#90 Tech-entrepreneurship and ESG

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Hi everyone, and welcome back to the Proteus Leader Show. My guest today is Nick Miller, an innovative career entrepreneur and a pioneer in the tech world. Over his extensive career, Nick has founded and led multiple companies, across the software, wireless, and ESG analytics sectors. He's currently the CEO and Chairman of ESG.AI Technologies, a Canadian fintech that's making waves in ESG data and analytics in collaboration with the London Stock Exchange Group. Nick, it's a pleasure to have you here.

Hi, Marie. Great to be with you from rainy Vancouver today, but Yes, London.

Yeah, not rainy at all.

So, okay, well, the world is ups and downs. Yeah, absolutely.

Let's dive in. You founded and led numerous ventures in technology and analytics, and I'm curious about what has inspired you to pursue such a broad range of tech sectors. And, you know, what do you see as the most rewarding part of this entrepreneurial journey?

Well, thanks, Marie. That's a great question. I think when I reflect back over my career, you know, I think the different companies that I founded have been slight, almost accidental, slightly accidental. I've oftentimes been, I mean, back in the '90s, I founded a company that was active in the cellular space. We were innovators before, even before SMS messaging. So I'm really dating myself, but way back when. So I saw an opportunity and built some technology to address the opportunity and built the company. And then we ended up listing that company on NASDAQ and selling it. My previous company to ESG AI was pretty interesting. We'll talk about that a bit later on, but it was, in that particular case, we developed a security solution for enterprises. And it's a long story that I won't get into, but we were, long, very long story short, we were contacted by the Department of Defense who looked at our technology and said, hey, we'd love to have this technology, but we need you to do something different. We needed to be able to detect and locate cell phones. Do you think you could do that? So we said, yeah, we built that and the rest was history. We ended up then selling a very interesting security solution to all of the, the US Department of Defense, all the major security agencies. That was a very interesting journey and we can certainly come back to that later. And then with ESG AI, I had, I've been a lifetime environmentalist, very interested in the environment. I was one of the people who Al Gore trained after the Inconvenient Truth movie. I don't know if remember that back in—

Yes.

About 10 years ago to give his presentation because that movie was really a PowerPoint presentation made into a movie. So he got a lot of people like me who gave presentations for a living to go out and present. And so I did that. And one of the issues that we had back in the day was that it was very difficult to convince corporations to do the right thing out of altruism. And when ESG came along, I saw an opportunity and I thought, wow, all of a sudden now we're measuring companies' performance And it's going to impact whether funds invest in them or not. So I felt, wow, all of a sudden now we've actually got some real leverage here where we can actually get companies to do what they should do from an environmental, social, and governance perspective. And when I looked at ESG, I, again, I saw a problem. I saw that it was extremely complicated, not well understood by senior executives. So I thought, I think what the world needs is a platform to make that simpler. So that was what we built with the SGAI. So I would say that in every case, it's been pretty much, I've identified an opportunity, seen an opportunity that was born out of technology, a requirement for the customer, an opportunity to innovate, build some interesting technology that nobody's thought of before to meet the need. And that's really how it's evolved. Long answer, but—

No, wonderful, because I think the stories illustrate that Your approach is not calculated. You see an opportunity and then you just want to solve the problem. And I can see through that storytelling that this is what you enjoy, but maybe what you find rewarding in it.

Yeah, absolutely. I think the planets have to line up a little bit. You can't really put— drive this. You can't really sort of engineer it. Almost everything, if you look at any of the big, big, more recent big companies in the world like Google, Facebook, and so on, Meta as it's now called, They were founded to do something somewhat different from what they ended up doing. Perhaps not so much in the case of Google. It was built in search, but it's evolved into so much more. And Meta has evolved into so much more than what Mark Zuckerberg originally designed it to do. So I think you start with the germ of an idea and then run with it, see where it goes. And but also keep a close eye on what the market needs. So I might keep trying, testing, evaluating, comparing, and making sure that you're doing really delivering what people want.

Yeah, you mentioned that some of your clients were the US defense and intelligence agencies. And I'm curious, when there are such high stakes involved, what are the elements you consider as provider of the solution?

