YouSaid · the spoken record

Wendy Cromwell

lines on the record: 84
first: 2020-06-08
most recent: 2020-06-08
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“Really very wise and can be applied to so many aspects of life. Of course, it can be applied to investing, looking for that 1%. It can be applied to your dialogue with regard to politics today. It can be applied to the way that you receive feedback from your colleagues. It can be applied to your negotiations with your teenagers. And so I'm forever grateful for him for saying that because it has made such an impression on me.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“Years ago, our former head of investment research, Phil Perlmutter, said something to me that really stuck with me. I was impressing upon him my view on something. I don't even remember what the topic was. And he said to me, well, you know, Wendy, the truth is always somewhere in the middle. And of course, I was really annoyed with him at the time because clearly my truth was the right truth. And why didn't he just take my perspective? But over time, the wisdom of that statement has really grown on me and what he really meant by that is, you know, no one person sees the whole picture. Everybody has pieces of the picture, so no one person is 100% right or 100% wrong. There are grains of truth in everyone's perspective. So looking for even the percent grain of truth in what the other person is saying can be really productive. And that's where the truth lies in the middle, somewhere in the middle. And if you think about that, it's really...”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“And the value of it. And so if you bring those two kind of learnings together, I think that's really informed who I am as both an investor and a person.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“My parents were both educators. My father was a statistics and quantitative methods professor and my mother was an early childhood educator and most of her career that was at an inner city school. So this appreciation for learning definitely from both of them. And then from my dad, this concept of how important math and statistics can be to problem solving was definitely instilled in an early age and also the fact that I am good at math and statistics. That wasn't a choice, which is actually a great gift to give to a child for them to believe that they're good at math and statistics. That would be from him and also this drive at excellence along those dimensions. And then from my mom, because of her work in these inner city schools, this incredible broad mind of understanding different perspectives and different backgrounds and just having a real empathy for all of them.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“I've been in the asset management industry, and in fact, I've been at Wellington for 24 years, and I feel like my whole work is just self-growth. I feel like I get paid to learn and every day is fascinating. And so asking tons of questions, engaging with people who have different areas of expertise, learning from our clients. We mentioned all of this variation, geography by geography and client type by client type. There's just so much richness in that that I feel like by getting up and going to work and exploring these topics, it's my favorite form of self-growth.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“Speak to sustainable investment particularly, where either people think they know what it is, but they haven't fully explored the space, or they try to make it rules-based. And so not handling the information with the rigor and robustness and nuance it deserves, I think is an investment pet peeve of mine.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“Now, you have to remember that we have been in lockdown or quarantined as a family. And I have to give my family credit. I've got two teenagers, a 17 year old and a 13 year old, and my husband, and everybody has been getting along great and everybody's been pitching in and doing the dishes and walking the dog, et cetera. So take this for what it is. It's a small pet peeve in this environment. But do you remember the far side cartoon where there's a guy and he's looking in the refrigerator and the refrigerator is full of butter? It just says butter, butter, butter, butter, butter, butter, butter. And he's looking over his shoulder and he says, hun, where's the butter? I see that happening in my household with all three of my family members. I'm the designated looker. You know, it could be right in front of them, but it's mom, where are my socks kind of thing? And so it's a relatively small penalty for what has otherwise been a good time together.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“Some of it is just the way that people communicate. And again, I may be over extrapolating, but I find these parallels in the God of Small Things, the language and the way that it's written to me is pretty intricate. And I find communication in India to have that same intricate nature to it, those types of lessons, or the language in brothers is pretty vivid. And so I find there's some parallels in the communication style in China as well. So those are the parallels.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“In the case of India, also pretty informative for this earth of mankind, which is maybe more controversial about Indonesia. Just reading a novel in the voice of someone from that place, I find that very enjoyable.