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Is The Future Investable? · Simmer Down

• 0:00
  Mark Hays: For us, look, we believe climate change is an important physical risk that can cause real financially material issues to your investment portfolio.
• 0:09
  Kathleen Biggins: Welcome to Simmer Down, where cool heads take on a hot topic: climate change.
• 0:15
  Kathleen Biggins: Today we're taking a look at how climate change is impacting our investments.
• 0:20
  Kathleen Biggins: To guide us in this discussion, we have invited an expert, Mark Hayes, Managing Director and Director of Sustainable Investing at Glenmead.
• 0:29
  Mark Hays: Thanks for having me.
• 0:32
  Kathleen Biggins: So, Mark, could you tell us a little bit about what you do as a director for sustainable investing?
• 0:37
  Mark Hays: Yes, absolutely.
• 0:38
  Mark Hays: So Glenmead has worked with individuals, families, endowments, and foundations to design investment portfolios in line with a wide range of motivations for about 70 years.
• 0:47
  Mark Hays: My job specifically is to help them align portfolios towards issues including climate change, health equity, and economic empowerment.
• 0:55
  Mark Hays: And I will say I'm delighted to be here because climate change is by far where I'm seeing the biggest area of interest right now.
• 0:59
  Kathleen Biggins: Terrific.
• 1:00
  Kathleen Biggins: Well, we are thrilled you're here.
• 1:01
  Kathleen Biggins: I think there are probably two different scenarios that would be very surprising to our audiences today.
• 1:07
  Kathleen Biggins: The first is a bit negative and worrisome, and the second is quite positive.
• 1:12
  Kathleen Biggins: Which one should we start with?
• 1:14
  Mark Hays: Uh let's rip off the band-aid.
• 1:15
  Mark Hays: Um I tend to be pretty optimistic, so I'd like to get the negative out of the out of the way and then build from there.
• 1:21
  Mark Hays: So let's start with the other negative statistic.
• 1:23
  Kathleen Biggins: Many of our listeners may think of climate change as it pertains to their home or their community, how hot it gets.
• 1:31
  Kathleen Biggins: But many may not be translating the risks to their actual investments and the companies that they have faith in.
• 1:38
  Kathleen Biggins: And if you take a look at what a lot of experts are saying, including the standard and poor's, they're projecting that these same physical risks that could be impacting us personally are also incredibly important risks to companies.
• 1:51
  Kathleen Biggins: And they've taken a look at what is expected by 2050 and broken it down by sector, at the billions of dollars for each sector that could be imposed on them by these typical climate change risks.
• 2:05
  Kathleen Biggins: Too much heat, too much rain, too much flooding, drought.
• 2:09
  Kathleen Biggins: And they project in total that the actual costs could be over $1 trillion by mid-century.
• 2:17
  Kathleen Biggins: So clearly there is a danger in simply following the current line of investing, following the status quo, if you will.
• 2:25
  Kathleen Biggins: How do you broach that with your clients?
• 2:29
  Mark Hays: Yeah, well, we always start with financial materiality, meaning how material are these physical risks over the life of the holding period of those assets.
• 2:38
  Mark Hays: And we go asset class by asset class and try to understand and help our clients understand how some of the assets they hold today might be at risk today and how others they need to take a longer term view.
• 2:48
  Mark Hays: I'll give you an example.
• 2:50
  Mark Hays: Um, there's some part of the market that has adjusted on an annual basis, I would say in line with the physical climate risks we're seeing, and that's the insurance market.
• 2:58
  Mark Hays: Yes.
• 2:58
  Mark Hays: Certainly insurance has been repricing on a regular basis based on what they're seeing.
• 3:03
  Mark Hays: Um but I think what we're not seeing flow through to the degree that you would expect outside insurance is what I would call the persistence of chronic physical risk, meaning how does the market look and how do the assets you hold look one year, two years, three years, four years down the line if physical risks, increased heat, increased seawater rise continues to happen at this pace.
• 3:25
  Mark Hays: And that's what's not being adjusted.
• 3:26
  Mark Hays: I would say the biggest part of the portfolios we see right now that are not pricing in these risks are any real assets.
• 3:34
  Mark Hays: So that extends to residential, commercial real estate.
• 3:37
  Mark Hays: It extends to any infrastructure or projects that you'd hold assets in the ground.
• 3:42
  Mark Hays: Um and three, and I think this is the most nuanced, I'm happy to talk more about it, supply chain risk.
• 3:47
  Mark Hays: And that's where you extend to almost all sectors where that's every company under the sun relies on a global supply chain, which is physical assets in the ground.
• 3:55
  Mark Hays: Um, that's the big unpriced risk that we're seeing in the market right now that needs to be adjusted.
• 4:00
  Mark Hays: Trevor Burrus, Jr.
• 4:00
  Kathleen Biggins: So it's interesting that you picked out insurance as the sector that's really kind of ahead of the curve.
• 4:05
  Kathleen Biggins: And maybe that's because they've been looking at it so long.
• 4:08
  Kathleen Biggins: Munich rebegan to warn about climate change all the way back in 1970.
• 4:12
  Kathleen Biggins: And simply as a matter of what their business entails, they've had to be very clear-eyed in what the risks have been and will be.
• 4:22
  Kathleen Biggins: And in fact, it seems like they have kind of been leading the market, um, recognizing things that many corporations have not yet caught on to.
• 4:30
  Kathleen Biggins: Is that true?
• 4:32
  Mark Hays: Yeah, I think look, you're spot on and that insurance has been looking at this for a long time.
• 4:36
  Mark Hays: They've always had some of the top-notch climate-related predictive models.
• 4:39
  Mark Hays: You know, RMS and AIR are really two of the leading models that one should look at to understand climate risk.
• 4:45
  Mark Hays: Um look, I think it's as simple as that.
• 4:47
  Mark Hays: This is uh critical to the ability for them to continue to be profitable is to deeply understand these risks and how they're pricing their own business.
• 4:55
  Mark Hays: Um I think um, look, I talked to a lot of business leaders, and I think all of them are thinking about it in some form.
• 5:02
  Mark Hays: Um from my standpoint, I think some aren't prioritizing it to the level that they probably should be, given that these risks are only increasing today and are increasing in our view as investors in terms of their financial materiality to the bottom line.
• 5:14
  Kathleen Biggins: Aaron Powell Okay, so let's probe these risks specifically because I think we all know, okay, it's too hot, it's a little dangerous for me to be outside or my raining too hard, maybe my roof is at risk.
• 5:24
  Kathleen Biggins: Translate how these physical aspects of climate harm businesses.
• 5:29
  Kathleen Biggins: Aaron Powell Sure.
• 5:30
  Mark Hays: Let's talk about a uh global uh e-commerce retailer, right?
• 5:34
  Mark Hays: Uh let's call it a tech business that's uh transporting and selling goods to individuals around the world.
• 5:40
  Mark Hays: Um that business, as you can imagine, um, really relies on a durable global supply chain that is consistent to be able to deliver its goods on time in a safe manner to its customers around the world so it can be profitable.
