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Welcome to Trader Talk where we dish out the latest Wall Street buzz to keep your portfolio sizzling. I’m Kenny Polcari and I’m coming to you live from the Yahoo Finance headquarters here in the heart of New York City, a global hub where deals are made, fortunes are built, and the next market move is always just around the corner. Coming up, I’m gonna share my thoughts on ESG investing. I’m gonna chat with my friend Dan Labovitz, and I’m gonna share my feetta shrimp recipe. Now, let’s jump into my big take.ESG has become one of the most misunderstood ideas in modern investing. To some, it’s a political agenda. To others, it’s marketing fluff. But strip away the noise, and here’s the reality. ESG is not about virtue signaling. It’s about risk management. And markets have always cared about risk management, whether they call it ESG or not. Environmental, social, and governance factors are simply a structured way of asking hard questions that investors used to ignore.Does this company face regulatory risk because of pollution or carbon exposure? Does it depend on fragile labor practices or an unstable supply chain? Is management aligned with shareholders or are incentives broken?These aren’t moral questions, they’re financial ones. Now look at history. Companies that ignored safety standards, governance controls, or social backlash, didn’t just suffer reputational damage, they lost billions in market value. ESG failures show up as lawsuits, fines, executive scandals, customer boycotts, and higher capital costs. The market eventually prices all that in. ESG just forces investors to look earlier instead of later.That doesn’t mean every ESG labeled investment is good, or that return should be sacrificed. It means smart investors use ESG as a lens, not a mandate.You don’t buy a stock because it has a good ESG score. You avoid or discount the stock when poor ESG signals point to hidden landmines. Governance alone can make or break a company. Ask anyone who lived through Enron, Wells Fargo, or FTX. For investors, the takeaway is simple. ESG isn’t about being woke or anti.By capitalists. It’s about understanding long-term sustainability in a world where regulation, transparency, and accountability are rising. Capital flows to companies that can operate, adapt and grow without blowing themselves up. The bottom line, ESG is not a feel-good strategy. It’s a forward-looking risk screen. If you ignore it, you’re not principled, you’re being blind. Markets don’t reward ignorance, they punish it.Now, my next guest is a friend of mine from the New York Stock Exchange, Dan Labovitz, co-founder and CEO of the Green Impact Exchange, the first registered national securities exchange built specifically for the green economy. Dan’s a market structure guy through and through. He spent a decade at New York Stock Exchange regulation right.All the trading rules and serving as an exchange prosecutor, focused on keeping markets fair, orderly, and transparent. Now he’s bringing that same discipline to sustainable finance, aiming to turn a trust me marketplace into one that can be verified and priced like any other asset class. Ladies and gentlemen, please join me in welcoming Dan.To the show. Dan, it’s always a pleasure. Thank you for coming. It’s been a while since we’ve seen each other. It is,
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but you didn’tmention that, by the way, I used to be your regulator.
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Yes, so you know, do we have to go there? Not that I did anything wrong, but yes, you were the regulator. All right, listen, I think I wanna start with one simple, simple idea. Explain to the audience when we talk about carbon.Credits, carbon, carbon, carbon. Define what that means. So a
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carbon credit is an accounting method. It’s basically saying, I took an action that resulted in a ton of carbon being removed from the atmosphere,
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which is good, which is good. Yeah,
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we’re we’re,we’re reducing or we’re avoiding putting carbon out. I get a credit. It, it’s, it’s a recognized thing that then I can turn around and I can sell it tosomebody.
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Who gives you the credit.
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The credits are issued by.registries called, uh, they’re they’re non-governmental organizations that maintain these registries of carbon credits. You get an accounting firm that will accredit it and make sure that it’s valid. And then they issue and it lives onthat
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registry. Is it a US thing only or is it?
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It’s
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global.
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There’s, there’s different kinds of carbon credits and carbon markets. There’s the voluntary carbon market, which is, you and I are going to do this because it’s good for our bottom line, but nobody’s telling us we have to do it.And then there’s the compliance market, which is the European Union or the state of California. Others say, power plants and other big emitters have to reduce their emissions, or else they have to pay a fine.
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And that’s global, right? So countries around the world are embracing this carbon credit.
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Morecountries outside the US obviously thanthan
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inside the US, perfect. OK, so now, let’s move past the kind of the ESG label and let’s talk about.about how you strip out politics and make sustainable finance really about risk and returns and data.
