Jason Mitchell is Co-Head of Responsible Investment at Man Group. He was a hedge fund manager. He is a poet. He is a deep thinker on all things sustainable and finance. He hosts a brilliant podcast on sustainability, A Sustainable Future.

We chat on his poetry and how he witnessed refugees in the Mediterranean sea. We dicussed what poetry has taught him.

“rescued by our boat one morning, the man asked me, is it true what they tell us, the traffickers, about these waters, that the sea has no bottom? I told him no, there is indeed a floor, half a mile or more below us. And Europe is a much farther, more difficult journey than the traffickers promised you”.

I asked whether fund managers on average know enough outside finance and about his journey into sustainability.

Jason discussed the Jevons paradox. How we use something more the more efficient it becomes.

Jason gives his views , overrated/underrated, on:

• Carbon Tax

• Divestment as a social political tool

• Shareholder activism as a theory of change 

• Carbon offsets (and shorting as a tool)

• Sustainable finance regulation

• Stakeholder capitalism

We end with Jason’s favourite podcasts that he has hosted, what people misunderstand and his advice for others.

“no doesn't mean never”

PODCAST INFO

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

• Spotify: https://sptfy.com/benyeoh

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

Click below or wherever you get podcasts.

Jason Mitchell podcast with Ben Yeoh (transcript, only lightly edited, expect typos etc)

Ben Yeoh (00:00): Hello, and welcome to Ben Yeoh Chats. If you're curious about the world, this show is for you. How can you be a poet and a sustainable hedge fund manager? On this episode, I speak to Jason Mitchell. We talk about his poetry, his journey through sustainability and asset management, and he gives his views on a range of topical subjects, such as carbon tax, divestment strategies, sustainable finance regulation, carbon offsets, and stakeholder capitalism. These are personal views only, and there is no organizational endorsement or any investment advice to be taken in this educational conversation. If you enjoy the show, please like and subscribe as it helps others find the podcast. Thank you. Be well. Hey everyone, I'm super excited to be speaking to Jason Mitchell. Jason is co-head of Responsible Investment at Man Group. He was a hedge fund manager and he is a poet. He's a deep thinker on all things sustainable and finance and he hosts a brilliant podcast himself, A Sustainable Future, which you should check out. Jason, welcome. 

Jason Mitchell (01:12): Thank you so much. I'm really looking forward to this. It's great to see you, Ben.

Ben Yeoh (01:15): Great to see you. So, you've been on a small boat in the middle of the sea witnessing refugees in the Mediterranean and you've produced poetry and photography on the experience. You bore witness. And I think I quote “rescued by our boat one morning, the man asked me, is it true what they tell us, the traffickers, about these waters, that the sea has no bottom? I told him no, there is indeed a floor, half a mile or more below us. And Europe is a much farther, more difficult journey than the traffickers promised you”. What did the experience teach you and what should we know more about the situation?

Jason Mitchell (02:03): Yeah, so you're referring to my experience on a 26-meter decommissioned German lifeboat that was designed for the north, the Barents Sea. I and a group of six, seven other Germans were on it for several weeks off the coast of Libya in late 2016 during the absolute height of the migrant crisis. It was interesting. I think it's actually worth just giving a little bit of back story to that. Cause I think, and I suspect probably like you, my interests were…they tend to be guided by climate. Right now, the climate, particularly in sustainable finances, is just such a powerful issue. And certainly, now with net zero and the mass media, into COP26, the prevalent issue, I think what was interesting for me was coming out of COP21 in Paris in 20, at the end of 2015 and feeling pretty brilliant about the state of the world, about what the Paris Accord meant. 

Jason Mitchell (03:25): I think coming out of that, I had a friend who was doing some work at an NGO around the Calais and Dunkirk migrant crisis in France. And he was just doing a quick run from London out there with secondhand clothes. And I said that I would join. So, we did the trip, dropped off the clothes and I ended up staying for several weeks and it kind of blew me away that climate, and justifiably because of the existential risk of climate change, but it's the predominant theme that captures everything. But there are these other crises, in this case this migrant crisis, that was less than 300 miles away from Paris, in London happening in Western Europe reflecting, obviously, the crisis in Syria and the persistent migrant flows from West and Central Africa. And so, for me, it was kind of fascinating to have to switch lenses from climate to this kind of humanitarian crisis. And I think from thereafter, I found it kind of fascinating and overlooked in a relative sense. And so, I ended up dedicating a good part of that year working in Calais then working in Lesvos with an NGO that worked alongside Medecins Sans Frontieres. Then ultimately hooking up with these German NGOs and working off the coast of Libya. Does that answer your question?

Ben Yeoh (05:10): Yes. I guess it puts a real human face onto climate crisis and everything about that. Was the experience informing your thinking around sustainability and the messages that we need to talk about? Or, you were kind of hinting about it, that actually there is this climate thing and it's all pervasive. But there are many crises that are kind of right there and these people and it was kind of interesting that this is intersectional, so that there's this crisis happening. But your work, your poetry and your photography seem to be so powerful out of it. I couldn't help, but think that this was something other in terms of your own journey.

