Episode Transcript
Speaker 1 00:00:01 Welcome to the Definitive Sustainability Perspectives podcast, where we share examples of leadership and innovation. Small entrepreneurial businesses, large mega corporations, and all types of enterprises in between are seeing a global shift in perspectives around the role of business in society. From ESG investing to sustainable finance to social impact in our communities, we're on a journey to leverage data and intelligence to make the best business decisions possible. Enjoy the podcast.
Speaker 1 00:00:37 Hello everyone, and welcome to the Definitive Sustainability Perspectives podcast. This is Kesa Shrine, and our guest today is Audrey Choi. Audrey is Morgan Stanley's Chief Marketing Officer and the firm's first Chief Sustainability Officer. She also is the founding c e o of Morgan Stanley's Institute for Sustainable Investing. As Chief Sustainability Officer, Audrey oversees Morgan Stanley's global efforts to promote sustainability through the capital markets and the focus around bringing sustainable investing into the mainstream. As Chief Marketing Officer, Audrey Stewards the global brand, and prior to her work at Morgan Stanley, Audrey Health Senior policymaking positions in the Clinton administration, including serving as Janet Yellen's chief staff at the Council of Economic Advisors and domestic policy advisor to Vice President Al Gore. We are not done yet. Audrey also served as the Wall Street Journal's Bureau Chief Audrey, we are so pleased to have you here. Thank you so much for joining.
Speaker 2 00:01:41 Well, it's great to be with you Kisa, and my life sounds so much more exciting when you say it, so I love it, <laugh>.
Speaker 1 00:01:46 Great. Well, we definitely wanna get into your work with the White House as well as the work that you're doing now with Morgan Stanley. But first you talk a lot about making the case for sustainable investing. And I know one of the platforms that you really focus on is separating the truth from the myth in terms of what's out there in society about sustainable investing. Is it sustainable, um, is it revenue generating? So could you talk to us a bit about what myth and what's fact when it comes to that?
Speaker 2 00:02:14 Sure. Um, I think that really the biggest myth about sustainable investing is that it means that you are a softhearted investor who cares about the environment more than returns. And that if you're going to do it, that it means that you're willing to accept some sort of discount in exchange for being virtuous. And, um, you know, and that really is a, uh, increasingly, it really is a myth and I think it's increasingly a myth. Um, because, you know, what we've found is, look, there are certainly ways that you could say, um, that you want to invest and get a lower return, perhaps because you wanted to actually, you know, donate some of the returns to capacity building or to philanthropy. Um, but if you are an investor and how Morgan Stanley thinks about sustainable investing is, we think, look, an investor wants to think about, I think an investor wants to think about sustainability in a number of ways.
Speaker 2 00:03:08 First is, as you said, financial sustainability, right? Because you're not gonna do it a second. And a, you might do it once, but you're not gonna do it a second and a third time, and therefore make it economically sustainable if it just doesn't make sense for you as an investment. And so, at Morgan Stanley, we've always talked about sustainable investing with what I like to call sort of a capital s It needs to be financially sustainable as well as environmentally sustainable, socially sustainable. And you know, from a, from a good governance perspective, once you apply that lens to it, and you are actually talking in the realm of investing, can I do investing sustainably? We believe the answer is yes. Um, we, what we've seen from our studies actually is that, um, uh, that not only does sustainable investing not require a discount, but it can actually also help reduce risks.
Speaker 2 00:03:54 So just let me give you some, uh, I'll give you some hard data because a lot of people don't necessarily believe that if you just say it. So for example, um, we recently did a study where we analyzed 11,000 investing funds and we compared, um, the sustainable strategies to the traditional strategies. We tracked their performance from 2004 to 2000 eighteens over 15 years performance. And we compare the sustainable strategies to the traditional strategies. And we found a couple of really interesting things that I think go right to that myth busting. First of all is if you plotted the performance of the traditional strategies, unsurprisingly, you would probably, you would see a normal bell curve distribution. Cuz most things in life have a normal bell curve distribution, right? So there are some managers who were lucky and or good, some managers who were less so, but most of them clumped in the middle.
