A Sustainable Future: Keith Guthrie, Deputy CIO, Cardano, on the Role of Short Selling in Sustainable Investing

Listen to Jason Mitchell discuss with Keith Guthrie, Deputy CIO at Cardano, about what’s at stake for hedge fund in the path to net zero.

What’s at stake for hedge funds in the path to net zero? Jason Mitchell talks to Keith Guthrie, Deputy Chief Investment Officer at Cardano, about the role of short selling in sustainable investing, how to incorporate hedge funds and derivatives into net zero strategies, and why it’s vital we distinguish economic risk materiality from real world impact.

Recording date: 27 June 2022

Keith Guthrie

Keith Guthrie is the Deputy Chief Investment Officer at Cardano and a member of its Sustainability Steering Committee and Investment Committee. Keith is also co-lead of the IIGCC Derivatives and Hedge Fund Working Group where he oversaw the Derivatives and Hedge Funds Discussion Paper. Keith’s primary focus at Cardano is on Investment Philosophy and Frameworks, and Sustainable Investing, with oversight of the Manager Research and LDI teams. Prior to joining Cardano, Keith worked at GAM managing a variety of multi-asset and hedge fund portfolios.

 

Episode Transcript

Note: This transcription was generated using a combination of speech recognition software and human transcribers and may contain errors. As a part of this process, this transcript has also been edited for clarity.

Jason Mitchell:

Welcome to the podcast, Keith Guthrie. It's great to have you here today and thank you for taking the time.

Keith Guthrie:

Thank you, Jason. It's really fantastic to be on the podcast. I've really enjoyed some of the previous episodes, so it's great to be here.

Jason Mitchell:

Oh, that's kind, that's great to hear. And, and I'm very excited about this episode. Lot of relevance in it. So Keith, there is definitely a lot to chew on. In this episode, I'd like to start with some scene setting. First, what's the role of short selling and derivatives in the context of sustainable finance, the FCA in the UK is clearly doing some work, but regulators have largely ignored it. What policy signposts influenced this IIGCC derivatives and hedge funds discussion paper.

Keith Guthrie:

So I think you're right. Jason, the regulators have largely ignored both derivatives and hedge funds and shorting as part of the thinking that goes into sustainable portfolios so far. A lot of the frameworks have been built around a traditional long only investing universe. And I think that's very natural. That's where the majority of capital and assets are. And adding in derivatives long short adds an extra degree of complexity that just hasn't been dealt with yet in these sort of sort of frameworks.

Jason Mitchell:

I wanna pause for a second, so we can lay out some terminology first. How are you defining finance emissions in this paper? How are you using the model of investor influence to distinguish between these dual objectives like economic risk reward exposure versus real economy influence and impact?

Keith Guthrie:

So maybe before I dive into the detail there, if I can just take a step back and frame the problem a little bit, because adding in longs and shorts add a considerable amount of complexity to the equation. And what we tend to find is that that adds a lot of confusion to the way people are thinking about it and to the metrics they use. And the key issue that keeps on coming up is people are unclear as to exactly why they are using a particular metric and finance commissions is the big one where a lot of people are, you know, there's a lot of debate and difference of opinion about what they should be used for. And I think if people are not clear on the purpose of a measurement, then they will not end up being clear on which measurement they should use for what context.

Keith Guthrie:

And so for us, what really was one of the key insights in the paper was that in along any world, your financial risk and your real economy impact is completely aligned. If you have a certain amount of exposure to carbon, that is both the risk in your portfolio, as well as what that portfolio actually is having in terms of influence on the real economy. Whereas when you move to this long short world and that extra dimension of complexity, you really are in a position where you can separate out financial risk reward and real impact and influence. And so it all starts with really being very clear about which question we're trying to answer. And so if we ask the question, what is your financial risk exposure in that case, what the paper recommends. And I think where there's a great degree of consensus is that a net carbon metric longs less shorts is a fantastic measure of carbon risk in a portfolio.

