Daniel Larson:
Hello, and welcome to this evening's alumni college webinar, The Business of Climate Change co-sponsored by the Brandeis University Alumni Association and the Asper Center for Global Entrepreneurship at the Brandeis International Business School. Thank you for joining us. We are pleased to welcome our special guests, Carly Greenberg, Brandeis class of 2011, and Brandeis MA Class of 2012 with environmental sustainability, and environmental, social and governance ESG reporting at the Hershey Group, and Robert Brown, Brandeis University Class of 1988 and Brandeis MA Class of 1989, founding partner at Atlas Impact Partners.
Daniel Larson:
Our session is moderated by professor Ben Gomes-Casseres, Brandeis University Class of 1976 and Brandeis parent of the Class of 2015. Professor Gomez-Casseres is the Peter A. Petri Professor of Business and Society and director of the Asper Center for Global Entrepreneurship. Thank you all for being part of this discussion, and with that we will begin with professor Gomes-Casseres, thank you.
Ben Gomes-Casseres:
Okay. Thank you, Daniel. Thank you very much and welcome too, all my friends who are alums from my years and alums from other years, and those of you who are not alums, welcome to Brandeis and welcome to this session. So Daniel, I just want to be sure that the Zoom stuff is going to work. I now have my screen share, you can see the opening slide and then the three of us I think are visible hopefully to all the audience.
Daniel Larson:
That's correct, yes.
Ben Gomes-Casseres:
Okay, excellent. Well, welcome all of you to our classroom, and welcome back Rob Brown and Carly Greenberg back to Brandeis. This is a group of alums, the three of us are now across the years, Rob '88, I'm '76, Carly '11, and we look forward to discussing with you, in our audience some of the really important issues that I think face all of us in society. So, what I'd like to do is, instead of beginning with an introduction, which I will, ask our speakers to introduce themselves a little bit more in a minute, their bios are online and you will be able to get this PowerPoint afterwards so you can certainly follow up on some of what you see here. But if I may, I would like to do a little professorial thing and frame these issues a little bit for you.
Ben Gomes-Casseres:
The topic is called Business of Climate Change, but it is a much bigger than that, and we are now at a juncture in our society that is, I think, very important and big. Before we get there, let me just say, Brandeis is doing the best it can in many ways in terms of climate action, these points that you see here were given to me by Mary Fisher, our director of Terrific Sustainability Program on campus. We are signatory in the global commitments that colleges sign to, we're developing a new climate action plan that will have a specific steps that we hope Brandeis will be able to take in the next 10 years, and we've done some things in the last year, what you see there, one of the bullets says new skyline residence hall for those of you in my year, that's the castle. The castle has been transformed now, and the piece of it that is totally new is heated by geothermal and it's electrified, it's really quite good.
Ben Gomes-Casseres:
So, that's a little bit of the local Brandeis scene, but we're really talking about a much larger issue, obviously when we talk about climate change. At Brandeis or more specifically at the business school, so I'm at the International Business School, and we have been addressing this, specifically this particular spring, we had a week planned on climate change issues. Now that week was exactly April 30th through, sorry, May 30th through April 3rd, and you know what that is, that's when COVID hit Boston. So everything went online and we had to basically regroup ourselves, but we were able to continue with some of what we did, which is that in many of our classes, we were able to incorporate climate change issues as regards the business economics and finance topics of that class. So, we had a lot of speakers.
Ben Gomes-Casseres:
We did have a terrific opening night with Tom Friedman, which was canceled, so that hopefully will be something we hope to be able to do in some form in spring of next year. So, please be on the tune lookout for that. But the topic we have is the business of climate change, which is how does business affect and can improve climate change. The problem is basically one that we all know, well, this is just a very dramatic picture...
Daniel Larson:
Ben, sorry to interrupt, you're still on the title slide, it's not advanced.
Ben Gomes-Casseres:
Oh, really? It's not advancing. Oh, that's terrible, I'm sorry about that. You're not seeing anything advancing? That's bad, I'm sorry about then. What are you seeing now?
Daniel Larson:
Now we see your slides.
Ben Gomes-Casseres:
Oh, I'm sorry. Okay. I'm not repeating the lecture, but we rushed through this slide and then the climate education at the business school slide. Is that there?
Robert Brown:
Yes.
Ben Gomes-Casseres:
Okay. I'm sorry. What we now see is a global temperature chart change. You see that? Just to be sure we're working. Okay. Thank you. All right, I'd really don't want to spend too much time on this except to say that the crisis that we have in climate and the urgency that we have in climate has been obviously enveloped now by another crisis, the COVID-19 crisis. I hope you see that slide now. Did that move okay, Daniel? Thank you. That obviously creates a tremendous social healthcare livelihood upheaval in our world. So, what used to be climate issues in some sense took a back seat as we have to fight the health crisis.
Ben Gomes-Casseres:
Then now we have another hugely important movement, another black man murdered that is sparking another movement, which some of us may remember movements in the 60s, this is bigger and more important. I think all of these crises are enveloping each other. When we talk about business and social responsibility, we can't just talk about climate change anymore, we're also talking about the health crisis and we're talking about the social injustice and racial injustice issues that we're facing now. All of that gets piled upon an economy that has seen great disparities of income increase since the time that at least I was here in college, and we're back to the Great Depression or the roaring 20s, when Louis Brandeis spoke out against big business at that time.
Ben Gomes-Casseres:
So, we have a very difficult situation economically, almost a renewal of our social contract, because of all these challenges that I think are coming to a head. What we're going to do today is to talk a little bit about, with experts, about the responses that business has had or can have to these kinds of issues. The kinds of responses that business have, they fall into these five categories and there may be more, but traditionally philanthropy, corporate social responsibility CSR, the triple bottom line approach and ESG investing, which is something we'll talk about a little bit more and social impact investing.
