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Did 1 Fund Push "Apple Inc." to Drop Leather Watch Straps? with Claire Smith · find your cause

• speaker-0: He had made money by restructuring the balance sheet of a coal company. I'm not sure that there's a good trade there. speaker-1: Ready, so thanks everyone for tuning to this episode of Find Your Cause. Today we have Claire Smith, who is the founder and CEO of Beyond Investing. Claire, thank you so much for your time on this Thursday afternoon for me. speaker-0: Great to be here. speaker-1: Awesome. So per usual we like to start with the mission of the organizations we're interviewing. So what is the mission of Beyond Investing? speaker-0: The mission, well, there's kind of two missions in some ways. The mission as a business is to put out into the market investment products that are suitable for vegans and environmentalists, which is an area, an audience which have not been very well served in the past, if at all. There's a kind of beyond that mission, which is really to try and demonstrate that it's possible to create. investment programmes that take these clauses into consideration and ultimately to affect the businesses of the companies that we exclude by depriving them of capital. So thereby diminishing their impact on the world. speaker-1: Yes. And this is such a unique and interesting topic and I have a million questions. But before we do, why you? Why is this something that you've taken the torch up on and made it a huge part of your life? speaker-0: Okay, caring about animals has been a huge part of my life since I was a child, but certainly since about age fif fourteen, fifteen, I discovered that there was such a thing as vegetarianism and looked into it and became vegetarian, much to the the sort of disapproval and horror in some ways of my family at the time, especially my mother who told me I'd better learn to cook. But I carried on. with that and over time I became more concerned about other forms of animal exploitation, so it made sense to to go vegan. And the timing of that was also around an quite an emotional time in my life, which was just after I'd I'd had my daughter. And my emotions were very attuned to the very strong bond that a mother has with their child, with their baby. And I guess I empathized with cows who obviously are deprived of their own babies. That evolution into veganism Also continued throughout my life in terms of environmental causes. I was part of an anti-GM group in the late 1990s, one of the founders of that. And then over time I became more and more concerned about the climate crisis and became aware that animal agriculture, whereas I've been more tolerant of people eating animals if they were okay with that in their conscience. I became more concerned about that because effectively it felt a bit like sort of passive smoking almost, that other people's behaviour was was going to affect me as well. So I guess I became a little bit more of a kind of activist vegan at that stage. And how did that turn into businesses around investing? I became very aware from my own sort of personal pain point of trying to manage my own pension fund. that there were no funds that I could invest into that that were actually applying any kind of vegan criteria. And and I felt if that I if I have that pain point, then other people have that pain point too. I also became aware of companies that were actively trying to put together solutions to create the same products or similar products that we had got from animals in the past and that they were desperately in need of investment in order to get off the ground. Towards sort of twenty seventeen, after I had thought about this for a few years, I exited the firm that I was working for and created these businesses. speaker-1: Well, I this is so exciting because I think the first thing that I feel like people don't realize is that they can make choices on where their money goes, whether it's their retirement portfolio, their pension, four hundred one Ks, etcetera, and actually choose where that money goes. And maybe a decade ago I looked into this when I wanted to maybe remove any ⁓ companies that were in my portfolio that were involved in fracking, I think maybe was the reason back then. But to see that you can expand it and you've expanded it to other topics that people are really passionate about is very exciting. What would you say constitutes a company that has vegan criteria? What are some of the things that you look at in your research for for companies to qualify for that? speaker-0: ⁓ yes, and this is worth talking about because there are some ⁓ often some misunderstandings in terms of what we're doing. So the essence of veganism is avoiding animal exploitation. So in order to create a vegan portfolio, we cannot be exposed to any company which is ⁓ directly harming animals. In actual fact, we Also apply some indirect types of screens. So we look at the entire supply chain. So if anybody is in has a business that is ⁓ making animal feed or equipment or even downstream the distribution points of animal products, we screen out the entire supply chain. And and from the companies that remain, we're then putting a portfolio together. That doesn't mean that they're Business is making vegan products. Right. Yeah, it doesn't mean that throughout their entire operations they are applying a vegan mindset. They may well still have a boardroom which has got leather chairs in it or food in their canteen. But what we have managed to confirm and reassure ourselves