Speaker 2 00:04:41 When you plotted the sustainable strategies, lo and behold, it wasn't magically different or warped or, you know, somehow disobeying the laws of physics and statistics. It too was a normal bell curve distribution. Some were lucky or good, some were less. So most of them in the middle. But then when you actually compared, you actually saw that there was, contrary to the myth, there was no financial trade off for the sustainable investments that they really performed right in line with the traditional investments. There was one difference, Harvard, which was interesting, which was on the volatility side that the sustainable strategies actually had lower volatility and in addition, they had a 20% smaller downside deviation than the traditional funds. So, leave aside whether you, and I'm making ear quotes here, care about the environment or society, I've never yet met an investor or a trader or a business person who says, I want option A, the one that has the exact same return and higher risk.
Speaker 2 00:05:41 Um, so I think that that's been one key piece of evidence. Um, and you know, we could also go into individual examples where we've seen that the individual companies where the management is focused on what some might call sustainability goals, what others might call good business, right? Good stewardship of your company, thinking about are you polluting your environment? Are you dealing fairly with your workers? Are you, you know, being in, um, are you, uh, thinking about diversity, about the broader impacts of your, um, of your company? And its effects we're seeing that those companies actually do outperform. Um, I'll, I'll give you just one other bit of data, cuz again, I feel like people are, are very focused on this, um, gender. Mm. From, from a gender diversity perspective, again, I think there's a lot of people who are very focused and interested in gender investing mm-hmm.
Speaker 2 00:06:29 <affirmative>, but they've all thought, well, you know, it's the right thing to do, so maybe I should do that because it's the right thing to do. Again, we said, let's, let's just do the work. Let's just look at the numbers. And our colleagues in our research, um, looked and they found that, um, the high gender equity companies actually did outperform their less diverse peers. And in fact, it was about 3.1% per year over the last eight years. Wow. When you compare the high gender equity to low gender equity. So I could go on, but I won't <laugh>. Uh, there's just lots of ways in which we're increasingly seeing that quote, doing the right thing Sure. Actually engenders, um, you know, uh, it does not have to be a dis a discount. So myth number one mm-hmm. <affirmative>, and then two, that it really can help, um, both reduce risk Sure. And then give you some insights into future trends. Well, just
Speaker 1 00:07:15 Digging into this, I'm fascinated by the risk, the volatility piece. So if we think about firms that are reducing their carbon footprint, firms that are using less water, those sorts of things. Okay, I get that. Because they're, you know, expending less by doing those things. But risk, where does volatility play a role in, in these sustainable investments?
Speaker 2 00:07:34 You know, we can come in in, in a whole variety of ways. Um, you know, it could come in, for example, if there's a company that is, um, you know, is, is perhaps not the best steward of the environment around its industrial process, and there ends up being some sort of pollution or a leak or some other thing that might be unexpected mm-hmm. <affirmative>, uh, and that might lead to damages that that can en engender additional costs for, you know, for a company. Um, you know, it could be, I mean, there's all sorts of, there, there could be all sorts of legal exposures and other things. There's also, um, you know, there can be, um, just ways in which you, uh, really have some, some virtuous or some vicious cycles created. Maybe it helps factually just give you two examples. Sure. Um, and, uh, you know, these, these are, these are not live stock recommendations. So take these as true facts, but which we should use as parables. Right. So, love that parables, your listeners should not trade on the following stories. We don't trade on
Speaker 1 00:08:29 These, they're parables.
Speaker 2 00:08:30 Exactly. But they're true. Right. So, for example, there was one company, um, in, in a particular sort of heavy industry that was known to housing some challenges in terms of how their environmental stewardship around water usage, and also in terms of their community engagement mm-hmm. <affirmative>, um, and sort of every, you know, every quarter every year investors and stock analysts would say, well, they're not, you know, they're not exemplary around that, but it's not really reflected on the balance sheet, and we don't think it necessarily affects our call for valuation for the next 13 week period and the next 12 month period. So it was never really noticed. Um, and this was actually right around the time where we were actually starting to look in our global research around how could we actually think about what are the environmental factors, the social factors that aren't on the balance sheet, but maybe should be mm-hmm.
