Sustainable investing | Guest expert Kate Temby

Maddy Guest: [00:01:11] Hello And welcome to another episode of your income company, a podcast for like minded people who want to learn to make smart investment decisions. I'm Maddy and as always, I'm here with my good friend Sophie. [00:01:22][11.5]

Sophie Dicker: [00:01:23] Hello, Maddie. We have a highly requested topic that we're covering today, so I am very excited. But before we start today's episode, we would like to acknowledge and pay respects the wonder people of the Korean nation who are the traditional owners of this land. We pay our deepest respects to the elders past and present and to the next generation who we hope to create a different future for. So Mad's sustainability, I swear to God, that is the one that's being fought about the most. I know it's been I requested, highly requested among the community, which is awesome because it's great to say that this is on everyone's mind. [00:02:01][37.4]

Maddy Guest: [00:02:01] Exactly. And it's you know, it's not just our listeners minds. It's on consumers, companies and governments. Everyone is talking about sustainability and everyone is talking about moving towards sustainable solutions. [00:02:12][10.7]

Sophie Dicker: [00:02:13] Yeah, well, I think especially coming off 2020 in Australia. You know, it was such a topic of conversation because we had the bushfires early on in the year and then we had the floods pretty soon after that, followed by covid. So, you know, all these extreme events and extreme weather events, it's really sort of shifting how we view things. [00:02:32][18.6]

Maddy Guest: [00:02:32] Yeah, and I think this is happening globally as well. Like I remember a couple of years ago, I went on a trip to New Zealand with uni and for the global politics. And a big conversation that we were having was around climate change. And I just remember one of the scientists was talking to us about how all these Pacific islands and all these people are having to move off these Pacific islands because of rising water levels like it was so real. And it was just like such a jarring topic. Yeah, pretty confronting. I mean, I think these kind of events are really creating a shift in sentiment in society more broadly. There's so much going on in this space, which is great to say. And, you know, sometimes it feels like we're moving a bit slowly. But I think for the environment, let's just be excited that we're moving in this in the realm of this sort of conversation. So we've seen the US reciting the Paris agreement, western China, South Korea and Japan omic net zero emissions. The UK is doing some awesome stuff. I've proposed the ban of manufacturing petrol cars by 2030, which is like that is certain. Like that's not that far away. [00:03:34][61.3]

Sophie Dicker: [00:03:34] I know. Like the electric vehicle space is seriously heating up, but cooling down or cooling down, going down the global cooling down the globe, heating up the vehicle space. We also had the G7 summit recently when they would and all the ladies were talking about climate action. And, you know, there are definitely skeptics who have said that, that they didn't achieve that much. But at least it's like on the agenda, like we've got to keep pushing for it, but at least it's on the agenda. [00:04:05][30.1]

Maddy Guest: [00:04:05] Yeah, agreed. I think one of the biggest things to think about and I guess consider what we're talking about investing in this space is in the past, a lot of businesses have been sort of reluctant to move towards more sustainable solutions because there was this perception that it would be more costly. And I sort of think that in some ways this might be true. You know, a lot of the technologies are in their infancy, which can be a lot more expensive. But I think as consumers are pivoting more and as general society is pivoting more and really demanding more from the products and services that they're engaging with, you know, we're putting a lot of pressure on businesses to pivot with them or they're going to risk losing customers. So I think it's really cool to think about sort of the power that we have as consumers, just like, you know, strong companies and governments into doing what we want in this space. [00:04:52][46.6]

Sophie Dicker: [00:04:52] I think the cool thing as well is that if you're investing in these companies that are making a change, you are helping them grow and you're putting more money towards being able to create more sustainable solutions. [00:05:05][12.3]

Maddy Guest: [00:05:06] So to help us break down this topic of sustainable investing, we are honored to welcome to the show Kate Tambe. Kate was previously a managing director at Goldman Sachs and is now a partner at Affirmative Investment Management, one of the world's first dedicated impact fixed income fund managers. Their mission is to manage fixed-income portfolios that generate positive environmental and social impacts. Amazing financial returns. It is also a conscious investment management committee member, and in 2017, Kate was a contestant on Australian Survivor season two. [00:05:41][34.6]

Maddy Guest: [00:05:41] Welcome, Kate. Thank you so much for having me. [00:05:44][2.6]

Maddy Guest: [00:05:44] Now, Kate, we always start with three questions for our guests so that people can get to know you a little bit. So firstly, do you have a morning routine? And if so, what is it? [00:05:54][10.2]

Kate Temby: [00:05:55] Oh, well, yes to that. I absolutely love the morning. And so I get up and I exercise every morning. So I have four years whether I was still going into the office or working from home. So that involves either a bit of yoga or a run or he saw some activity and then followed by a coffee. Yes. Dipoles of my day. [00:06:21][25.5]