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Well, I think you said it in your opening, sustainable finance is about identifying risks and mitigating those risks, or identifying opportunities and taking advantage of those opportunities. It’s not about, I’m a good person, I’m a good company. It’s that climate risk is a threat to business. It’s a business risk.That’s really, that’s,
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that’s the essence of it. And, and, and that’s the essence of it. You’re right. And so it is a risk. And though I wonder though, two years ago maybe people were more concerned about it. Are you seeing that that’s fading, or is it still top of mind for a lot of companies?
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So there’s, there’s this myth that somehow sustainability is passe.And nobody cares about it anymore. But that’s actually not true. What you see in survey after survey after survey is that particularly younger generations of investors and employees and customers are saying, I want to patronize businesses and companies that are doing things in a way that is sustainable.Right? So, from a customer perspective or an employee recruitment perspective, companies say, I need to invest in this because it’s good for my business. And investors are the same way. They see it as, is this creating value in the long term? 2 years ago,It was values, you know, we’re, we’re a good company. You, you, you wanna buy for us because you’ll feel good. That’s, that, it’s
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moved
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away from
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that. All right, so then let’s define this other thing just so the audience understands. The Green Impact Exchange was created. You founded it. You, along with Charlie and the other guys founded it.To do what exactly and who are you looking to list there.
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So theGreen Impact Exchange was founded on the idea that investors need more and better information about the companies that they’re investing in, so they can identify where are the value plays. And, andLook, the fact is that companies have conditioned investors not to believe them when it comes to sustainability. They say one thing, a guy flies to Davos, and he says, we’re gonna be carbon neutral by 2050. But guess what? That’s 3 CEOs from now. And he’s gonna be sitting on a beach drinking a mai tai. And, and when that check comes due, you know, he’s not gonna be the guy sitting there. So, what we said was,You talked about governance in your opening. It’s really all about identifying the companies that have good governance so that sustainability is threaded through everything they do. So that they see around corners, they see opportunities, they see risks. So that’s what, that’s where we started. And that’s what we’re trying to, to bring out in companies. OK,
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so, so just tell the audience also, where is Green Impact Exchange right now? Does it exist? Does it, is it
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trading? It’s nottrading yet. We were approved by the SEC as the, I think it’s the 18th registered National Securities Exchange. Congratulations. Thank you.Um, and we’re planning to launch trading next summer, um, which means we will be up and running. We’ll be just like New York and NASDAQ and all the other exchanges, we will trade the full list.Um, and we’ll start to duly list companies.
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So, OK, that was my next question so that people understand. So you, so duly list, meaning companies that are listed on the New York or listed on NASDAQ can then duly list on the Green Impact Exchange, and they’re gonna be, uh, I’m assuming they’re gonna only be able to list there if they meet a number of criteria that you have set up. Correct.
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So, duly listing just means that the company leaves its listing at New York Stock Exchange or NASDAQ, and then they take a secondary listing with us.Right, so it’s just a it’s, it’s a label.
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Yeah, we’re understood. Well, let me ask you one more question because I’m, I’m, I’m really fascinated about this. Are you gonna be asking different questions to list there than the New York Stock Exchange or NASDAQ ask these companies?
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There’sa set, set of basic criteria every company has to meet. New York, NASDAQ, us, doesn’t matter. And then we will have what’s called the, the alpha listing tier, which is companies that are engaged in corporate governance around sustainability. We will ask them to show us their commitment to sustainability and governance.Level show us their management strategy. Show us the data.
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So if they don’t meet that questionnaire, then they, they’re not eligible to list on your exchange.
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They’ll lose their alpha listings tier. They, it’s for, for SEC and fair access reasons, we have to let them list at a basic tier, but they won’t get the, the green marker.
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Ah, so if I were an investor, and I came, I wanted to buy, I don’t throw a name up. Well, let’s just say X, Y, Z. I, I want to buy X, Y, Z.And if it’s listed as an alpha tier stock on the Green Impact exchange, that’s gonna tell me that
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that’s gonna tell you that their board has made a commitment to sustainability as a long-term shareholder value proposition. The board is committed to robust oversight. It’s not just, you know, Kenny’s our board, our green guy, and once a year we hear from him at the annual meeting. It’s, there’s a regular cadence of oversight.And then it’s management saying, here’s how we’re gonna get there, and here’s the interim goals you should measure us on. OK,
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so if, if Company ABC is not, doesn’t have that little green X next to it, they’re just a standard listing that tells you that they’re not as committed.