• 5:52
  Mark Hays: Um that company is at an enormous risk from climate change.
• 5:56
  Mark Hays: When you think about where they place their warehouses around the world, a lot of them are now starting to think well, should we place them in areas that are far away from seawater rise?
• 6:04
  Mark Hays: Should we place them in areas that are less susceptible to droughts because those rely on fresh water to keep them going?
• 6:09
  Mark Hays: If companies are not thinking about supply chain resilience, that hinders their ability to deliver their goods at a profitable rate.
• 6:16
  Mark Hays: Let's talk about a consumer beverage business.
• 6:18
  Mark Hays: Their entire business is predicated on having fresh water at a usually a radius of about 100 miles to be able to deliver goods at the local level.
• 6:26
  Mark Hays: Again, let's think about droughts and think about how they might not have that access to water on a regular basis unless they're smart around where to place those facilities.
• 6:35
  Mark Hays: And again, as an investor, our job is to understand who's leading the charge versus who is not within an area.
• 6:41
  Mark Hays: And for us, we do already see winners and losers that we believe are positioned to be more resilient to climate change and those that are positioned to, again, potentially have supply chain disruptions that will really impact their bottom line.
• 6:53
  Kathleen Biggins: Aaron Powell So I can understand the supply chain.
• 6:55
  Kathleen Biggins: What about transportation?
• 6:56
  Kathleen Biggins: I mean, we all have heard about rivers going too low for transportation down the rivers, railroads being buckled.
• 7:03
  Kathleen Biggins: Are we seeing that play out as well and companies beginning to worry about that and protect themselves?
• 7:09
  Mark Hays: Yes.
• 7:09
  Mark Hays: So from a company perspective, again, it gets into supply chains around how those goods are going to be transported.
• 7:14
  Mark Hays: We're absolutely seeing again where they locate their hubs to be resilient in a way to get around those changes.
• 7:21
  Mark Hays: We are seeing increased shipping and water routeways instead of uh traditional land-related out routeways because of increased storms, particularly in the Midwest and the Sunbelt, for example.
• 7:32
  Mark Hays: So that's a big uh shift we're seeing.
• 7:34
  Mark Hays: I will say from personal transportation, we're seeing cities start to get really serious about this around even how they design their public rails.
• 7:42
  Mark Hays: Um, Miami is a really interesting case study, actually.
• 7:45
  Mark Hays: Um, they have the the country's first chief heat officer that is laser focused on this, and that individual is thinking about how do you design a transportation system for commercial and residents around the area to be resilient.
• 7:58
  Mark Hays: And I've seen some other cities, including right here in Philadelphia, that are starting to take notice around how to design this for a 2030, 2040, 2050 scenario.
• 8:06
  Kathleen Biggins: So one of the things that kind of comes to mind when you talk about that was Hurricane Maria.
• 8:10
  Kathleen Biggins: It happens to be where a lot of saline bags are manufactured and they got wiped out, and suddenly our entire country had a dearth of saline bags, which of course is something that we use all the time.
• 8:21
  Kathleen Biggins: And so it seems like there's been a real push to create more redundancy, to not be so dependent on a single location or single mind.
• 8:29
  Kathleen Biggins: Is that something you're seeing as well?
• 8:31
  Mark Hays: I would call this trend reshoring, and it goes across sectors.
• 8:35
  Mark Hays: Um reshoring is often thought of as manufacturing.
• 8:38
  Mark Hays: Um right now there's a big conversation around energy uh independence, which certainly with any anytime there's a there's a global conflict, you see a renewed interest in that.
• 8:47
  Mark Hays: Um certainly we're in an environment where it's a trade-constrained world from tariffs, but reshoring is actually critical as well from a climate change perspective.
• 8:55
  Mark Hays: When we look at country by country investments, we actually look at the individual companies' resilience around how they would deal with global supply chain shocks, which would limit its ability to get critical materials to that country.
• 9:07
  Mark Hays: So a lot of countries are thinking about this from the governmental levels and ensuring they have their own circle of resources that wouldn't be disrupted should there be large-scale catastrophes that limit the ability to bring goods in.
• 9:19
  Mark Hays: So it's a really important thing that we're looking at when we look at any individual company.
• 9:22
  Mark Hays: We try to understand how that company is resilient given the countries that they're either domiciled in or serving as customers.
• 9:29
  Kathleen Biggins: So are you seeing more action outside of the US?
• 9:32
  Kathleen Biggins: Or are we seeing companies continue to move in this direction, but perhaps be a little more quiet about it, given some of the pushback that we're feeling around climate action at the federal level?
• 9:44
  Kathleen Biggins: In other words, are companies still doing, not talking about it, or are they really pulling back in our country?
• 9:49
  Mark Hays: Um It's a mix of both.
• 9:50
  Mark Hays: Yes, companies are pulling back.
• 9:52
  Mark Hays: There's no question about it, and I wouldn't sugarcoat it, but I would say way more companies are doing much more in climate change than one would be led to believe based on what you're seeing out there.
• 10:03
  Mark Hays: Meaning, we've moved from an environment that I would call greenwashing a few years ago, companies that really weren't doing that much, shouting from the rooftops around how important climate change is, to what I would call green hushing today, which is companies that are still doing the work but are being a little quiet about it, particularly those that are located in the US and do want to make sure that they continue to get support from the federal government.
• 10:24
  Mark Hays: What I would say as an investor is that that does impact us in a couple of ways around the approaches we take.
• 10:29
  Mark Hays: I think it is frankly harder to use investment strategies that rely just on rules-based approach or quantitative techniques.
• 10:38
  Mark Hays: And let me explain it this way: a lot of investment strategies out there rely on no human interaction.
• 10:43
  Mark Hays: They're designed with a set of basic rules that says we'll buy companies that are over this amount, we'll sell companies that are below that.
• 10:50
  Mark Hays: And you're only as good as the data you have.
• 10:52
  Mark Hays: And I will say that two years ago, um, right before the current administration started, close to 100% of the Russell 1000s, so the thousand largest companies in the US, were disclosing carbon emissions data, they were disclosing their approach to sustainability, and they were disclosing their commitments towards net zero or equivalent area.
• 11:11
  Mark Hays: Today that number is about 55%.
• 11:13
  Mark Hays: So we've lost about half of the companies disclosing that information.
• 11:17
  Mark Hays: That does not mean they're not doing it.
• 11:19
  Mark Hays: So for us, we've moved from one that relies in some cases on rules-based approaches and much more on what we call fundamental investment approaches.
• 11:27
  Mark Hays: And fundamental is a fancy way of saying it is human-led.
• 11:30
  Mark Hays: It is an investment approach that relies on humans interacting with management teams directly, seeking to understand whether they still have these commitments, whether they're thinking about resiliency or not, because we just don't have the data we used to have.
• 11:43
  Mark Hays: And again, you have to be creative as an investor.
• 11:46
  Mark Hays: You have to make sure that you still, as a fiduciary, understand which companies are resilient and which ones aren't.