Jason Mitchell (05:55): Yeah. No, no, you're right on that point. Because I think it was, it was interesting to kind of think about this crisis outside of the lens of finance. That said, I still think that you can make some pretty powerful linkages about this crisis… what the implications were on stability, the political stability, and even the financial stability of areas. By that, I mean, look at to what degree the migrant crisis… Think about how that has shaped the political landscape and the move far right within Germany and certainly in Italy, following in 2017 and 2018. So it's had certain implications politically from a fiscal perspective. And I think to a certain degree, within markets as well. I think what was fascinating to me was to acknowledge those, but also see this different issue.  I had done this podcast episode with Mary Robinson, the former president of Ireland. Who's been phenomenal, her work around the SDGs in particular. She's a member of The Elders and she does a lot of advocating particularly around the SDGs. But one of the themes that she constantly goes back to, and it's so intangible and abstract, it's hard to really unpick it, I found until I had some of this experience, was this issue of pride, of self-worth and I think that's the thing that really-- what resonated with me, when you find that you have families landing on the beach of Lesvos with a few backs or in the story that I wrote-- 

Jason Mitchell (07:44): So you read a poem but there's another story I wrote for the Leonard Review of books, where I talk about the first death that happens on our boat and this man who was just incredibly young, incredibly strong from somewhere we think Western or central Africa. I just remember bright teeth, right. I mean, he was just in the prime of his life. And he ended up dying because he had spent 12 plus hours on the bottom of a boat, ingesting and inhaling this toxic mix of fuel and saltwater, which is quite acidic, so even his skin was peeling off in many places. To witness that … and the handover that we ultimately did to an Irish warship, surreally called the Samuel Beckett. But just a strange experience because we handed him over with nothing more than a piece of paper, which were the coordinates of where he passed away, in not the middle of the Mediterranean, but obviously 20, 25 miles north of Sabratah in Libya. But there was nothing more. There were no familial clues, no shoes, nothing about his name for where he was from. It was sort of a strange experience to see these people, trying to find a better life, snuffed out and not even a sense of remembering them.

Ben Yeoh (09:27): And you and your group really bore witness to that. And I think that something which comes through, which is that there was always an element when I hear you speak about that very human part to it. We talk about finance and these markets, and there's a lot of numbers on screens, but ultimately, it's hitting what economists like to say is the real economy, which is people in the middle of the sea, trying to make a better life for themselves. And I was interested. Is that perhaps how your poetry and your essay writing and your photography has informed your work in life, that it comes through this on a very human aspect, although we've ended up in finance and services like that. Does it inform that or does it work on a more parallel thread?

Jason Mitchell (10:09): No, no. I think it does inform. It's always interesting too, because I tend to think I'm very cognizant of voice in describing this, either through the lens or through essays or through my poetry. And I find that mine tends to be very impersonal. It tends to be a very neutral voice. It's not confessional, for instance, in describing those. I'm actually working on an essay right now that speaks to climate change over the long arc of my own family, which is set against another crisis, the cold war crisis. My father was in the Air Force and I spent most of my childhood on Air Force bases all across Europe. There are these certain kinds of arcs or circles of crises that are always over the horizon.

Ben Yeoh: (11:15): What else do you think poetry has taught you?

Jason Mitchell (11:21): A degree of empathy. Certainly, there has been…Being able to connect to experiences, obviously I'm not privy to, but to try and sort of understand certain experiences, cultures, et cetera, as an outsider. That's been particularly powerful. I would say mechanically too. I would say some of the economy of language. I wonder if you’re the same case, but I tend to value the economy of words. And I think that really manifests itself in poetry where each word each line breaks is sort of intentional and thoughtful, rarely is it arbitrary or ill-thought-out.

Ben Yeoh (12:26): No, I agree. And I think finance could do with more of that. In fact, that's one of the other questions I have, which is, there are many thinkers you've suggested that deep knowledge about art or aspects of culture is really related to a sign of good, call it human capital talent, and the lack of that. And I was wondering whether you think most hedge fund managers would believe that, or even fund managers in general. And do you think fund managers, or maybe finance in general knows enough outside the world of finance? I sometimes think even some of the best investors are very curious about the world and kind of know quite a lot. And over the last few years I worry that it's gotten narrower and narrower. And now you've got people who are very good with spreadsheets, but have lost that real economy or the human connection, or just the understanding about how this happens. So, yeah, I was just wondering about the effect of arts and cultural or the wider thinking on whether you think finance people know enough about outside finance.

Jason Mitchell (13:34): I don't think they do. I completely agree, I don't think they do at all. And I would say that for most of my life, I was probably in the same position. It's very easy to get comfortable around spreadsheets and looking at things analytically and to at the worst have to risk adjusting for certain positions, hedge fund roles et cetera within your life. But you're constantly looking and motivated by the light noises of Bloomberg or of markets. I remember this was actually a pretty profound decision for me in 2008 where it felt like it was increasingly obvious that the market was heading for reckoning. I mean, particularly in sort of early ‘08 and I ended up taking a few years out because I wanted to actually, per your point, understand the physicality of the world. The physicality of businesses or of other experiences outside of sitting at a desk and making decisions and just speaking to management at arm's length.

Jason Mitchell (14:54): So that actually led me in 2008 to end up leaving and working for advising for a number of private equity funds and for the UK government and really starting my path down sustainability. So I ended up working for something called the Commonwealth Business Council, which is a Commonwealth UK government project. They don't have their own balance sheet, but they're effectively coordinating finance around projects. It could be water, agriculture, energy for many of the Commonwealth countries. In particular, some of the big countries, Sub-Saharan Africa are areas and then as well as India.

Ben Yeoh (15:39): 2008 onwards you have a change of career partly and you go into development finance and that type of area. What did you learn from that stage in your journey?

Jason Mitchell (15:50): I learned that building a business… In my experience during that time, it was building out a business in water distribution and advising the UK government. But it was incredibly hard. It was very political in a sense. In order to make things happen, you really had to solve for a lot of different factors and personalities in many cases. It was fascinating but also somewhat disheartening. I think over that time, what was interesting is with the backdrop of the global financial crisis happening, what to me was fascinating was you have a real showdown between different development theories. The Western theory, which obviously Dambisa Moyo, which I'd interviewed, in her book Dead Aid, talks about, is very problematic, the fact that the West is through aid, not necessarily creating positive outcomes. But that juxtaposed to the Chinese development model, which was to go into countries and vendor finance, vast amounts of a number of different projects and effectively outbid others. I thought it was fascinating to see those two compete, and more often than not, to see the Chinese model win and actually have to think through the trade-offs in that, because there certainly are, to be frank.