Keith Guthrie:

But if you're asking the question, what is the real economy impact and influence of the businesses that are in this portfolio that net metric ceases to be a really helpful metric and actually a gross metric is much more helpful. And so in the paper, we go through a variety of different thought processes as to what kind of metric would be used there. And in the end, what we've settled on for finance emissions is a suggestion that it's the total long portfolio. And there are a number of reasons for that, which I can go into in more detail. So that would be the long book of both physical assets owned as well as any derivatives, but it is different from the net metric and in particular it's used because we think that it's the most useful metric to measure the real economy impact of the underlying businesses and how they're changing over time.

Jason Mitchell:

Can you talk a little bit about where you see the lines being drawn around this, frankly, sometimes quite contentious debate the I, a GCC and S C I views align with what I'd call a traditional longing perspective, but it's one where industry lobby groups, the, for instance, the recent MFA paper published alongside the Copenhagen business school have pushed back on why is this issue so important to hedge funds what's at stake?

Keith Guthrie:

So I think that the, the different perspectives that are drawn tend to vary between this real economy and financial risk perspective. So if you look at something like the MFA paper, which I think is a very good paper, you will see that all the arguments in that paper really revolve around the idea of financial risk reward. And in that context, a net carbon metric is a very useful metric. And so there's no problem with that kind of metric being used in the context of financial reward. The issue is just don't get that confused with the portfolio's real economy impact. And here's, I think where some of the contention starts to arise and particularly for investors like IIGCC framework that is about influencing the real economy towards net zero by 2050. And what gets very contentious is if you claim that a portfolio has low or no carbon emissions purely on a net basis, that may not at all be the case on the underlying portfolio exposure to the individual companies that it's exposed to those companies may have very high carbon emissions.

Keith Guthrie:

And if you're not thinking about the portfolio risk context, but actually about a real economy context where you're saying, what are the emissions associated with the portfolio, if you're claiming that your portfolio has low carbon, that is potentially very misleading and if not greenwashing and frameworks like the, I, I G C are very keen on aligning investors with the real economy decarbonization. And hence why there is this difference in opinion between the two, and you asked the question there of, you know, what what's in it for, for the hedge funds. Why, why is it such an important piece? I think that this gets a little bit to the crux of the the commercial incentives which is that it would be fantastic for the hedge fund community if they were able to sell their programs as saying, well, you know, our portfolio has very low carbon because we are using a net metric.

Keith Guthrie:

And therefore you, as an investor, don't have to worry about the kind of emissions that we have in the portfolio. Whereas that's not at all what we're really trying to achieve. Now, I would say that many of the, the hedge funds on the I, I G C working group are really very different to that. They have a, an objective where they are really wanting to change the real economy. And I'd love to see that from more hedge funds where hedge funds actually commit to a net zero objective and where they're using their influence to maximize their influence, to decrease carbon emissions in the real economy over time. And that's really what we're trying to set up with this framework is creating a framework where we can measure those kind of emissions, and we can create the right kind of pressures and incentives for companies to actually decarbonize. But I think that there's, there is a commercial conflict there between a desire to make something easy, to sell versus a desire to have the right metric measuring the right thing and actually creating that real world change.

Jason Mitchell:

Yeah. These are two really, really important points. I actually want to kind of talk to each one in particular first the confusion point. And then secondly, the agency problem, the commercial problem that, that you talk about when it comes to confusion, the, IGCC paper specifically highlights this potential issue. Is there just a fundamental misunderstanding among investors between the notions of net zero as distinct from carbon neutrality? It's not just an innocent case of semantics, carbon neutrality points to achieving carbon reductions through, I'd say a pretty much indiscriminate use of offsets net. Zero means actually reducing carbon emissions with the use of offsets as last resort for hard to abate sectors. The pro netting in a net zero construct argument seems to fall into, I guess, what I'd call kind of a 2010 style carbon neutrality model, where shorts are treated as offsets. And, and that's how you sort of get this, this netting benefit.

