- Sustainable Finance Solutions
- Sustainability Perspectives - ESG Podcast by Refinitiv
- Episode 69: Investing Impacting Humanity: The Path to a Cleaner Electric Grid
Episode 69: Investing Impacting Humanity - The Path to a Cleaner Electric Grid
Today, we introduce the Founder & CEO of Humankind Investments, James Katz. Humankind Investment's mission is to invest and encourage others to invest in ways that are best for humanity. James and Keesa talk about where we are in the journey to a cleaner electric grid, his thoughts on the first 100 days of the Biden-Harris Administration, the impacts of cryptocurrency and the future of divestment.
Host: Keesa Schreane
Guests - James Katz, CEO & Founder of Humankind Investments
Keesa: today we're speaking with James Katz, founder and CEO of Humankind Investments. He's talking to us today about how close we are to a cleaner electric grid, thoughts on the 1st 100 days of the Biden-Harris Administration and the future of Divestment and exclusion-based roles. James, welcome to the podcast. So before we get started, tell us about what makes humankind's quantitative approach unique.
James: Sure, so humankind investments we do a lot of work into and we do a lot of research into how all these different socially responsible concepts relate to one another. And that's something that I think is quite different from what happens in many other research shops so. Very often I think you would have a client come and say, oh, you know I don't like tobacco. Can I have a portfolio tobacco and you say OK great short here you go or another client might say oh I really care about climate change and give me a portfolio that relates to that. The manager can say yeah, sure I can do that. But how many managers can even try to answer the question? How many cigarette smoke equals one ton of carbon emitted? So just to give you a basic example, that's it. That's what we're trying to do. Is humankind investments. We're spending a lot of time trying to make these different issues come parable. And we think that that provides a pretty big benefit, because very often I think. Clients are even confused from the start about trying to figure out which issues should be prioritized in a socially responsible portfolio, and if we can't make these different issues compatible, we can have an answer as to which issue is sort of more important than another, or how they should. They should be weighted in a portfolio, So what we do it at humankind investments is. We try to put a dollar value on every impact that a company has on humanity. So we look at value for investors valued from ploy ease, value for customers and value for society. We try to put a dollar value on all these different impacts of profits, economic concerns but also value human life. Are these products making people sick or are there byproducts of the production process that are? Maybe polluting the air causing increased medical bills for whatever reason. So we try to put a dollar value on each of those different impacts. We add them all up and then for each company we end up with what we call a humankind value, which is meant to represent the total value that a company creates for humanity. And then we wait to the companies in our portfolios. On that basis.
Keesa: So when you're doing that work, are you using, say, the GRI framework? Is this completely proprietary? How is that? What do you take in in terms of those external frameworks and standards versus what you're doing that is very unique to you?
James: I'm is pretty proprietary, so we look to the scientific literature to see what the researchers have found in terms of the impact of all these different issues. So there's all kinds of research on different economic and social impacts of climate change. Tobacco breastfeeding substitutes wage that. You you name it, we we kind of put we put a dollar value that in part comes out of what the scientific literature is saying. So we try to find the most cutting edge scientific research we look at the impact that scientists have found and then we try to make we have to do some additional processing so that the issues can be made compatible. What we find is after having done that work you end up with something that I think is really unique.
Keesa: Especially when you're looking at an industry making sure that the measurements, the metrics there are comprable. Let's talk a bit about your thoughts about exclusion, divestment. Many investors or belief that it works better to really partner with companies to understand what their strengths are, understand what their plans are as opposed to investing or using exclusion-based rules. What are your thoughts there? Do you tend to lean toward one or the other? Do you think it's very situational?
James: Sure. Well, I would say is if a company of investor managers say they have their hands tide by mandate, you can't really just divest. Certainly, voting the shares and engaging with the company is the only thing I think that you can do. If you want to try to push some sort of socially responsible agenda forward, and I think that's better than nothing, certainly. But I do think that but by holding a lot of these companies shares, it could be the progress is being slowed. So, in many cases we find in our research is that there are certain companies that have a net negative humankind value, which means that overall there essentially destroying value for humanity. That means after we consider all the good stuff, the profits, employees, salaries and benefits and then even the value of their products and services. Center those are positive at the end of the day we crunched the numbers in it, and we've determined that every year values for humanity is being destroyed, so, For a company like that, but it's kind of hard to justify holding those shares if you come, you can divest and I think I think that if the CEO's of these companies feed that their share prices dropping because people are domestic there, there may be an additional incentive to fair to actually get the company to really change. Quicker way than a sort of more diplomatic engagement might otherwise.
Keesa: So, do you think that companies who have plans to definitely have a definite plan for making change? Transitioning by 2040, 2050, is that a quick change in your in your mind in terms of how a company, particularly a larger global company, could make a change to their climate objectives?
