finance

A Global Just Transition – For Whom?

Megan Biscieglia — Fri, 17 Mar 2023 15:20:55 +0000

A Global Just Transition – For Whom?Megan Biscieglia Fri, 03/17/2023 - 8:20 am

This episode is a collaboration with Foreign Policy’s Heat of The Moment podcast and features stories from Amy Booth and Elna Schütz.

A fundamental injustice of the climate crisis is that the rich countries responsible for most greenhouse gas emissions have the money to adapt – and poorer countries don’t.

According to the United Nations Development Program, 54 countries, accounting for half the world’s population, are carrying such huge debt burdens that they simply cannot pay for climate adaptation and mitigation on their own. Most of these same countries are in the most climate-vulnerable regions in the world, setting them up for expensive and compounding disasters.

As demonstrated by the creation of a Loss and Damage fund at last year’s COP27, rich countries of the world are finally owning up to the fact that their fossil-fueled development has unjustly put developing nations at increased climate risk. But those poorer countries will also need help financing a transition to a clean energy economy.

“The good news is that vast evidence shows that it is possible to grow our economy and take care of climate on agriculture, on energy, on transportation,” says Ani Dasgupta, president and CEO of the World Resources Institute. And the reality is, we don’t have a choice. “In the long run, countries will not be able to grow if they do not address the climate because the risk or the cost of climate would be so much higher.”

And yet this transition doesn’t have to solely be morally-driven: “Research we have done shows if we did transition the global economy in the way we should; transfer to low carbon, people-friendly, nature-positive, there is a $26 trillion additional gain to the economy and millions more jobs.”

But navigating these transitions is a thorny issue, with complicated interactions between finance and international aid, economic growth, national interests, resource development and economic justice.

In South Africa, the country’s utility recently decommissioned a coal-fired plant and is using a just transition framework to help the community. While funding and plans have been put in place to help the community recover after losing its main economic engine, many locals remain concerned about their present situation.

In Bolivia, we hear about efforts to get the country’s nascent lithium mining and EV industries off the ground, including starting a domestic electric car company, and how concerns over water use and jobs are playing out in the salt flats.

This episode is a collaboration with Foreign Policy’s Heat of The Moment podcast.

Guests

Ani Dasgupta

President and CEO, World Resources Institute

A Global Just Transition – For Whom?

03/17/2023

Heat of the Moment podcast (foreignpolicy.com)

What You Need to Know about the COP27 Loss and Damage Fund (unep.org)

In Person at COP27: Funding the Global Energy Transition (climateone.org)

Wanjira Mathai on Sustainable Development and the Power of Women (climateone.org)

Note: Transcripts are generated using a combination of automated software and human transcribers, and may contain errors. Please check the actual audio before quoting it.

Greg Dalton: This is Climate One. I’m Greg Dalton. We often talk about the need for a just transition from a fossil fuel-based economy to one that’s more sustainable and healthy. That also means supporting poorer countries as they decarbonize, develop new industries and adapt.

Ani Dasgupta: All these countries were colonies for hundreds of years, where labor and resources were extracted by design, not by accident.

Greg Dalton: But it’s not just a moral calculation. There are clear financial incentives for this shift.

Ani Dasgupta: If we did transition the global economy in the way it needs to transfer to low carbon, people friendly, nature positive, there is a $26 trillion additional gain to the economy and millions more jobs.

Greg Dalton: And the reality is, we don’t have a choice.

Ani Dasgupta: In the long run, countries will not be able to grow if they do not address the climate. Because the risk of the cost of climate will be so much higher.

Greg Dalton: A Global Just Transition. Up next on Climate One.

Greg Dalton: This is Climate One, I’m Greg Dalton.

Ariana Brocious: And I’m Ariana Brocious.

Greg Dalton: A fundamental injustice of the climate crisis is that the rich countries responsible for most greenhouse gas emissions have the money to adapt – and poor countries don’t.

Ariana Brocious: According to the United Nations Development Program, 54 countries, accounting for half the world’s population, are carrying so much debt that they can’t pay for climate adaptation and mitigation on their own. Most of these same countries are in the most climate-vulnerable regions in the world, which sets them up for expensive and compounding disasters.

Greg Dalton: That means those in the developing world will likely need help from wealthy nations which caused this situation to transition to a clean energy economy.

Ariana Brocious: This is a thorny issue, with complicated interactions between finance and international aid, economic growth, national interests, resource development and economic justice.

Greg Dalton: It’s complicated. So I invited an expert to help unpack all this. Ani Dasgupta is President and CEO of World Resources Institute. He has experience ranging from nonprofits in India to the World Bank.

New analysis from the International Energy Agency shows that the richest 1% of people in the world emit a thousand times more CO2 than the poorest 1%. Of course, we want to lift people out of poverty. But I asked Ani Dasgupta: if wealth and climate disrupting pollution go hand-in-hand, how do we help people get richer without increasing emissions?