• 11:52
  Mark Hays: That's kind of the shift that I've seen.
• 11:54
  Mark Hays: Um, again, with this idea that companies are still doing the work, but they're not talking about it as much.
• 11:59
  Mark Hays: Some have pulled back and we just don't have the data there.
• 12:02
  Mark Hays: And those are companies that maybe we would lean away from because if they're not doing the work, if they're not thinking about it, we think as investors that they would be a less resilient company financially going forward.
• 12:11
  Kathleen Biggins: So you you hit on something that I find very intriguing, and that is that many of these companies are multinational.
• 12:19
  Mark Hays: Yes.
• 12:19
  Kathleen Biggins: And even though there's been some pullback in Europe as well on providing background on what how sustainable they are or their climate risk, they are still ahead of us.
• 12:30
  Kathleen Biggins: And there are specific states like California and now New York that are pushing in that direction are already there.
• 12:36
  Kathleen Biggins: So how can these companies pull back when other parts of the world are demanding this sort of information and states right here in the US are demanding this information?
• 12:46
  Mark Hays: It's incredibly difficult for multinational companies to try to thread the needle and continue doing the work, but talking about it with the right language in each one of the areas that they operate in to ensure that they can continue to do business, right?
• 12:58
  Mark Hays: There's no way around it.
• 12:59
  Mark Hays: Um I will say that we have seen some companies that have lost very substantial pieces of business because they've pulled back too hard in the US.
• 13:08
  Mark Hays: And as such, they've lost business from Europe and parts of Asia.
• 13:11
  Mark Hays: I've also seen Wait, wait, wait.
• 13:12
  Kathleen Biggins: So they're kind of punished because they're hushing too much or they're changing their strategy too drastically.
• 13:18
  Mark Hays: Well, one and the same, but in this case, the examples I'm thinking of, hushing too much.
• 13:21
  Mark Hays: These are companies that are still doing the work, that are doing the work because they have constituents in Europe and in Asia and stakeholders that really value this and need to see this progress.
• 13:31
  Mark Hays: Um, by not talking about it enough, right?
• 13:34
  Mark Hays: By just kind of removing some of the ways they're amplifying this, they've lost some of that Europe and Asia business because it's viewed as disingenuous, not authentic, actually not seeing that progress going forward.
• 13:44
  Mark Hays: Um, I've also seen investment firms in terms of how they even think about designing strategies around this space.
• 13:51
  Mark Hays: I will say, even in 2026, um, we saw a very large investment manager lose a $52 billion investment mandate from the Japanese governmental pool of capital.
• 14:03
  Mark Hays: Because explicitly, again, this came out as a public note, because that investment firm talked and removed some of their uh climate commitments away from the from the table and what they had a couple of years ago, right?
• 14:13
  Kathleen Biggins: So damned if you do and damned if you don't.
• 14:16
  Mark Hays: A little bit.
• 14:16
  Mark Hays: And that's why, look, um, you have to pick a lane, you have to be committed, and you have to back it up with why you're doing it.
• 14:23
  Mark Hays: And I think what we've seen over the last few years is some folks that have stepped up and talked a big game around this that actually weren't doing the right work.
• 14:30
  Mark Hays: Um others that were doing it and now are being a little bit careful.
• 14:33
  Mark Hays: For us, look, we believe climate change is an important physical risk that can cause real financially material issues to your investment portfolio.
• 14:42
  Mark Hays: And for us, that is unchanged.
• 14:44
  Mark Hays: Um, you know, yes, we factor in how policy could impact certain areas in different ways, but for us, um, it would be essentially saying that climate change is posing no risks anymore to not take it into account as an investment portfolio.
• 14:57
  Mark Hays: So we're committed.
• 14:58
  Kathleen Biggins: So I am also a little bit shocked that the C-suite would be so willing to pull back when they can see long-term that these same risks that we've talked about, the physical risk and other risks that I'd like to probe with you, like regulatory risks, reputational risks that are coming, are things that they would ignore when they know that they're true.
• 15:21
  Mark Hays: Right.
• 15:22
  Kathleen Biggins: So is it really that they're kind of taking a nap?
• 15:25
  Kathleen Biggins: You know, they're just taking a little time out because of the political environment and that they will return when the environment changes, or is that they've had a change of heart?
• 15:36
  Mark Hays: No, it's not the latter.
• 15:37
  Mark Hays: It's the former.
• 15:38
  Mark Hays: It's the job, especially, and I want to make the distinction between what I'm seeing in publicly traded corporations versus private, because it's very different.
• 15:44
  Mark Hays: Public corporations and CEOs, um, they're managing to quarterly earnings.
• 15:48
  Mark Hays: They're managing to short termism.
• 15:50
  Mark Hays: And a lot of folks smarter than myself within the broad investment landscape have talked about how that short-termism of publicly traded companies doesn't create the largest amount of shareholder value.
• 16:02
  Mark Hays: And I think because of that short-termism, CEOs of public companies, particularly in the US, do have to adapt around the current policy environment, the current regulatory environment.
• 16:11
  Mark Hays: And we've seen, right, how CEOs have shifted and pivoted from one administration to the next.
• 16:16
  Mark Hays: Frankly, that is kind of what they have to do given the short-term nature of being a CEO.
• 16:21
  Mark Hays: The average CEO in the US of the S P 500 has a tenure of 2.8 years.
• 16:25
  Mark Hays: Oh my goodness.
• 16:26
  Mark Hays: So that shows you, right?
• 16:27
  Mark Hays: If your average tenure is 2.8 years, um, well, you better manage quarter to quarter in those 2.8 years.
• 16:33
  Mark Hays: You may not be thinking about the risks of some of the climate change risks which play out over a little bit longer period of time.
• 16:39
  Mark Hays: Um, some CEOs, particularly those in logistics businesses, shipping businesses, insurance businesses, since we're seeing this pricing flow through right now from climate change risk, of course they're incorporating it.
• 16:51
  Mark Hays: It's these more nuanced risks that are a little bit unseen, like we talked about, broader e-commerce companies, that there could be supply chain risks over time, those are the ones that aren't taking into account as much as maybe one should because of the short-term nature of public companies.
• 17:05
  Mark Hays: Private companies, I see the opposite.
• 17:08
  Mark Hays: Um, so we do a lot of venture growth equity, private equity-related investment.
• 17:12
  Mark Hays: If you look dollar for dollar, where a lot of the biggest innovation is occurring right now around climate change-related resilience and infrastructure, that is where it's occurring because those are companies that are held in vehicles that are 10 to 15 years in length.
• 17:30
  Kathleen Biggins: More when we return.
• 17:31
  Kathleen Biggins: We started at the beginning of the case.
• 18:51
  Kathleen Biggins: That's true.
• 18:52
  Mark Hays: We've been splicing in some positive options though.
• 18:54
  Mark Hays: Yes.
• 18:55
  Kathleen Biggins: But I think the thing that you have kind of inferred, but we haven't really struck on directly, is just how big this green investing sector is and is expected to be.