James: also, I have my thoughts on this. I think a metaphor that would use here is imagine you you're living in a suburban environment, your neighbor is is dumping trash into your backyard. I'm everyday your neighbor comes over and dumps their trash into your backyard and you tell your neighbor, hey can you can you stop that? And the neighbor says I pledged by 2050. I will be able to completely stop throwing trash into your backyard.
Keesa: Not apples and oranges? Not apples and oranges, James?
James: If it were apples and oranges. I wouldn't be so upset, but it's trash, then we then we have. Then we have a problem. I mean I think yeah, I do think it's compatible in the sense We did the companies that we're talking about very often are sort of dumping trash into our air, right? Insert into our lungs into our food into the product that we purchase, right? These are things that are happening. I am ongoing basis. I think they just they were not, you know. Normally I think we wouldn't expect a neighbor to the trash into our backyard. So that feels kind of, you know, kind of like a surprising thing. But should I think we should be surprised when companies sort of do the same thing to us? I think they think we should. That should be a very displeasing and upsetting experience, just as just as upsetting as it would be. If my neighbor was dumping trash into our backyard, so I think that we should be holding companies to a higher standard look. I think if they're setting a goal that's better than nothing, but I think that they should really try and be. They should really be suiting up these timetables significantly. Speaking for myself, I guess I'm not interested in having trash down symptom at backyard for the next 30 years.
Keesa: Very good. very good. I know that goals have been very important, not just for the corporate sector but also for the government sector specifically. As we look back over the 1st 100 days of our new Biden-Harris Administration. And there's been a lot of conversation about electric grids, electrification, electric vehicles, EVs, including infrastructure buildout, that would really support having more TV stations. In terms Of the progress that we've seen to date, with the electric grids and the cleaning cleaner electric grids. Would you say that we've made tremendous progress and you can use the same trash in the backyard analogy? You say that we are from a government perspective, a public perspective falling behind in the way that you've just communicated that the corporate leaders in some cases are falling behind.
James: From electric good perspective, I think there's a lot more work to do. Some of the shortcomings of the renewable energy sources that we're hoping to rely on or that they can kind of. They can be unreliable and certain aspects right. The wind is always blowing and the sun is always shining over the winter. Wind turbines and solar plants that that we'd like to use. Having major investment into. Electric grid that could actually store this energy when it's not being. You know when when it's not being used to actually then allow these sustainable energy production sources to be potentially work for the whole country in the sense that even when the sun isn't shining used enough solar energy, you can then tap into that storage during times when. Let's say the sun in shining, or if you start a bunch of wind energy, you can tap into that energy when the wind isn't blowing, and but that does require a huge infrastructure investment. I think the Biden Administration is doing the right thing, at least by talking about it. You know, I think it still remains to be seen to what extent this big infrastructure investments actually going to happen.
Keesa: and do you see that there's a role for the demand? So you talk about, there's a need for it, but do you think we are educated enough as investors and even as retail investors as well as well as additional investors? Are we educated enough on what needs to happen to really demand those things at this point?
James: my dad always had a saying which is like for better there is no limit so you know I'm sure we could. We could always do better in terms of advocacy, spreading the word education, getting people to understand what issues are at play here. So yeah I would. I would certainly say that there's room for growth in that in that area, but it seems to me like there's been certainly today more so than ever as far as far as I can tell, much more support for this than I've ever seen, so I think we're on the right path, but hopefully we'll get there sooner rather than later.
Keesa: Great. And in terms of really making this relevant of the need for cleaner electric grid, I know that the cryptocurrency space has been just seeing tremendous energy lately. If you will, in terms of the rollercoaster ride, let’s get your thoughts. We talked about how the crypto space can really benefit from this cleaner energy grid and so would love to get your thoughts on how it happens? Just talk us through how that happens.
James: Sure, well, the big issue with crypto currencies from a socially responsible perspective is that they take a lot of energy to conduct the transactions they need to do to work as a decentralized currency. So, bitcoin uses massive amounts of energy and because the energy grid is journey still dirty and Depending on fossil fuels using significantly more energy. That means using Bitcoin worth instead of the traditional financial system would be a step down from a sustainability perspective because we would be using more energy to conduct all of these transactions. there's all these new Bitcoin mining operations that takes so much energy to solve these problems of this proof of work. That means that these transactions are secured and that people can actually bitcoins and have them sent around the world that that computational spend is so energy intensive, that really anything that's super energy intensive when you're coming off of a dirty grid is sort of less sustainable than something that takes less energy. So, cryptocurrencies compared with the traditional financial system, it seems, is currently less sustainable. Which is something I think Elon Musk realized just this past week, when he made the announcement he would no longer be accepting Bitcoin, because of the climate concern. Despite him being a big booster of cryptocurrencies in general.
Keesa: Such great information. From really talking about holding corporates accountable and your analogy about trash in the backyard, very interesting. As well as the heading in the right direction around educating ourselves and each other around the benefits of a cleaner electric grid. And making the demands as well as how it impacts, very relevant topics like cryptocurrencies. James Katz, Humankind, thank you so much for joining us.
James: Thanks so much for having me.