The Exchanges

Q And how did that formation of Just Capital come to you?

A Well, it came to me through a referral on the board of something called the Carbon Disclosure Project, and the chair of that board knew about a search that was underway to find the CEO of Just Capital and put my name forward. But Just Capital itself was really, it's interesting, there are several co-founders, but the two that came together to spark it were Deepak Chopra, who was teaching a course at Columbia on Capitalism and just capitalism, and what does a just company even mean? And somebody said, one of the students, well, what if we track companies, like actual companies, on how just they are? And that idea sort of sparked with Deepak, and he took it through Pochiala and a few others to get to Paul Tudor Jones, and Paul loved the idea and really seized on it, first as an investment proposition, would these companies outperform, but then more broadly and more expansively as an entire movement. That if you could shift the trajectory of the capital markets onto a slightly more just course, you could really channel vast amounts of not just money, but innovation and resources to solving major problems that we face today.

AI assessment note: “it came to me through a referral on the board of something called the Carbon Disclosure Project”

Q And what are the techniques for doing that?

A Well, we start out with focus groups. So we bring seven, eight, nine people together, blank sheet of paper. What does a just company look like to you? So I just, people talk about that. Then the moderator is obviously trained at these things and start to introduce ideas now from previous years. What do you think about this? What do you think about that? Without kind of putting our finger on the scale that from the focus groups, and we've done dozens of these now all around the country. And from that, you get a sense of the issues. We then can group them together in different groups, which we then put to the test through qualitative polling. We'll conduct qualitative polling where we're testing the use of different words and language. Do people understand what we're talking about? Are people confused? Are they conflating two things which are separate in our model? So the qualitative helps us actually Name the specific components of the model. So pays a fair wage, provides good benefits, invests in local communities, provides good jobs, and so on and so forth. Those things come direct from the public. And then we do a final phase, which is a quantitative polling, where people are forced to make a choice between two types of companies. If you rotate the things that vary between those companies, At the end of that, and you do that thousands and thousands of times, you get the weigh…

AI assessment note: “Well, we start out with focus groups.”

Q Why don't you just start with your background? We'll go from there.

A Sure. So, well, it's a long and complicated one, maybe. So I started out life as a chemistry, as my major. I grew up in England, the north of England, went to St. Andrews in Scotland, studied chemistry, moved to Montreal because of love, not for anything else. Then my girlfriend, now my wife. And I did a master's there. I found myself in the oil industry, working for Elf, Accutane, in London, in the environmental group, and the guy I was working for, Tony Helis, his name was, big six foot five oil guy, would say, if you care about the environment, follow the money. And it kind of stuck with me, and I, I was fortunate enough to get the chance to do a PhD in environmental risk assessment in the early nineties at Edinburgh University in Scotland, and that was a really interesting time because George Bush signed, was at the Rio Earth Summit, and the whole issue of sort of sustainable development was sort of accelerating, and there was this part of it that was focused on finance and how the banking and the insurance and the financial industry should care about sustainable development, and I thought, that's interesting. You know, everything's kind of a combination of luck and judgment. So I'm like, that's really interesting. I have an environmental background, but I think following the money is the right way to go. So I did an MBA, I became an analyst, and I was hired by Swiss Re, wh…

AI assessment note: “I started out life as a chemistry, as my major. I grew up in England”

Q What did you find when you started doing the polling?

A So I'll give you the headline right up front. Seven major themes have been prominent throughout, and we weight them according to their relative importance, or I should say the public weights them through quantitative polling on their relative importance. The most important one is how a company treats its workers. So that's fair pay, benefits, safety at work, working conditions, training, Those sets of issues have always been the most set of, the important set of issues. So am I being paid fairly relative to the person next to me doing the same job? Am I paid a living wage? Millions of Americans in frontline industries are not paid a living wage and rely on food stamps to get by. So you tell me, is that just? So, what you get back is a very practical set. So, benefits. People are just looking for good benefits. People are looking for a good treatment, you know, a dignity at work, to be treated with respect and dignity in the workplace, and to get back a fair share of what is being produced. Going down in order of importance after workers were how a company treats its customers. And now we've seen, especially in the last couple of years, a rise in importance on data privacy, but it also includes things like labeling and advertising. The nature of a company's products is the third driver, and that really includes our product's high quality. It does include value and cost, but it a…

AI assessment note: “Seven major themes have been prominent throughout, and we weight them according to their relative importance”

Q piece, but a lot of it focuses on the environmental part. I understand the sort of people in the country want certain things, but sometimes the people in the country don't fully understand the economic impact of, say, other more important factors. Have you thought about that mix in the sort of economic impact Of what just companies do versus sort of what the people say a just company is?

