ICE's Larry Lawrence Discusses the Data Powering Sustainable Finance

The rise of ESG investing has investors clamoring for accurate and transparent data. Larry Lawrence, Head of Sustainable Finance - US at IntercontinentalExchange (ICE), outlines the crucial role data plays in the ecosystem of sustainable finance.  Public companies have ginormous reporting obligations, so Larry and the team at ICE help organizations sort through seemingly endless reams of data to satisfy stakeholder expectations and regulatory expectations associated with ESG investing.

So when you hear a company announce a bold net-zero commitment, chances are that company is relying on someone like Larry to help navigate the maze of data needed to report progress on those goals. But ICE doesn’t just serve the needs of big companies with household names. When a small company – or maybe even one of the many oh-so-hot ClimateTech startups – is considering going public, Larry helps guide those businesses through the complexity of that process.

With more than two decades of experience working in sustainable finance, Larry has seen trends come and go. The insights he shares on topics ranging from carbon markets and greenwashing to Know Your Data principles and the individual intricacies of the "E" the "S" and the "G" in ESG are definitely worth a listen.

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Transcript

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

Sean McMahon  00:14

Hello, everyone, and welcome to the Modern Money SmartPod. I'm your host Sean McMahon, and today, as the title of this episode indicates, we're going to shine a spotlight on sustainable finance. In a minute, I'm going to be joined by Larry Lawrence. Larry is the head of sustainable finance in the US for IntercontinentalExchange. IntercontinentalExchange or ICE, as it's commonly referred to, plays a crucial role in the ecosystem of sustainable finance. Not only is ICE’s history steeped in energy markets and data services, but it also happens to own one of the world's foremost stock exchanges. The New York Stock Exchange, perhaps you've heard of it? 

Public companies like the ones listed on the New York Stock Exchange have ginormous reporting obligations. So Larry and the team at ICE help those companies sort through the seemingly endless reams of data and mountains of regulatory initiatives to satisfy the information demands and expectations associated with ESG investing. 

So when you hear a company announced a bold Net-Zero commitment, chances are that company is relying on someone like Larry to help navigate the maze of data needed to report progress on those goals. But it doesn't just serve the needs of big companies with household names. When a small company or maybe even one of those oh-so-hot ClimateTech startups is considering going public. Larry helps guide those businesses through the complexity of that process. 

Larry has worked in the world of sustainable investing for more than two decades. So he has seen some trends come and go. The passion he displays for this topic shines through when you talk to him. So I think you're gonna appreciate hearing all the insights he has to share. But before I kick off my conversation with Larry, here's a quick word from the exclusive sponsor of today's episode, MF s Investment Management.

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Sean McMahon  02:33

Hello, everyone, and thank you for joining me for today's episode. I'm pleased to welcome my guest, Larry Lawrence from IntercontinentalExchange. Larry, how're you doing today?

Larry Lawrence  02:42

I am doing well. Thanks for the invitation. Glad to be here.

Sean McMahon  02:45

Yeah, I'm really excited to have you on. Now before we get into a deep discussion about ESG. Tell me more about what you and your team at ICE do?

Larry Lawrence  02:52

Yeah, so I belong to what we call the ICE sustainable finance data team. We are a group of a number of people spread across the world globally across research data scientists and listen product experts that deliver data and tools across different assets with a focus on fixed income to help our clients meet their sustainability goals. Whether it's just I need ESG data on the companies I invest in, I need climate risk, analytical tools for reporting and regulatory compliance, I need to dig into the physical climate risk dynamics of a municipal portfolio or MBS portfolio or I need to look at transition risk and think about what targets companies have set and measure those targets and aggregate and think about reporting and how to avoid emissions play a role into that, like if I've been avoided in projects or companies that are, you know, working to mitigate the risk of climate change. How do I account for that in my reporting. So I would say we have a global growing portfolio of sustainable finance data sets and tools across climate risk analytics, emissions data. We also have holistic ESG data and you know, with a focus on delivering some pretty innovative and differentiated solutions for the municipal and MBs. market as well.

