Jérôme Tagger is CEO of Preventable Surprises. Jérôme is a thinker on long term ESG trends (a catch-all phrase for extra-financial environment, social and governance) and systemic risks. He was a Director at the Global Impact Investing Network, the founding COO of the UN-backed Principles for Responsible Investment, Head of Research at Eurosif and Chief Revenue Officer at ImpactAlpha.  He co-hosts a podcast with Alison Taylor, the Breaking Fever.

We chat about the differing roles of companies, civil society and government. What Jérôme thinks about the most important levers and theories of change.

Why ESG could be thought of as a form of negotiation.

Whether we have an idea on what the neglected issues or under rated ESG challenges are.

What you should be thinking of as the chief exec of a think tank start-up. How we should think about building institutional capital. The importance of relationships and “social capital”. 

Whether we should consider “less democracy, technocractics rather than democratic decision making. 

What Jérôme thinks about billionaire philanthropy. 

What Jérôme is hearing about views on regulation on greenwashing and, in particular, on SFDR (Sustainable Finance Disclosure Regulation, EU).

“...​​I haven't talked to a single person whether on the finance side, on the NGO side, civil society or otherwise that is happy with this regulation.”

Jérôme ends with advice and current projects.

Podcast available wherever you get podcasts, or below. 

PODCAST INFO

• Apple Podcasts: https://apple.co/3gJTSuo

• Spotify: https://sptfy.com/benyeoh

• Anchor: https://anchor.fm/benjamin-yeoh

Transcript below.

Jérôme Tagger in conversation with Ben Yeoh (lightly edited only)

Ben

Hey everyone, I'm super pleased to be speaking to Jerome Tagger. Jerome's the Chief exec of Preventable Surprises and is really an expert in all things sustainable and environmental social governance (ESG). Jerome, welcome.

Jerome (01:18):

Thanks so much for having me, Ben. I'm very honored to be here and also a bit intimidated because you always have these really cool guests and they have a lot of interesting things to say. I mostly have questions, so fire away.

Ben (01:32):

Well, you are right up there with them. So, I guess over the years there's been this model of having government, having companies, having civil society, NGOs, and there's a sort of, "Yeah, companies have their own role and responsibilities. Government obviously for that has civil society as well." But there seems to have been maybe a blurring of those boundaries about what should be responsible or not, whether government's getting log jammed, companies may be taking more responsibility, activists and things. How do you feel that framework maybe holds up? And with your work on civil society and companies, do you think maybe we should be reforming some of those boundaries about what we should be responsible for more in the future?

Jerome (02:24):

Well, that's exactly what I'm trying to figure out. So as I said, I come with questions. I think the context for all this is the history of the last 30 years and then obviously every piece of history before. But we're in the kind of like neoliberal post-communist world. We're in a globalized society, we are in a digitize society and that means a number of things. It means that governments have a much harder time doing their work. They have a harder time doing it because things are going much faster. In fact, if you look at the last 5, 6, 7 years, maybe even going back to the great financial crisis or maybe even going back to 9/11, what governments are doing is largely being reactive. A lot of it is being reactive and a lot of it is also reacting to public opinion and whatever is happening in society. You could argue it's the same with companies. So that's one thing.

In the context of globalization, you also increasingly have things that fall between the cracks of what would be jurisdictional boundaries and that's typical of global issues like climate change. There's no single person or entity that can regulate climate change. It's also exemplified by all the scrutiny on supply chains. Suddenly, a societal concern like

labor status, labor rights which could be negotiated between a labor group and the governments and corporations or business representatives and so on in one place, don't necessarily have the scope to do anymore because the workers are somewhere else. Sometimes a lot of people are unhappy about actually the workers being somewhere else, either because it means jobs have been displaced or because other forms of I suppose expectations and interactions about how society works.

But the bottom line is, those questions about labor relations become globalized and they also end up falling between jurisdictional and cracks. I'm using a very simplified model here. But to say, "Look, when we expect-- I think our mental models, we expect governments to do one thing and others to do other thing and it isn't working that way." One of the reasons is that governments aren't really in the position to do the work that they used to be doing. And in fact, I believe that a lot of the populist backlash that we've experienced left and right in the western world over the past 15 years or so, but sometimes more, has got to do with this as well. It's people trying to reclaim a sense of control. I would say largely it fails, but I think that's a dynamic that's happening. Sense of loss of control generally by the general population and appetite for more control.

