Where do consumers look for ESG investing info?

Social media, corporate websites, word-of-mouth ... It's the Wild West out there for consumers in search of ESG investment data.

Craig Martin, Managing Director and Global Head of Wealth & Lending Intelligence at J.D. Power, shares the key takeaways from a survey his team conducted about where consumers seek ESG data and how they prioritize various ESG topics. Which aspects of environmental, social and governance practices are nice-to-have ... and which ones are non-negotiable?

Craig also explains how the lack of standardization when it comes to ESG data and the absence of trusted and reliable sources represents an opportunity for financial advisors, who might be able to enhance the service they provide by helping clients separate the green from the greenwashing.

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J.D. Power - When It Comes to Corporate Environmental, Social and Governance Efforts, Americans are Searching for Answers

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Transcript

(Note: This transcript was created using artificial intelligence. It has not been edited verbatim.)

Colin Hogan  00:14

Hello everyone and welcome to this episode of The Modern Money SmartPod. I'm Colin Hogan 

Sean McMahon

And I'm Seann McMahon. 

Colin Hogan

So far with this podcast, we have focused a lot on the institutional side of sustainable investing and how companies and markets will be affected by the developments from Cop26. Now we want to take a look at ESG investing through a different lens that have investors in specifically individual investors who are proving to be a rising force in markets.

Sean McMahon  00:43

Today, we're gonna be talking to Craig Martin, the managing director and Global Head of Wealth and Lending Intelligence at JD Power. His team recently released results from a survey about how retail investors view ESG and which individual environmental, social or governance issues they prioritize when making investment decisions.

Colin Hogan  01:01

We'll also talk to Craig about where individuals can find data to help them make their ESG investing decisions, and the challenges companies face in claiming ESG labels as investors and authorities alike grow increasingly vigilant toward greenwashing.

Sean McMahon  01:18

Craig's insights also highlight how the trend towards ESG investing represents a massive opportunity for financial advisors who might be willing to help clients sort through the murky waters of ESG data. But before we get things started with Craig, here's a quick message from the exclusive sponsor of today's episode: ICE.

Advertisement  01:35

Environmental, social and governance issues are in the spotlight. Investors need the markets, data and indices to understand how their decisions impact the planet, people and their portfolios. ICE provides data, markets and analytics to help you measure performance, manage risk, and connect to opportunity. For more information, visit ice.com/ConnectToESG. Or click on the link in the show notes.

Sean McMahon  02:04

Hello, everyone. And thank you for joining us today. Colin and I are very excited to welcome our guest, Craig Martin. Craig is Managing Director and Global Head of Wealth and Lending Intelligence at JD Power. Craig, how you doing today? 

Craig Martin

Doing great. Good to be with you guys. 

Sean McMahon

It's great to have you. So Craig, one of the reasons that call and I decided to bring you in is because a lot of the shows we've had so far we talked about the complexity involved with ESG investing, right. And it's complex for institutional investors, you know, professional investors and corporate, they're trying to do all the reporting. But part of the purpose of this podcast is to try to look at finance from all angles. And so we've got to look at it from the consumer side or retail investment side. And it seems like ESG investing and how an investor can find all the information they need, will be incredibly hard. Like I said, the professional investor is having a tough time doing it. So you in the team, a JD Power did a survey and you put out some article and it shared some insights from the results of that survey. It's called “When It Comes to Corporate Environmental, Social and Governance Efforts, Americans are Searching for Answers.” And so we're gonna include a link to that article in the show notes. But it sounds like you and your team have done the research. So where do investors get data for ESG investing?

Craig Martin  03:09

That's a great question. We asked that question of where people are looking for information, two things stood out. So first, we asked how easy is to find information. And one of the answers that kind of stood out was about a third 29% of respondents said, they don't know they haven't really looked for this type of information. So that was noteworthy in that consumers may have be forming judgments, maybe forming their opinions, but they're not really sure where to look. And so that was kind of one of the things that really stood out to us. But then when we look at kind of warehouse, the number one answer was social media, followed by corporate websites. So 42% Social media, kind of the Wild West, if you think about it, there's lots of opinions lots perspective, not always lots of facts out there.

Sean McMahon  03:56

Greg, are you suggesting that social media is not the most reliable place to go seeking investment advice?

