Ep. 32 Trevor Neilson

About Trevor Neilson

Trevor Neilson is co-founder and CEO of i(x) investments, an entrepreneurial, multi-strategy impact investing platform, structured as a holding company, addressing areas of human need. To date, under Neilson’s leadership, i(x) has launched platforms in the following issue areas: Renewable Energy, Carbon to Value, Waste to Energy, Green Commercial Real Estate, Gender Equality, Education and Media.

Prior to launching i(x) investments, Neilson served as President of G2 Investment Group where he helped lead the firm’s initiatives in energy, real estate and security.

Before his work with G2, Neilson was co-founder of Global Philanthropy Group an advisory firm (sold to Todd Wagner and Charity Network in 2017). In that capacity, he has been involved in the creation and implementation of many of the world’s most respected philanthropic initiatives and has worked with over fifty major philanthropists.

Neilson’s leadership in business and social change included time as the Executive Director of the Global Business Coalition (GBC). GBC is a coalition of over 200 multinational companies which is focused on global health issues and was created with investments from Bill Gates and Ted Turner amongst others. In this capacity, Neilson reported to Ambassador Richard Holbrooke, former United States Ambassador to the United Nations and President Obama’s former Special Representative for Afghanistan and Pakistan.

Prior to his leadership of the GBC, Neilson worked closely with Bill & Melinda Gates, both in their family office and as Director of Special Projects and as a founding member of the team that created and launched the Bill & Melinda Gates Foundation where he served as the Director of Public Affairs.

Named by the World Economic Forum as a Young Global Leader, Neilson served in the White House during the Clinton administration and served on the Business and Human Rights Resource Centre International Advisory Network.

Neilson also serves as Co-founder and Chairman of the Climate Emergency Fund and as Chairman of Las Flores Holdings, an investment firm focused on companies creating top-tier returns and measurable social impact.

He is active in a variety of personal philanthropic initiatives including the Climate Mobilization. In the wake of the devastating California fires in 2018, Neilson co-founded the Malibu Foundation. He was named a “Citizen of the Year” by the Malibu Times in honor of his work following the devastating fires in Malibu and the surrounding region.

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Chris Rising: 00:49 Welcome to the real market with Chris Rising. I'm really pleased to have my friend and partner, Trevor Neilson, the founder of i(x) investments on the podcast today. Trevor, welcome to the real market.

Trevor Neilson: 01:00 Thank you, thank you. I'm happy to be here. I've been a listener, but I've never been a guest, so I'm excited. Chris Rising: 01:04 Well, we're happy to have you here. Why don't you give a little bit to our audience about what i(x) is and your focus and tell us what you're doing.

Trevor Neilson: 01:13 So i(x) is an investment platform primarily for the world's wealthiest families. There's over 50 families as shareholders. And the thesis of our work is that you can align profit with purpose, that we can target top tier returns, and always top tier returns first, and measurable social impact. With a huge focus on environmental issues and carbon reduction in particular, and the idea really came from the notion that there are not a lot of investment companies out there that say to wealthy families, "You have the ability to do both of these things." In fact, as you know very well, there's a misperception in the marketplace, which suggests to people that you have to lose money if you want to do good things in the world, that the only way to profit is to be ruthless and not care about the impact that you have.

Trevor Neilson: 02:08 We think that that's silly. And I don't need to tell you about this, we look for things that accomplish both. Both profit and purpose.

Chris Rising: 02:18 And when you, when you talk about things that you're looking at, can you give an example of what are investments that i(x) would make? What companies and-

Trevor Neilson: 02:25 Well, a great example is one that I just came back from in Panama. In Panama, we are looking to convert waste from city's, landfill waste, into aviation fuel. And there's a proven technology that does this. The company is actually based in Reno, Nevada, that we're working with. It's called Fulcrum Bioenergy, but we've formed an international partnership with them and the economics are staggering for that. The ROI is fantastic, but the social impact is really extreme too because you're addressing the plastics crisis, because this technology incorporates the plastics, and you're addressing carbon emissions from air travel. So, air travel is a huge carbon emitter and a huge greenhouse gas emitter overall, outside of just carbon.

Trevor Neilson: 03:15 Plus methane, landfills are one of the primary causes of methane emissions in the world. Methane is 30 times as powerful as a greenhouse gas than carbon. 30. So, when you look at climate change and greenhouse gases overall, methane is the worst of all. That's a reason why people are starting to pay attention to cattle, to milk, to beef. Cattle emit an enormous amount of methane through their mouth and through the other end as well. And so that's a good example.

Trevor Neilson: 03:45 Another example would be a company we've invested in alongside Bill Gates and others called Carbon Engineering. Carbon Engineering is more of a tech play. It's a proven technology, but it's not yet been built at commercial scale. That's happening right now. And carbon engineering has a direct air capture technology of carbon, which converts it into clean fuels. So, they've got a plant built up in a BC, near Whistler. They are sucking carbon directly out of the air and turning it into clean fuels. They're at the stage now where they're trying to build the capacity because on a per ton basis, it's too expensive right now. But they'll get there.

Trevor Neilson: 04:20 And then a third example would be what we're doing with you. I think in the entire world of things that we're doing, our work with Rising has the clearest social impact and it's the easiest social impact to explain because you can measure exactly what that impact is on a building by building basis.

Chris Rising: 04:40 Well we, we've enjoyed our partnership with you and as we continue to get out and raise money ... At the end of the day, our mutual goal is to prove that you can make value add returns and measure the impact you have when you're doing that. And when you take over buildings that are outdated and you retrofit them and you redo the infrastructure, you can create a great place to be and also know what the carbon output has been, what the quality of the air, the light, the water.

Trevor Neilson: 05:12 Do you remember what you first said to me on this topic? I bet you don't.