Keith Guthrie:

Yes. So I, I think that there's an analogy there in that, you know, many investors were hoping that carbon offsets would offset the the emissions from their long portfolios. And we all know that that's a very dangerous route because there's no way that the total size of carbon offsets would ever be able to do that. However, carbon offsets are still a more direct form of taking carbon out of the atmosphere than shorts are. And this is where there's the very big potential for this to be very misleading. So to be a hundred percent clear, the emissions from a portfolio come from the underlying companies, and whether you are long of those individual businesses or short of those individual businesses, they continue to put carbon out into the atmosphere. And very few businesses actually take carbon from the atmosphere. And so in no way, does a short position offset a long position.

Keith Guthrie:

And I think that's a very dangerous thing, which all of the investors on the, on the I GC working group were completely in alignment with, but that, that a short in no way is taking carbon out at atmosphere in the same way as a long position is not actually putting new carbon into the atmosphere. It's the underlying companies that you're attempting to measure that are really having impact. And if I may just draw the reasoning through as to why the net measure is really not helpful. If I constructed a portfolio where I had a long, a long book, which is exposed to carbon EMS, that we say just for the sake of argument, putting out a hundred tons of CO2 equivalent into the atmosphere and a short book of a hundred tons of CO2 into the atmosphere, then we would say that the net metric, the net carbon exposure, that portfolio would be zero.

Keith Guthrie:

And that would be a very useful thing in a risk management context. It would say you've got no sensitivity to carbon prices going up or down, but what it would be completely unhelpful with would actually be targeting a change in that metric over time, because the portfolio is already at net zero carbon in a risk sense, but in a real world sense, it's perfectly possible for both the carbon output on the long side of the book and the short side of the book to increase over time, and the net metric would remain zero. And this is the key argument for why this net metric is useful from a risk context, but completely useless from a, from a real economy context, because it doesn't measure over time changes in the real economy that could actually used to target a reduction in carbon over time.

Jason Mitchell:

I want to go to that second point, because again, can you pull back the curtains a little bit more on the working group that you co-led? I mean, what was the spectrum of views and how did that lead to the recommendations in the paper, especially the implication that I've found quite interesting that netting short positions in a net zero context could even represent greenwashing.

Keith Guthrie:

And I think the area where there was the most lack of consensus was this issue of in a real economy context, what should the correct metric be? And there were really a variety of potential views. So on the one hand you could start by saying, well, the only assets of which I have any direct influence are the ones who I own physically where I can actually vote. And therefore what I should just have is the long directly owned positions as part of my portfolio emissions. And then the question sort of came up as well. If a portfolio manager wanted to disguise their exposures to carbon EMS, what they could then just do is instead of owning the carbon miners in a long form in physical form, they could just own them in derivative form and say, well, okay, you know, my portfolio has very low carbon emissions, but I that's only because I'm just own all of my, my long em EMS through, through derivative and, and none of them through physical form.

Keith Guthrie:

And so that immediately creates the potential for the framework to be exploited, to make portfolios look more attractive at the other extreme, you could say, well, all of the underlying derivatives, whether we've got exposure to them through derivatives or through physical are all putting emissions into, into the atmosphere. And what we should really use is a gross metric where we add up all of the longs and all of the shorts and their total emissions, or what is the appropriate emissions for the whole portfolio. And that, that is a, in reality, a good measure of the, the total emissions associated with the underlying businesses. But of course it has a few challenges as well in particular that when it comes to setting targets on the short side of things, we don't particularly want to create a, a framework which incentivizes not shorting highs. And so when it came to actually setting the targets, the reason that we ended up using the, the long only measure, which was direct longs plus indirect longs through through futures was because it made sense for us to be setting targets around that over time to be decarbonizing a portfolio. Whereas on the short side, it made lot, lot less sense to, to be, be shorting them.