Speaker 2 00:09:16 <affirmative> because they could have material financial effect on their returns mm-hmm. <affirmative>. And so we, our, our research analyst actually developed a model and, um, put out a big, um, a a big, uh, model and a, you know, a, a system whereby we could actually embed materially relevant environmental and social governance factors into our core valuation. And so when this analyst of this particular company went back and looked at the companies in his, in his sector, he realized that this one company, you know, again, challenges with water usage, challenges with community engagement, never seemed material. When he really looked closer than with this new kind of lens to it, he saw that the, the water usage meant that they were on the verge of being slapped with an order to do a feasibility study to build desalination plant. Mm. Which could have an unanticipated capital expenditure of anywhere from a half a billion to a billion and a quarter dollars at the same time.
Speaker 2 00:10:05 This, eh, social engagement with the community. Mm-hmm. <affirmative> meant that, um, their permitting for new sites was getting slower and slower and slower each time because Wow. There was actually a member of the community who was the person who had to sign off on the permit. Um, and so when you, and so that meant then actually if you have slower, longer permitting delays before you can start a new site, that means potentially lower output. Hmm. So suddenly lower output and unanticipated CapEx actually suddenly met, uh, you know, um, um, a downgrade. Yes. But on the other side, in a different industry, there's a different company who had been doing an exceptionally good job on girls empowerment, female employment, community engagement, recycling, a whole bunch of things that people thought, well, that's great and they have a lovely community, you know, social, social responsibility report, and they're really nice, but it's not showing up on the balance sheet.
Speaker 2 00:10:59 So whatever mm-hmm. <affirmative>, and again, when we looked at, with this new model, they started realizing that actually all that recycling meant that they had a lower cost of good sold because they were getting input materials for Jibo. All that girl power and female employment and blah blah. And work that they were doing with the community was not blah blah at all mm-hmm. <affirmative>, in fact, it was leading to the fact that they had higher attention rates, longer average tenure, which was leading to less cost from churn and recruiting and vacant spots, higher productivity and hi higher innovation. Hmm. And suddenly all that was incredibly financially material and it led to an upgrade.
Speaker 1 00:11:35 Wow. That's, I love how in that example, community engagement led to employee engagement. Mm-hmm. <affirmative>,
Speaker 2 00:11:40 Right. I mean, cuz again, and I think you could, you could go up to any CEO and say, do you believe your company will be better, have better products, be more effective, be more efficient, be more productive, be more innovative if your companies are happy mm-hmm. <affirmative> engaged, loyal, and think that you are a company that does good things in their community, or the opposite. Wow. I don't think you'd find any CEO e o who would end up on the side of not being a, you know, wanting to be a qu sustainable c e o. Exactly.
Speaker 1 00:12:05 Wow. This is amazing. I I wanna dive right into your work with, at the White House. Um, when we think of Vice President Al Gore, he's probably one of the earliest advocates, right? Of sustainability, of sustainable investing. I can imagine that in those days you ran up against some brick walls just because we weren't talking about sustainability or sustainable investing. Na then in the way that we are now, could you let us know how you were able to open doors? How did you begin to socialize the language, socialize the concept in a way that started to resonate with people?
Speaker 2 00:12:37 You know, it, it's really incredible if you think about that journey, keitha. So I, I did, I have the, I had the great privilege of working in the Clinton administration and working for Vice President Al Gore, also, as you said, working for Janet Yellen. Um, and, um, you know, just a, just a lot of really, really wonderful leaders. You know, that was, I was working for him in the mid nineties. What's amazing is, it was actually 1976 when Al Gore, as you know, freshman, uh, congressman from Tennessee held the first congressional hearings on climate change. So 1976, right. That's, that's my math. Uh, 43 years ago, I believe. Right. That he first actually started saying, let's look at 600,000 years of data from, you know, Antarctic ice and what that tells about weather patterns. And he started talking, I think, called climate change. You know, it really took an enormously long time, uh, before that really did gain traction.