Obviously, we had to be, in that particular case, we had to be very concerned about security, obviously, because we were, the system that we developed required sensors to be deployed inside areas where the classified information is held and so on. It had to be bulletproof in terms of couldn't be penetrated and it couldn't be— we didn't obviously don't want an enemy of the US to somehow get into the technology because now you've got a sensor network that you could access, which would be horrendous. So I think that was very important. That was, that company in particular was a very interesting journey for me getting involved in the whole scene in Washington, DC, especially with all the 3-letter agencies as a Canadian and a Brit. I have dual Canadian and British nationality, but neither of those nationalities qualify for a US security clearance. So that was challenging. And I remember I, the first deal that I did for Air Patrol, the company was called Air Patrol, was in the coffee shop of the Dulles Marriott Hotel because they wouldn't let me into any of the offices. It was interesting. I had the, I had Richard Clarke, the former cybersecurity czar, very famous for US presidents, the former deputy director of the National Security Agency on the board. So we had a really interesting board. It was a lot of fun, very interesting. One of our first clients was DARPA, the Defense Advanced Research Projects Agency, which is a famous agency in the United States. Very, all very interesting and challenging.

Got it. So it feels like you had to adapt with the complexities of the client needs, but also the global nature of the business of where you're from. Fascinating.

Yeah, it was absolutely fascinating. Absolutely fascinating. Yeah.

Now, I really like to zoom in on esg.ai. This is how we met, how much purpose there is for me in sustainability and the importance of that conversation at the boardroom level. So I'd love to understand your vision for esg.ai and what you believe makes ESG data so essential for leaders.

I think fundamentally ESG data is used as a criteria by ESG funds as to whether or not they will buy, sell, or hold a position in a company. So it's fundamentally important if you want to have ESG-focused funds take a position in your company, invest in your company. I think there are 2 aspects. There's the sort of altruistic aspect to ESG. Everybody should be doing the right thing from an environmental perspective and from a social perspective, from a governance perspective, obviously. But quite apart from that, it's a requirement now over, there are over $40 trillion worth of funds under management that require ESG criteria to be met. So it's approaching half of all of the funds under management in the world. So it's a massive amount of money. So if you, as a corporation, you really can't say, we're not going to bother with half of the funds under management. That would be ridiculous. If you want to attract investment from those funds, you have to meet ESG criteria, number one. Number one is you should do it because it's the right thing to do. But number two, you need to do it because you're not gonna, some of these funds say—

If you want to survive.

You want to survive, they simply won't invest in you. And then thirdly, in Europe in particular, and now increasingly in North America and around the world, there are regulatory requirements that require companies. In Europe, it's the CSRD, Corporate Sustainability Reporting Directive, that requires companies to provide data. So it's gone from a right to do the right thing to do to a, you really should do it. To now you actually have to do it because we've got to, you've said it's been this sort of progression. So it's really fundamentally important. And what we're all about at ESG AI very simply is we're trying to make the process easier and simpler. When I founded the company, our initial mission was to try and make ESG easier for C-suite executives, board members to understand. We've done a great job, we think, of visualizing the data. So it's very easy to see your data to see the holes in the data, the, the, the where you're performing poorly, where you're performing well, and so on. One of the really unique things we did in ESG AI that has turned out to be really important is in partnering with the London Stock Exchange Group, we were able to convince them to give us their ESG scoring algorithm. And what that enables us to do is whenever a company changes data, they can immediately see the impact of that data on their ESG score. What was really interesting is we discovered, frankly, by accident, that this created a sort of a feedback loop, a dopamine-fueled feedback loop, because when you make a change and you see the result and then you go, oh, let's try the next one. Oh, so you get this feedback loop.

This momentum and you want to do better and better.

Exactly. Initially, we put that feature in because we thought it would be useful for senior executives to be able to see where they should start. What we discovered somewhat accidentally is it created this sort of feedback loop that's very motivational and really encourages people to enter the data. And believe it or not, we often get VPs of sustainability calling us up very excited. They say, you know, I just deployed this yesterday and I've already seen how I can make improvements and, and get significant improvements and so on and so forth. So.

I, I imagine with the making it easier for them, you help them prioritize, evaluate the impact, convince The organization of the benefits of investing time.

That's exactly right. I think the impact, as you say, Marie, one of the things that we were able to do, which I don't think anybody else in the industry can do, is because we have the scoring algorithm built right into the platform, we can actually, we know how the formula works, so we can actually calculate the impact of each individual metric on the score. That helps people prioritize. So in London Stock Exchange Group's case, they're dealing with about 180 metrics, but the problem for an executive is where do I start? Where do I even— what? So we said, we'll show you exactly where to start because we've sequenced this by impact. So I think that going back to my earlier point about delivering what the customer wants, we imagined early on, I saw myself, I thought, I'm a CEO, I've been a CEO for rather a long time. What would I want? How would I want to use this? And we built a tool that really does exactly what a CEO or a senior executive would want to have the tool do. But then after we did it, we reflected it back to them and said, okay, what do you think of this? And iterated it. And then Amazing.

Amazing. The question that is coming up for me is, given that ESG funds, the London Stock Exchange Group, NASDAQ, they might all have different approaches to calculate the ESG score, different criteria. How do you manage that complexity within your tool?