Jason Mitchell:

I wanna jump into this, this point that the IGCC paper emphasizes this distinction between financial materiality and double materiality, or in other words, risk materiality and net zero materiality. To what degree in your opinion, is this a fundamental divide in the whole netting debate, double materialities in EU and to some degree, an increasingly important UK consideration, but it's not one that's recognized or even appreciated in the us where financial materialities much more rooted in, in a whole history of securities law in a past podcast episode with former S sec commissioner Allison Herrin Lee on this podcast. She of course is one of the biggest ESG, or she was one of the biggest ESG advocates on the S sec, in fact, establishing the ESG enforcement task force. But even she in the interview I did with her was incredibly skeptical of double materiality. She called it sort of a false dilemma, false dichotomy.

Keith Guthrie:

Yes, I, I do agree with you. I, I think that the whole concept of double materiality is still in its infancy, even in the EU and the UK, which are maybe further along that, that journey path. And so it's definitely the case that the vast majority of investors globally have not set themselves dual objectives. They mostly set themselves a financial risk return objective. So most investors have set themselves a financial objective and setting a real economy. Objective is a new concept. Now there are definitely ways in which the two reinforce each other. So I do believe that if your economy is driven by more sustainable businesses, more sustainable businesses will over time below risk and have better financial returns. And that's sort of a key concept in the, in the whole sort of sustainability drive and in for example, that model of influences that we were talking about.

Keith Guthrie:

There are times where financial materiality and double materiality are the same thing they're reinforcing. And so if I believe that a business is gonna become more sustainable over time, I think it's gonna be lower risk, have probably a better cost of financing and be a better financial risk reward than a less sustainable business. And in that sense, that real economy improvement in the business is actually affecting the risk reward, but there are also times where these two are intention. And so to just give examples on both sides of that spectrum, you can have poor financial risk reward with fantastic impact and sort of philanthropy would be your typical example of that, but you can also have the opposite where the financial risk award might look fantastic, but it really comes at the cost of real economy burden. And so I think investors who are hoping that they can always just distinguish between these two are actually that they'll always lead to the same outcome are fooling themselves to a certain degree.

Keith Guthrie:

And I do believe that over time it'll become more and more accepted that it's okay to have two objectives, which are not always going to be aligned. And that it's up to us as investors to make decisions between those. We're very used to making decisions between one financial risk and another financial risk and constructing a portfolio that has both high risk return and low risk return sort of opportunities in that portfolio. And we're gonna have to get used to doing that in a double materiality world. And this is where in hedge fund world, it really becomes important is when you introduce the idea of shorting or going long through the relatives for the first time, you are able to actually separate your financial risk reward from your underlying economic influence in a very material way. And so it becomes almost more important in a long short context, in a hedge fund context to be recognizing that you can actually create two different sets of objectives and maximize your real economy impact and influence separate from your financial risk reward. And those two can actually be really mutually helpful to one another, because you can, for example, be running a low risk portfolio from a carbon output perspective, but at the same time, create a portfolio that has very high influence and impact. And that's really the opportunity if we get this framework right, for these sort of strategies.

Jason Mitchell:

I, I often hear about the risk of double counting emissions is the rationale for maintaining the what I've heard called the ownership principle. In essence, it results in double counting of emissions across the economy. This true upward balance seems to be at the heart of the debate yet again, as MSCI noted, regulators, don't stipulate that emissions of a given company held across different portfolios even require summing to the total company level emissions, should the carbon emissions for net zero purposes of all market participants add up, should they even balance out? It would seem like they should balance out in the carbon neutral model, but net zero inherently is an exercise in reduction in reducing carbon emissions.