before we put a stock into the portfolio is that their business model, how they make money, is not speaker-1: And I think the most obvious and well known harm of animals that people think about is animal testing as a part of any of the product development that companies have. Is so I feel like that's an obvious one, but what are some of the less obvious examples of animals being yeah. speaker-0: Sure. Actually, when I was looking for funds for this pension fund, I did find one manager that I was able to put some money with that was screening out animal testing. But it makes no sense to me as as a vegan, the vast majority, animal testing does affect a large number of animals, maybe about a hundred million a year. But you're looking at that versus close to a hundred billion, which are land animals that are in farming systems. And then if you look at fish, you're into the trillions, maybe about a trillion. So these are massive orders of magnitudes larger than animal testing. So the the the the obvious one that we obviously scream for is the animal farming and anything that is involving any animal parts or the ⁓ items things that come from animals such as eggs and milk as well. Which The animals provide without being cured, which is obviously the difference between vegetarianism and veganism, but it's still a system which results in those animals being cured. And a lot of them are actually harmed in the process because of the conditions in which they're kept. And so that obviously needed to be incorporated. Other types of things which may be are less evident. A lot of gambling stocks gambling stocks generally fall out. Why? Because horse racing is one of the main things that people so that's one. The film industry uses animals. The animals don't choose to be there. They may we hope be looked after well by other trainers, but they are being used for profit in that way by being animal actors. Th those entertainments such as I don't know SeaWorld, ⁓ that would be a fairly obvious one, we do actually exclude Disney because they operate a zoo. Their wild animal park, although it may look quite appealing, is a zoo, basically. So we can't as vegans be positive about that. Yeah. Yes, so those are some examples. speaker-1: Yeah. So yeah, that's really helpful. So I work my day job, I work in the tech industry for Amazon. A as you think about that specific sector, is it wrong to assume that there's no animals involved in some of these big tech companies like Apple and Google and and Amazon and Microsoft, or should I think about it a different way? speaker-0: Amazon is excluded because fairly obviously because Whole Foods is a retailer supermarket chain that that has meat in the islands. I can't recall. I remember that Amazon did buy out Whole Foods early on. Yes. speaker-1: Yeah, it's probably fifteen years ago, I feel like. Yeah. speaker-0: Yeah, it might be that long ago. But certainly, ⁓ as as soon as they had Whole Foods, there was no debate. I'm not sure if there was a day ⁓ a debate before. Amazon's business has evolved over time and at a certain point they were more of a platform where people would put up products, besides obviously the the books which they came from. But to certainly they don't have any kind of policies around animal products on the platform either. So far as I so far as I'm aware. So yes, I'm afraid they would fall out because you can find animal products on Amazon. So yeah, but otherwise in tech, most things which are hardware and software are okay in in the main. Where something might drop out and where we have had a very large stock drop out, and that being Microsoft, is the extent to which their products may be used in the military. So we are we we yeah. So we do have weapons and gun screens. And we did remove Microsoft because of a contract for a product which was in which was involved in kind of battlefield operations. It's not about do they have windows on their computers. That's ⁓ like most people I would imagine. But it was something specifically in the area of fighting forces, let's say. speaker-1: Yeah. speaker-0: that causes to take out Microsoft. Yes, so we are doing that level of investigation in terms of every company. We are looking for not just the animals, we're looking for fossil fuel exposure. So we take our oil services as well, we take our energy stocks which are majority ⁓ production from fossil fuels. And so we we're looking at the company's business in terms of its customers and suppliers as well as what it does as well. speaker-1: If you were to have a heat map of the the full portfolio of companies that are approved and that have made it through, how would you say that heat map has evolved over the past ten, twenty years from a geo geographical standpoint? So like US, China, Europe, how would you say that has evolved? I'm curious as to to see where we're heading and where we've come from, like as a nation and as a a world. speaker-0: Yeah, because of the way that we have put out products over time, what we did initially was create a US index and that that was in twenty eighteen. Then we created a Europe index in twenty one a global index again later in twenty one, then an international index in twenty twenty two, and somewhere along the way we also created a small to mid cap company index which was global but was Stricted to very small companies under $10 billion in size. So I can't really answer that question in terms of whether the space has changed geographically because we've had these different products coming out at different times. A very key