So the power balances, power hierarchies, whatever you want to call it, that's all shifting. You've got companies and sectors that have significant influence over the course of environmental degradation or progress for that matter, and social relations. It could be entire sectors. Typically, we talk about oil and gas. It could be large global employers. It could be tech companies which is now the new villain and that just raises questions. I really don't think there's any easy answers to any of this so I don't come with a recipe of solutions. But I do believe that it does create a space for the questions, for the interrogation and for advocacy because if you care about stuff, whatever it is that you care about, and you're looking for a way to advance the supporter, the cause-- and by the way, the cause could be financial markets that work for all. It doesn't have to be about a specific population group or anything. Then you've got to ask what the levers are in this complex system. How do they work? How do they interact? Who's got leverage or who's got power over what? What are their incentives? What motivates them and what would bring them to change their behavior?

Ben (07:37):

Sure. So I guess that brings into the question of theories of change. Where have you

got the levers and mechanisms? So I guess there's one set of advocates who argue companies should stay in their box, maybe do some extra financial, focus on the profit, and particularly on the climate lever, leave that to policy and government but should probably advocate for it. But companies can't do that much. And if they do too much or too much signaling which isn't actually that effective, you slow down government. But as you alluded to, others would argue government, particularly globally, there's a lot of conflicts of interest. Got global south, global north, don't always have political backing. There's a lot of things. It's kind of obvious that government has not produced the kind of actions or regulations that we would want. Well, in which case then it's the other groups. NGOs and companies will have to step up if you want to do something.

So I'm interested in where you think those mechanisms could be or whether we have to do a little bit of both. And perhaps on top of that, you could say that actually within markets often fits into people who have an advocacy divestment theory of change. Let's put pressure on companies. Maybe that changes cost of capital arguably, but maybe that puts social political pressure. And those who have an engagement theory of change saying, "Well, governments will do what they do. We can try and do something, but we haven't had a very good track record there so far. So let's get companies to tilt their business models to the extent that they can; maybe radically, maybe less radically. Let's use forceful stewardship and those." So I'd be interested, do you think those are two possible levers? We should do them both? Do you have any views on either and on that top level of how fair or unfair is it to say what companies should do given where governments have got to?

Jerome (09:39):

Well, that's another tricky one because I don't have any simple answer but I do have thoughts. One of them is that first of all, I don't think there's any sort of one size fits all. In your question you talked about the conflicts of interest. That's one big piece of it, but there's a gazillion conflicts of interest that we're dealing with. I think the risk in this conversation is always that we become a bit solipsistic and thinking that there is a government abstraction and a civil society abstraction and a business abstraction. But they're not homogeneous groups, obviously. There's lots of different governments and lots of different civil society groups and lots of different businesses. They all have different interests and they have their own internal conflicts and so on. So absolutely, no one size fits all.

Second, I think of this field-- and I'll use ESG as a shortcut. Everybody imprints their own thing on what ESG means, but I will use ESG as a shortcut. I think of ESG as a

negotiation. Some people will say it's a set of issues. Some people say it's a set of processes. Some people say it's materiality which I view as taking a site. But to me it's a negotiation and it's a very complex negotiation between a very amorphous set of actors that fall in these categories about an amorphous set of issues, but which is fundamentally about trying to find how these environmental societal issues can evolve with some agency and intention in society as opposed to the opposite fallback which is, “Let markets do their work and let's see what happens and be more prone to just watching the accidents of history.”

So in many ways by saying that, it's kind of a left wing view of the world even though I wouldn't call myself a left-wing person. But if you're trying to think about any of these issues proactively, then you have to think about these questions. That's absolutely not the question you asked in the first place. I got a bit sidetracked. But I think my point is that always requires some level of analysis. What's your context? What is the geography? What is the economy of the challenge you're trying to address? What are the actors? How concentrated are the actors, for example, if it's an economic sector? What happens on the business side? What happens on the policy side and how do they interact? We've done a whole bunch of work. I'll use this as an example at Preventable Surprises on lobbying with the idea that if you were an investor looking at ESG questions and you were only looking at the behavior of individual companies or sectors, and you were ignoring what was happening in terms of the interaction between those businesses or those sectors and regulators, then you're just not looking at the whole picture. That I think is one manifestation of a bigger question which is what happens at the micro level and what happens at the macro level? Typically at the micro level, it's companies doing stuff; investors doing deals and things, and at the macro level, we think about it as regulators and maybe sovereign debt and that sort of things. Anyway, we're trying to resolve the interaction between the two.

Ben (13:49):

I like that analogy. I haven't heard of ESG as a negotiation. I'm interested that maybe there's some cause for the fact that ESG (Environmental social governance) is almost no longer a useful term. It's a little bit like woke. It's being politicized and actually it no longer refers to what it's meant to refer to. And to your point actually, no one was initially quite sure what it refers to either when one person says that they might not mean the same thing. Reflecting what you said, I almost think it's another word for the debates we have around progress, whether actually you're left or right. Whether you want progress to be unfettered markets and innovation and techno optimism's going to save the world, or whether you are the other side and you want degrowth and regulation and that's going to save the world. They're the two extremes, right? Most people are somewhere

in the middle of the two and you've got elements of degrowth and not wanting to do food waste. And you've obviously got elements of innovation because we're going to need a lot of that for change. So I'd be interested in whether you think when we think about how it evolves, whether that is a useful term at all and how do you think this negotiation is going to go?