Yeah, it was 2 things. I think first of all, the data is paramount. So one of the things that we're finding talking to asset managers is that they are increasingly looking less at the score and more at the underlying data. So one of the issues with ESG scores, there are a number of issues with ESG scores, but one of the most important, one of the most significant issues is that they're all different. They're all calculated differently. So unsurprisingly, you get a different result. There have been a number of academic studies pondering on why is there variance amongst ESG scores?

Yeah.

Well, why would there be concordance? They're all using different algorithms. They're using the same data, but they're treating the data differently. So of course you're going to get different results. So we're finding that's an issue. The other issue is that they're too generalized. When you take 186 data points and you try and create some sort of score out of all of those diverse points, everything from whether or not a company has a daycare program to how much was their carbon dioxide output. When you mash everything, you know, into one number, the usefulness of that number is limited. And when you talk to asset managers, they're saying, I'm running a climate impact fund. I'm really not interested in 186 data points. I'm interested in these 15, 10 or 15 key data points. So those asset managers really prefer to see the data and they want the data to be accurate, up to date and complete, which is what we're all about with our platform, with LSEG. So.

Got it.

So I think that, long answer, but I think, I think first of all, it's most important that you get the data right. If you get the data right and it affects an improvement in your score with LSEG or with MSCI, there's reason to suppose that if you give all of the other providers that same set of data, you'll get a corresponding improvement there as well.

Got it.

But as I say, I think from the standpoint of asset managers who are the principal people using this data, they're really much more interested in the underlying data. than the overall generalized score increasing. And you'll see next year us coming up with a number of tools that help asset managers do that. We're going to offer a bespoke scoring tool on a number of other things next year to help them with that.

Got it. In a way, they, they use that underlying data to calculate their own score based on what the funds focus on.

Yeah. Yeah, that's absolutely right. And many of them actually do exactly that. They actually have their own scoring algorithm. And, but I think that beyond that, as I say, it's not really a one-size-fits-all solution. The problem doesn't require a one-size-fits-all solution. It requires more precise— if you're doing a climate impact fund, you need one set of data. If you're doing a social impact fund, you need a different set of data. So generalized scores are really not that useful if that's what you're trying to do. So.

Got it. With the Portuguese Leadership Show, we love leaving our leaders with some practical steps that they can take. So, for leaders who really want to embed more sustainable practices into their work, what are some of those practical steps they can take from tomorrow?

Yeah, yeah. So, I think first of all, you need to understand the regulatory framework and the regulatory environment. So, CSRD is looming in Europe. That impacts about 50,000 European companies and about 10,000 non-European companies, international companies. who do a sufficient amount of business in Europe, understanding the regulatory requirements is very important. We're still a little bit of a ways out from having to deliver that data, but you need to start preparing for that now. You can't leave that until the last minute. It's a fairly draconian amount of data that's going to be required. So you need to get on top of that now. So that's a real practical reason. I think also increasingly companies want to perform well from a social perspective and a governance perspective and an environmental perspective. And I think having a good score is something that you can be proud of, that your employees will require, your stakeholders will look for. So it's something that you need to get on top of. So I would say this is a little bit self-serving, but I think I would say find a platform that you can use to help you with that journey. It's not something that you can do off the back of an envelope. It's too complicated. You need to bring some technology in-house to help you see what the problem is, see where you want to start. Even though the LSAC platform is targeted at public companies, LSAC collect data on the top 85% of the global market cap, about 12,600 public companies. Even if you are not one of those companies, even if you're a smaller company or even a private company, you can still use the platform. You can input your data and start with the most impactful metrics and work your way down and actually produce a pretty good score as a result. And perhaps more importantly, wrap your arms around the whole problem and get to grips with the whole problem. And in our platform in particular, and this is again a little self-serving, but you can actually see the mapping to things like the ISSB standards, the CSRD reporting requirements, and so on and so forth. So I would say get on top of it, get some technology to help you. It's the right thing to do, and it's something that you're going to have to do to meet regulatory requirements in the future.

Yes, it's looming in, as you said. Thank you so much, Nick, for sharing your insights, experience, not only on sustainability, but also on entrepreneurship and leadership. Now, listeners, if you want to learn more about the ESG analytics and the work that Nick and his team are doing, please visit esg.ai. And to explore how Proteus supports leaders and organizations in thriving through meaningful growth, visit us at proteus.international.com. Thank you for tuning in, and until next time. Here's to creating the life you truly want.

We hope you're feeling better equipped to create the career, the business, and the life you want. To find out more about how we support our clients in leadership, learning, and change, visit us at proteus-international.com. Have an excellent day, and thanks for listening.