In this episode, Cindy Moehring chats with Louis Bowen, CEO and Chairman of Asia Capital Management (ACM) Group. They discuss the growing ESG space in Asia, the role of investors in implementing ESG practices, and Bowen's recent work with a sustainability technology developed at the University of Arkansas!
Podcast:
Resources From the Episode:
- Dean’s External Advisory Board
- Arkansas WTC Board of Advisors
- Asia Capital Management Group (ACM)
- BlackRock
- “How to Avoid a Climate Disaster” by Bill Gates
- “The Code Breaker” by Walter Isaacson
Episode Transcript:
0:00:16.1 Cindy Moehring: Hi everybody, and welcome back for another episode of The BIS, the Business Integrity School, and today I have a very special guest because he's an alum of Walton College. With us, Louis Bowen. Hi, Louis.
0:00:28.5 Louis Bowen: Hi, how are you, Cindy?
0:00:30.3 Cindy Moehring: I'm just fine. I'm so excited to have you with us today. He's gotten up quite early. Louis is joining us from Hong Kong for this conversation. And so thank you for getting up a little early. We're gonna jump into our topic of all things ESG, which is the topic for this season of the video podcast, but let me tell you just a bit about Louis first because he has a very interesting background. Louis is the chairman and the chief executive of Asia Capital Management Limited, and he's been in the private equity and venture capital business in Asia since 1981. Prior to that, he spent nine years with Citicorp in New York, including four years being responsible for their corporate finance activities in the Asia Pacific region from '77 to '81. And in his 40 years of private equity and investment banking in Asia, Louis has been responsible for over 50 investments in a range of industries and countries.
0:01:29.6 Cindy Moehring: He's advised a number of companies on cross-border corporate finance transactions, and he currently serves on the boards of several companies in the Asia Pacific region. Now, Louis received his MBA in Finance from the Wharton School, and as I mentioned, he got his BA in Economics from the University of Arkansas. Proud to say he is a member of the Dean's External Advisory Board for Walton College, Dean Waller's board. And he is also on the board of advisors for the Arkansas World Trade Center.
0:01:57.4 Cindy Moehring: So Louis, it is a real pleasure to welcome you today to the podcast episode, and I would just love it if you could start by sharing with the audience how you got from Arkansas with a BA in economics to Citicorp in New York, and then all the way over to Hong Kong where you've been for a long time.
0:02:20.2 Louis Bowen: Thank you, Cindy, and it's my pleasure to join you and participate in this program and support what you're doing, which I think is innovative and a real support in the area of business education, a topic that I'm really interested in and follow closely.
0:02:40.8 Cindy Moehring: Well, thank you.
0:02:42.2 Louis Bowen: Yeah, my track was after graduating from the university, I was trying to decide what I wanted to do, and I thought about continuing to study economics and going to the University of Edinburgh and studying the life of Adam Smith, one of my idols, and instead, a good friend said, "No, I think you need to get a serious outlook on life, go to business school, where you can make a living." So he recommended I applied to some business schools and I did, and I ended up going to Wharton at Penn. And took up finance, and of course, that led me to New York and to join Citi Bank. And at that time actually commercial banks as distinct from investment banks, which were very separate at that time because of Glass-Steagall was just starting to hire MBAs. Up until that time, very few MBAs had been hired by commercial banks. And a real visionary in banking by the name of Walter Wriston, who was CEO and chairman at the time, said, "No, we'll just start hiring MBAs and we're gonna start sending them around in the world internationally.
0:04:00.7 Louis Bowen: And so I signed on to that program and it was really the first step towards Citi Bank developing an investment banking capability. And so I joined this particular division, and four years later, they assumed I'd been trained well enough and they asked me where I wanted to go and like all the other colleagues in that program, I wanted to go to London, 'cause that seemed to be the fun place to go. And culturally, the easiest. And anyway, I went to see the head of the banking group and he said, "Well, we've got a really interesting place for you, and it's in Hong Kong." And I said, "Oh, okay. Well, I don't know that much about Hong Kong." But anyway, he said, "No, it's gonna be all yours." So at the age of 28, he made me a vice president of the bank and sent set me to Hong Kong to find out whether Citi Bank can do investment banking in the Asia Pacific region. And that was how I got here.