Ben Gomes-Casseres:
So we're delighted to have really experts in at least the last two parts of this on the panel who are going to walk us through it. This is a little chart from Carly's work, Carly is a thought leader in the area of ESG investing, and particularly in the application of the UN sustainable development goals to ESG. This is from a paper she wrote, again, the link will be available to you. But what you see from that is, when we say the word ESG, we mean three things, we mean environmental issues, social issues, and governance issues, governance in particularly on how companies are governed, but I think also in a way how society is governed.
Ben Gomes-Casseres:
So, these are the agenda points towards today, and what I'd like to do is really start with asking our panelists a little bit to reflect on how they got from here to there, from there, then to now, from Brandeis to the work in social responsibility that they're doing now, then we'll talk a little bit about what ESG is or social impact investing and how those work, and then may be specifically the question of environment. So, how can business affect our health in a way with climate change, and then how can business affect health with the social injustice S part of ESG. We will have time for your questions, we hope to have some of your ideas and have a free flowing discussion is really what my hope is.
Ben Gomes-Casseres:
So, the introductions formerly, I think were given, I would just say that, Rob Brown is just steeped in the area of investment and investment for justice. He has worked in this through various companies before, had his own research and then his own company now Asset Management Company, that focuses on social impact investing. Carly Greenberg is another one steeped in ESG investing on the side of how to evaluate these and she worked for an activist asset management firm that took action on these things in the boardrooms. Finally, well, I teach about some of these things and I hope to just keep our conversation flowing. So, I'm going to just now stop the screen share, we really don't need that anymore. Daniel, have I gotten rid of it properly?
Daniel Larson:
Yes. You're good.
Ben Gomes-Casseres:
Okay. Rob and Carly, it's us. Welcome to my dorm room. Let's talk.
Robert Brown:
A lot nicer than my dorm room ever was.
Ben Gomes-Casseres:
It got upgraded a little bit in the last 45 years. I mean, as I said, we are in a such a juncture today and you both are doing such an important work in this area of business, social responsibility, generally speaking. Can you just briefly tell us the milestones or the most important things like from Brandeis to what you do now? And we'll definitely get into what ESG means and the broader issues that we go. But maybe Rob, maybe I can ask you to just tell us a little bit about where you started and where you are now.
Robert Brown:
Sure. Thank you Ben, and thanks for having me here. So, I always believes that a view towards socially conscious investing is really reflection of one's own socially conscious mindset. I honestly can say that that is something that I was taught at a very early age. It's not something you learn professionally, it's not something you learn at school, my parents used to teach us that if there was one thing you do in this world before you leave it, you should find a way to make it better. That was taught to us at home, it was taught to us when we're sitting on a hard bench on Saturday mornings and shoal, right? It was part of how I grew up. Now, the transition obviously from that set of personal values to a professional life really did begin at Brandeis.
Robert Brown:
It was where I learned that having those sets of behaviors was common to lots of other people, and where I learned that you could express your views and feel comfortable with those views amongst your peers. I will also say that I was trained very well at the business school now, what then was just the international economics program at the Lindbergh school, but I was trained as an econometrician. That skillset of understanding empirically how things work and understanding how to analyze things empirically, has been an important transition point from my professional career as an investor to my professional career as, let's call it a socially conscious investor. Because one of the issues that I think is written, and hopefully that we talk about today, that's really lacking in the world of whether it's ESG or impact investing or values based investing, is the idea that you supposed to do so with a level of rigor.
Robert Brown:
The folks who say we have to do this now, I don't think are understanding the full picture, because investors don't allocate capital just because someone tells them they have to do this now, they invest capital because there's a return. Now you can do that with a socially conscious mindset, and you can do that intentionally with the purpose, but no one does it just because someone said you're supposed to. Now, in between where I started life in here, there's a lot of steps, we could talk about those, but those are really the driving forces behind what led me here, right? An empirical mindset that I learned at Brandeis and something that I was taught at a very young age by my family and my friends.
Ben Gomes-Casseres:
Terrific, thank you. Thank you, Robert. I mean, that really is a synthesis that I think Brandeis reaches for. Its best days if the heart and the mind and the science that you're bringing to your work today. So, Carly, you actually came also through APA program just like Rob did, except when you were with us, it was already now a business school, but again similar kind of path. So, tell us how you got from then to now.
Carly Greenberg:
Sure. Thank you so much for inviting me to be a part of this conversation. So, much like Rob, my pathway into this ESG, sustainable business world also began at Brandeis, but when I matriculated to Brandeis, I actually, very firmly believed that I was going to be a lawyer, and so my path going to where I am now actually started when I was a sophomore, I took an environmental law class with professor Laura Golden and over the course of that year, basically the environmental part stuck and the law part didn't. It was actually through professor Laura Golden's earth note listserv that I got my first opportunity in ESG investing.
Carly Greenberg:
So, at that point to be an environmental studies minor, you needed to have an internship in the environmental universe, and I was also an econ major. So this opportunity came up across the list for analyst opportunity at this firm called KLD Research and Analytics. It was essentially an ESG research role and it was my first foray into the field, then after stepping into it, I immediately caught religion. I thought it was the best thing since sliced bread, and I luckily got into it when I was a sophomore, so I was able to gear the rest of my studies towards really making myself as competitive of a candidate as possible in this ESG investing world.
Carly Greenberg:
So after that, I felt pretty confident about my ESG, sorry, my environmental and social justice street cred but I felt I was lacking in the finance street cred. So I felt pretty heavily for the remainder of my time into financial studies. I pursued the MA-IEF, as you just mentioned. I also, right after I finished grad school, sat for all three levels of the charter financial analyst designation and then the CFA charterholder now. Basically, started working at Boston Trust Walden when I was a rising senior, and was with them for close to a decade. Then an opportunity opened up for me to jump to an in house position at a company. So I am now working on ESG issues for a Fortune 500 chocolate company, and here I am today.
Ben Gomes-Casseres:
Wonderful. Well, that's another one of these perfect Brandeis career paths in a way, right? You followed your heart and you combined it with the rigorous study that you got here and that's been working. So, you two are going to solve the world's problems for us now. Right?