Ben Yeoh (17:37): And then how did that evolve into becoming a fund manager, hedge fund manager, again, and then into sustainability and responsible investing?

Jason Mitchell (17:46): Sure. That period of my life was one of great personal growth. I was reading a lot. I was exposed, particularly in politics or political theory, development theory. I was exposed to a lot that led me to really reconsider where I wanted to go in life. At one point I really wanted to head to and work for the IFC which is the commercial part of the World Bank, particularly within emerging markets perspective. To do that, the World Bank tends to be, and for good reason, but they tend to be pretty orthodox about some of the hiring and insist on a post-grad, like a Master's Degree. So I ended up doing a Masters at LSC with the intention of trying to find work at the IFC or another DFI. And I think along that way, ended up rekindling conversations with Man Group then it was GLG Partners, Man had acquired it in 2011 or 2012. And I think there was an opportunity to shift my focus from the long-short side to the long-only side. And think about it a bit more constructively. There was an opportunity to kind of rejoin, look at finance through climate strategies. So I was managing a climate strategy and I ended up launching the global sustainability long-only strategy as well. And so, for me, that was actually pretty interesting. It's still very similar to that original goal, but obviously in a listed context.

Ben Yeoh (19:36): I often feel a bit of dissonance between investing work and speaking with these companies. And then, as we spoke about in the beginning, that real world migration crisis, climate crisis and all of those. Do you feel that dissonance often, and how do you manage through that? Maybe bringing some more real world into expanding into… I'm often speaking with peers, maybe peers who are a little bit more, how should I put it, skeptical about what we do in the real world or whether we should. But when it actually hits them and when they hear these stories and things, it does often jolt them into a slightly different… Nudge them onto a path where I think they then start to feel more fulfilled and more holistic around that. But it comes from this area of dissonance where I sometimes have to shut it off for a bit because it almost feels… I almost get a little paralyzed from it sometimes. And do you feel this kind of dissonance and how do you work that through and what do you do with that?

Jason Mitchell (20:34): Well, first I kind of want to throw it back to you. Can you give me an example where that's happened? Because this is interesting. I know what you're saying but I'm curious and want to tailor it to an example of your own.

Ben Yeoh (20:47): Sure. So I haven't had so much one on say climate recently. Because I do a lot within health care and ultimately in health, it is kind of really interesting, is that one way of thinking about it is you save a patient's life in some respect or extend their life. And actually, the side effect of saving a patient's life, depending on how you do it, is profit for something else. But your primary effort is saving patients' lives and things. And then when you go through and you see you're in a hospital, or I had this when I was looking at some robotics and you think about how many robotic surgeries start all things. And then you're there and then there's an emergency and someone's life are saved. And it's like, well, that is the real-world impact of this thing. And you get this right. More people will live longer and their lives will be saved. And you misallocate the capital that you don't understand what they're doing and they're just widgets or numbers, and it feels less real and more divorced. I feel the climate one is sometimes a little bit more distant than that, but you do have a… That's why I was referring to the back because you had on the front, the refugee crisis and someone right there on your boat, which is connected to everything we're having. And I feel that dissonance sometimes is… It's just interesting to see how that plays out. Does that make sense?

Jason Mitchell (22:08): Yeah. No. I think it does. I know what you're saying. I think it was less apparent to me during the migrant crisis. They seem like two very distinct things. Whereas in the climate crisis because of government policies, because of thematic investing, they kind of conjoin where there's obviously not so much. And then I think it becomes sort of this bigger problem or this other problem of not so much. Well, it's a different kind of dissonance. So for instance, I mean the one… I'm a big fan of paradoxes and I think it's the Jevons paradox, but it might be the Jevons paradox, J E V O N S. But it's this efficiency paradox. And you find that many thematic investors are always talking about kind of efficiency metrics. But the reality is when you look at kind of efficiency, particularly resource efficiency, it's not necessarily a good thing. I mean, you can go back to the history of resource use around coal, right, and the efficiencies around coal use. And all it's done is made coal a more prevalent input in economic activity, right. And so, these are the kind of these dualities of these dissonances that I struggle with, in that you think that you're making progress around something, around let's say, an efficiency issue, but all you're doing is basically supporting the greater use of it, albeit at a more efficient metric.

Ben Yeoh (23:57): Yeah. No, exactly right. And that is exactly the Jevons. 

Jason Mitchell (24:00): Is it? Okay, good.

Ben Yeoh (24:01): It is. You've got it right. And call it a common example. Although the one I always think about is actually light. So we went from candles to light bulbs and we just exponentially increased our use of life because it was that. And that's what you see in light. Arguably obviously there's an energy thing you can conoscere in a more positive tone. But obviously coal has all of these other huge side-effects on that. So you become running a long-only sustainability fund. And then that kind of evolved into your current role, which is more strategy oversight and policy and things like that. What have you learned from both and others and either the pros and cons. Is there some stuff you miss about that direct exposure to investing and you'd wish you'd known more about when you're investing now that on the policy side or vice versa?

