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

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“There are other large managers out there, of course. We happen to be one of the largest active managers in our engagements with companies. We do say instead of saying something like, we're going to own you whether we love you or hate you, and we're going to try to influence you via our proxy voting and our stewardship. We say, listen, we would really like to own you, but we're really only going to own you if we love you. And so why are you doing this and not that? We see this best practice over here. Why couldn't you implement it? And we find that to be a pretty productive conversation 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
“The other thing that I think really benefits us in this area is this concept of access. I mentioned before that we're a large asset manager. We manage a trillion dollars in assets under management. And this is terrific in terms of being able to get access to company management. And so we think of that as a way. We have to make sure that we're using that advantage to advantage our clients and to be able to add value. And then last but not least.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“So often these CEOs are on equity roadshows and they do have a message, a script, if you will, by adding in this kind of differentiated perspective, ESG and credit and equity all at the same time, you just get to more of a dialogue. It's not a gotcha. It's just really trying to understand the company more holistically. And so we think there's a lot of power in that triangulation and that multidisciplinary approach.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yes, we have a central research team, our global industry research team. And in that, we have equity investors that we refer to as global industry analysts, GIAs, credit analyst, and ESG analyst. And they're all organized by sector. And one of the things that we do is we bring those investors together to triangulate on the value of a security. So for example, what does that look like? When a company comes in to meet with us, we'll have all three of those perspectives often in the room. And we'll tell the CEO or the chair of the board or whomever we're meeting with that that's the case because we don't want them to feel caught off guard, that they're going to get a fixed income question and an equity roadshow or something like that. So we'll tell them you're going to have multiple perspectives in the room and set them up for that in advance. And the thing that we find that's helpful about that is”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“The bad companies and work on getting them better, then that would accrue benefits to the second team, the one that focuses on inflection points, and erode the value of the team that focuses on compounders. And so the way for me, the way that this is most sustainable, sustainable investment is most sustainable, is by having it intrinsic to the investment philosophy itself and owned by the investment team themselves, not externally imposed in some way. From a criteria standpoint, that's our criteria is that you need to have a genuine, incredible articulation of how you embed this into your investment philosophy, but we don't prescribe what that is. We do evaluate it. We give you feedback on”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“But it also means that those investment philosophies differ in the inefficiencies that they see differ. And so when I was talking about those two strategies, one team that was focused on these compounders and the other team that was focused on these improvers, if you will, we want that to be the case across all of our strategies where the ESG integration is genuine, incredible and intrinsic to the investment philosophy, not something that's externally imposed. So if you think again about those two examples, if I were making the judgments for our firm top down and I said, okay, everybody, let's buy best in class compounders, then that would totally accrue benefits to the clients of the first team and erode the value proposition of the second team. And so then if I said, no, no, no, never mind. Let's really focus on”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“Model because it attracts this type of investor who wants to own their outcomes, who have these strongly held investment beliefs. They want to align with their clients in terms of the outcomes that they're achieving and be held accountable.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“So to answer that question, I think it probably helps to have some context for who Wellington is as an organization. We're a large global asset manager. We manage about a trillion dollars in assets under management for clients across the world and across public securities primarily, but we also have a few private markets funds. And we're a privately held firm and importantly to our business model, we have this orientation of no CIO, which means we don't have a single decision maker that everyone is feeding the insights to. Instead, we have this concept of having a community of investment boutiques where we have 50 plus investment boutiques in each of those boutiques has a decision maker that has a strongly held investment philosophy and process. And the reason I highlight that is we like the”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“That could be misundied and not well valued. So you can see looking through a different lens can give you a different endpoint in terms of valuation.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“In and of itself as an impact proposition in our minds. So it just helps you to kind of change the lens in the company and establish a different viewpoint. When I talk about these companies being misunderstood, sometimes people ask for examples. And so I go back in time. And this example, I think, would be pretty well understood today. But early on, thinking about an emerging markets telecom company and the telecom analysts thinking about the voice and data prospects of that company and then us looking at that company more for its ability to enhance financial inclusion in emerging markets. And so that allowed us to have a differentiated value on the company itself. And that to some extent extends to today, you've got mobile money and that's better understood in terms of financial inclusion. But they've now moved into mobile credit. And I think we think.