Craig Martin  04:02

Well, you know, as much as I would say that social media has some interesting things on it kind of videos and the like, probably not necessarily you're never want to answer for where to find your investment choices for the future. It really is, if you think about it, you know, so much energy and effort is put out there to share opinions. And you know, ESG is a challenging topic to begin with. So when you're being kind of from barded, by people's opinions that oftentimes have no basis in fact, I mean, I won't get too too far into the any political debates, but it's very clear that there are strong opinions and a lot of misleading information that's shared, not for the intent of helping consumers make informed choices on social media. So again, kind of a potential danger that that's the place that people are starting or saying that they most look for information about what organizations are doing on ESG

Sean McMahon  05:01

So you mentioned the top two sources for social media and corporate websites, one of the sources of information are investors turning to seeking ESG information.

Craig Martin  05:09

So we're seeing them go to certainly the traditional outlets like TV, newspapers, magazines, word of mouth. And you know, I think another key area, particularly for those investors who have financial advisors, they're turning to the experts. So they're looking for that guidance. And if you think we actually have a survey the advisors about their work with asset management firms like BlackRock, Capital Group, etc. And we're seeing that that group of financial advisors actually indicate that ESG is the number two topic that they're focused on when they're considering where else they're going to work with, you know, where else they're going to place money. So, you know, I think what we're seeing is that consumers are turning to experts, certainly, you know, that they're paying attention to various outlets and kind of sourcing lots of different information. But they're also really looking for expert perspective. And that's, you know, in the financial advisor, and their decisions about where they're going to invest is going to be influenced. And they Yeah, I think that when it comes down to is, the investor is going to say to the advisor, these are my requirements, this is what I care about. Now, I'm going to put you on the hook or you're responsible for taking care of and ensuring what I'm investing is matches up to my needs and wants. So I think that's increasing demand on that marketplace in the in the investment community to support consumers and provide that information and product to meet those needs and wants, in terms of their personal beliefs.

Sean McMahon  06:41

That sounds like great news for all the financial advisors listening to this podcast,

Craig Martin  06:45

a little extra work for everyone a little extra demand. But I think, at the same time, it also demonstrates value mean, what one of the things we've seen with the financial advisor is consumers are more and more increasingly questioning what's the value of an individual visor. And that's not to say they're doing a bad job by any stretch. But there's a changing and evolving expectation of the value proposition. So this is a great way for you again, to demonstrate we understand you there's a personal connection, it's a relationship, it's more than just, you know, I'm here to pick your stocks, but rather, helping you to align to your beliefs and actually achieve your personal goals. And that's fundamentally that really effective financial adviser is that consultative and achieving that level. So this could present a new opportunity for a lot of advisors that may not otherwise exist, when you're strictly talking about picking stocks, and that I think that difference of customer and their opinion, really could be impactful going forward.

Colin Hogan  07:48

So what's the availability of this data, like for an individual investor are some kinds of data within the ESG world easier to find than others? Yeah, I

Craig Martin  07:58

mean, I think the easiest are kind of most front and center information tends to be the environmental in those are pretty well documented, I mean, that there's a lot of technical things you can look at. So things like Le the certified buildings, recycling programs, I mean, I, we spent a lot of time going into corporate offices, or we did pre pandemic, and the first time you walk into a building, and there's no cups, and you can't get a cup of coffee, you start recognizing there is something going on, I mean, some major financial institutions, you have to bring your own cup, or they give you a reasonable cup for things like that. So there's a lot of bigger actions that can be taken, you can you know, in spotlight, whether they're investing in, yeah, they've got a fleet of vehicles, they're using electric vehicles, I would say that things that are social responsibility, those tend to be a little bit more local, they still tend to be front and center. So it's things like charitable donations, corporate staff participate in civic organizations, a lot of that gets promoted and kind of what their activities are. But that's a little bit more challenging. And again, like I said, it tends to be a little more localized. Because, you know, if you think about a large corporate organization, how do they align two different entities will depend on their company, and then governance, a lot, lot less overall. So that's the easier things to find that the the, I guess technical check the box type of things. And that's not to say they're bad. Those are very, supporting the local baseball team. Yeah, the kids softball team, things like that. It's great. But if you think about larger actions and activities, it's gonna be a little bit more difficult to find. And a lot of what you find is that you're relying on the corporate organization to communicate that out. There's no requirements, there's no standards on those sorts of things. So when they share that information, that is their choice to disclose, and that's, if you think about more broadly what even the the Investment Committee At the professional investors, they're relying on publicly reported information. So more and more we are seeing that become central to what they're doing. So they are demanding more of that information. But it's interesting, I actually received something today, from a company we work with a major financial institution asking us to report par, social responsibility information is specifically environmental. But we're finding that again, more and more, it's kind of, I have to disclose someone else has to disclose, you're still reliant on what information is being shared. So while it's certainly valuable information, it is dependent on my choice to report or not, I think the Wall Street Journal did a ranking, I want to say it was nine months ago, and then they redid the ranking. And they, they dropped Apple because Apple didn't report certain information. So they stopped reporting it, but the information was not out there. So they can't get it from anywhere else except from the company source.