A We just try to steer as close as we can to our North Star, which is just making sure that we're accurately capturing how people think about and define a just company without thinking about it through any kind of economic lens or presupposing whether they're right, people are right or wrong. We have dissected the returns. You know, we looked at our own portfolio, our own index. The index has outperformed its benchmark since inception by a couple hundred basis points. But We've been able to dissect that alpha signal, and actually you see a lot of that coming from the S, the social elements, which stands to reason. Every CEO I know says our greatest asset walks out of the door every night, right? So how you treat your people, yet we often think about employees as a cost, not as an investment. So, so I think the S of the ESG and the human element, let's call it, that we're picking up, is probably one of the most undiscovered sources of alpha. And when we do our factor analysis, one of the greatest contributors to the outperformance that we see.

AI assessment note: “making sure that we're accurately capturing how people think about and define a just company”

Q If you set aside balancing and comparing companies across industries, are there certain industries that naturally lead themselves to being more just than others?

A So if you looked at our absolute ranking, you tend to get software companies, tech companies rising towards the top. Although I will say the just 100, which is the top 100 companies, It has every sector represented and is actually very diverse in terms of its sector representation. The tech companies, they typically have created a ton of jobs. They've done well financially. They are able to pay people well, which is obviously highly rated in the model, highly weighted. So, so they do do well in all those things, but it's not across the board. You know, we're starting to see a pushback, data privacy. How healthy is social media? How do people think about the job Destruction factor, as well as job creation. Is technology serving society? Are we creating an economy that is giving more people the chance to pull themselves up and build a more prosperous future? You know, is tech doing that? I think we may start to see a bit of a rebalance. We're in the middle of our 2019 polling right now. It'll be interesting to see how some of the travails that tech has been through in the last six months play out. Yeah.

AI assessment note: “you tend to get software companies, tech companies rising towards the top”

Q Yeah. What are some of the other core tensions you run into?

A Well, to what extent do we lean into advocacy? You know, a lot of people are very focused on individual issues that we track. I'm thinking of like things like paid family leave, a lot of activism around that. A lot of people involved in policy who know far more about that issue than we do, but who will use our data and see a need to try and get companies because they see the scale effect. If we can get the top 10 retailers To invest in workers more and improve training and lift wages, as we're starting to see, actually, that affects millions of people and tens of millions of families. So they see the scale effect. So the tension there is, to what extent are we leaning into the advocacy and in order to sort of support that process of change? And to what extent do we say, no, no, we're maintaining complete independence and we'll let the market do what it will.

AI assessment note: “to what extent are we leaning into the advocacy and in order to sort of support”

Q Have you thought about applying the same polling and frameworks to the private markets?

A Absolutely. I mean, when we talk to the public, these same sentiments and the same model can just as much apply to a private company as it can to a public company. So we're most focused on the public markets because we can get data on those companies and we can rank the companies, but the model itself, absolutely. We want to drive that. I mean, look, we're a nonprofit, so we're open for business. You know, we want private equity investors, private companies, business owners, To come to us and say, hey, look, I really like that framing. How can we adopt that? How can I, as a CEO of a private company, or as a GP in a private equity firm, benchmark my companies against the largest publicly traded corporations in the country? I want to know that my company is a just company. I want to know that my companies I'm investing in are doing good things as well. So absolutely, this is an economy wide thing. This is not just meant for public market investors.

AI assessment note: “Absolutely. I mean, when we talk to the public, these same sentiments and the same model”

Q Which is a wonderful mission to use capital markets in such a way that improves our vision of what should be. Let's start with how do you define, as you started with Deepak was saying, how do you define what a just company is?