Ani Dasgupta: That has centrally become a justice conversation between richer countries and poorer countries simply because historically richer countries have produced because they become rich by industrializing, by burning fossil fuel, it’s not their fault that was the norm 200 years back. But the fact is that's how they become rich. And you go to Africa, who has produced 3% of emission out there in the atmosphere. So, then to answer the question is, you know, who should bear the brunt of paying for this right now. If an island in Fiji is going underwater because the sea level is rising, who should be paying for it? So, the last time countries came together in Sharm el-Sheikh in Egypt, the biggest win was this loss and damage fund. Rich countries finally after 30 years acknowledging that yes, this damage that is happening that you can’t recover from, if a village is going underwater from the sea level rise, you can’t adapt to it, you have to move that village. That cost, that they said yes, we agree and we should pay for it. I mean that’s just a beginning the fund is not there but agreement to it is a very important part. And that’s true inside a country. When climate related impacts take place it’s the poor who suffer. There’s a land you can’t grow crop on, it’s the poor or poorest farmer who suffered. There’s no water, it’s not the rich who suffer, because they can afford the rising cost, it's the poor who suffer most. I personally think the good news is that vast evidence shows that it is possible to grow our economy and take care of climate on agriculture, on energy, on transportation. And not only that, that in the long run countries will not be able to grow if they do not address the climate because the risk or the cost of climate would be so much higher that it won't be able to grow anymore. Research we have done shows if we did transition to global economy in the way we should transfer to low carbon people friendly nature positive there is a $26 trillion additional gain to the economy and millions more jobs. That is what the evidence is showing but how does it happen in every country is something we need to all figure out one by one and every country transition would be different.

Greg Dalton: Right. And the US has shown the US emissions have gone down while the economy has gone up so it has decoupled emissions from growth, so that's possible in a rich country. But the question is --

Ani Dasgupta: Yeah, 37 countries, Greg, in our evidence that actually has bifurcated growth and carbon emissions, and some of these countries they’re not the richest.

Greg Dalton: Right. But there seems to be underlying this conversation that kind of richer countries are rich because somehow, they've got some things that they, I don’t know, do better. And that there is, you know, most Americans don't have a passport for if you travel outside the United States. So, it's hard to develop empathy for people you've never seen. So, how do we get to a place where there's more humanization and empathy of this conversation?

Ani Dasgupta: You told me that you interviewed Wanjira Mathai who’s our head of Africa program and leader on her own right. And she said this is the gap here is a gap of empathy between countries, between people. The climate or the atmosphere doesn’t respect any national boundaries. It is across the world. And we cannot solve the problem alone without us coming together. A very good example of that, Greg, is that, you know, we all talk about climate change, quickly it becomes a discussion of energy, how we need to use different energy, how we need to move away from fossil fuel. All that is true. But at the same time there are 740 million people in the world who don't have energy access. So, for them the question is not whether there’s fossil fuel or not, the question is whether they have electricity in their home or not. So, that is a very different problem than if you have a big car and you need electric car. It's a very vastly different definition of the problem. And that is exactly why we need to have a global solution; for some countries actually the energy demand is going up and we need to support them so they can actually get out of poverty-produced energy so they don't burn fossil fuel in their homes and kitchen, which causes the biggest amount of health issues with children and women. And they actually have an alternate source of energy to cook, which is a basic, basic thing. There’s a vast amount of population that doesn't have access to that. Only point I'm making, Greg, is that the problem of transition looks very different from different countries. And I think empathy is absolutely needed but I also must tell you that I'm actually quite encouraged how the current administration and the Congress push together three of the most ambitious climate related policies ever in any country especially in the United States: the Infrastructure Bill, the Inflation Reduction Act and the CHIPS bill. But what is very interesting to me is that they frame that transition as an economic transition. You know the word climate doesn't come up in any of the three bills. They’re about shifting the economy creating job focusing on Justice40 which is what they’ve said. And I think that is the story in any country, that how do we transition our economy to a more competitive economy in the world. So, what I'm saying is if you focus on that transition if you understand that transition, you would understand what are the countries that are going through.

Greg Dalton: And that's what a group of 20, the world's 20th largest economies are working on that. They pledged to give Indonesia $20 billion to help retire coal plants early. This was seen as a huge breakthrough in funding a just transition. Yet Indonesia the fourth most populous in the world is still building new coal plants. You recently returned from Indonesia. What struck you personally there about a just transition?

