32. Impact investing: Capitalism created this mess. Capitalism has to fix it!

December 15, 2021

Bob Rosenfield was the CEO of the second largest company in the $4 billion US auto glass repair replacement and claims services market, and during that time he learned that “it isn’t as hard as you think to do the right thing and doing the right thing can be very good for business if you do it right.”

He has since founded and is managing director of Cape Vista Capital, a family office investment entity focused on renewable energy, sustainability and broadening the availability of housing, healthcare, and a healthy food supply chain.  The goal: to realize excellent returns on investment and to use the leverage of Cape Vista’s investments to change the shape the environmental issues that we have created.

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Links

The Energy Switch

Global Impact Investing Network.

Global Impact Investing Principles

Cape Vista Capital

Quotes

Capitalism messed this up, capitalism can fix it.

My first experience with impact investing (while a CEO in the auto glass industry) was a tremendous learning experience in two ways: number one, it isn’t as hard as you think to do the right thing, and number two, doing the right thing can be very good for business if you do it right.

What we see now are vast billions of capital being deployed in an effort to fix problems created by the prior model, which considered all this stuff in externality.

Our public equity investments are really segment investments in renewable energy, for the most part, in companies that we think have been and will continue to be more committed to going from fossil fuel energy generation to renewable sources. It’s kind of that simple in the public equity space.

We have found that companies that are engaged in combating climate change are finding the cost of capital in issuing private bonds to be desirable for 5% and we’ve made several investments in solar and other combating climate change items or initiatives that help us generate a solid present income and yield.

Big Ideas/Thoughts

Bob  Some people are still going to believe they could get better than market returns in non-impact, so I think we still need to label it as such, but least in my opinion regular impact investing and non-impact investing are truly converging.  Companies that do not pay attention to what were previously called “externalities” will be outcompeted in the marketplace, so in that way, it’s fundamentally capitalist driven.

Raza I think, as you have said earlier, the externalities are realities, and I hope that the two worlds keep converging and I think that you’re rightly pointing out that that’s the fix of the capitalism, that capitalism actually needs to do.

Joe The “holy grail” is to be able to do the best thing for the economy, for the environment – for whatever area in which you’re involved – and also have it be good for your business, because the financial incentive is going to drive people to do “the right thing.”

Engine No. 1

The whole Engine No. 1 issue is: “ExxonMobil might be paying a 9 or 10% yield now, but if I hold this stock for 30 years, as opposed to another energy company that is paying attention to the future and doing better things, I’m better off with an investment elsewhere.”

There are three things that Engine No. 1 did.  First, in general point out that having a carbon-based, fossil fuel-based strategy might just be a losing strategy as an economic argument. But they did two other things to sort of turn that viewpoint into action, and I thought they were really valuable and important lessons in both.

They engaged with the Wall Street analyst community because there were institutional investors in there that couldn’t decide, do I go left, or do I go right? They helped quantify in the financial analyst community, how do you run the numbers? I mean, every securities firm that has an analyst that follows a company is going to do a 5-year projection or 10-year projection, discount it back, the stocks are undervalued the stocks are overvalued, so they engaged with the analyst in the meantime and pushed them, “What are you doing with these numbers? How could you project that up? That’s not likely. Here’s why.”

They also partnered with another firm, and the business proposition of their partner basically says: “Come to our website, and instead of giving us 100 bucks to support the cause of environmentalism, spend a $100 to buy a share of ExxonMobil and let us vote this year for you.” It’s democratizing the voice of stockholder constituency. I thought that was really, really, really smart tactics.

Transcript:

Joe: [00:00:00] Hello and welcome to On Boards, a deep dive at what drives business success. I am Joe Ayoub and I’m here with my co-host Raza Shaikh. On Boards is about boards of directors and advisors and all aspects of governance. Twice a month, this is the place to learn about one of the most critically-important aspects of any company or organization, its board of directors or advisors as well as the important issues that are facing boards, company, leadership and stakeholders.

Raza: Joe and I speak with a wide range of guests and talk about what makes a board successful or unsuccessful, what it takes to be an effective board member, what challenges boards are facing and how they’re assessing those challenges, and how to make your board one of the most valuable assets of your organization.

Joe: Our guest today is Bob Rosenfield. Bob is founder and managing director of Cape Vista Capital. Cape Vista is a family [00:01:00] office investment entity focused on renewable energy, sustainability and broadening the availability of housing, healthcare, and a healthy food supply chain.

