#74 John Berry of Pathfinder on Ethical Pension Funds

Hey, Kia ora Shmi. Welcome back to the latest episode of the Be Better podcast. Thank you so much to all our regular listeners. If you're a new listener, thank you for dropping in and giving it a go. Hopefully this is the banger that makes you stay for the rest of them and you get into the back catalog with me today. I have a absolute legend, a true gentleman, just genuinely awesome human. Mr. John Berry. Hello John, how are you?

Kia ora, Tim and everyone. I'm well, thanks. Thank you for having me on the show.

A pleasure, absolute pleasure. I've been keen to get you on, on the show for quite a while. So here we are.

So would you be well known, Are you sort of notorious in New Zealand? I don't know, maybe. But for people who don't know who you are and what you do. Yeah. Who are you and what do you do?

So my name is John Berry. I'm co founder and CEO of Pathfinder Asset Management, which is a fund management business. So we manage a Kiwisaver and manage funds. So we're investors. We're investors and we look after other people's money.

Nice. So for people, because we do have some international listeners for people outside of New Zealand, Kiwisaver is essentially. Well, you obviously know more about Kiwisavers than I do. But as I understand it, Kiwisaver is basically a government sort of dictated superannuation type program where you as a employer or employee can put some money in towards a scheme, the government puts some money into the scheme and hopefully when we're all older there's a bit of money left in it and you might get some cash out of it. That's kind of the theory. Yeah, but.

Well, the theory is that your fund manager should make you a lot of money. So when you retire there's a lot in there. But yeah, it's a government government mandated savings scheme.

Yeah.

For long term. Long term savings, yep.

So same as like, I suppose in the UK you have the pension, but I suppose slightly different. I mean Aussie in New Zealand have superannuation where it's kind of, I guess this seems. Well I've been out of the UK for quite a few years so I might just be talking complete rubbish here. But in the UK it used to be that there was like pretty much one pension fund that the government had and then if you wanted a private pension fund, that's where you could choose to go and invest your cash or have a. Is that still the same or are you out of the loop over There.

So the uk you had defined benefit schemes which would essentially their final salary. So they give you a percentage of your final salary when you retire and pay that right through your return.

Yes.

Or you get a lump sum, which is how much you've saved plus your investment returns. And the New Zealand scheme is that scheme. It's how much you save plus your investment returns. Yeah.

Cool. And for people in the us, they're just lucky to get any money at any point and any holidays, from what I understand. So, yeah, good luck.

That's a whole different. Whole different story.

Different story, yeah.

So, yeah. So tell us a bit about Pathfinder. There's obviously, you know, all the major banks in New Zealand have a. Have a Kiwi savvy scheme. There's a few other independent organizations that run Kiwi savvy schemes. But yeah. So tell us about Pathfinder. What's different? Obviously you're a B corp, but yeah, what's the go with Pathfinder?

What's the go. Where are we different? I suppose the, you know, the key different difference I'd say is we're really open about the fact we take values into account with the way we invest and our focus, our mission as a business is gener individual wealth and collective wellbeing. So it's this idea of I still want to make as much money, our team still wants to make as much money as we possibly can for our investors. We just want to do it in a way that's positive for people, planet and animals, so it serves a positive purpose. And what does that actually mean in practice? Ethical investing to us has five different layers. Like we're New Zealanders.

Will be most aware of taking values into account as exclusions. So avoiding stuff, and that really is the main focus in New Zealand. For us, that's a good starting step. But look, I'd say if your mission is to want to change the world and want to positively change the world, just avoiding stuff, avoiding harm is not going to do that in any sort of hurry. So yes, we have exclusions around fossil fuels, animal exploitation, weapons, whole bunch of stuff we really important because that helps me sleep better at night, it helps me feel better about the way I'm investing, but it won't necessarily drive change. And for us, that knocks out about 15% of all country companies right around the world that we can invest in. But there's still this massive opportunity set of 85% of the market we can invest in. So for me, being an ethical investor, the key decision is not so much what you avoid that is important, but it's actually where do you put. Your money is way more important.

Yeah. And I guess. Well, again, you'll be able to educate me and listeners. It seems like increasingly most Kiwisavers pension funds globally are. Yeah, okay. We now know that the ones we shouldn't be investing in. So most of them have taken some kind of stance against weapons. But that's a really interesting one. I don't want to get into it, but the whole Israel, Gaza, Ukraine, on one level, we see lots of people going, yeah, yes, let's send money and guns to support people. But then on the other hand, we don't want to invest our kiwisaver in guns, but we're happy to make. That's just, I think that's a whole. Maybe that's a separate podcast we do on that one.

Well, you know, just, just. And like I say, we don't want to go too deeply into and you know, there's conflict in Ukraine, there's conflict in the Middle east and you know, the, the civilian cost is huge of these conflicts and you know, so we don't just boil it down to sort of numbers and investments. But there's a couple of approaches you can take as an ethical investor. One is to say, what is the future world I want to live in? Like, what does the world look like in 30 years time, my grandchildren's world? What is that going to look like? That I want it to be, how do I invest now to bring that about? So that would probably tend you to invest away from weapons because you don't see that as the future. Another approach could be to say, yes, we, you know, weapons are important in the sense that democracies need to be able to defend themselves and they have a right to defend their institutions and their, in their country. But the problem with weapons manufacturers is you can't distinguish between a weapon that's used for defensive purposes and a weapon that's used for offensive purposes. So don't invest in them. And weapons companies are going to find capital, you know, they're going to get capital to invest in. So, you know, by us not investing in weapons, we're not, you know, we're not stopping weapons companies defend democracy in countries, but we're just saying we can't just distinguish between offensive and defensive weapons. Let's stay clear.

Yeah, that's fair enough. It's, I think with a lot of this impact stuff, it's not black and white because like you say, you. What's that famous quote? You know, if you if you want peace, you must prepare for war. You know, it's for the entirety of human history. You know, has there been a day since humans have been around where there hasn't been some form of conflict, at least between, you know, maybe just two local tribes? I would hazard a guess. No. Yeah, so it's really, really complicated. And then you add geopolitics and whatever else on Twitter. That's way above my pay grade. Yeah, but I remember when we first met. Which would have been what? Well, it was before the pandemic, so. What's that? BP before pandemic. It would have been possible. I think. I think I met Paul, your co founder, at the wow. Summit in Queenstown. That would have been. What are we, 20? Maybe 20. When did you guys start? Was it.