Colin Hogan  10:55

And so what do you see from investors in terms of which category? You know, environmental, social, or governance is the most important, what are they most focused on right now.

Craig Martin  11:06

It's interesting, I think what we've seen the most of is environmental. So we asked them to take and basically allocate 100%. So if you if your rating II, S and G and distributing between those two, in terms of importance in the three categories, we found that environmental was 38%, social was 32. And governance is 30. So what that says a little bit outweighed on the environmental side. And I think you can part of that comes down to just your ability to process it. I would say environmental, while you can debate it a little bit, doesn't tend to be as as much of a point of contention as some of the other issues. I mean, what is your social issues, you can take, you know, one or two sides on that. And it can be pretty, you know, extreme differences. And there's not necessarily right or wrong. If we talk about, Hey, should we treat the environment? Well, you don't tend to have a lot of people saying no, let's go pollute? No, let's, you know, ignore those. Now, there's can be different views on kind of what the impacts are, and some of the different elements of it. But from a grand scheme of things, you don't tend to find that, you know, people go, Hey, let's just ruin the environment. There's no one making that stance, it's usually just a difference of opinion. So I think from that standpoint, there's a little bit more of a right and wrong in the average consumers mind and most are generally supportive of conservation and positive kind of treatment of the earth. And it's like that. The other I think, part of that is environmental. Yeah, there's very clear consequences and impacts to a business. So yeah, just from a financial standpoint, you know, the cost of if there's damaging environmental impacts, cleanup costs, things like that. It's a pretty tangible thing that can happen to accompany with that. So I think from for those reasons, we do see that to get a little bit higher rate, but it's still fairly equally distributed. There's not a overweighted, again, ESG environmental leads, but I think the others are still important, fairly strong for for most consumers.

Colin Hogan  13:10

Are there any kind of specific issues within the s or the G within social or governance that that are kind of hot with investors right now that are kind of gaining more focus?

Craig Martin  13:21

So when we asked we asked, not what, is there anything that's non negotiable? And I think what we're hearing right now is certainly fair wages employee, I mean, with a great resignation, it's becoming even more front and center. It's people are really focused on human rights, pay quality, those are those some really big hot button issues for people saying, they're, they're kind of reassessing their life, and you know, what they're involved with. And I think there's, especially with young, younger generation, there's this desire to be part of something bigger part of you on something more and you know, I think trying to get more out of the working life that they have, if you think about it, many people are, you know, their affiliation with organizations, and what they do for a living is the majority of their life. I mean, 40 hours a week, yeah, heck, a lot of us dream 40 hours a week. But if you're spending that much time, energy and effort with an organization, you want to make sure it's meaningful to you. And I think the same goes for if you're going to give them your money, if you're going to give them your your business and or invest in them. You want to make sure there's an alignment there. So we definitely the top ones certainly equate to fair wages for employee and that's that's the number one answer and then human rights is short laughter and gender pay equality was the top three. But the interesting thing on the non negotiables, only seven and a half percent of people said there's none of the options we gave and we gave a list about 15 to 20 different things. There was no non negotiables. So what that tells us is everyone has something that they really care about. Now, there may be multiple things, but if they if you Think about organizational alignment. And that's, that's, you know, when we asked it, it was what you work with them, it's your work, it's your investments, it's your business, you know, binding Trump, something matters to everybody. And therefore, you really need to think of you know why ESG is so important is because it really does come down to how do people get involved? How are they going to be perceived? And then what's the impact? I mean, environmental, certainly, with the recent summit has started to come more front and center. And that's not to say it's not important by any stretch or not as important. But I think if you think about the human side of it, people can definitely empathize more directly, it's, Hey, I want I would if I was in that position, I want to have a fair wage I don't want to be, I'm not going to buy things when you're doing child labor or other things like that.