Carly Greenberg:
With help, with other people's help.
Ben Gomes-Casseres:
So, help us understand in the audience and myself, what is this ESG investing? We hear that word and I know social impact investing as Rob the way you ... that's fine, whatever it is, let's define what it is, and then we'll see how this works. So, what does it make? Carly, since you wrote the book on this that I quoted. So maybe I'll start you with a little quick definition of what you think this is about and then Rob, please Carly.
Carly Greenberg:
Sure. Well, I'm sure Rob will touch on this too. One of the biggest challenges within the ESG investing and ESG business area is that there is just a problem of linguistics, we really have a crisis of too many acronyms, and then also people really disagree on what those acronyms mean. So, I personally subscribe to the methodology or the mindset that ESG is a big tent and SRI, sustainable, responsible impact investing is also a big tent. There are people who see a lot of daylight between those, so you'll encounter folks who will say no SRI investing means only this, any issue investing means only this, but broadly what I think is in that big tent, is people who are looking to allocate capital for social good, as well as people who are looking to just utilize what is out there and take a broader view of their investments to limit risk and make better investment decisions.
Carly Greenberg:
So, ESG investing most broadly is the incorporation of environmental, social, and governance considerations into your investment decision making. So, that could be negative screening. So maybe you don't like how a company is acting on ESG issues, and so you don't want to invest in it. It could be positive screening, and it could also, again, be taking a more sophisticated view on the risk and potentially using that with an asset allocation mindset. So, it's a big tent, there are many sisters who live within that tent, so impact investing and social impact investing. So I'll hand off to Rob to continue with the discussion.
Ben Gomes-Casseres:
Yeah. So, let me just add to that, Carly. Also, there's activism involved, right? Investor activism, which is what Walden did. Can you just briefly say what that's about?
Carly Greenberg:
Sure. So, Walden participated in this practice called shareholder engagement or active shareholder engagement, and essentially if you went to business school or even if you took a business course, there is this concept that if you own equity in a company, you are a company's owner, you technically are an owner, you're a shareholder. So their rights and view to you as a shareholder, and one of which is that you have the right to have access to management and you have the right to engage with management to talk to them about practices that you would like to see done better, done differently and continued. So Walden would have engagements with the management of the companies that were in our client's portfolios and encourage them to adopt better ESG practices, better ECG policies to become more transparent and so on and so forth.
Carly Greenberg:
So just to give example, while at Walden, I oversaw our LGBT equality engagement, and so I would write to companies that were in our portfolio who didn't have a publicly accessible nondiscrimination policy or maybe did have an accessible nondiscrimination policy, but it was lacking explicit recognition of sexual orientation and gender identity. I would write to them and ask them to expand their nondiscrimination policy. So, all employees would know that they were welcomed there and would not be discriminated against.
Ben Gomes-Casseres:
Wonderful, that's good to hear. I mean, the word activism had a different ring for us in the 1960s, but I see the effect that it has, this is part of the way business works on this topic. So, Rob, let me throw it to you, again, we've talked about ESG, social impact investing and you're in the business of really allocating capital in many ways, and you are also involved at Brandeis in our asset management group and on the committee that reviews the endowment of Brandeis. So, how do you think about these criteria for investment and your work?
Robert Brown:
Well, I've always thought that, that criteria isn't as important as a criteria, just for starters. I think it's, as Alison said, excuse me, Carly said, it's a very big tent and there's room for lots of different views. I do think one of the issues that is challenging today is that there's not a lot of appropriate measurement of what's going on, so people are free to make statements that a lot of folks would call greenwashing for example. I think that has to change, but I do think fundamentally that it's a big tent. We at my firm ascribed to a philosophy of investing called impact investing. Now for us, what's most important, what's dominant there is the product or service that the company creates and sells to the world and what that product or service does to generate change in the world or to mitigate externalities in the world.
Robert Brown:
So perhaps an example is, we invest in manufacturing companies that create solar inverts, which essentially is the technology that converts unstable sunlight into stable AC current, that company does one thing, it does one thing only. And our view is that that is a very important contribution to the mitigation of climate risk. We go so far as to say, "Okay, if that company didn't exist, what would the world look like?" So we try and measure what is the improvement that accompany is making versus some counterfactual. Now, in the case of environmental externalities, it's pretty straightforward because you can measure what's the kilowatt hours of the installed base of solar inverters, and you can then ask the question, if those kilowatt hours were produced by a traditional carbon based energy company, what would be the emissions? And the difference of course is what we would consider to be that impact.
Robert Brown:
Environmental solutions are the most obvious, but there are also others in the health and wellness space. There are lots of companies that we think are creating innovative technologies to help you solve human health problems. On the short side of our book, because we are a long short hedge fund, we like to find things like diesel engine manufacturers. We like to find things like companies that are creating the pumps to put pressure down well to push natural gas out, which of course creates fluid and effervescence that pollutes the earth.
Ben Gomes-Casseres:
Those are your short sales.
Robert Brown:
To your point about allocating capital, I think it's also important to note that we don't just say that this company is doing something good or that company is doing bad. Then it's certainly how we define it as a part of our investible universe, but once it's in our universe, our job is then to create capital allocation decisions that generate revenue or return for our investors, and that's where we become just hard-nosed investors, right? Like everybody else, in order to make decisions about who we're going to invest in and who we're going to short.
Ben Gomes-Casseres:
Yeah. So, this was great. I mean, both of you are doing important work in that slice of the investment world and the business world. How can we widen the lens now and ask the question of what impact can business have on the climate issues that we face? And we're talking about a type of investment with maybe it's a small slice or maybe it's a big slice, I don't know. But I mean, Rob, let me just stay with you on this. How big are the flows that you're seeing, given these criteria, and do you think they'll have some measurable impact or what else should we think about in terms of the role of business in mitigating and improving and helping climate change?
