Tabula CEO: ‘We Don’t Have the Luxury to Stand on Principle’

For
readers
looking
to
invest
in
the
fight
against
climate
change,
how
does
bond
fund
investing
differ
from
active
equity
investing?

The
standard
explanation
is
that,
with
equities,
you’re
an
activist
investor
and
you
try
to
influence
the
direction
of
a
company.
You
have
shares
and
you
get
to
vote
every
year,
you
can
go
to
the
meetings,
you
can
be
noisy,
you
can
vote
people
down
and
vote
for
initiatives.
In
the
bond
world,
none
of
that
exists
and
you
don’t
have
any
meetings.
But
you
can
have
a
lot
of
direct
impact
on
the
company
by
whether
you
fund
it
or
not.

For
fixed
income,
the
idea
is
that
you
don’t
want
to
invest
in
people
who
aren’t
doing
what
you
would
like
to
see
them
do
for
the
planet
as
a
whole,
and
for
themselves
and
their
businesses.
For
the
planet,
because
we
want
to
drive
towards
Paris
goals,
the
only
way
we
see
to
do
that
is
through
companies
that
have
created
significantly
smaller
carbon
footprints
and
we
want
to
incentivise
them
to
take
over
their
industries.
From
a
business
perspective,
we
want
to
show
that
there
are
sanctions
if
you
fail
and
we
want
to
make
sure
that
we’re
investing
in
companies
that
are
sustainable
in
their
underlying
businesses
–
those
companies
will
perform
better
with
better
credit
spreads
over
time.

The
Paris
Agreement
carries
a
lot
of
weight
as
a
climate
goal,
but
the
guidelines
have
also
been
criticised.
We’re
not
exactly
on
track.
How
does
that
affect
your
strategies?

I
don’t
think
anybody
criticises
the
guidelines
they
put
in
place,
what
they
say
is
that
people
are
not
complying
with
it.
For
example,
this
year,
the
amount
of
greenhouse
gas
emissions
is
higher
than
it
was
last
year.

When
you
build
financial
products,
you
separate
yourself
from
these
political
issues.
How
do
countries
who
have
signed
up
to
the
Paris
Agreement
implement
these
guidelines
from
a
geographic
perspective,
down
through
their
corporate
sectors?
What
control
do
they
actually
have
over
the
political
versus
commercial
interface?

We
know
the
bond
issuers
in
the
main
index,
we
know
their
carbon
footprints,
we
have
a
lot
of
data
around
their
behaviour,
and
a
we
have
information
around
their
alignment
with
various
United
Nations
Sustainable
Development
Goals.
And
we
can
change
the
benchmark
based
on
these
control
factors
and
select
who
we’ll
invest
in
and
who
we
won’t.
It’s
pretty
programmatic.
These
liquid
Paris-aligned
strategies
are
the
only
ways
in
which
you
can
move
billions,
if
not
trillions,
because
they’re
designed
in
ways
that
they
remain
as
liquid
as
the
parent
benchmarks.

You
use
indices
specifically
aligned
with
the
Paris
Agreement.
Do
you
see
other
major
indices
doing
that?

It’s
a
tipping
point
issue.
I
think
once
you
get
past
a
certain
amount
of
money
moving
into
Paris
Agreement-aligned
benchmarks,
and
the
intellectual
and
investment
conviction
among
most
major
investors
is
that
they
want
to
be
exposed
to
Paris-aligned
strategies,
then,
you
can
go
back
and
use
corporate
action
to
change
the
benchmarks
that
old
funds
are
tracking.

But
if
you
talked
about
this
five
years
ago,
there
was
almost
no
money
tracking
any
form
of
ESG
benchmark,
or
belief
that
we’d
be
here
today.
Crowd
behaviour
has
led
to
hockey-stick
growth
in
investing
in
ESG
and
Paris-aligned
strategies
over
the
last
five
years.

What
that
crossover
point
will
be
I
can’t
tell
you,
but
it
will
be
a
combination
of
money
moved
and
a
sense
of
urgency
from
investors
that
they
can’t
just
drag
their
heels
anymore
on
this.
It
can
be
frustrating.
We’re
talking
when
it
feels
like
we
should
be
doing,
but
it
takes
a
certain
amount
of
talking
and
agreeing
before
everyone
feels
comfortable
doing.
But
then
when
you
finally
do,
there’s
an
avalanche
effect
to
the
follow-through
on
it.

What
are
you
expecting
to
see
from
COP
this
year?

It’s
a
big
question.
Last
year
was
the
biodiversity
COP.
I
expect
a
lot
of
energy
and
effort
is
going
to
go
back
into
how
far
we
are
away
from
the
Paris
guidelines,
how
more
carbon
is
going
into
the
atmosphere
every
year.
How
are
we
supposed
to
be
drawing
down?
And
I
think
there’ll
be
a
lot
of
discussion
of
carbon
capture
and
how
you
make
it
economically
possible
to
change
the
big
numbers.

One
concern
for
people
is
that
even
when
some
countries
are
getting
on
board
others
aren’t,
allowing
bad
actors
to
keep
going
and
creating
too
much
carbon
while
somebody
else
is
coming
along
to
clean
up.
When
you
clean
up
after
your
kids,
it
incentivises
them
to
just
throw
their
stuff
on
the
ground
because
when
they
come
back
to
their
room,
it’s
always
tidy.
It’s
the
same
thing
in
the
environmental
space.
If
some
good
Samaritan
comes
along
and
cleans
stuff
up,
spends
trillions
on
capturing
carbon,
it
allows
other
to
behave
badly.

I
don’t
think
we
have
the
luxury
of
standing
on
principle.
We’re
hitting
tipping
points
to
keep
1.5
alive
–
and
most
people
have
actually
given
up
on
1.5,
and
keep
talking
about
it
as
a
way
to
pushing
for
change.

I
think
this
year
will
be
about
reaffirming
what
the
goals
are,
what
is
actually
achievable,
how
we’re
going
to
get
there,
and
how
we’re
going
to
accelerate
and
get
on
top
of
this,
as
opposed
to
keep
coming
back
together
every
year
and
moaning
about
how
we
failed.

This
interview
has
been
edited
for
clarity
and
brevity

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