Raza: Bob is a lifelong entrepreneur and describes himself as a committed challenger of the conventional wisdom in business. Prior to Cape Vista, he was the CEO of Truroad Holdings and JN Phillips Auto Glass, guiding the company’s growth from an 8-store local business to become the second largest company in the $4 billion US auto glass repair replacement and claims services market. That business was acquired by the number one industry participant in August 2019.

Joe: Bob was born and raised in Greater Boston where he developed a fondness for all things nautical and for the Boston sports scene. Near and dear to my heart, he is an avid and knowledgeable Celtics fan. Welcome, [00:02:00] Bob, it’s great to have you to join us today on On Boards.

Bob: Great. Thank you. It’s great to be here. I really appreciate the work you guys are doing to strengthen private company and public company boards, but near and dear to me, being the CEO of a private company, and it can be lonely at the top, and having a good circle of advisors and solid board is so important, so thank you for the work you guys are doing.

Joe: Thanks for saying that. I appreciate the kind words. Before we start to talk about impact investing, could you give us a little bit more background about your role as CEO? For how many years was it that you were CEO in the auto glass industry? And just talk a little bit about that.

Bob: Yeah, that was 23 years as the CEO at what was originally JN Phillips, 34 years all told with the company and in that industry. The industry, when I entered it was in a state of[00:03:00] moderate consolidation, but accelerating, and so when you’re an entrepreneur, you have to embrace change. There were 30,000 auto glass shops in the country, and that number was going to go down. The biggest player maybe had one or two percent of the market. We were a small player in Massachusetts, and I wanted to have some fun. I wanted to grow it. I wanted to be on the right side of the consolidation line.

 I guess when I started, we were about 30 people. When I exited, we were about a thousand and I learned a ton. I loved the people I worked with, I loved the challenge. And the industry did consolidate, and you know what, the industry got better. It got more professional. It had a greater chance to raise capital to improve the service offering, and it was a good ride and I love that industry, but it was time for me and the company to move on to something else.

Joe: Great. Thanks for giving us that context. Now, you [00:04:00] became involved in impact investing while you’re still CEO in the auto glass business. Can you tell us how that came about?

Bob: Yeah. I realized in 2010 or maybe a few years before that, that when people think about glass, they think about recycling it because you take the bottles and you go back to the supermarket or wherever. In some states, they give you a nickel and others still, it’s part of their recycling stream.

But a windshield isn’t like bottled glass. It’s a sandwich of glass and plastic. The conventional wisdom was, “Oh, you can’t recycle that because you can’t separate the glass from the plastic that was originally joined in a lamination process. And as you mentioned at the outset, I like to challenge the conventional wisdom and said, “No, there’s got to be an answer.”

We became the first auto glass company in the US to recycle the windshields, it’s called post-consumer, that we took out of your car when the old [00:05:00] windshield was broken, and that was a tremendous learning experience in two ways. Number one, it isn’t as hard as you think to do the right thing, and number two, doing the right thing can be good for business if you do it right.

One of the steps we took in that project was to hire an environmentally-focused marketing firm, and the first thing they said to me was, “We have to be sure as a client you’re not going to do greenwashing.” And I said, “What’s that?” This was in 2010. And they said, “You can’t go out and make promises just to think you’re going to get more customers and more business and not back it up. It’s not the right thing to do. We won’t do that for you. And, in fact, the more you can do to verify your efforts, the better.”

We actually joined with UL, Underwriters Laboratory, and they audited our process so that we could prove that the windshields really were being [00:06:00] recycled. We could prove the things we were saying in our consumer and B2B marketing. That learning experience taught me a couple of lessons about impact investing.

Joe: When we spoke earlier, you’ve mentioned that once you started to do the recycling and you were the only auto glass business doing it at the time, you made a radio ad that says something like, “Go to anyone you want, but here’s what we’re doing,” and that, as I understand it, attracted a lot of attention. To your point, you were doing the “right thing,” but it also did generate business because people wanted to hear that and wanted to be a part of that. Is that fair to say?