factor in the last four or five years has just been the growth of the US market. And if you're putting any index together, generally you're putting it together on a market cap basis. So the largest markets have the largest weights. And because the US market has performed extremely well, the US market has actually increased in size vers ⁓ as a proportion of the global of the global markets. And that's really been much more of a factor in terms of geographic weightings than anything else. speaker-1: Yeah. If I was the CEO of a company and I had similar values and beliefs and wanted to get on a path where I would want to be included in one of your indexes, I come to you for advice, consulting. What are some things that I should r look into from like a maybe business operations? Maybe think of like retail CPG industry, for example. probably ⁓ one of the harder industries, like software, hardware that's a little bit easier, but think of an industry that might have some crossover. What are some of the things that you would advise me on? speaker-0: A very nice example of that, and it's a company that's been in our portfolio for quite some period of time, is the company called ELF Beauty, which we put into the US index several years ago as part of our mid-cap exposure. Now, although we're primarily selecting from the top 500 stocks an investable universe which is similar to the S P 500, because we end up with these relatively large sector tilts because certain sectors it's almost impossible for us to buy any stock without it having some animal mutation or fossil fuels for example. The energy stocks in the SP five hundred are all oil and gas. So they all go. In consumer staples, you're talking about all the food production man and manufacturing companies and the the supermarkets, all of which has some speaker-1: Yeah. speaker-0: Because of those those pr issues, we have put renewable stocks into the mid cap not companies creating even components that are used in renewables, for example. One example might be N phase, that was one of our mid cap replacements. And another one was actually Elf Beauty, because that's a consumer stock, it's a consumer discretionary rather than consumer staples. But even on the consumer discretionary, we tend to be rather light because there's a lot of clothing involved there. And a lot of clothing is animal derived. The ELF Beauty did go in as one of these mid-cat replace replacements, and I think the the company has done well and is now in the top 500, but we already had it in our portfolio. So if I was going back to your question about a CEO of a company, aside from just being the CEO of a company that has got nothing to do with animal exploitation, like a software company, you could also, as a CEO. Elf Beauty has a they specifically are a vegan and cruelty-free beauty company. They were created as such, and so they comply, and we're very glad to see that it has grown, obviously. And so, yes, look at what your products are and decide if you can remove all of the animal products from your operations. Another really good example of that is Apple was in the portfolio briefly. at the start and then we removed it. Then we removed it because we were concerned that the size of that Apple Watch business was increasing dramatically. Now you you think about it, ten years ago, how many people do you know w that had an Apple Watch? Not so speaker-1: Not too many, yeah. But it's the leather, not vegan leather. speaker-0: Became the accessory to have as people got interested to be watching their email all the time or body hacking or whatever else. And we were tracking that in their in their financials. We were looking at the size of this kind of accessories business increasing and just felt uncomfortable, got in touch with Apple. We didn't manage to get a a hard and fast number as to how many of the Apple watches included leather. But we had to make some kind of estimation based on the range of product that was out there as to what percentage might be, and it was troubling to us, so we removed Apple and we told them why we removed them and put various arguments as to why they should remove leather. This was from 21, 22, and then I think in 2023 they actually decided to remove leather from their wash track. ⁓ which which was great. I'm glad they took our ideas on board and that meant that we could actually put Apple back into the portfolio at that time. speaker-1: Is there a carbon buyback equivalent of I yeah, I don't know, I probably answered my own question, but I'm thinking about companies that are trying to be carbon neutral. I don't know if that is a way for them to get approved to be as a part of your indexes or if they're involved in any over overly exploitative or just too much carbon creation, or you mentioned fossil fuels, but what is the barrier for that and how is how are you guys measuring that? speaker-0: Yeah, we are yes, one of my business partners in the Beyond Investing Business operates a firm which does impact measurement and which collects all of that data around carbon emissions of companies. So he has an extraordinarily deep database, not just on carbon, but also water waste, which is extracted from the the data that the companies report. And so we are investigating our process has multiple steps. Part of those steps is investigating the activities, but then when we have got to what we believe to be a sort of the long list, as it were, of companies that we will go into, we then get all of that data from his database and check that we aren't missing or