Sean McMahon  04:13

That's wonderful background, your position at international exchange or ice, as everyone knows, it puts you in a pretty good perspective to see what's going on in the realm of sustainable finance. So tell us, what are the biggest trends and challenges you see right now when it comes to sustainable finance?

Larry Lawrence  04:28

Yeah, good question. And I've been in the ESG or sustainable finance space for 22 plus years now. So I've been in the front row seat to see in lots of changes, lots of things develop over the last 10 plus years, especially when things really accelerated quite a bit. There are certainly some major, major trends we see as of late. I mean, I think the biggest is the entrance of regulators into really looking more closely at you know, how information is reported, what information is reported and some of the confusion around the inconsistencies and definitions and what it means To be in, say, ESG. So, you know everything from the regulations coming out of the EU with the SFDR. And then, you know, regulations around climate with the task force for climate related disclosure with the tcfd. And we see this around the globe, I would say the regulatory element of it is a huge driver of focus and interest of a lot of people, obviously, our clients are very focused on it. And that's where we spend a lot of time to help them navigate some of the trends on the regulatory side. But also, when it comes to helping them understand you know, what data sets they need and reporting mechanisms, they need to adhere to certain regulations, we certainly do a lot of work to help our clients there. The other thing I'd say on the regulation topic is 48, of the world's 50 largest economies have some form of sustainability policy for investors. So it certainly isn't, you know, a non issue, it's a pretty significant topic around the world. And you're starting to see things pick up in the US at the SEC, and some of the climate related disclosures as well. The other big trend that we've seen is obviously, it's the elephant in the room, right? The lot of the pushback you've seen on on ESG investing. But what I've seen as a positive outcome of that, really is that investors, you know, the asset managers of the world, and other investors are becoming much more clear about what they mean by ESG. And throwing some clear distinction between, you know, what they mean by impact or intentionality and ESG integration as in they use ESG as an input to help me manage risks from different potential events down the road. The other trend that we see is ESG. Certainly, you know, demand is still there. We recently conducted a survey with a third party, where we talk to 111 traders and asset managers around around the world. And it's 30 plus percent of them said, yes, she was a still a pretty important priority for the organization. And then as you looked at, in the same survey, we asked the question about where do they expect to focus a lot of their attention? Are their top priorities going into the next three years? As it relates to ESG? And still, it was how do we embed ESG across the investment lifecycle across different asset classes, as well as how do we improve our reporting capabilities so that our stakeholders, our clients have a better sense of what we're doing with ESG as a firm, but also the performance from an ESG perspective with some of the products and investment opportunities we give them?

Sean McMahon  07:27

What are some of the examples of how companies are using data to navigate the intersection you talked about, you know, stakeholders, and investors have these priorities? And obviously, there's a pretty strong regulatory focus. So what role does data play in that? And if you can, can you share some examples of how companies are leveraging data to navigate that?

Larry Lawrence  07:44

Yeah, I mean, data plays a very important role into that. We can dig into that a little bit as well. And I can give you a good sense of how I've seen things change from my perspective over the years. But in terms of helping navigate, you know, obviously, we listened and engage with a number of companies. In my role, I spend the majority of my time interfacing with institutional as well as well, investors, asset owners, as well, in helping them think about how our datasets can help them to accomplish exactly what you described. And it comes from a different angles from, like a specific company perspective, I recently engaged with a number of smaller mid sized private companies who are potentially thinking about what some of the reporting requirements might be if they were to go public or something like that. And I think what it comes back to in terms of different ways to approach this to make it make sense for you is, you know, a couple of things, I can point two, one, the stakes are certainly higher when it comes to ESG. For a company, and especially with reporting, but at the same time, the cost of disclosure is also increasing quite a bit. You have an onslaught of surveys from, you know, over 20 Different ESG providers out there now that are finding his way into your inbox. How do you sort of manage, you know, responding to all of them? How do you prioritize and the advice we, we typically give, and what we recommend sometimes is listen, there are frameworks and standards out there, like organizations like you know, SASB, that have developed a framework for, you know, understanding which issues and material to you as an organization based on what industry you fall into. So that's definitely a great place to start, from a corporate perspective, focus on what's material to your organization, because you can't possibly respond to every single survey to every single request. We're reporting on different metrics, so as to focus on what's material, what's important to your organization, based on the sector that you that you fall into. So that's that's one area where I would suggest and where we spend a lot of time and helping people navigate and helping them understand which issues are material but also giving them the information and data to illustrate, hey, here's how companies in a given sector are reporting here are the metrics that most companies are reporting here are the metrics that only some companies reporting. And we can provide the nuances around, you know, those types of metrics to help them gauge and prioritize where they potentially spend their time.