Ani Dasgupta: What struck me is how difficult and thoughtful we need to be in this just transition part. So, here is a case where the government at the highest level, the president the coordinating minister, very much pushed through a commitment to reduce their carbon emission. They are a very big coal -dependent country and to reduce goal, you know, decommission actually coal fired powerplant and move toward a just transition. The world pledged $20 billion, $10 billion public, $10 billion private. Now, the complexity of this is these powerplants that are being built, they are being built because they are PLN which is the company that is the national utility, actually has long-term contract to buy power from them depending on that they actually have financing for this oil company. So, their contractual agreements that are existing already that allows these both powerplants to be financed by different country China, Korea, Japan. So, the next step is to unravel and figure out how does one take this off the table and work negotiated outcome as for the financiers for PLN to be there and solve them so they don’t go to jail because they are throwing our contract. What I'm saying is this complexity of working through is the next step. there is a political commitment then there is the economics and the financing off these transactions that’s already in the book that you can’t just wish away you actually have to work one at a time to make sure. That's one side of it to make it viable. The second side of it is to figure out what happens to employment for people who used to work in this place which is what South Africa is trying to figure out. Which is a very important part of the just transition. We’ve been encouraged, Greg, how South Africa has dealt with it, it created a commission under the president to actually look at the transition as a multiparty multi-voiced commission in South Africa. They’re lucky to have very strong labor movement who’ve been very much part of the conversation about training who gets the job. And even there it’s difficult. But I wanna say other side of the just transition which is one is to moving from one kind of energy to another. The second is a mixture of people who benefit from this transition and don't lose out. People who used to work in the older fossil fuel economy. And the third side is that we also make sure the nature positive part is part of the story it’s not just energy. And Indonesia, Indonesia has been phenomenal in the last six years in reducing deforestation that they will be net sink by 2030, which is a very important and significant. They’re not just focusing on the just energy transition, but also focusing on the nature part. I do think, Greg, they need to do a lot more on the transition of employment part which will come next as these different plants get decommissioned.

Greg Dalton: So, that's really helpful. Flipping off coal plants not so easy because there’s lots of contracts and funding intertwined with them in Indonesia and same is true in the United States as well. Jobs are a key part of that and then financing. And we talked about Indonesia, South Africa, a lot of the just transition there is actually as debts rather than just actual grants. And so, the question comes up about how to help these countries without increasing the national debt, which in international development that's been a big real problem, right, loading up developing countries with crushing debt. So, you’ve talked about they need $5 trillion to between what spent and what's needed to make this energy transition. Where will it come from and will it all come from debt?

Ani Dasgupta: So, just on the $5 trillion. The $5 trillion is how much money we would need for the transition by 2030. And it is one of this number come from IEA which is just energy transition. Remember it's not just energy we need to transition we need to transition agriculture, transportation, cement, steel all these sectors. The more conservative number has been has come from the World Bank which is about a trillion per year now. Just to give for your audience to give a sense of these how large these numbers are compared to what the current transfers are right now from the richer countries to the poorer countries to public and private sector is about you know about five to $600 billion total if you add them up. So, there is a magnitude of half a trillion gap right now and it’s going to increase exponentially as we go. So, the question is where will that money come from? I don't want to simplify this answer because it’s a complicated answer. Right now, public sector plays a big role in it, public finance domestic public finance. But if you look at the global finance, Greg, the only place this amount of money can come from is actually a massive infusion of private capital into this transition. Because there’s not enough public capital if you add up the development banks like the World Bank and the Asian Development. There’s not enough capital there. They can be very instrumental and catalytic in helping private sector move, but we need private capital flow in Global South transition which is not really happening at scale we need.

Greg Dalton: Right. And when I was at the latest UN climate conference in Egypt in the African continent spoke to a trade minister there who said that private capital sees investing in the Global South as risky. The cost of capital is higher for countries that need it most to develop their economies. So, there is risk in developing countries is there also racial overtones to that?

Ani Dasgupta: I don't know if there’s a racial overtone to that. I do think people perceive risk differently for places they haven’t worked in. A lot of these funds are big fiduciary funds like life insurance and things like that. They do need, you know, predictable capital return; your my pension might be in these funds, for example. But the fact is absolutely true if project in the United States might get funded at say 2% or 4% whatever the number is it might be 10% more expensive in Nigeria and Pakistan. The same project, exactly the same project.

Greg Dalton: Alright. And there's also corruption risks to be fair, right, in countries.

Ani Dasgupta: I think the risk people perceive are following. That historically there has been political risks, existing contracts have been thrown out by some government fiat.

Greg Dalton: The rule of laws.

Ani Dasgupta: That's why Indonesian PLN is so careful not to do that, right, for the coal one that I just mentioned. They’re careful to figure out how to do it in the most negotiated way so it doesn’t look like they’re not falling. So, that’s been one big the lack of long-term contract or long-term project. There are other kind of foreign exchange risk, risk of policy. But I do think it is possible, places like World Bank and others, and I have seen the International Finance Corporation, which is an arm of the World Bank that focus on private capital can do things to decrease the risk or assume the risk of this political risk or these policy risks that this thing. And I think these are the kinds of things need to happen. That's why the just energy transition in Indonesia is so important because the $10 billion private capital it's sitting next to $10 billion public capital. So, that 10 billion public capital definitely could be used in a way that makes it possible and attractive for private capital to flow in this project. So, you know, this is the best-case scenario, right, when there is associative public capital there that can assure, provide assurances to the private capital that this risk can be reduced.