Speaker 2 00:13:30 Cause I think in those early days, a lot of the, you know, the members of Congress were like, what's this kid talking about <laugh>? Sure. Um, you know, and I think that, you know, it, it is really stunning when you think about where we've gotten to today mm-hmm. <affirmative> where, you know, climate change is in the parlance of the Federal Reserve of, you know, um, dozens of central banks around the world who are part of the greening, the, you know, the financial system network, um, of the, the financial Stability board. Ever since Mark Carney's leadership with, uh, you know, establishing TCFD to really focus on climate change risk as a material part of financial disclosure that you need to understand for the very stability of the financial markets. And, you know, I think a number of things have contributed to that. One is obviously over the past 40 some years, we've seen, you know, increasingly the, um, the impacts of climate change in all geographies, including right here in the United States in some of our largest cities.
Speaker 2 00:14:24 I mean, it's, it's really hard to actually find a place where you're not seeing direct palpable impacts of, you know, of climate change. Uh, actually just last month we had our, um, Morgan Stanley hosted our first sustainable investing summit. And, you know, climate change was a significant theme throughout the day of something that as a, as a responsible investor, as responsible corporate leader, um, that you really can't ignore. You know, Mary Shapiro, um, who's on our board and former, uh, s e c chair was saying, let me be clear, climate change is not just an issue for the green investor. It's an issue for every investor and for every boardroom. And similarly, you know, we have, uh, this amazing, um, scientist, Dr. Rosie Bierbaum, uh, recently elected to the National Academy of Sciences. She's also on our board at the Institute for Sustainable Investing. And, uh, you know, she did this incredible presentation of the climate impacts and the now completely undeniable evidence that this is not just your sort of normal weather fluctuations.
Speaker 2 00:15:23 That, again, when you look at hundreds of thousands of years of, of, um, of records of temperature changes in carbon emissions, there was something very anomalous and different going on. And that from the financial perspective, again, whether or not you care about the environment or care about climate change for its own sake, you do care about the fact that, you know, each year we're having successively growing insurance losses. We're having, you know, according to the Sustainability Counting Standards board, um, which I'm on the board of, um, which is a nonprofit focus on sustainability, really is a core part of what should be disclosed for investors to make good decisions. It has more than 90%, I think it's that 93% of the value of the US stock market is exposed, exposed to climate change risk. Wow. So when you start seeing things of that order of magnitude, and again, as you know, Dr.
Speaker 2 00:16:09 Biba mentioned, you know, when you have a city in the United States in three years, having three occurrences of what are called 500 year floods, that's probably a pretty good sign that your, your risk models from the past might be a little bit off. Mm-hmm. <affirmative>. So what's fascinating is, you know, when you think about that span from, again, 1976, Al Gores is getting congress for the first time to listen to something about climate change, to now where it's chief risk officers, chief financial officers, regulators around the globe are saying climate change is probably one of the most significant systemic material risks that every business financial regulator and financial markets needs to take account of. It's, it's a pretty dramatic change, and yet it's not been nearly fast enough. Mm-hmm.
Speaker 1 00:16:54 Mm-hmm. So you've been on both sides of the spectrum, corporate and government. What makes for the best partnership, because what I'm hearing now is that you're bringing these stakeholders to the table to, to really talk about this and to really drive change in terms of getting governmental organizations together, NGOs, corporations, to work on one accord. How does that work? Well, is there a secret sauce, so to speak, or how can we really drive change through that type of collaboration?
Speaker 2 00:17:20 Well, I think, you know, exactly as you said, collaboration really is the key. Mm-hmm. <affirmative>, um, you know, I think it's, it's a, it's a false choice to say business can do it on its own. Mm-hmm. <affirmative> or government needs to do it. It really does need to be both, right. I mean, like, it's very clear government play is government and it's, you know, sort of enlightened policy setting plays a critical role for any industry, any issue of, you know, setting the rules of the road, determining whether, you know, the playing field is level or whether you are, you are, you know, you're trying to help advantage a new industry, a new entrant or, you know, or protect an old industry. And there's, there's, there's unmistakable levers of power that policy makers in every single country have. And, and also at the city and, and the state level.