Sean McMahon  10:09

Now data is obviously kind of part of the DNA, team and ice, you know, you guys, I mean, I've heard right on up to just record data data data for years now. But when it comes to ESG, I mean, you mentioned how companies get their inbox gets flooded with surveys and metrics and data data. So, for this topic, ESG, do we live in a world where there's too much ESG data, or not enough? That's

Larry Lawrence  10:31

a great question. And the unfortunate answer is, it depends. You know, because it all depends on who you are, if you're an institutional investor, so you're more on the, you know, the sophisticated side of things. Sometimes you want as much information and data as you can get your hands on, because you using your expertise. And your resource internally can make a decision on what's most relevant for you to integrate. And you can sort of reconcile between these datasets and make make a call on what's relevant, right. So the insulin the institutional side, you know, they have the resources, sometimes, or most times, they have internal teams that help them navigate just ESG. So you will see in lots of these organizations, there is a head of ESG. on the research side, just help them navigate the content that they bring into the organization. And then at the same time, at these institutional firms, you have teams that are building out data lakes, and with the explicit intention of taking in as many data points as they can, and then build in new algorithms and technology to help them derive insights across all of these different datasets. So on one end of the spectrum, more data is great. And Institutional Investors love it. They obviously have lots of questions. On the other end of the spectrum, you have the wealth audience, and even retail investors who are beginning to express more and more interest in ESG, they're less is more Absolutely. Because you know, as an essentially, as a financial advisor or an individual, you don't want to step through a 40 page report on a given company, you don't want to sift through 600 data points on a given company you want that distill to you means and you want an organization like us to help you reconcile what does this mean, for this company? For example, if you look at carbon emissions, you know, a sophisticated investor will dig into every element of this, which is scope one, scope two, scope three, do you have any carbon reduction targets? You know, have you signed up for the sbti? You know, is? Are your targets, you know, supported by science based targets initiative? You know, do you purchase any renewable energy? So really digging into all of the different performance metrics, initiatives, policies, and things like that, as an advisor on the retail side? All you might want to know is, okay, is the company doing? Well, when it comes to emissions? Are they doing better relative to their peers? Are they doing better relative to the last three years in terms of their trend and trajectory, and that might be all you need. And then overlay, and all of that is, this is so new, and so fluid, things are changing, new things are bubbling up to the surface as important. Regulators across the world don't necessarily agree, you know, the definitions can vary depending on who you talk to. So all of that begs for the need for more education, the simplification of like, what people are trying to do and what these datasets mean. But yeah, that's the you know, that's, you know, a very long winded way of answering your question, but it's a it's a multifaceted answer. And it's not easy, but it really depends on who you are, how sophisticated you want to be, and how quickly and how much time you have to dig through the content.

Sean McMahon  13:38

Right now, you mentioned how much a company is going to need to know their data, you know, kind of be familiar with what they are maybe what they know what they don't know. But what are some of the essentials companies should prioritize when they're trying to establish know your data systems and protocols?