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, for work and personally, prior to the COVID crisis, a travel affair amount. And of course, when I'm traveling to prepare for those meetings, I read a lot of research and I look at the economic data and I read history. But one of my favorite practices and hobbies, I guess I would say, is to read a novel of a local author. And I've really come across some interesting authors and works via this practice. And I think it at least I may be overestimating it, but to me, it certainly adds to my enjoyment of the trip. And I think it adds to the richness of my understanding in some cases. And so I would highlight an author, a Chinese author, Yua, who wrote Brothers, which is a wonderful novel and another wonderful novel to live, which I think really has the way, the writing itself, I think, is informative and the subject matter addressed is informative for the God of Small.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“Of evolution over the last year and a lot of momentum over the last year and this big inflection point. And certainly I'm talking about geographies as if everyone is the same and that's not the case. But it's in aggregate how I've observed the evolution and everybody kind of rapidly moving through that curve.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“In the sustainable investment concept, you have more of the market adopting these practices. And so what I see is that all geography seem to be traveling along this curve. And then some countries started earlier. So in that innovator category, you really do see the Nordics and the Dutch and in the early adopters, you see Europe and UK and then early majority. You see Canada and Australia, which is really interesting given their economies and the real asset base of their economies, how much they've embraced some of these concepts. And then you start to get into Japan really starting to, from a top down perspective, starting to embrace this to a greater extent and even in some ways China, I put the US, and maybe I do this provocatively. So I put the US as a laggard in this category with a lot.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“You think back to school, you'll probably remember this concept of the product adoption curve. And I use this sometimes internally to describe what I see happening, but I apply that product option curve to sustainable investment practices and geographies. So just as a quick reminder, the product adoption curve is like you have people who adopt new technologies or new products at different rates. So UTED might have bought the iPhone one and so you were an innovator, an early adopter, and I might have bought the iPhone X as my first iPhone. And so I'm in the late majority or the laggard category. And so applying that concept, and of course, as you move through that curve and you have innovators and early adopters and early majority and late majority and laggards and so forth, you have more and more of the market in the product concept. You have more market share.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“Circle back to where we started at the beginning when you were on the client side. So as you're now talking to a wide range of client types about all of these sustainability investing initiatives, where are we in that trajectory of interest and who are the early adopters?”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“Engaging with a lot of different managers, then their questions get richer and more nuanced over time. And again, it just pushes people on this dimension.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“Europe is very active and hard to keep up with, I will say. And some of it is by country and some of it is at the EU level. And we see similar activity in Australia, for example, and in Canada, less so in the US. You may see some state by state. We've seen some state by state. But this idea of embracing this information as a part of your fiduciary duty, not leaving it out of your investor toolkit, is really, I think, coming to the fore across all of those. It takes different shape and form in different countries, but across all of those, you see some element of that coming into play, which I think really starts to get asset owners asking more precise questions. We're early days in some markets of this. But once they see the variability and the answers to those questions because they have the benefit of”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“In addition to serve that research with Woods Hole, which is very focused on climate, there's a lot of the climate and maybe even some of the social considerations as it relates to labor that relates to eventually regulation. What have you seen happening from the regulatory level on some of these major shifts?”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“Or attracting value is going to be really hard, right? It's a forward-looking concept. So sometimes that can be hard to translate to a pure want strategy, but there are other concepts that translate really well in terms of CEO compensation or thinking about other quantitors, but not all of them will be able to be applied as readily via quant lens.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“Your consumer company or not, that that's going to be good for value over time. The companies that you buy and the way that you apply the information, I used that example before do you buy the best in class or do you buy the bad getting better, that can differ. But I think it's really hard to find a strategy where you're not including some of this information already in your investment process as a decision-making tool. Now I'll say I personally find it trickier and harder to do in quant strategies or systematic strategies, which we have a big book of business that's in systematic strategies as well. Systematic investors are inherently empiricist. And so they're looking for evidence in backward-looking data of value creation. Now, trying to apply physical climate risk and look for historical evidence of physical climate risk generated.