Bob: That’s absolutely the case. I would walk through our contact center. In our radio ads, we promoted our toll free number and when people called it, it would ring in our contact center and I would walk around and talk to the agents and ask them. What I didn’t tell them[00:07:00] at the time was, you may know I was the spokesperson for the company, so I was just wanting to hear if any of the messaging was, “Could you get that guy off the air? I’m tired of hearing him or something like that.”

But fundamentally, they said, “Yes, the phone is ringing and Bob, more people than I would have expected have said about the copy in our ad wasn’t different between glass companies. I chose you because recycling the windshield is something I’d like to be a part of.”

Joe: That is the holy grail, to be able to do the best thing for the economy, for the environment, for whatever area that you’re in, and also, let it be good business for you because obviously the financial rewards, the financial incentive is going to drive people to do this.

Now, when you first did it, and before you knew it was going to be something that would be well received by [00:08:00] customers, how much support from your board of directors did you have? How much of a factor was that support in whether you did it or not, or did you just kind of take the initiative on your own and hope that you could convince them it was a good idea?

Bob: It was interesting. We had two tracks to go. One involved a significant capital investment, and one did not. And as I thought about risk return for the company, aside from operational issues, just kind of risk return, I was like, “Well, I don’t need to go to a board and ask for a capital plan, like this is just a transaction. We could start it, we can try it. If it works, great. If it doesn’t work, we don’t have a long contractual commitment to make it work.”

I was a bit of a maverick. Now, as much as I’m delighted at the work you guys are doing, I think I learned about the [00:09:00] effectiveness of boards by, in a lot of ways, not having a highly functional board. So being a CEO in an environment where I spent a lot of time educating my board members/family members how they could be effective board members at 10 in the morning and VP of this at noon, and of course, as you guys know, that takes a ton of work. Truth be told, I probably did more asking for forgiveness than asking for permission.

Joe: Got it.

Raza: Bob, I want to switch to the impact investing that you do. The first thing I want to understand is, your thoughts on what is impact investing? And I put this in context of is it that the underlying assumption as we’re kind of talking that the holy grail is that do good and you make money, but is the underlying assumption for impact investing is [00:10:00] concessionary returns. How do you define impact investing and how do you see that?

Bob: Yeah, that’s a good place to start. I think if you asked 10 impact investment professionals, you might get 12 different answers. But one of the textbook answers is, well, you look at ESG, you look at the ESG score, and you use that as a filter.

There are some industry standards starting to come about. There’s a group called GIIN, Global Impact Investors Network, and they have yet another acronym, IRIS+, of how to measure the impact that an organization is having. There are efforts at quantification.

I look at it in a simplified fashion, which is that the way we got in this messy situation of environmental and social disequilibrium was a motto [00:11:00] of capitalism that was sort of defined in the 1930s in micro and macro economics. And these other issues, environment, climate change, global ice melt or polarized melt, I should say, those were not in anybody’s equation and it’s been too slow to have them factored into traditional economic model.

The schoolyard way I would say that is capitalism created this mess. Capitalism has to fix it. What we see now are vast billions of capital being deployed in an effort to fix problems created by the prior model, which considered all this stuff in externality.

Raza: Bob, in that thought process of regular investing or capitalistic investing versus impact investing, do you think or feel that these worlds are converging and should converge, or regular capitalistic investing [00:12:00] is still a little separate than impact investing where people are looking for impact in addition to investment returns?

Bob: Yeah. I think while they are converging, they need to continue to be well-defined. And what I mean by that, there’s a segment of investors that think, “Well, I can get disproportionate returns investing in bad stuff.” the dividend rate at ExxonMobil is pretty high or had been, and so some folks said, “Well, I’m going to be a non-impact investor and I’m going to get higher returns on account of that.” That may be true or it may not be. That was the whole engine number one issue. They’re saying, “Well, you might be paying a 9 or 10% yield now, but if I hold this stock for 30 years, as opposed to the other energy company that’s doing better things, I’m [00:13:00] better off over there.”

But some people are still going to believe they could get better than market returns in non-impact, so I think we still need to label it as such, but they are truly converging because, at least in my opinion, companies that do not pay attention to what were previously called externalities will be out-competed in the marketplace, so in that way, it’s fundamentally capitalist driven, but that’s in the long term. In the near term. I think things should be labeled as clear as possible.

Raza: I think, as you have said earlier, the externalities are realities, and I hope that the two worlds keep converging and I think that you’re rightly pointing out that that’s the fix of the capitalism, that capitalism actually needs to do.