Chris Rising: 05:19 I want to get the building leased?

Trevor Neilson: 05:20 No. Well, similar. I said, "Well, what you're doing is impact investing." And you said, this is a direct quote, "It's just smart business." And I said, "Well, exactly." That's the idea is that impact should never be an add on. Impact should never be a tax on a business. Impact should never be something that's done to make people feel better about other bad stuff that they do, which is far too often the case. Impact should be the alpha generator of a business.

Trevor Neilson: 05:51 So, when I initially learned about Rising and saw what you had been doing for many years, that's the best example of impact investing there is. Where people make more money because you're doing the right thing in the world. And I think the issue is that, and this comes to a certain degree down to just being brought up well. People have this perception that being altruistic or caring about the world is somehow weak or non-businesslike. And if you think about it, it's really absurd. You escape that because of your family. I escape that because of my family. But a lot of people have that perception.

Chris Rising: 06:36 Well, let me ask you this, since I think one of the things we've come up against, and I know you do every day, is people think impact, sustainability, ESG. And they think it all equates to philanthropy. And the number one thing we've heard when people were not enthused of what we're doing is, "I will not give up one basis point of return to do something that I should be doing with my philanthropy." Probably every business that you invest in or you're interested in faces that. How do you address that?

Trevor Neilson: 07:07 Well, the greatest company that the world has ever seen are the companies that address the biggest problems or the biggest needs the world has. Let's think about Google for a second. Search. The ability to attain any type of knowledge instantaneously, easily, and for free. Wow. Talk about an impact, right?

Trevor Neilson: 07:32 Or, you think about a company, any company that's changed the way that we live, right? So, we view impact as being about solving problems. Now in the case of carbon and climate change and the fact that we have 415 parts per million of CO2 in our atmosphere, the highest level ever in human history, mammals were not alive at the last time we had this amount of carbon in our atmosphere. We have an emergency on our hands. The companies that solve that problem, I believe will become the biggest companies in the world.

Trevor Neilson: 08:09 And the fact that most people in business are not really thinking about this. They're starting to, you see Goldman Sachs putting out reports, you see the business round table came out and changed their view of the shareholder privacy issue. That's an opportunity, because the slower others are to address the problems through their businesses, the bigger the opportunity is for those of us that are tackling these things. And so I guess I just think there's a total correlation between the size of a problem and the market opportunity that exists in that problem.

Chris Rising: 08:43 Well, let's take a little detour here and give our audience a little bit of a background on you. You grew up in state of Washington. Have you recovered yet from your Cougars losing to UCLA on you?

Trevor Neilson: 08:54 So, what happened at that game was the following: I'm getting old, so I like to go to bed early. I was watching the Wazoo-UCLA game and it was, I believe, the third quarter or maybe the beginning of the fourth. The Cougars were up by at least 17 points or 20-

Chris Rising: 09:12 30, I think. Trevor Neilson: 09:13 Sorry, 30 points. I went to bed, thought nothing more about this game. Got up the next day, turned on ESPN, and saw that it had been a historic comeback by the Bruins. By the way, this is the story of being a Washington State Cougar. There's a reason that the term "couged it" is a verb, for those of us that went to school there. They just struggle from time to time. But nonetheless it was a great place to go to school.

Chris Rising: 09:40 Well talk a little bit about your growing up and what led you on the path all the way up and i(x).

Trevor Neilson: 09:48 Yeah, so I'm from the Seattle area. I lived in Olympia for a while. My dad was a attorney and then is a retired judge. And being from the family I'm from, I didn't really have a choice but to be involved in philanthropy and impact for a couple of reasons. One is that my mom has always been involved in community things and formed her own nonprofit and spent pretty much her entire life helping orphans. So she ran something called the World Association for Children and Parents and was focused on adoption and child welfare around the world. She's a person of faith and that's what gets her out of bed every day. Including now where they even still support programs in Malawi and Mexico and elsewhere. They have a foundation that's the main thing that they're focused on.

Trevor Neilson: 10:40 And then my dad, also very involved in children's issues, child poverty issues, foster care, things like that. And the basic premise, and I know it's the same as the family that you grew up in, was that those who have the ability to make things better have a responsibility to do that. Somebody else asked me about this today. There's nothing in my view that's all that noble or momentous about trying to make the world better. If you have the ability to make the world better, you should. So also in our case, we had a unique situation, which is that I have four brothers and sisters, all of whom were adopted. So I'm the only white kid in my family out of five kids. The only biological kid in my family and I have two sisters who are Korean and I have two African American brothers.

Trevor Neilson: 11:33 And so when you grow up in that family and you're the oldest and you're the only white one and you have to get in a lot of fights because people call your brothers and sisters all sorts of terrible things, it gives you a certain worldview I think. Definitely a certain view on race issues in this country. And I think it just led me a little bit on that path. I thought I was going to be a lawyer like my dad. I ended up working in the Clinton white house in a very junior position. Came back to Seattle, was going to law school at night, got an offer from the Gates Foundation and Bill and Melinda Gates' family office to come work for them in-

Chris Rising: 12:16 Was it right when it started or was it ...

Trevor Neilson: 12:19 It didn't even exist yet. So, it's a funny story actually. I get a call from a headhunter and at the time I was actually working for the Seattle Public Schools as their head of government relations, which I didn't end up doing for very long. But I come from DC and I knew enough about government that they thought that I could be helpful. I was very young by the way, but I made them think that I knew a lot. And a headhunter called me and said, "There's a foundation that's being started. I'm not going to tell you who it is. They want somebody that has some education experience and they want somebody that's got some experience in Washington DC. Would you like to come talk to them?" And so I thought, well, okay. And I went to this office and I sat in a conference room and Bill Gates Sr. walked in. So, this is the former chairman of Microsoft's father. And I knew exactly who Bill Gates Sr. was because he was a very prominent civic leader in Seattle, a lawyer. I knew exactly who Bill Sr. was. So at that moment I thought, "Oh, this is going to be that kind of foundation." I had no idea that it was at the time the world's wealthiest person starting a foundation.