• 19:04
  Kathleen Biggins: Uh Boston Consulting Group projected that today already the green economy is at $5 trillion, projected to be at $7 trillion by 2030.
• 19:15
  Kathleen Biggins: Except for AI and tech.
• 19:17
  Kathleen Biggins: It is the fastest growing sector out there.
• 19:20
  Mark Hays: Yes.
• 19:21
  Kathleen Biggins: So not only are we experiencing perhaps more risk than we know by staying with our status quo investments, but we're also missing out on opportunities as this new sector really grows rapidly.
• 19:34
  Mark Hays: Yes.
• 19:35
  Kathleen Biggins: So how do you share that with your clients?
• 19:37
  Kathleen Biggins: How do you move someone who might be a little reticent, scared to do something new, into understanding the potential?
• 19:43
  Mark Hays: Sure.
• 19:43
  Mark Hays: Yeah.
• 19:43
  Mark Hays: Look, it's it's a megatrend, and we're focused on megatrends as an organization.
• 19:47
  Mark Hays: And one of the ways that we actually help them understand it is by ingraining how important climate is to unleash the other big mega trend, which is AI.
• 19:56
  Mark Hays: Every large organization right now that's focused on AI, if you actually look at how they're talking and some of their strategy around it, uh, the climate side is a big piece of this.
• 20:05
  Mark Hays: Um actually, SpaceX, which just had uh their IPO, I believe, when this is airing, one of their big levers and strategy, which has helped them raise a lot of capital, was around this idea of data centers in space.
• 20:17
  Mark Hays: Right.
• 20:17
  Mark Hays: And a big idea of that is because of climate change, because of the enormous water use and the energy use that data centers consume on land, space actually makes a lot of sense from them.
• 20:26
  Mark Hays: Obviously, closer to the sun, they can be powered that way.
• 20:29
  Mark Hays: They're not taking up that space on Earth, right?
• 20:31
  Mark Hays: So And it's cool.
• 20:32
  Mark Hays: Right.
• 20:32
  Mark Hays: So you know, even a company like that, which people are excited about, you know, space, everything like that, that's playing off of climate change, right?
• 20:40
  Mark Hays: So I think for us, we don't try to think of these as distinct silos where you're either investing in this or this.
• 20:47
  Mark Hays: We're trying to think about things like AI and climate and other trends, by the way, that we're focused on right now, you know, health access and equity, probably a different podcast, is a big trend for us.
• 20:56
  Mark Hays: Um, that's impacted a lot of your portfolio.
• 20:59
  Kathleen Biggins: So, Mark, again, I think we can visualize the physical risks.
• 21:02
  Kathleen Biggins: We've talked about them a bit right now, but I'd love for you to help people understand some of those more nebulous risks, some of those transition risks that we know are also impacting businesses and that businesses are preparing for.
• 21:16
  Mark Hays: Well, we're spending a lot of time thinking about how AI, energy, and water intersect.
• 21:21
  Mark Hays: Um, water is something that I really want to uh focus on for a second because fresh water is one of the most important inputs for AI going forward in terms of data center build outs.
• 21:32
  Mark Hays: Um, we're only going to be as good as the amount of fresh water we have and energy, which we'll talk about, to power that build out.
• 21:37
  Mark Hays: Um, what we're seeing is an enormous strain on our energy grid and our fresh water because of this data center build-out going forward.
• 21:46
  Mark Hays: Technology company growth in general has relied on fresh water.
• 21:50
  Mark Hays: Chip generation by Nvidia, one of the largest consumers of water in the world.
• 21:54
  Mark Hays: And the largest company consumer globally of water every year, um, people always guess, you know, maybe it's one of the beverage makers.
• 22:02
  Mark Hays: Nope, it's Alphabet, the parent company of Google.
• 22:05
  Mark Hays: They are the number one consumer of fresh water.
• 22:07
  Mark Hays: Um, so as you think about climate change, you know, uh an obvious issue here is the increased droughts and heat that will cause water scarcity in a lot of the world.
• 22:15
  Mark Hays: And let's think about how that could impact the biggest area of growth for GDP over the last year and absolutely projected to be the biggest area of growth going forward.
• 22:25
  Mark Hays: You know, if you look at the last two years, uh, there's a set of stocks called the Magnificent Seven.
• 22:29
  Mark Hays: Yep.
• 22:30
  Mark Hays: All seven of those are in the top 20 of water consumption in the entire world.
• 22:34
  Mark Hays: So let's think about how climate change, which is gonna impact both of those areas, will impact those seven companies, would have driven more than half of growth in the S P 500.
• 22:43
  Mark Hays: So that's gonna touch every investor out there.
• 22:45
  Mark Hays: It's gonna touch you if you have a 401k because you have a huge amount of exposure to those companies.
• 22:50
  Mark Hays: It's gonna touch you if you're a pensioner and you're receiving pension payments.
• 22:54
  Mark Hays: Everyone is invested in those companies.
• 22:55
  Mark Hays: And that's why we need to figure this out because it's not just uh those that hold insurance companies or those that hold real estate.
• 23:02
  Mark Hays: State that are going to be affected.
• 23:03
  Mark Hays: It's anyone with at least one dollar invested globally is going to have exposure to this because they're the ones most affected by these risks.
• 23:11
  Kathleen Biggins: And intriguingly, they have also been kind of at the forefront of finding new sources of energy.
• 23:16
  Kathleen Biggins: Not so much on the water side, but on the energy side for sure.
• 23:19
  Kathleen Biggins: And we're seeing this burst of AI activity in some ways compromising some of the momentum that these seven have had.
• 23:28
  Kathleen Biggins: It's really an interesting time to see whether AI can help in some ways by coming up with new ways of creating energy.
• 23:36
  Kathleen Biggins: I mean, I know the fusion area is really excited about the potential of AI there.
• 23:41
  Kathleen Biggins: But also because of its need for energy, as much as a small city for one AI center.
• 23:47
  Kathleen Biggins: Yes, correct.
• 23:47
  Kathleen Biggins: A small, mid-sized city.
• 23:49
  Kathleen Biggins: It's like throwing all the cars up in the air and seeing where they fall.
• 23:52
  Kathleen Biggins: It's like people don't even at least it seems to me that people don't even know exactly how they're going to fall.
• 23:57
  Kathleen Biggins: They just know that they had to throw them up in the air.
• 23:59
  Mark Hays: Yes.
• 24:00
  Kathleen Biggins: So this your your your description is really intriguing.
• 24:03
  Kathleen Biggins: And I did not realize they were the biggest water users as well.
• 24:06
  Kathleen Biggins: That's fascinating.
• 24:07
  Kathleen Biggins: Trevor Burrus, Jr.
• 24:08
  Mark Hays: Yes.
• 24:08
  Mark Hays: And look, I think from an AI perspective, I'm glad you mentioned that there is some hope as well.
• 24:14
  Mark Hays: Look, AI from a sentiment perspective right now in the United States, there's not many issues that are this unpopular.
• 24:20
  Mark Hays: In fact, I I think that AI actually I just saw is is less popular than Congress in terms of support, right?