The business has been going over a decade, but I could be sort of started 2019. I think that's when you would.

I was going to say 2019 rings a bell. And then. Yeah, we met in Christchurch. You were down with Simon and we had a. We had a nice cup of tea and a chat.

Well, y.

And I do remember, you know, just, just what you're talking about, you know. Yes, there's some obvious things that we don't want to be putting our money into to create a better future. But I remember you sort of talking about the. The extra layers of screening that you put on your investments and like the reputational index and how in most funds, you know, the pharmaceutical industry is considered a, you know, what's the word I'm looking for? Not like sustainable, but they call like an ethical investment. But you guys, is it, is it a company, Is it in Denmark or the Netherlands or somewhere where there's like this reputational index that you put as a secondary screening beyond the obvious screening. Can you tell us a bit more about that?

Yeah, I think you're talking about a controversy screening. Yeah, we're looking for.

Sort of news flow lawsuits. Just what's happening in companies right now looking for either bad behavior or.

And I'll give you an example, Johnson and Johnson came on our screen when we saw.

They'Re selling talcum powder in North America. And executives were actually aware that there was a connection between talcum powder and cervical cancer. And so for us they became like a talcum. Sorry, like a cigarette company. And that they knew they were harming their consumers but continued selling and we sold. And that would have been back in 2017. So we sold J and J back then. And there's two lenses to that. One is from an Ethical perspective. I don't want to be investing in a company that has a culture like that where it's okay to sell product that you are pretty sure is harming your end users. And then for an investment lens, you know, an investment lens would say this is indicative of culture and of poor culture, which often has financial consequences. And if there really is harm to hundreds of thousands of consumers, you are going to have hundreds of thousands of lawsuits down the track. And that has been problematic for Johnson and Johnson in the US the lawsuits and the management drain in dealing with it. So, you know, we'd say companies that behave badly, they do have financial consequences.

Yeah, it'll catch up with you eventually. I mean, I think when we first met, I talked about, I worked for Johnson Johnson for a year, saw the workings of the empire from the inside.

And yeah, I mean, one of the products that they launched, I used to sell hips and knees for Johnson and Johnson. And one of the products that they launched whilst I was a, you know, a sales rep for them was this product called the ASR, which has gone down in history as one of the biggest medical disasters because they launched. So the way the medical world tends to work is there's intense competition for market share. One company might launch a, like a, a product or they get wind that a company has got like a prototype in the market. They then all rush to get their version of it to market so that they don't lose their customers to, to the, you know, to this, to the new product. And so they launched this product too soon. Hadn't, you know, it was. Some of the testing results weren't looking great. And then they launched it globally. And then I guess after a couple of years, they realized that actually this wasn't for every orthopedic surgeon. Like, you had to be a highly skilled surgeon to use it. But there were, you know, orthopedic surgeons who, a good orthopedic surgeon might do, I don't know, like 500 hips a year. But they were, they were getting guys who were maybe doing two a year using this product that they just weren't capable of using. Biggest, one of the biggest medical recalls in the history of the world. And their response in New Zealand was, well, you've got acc, so just go and get it, get it redone by, by someone, you know, you'll be all right. And that was typically how the medical world seemed to look at it. It's like, yeah, it's like that. The classic story about, was it Ford Cars who did the, did the numbers on one of their braking systems that was failing and they worked out that, you know, X number of people are likely to die, which means X number of dollars of lawsuits. But we're comfortable taking the lawsuits because we know that we can afford to pay them where it's going to cost us more to stop the production. And, and that's how the medical companies work as well. They kind of go, oh look, if we launch it, you know what's. In many ways their legal department probably sits in their marketing department because, well, we'll just consider this part of the marketing budget to get the product into the market. And yeah, I think not many people realize that that's how some of these big corporations that are considered ethical, just because they're in the medical world doesn't actually mean how they're behaving though on the day to day. So yeah, kudos to you guys for doing that.

Well, I'll just mention as well, and I don't want to focus on JJ.

Because we get lawyers.

Well, they have been in the news again recently, what's called a Texas two step.

They have separated out the company that has the talcum powder and essentially tried to bankrupt it to limit the amount they have to pay out under the lawsuits that are, you know, the billions and billions of dollars in the lawsuits. And, and again that's just, you know, unacceptable behavior when the parent company can pay the full liability that it's owing. Don't try and back down, bankrupt it like an asbestos company. You know, it's. Anyway, I don't want to focus on the negative because like I said, let's focus on the positive.

We're looking for better companies. We're looking for, we have what we call sustainable themes, which is a chunk of our portfolio invested in things like renewable energy, energy efficiency, water, technology, social housing, things that.

Will have great returns, commercial returns for investors, but at the same time have a positive for the planet. And.

The whole focus of us is what we call a duality is make money ethically but don't compromise on returns. And you can do that. And all those things, even social housing, where in New Zealand, it's an absolute disgrace for a first world country. But we have 30,000 people that are living in emergency housing, which could be temporary motels, cars, someone's garage. And that number's grown by about, I don't know, 10,000 over the last three, four, five years. It's not going down and we want to be part of the solution for that. So we're helping fund, we're working with the charity Community Finance to help fund social housing and get people into permanent, you know, dry housing for them and their family. And then you can wrap around social services to work on employment and school truancy and mental health and all those, you know, those impacts as well. So, you know, and your kiwisaver can, can help bring those about and make a commercial return at the same time.

Yeah, and I think that's increasingly what people are realizing is that, you know, you can do good and do well, I guess, by yourself. They're not, they're not mutually exclusive.

Yeah, no, it's just, it's super cool what you're doing. So how do you, how do you choose then, the positive investments? I'm guessing you've got some smart people who work out with algorithms and spreadsheets and stuff. Or do you just kind of go more gut feel like, yeah, this sounds like good. Or is it a combination of the two?

Yeah, look, it is.