Jerome (15:02):

Let me clarify on this negotiation. I think it's a very skewed and imbalanced negotiation because it's not a negotiation between equal parties, finite actors and not everybody is negotiating in good faith. But I would call it the gray area. And then some of it gets pulled into what becomes materiality or compliance or regulation. It's the subject matter that gets negotiated on all the time. So we get into these questions about label as you say. “Well, then ESG has become a certain generally accepted practice or set of things and reporting standards focus on materiality.” And God knows, I hate all these words so forgive me for using them especially if this is not your area of interest or expertise in talking to the listeners.

But my point is it does not take the questions away. You could say ESG is something else or it's been... Okay, it's no longer negotiated. It's been captured by a certain set of actors in this conversation. It doesn't take anything away from the questions about, "Well then, what's happening at the intersection of business and finance and society that has so much influence on environmental and social outcomes?" It doesn't take anything away from the question of, "How do businesses and investors understand systemic challenges and risks such as climate change?" It doesn't take anything away from the question of, "Do they know what influence they have on them and do they know how to mitigate them?" So many ways, I don't really care about what happens with the label ESG, whether it stays or goes. Maybe it will be replaced by something fancier.

There's the whole ESG and impact conversation. There's another ESG and regeneration conversation and I'm sure other things will pop up. I personally find that arguing about the words is not the best use of my time because I don't have many ideas to suggest. But fundamentally, we are going through a clarification phase because of the political. People saying or the Republican state treasurer saying, "This ESG thing is a political ploy" which by the way I disagree with on the sense that I think it's financial markets are a political ploy. ESG is just one manifestation of it. Then you've got the whole compliance greenwashing question and all of that is kind of filtering and clarifying some stuff in the negotiation. How we come out of this I don't know. I don't think

anything of this will become easier. I don't think any of these questions will become easier.

Ben (18:04):

And that's because markets finance if you think about it on a high level, is an expression of humanity, right? It's a social political question. I always say the parrots don't care about financial markets per se. So ESG is a manifestation of that, or regulation, or any of these financial markets. I'm interested then kind of within that. What do you think is perhaps most neglected in terms of this intersectional, or the questions you think are most interesting and perhaps are not paid so much attention because climate is up there, but it's very well contested? Within Preventable Surprises I'm always interested, and I think some of your colleagues and yourself have talked about willful blindness. I'm not sure the term is necessarily willful. There's sort of things around it. I was intrigued. I think there's been some work on antibiotic resistance.

I feel that that might be part neglected. People know about it, but given the impact it could be and one can see it so you could say, "Is the world being willfully blind or not?" I think interestingly being prepared for the next pandemic even though we're arguably still in this one is remarkably-- given that we're still in one, there's this kind of remarkable blind spot on that. Then there are some of these other things like social issues and things. I wonder how global or geographic they are. But I'd be interested, what do you think are either most neglected or the questions you think are quite interesting to discuss? Maybe some of them we don't have answers. But for instance, on pandemic preparedness are very simple answers. We need a little bit more money and organizations who could do it. So it's kind of a relatively simple one. Politics are pretty tough. But yeah, neglected questions or interesting ones around this.

Jerome (19:56):

Well, I think-- and this is not a cop out, but I think to start it's important to recognize that we don't necessarily know what the issues are. I would say reasonably that four years ago very few people in the ESG world thought about pandemics as an issue, where you could argue that if you were paying attention and listening to Bill Gates' podcast and writings-- I don't, so I missed it-- you would've known about it. Or if you were focused on geopolitics in Eastern and Central Europe, you would've seen the invasion of Ukraine coming and all the consequences of this in terms of food crisis, in terms of energy crisis and so on. So to me, one of the big things about this whole space and this whole interrogation is that it's not just about figuring out a list of issues, which is again why I also don't think that ESG issues entirely captures the thing because you don't go to like a MSCI or type website and get a list of issues and then go take boxes. It's dealing with

unknowns, uncertainties. Some of them you can have in the risk model and some of them you can't because they're the unknown unknowns. But I think that's a big part of it.