Trevor Neilson: 13:34 So, that got my attention because I started realizing what the implications could be and fast forward, I was hired there. I was the third employee of the foundation, but I was also working for the family office because the foundation hadn't been launched yet. And then Bill and Melinda transferred ... Well, we had a office over a pizza restaurant in downtown Redmond, outside of Seattle where Microsoft is.

Trevor Neilson: 14:02 I heard my boss, Patty Stonesifer, over in the corner yelping, "Oh my God. Oh my God. You're not going to believe what happened." And we came over and Bill had transferred us $5 billion in Microsoft stock. Then he did it again.

Chris Rising: 14:17 Wow.

Trevor Neilson: 14:17 Five billion, five billion, five billion, five billion, five billion, to $25 billion that he transferred to us in a very short period of time. And we had 13 employees, $25 billion to give away, a requirement from the IRS to give away 5% a year, which is the rule for foundations. And that just put me on this pathway in the world of philanthropy. I then over time left, I got more interested in the entrepreneurship side of things, started a couple of different companies, sold one of them and got interested in this impact investing space, which is where I am now with my partner Howard Warren buffet.

Chris Rising: 14:58 Well, talk a little bit more about your Gates experience. Let's talk a little bit about setting up a foundation like that from scratch and what the real directive was back in, this was mid, late '90s, somewhere in there? Trevor Neilson: 15:13 That's right. Right at the very end of the '90s.

Chris Rising: 15:13 And what was the edict given from the Gates family?

Trevor Neilson: 15:17 We didn't know what we were doing at first. At first, actually the focus was on wiring public libraries because at the time there were thousands of public libraries across the country that didn't have internet access. So Bill and Melinda were providing funding. Microsoft would provide the software for free. We did a deal with Gateway computers at the time and a deal with Dell at the time and were wiring public libraries. Then the focus got more into education reform overall and some of the thorny issues associated with that. The fact that our public schools are failing, especially low income kids across the country.

Trevor Neilson: 15:58 And then global health really started to become more of a focus. So there's a famous story that Bill read a New York Times piece written by Nick Kristof, when Nick Kristof was a reporter, not so much a columnists as he is now, about diarrhea and how, I forget how many, million kids a year were dying from diarrhea. And Bill is the wealthiest person in the world and he and Melinda sat down and said, well, that is really crazy that this many million kids a year are dying from a completely preventable phenomenon. Diarrhea is a preventable ... It's not a disease, I guess, but a preventable

Chris Rising: 16:40 Illness.

Trevor Neilson: 16:40 Illness. Condition. So, that then set them down this pathway of becoming the world's most important philanthropists / investors in global health and specifically diseases impacting the poor. So malaria, AIDS, tuberculosis, sanitary diseases like diarrhea that are prevalent in the poorest countries of the world and parts of Africa, India, et cetera. Trevor Neilson: 17:09 And I think that the thing that I really learned there, I learned a lot there obviously, and it was a real privilege to work directly for Bill Gates. One, by the way, that I've been reminded by cause because there's this new series on Netflix all about his life and it's been giving me these flashbacks. Not the easiest person to work for at times, either, as you might imagine.

Trevor Neilson: 17:33 But I think I really learned there the limitations of philanthropy. Even though I was working for the world's wealthiest man with the biggest foundation in history, I saw just what philanthropy couldn't do. And I had come from government where I had seen also what government couldn't do. And I think that's where I started really thinking about the role of the private sector on impact. That if you harness the profit motive and if you harness the the ability that business, when built correctly has to scale and replicate, that gets pretty exciting and there's just certain things that the government is not going to fix and philanthropy is not going to fix.

Trevor Neilson: 18:22 Different issues are different. But for example, there's not a lot that philanthropy alone can do on the climate emergency. I'm focused on the activist side of that emergency because I actually think that's one thing philanthropy can do, is support activists. But we have to transition from a dirty energy economy to a clean energy economy and that requires the private sector. Government can help with regulation. You told me very early on that the way to think about ... I forget exactly how you said it, the way to think about old real estate was that it was a, I don't think you used the term stranded asset, but stranded asset would be the term you use in oil and gas. Where if people are not-

Trevor Neilson: 19:03 ... asset would be the term you use in oil and gas, where if people are not building with the regulatory environment in mind, what was the phrase you used?

Chris Rising: 19:09 I don't know.

Trevor Neilson: 19:09 Basically they're going to lose money.

Chris Rising: 19:11 Yeah.

Trevor Neilson: 19:11 Because you are building to a regulatory-

Chris Rising: 19:14 Yes.

Trevor Neilson: 19:14 Standard that you knew was coming.

Chris Rising: 19:16 Mm-hmm (affirmative).

Trevor Neilson: 19:17 Or at least that you-

Chris Rising: 19:18 Yeah, you're talking about Title 12 and-

Trevor Neilson: 19:20 Yeah.

Chris Rising: 19:21 Yeah, when we saw early on that the regulations were actually going to make the buildings more efficient, and rather than waiting to be regulated to do it-

Trevor Neilson: 19:29 Get ahead of it.

Chris Rising: 19:29 Get ahead of it, yeah.

Trevor Neilson: 19:30 Yeah. So, you know-

Chris Rising: 19:31 And in fact, once the regulation came in and everyone had to do it, the cost of it went up dramatically because now-

Trevor Neilson: 19:37 Of course.