For the listed companies. It is. You know, there's a lot of science behind it in terms of there are thousands and thousands and thousands of companies in the global universe. So once you've done your exclusions, how do you build a portfolio of, of companies with a low carbon footprint that look after their staff, that care about their interaction with the environment? And so there is science behind it based on the data streams that we use. There's also, I mean, you've got to build a proper portfolio. If you said, I just want the lowest carbon footprint companies in the world, you'd only be in the technology sector because there's low, like low footprint. But you've still got to have transport, you've still got to have energy companies. So we have to put constraints to make sure we've got a proper diversification across industry. And same with geography. If you just wanted companies with the best diversity and the best governance, you probably only invest in Scandinavia. Again, we've got to put constraints around geography to make sure that we've got appropriate weights to North America and to Europe. So there's quite a bit of science behind it that's in the listed space and then an unlisted company. So we're really big fans of long term investments, including an allocation to private companies. So private companies are not listed on a stock exchange and a lot more work in terms of finding them and due diligence for investing in them. But the good thing is.

Firstly, they can have outsized returns. So every wealthy family, every long term endowment fund invests in private assets, private equity and it's really hard for your average investor to get access to these assets because there's typically quite a high cost hurdle to get into them. But we're investing our Kiwisaver into them and giving access to for all New Zealanders. So one thing is you get access to potentially high returns. The other thing is we can select companies that are not just going to get what we think are the high returns, but also real world impact. So think of when you go to invest in a company listed on stock exchange like a bank or an energy company, you're not actually giving money to that company to expand, you're buying the shares of someone else. So those shares already exist. With a private company, it's called a primary market transaction. You are giving the money to that company to help it expand. And in a lot of cases if they don't raise their capital from people like us, they can't expand. So just some examples, there's a company called Lodestone Energy, they are building five solar farms in New Zealand up north and in the East Cape. They will supply 2% of New Zealand's electricity. They've raised 150 million of equity and close to double that in debt from the banks. So significant, significant investment running into hundreds of millions of dollars. They will supply 2% of New Zealand's energy. So helping decarbonize energy will aid as a company makes a biodegradable band aid. NGI Tahu and Pathfinder through our Kiwisaver invested in them to help them launch into the us. Every band aid in the world is made of plastic, ends up in the ocean, ends up in landfill. This one biodegrades within four months. Made of New Zealand merino wool. So you know, things like that Groover, mental health app, Mint innovation, really cool one we invested in this year which takes.

E waste, so laptops, TVs and extracts metals out of them. So no mining involved. It's called urban mining, but no hole is dug in the ground and it's a lower carbon footprint and a lower cost for extracting the metals. So again, we don't invest in mining companies, we need to invest in solutions so countries can have the commodities they need and extracting it from E waste is a way of doing it. So again, high impact on helping them expand. They've just launched a plant in the in Australia and they're scoping out a plant in the US at the moment. So giving them capital to actually help them expand and have impact.

Nice. And of course just to close the loop on Johnson Johnson there of their first product was the Band Aid. That's how they, that's how they started the company was the two brothers Robert Wood Johnson and I can't remember the other one now but yeah they, they, they started with the Band Aid. So is it Lucas? Is he still Wool Aid? Yeah.

Lucas. Lucas from Checkerboard.

Yeah.

It's amazing. Every conversation seems Johnson today. What's.

It's so ingrained in me. Well just hope hopefully Lucas can stay true to his original roots and when he, when he's created a global medical device empire in 50 years time he'll. We can, we can be the ones who tell him about what happened, you know, with the other. His predecessor.

Back to your mission.

Stick to your mission. Yeah. Because and that's the thing. It's interesting.

Yeah.

Like some of those, you know, the original Johnson and Johnson they had a really clear purpose. Like this Band Aid is actually going to save lives.

Yeah.

But it gets. Yeah. Have you seen the Painkillers documentary or not documentary. The series on Netflix about the Sackler family and the.

I haven't seen the. And I probably don't want to watch it the actual series but I've done enough reading.

Yeah.

To know what, what I've done. Train wreck for communities that, that, yeah. That whole story is.

Yeah.

It's awful.

Yeah. But you can see how, you know, a glimmer of. Of purpose and contribution can be quickly co opted by money and you know, greed and you know, more, more, more, more, more and, and then you. And you increasingly lose sight of. Of the impact. So yeah. So it must be. Do you find it tricky because presumably you're seeing a lot of cool companies that you probably want to give them all awesome money because they're all doing some good stuff. So. Yeah. How do you manage. I mean all the companies that you just mentioned, I'd be like, yeah sure, how much do you want? Which is why I don't work for you in that role. But you say so how do you work out? Yeah. Like how do we allocate impact? And yeah, yeah.

Look at, look it is tough. We see a lot of companies. Some, some you can knock out because there's no clear purpose driven approach. It's just a good company. There are others. So at one extreme you got companies that are going to get great profits but actually don't have real world impact. So they're out. At the other extreme you've got companies that their business plan looks amazing in terms of potential impact but actually they're never going to make Any money. So that's not a great investment either. So you're trying to marry the two things, but it really comes down to the skill of our team and in terms of sourcing the opportunities. And then, you know, it may be a good, A good opportunity, but the price is too high, so you're not going to get the change you want because they're asking too much for the investment. But yeah, there's. We're seeing a really good flow of ideas. I mean, it's amazing. Some of the work that's been done in New Zealand and the companies here, you know, extracting metals, for example, out of geothermal steam, you know, the technology is well established for that. There's some really cool, really cool technology coming out of New Zealand. It's. It's great.

That's. Yeah. I wouldn't even know where to start making that happen.

I know.

So how, how did you get into starting a kiwisaver fund? Presumably you've got a bit of a background in finance or some, some level or some degree. Yeah. But did. And how did you and Paul come up with the idea?

Okay, so backstory. I originally started as a lawyer and then spent about a decade.

We won't hold that against you, though.

Okay, thank you. Thank you. Yeah, just pretend I never said that. We've worked in the UK for close to a decade and got into investment banking over there, returned to New Zealand and met Paul and we set up Pathfinder together.

Back in 2009, actually. So we've. We both met each other working at Deutsche bank and set up in 2009. I think our big turning point for us was 2010. We set up our first sustainably themed fund, which is the Global Water Fund. So investing in companies that.