Joe: I wanted to just jump in for a second and ask you, to what extent you [00:14:00] observed the pandemic having an impact on the whole concept of impact investing? When we talked to you earlier, there were a few things that I think you considered to have really brought it to the forefront.

Bob: Those of us at least in this country and probably many other countries, I’d say we were conditioned in certain ways that every problem gets solved in either a half-hour TV show or a one-hour TV show, like everything resolved, and so they’re sort of like no problem bigger than us and so all the assumptions we have hold into perpetuity.

They’re good. There’ll be minor aberrations, but you know the field of play and the frame of reference. Nobody is moving the foul line from 15 feet to 16 feet over night, and then we all realized that that’s not exactly true. [00:15:00] That’s not a reliable set of assumptions. Things can change instantly and they do, and this may not be the last pandemic. And what else will happen to shift the assumptions of my world? Maybe that scientist who says melting of the polar ice caps might be linear, but there could be seminal events and the dam breaks, so to speak, and I think that just became reality. It was probably the biggest impact .

Raza: Bob, we want to talk about how your firm Cape Vista does impact investing. Is it investing in public markets, private markets, startups? How is Cape Vista investing?

Bob: Yes. Thank you for asking. Really both.

Our public equity investments are really segment investments in renewable energy, for the most part, in companies that we think have been and will continue to be more [00:16:00] committed to going from fossil fuel energy generation to renewable sources. It’s kind of that simple in the public equity space.

We are not using ESG scores in the way that maybe others are. We are also investing in some public income instruments, the Calvert Social Income Fund, a company called CNote. There are a couple others, and those are CUSIPs that you can go out and buy and they’re going to pay you an interest rate and a duration and you can trade them, and we found that to be a balance to our equity portfolio as well.

In the private segment, also fixed income and equity investments. We found that companies that are engaged in combating climate change are finding the cost of capital in issuing private bonds to be desirable [00:17:00] for 5%. If they get the money from it as equity, it’s going to cost a lot more than that, and so we’ve made several investments in solar and other combating climate change items or initiatives that help us generate a solid present income and yield.

Joe: Are the returns as good as they would be if you are not at all focused on the impact your investments were having?

Bob: Well, the fixed income market is crazy. We consider the risk return profile on corporate bonds to be out of whack. And government bonds, I heard someone the other day say instead of it being risk-free return, it’s return free risk. Maybe we could get 3% on a bunch of junk bonds, so to speak. If we get 4% loaning money to a company or buying a bond from a company that’s putting [00:18:00] solar into low-income housing, houses of worship, other places that couldn’t access that capital, that 4% or 4-1/2%, well, yeah, they were borrowing that money at 7 or 8 two or three years ago and maybe a conventional commercial bank might charge them a little more, but we feel like relative to the public fixed income market, we’re doing well and we’re good with it. We don’t consider it concessionary as much as picking a segment of the market that is not as worked over.

Raza: How do you determine a good impact investment? Now, this is going back to the thing that we alluded earlier, a score, data, frameworks, standards or is it subjective and based on pieces that the impact investor wants to help with?

Bob: When I got out of business school, it was just [00:19:00] when the spreadsheet was coming into its own, and good for the Boston economy because originally if you remember, it was Lotus 1, 2, 3, and it was here at Cambridge and it was a tech star and a rocket ship. Anyway, like the confluence of those two things said, “Well, everything could be figured out in this spreadsheet, just do a 10-year discounted cashflow and the answer will pop off the page because now we have those great tools for that.” Over time I just sort of learned to understand that, but trust my instinct and try and make a read on people.

We explore a lot of private deals. First, what segment are they in? Number two, how competitive is the marketplace? How big is the marketplace? Therefore, the third layer, how realistic are their goals? And number four, do we think this team can execute? Do they have marketing skills, [00:20:00] sales skills, operation, technology, and those are the four layers of the filter.

We went through that and one investment we’ve made. is with two young persons who had about ten years’ experience in developing a large community and small utility scale solar, which is a lot of jargon words. It’s basically go see the farmer in Augusta, Maine who’s got 50 acres that are not useful. Go to the city of Augusta, tell him to start to put a bunch of solar panels in the field and feed that energy back into the city of Augusta homeowners or to the power company in Maine and everybody wins. To us, well, we need more solar, that’s the highest and best use for the land, these guys have a track record and they’re the kind of people that [00:21:00] are going to own what they do, so to speak.