Jason Mitchell (24:54): One thing I absolutely do miss is being able to go deep around stories, around themes. Sitting across three or four management teams within a sector and really trying to understand where the industry is heading, to me that was really fulfilling. I think now, particularly at a policy level, it's a different kind of competency, frankly, different kinds of skill sets. So I do miss going deep. I would say as a portfolio manager and this was…Frankly, this was true, both for the long-short and the long-only side. It was also a different kind of pressure. I'm sure you're familiar with it, right? You wake up and if you're not doing well, if your PNL’s running at a loss in a long-short perspective, or if you're running a couple of hundred basis points below benchmark in long-only format, there's a certain degree of just pressure and it's constant until you can fix that. But there's a certain degree of freedom and feeling that you can fix it, you can turn it around next month with a better idea, right? I think on the side I am now particularly given the just dramatic reshaping from a regulatory perspective around sustainable finance. It's a different kind of pressure. So it's not that 4:00 AM waking up in the morning wondering what's going to happen next year, what firm you're going to work at if you ended up getting fired. It more trying to juggle just this stack of applications whether it's at a policy level, whether it's at a fund level. And that fund level can take a whole number of different whether it's the prospectuses, whether it's the investment framework around an element of SFTR that use sustainable finance disclosure regulation, how that sort of fits with some sort of disclosure regulation or rule from an SEC. I think it's a different kind of problem solving and a different kind of pressure.

Ben Yeoh (27:21): Yeah. No, I agree. And there's something great about markets and the investment side where you get relatively immediate feedback. And so even if you're not doing well, you can see it and you can plot a path. And you have end results, whether you're looking at it annually or whatever timeframe you're looking at and feedback. Whereas on the policy level, you're just constantly working very rarely do you get the ideal policy that you wanted because there's obviously a lot of other people and other things involved, and it's kind of this long, slow thing that you don't get as much feedback, which I think I would find, that I do when I dipped into it, somewhat frustrated.

Jason Mitchell (27:59): And if anything, I would actually say that I've just been surprised at how much more mired you are and this interpretational swamp. Swamp is probably unfair, but think about the notion of greenwashing, a term that I don't tend to like very much because many people are able to call out greenwashing, but what's the opposite of green... It's hard to sort of look at the universe of it and call out what's good practice. And there's a lot of difference around greenwashing nonetheless. I mean, think about it in the European context the USFDA, sustainable finance disclosure regulation does go to great effort to draw protections against greenwashing. That's a really, really good thing. I think what's problematic is that over this development, suddenly you have a national notion of what greenwashing is. I think France has its own ISR label. Belgium has its own label towards sustainability and to a certain degree, these run not counter, but there are certainly more rigorous forms of it versus others. And there are trade-offs you can make, there are ways that, unfortunately, I think asset managers can game no one wants to see bad behavior. I'm not certainly condoning it but I think there are ways that some asset managers can gain this, particularly from a passive ETF perspective. But yeah, I think it's a bit… It's problematic. What I expected would be more defined is actually much more interpretational.

Ben Yeoh (29:53): Yeah, much more slippery. I find this particularly looking at the US which has a very, what we call literalistic view on legal or policy terms. And you fight over these meanings of individual words, which actually can pivot you in one direction or the other. And that's, sometimes it misses the picture. And like you say, on this notion of greenwashing, it's obvious to everyone in the world. In fact, in legal terms, you have this idea of corporate puff, which is when a corporation says something; you just obviously can't believe them. I think the classic one is the advent of saying this is the best beer in the world, or whatever is like, obviously can't be. And so, I think there was a court case where someone-- There was a litigation where someone said, we are the best something else in the world. And they said, well, that sounded too similar. And I think the judge threw it out because he says, you're obviously neither the best anything in the world because it's corporate puff. And so, with greenwashing, you're always going to want to look your best to some extent…. you kind of want a little bit of that because you want people to ratchet it upwards and in which case you've got to try to show things in your good light for that. So I definitely hear you on that. Okay. I thought maybe do a small section of Underrated or Overrated. You can pass, or you could say it's neutral, or you could dive into what the kind of thing or the concept is, if you like. So underrated or overrated: Carbon Tax.

Jason Mitchell (31:24): Underrated.

Ben Yeoh (31:26): Underrated. And why is that?

Jason Mitchell (31:27): Absolutely underrated.

Ben Yeoh (31:28) Conventional underpinning that all economists say, right?

Jason Mitchell (31:31): Yeah, look I agree. It sounds very reductionist, but we need a price on carbon. I mean, whether it's a…

Ben Yeoh (31:42): Tax price adjustment.

Jason Mitchell (31:43): Yeah, a price… Exactly, right. 

Ben Yeoh (31:45): []

Jason Mitchell (31:46): We need some way to price that on a global level. That externality, we don't have that. I think it's article six within the COP26 that's coming out. I could be mistaken, but I think it's article six. But that is the one problematic issue that's never been resolved over the last several COPs, which is the Paris Accord really, really tried… made an effort to create this international UN governed carbon market. And obviously the US has been one of the big holdouts, but we've seen a tremendous amount of progress from China, from Korea, from Canada, from many other countries. So it'll be interesting to see. I'm not particularly optimistic, given the mood in the US. But it'll be interesting to see if there's any progress made on that front at COP26.

Ben Yeoh (32:47): Yeah. It's interesting if you look at economists, whether they're left or right. There's some huge agreement, like 80 or 90% of them think of carbon tax innovation, carbon tax--

Jason Mitchell (32:56): Incentives. 

Ben Yeoh (32:58): Yeah. And it's kind of remarkable. I think you had one left/center progressive economist, Jason Furman, who said, he thinks it's like 80, 85% of the economic solution to this is within that. Because it sparks everything else. Okay.

Jason Mitchell (33:14): And further to that, I think one of the unfortunate things is there was the Baker-Schultz effort within the US.

Ben Yeoh (33:23): That was the carbon tax and dividend one.

Jason Mitchell (33:26): Yes, exactly. And that was quite well known because it was bipartisan. Unfortunately, Baker and Schultz now have both passed away, sadly. But I think that's the unfortunate part where that bipartisan effort even within the US is to some degree diminished that section.