0:05:03.9 Cindy Moehring: And from there you went on and formed your own company and have gone on to do all kinds of really great things in terms of investing that we'll talk a little bit about. So let's turn to that topic of ESG then. It has become quite an important topic here in the US, and you're in Hong Kong, and I wanna talk about the global aspect of that. But environmental, social and governance issues, they've been around for a long time, but they've in many respects, been seen kind of as over here on the side a bit, maybe not tied directly to the core of a company's business. I think a number of things have caused that to change lately, covid, for one, the social justice issues that have arisen over the last year and a half, business roundtables taken a different perspective on the purpose of a corporation and adopting sort of the stakeholder theory and BlackRock's statement, of course, that came out on what they were going to be investing in and expectations of their companies. So my question is, before we dive too far into all of those layers, has this fire been lit in Asia? What is it like?
0:06:15.9 Louis Bowen: Well, the short answer to the question is yes, the fire has been lit. It is a relatively recent claim, I have to say. I would say that during my first 25 years or so of investing in Asia and being involved in the financial world, there was virtually no sensitivity or interest in the subject or subjects of ESG. And frankly, it was true for all different levels of the commercial world, whether for companies, for employees or investors, and also importantly for policymakers, it's not something that was really on anyone's radar. But that really has changed, and I would say it's been about 10 years since it really started to gain some speed. Before that, before the changes 10 years, maybe going back to 20 years, there was an increasing awareness on "the E side" of things, on the environmental side, particularly as it related to cities, because the growth of Asian cities were so intense that they were bumping into problems that people wanted to... They felt that they needed solutions for. And so that began to focus people's attention and minds on that particular problem.
0:07:48.7 Cindy Moehring: Right.
0:07:50.6 Louis Bowen: And governance has always been an issue in the Asia Pacific region for a number of reasons, some of which are unique to Asia, for example, a very high concentration of family-owned businesses, unlike the United States and Europe, as other examples. And companies in Asia have historically been predominantly always controlled... I'm talking about public companies, not just private companies, have been controlled by family interests. But anyway, going back to your point is that... Or your question about the trend. The trends are definitely in the right direction in all of the areas of ES and G. I think the S is a little more difficult to get your arms around, at least it has been in this part of the world. What is really... What is sustainability? What are the components of it? And of course, one of the main components of sustainability is diversity.
0:08:53.4 Cindy Moehring: You're right.
0:08:55.9 Louis Bowen: And that's all still another interesting topic to examine in the context of Asian culture...
0:09:01.8 Cindy Moehring: Yeah.
0:09:03.5 Louis Bowen: Because of very strong predilections toward your own national culture, which often revolve around historical indigenous parties and indigenous cultures. But also in particular, the role of women in not just society, but in businesses. But anyway, so there's a lot of interesting things about Asia that have made development of ESG somewhat more challenging in areas, and still does, but at the same time, if you have a long way to go, you can make good progress...
0:09:47.7 Cindy Moehring: Sure.
0:09:49.0 Louis Bowen: I think that's the positive note about what's happening in Asia Pacific now.
0:09:57.2 Cindy Moehring: That's a very interesting context. And I wanna ask you a couple of follow-up questions on that. Are you... In Asia, are you starting to see with respect to ESG, that being tied to, let's say a company's valuation yet or its market capitalization? Are the metrics there enough to draw that tie yet and is that accelerating the efforts at all?
0:10:25.8 Louis Bowen: Absolutely. That's another characteristic I think of Asia Pacific and ESG is that I think a lot of businessmen and investors, they have to see a reason for wanting to make these changes and just because it's the right thing to do is really not a sufficient motivation. So it really started this movement I mentioned, which can be observed in a significant way over the last 10 years, really started with the introduction of foreign investors in the major equity markets in the Asia Pacific coming in and bringing the concept of having investing in companies that can show measurable movements in the areas of the ESG. And of course, it's been spotty and it's been on very specific issues, but it's expanded and now a lot of areas are being identified by international investors and they become activists in the sense of exercising the right to vote on boards. So measurements that affect people's market valuation and how they're perceived by the investing public is clearly having a bite and is important as a motivating factor to move this forward.
0:12:11.6 Cindy Moehring: So let's turn now, Louis, to some of your companies' investments that kind of fall into the ESG space. And first, can you just explain a little bit about the journey that maybe you and your company have been on in terms of when ESG sort of hit your radar screen of not just being something that's good to do, but was actually good for business too, and then roll into an example to explain that.