A So that is a great question. It's also a defining one for us because the essence of what we do is that we don't define it. That sounds counterintuitive, but what I'm saying is we actually turn to the American people and that was I think Paul's insight was it doesn't matter what, what I think, or what you think, Martin, or what Deepak thinks. This is about connecting to Main Street. So we began in early 2015 surveying Main Street America on what a just company looks like. It sounds kind of simple, but that's how we started. We wanted the public to define the elements In a very sort of detailed way, very practical way of what does a just company look like? What does it do? What are the specific criteria that make up a just company? And of course, in the first time we did this, we didn't know what we would get back. So it was a real leap of faith. I think we believe that if we're going to build a market, it has to serve as many people as possible. It has to serve the public. And so it makes sense that That they should be the ones to say, this is what a just company looks like. And five years in now, we've actually got back results that make a ton of sense. It's very kitchen table values. We have a model now that has come from the survey and the polling work, and we, we've done what I think is probably some of the, the most sophisticated survey work on how ordinary people think abo…

AI assessment note: “the essence of what we do is that we don't define it. That sounds counterintuitive”

Q And how have you measured what has changed in the five years since you took the helm?

A Well, we're tracking companies all the time on their performance. That's what we do for a living. So the metrics that we've developed are Every year, we release the new rankings, but on an ongoing basis, we're gathering data on how companies are tracking to all these things. So we had a tech company recently do its first living wage audit. It had never done that before. Did that on account of our, our involvement with them. So we started to see progress take lots of different form. And you see companies disclosing data, giving us data. We have tens of thousands of individual company data points now, which are now public, Before we see investment dollars flowing in more just direction. So there's lots of markers of progress and adoption, but hey, you know, we're early on a journey. We're trying to move markets and that doesn't happen in a couple of years. That's going to take more than just capital and it's going to take decades.

AI assessment note: “we release the new rankings, but on an ongoing basis, we're gathering data”

Q So as a concept, you get hired in to be the CEO of this new thing called Just Capital. Where do you start?

A So I should make it clear, just Capital is a not-for-profit, which is even odder insofar as we're not a classic, but that is indeed our structure, and we formed that way because we're really about the mission, and the mission drives everything we do, and I was lucky enough to have some great founding board members who were there at the beginning, so obviously I've mentioned Paul, who's our chair today, Deepak, Arianna Huffington, Ray Chambers, Rinaldo Brutico, Gene Allwang. I mean, some phenomenal people there who had a vision for what this thing could become. My job was really to bring it to life. So it was everything from filing the documents to become a five or one C three to setting up the office, to hiring people, to really trying to bring the strategy to life. And, and, It's like any company. It's actually, even though it's a nonprofit, I've never worked as hard in my life as I have at this point in time. I think the advantages of the structure that we have and the approach that we have is we're really about trying to solve problems and we're trying to get markets to be better and to do more and to sort of breathe life back into this, this ideal of the American dream. And more and more people are warming to that fact, more and more want to support us. And Not just believe that it's a great investment thesis. So this is like going to help me be smarter as how I see the, th…

AI assessment note: “filing the documents to become a five or one C three to setting up the office”

Q So other than the Goldman licensed ETF, how have other managers taken the research you've done and applied it into their own investment processes?

A So that's obviously something we encourage. We have a lot of folks, since the press and the attention we've received since the ETF launch and our overall marketing efforts as our profile builds, we have a lot of investors who say, hmm, that's an interesting signal, I'd like to use it. How they use it, we want to make sure that it's being applied in a way that's consistent with our mission, but we also want to encourage adoption of our rankings, and we know that investors will use it in different ways depending on their strategies. So a good example is, you know, a startup manager, a new manager called GrayArc that is interested in synactive management strategy. They want our signal. They feel like our signal can be accretive to their own investment decision-making process, their own thinking. And we think that's great. So we want them to use it. We want them and other active or passive managers to start using our signal. And as I said, provided it's consistent with our mission, channeling capital to more just companies, and therefore encouraging more just corporate behavior, then we're right behind that. We want more of it.

AI assessment note: “a good example is, you know, a startup manager, a new manager called GrayArc”

Q And how do you get from here to there?