Now, in terms of specifics-- So climate's always been the golden child of ESG probably because of some level of global consciousness and it's a global challenge and it's at a big political stage. Also, it feels relatively easy to consider in terms of inputs and outputs and the sector's concern. When we look at the energy sector, we look at oil and gas, fossil fuels, we think we can establish a list of companies and we can see where the demand is and so on. By the way, our knowledge of this evolves. It's not that simple. And then there's methane and whatnot. I don't want to oversimplify it, but ultimately you can do a measure of GHG (Greenhouse gas emissions) and feel like you've got some level of understanding or control over the issue. All the others are more complex. So I feel like the opposite end, anything related to human rights is always the abandoned child in the family. Way too easy to sweep under the carpets, extremely challenging to deal with. Again, going back to the supply chains and jurisdictions or sometimes geopolitical context where you have very little leverage. One of my concerns with this is that companies and investors tend to focus on the headlines, tend to be reactive, tend to say, "Oh, dang, now we need to do something about DEI. DEI is super important." And then maybe nothing happens.

One of those issues that we've been really interested in is the fate of migrants. One reason that it is interesting-- I mean, there's a gazillion reasons why it's interesting. First and foremost, because they're human beings. We're talking about there should be enough reason. But also because migration is a huge political contentious issue. There is growing movement of people. A lot of it is now also linked to the manifestations of climate change. I think the UN estimates that a billion people will be on the move by 2050. So in some ways it's a symptom and then a manifestation of all sorts of instabilities; climates and then sometimes political upheavals, economic ones and then in host countries.

You can't open a newspaper without having some story about people in the Mediterranean. You see people crossing the channel, people at the southern border of the US, people in indefinite detention somewhere offshore Australia. I'm just talking about the western examples here but there's a range also in Asia and elsewhere. The treatment of migrants is increasingly privatized. It includes in Europe and the UK and in the US and elsewhere. You've got a number of companies that are involved in this; in logistics and advisory roles and detention and in technology and this whole gray space here about how these humans are handled. Sometimes very conflicting business

models that encourage organization focus on the detention of migrants. So actually trying to detain as many people as possible because that is their business incentive and very little oversight and a range of human rights violations and link that to... I think sometimes maybe that's kind of a training ground in the technologies for humanity at large. I could blabber on about this but I think that's a big one. And generally stability of institutions and democracy and that's very true in the US, but I feel it's increasingly true elsewhere in countries that have had the joy of being under democratic rule for them.

Ben (26:30):

Yeah. I think I agree that that issue of-- and particularly when you go into human rights you're talking lots of places in Africa, you're talking lots of places in China. Very complicated to deal with. I think that's one reason investors skate over it because they feel that they actually don't-- They don't have any answer. They could try and engage, but they don't really know even what the questions to ask are. I think also you make a really good point on what I would call to use kind of accounting to the institutional capital because it does decay over time, maybe like everything. I don't know whether that's entropy or humans. You either need to rebuild and refresh them, or you need new institutions or new arms of old institutions to help either compete against the old ones or create new ways of thinking.

So actually, I'm quite interested in the chief exec of a kind of startup think tank to some degree which is a new institution. How have you found that journey? And I guess you helped startup UNPRI, which is the Principles of Responsible Investment, which is now a large organization but started from startup. So in a way you've had at least two sort of startups. I know you've come into Preventable Surprises not as founder, but a little bit later on. Perhaps some reflections on building a startup or new institutions. Has that helped? Has that given you a vision of like, "Wow, how hard it is to sometimes heard cats and things within institutional and people?" I guess other people out there-- I speak to some people who kind of think, "Oh, maybe I should jump into the world of think tank or maybe I should start up my own." People always go, "Oh, there's a hole there." I kind of nudge them that, "Well, if that's what you're feeling, maybe you should do it." But there's kind of this fear of doing it because it's challenging and new. But yeah, have you learned anything either from your old days of startups being chief operating officer, now, Chief exec?

Jerome (28:40):

Ben, all your questions I feel like you're in my brain. Some of the things that keep me awake at night and asleep during the day. By the way on institutions, just going back on this and also to this question of shifting powers and of the increasing role that we ask

investors and companies to play on the environmental and social issues. I think we also have to put that in the context of democratic decay and that sometimes asking these companies and investors to effectively have more influence is not really that good for democracy. So it's a balancing exercise. Now to your question about startups, about starting new institutions. So I think part of this is specific to this field. Part of this is about who we are as individuals.

As a person, I also talk to people all the time who are either interested in startups or in ESG or something. I rarely fully shake up the impression that there's a feeling that the grass is greener somewhere. I encourage people to proceed with caution because at the end of the day, the grass is not that much greener. It's just a green that fits you. So when we say the grass is greener I think it reflects two questions. One is that people need a sense of purpose and they want a sense of influence. To people who want a sense of purpose I tell them, "Please become a nurse, a teacher, a doctor, join the police, join the military-- I'm probably forgetting a million things. Volunteer." You can do a lot of really important things and some of the most important jobs-- What would we call them during the pandemic? The frontline workers?