Sophie Dicker: [00:06:22] And Kate, who or what influenced you to invest [00:06:25][2.7]

Kate Temby: [00:06:26] the really good questions? I think I've always been interested in how the world operates and in understanding that I always felt that you needed information. And very early on, my mother, I think, was part of the inspiration in so far. I recall her having to ask for her super contribution. Wow. And I was perplexed that she was employed, but she had not been paid her super. And to me it was the penny dropped that you need to know what you're entitled to, because once I then learned what super was and the power of compounding interest that you can very clearly see if you're missing out, then cumulatively then that really is a challenge. So I think that was a start. And then secondly, I am fascinated with how businesses operate. And so that is both from a Profit-Making perspective, but also what they do for their people and what they do for society. And I think that thread has just really worked through my career as I've spent 30 years around different businesses and investing. [00:07:39][72.8]

Kate Temby: [00:07:41] Well, that leads us nicely to our next question, then. If you're interested in, you know, how the world works and companies, how they work, if you could be a stock or a company, who would you be and why? [00:07:51][10.4]

Kate Temby: [00:07:52] I want to be two companies. I've decided I have a I for two reasons. I have a deep admiration for Atlassian, but three reasons. I think wholehearted founders just really do appeal to me. I think the entrepreneurial spirit and building something from nothing is it's just really inspiring. I think around Atlassian, I am also very focused on productivity. And so any tool that can be delivered to organizations to make them more productive and people who work environments more efficient. And obviously that's at the heart of what Atlassian does and then their leaders in the space of the one per cent pledge. So you may be aware that they came together with Salesforce sometime back around really seriously saying that we're going to pledge one per cent of our employee time or our product or one per cent of our profits. And finally, I'm very focused on clear communication and not being afraid of putting out targets and really telling your shareholders and stakeholders why you've achieved those targets or why you haven't. And, you know, I think Atlassian, their corporate sustainability report is just a hallmark in that regard. They both tell you what they've achieved, but most importantly, what they didn't achieve. And so it builds trust in that transparency. But I do actually have to add, I like Chobani as well, because I do love yogurt. [00:09:19][87.1]

Maddy Guest: [00:09:20] Yes, I know. [00:09:21][1.0]

Kate Temby: [00:09:22] And the idea that you can take, you know, an old fashioned way of producing yogurt at an old factory, I don't know if you know their story. You know, they bought a craft factory. They weren't really caring for their employees. They had one per cent of market share there. Now, fifty per cent of the global market share of yogurt, you know, they employed thirty per cent migrants. They're the one per cent pledge as well. Yeah. So from a product perspective, I quite like that one as well. [00:09:49][27.0]

Maddy Guest: [00:09:50] Yeah. I didn't actually know that story about Jovani. That's great to hear. [00:09:52][2.7]

Sophie Dicker: [00:09:53] It's a good one. Look it up on Google. It's a really cool story. So I have to ask before we go any further, you were a contestant on Survivor, so please can you tell us what was that like? [00:10:04][11.3]

Kate Temby: [00:10:06] Well, what it was like and how I got there was, you know, a mixed bag, actually, Maddy. So it was after I finished at Goldman Sachs, I had the summer off. And so my kids at that stage of 14 and 16 thought it would be a great idea to apply. [00:10:21][14.6]

Maddy Guest: [00:10:23] Yeah, just after all, you're working at Goldman Sachs and then all of a sudden you just need a break. But instead you go on Surviver and. [00:10:31][8.6]

Kate Temby: [00:10:31] We lived in New York for many years, so my husband and I are a big Survivor fans and he was keen to go on as well. So we both applied and I think I fit the right spot given, you know, I had that corporate background and but I got fit and it was hard work. It was hard work. It wasn't good in my life. But it's a fascinating experience and great to push your body, really push your body in both the physical and the mental. And, you know, we always wish that you I wish I was there a bit longer, but it was a great experience. [00:11:09][37.2]

Sophie Dicker: [00:11:10] Now, you worked at Goldman Sachs for 17 years, and during this time you were a founding member of the Australian Goldman Sachs Women's Executive Network Committee. Can you tell us a little bit more about why it was important for you to be a part of this network? [00:11:24][14.4]