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That’sthat it tells you that they have not made the commitment to actually doing the governance work, OK.
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That’s gonna be interesting. I’m, I’m, I’m, I’m gonna be fascinated to see how big listed market cap companies respond or react to this.
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So what’s really interesting is that I would say probably 80% of companies are doing something when it comes to sustainability. And, and I just, I just want to make sure your, your viewers understand. GIX is really about environmental sustainability. The, the S and the G are very important, and they’re part of, of the whole ESG movement. Um, but we’re really laser focused on the environmental piece, becauseFrankly, if you try to talk about E and S and G in one sentence,
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it gets lost, right. OK, so the, so the environmental part is where the carbon credits come in. OK, so, so, so let me ask you a question. Then let’s talk about what you’re looking for in a company that, what do they need to be doing with their carbon credits.
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So that the carbon credit product, what we’re looking for is to take the carbon markets, which are functionally not working, right? It’s, it’s an over the counter market. It’s more like a, a, an e-commerce model.You know, you have a, you, you do a project, you develop carbon credits. You now put them on a website and I can say, click on Kenny’s credits and put them in my basket and buy them. And there’s no price discovery. There’s no liquidity, there’s no market making, none of the things that you and I would recognize as marketstructure.
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And the reason you want to buy my credits is because it helps you,
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right? So I’m, I’m doing, let’s say like I’m Delta Airlines, right? I’m, I’m flying planes and as much as I am a sustainable company, planes take carbon to, to fly, right? So Delta will reduce as much as it can.And then on top of that we’ll buy offsets from somebody who is removing carbon from the atmosphere so that they can be carbon neutral.
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They can be carbon neutral. Right, hold that thought one minute because we’re gonna take a break, come right back.Now we’re back at this whole carbon neutral thing. So I, that was a very fascinating conversation. I’m interested to see now as we move forward, how these listed companies, because I, I suppose what you’re gonna do is you’re gonna reach out to all the listed companies that trade, NASDAQ in, in New York, and present them with the green Impact exchange. Here are the qualifications, see who wants to, see who wants to be part of that movement.Am I right?
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Who wants, who wants to be valuedthat way? Who wants to
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be valued that way?
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I say with the word movement becausemovement suggests,
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yeah, OK, yeah, you’re right. Who wants to be valued that way? No, you’re right, uh, but I would, I would suspect that companies that big market cap companies that come to list here and get the green check mark, that has to be a positive for them in terms of investor perception,
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not onlyinvestor.Perception, but actual results. I’m gonna, I’m gonna throw some stats at you. Yeah. So, so every dollar that is invested in sustainability returns $21 in value. OK. That’s CDP, the carbon Development Project, right? Um, CBRE, the real estate folks say that that it increases firm value by 36%. Like, who wouldn’t want that? It increases profitability by 21%. It increases shareholder returns by 6%.Uh, B2B and B2C sales up 20%. Employee engagement up 57%. Those are things that you want as a company.
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They’re real things. They’re real value. And I would imagine as an investor, if you’re looking at it and you see that that company is doing that, that only endears you more. If you like the story to begin with, that would only endear you more to the company,
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and especially if you are in aIn Gen Z or millennial generation like Morgan Stanley did a survey. 99% of Gen Z and 97% of millennials said they look at sustainability as a factor in their investment?
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And I, and, and, and we know that we hear it all the time, right? And look, and I suppose I don’t know what’s after Gen Z, the alpha generation, and I’m sure they’re gonna look at it the same way, right, because that’s kind of gonna be the way that they’re.Educated about it. And it’s all good. I’m not saying there’s anything negative. I think it’s great. So let’s talk about why market structure matters, right? the green economy, uh, it’s massive already, the green economy, but what breaks, um, uh, when trading infrastructure lags the growth. So, so talk about that.
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Well, for one thing, the, the politics of it is you’re seeing a lot of backlash against ESG, which means thatInstitutional investors are being told, you’re not allowed to think about these things, or we’re going to come after you, think about these things. Well, that’s not good for value, right? The second
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thing is that more social than it is about environmental.