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“Because you're thinking about them in a way that isn't common. And to me, good investing in good investors do this very well, right? They identify something, an area of the market that's changing or that's misunderstood, that isn't well followed. In fact, I think fits that criteria. And then they look at companies or their potential investments through a different lens, again, impact fits that criteria as well. So on the equity side, identifying the universe was a major inefficiency. And then on the bond side, there's actually companies who are issuing green bonds or in some cases impact bonds. And of varying quality. And it doesn't really acknowledge some of the municipal securities that would qualify as impact securities or some of the corporates who are issuing bonds that aren't, quote, green bonds, but their business proposition.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“Mentioned earlier that team about seven or eight years ago, we started to develop this concept of trying to translate best practices from private market impact investing to public market impact investing. And I do think that there is an inefficiency there in that this concept of impact investing hasn't really existed in public markets. So it's almost like the ultimate inefficiency. There's not a universe that's predefined of impact stocks that you can choose from or impact bonds that you can choose from. You have to identify those yourself. And the act of doing that means that you're looking at these companies in a different way than the rest of the market. You're identifying impact companies. They haven't been pre-identified by someone else. So just analyzing whether they're valid for inclusion in the universe is the first step in the innovation.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“Describe to you that I stole from GPIF the large Japanese asset owner where they took two of their ratings providers and they plotted in a graph the ratings of each of the underlying companies they hold. And so if you compare those ratings and if those two ratings providers agreed 100% you would see a 45 degree line from the bottom to the top right hand side of the graph And when you look at this graph, it really looks more like confetti at a party. There's dots everywhere, which is a very visual way of saying these vendors don't agree on their assessments of the companies. And so some people will look at that and they'll say, well, then ESG is nonsense. If these vendors don't agree that these companies are good or bad or whatever, then it's nonsense. And we as an active manager look at that and say, wow, what a market inefficiency.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“So I like to highlight these two kind of side by side because they're very different approaches and I think they're both high integrity ways to think about ESG. And so this actually gets at this concept of, in my view, there isn't one way to adopt ESG integration, that there should be multiple ways and it should be intrinsic to your investment philosophy. So I wanted to highlight another inefficiency, which is this idea that the third party ratings providers are doing a great service. They're uncovering a lot of data. They're providing a lot of information to the marketplace, but that they're very inconsistent with each other. And I think that that will remain over time. People sometimes wonder if they'll converge like the credit rating agencies have converged, but I don't think that's the case because they're fundamentally often measuring different things or placing emphasis on things in different ways. But there's this great slide that I like to use in client presentations that I'll”
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 certainly an element of that, and I think we're actually starting to see that play out right now in this environment. There is also this thesis that good corporate stewardship really isn't well understood and that the potential to have good corporate stewardship can build loyalty and commitment. It can make your business stronger and more durable. It can lower your cost of capital, which allows you to reinvest in your business and sustain those profits over time, creating a flywheel effect. And that people just aren't as focused on that as they could be because of this short termism. Those benefits tend to accrue in a compounded way over time. And if you're focused on less than 11 months, what's going to happen? You're not focused 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
“And what they found was those funds from 1994 that had high active share. They were very different from the benchmark. And they had high fund duration. They had long holding periods. They significantly outperformed. So at the same time, you're witnessing this drop in the average holding period for stocks. You're actually also witnessing this potential to outperform by taking a different view. And so that's an inefficiency that we see in the market that some of our strategies try to take advantage of by extending their time horizon to 10 years by investing in high relative return on capital companies, by looking at their stewardship philosophy and whether or not they're going to be able to sustain that high relative return on capital over time by implementing good stewardship practices. So that would be one example.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“in terms of when the proxies are voted. So it really does change your behavior and it makes it a little bit more speculative in our view than investing. And at the same time, we noticed some research by some professors at Notre Dame and Reckers where they did a study of US investment funds and they looked at these funds and they divided them up based on their characteristics. And the two characteristics that they used to divide them up were active share, meaning how different are the holdings from the benchmark called fund duration, which is unfortunate because that's usually a fixed income term, but they mean holding period. It's pretty clear in the paper. And whether you have a long holding period or short holding period.”