Robert Brown:
Well, I think we have to be careful when we answer the question flow about capital flows.
Ben Gomes-Casseres:
Okay.
Robert Brown:
Because there ... if you speak to any of the large mutual fund companies, for example, they will tell you that there's several tens of trillions of dollars going towards socially conscious investing. That's typically because they've all signed something called the United Nations Principles of Responsible Investing, it's a nice thing, we ascribed to it. We think it's important, but it's a pretty easy thing to decide to ascribe to. It basically says I'm going to do my best efforts and I'm going to integrate these kinds of issues into my investment strategy. There's not a lot of rigor there.
Robert Brown:
I think it's much more important to look to companies like Hershey where Carly is, and see that they have actually gone to the extent of mapping all of their efforts along these avenues, right? These, whether it's environmental, social and governance or I think I don't want to speak for her, but they map it all to the United Nations sustainable development goals, and they've actually said this is what we do along each one of these axes. Right? They discussed it in the report that they released. That kind of standard holding yourself to that higher standard, I think is very important and much more rare.
Robert Brown:
So, that's a long introduction to the answer to your question. How much capital flows are really going towards authentic, dedicated, socially conscious efforts? I don't have the right number, it's far less than people claim it is, and it is certainly growing, it's in the billions, but it's not really moving the capital allocation needle yet.
Ben Gomes-Casseres:
Okay. Important to know that, at the same time, what you mentioned, which Carly maybe can pick up on this, is that it's not just those investment flows, it's what companies are doing internally that could either be helpful or not helpful. Right? So Carly, you're, I think, at Hershey, is that part of what you do is to help them tweak their business operations or how does that work from inside your company?
Carly Greenberg:
Yeah. Well, let's talk probably at the question that you first posed to us, which is what impact can businesses have on climate change. So I actually have three thoughts in terms of where business can be really, really impactful when it comes to climate change. The first one, and this is largely related to what I'm doing right now at Hershey, businesses can themselves hold themselves to climate science, so the intergovernmental panel on climate change has been working on proper climate modeling. And basically it's developed a pretty comprehensive carbon budget that they say all of society, businesses, humans, governments have to stay within that carbon budget, otherwise, for lack of a better word, we're all screwed.
Carly Greenberg:
So businesses are a huge part of that recipe, and so right now I am working for Hershey on setting the company science-based greenhouse gas reduction goal. And essentially what that is, is we are looking at where are we today for our baseline and where do we need to be in a given future deadline? So by 2050, by 2075, how much carbon are we allowed to emit to stick within the global carbon budget? And so that's one way that companies can really have an impact on climate, and I would say companies have been setting carbon reduction goals for years. The way you can think of a normal carbon reduction goal versus a science-based reduction goal is, in normal carbon reduction goal often has been set by a company just picking a number that sounds good or a company picking a number that they thought was achievable.
Carly Greenberg:
A science-based target really slips the paradigm, and it makes the question not what can we do, but what does the world need us to do? That's one aspect that a company can do. The second aspect is that companies themselves are big spenders, capital expenditures from companies can be quite significant. So companies have a history of supporting CapEX for renewable energy projects, which itself has actually been able to reduce the pricing of renewable energy technology so that it's more accessible for others. So I think company CapEX to some core emerging technologies, as well as to provide large scale demand for renewable energy projects, because you still do need a large off-taker for most renewable energy projects to get enough seed funding to be approved. So that's another aspect where companies can have a big impact.
Carly Greenberg:
The final aspect, and I think this is one that is often missed and it was something that we focus on a lot at Boston Trust Walden, is companies themselves can also be a big advocator for public policy on climate change. So there are a lot of companies out there that are advocating now for a price on carbon or at least saying that there's ... for years, the companies who benefit from climate change not being regulated have been the most active in public policy spheres, and hopefully within ... starting now, hopefully, but going forward, hopefully we see that starting to shift and companies that would benefit from having stronger climate policies are going to be a bit more vocal.
Ben Gomes-Casseres:
Cool. Let me pick up on that.
Robert Brown:
Ben, can I jump in here for a second?
Ben Gomes-Casseres:
Yes please. Yeah, yeah. We'll come back.
Robert Brown:
It's also really important to ask the question, what can investors and consumers do. I think the answer to that is hold companies accountable for the truths in what they're doing. So for example, you look to a company like British Petroleum, right? Now, you look at all of their materials, they're all green. You get that nice sun, right? And it's yellow and green that they put up on all of their materials to their pumps across the world. They will tell you that in 2018, they spent $500 million of CapEX on renewable energy projects, which sounds like a lot of money, right? Except when you asked the question, what's the total CapEX budget, which was $16 billion.
Robert Brown:
So, we're talking about something like 3% of their CapEX budget for a company that says things like they are enabling the energy transition, they are re-imagining energy, right? This is the language that they use, and for a company that has committed to have net zero carbon emissions. Now, they've said by 2050, you don't need to be a genius to know that, that's 30 years from now. Right? But that to me is an example of greenwashing that we shouldn't stand for. Similarly, you could look to a company like Cummins diesel engine, which likes to say that they spent $15 million on solar panels so that they could generate solar energy to support their operations.
Robert Brown:
Now look at how much carbon they've put into the earth, just by producing the products that they produce. Nevermind the diesel engines themselves once they're installed, right? It's 808,000 million tons of CO2. That's a lot of pollution. So for them to claim that they're doing something good for the world, that was a little disingenuous, and I think we as investors in particular, because we focus on these issues need to hold them accountable, and I think as consumers, maybe you want to think twice before you go to a British Petroleum pump next time you fill up the gas tank. Hopefully-
Ben Gomes-Casseres:
Okay, yeah. Well taken, Carly, I think we'll still eat chocolate though, but-
Carly Greenberg:
All of Hershey chocolate as of January is sustainable and certified, oh sorry, I should say certified and sustainable.
Ben Gomes-Casseres:
Certified by Carly Greenberg, Brandeis University, that's how I would say.