Chris Rising: 19:38 You know, there was some-

Trevor Neilson: 19:39 Well, this is what-

Chris Rising: 19:40 Yeah.

Trevor Neilson: 19:40 So the CEO of ExxonMobil should listen to this podcast, because what the oil companies are going to soon realize is that hoping that this issue goes away, hoping that people don't pay attention to the fact that it's, you know, 70% of carbon emissions are driven by a handful of companies.

Chris Rising: 19:58 Mm-hmm (affirmative).

Trevor Neilson: 20:00 And we know who they are, right? And you're only going to see the regulatory environment around carbon tighten and tighten and tighten and tighten. And it's going to happen in a lot of different ways.

Trevor Neilson: 20:11 So fossil fuels are a terrible investment. And companies like yours that are built to imagine a carbon-free world or a dramatic reduction in carbon are the businesses that are going to win.

Chris Rising: 20:27 Mm-hmm (affirmative).

Trevor Neilson: 20:28 That's what the private sector needs to do. You can't, you know ... Sure, government can incentivize. Government can tax. Government can spur innovation in some cases. But at the end of the day, this is about shareholders and investors. And the good news is we think that you can make a ton of money while doing this.

Chris Rising: 20:46 Mm-hmm (affirmative). Well, as you look at the things that you're working on, and I do want to get back into climate and climate change and such, but let's talk a little bit about some of the other businesses and some of the other interests and what led you from the Gates Foundation to deciding that, you and Howard, that i(x) was the vehicle you wanted to create.

Trevor Neilson: 21:08 Yes. So I've gotten to know the Buffetts mostly through another company that I founded, called Global Philanthropy Group. So we were doing some work with them in that, through that company, actually on water issues. We helped create something called the Global Water Initiative.

Chris Rising: 21:26 So was this after-

Trevor Neilson: 21:28 After Gates.

Chris Rising: 21:29 But were you at the Gates Foundation when the Buffett family made their commitment-

Trevor Neilson: 21:32 No, no. I was there earlier-

Chris Rising: 21:33 That was later-

Trevor Neilson: 21:33 Yeah.

Chris Rising: 21:33 Okay.

Trevor Neilson: 21:33 Yeah. They made that commitment while I was at Global Philanthropy Group while I was working with them, but I wasn't at Gates.

Chris Rising: 21:39 Yeah.

Trevor Neilson: 21:40 And you know, I just really hit it off with Howard. So this is Howard Warren Buffett. This is Warren's grandson. It gets a little confusing because there's several Howards. His father's name is Howard.

Trevor Neilson: 21:50 And I love the guy. I've known him since he was in school. You know, we just really hit it off. And what happened over time was that we would kind of trade ideas back and forth and always kept in touch. And Howard is very smart and is an academic. Now he's a professor at Columbia University in addition to what we're doing together. And he would send me thinking. You know, I've been thinking about this, I've been thinking about this. And in fact, at our shareholder meeting last year, he actually brought out one of these emails, which showed that he had been thinking about what became the system of measurement that we use, which he invented called impact rate of return. He'd been thinking about it and we've been talking about it for 10 years.

Chris Rising: 22:32 Mm-hmm (affirmative).

Trevor Neilson: 22:33 You know, not intensively, but, you know.

Chris Rising: 22:36 Yeah.

Trevor Neilson: 22:36 So when I started looking at the world of impact investing and I had this idea to start the business, I made all the rounds. I went to the conferences and I read the papers and I met with some of the big banks and tried to kind of really get my head around what the landscape was. And what I saw was that there were three big problems in the world of impact investing.

Trevor Neilson: 23:03 One, a lack of product. There just weren't products that had sufficient scale to put big families, multifamily offices, institutional investors into the space. That was number one, lack of product. Lack of people. You know, the smartest minds in finance just were not in this impact conversation. And then the third was more of a brand problem, this perception that we referenced earlier that-

Chris Rising: 23:28 Mm-hmm (affirmative).

Trevor Neilson: 23:30 If you're investing in a way where you at all want to make the world better, you must be losing money, right?

Chris Rising: 23:36 Mm-hmm (affirmative). Trevor Neilson: 23:36 It's just, you know, you're just a wimp if you care about your children's future. You know, anything silly like that, right?

Trevor Neilson: 23:44 With those three problems in mind, I called up Howard. And I said, "Hey, you've been thinking about this stuff a lot, right?" And he said, "Yeah, I have." And I said, "What could we learn from the Berkshire Hathaway model as it relates to this space?" Trevor Neilson: 24:01 And you know, we can't really compare ourselves to Berkshire Hathaway. I mean, first of all, it's probably the most successful finance company in the history of the world. And I don't mean to compare us, but the one thing that we really took from that was that the fund model in our case was going to be less efficient than a permanent capital vehicle where investors come in and become shareholders alongside us.

Trevor Neilson: 24:27 So we made that decision. We decided to apply this system of impact measurement, which you're using here and that Howard invented, called impact rate of return, incorporate that in everything we're doing, and then go out and purposely begin with the leading families of the world. We always thought if this can be a place where we gather really influential families together in this strategy, then later on we can engage institutional investors and then eventually could IPO the whole thing. That's one of the benefits of the permanent capital structure as opposed to the fund structure. Trevor Neilson: 25:07 So we went out. And we put a PowerPoint together and went and started meeting with people and raised a friends and family round from people that were willing to come in really early. Some friends of ours, some really great, really just amazing, really diverse group of people. People like Aileen Getty, you know, was right there from the very beginning. Jonathan Klein, who's the CEO of Getty Images actually but not connected to Eileen, from the very beginning. Dave Sams, who's the CEO of a bunch of insurance companies. Anthony Kiedis from the Red Hot Chili Peppers is a neighbor of mine in Malibu. You know, just a really great group. I think it was 14 people?