Larry Lawrence  13:49

Yeah, I think that's a great question. So there are a couple of things that I'll throw out there. First, you know, you need to decide both what to collect and what to not collect upfront, then review that based on stakeholder feedback I mentioned earlier, a good framework and potential policy for that is looking to see what some of the frameworks can indicate is what's material for your industry so that you're not sort of all over the place, it gives you sort of a good place to start, you know, and then you want to certainly evaluate automation capabilities, time and cost to automate a data point, you know, has to be weighed against the risk of that data being collected manually, because it can get out of hand. So you need to think about, you know, ways to build some efficiencies in the process. And then the other thing is sort of review existing models in in use in your industry. You know, climate data, you know, for example, there are standards that are agreed on by the industry or by regulators may save a lot of time and effort in setting up a whole granular and different process. So leverage what's out there. And then maybe the third thing and I think this is going to become important over the next five years going Get about the future a little bit. I mean, that is make sure that language in your agreements with suppliers is set up to cover additional data that you may need to ingest from them over time, and how it will be managed. So, you know, those are some things that I'd point to is sort of what we talk about most when it comes to this type of thing.

Sean McMahon  15:17

Okay, well, that makes sense. We'll be right back.

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Sean McMahon  15:50

And now, back to my conversation with Larry Lawrence from IntercontinentalExchange. You mentioned the regulatory and the landscape, both here in the US and globally. Now, are there any specific aspects of the SEC has proposed climate disclosure rules, or other regulatory initiatives around the world that really stand out to you is causing the most concern for companies?

Larry Lawrence  16:09

I think you know, what companies in general, from my perspective and our perspective, we don't want to make it any more difficult to be to be a company, a public company, so so that you know that costs of disclosure is obviously an important thing to consider. But at the same time, on the other hand, when we work with investors, you know, they want more disclosure, they want more transparency. So it's certainly a balance. And as you said, I think you asked it you nailed the question is like, how do you reconcile the need for more information, and, you know, your ability to support and respond to all of these surveys and different things that are coming out there? I think, you know, related to the SEC proposed climate disclosure rules, there are a couple of common issues that we've seen raised by people like swing example, the scope, three definitions are not solidified. Inability to sort of compelled disclosure in the value chain is very difficult to do. So that's probably one of the issues that bubbling up to the surface, you know, there are disincentives around reporting targets and goals. So it sort of there are a number of things there were there are some issues. That that I think we'd need to reconcile, but what there is support general support for the proposal movement in a direction where we start to harmonize and align global policy around climate disclosure, and expectation. So certainly, improving the function of voluntary carbon markets, for example, not an area where I spend a lot of time but as more information becomes available, and people start sharing more, I think all of those systems, you know, will improve with more accurate information. So you see, we see a lot of support for that.

Sean McMahon  17:49

And now, when it comes to the blowback that's starting to kind of surface, you know, again, ESG had explained that or what's what's your take on that?

Larry Lawrence  17:57

So my basic take on that, I think, is ESG will manifests itself differently in different ways, depending on on factors such as geography, asset class, how mature different capabilities are, it's certainly been a dominant theme in the financial industry over the last few years, especially while the term is prominent, where you see a lot of sort of confusion is that the term you know, it's prominent, but it's not precise. You know, some view ESG as a risk management technique, right? There are externalities out there events that could occur, will take climate change, and, you know, the physical exposure that companies have, to where their operations are located, especially if you're a manufacturer, and physical locations are important to what you do. That's a pretty important theme and a pretty important consideration. When it comes to, you know, just basic risk management, you need to be aware of that. So ESG plays a role there. Others view it as an opportunity to generate impact. And I think that's where some of that confusion potentially lies. And, you know, the the intentionality is there, but but the results may not necessarily be there. So I think your your, you know, despite the lack of consensus, though, you know, you still did, there's still a lot of movement in the direction of people wanting to find the solution. Adoption still growing. But I think it's, you know, to be honest, it's the reason for the blowback and I think it's related to the green Washington debate, a lot of people have made lots of lofty promises that they've not been able to provide evidence of achievement. And I think as a result, you're going to get a lot of people asking questions, which is which it's critically important that you know, the implicit data to help provide evidence to support what you're doing is a pretty critical part of a lot of this discussion.