Kate Temby: [00:11:25] So I have really strong view around diversity. It's and as we know, I think there's no organization in Australia or globally. It's not talking about diversity, but it's a really difficult topic to tackle. And so two ways that I probably three ways and that I get involved in diversity is one is just having a fulfilling and happy life in myself, being a woman who is taking part in different areas of finance, but also being happy with the balance of my life. So I think that in the first instance, secondly, really getting to know young women and helping them navigate, and that's both within the working environment, whatever firm I'm with, but externally just really helping people figure out their own path. And second and thirdly, I think it's being involved from a policy perspective. So the Goldman Sachs Women's Network was really coming together with the leaders of Goldman Sachs to figure out what to do next. And I think the biggest issue that we focused on was actually one of inclusion. So, yes, we can have all the policies that we know, but day to day, do people feel included? And so we worked a lot on that. So I think around bringing people together to talk about inclusion and what that means. So I think I see it very much sitting together as the three prongs that I could do in regards to my efforts to improve diversity. [00:12:54][89.0]

Maddy Guest: [00:12:55] Yeah, I think that's such a great point. I read on Twitter the other day. I think it was the chief diversity and inclusion officer at Netflix. And in her Twitter bio says diversity is, you know, making gender quotas, but inclusion is being asked to dance around the table or something like that, just so it really captured the point beautifully. Totally agree. Yeah. So today you are on the Investment Committee of Conscious Investment Management. So I'm wondering what led you down the path of a career in sustainable investing? [00:13:29][34.0]

Kate Temby: [00:13:30] I think it has been a path, and that's fair to say that I did not start in my 20s thinking I want to use capital to change the world. That was absolutely not my starting point. My starting point was I really want to figure out how businesses work. And, you know, as I said, deliver profit over time. I think once I worked at what delivering profit meant, I was then focused on how you care for people. So that was my time at Goldman. And I really think I thought, okay, well, I think at Goldman Sachs we're pretty good at delivering profit. That happens really at people, their business. How can we invest in our people and make people's lives better? And then people are thriving. And then once I left Goldman Sachs, I really sat back and thought, well, I've now got another 20 years of working ahead of me. So what do I want to do? And I'm not very good at recycling. My children tell me that all the time. So I'm not going to save the world through recycling. But my skills are raising capital and communicating to investors. So when I look at those skills and I sat back and this is four or five years ago thinking about how are we going to solve the problem and what are my skills. And I could say very early on that this was five years ago, that technology was already there to solve the climate challenges. We also the cost curve was coming down. You know, solar was very available. But what wasn't there was the capital. And therefore, I then the worlds collided and I was and you, Stephen Fitzgerald, who is the founder of a massive investment management. And as you said, we're a global fixed income impact manager. And he asked me to join the firm as a partner. And I could really see my role there as to talk to the investors globally here in Australia. But I do talk to investors in Europe, in the US and in Asia around. What is the world of impact investing and is it possible to deliver market returns with impact? So I come from a very conservative traditional base of investing, but I really believe we could bring those two worlds together and then from that of expanded my portfolio to be involved in conscious investment management. And they focus on property, on hard assets, but with an impact around social services, social disability, housing, some solar investments. And I'm also a board member of Net Wealth. And you could say, well, net wealth, they are a financial services platform, technology business, but they, too, are doing things that are making a better future financially for people. So it is a really nice combination now of my portfolio. And I'm a true believer that we can deliver returns with really great life for people to work as well as for the planet. And socially you [00:16:30][180.3]

Sophie Dicker: [00:16:30] can have it all. So I guess sustainable investing is very topical at the moment. It's something that our peers and our community talk about a lot. And so we wanted to know, how do you define sustainable investing? I know you also mentioned impact investing the same thing. Do they differentiate a little bit? [00:16:51][20.9]

Kate Temby: [00:16:52] I think it's it's a really good question because it's so confusing. And just to put it out there, I speak to investors both small and large, you know, large institutional investors, superannuation funds, as well as your advisors as well as your family offices. And the consistent view is it's confusing. So when you're sitting there and the. I'm confused. That is fair enough. There are some great articles out there that are very basic. And I think if we really base ourselves on the definition of sustainable investing is sort of like an umbrella. And then what comes out of that is a spectrum. So you could express your sustainable investing, your ambition to make an impact or a broader conscious way of investing through a whole different spectrum of approaches. One of them, and probably the first one that you saw was negative screening. So to say, oh, no, I don't want any coal, no, I won't have any tobacco, I won't have any human trafficking in my portfolio. So an exclusionary liquid labeled exclusionary or a negative ESG environmental, social or governance approach. The next one is to say, and we're moving along the spectrum here is positive ESG. So I would like to invest in companies that have expressed through really good things around environmental, social or governance. One example that is very topical at the moment is women on boards. I would like to find those companies that have a good percentage of female board representation and we can talk about if these are going to generate returns. But let's just talk about the buckets for the moment. The next one, along with the third bucket, is impact investing and impact investing is where you want to make positive returns, but with a positive impact. So you want to express it, not an exclusion. You might do an exclusion as well, but you want to actually have a positive impact on the environment or social. And then there's others such as concessionary returns. And that would be where you're not expecting a market return, but you're doing it for the social. That's not what we're talking about today. We're talking about market like returns. And the other one, I would say, is there's sort of in that same bucket is social impact bonds, where you say, OK, I want an outcome of better educated children and then I'll get a return for that. But that's sort of not what we're talking about today. But it's good to have the full spectrum of of terms because then where are we sitting? So I think today's conversation is really around that ESG positive and positive impact. [00:19:37][165.1]

