to answer it, But can you give us an idea of what theme that you're playing cycle would be at the environment, racial discrimination, worker pay, incoming equality,

what's your next name? I mean, really all of above, I can tell you that, Um, there's more to do, certainly on the um IOC front. Uh there is more to do, not just on the supply side of them, the climate change and energy transition uh issue, but on the demand side. I'd say, a lot more to do. I think that on the human capital management front, there's a lot to do in kind of marrying the idea

of good operational decisions enabling greater investment in people. I think on the responsible technological front, uh, there's a ton of work to be done. So working on a bunch of different stuff, and it's just a question of, uh, you know, when the work gets done, when the timing is right, and you know, when we're sure that that you know we're we're more likely to be successful than not. So Um, Yeah, I think there's a lot of interesting

stuff coming down the pike hopefully. Sure, But what's going to be the focus though, I mean there's lots of issues there. Uh, the focus will be um, systemic change will beyond things that aren't tweaks to a business model and are not the type of thing where you say, for example, like you know, a lot of funds you know focused on percentages. Can you can increase this percentage?

You can decrease that percentage. What we'd like to do is is U propose things that offer a better and more long term and more sustainable in every sense of the word business model. So I can tell you there's a couple of things that that con see the light of day, uh this year, that that fall into that category, and they're not in the energy space. Is that more well?

Systemic change is quite a nebulous sort of concept. So why don't you guide us a little bit more to sort of the theme that you're you're looking at the Siegel I'm doing. I'm doing. My joke is called uh, I look, I don't want to ruin the surprise. I think that you like it. We'll talk when the time comes. Stage prompts. Can this thing go global? I mean obviously you have UM, you know different UM shareholder rights structures globally, So can can you build an international index and edition

at US index with the similar concept? I hope we see more versions of our strategy beyond just the S and P five hundred or morning Star five hundred type of exposure. I mean, ultimately, the value proposition we're trying to think about with this products, that is, let's find pockets of core market cap assets where they're large, they're meaningful,

and investors use them in building portfolios. UM. Clearly the US is you know, different cuts of the US is a more kind of simple extension story, so small cap made cap value growth. But um, but but I do think you know, the concept of what we've done here, what we've cracked the code is not just niche to what we've done. There's many other places we can go with it. Um And I personally, for me, I want

to see where investors bring us on that. UM. I think it's going to be most interesting to see how this product is received and where people actually want to pull us from the concept of other indexes but similar active ownership strategy. There's no only no reason it couldn't. I mean, most of the non US markets, they actually have, at least in terms of the actual rights that shareholders have,

fairly robust rights. It's really more a question of the local uh you know, market and kind of shareholder attitudes quite frankly, which you know, I think are bigger determinants of whether or not makes sense center particular country. But um, yeah, there's in most most situations, there's there's no reason why you can't as long as you have a good handle

on the kind of attitudes of the shareholder base. Yeah, I mean it's a question we ask at the end of every trillions, what is your favorite et F ticker that is not your own. Oh my gosh. Um, I actually did like I do like she and just maybe just keeping it in the space of sustainability, um, keeping it very simple to what those products we're trying to achieve. Yeah, and Charlie, how about you. I don't know if I ever gave more than thirty sects a year ago. I

just google them. I'll go with yo. No idea what it is, but it rolls off the time. All right, there you go, Charlie, Jasmine, Sagril rob thank you all so much for joining us on Trillia. Thanks, thank you, Thanks for listening to Trillions til next time. You can find us on the Bloomberg terminal, Bloomberg dot com, Apple Podcast, Spotify, and wherever else you like to listen. We'd love to hear from you. We're on Twitter, I'm at Joel Webber Show, He's at Eric fall Tunas. You can find more about

Engine number one at engine one dot com. This episode of Trillions was produced by Magnus Hendrickson. Francesca Leevie is the head of Bloomberg Podcast. Bye