Chris Rising: 25:51 Mm-hmm (affirmative).

Trevor Neilson: 25:52 At first, who really came in very early. And now, fast forward, we have 56 families as shareholders. And the structure is really just to invest in things off of our balance sheet, but then more importantly to syndicate investment opportunities to these families. And that so far seems to be working. Chris Rising: 26:15 Mm-hmm (affirmative). So why don't we dive a little deeper into what Howard's book, Social Value Investing, and what the lowercase impact rate of return really is and why it's relevant to not only what we're doing for our real estate investments, but also for how you can measure yourself with your investors?

Trevor Neilson: 26:34 Well, everybody should read that book, first of all. Social Value Investing is like a look into the future of impact. It spends a huge amount of time on public-private partnerships, cross-sectoral partnerships.

Trevor Neilson: 26:48 It's written with one of our board members and one of our investors named Bill Eimicke. Bill has had an incredible career primarily in government and academia. He was the housing czar for the state of New York. He helped run the Fire Department in New York City. Just a really amazing guy and arguably the leading thinker on affordable housing globally. He gets flown to every city in the world to consult them on affordable housing, that sort of thing.

Trevor Neilson: 27:16 And one chapter in the book, which Howard authored, that chapter is focused on what's called impact rate of return. And impact rate of return is an effort to be able to have an apples-to-apples comparison of impact across asset classes. Because previously in the world of impact measurement, people had these systems of measurement that required five hours of description and 400 pages of charts and spreadsheets to discuss. And so, Howard, and really what people should do is read that book and read that chapter in the book in particular, but what he's done is boiled it down to an algorithm, an equation, that allows you to put a series of metrics in on one side and get a score on the other side.

Trevor Neilson: 28:07 And that scoring system can be applied to commercial real estate, as in the case of our work with Rising, but also it could be used across other investments. You could use that in waste. You could use it in water. You could use it in ag. You could use it in gender investing. Whatever the case may be, it can be applied. So the real brilliance of it is actually its simplicity. And I also think it's brilliant that he named it what he named it, because it allows people to think of impact measurement in the same way that they think of regular IRR, so the numbers can exist alongside each other.

Chris Rising: 28:43 Mm-hmm (affirmative).

Trevor Neilson: 28:43 And that becomes a norm, right? And I think that's where the world's heading.

Chris Rising: 28:47 Well, I think what's really ... What I like about it is it allows us to go to our investors and say, "You should hold us accountable for what our internal rate of return is." We said we're going to buy properties and we're going to return at the property level 16 to 20 percent. That's the IRR. We said we're going to give you a 2X multiple. And that's what we need to do, to be relevant, to be able to raise money. But on top of that, we're saying, "You should hold us accountable." So when we make a decision to value engineer something, if we value engineer and we don't take away the carbon, the investors should know that. Trevor Neilson: 29:24 Right. Chris Rising: 29:25 And I find it's amazing that people will give billions of dollars and only focus on what the return is and somehow think, Well, I'm doing the right thing. It's all good. Trevor Neilson: 29:36 Right. Chris Rising: 29:36 They should know if those billions of dollars are going to perpetuate businesses that are destroying the Earth and those kinds of things. But also, what we are doing within real estate, and we have in other businesses, is actually making things more efficient. Trevor Neilson: 29:51 Yeah. Chris Rising: 29:52 And lowering operating expenses. And doing these things- Trevor Neilson: 29:54 And that's more valuable. Chris Rising: 29:54 And that's more valuable- Trevor Neilson: 29:54 It's a long-term mindset. Chris Rising: 29:54 With the longer life- Trevor Neilson: 29:54 Yeah. Chris Rising: 29:59 And a longer life to them, bringing assets back to life. But what I think what's really unique about Howard's is you can now say to someone, "Do you want to measure your real estate investment? You can measure that against every other dollar you could have put-" Trevor Neilson: 30:11 Sure. Chris Rising: 30:11 "In any other building around here. Or you want to measure your investment in the stock market? You can measure it both on an IRR basis for internal rate return and for impact rate of return." Trevor Neilson: 30:21 Well, you know, we earlier were talking about this Campden Wealth study that just came out around the attitudes of family offices on various issues, but one of them was impact. And climate change is now the number one concern of family offices as it relates to impact. Trevor Neilson: 30:41 I would say family offices control something like $5 trillion of wealth. It's probably more actually, but that's kind of the publicly reported number. I would say 80%, maybe more, even, of family offices and families have never considered that their investment portfolio can help them achieve their goals, their values-driven goals around addressing climate change. They haven't even considered it. And that's because their advisors have never considered it. And in a certain way, this is just an education process. When people know these products are available and then the family has a conversation around them, they're going to be attractive. Trevor Neilson: 31:28 And then the other big thing that's happening is divestment. So there's an enormous amount of pressure, and a lot of the families that i(x) has are going through this right now, around divesting from fossil fuels, both because people see it as a bad place to invest, but also because families just don't want to be associated with increasing carbon emissions. So that process of divesting is a very natural place for then families to begin thinking about, well, where are we going to reinvest? So why not reinvest in things that actively make the issue better, once you move that capital out of things that make the issue worse? Chris Rising: 32:02 So let me ask you this, are we just drinking Kool-Aid? I mean, we've got an administration that has flat-out said, "Climate change doesn't exist." We've got lots of people that we talk to who think that we're just really hippy, liberal people who want to just eat granola and make the world a better place, Kumbaya. I mean- Trevor Neilson: 32:25 That's because you wear those Birkenstocks to every meeting, and so, if you get rid of ... I keep telling you, I know they're comfortable, but you're going to ... For the record, Chris does not wear Birkenstocks [crosstalk 00:32:35]. And I would not want to see his toes either, by the way. Chris Rising: 32:40 But I mean, honestly, I mean, because we do get asked a lot. And really, it can get hostile with people who genuinely say, "Why is the EPA is saying that California regulations on cars is a bad thing? It hurts business." At some point you have to have a rational discussion with people who are in power. What is it about climate change that you're seeing, that I know scares you to death, and how can we rationally say to people who are deniers of this, "Why aren't you looking at these facts?" Trevor Neilson: 33:10 Well, I think a couple of things. One is that you have to decide how much of your time you want to spend trying to convince people that don't believe in science or physics or math. Because climate change now is just about science, physics and math. There is universal consensus around the scientific facts, and the scientific facts are terrifying. Trevor Neilson: 33:35 There's also universal consensus around the extreme weather events that are being precipitated by the rise in temperatures. Species extinction, coral reefs dying, acidification of the oceans, we're in the midst of this right now. So my view is I would rather spend my time talking to people that believe in science than bothering to try to convince other people who don't. Trevor Neilson: 34:05 And there's been a lot of psychological research about climate change. And the conclusion of that research as it relates to the people that deny its existence and just can't go there is that it is what they refer to as a hyper-object. It is so big and so terrifying when you actually go there that some people are just incapable. And by the way, I'm talking not just about fire-breathing, radical people who you would typically stereotype as being, you know, people that own oil rigs in Texas and hate California and all that. I'm not actually even talking about those people. I'm talking about people that are our friends, who we would socialize with, who we consider to be smart people, successful people, people in California, people in the Bay Area, people in Silicon Beach, who just can't go there because the reality of it is so scary. Trevor Neilson: 35:09 And there's the sociological research that shows that you don't actually, in the history of movements, you don't actually need to convince everybody. You need to convince ... It's actually 3.5%. 3.5% of the population needs to be converted on one of these issues to have it tip. I believe we're in the midst of that right now. Trevor Neilson: 35:32 But I also believe that it's the job of those of us that believe in science, believe in physics, believe in math to tell the truth. And for me, when the Woolsey Fire hit Malibu, where I live, worst fire in the history of Southern California, I was in New York at a board meeting. My wife and our two-year-old are fleeing in the Volvo station wagon with the family dog and some photo albums, literally, while I can't reach them, which is my worst nightmare. Chris Rising: 36:01 Mm-hmm (affirmative). Trevor Neilson: 36:02 That was sort of a wake-up call for me because it made me realize that a gradualist approach to this issue, which was absolutely the path that I was on ... Serve on some boards, give some money, make some investments, but not really do anything too disruptive. A gradualist approach on this issue is going to doom all of us.