Speaker 2 00:18:03 Um, at the same time, business absolutely has responsibility and a need to be at the table because all the philanthropy in the world and all the government funding in the world is, you know, necessary but insufficient to solve problems on the, you know, on the order of magnitude and the scale that they have now. So that's why we are so excited about what we're able to do is that, um, you know, obviously policy is gonna do what policy is gonna do. You know, we as a capital markets player, um, we've been really focusing on how can we, um, do the work, analyze the data, you know, bring that proposition to investors to say, if you are interested, if you're not, you're not. If you are interested, here's what we found about what thinking about the environment or society might do to, to your risk, to your returns.
Speaker 2 00:18:48 And if you were interested in choosing these kinds of portfolios, um, that we were able to help put those kinds of investment opportunities together. I mean, I think that's been one of the big changes. You know, Morgan Stanley actually started on this journey, um, back in 2009, which, you know, was very, very early for mainstream financial institutions. And if you think back to the world of what was happening in 2009, particularly in the financial sector, yes. Um, it was not necessarily an intuitive time to say, Hey, let's start a new group called Global Sustainable Finance. Um, but that's actually what Morgan Stanley did at the time because we, we had this belief that environmental issues and social issues really weren't just, you know, as they call 'em extra financial issues, sort of side issues or CSR issues, but they really could be material to understanding risky and opportunity.
Speaker 2 00:19:35 Um, you know, and, um, you know, I, I think that that, um, you know, what we've seen happening there is that, um, as we've started to develop products that investors have becoming more and more, and, you know, but when we started back in 2009, again, impact investing and a lot of the other terms that, that, uh, that you hear talking about whether it's sustainable investing or impact investing or values, uh, driven investing at the time, a lot of people thought, oh, well that's something very interesting for a mission driven investor, um, who is interested in something like sort of interesting and charismatic, and maybe it's a really exciting, you know, private equity fund for very wealthy investors to do something, you know, really, really ambitious in, you know, in a far flung part of the world with some, you know. And, um, and, you know, and, and it was hard at that point if you were sort of, you know, a regular person to think about investing at a lot of the activity at that point focused on private equity funds, emerging markets.
Speaker 2 00:20:33 And you did need to be, um, you know, an, an accredited investor with, you know, know the ability to do those kinds of alternatives and high, high end high prices. Um, what we've, one of the things we've worked at at Morgan Stanley is making that more and more and more accessible. So after a couple years, we, we actually launched our first, um, model portfolios where you could actually get sort of a diversified portfolio following our investment committee's recommendations. And at the time, it was considered a great victory that we got the prices down to only 600,000 and 400,000 to be able to buy into these, these model portfolios. Fast forward a couple of years, we've gotten it down to 10,000 and even to $5,000 or someone could, you know, whether you're, it's your first, uh, you know, your first investment as you start the world of work or, um, that you could, you know, with, with, uh, with $5,000 or $10,000, you could choose diversified portfolios that give you exposure to, to a range of sustainability focused, um, uh, options. And, and as you've seen, the market has just exploded. Again, it's now globally, uh, according to, you know, to the various estimate's about 30 trillion market meaning one out of every $3 under professional management in the US it's about 12 trillion, about one of every $4 under professional management. So
Speaker 1 00:21:44 It's important to make this accessible, not just to the higher end, um, um, investor, but to everyone really.
Speaker 2 00:21:51 Exactly. Right. Because what we've seen is, you know, one of the other things we do is we've been polling investors the whole time mm-hmm. <affirmative> to say, are you interested in this? Right. And what we've seen has been a really fascinating evolution. So when we first poll investors in, I believe it was 2015, we had 71% of, um, of investors saying, yep. You know, they were, they were interested in it. Um, what was interesting, if you broke that down though, is that we've sort of always had millennials and women leading the way. So it was 71% overall, millennials were 84%. Wow. Um, women that first year were 76% and men were 62%. Wow. A couple years later we went back, the men come a little bit, they were 67%, the women had jumped 84 and the millennials were at 86. And the last time we did, most recently, 85% of all the investors polls that they were interested in sustainable investing.