Were providing products to help solve the world's water crisis, which could be desalination membranes or pipes and pumps or water metering technology. So around the water industry and the thinking behind that was from a financial perspective, there's got to be tailwinds behind the water industry because water scarcity is an issue and climate change and a whole bunch of stuff and sort of on the sustainability side is the, you know, we want to be part of the solution for these problems which are going to get worse for around feeding the world's population, around wet parts of the globe getting wetter and dry parts getting drier. So the water Fund to us just seemed like a, you know, a fantastic idea. And we launched in 2010, possibly a little bit before its time. The reception, you know, at the time we were distributing our products through financial advisors. And they said to us like, this is kind of a nutcase greenies. No one's going to invest in it. And they were kind of right, because even three years later, in 2013, I think we just hit $2 million in the fund, which is like not even enough to cover the cost of the fund. The returns were actually starting to get, you know, were proven to be quite good, which is why we started attracting people into. But it was pretty hard going back then, talking about climate change and talking about water challenges for the world. I think a big change came probably in about, was about 2017 when everyone found they had controversial weapons and nukes and landmines and cluster munitions in their kiwisaver. And I think that started waking people up to the idea that actually how I invest matters. It's what do I want my money invested in? How do I feel about that for my conscience? And this sort of married with our message, which is, you know, there are three easy ways for everyone to think about how they can have an impact on communities. One is how you spend your time so you can mentor young people, you can volunteer for charities, how you spend your time, how you spend your money. Like everyone gets conscious consumerism and making those choices. And the third is how you invest your money. And we'd say how you invest your money is just as important as how you spend your time and how you spend your money. And so your choice is on what you want to be invested in, what you don't want to be invested in, what corporate behavior you want to encourage or discourage is really important for helping shape the future.

So around that time as well, a big move for us was we were talking about investors need to focus on multi decade approaches rather than looking at fund managers, looking at the next one, two, three years. We need to be thinking in terms of decades ahead. And that caught the attention of Maitahu, who then gave us, entrusted us, I should say, with all of their international equities. So we managed, managed a good amount of money from Otahu and we're deeply appreciative of the trust they put on us. But they were basically saying, you're the only fund manager that's talking the same language that we want to hear of thinking intergenerationally and thinking long term. And from our perspective, if you extend the time horizon of your investment decisions, what you have to think about broadens considerably. And if you take to one extreme and say I'm a day trader or I'm a high speed hedge Fund trader, in and out of stuff in seconds or minutes or fractions of a second. You don't care about climate change. It doesn't impact your investment decisions. But you extend that out to 10, 20 years, suddenly your range of risks is wider and climate change becomes really important. There's a risk within business and a risk for how the world is shaping. So, you know, time horizon is really important to us. And I suppose the other thing that had a really, really big impact on me, which absolutely blew my mind about the same time were giving us their investment, was reading a study on the Mariana Trench and the Kermitic Trench, which are the deepest parts of the ocean. So they're two kilometers underwater. And now it should be pristine down there. You just imagine it's the purest ocean water. But they sent probes down there and they found that toxins, man made toxins, were just off the scale. And that kind of blew my mind. In terms of the peaks of the Earth are impacted by climate change, which.

Has been driven by the Industrial revolution. So mankind's footprint on that and then the depths of the ocean have really high concentrations of human pollutants. No part of the planet is safe from us. And we have to do better as investors to do what we can within the investing structure to bring change or bring positive change and not just avoid harm, but actually be positive in terms of what we're trying to achieve.

Yeah, well, and we're already polluting space. There's the space junk and we haven't even actually got to Mars or wherever people want us to get to do it. I mean, it's like we've already, we've already on our own doorstep. It's not even our doorstep yet, but we're really good sometimes in that, aren't we? Yeah, yeah, yeah. I mean, you were well ahead of the curve though, 2009, talking about, you know, doing good for people and planet because you sort of think, well, the idea of CSR, I think only came in in 2007. I think that's like when the term was first coined from a, like a literature perspective. I'm pretty sure I'm correct in saying that it's certainly. Yeah, it might even have been later than that, csr. So, yeah, I feel your pain because it feels like I've been doing the same for the last eight years. You know, it's like, hey, there's this B Corp thing. It's not just about making money. You might want to consider the impact you have on people and community and planet. Yeah, sounds Vaguely interesting, but I'm not really sure. Yeah. What that really means. So, yeah, you must be feeling pretty good about your decision makings. And, you know, you've obviously done a lot of groundwork since 2009 to put yourself in the position that you're in now, which is kind of what I'm feeling. In some ways. It's like, cool. Done a bit of mahi on this over the years. Kind of know a few things now. Whereas I imagine a lot of other investment firms, advisors, are now trying to scrabble to get up with the play and go, oh, okay, we actually do need to think about this stuff.

Yeah, yeah. And I suppose from, you know, one question I get asked a lot is just tell me that one thing I need to do to make me more ethical or make my business more responsible. What's that one? You know, how can I just flick a switch? And it's actually, you know, we've been working on this for 10 years and it kind of. I hate using the word journey, but.

It is, it is.

It is like that. It is like that. And like you're saying you've got to do the harm and no one sees you doing it and you're doing in the background and it takes you a long time, but you've got to do that because you can't just magic up a great organization or a great product. It's actually the whole thought process and ethos and the, you know, the way it's constructed and the authenticity or the extent that you want it to be genuine, you can't just make that happen. It takes time and hard work and sweat. And I suppose, you know, one other side to it as well is I differentiate between product and business. And I think it's easier for any business to create what looks like a green product to look like a sustainable product. And whether it's a manufactured product or a service or a financial product like ours, you can create.

The product features and describe it as sustainable. But what I'm really interested in is do you really believe that what you're doing with that product, if you do, you'll put it into your business as well. And putting it into your business, which is where B Corp comes into it. Right. Is. Is then challenging you to whatever principles you put in to build the sustainable product, put those into your business and make your business better as well?

Yeah, no, totally. And I think increasingly people see through the sort of the thin veneer of, we've got one little product that's less than our others. You know, Aren't we amazing? Yeah, I think people can, can see that increasingly a mile off and you, you can see, you can really sense the companies where it's embedded. And you know, you kind of like this, the old stick of rock, you know the goes in the uk, the sticks of rock and you know it's got like Brighton or Scarborough beach or whatever and every time you crack a bit of the rock off the line goes all the way through. Just like, you know, you cut, stick a rock in half. It's got the same, it's the same with like a truly perfect room. You cut it in half. It's, it's there in the middle, it's all the way through. It's not just this little thin veneer on the outside that you crack like an eggshell. Oh, hang on a minute. Oh. Which is, which is again what I found at the company that we no longer name. But I think I feel like we need to have like, instead of, you know, like when actors can't say we need to have the Scottish. Yeah, we'll call them.