Chris Rising: 36:25 Let me ask you this, because this gets thrown at me a lot. 10 years ago, a little bit more than 10 years ago, Al Gore produces a movie that says, "Now-"

Trevor Neilson: 36:31 Yup.

Chris Rising: 36:33 "The whole planet's going to be flooded." And that hasn't happened. So how do we deal with some of the ... People like to cherry pick them, but that's a legitimate thing.

Trevor Neilson: 36:42 Yeah.

Chris Rising: 36:42 10 years ago we watched something that scared us all.

Trevor Neilson: 36:44 I don't remember exactly what the film said. But you know, climate science is incredibly complicated. It requires millions of inputs, and there's a thousand different directions that can go. But the evidence of climate change is with us every single day. Will it be as bad as certain people say it's going to be? Nobody knows.

Chris Rising: 37:11 Mm-hmm (affirmative).

Trevor Neilson: 37:12 But betting that it's not going to be bad is a fool's bet. So I think where we're at on this is we're all going to be living in a very different world. We all are already living in a very different world than we were when we were kids. You know, you and I are about the same age. I think you're a little older. At least you look a little-

Chris Rising: 37:33 I look a little younger, but that's fine-

Trevor Neilson: 37:36 When we were kids, we didn't have the extreme weather events that we now have.

Chris Rising: 37:41 We certainly had smog here in Southern California.

Trevor Neilson: 37:44 We had smog. That got fixed-

Chris Rising: 37:44 And we fixed it.

Trevor Neilson: 37:45 Now it's getting worse again.

Chris Rising: 37:46 Because, yeah.

Trevor Neilson: 37:47 You know?

Chris Rising: 37:47 Right.

Trevor Neilson: 37:49 And so, we're in the midst of this change. The species extinction stuff is really terrifying, because it's the first time in our lifetime this has happened. We're losing a couple hundred species a day, okay? This is ...

Trevor Neilson: 38:03 ... a couple of hundred species a day. This is scary stuff because it's things like insect populations start declining, there's a food chain thing that kicks in. I think what we're doing now is pushing ourselves to not end up in the worst case scenario, is the way to think about it. And the worst case scenario is really quite terrifying. And it's not actually about sea level rise. That's been a little bit of a diversion. It is a problem, certainly, especially for those of us that live in Malibu. But the bigger issue is drought, crop failure, mass migration, because of which we're already seeing. The reason that there are so many people on our Southern border is because of crop failure in Central America and resulting chaos associated with narco trafficking and everything else.

Trevor Neilson: 38:54 So we're trying to prevent the worst of these scenarios from occurring. But the reality is, without a dramatic change, the worst case scenarios become more likely. We put more carbon into the air last year than ever before. We're not even making a tiny part of the change we need to make. And that's why I think the work of these activist groups is really important.

Chris Rising: 39:20 Yes. Well before we go back to the activist group, talk a little bit about your family. And outside of not being able to go to sleep on this climate stuff, tell us a little about your personal life.

Trevor Neilson: 39:30 Yeah. I've got an amazing wife named Evelyn. She runs actually the Malibu foundation now. I have three kids. Maddie is 15 today, actually. Lucy is 12 and Max is three. Maddie will be playing your daughter tomorrow in a fierce competition-

Chris Rising: 39:49 In volleyball.