Ben (31:03):

Key workers.

Jerome (31:03):

Key workers. So yeah, but they are. Turns out they are. So for people who are looking for purpose, look at this. For people who are looking for influence or really a sense of agency on things-- Well, there's very different ways to have agency on things where it fits... You can have agency as a regulator, you can have agency as the CEO of a big company or as an executive somewhere. You can have agency over your community, over your family. Again, pick your battle. Where it might be sort of tickling, the whole startup thing, is in a sense of freedom. "I don't want to have clients anymore. I don't want to have a boss anymore. I don't want to have something." And some of this is true. I delight in nothing more than no one else having control over my time; in my work dedicated time. So that's a great joy. But you still got to interact with other people. Your existence as a startup, as a think tank is based on, "Well, do people trust you? Do they respond to what you're offering? Do they engage with you?" So it's not like I'm going out in the world just saying whatever goes from my head. Although clearly today I am. It's still a job of crafting thoughts and ideas and articulating them and finding ways to communicate them in a space that will be responsive. And yes, it's hard. It's hard in a

sort of economic stability, visibility standpoint. So got to be ready to have that battle.

Now, on building institutions in the field of ESG in general. I mean, I started in it at a time when it was just emerging. So yes, it didn't really have institutions. I think you try things, you do things. Institutions emerge because people want a space to congregate, to gather. They want a space for thought leadership, they want all sorts of things. So that's how things like the PRI emerge. Preventable Surprises in a number of ways created as a-- Counterweights would make it sound too weighty for what we actually are, but for a different voice. So rather than the structured institutions with signatories or members who are trying to reflect the views of an aggregate number of other institutions, whether they're financial or the United Nations or otherwise, we want to be the nimble ones. We want to be the people who said, "Well, we're not dependent on this to express perspectives and offer ideas and things that are relevant to this field."

That may speak to perhaps more ambitious participants, but eventually create a space to discuss ideas that is more open, that is more candid, that larger institutions cannot have. I don't have grand ambitions about growing Preventable Surprises. I call it a re-startup. Yes, it existed before me. I have infinite gratefulness to Raj Thamotheram who founded it and all the people that have been part of the journey. But in many ways it was a relaunch. I want to stay nimble, and to do that I can't grow it and I don't want to grow it. I'd be happy to have a few more people obviously. But I don't want to get into a position where I'm dependent on other people's point of view. You always have some relationship in the funders and other things and also having people depend on me for their livelihood.

Ben (35:30):

Sure. Is it that question of being agile, quick decisions, less bureaucracy, or is there something other special about being small and this other voice which you think is perhaps a unique attribute which you'd want to keep? Or is it these kind of structural social political things? I sense there's something maybe a little bit more that's almost foundational. You need-- I kind of describe it as you need small boats and large boats when you're in a flotilla and if you have just one kind, you're just not as good.

Jerome (36:04):

Yes, I agree. I think that maybe in that sense when I use the counterweight analogy it was inaccurate because it takes a variety of actors. In many ways we can exist because

these larger things exist. I'd like to say we are relationships more than anything else and that includes institutional relationships. I think quite idiosyncratically our little boats is able to exist because the big boats know that we exist. Because we've worked there, because we've lived there, because we have the relationships with all the people in the big boats. I think there's lots of people in small boats who would love to have the sort of attention that we get and there's a real inclusiveness question about how all these institutions interact. But yes, we're part of an ecosystem for sure.

Ben (37:17):

That's interesting. I reflect that the importance of that essentially human connection, institutions… Yes, we have processes and ideas and mission statements but they're made by people. Therefore institutional to institutional relationships are also made by people. And where people have been or obviously the history of where that comes from, I hadn't thought about it like that. That there is in building institutions, potentially building relationships is one of the very underrated features. It's obvious on the one hand, but actually you have to put a lot of work into it particularly on that. I was also thinking about your earlier comment. There's one idea about actually maybe the world or certain countries need 10% less democracy. This idea that you need it, but actually we are log jammed with consultations which don't go anywhere because they're 51/49% consultations or even they're 60/40.