Raza: What is that company called?

Bob: It’s called East Light Partners. They’re based in Cambridge and this is their second fund, and two things are happening. Number one, they’re doing that. And number two, what happens in that project is you get a power purchasing agreement. Let’s say Central Maine Power will take 20 megawatts a year at this price, and then that becomes securitizable and there’s a lot of demand for that as a derivative.

Raza: Bob, on the ESG, if we break it into E S and G, is it that you mostly focus on the E part? Do you also look at the S and maybe even the G part of investing in the ESG sector?

Bob: Our history has been mostly around the environmental. I think that the social is harder for a [00:22:00] small shop to sort through and we are hopeful that better quantitative information will come out and help us think about that segment. I would say 80% of our energy is in the environmental focus.

Raza: Any interesting companies, sectors or deals that you want to mention that you’ve recently done that you are excited about?

Bob: There are a couple of things. One we’ve invested in, and it was a bit of a leap for us to support crowdfunding opportunities, but we came across this organization called Raise Green. They’re a platform. We learned of them first through a company called BlocPower, and it’s a really interesting entrepreneur/CEO leader, Donnel Baird, but their business model is really simple. They’re based in New York City, in the boroughs of [00:23:00] New York City, and they will go to a large multi-family building or multi-office building that’s got a big boiler in the basement, oil boiler, maybe gas if they’re lucky and say, ” we’re going to help you take that boiler out of the basement and we’re going to put those systems on the wall. They’re called split systems you’ve -probably seen them, Mitsubishi or someone else- and just throw the remote and you get heat and you get air conditioning in the summer and it’s electricity, and we’ll get panels on the roof if we can and get clean electricity, but we’re going to get you off of fossil fuels and we’re going to do it fast and we’re going to do it efficiently, and that’s all we do. We’re now solving every climate change problem.”

They’ve had two capital raises in fixed income. They’ve done really well. This is not a guy who came from Westinghouse or came from [00:24:00] some Fortune 100 company and went out and classically raised capital. He said, “Hey, this is feet on the street kind of initiative that can make a huge, huge difference.” I really admire that company and the approach they’ve taken.

Raza: Talk about that crowdfunding platform that you mentioned as well.

Bob: Raise Green. Someone could go and subscribe and get alerts and get updated, or they could see the current financing opportunities that are available and just subscribe. It could be, I think, as low as a $1,000 and sort of as high as that particular organization it sets as a maximum limit.

Raza: Bob, the impact investment family office unit, how is the governance and decision-making of that unit working? How do you guys make decisions on investments?

Bob: I’m the one-man investment committee at this point.

Raza: Wonderful.

Bob: Yeah. [00:25:00] And I try and keep my network active, not just people in the space, but people that I trust, people that I’ve known from the auto glass industry, people that have been other entrepreneurs who’ve been successful, because everyone needs a reality check from somewhere. To say “Well, I make the decisions on my own in a vacuum” would be a disservice to me and a disservice to someone who is listening. It’s really important to sort of take in commentary, like from the side, not straight ahead. Do you know what I mean?

If I’m going to make a solar investment, yeah, you talk to people in the solar industry, but they’re biased. I’ll go ask someone in an industry that isn’t that, but maybe a real estate development where land up development of something else, and I just kind of always try and triangulate too whether my instinct and logic is [00:26:00] betraying me.

Raza: Bob, that triangulation and crowdsourcing of wisdom is such a great idea. We as angel investors do that all the time. We don’t know everything, and I think as you’ve mentioned, the pattern of industry insiders are the biggest naysayers for, “Oh, this can never work,” so you really have to get multiple perspectives into the equation to make your decisions.

Joe: The best thing to do is talk to your kids. They’ll give you a reality check.

Bob: No doubt about that. My daughter did a middle school project about the way that meat is produced ,and the net result is she got the principal of the middle school to go from being a mediator to being a vegetarian.

Joe: I love it. And that actually leads me to go back to a question that Raza asked about how one would determine whether certain companies or certain potential investments really are going to have a positive impact. You talked about [00:27:00] ESG scores as something that really isn’t reliable yet. What is out there that is reliable, and what is coming out that might allow people to have something to look at that would be very reliable?