excluding a company which has ⁓ particularly high carbon, which is kind of an outlier, you know, in the top decile of carbon of the ones that we ⁓ have retained. Because high carbon in itself is an exclusion, is a reason to exclude. So yes, so we're doing another review of the portfolio for carbon after that and if there's anything that's that's standing out on that basis, then we remove that as well. Yes, generally anything that doesn't that doesn't that does comply with our animal activities screens could and the other screens that we're applying could get excluded. in a later step just by having high carbon emissions. So obviously every company should be investigating its carbon emissions and trying to reduce them as much as possible. speaker-1: Yeah. Throughout the evolution that you founded and have been CEO of Beyond Investing, how have you in your brain fought between capitalism and just like pure capitalism, like making decisions that are best for the business and like personal responsibility for for for the world. And how's it evolving? Because I'm sure that's what a lot of people fight internally for themselves is like, yeah, I have these beliefs, I have these values, but I also believe in like true capital or it's hard to make decisions on those values in business. So I'd I'd love to hear your journey throughout that over the years. speaker-0: Yeah, no, and i essentially once I had obviously gone vegetarian, gone vegan, been activist for environmental causes, made charitable contributions, sorted my trash, bought an electric car, put solar panels on the roof, both water and electricity. There were the two versions. I was running out of other ways that I could have positive impact and then I was Thinking, what am I doing during the day? I'm getting up in the morning sitting in front of a supercomputer and analysing hedge funds not known for being the most ethical or sustainable sustainably inspired types of funds or companies in terms of some of the activism, etc., that they might get involved in, which may not be very good for workers for a start. That created a huge dilemma and The story I tell which really encapsulates it is when I went to see a New York-based hedge fund manager active in the the credit space, credit and distress, so companies that were on the verge of bankruptcy, who was telling me how he had made money by restructuring the balance sheet of a coal company which was on the verge of bankruptcy, had far too much debt. And they exchanged debt for equity. They were no longer facing bankruptcy because they by going into default on their loans, it had been exchanged into equity and they termed out some debt by five years. So the next time that they might go into bankruptcy wasn't for another five years. And my recollection is he'd made eight million on by doing that. And that was his best performing position. And so that was the sort of thing that he was expecting, you know, to be applauded for in a pure financial Way, you might say, ⁓ well done to him, he made that much money. I was disturbed by this, went back to my desk, looked at the eight million, and also calculated, looking at the company and the production volumes that they had, that they would be able to continue to produce coal at those volumes for another five years, at least. And five years worth of production was a hundred and sixty million tonnes of carbon CO two going into the atmosphere. And I was like I'm not sure that there's a good trade there, that this eight million profit has led to that many tons of carbon in the atmosphere with the temperature increase that might contribute to. So yeah, so that was one of those so I close my computer. speaker-1: One of those experiences of the speaker-0: Terrible dilemma. And I did not write up a recommendation for that manager. I basically just shelved it, as it were. And I always wonder if this manager ever realizes why yeah, I never told him precisely why they didn't get this positive recommendation out of me through having done such a stellar job in making eight million on this one position. But yeah, that's where there was this kind of personal and professional dilemma and conflict that I felt I really needed to resolve and I couldn't keep finding myself in that situation where I would have to compromise a personal conviction in order to a achieve something professionally. speaker-1: Yeah. I guess a deeper question, but what do you think got you to the point where hearing that felt wrong? And ⁓ w what do you think that person that you shared the example about did or didn't do or shouldn't do for I don't know, to them feel like that was wrong? So obviously it didn't feel like it was a bad thing in his opinion. What do you think led him to get to that point and what are some of the experiences that led you to get to the point where you've felt that? And you I think you mentioned briefly personally speaker-0: I I think at best people in the hedge fund industry or and financial industry generally are morally neutral. They don't see how moral value should necessarily impact upon what they're doing. If they can make money something, they'll just go ahead and do it. That's always been the case. I would say, and my former firm has had something to do with this since then, that there's now even in the hedge fund industry. managers, some investors are requiring managers to re do some reporting or explain how they introduce ethical and sustainable considerations into how their decisions on what trade they will do and what they will not do. But I'm quite sure