Sean McMahon  19:54

That segues perfectly to my next question here. So, you know, how are firms using data to address concerns urns are accusations of greenwashing. I mean, have you worked with anyone who's been like, okay, hey, we've been accused of this. But look, here's our dataset that proves that, you know, we're sticking to our word or at least working towards our goal in an effective way.

Larry Lawrence  20:11

I mean, no one's come to us and said, Hey, we've been accused of greenwashing help us. No one, no one, no one's come to us saying that explicitly. But, you know, it's, I can tell you based on discussions I've had with people in the industry, it's a very topical subject, that almost every asset manager, right, like, we need to be careful about what we say, we need to double and triple check everything we put out there in the public sphere. And we need to support things with, you know, as much evidence as possible. And that comes right back to the same discussion, data, data data, brings it back to knowing your data is absolutely a critical part of helping avoid this whole green Washington topic for you know, for asset managers. I think obtaining and applying what I call raw and granular data is the first step towards making sure you don't sort of get into this greenwashing trap. You know, you can sometimes, you know, firms get too reliant on some of these ratings that you see out there. And, you know, a rating is obviously affirms, especially if it's a ratings provider firms opinion, because they have a methodology that goes into that, but it's derived from a lot of different things. And you know, it can't solve for every single use case. So what you need to do is address specifically what you're trying to accomplish, and then use actual raw data that comes back as close to the source as possible, for example, not just the score on the environmental record of a company, but the actual emissions, and the performance of those emissions over time, and then reporting that and showing, and using that to illustrate the story and defend, you know, what you've articulated as goals, what you're trying to accomplish. The other thing is, you know, just you know, and I think we wrote a wrote an article about this earlier in the year. The other thing, I think it's important in the greenwashing debate is just, you know, this goes back to what I mentioned about the granularity or the volume of data, it's could be a good thing, depending on who you are, and the more sophisticated investors like more data, but you know, one of the things you need to be very careful of is you need to be aware of the potential biases that are in and the limitations of the data that you use from depending on who you get it from, from different data vendors, some data vendors can introduce bias in the way they collect information, they can introduce bias in the way, because a big part, even though we've come a long way, in terms of improving the number of companies that we collect information for, as an industry, the number of companies that we sort of report in published ESG data for, there's still a tremendous amount of work to be done. And obviously, to the disclosure regulations, and regimes around the world will help. But a lot of people rely on estimation of inference models to fill in those gaps. So understanding how those work is a pretty important part of making sure you know your data. Because you know, if they're wildly inaccurate, you know, that can put you in a position to defend something that you're not entirely comfortable with, or you potentially can't defend. So the idea is to try to refer to the facts as much as possible, like raw data, that's what I mean by raw data, rely less on scores. And that'll put you in a pretty, pretty decent position, I would think.

Sean McMahon  23:26

And now, since so much of this is, like you said in precise, you know, a lot of inferences and things like that. What's your take on the notion that perhaps E and S and G should be pulled apart? And so that an individual company, you know, might be great at, you know, they're buying a bunch of renewable energy, and they're great on their emissions, but their governance is awful, you know? And so how does that all factor? Should those remain together? Or perhaps be siloed?