Trevor Neilson: 39:49 ... in game of volleyball. My daughter is terrified of your daughter's hitting, because your daughter is one of the best hitters I've seen. They're amazing. I'm somebody that I'm a meditator. I'm somebody that spends a lot of time trying to stay present and grateful for what I have. And my family is the thing I'm most grateful for. Interesting that you brought the two things up together because lately I've been really thinking about how do you talk to your family? How do you talk to your kids about these issues? And in fact there's a brand new book out about this that I have not read yet, but it's been something that's I've really been struggling with.

Trevor Neilson: 40:37 And in part because I gave a speech that my 12 year old was at, well both of my daughters were there where I talked about ... the speech was entitled Waking Up to the climate Emergency, and it included video scenes from the Woolsey fire, scenes from the Paradise fire, some tough, tough stuff. And I looked down in the middle of the speech, and my 12 year old is absolutely bawling her eyes out. And I thought, "Wow, what are we supposed to do with our kids?" That's been a topic that's really front of mind for me lately. And I guess the place that I've ended up on this is that I want to tell the truth. Even if it's hard, I want to paint a picture of hope, because I believe there is hope, but I want to tell the truth.

Chris Rising: 41:32 I would agree. I think it's a scary, it's a very scary-

Trevor Neilson: 41:35 Do you talk to your-

Chris Rising: 41:35 We talk. My twin girls are very aware of it. My 10 year old son, probably less so. But I try to focus on the things we can control. And I just think you can make a lot more money in business if you're focused on these things. In the short term, I can't tell you if Exxon stock is going to go through the roof because the Iranians bombed the Saudis. We can't play that game. That's not what we do. But I do think that we are creating buildings that are more efficient, producing less carbon, and are places where people want to be.

Trevor Neilson: 42:11 Do your kids understand that?

Chris Rising: 42:13 I think so. They enjoy hearing the discussions about it. So I think so. I do think-

Trevor Neilson: 42:20 It's the kids that are leading this now, you know?

Chris Rising: 42:22 We just saw that with the young woman from Sweden-

Trevor Neilson: 42:24 Greta.

Chris Rising: 42:27 I guess where I get frustrated, and I try not to lose my cool, is the cynicism that we get hit with it. Just an unwillingness to even have a discussion about it and the immediate assumption that ... stereotyping what we're doing. And I just say this is just good business.

Trevor Neilson: 42:45 Yesterday's Toronto Sun, which is the newspaper in Toronto, called me a Millionaire Marxist.

Chris Rising: 42:53 Well, I know you're not a Marxist. I know you're a Capitalist.

Trevor Neilson: 42:55 I don't even really know what a Marxist is, I have to be completely honest with you. But he called me that, called Rory Kennedy that called, Aileen Getty that because of our philanthropic work. But that sort of sums it up, right?

Chris Rising: 43:10 Yeah.

Trevor Neilson: 43:11 I am relentlessly focused on profits for our shareholders. I believe in Capitalism. I like making money. But I think it can be done in a way that does not harm the earth, and in a way that provides a future for our kids. And so-

Chris Rising: 43:28 What I don't understand is how we've lost our agrarian roots. You go back 200 years, people knew you couldn't plant the same crop over and over and over and over and over again, that we had to be good stewards of the earth that we're on. And I just don't see people ... I don't understand why that's lost. And I don't think what we're doing is ... I really don't look at it as anything radical. I just look at it as smart business.

Trevor Neilson: 43:52 Well, that's what you told me the first time I met you. And the thing is that the numbers don't, it's proven that it is a smart business.

Chris Rising: 43:59 I agree.

Trevor Neilson: 43:59 So what you're pushing through is just this really simplistic initial reaction. Now if you get pulled into kind of the political and cultural wars around the topic, then there's no way to win. Because then people are just ... the next thing you know, they're saying to you, "What about Hillary Clinton's emails? Or these kind of tropes that are out there.

Chris Rising: 44:27 I think I heard that they're in Ukraine now.

Trevor Neilson: 44:29 Right.

Chris Rising: 44:29 Is that what I just heard.

Trevor Neilson: 44:32 Yeah, this thing-

Chris Rising: 44:32 No. But I hear you. And I don't want to minimize it because this is very serious stuff, and I think it can get lost in the political bickering. And I think what's really important, and this is the point that I think we're both trying to drive home, is we have a standard, Howard Buffet has given us a standard. You can like it or not like it, give us another standard. But just as investors, hold the people that you invest in to the same standards that you do on the multiples and the IRR, to what they're doing in terms of impact. And ours has a piece that is social that, that we just believe that when we're in it, we own an office building and we have a thousand people in that building, we have an impact on this community that we're in.

Chris Rising: 45:14 And we should be doing things about it. It doesn't have to be ... It's actually the little things. It's the people who really enjoy handing out toiletries to people who don't have a home. And you're having an impact, and we want to measure that. You're having an impact when we've shown that the water is cleaner, and we've taken out the asbestos. And just ask people to be held ... And we're very specialized in real estate, but there are other businesses. And we're just saying, "When you have an impact on the globe and on communities, you should be able to measure that as well as the financial return."