Greg Dalton: You’re listening to a Climate One conversation about a global just transition. If you missed a previous episode, or want to hear more of Climate One’s empowering conversations, subscribe to our podcast wherever you get your pods.

Please help us get people talking more about climate by giving us a rating or review. You can do it right now on your device. You can also help by sending a link to this episode to a friend. By sharing you can help people have their own deeper climate conversations.

Coming up, a community in South Africa navigates the decommissioning of their local coal plant and the transition to renewable energy, and what it means for local workers:

Margareth Mahlangu: If you're going to phase out the coal and you're going to close the power station that is using the coal... I'm thinking of my nine year old today. When she reaches my age, how is she going to survive?

Greg Dalton: That’s up next, when Climate One continues.

Greg Dalton: This is Climate One. I’m Greg Dalton. We’re talking about how to create a just global climate transition with Ani Dasgupta, President and CEO of the World Resources Institute.

According to the International Energy Agency, the transition to a cleaner economy will create 14 million new jobs by 2030. At the same time, 5 million fossil fuel workers could LOSE their jobs. That's a net gain of 9 million jobs but that’s still 5 million people out of work. And these new jobs may not be in the same region, and will require new skills.

Ani Dasgupta: This is the crux of the just transition issue: employment. And there it is whose employment is it. the transition can replace the jobs in theory, that’s the bottom line. But the biggest issue is where are these jobs? Because these jobs are not exactly where coal plants were or natural gas plants were because there is a logic to where you can build wind energy and solar energy. There is a particular map and that’s where it is. So, the labor mobility is a very big issue of justice. And I must say I feel and we all feel that we have not focused enough on the specificity of employment. We say, you know, 900,000 jobs, 800,000 jobs but we need to focus on which jobs are changing, which jobs can be changed. And who needs training where it should be located. This is something that’s happening in states now here, not all. We just want to see more happening in South Africa but not enough granularity is not there in place. I also want to say, Greg, that the big oil and natural gas companies in the United States, for example, actually, right now have the most spendable capital in this business and much more than the government and the most trained personnel. So, if these companies actually shifted, they actually bring capital and personnel that you absolutely need for this transition with them. So, for me it would be good to see when will these companies they’re not yet in the path to transition, but when they are will be that would be a very positive shift for all of us.

Greg Dalton: Right. In fact, they're actually going the other direction. BP has backed off its climate commitments, etc. So, they’re spending capital where they get the most returns. WRI podcast on the just transition in India looked at what happened to the local community when some seemingly underused land was transformed into the world's third-largest solar energy plant. Sounds really good although the landowners got money, but the local agricultural laborers lost out. That land was no longer available to be farmed. What does that say to you about how clean energy can widen wealth gaps and as you kind of alluded to earlier, the poor often get screwed either way.

Ani Dasgupta: They do and then that's why that example is a perfect example, Greg, that we need to be much more thoughtful about not only people and employment that people in those communities are part of the decision-making. That it is not just just transition, not just everyone's getting job but communities that get impacted by whatever, if it is infrastructure about land. Land is a big issue both in the United States and in India because both solar and wind require a lot of land, transmission requires a lot of land. And a deeper understanding of who is getting impacted. So, an example very similar example in South Africa, which is a well-meaning the first decommissioning of a 60-year-old coal plant took place recently. Where they did the analysis, they said no one will lose jobs and they said they would get trained all those good right things. But it turned out, the community turned and basically said this is not good enough. If you’re giving a package that doesn't mean people are not losing jobs. And also, they said, this is all of our former employees of the company. There's a huge amount of contract, the day laborers in this that got nothing about it. So, I just want to point out you’re absolutely right, we need to understand the complexity of who is getting impacted and who is part of the ecosystem, not only directly employed by the coal plant who is dependent on the coal plant for example. And that is a bigger ask than just training of employees that actually you’re employing right now. So, this Greg, is also a political question of power and how people participate in decision-making. Because a lot of it is very top-down right now, right, if you think about just energy transition in Indonesia or South Africa, government has made a plan to do this, but how it gets implemented and how just it is. I think will not only matter for a moral side, Greg, I actually think you won't be able to implement these if people do not see benefit out of it because they won’t elect the government who is pro these things next time. It's a political issue, right?