You actually kind of know. People know without them and therefore you can't make decisions. I was wondering what you think about that. I'm quite keen on having participatory forums. So I like this concept of open space, even climate assemblies, juries, some of the things which has happened in Taiwan. But actually, I also think that then you do leave it to technocrat. So you get a better source of information, proper participation that happens across many domains, but then you let policy makers actually craft given that information with perhaps less democracy. But there is a balance. I'm not sure, but it seems to be that some of our governance processes at least as they are today, don't seem to quite fit what people in general want. But we haven't manage to square that. Obviously this is one of those that has no answer, right? Governance mechanism, we had a better one in that we'd probably put it in. Arrow's theorem suggests there isn't any perfect way of doing it, but it seems even less perfect today than where we were. I wonder whether actually we need some rebalance between on the one hand more participation which is a form of democracy but you don't necessarily have the binding vote, and then allowing essentially expert policy makers which seem to have got downgraded in people's thoughts, but to my mind are actually even more important today-- the genuine ones-- there's a question around that. So 10% less democracy or 10% more democracy?

Jerome (39:48):

First of all, it really depends where. I think the conversation about democracy in the US or France or Germany or the UK or Taiwan or Japan is pretty idiosyncratic. You have different institutions, you have different societal expectations. You may or may not have a monarch. You may or may not have a constitution. I'm also generally drawn to those participatory models. I think the risk that you described of those, I guess technocratization of decision making exists, but at the same time it's kind of already there; the techno structure. We certainly see it in the EU with the commission and otherwise. I also worry-- and this goes back to my earlier points about, "Why we should worry about all this," that the participation can be skewed. What sort of interests are in play? Who is really participating at the table? What sort of underhand influence in lobbying takes place by a range of institutions around it? So I think it's good, but it's insufficient per se. I think each country in this case in their own institutions and with their own people have got to figure out this balance between the balance of powers, between industry and finance and technology and society and other interests. So that's my non-answer answer.

Ben (41:44):

Was a very good one. In the US I think there's a bit of a debate as well on-- I'm going to call it billionaire philanthropy, but this is a sort of NGO blob, I guess. Do you think we should have more, we should have less? Are they doing the right thing? Is this a problem because it got into the gap of where government hasn't been able to go? Actually, from that view then maybe they're imperfect, but they're going into that gap. I guess it does matter geographically as well because there seem to be more US billionaire philanthropists than any other form of billionaire philanthropists although there are some in Asia and Europe and around. But there's been in the same way that so much in the US has contested this kind of pushback. Like you mentioned earlier, Bill Gates you could argue was a visionary in terms of pandemic. If you're paying attention, done a lot in global development. We have a newer wave actually with a movement called effective altruism to some extent. So I'm interested in what you think about the philanthropy space and whether we should have less billionaire philanthropies or more, or is it about right?

Jerome (43:00):

I think it depends what they're doing. On the one hand we shouldn't overstate the power of philanthropy. Bill Gates, I remember reading a piece like an interview of his in the

Wall Street Journal some years ago reflecting on his experience trying to change American education which I think was his kind of first interest. "We're going to do stuff about education and we're going to pour billions into it." After a few years-- and I maybe poorly paraphrasing and maybe mistakenly paraphrasing, so it's my impression of the conversation. Bill if you're listening, I apologize. I'm not getting any money from the Gates Foundation. I don't think I'm on the radar. But he said, "Oh, I realized that we're a drop in the ocean." The amount of money that goes into philanthropy is in the hundreds of billions. It's nothing compared to the scale of financial markets to begin with. I think the political influence of billionaires in the US, of wealthy people or parts of wealth in general, particularly in the context in where essentially the private finance of political campaigns has become the norm-- Just the whole idea that the presidential campaign could cost like a billion dollars to me is so absurd.

I mean, there is something about the scale of the country and everything but it always shocks me. That is more of a question to me. I think we pay way too much attention to billionaires, whether they're Donald Trump or Elon Musk-- and maybe that's a sort of social media effect and the sort of intersection of narcissism and social media and desire for leadership, I don't know. I'd love to read some analysis on this. But Elon Musk is just a dude, right? Some argue he's a very privileged dude and all of this. That's true. He has created some interesting businesses and in others and he's probably lunatic and whatnot. Why are we paying so much attention to everything that Elon Musk tweets? In some ways I shouldn't even be talking about him right now because I'm giving him attention. Some of it's interesting, some of it's not interesting. Why is it constant headlines? Why are we obsessed with this? So one way to decrease the influence of billionaires is to pay less attention to billionaires. Again, that's my non-answer to your question. But I've met billionaires that I liked. I've met two billionaires in my life. One I liked and one I didn't like.

Ben (46:14):

50/50. Well, that leads me to reflect that it's potentially part of the human condition with social animals. There's something about-- and you can say the social media and things. You've got some hundred million followers. There's something like humans like to pay attention to things other humans do because of this social animal background that we have which leads me to think that there's always a part of me which is disappointed that this blob of ESG can say nothing about art, can really doesn't say very much about humanities. And I think maybe this is the problem, is it does barely say something about human rights. I mean, it does in principle. It says everything about it. But as you've alluded to, in practice within financial markets it's very tough. You get at the margin some extreme embargoes or things like that.