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“Funny because a lot of this is good investment information. And so I think that when someone asked me that question, like maybe it doesn't apply to a batik, I was like, okay, so capital allocation, which is a key governance principle, doesn't apply to our investment boutiques. Of course it does, right? Good capital allocation is good capital allocation or understanding the incentive structure. So all of the governance things, the incentive structure of a management team and whether they're incentivized in the way that you think is aligned with your investment thesis or not, it's really important. So the Gs are pretty easy to get to. And then when you start to get to ask it's things like understanding the supply chain and if there's going to be supply chain disruptions or product quality and safety, I think you'd have a hard time finding any investor who thought that it was a really great idea to have poor product quality.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“In the structure of the organization that you described where you have 50 boutiques, how do you think about the sustainable investing lens on those boutiques that either by strategy or industry they're just much less focused on some of the core concepts we've been talking about?”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“Do you necessarily subscribe to, nor does it interact with your investment thesis and you're applying it? So when that doesn't work, how do you defend it? How do you stick with it? How do you articulate and add value over time or in any way, shape or form, financially or otherwise? If it hasn't been embedded and it is an intrinsic. So I do worry about that, that there's been a lot of new concepts introduced and a lot of approaches and that they'll all some will be higher integrity and some will be less high integrity and that maybe some of those that don't work out, you'll start to see articles about, oh, this whole thing doesn't work because these that were labeled this way didn't play out as expected. But of course, investment strategies overall, some will do well and some will do poorly. So trying to paint the whole space with a monolithic lens I think would be a mistake.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“I will say that because it's a new and evolving space, people are tackling it differently. And in some cases, because there's so much interest from the client side of things, you will see some investors clamoring to meet that interest. And maybe you'll see what I would think less high integrity offering where you take a vendor score and you say, I'm going to apply that to my process and I'm not going to buy fours and fives. And that'll be my ESG version of whatever portfolio I manage. And the reason I think that's problematic is it's not intrinsic to the investment thesis to the investor himself or herself. And I just think that that whole process makes it less sustainable over time and less likely to generate good outcomes of any type over time because you're taking this external view that you did not generate nor”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“Is in the divestment conversation. And there's been a real sea change here where you heard more about engagement over divestment, less engage with these companies. And I don't think engagement is dead. Like I think we're going to need to have some of these companies exist and transition just because of the amount of capital there. But I've just noticed, and I would say maybe in the last three or four months, more of a willingness for mainstream asset owners to consider the case of divestment over some period of time from the oil and gas industry in particular. And that's the change too. And I think that'll have a feedback loop into pricing that should be considered as well.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“A more rapid energy transition than we had been anticipating. Because as you have more and more capital focusing on the largest emitters in their portfolio and wanting to reduce their emissions overall, you start to find that by making small changes, you can reduce your carbon footprint by 20 or 30 percent with a 50 basis point change in tracking risk. So it seems like a relatively small change in tracking risk or volatility versus some benchmark for a relatively big change in carbon that's usually attributable to just a few securities in the portfolio. And so one of the pieces of research that we've started to do is understanding is there a cycle there where it starts to really affect the pricing of those securities. The other thing that I've seen more willingness to engage in more recently”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“On the climate side of things, I focused a lot so far in our discussion on physical climate risk I alluded to transition risk as well. And I want to spend a little bit of time on that because one of the things that I see picking up across the globe, not so much in the US, but definitely in Australia and Canada and Europe is this concept of carbon footprinting. And so carbon footprinting is the act of looking at what you hold as an asset owner in terms of securities and what the emissions of those securities are and trying to understand your own carbon footprint. And then once you have a handle on that, which is imprecise, of course, but once you have a handle on that baseline, the instinct for most investors is how do I get that to be lower? And interestingly, I think that act in and of itself may facilitate”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“Have this morning investment meeting every morning where all investors across the globe come together and it's a moderated discussion. It's not a dictated discussion, if you will. So anyone can submit, we call it submitting cards, even though now it's all electronic. It has been for years, but in the old days in the 60s, when we started this process, you actually submitted a.