Carly Greenberg:
More by Rainforest Alliance and people who know what they're doing in that regard. But yeah.
Ben Gomes-Casseres:
Okay. Well, listen. So I think what we're just discussing and now can we add onto it the important other component that ESG social part, and that is just on fire now. I mean, and I think for the right reasons, people have thought about climate issues and not in the abstract, but also in the way they affect communities. The poor communities in the poor countries in the world are probably the ones that are going to be hit hardest and already are being hit hardest. So I think in a way, what COVID did to us and now Black Lives Matter movement that has continued to show and teach us is that these communities are the front line in many ways. And so how do we think about ESG and social investing and the role of business as affecting and improving social injustice as a related factor to climate, but also on its own?
Ben Gomes-Casseres:
Maybe Carly, let me just stay with you on that, because I think the UN goals, many of them were in some sense, social goals, social economic goals, and maybe that's a good place to start. What's your sense for what business can do on the social justice front?
Carly Greenberg:
Yeah, it's a great question, and especially as it relates to climate change. So it used to be very common for the E, the S and the G of ESG to be siloed, to be their own little bench and especially following COP24, the Paris Climate Agreement in 2015, there emerged this concept called adjust transition, which is, as you are moving towards a low carbon economy, you can't leave people behind. So, especially with COVID-19, there's been a lot of clamoring from the investment community, as well as some businesses, as well as some civil society groups to, when we restart our economy, to do so in a way that is climate smart. But in terms of what businesses can be doing to support social justice, I would say quite a lot.
Carly Greenberg:
So if you think about it, where are the pockets in which businesses could affect people and could help either widen social justice gaps or close them, and it's with their own employees, it's with the people who are within their supply chain, and it's with some people who are within the communities in which they operate. For some companies it also includes their customers, I'm not in a company where our chocolate really is helping to widen our narrow, the social justice gap with our customers, I'm going to focus on those other three institutions. So I think really thinking comprehensively about where are we hurting our employees or our supply chain partners, and where are we benefiting them and how can we do more good and where can we narrow where we're doing bad, is really an important question for all companies.
Carly Greenberg:
As Rob mentioned, Hershey's SDG report, and in that report is doing just that. It's a very honest look at, here's where we are today, here's the risk we have, here's what we're trying to do to narrow those risks and watch as we go through this journey. Hershey has done some really great work especially within cocoa growing communities. So cocoa growing communities are known to have systemic problems with human rights abuses, specifically child labor, deforestation is another key consideration too, which is both social justice and environmental issue. So all those issues are really symptoms of bigger issue, which is poverty.
Carly Greenberg:
So Hershey has instituted a very smart program, and I don't really work on it, I just get to report about it. But the program is called Cocoa for Good, and what it is doing is it's trying to address poverty head-on, while also trying to address those symptoms so that we could really root out all of these key issue that are really plaguing the supply chain. So that both and on the business side so that our supply chain stays healthy and we can stay in business for another 125 years. But then when you think of the human side, these are real life impacts that are occurring for cocoa farmers, the thousands of cocoa farmers that are our partners and bringing our delicious treats to the public. So hopefully that answered your question.
Ben Gomes-Casseres:
Yeah, yeah. I mean, so it's in the supply chain and in some sense it's good business tool in the sense that the sustainability of your supply chain also, I take it. Yeah. Rob, what's your sense of this, the social part of the ESG goal?
Robert Brown:
I think historical context is always important and the movement towards socially conscious investing actually started with a farming consultant, which not everybody knows, but it was a guy named Moses who was talking to his boss, and his boss told him in Leviticus 19-
Carly Greenberg:
I was wondering if you were going there.
Ben Gomes-Casseres:
Yeah. Where are you, when did this happen? Now, thank you.
Robert Brown:
That when you reap your harvest, you should leave the corners of the fields for the poor and the strangers in the land. This is a concept that goes back as long as humankind. What can companies do? I think they can heed the words of Justice Brandeis, who said that we can have a democracy or we can have concentrations of great wealth but we cannot have both. You want to solve poverty in America? Treat people fairly and pay them well. Now, well doesn't have to be excessive, but well ought to be a living wage for anyone who's on your payroll. And what we've seen of course, is the shift away from human capital, right? Towards other means of capital, you could call it either money or actual physical capital. I think that has to revert back, the scales have to tilt a bit, and it's only companies that can do that, right? Unless we mandate a living wage through policy, which isn't a bad idea, companies have to take the mantle and some have.
Ben Gomes-Casseres:
Yeah.
Robert Brown:
But I think that's what companies need to do. I said that as someone who cares an awful lot about corporate profitability, and I'm certain you can have both, right? High degrees of profitability and you can pay your workers well.
Ben Gomes-Casseres:
Yeah. Well, you bring up Louis Brandeis, which I mean, he lived in that earlier phase of the inequality that I showed that chart from, and of course he was very suspicious and against the power of big business. So, what do you think about bigness? Did businesses get too big in the sense that the power they have it's basically determining our social contracting, including things like racial injustice and things like externalities of the environment. So, what's your position on bigness I guess a la Louis Brandeis?
Robert Brown:
Sorry, Ben.
Ben Gomes-Casseres:
Go ahead.
Robert Brown:
I shy away from concept of too big. I think what's important is a balance between the size of your company and the impact you have and the externalities that you create and the constituents that you're trying to serve, whether those are investors, employees or your consumers, that's what's really important. When I was at an organization called JUST Capital which is in a sense, an ESG ratings platform, it's not quite that, but you could put it in that group. We did a lot of very deep research work to ask the question through surveys, what does the American public believe as a just company? What are just meaning ethical behaviors of a company?
Robert Brown:
Then we ranked those companies, the largest companies in America, based on those set of values. I'll tell you, some of the companies were pretty pleased with the results, but a lot of them were forced to stand up and account for themselves and ask themselves, "Am I really serving my constituencies equally well and is that the path to profitability?" I think companies are starting to talk a lot about it, they're not all starting to act well about it.