But in the messy middle where we know kind of life goes on, essentially the blob of ESG is silent. I extend that to being it's silent over art and humanities in general. And really therefore, financial growth is overly important. GDP seems to correlate with all of the other things that we think are important like happiness and life and health and education. But then when you get down to it, the kind of things that we seem to really say these are what make us human; dance, poetry, drama, narratives, maybe the blob that social media why we pay attention to billionaires. That core of when people ask, that is really important to not everyone in different flavors of it. And maybe that's the case because we're going to be segmented and we've potentially segmented financial markets in that way. Humanities answer for doing that.

But it seems to-- In some ways I was discussing with people they kind of argue, "Well, maybe does that make us less?" I don't see any reconcile so this is my non-question to your non-answers. But I'd be interested in do you think the power of broadly the arts of humanities have anything to say on financial markets, the blob of ESG or vice versa? And could we do with something more on a systematic level which has more reflection? It goes into, "Do we study enough humanities in universities? Is that the right way of studying it? Why can we not all be more artists at the same time?" I don't know. But anyway, ESG seems to have a lacuna over arts. That makes me sad. I'm not sure if it's a mistake. I feel it might be a mistake. What do you think?

Jerome (49:05):

Lots of things. The starting point we're talking about Elon Musk or billionaires and so on. And all of these things, you're right, they speak so much to some mental models or expectations about how society works. The alpha male followers whatever thing. If we want to be thinking about... Sorry, I'm looking for my words because I'm slightly outside of my comfort zone in terms of things that I may or may not have said before. But I think that's something that's shifting. Those models, the traditional male dominated society that's dramatically shifting that's shown by numbers in terms of who finishes superior education and performance in school. It's shown in who gets jobs and everything. The presence of women in the formal workforce in a range of countries and so on and so forth, that's a huge deep shift that the ESG world is not quite paying enough attention to. And I think this links to culture, this links to how society works, how society is evolving. It's a big deal. In many ways companies pay more attention to it because it's the clients but not always that well, and they don't pay particularly well attention to it in terms of the workforce and so on and so forth.

Maybe I should summarize what I've been blabbering about for the last two minutes about saying, yes, there are deep questions. Gender is one of them and we should be spending much more time on it. Humanities-- First of all, I'm finding that a lot of people that work in ESG are interesting. Part of the reason I've stuck in this field for 20 years is that I keep running into interesting people from different backgrounds and other things. ESG is an endless field. You can have expertise in a range of issues. You can have expertise in a range of asset classes. You can have expertise in a range of industries. Nobody's got that and nobody should pretend to have that. No one should pretend to have a system that captures all of that by the way. That's a big part of it. So I do find people who have this varied set of interest and that naturally gravitates to these questions. They're probably more curious about how the world works. "Can you engineer that?" I mean, I'm generally a big fan of people getting broader, generalized education in humanities and in societal issues and just knowing stuff. Certain faith in road to understanding of things. But it's clearly not enough.

Ben (52:45):

Sure. My last three questions then coming up for time. So one was referring back to the comment you made earlier about the levers that we can pull. I'm interested in what do you think are the few, maybe two or three levers that we should be most looking to pull; either maybe those which are underrated or those which are maybe obvious but we think we should be pulling more. And maybe you could think about that in the context of potentially policy levers. Are there one or two policies that you think, "Oh, we do this and this is a potentially important lever, whether that's carbon tax or innovation or regulational standards? Or are there some levers within the civil society company interaction where you think, "This is where we should be focused or this is where we need more attention." If we think about the levers of the world or the levers that you are interested in pulling yourself, what would you highlight?

Jerome (53:49):

So one that comes to mind is lobbying and in part because we've talked about it and we've done some work on this. But the fact that a lot of the outcomes and lack of regulation around some of these issues, sometimes in spite of and quite often in spite of general popular support happens in closed door negotiations is worrying. I'm not an idealistic about, "We're all nice and we are all making decisions.” And, yes, the sausage is dirty and you don't want to look at how the sausage is made except at the moment the sausage is very dirty. We could use a bit of cleaning. That's one answer. Another thing that I've been thinking about-- and this is more a question than a statement. But

I'm looking at how much regulators are struggling to address greenwashing and all these questions about what is sustainable finance and what is responsible investments and so on.

I think there's two reasons for it. One is the general focus on transparency and disclosure. I think as an industry we spend way too much time on transparency and disclosure and in some ways let the regulators do what they're going to do and then continue the discussion. That's a whole other conversation. But the other thing it seems to me is that it's kind of odds that we are putting so much focus on trying to regulate sustainable finance and so little focus on regulating unsustainable finance because it seems to me that we have a much better understanding about what is unsustainable in terms of markets, practice or mechanisms or emergent phenomena. Then we do about what is sustainable.