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“Be the same, and what is the right answer here? And of course, there isn't a right answer. It's like, what is the answer? And then I'll try to figure out whether that's going to be sustainable over time. So it's been a fascinating time to engage with companies. And there have been a variety of responses across the board and some that we would deem to be better from a long-term value standpoint and some that we would deem to be less high integrity.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“Think engagement is imperative, and you learn a lot about a company, not only about their social practices, but about their culture and their leadership style in a crisis. And so their reaction to this crisis and what they're doing, I think, informs our investors about whether or not those companies are actually aligned with their investment philosophy. And I said we've done 3,100 meetings with company management teams. during the first nine weeks of quarantine, all of those have been designed to really explore what are you doing in this environment? How is it impacting you? And sometimes there are these tricky questions because you're asking you, how has it impacted your cost structure? And the company's trying to figure out, do I say that it's become more expensive because I need to vacant social distancing in my plants or do I try to say that my margins are going to”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“Which had been relatively maybe underserved in aggregate has really come to the fore. And trying to understand these social practices, whether it's burden sharing or labor practices or safety and security or product quality and safety, supply chains, that's all come to the fore. And so now I feel like you have this more holistic, maybe everyone isn't recognizing that they're more fully embracing all three letters, but that's what I see in the marketplace today. All three letters are coming more into the general investment dialogue in a way that's really productive.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, if you think about the progression of ESG in the marketplace early days when people started using this moniker, most investors would say something like, well, I've always focused on G, which I think is generally true. Like governance has been a focus of most investors. And so the E and the S were newer areas of emphasis across the marketplace. And then people really rapidly started to lean into understanding the E-More based on the climate change imperative and I think that will continue to be the case. That dial really turned, if you think about a volume on a stereo, if you will, I'm showing my age, that dial went from two to ten on climate in a very short period of time within 2019. Lots of intensity of interest that I think is going to have lasting repercussions in terms of pricing. But what's happened in the COVID crisis is S.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“Of climate change and to really come up with recommendations that are data driven and results oriented on how to best mitigate those risks. So taking all of that together, that's how we're trying to do more than just benefit our clients' portfolios, but really try to reshape how the economy and how regulators are thinking about climate risks.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“And the reason we think that's so important, of course, is companies make up economies and economies make up society. So the first step for us all becoming more resilient is to figure out ways to adapt at the business level and increase awareness is meant to help on that process. The other ways that we try to contribute is by speaking at conferences and immediately before we went into quarantine, I think it was March 4th, I spoke at a climate change conference at HBS. Crisco Gazen, our director of climate research, has spoken at conferences at the UN or with the S&P, trying to get that word out more broadly. And then Chris is also a very active participant committee member in the climate-related market risk subcommittee of the CFTC. And that's led by Bob Litterman. And that group is trying to proactively identify and assess financial risks.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“How demand for your products may change, how your expenditures may change based on fixed asset impairment, how your logistics and whether your supply chain will be disrupted, whether your employees or your talent will be impacted, whether there's an acquisition strategy that should be impacted by this analysis as well. So it really does give some recommendations on how to think about it. We've already seen a couple of companies take us up on this, start to use this document to think through the physical risks that their businesses face and also to provide increased disclosure on that.