Larry Lawrence  23:49

The way I answer that, I'd answer it in a couple of ways. And I'll start by answering it this way, people use it that way already. Right. So like you may see in a composite rating, that is an aggregation of all all three things. So that is one way of looking at the information. And some people value that because it's, you know, simple metric, you can sort of optimize and use as a lever one way or the other. But we've over the years, we've had a lot of people, a lot of clients, a lot of investors who already disaggregate and use these individual components the way they want. So I think there's a lot of power in doing it that way. I think, you know, we're not here to tell investors how to build and manage portfolios. Our goal is to give them the data, listen to them, in terms of how they'd like to use the data, so we enhance our capabilities and datasets, and deliver that to them and enable them to make the decision. Like, you know, we're not we're not making the decisions for them, right. We were an enabler and we, we support them with what they need to enable them to make the decision. So I do agree that looking at these pillars, distinctly, and delivering them distinctly which I know many firms do is probably the best approach and leaving it up to the investor. Then pull the levers to the and assign the weight, tilt anything in a particular direction based on what they're trying to accomplish. Like one example I'll give you is in like wealth. For example, wealth is an area that I covered for years where you have lots of high net worth, investors who work with advisors and these high net worth investors are tend to be very ESG focused and oriented, they want to understand what they own, they want to know what they own, they want their capital working to have a net positive in the world, and they want to avoid exposure to certain types of investments in companies. And, you know, in wealth, you may have a single advisor who works with 10 or 15, different high net worth clients, as an example, one client will come to you and say, I'm very concerned about the environment, climate change, and you know, avoiding, you know, the catastrophes that have been estimated. And, you know, you know, in the next decades to come as there and dear to my heart, you can't do that with a composite signal, right, you need to dig into the data set, you need to focus on the environmental issue to solve for what that client cares about. Because at the end of the day, you're trying to build a goals based approach to helping them achieve what they want, and you're trying to reflect the values with their investment portfolio to some degree. So you can't anyway do that with a single signal, you need to dig a little deeper into the data set. And you may have another client that comes to you and says, the social issues are near and dear to my heart. I care about how companies treat employees, I care about how they treat employees in global communities and the locales where they sourced materials from and where they operate. And I care about how they treat you know whether or not they have collective bargaining agreements for all of their suppliers. There are people who are very focused on these types of issues. So again, you can't solve for this with the composite rating, you need to dig into the data, go a few levels deeper, to really tilt and adjust the portfolio to reflect, we say, customize the portfolio to reflect what the client wants. And the last example on the GE side. So when they come to you and say I care deeply about diversity on boards, specifically with women on boards, which is a theme, we've seen a tremendous amount of momentum around. Over the last few years, you've seen a number of studies and papers published, illustrating that, you know, once you see a 30% more threshold in terms of women on boards, you tend to see outperformance of companies relative to their peer groups. Like there are lots of people with that mandate, who say, Hey, I'd love to I want to focus in on this as the topic area. Again, you need to dig into the data, you need to look at some of these thematic categories in but that's the best example I can give you those thematic categories provide the best optionality because it certainly means different things to different people, one size absolutely does not mean does not fit all, because it's at the end of the day, it's just data. It's really how you apply it that that matters. I gotta tell you, Larry, I'm loving this.

Sean McMahon  27:50

I mean, you have your, your eyes on so many different areas of the ESG.

Larry Lawrence  27:55

realm. Yeah.

Sean McMahon  27:57

Wonderful. So leveraging that you've obviously been working in sustainable finance for a really long time. And so you've seen some of the things come and go, What are some of the biggest changes you've seen during your career?