Maddy Guest: [00:19:38] So what you're saying is that within sustainability investing, you can actually be investing in companies that are doing, you know, good for the social or environmental, but a part of sustainability investing is also the fact that you might just be investing in a company that doesn't have a particular purpose to do better for the environment or social. But you can exclude certain factors, let's say tobacco or gambling, is that right? [00:20:01][23.3]

Kate Temby: [00:20:02] That's right. And it's like I think he did a podcast recently on sematic investing. What you're saying, you know, we can talk about this. You need to step back and say, well, how do I want to approach it personally for my investment philosophy? What's my philosophy? And that's what people do. They say their investment beliefs are I am a value investor. And how I want to express my sustainable investing is just through exclusions at the moment. I don't want to. To the absolute positive, but there are plenty of clients of ours, but also organizations that are saying, I want to have 100 per cent impact of my portfolio, some say I just want 10 per cent and I'm going to grow it over time. But it's a really good process to go through and think about how am I going to express it in my portfolio either through direct stocks or through managers, and then you go ahead and execute that. [00:20:59][57.2]

Sophie Dicker: [00:21:00] So when we're thinking about how we want to, I guess, express that, is this process transparent with the companies? How do we know whether, you know, sort of which bucket they come into with that? [00:21:11][11.3]

Kate Temby: [00:21:12] It's a core question that the market is really grappling with, because it's really easy to say all these great words. And and I think the way that companies typically are reporting that ESG is through what they call asset corporate sustainability statement. So often that is included in the annual report, and I am one of those crazy people who like to write annual reports and corporate sustainability statements. And there are a lot of pictures and there are a lot of wholehearted comments. And it all sounds really great. But the question is, how do I know what they're doing? [00:21:51][39.4]

Sophie Dicker: [00:21:52] Because they write it themselves right back when they're right, they're going to make it sound good. [00:21:56][4.3]

Maddy Guest: [00:21:58] Oh, there'll be plenty of photos of happy people and lots of green plants and all of that sort of stuff. And you see how as an investor, can you really understand? There's two ways I think that's really helping us with this many. One is regulation. So the market has cottoned on globally and we know that Europe is ahead of Australia. And what let's talk about European in a minute to look at the regulation. But regulation is our friend in this regard because what we need is standards. So when we pick up an annual report now, we have some confidence in those figures because we know it's regulated, whether it's in Australia or whether it's anywhere. Now, I started my career at Pricewaterhouse and I remember way back when and I was chartered accountants and we were talking about globally consistent accounting standards. And I thought that was just like, how are we all going to speak the same language? The importance of getting there was that then we could read financial statements with that confidence. And that's exactly where we need to get to now with environmental and social and governance disclosures. And we're not there yet. We're starting. So you might hear when you start digging into this area around Taxonomy Honeywood, you know, such an EU taxonomy. Now, what that is, is really just a simple way of saying translating the environmental and social objectives of the EU into exactly specific targets and specific ways of talking about your portfolio and allocating to your portfolio. There's also regulation, if I can give you all these funny acronyms. And but what they're getting to is legally embedding. What you say is what you have to do. And this is why it's positive, because then as an investor, we can read the different statements and say I can have some reliance on that in Australia. We're not there yet across that area. But one area we are there is modern slavery. And you might be aware that a couple of years ago, Australia enacted into law the modern slavery statement. And what that meant is that any organization over a certain size is mandated to report a statement. But what's very clever with this, it's not a policy, it's a statement. So it says this is what we do with our employees and our supply chain. So all of a sudden you've got to go right through your suppliers. Even if they're not big, you've got to ask them to provide their modern slavery statement. And then you have to put targets and say, what are you going to do to improve that? So that's a positive. So there are lights everywhere about that. We're getting better information. But as an investor standing back, it's why then you would say maybe I need to use an asset manager and a fund manager, professionals that can go through this data and have their methodologies and understanding because it's very technical when you really need to peel back the onion to see what people are doing in these areas to help me select different names, whether it's stocks or property investors or fixed income investors that are really authentic in this space the other way. Finally, we've got some of those rating agencies like a Morningstar or a nurse or, you know, Lansac that are starting to write. So there are external parties that will say, okay, this is your writing and MSCI might put a rating. So there's different ways. But you're right, there is some ways to come with it. Consistent disclosures. [00:25:41][223.4]