Ben Yeoh (33:42): I'm veering more and more it being what they would so-called political economy problem. So it's a problem of politics. And I think particularly in the US, if you look at the surveys, like the Yale Climate Change Survey one, 30 to 35% of Americans do not believe in man-made climate change. And so that's a big chunk to deal with. And therefore, even a bipartisan carbon tax when wanted in another way, preserved as an elite technocratic solution. And you're dealing with 35%. You can gauge with that but cross which doesn't really think that that's suitable is where… For me that's an obvious log jam about trying to do something there, and that's where we kind of got to.

Jason Mitchell (34:28) I mean to some degree, not to keep going on this because it is such a fascinating issue, but I wonder how much of it is inevitable. I forget the author that talked about this but when we think about political regimes and monetary regimes. Think Bretton Woods, the post-world Bretton Woods, open markets, liberalism, that project. What is in this long wave of regime change, what happens next? And I think there was a really compelling theory to say that, given the financial existential damage that climate change represents, that the next regime might well be a climate regime rather than a Bretton Woods. So it organizes itself around survival of climate change. And you get a whole different reordering of the values from the previous regime. So certain values for better, for worse are subordinated by just this imperative to survive climate change.

Ben Yeoh (35:38): Yeah. And I think you've seen in the long cycle of history when slaves were made illegal or women got votes or go back on things you do get this kind of… I guess it is like this step change as a regime change and suddenly you just really quite fundamentally changed the rules somehow because society needs or wants to for whatever reason. So I think that's possible. It’s interesting that the people I call the crypto bros also think about it within that from crypto, which you probably won't go into, but part of their theory of changes that it's a regime change. So whether it ends up there or not, it does seem that it is quite a plausible thing to happen. Okay, next one. Underrated or overrated: Divestment as a social political tool.

Jason Mitchell (36:32): I understand both sides very well. I do, and I note there's a really good piece of research that came out called The Impact of Impact Investing, which talks about the ineffectiveness of divestment relative to engagement.

Ben Yeoh (36:55): Specifically, only on cost of capital, which I think is obviously an interesting lens to look at it. The divestment people would not say that's necessary there transmission mechanism, but I wouldn't actually go into an argument on that. But yes, please go on.

Jason Mitchell (37:10): But I'm a little bit more sympathetic and I've only looked at this in discreet ways. I think the one area that was incredibly compelling to me that I'd done a lot of work was to say look, what are the discreet areas where there's been a lot of divestments over the last five to seven years? One of those was tobacco. Tobacco was easy because it was a discreet business. You didn't have conglomerate businesses where it got messy. And you could follow this shadow of divestment announcements from particularly asset owners, so not managers, not double counting. And so, you had this shadow of announcements. And so, what I ended up doing was kind of going out really trying to track several years ago but the AUM for those asset owners, and then trying to kind of back into what that meant. And you found there were a few data points, effectively public, where you could back into the implied investment or kind of a range. So if you took an asset owner's total investment, you found that out of their total assets, roughly around anywhere from 0.25% to as much as 1% of that was invested in tobacco. And that was dependent on if you were UK or US, where tobacco was a big part of it as a constituent of the benchmarks you tended to be up on the bigger part of that. 

Jason Mitchell (38:39): If you were to say Australia where you don't have a tobacco constituent in Essex it was on the lower end of that. But you had sort of a spectrum. And I think what was interesting was, you could sensitize that against these flows. And I got to a figure that was somewhere between 50 and 60 billion of outflows relative to… at least when I did it. So I have not re-run these numbers to the market cap of global tobacco. There's an MSCI index and that index is roughly around 350 to 380 billion. So 60 out of call it 350, 360 is meaningful, right? I mean, that's a big sucking noise. And I think what you could make is an argument in this case that with this kind of sustained outflows, you might see a structural de-rating relative to the market. That's not to say that in a risk off market suddenly tobacco outperforms, it probably would, right? It just wouldn't sustain that outperformance. And so, then you had these arguments. You've actually seen this with coal right now from hedge funds. But this idea that as people divest the expected returns are too enticing for particularly hedge funds not to get involved, right? But expected returns are kind of a tricky thing, right? Expected returns are not realized returns. Expected returns are the sum of expected returns plus unexpected returns equals realized returns. And I think what people forget is what is in the unexpected return element, right? And I would say that the impact of negative of outflows from divestment could be, in some cases, and I would point to tobacco, pretty meaningful and would re-base the expected element. So expect that it's unrealized, right? Does that make sense?

Ben Yeoh (40:54): That does. Pretty sophisticated argument, but I buy into that. I'm also very suspicious that some of these hedge funds are not a… Long story short, the commodity price has gone up a lot in an unexpected way. That is actually not that connected to divestment either way, like harking back to that end paper. So it's not particularly that they've seen something go on and some people divest it and they bought it. But when your underlying commodity price has gone up 600% in a few months where that's iron or whatever, that's a huge, as you put it, unexpected return. It's really divorced from this other mechanism. So I feel that’s very financially unsophisticated for some of those hedge funds to claim that, which … means that actually they're just maybe skillful or lucky traders or traders rather than something about what's the transmits mechanisms and what's really happening there. So then the opposite side, Underrated or Overrated or commentary on: Shareholder activism as a theory of change.

Jason Mitchell (41:58): I think it's massive. Well, I don't think it's fair to call it underrated because I think people… To be clear, I do think it's underrated. I’m a huge proponent of it. And I'll give you some of my background. I think just my own experience from the firm that I work at, Man, we have not… When it comes to stewardship, we've always tried to struggle with two issues. One: A big part of the firm is Quant. And so, while we do a lot of systematic voting, that's fine. And you can recalibrate that however you want. I’m a more greenish cheese flavor versus a vanilla flavor. You're never really engaging with companies particularly among that amount of breadth within a given portfolio. On the discretionary side, you run into issues that are very different. So you run into the alternative problem. So you have depth, you don't have breadth, so you're engaging a lot. The question is to what degree are you voting? And that is somewhat contingent on your mix of ordinary shares versus synthetics. CFDs -- Contracts for Differences or swaps. 

