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TED@StateStreet Boston

Audrey Choi: How to make a profit while making a difference

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Can global capital markets become catalysts for social change? According to investment expert Audrey Choi, individuals own almost half of all global capital, giving them (us!) the power to make a difference by investing in companies that champion social values and sustainability. "We have more opportunity today than ever before to make choices," she says. "So change your perspective. Invest in the change you want to see in the world."

- Sustainable investment expert
Audrey Choi is a thought leader on how finance can be harnessed to address public policy challenges. Full bio

I believe big institutions
00:13
have unique potential to create change,
00:15
and I believe that we as individuals
00:17
have unique power
00:19
to influence the direction
that those institutions take.
00:21
Now, these beliefs did not
come naturally to me,
00:24
because trusting big institutions,
00:27
not really part of my family legacy.
00:29
My mother escaped North Korea
00:32
when she was 10 years old.
00:34
To do so, she had to elude
every big institution in her life:
00:36
repressive governments, occupying armies
00:40
and even armed border patrols.
00:43
Later, when she decided she wanted
to emigrate to the United States,
00:46
she had to defy an entire culture
00:50
that said the girls would never
be the best and brightest.
00:52
Only because her name
happens to sound like a boy's
00:56
was she able to finagle her way
into the government immigration exam
00:59
to come to the United States.
01:02
Because of her bravery and passion,
01:05
I've had all the opportunities
that she never did,
01:08
and that has made my story so different.
01:10
Instead of running away
from big institutions,
01:14
I've actually run toward them.
01:16
I've had the chance
over the course of my career
01:18
to work for The Wall Street Journal,
01:20
the White House
01:22
and now one of the largest
financial institutions in the world,
01:23
where I lead sustainable investing.
01:26
Now, these institutions are like tankers,
01:28
and working inside of them,
01:31
I've come to appreciate
what large wakes they can leave,
01:32
and I've become convinced
01:36
that the institution
of the global capital markets,
01:37
the nearly 290 trillion dollars
of stocks and bonds in the world,
01:40
that that may be one
of our most powerful forces
01:45
for positive social change
at our disposal,
01:48
if we ask it to be.
01:50
Now, I know some of you are thinking,
01:52
global capital markets,
positive social change,
01:54
not usually in the same sentence
or even the same paragraph.
01:57
I think many people think
of the capital markets
02:01
kind of like an ocean.
02:03
It's a vast, impersonal,
uncaring force of nature
02:04
that is not affected
by our wishes or desires.
02:08
So the best that our
little savings accounts
02:11
or retirement accounts can do
02:13
is to try to catch some waves
in the good cycles
02:15
and hope that we don't get
inundated in the turbulent ones,
02:18
but certainly our decisions on how
to steer our little retirement accounts
02:20
don't affect the tides,
02:25
don't change the shape or size
or direction of the waves.
02:26
But why is that?
02:31
Because actually,
one third of this ocean of capital
02:33
actually belongs to individuals like us,
02:36
and most of the rest
of the capital markets
02:40
is controlled by the institutions
that get their power and authority
02:42
and their capital from us,
02:45
as members, participants,
beneficiaries, shareholders or citizens.
02:47
So if we are the ultimate owners
of the capital markets,
02:51
why aren't we able
to make our voices heard?
02:55
Why can't we make some waves?
02:58
So let me ask you a different question:
03:00
did any of you buy fair trade coffee
03:02
the last time you were
at a supermarket or at Starbucks?
03:05
OK. Do any of you go to the restaurant
03:07
and order the sustainably farmed trout
03:10
instead of the miso-glazed
Chilean sea bass
03:12
that you really wish you could have?
03:15
Do any of you drive hybrid cars
or even electric cars?
03:17
So why do we do these things?
03:21
Right? One electric car doesn't amount
to much in a fleet of 1.2 billion
03:23
combustion engine vehicles.
03:27
One fish is just one fish in the sea.
03:29
And one cup of coffee
03:33
doesn't amount to a hill of beans
in this crazy world.
03:35
But we do these things
because we believe they matter,
03:39
that our actions add up,
03:41
that our choices might influence others
03:43
and collectively,
what an impact we can have.
03:45
So, in my bag I have a coffee mug
that I bought a couple of years ago.
03:48
It's a reusable mug.
It has all these things printed on it.
03:51
Look at some of the things
that are on it, that it says.
03:54
"This one cup can be used
again and again."
03:57
"This one cup may inspire others
to use one too."
04:00
"This one cup helps save the planet."
04:04
I had no idea this plastic cup
was so powerful.
04:06
(Laughter)
04:09
So why do we think that our choice
04:10
of a four dollar shade-grown