that none of those considerations are anywhere as stringent as what we're doing. So I was in a position when I when I moved into this where literally No financial firm that I could think of would want to onboard me in order to do what I'm doing to create the investment funds that I created. I had to do it for myself. And there was a very critical point with my business partner Larry, who I'd known for I think something like fourteen years professionally at that point, where we were actually at a conference together. And he had already developed some models around ethical and sustainable investing, which as I say, we've been able to build on because of the data that he's collected. But we were at this investment conference and one of the people, one one one manager that was seeking to raise money at this conference, which was an impact investing conference, so it was actually supposed to be about doing good things in the world. was raising money to create a sort of grass fed beef operation. And whereas I guess a lot of people would say, ⁓ that's quite a nice way of farming. cows are out in the field and all the rest of it. speaker-1: That that's my that's where my head goes, so yeah. speaker-0: Yeah. The reality is that all the animals die, and they die without necessarily wanting to die, absolutely not wanting to die. I don't know of any animal that asks to be killed. But in addition to that, the way that they were speaking about the animals, I remember them stating this this term there's X hundred cow units. And that what's a cow unit? It's a cow. What's a cow unit? And I heard other people actually in farming talk about stock units as a way of kind of hand aggregating up cows and sheep and pigs, they call them stock units. And as soon as you start talking in that way, you're really objectifying these animals and and moving a long way away from considering them as living and sentient beings. Yes, I'm afraid I disrupted their presentation. Pointed that out I didn't their very use of that kind of tech terminology. speaker-1: Yeah. speaker-0: rather expose them as just thinking about these animals as means to make money as opposed to really considering the needs of the animals. Yeah. ⁓ and I remember talking to my business partner and saying, but these guys can raise money, then surely we can raise money to do things differently. And that and that started the conversation going as to how we would do that and what what we would and what we wouldn't invest in. And here we are, ten years later. speaker-1: I would love to hear and hope to hear that this is just good for business in general, for companies in the elf example that that are vegan and cruelty free. Cause I'm assuming it probably costs a little bit more to do what is needed to be done to be vegan and cruelty free. Correct me if that's a wrong assumption, but I feel like that might be one of the reasons why it's not done more. But i either way, if it is say costs a little bit more. Is it still long term better for business? Does the culture you create yeah. Yeah. So I'd love to speaker-0: Yeah, I'm one hundred percent behind that idea that the the frankly I perceive using animals really in any way as medieval. I really feel that we should have evolved beyond that. And what we what also should be the case is that any means of production which does not use an animal is more efficient. We can sh show that in the numbers. We show it in our venture funds. So where as I mentioned we're investing in startups which are doing which are creating or alternatives, which are creating replacements for the animal products without using any animal. And all of these processes are generally using far ⁓ emitting far less carbon, using far less water, creating far less waste and are more efficient from the perspective inputs leading to Outputs with s left over less energy needed, the the whole shebang. Because animal production itself is extraordinarily inefficient. You are causing an animal to be created, you're looking after it for a certain period of time while it grows, feeding it, watering, etc. Then you kill it, then you separate it out into all the various parts that you want. But in that period from birth to death, the animal isn't just producing the things that you want. It's biological organs are working, it's breathing, it's it's taking things in and things are coming out the other end, and they are and all your inputs are not all contributing. In fact very little of it is contributing to the end product. A lot of it is being wasted in in in a way, in the sheer activity of keeping an animal alive. And inputs versus output, all of our biological processes are more efficient than in the animal. speaker-1: It's really interesting. I would agree with you that yes eat eating meat and animals is pretty medieval if you think about it. 