0:12:42.0 Louis Bowen: Right, right. Well, I would say I'll go back to the 1990s, and in the 1990s, up until that point in time, most of our focus had been on areas that were related to consumer spending. That was our original investment thinking thing. The concept being that consumer consumption in the Asia Pacific region was the major economic driver of the fastest growing region of the world. And so we wanted to ride that curve, and so we were investing in a lot of consumer businesses. And then toward... And one of the first ones that we invested in, which started to get me into and thinking about businesses where there was a need for the service, not just for consumption purposes, for lifestyle or whatever, but it was actually a need that also improve people's lives, and that was invested in healthcare services and companies involved in delivering primary care services. But what really got me going was when around the turn of the century, we made an investment in a company in the Philippines in affordable housing, and the original idea from just looking at it from a pure business perspective, the driving force there was, there was a pent-up demand for housing that was mindboggling by any standards.
0:14:21.4 Louis Bowen: There was a pent-up demand for about 5 million housing units country-wide, and it was really a question of how to be able to deliver that need and get it financed in the context of the financial system in the Philippines. And so we thought we would get into that. But also, one of the interesting parts to it was, we were given a presentation by the company and three women came to see us and they were the founders of the company, and two of them had been bankers in banks that I knew well, and one of them was a lawyer, and they came in and they made this pitch, and they just said that there needs to be a new approach to how we provide affordable housing in the Philippines, we not only need to address the social problem of the massive shortage of housing, but we think we can have a special marketing approach to this, where we focus on overseas workers. Many people don't know this, but the number one foreign exchange earner, one of the largest industries in the Philippines is actually exporting labor. This creates an additional social problem in that you have so many families that are essentially separated by the fact that one member of the family must work overseas on a full-time permanent basis to support the family at home. And what they wanted to do was they wanted to focus on building homes, first-time homes for families who have taken the step of sending a family member overseas to earn enough money for them to build their first home.
0:16:16.4 Cindy Moehring: Wow.
0:16:18.1 Louis Bowen: And they had a particular access to that which was that they brought in, as one of our partners and we agreed to invest along with this partner, which was the largest employer of overseas seamen. They were supplying about 45,000 seamen, crewmen to ships around the world. And this company had the foresight to say, "If we can provide a mechanism to facilitate their purchase of their house for their family, then this is an advantage for us vis-à-vis our competitors with the shipping companies." We invested in that and it turned out it wasn't just the three founding women. Most of the company and management were women.
0:17:04.2 Cindy Moehring: Wow.
0:17:05.9 Louis Bowen: And they were... When design communities instead of just subdivisions where they just build houses, they would put community centers in as a way of helping build community spirit of these families that had members of the family that were not there. And they just brought a completely different approach to building affordable housing. They also were the first company to engage in sustainable building materials and building practices.
0:17:35.6 Cindy Moehring: Wow.
0:17:37.1 Louis Bowen: And in all of these, the interesting thing was, as they were rolling out their plan... All people would say, "Well, what is the cost of this and how does this impact the company?" And what transpired was all of these initiatives which were addressed... Bringing social benefits to the company, absolutely positively impacted the business from a commercial point of view. They had access to a great market, and they built excellent communities, and they became one of the places to go if you wanted to build your first-time home in the Philippines. And it was one of the best places in Metro-Manila to work. So it was quite a... That was the eye-opening experience for me.
0:18:33.0 Cindy Moehring: A fabulous example. That's amazing. And I think you've got another one that it hits much closer to home here in northwest Arkansas, in the environmental/sustainability also has a tide of food safety. Why don't you tell us a little bit about that one?
0:18:52.9 Louis Bowen: Well, a little over 10 years ago, I was invited by the university to come back and talk to various people in the university about what they were doing as it related to Asia and China in particular, because the university had started an outreach program, they wanted to have better interaction with this part of the world. I think companies like Walmart and Tyson Foods and JB Hunt are doing tremendous amount of business over here, and thought that it would be helpful to increase the exposure to Asia-Pacific. So I went back and I was giving out presentations at various colleges about things that were being done as it related to China or Asia, and at the Agricultural School, division of agriculture, they gave a presentation about a unique vaccine platform that they were developing at the... With the support of the US government and Tyson Foods and others, and it was addressing diseases, these were animals that in many cases, these diseases were either endemic in the Asia-Pacific or they were certainly a major economic problem, and they asked if I could help them find commercial outlets and find a way to take this technology out of the labs at the University of Arkansas, in particularly the poultry health lab.
0:20:22.8 Cindy Moehring: Mm-hmm.