Ben Gomes-Casseres:
Yeah. Carly, what's your thought about that? What's a just company. I mean, that's quite a concept.
Carly Greenberg:
Yeah. Well, it is quite a big concept. I actually wanted to respond though to your question about bigness and what has happened and whether big corporations that's ruined America or even just global capital markets at large. So one thing I actually approached in that 2017 paper that you showed Venn diagram from, is this issue of things that investors would call systemic risks, which are risks that don't necessarily affect anyone particular company, but affects the entire market. So it's non-diversifiable risk. You can have a perfectly diversified portfolio and it's still going to affect you. I think there are ESG issues that can be called non-diversifiable risk.
Carly Greenberg:
I bring them up because I think large companies, well, for each individual, one, some of these risks may have not necessarily been material. I think there's been an issue of a tragedy of the comments that has arise. So, I think climate change is certainly one of those large systemic non-diversifiable risk, and I think inequality is another one. So, while every company that doesn't necessarily really tip the balances on inequality, they can make choices that can either widen that gap by paying most of their employees the fraction of what the CEO gets, or they could have more equitable compensation structures. So I think I like where Rob was going in terms of this holding companies accountable, and I think the beauty is that a lot of people started watching.
Carly Greenberg:
So now we live in a high ... the Twitterverse exists, it's to call companies out on things, and so companies now are being held to a higher standard because there are more people watching. There's an adage, sunlight is the best disinfectant, and these days it's very easy for things to come to the sunlight, which I think has created a bigger onus on companies to write their behavior. So I think to get back to your question of what is a just company, I think a just company is one that is willing to be transparent, is one that listens to its stakeholders, and is one that is willing to change as they learn more and more information.
Ben Gomes-Casseres:
Yeah. Well, maybe we have more of those given what you're doing, maybe we will, I want to turn a little bit to some of the questions that we've been getting on the chat, that I'm getting here. Let me interpret a couple of them, one of them has to do with the chocolate supply chain, I guess, Carly this would be for you, but it has to do with what goes to the farmer, what comes to the company. The way I think about other than a strategy view is that we do have a social contract here and all along the supply chain, we have transactions, and somewhere profitability gets allocated and gets captured.
Ben Gomes-Casseres:
So, how do we think about the parts that get captured, and some of the inequality measures suggested that capital is capturing more and more, labor is capturing less. In this case it would be an international question in terms of the chocolate supply chain. So, we could talk about the chocolate supply chain, but if you want to comment more broadly about who's capturing the value that's being created by capitalism, that would be a big question. So, Carly.
Carly Greenberg:
That would be a big question. I think I am going to answer it a bit more narrow in terms of what Hershey is doing. So Hershey, I mentioned Cocoa for Good. So Cocoa for Good is the commitment to invest 500, basically half a billion dollars in our cocoa supply chain by 2030. Basically a lot of those investments are going to the farmer to help them, I mentioned that this program is about trying to attack poverty head-on, and so a lot of those investments are related to upscaling women farmers skills to diversifying incomes, to improving cocoa yields so that people can sell more of their crops. Even fun things like training cocoa farmers on how to make chocolate. A lot of cocoa farmers actually have never tried chocolate and just training them how to make that finished good allows them to go sell the commodity as well as the finished goods.
Carly Greenberg:
You're totally right in the capitalist structure, there has been a ton of middlemen that have oftentimes whittled down the profits that are seen as cocoa is sold up the supply chain. Hershey, as I mentioned earlier, has a 100% of it, cocoa, as of January, 2020 is certified sustainable. So part of that certification is related to equitable payments. But beyond that to, Hershey at the beginning of this year announced a new commitment which that a lot of cocoa is sourced by large companies like Hershey, Mars, Mondelez, et cetera. It's sourced by them through what's called mass balance sourcing. So that means, cocoa goes from farmer A, B, C, D all the way through Z and ends up in a big pot, and then when the company gets it, they can't actually tell whether it came from farmer B or farmer Z or farmer V.
Carly Greenberg:
So, Hershey made a commitment that by 2025, we are going to have all direct sourcing cocoa for Ghana and Côte d'Ivoire. So any cocoa that we buy in those two countries, which are our highest risk zones within our supply chain, we are going to know the farmers that are our suppliers. Currently we have 21% transparency into who our farmer is, which is pretty good, and we're just trying to get better. So hopefully I answered the question-
Ben Gomes-Casseres:
Yes. Well-
Carly Greenberg:
I said micro instead of macro but hopefully that helps.
Ben Gomes-Casseres:
No, that's great. But you also showed the value of transparency and that sunlight that makes it visible and therefore drives your actions. Rob, let me try to bring in another question that comes in, it's related to food again, but the direct question is how do consumers or investors influence the market change to build stores in nutrition deprived communities? Let me broaden that question for you a little bit. How do we as investors and perhaps as consumers actually steer what companies decide is their goal? Like, do they go to nutrition deprived communities or not? Do they go to places where their health care is needed or not, right? Is that a pure profit calculation or can we steer that, can we help companies do the right thing in that sense?
Robert Brown:
Well, the best thing a consumer can do is vote with their pocketbook, and the only way to do that is to get informed about what the companies are doing. The only way to do that is to demand that the companies are giving us information that's reliable and credible. There's a lot of smoke that gets blown around, and a lot of talk about programs that are accessing underprivileged neighborhoods, programs that are accessing food supply chains, right? In the right way, and I have no doubt that Hershey is, but there are others that are not. I think we as investors need to demand better disclosure of information. There's a whole conversation we could have about the quality of that information as it's disclosed, but I think consumers have to make wise choices and be informed to do that. Investors have to demand better information. I think the two go hand in hand.
Ben Gomes-Casseres:
So, it's that information and transparency, I can link that maybe to another question that's being asked, there's a couple of different versions of this question, which is what are the actionable steps that consumers can take? I think you addressed some of that, and related to that, what is the success rate of these shareholder proposals that drive to improve practices over the objection of management? Maybe Rob, let me stay with you on that and go back to Carly, how active and successful is that route of change?