Keith Guthrie:

Yeah, so, so I agree with you that then we are never gonna get to a situation where every business has decarbonized completely. And so even at 2050, I suspect we will have real carbon offsets where, where there are businesses that are taking carbon outta the atmosphere, as well as some that continue to put carbon into the atmosphere. And even in that context, that gross metric will still be a useful metric in terms of understanding where your carbon emissions are coming from in your portfolio. So, so yes, the author is you don't have to have everything going to, to zero to in order to achieve our real economy objective, which is that in the real world, we're having no emissions going, going into the atmosphere on a net basis.

Jason Mitchell:

There's this belief, there's this argument by the pro netting community, that by using a gross metric, when allocating means that hedge funds are disadvantaged during that allocation process, what are your views?

Keith Guthrie:

So this is one of the things that I really disagree with most strongly in my experience, most hedge fund investors are sophisticated investors, and they have every capability of distinguishing between when a gross metric should be used or when a net metric should be used. The idea that the net metric disadvantage advantages hedge funds is really coming from the, the view that's well, we will get more allocations if we say that our carbon footprint is lower, which is clearly a misleading statement, and goes back to the whole concerns we have about using shorting as potentially greenwashing and sophisticated allocators to hedge funds can really make the distinction between saying, well, I've got a gross metric and understand that this hedge fund has exposure to these underlying businesses. So the key issue here is that it is not acceptable to say well, just because I want to make it easier for hedge funds to get into portfolios. I should use a metric that is itself, not a helpful metric in actually measuring the real economy problem. And that's the biggest issue that I have with this net metric. It doesn't measure the real economy emissions of the underlying portfolio assets that the portfolio is exposed to and how those are decarbonizing over time. And I think sophisticated allocators can very easily deal with the gross metric without saying, oh, that's gonna disadvantage allocating to hedge funds.

Jason Mitchell:

Let's go into that model influence specifically around the cost of capital. On one hand, the recent S C I paper came out sort of stating they didn't find much support for the cost of capital argument. On the other hand, there is some academic evidence that short selling impacts prices and adds to informational efficiency. My own view agrees on this, whether you're selling or shorting a share, you're applying some conceptual pressure on the cost of capital. Obviously there's a time varying aspect to short selling in terms of ultimately covering the short, but talk about how the paper deals with this in the context of the theory of change it proposes what's the rationale for a hierarchy of influence and why is it so important to tier investment tools according to their net zero impact?

Keith Guthrie:

Right? So you've got quite a few different components there of, of, of, of the thinking. So I'll just try and tackle them maybe starting off with the overall model and then diving into the cost of capital piece. So if we start off with the, with the overall model, what we've suggested is that there are investors can think of the mechanisms by which they create a real economy influence, and they can think of it in, in terms of three tiers of influence. The first tier is what we describe as very high impact and direct influence. And so this would be for example, providing new capital to a business, either through debt or through equity, or particularly through collaborative engagement with other investors on a particular issue. We think that those are highly impactful, direct ways of influencing businesses. The second year is what we would expect of all asset managers.

Keith Guthrie:

And that would be good stewardship. So where they have the ability to vote on shares, voting on those shares, engaging with management around ESG issues, really something that is becoming standard in industry in terms of stewardship code in the UK, which I think is really a leading framework for thinking about stewardship. And then the third tier, which is a positive influence tier, is this idea that investors can impact the outcomes for companies by influencing their cost of capital through their buying and selling activities. And so the basic thought process here is one where if investors are on average buying shares, you're pushing up the prices, pushing down the cost of capital for the businesses in which you're buying. And if you're shorting or selling shares, you're pushing down the prices of those securities and increasing the cost of capital for those businesses. And so if that is done consistently over time, if the buying is directed towards more sustainable businesses, they will have a lower cost of capital over time and be more competitive.