• 24:26
  Mark Hays: Well, that's low.
• 24:27
  Mark Hays: Which is low.
• 24:27
  Mark Hays: And I think there is a little bit of a storytelling problem with AI generally, in that there's no question that AI could disrupt jobs.
• 24:36
  Mark Hays: There's no question that AI creates a lot of energy strain, water strain, data center build out.
• 24:41
  Mark Hays: But you're right to point out that out of that need for these companies to keep growing, we are seeing an enormous use of cleaner energy sources to get there, right?
• 24:51
  Mark Hays: Those companies aren't building coal plants to be able to get there.
• 24:54
  Mark Hays: Yes, they're using natural gas, which is at least cleaner than coal, but there's an enormous build-out from these companies of solar, of wind, of other energy storage areas, and you touched on nuclear as well.
• 25:05
  Mark Hays: So I think what's really interesting is you're actually seeing these technology companies being forced by state legislatures to build their own renewable energy power sources to power their data centers, which I think ultimately could speed up the progress and drive down costs in renewable energies in a really pronounced way.
• 25:21
  Mark Hays: I think the other thing I would say is you mentioned AI's ability to solve complex problems.
• 25:25
  Mark Hays: We're seeing some really interesting use cases already with AI that essentially is helping companies be more efficient with its water use, for example.
• 25:33
  Mark Hays: I'm seeing some really interesting use case of desalination of saltwater for freshwater.
• 25:37
  Mark Hays: AI is helping there.
• 25:38
  Mark Hays: I'm also seeing AI being really helpful on energy efficiency and load management, switching between different sources.
• 25:44
  Mark Hays: So I wouldn't call myself a techno-optimist, right?
• 25:47
  Mark Hays: You know, but I would say that I might be more optimistic than most around how AI could actually, in the end, help us solve some of these issues around climate change over time.
• 25:57
  Mark Hays: But right now, it is creating a strain and there's no way around it.
• 26:00
  Kathleen Biggins: I don't want to go down too much of a rabbit hole, but one thing that I think is intriguing is the point you just made, which is if we could use the data centers in in a way that could support the grid, um, they could actually be a really good neighbor.
• 26:14
  Mark Hays: Yes.
• 26:15
  Kathleen Biggins: And what that really means is that in in general, they don't need all that energy.
• 26:19
  Kathleen Biggins: It's just at certain times.
• 26:20
  Kathleen Biggins: So it's their peak times that they throw us out of whack.
• 26:23
  Kathleen Biggins: But if they could help pay for the the wires and the transmission distribution during the non-peak times, that could be a good thing for our grid.
• 26:31
  Kathleen Biggins: And so part of it is again throwing the cards up without really having a plan of how we want them to fall.
• 26:37
  Kathleen Biggins: Yes.
• 26:37
  Kathleen Biggins: Um It's very well said.
• 26:38
  Mark Hays: And look, there's NIMBYism, right?
• 26:40
  Mark Hays: The not in my backyard issue around data centers right now.
• 26:42
  Mark Hays: Nuclear, we're seeing the same thing.
• 26:43
  Mark Hays: But to your point, I do think there is messaging that is genuine around how AI ultimately could drive down costs, um, in which case there might be a larger acceptance around some of these areas.
• 26:54
  Kathleen Biggins: Just talking about topical things.
• 26:55
  Kathleen Biggins: One of the other things that is really top of mind in 2026 is the conflict in Iran.
• 27:00
  Kathleen Biggins: And that obviously is leading to energy shortfalls around the world.
• 27:06
  Mark Hays: Yes.
• 27:06
  Kathleen Biggins: We are reading over and over again that other countries are moving more aggressively to embrace clean energy technology simply because of this disruption and because how expensive the fossil fuels that they used to depend on have gotten.
• 27:20
  Kathleen Biggins: And we're seeing it in a big way in Asia.
• 27:22
  Kathleen Biggins: We're seeing it in even the Middle East.
• 27:25
  Kathleen Biggins: Are you seeing that translated into investment opportunities yet?
• 27:30
  Mark Hays: Yes, I'm seeing it in a couple ways.
• 27:31
  Mark Hays: And I and I do want to put a finer point on this.
• 27:33
  Mark Hays: I think there's a perception that only innovation and only investment capital is flowing into clean energy in Europe and Asia because of a somewhat negative uh current administration.
• 27:45
  Mark Hays: Um, there's no question that the current administration slowed down some capital flow and definitely had some cancellations of projects in the U.S.
• 27:52
  Mark Hays: There's no question.
• 27:53
  Mark Hays: I will say since the Iran conflict, I'm seeing that reverse, including in the US, because I think there's a recognition, even removing subsidies from clean energy, that we absolutely need those sources to be able to get to true energy independence as a country.
• 28:09
  Mark Hays: So I will just say that I think folks are down on the US from this area.
• 28:13
  Mark Hays: And look, I think on our end, we are being nuanced around it.
• 28:16
  Mark Hays: We're spending more time on energy storage versus solar, we're spending more time on nuclear.
• 28:20
  Mark Hays: But I will say in Europe and Asia, um, between the two, we are spending the most time in Asia.
• 28:25
  Mark Hays: Um, actually, Asia is where we're seeing most of the capital flow.
• 28:29
  Mark Hays: We're seeing a large commitment in a number of countries in Asia to really get themselves up to speed, including for reasons including foreign, you know, energy independence, but also their own AI build-outs.
• 28:40
  Mark Hays: And that's where we see the most attractive opportunities.
• 28:42
  Mark Hays: Europe, I would say we're selectively investing.
• 28:45
  Mark Hays: We are doing some nuclear energy investment.
• 28:48
  Mark Hays: Countries like Germany, who embraced nuclear, then abandoned it, is now back.
• 28:52
  Mark Hays: We're also selectively investing in natural gas technology around Europe because that has been a big shift by Europe, who previously had kind of shied away completely from natural gas.
• 29:01
  Mark Hays: I think because of a pragmatism uh type of general idea in Europe, we are seeing more opportunities there again.
• 29:08
  Kathleen Biggins: Aaron Powell So that's so interesting that you said Asia is the area you're investing in, because obviously that is the area of the world where emissions were expected to go up the most in the future.
• 29:18
  Kathleen Biggins: So that's really good news that we're seeing um countries pivot uh more quickly to some of these uh low carbon sources.
• 29:27
  Kathleen Biggins: And really they're doing it because the economics around them makes sense, right?
• 29:31
  Kathleen Biggins: And even in our own country this year, 88% of all new electricity generation coming on board is in the renewable sector.
• 29:39
  Kathleen Biggins: 88%, even with the headwinds from the federal government.
• 29:42
  Kathleen Biggins: And that's because of the economics.
• 29:44
  Kathleen Biggins: So can you talk a little bit about how you explain that economic story to your constituency, your clients?
• 29:51
  Mark Hays: We explain it kind of how we think as investors, and we say, look, we stack up coal versus uh, you know, solar versus wind versus nuclear versus natural gas, and we actually show them here's the cost of each one of these sources, removing all subsidies across the board.