Trevor Neilson: 45:43 But part of it is like if somebody is an investor in real estate, and they proactively do not want to make the world better, then Rising is probably not a good fit for them. Chris Rising: 45:56 That's true. Trevor Neilson: 45:58 If that's their bias, and they actively do not want you to help homeless people across the street in the park or use less electricity or use less water, if they ... And there are people like this. I've met these people, I know you have as well. They're probably not the right fit for Rising. They're not the right fit for IX. Our goal is not to convince everyone. It's just to offer a path forward for people that want to both make money and do good in the world. And we believe that's possible. Chris Rising: 46:32 So before we wrap up, I got to ask this. Why don't you describe for us how big IX is. Describe the company a little bit and how it functions as a business. Because most of our listeners always are interested in what is it that allows you to make investments around the globe? What kind of operating systems do you use? What kind of technology do you use? And how do you run your business? Trevor Neilson: 46:54 Yeah. So at a very practical level, we run it using a database called Backstop. We use Asana for workflow. We use email way too much. We actually use WhatsApp a lot, group WhatsApp chats a lot. So that's the tech side of things. Chris Rising: 47:16 Do you believe in conference calls or do you believe in video? Trevor Neilson: 47:19 We are basically Zoom only now, which also creates problems because so many people don't know how to use Zoom on the other end. But we just kind of set that. I really enjoy seeing somebody when I am talking to them. I feel like it's a completely different experience. So we are set up well for that, and we're encouraging other people too. We're a very data centric company, so we have built a database that has over 12,000 high net worth individuals, family offices, and other investors in it. That dataset has been evolved over time. We've purchased databases. I don't advise that by the way. We've kind of added to it over the years, and we use this Backstop sort of CRM system for that. Trevor Neilson: 48:06 The way the business makes money is that we invest in companies off of our balance sheet, and then that'll bring up a certain return. But then we also syndicate investment opportunities to our families. And then in some cases at least ... well there's two cases really, including our work with Rising, where we really get involved and help build the business. Where we're not past passive investors, we're out there every day building it alongside a partner who knows more than we do about a certain space. And that's actually core to our business model, because if all we were doing is making passive investments, we may as well just be a fund to funds or something. And we've never seen the company that way. Trevor Neilson: 48:52 We've seen it as a highly entrepreneurial platform where, if we're going to be in the commercial real estate space, we're going to do it alongside a partner that we believe can build a multi-billion dollar pipeline for us, which then our families and others can invest in over and over and over again over time. And then, which eventually we could IPO. So it's this invest off the balance sheet, but it's usually small amounts of capital, not more than about a million dollars at a time, syndicating investment opportunities, and then helping build businesses where we end up owning a part of the equity because we're actually helping build the company. We also have a broker dealer, which for people that aren't in finance, is just a capital raising tool that allows us to be a placement agent when that's appropriate as well. Trevor Neilson: 49:43 So yeah, the long term structure is that we hope to IPO the whole thing at the right time. We're not going to have any WeWork type situations. And this could be in a long time from now, by the way. And if that happens, we believe that we might be the very first publicly traded finance company that pairs top tier returns with measurable social impact. That does not exist in the world today. So that's the big vision, and we think it's very possible. It's not imminent. This is not around the corner or anything like that. But over time, that may be where we end up. Chris Rising: 50:28 That's terrific. Well, as we end here, I thought it'd be a good place to end is talk a little bit ... we just talked a lot about our view that you can make a lot of money by doing well. By doing good, you can do well. But why don't we talk a little bit about the piece of the philanthropy that you're focused on right now that is pure philanthropy that you and Rory and Eileen are focused on. Trevor Neilson: 50:51 Yeah. Look, no matter how you look at it, the situation with carbon in our atmosphere has gotten a lot worse. And we have put more carbon into the atmosphere in the last 30 years than we had in all of human history prior to that. So the numbers are staggering. And policymakers are completely failing us on this topic. Most of them just kind of have their head in the sand, but even people that say they care are not doing what needs to be done. And so I started looking at the world of activism and advocacy around climate and started paying attention to groups like Extinction Rebellion in the United Kingdom, the Students Strikers, Greta Thunberg, Fridays for the Future, this kind of movement of young people, and became very impressed. And I went very deep. I flew to London, I met with all the core people, really got to know what was going on. And all of the activists, the student groups, the Extinction Rebellion groups, the others that are involved, said the exact same thing, which is that there is no funding in the space for activism. Trevor Neilson: 52:03 People are perfectly happy to year upon year give big checks to the Nature Conservancy or to Sierra Club or whoever. And I'm not knocking those groups by the way, but they're not the people that are out there demanding that government act. And so Rory Kennedy, who's one of RFK's kids, and has been a friend of mine for over 20 years, Aileen Getty, who's an heir to the Getty oil fortune, and a few others created what's called the Climate Emergency Fund. We had been raising money and getting it to activist groups in small increments. So if you're a student, if you're a group of high schoolers in Tallahassee, Florida, and you're sick and tired of hurricanes hitting Florida, and you believe somebody needs to do something about the climate emergency, you can make application to the Climate Emergency Fund very quickly. And you might get a grant for $1,000 to buy bullhorns and pay for your printing at FedEx, Kinko's. And maybe you need sandwiches for the rally or whatever the case may be. And it's working. Trevor Neilson: 53:05 The best example of this is Extinction Rebellion, always nonviolent, civil disobedience sometimes, which by the way, is a proud tradition in this country. Let's not forget how this country was founded. They shut down London for 10 days. They asked the British Parliament, in the midst of the Brexit chaos, to declare a climate emergency. They got exactly what they asked for, exactly. Declaration of emergency from cities and governments as a core part of the call to action. So you have the climate emergency fund. I'm excited about it. People will be hearing more about it, and I think it's necessary. Chris Rising: 53:41 That's terrific. Trevor, I really enjoyed the conversation. Trevor Neilson: 53:44 Me too, buddy. Chris Rising: 53:44 Thanks for being on the Real Market. Trevor Neilson: 53:46 Thanks for having me. Chris Rising: 53:47 All right my friend. Trevor Neilson: 53:47 Just don't wear the Birkenstocks next time. Chris Rising: 53:49 All right, my friend. Thank you. Trevor Neilson: 53:51 Thanks so much.