Greg Dalton: Right. Right. And oftentimes the costs are today and the benefits are tomorrow or in the future or somewhere else. And that's one of these challenges. Developing countries are often characterized as climate victims. I spoke with your colleague Wanjira Mathai, leader in Africa. She said the problem with that framing is it makes it sound like people in developing countries are sitting around doing nothing. And so, how do you think about the language and framing because there is, we’ve learned from the last two years certainly I have how white supremacy is enshrined in the U.S. Constitution, the Global North tends to be these white countries that somehow these developing countries they’re less developed because of some kind of reason, right? There is sort of --

Ani Dasgupta: I think a big reason is that these countries that we're talking about just now all these countries, the colonies for hundreds of years where labor and resources were extracted by design, not by accident. So, you can't forget that, right, this is not by accident these countries are poor right now, poorer not there, some of these countries are not poor, Indonesia is not a poor country, South Africa is not. But they are poorer because of the extraction of labor and resources. And we need to acknowledge it. I mean that is why this is such a tricky conversation. That is why it took us 30 years to have a loss and damage fund. But I must say that I just came back visiting 4 countries. Let me list them. Ethiopia, Kenya, Rwanda and then Indonesia. And I met with senior leadership, ministers, presidents and not a single one of them think they are victims. And not a single one of them I felt, oh my god, they’re reluctantly embracing what they need to do. They are rushing forward. They know what needs to be done that climate is a reality. Their people are suffering. They need to do something and not wait around. And each one of them I can actually list what they're doing. So, I very much agree with Wanjira. I think this idea that they are just sitting around being a victim they’re just a misrepresentation. These are ambitious leaders they’re trying to figure out what to do in a very difficult situation. how do you do this. Okay, we agree just transition but what does it mean? How do you do it?

Greg Dalton: We’ll hear more from Ani Dasgupta in a little bit. But now we’re going to take a closer look at one of the examples he mentioned, in partnership with Foreign Policy’s climate podcast, Heat of the Moment. Reporter Elna Schütz visits a community in South Africa where a coal-fired power plant was recently decommissioned by the country's utility – Eskom – using a just transition framework. While funding and plans have been put in place to help the community recover after losing its main economic engine, many locals remain concerned about their present situation.

[PLAYBACK]

Elna Schütz: Komati is a small, quiet town in rural South Africa, in the Mpumalanga province. Really small. The kind where chickens run in between the houses, which are all older brick buildings and look a bit the same. The town has the same name as one of the oldest power plants in the country, built in the 1960s, and with good reason. The fate of Komati village has long relied on that of the plant and its accompanying mines. But, ward councilor Edward Nyambi explains that just a few days before I visit, in November 2022, everything has changed.

Councilor Edward Nyambi: On Monday they were shutting down the power station. So we as a community and the people that were working there, we are very, very disappointed. But we cannot do anything on that because they have explained to us that the power station is too old.

Elna Schütz: Councilor Nyambi is in a tricky situation. On the one hand, his community needs jobs and investment, like clinics and more public spaces. But, on the other, the power utility and Eskom have long supported the area, and have to fulfill their climate commitments. In fact, all of Komati is stuck in this balance. We can theorize a lot about how a Just Energy Transition should work, but here is an example of what it actually looks like on the ground, when it happens.

Sikhonathi Matshantsha: We are entering into this just energy transition phase by converting that power station into these three technologies - wind, photovoltaic and natural gas.

Elna Schütz: That’s Sikonathi Mantshantsha, the national spokesperson for the country's power utility Eskom.

Sikhonathi Matshantsha: And we are training the staff that was working at the power station to actually be technicians that can build, that can assemble, and that can maintain renewable energy components at our station.

Elna Schütz: Noella Molefe, a senior advisor from the Eskom team talked about how the existing energy infrastructure in this part of South Africa is a key reason why jobs should be able to remain in the area.

Noella Molefe: Mpumalanga is very well endowed with a lot of resources and can easily become the energy hub for the energy transition and it’s more likely to transition quickly than any other place in the country. Most of the power stations are situated in Mpumalanga, so therefore we have the grid which is already readily available to connect the renewable energy. So that is one positive aspect of Mpumlanga, as well as the people. We’ve just reflected on the unemployment rates and there are approximately 200 thousand people that can be reskilled or trained to work in the renewable sector.

Elna Schütz: While the future is bright, the immediate implementation is tricky. On that Monday, the plant is decommissioned and some of the workers or contractors are sent home. On the Thursday, Eskom hosts a town hall consultation in Komati. Many attendees are reacting to the company's plans with skepticism and derision.

Margareth Mahlangu: [Speaks Zulu then switches to English...] It's foreign to us. Whether it's good or bad for us, we have to take.

Elna Schütz: Margareth Mahlangu was born in the area and has lived in Komati since the 80s. She's worked at the power station for many years, hopping from one contract to another with different service providers. She says working for the coal plant is all she’s known.

Margareth Mahlangu: I started as a general worker, then to the cleaning service. Accommodations and logistics.

Elna Schütz: Her latest contract ended a few weeks ago, with no clear prospect of a new one on the horizon now that the station is decommissioned.

Margareth Mahlangu: Yeah, this is very difficult because there's nothing that you can do. So when you work, especially on contracts, it's like from hand to mouth, you cannot invest in anything.