• 30:07
  Mark Hays: And then we show them a second chart that adjusts for the current subsidy environment.
• 30:11
  Mark Hays: Um and right now, removing most of the subsidies from the clean side is actually the correct environment in the US.
• 30:17
  Mark Hays: We show them the same chart in the Europe, which still has subsidies in place.
• 30:20
  Mark Hays: We show them the same part in Asia, which depending on which part of Asia has subsidies as well.
• 30:23
  Mark Hays: And what I will say is with no subsidies whatsoever, it still makes the most economic sense.
• 30:28
  Mark Hays: If you're just looking at it, removing all politics to focus on solar, to focus on small modular reactors on the nuclear side, and to focus on focus on energy storage.
• 30:38
  Mark Hays: Those are the three areas that are the most compelling in the US.
• 30:41
  Mark Hays: I will admit, areas like offshore wind are not compelling currently given the policy environment.
• 30:45
  Mark Hays: They're not, right?
• 30:46
  Mark Hays: So we have to pick and choose based on that.
• 30:48
  Mark Hays: We show them the same charts in Europe, we show them the same parts in Asia.
• 30:51
  Mark Hays: Um, the other thing we do is with our clients that come to us and say, look, I really care about climate change, I want to design a portfolio that's climate aware.
• 30:58
  Mark Hays: Our job is to move away from energy and water, which are kind of the obvious ones where people say, okay, I should probably hold less soil and gas companies and more clean energy.
• 31:06
  Mark Hays: Certainly that can be part of it.
• 31:07
  Mark Hays: For us, it's our job to focus on what we call adaptation.
• 31:10
  Mark Hays: Adaptation is so underinvested.
• 31:13
  Mark Hays: Yes.
• 31:13
  Mark Hays: We've been talking so far really only about mitigation.
• 31:15
  Mark Hays: Um adaptation is the most misunderstood and underinvested area globally.
• 31:20
  Kathleen Biggins: Okay, wait, let's decide.
• 31:21
  Kathleen Biggins: So mitigation, we mean stopping putting up the greenhouse gas emissions, taking down the amount of emissions that are up there.
• 31:29
  Kathleen Biggins: Adaptation means living with the changes that have been set into motion.
• 31:33
  Mark Hays: Correct.
• 31:33
  Mark Hays: And how how do you adapt industries and sectors with a world that will be two to three degrees Celsius warmer at the lowest?
• 31:40
  Mark Hays: That's the idea.
• 31:41
  Mark Hays: And it's about looking at traditional processes that are carbon intensive and trying to understand more efficient ways to focus on those areas.
• 31:49
  Mark Hays: I'll give you a couple of examples.
• 31:50
  Mark Hays: Um a big area we're focused on is agricultural technology.
• 31:54
  Mark Hays: So this is an area where there's enormous innovation occurring on the public and private markets.
• 31:58
  Mark Hays: It's this general recognition that we're going to have less arable land, less water to support crops around the world.
• 32:05
  Mark Hays: As population continues to grow, I should know.
• 32:07
  Mark Hays: Um there are some really interesting companies that are focused on precision agricultural technology that can that can help both large-scale and small-scale farmers increase their yields, produce more with less, produce more in a more efficient way.
• 32:20
  Kathleen Biggins: So precision meaning you just irrigate small portions, that you use sensors to decide when and all of that precision.
• 32:27
  Mark Hays: And and even there's small farmer solutions that can help do this, that typically on the private side.
• 32:32
  Mark Hays: But some of the largest agricultural companies around the world, they're using enormous amount of technology to help plot by plot understand exactly where are the best areas to plant.
• 32:41
  Mark Hays: Again, AI can help here, where are the best areas to plant, what exactly is the right time to plant given the weather trends around that area.
• 32:47
  Mark Hays: You know, all the listeners will think, like, well, that would actually be really helped by AI and big data and the world's knowledge to help you get better there.
• 32:54
  Mark Hays: So agriculture was a huge area of focus.
• 32:56
  Kathleen Biggins: Aaron Powell And it's really important because we know that we are approaching heat thresholds where many of our predominant crops will start losing yield.
• 33:05
  Mark Hays: Yes, yes.
• 33:06
  Kathleen Biggins: So the the threat is coming at us quite quickly as the innovation is happening.
• 33:10
  Kathleen Biggins: So we're we're in a race, if you will.
• 33:11
  Kathleen Biggins: That's what it is, right?
• 33:12
  Mark Hays: So it's so it's about, okay, we've talked about energy a lot, right?
• 33:15
  Mark Hays: Let's talk about where there are pockets of opportunity, but let's talk about other parts of your portfolio that can be affected here where there's real innovation happening that are less susceptible to policy changes to begin with.
• 33:24
  Mark Hays: We talked about agriculture.
• 33:26
  Mark Hays: Another one is cement.
• 33:27
  Mark Hays: One of the least exciting words I could possibly say on this podcast, right?
• 33:30
  Mark Hays: But cement is 8% of global emissions.
• 33:33
  Mark Hays: Actually, some of the world's largest cement companies, if you look at any of them, um, are thinking about this.
• 33:38
  Mark Hays: They're thinking about more efficient ways, less carbon-intensive ways, more sustainable ways as a business to produce cement.
• 33:44
  Mark Hays: And there's some real innovation happening there.
• 33:46
  Mark Hays: So again, that's part of an industrials or materials part of your portfolio, but also something that you want to make sure is climate aware.
• 33:52
  Mark Hays: So, my point with all of this is it's important to shift the thinking away from less oil and gas, more clean energy.
• 33:58
  Mark Hays: Sure, that's part of it.
• 33:59
  Mark Hays: But let's think about adaptation, let's think about food and ag, let's think about cement industrials and how those companies are shifting themselves.
• 34:06
  Kathleen Biggins: Right.
• 34:07
  Kathleen Biggins: That makes a lot of sense.
• 34:08
  Kathleen Biggins: And there's a big argument for that because we have set things in motion that we will not be able to stop.
• 34:13
  Mark Hays: Yes.
• 34:13
  Kathleen Biggins: And so the faster we get ready, the less we'll lose.
• 34:16
  Kathleen Biggins: So that makes a lot of sense.
• 34:18
  Mark Hays: Yes.
• 34:19
  Kathleen Biggins: The the cost to actually adapt and to get ready and to mitigate around this issue of climate change is extraordinarily high.
• 34:29
  Kathleen Biggins: It's so high that even governments alone couldn't handle it.
• 34:34
  Kathleen Biggins: But investment could.
• 34:36
  Kathleen Biggins: Private investment, public investment around the world could.
• 34:41
  Kathleen Biggins: What how big of a role is investment as a as a category playing today, and how big a role could it play in the future?
• 34:51
  Mark Hays: Yeah, just put numbers on that.
• 34:52
  Mark Hays: Um federal balance sheets around the world are about $95 trillion.
• 34:56
  Mark Hays: Um certainly they could play a big role in this.