Speaker 2 00:22:40 And the men had, uh, come up to 83%. The women were at 86% and the millennials at 95%. Oh my Right. And we're seeing that this next generation, right. Which is already the largest generation in the US workforce today. Right. Cuz the old millennials were at 35, 36, they're already significant for us. You know, they're like, well, of course we would think about sustainability in our investments. Like, why, how could you not? Right. Like more than 90% of millennials, um, want, um, sustainable investing to be one of their retirement, uh, investment options. Um, although only about, um, I think it's only about 17% of companies actually offer sustainable 401ks today, interestingly. But also millennials are twice as likely as other generations to check packaging to see if the products they're buying are sustainable. They're twice as likely to, um, uh, to, um, to, to, to buy something as a result of that. They're twice likes to boycott as a result of that, and they're three times more likely to choose their employer based on sustainability. Mm-hmm. <affirmative>. So we're, I think we're definitely seeing a, a real sort of seed change here. And, but that means that it has to be something that, you know, if the, if the demand is that broad, we need to make sure the access to the products is equally broad.
Speaker 1 00:23:49 Right. And speaking in terms of access, we're talking about, um, now not just portfolios, but what Morgan Stanley is doing around access and collaboration, um, Morgan Stanley's multicultural innovation lab and context of investing in communities that have historically experienced under investment. That's another way that you're, you're looking to collaborate and to really ensure that folks have access mm-hmm. <affirmative>. So with labs of that nature, how would an entrepreneur or a group reach out to Morgan Stanley to say, you know, hi, I have something that you might be interested in, I'm interested in, in pushing the envelope in terms of su of sustainability. I'm interested in really driving things forward. How does that happen? How can an entrepreneur or a group connect with Morgan Stanley to really help you in terms of your efforts there? Mm-hmm. <affirmative>.
Speaker 2 00:24:32 Yeah. I mean, so there's, there's a number of ways. And so the, the multicultural innovation lab that you mentioned is led by my, my amazing colleague, Carla Harris. And every year there was actually a call for applications for entrepreneurs. And so that's, you know, that's an open application process. I believe that's actually underway sort of as we speak. Um, and that's definitely something where every entrepreneur, um, you know, women and entrepreneurs of color, who, as the studies that Carla has done, have shown, you know, haven't been getting equal access to capital for whatever set of, you know, a whole variety of reasons. Mm-hmm. <affirmative>, that's the only opportunity for them to apply, um, at the Institute for Sustainable Investing, we've also been focusing on the next generation, um, and, and how to get them into this. Um, and we've done a couple of things. One is we have a, um, a sustainable investing fellowship where we actually bring students from business schools, from university, from other traditional disciplines into Morgan Stanley to work, um, you know, during the summer with us on a specific project or set of services and products around sustainability.
Speaker 2 00:25:29 But where again, you know, our lens is sustainability is a part of a core financial product and service, not sort of a, a side or a delusion of it. And so how, what does that look like? Um, and then we also do our, um, Morgan Stanley sustainable investing challenge where we issue, and again, that right now we're also just in the, in the recruiting phase of it. So, um, anyone who is in, um, in business school right now globally should think about it. We issue a call to, um, to graduate students globally to bring us your best idea that is, um, for, for financial product. So not a company in this case for financial product that you believe can be scalable, that can be sort of, you know, appropriate risk adjusted rates of return, um, to really attract, you know, mainstream capital. And that also delivers a positive environmental and social benefit.
Speaker 2 00:26:15 We've done this for about six or seven years, um, and the first year we thought we've made that strike zone so tight, right. A scalable commercial financial product that also delivers, you know, environmental, social, are we gonna get, you know, more than three applicants? And we've gotten, you know, hundreds, not thousands of applicants in terms of students, different schools. I think our last one we know we had, uh, we had several hundred teams from, you know, uh, more than more than 35 schools around the, around the globe. And they come up with these amazing ideas. It shows you that the next generation just, you know, really can't fathom in many ways why you would undertake your life's work as something that makes money at the expense of all the other things that they value. Hmm.