fair trade artisanal cup of coffee
04:12
in a reusable mug matters,
04:16
but what we do with 4,000 dollars
in our investment account
04:18
for our IRA doesn't?
04:21
Why can't we tell the supermarket
and the capital markets
04:23
that we care,
04:26
that we care about fair labor standards,
04:28
that we care about sustainable
production methods
04:30
and about healthy communities?
04:33
Why aren't we voting
with our investment dollars,
04:34
but we would vote with our lattes?
04:37
So I think it has something
to do with the myths,
04:40
the fables that we all carry around
in our collective consciousness.
04:43
Do you remember the Grimm's fairy tale
about the magic porridge pot?
04:47
If you said to the pot,
"Boil, little pot, boil,"
04:50
it would fill up with sweet porridge.
04:53
And if you said, "Stop, little pot, stop,"
04:55
it would stop.
04:57
But if you got the words wrong,
it wouldn't listen,
04:59
and things could go terribly awry.
05:02
So I think when it comes to markets,
05:05
we have a little bit
of a similar fable in our heads.
05:07
We believe that the markets
is this magic pot
05:09
that obeys only one command:
05:12
make more money.
05:14
Only those words said exactly that way
05:16
will make the pot fill up with gold.
05:19
Add in some extra words
like "protect the environment,"
05:22
the spell might not work.
05:26
Put in the wrong words
like "promote social justice,"
05:28
and you might see your gold coins shrink
05:32
or even vanish entirely,
according to this fable.
05:34
So we asked people,
what do you really think?
05:38
And we actually went out and polled
a thousand individual investors,
05:41
and we found something fascinating.
05:45
Overwhelmingly,
05:47
people wanted to add
those extra words into the formula.
05:49
71 percent of people said yes,
05:52
they were interested
in sustainable investing,
05:55
which we define as taking the best
in class investment process
05:58
that you already have traditionally
06:01
and adding in the extra
information you get
06:03
when you think about the environment
and society and good governance.
06:05
71 percent wanted that.
06:08
72 percent said that they believe
that companies who did that
06:10
would actually do better financially.
06:13
So people really do believe
that you can do well by doing good.
06:15
But here was the weird thing:
06:19
54 percent of the people
06:20
still said if they put their money
in those kinds of stocks,
06:22
they thought that they
would make less money.
06:26
So is it true?
06:29
Do you get less sweet porridge
if you invest in shade-grown coffee
06:31
instead of drinking it?
06:35
Well, you know, the investors
in companies like Burt's Bees
06:37
or Ben & Jerry's wouldn't say so.
06:41
Right? Both of those started out
as small, socially conscious companies
06:42
that ended up becoming
so popular with consumers
06:46
that the giants Unilever
and Clorox bought them
06:50
for hundreds of millions of dollars
06:53
each.
06:55
But here's the important thing.
06:57
Those corporations realized
06:59
that if they wanted to protect
the value of their investments,
07:00
they had to preserve
that socially conscious mission.
07:03
If they didn't keep adding in
those extra words
07:06
of environmentally friendly
and socially conscious,
07:08
those brands wouldn't make more money.
07:10
But maybe this is just the exception
the proves the rule, right?
07:14
The serious companies
that fund our economy
07:17
and that fund our retirements
and that really make the world go round,
07:20
they need to stick to making more money.
07:23
So, Harvard Business School
actually researched this,
07:26
and they found something fascinating.
07:29
If you had invested a dollar 20 years ago
07:31
in a portfolio of companies
07:34
that focused narrowly on making more money
07:35
quarter by quarter,
07:38
that one dollar
07:40
would have grown
to 14 dollars and 46 cents.
07:41
That's not bad until you consider
07:45
that if instead
you'd invested that same dollar
07:47
in a portfolio of companies
07:50
that focused on growing their business
07:52
and on the most important
environmental and social issues,
07:54
that one dollar would have grown
07:58
to 28 dollars and 36 cents.
08:00
almost twice as much sweet porridge.
08:04
Now, let's be clear, they didn't make
that outperformance
08:07
by giving away money
to seem like a nice corporate citizen.
08:10
They did it by focusing on the things
that matter to their business,
08:13
like wasting less energy and water
08:16
in their manufacturing processes;
08:18
like making sure the CEO contracts
had the CEOs incentivized
08:20
for the long-term results of the company
and the communities they served,
08:23
not just quarterly results;
08:27
or building a first class culture
08:28
that would have higher employee loyalty,
08:31
retention and productivity.
08:33
Now, Harvard's not alone.
08:36
Oxford also did a research study
where they examined 120 different studies
08:37
looking at the effect
of sustainability and economic results,
08:41
and they found
time and time and time again
08:45
that the companies that cared
about these kinds of important things
08:48
actually had better
operational efficiency,