Sean McMahon  15:49

We're going to take a quick break. But when we come back, we'll hear more from Craig about why the boom in ESG investing could translate to a boom for financial advisors.

Advertisement  15:57

Environmental, social, and governance issues are in the spotlight. Issues like climate change, diversity and data privacy have growing influence across the investment cycle, from assessing exposure to allocating capital and achieving sustainability goals. Investors need markets, data and indices to help them understand how their decisions impact the planet, people and their portfolios. ICE provides quality data, analytics and markets to help you measure performance, manage risk, and connect opportunity. For more information, visit ice.com/ConnectToESG, or click on the link in the show notes.

Sean McMahon  16:41

And now back to our conversation with Craig Martin, Managing Director and Global Head of Wealth and Lending Intelligence at JD Power. 

So Craig, I got a question here, you know, looking at the data, and like we talked about, you know, when you look at the big buckets of E, S, and G, you know, investors preferences are the most important one of them was, you know, environmental at 38%. But then when we dig into the non negotiables, the top three non negotiables are social, right? Environment comm checks in at fourth. So does this ebb and flow? You know, you mentioned the cop 26 summit, so it can this kind of, you know, if there's a huge natural disaster, then people are all about environment. And if there's social unrest, you know, to George Floyd and things like that, suddenly, it's social things like what does it look like in terms of ebb and flow of consumers priorities here,

Craig Martin  17:24

I think what it comes down to is what's front and center and the media can have an impact and bring topics to the forefront of consumer for consumers. And they're, you know, that the actions that they may take become more overt, so they're actually spotlighting it. And, again, when it presents an opportunity where extra attention is on the topic, it consumers and organizations may feel compelled to be more public, or or at least comment or, and are kind of put in a position where it's front and center. That said, I think the underlying beliefs tend to exist and aren't necessarily changing with the new cycle, but instead are just amplified. So if you think about, again, social unrest, or if it's environmental situation, it spotlights it, and it gives an opportunity, but I don't think that changes, you know, someone's belief that it's right or wrong, or it will change some IV CMA, I think there is that moment in time where someone, obviously all the things come together. But it's kind of like, much of what we've talked, I go back to customer experience is a topic that we look a lot at JD Power. And what we talked about frequently is, it's rarely one thing that causes a consumer to say, I'm, I don't like you, and now I'm going somewhere else for business, and I'm not going to do anything more with you. It's not one individual event, it's not one of visual experience, but rather that combination, and I think same thing goes for, you know, consumers beliefs, it builds up over time, you know, I'm exposed to these things, I experienced that. And then it may be a seminal moment where I come to that conclusion, or I actually feel compelled to speak or act. But it's not that you didn't feel that way before you didn't have those beliefs form. It's just that, you know, again, those trigger events, may crystallize it or just gives them in many cases, it just gives an opportunity to voice that which you already felt. And I think that's what we're seeing in the data is people feel a certain way they they think a certain way. And then when they're put on the spot, or they feel like that situation requires them to do something that's when they do act, but you get I don't think people's opinions change about these things or really evolve or they do evolve to they haven't really been changed by the media cycle or something that's going on.

Sean McMahon  19:48

We joked earlier about investors going to social media for information right now. That's the Wild West. But are there any reliable sources out there for consumers who are seeking ESG investment data because we also talked about them going to the websites have individual corporations? And I would contend that perhaps that's not the most objective source of data either. Yeah. So you know, when I want to buy a refrigerator, there's websites, I can go to that have all these reviews, I want to buy a car, same thing. Are there any reliable sources of data that investors can turn to?