Elna Schütz: Margareth is trying to help herself and the community in the shorter term by growing vegetables on a small plot of land. Still, she feels that the people on the ground aren’t being helped.

Margareth Mahlangu: So people will survive. We will live with or without. Even though we know that there are people who are going to benefit even more, not even thinking about the people that on the ground, how do they survive like now?

Carlos Vilankulos: You can’t just move to another place to work.

Elna Schütz: This is Carlos Vilankulos, he used to be a welder at the power station. He worries about finding a new job.

Carlos Vilankulos: The future is 50/50. It's like a coin. I might say we're gonna win, and I can also say we're going to lose. So we will just wait and see.

Elna Schütz: There are a lot of questions swirling around tonight and the answers offered by the Eskom representatives seem to be doing little to assuage the concerns in the room.

Consultant: What did we miss? We're trying to understand. Help us understand. [Shouting]

Elna Schütz: While the consultants and power utility representatives are clearly trying to come up with solutions in a difficult situation, for the community members suddenly sitting without jobs, the future is scary. Here’s Margareth again.

Margareth Mahlangu: If you're going to phase out the coal and you're going to close the power station that is using the coal... I'm thinking of my nine year old today that when she reaches my age, how is she going to survive?

Elna Schütz: Margareth is glad there are consultations happening, but she feels they are somewhat lacking.

Margareth Mahlangu: They've consulted with a small portion of the community, and the information that was collected, it was never given to the community at large.

Elna Schütz: But, the Eskom spokesperson, Sikonathi Matshantsha, is more optimistic about the longer term future.

Sikhonathi Matshantsha: The reality, though, is you may see initially when the power stations close some job losses, but over time, you start a new industry all together. This will be a net job creator. They are estimated at 300,000 jobs to be created out of renewables in those areas over the next 20 years, which is way more than you currently have in coal and can ever have.

Elna Schütz: Filling the gap between what’s planned and the reality on the ground will take a collective effort, that all these different players - from Eskom to the government - are trying to make central. Lives are being disrupted. But the hope is that the investments being made today will pay off not just for the climate but for the community as well. The World Bank has been working closely with the government and Eskom for many years. Here’s the country director for Southern Africa, Marie Françoise Marie-Nelly.

Marie Françoise Marie-Nelly: What we understand is that for one job lost, there will be two or even three new jobs created. Unfortunately, the challenge is that the jobs may not be created in the same area where they will be lost. And secondly, the new job may not be able to occur at the same time. So that means that there is a need to have a proper strategy to support not only the employees but also the community.

Elna Schütz: While plans have been put down on paper, whether this all works out is another question.

Greg Dalton: That was reporter Elna Schütz with the podcast Heat of the Moment, a partnership between Foreign Policy and the Climate Investment Funds. We’re partnering with them on today’s episode to bring you these stories.

Greg Dalton: You're listening to a conversation about a global just transition. This is Climate One. Coming up, a key and often overlooked aspect of this shift:

Ani Dasgupta: Every time you hear about climate you hear about energy which is obviously important. But I must point out that it’s just half the story. Most people in the world, the poor people in the world are employed on land and agriculture. And agriculture produces 35% of emission in the world. That transition is as important as energy transition. (:20)

Greg Dalton: That’s up next, when Climate One continues.

This is Climate One. I’m Greg Dalton. We’re exploring the idea of a global just transition, helped by our friends at the podcast Heat of the Moment, a partnership between Foreign Policy and the Climate Investment Funds.

Now we head to Bolivia, where Amy Booth reports on the country’s nascent lithium mining and EV industries.

Amy Booth: I’m in Cochabamba in central Bolivia. This is a beautiful city where the avenues and squares are lined with immense palm trees and intense purple bougainvillea flowers spill over the walls of the houses. You can see why it’s known as the city of eternal spring. But despite its beautiful weather, the city faces a pernicious problem: it’s so polluted here that the municipal government has declared three Sundays a year as car-free days, to clear the air.

It’s pretty clear why people living here might want to switch to cleaner forms of transport. But there’s one problem: how are Bolivians supposed to switch away from gasoline when electric cars are so expensive? Even the cheaper Tesla models tend to cost at least $40,000 - that’s more than 10 times what the average Bolivian earns in a year.

Then, a local businessman had an idea. Maybe the solution to Cochabamba’s pollution problem didn’t involve Teslas. What if there was a company that made electric cars right here in Bolivia?

Jose Carlos Marques: En América Latina el el tráfico es bastante lento. Por ejemplo, el promedio en Ciudad de México es 13 kilómetros por hora. En Lima 12 kilómetros por hora. Y no necesitamos un auto rápido como Tesla. Necesitamos algo que se mueva bien dentro de las ciudades y que al mismo tiempo sea económico.