Jason Mitchell (43:16): And so, when you own those synthetics there's certain advantages particularly around transaction, costs, friction because you're basically not owning the org, you're owning a contract through your prime broker. It comes at a lower cost. So its performance enhancing, and more importantly, it allows you, and this is important for hedge funds, you're borrowing at margin. So it allows you to level up and that's how you accomplish leverage returns. The problem is when you engage in those kinds of contracts, you forfeit your right to vote. So you lose voting rights, so different problems on different sides of the businesses. I think for context, and I think where we have and in particular-- I've spent a lot of time helping develop the team on this, to get compensation for these problems. I would say that you've got to increasingly build better, stronger stewardship capabilities at the firm level and not speak at an underlying subgroup level or at a fun level. And so that's what we have gone about doing to the point that in our 238-year history, I like to point out that this year was the first time where we ended up voting or filing on our-- This year was the first time in our 238-year history where we co-filed on a climate shareholder resolution with HSBC, which I think actually turned out very well. 

Jason Mitchell (44:47): We worked via 15 other investors in share action, who I could not have stronger thoughts and support for, but worked constructively with the board and management to effectively level up or upsize their net zero commitments. So to basically turn what was an ambiguous ambition 12 months ago that lacked a lot of flesh, a lot of real detail into something that was a hardened commitment. I do think language matters around this into a commitment where that was time-bound in terms of phase outs around fossil fuels, coal, et cetera.

Ben Yeoh (45:35): And you got mostly what you wanted and withdrew the filing, so it was kind of like an ultimate win, right?

Jason Mitchell (45:41): So the question is to what degree was that… We've talked about this before, to what degree was this an anomaly? Or does it sort of represent a change, a shift? There have been others, obviously with investors working on changing the board composition for Exxon. But it does feel like since the emergence of …  and kind of coordination in what was generally a pretty atomistic system of financial players. There's a lot more, there's a lot greater coordination in advancing progressive ESG policies.

Ben Yeoh (46:25): Great. And then overrated, underrated or comments on: Carbon Offsets.

Jason Mitchell (46:31): Yeah, this is a super controversial one. So I want to be very careful. Can you re restate the language of the question?

Ben Yeoh (46:43): Okay. I've just put carbon offsets as a word out, not thinking too deeply. The two angles you could think about is using carbon credits or offsets in the ones you can buy in the market to decarbonize portfolios or operations. So you could comment on all of that. And I guess the controversy is that some of those offsets have not been seen to maybe be as reliable as we thought. And then the other counter argument is that that is not having such a real economic effect in terms of actually getting people to reduce things. On the other hand, other people would argue that if you are doing additional projects and stuff, which are helping, then that is something that is worth investing in. So you could take either side or not on that. But the idea is, are we overrating, underrating? And I can start, I have lowered-- So I still think they're helpful, but I'm probably less convinced about them now than maybe I was five years ago. And either that was five years ago, I was a little bit more naive or today it's come true on some of those. Except I do see some projects in, I guess you'd call it maybe even negative emissions or very what is actually quite high prices, but quite… And we don't know whether they'll work, but would look quite interesting. And I do feel that we should probably still incentivize and try some of those. You don't want to put people off like Stripe in their negative emissions. You want them to try it out. So yeah, Carbon offsets, thoughts?

Jason Mitchell (48:21): I'm going to maybe controversially say that they are underrated. I get the criticism. I think the question or the debate needs to be more reframed, right? It's not whether we should be using carbon offsets in the abstract, but how do we actually start using a better higher quality version of offsets? How do we move from avoidance to genuine removal technology nature-based solutions? The reason I say this is so controversial is, and I've seen the IGCC has the investor framework where they recommend against using offsets. It has been widely recommended against by a number of NGOs. I think the thing that I struggle with is that it runs counter to all the policy signals that I see coming out. So you mentioned a sustainable future, my podcast, I had chairman acting, chairman Rostin Benham of the US CFTC, the Commodities Futures and Trading Commission, so the sister of the SCC. Carbon is a commodity, right? And, and I think they have an interest in developing bigger, higher quality carbon offsets markets. And that's key, right? I mean, how do you create things that are more authentic or higher quality and specifically removal based? 

Jason Mitchell (49:52) I had another conversation with Elizabeth Maruma Mrema, who's the executive secretary of the Convention on Biological Diversity for the United Nations. And I think from a biological or biodiversity perspective, I think it was interesting because I asked this question as well. I sense she did not say it overtly or explicitly. But I definitely got the sense that there should be, or may be an opening for offsets and to some degree they already are. But to explicitly solve the biodiversity issue the funding problem there. So I would say it seems naive to throw them out when policy signals seem to say this is going to be a bigger part. I read a really interesting Barclay's research report yesterday that talked about offsets markets growing from 500 million annually today, to 250 billion by 2030 and to 1 trillion annually by 2050. And so, I think it feels like this can be a constructive source of offsetting. It shouldn't be some dispensation to say, I can meet all I want, but I'm just going to use offsets. But it can be a powerful tool to take care of. Certainly, the residual that we can't genuinely remove towards the tail end, but it feels like there's a use case over the next 10 to 15 years in this transition. 