Maddy Guest: [00:25:43] Yeah. One of my favorite racehorses, just as a really quick and easy one to check, is the tab on Yahoo! Finance. They've got a tab for sustainability. And you can just go in and have a really quick look at how they write. And it's a great starting point to sort of figure out where the companies are. [00:25:58][15.3]

Kate Temby: [00:25:58] Excellent. [00:25:58][0.0]

Sophie Dicker: [00:25:59] So this leads us nicely into a term that we have heard a little bit in the sustainability space, which is greenwashing. We're wondering if you'd be able to explain what this is so [00:26:12][12.4]

Kate Temby: [00:26:13] that we love new terms. Just when you think your your understanding an area, [00:26:18][5.0]

Sophie Dicker: [00:26:19] all the jargon, crazy [00:26:20][1.5]

Kate Temby: [00:26:21] jargon. So it means that when you're saying that you've got a very comprehensive approach to environmental disclosures. But really, it's actually not truly authentic. So you are sort of what we were talking about in regards to saying you would do something, you're doing something in the environmental area, but maybe it's not as authentic as what one would have hoped. So there's different areas around greenwashing and and how it's evolved. But it's a very broad term to just really say, are you authentic? We also have terms such as rainbow washing. So you might have different areas around, whether it's blue bonds or whether it's whatever you're pursuing across different areas around your portfolio. It's exploding in that area. But really, are you really doing what you say you thought you were intending to do? [00:27:25][63.9]

Maddy Guest: [00:27:26] OK, so I think that's a really good sort of lead into our next question, which is do you have any tips for, I guess, the best way that we can really understand whether a company is sustainable or not? We know that recently or in the news this week, there was a story about how British Airways has removed Tesla from the ethical akef. So, you know, that took a few of us by surprise, I think. Do you have any tips for how we can really sort of drill in and figure out what what's true and what's not? [00:28:00][34.6]

Kate Temby: [00:28:01] I think it's trying to find a very external party that you're confident in their assessment, because, as you pointed out, it's so subjective, this area. So Tesla, great example. You might assume that, well, look, they're pursuing renewables there. How can we not say that they are sustainable, but through a certain lens and whether it's beta shares or whatever lens they had around was their corporate behavior or I'm not quite sure about what why they chose that exclusion. They did choose an exclusion. And so we I think we have to accept there's going to be inconsistencies of the view. So it's working. I would really focus on is it a fund manager that you're going to rely on or is it a data feed? Actually, Yahoo, whatever their data feed is, is that MSCI? I'm not sure what their data feed of their filtering, but I'm going to rely on that because it's you know, remember, I assume most of your listeners are not full time investors and you are not yet meeting the companies in the details. So you are relying on publicly disclosed information. So I would research and say, okay, I'm going to use that filter. And that's and I might read about the company and I might disagree on a certain timing or something, but I think you really just have to find that third party or that fund manager. There are fund managers and out there in the equity space, let's say a very well known fund manager is generation. Yep. And one of the largest is early on very successful equity, I would say impact positive ESG manager. Now, they I would say look on their website, read the huge amount of data that they provide really systematic reports, go to those specialists who have been doing it for some time, and then you will really learn and you'll be guided by that group of 100 investors, you know, that are thinking about this day to day. Similarly, at affirmatively invest in fixed income, we are seen as world class in our impact measurement. So not only identifying those that have opposed those stocks that have a positive impact, but also measuring it because remember, we've got to make sure did the company do what we thought they were going to do? We have a big team that was just focused on that. So one person alone doing it as a side bar investment, I wouldn't even tackle it. That would be my preference is that you find experts in the field. You really look at their websites. There is so much material that is available that's publicly available to any investor, go on and build some confidence in that area and start following their views. And I think you will learn a lot. [00:31:04][182.4]

Maddy Guest: [00:31:04] Yeah, I think that's a really important point because as you said, not everyone is doing day to day trading and it's more of a passive approach. And a lot of our community is investing in ETFs and we don't always know every single company, the tiny companies that are in in an ETF. So sometimes you do need to rely on the people that are looking at it every day. I know with the example that Maddie used with ethe dropping Tesla, I think one of the reasons was to do that part of the company. Was using forced labor. I don't know whether those claims are correct or not, but as an everyday investor, that's really hard to know that stuff. You really need to be sourcing information from people that know what they're doing [00:31:42][37.2]