Yeah. And again that long term thinking, that's, that's just something that, whether it's, you know, a westernized method of thinking, we just seem to have been captured by this idea of immediacy and even more so with social media now. You know, the thought of delayed gratification, even the thought of I have to watch my TV program tonight and then I have to wait a week for the next episode. No, no, no, no, no. Just watch all of them right now. There's not even a scary of consideration that a week, you know, I can't, I can't wait a week. Like I have to do it all now. I remember talking to Dan Fowley and Abhinav from Trinio. I don't know if you ever hang out with those guys. They had a startup company here in Christchurch, got B Corp certified and then got purchased by a Canadian B Corp. And then that Canadian B Corp got purchased by Salesforce. But having lunch with Dan and Abhinav and Melissa who was the cfo and they were talking about their interest in B Corp and Abhinav was saying his, he's of Indian origin or his family is and he said, I think it was his, one of his cousins was working for an Indian company and he was talking about how their, their smallest scale business plan is 100 years. And you know the guys sitting there as a fast growing tech company are kind of daily stand up almost hourly. You know, team huddle, check in and they're like, let's maybe we need to stop that and maybe we actually need to think about what, what does this look like in 100 years? And yeah, I just think we've, we've clearly lost that, that mindset. Whether we actually even had it, I don't know. Yeah, well, I think part of massively changes your, your lens on what's important.

Yeah, look, it totally changes. It needs a mindset change. And I think that's the challenge for capitalism at the moment.

Right.

It was back in the early 70s when Milton Freeman was saying business should not serve a social purpose, it's just there to make money for shareholders and pay dividends and it's all about short term profits. And that has been the driving philosophy in the Western world for business for 50 years. And it's failing us and we need to do better. And part of that is.

There'S a bunch of things that need to change, but one of them is have a long term lens with a broader mix of stakeholders other than just shareholders.

And have more purpose in your business rather than trying to say our purpose is generating profit.

Yeah, totally agree, which is why we're doing what we're doing.

But having said that, you know, I'm still a capitalist in the sense that businesses need to be sustainable to make profit for our kiwisaver investors. I still want to make our investors as much money as possible. I just want to do it in a way that's beneficial rather than harmful. But profit in itself is not a bad thing. It's, you know, just match it with some purpose.

Yeah, I think one of the key differentiators for me is there's profit, but then there's profiteering. And I think that's where sometimes, yeah, capitalism gets a really bad rap. I mean, what is it Churchill said? Is it. I'm pretty sure it's Churchill. Or it could be just one of those misattributed quotes where I'm going to misattribute it. But there's that quote, you know, capitalism is basically the least worst of all the other systems that we've tried. But it's because I have got a book that I'm trying to write on organizational purpose and kind of like the history of purpose. Because when you look back.

You know, the, if we were a small group huddled around, you know, the campfire, doing our things, you know, John would be the expert in, I don't know, whatever. You're expert in playing the guitar, as we said beforehand, or trying to be. John's gonna John's gonna play us out at the end.

No, I'm 6 foot 4, 100, 115 kgs. I'm probably good at lifting heavy stuff around. You know, we, we all have our contribution to the tribe. And then you kind of go, well that then got extended to, you know, if you think later on, the names that we gave ourselves were based on the contribution that we made. So you have Shoemaker or Schumacher, you have Fletcher, you have Cooper, you know, so on and so forth. And then it seemed to be that at some point we, we, we lost the connection to the actual contribution that we're making. The business suddenly becomes this vehicle where like you say you can put stocks and shares and you can buy it, you can invest in it and then I don't really care about what you are doing and how you're contributing. I just want you to maximize your financial return. And so the origins of commerce and profit are actually quite noble. And then you do a little bit of research on what the guilds and the, you know, the associations where you had to, you had to meet a minimum standard of production in your, you know, in your standards. Yeah, you know, and you weren't allowed to rampantly profite. But yes, it's only really from the bit of research I've done, it's only really in the last 50 to 70 years when people started realizing they could do leverage management buyouts and you know, we can buy the company, we can, you know, get rid of all the staff, we can run it on a oily rag for six months and then flip it for massive profit and all that kind of. It's actually relatively new, this concept of sort of profiteering. So.

Well, I do wonder if it goes back a little bit further in terms of.

You know, essentially what you're talking about is skilled artisans who, you know, are a specialist and operate their own, as their own sole practice, essentially as a blacksmith or jewel or. But once you've got corporations with separate legal personality and external investors providing capital, that kind of changed. So that might be going back a little bit further in history.

Yes.

Yeah, so, so I mean you can go back to 1600 and the.

Yeah, I was going to say, yeah, the Eastern Company.

Yeah, that, that's, you know, which had its own private army bigger than the British private army. Yeah, it's, yeah, it's an insane part of history, but yeah, you know, and, and that's.

Legal personality provided to something that is not a human. It's.

You know, sources of capital from passive investors, plus people actually working in the business, it just gets a lot more complicated.

Yeah, which. That's an interesting point which leads to. There are some. I'd be interested to get your thoughts on this. There are some people that say you should put a monetary value on everything. So, you know, what, what is the cost of having bees in, in the world? Because, you know, they're contributing to the pollination and the, the ability to make honey or what's the value of all the water, you know, in New Zealand or in, in a, in a geographic location. But there's a. Another guy, was a guy, Dr. Tim Casser, who's, I think he's a psychologist, and he's looked into the connections between, you know, money and happiness and purpose and happiness and so on and so forth. And I'm pretty sure it's him who said, you know, the risk of actually putting monetary value on. On stuff that has no real monetary value is that it then does have a monetary value. And then it becomes in a hierarchy of, okay, well, bees are more important than water, so therefore, actually water is less important. So actually, yeah, we can use all the water and get rid of it because it doesn't have as much monetary value. So do you think about the environment and people in communities in that kind of lens or does that, Is that. Yeah. Is that a concept that you've.

That's quite a complicated area. Right. Because on the one hand.