Jason Mitchell (51:30): Microsoft is a great example of this, where they talk about their kind of journey from 2010, where they widely used avoidance offsets, have transitioned now to removal offsets and are heavily using those to get to carbon negative by 2030. I think the interesting part is that I remember listening to a podcast with Lucas Joppa, the Chief Environmental Officer. But I found it really interesting where one of their big problems and they've been one of the most progressive around this area, is effectively just trying to find liquidity in high quality offsets. So that's the thing we should be solving for. I don't want to get these numbers wrong, but I do recall them in the market trying to buy something greater than 1 million tons of offsets. And the market was only 1.3 or 1.4 million tons. I mean, effectively, they were buying the market for offsets, in these high-quality offsets. And if that's the case, how do we grow that market and try and remove as much as possible? But not to go on this, but I think there's also another, not perfidious, but there's this sort of strain too in the long-short area where a number of managers are trying to make the case that shorting can support your path towards net zero. In my mind, those are completely distinct, right?

Ben Yeoh (53:07): Like getting paper from AQR. I think even Cliff Asness might have written it. 

Jason Mitchell (53:10): Yeah. 

Ben Yeoh (53:12): Talking about this, if people want to see that side of the argument. Yeah. But the short book is that issue with it being where the real economy is. But you can get to a finance portfolio where it looks net zero, so your thoughts.

Jason Mitchell (53:25): I think we're conflating a couple different things. Because I think what they're trying to do is address it from a carbon accounting perspective. But look, the point of net zero, despite problematic, that it's called “net zero” by taking your gross emissions and netting them with offsets, is ultimately you're trying to take offsets or you're trying to take emissions out of the atmosphere, right? Shorting, at least in my mind, doesn't do that. Nature based offsets, technology solutions would do that as, as genuine offsets. Personally, I don't buy that argument that shorting actually would solve the big problem that we're trying to address. That's not to say it's not useful. I do think that expressing your fund on a net emissions basis has its values. Look, if I was an investor in a long-short fund and I really cared about climate first, I'd want to see to what degree is-- How are they kind of addressing the big problem of managing emissions, right? And that's on the gross long-basis. But I'm also an investor in the fund. I'd be naturally interested in my economic exposure. If there's a carbon shock, if you see ETS or carbon allowances up X amount what would be the impact on my portfolio, right? And so I think that net figure can supplement in terms of the economic exposure alongside it. So it's not without its uses, but I think it's wrong to switch them.

Ben Yeoh (55:12): So that's a pretty sophisticated answer, probably the most sophisticated I've heard, so that's great. And so, it is not…We want better projects not to throw out all of the projects. There's the biodiversity angle, which I've heard few people talk about, but I think could be quite important potentially when you think about it. And then actually this loop back to the very first things we were saying, whether you are having a real economy impact or thinking where a need to base offset or technology might be doing something as opposed to pure carbon accounting, which might have its place, but is a different thing and you don't want to conflate the two. So yeah, really well articulated. Couple more on the overrated underrated, we're getting quite a lot out of these ones is I guess sustainable finance regulation. I guess people are thinking particularly of SFDR, but then U has come out with a load.

Jason Mitchell (56:06): SFDR.

Ben Yeoh (56:07): You've got-- Yes, SFDR,… You've had corporate governance codes, stewardship codes, I guess and things like that. I guess critics tend to, what do they argue over prescriptive. If you've got this sort of taxonomy, you can't go from dark brown to light brown maybe that's too restrictive and you've got all of these different nationalistic ones, which actually you refer to. On the other hand, what do you do about the fact that you have no standards, nowhere to start also protecting the real Intel investor, but also trying to funnel money into roughly the right buckets of area and arguably there has been a kind of market failure because there hasn't been enough done in which case, well, then you need more regulation, I guess, the two sides of that. So, any thoughts on sustainable finance regulation? You think it's overrated, underrated, or just some comment?

Jason Mitchell (56:58): Yeah, I'm going to say it's massively underrated, massively and not to say it's the panacea, I think it's going to probably get worse interpretationally before it gets better. I think the EU SFDR has been incredibly helpful for at least making an effort to address these difficult questions and I actually found it interesting that commissioner Allison Herren Lee on my podcast mentioned this as well that there's a place for principles-based approaches. I think in this space they tend to be too abstract, too broadly interpreted. It feels like we are increasingly headed to something more as a matter of necessity prescriptive, particularly in terms of defining protections against greenwashing, right? I mean, we've got to define what greenwashing is and I think one thing that has been probably overlooked, but where the US FDR has been incredibly helpful is introducing this contractual legalistic term, binding. So, I think in sort of my day doing ESG, I think I was always a little bit offended by other PMs that were trying to do it, but were doing it on an ad hoc basis. Like when it makes sense, they do it, but not really, not systematically and I think where the EU comes in is, I mean, they want something that is systematic, it's a binding term that you're measured by. So the attributes of your portfolio are determined by a certain kind of process, or you're doing this to your investment universe, which reshapes your portfolio in certain ways and this is something that, again, is binding.

Jason Mitchell (59:00): So, I think that's powerful. I think what's interesting in my mind though is just these issues that still need to be reconciled, which is this question around disclosure and I think we want better disclosure, but how do you make it happen? There have been critics for it. I actually applaud their decision. I think it was pragmatic and actually quite effective but how do you solve for getting better disclosure among all companies, not just companies with more than 500 employees. It's hard to kind of go to them and put a big reporting kind of burden on them just giving costs, resources, et cetera. One way of doing that is kind of creating these layers of legislation, but also attacking the investors. So getting the investors to actually drive that. So they've kind of inverted the disclosure cycle. So they've gone to investors first, placing pressures on investors and those investors then will place a lot of pressure on the underlying companies. It'll be interesting in the US where again, I think that they want to follow a much more linear path, so they want to go to the investors. I mean, sorry, so they want to go to the companies, improve disclosure and ultimately sort of have that lead to better disclosure at the product level.