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It, it is mostly. Um, and that’s the problem with ESG. If you don’t like one thing on the social side, you can use it to bash everything. So, but, but on the market structure side, like particularly carbon credits, just go back to that.Environmentalists are great people and they do important things, but they’re not market structure people. And you wouldn’t trust me to design a carbon credit. I, I can design a market that that trades like, you know, carbon credits are more like a commodity. They should behave like a commodity, right? They, they, you need market makers, and you need institutional investors, you need speculators, you need all the people who are in the market to be there, but they’re not, because it’s very, very hard to buy a carbon credit right now. So what we’re doing isTaking those carbon credits and making an equity wrapper, putting that around it, trading like an exchange traded product. So it’s an ETP that holds a carbon credit. Now you can buy it as an institutional investor, somebody else can buy it as a speculator, retail investors can buy it, etc.
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Would that be proprietary toYour exchange, it would be able to buy that on the New York as well.
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It would be a listed product, so it’s a listed EP product, so you can trade it on New York or NASA. But,
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but it would, you would be the primary market, the same way the New York Stock Exchange is the primary market for all those other companies, right? All the,
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all the ETPs and ETFs that are listed on ARCA can trade everywhere, but they’re ARCA listed,
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right, right, right. OK, so let’s solve the trust problem, right? How does theChange level kind of verification change how investors price green companies? I mean, does it make it, do, do they have to price them differently as a result? Well,
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for one thing, having a listing, you’re having a green marker next to your stock ticker matters because it, it’s a quick signal to investors. Is that
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like having the blue check on my Twitter account?
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It is, except it’s harder, except it’s harder to get.
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OK, fair enough.
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Um, if you wanna pay me $8 I’ll take it.Um, but, but, so that’s one thing. And the second thing is that there is a regulator who’s looking over this, who’s, who’s back checking this. Um, and then the third thing is that I’ll tell you, as a new CEO of a company, when I have to sign my name on something that has regulatory implications, I pay more attention. So that we think that helps.
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Well, I would imagine it helps. Yeah, I would imagine it helps too. And I would imagine that that once investors kind of understanding, get used to it, it’ll, it’ll, it’ll.It’ll change your perception, maybe, right, which is really what you want to do.
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And when yousee that these companies are the ones that are excelling in funds and in and in your investment portfolio, that also has,
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and that you, it also in fact then may cause other companies to, to start paying attention, right, if that happens, um, it might cause other companies thatMaybe I haven’t been paying that much attention. Suddenly stopped paying attention,
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right? I think when companies understand that there’s a value proposition at play, that you can improve all those stats I gave you before, when you’re looking at how do I juice growth, how do I improve my engagement with employees, how do I retain customers, all that, that starts to matter. People start paying attention.
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Doyou think that’ll become part of an earnings call? Can they, can they somehow define that?
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Well, I think they can define the, uh, the value connection. I think one of the problems with ESG was that you didn’t make the connection between we’re doing this thing, and here’s why it matters to shareholders. And I think that there are metrics out there, particularly on the environmental side. We reduced our carbon by 1% we reduced our risk by 10% that has a follow-on cost and value. And they they
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should be connected connected.I think that, I, I think that would be great if they were able to do it and actually show investors what their efforts have yielded,
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right? Yeah,well, all get all the stats, like I, I can show you my, my sales went up by 10% because I was able to tap into the sustainable market. Those are metrics you can measure, and we should be measuring,
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and we should be measuring, and they should be, they should be public. People should know that, right? Right. OK, great. So what does safe trust do?To make carbon credits tradable and then
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transparent. So for your viewers, a safe trust is, it’s a simple asset financialization ETP. It’s a brilliant name that I came up with one night.
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Oh, you came up with that name. Is,
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simple asset financialization ETP. So you’re taking something that’s not a security, carbon credit. It’s carbon credit is a thing, right? And you’re putting it into a wrapper, a securities wrapper, and you’re issuing shares and you trade the shares.And then a shareholder can take that share and redeem it and get the underlying assets. Do you remember the old gold trust, you could get a bar of gold, you take your shares. It’s the same kind of thing. You can take your share, you can give it back to the trustee, and they’ll give you the carbon credit. So if you’re a company that needs to offset your emissions, you buy it and hold it in your brokerage account. It’s a simple transaction. There’s a mark to market. There’s all the things that market structure adds, and you still get the carbon credit.
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So, let me say, I, I just, I’m curious. How do you price something like that?