A Resources for the organization. We have some great partners. Obviously we partnered with Goldman Sachs Asset Management. They've been a wonderful partner on the launch of the ETF. We want to do more with them. You know, we want to get the word out. And thanks to you, Ted, with this podcast, hopefully that will contribute. We appreciate that. But we're trying to get as many eyeballs on what we're doing on the mission as possible. And it's like any business. You just grind it out day after day, and then your moment in the sunlit uplands comes later. I see how active As an investor, New York State Common is on climate change. I see how active family offices are on trying to align the values of perhaps next-gen family members with the way the portfolio is run. Large asset managers who just believe this is a very, very strong opportunity in the market right now because a lot of money is Seeking a way in, a credible way in to impact. So I think that that's the state of the ESG market, and we want to help investors by providing them with data and providing them with products. But I, I'd also say, quite honestly, this transcends ESG and impact. We're talking now about, it's a legitimate debate in this country right now about the future of capitalism. Reimagining capitalism. It's almost 50 years from the date of Milton Friedman's seminal New York Times piece. That has defined a generati…

AI assessment note: “Resources for the organization. We have some great partners. Obviously we partnered with Goldman Sachs”

Q of the ETF, you're doing this polling to see what matters. You're then doing all this research to see how companies stack up. But all along the way in that process, you started with the hypothesis that this was better for performance. We're going to follow the money. At what point in time did you say, well, maybe we should see if these companies actually do better in corporate performance?

A Well, we started out not to build an investment product. Just to be clear, we started out with a mission to build a more just marketplace. It's like turning a light on in a dark room. If we provide the market with information on what companies are doing on things that matter to their workers, their customers, the people who live and work in their communities, those are just better companies. And this is a really interesting, neat, unique way To get a handle on that. And so, investors, active, passive the world over, are looking for an edge. And we think this is sort of like the proverbial dollar bill on Walls, lying on Wall Street, on the sidewalk. It can't be real, because somebody would have picked it up if it was. Going to the public to saying, hey, what do you think? It's actually kind of a neat way to think about it. Look, the proof of the pudding is in the eating. You know, the performance of the index has been good. The performance of just companies, We slice and dice this lots of ways. Tends to be very strong. You know, we see the top quintile, bottom quintile in our model, according to Justin, it's not financial performance, just, just ranking as a material spread. So we think there's a strong investment thesis, but that's not why we're doing this. It's not why we started this.

AI assessment note: “we started out not to build an investment product. Just to be clear”

Q You have this mission, and you've done the polling, and you have the ETF, but inevitably, half the companies you're ranking fall at the bottom half of the ranks. How have those companies engaged with you?

A Well, it's been really interesting. You know, even companies that are lower down in the ranking, we never call them bad. So we're all about trying to incentivize and encourage and influence companies to be better. So we want to showcase the best companies. We award them a seal. We want the seal to be displayed so that they can market their justness. So we're always trying to encourage companies to do better, be better, and the rewards for doing that will come to you. So the companies who are lower ranked, Typically, they're on a journey anyway. They're trying to figure it out. How can we be better on some of these things? Sometimes our data can help them be better. Sometimes they want to emulate best practice. Occasionally, it's the first time they've been benchmarked on some of these things. So we've had, again, I gave you sort of the impressive corporate engagement numbers that we're posting now. That's across the board. That's not just among leading companies. That's across the board. And I think We want to try and meet companies where they are. We're not naming and shaming. Once we earn their trust, this is why the transparency matters. We want to build trust with the companies that we're really just trying to tell their story accurately and honestly, and increasingly they're buying that, whether they're ranked high or low.

AI assessment note: “So the companies who are lower ranked, Typically, they're on a journey anyway.”

Q correlation with what you're doing? So the one that comes to mind as you're talking about this is, well, high profit margin businesses have the ability to pay their workers more and treat people better. So are there any consistent sort of correlations with other factors that don't lay into the polling that would indicate that it's easier for a company to be just if certain factors are in place?

A Now you're getting to the heart of causation and correlation, and we're, we're very obviously aware of that, and we're really trying to drill down into what, what's the persona of a just company? What are the connecting factors here that you could say, yeah, you know what, that company has these attributes, and it's going to be more just, and it's going to do better financially, anyway. So when you break that down, some of the things you start to look at are leadership. The integrity of a company's leaders. How is that being transmitted throughout an organization? We talk about culture, management quality. Those are the kind of hallmarks of a well-run company, a company that does look after all of its stakeholders well. And so I, I think that's what we start to see come through. But again, we want to be very intellectually honest about this. So We want the chips to fall where they may in terms of, okay, the polling, the process. We are very cognizant of the need to be asking the right questions. So I want to make sure that, you know, our polling team, they are very, very focused and very professional, very expert at making sure that we're not leading the witness in any kind of way.

AI assessment note: “some of the things you start to look at are leadership. The integrity of a company's leaders.”