Keith Guthrie:

Versus if you are consistently selling or shorting less sustainable businesses, they will have a higher cost of capital and be competitive over time. And that also, if the mechanism by which management understand what is attracting capital, what is attract attracting investors into their shares is understood what the criteria are that investors are using. They will management might then adapt their behavior. So it's sort of got management signaling kind of approach, but it's a very indirect form of influence. And I think this is also why it then becomes quite difficult to find evidence for this in the academic literature. And the first reason is just that I think that these influences are most impactful when many investors are pushing in the same direction. And the reality is that things like ESG investing until recently have been a relatively small portion of the entire market. And so their ability to create this sort of cost of capital influence, I think has been relatively limited as it becomes more mainstream.

Keith Guthrie:

When we see more and more investors adopting an ESG approach, I think you may well stop to see the, the, the academic evidence behind this sort of it mechanism influence, strengthen. And so we want investors to really be thinking about having influence in all three of these tiers. We, we don't want people to just say, well, I can only, I'm only gonna focus on the cost of capital piece. And that really is why we ended up suggesting a number of different tiers to really encourage investors to say, look, am I doing everything I could be? Have I thought about whether or not I can do some more collaborative engagement, which might, you know, have more influence on these businesses? Am I doing everything I can in terms of stewardship and is my cost of capital influence aligned with the real economy objectives I'm seeing. And I'm trying to create my portfolio.

Jason Mitchell:

I wanna touch on this point around engagement engagement is often held out as this silver bullet. You know, this bridge of influence between ESG and short selling purposes of this paper and this discussion, practically speaking, where's the evidence that this is actually happening. Most hedge funds that actively engage, just look at the news, whether it's engine number one for Exxon or, or Chris Hahn express their activism through their long positions, not necessarily short positions, at least that I've seen more over a culture of transparency for short positions doesn't really exist anyways. And indeed funds have been specifically targeted think Melvin capital and game stop in the past for their short interest being public.

Keith Guthrie:

Yes, I agree wholeheartedly with this. And there are real challenges here in shorting. Most, most hedge funds who operate are not open and transparent about what companies they are short that is typically because they don't want to lose access to management. When they're speaking to management, they don't want it to be known that they're short of something because they could face a short squeeze. And so I think it's disingenuous to, to, to sort of say, well, shorts really have an ability to influence a lot if we are not really being public about them. Now, there are obviously exceptions. There are, you know, occasional short sellers who really go very public on the companies. They are short and create a sort of public campaign about, but those are very few and far between. So I think the engagement, it seems like most of the examples we see are more effective on the long side and are more, certainly more, more common.

Keith Guthrie:

And the ability to sort of collaboratively engage on the long side is also also there. I think that there is the possibility on the short side, that there is still a messaging getting back to management teams. And so I'm sure that most management teams are very curious about who might be short based stocks and why they are short burst stocks and sort of what the thesis and rationale is of a short seller on a particular business. And that may well have an influence on management who might do something to say, well, okay, you know, everyone's going short with my company because I've got high carbon emissions, maybe that will create some pressure on the management to say, well, we should reduce carbon emissions and, and therefore that will help our stock price and maybe our share options. So I can see an argument for that. And it, it probably the mechanism there would probably go through the, the investment banks, probably the, you know, the bankers to the company might say, well, here's what we've been able to glean from the market as to why people are short your stock. But I agree with you that for the most part, it seems like a very indirect mechanism. And so I don't really buy the, in some cases, the very strong argument that shorting is made out to be even more powerful than long positions in most cases.

Jason Mitchell:

Yeah. I've got a bit of skepticism as well. I mean, on one hand, I've tried to defend it in the sense that short sellers are again, incremental buyers. So they tend to be incredibly efficient in terms of information. And if the story is improving, then they could certainly go long and again, impact the cost of capital. But I think if you ask your average short seller, I think they're sort of incentivized to see the company and its kind of situation deteriorate, not improve,

Keith Guthrie:

Which of course is, is what the cost of capital model is, is saying to you that you want, you sort of want that pressure to be ed on the share price.