Larry Lawrence  28:08

That's a good question. I would say some of the biggest changes I've seen is that I like to characterize it in a couple of ways. You know, from my personal view, what I've seen over the last, let's just say 510 years is that I take it from a data providers, you that's where I sit, right? The different data providers have been in a race to, not to not a race to the bottom, as people would typically say, hey, it's not a race to the bottom in terms of fees or anything like that. But it's in a race to cover more and more companies. You know, yours when we started, we started with large caps in the US then we started to expand to the large caps and like Europe, now it's large cap, emerging markets mid cap. And now small cap. So you're going down and down market, you want to cover China, AIPAC, more coverage, you want to cover Canada and all companies in Canada. So what you've seen is a race for more coverage. And a lot of that is driven by investors wanting to cover what it called the total portfolio. Imagine as an asset owner, for example, and this is probably one of the biggest trends we've seen. You've made a commitment to decarbonize your portfolio by 2030. Likes asset owner who's got exposure to the four main asset classes, corporates, you know, sovereigns, you know, Munis MBs, potentially real estate, private asset, different alternative assets. Those are that's a lot of different assets out there, that you would need to have some view about the carbon footprint as it is today, in order for you to actually achieve that goal, which is to decarbonize our operation by how many X percent by 2030. So I think that's been the biggest one of the biggest changes I've seen is driving race to cover more and more assets over the last, you know, decade or so, and we've made lots of strides and, and we've moved beyond and I shouldn't say this, but we move beyond the dark ages of underground manual research where literally I used to, I never sort of sat down and did the analysts work. But I worked closely with all the analysts were literally either looking at physical CSR reports physical pancakes or downloaded them from websites, even through them, copying and pasting different data points to where now we've applied sort of different machine learning and natural language processing mechanisms where you can take unstructured data from the cloud, right? Place it into a database, eliminating the need for that individual to do that manual data collection. And now you've got alternative data that's being used. It's not just about what the company says it's about all the things that are adjacent to that company will give you a better picture of about what that company is doing. So taking information from different regulatory bodies, government agencies, whether it be OSHA and others like that, all of these datasets and alternative datasets to play more and more of a role into painting a better picture, and sometimes a more accurate picture. One of the criticisms you've seen, we've seen about ESG over the years is that listen, a lot of these companies that perform well or have these high ratings are the ones who can actually afford to put out these glossy reports, and push this information out. Now, in the early years, that may have been the case, we've certainly seen, that's not necessarily the case. But that struggle is still there, where the people who can afford it, do the extra work to put the information out there. And as a result, depending on who you are as a provider. And again, this is why it's important to know your data that may weigh more into a particular model or not. But but we've seen lots of strides in the way information is collected in these technologies that have been put into practice. You know, one of the biggest trends we've seen, especially in the last three years, like every school has a Climate Center, maybe not every school, but lots of school has climate centers, now. They're incubating new ideas, new companies, new models and things. So it's a remarkable, it's a remarkable time to be in the ESG industry, because things are changing so fast. There's so much innovation, you're seeing lots of companies pop up that address the disclosure issues, you know, how do I capture all of this data to just report my emissions, there are companies out there that sort of focus just on helping different organizations do that. And then you have companies out there that are taken advantage of the circular economy that are building ecosystems to help you make use of products reuse products to you know, at the end of the life so that they're not just found in, in a landfill somewhere. So all these different innovations are happening. And then from the investors that can keep going, obviously, but tell me to shut up. And when you want me to stop. Fantastic. And then on on the investor side, some of the things you're seeing out there like sophisticated investors, you know, typically when I say sophisticated, it's not to say, you know, the better than anyone elses. These are the people who are at the forefront, who have the resources in early doing a lot in the space, they're looking at rolling this out across all of the different asset classes they have exposure to so not just, you know, equities and fixed income, but within fixed income, like municipals and mortgage backed securities, like that's, that's where we do a lot of work, we've rolled out some of the first solutions to help you measure what your physical climate risk is, in the muni and MBs. Market, right? It can help you project over the next, you know, 1020 30 years with how those risk parameters change. And then if you're looking invested in the hospital system, you know, looking at how the risk changes depending on the drive time from that hospital or from the school system. So we've done some pretty remarkable things with we've built like this geospatial and machine learning platform that sort of harbors all of this remarkable technology that enables us to sort of take any patch of dirt, and be able to tell you what the climate risk analytics size is susceptible to wildfire, how that changes over the decades is susceptible to hurricane and how that changes over the decade. But beyond that, for an investor, how that is applicable to your portfolio. So these are remarkable things that we've seen. And then lastly, and I'll shut up, I promise, you know, we've seen, you know, the climate discussion is real, right. And there's been lots of questions to ask about are some of these companies decarbonizing their operations by just selling off the units that are highly intensive to the private sector, you know, to private companies and taking them off, essentially off their books. And so they're now you're seeing the big push to get more transparency into private companies and private assets. And then, obviously, measuring scope three, a huge piece of that is understanding, you know, your supply chain, and the carbon footprint of different suppliers in your supply chain and encouraging them to either change or report more effectively. So you're seeing all of this, and I think we're the only increase we haven't even talked about real estate and the potential there and infrastructure and different things like that. But it's remarkable things that have happened over the years, lots of new companies, lots of new competitors. But I think it's an extremely fun time and if you know if you're thinking about it You're listening and thinking about entering an industry, this is certainly a pretty exciting one. Now, it's