0:20:23.0 Louis Bowen: Which is the... In Fayetteville, just down the road from the campus.
0:20:26.5 Cindy Moehring: Mm-hmm.
0:20:27.8 Louis Bowen: And to make a long story short, I came back and contacted some people that I knew who understood this field, and I knew nothing about it, so I had to learn myself, and that... Well, the short of it is, is that we decided that collectively with some friends here, as well as some of my friends from Arkansas, my old friends to set up a company, and we proposed to the university that instead of just making a few phone calls, which I didn't think would really be very helpful to set up to set up a company that would in fact seed an investment, and then take a license and really proactively find out a way to commercialize the vaccine.
0:21:16.7 Cindy Moehring: Wow.
0:21:18.2 Louis Bowen: It wasn't just one vaccine, it was a whole platform, it was a technology platform. And that was 10 years ago, and we have done this, we've spent 10 years taking technology, very interesting, leading-edge vaccine technology for animals out of the lab and taking it into the fields, we've developed it in the field, we've put it in front of regulators, and then we put it now in front of the commercial world, and we had our first commercial successes a couple of years ago with our first license agreements with a major US corporation, and now we are going to expand that business by giving into manufacturing of one of our... What's called an adjuvant, which is a very important component of the vaccines.
0:22:08.6 Cindy Moehring: Mm-hmm.
0:22:08.6 Louis Bowen: And we're also going to expand and build our own internal research and development lab, and we're going to set up a major headquarters there in Fayetteville, Arkansas.
0:22:21.9 Cindy Moehring: How exciting, [chuckle]
0:22:24.5 Louis Bowen: Because we wanna be close to the progenitor of the technology.
0:22:28.3 Cindy Moehring: Right.
0:22:28.8 Louis Bowen: And to share resources in areas where we know we can get access to help from the university, so we're very excited about this program.
0:22:43.4 Cindy Moehring: That's just wonderful to hear. Well, thank you, thank you so much for partnering with the university on that... That's another really great example. This has been a fascinating conversation. Loved the examples of some of the investments that not only good for business, but good for ESG and lo and behold, it does highlight how they can be tied together. I always like to leave the audience, Louis, with some further resources that they can go to if they want to dig a little deeper into the topic, so are there any good... I don't know, documentaries or books or podcast series or anything that you think might help the audience understand ESG a little bit better or its positioning in Asia?
0:23:28.0 Louis Bowen: Now. Well, I've been reading one book and then there's another book that I really highly recommend. Bill Gates has recently published a book on climate change and how to address that.
0:23:51.1 Cindy Moehring: Right.
0:23:51.3 Louis Bowen: And I think it's really well done.
0:23:54.0 Cindy Moehring: It's a good one.
0:23:54.0 Louis Bowen: It lays on the problems and the host of solutions, and he does it in a way that's very readable, he doesn't get down into too many weeds, I would highly recommend that because it gives you a good understanding of the goal of net zero. And it talks about it in very practical terms. And I think in terms of an overall understanding about that challenge and how to address it, his book, I think is a really good read, and the one I'm reading now that I'm just finding fascinating, and this really comes down to the question about diversity, and I'm reading Walter Isaacson's newest book about Jennifer Doudna who invented the CRISPR technology and won the Nobel Prize for this.
0:25:01.7 Cindy Moehring: Mm-hmm.
0:25:02.8 Louis Bowen: And her story as well as the whole story about going back to the invention of DNA coming up through her creation and development of the CRISPR technology, which is really changing the world of biology in such a way that it's having a dramatic impact on all of us and will in the near future.
0:25:30.4 Cindy Moehring: I am adding that on to my book list tonight, and I'm gonna order that... That sounds very intriguing. Wow, that's great. Well, those are both fabulous recommendations, this has been a very, very illuminating conversation. Louis, thank you so very much for your time and for sharing your wealth of knowledge with us, and I know that all of the University of Arkansas students, faculty, and staff and others who listen to this podcast or watch the video are gonna learn a lot, so thank you so much.
0:26:02.6 Louis Bowen: You're very welcome, it's my pleasure. And if I can help in any other way, or if some of your students have questions or would I'd like to follow up in any way, I'd be happy to do so...
0:26:17.2 Cindy Moehring: Well, thank you, I appreciate that. Alright, talk to you soon, bye-bye.
0:26:21.8 Louis Bowen: Thank you. Bye-bye.