Speaker 1 00:26:57 Great, great initiatives. And I'm wondering too, in terms of the work that you're doing, you're, you're just a wonderful advocate for this work as well as for Morgan Stanley. You also are the head of chief marketing officer. So is there a line between being just extremely proud of the work that your firm is doing and really socializing that work a line between that and maybe seeing in some ways tooting your own who, I mean, how does that work to balance being a chief sustainability officer as well as a chief marketing officer?
Speaker 2 00:27:26 You know, it's, it's, it's a, it's a great question. You said it's really interesting cuz the first number of years when I was, um, just working on the sustainable investing side, I often actually would, you know, people say, oh, isn't this just like good market? Like no, no, no, this is not marketing. We are not part of the marketing division. Um, and then, you know, a number of years later I was asked to, to, to also become our chief marketing officer. And, you know, I have to say, I think that at this moment in time, it actually makes a ton of sense because frankly, what consumers want today, uh, what clients want is they want, they do want brands that they, that they feel stand for something and that, you know, stand up for, you know, doing the right thing. And, um, you know, and again, I feel like because Morgan Stanley has been focused on sustainable investing, you know, long, long, long before I was, you know, part of our marketing organization, um, that this is really more just an alignment of, of the two things.
Speaker 2 00:28:19 And we're not changing anything that we're doing for sustainability because of the marketing. We are, as you said, you're sort of using marketing to, you know, to talk about it among other things. But, um, but again, I think, you know, we're, um, you know, again, we view it not as trying to tutor or horn own horn or whatnot, but really, um, you know, trying to think, trying to say, you know, what's, what's, what's of, what's of service to, to our clients. And frankly, all the questions that you've been asking are the questions that our clients are asking, which is, I think I might be interested in the sustainable investing, but, you know, here's all the myths that I've heard. Are they true? What are the facts? What are the strategies? What are the possibilities for it? Um, so I think, you know, I, I feel very comfortable that we're, you know, because we've been doing this work on sustainability for such a long time, um, you know, it's not like we're doing something differently because of marketing. We just happen to now also be talking about it. And, you know, fundamentally really also aligns with our firm values, right? Our firm values actually are to do the right thing to give back, um, you know, to lead with exceptional ideas and, and to put the client first. So great. I feel like they've been really fortunate that they're all consistent.
Speaker 1 00:29:26 Great. So finally, Audrey, speaking of leading with exceptional ideas, what is the big idea, what do you see happening in 2020 and beyond that is really gonna knock our socks off? Take us by surprise. In the world of sustainability and the world of impact investing, what big idea do you see really coming to the forefront?
Speaker 2 00:29:43 Well, um, you know, the, I would say one general thing and one specific thing, like the, the general thing is I think, um, you know, that this is just going to continue to accelerate, right? It really, for years now, I've sort of felt a little bit like the, you know, the grandfather clock in the hallway that says, you know, that no matter what time of day you go by, it says it's, you know, this the same time. Cuz the last 10 years I've been saying this is really gonna be mainstream. This is material to business. This is a growing field and it's always been growing. But now I think the exponential growth has been so clear that people are really focusing on, and you're seeing a tremendous influx of activity into the space. And so that's a, I think, sort of a secular trend that's going to continue.
Speaker 2 00:30:22 The, the more specific thing that I'll confess that, you know, we are very, very excited about. Um, and you know, in, in a slight cheat, we started it in 2019, but I think it's really gonna continue is we just, um, made a major in, in April of 2019, we did a major firm commitment, uh, which we've called the Morgan Stanley Plastic Waste Resolution. And this emerged because we were really thinking with all this work that we've been doing in sustainability, um, you know, there are, there also a few sort of specific issues that really need some folks attention. And you know, we, we, we did a lot of thinking really came back, uh, again, again, it's issue of plastic waste. You know, I'm sure your readers have probably, your listeners have probably read and heard a lot about of late. But, you know, again, just to kind of level set again where we are, right?