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So,That’s the other problem with the carbon markets. Right now, carbon markets are based on a whole bunch of financial and non-financial aspects. So what we’re doing is we’re focusing on the really the two things that matter to the environment. A molecule of carbon was taken out of the the atmosphere, and it was put away somewhere, and it’s gonna stay away for some period of time, right? So, that’s called the, the, how long is it put away? That’s the tenor.And how sure are you that it’s going to stay away? That’s the durability, right? So, what we’re doing is we’re basically saying, if you, if you have two projects, your project has a 20% risk of failure, my project has a 10% risk of failure.Now do a future value calculation. Let’s say Kenny’s gonna deliver 100 tons of carbon in 3 years. How many credits do you have to put away now? 120, because you have a 20% risk that it’s not going to deliver. I only have to put away 110, right? So once we make that permanence adjustment,Now we’re talking about a standardized unit that you and I can both value. We can put that into a product. We can make yield curves on those things. We can do all the things you can do with different dated bonds. We can now do that with
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carbon credits carbon credits. So, let’s talk about where tokenization, that’s another new word that we’re gonna be hearing all, all kinds of things about, you know, 2026 and beyond, what their role is in this, right? How tokenized real-world assets are gonna fit into this regulated market.
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So tokenization has two components to it. One is, there’s the fad, you know, everything needs to be tokenized, you know, tokenize my, my pillow or something, you know. We’re talking about taking things that have economic value and tracking them in a way that we can then transfer them with minimal friction, right? So, like,Take equity shares, right? Right now, you and I, you have to go through a broker, to go to DTC. There’s a whole process. A tokenized share should have atomic settlement. You should be able to settle it person to person immediately. So that’s one aspect of what we’re talking about, because as an exchange, we have to be focused on what’s the future.Stock trading. But the other thing is
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that in the future of stock trading is going to be tokenization. I, I think it’s, it’s paying attention to what’s going on. Yeah,
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it may,it may take 10 years, uh, but it’s inevitable. And frankly, you know, we built a whole book accounting system for back office over the last 50 years. Banks are not going to give that up easily, but when they do, look out. But the second piece is tokenization is just another way of saying a fancy database. It’s if you take a ledger.And you put something in that ledger, and then you can track it. And the thing that you’re tracking is the token. So a carbon credit, right? It a token can contain all the information about where was it created, who created it, when was it created, what was the method that was used, um, uh, you know, all of that stuff. And then I can trade that to you, and now it tells me, Dan created it, Ken bought it, right? And then you trade it to somebody else, and now it says Dan created it, Kenny bought it, Kenny sold it. And now we can start to create an ecosystem of tradable instruments.So a token is, is, is a nice way of saying we’re gonna make something stand, we’re gonna put it in a package, we’re gonna
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sell that, and that’s true of tokenization for anything, anything, right, for anything, real
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estate,cars, whatever you want, right? So I don’t wanna say, I don’t say.
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No, no, no, yeah, yeah, you know, I hear you. All right, listen, I could sit and talk about this all day, and in fact, I should have you come back and we should, we should talk about it again, but we’ve run out of time.But in the meantime, I wanna, as I always do, uh, I end the podcast with a dish. And so today I’m gonna give you the feta shrimp, which is a crazy easy dish to make. It, it is a, it is a Christmas favorite at my house, but I’ll just give you a little sense that the dish, uh, it was born on a Greek island, right? really shaped by the wind and the water and the salt, and the saltwater, right? A place where the white stone buildings on the, on the cliffs of, of the Greek island holds the heat of the day and the sea decides what we’re gonna have.For dinner. The shrimp arrives from the boats at dawn. It’s still tasting of salt. The garlic is sliced without even counting how many you’re using. Time is kept by the light, not by the clock. The butter now meets the olive oil in the hot pan. The garlic softens, filling the air even before it can darken. The shrimp are then laid down carefully. You’re going to sear it really quickly. They turn pink, um, and then you fly, and then you pour a little bit of wine and it flashes in the pan and it brings the sea and the heat together. Then you add some.Sliced tomatoes on top and they collapse in the sweetness, and then you cover it all with feta cheese. Oh my God, it is so delicious. It all comes melting together, and it, and it, and it binds everything together without surrendering anything. Now, you can serve this over orchetti pasta or just in a bowl with toasted garlic bread. In any event, you are not gonna go wrong. You can scan the QR code on the screen for the full recipe and trust me, you can thank me later.That’s a wrap for today’s Trader Talk, but the conversation continues. Subscribe on Apple Podcasts, Spotify, Amazon Music, or wherever you get your podcasts. You got questions or topics you want covered, email us at tradertalk@yahooinc.com because we’re always listening. Until the next time, stay sharp, stay disciplined, stay in touch, and take good care.
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This content was not intended to be financial advice and should not be used as a substitute for professional financial services.