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“P rock, it stands for physical risks of climate change. And we use this document when we meet with companies, when we see that those companies have physical risks, at least based on the science that we're looking at. And when we've looked at their own company filings or the transcripts of their conference calls, et cetera, and we haven't seen them really acknowledging that physical risk in the public domain. So we want to sit down with them and say, here's what we see, look at this map, here's what it looks like. Are you aware? What are you doing? How are you thinking about adapting? And in some cases, they'll say, oh, yes, we're aware and we're thinking about it. And we'll ask them, do you need help? Do you need help thinking about this further? And that's what this physical risk of climate change consultation document is meant to do. I think it provides a pretty good step-by-step guide on how to think about and identify businesses' physical attributes. For example,”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“Of reasonable outcomes we could expect with regard to our emissions behavior. And when you start to look at physical risk, one of the things that you learn is no matter which of those two paths that we're on or any of the paths in between, the physical manifestations of climate risk over the next 10 to 15 years will be the same. And there are more consequential than I knew. And then maybe you know. And once your eyes are awakened to that, once you see that, you really feel compelled to share that insight more broadly because we need to adapt and we need companies to adapt. We need economies adapt. We need societies to adapt. So one of the ways that we try to help with that process is by meeting with companies. And we worked with Woods Hole and another partner, CalPur, is a large California pension plan to create a document that we refer to as.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“Ted, I'm really glad you asked that because it's a very important point. When you and I started talking about this climate research that we're doing, we talked about these two streams of climate research and climate risk. Transition risk and physical risk. And of course, our Woods Hole partnership is focused on physical risk. And one of the reasons for that is when you start to study physical risk, one of the things that you quickly learned that I was not aware of as a layperson is no matter what we do with regard to emissions. In other words, there's these RCP scenarios, representative concentration pathways that represent different paths that we can take with regard to our own emission behavior. And if we stop emitting everything today as a society, or if we continue on the same path that we're on, that basically”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“Oh, from heat, we went to drought. And that's actually kind of an interesting story too, because we were originally slated to go to hurricanes. And you'll recall the California wildfires erupted while we were starting, while we were doing the heat work. Our wildfire work did not precede that, but our investors said, wow, you know, all of these wildfires are happening. Can you focus your time and attention there next? And the order heat and drought need to come before wildfire. So we moved from heat, we reprioritized our research agenda, moved from heat to drought, then to wildfire. And of course, that was helpful in thinking about California, thinking about the response to the California wildfires, also thinking about what happened in Australia in December.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“To buy and maintain credit. We've done special projects on theme parks. So it really does on regional banks because of place-based lending. It really does translate more than you think to the security level within an investable time horizon.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“Of mispricing and what we found was Municipal bonds that have the exact same financial characteristics, so yield, credit rating, maturity date, and very different client outcomes. And that was our aha moment that if it's not priced into municipal bonds, which are place-based, have a long duration to then relatively well traded, then it's probably not priced everywhere. And you give that information to investors, and now we've got it in a desktop tool firm municipal bond team in particular and broader. And they don't have to own every municipal bond. If they've got two securities that have the same financial characteristics, why would you own the one that has the worst climate outcome? You wouldn't. And so that's how we started to use the information and we've expanded from there to reaps, to anything that has high levels of property, plant, and equipment as evidence of them being more place-based.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“There's a lot more change in this variable than we expected in a shorter time frame than we knew. I think the scientists knew that the investors didn't know that. And for example, you look at Houston and Houston will have two additional months of extreme heat days unfolding annually in the 2020 to 2029 period. And that seems like a lot to our uninitiated eyes. So once we saw that, we said, wow, I wonder if this is priced into capital markets. And part of this is imagination, right? Where would this be priced in? What's an asset that has some sort of location orientation to it that has a duration to it that's 10 years or longer? And we came up with the concept of municipal bonds. And so we overlaid that initial map, the very first map that we saw with all of the U.S. municipal bonds. And then we looked for evidence.