Craig Martin  20:16

Yeah, I think there are lots of sources of information on ESG. But there are kind of some underlying challenges to that. I mean, one of the big problems, or I call it a problem, but you think about ESG. many regards, the topics are subjective. And that's why social media kind of is a factor, but also is a challenge. And that while we all may be able to agree on some basic ideas, like, you know, you shouldn't use child labor, or there's a lot more gray area, when you wade into these topics. And so, if you think about what is reported, and again, that's all these sources are coming from disclosures, or it's done voluntarily. So if someone can pick and choose what they share, and what they spotlight and even then you have to interpret that. The other pieces if you think about it, while I would say the large corporations that are public, that then tend to be front and center, if there's a big spotlight on them. So they in some ways, are providing a lot more information than that there's a lot of non public companies. So they don't necessarily have the same required disclosures. And they, while they might choose to promote their activities and actions, they don't necessarily have to do that. And so right now, in the US, at least, there's a lack of clearly defined standards. So it's somewhat difficult. And I think the best sources I've seen, that you've got publicly, you can look at a lot of these rating agencies and the good news, there's, there's a lot of competition, so better information that are content, and they've all got their own proprietary methods. So yeah, I think that's if I'm thinking about where do you go? First and foremost, you know, the reporting agencies and you know, it's the MSC eyes and things like that. There's a service or a company called csrhub, who actually aggregates data. And we're seeing more of that, where there's never going to be a right answer, so to speak, in ESG, but the ability to aggregate lots of different data sources, and that includes ratings from different sources, like, you know, a JD Power source, but also could be at getting customer reviews, it can be they're reporting on their environmental activities, and a lot of that comes from corporate disclosures, more and more, there's becoming standards, or there's a move towards things like environmental standards, and what you have to, you know, if you're going to claim certain things, you have to report that a certain way. Certainly, there's millions of records, a lot of the new data that's coming out as entities that are actually scraping the internet, and collecting all this data, and then combine it together. And I think that's the really interesting part of this is, you're starting to say, how to use big data as an aggregator to really understand it. I mean, today, I don't know that you get there's lots, there's hundreds of tools and sites out there. And all these rating agencies. Again, MSCI standard libbets rep risk. But you know, part of this comes down to it. Again, I mentioned this before, it's opinion in many ways. So what is good social responsibility, and what's not good social responsibility? Part of that depends on your social beliefs. If you have more conservative beliefs, or more progressive beliefs, what may be a good rating might be variable. And I think that's some of these tools now, are enabling you to apply those kind of filters. So you can say, this is what I believe, and therefore this is aligned to what I believe. But yeah, I think that today, you know, do I what I say there's, here's the the silver bullet tool, I don't know of one that I've seen that really is the one answer to everything.

Colin Hogan  24:02

So with this lack of standardization, then what are the corporates and what are financial services firms using to kind of measure their ESG performance at this point.

Craig Martin  24:15

So most of them are using these rating agencies. So if you think about it, it's just like sock ratings. And if you think about what's a good stock to buy, is there a definitive answer on that now, you've got a bunch of analysts that are out there measuring, reviewing, assessing and giving their opinion based on what's shared? And so in many regards, it again to think about it as bad data or good data is, it's not really, you know, fair to say, because if you think about Mike Mayo at Wells Fargo not too long ago, put out, you know, a big report on ESG and its impacts and the importance, and he called out the same idea, which is, again, you've got lots of different sources. So if you think about a Sustainalytics it mean that there's a great deal of impact. And they're collecting that they're essentially sourcing lots of different information to assess these organizations. And that's the best we have at this time, I would say is that you've got, you know, again, the competitive nature, I mean, you're talking, Moody's, you're talking s&p Global. And that's what they've done. And that's kind of the nature of their business. So, you know, to say it's not good is not accurate. But there's also no standards, I would say, for like defining what's the best stock within a sector, I mean, that's really up to the opinions and beliefs of the analysts, and based on different data points that they think are going to determine winners and losers on that front. The other thing about that, if you think about where they're at right now, the focus of ESG, from an investment community is the impact of the business. So from their standpoint, it's long term risk, and they're looking for as much information and so if you're less transparent, if you're less forthcoming, that will bring doubt and concern from an analyst who's then gonna downgrade your stock potentially, for that. So there is a I think just the fact that the investment community is focused on it is demanding the information and better information and more transparency, gives them greater confidence, and therefore their stock ratings and their Buy and Sell, sell choices are going to be impacted by that. That's a good check and balance on this, you know, again, the quality of the data that they have to go off of is improving. And there is a lot of efforts and push towards more standardization. And a you know that the European community has gone further along this line, and defining some of that, and, you know, would anticipate that in the next few years, we're gonna see more of that in the US. But I think for now, it's, again, having all this competition does help to create that kind of elevated, you know, focus and energy, because in the end, it really is about how does this impact the business. And if it's, if people are, you know, consumers don't buy if there's more cost to doing business for a variety of reasons, if they're investing in things that long term aren't healthy for the organization, that brings to light kind of a problem for the business model. And therefore, it's bad for the stock price and for the investment long term.