Kate Temby: [00:31:43] and to know it's a moving face to do. We know a forced labor is not something we want to accept, but what is the plan? What is the forward looking plan and how are they moving to that? I think that is and will touch on transition. But I think it's a really important part ofi that, you know, finding those those sources you can trust. [00:32:05][21.5]

Sophie Dicker: [00:32:06] We are going to take a quick break for our sponsor and we'll be right back to chat. More sustainable investing with Kate. [00:32:12][6.5]

Sophie Dicker: [00:32:50] So historically, there has been a bit of a belief that to invest sustainably means or meant to compromise your returns. So I do think that there's been a lot of commentary recently about how this perspective is really changing now. What's your view on this? [00:33:08][17.2]

Kate Temby: [00:33:08] I am a strong believer that the market like returns and sustainable investing, an impact that can be achieved. I do think, though, in tying together what we were talking about, authenticity, that you really need to have experts who are really attacking the problem and identifying the issues. I think there are some screenings that goes on. We know that screening for bad stocks or but my view is it's a far more active way of investing. And I think through that, you can identify high returning opportunities and having an impact. I'm a true believer. I think what has helped us is these markets are deepening. So we know that fundamentally, if there is a wider opportunity for, then there is more opportunities to generate returns. So this process that is it doable? It is absolutely more doable than what it was 10 years ago, whether we're talking about equity markets in regards to particular transition. There are so many organizations and companies that we know that are moving from the old way of doing approaching to a more efficient way of running the businesses. And in that movement and as we say often, and whether it's going from bad ESG to better ESG, that is an opportunity for Elfa, an opportunity for returns. So that's important as well as there are companies that are already highly efficient operating in these new industries, whether it's renewables or, you know, socially attacking problems that are highly efficient and they're very profitable and strong businesses. So I don't think you're trying to find a needle in a haystack anymore. I think all organizations really focused on how they can actually improve their business. And one thing I would say that I enjoy doing affirmative. You know, six years ago, five or six years ago, I really spent a lot of time across every asset class, you know, understanding how we are investing and where the opportunities were. I was just so blown away from a fixed income, a funding perspective about the problems that they impact bonds or green bonds that we call them as solving. You know, they are as diverse as immunizing children in sub-Saharan Africa, which is absolutely important to retrofitting refrigeration systems to a more renewable platform to building hydro plants. It is so diverse, but they are all problems that need to be solved for businesses to become and societies to become more efficient. [00:35:59][171.1]

Maddy Guest: [00:36:00] And I think like even climate change is a really good example of this, because if companies aren't embracing sort of more sustainable ways of operating, then they're going to have to endure the costs in the future. So I think, you know, we're seeing more and more rhetoric around how companies have to embrace these things. Otherwise, actually, it's going to be more costly for them in the future down the track. [00:36:21][21.4]

Kate Temby: [00:36:22] And I would say there's two pieces to that. Exactly. Meti one and you can think about two buckets. And this is another good term, climate mitigation or climate adaptation. So mitigation is where what am I doing to stop it on my business, you know, to protect it. But what am I doing? Adaptation to adapt or change my business so they to areas where we are seeing that a quite clear terminology and clear path that people are taking on and I think we're working at adaptation is really important and costly. Right. And that's what we're seeing governments are doing globally, bringing the infrastructure spend. They are adapting their their businesses and their approach to infrastructure globally. So it's it's really important. I would also say that the regulators, you know, ASIC in Australia as a corporate director, then they are saying that one of the risks you need to consider is climate. So no longer is it just around financial liquidity risk, all these risks that we're used to. Actually, as directors, you need to think about the impact of climate risk on your company. [00:37:39][76.9]

Maddy Guest: [00:37:40] And I think as well, like the consumer now has so much power, we can really influence our businesses and our governments to kind of make that change. So it's not just that the. We have to respond to those risks, but it's also that we are wanting it as a society, so they have to respond to us as well. I mean, we saw a good example of that is the only the milk that's just gone public and its its share price because that's what people value and it's what they care about. But I wanted to ask, you know, it's really important for for example, for Maddie and myself that we're investing in companies that do align with our values. And, you know, I'm just one person and that is just one that you're just one person. When you're giving your money to these companies, what are you helping achieve? It is a [00:38:24][43.4]

Kate Temby: [00:38:24] good question because we could all sit here and say, OK, if I put my one milk bottle in the right recycle [00:38:31][6.8]

Sophie Dicker: [00:38:32] is that I always think that I mean, I love recycling, but I'm like going to the recycling place, isn't [00:38:39][6.1]