08:51
lower cost of capital
08:54
and better performance
in their stock price.
08:56
And then there's Al Gore.
08:59
So 20 years ago, when I worked
for Al Gore in the White House,
09:00
he was one of the early pioneers
pleading with businesses and governments
09:03
to pay attention to the challenges
of climate change.
09:07
Post-White House, he opened
an investment firm called Generation,
09:10
where he baked environmental
sustainability and other things
09:13
right into the core investment process.
09:16
And at the time there was
a good bit of skepticism about his views.
09:18
Ten years later, his track record
is one more proof point
09:22
that sustainable investing done right
can be sound investing.
09:26
Far from making less sweet porridge
09:30
because he added
sustainability into the mix,
09:31
he actually significantly
outperformed the benchmark.
09:34
Now, sustainable investing,
09:37
the good news is
it doesn't require a magic spell
09:39
and it doesn't require
some investment secret,
09:42
and it's not just for the elite.
09:46
It is not just about private equity
for billionaires.
09:47
It's not just groovy-sounding investments
like clean technology
09:51
or microfinance in emerging markets
09:54
or artisanal bakeries in Brooklyn.
09:55
It's about stocks and bonds
and Fortune 500 companies.
09:59
It's about mutual funds.
10:02
It's about all the things
10:03
we already see in the market today.
10:04
So here's why I'm convinced
10:07
that we collectively have the power
10:09
to make sustainable investing
the new normal.
10:11
First, the proof points
are coming out all the time
10:15
that sustainable investing done right,
10:19
preserving all the same
good principles of investing,
10:21
the traditional sphere, can pay.
10:25
It makes sense.
10:27
Secondly,
10:29
the biggest obstacle standing in our way
10:30
may actually just be in our heads.
10:32
We just need to let go of that myth
10:35
that if you add your values
into your investment thinking,
10:37
that you get less sweet porridge.
10:41
And once you get rid of the fable,
10:43
you can actually start appreciating
those facts we've been talking about.
10:45
And third, the future is already here.
10:48
Sustainable investment today
is a 20 trillion dollar market
10:50
and it's the fastest-growing segment
of the investment industry.
10:53
In the United States,
it has grown enormously, as you can see.
10:57
It now represents
one out of every six dollars
11:00
under professional management
in the United States.
11:03
So what are we waiting for?
11:06
For me, it goes back to the inspiration
that I received from my mother.
11:09
She knew that she wanted a life
11:13
where she would have the freedom
to make her own choices
11:14
and to have her voice heard
and write her own story.
11:18
She was passionate about that goal
11:21
and she was clear that she would let
no army, no obstacle,
11:24
no big institution stand in her way.
11:27
She made it to the States,
11:31
and she became a teacher,
11:32
an award-winning author
11:34
and a mother,
11:36
and ended up sending
her daughters to Harvard.
11:37
And these days, you can tell
that she is amply comfortable
11:40
holding court in the most powerful
institutions in the world.
11:43
It seems almost too prophetic
11:47
that her name in Korean means
11:49
"passionate clarity."
11:51
Passionate clarity:
11:54
that's what I think we need
to drive change.
11:55
Passion about the change
we want to see in the world,
11:58
and clarity that we are able
to help chart the course.
12:02
We have more opportunity today
than ever before
12:06
to make choices.
12:09
We have more power than ever before
to make our voices heard.
12:11
So change your perspective.
12:16
Vote with your small change.
12:20
Invest in the change
you want to see in the world.
12:21
Change the fables
12:25
and change the markets.
12:27
Thank you.
12:29
(Applause)
12:30

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About the Speaker:

Audrey Choi - Sustainable investment expert
Audrey Choi is a thought leader on how finance can be harnessed to address public policy challenges.

Why you should listen
Audrey Choi is CEO of Morgan Stanley's Institute for Sustainable Investing. She is also Managing Director and Head of Morgan Stanley's Global Sustainable Finance Group. In these roles, she oversees the firm's efforts to support resilient communities and promote economic opportunity and global sustainability through the capital markets.

Prior to joining Morgan Stanley, Audrey held senior policy positions in the Clinton Administration, the Commerce Department and the Federal Communications Commission. While at the White House, she served as Chief of Staff of the Council of Economic Advisers and Domestic Policy Advisor to the Vice President. 

Previously, Audrey was a foreign correspondent and bureau chief at The Wall Street Journal. She is currently a member of President Obama's US Community Development Advisory Board and on the boards of several national nonprofits focused on education, conservation and impact investing. Audrey is a graduate of Harvard College and Harvard Business School.
More profile about the speaker
Audrey Choi | Speaker | TED.com