Robert Brown:
Well, I think we've got to talk about past current and future, but in the past clearly, most shareholder proposals have been pushed aside, no doubt about that. But I think a watershed moment was really in, I think it was, 2018 when ExxonMobil shareholders decided that ExxonMobil would be held to the standard of the Paris accords, even though the United States government decided to withdraw. That to me was a very important moment for shareholder advocacy, and I think the more shareholders make proposals that are supported by a large base of investors and the public, because believe me, companies pay attention to what their consumers want, the faster this evolution will happen, so what can you do as a consumer, right? Spend your dollars, demand more from your company and make sure as an investor you know it.
Ben Gomes-Casseres:
And hope that the companies maintain these goals that they say they have and don't drop them at a moment's notice. There is a question which-
Carly Greenberg:
I have to chime in on with shareholder proposal.
Ben Gomes-Casseres:
You have to. Yeah, please of course Carly.
Carly Greenberg:
I do, because I've filed so many shareholder proposals and I would say-
Robert Brown:
And we vote on this.
Carly Greenberg:
Thank you. I don't file them anymore, but thank you for voting on the ones I used to file. So, I would say there's ... Americans often think, and I think it's what the winner take all type culture that if something gets below 50%, it loses, and most shareholder proposals do get below 50%, but that's not the goal, we're not shooting for a high, low rate, we're shooting for change. So I will say that shareholder proposals are a very valuable tool for shareholders to be able to affect change at companies. Oftentimes at Boston Trust Walden, and actually every time at Boston Trust Walden, we would start off an engagement through writing a letter. So you're seeking a dialogue, and sometimes the company gives you that dialogue, but they kind of pigeonholed you or sometimes they just completely ignore you, and your letter ends up in the circular file.
Carly Greenberg:
So filing a shareholder proposal, just the action of filing it, really does elevate the concerned to the level of the board, which means there's more eyeballs and the company has more pressure to do something on it. Shareholder proposal getting above 30% of the vote, well, by most of America's minds, that's a losing proposal, that gets eyeballs too, because it means a third of your shareholders, a third of your shares want to see this change and that is a significant number to pay attention to. Then beyond that too, if a proposal actually does get above 50% and the company does nothing on it, then there's more teeth that come out because then you have proxy advisory firms, which are firms that produce research that encourage and also help direct fund advisors on how they should vote their proposals. They actually start voting against your board.
Carly Greenberg:
They recommend that that is a failure of governance, if you are not listening to your shareholders, and you should no longer be on the board, which really gets company's attention. So I have a different view from Robert that I think shareholder proposals can be quite effective, not at every company, but certainly at a lot of companies.
Robert Brown:
And while we're talking about governance here, Ben, there's a pretty important distinction that I think people should be aware of when you're thinking about a company's pursuit of these issues. Ask the fundamental question, where does this issue lie in terms of responsibility in the management team? Who does that management person report to? And then who on the board is held accountable for making sure that these, let's call it issues, get driven down through the company? So, many times what you'll see is the person who's responsible for environmental impact is reporting to chief counsel. That's an organizational structure that has no teeth whatsoever.
Robert Brown:
However, if that person reports to someone in the C-suite and that person C-suite is incentive, and you can read all this in the company's filings, with very specific targets to achieve very specific goals, that's a whole different kind of seriousness of mission at a company, and as investors and consumers, that's what you should be looking for, right? You should look at all the information you can find to understand is this company serious or are they just writing about things in their annual report?
Ben Gomes-Casseres:
Well, terrific. I think that there were a couple of questions that both of you touched on here. So I will go over them, having to do with, will companies maintain this commitment in a time of crisis when they might have to be doing something else for their economic survival? So I think it's a question.
Robert Brown:
...discretionary space of pressing their foot on the gas.
Ben Gomes-Casseres:
Are they?
Robert Brown:
Yeah, because they understand that this is not a passing phase in America. This is a real moment and time, and they can either, frankly, as capitalists, they can take advantage of it and change the way they behave to attract more consumers, which is what they should do in my opinion, or not.
Ben Gomes-Casseres:
So you're hopeful that there's not going to be ... we forgot about climate, we forgot about health care when ... it's like it maintains its primacy in the years ahead.
Robert Brown:
I do believe this is a real inflection point in America.
Ben Gomes-Casseres:
Yeah.
Carly Greenberg:
I agree.
Ben Gomes-Casseres:
And Carly?
Carly Greenberg:
I was just going to say like, the great thing is, there is definitely this positive groundswell that occurs between sustainability folks within the company and sustainability folks within and finance, and certainly what financial people are loud and proud about has big impacts within a company. It's been really fantastic to see many people in the financial world say, "You're not getting a free pass on climate change just because of COVID." I mean, I appreciate it because it's job security for me. But we're not getting a free pass, our big shareholders still want to see us making an impact on climate change. In some ways, many people have also been saying that COVID is climate change training wheels because pandemics become a lot more prevalent within a climate changing world, and there's going to be a lot more disruptive events if we do not get the act together and effectively do something on this.
Ben Gomes-Casseres:
Yeah. There's one thing I think about the COVID crisis as well as our injustice battles now, which is that there is a role for regulation and important one for government, this is going back to Louis Brandeis also I think, and can we wait for business to solve these things or are we talking about the need for serious policies both on the climate as well as the inequalities?
Robert Brown:
I think it depends on which issue, by the way, I think you need the public, you need policy and you need companies, right? All three need to be involved in a meaningful way. And depending upon the issue, which one dominates the answer changes. I firmly believe that in terms of worker rights, and in terms of compensation structures, companies aren't going to take the lead on that. They're just not, they're going to pay attention to the local market dynamics for labor. When it comes to environmental solutions, I do think companies, if we can get people paying a price for carbon, right? That is traded effectively, I think companies will step up.