Jason Mitchell:

What areas still need to be worked out in this debate. How do you think about leverage, for instance, how should leverage be treated in terms of real world impact, should a ed fund report gross levered emissions, or does it make sense to normalize to a hundred percent there are a lot of technical kind of questions that still clearly remained.

Keith Guthrie:

Yeah, so, so I think that the, these are the sort of technical questions that any good investors should be able to work through and figure out how to do, you know, on, on the issue of your gross submissions. I think there are, are different ways of, of dealing with that when you're using leverage, you could either compare your leverage position sort of, you know, user denominator of your gross exposures or gross long exposures, and say, I'm gonna compare that to an index or you can gross up an index and, and say, well, okay, I'm gonna compare my long book to the S and P levered two times because I'm on average two times delivered. And so I think that investors can legitimately use different approaches and, and come up with approaches to do it. I think that there are some areas where the aggregation of the metrics do become problematic and investors need to think through a little bit how they're gonna tackle them.

Keith Guthrie:

So in particular, when I think about allocators, who are allocating across a wide variety, so for example, an endowment or a pension fund, they typically have, you know, a wide variety of long only, and maybe some long short exposure in their portfolio. And if you say, well, okay, I'm gonna aggregate up all of the long, only including the realtor's exposure of the underlying managers across all of those positions. They could face a problem, particularly if they have set themselves a decarbonization target that is set in very absolute terms. So a decarbonization target relative to the market, they could easily say, well, okay, relative to the S and P with the same exposure I can now say, well, I've, you know, I've my, my decarbonization is progressing as I wanted to, and they're allowed for the, the size of their gross book, but the challenge would become more if they set themselves an absolute target.

Keith Guthrie:

And there, I think that it's valid to be thinking about something like netting. So I think I would probably make the exception in thinking about aggregating across multiple managers to allow for netting, if you've, if you're really focused on that one thing, which is what is my decarbonization of my total portfolio, but I think the key there is always being clear that you should never mix that up with an idea that you somehow don't have exposure to more than that in the real economy or that your portfolio is having less of a real economy impact than, than, than it actually is.

Jason Mitchell:

For my own conversations I know that this debate has helped inform regulators about the role of short selling over the last six to 12 months. Where, and how do you see it continuing or even concluding? It seems like the best way to resolve this is through a respected carbon accounting initiative in the financial sector to give guidance and basically the partnership for carbon accounting financials or PAF.

Keith Guthrie:

Yeah, I would agree that it would be really helpful for them to come out with some guidance. I think that the, the current measure of finance emissions is, you know, largely adopted from their work. And it would be really helpful for them to be coming out with some guidance on this. I think that in order to do that, they need to be very clear on what the metric is being used for. And is it being used for a financial risk perspective or is it being used for a real economy, decarbonization perspective? And I think that the moment that they introduce the idea of allowing for the shorts or, or Ford drill to the long positions, they're gonna really need to tackle that question. And it may be that they should really come out and recommend very clearly that there are two metrics that there is a net metric, which should be used for financial risk. And there is a gross metric which should be used for real economy measurement. And I think that would be the simplest and, and clearest way for making this debate clear. Because right now, I, I think the whole term finance emissions people use it all over the show in very different contexts and are not clear about what their reason for using it is. And so that, that will really help a lot with that debate if we can get them to come out and clarify that. Yeah,

Jason Mitchell:

It's very true. Very true. So it's been fascinating to discuss what the role of short selling is in the context of sustainable investing, how to incorporate hedge funds and derivatives into net zero strategies and why it's vital. We distinguish between economic risk materiality and real economic impact. So I'd like to thank you for your time and insights. I'm Jason Mitchell, head of responsible investment research at man group here today with Keith Guthrie, deputy chief investment officer of Cardo and co-lead of the I GCC derivatives and hedge fund working group many, thanks for joining us on a sustainable future. And I hope you'll join us on our next podcast episode. Thank you so much, Keith. Jason, thank you so much. It's been a pleasure.

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