 Hello Dr. Broek. It's nice to be here. Please sit down. Thank you. Wonderful that you'll be that you're back here in Rotterdam You have given presentations for our events in the last five or six years Also here in Rotterdam. I'm excited to have you back all the way from Puerto Rico Dr. Jaron Broek, you're the chairman of the Iron Rent Institute. You're an established author You're also an investment professional Who better to ask about ESG There's a lot of regulation coming out of the European Commission on ESG ESG means that pension funds must assess certain risk on the environment Social and governance when making investments in companies This regulation is said to be morally good you're not Investing in companies only because they're profitable, but because they're minding the environment They're minding the the the workers. They're minding the governance the diversity in the boards Pension funds struggle with the implementation of this legislation Their dilemma is if this legislation is morally good, but I'm still struggling What can they do? Well, one has to challenge the idea that this legislation is morally good That is if it is true that all these things are important to The ability of pension plans to do what they're supposed to do and what pension plans are supposed to do is Provide a pension to the pensioners. They're supposed to return a good profit They're supposed to return a certain rate of return So that the pension the money is there when the pensioners retire that they can pay them off That needs to be the single focus of pensions Trying to get pensions to now Set a social agenda a philosophical moral political agenda is wrong if government wants to regulate Businesses to behave in a particular way. That's a political decision. I think it would be a mistake But that's a political decision, but to in a sense outsource the regulation to the pensions is Wrong, and I think the people who should most be upset about this Are the pensioners? Because they're the ones who are putting their money at risk you mentioned the risk of Environment government, but there is no risk there if it was a real risk Then pensions would have to take into account anyway. That would be the fiduciary responsibility that would be part of maximizing the return for the pensioners or maximizing the risk adjusted return for the pensioners But the whole point is this is not about risk. This is not about financial risk. This is about politics This is about a particular social agenda that our politicians that the government would like to impose on business and is using pension plans To impose it by proxy and that is that is wrong It is unproductive and indeed I think it's what increases risk of the ability of pension plans to ultimately fulfill their responsibilities After we come back, I would like to ask you about Policies pension fund trustees may form to avoid this ESG legislation Does a spot on the cliff hangers in here Dr. Brooke, did you just explain to us that ESG legislation is politically motivated? If you're a pension fund you have to deal with regulators How can a pension fund still comply with this legislation yet disregard this political motive? Well first I think that the pension plans have a fiduciary duty to the pensioners to fight this legislation So before the legislation ever gets passed They should be mobilizing to argue against it and they should mobilize The pensioners maybe politicians don't care about the trustees of the pension plans But they certainly should be caring because they're large numbers of voters of the pensioners The people are actually going to get a pension and there is a legitimate reason that the Trustees can go to the pensioners and say look what the politicians are doing is going to hurt your pension It's going to put at risk the return that you were promised that return that you expect And hopefully they can mobilize politically to challenge The legislation once the legislation is passed It becomes very difficult for the pensioners to say no I'm not going to do this But it's funny because if you look around the world at ESG Implementation Pension plans and mutual funds and other financial institutions that supposedly follow ESG if you look at their portfolios They're very similar to everybody else's portfolio. So what actually happens is they define ESG very very broadly Much broader than what the regulators and what the government would like them to define them as they define them in a way That includes almost everybody. Yes, there are a few companies that are excluded But almost everybody is included because they realize that what really is Their purpose is again that risk adjusted return that they have promised the pensioners So I think they need to stand up against the legislation. I think they need to fight it I think they need to try to change it. I think they need to try to soften it to give them as much flexibility as possible To design the product to fit the pensioners rather than the politicians Dr. Brooke, what do you think of the assumption that companies should not be focused on profit alone? I think it is a horrible wrong assumption I think if you understand what profit represents Then you understand that you cannot make a profit without treating your employees well You cannot make a profit long term without treating your suppliers and other so-called stakeholders well The fact is that the fiduciary responsibility of a business is to maximize its shareholders wealth over the long run It's to maximize the profitability the economic profitability not the accounting profitability the economic profitability of the business over the long run and that all of us as an economy as a society Benefit from companies that pursue that profit maximization over the long run and don't get involved in a variety of different social agendas in a variety of different political agendas that are Single-mindedly focused business is an enterprise that should be focused on creating value and profit is a Is a basically an illustration of the value that they're creating the more value creates The more profit there is value for whom? Value for your consumers value for the people you engage with all your different stakeholders What a beautiful Statement and which is very new to legislators apparently Thank you so much dr. Brooke for your visit all the way to Rotterdam It's been a pleasure to have this interview with you. My pleasure as always. Thank you honor