Sean McMahon  27:22

So I wanted to expand a little bit on what you're talking about earlier, in terms of for some companies, you know, whether or not they have a high ESG ranking is in the eye of the beholder, right, but depending on that individual investors beliefs. So with that in mind, and kind of thinking about the basic history of ESG investing and how it kind of all got started, what's the biggest challenge when it comes to establishing ESG rankings?

Craig Martin  27:42

You kind of hit on it, if you think about, one of the questions we asked in our survey was you name the top three, and the bottom three, in terms of ESG, from your perspective, and what we found is that you had, you know, the ones who are top in one's list are the bottom of the others. So something like an Amazon, or Facebook, or a Chick fil A, again, how do you subscribe to those beliefs. I mean, if you go back, if you think about the concept of ESG, our Yeah, you can also turn it social responsible investing, it goes back a long time. I mean, it's the the churches really, in many ways were the starting point of this is they had a massive wealth, but they have a certain core set of beliefs, and they want to restrict their investments. So you know, again, these large institutions are collecting money, they have to put it somewhere they put it into investments, but then they're going to say, but we're not going to support alcohol, or tobacco, or gambling or weapons or other things. And so they make choices about what companies can invest in. And I think you'll get if you think about it, people are always making these choices. Now, it's more overt now. And it's in some ways, it's the peak or the positive end of of all of that development over the years, me, you may say, I'm not going to invest in a company that supports alcohol. That's your belief, you say I just don't Yeah, I have a core belief and not drinking is bad or whatever. So you're gonna avoid those stocks and companies and even funds that support that. We've seen it play out. So I think people will kind of assume that this is a new thing. It's new in the sense of it's gotten the term and it's actually been coordinated, but it's really not new. I mean, there's political investing or choices and political pressure in that in that usage of my investments are going to be adjusted based on what you're doing and your company and what you support is going to be key. But like I said, the like, you know, that the problem becomes is I have to make a choice at some point. And you know, again, if I say you know, you're By put 100 point scale and say your ESG rating is a 90. Why is that, and if that company over here is a 60, it may be a function of their social beliefs because I, I support certain people's rights. And, you know, someone else disagrees with that. That's a personal belief. And so we are seeing more and more the challenge that comes out, I mean, you will get someone like an Amazon and they've done a lot of it, advertising it heavy on the environmental. I've seen something recently they I think it was an Amazon commercial where a gentleman whose work is in the Amazon wanted to become a nurse and they were kind of encouraging his life dream and it was kind of a connected to that social and, and positive angle. And at the same time, I think many people would also get there I live in Alabama, and yeah, the the push for unionization at their plants, well, they're certainly they were against it, and that, you know, pushing against it, and again, not making a judgement. But again, that causes you know, yet people are gonna fall on different sides of that. And as a result, their view of how truly like oriented on ESG will differ based on their position on on different matters. And that really makes it challenging to say this company is good ESG. And this is bad ESG, because it really is you almost have to have different lenses or windows through which to look at the data.

Sean McMahon  31:28

So real quick, I want to just circle back to the article, the insights from the survey you conducted, we've already touched on which of the the SMG investors value most, we talked about the non negotiables, I found it fascinating that 7% of the people have nothing that's non negotiable. But are there any other little nuggets in that report that you found fascinating, you know, we've covered the highline stuff, what else is in there that might be of interest to our listeners?