Jason Mitchell (01:00:34): The other issue too is this sort of question of materiality and kind of what it represents. I think, as I talked about in that podcast, one of the things that has been interesting to me is and I know that you've read some of this stuff, but when you look at the speeches and statements coming out of the SEC and the SEC is composed of five commissioners, the balance of it tends to change per political cycle. So now it's Democrat heavy, but you find a lot of big philosophical, even ideological differences around principles based, more lenient or more prescriptive and views around things like materiality in particular. So we're watching that happen right now and there's certainly some antagon-- not antagonistic, but there are certainly some differing opinions between commissioners, particularly commissioner Pierce and commissioner Lee in terms of how to kind of calibrate this. In the EU process, a lot of that stuff was bureaucratically set, so we never really got to see a lot of it. So I think it's been sort of interesting to kind of see the teething pains of that legislation from an EU perspective, but effectively the seeds of it from a US perspective start to work out.

Ben Yeoh (01:02:07): Yeah, that's fascinating and I think you just articulated the case for regulation better than I've ever heard a regulator articulate it. So they could do with some of that. Okay, last couple on this one. Oh, actually, and I should tell everyone, if you want to hear more about that, do check out Jason's podcast with the SEC commissioner on that. That's a really fascinating one. Stakeholder capitalism, underrated, overrated, or any comments?

Jason Mitchell (01:02:34): Yeah, I feel like it's unfair to say it's underrated maybe because that's in the circle, I think, that you and I are in. I mean, we kind of-- Alex Edmond or Paul Pullman or others speak so widely about that. I mean, perhaps it's a European kind of UK thing. I would still call it underrated, but I feel like it's really starting to hit the mainstream. I think if I were a US investor, I would probably take a different view because it's still much of a shareholder kind of centric kind of perspective over there.

Ben Yeoh (01:03:15): Sure. What's a recent favorite podcast you've done, or one that you learned the most? Obviously, we had one with the SEC commissioner, which obviously was really recent and really fascinating, but any others over the time you've done it that you thought, oh, I really learned a lot from that one.

Jason Mitchell (01:03:31): Yeah. One of my recent favorite ones was with Chris Stark, the CEO of the climate change committee who is the independent advisor to the UK on their net zero plan and the work around it. And so, I think it was refreshing particularly some of the questions around how the role of the climate change committee is changing a little bit. They're having to become more of a moderating voice for the boosterism of the Boris Johnson sort of a cabinet and more of a kind of a factual check against some of the UK's claims. They are actually working on a new report for the recent treasury report that just came out. So it'll be interesting to hear from that. I think there have been a whole bunch of really interesting episodes. I mean, one that actually surprised me, and this happened several years ago, quite unexpectedly, was when I interviewed the CEO of a Spanish bank and this was probably about two and a half, three years ago and that is changing, but, but at least several years ago, they were kind of seen as a laggard in terms of the east G momentum across Europe, certainly behind, the Dutch, Nordic countries and Belgium and French.

Jason Mitchell (01:05:04): And so, I wasn't quite sure what to expect. I knew that he had a kind of keen interest in this and so we started the interview and it was clear he actually knew-- as a CEO, he actually knew quite a lot, particularly around climate and I made a quick remark about that on the tape. I said, "I'm actually quite surprised that you're so conversant and articulate around climate risk." And he looked at me, and this is in a room full of four or five other very senior people and he looked at me ungraciously for like seconds uncomfortably. He looked at me and he said, "Why?" And I kind of stammered and he said, "Barcelona," and this was in Barcelona, "Barcelo is X meters below sea level. We will be one of the first victims of climate change." And it was kind of unexpected, this realization that for certain cities like Barcelona, for instance, that this was actually really striking home in a real sense, not in a kind of a conceptual research report sense and that people were having to kind of plan around it their businesses or their lives, maybe. I thought that was really, really interesting.

Ben Yeoh (01:06:30): Yeah. That was really real. Cool and last two questions then. One is, what do you wish people understood more about the world? Or is there something that you think you really understand and that people haven't quite got?

Jason Mitchell (01:07:41): Yeah. I would actually have to go back to-- we began this episode talking about the work around the migrant crisis and in particular, and I sort of misstated the word but I mentioned Mary Robinson, the former president of Ireland and her work around the SDGs and her empathy for migrants, refugees and so I use pride. It's not just pride, it's this idea of dignity and I think that's the exact word that she used and that is the exact word that I sort of independently on that boat and across my experiences of which I hope to do more kind of realized, which was just very, very different from our working environment. Dignity has a lot of different connotations. In the work environment, you want a safe, good working environment no matter what. I think in a situation where people are voluntary or involuntary migrants, they've given up a lot and sacrificed a lot. They don't have a lot. The little things they have, dignity is actually a very large part of that. And it was something that I was very, very, very sensitive to on that boat, that particularly some of the families I'd seen that had kind of forfeited pretty much everything, treating them with dignity and speaking to them meant a lot.

Ben Yeoh (01:09:25): Yeah. Be kind, have dignity. Great. And the last question is do you have any advice for people listening? This could be advice for young people who want to be activists, some people thinking about finance as a career, somebody who might want to think about being a poet or a poet and an investor. Any advice for people?

Jason Mitchell (01:09:49): Yeah. So, my favorite piece of advice that a mentor had told me once was no doesn't mean never. I've got boxes 20 or 30 years ago when I was kind of a struggling poet at university and thinking about getting a master in Fine Arts, where I was sending self-addressed stamped envelopes with five to eight poems to every literary journal in the US and abroad and effectively getting 95% rejection receipts back. I feel like that was fortified in a sense. There's a lot of talk about failure porn, this idea of using it to fortify, but I'm a big believer in this. If you keep trying around areas, you should not accept no as sort of this final determinant for what you want to do.

Ben Yeoh (01:10:57): Yeah. That's a really good piece. No does not mean never. So with that, Jason Mitchell, thank you very much.

Jason Mitchell (01:11:05): Thanks so much for having me.

Ben Yeoh (01:11:08): If you appreciate the show, please like and subscribe as it helps others find the podcast.