Ben (55:55):

That's a very good observation. I haven't heard it express that way. My immediate reflection is that you are correct. That actually we could do with better standard financial regulation and let the markets try and figure out what is sustainable or not. Let sophisticated practitioners still work it out, which we're still working it out. We have an idea of what causes bank runs. We have an idea of what isn't very good finance. In some ways, some parts of what I like to call high finance could do with stricter regulation or certainly more oversight. And what I call the frontier parts where we don't have a consensus on it still like, “What is ESG? What is sustainable?” No consensus on some of the-- Some there are, but some are not. So if the experts don't really understand it I'm not sure how the regulators would understand it which actually means that I'm going to ask one extra question. This is maybe a bit more technical then.

But do you have a view on EU taxonomy or SFDR which are these sustainable finance regulations coming through? Because there is a strand of thought which is that they're not really doing that much. This maybe alludes to your fact that transparency gets you so far but extra transparency is not adding anymore. You get the sense that people are flailing around to try and do something. Maybe this is back to the 10% less democracy thing but it's not really doing anything on the practitioner level. There's just a burdensome of regulation which if it was good regulation, say on the ozone layer, you'd want it. But when you look back and go, "Well, what is this really doing? Do we really understand it?" You kind of go, "Well, it's not adding anything." I don't know if you have a particular view on particularly taxonomy or that or any of the other regulations coming in.

Jerome (57:41):

So I haven't talked to a single person whether on the finance side, on the NGO side, civil society or otherwise that is happy with this regulation.

Ben (57:51):

They managed to upset everyone.

Jerome (57:53):

No, it is interesting. It's capturing attention. I've had conversations about some elements that may be interesting in terms of over time getting financial institutions to publish things around their externalities; negative externalities and so on. So yes, maybe that's interesting especially because it's kind of a way to everything else that is focused on materiality. And again, I apologize for using all these annoying words. Other than this my sense is that the taxonomy is a cultural misunderstanding in a number of ways. Part of it is bureaucrats and equity markets. Part of it is European thinking and Anglo-Saxon models. But part of it is also fundamentally, trying to codify things that are changing a lot. So with the taxonomy they said, "Yeah, we'll revise it and so on." But it just seems like an absurd exercise and what that is by definition will be too slow.

Ben (59:15):

In a way that's the issue with all regulation, that even the very best is only up to date in that moment in time and then it ossifies. Some parts of the world ossification doesn't matter so much because it's slow and that part of the world is not changing so much. So maybe regulation if it can do that in a part of the world or the system which is changing very fast and or there isn't actually any consensus to begin with. Then when you ossify or you put in rules which may not reflect what people think and then it's useless a year later, I can see that definitely as criticisms. So last question, two part question. What are current projects that you are working on or things and thoughts for the long term? Second part is do you have any advice for listeners out there, perhaps young people who want to make an impact or people in the field about what they should look at or potentially any life advice you want to share about arts or your career or your journey so far? So current projects and any life advice?

Jerome (01:00:32):

I'm trying not to be trite with the life advice.

Current projects, we're working currently on reproductive health. It's a topic that affects us all. It has been particularly in the political spotlight in the US post the Supreme Court decision to pull back on federal productive rights. People tend to think of this as something that happens in the US, but stuff that happens in the US is a way of crossing the ponds more often than we'd like. Sure there's very different views around this globally so I'm not taking a political stance on it as much as saying, “Here's a fundamental health issue and a health question that is not on the ESG radar because it's awkward. Ooh, its swimming. Ooh, it's like political,” all of that stuff. So that's one.

The other project that we are working on at the moment-- We're doing this with support of a foundation called Direct Action for Women Now. And then we're working with the support of another foundation called the CO2 foundation with a really interesting project about bringing together climate activist and social scientists on the finance side, but to try to figure out why is climate action so slow? Why is climate finance moving so slow? Is there anything about human dynamics, behavior and the soul that we can look into that would make us better at our jobs? So that's a project we also have going on.

So the trite life advice is be yourself. I mean, that's one. I've never been happier than when I didn't give a damn about what other people thought of me. Even though I say this, I worry about what people think about me all the time. But in a way where you sort of overcome that and say, "What is it that I can be in this world?" Focus on relationships. To me that is so important in the world that increasingly now is so fragmented and so focused on individuals. I really value relationships. I think we exist because there's a world around us. It's that simple. Make the mistakes you can afford, but make them all.

Ben (01:03:30):

Great. Well, that's a very good note to end on. So Jerome, thank you very much.

Jerome (01:03:36):

Thanks for having me, Ben. So happy.