Ben Gomes-Casseres:
Yeah. Carly, what's your thought?
Carly Greenberg:
Yeah, if I can just comment, get on the tail of that carbon piece. I think companies are doing a lot, there's 800 companies along with Hershey who have committed to set things in a science-based greenhouse gas reduction goals. But, even though you have that many countries who are doing it, and that number seems to be growing exponentially, we need governments to act, really I think climate change, and this is me personally, not speaking for any of the groups that I am affiliated with, I personally think that climate change will always remain an issue, and this is my econ background at Brandeis until you price the externalities and companies have set prices for carbon. So Microsoft has a price on carbon, ExxonMobil, surprisingly enough has a price on carbon, but it doesn't mean anything unless it is what Rob said, that universal price that is set by the governmental organization.
Robert Brown:
Or traded on the open market.
Ben Gomes-Casseres:
Yeah. So, I mean, there was a question here and we...
Robert Brown:
Ben, sorry.
Ben Gomes-Casseres:
Yeah, go ahead.
Robert Brown:
I don't mean to belabor this point, but if you think about solar electricity, right? 72%, first of all, of all new utility scale power projects or alternative energy in the coming two years, and that's because the price of energy, whether it's solar, wind, geothermal is somewhere between six and nine cents a kilowatt hour at utility scale. That's actually highly competitive, if not cheaper than traditional carbon-based sources of energy, and it's certainly cheaper than coal, right?
Robert Brown:
So there's two points to be made there. One is, we needed government support to get to scale in the solar industry, no doubt about it, but guess what? Now we've got an industry that is actually cheaper than traditional forms of energy. So anyone who opposes it doesn't understand two things, one is, just the economics of the power sector, and two is, the idea that something like 60,000 people in America work in the coal industry, which is far less than the number of people who work in the solar industry.
Ben Gomes-Casseres:
Well, I mean, economic forces hopefully will also lead us in the right direction, but with the pricing, those externalities is a key part, I suppose of getting that right. We're out of time, there are many questions that I hope we will be able to get back to those who ask questions, we'll try to respond to them. This presentation will become available through Brandeis as a recording. But let me ask both of you to give us some parting shot here in terms of what can we hope for in a realistic way in the near future that will improve our predicament on environmental and social and almost under societal governance we're in, so open question for you to give us a parting shot.
Robert Brown:
Carly.
Ben Gomes-Casseres:
Carly?
Robert Brown:
Yeah.
Carly Greenberg:
That's a big question of what can we hope for. I mean, I'm a fatalistic optimist, and so I feel like I'm at risk of saying something that is probably to climb the sky. So rather than answer that, I think I'd like to end on something a bit more practical. There was the question of what can consumers do. And I think in thinking that we were thinking of when I go to a store and I buy XYZ good, but the other thing that everyone on this phone call is, is you're likely probably an investor, you probably have a 401(k) potentially you have your own fund that you're actively investing. That's another important part where you can vote with your dollars.
Carly Greenberg:
So I would say, think about ESG as your investing, ask your fund manager if you're not managing your own money, how they're voting your proxy on your behalf, re-allocate capital to ESG funds, go into impact investing funds and engage your employer to get an SRI option in your 401(k) there are so many options that you have at your disposal to touch these issues and employ more dollars towards environmental and social means that you might readily recognize.
Ben Gomes-Casseres:
Thank you. Very, very practical, and because of that, very hopeful in its own way. So thank you, Carly. Rob.
Robert Brown:
Yeah, I would agree with what Carly said, particularly the point about allocating capital, it used to be the widely held view that you had to expect some return that was subpar in order to be a socially conscious investor. I will tell you that this year, which has been the worst year in the capital markets that we've seen, I think at least since the Great Depression, we've made money every single month, a positive return every month. It's because of the kinds of companies that we look at, and it's because of the way that we focus on those companies. So you absolutely should be thinking carefully about where you're directing your capital, not only because it's your values, but because it's potentially rewarding place to be, as far as what do we have to look forward to? I would think back over the course of history.
Robert Brown:
In 1977, the Sullivan principles were promoted by General Motors as a way to conduct business in South Africa, General Motors, right? That led essentially to 125 companies in America supporting these principles and spurred along the way to the apartheid movement. So, being active at a corporate level and demanding more from companies, I think is something that is very real and very durable. I would say that what we have to look ahead from there is an acceleration of awareness and certainly an acceleration of the movement.
Robert Brown:
I mean, I've been doing this for about 15 years now, and I've never seen so much serious thought and so much serious analytics going into any kind of investment process, and I think Carly would probably agree that the amount of thought and care that's going into corporate understanding of these issues and response to these issues has never been higher. So I'm actually highly optimistic about the future and where we're headed.
Ben Gomes-Casseres:
Well, terrific. On that note, we're out of time, we start our classes on time, we end our classes on time, and we thank both of you. I mean, I knew you were going to be total experts in this stuff, which you are and you brought it to us, and you brought it to our audience, and I hope our audience learned from this, and certainly hope that we can continue to engage with our alums. This was a conversation that Brandeis would be proud of, Brandeis as a university would be proud of, we would love to have you in person to do this in person next time, but in the meantime we are online and we continue to try to reach out to everybody.
Ben Gomes-Casseres:
So, thank you. Carly, thank you, and continue good luck in your work, your great work. Rob, thank you and continue good work for you in all that you do for Brandeis. I know you do that too, so thank you all, audience, please be safe, be well, and it's been a real pleasure for us to be with you this afternoon or this evening. I think I'm just going to ... Alyson I think I'm just going to shut it off, right? Bye-bye.
Carly Greenberg:
Bye everyone.
Robert Brown:
Bye everyone.
Ben Gomes-Casseres:
Thank you, thank you Rob, thank you Carly.
Carly Greenberg:
Thank you for tuning in.
Robert Brown:
Thank you.
Ben Gomes-Casseres:
Bye-bye.
Carly Greenberg:
Bye Ben, bye Rob.