[TRANSLATION: In Latin America the traffic is pretty slow. For example, the average in Mexico city is 13 kilometres per hour. In Lima, it’s 12 kilometres per hour. We don’t need a car as fast as a Tesla. We need something that moves well in cities and is cheap at the same time.]

Amy Booth: That’s Jose Carlos Marques, the founder and CEO of Quantum Motors, Bolivia’s first car company. They came to market in 2019, and all their vehicles are electric. On a sunny weekday morning Adriana, a Quantum employee who also owns one of the cars, drives me to the factory. The engine sounds less like a traditional car and more like some kind of spaceship. There’s a driver’s seat and room for one or two people in the back, or a large load of shopping. It’s a modest vehicle. There’s no trunk, and some models struggle with hills. But for people who live in the city, it’s a practical option to get to work or the market. Depending on the model, they cost between 6,000 and 8,000 dollars new. It’s still a lot of money for most Bolivians, but it’s a lot cheaper than a Tesla.

The factory is in a big warehouse out in the western suburbs. Near the door, teams of engineers are wiring in bright yellow and black battery packs, while further back, others hammer parts into place and spray paint the doors. In a corner, sparks fly like fireworks as a mechanic cuts pieces with an angle grinder. After a quick look around, I sat down for a chat with Eunice Muñoz, an industrial engineer at Quantum’s factory.

Muñoz: Bueno, actualmente lo que se ofrece es una autonomía de 50 kilómetros con una velocidad máxima de 50. Pero es a lo que estamos ya avanzando. Más se podría decir con las nuevas baterías de litio que tenemos de 105 amperios, que estamos llegando a una, a una autonomía ya casi de 80 kilómetros y a una velocidad superior.

[TRANSLATION: Well, right now what we’re offering is a range of 50 kilometres with a maximum speed of 50 kilometres per hour. But we’re making progress already. You could say that with the new hundred and five amp lithium batteries we have, we’re managing a range of nearly 80 kilometres and a better speed.]

Amy Booth: Muñoz just mentioned something crucial: lithium. Bolivia is home to the world’s largest lithium deposits. Together with northern Argentina and Chile, it forms South America’s so-called lithium triangle, a region that contains around 50 million tonnes of lithium resources, according to the US Geological Survey. Just under half of it - around 21 million tonnes - is in Bolivia, the largest known lithium deposits in the world. That’s more than four times as much as China’s reserves, A car battery requires around 8 kilos of lithium, depending on the model. The lithium is mostly around the Salar de Uyuni, the world’s largest salt flat. Unlike metals such as tin and silver, it doesn’t come from a mine, but rather is extracted from the brine under the surface. The solution is pumped into giant evaporation pools so it can dry out and become concentrated. Then, the lithium is extracted via chemical treatment and filtration. But while Chile and Argentina have become major producers and exporters of lithium, in Bolivia, bringing it to market has proved complicated. The Salar de Uyuni is in a remote part of south-western Bolivia where infrastructure is less developed than over the border in Chile. Many of the region’s roads aren’t paved, and there aren’t many high-tension power lines either. The government is currently in the process of selecting a foreign company to partner with state lithium company Yacimientos de Litio Bolivianos, or YLB for short, to kickstart large-scale extraction and work on increasing yields. Despite these challenges, Bolivia has started to commercialize small quantities of lithium, including the production of lithium batteries. In mid-2022, Quantum began using nationally-produced lithium batteries in its cars.

Jose Carlos Marques: Al ser Bolivia el país con las reservas más grandes, nos gusta que que seamos pioneros y que al mismo tiempo pensemos de que no solamente vamos a ser exportadores de materias primas, sino dar valor agregado a un punto que ya tenemos un producto terminado.

[TRANSLATION Since Bolivia is the country with the largest reserves, we like that we’re pioneers, and that at the same time, we can think that we’re not just going to be raw material exporters, we’re adding value, to the point that we already have a finished product.]

Amy Booth: For Bolivia, Quantum is a tech sovereignty success story showing that the country isn’t limited to exporting raw materials. But are the communities nearest to Bolivia’s lithium deposits seeing the benefits of what many hope is an incipient lithium boom? I traveled to the edges of the salt flats to find out.

I'm on the main street of Rio Grande, about 600 kilometres from Bolivia's administrative capital of La Paz. Throughout the 80s and 90s, Rio Grande made a name for itself extracting first lime, and then borax and ulexite, minerals with many industrial uses, from the deposits here, just outside the village. But now, there’s a new gig in town. About 3 miles away, YLB has built its vast flagship lithium plant, the Planta Llipi. Some people thought that would be a turning point in the town’s fortunes. Donny Alí is a lawyer and businessman who’s also from Rio Grande. The idea that his small community was about to transform into a bustling commercial hub inspired him to open the aptly-named Lithium Hotel in 2016. But the reality hasn’t lived up to his expectations.