Craig Martin  31:51

What was interesting to me is everyone feels that company should be involved. But to what level? It is, I think, interesting point to what's going on. Because what we asked is that basically took the Milton Friedman, the company has no social responsibility to the public or society, it's only responsibility to shareholders. And we asked that question. And, interestingly, only 8% strongly agree with that, which means most and actually about 70 over 70% disagree or strongly disagree, this old mindset of firms are here to make money. And that's all they're there for. That's gone away that old idea of, you know, the corporate standalone, and they can do what they want, just as long as they are meeting the corporate need. Not that that's a perfect answer of what you know, Friedman was really going for, but it's interesting how they kind of split up on that, and that you get the most people say, no, they have to have to kind of find the right mix. And then we asked them about oversight. So I mean, most people would say, I think over the years, like you got a lot of people will feel pretty strongly one way or the other on government involvement. And, you know, like, how should their activities be regulated? And when we asked, the vast majority, said that we gave them kind of a scale of let the market sorted out, don't have the government involved at all. And then completely regulated, heavy hand. And what we found is that pretty much people land in the middle, they go, government needs to be involved. And so it's about two thirds about 63% said, it's a mix of market forces and government oversight. I think the one other thing that I find interesting is, I think there's an assumption sometimes that customers are not acting or behaving a certain way, that's an indication they don't really care or it doesn't really matter. And I think that's actually a false conclusion, based on data. And in one of the things that we saw in the data that when we started cutting it by different segments, we found that part of what drove the actions is the wherewithal or the means to do that action. So if I'm wealthier, I have the financial means to make certain choices, whereas consumers who may not be as affluent might not have the financial means may want to act in a certain way, may may truly want to whether it's social or environmental, they, they believe it, they would act that way. But they don't have the financial means to change that behavior. So again, if it's going to cost them three times as much to buy that organic apple and they have a regular apple in front of them for a third of the cost. They may choose that regular apple. It's not they don't believe in organic farming or any of these other things, but they don't have the financial means to make that different choice. And I think that's an important point is it just because people aren't acting a certain way doesn't mean they don't believe it. It's, again, there's always going to be a trade off and at some point If you can drive down the cost or support that ability to do what people really want, it will allow for that. And again, it's it's more barriers to the in the system that are built up rather than actual consumer choice or preference that that is preventing kind of some of the actions that we see.

Colin Hogan  35:20

So Craig, what advice would you give investors who are trying to avoid investing in companies that may be greenwashing?

Craig Martin  35:28

I think, partially, the first thing you need to do is understand your priorities. And your non negotiables. I mean, just just like we were talking about is, what is critical to you what's important and and why? Because it's really, it's almost impossible to have good information and everything that could be covered by that VSG headline. So yeah, if you want to avoid greenwashing, or avoid, kind of getting engaged with a firm that that is doing things against what you wish, you have to understand what your kind of thresholds are, as well as kind of what your priorities are. And I think once you have that clear, then you can seek out sources that are focused on those topics, specifically, because there's a lot of great information out there. But if you're literally trying to say, boil the ocean and figure out every last thing about an organization, you're gonna be overwhelmed. There's just so much data, so many different ways to look at it. I think the other piece of that puzzle is, you know, again, this kind of goes back to that non negotiable piece. If there's certain things you say, what is a comfort level I have with what these what they're gonna do? If it's environmental, what are the things that you would tolerate? And what you feel is is a non negotiable? You even think about what are they doing today? And what are they focused on for the future? I mean, while there's a lot of push towards, whether it's electronic vehicles, or is renewable energy, I would say most firms right now the source of the electronic power, and and all these things somewhat limited. So if you're thinking about what can they do today, it's even constrained by what's in the marketplace. So how much is it, they're driving towards the future that you want? So to say, I won't have any interactions, or I won't work with these companies? Or I won't, I won't do business with Amazon, or, you know, whoever it is, a big part of it comes down to what are the most critical priorities for you? What are those items, and then you can start to find the sources of information that really bring out kind of that key key information. And I think that's it again, I've mentioned this company before csrhub does a good job of aggregating information. And one of the things that they've done is they allow you to score based on lots of different pieces of information. And so if you say I want to focus in on environmental as the most important thing, narrowing in on that you can really understand what are those critical non negotiable things? And and not maybe get lost in some of the the minutiae that can cause you to become overwhelmed. And it it can even even if it's not, it can feel like greenwashing or you can people are trying to make you believe a certain thing. I think that's fundamentally that the most important part of the process is really understanding what what your priorities are what's most important to you, because it, there is not going to be a perfect answer. It's very much a gray area of gray when you think about all these topics.