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“Up in Louisiana, and I refer to my mother as having said it's hotter here in Louisiana than it is in Arizona because Arizona, it's a dry heat versus a wet heat. And she was actually right. There is a difference and it is more consequential when you combine the two. So once we pick that index, Woodshole goes off and they create these granular grids that are maps of different geographical areas about how this index or how this metric changes time period over time period geography by geography. And then we get together to review those maps. So the first map that we saw was one of the United States and there's a lot of variability in the heat index in the United States that unfolds through time, including in the 2020 to 2029 decade. And so we were immediately drawn to this concept of”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, we partnerships September of 2018, and I rattled off some of those variables that we wanted to think about. And there were six that we wanted to get through in the year 2019. The first one that we focused our attention on was heat. And the way that the partnership works is Woods Hull gives us a bunch of literature. They do a literature review and they say, here, Wellington, read all of this so that we have more of a basis for our questions. And then we get together and we say, these are the types of capital markets questions we think we want to answer. And then based on those questions, the scientists help us pick a metric that's going to inform our view. So in the case of heat, we picked a metric that was the combination of temperature and humidity called the heat index because of its impact on the human body, being more consequential than just heat alone.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“So emblematic of the need for this partnership, you've got climate scientists who are analytically rigorous and so thoughtful but know very little about capital markets and then investors who know a lot about capital markets and very little about RCP scenarios or climate science. So bringing those two together has been very impactful and an area of interest by our clients.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“Of those emissions over time. And it can affect any company's value. So how much And not very many people were focused on physical risk. And so we decided to spend a lot of time, attention resources, partnering with a science organization, Woods Hole Research Center, to really understand those physical climate risks, the ones that I just mentioned, heat drought, wildfire, hurricanes, floods, access to water, and their implications on capital markets. And this has been a hand-in-glove partnership where we're trying to bridge the divide between climate science and investing. I think I told you earlier, Ted, when we were chatting about this conversation we had early on with Phil Duffy, who's the head of a research center. And I think it's just so emblematic of that divide. We sat down and said, we want to understand the implications of these physical climate risks and basis points. And Phil, who is brilliant, said, what's a basis point? And to us, that was just.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“See a lot of burgeoning interest in public securities impact investing. And I think it's because it's such a new field. And we were one of the first to offer a strategy in that area. There's been a ton of interest in that. There's also a lot of interest in our climate work. Another one of the inefficiencies that we observed in the space was this concept that a lot of people have been focused on climate. And within climate research, there's two main threads. One is transition risk and the other is physical risk. And transition risk is focused on carbon and mitigating emissions and whether or not we'll see policies or a carbon dividend or a carbon tax or changes in consumer preferences. So when you think about transition risk, think all about carbon and who emits which companies emit. But there's this other category and area of research that's physical risk, which is the result.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“And then we, of course, had a lot of physical climate risk events. And so for people who thought that climate change was too far away to matter, their base assumption started to erode when they started to see some of these implications and some of the data on having had hottest 18 years having been in this most recent timeframe or the wildfires in California and then 40 million acres burned in Australia, their assumptions were challenged about this is 30 years away this is going to impact a security that I own today or within my investment time horizon and I need to think about that more.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“You have to consider ESG considerations as part of your fiduciary duty or some version of that, then the asset owners push the asset managers and the asset managers push the companies who then have to change their practices in some way, shape or form to become more sustainable and resilient. And so we saw that unfolding through regulation and continuing to unfold through regulation throughout Europe country by country and also in the EU overall.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“Usually, people ask me what caused the interest in sustainability, and I say it's the interest in climate. But you asked a different question, which is why did climate interest accelerate last year? And I think there were a lot of studies that were scientifically rigorous and well-vetted that came out from groups that were deemed to be that really captured a lot of attention. I think that was one thing. I think there has been more regulatory focus, in particular in the EU, which has captured a lot of attention and demanded that asset owners think about this. And so the EU has been really fascinating because they have captured this belief that capital markets can be a force for change, which is, I believe, very, very true. And so then they have this concept of if we target the asset owners, if we regulate the asset owners and we say,”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“As you filter that into what you're offering to clients, I'd love to talk some about the trajectory of sustainable investing. Maybe the place to start is the interest in climate accelerating last year.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source