-: I could see a world in five years
where ESG is meshed in every asset class
and everything we do,
and I believe that's where it's going.
We have seen billions and billions of dollars
moving into more sustainable strategies.
So this tectonic shift of capital is just beginning.
And so for the companies
that you are advising on transition risk,
if they're not moving fast enough
and another company in their industry is moving faster,
they're going to have outflows in their ownership
and the outflow is going to go into
a company in their same industry.
And that's what we're seeing,
that is what to me is the "aha moment."
I do believe in the next five years
we're going to create more sustainable strategies,
we're going to create more customized portfolios.
And through analytics and modeling
we can create a hybrid portfolio
that closely, let's say mimics an S&P or a Russell.
And it has X, Y, Z of tracking error
but we will be able to eliminate
let's say 10, 20, 30, 40% of the worst offenders in the S&P.
It is a form of greenwashing if the traditional companies
sell off their hydrocarbons or the worst offenders
to some private equity firm.
The net carbon footprint of the world does not change.
We need holistic solutions with government,
with investors, with companies, how to evolve.
Maybe we could create a liquidating trust
to the hydrocarbons managed by those traditional companies.
Maybe we could create like a good bank, bad bank
like we've done in financial services
for traditional companies.
It is urgent that we have conversations
with the most traditional hydrocarbon companies
and working with them.
They actually have some of the greatest scientists
in this business, and it's going to be those companies
probably are gonna create
the best alternatives to the green hydrogen.
We need to have a just transition.
The best way to create a just transition
is to be working with the traditional companies
and helping them move hopefully faster,
but more productively.
The number one thing we have to do as investors
is to be investing with these traditional companies
and investing in new companies on finding new technologies
to bring down the green premium.
It took us 30 years
to bring down the green premium from solar and wind
to make it more competitive than coal today.
We don't have 30 years.
We need to find a solution for biofuels.
We need to have a solution for all these different products.
Right now, 10% of the carbon footprint
is created by cement and steel.
Are we going to stop building?
Of course not,
but we're going to have to create new technologies.
And so I look at transition risks, not really as a risk.
I look at transition as an opportunity.
(gentle music)