Sean McMahon  35:05

fascinating to hear everything that's changed. And you've seen the industry evolve over all these years. But as we know, you know, past results are not an indicator of future performance. And so one of the things I like to do in the show is ask guests for their bold predictions. So I feel like two or three years ago for talking about ESG, like, a not so bold prediction to be like, Oh, it's gonna keep growing, you know, but now, some of the winds have not shifted, but they're starting to die down a little bit, maybe even shifted, I guess. What kind of bold predictions do you have about where this space goes? In the next, say, five years?

Larry Lawrence  35:36

Yeah, I mean, that's, that's a great question. Obviously, some question we spend some time thinking about, as we think about the future and what we're solving for and what we're building for. You know, I think you'll continue, as you said, right, there's, there's going to be some ebb and flow with with the level of acceleration, given some of the some of the pushback, you know, we're starting to see people a little bit careful about the products they put out there, they're taking a little bit more time, doing due diligence and making sure all the i's are dotted, all the T's are crossed before product class. So you may see a little bit of a slowdown in some of that, but the investor appetite is not disappeared, I think they think you're just gonna see a lot more, you know, methodical steps taken. So things may be a little bit slower. But but the pace and or at least the interest and pushed it to do more, I certainly think is there, and our clients have indicated as much and and we expect that to change. I so I would say in terms of bold prediction, I think there's no question that climate is going to be super relevant still, because I think it's, you know, there's still a lot to do progress towards some of our goals have been a little lackluster. So I think you're gonna see increasing focus on what are we doing there some of the disclosure regulations, when they finally are in play, and people start to see more and more data, I think they may open some eyes to either increase the focus on what people are doing, I think that's going to be the other prediction I have is, I think retail, and individual investors will start to play a much more important role in the discussion. So you know, there are some, you know, even some airlines now giving you the options, when you fly to been five $10 To offset, you know, the emissions from your flight, I think that's going to find its way into different retail, in, you know, technology, as well as investor shops, you know, I don't want to see any names, I'm like, so close to saying names, but I want to avoid, I want to avoid saying names. But if there's a platform as an individual, where you do self directed investing, I think you're gonna see that more and more. And what we've seen is that anyone, if you provide financial services to individuals, and you don't have anything to say about the issue of climate, I think you're kind of far off and not listening to to investors, I don't think that's going to change. So I predict that being investors playing a very important role in all of that. And choice in where you buy products and who you buy products from will become more and more commonplace for investors as well. You know, my dream of the future is that similar to the nutrition label on the back of every item, you see in the grocery store, you'll see something similar for a climate in ESG for investment products, and like, it's just be everyone won't just know what they're buying and what they're getting into. And I think over time, more transparency. Again, this is just data we're not, he's not asking people to make things up. We're just saying, just give us a little transparency into what's in there. So that we can make a decision. And I think if that if access, and I think over the next five years access will certainly improve. I think that's going to be a net positive for everyone if those are things you're using to make decisions. All right, well, hey, Larry,

Sean McMahon  38:46

I mean, you're an absolute fountain of knowledge on for sure. But hey, I definitely appreciate you sharing some of that knowledge with my listeners. So this has been outstanding. Thank you very much.

Larry Lawrence  38:58

Absolutely happy and let me know when you want to do this again.

Sean McMahon  39:03

Well, that's our show for today. But before we get out here, I want to say one final thank you to the exclusive sponsor of today's episode, MFS Investment Management. 

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