Companies that send carbon dioxide into the atmosphere or companies that put waste in a river, they're externalizing their cost, but that cost is not measured. In some ways, a financial measure is kind of a handy way of doing it. But then you've also got here in New Zealand, you know, with.

Allocating money to pharmac, allocating money to drugs, you have to put a value on a human life or an injury that's going to be sorted by a drug or a treatment. And again, that's more complicated than just a dollar value. That's someone's life and someone's quality of life. But financial lens is the easiest way of measuring it. And then you look at measurement in terms of gdp, of success or otherwise of a country is purely measured in GDP terms at the moment, which is the value of all production. But that doesn't measure time people give to charities or time people spend looking after loved ones. There's a whole bunch of stuff that's not measured in GDP and should be measured. And then the question becomes, how do you measure it? So.

The challenge is, what is a better measurement system? But, but yes, putting a Financial value on things will mean that you are directly comparing things. So, like in your case, you know, is water more important than bees? You will drive that decision through what dollar value you decide to put on it. You know, there's some interesting work that's been done by Impact Lab.

Which is Sibel English, and you know, working out where money should be spent and in the social good that it generates and putting a dollar value on that in terms of mental health outcomes or, you know, people not going into prison because they. Because a charity is helping them with their. Improve their lives. Again, it's putting dollar values on behaviors.

Which. Which is a hard thing to do, but, you know, hard to find a. Another measurement system. I'm no expert in this space, Tim, so I know.

Yeah. Just curious.

I might leave it there, mate. But it is.

Yeah, that's good. Yeah. I mean, it's. Because, you know, there's. What is it? I think there's a tribe in Africa, the Hunza tribe or the Hanza tribe, which is like a really. Well, all the anthropologists kind of go and study them because they're one of the, like the last remaining hunter gatherer tribes that haven't been completely done over by Western, you know, input. So that they're what. What we believe to be the closest to what, you know, we've historically been. And you just kind of go to them, well, you know, how. How would they put. Well, a. Would they even know what money is? No. And so how would they then even assign, well, what's more important to be. Or the water when they go? Well, actually it's not. It's all part of the. What the same system. So even the, the fact that we're trying to measure relative importance of something is. Is ma. I sometimes feel that that's almost where we go wrong. You know, it's like actually all of it is important and you can't disconnect one from the other because it is all interconnected. I don't know. Again.

And it's Friday afternoon, so I think.

We'Ve made the world a lot more complicated, you know, with the economic system that we have, the scale of population, the use of technology, like stuff is just more complicated and we're facing problems that are. That are really hard to face. You know, there's probably indigenous thinking here in New Zealand that would help us answer and have really interesting perspectives on these problems.

And I agree. And I think the combination of ancient indigenous wisdom and thinking with modern technology, that's a really powerful combination. And I think in general the modern world relies so much on the technological fix, the scientific, the rational. But we're missing the spiritual, the metaphysical, the personal, the. Yeah, all of that stuff. And I think, yeah, you put the two together, which we've never done, and you just wonder where that could take us.

Yeah, look on that as well, around technology. You know, thinking of climate change solutions. So many people I speak to believe technology will save us, but it's actually human behavior change will save us. A mind shift change will save us. Waiting for technology that doesn't exist yet to be created and scale up.

That's not the answer. Right. But for that to be the go to solution, to just say technology has solved this, we actually don't have time to wait for that. We have to change our behavior. But it does seem to be a trap that we've fallen into.

There's a guy, Gus Speth, who was an environmental lawyer. Then if you've seen his quote, paraphrasing it badly, he's like, you know, I used to think 10 years of good science would help us solve most of the environmental problems in the world. But I've basically realized actually it's not science that we need. It's. It's an elevation of consciousness and spirituality and a new way of thinking. And that's 100 how I see it as well. And it's, you know, to get, to get pretty woo for a little while. You know, good old Carl Jung, one of the first sort of psychoanalysts, he talked about how the transition from the age of Aquarius to the, sorry, the age of Pisces to the age of Aquarius is the time when humanity comes to its true potential in terms of consciousness. And we're in that transition period from Pisces to Aquarius in terms of, not astrology, but in terms of actual movements of what are the words, astral systems. And yeah, he said, you know, it's going to be this really messy period that could last up to hundreds of years where humanity becomes everything that it could be. And I just, I just think it's really interesting to reflect on that as companies like yours and mine and other B Corps are kind of in this real tension point of trying to get more people to think in a different way. And I think we'll look back when we're in our rest homes on Mars in 50 years time with Elon going, man, that was pretty cool when we managed to, we finally converted them all to think differently, like what a journey it was. But hey, we're here now.

I think There's. Without knowing much about the Age of Aquarius myself, but.

There is this huge shift in politics, in society and business from sort of old world thinking to new world thinking. And there's polarization going on and there's tension and conflict and, and it is hard and really messy at the moment. But it feels like we have an opportunity to move thinking to a better place. I just hope we do it without it being too messy and scrappy and we do it in time to solve a whole bunch of the problems that need solving.

100% agreed. 100% agreed. So, yeah, tell me a bit more about B Corp. When did B Corp come up on your radar? Because when you founded the company. 2009. Yeah. There weren't any B Corps in New Zealand. So I think 2012 was the, was Eagle Protect the first B Corp? Yeah. So how did B Corp pop up on your radar as a tool to kind of pull all of this and some of this thinking together for you?

Yeah, I met the team of sharesies when they were getting started and it was probably 2018, 2019. Brock mentioned to me about B Corp and described it and I thought that sounds pretty cool. And they were most of the way through the.

Most of the way through the, the process. And you know, we work with sharesies. Three of our funds are available on the sharesies platform. So we work quite closely with, closely with them for a number of years. And I looked into it when, when she encouraged me to and it was like, wow, this is, we want to be on this train. This is, this is pretty cool. So we, August 2020, we got certified and, and are just going through our first recertification at the moment.

Nice.

Yeah, so it was still, I think, you know, there's over 100, I think B Corps in New Zealand now. We were somewhere in the mid-30s, I think.

Yeah, I think we're just about 125, 126 last time I checked. Last week. Yeah. And yes. What was the, what was the sort of the journey like for you? Any highlights, Good, bad, indifferent otherwise?

