Lauren Taylor Wolfe, co-founder and managing partner of Impactive Capital, discusses their collaborative, private equity approach to ESG-oriented activism. They highlight the potential for improving ESG without sacrificing returns, transforming industries. They also delve into their unique approach to engaging companies as activists using extensive research and due diligence. The podcast further explores the financial advantages of diversity and breaking barriers for women in hedge fund leadership positions.

HBS Prof. George Serafeim moderates a panel discussion on driving climate performance with Carter Roberts, President & CEO of World Wildlife Fund, Deb Spar, HBS professor, Bonita Stewart, Board Partner at Gradient Ventures, and Lauren Taylor Wolfe, Cofounder & Managing Partner of Impactive Capital. Topics include the role of boards in driving climate performance, collaboration across sectors, government intervention, data quality, the potential impact of the European border tax, and driving sustainability through boardroom focus on products.

My guest this week is Lauren Taylor Wolfe. Lauren is the co-founder and Managing Partner of Impactive Capital. Prior to founding Impactive she spent 10 years at Blue Harbour Group, a $3 billion activist investment firm. Our conversation is on the modernization of the activist investor playbook—how investors engage with companies to make them better and improve long term outcomes. We discuss the entire activist toolkit, focuses on what has changed the most in recent years. I’m also very excited to announce a new initiative. After years of building, operating, and investing in software, we are launching Positive Sum, a new early stage equity investing firm. You can read a bit more at positivesumadvisors.com. Now, please enjoy my conversation with Lauren Taylor Wolfe.   This episode of Invest Like The Best is sponsored by Canalyst. Canalyst is the leading destination for public company data and analysis.  If you’re a professional equity investor and haven’t talked to Canalyst recently, you should give them a shout. Learn more and try Canalyst for yourself at canalyst.com/Patrick.     For more episodes go to InvestorFieldGuide.com/podcast. Sign up for the book club and new email newsletter called “Inside the Episode” at InvestorFieldGuide.com/bookclub. Follow Patrick on Twitter at @patrick_oshag   Show Notes (2:31) – (First question) – Her background and how she landed at Impactive Capital (6:25) – Impactive’s strategy vs the stereotype of the activist investor (10:55) – Potential candidates for what they do (13:26) – How they view the small cap tech world as the space is dominated by huge companies (15:24)  - How capital allocation has evolved over her career             (15:30) - The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success (17:38) – Best capital allocation strategies and mistakes that most companies make (18:48) – The levers activists pull: cap structure; capital allocation and operating structure (22:00) – Major lessons from earlier in her career (23:25) – Major changes in Governance as part of the ESG strategy (26:13) – The issue of dual-class in the space (27:35) – Features of a pristine healthy board (28:40) – Board’s role setting incentives and objectives for management (29:55) – How she thinks about the E&S in ESG and how it helps shareholders (32:56) – Applying her strategy in a real-world example (37:40) – What they look for in a business when it comes to sum of the parts (40:29) – Businesses that are misunderstood and what she looks for in that category (41:39) – How she manages relationships with the boards (45:11) – What she has learned transitioning business models (47:08) – The rise of employee activism (50:02) – What she’s seeing in terms of diversity and inclusion in board rooms and C-Suites (53:32) – Best practices and ways to disrupt hiring (57:48) – Something she doesn’t understand well today that she wishes she did (58:59) – Kindest thing anyone has done for her   Learn More For more episodes go to InvestorFieldGuide.com/podcast. Sign up for the book club and new email newsletter called “Inside the Episode” at InvestorFieldGuide.com/bookclub. Follow Patrick on Twitter at @patrick_oshag