'Cause if I were to try to think about what life looks a hundred years from now for just crazy thought, ⁓ the way technology is advancing, like I I feel like eating is not g it will be a delicacy. Eating meat would be a delicacy at that point because we know what nutrients we need as a human being. We just have to decide what type of body we want, right? Which is really interesting. speaker-0: I mean in a way and there's there's been I don't know, there's been the various kind of products that have come out over over the years. I remember when I was a kid everybody was saying, ⁓ we're only gonna ⁓ take tools in the future, we won't need to eat anything and then there's things like soylent and Huel and all those kind of things, you know, where it's this convenient sort of drink you just add water to. Think about the astronauts in in the space station. Think about speaker-1: Cooking up filet mignons, like speaker-0: As well, let's say that any of these kind of space explorations were to lead to the installation of a human colony somewhere, I guarantee they're not going to start shipping cows up there. speaker-1: No chance. Yeah. speaker-0: Yeah, i it so if you think about it from that perspective and think how you could survive on the least resources possible, then well r n not using animals is the only way that you could. No. And evidently it's possible to create highly nutritive, complete nutrition without the use of animals and for people to live on it perfectly well. I certainly wouldn't be here if it wasn't possible. And maybe I know. So to say, ⁓ it's impossible for humans to eat, to live without eating animals, well sorry. Forty odd years of existence it must count for something. Yeah. speaker-1: Yeah. ⁓ that's that's so interesting. So people that are listening and are really inspired and want to learn more or get engaged, what's the best path for them? speaker-0: Evidently we operate investment funds and the two investment funds that we have available in the US, and I'm deeply sorry to Europeans, we haven't managed to a European fund yet, but it's on our roadmap. One has been operating since twenty nineteen, one just launched a couple of weeks ago, and they allow investors to access either US or international exposure, their ETFs so they're on any brokerage platform. And we have two websites, one called veganetf.com and the other one called Vegan Climate ETF, because they're both called Vegan Climate ETF, but one is called US and the other one is called International. So very easy to go to those websites, easy to follow us on social. The Beyond Investing is our handle on most platforms, apart from w what is now X, where it's called Beyond Invest, not Beyond Investing. And outside of the beyond investing we also have the venture side, but they're obviously that's only for sophisticated investors. We can only deliver information to them on reversing quality. So if you're interested in that, get in touch and then we can tell you more. speaker-1: Yeah. And just to summarize that, for example, I have fidelity for like all my retirement and brokerage accounts and HSA fund, et cetera. So you're saying I could go in there now and search for your index funds, your ETFs, and I could, if I want, just reallocate money and put future money into those ETFs? speaker-0: Yeah, if you're using Fidelity as a brokerage platform, then you would go in and alongside all the other ETFs and stocks, you would see V G N and V E G X and those tickers and those tickers y you would then go through your trading screen to buy those those particular ETFs. Yeah. speaker-1: Awesome. All right. Just how simple that is. Okay. Then continue. Sorry, people that are listening in engagement, that's one way and your website is another way. speaker-0: Yeah. And I haven't got onto it, but as part of creating these operating businesses, I thought I don't want to just create operating businesses, hopefully make profit out of them because we want to grow. The more we grow, the more good we can do in terms of those businesses. But there's other ways to do good as well. And so I also created a foundation called Beyond Cruelty, which profits from the operating businesses, the investment businesses, are going into. And that foundation obviously Is aligned with the concept and the objective of reducing and ideally removing animal exploitation, and it has various campaigns that it's been running over the years, one particular one being called SDG eighteen, which is pointing out that the SDGs, which were created in twenty thirteen by the UN and which all most governments signed up to, have Absolutely nothing in them that refers to the situation of animals that human beings are using in this in in their development, let's say. And we the the the foundation believes that using animals is not sustainable, so any use of animals is should be outside of the objectives of the sustainable development goals. And in avoiding even mentioning animals. that SDG eighteen is missing and that should be a goal of removing animal exploitation. Yes, so we're quite yes, I'm a little bit of an evangelist about this. Everything that I'm doing in the operating businesses, the investment businesses, and obviously in the foundation is directed towards that goal. speaker-1: But this is really amazing. I have learned a lot and it is really just exciting to to hear that for people that want to put their money where their mouth is and have more ethical investing, especially in the veganism realm, that you have a pathway for them. So people that are listening, get engaged and please reach out to Claire with any questions and and I'm sure that this has been learning for a lot of people that didn't know that this was possible, that you can put those dollars towards companies that share your beliefs and your values. And also that means away from the companies that do not share your beliefs and values. Thank you, Claire, so much for your time. We really appreciate it. And any final words before you wrap up? speaker-0: No, thank you very much for having me and ⁓ please if anybody does have interest in what we're doing, don't hesitate to reach out. We're always happy to answer any questions. speaker-1: Thank you, Claire. Have a good rest of your afternoon. speaker-0: Thank you.