Kate Temby: [00:38:40] Yes. So I use that analogy because if I put my one dollar into my one company that I think is making a better effort, is it really making a better effort? So in doing that, I we talk about it. Certainly we felt that back at the right back, if that company, the right company, and I think that in itself is really important because all of a sudden we're not just talking about where we throw the rubbish, you know, green bean, the bean, and then does it all go together. But then we start thinking about where this rubbish go and all of a sudden we start a bigger conversation saying, oh, should we be sending our rubbish tip to Asia? And then we sort of thinking more broadly. But wait a minute, what's my council doing with my compost? And then I start asking my council about my compost, but it's not actually about the milk bottle that I threw away on the milk carton. So I use that analogy in the same way that I think, okay, there's my dollar. I've invested in the company I think's doing a good thing. OK, let's say I'll invest in Atlassian. Oh, what else are they doing? And then I start asking broader questions about the rest of the portfolio and I think all one percent pledge. Let's say that's a great concept. And what what other companies are doing that? And is that symbolic of the bigger behavior towards their employees, the environment socially and also building a sustainable business? So, yes, you could say your dollar doesn't go anywhere, but I think knowledge goes a long way and conversations go even further. [00:40:13][92.6]

Maddy Guest: [00:40:14] So, Kate, as a director of Net Wealth, which is a wealth management business, we're keen to hear what is the board of directors thinking about sustainable investing and where do you sort of say the sustainability trend moving into the future? [00:40:26][12.3]

Kate Temby: [00:40:27] So I think the trend we've covered a lot in this conversation is both top down and bottoms up. Top down. We're seeing regulation. So as a director, the director's responsibilities, both from the regulator around what risks you need to think about from ASX, what rules do you need to disclose, but importantly from the bottom up, how we building a sustainable business. So how are we building it from a profit generation perspective? How do we look after our people and actually how do we look after our environment? So I think every director is feeling that the temperature is increased around sustainability from what you're hearing from your employees, what you're hearing from your stakeholders, but also what you're hearing from regulation. So absolutely moving forward in regards to articulating what we do, I think many organizations actually do do a bit, but actually haven't had the opportunity to really write down what they do and actually and articulate their targets. So wealth is going through that process. And secondly, for net wealth, because they're a technology company, a platform that provides investments to advisors and underlying investors, is providing more options around impact investing and around sustainable investing. And that's happening over time as more managers are coming and offering different investment capabilities. So really expanding that and finally doing what we talked about, about finding a good external rating system so we can educate the investor around exactly what we're talking about, what's good, what's bad, what's improving and what isn't. So really addressing it on all of those spectrums, but making huge progress. [00:42:23][116.0]

Maddy Guest: [00:42:23] Yeah, we need a little like rating system on, I don't know, a certain platform. And you can look at a company, it's either like one, two, three or four all the way up to 10. And if Ten's the best sustainability stock you can find and one's not, it might not be a great system that would be good for us. [00:42:38][15.2]

Kate Temby: [00:42:40] And so I think that that is coming that is coming across Pacific equity names and managers, investment managers. So it's there in different areas. But you are going to say wholeheartedly it be embedded in platforms and in everyone's conversation. And so portfolios can be built much more easily. And I would say that I speak to advisors and, you know, three years ago it was no one says impact investing is a bad idea. You know, everyone wants to talk about it. But then three years ago, all but there's not many people wanting to actually invest. Now it's yes, we want to invest, but how can you help me build a balanced portfolio or help me find a stock? So we are in a better position where as soon as investors are asking for that, the service providers actually have to respond. So the future's bright. [00:43:29][48.7]

Maddy Guest: [00:43:29] Yeah, I'm excited to see in the next ten years where it all goes. I mean, Ten's a short period, but, you know, ten, twenty will be having the same conversations for a long time to come, I'm sure. Now, Kate, each episode we have been asking our guests to add a stock company, news story, trend industry, anything that's of interest to you at the moment, to our watch list. The purpose of this is to get people. Thinking outside their box and broaden their horizons in the investing space, but we're not financial advisers. This is purely for educational purposes only and doesn't constitute any financial advice. So we would like to ask, what are you bringing to the watch list today? [00:44:11][42.3]