Yeah, I suppose good bad and I suppose in terms of bad, not much bad other than the time it took to apply. It was about a 12 month process, which is not your normal certification. And the intensity of the questioning into the business, I think surprised me.

The level of detail we had to go into. But on the good side, firstly, it made us think really, really deeply about our business and it made us formalize a lot of the stuff that was in our heads or a lot of the Good behaviors we had anyway. It made us put structure around that. I think another good thing about it is you end up with this community of B Corps that you're part of. And you mention Equal Protect. I went to Christchurch, didn't know those guys. I just sent a note saying I'm coming to Christchurch, love to meet another B Corp and met those guys. And you can do that when you travel around the country. You just talk up with people and hear really cool inspirational stories from business founders or business leaders and members of their team on how they've got to, where they got to, what their thinking is. And it just helps you with your own business. Right. And so I think being part of that community is really cool. And then you want to work with other B Corps. I mentioned we work for sharesies who are a B Corp. Quite a few B Corps have chosen us. Every company in New Zealand is, can choose a preferred KiwiSaver provider for their staff. So if they have someone join who hasn't been in KiwiSaver and they can choose a preferred provider rather than going to a government appointed default provider, quite a few of the B Corps have chosen us for that, which is just a really cool sort of community that, that we're building. So, you know, the other good thing about B Corp is we've had, you know, the Best of the Best for the world awards every year.

Nice.

We've been top 5% in the customer one, I think the last two or three years. So.

Wow.

Yeah, that's cool for us. That's cool. But look, it's. B Corp is I was talking earlier about the differential between your product and your business. And for me, B Corp just really helps us focus that lens on our business.

And make sure we're doing things better in terms of thinking about stakeholders.

Yeah. Because like you say, I guess you could have, as you said, yeah, you guys could have a great product, you're investing in all these great companies, but you could be treating your stuff like, like rubbish. You could be really poor community citizens internally.

Yeah.

And all the rest of it. And I think that that's where almost some people get the wrong end of the stick about B because they think it kind of almost is about the product and the number of times we've worked with clients and we're going through the governance section the very beginning and they go, oh yeah, we kind of do that for our clients. No, no, no, no. This is. How do you do this in your office, in your company, for your team? Oh, oh, okay. Yeah, yeah. This is about you. There's going to be some questions about your product or your service. Sure. But this is you. Yeah. And I think it's kind of like the belt and braces. It's like, yeah, we've got a great product and that's possibly got some other certifications or obviously, I'm sure yours has got to have some kind of accreditation or your company is accredited in some financial.

You know, circle service, you know, you know what I mean? There's got to be some financial industry authority that you are certified by to say that you can sell your products. I imagine. Unless it's.

We have a government. We have a government regulator for a start. The fma.

Yeah. So that's kind of like, yeah. Your core product and how you're doing it. Cool. Like that's, that's table stakes. But yeah, for you it's like, well, how do we run the business? And that lens for your. For your clients as well. That's super cool. So, yeah. What does being a B Corp mean to you now as an almost second time around, B Corp?

So I think what it means.

Is you just get a sense of your business as positive and doing something good and has purpose behind it. And why that's important is that's not just for me as a founder and co owner and for Paul, my co founder, it's not just about us and what we're building. It's about how your staff feel and engage in your business. How our customers, you know, the people who entrust us with their money to invest, our KiwiSaver members, how they feel about us, you know, all the interactions we have in the industry and in the community. It gives us, and I think other people a sense of there's something more to this business than just.

Your average run of the mill making money for its shareholders.

Nice. Perfect. Yeah. And I think that's. I think that's one of the reasons why a lot of people look at it. Yeah. It's like we should want to be able to demonstrate and prove that we're in business for the right reasons. Yeah.

And internally it just helps build a really strong culture. It builds a. You know, we've got people who want to be there and who feel the mission that we're on. And B Corp is part of help, part of helping you build, build that team culture.

Nice. Yeah, I think, but I think you need to work on that. I don't think it's, you know, we always say to people.

The risk is you can use B Corp as a framework and if you just use it like a framework to answer the questions and prove the good that you're doing, that's, that's useful, that's, that's a really cool tool. But the key is to, is to bake it into the culture, to embed it, to make sure that the whole team understand and know and have insight and understanding of what the framework is about. So that on the day to day employees are empowered and engaged to know. Oh, hang on a minute. Actually, the way we're doing that based on B Corp, I actually think there's a better way to do that and I understand why that's important and I understand how that connects to my role and the purpose. So I think it's almost like a Simpsons episode. There's like layers and layers of the humor. There's like layers and layers of the. Yeah. Of impact and purpose that you can use it as like a lightning rod or a galvanizing tool to bring all of this stuff around. But yeah, the worst case scenario is it's a framework and an independent verification of good that you're doing. But there's so much more to it that you can use it for.

Yeah, totally.

And so what do you reckon? What does the future of B Corp look like? You're obviously hanging out with lots of B Corps, possibly investing in some B Corps, working with B Corps to get, then, you know, get that kiwisaver hanging out with you guys. So yes, where do you see, you know, looking 10 years into the future, what does, what does the world of B Corp look like for you?

The world of B Corp? I suppose if I'm thinking about what does the world of B Corp look like in 10 years, I'd say what does capitalism look like in 10 years? And what does capitalism need to look like in 10 years is the question we should be asking. And what it needs to look like is something a lot closer to, to B Corp. So, you know, the sense I get here in New Zealand is that there's so much momentum behind B Corp, there's so much more recognition of what it is and what it stands for. Instead of talking to people and them saying, oh, you're a B Corp and what's that?

A lot of people now have an understanding of exactly what it is. And so I think that is going to grow the community it, the place I'd like it to end up. And I know a lot of businesses and financial services are looking at it. I'd like it to end up in a place where.

Consumers expect it and Consumers want to deal with B Corps and consumers want to have their money managed by someone who's B Corp or buy from a B Corp or get services from a B Corp and so it becomes something you need.

To operate and continue succeeding. So, you know, we sort of forget in New Zealand that in the US and some European countries, the B Corp Benefit corporation is actually a legal structure and so it's embedded in law. Right. You can choose to be a normal company and just focus on fiduciary duty to shareholders, or you can be a benefit corporation and focus on a wider group of stakeholders. And I think the mere fact that it's enshrined in law in that way and people are given the options when they set their companies up, means this is going to grow over time because there is this movement towards stakeholder capitalism or doing capitalism better. And B Corp actually has the legal structure to provide for that.