• 34:59
  Mark Hays: That would be enough to solve it right there, but there's a lot of priorities there um for federal governments.
• 35:03
  Mark Hays: Public and private capital markets combined is over $100 trillion.
• 35:07
  Mark Hays: It's actually a larger pool.
• 35:09
  Mark Hays: So we're nowhere close to using uh a large part of that balance sheet from a private and public capital markets perspective to solve this.
• 35:17
  Mark Hays: You mentioned some numbers earlier.
• 35:18
  Mark Hays: It's in the single digits trillions.
• 35:19
  Mark Hays: We're getting there.
• 35:20
  Mark Hays: Uh certainly there is room to grow here.
• 35:23
  Mark Hays: Um so a lot of that can be leveraged to solve this, frankly, without just a reliance on federal governments.
• 35:30
  Kathleen Biggins: And I think that's such a positive note because it it's the fact that we can use our money and still get returns, but also help make a difference on this issue.
• 35:40
  Kathleen Biggins: And I think when we think of decarbonizing our footprint, we often don't consider how our own funds and our investments are used.
• 35:49
  Kathleen Biggins: So let's go back to something you said a little while ago, which is that the companies that are really forward thinking on this are the ones that you believe will tend to give better returns that are better investments, if you will.
• 36:01
  Kathleen Biggins: Let's get to, I think, the crux of the matter.
• 36:03
  Kathleen Biggins: Many people believe that in order to do good, you have to accept lower returns.
• 36:09
  Kathleen Biggins: Is that true?
• 36:10
  Mark Hays: It can be.
• 36:11
  Mark Hays: It doesn't have to be.
• 36:12
  Mark Hays: And it hasn't been our experience around investing in this space.
• 36:15
  Mark Hays: Let's talk about climate change because that's what we've been focused on today throughout.
• 36:18
  Mark Hays: If you look at the empirical evidence, and I'm gonna use NYU as an academic institution that has put out a series of meta-studies, fancy way of saying study of studies.
• 36:28
  Mark Hays: They looked at about 2,000 studies last year that have looked at the effect on an investment portfolio of leaning in towards companies that are strong in terms of their commitments and their approach towards climate change transition, and leaning away from those that aren't.
• 36:41
  Mark Hays: And what they found is that about 70% of the time, those companies were actually positively affected from a risk return perspective and a shareholder value perspective compared to those that weren't.
• 36:52
  Mark Hays: Yes, exactly.
• 36:54
  Mark Hays: And I think that's a really important note because again, across all studies, that's the average of what they've seen.
• 37:00
  Mark Hays: Um now, again, that implies that 30% of the time you actually give up return from doing this.
• 37:06
  Mark Hays: So again, it depends exactly on your approach here that you're taking.
• 37:09
  Mark Hays: It also depends on your time horizon.
• 37:11
  Mark Hays: Our experience is this when we build climate aware portfolios for our clients over a full economic cycle, we have seen those portfolios be at least in line with those that took no climate aware tilt whatsoever.
• 37:25
  Mark Hays: So at least in line with what you have done otherwise, on average, we've seen a little bit stronger of a risk-adjusted return from doing that.
• 37:32
  Mark Hays: Now it's important to talk about our approach.
• 37:34
  Mark Hays: Our approach is one that tends to lean towards investing over divesting.
• 37:38
  Mark Hays: So if you came to me and you said, look, I want to focus on climate change and I want to exclude out all fossil fuels from my portfolio, my job would be to tell you that you probably will underperform, at least over a short term period, because you're excluding out such a wide swath in the market.
• 37:53
  Mark Hays: But if you told me that and I said, well, what if we, instead of just excluding out all companies with fossil fuels, if we picked and chose companies within each sector, including oil and gas, and we said, we're still going to invest in some oil and gas sector companies, but choose those that are leaning into this space in the most aggressive form, those that are shifting their business already to be more resilient, that are already making big investments in clean and shift away from those that aren't.
• 38:19
  Mark Hays: If you were to take that approach, which is our desired approach, that type of strategy has done quite well across market cycles.
• 38:27
  Mark Hays: And it's one that for us shows that you can invest in this way while keeping your investable universe open and still being at the forefront of innovation, including some of those really large companies that are going to be important actors here.
• 38:38
  Mark Hays: So again, I don't want people to hear this and say, oh, yeah, you'll outperform all the time by doing this.
• 38:43
  Mark Hays: You won't.
• 38:44
  Mark Hays: You could underperform depending on your approach, but if you're open to a wide variety of sectors and invest over divest approach, you absolutely can design a portfolio that can outperform.
• 38:54
  Kathleen Biggins: So I know you don't want to give any specific advice, and that's not what we're here for.
• 38:58
  Kathleen Biggins: But when you talk about the oil and gas good guys, I'd be intrigued with whom you're talking or who you are describing because I know BP kind of got out front, Shell kind of went in that direction, and then I saw them reverse.
• 39:14
  Kathleen Biggins: So are there companies out there that really are forward thinking in this arena?
• 39:19
  Kathleen Biggins: Or if so, it's not that apparent to the layperson.
• 39:22
  Mark Hays: Yeah, I think that's a good point.
• 39:24
  Mark Hays: You're right that I'm uh prohibited from talking about individual stock ideas here, but I will encourage folks to look at um oil and gas companies that are truly global in nature.
• 39:33
  Mark Hays: Look at some of the oil and gas companies that are the most prevalently focused on US, Europe, Asia, and South America.
• 39:41
  Mark Hays: Um, those companies tend to be thinking in a more nuanced way because they're truly global.
• 39:45
  Mark Hays: They're less susceptible to the crosshairs of the current regulatory environment in the US than others because they know they have to support a global business.
• 39:54
  Mark Hays: I also would note that looking beyond just the largest majors is a good approach as an investor.
• 40:00
  Mark Hays: So look beyond the six or seven largest uh, you know, oil and gas companies in the world and look one layer down because that's where you're seeing a lot more innovation occurring.
• 40:08
  Mark Hays: Again, companies that are a little more flexible and be able to do what they do.
• 40:12
  Mark Hays: Um, the third thing I'll say is when you're thinking about traditional energy companies, think about not just their stated commitments and their net zero side and things like that.
• 40:23
  Mark Hays: Look at the underlying revenue sources of the company.
• 40:26
  Mark Hays: I think it's really important.
• 40:27
  Mark Hays: And you can pull this out, especially with AI.
• 40:29
  Mark Hays: You can ask AI to say, look, give me the 20 largest oil and gas companies and show me their revenue from coal, from natural gas, from clean energy, from other.
• 40:40
  Mark Hays: And it will unpack that for you.
• 40:41
  Mark Hays: It's all publicly disclosed and say, give me the trend over the next five years and give me the trend over the last five.
• 40:48
  Mark Hays: And pretty quickly you're gonna be able to see anyone listening right now, who's on the forefront and who's not.
• 40:53
  Mark Hays: So I just would encourage folks to move away from just big headlines, what those companies are saying.
• 40:59
  Mark Hays: I would certainly move away from any sort of score that is being placed on these companies from an ESG perspective, and instead just look at their business and look at what they've done.