Kate Temby: [00:44:13] The consistent with, I think, some points we've talked about, I am really fascinated by transition. So thinking about those old world names, whether it's Telstra or whether it's new world names, you decide Lessin, how are they moving into their next five to 10 year phase? Because you can have and we've got examples already in Europe where we've had old utility companies transform to be now 80, 90 per cent renewable companies. And so that opportunity to go from old ways of operating to more efficient, cost efficient ways, better ways to treat the environment and your employees creates Elfa. It does create returns. So really have a mind and have a sort of a mind around that and thinking, OK, what is this company doing to go from where it is now to where it is in the future? And companies are going to tell you about that. That is a good news story. So it could be in particular sectors such as plant based food, but that's a disruptive industry. Very exciting. You talked about oatmeal, Krait. We all know what is growing and trust your instincts. You know, I think one thing that, you know, both of you talked about on this podcast is being interested in what you're interested in. That is really important as a consumer. You know, why are we saying online whether it's, you know, cosmetic players, why some, you know, achieving more than others? So trust your instinct as a consumer, but also as to monitor where society is moving. And don't be afraid, I think, in that to ask people of different generations, because what you are surprised about and I think this is really interesting, when we were raising funds three years ago in Europe, much more advanced in regards to impact investing than Australia, we would have thought it was the millennials who was supporting this initiative. Well, actually, it was the more retired generation that wanted to leave a legacy for their grandchildren. So they had established their wealth and they actually wanted to make sure they were investing it with purpose. So while you have your own lens, talk to other people about the lens and then you might get a thread and you'll see that transition. And that's an exciting area to invest. [00:46:48][156.0]

Sophie Dicker: [00:46:49] I was so looking forward to hearing what you've got to question because I just knew you would have a great answer. So I think that's really interesting and it's such a great way to think about sustainable investing, because often we think that it has to be the newest companies doing the new things. But I think you're right. And, you know, Europe has demonstrated it beautifully that actually some of the oldest companies can really transform their businesses. [00:47:12][22.6]

Kate Temby: [00:47:13] Yeah, not as an example of from social. We've talked a lot about the environment on the on the conversation today. But if we think about conscious investment management, so we invest, we partner with charities to solve social and environmental problems and then we help bring capital to the property. So we do a lot in social disability housing. So that is an old problem of how we deliver health housing suitable for disabled cohort in Australia. Well, by bringing and really helping, that's one of the charities with two of the charities that are very established in Australia. But bring capital to that problem with the quality of the governance to make sure that the residents are well looked after. That movement is going to actually magnify and expand the impact that that smaller charity can have. So it's a similar example. So we can reach more socially disabled people and deliver a better service on a better long term outcome that is going to give you returns. So it's really broad. But keeping that in mind of what's the transition and where can the capital go to magnify the impact, whether it's environmental or social is really exciting. [00:48:31][78.8]

Maddy Guest: [00:48:33] So we ask every guest on our show the same final question, but we are going to put a little bit of a spin on it related to sustainability. Today, we're wondering what piece of advice would you give to someone who is getting started investing and who really cares about wanting to create a better world but isn't sure where to stop? [00:48:51][18.3]

Kate Temby: [00:48:52] It is a good question. And I would say find some investors that you really trust. So we've talked about a couple of names, but there's a number of them out there. And I would read what they are talking about. I think it's high. It's really good to read the paper, et cetera. But we all know sometimes it gets a little sensationalized. But if you look at trusted advisers, Responsible Investment Organization of Australia, Reya is RIAA, go on their website, that's all they think about is companies and asset managers who are doing positive things or whether it's generation or Amitav Investment Management or conscious. They go on the website and just read and learn because they are more advanced. Those investors are doing it 100 per cent of their time and you will learn, you will learn and and then become more confident about what you're passionate about. And it's an exciting time, and I think it is being integrated into the mainstream more and more, so there's no shortage of learnings, but I think it's it's really trying to navigate authenticity and finding companies or managers who really do what they say and can really make a difference and deliver those returns. [00:50:17][85.3]

Maddy Guest: [00:50:18] I love that. I think we always tell people to try and do as much research as possible. And I think you suggesting that you should find some people that you love and trust and raid their whatever they're researching. I think that's a great point. Thank you so much for coming on the show today. We really love chatting with you. This is such a popular topic that people want to hear about before we kind of sum up. Is there anything that you want to plug social media linked in your work? [00:50:45][27.0]

Kate Temby: [00:50:46] I would say and just keep searching for really interesting people that you want to follow. I think another really good in this area. John Treadgold does a great podcast. So I don't know if he's where of his podcast, but I think there are some really good people out there. I'd plug that one. As I said, I think this is a long conversation and I think we're on the right path to victory, both from a regulatory point of view. But the bottoms up investors are calling for a higher bar. And with that, we know it creates the flywheel effect. Right. We have momentum on this. And I'm just so excited that, you know, your your podcast is outstanding, that it's bringing information, but it's it's really taking away all the myths and and bringing plain talk to it. So I expect we'll I'll come back and we can do another another update as this is evolving. You know, this is a really exciting and evolving topic. So there's plenty out there. [00:51:53][67.5]

Sophie Dicker: [00:51:53] Thank you so much for coming on today. [00:51:55][1.3]

Kate Temby: [00:51:56] You're welcome. . [00:51:56][0.0]

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