Right now, it sounds like you really just have to do a very deep dive into the company and make your best judgment call. Are there things that are happening that will make that easier for investors?

Bob: I think that’s one of the reasons when I started out at impact investing and I canvassed the industry for advisers, it sounded as much like conventional investing as impact investing, which what I mean to say is, “Okay, we’re a wealth manager focused on impact, so we go and pick investment managers who are good at what they do,” and they go out and pick 30 companies and say, “Don’t worry about it.”

I realized I was more of a hands-on kind of [00:28:00] person and to be impactful in impact and value, at least for me, I needed to pick the spaces in which I thought I could accumulate some industry knowledge and make a difference. Anyone that’s interested in what’s happening in renewable energy, I’d encourage them to find the book called “The Energy Switch” by a local Boston guy named Peter Kelly-Detwiler.

A smart guy, he spent 30 years in the industry and wrote this book to explain to a lay person, “Here’s how the electricity grid works in the US, and here are the things that are going on that could impact it. Here’s the good news about solar. Here’s the challenge about solar. Here’s the good news about wind energy. Here’s the challenge, and how is this all going to play so everybody gets electricity at the right [00:29:00] cycle so that it comes in their house and does what it’s supposed to.

I spent hours and hours with that book, so I would understand the assumptions in the narrow slice of renewable energy I’m interested in providing capital to.

Joe: That sounds great, but it also sounds very, very labor-intensive. My question I am going to go back to it is somebody isn’t willing to read a couple of books and talk to a bunch of people and really do it, are there things out there that are either in existence or being developed? What are the things that might happen that make impact investing easier for a range of people?

Bob: Yeah, I think there are three sources. One I mentioned earlier, the Global Impact Investing Network. They publish a lot of information and they’ve put a lot of work into this [00:30:00] sort of standard. I talked with you guys earlier about kind of, can this be made similar to a GAAP accounting? They’re working hard at that.

There’s another consortium that have published. I think it’s called Global Impact Investing Principles, and they have recruited corporations, large and small, to say, “We will operate our business in accordance with the seven principles of impact management.” And I think that together with the UN has published their sort of standards and priorities around climate change and impact. Those three sources, I think, would give someone a really good start at, “Okay. Who’s committed to what, and what is the score card? Even if it [00:31:00] isn’t refined down to the decimal place, what is the score card that’s starting to emerge?”

Joe: Another way to have an impact through your investing is to be active. You mentioned earlier a very well-known example, Engine Number 1, which through very careful thought and strategy got three members on the board of Exxon. They made it a point to use their money to have an impact on one of the largest corporations in the world to change how they are managing their company in the future, and the principle is “we think you’re not taking the risk of the way you operate fully into account. And unless you do, your company is going to be worth less at some point, and we’re going to put pressure on you to do that because that’s better for us as investors. That’s better for stakeholders in general.”

It’s something similar to what you said earlier, Bob, we’re now looking at a longer term impact. That’s true [00:32:00] in most successful companies, family-owned businesses, that can look 5 or 10 years down the road. CEOs of public companies who are not completely bound by the quarterly report, but are thinking long-term for their company. This kind of activism is another way to put pressure on companies to think about the big picture, to think about what you refer to as the externalities that, in fact, are an integral part of what companies should be taking into account as they develop their strategic plan. What are your thoughts about that?

Bob: Yeah, I think that’s a great example, in particular, because of how public it is in was and how everyone kind of knows the brand ExxonMobil and kind of what they do and what they bring to the marketplace.

But there are three things that they did. You mentioned the first one, which is just in general point out [00:33:00] that having a carbon-based fossil fuel based strategy might just be a losing strategy as an economic argument. But they did two other things to sort of turn that viewpoint into action, and I thought they were really valuable and important lessons in both.

One, they engaged with, let’s say, the Wall Street analyst community, because there were institutional investors in there that couldn’t decide, do I go left or do I go right? What it really did is it helped kind of quantify in the financial analyst community, how do you run the numbers? I mean, every securities firm that has an analyst that follows a company is going to do a 5-year projection or 10-year projection, discount it back, the stocks are undervalued the stocks are overvalued, so they engaged with the analyst in the meantime and pushed them, “What [00:34:00] are you doing with these numbers? How could you project that up? That’s not likely. Here’s why.”