• 41:08
  Kathleen Biggins: So you mentioned ESG, which stands for Environmental, Social, and Governments, a moniker that was used to evaluate investments that was quite popular in the last, say, five or ten years.
• 41:19
  Kathleen Biggins: Today it's kind of disappeared.
• 41:21
  Kathleen Biggins: I feel like it's been kind of put in the closet under the stairs.
• 41:25
  Kathleen Biggins: Is that a good thing or is that something that concerns you?
• 41:28
  Mark Hays: I'm glad that we took this long to say ESG as an acronym because I've always hated the acronym.
• 41:33
  Mark Hays: The idea of it never made that much sense to me because I've been in the industry for a long time around so-called sustainable investing, and it's always been about identifying companies that have a competitive advantage because of the environmental or social problems that they're looking to solve.
• 41:49
  Mark Hays: That's always been the case of sustainable investing.
• 41:52
  Mark Hays: Suddenly, this ESG acronym came in and it jumbled together a lot of unrelated investable factors into one concept.
• 42:02
  Mark Hays: To me, it's always been a set of data that we draw from, we pick and choose from to help make investment decisions.
• 42:08
  Mark Hays: But I never really understood this idea of putting an ESG score on something or a rating because that doesn't automatically link to the economic reality.
• 42:17
  Mark Hays: Just because a company is better at an unrelated group of 30 factors doesn't mean that it's going to be a better performer than one that's not, perhaps maybe over an entire 50-year life.
• 42:27
  Mark Hays: But over a three to five year holding period, it never made much sense to me.
• 42:30
  Mark Hays: So I think the acronym was ill-designed.
• 42:33
  Mark Hays: I think that it certainly got mischaracterized as some sort of an investment approach.
• 42:37
  Mark Hays: Um, it's not.
• 42:38
  Mark Hays: And frankly, I think that there was a little bit of a boom and bust around this ESG space.
• 42:43
  Mark Hays: It's probably ultimately good for the space.
• 42:44
  Mark Hays: Um, because what I've seen is folks that jumped in at the height of so-called ESG that were putting labels on every product all of a sudden, they're gone.
• 42:54
  Mark Hays: And I think who remains is those that continue to go back to what I talked about, looking for companies that have a competitive advantage because of the environmental problem they're looking to solve.
• 43:02
  Mark Hays: That's where we're gonna win on this.
• 43:04
  Mark Hays: That's where we're gonna be able to show strong returns alongside impact.
• 43:07
  Mark Hays: That's where the space is going.
• 43:09
  Mark Hays: So ultimately, I think it's good.
• 43:10
  Mark Hays: It's a little bit smaller of a market, it's still a very large one.
• 43:13
  Kathleen Biggins: I love how you said that.
• 43:14
  Kathleen Biggins: A competitive advantage for solving a problem.
• 43:17
  Kathleen Biggins: Correct.
• 43:17
  Kathleen Biggins: That's what businesses have always done.
• 43:19
  Mark Hays: Yes, exactly.
• 43:20
  Kathleen Biggins: And we have a really big problem, but that means that there's a lot of room for a lot of great solutions.
• 43:26
  Kathleen Biggins: Yes.
• 43:27
  Kathleen Biggins: So that's a very positive spin on that.
• 43:29
  Kathleen Biggins: Mark, we've covered so much, and yet there's so much more to talk about.
• 43:34
  Kathleen Biggins: But let's finish off by a very simple question.
• 43:38
  Kathleen Biggins: What is it that gives you the most concern looking forward around this topic?
• 43:42
  Kathleen Biggins: And what is it that gives you the most hope?
• 43:45
  Mark Hays: I am concerned that corporates, investors, uh stakeholders, citizens are going to wait for a really large catastrophe to actually take action in a timely way.
• 43:58
  Mark Hays: I see each time there's the wildfires we saw uh last year, a terrible hurricane, uh, a flood.
• 44:06
  Mark Hays: Each time one of those things happen, I see a groundswell of policy actors talking about how we need to do more.
• 44:12
  Mark Hays: And I see investors stepping up and saying we need to do this now, and then it kind of goes away and we start to think about the next thing.
• 44:19
  Mark Hays: Um I don't want there to be more and more of these without action being taken.
• 44:23
  Mark Hays: So that could that concerns me.
• 44:24
  Kathleen Biggins: And that is human nature.
• 44:25
  Kathleen Biggins: And then we also don't think it can happen to us.
• 44:28
  Mark Hays: Right.
• 44:28
  Mark Hays: Right.
• 44:29
  Mark Hays: And I think uh more and more of us are being affected by this.
• 44:32
  Mark Hays: Again, we saw the wildfires in in LA, and a lot of us knew people that were affected there.
• 44:37
  Mark Hays: Um it's no longer a distant melting iceberg with a polar bear.
• 44:41
  Mark Hays: Um, it's actually happening to us.
• 44:43
  Mark Hays: And I don't want there to be too many more of these before real action is taken.
• 44:48
  Mark Hays: Um what gives me hope is frankly the next generation.
• 44:52
  Mark Hays: I spend a good amount of time working with clients that are part of the next generation or part of large families or foundations that have an increasing voice.
• 45:01
  Mark Hays: I'm hearing from them they want to take action.
• 45:03
  Mark Hays: I also spend part of my time teaching courses at a couple of different universities, including here in Philadelphia at the University of Pennsylvania.
• 45:09
  Mark Hays: I just got done spending a couple of days with five different cohorts of students, and they are so far up to speed, so much farther up to speed than I was at that age, and so much more passionate about this, and really focused on doing more as investors, as professionals around this space.
• 45:28
  Mark Hays: So that gives me hope to see such a groundswell of support and urgency from the next generation that again, my my hope is with them.
• 45:35
  Kathleen Biggins: You've given our audience a lot to think about, Mark.
• 45:38
  Kathleen Biggins: Thank you so much.
• 45:39
  Kathleen Biggins: Always a pleasure.
• 45:40
  Mark Hays: Sure, great to be here.
• 45:42
  Kathleen Biggins: Thank you for joining us, and thank you to Mark Hayes for bringing his insight and expertise to this discussion at our table.
• 45:49
  Kathleen Biggins: If you'd like to learn more about sea change conversations, please look at our website, the letter C-conversations with an s dot org.
• 46:00
  Kathleen Biggins: There you can find all sorts of information about climate change.
• 46:03
  Kathleen Biggins: Please reach out.
• 46:05
  Kathleen Biggins: We'd love to take this presentation to your town as well.
• 46:09
  Kathleen Biggins: If you got something out of this, please pass it along.
• 46:13
  Kathleen Biggins: Simmer Down is produced by Hans Buto and Rebecca Fishkin.
• 46:17
  Kathleen Biggins: A special thanks to Carrie Dykman, our creative director, and to Nicole Kernan and Margaret Koval for their ongoing contributions.
• 46:26
  Kathleen Biggins: We hope you listen to our other episodes and bring the climate conversation to your kitchen table.