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 tons. I'll give you two that are really focused on the ESG dimension. This concept that the market is overly focused on short-term growth. And we've actually found some support for that in data and research. There's a piece by the World Bank that shows that the average holding period for stocks globally has fallen from over three years back in the late 70s to less than one year today. And so there's been this real shift in market participants and their time horizon. And if you think about what that implies, that means that if you are an investor today and the average holding period is less than one year, why would you ask a company management team about long-term strategy? You don't really care what their long-term strategy is. You'd be more focused on the quarter. Why would you consider their proxies in trying to influence them that way? You may not even be around.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“Actually, a lot of inefficiencies created in this rapid change that you can take advantage of as an investor, and it's a great way to add value. And in certain cases, to have impact in other ways.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“Portfolios at Wellington have what we believe is a credible and well-articulated investment philosophy and process across our entire platform. We think that this is the key to success and the key to adding value in client portfolios. And that investment philosophy statement has to answer three questions. What market inefficiencies do you see? Because inherently if you're an active manager, you think that markets aren't efficient, that you can beat them. Why does that inefficiency exist and how are you going to take advantage of that inefficiency? And we apply that same principle of investment philosophy and process to all of our strategies, including those that have a sustainable investment lens. And in many cases, because sustainable investment is rapidly evolving and changing and misunderstood and the definitions aren't well known and the data isn't great, we think that there's”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I might switch your question up a little bit because the most common question that I get from clients is does sustainable investment add value, which is a version of what you're asking. And I often refer to that as a trick question because that suggests that monolithic and is one thing. What that means is that by looking through a sustainable investment lens, we think that we can add more value. We think this is a unique perspective that leads to differentiated insights. And so therefore, it's non-concessionary and we can be benchmarks by doing so. So the reason it's a trick question is there isn't an answer to that. It depends on your portfolio construction investment philosophy and process.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“Of these concepts can intersect with each other, so they're not mutually exclusive. And certainly you would want your impact portfolio to have ESG integration. You would want your impact portfolio to include acknowledgement of the UN Sustainable Development Goals, which is another form of investing SDG, investing. So they're not mutually exclusive necessarily, but they don't all just because you're an SDG strategy, which means you're investing in one of these United Nations Sustainable Development Goals that they've defined a need to meet by 2030 doesn't necessarily mean that you're doing that with an impact orientation to it. So they can intersect, but they don't always.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“Find them to be undercovered from a market standpoint and misunderstood because people aren't looking at the thesis through an impact lens.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“Moving on from there, a category of sustainable investment is also thematic investing, which is pretty self-explanatory. It's as it sounds investing in a specific theme like climate change or water or gender lens or emerging markets development. And then I'll pause for a second on this concept of impact investing that really started in private market space, but we've tried to translate it to public markets so that more people can have access. You can get more capital moving in this direction. We call it democratizing access to impact investing. But for us, what that means is investing in companies whose core goods and services are targeting one of these worlds pressing problems. And we're doing that in a way that we think we can beat benchmarks because we think these companies are very good companies. They're targeting world pressing problems. There's a need. And so therefore they can grow alongside that need. And we also”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“Alongside ESG integration, a concept that people refer to as engagement. And engagement really means meeting with companies, company management teams, sometimes policymakers, and sitting down with them and trying to understand their strategy, trying to perhaps in some cases offer best practices that you've seen in other places and influence that strategy for better outcomes. So that's something as an active manager that we do quite a bit of. I actually touched base with our team internally. When I touch base with them, I learned that we did 3,100 meetings with company management teams during the first nine weeks of quarantine, which was about mid-March in Boston. So it's been a great time to engage with companies and obviously their strategy in this moment is really important.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“Environmental, social, and governance considerations. I think sometimes there's a misperception that that needs to be values-based in terms of your evaluation of those things. In our view, we're trying to understand companies holistically. And invariably, what they do in terms of their water efficiency is going to affect their operating cost or how they treat their employees is going to affect their employee retention and therefore their cost. And so trying to understand companies holistically, including these characteristics is really, really important to us to making investment decisions and having different insights.