The second thing is they partnered with another firm, and I’m going to paraphrase it and I might not get it exactly right, but this is my recollection of the website and the business proposition of their partner. It basically said, “Come to our site, and instead of giving us a 100 bucks to support the cause of environmentalism, spend a $100 to buy one share of ExxonMobil.” And maybe it wasn’t a 100, maybe it was 300, maybe it was 65, I don’t remember, but it was buy one share of ExxonMobil and let us vote this year for you.”

It’s kind of democratizing the voice of stockholder constituency. I just thought that was really, really, really smart tactics. Blackstone is going to own [00:35:00] a million shares, and they talked to Blackstone and said, “Here’s why.” But they’re like, “Well, if I can get a hundred thousand people to buy 10 shares. if we’re right, the stock will go up. The stock is not going to crash, and the stock is better than a $100 just given away to a donation.”

I think that’s a good model going forward to try and cause the CEO of that company, the board of that company, to say, “Well, we have to do more. Our shareholders are demanding more than short-term profits, and in our next investor call, some analysts might say, ‘Well, I’ve got a question about Year 8 in your projections,” And that’s what has to happen, and that’s the sort of the blood and guts or the nuts and bolts of turning capitalism. I doubt you’d find an analyst on Wall Street who doesn’t have a methodology [00:36:00] for trying to address the cost of ignorance in de-carbonization.

Joe: No. I love the story you just told about the 3-pronged approach that Engine 1 took.

Last question. In looking at boards of directors, how can they put pressure on their company to take a longer view in how they’re running the company? And specifically, when companies we’re saying Exxon, as an example, I’m not accounting for the risk they’re taking, whether it’s through their audit committee of they have a separate risk committee, but they’re not accounting for the risk that, as you said, having a total fossil fuel program might be. How can boards put pressure on senior management to do that, to stop taking the short-term and to look long-term and to [00:37:00] take into account and report on risks that might arise from the type of strategy that they have used for years that are continuing? ,

Bob: I was probably further over to the strategic side as an executive, and I was fortunate I had a great team and they would remind me that someone had to dot the I’s and cross the T’s. But I always thought my job was to make sure our business survived and thrived and earn better than market returns, but when you’re running the shop and it’s like you got to make payroll every Friday and you really should check in to see if big customer number one paid on the fifth of the month like they always do. And if they didn’t, I better go get my line of credit. The CEO often has to be totally engaged in the moment.

But in the boardroom, [00:38:00] the board is best to help the CEO put that in the drawer for a couple of hours and say, “Let’s just assume that all those exigencies happen next week and then next month and the next four years, you’re going to handle because you have for 15 years, so let’s talk about where we need to fly this rocketship to that’s going to be of more value to our customers, either in the product and not be a commodity to earn a better price so we can make a better profit and reinvest in our company. And number two, position ourselves so our competitors, current or future, have a harder time by taking a bite out of us.”

If I were advising a board member, I would say spend the time with the CEO to say, “Where are environmental social issues going to impact our ability [00:39:00] to deliver a product that’s of increasing value to customers or going to put us at an advantage or disadvantage to our current or potential competitors?”

In that way, introduce to my CEO two things. Number one, yes, there are exigencies in the business and maybe asking our suppliers to tell us how their supply chain works and cut carbon by 10%, seems like a distraction, let’s turn that around and let’s visit it and say, “How do we make all of this into an advantage?”

that would be the kind of discussion I’d ask boards to foster with their CEO like, “Yeah. I get it in the short term. It might be a little bit of a hassle. There might be a cost, but what are the winning strategies associated with changing the direction of our company, and how do we implement it through [00:40:00] the organization? Is it sales? Is it marketing? Is it operational cost reduction?” And just make it a central part of the business’s long-term strategy.

Joe: Thank you.

Bob, it’s been great speaking with you. Thanks for joining us today. And thank you all for listening to On Boards with our special guest, Bob Rosenfield.

Raza: We have a request for our listeners. Please take a moment to rate and review On Boards Podcast on Apple Podcast if you enjoyed listening to it. It really helps others discover this podcast. Also, you can visit our website at OnBoardsPodcast.com. That’s OnBoardsPodcast.com. We’d love to hear your comments, suggestions, and feedback.

Joe: Please stay safe and take care of yourselves, your families and your communities as best you can. And Raza, you take care, too.

Raza: You too, Joe.

Joe: Thanks.

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