Speaker 2 00:31:07 Plastic was actually only invented 70 years ago. Wow. 70 years ago. There was sort of, you know, some innovation and some research and some serendipity in, in the lab that led to this clear substance in the bottom of the test tube. And over the course of the, the next 20 years, um, you know, sort of entrepreneurship and innovation and all sorts of things made pla start to become something that came into, to, into sort of widespread. And over the last 50 years, it has now permeated every single element of our economy and daily lives, uh, which is terrific because it has all these great properties that we didn't have before. Right? It's malleable, it's stretchable, it's lightweight, it's done incredible things for, for medicine, you know, in terms of reducing infection, uh, in terms of, uh, you know, in, in terms of food waste, reducing food waste, uh, lightweighting cars to reduce their climate impact.
Speaker 2 00:31:56 But it's also how this problem that this chemical substance is not biodegraded by nature, cuz nature didn't invent it. We did. And so nature doesn't know how to biodegrade it and we haven't actually yet quite figured it out ourselves. And so we now have 5 billion metric tons of plastic waste sitting in our rivers, oceans, landfills, and landscapes. And the, about about half of that was only ever used one single time. Right. And so, cuz it's mostly been used as packaging. And so if you think about that plastic grocery bag that's often has an act left about 12 minutes and then it might disintegrate for decades, if not centuries before it becomes micro granules of plastic that come back to us in our water, in our food, in our salt. Anyway, I could go on for, but I won't. Um, but I think what's interesting is, you know, again, we started thinking about this is a massive problem, but it's not just an environmental problem, it's actually throughout the entire economy.
Speaker 2 00:32:49 It's through the value chain of just about every industry. And if we're gonna solve this, you can't say it's all x, y, z companies or industry's responsibility to do it. We will have to think about a systems approach. How do you think about everything from the chemist, the materials engineer, the product packaging designer and the consumers as well as government officials and then, you know, the, the people managing public dumps or whatever else in terms of recycling and the full life cycle. And we thought, wow, that's a big hairy issue that no one alone can do. And certainly Morgan Stanley alone couldn't do it. But all those different players I just mentioned, we work with all of them as clients, right? With public, you know, with, with governments, with sovereigns, with large corporations in the chemical company, consumer packaging and consumers. And so we put together this resolution and said, you know what?
Speaker 2 00:33:41 Together we wanna help facilitate the prevention reduction removal of 50 million tons of plastic waste between now and 2030. Um, we're really excited at the, you know, at um, at what we've seen so far, when we, when we first launched the, um, announcement, we started with a proof of concept with the World Bank, um, and we did a 10 million bondage once for the World Bank where the proceeds were dedicated towards marine health and plastic waste reduction. Fast forward six months later, we had the opportunity to work with Pepsi, uh, to help them issue their first, um, billion dollar green bond with the bulk of the proceeds, uh, dedicated towards helping them reduce by 35% the virgin plastic in their beverage chain by 2025. And when you see that even just that trajectory alone, you know, a 10 million proof of concept in April, a billion dollar bond in September, and a major player like Pepsi thinking holistically about their value chain, about their supply and what the impact is of that, you know, overall, that's when you start to actually begin to scratch the surface as systems change. So for 2020, I'm really excited to see the continued acceleration of this where we really see, um, you know, all different parties coming together, corporates, financial institutions, um, you know, consumers all together saying we can do better than throwing away a hundred billion worth of economic value every year in the form of one time plastic usage. Right. I mean, since you and I have been talking yeah, maybe 30 million, um, disposal water bottles have been used around the world. Hmm. We can do better than that.
Speaker 1 00:35:13 It's in perspective. Yeah, definitely. Well, it sounds like collaboration is the key and your career has been about bringing these groups together, working in corp government as well as in corporate. So collaboration really seems to be the way
Speaker 2 00:35:24 Forward here. Absolutely. Right. All, all of our challenges are too big for us to do it, do it, uh, individually, so, exactly.
Speaker 1 00:35:30 Audrey Choi, thank you so much for joining us today. Oh, thank you
Speaker 2 00:35:33 Guys. It's been a delight.
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