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“What we found is those same people can find much more alignment on what they do want to invest in. And so if I say to them interested in investing in companies who are whose core goods and services are solving the world's most pressing problems, and therefore they've got these great growth trajectories, and we think that they're mispriced because they're not well understood, all of those people who have argued about what they didn't want to invest in can say, hey, that sounds like a really interesting idea. Let's follow that. Or if I say, are you interested in investing in companies with high relative return on capital that have best in class stewardship that compounds that capital over time? I'll say, oh, tell me more about that. So instead of talking about what you're not going to invest in, talking about what you are going to invest in and why, I feel like that's been a really progressive and important evolution in the space. ESG integration, ESG, of course, refers to”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“The opportunity set by what you don't want to invest in, thinking about what you do want to invest in and why. So this concept of exclusions was a little bit limiting in terms of the number of people and the types of investors who could get involved because obviously many investors, asset owners, have a wide variety of beneficiaries that have had different experiences and have different preferences and thought processes. So they would spend a lot of time arguing about what they didn't want to invest in and ultimately go round and round in circles and not make progress. So that was a little bit of a limiting feature. Plus it wasn't that motivating talking about let's invest in this universe except for these things without some rationale wasn't that motivational and it didn't express the investment outcome that you were seeking. Now if you take those same people who've argued over and over again about didn't want to invest in”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“I'm going to use the definitions that we use, but I think one of the things that you will observe throughout your whole series on sustainable investment is that it is a rapidly evolving space, which makes it a really exciting space because there's so much to explore, there's new research to do, there's new avenues to pursue, but it can also be a confusing space because people are using similar terms differently and there can be some misperception. So I'll walk you through how we think about it. And sustainable investment for us is the umbrella term that is encompassing all of these various aspects of investing. Really, the space God's start in negative screens or exclusionary portfolios where you're screening out something you don't want to invest in. And that still can play a role, but one of the observations I have is the most productive evolution in the space has been instead of defining”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“Foundations. And that was really, I think I was drawn to them because of their progressive thinking on investment policy. And from there that work within and understanding investment policy considerations led to more work on investment policy and research and asset allocation and development of a multi-asset philosophy and managing money and establishing a group within Wellington.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“I went to business school at Vanderbilt and coming straight out of business school, I joined Welling about a year after and my entree into the field was actually on the client side. And on the client side, I joined in our institutional client services group. And one of the things that I originally observed was that we were, this was back in the mid-90s, we were organized more geographically and I wrote a proposal at that time to organize more by client type because I thought if we really understood the problems that the clients are clients have, that we'd be better able to put investments against them and come up with creative solutions to their problems. And the head of the group at the time really liked that. And based on the fact that I'd written that proposal, he allowed me to kind of pick what client type I wanted to focus on. And I focused on endowments.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, you know, I had this great conversation with Gin a while back, and she had such a fascinating background. You're going to have to just take me back into how you first got interested in investing in the first place.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“Okay, great. Well, I have been in the asset management industry for almost 25 years now, and much of my career has been spent on the investment side and most recently leading our multi-asset business. And about two, two and a half years ago, in speaking with our CEO, we noticed a lot of sustainable investment content coming up from the bottom up with our investors and others at Wellington, including some from within my former team where we were focused on impact investing. And we thought that we needed to knit all of that together and really put some strategy and resources behind it in a different way than we had already. And he asked me to lead this initiative because inherently sustainable investment crosses all asset classes and because I had this inherent interest based on the work we had done on impact investing in public markets.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source
“My guest on the first episode of Sustainable Investing, The Next Frontier, is Wendy Cromwell, Vice Chair of Wellington Management and the Director of Sustainable Investment at the firm. She joined Wellington out of business school twenty five years ago and has been there ever since. A year and a half ago, Wendy also became one of two asset managers on the 10-person board of the UN PRI, or United Nations-supported principles for responsible investment. PRI is the world's leading proponent of responsible investment, canvassing two thousand five hundred signatories globally across asset owners, asset managers, and service providers. Their mission is to understand the investment implications of ESG factors and support the incorporation of those factors globally.”
2020-06-08 · Capital Allocators · Sustainable Investing 1: Wendy Cromwell – The $170 Trillion Opportunity (Capital Allocators, EP.139) · IDENTIFIED FROM THE TRANSCRIPT · source