Sean McMahon  38:33

So Craig, what does this all look like in five or 10 years? You know, has the ranking thing been sorted out, you know, to someone like, you know, Larry Fink at Blackrock kind of just there's a lane for his firm to kind of come in and start anointing which funds and which firms are best, or, you know, what does the landscape look like in five to 10 years, for consumer investors going to be looking for research at that time?

Craig Martin  38:51

I'm optimistic, you're gonna have a lot better information may I think, if I was to guess, there's lots of different factors that play into this, but there'll be some standards, in terms of what information is being reported what information is being shared. When that happens, then you have kind of, much like accounting standards, you've got rules of the road that people have to follow in, and, you know, when they're making claims, you know, like a lot of things that the government has overseen, having that structure will be important. And I think that's coming and I would anticipate in the next 510 years, we'll get some more formalized standards when you're making claims. It's kind of like things that are certified organic or any, any of those other labels that we are so used to now our calorie counts and things like that.

Sean McMahon  39:40

Are we gonna have cage free investment opportunities? You know, I wouldn't be surprised grass fed and cage free.

Craig Martin  39:47

Yeah, no. Well, I think you will start to get that where when people start to define things and claim certain things. There's going to be a breaking point where people say I need this needs to be verified, there needs needs to be some kind of requirement, a minimum standard, when you make these claims, corporations are starting to recognize the power that consumers have. And that's the other side of it as much as the government or regulatory side of things, people are going to start demanding. Prove it to me, show me the facts. And if the answer is okay, I've got, you know, like 1000, page disclosure, it's not really going to cut it. And so again, the combination of technology and you know, whether it's AI and machine learning and the power of that data, to source all this information, combined with, I think that I do think one of the things about where we're at right now as as a society is, consumers are more empowered than they ever have been before. And so the claim that they're going to be giving business and acting in a way we looked at it, and I think it's around 69% of consumers said they had made purchase decisions based on one of these on the ESG factors. So people are buying or not buying or, or switching, and making changes based on these factors. So for it to be that high right now, I think it's only going to increase and therefore, people are going to continually when they start making those decisions, they're gonna be looking for more information. So, again, I think what you'll see is an increased level of information, increased standardization from the government to say, if you're gonna make claims, or technical definitions there, and then again, you're going to start seeing people moving, I'm hearing more and more ads, you know, listen to NPR, you'll hear ads for a new fin tech startups and things like that. I think, once they make these claims, at some point, someone's going to challenge it and say, okay, you've said you're doing these things, you claim your business is oriented this way. I need to see the facts. And so I think there you again, it's, it's going to be a trust and verify type of situation, and more pressure will come to bear. And yeah, I think the internet has as its flaws, but it's the it's so easy to find information and go to different sources. And again, I think that's that's going to be the power that you can, technologist. So moving so rapidly, you're going to see that so I think there's no going back in terms of the ESG I don't think we'll we'll have BlackRock and Larry Fink and others, you know, be taking over? I don't think so. I think the consumer in many regards, is going to dictate what they need, and what kind of information they're going to demand. You know, yeah. Are they going to have all the fine print? Probably not. But I think there's going to be a lot more good information. And a and like I said, I was almost a little bit surprised today when I saw it. Because, you know, again, you can think about the nature of the relationship JD Power has with many of these, you know, large institutions. Again, we're a partner for guiding them in customer experience, but they're asking us about what we're doing. So it points to the pressure that's coming and and you know, just if that's a precursor, the expectations for an organization that how how much scrutiny they'll be under, not just about what they're doing, but everybody they work with and how they're doing it. And I think that if that's happening today, 510 years from now, that'll become even more substantial, and that there's a third party that's sourcing that and so I think there's going to be more businesses cropping up that will help to to drive that forward.

Colin Hogan  43:29

Greg, thanks a lot for joining us today. Really appreciate all your insight on this.

Craig Martin  43:34

Now, my pleasure, thank you all for the time and really great conversation look forward to having further conversations on the topic.

Colin Hogan  43:41

That's our show for today. But before we get out of here, we just want to say a quick thank you to the exclusive sponsor of today's episode: ICE.

Sean McMahon  43:50

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