Yep. And we've already seen like in the uk, they've updated the Companies act to now include, you know, directors officer. Shareholders may choose to consider the impact of their operations on people, planet, communities, what have you. And obviously to be a B Corp now in this region and in others, you have to be willing and able to update your constitution to include an amendment that says we will at all times consider the impact, which is basically the same as that benefit corporation structure in the us. So yeah, it's really interesting. Increasingly the business community is embracing the idea that, well actually why shouldn't we at a board meeting or senior leadership team meeting instead of just going, yeah, we need to sack half the staff to maintain profitability. Well, actually, what impact does that have on our staff, on our reputation as a company, on the communities in which they live in? You know, is there a better way we can do this? Which I think, yeah, all round is just going to create better, better outcomes. So.

Yep, yeah, yeah, look, better decision making. Absolutely, yeah. Less short termism.

Yeah, totally. And so I know you've got to get a bus. We've got, we've got a couple of minutes left. What's the future look like for Pathfinder? Hopefully you're going to get your reset. I'm sure you get your research guaranteed in the bag, but other than becoming a two time B Corp. Yeah, what's, what's the future hold? Anything new and exciting? Any big investments you can give us a sneak preview on or not?

Look, I might actually just talk a little bit about something else that we do in the business and in the future of that, which is we've Actually built into our business a model of giving, of donating. So you know, part of what we try and achieve as a business is not just invest ethically and give people great financial outcomes, but also ethical outcomes with the way they invest. But you know, been on the board of Men's Health Trust for a decade and seen the challenges for charities in New Zealand and it's probably a global problem, but the challenge of fundraising for.

Projects, for overheads for the charity and so much board time is spent working out the fundraising as opposed to working on the structure, actual strategy for delivery and we want to be part of that solution. So with our KiwiSaver, we give 20% of our management fees to charity and we've democratized it in the sense that everyone who joins us chooses one of our 18 charity partners and 20% of the fees they pay go to charity. So when we set our funds up, we charge the average fee in the market. So what I'm really clear about is this cost of giving comes from me and my co shareholders and that we charge the average fee, which is a fair fee to charge. We want to give 20% away. We ask our QBsaver members where it should be paid to. And the exciting thing for me is, you know, that's just ticked over a million dollars in terms of paid and accrued donations. And the exciting thing for us is we want to grow our KiwiSaver. I believe I can get to 2% of market share in New Zealand, which would be a $2 billion KiwiSaver. The giving we can do off the back of that is just massive in terms of the help we can give to charities through this long term, long term income streams. So, you know, and I suppose one of the, when I go out and talk to different businesses and I challenge businesses to think about how can you not just have a product that's doing good, but how can you embed it in your business model? And for us as a financial services business, you know, this giving model is, is a really cool way of doing it. But there's, you know, also buy one, give one, there's pay it forward models, there's koha, pay what you can afford models. But you know, in your business model can you actually embed good into your business model as well? And the, you know, one of the challenges is when you're trying to mix purpose within a, within a business, you've still got to be sustainable and profitable. So you've always got that challenge of.

You'Ve got to be a proper business and make money to be sustainable and actually achieve your outcomes. So you've got to still be commercial in how you approach things. But I challenge business leaders to think about what does good look like in terms of embedding it in the DNA and in the structure of your business in such a way that if your business doubles, the amount of good you're doing doubles as well. So it's not just a matter of saying we can give, I don't know, so much time to a charity. It's actually like, you know, your. Your solution scales with your business growth.

Yep.

And then you become a larger business. You'll be having, you know, two, three, four times the impact. Yeah.

Yep. No, that's super cool. And, yeah, I think. I mean, that's 100. The key is impact and revenue need to be and, you know, completely linked. And I guess even. Even potentially, how do you get exponential impact with growth? You know, so that. That's. Yeah, that's a whole other podcast, I'm guessing. But, yeah, it's. We've got a couple of other podcasts we need to organize, mate. Yeah, I totally agree. Like, just got to bake it in rather than it being an afterthought of, yeah, we'll just chuck some money or, you know, yeah, we'll do a volunteer day and see how it goes. Yeah. Baked, doing good in. It's. I sort of say it's almost like, you know, the analogy of putting salt and pepper in your omelette. If you. If you put the salt pepper in while the eggs, egg mix is, you know, still runny, and then you cook it, the salt pepper gets really baked into it. Whereas if you make an omelette and then put salt pepper on the top afterwards, it's pretty easy to blow it off. You know, you can wipe it off if you. If you really wanted to. So. Yeah. Or making a cake is like, put it. Putting all the ingredients in and then baking it rather than. Yeah.

And it goes back to, you know, you talked earlier about the term csr, corporate social responsibility. My challenge to businesses that are listening is, is your CSR like, part of your marketing team? Is it out to the side, or have you shifted it into the core principles of your business? And there are too many businesses and business behaviors I've seen where corporate social responsibility is clearly an extension of the marketing department. It's really just about brand building, not about solving a social or environmental issue and the challenges to reorient it into the DNA and the core of the business.

Totally agree. I might know a guy who could help you do that if. If you're a person listening who's struggling with that.

Yes, yes. Tim's a man. Yeah.

Might just be able to help you on that, mate. No, that's super cool. You've got to run and get a.

Bus, so it's really cool.

Look at that. Crushing it all around, aren't you?

Called the Mahu Express. It goes from downtown Auckland to Walkworth and they've got two electric buses. It's. It's awesome. So there we go.

Super cool. Well, maybe next time we could record the episode while you're on the bus and we could bring in, like, crowdsource some answers to some stuff.

But, John, thank you so much. I always love catching up with you. You're just an awesome guy, full of positivity. You're making big waves, you're making some big changes. I have no doubt that you'll get to 2% market share, if not more so. Yeah, keep on doing what you're doing, man. Love it.

Nice one. Thank you, Tom. It's been a pleasure.

Hey, it's Tim here, that B Corp bloke from Grow Good. If you want more content on purpose, B Corp, how to do more good in the world as an individual or a business, then you know the drill. Hit the like and subscribe. Check out some of our other videos. They're probably floating around here somewhere. You know how it works. Thank you so much. See you next time.