Donny Alí: yo pensaba que teniendo aquí el centro de hospedaje, el Hotel Lithium, pues iba a ser el centro de repente de hospedaje de los grandes inversores, gente de negocios que venga por el tema de litio. Mucha gente profesional que quizás venga a trabajar al proyecto. Pero no fue así. Solamente fue una temporada que una o dos empresas se quedaron aquí de hotel y estábamos con todo full en las habitaciones.

[TRANSLATION: I thought//, businesspeople who would come here for the lithium. A lot of professional people who might come and work on the project. But that’s not what happened.

Amy Booth: So far, the main job lithium has brought to Rio Grande has been driving trucks. But Ali says truckers were disappointed to discover that the pay was actually lower than in the borax industry. What’s more, the truck driving work came with conditions attached. Unlike borax and ulexite, lithium extraction is a water-intensive industry, and he says it was part of an agreement whereby YLB gave them work in exchange for being allowed to extract the community’s water. Now, Alí and others worry that they don’t know how much water is left.

Donny Alí: si bien ellos han accedido a darnos una oportunidad de trabajo con las volqueta en el salar, no se han cumplido otros compromisos, como por ejemplo informarnos del caudal del agua de los pozos de San Jerónimo. Y tampoco tenemos la información exacta de cuánto es la explotación diaria de estas aguas y que reservas nos quedan

[TRANSLATION: Although they’ve given us the opportunity to work with the skips on the salt flats, they haven’t fulfilled their other commitments, like for example keeping us informed about the water levels in the San Jerónimo wells. And we don’t have precise information about how much water is being consumed each day and what reserves are left, either.]

Amy Booth: I spoke over the phone to Merardo Ramos Lopez, cazique - that is, leader - of Mallku Villamar, a remote Indigenous Quechua village of 580 people. Recently, Merardo went out to the Pastos Grandes lake and got a nasty shock.

Merardo Ramos Lopez: Entonces, en esa ocasión visitamos lo que es la laguna, o sea el Salar de Pastos Grandes, y encontramos actualmente la empresa YLB está en tema de exploración actualmente

[TRANSLATION: So, on that occasion we visited the lake and the Pastos Grande salt flats, and we found that YLB is currently exploring there.]

Amy Booth: The lake is on his community’s land, he said, and the community should have been offered prior consultation before works began. But even though he’s the cazique, he didn’t know about it. When he spoke to YLB officials, they told him they already had the environmental permits.

Merardo: Practicamente yo estoy molesto como cómo es posible? Ellos trabajan sin tomar en cuenta una comunidad originaria.

[TRANSLATION: Really, I’m angry. How… how is it possible? They’re working without taking account of an Indigenous community.]

Amy Booth: Dr Diego Von Vacano, a political science professor at Texas A&M university, who has worked as an advisor on lithium policy to Bolivian president Luis Arce, agrees that YLB needs to do more to consult and include local communities in the areas where it’s extracting lithium, as well as cutting down on water consumption - but going forward, there are reasons to believe it could improve.

Diego Von Vacano: I think the new technologies, again, will not necessarily use water to the extent that they have been using in Chile, for example, with very bad effects on the environment and the local communities. So I think if Bolivia makes a concerted effort on using the right technology, using less or almost no water eventually

Amy Booth: He’s referring here to Direct Lithium Extraction. That’s a new method of extracting lithium. It’s a developing technology that’s still being scaled up. But if they can get it to work in Bolivia, it would not only use far less fresh water, it would also be faster, because it doesn’t rely on waiting for water to evaporate from the ponds. In the 2000s, Bolivia largely nationalized its oil and gas industry and plowed the profits into social programmes that helped reduce poverty. Now, with gas reserves dwindling, the government’s dream is that lithium could do the same.

Greg Dalton: That was reporter Amy Booth from the podcast Heat of the Moment. Their whole season is focused on these questions surrounding a global just transition–check it out wherever you get your pods.

I also talked about Bolivia’s lithium resources with Ani Dasgupta of the World Resources Institute. We discussed the difficulties presented by mining, a historically dirty and dangerous business, even in pursuit of materials essential to a green economy.

Ani Dasgupta: They could be a dirty deal, but there are ways, Greg, for countries like Bolivia, countries like Democratic Republic of Congo which has a vast cobalt resource deposit that you need for electrification of cars. What should we be doing? We should be all should be helping these countries to develop as safe mining practices as possible and not only that, as much of the value added. So, what happened in cobalt in DRC they get mined and the whole ore --

Greg Dalton: Often by children.

Ani Dasgupta: Yes, terrible labor practices. They actually get ore and ship to another country to get processed. All the value-added jobs are not in DRC. So, this is exactly what we should be helping these countries so that they actually have a resource now that they have a developer practice that does not include children. And we know what safe mining practices look like and how we can help these countries to develop an industry that is low carbon that creates the value-added job. Because these countries, I mean we have to recognize Democratic Republic of Congo, for example, because it's close to my heart because I've met with a lot of people, Rwanda they all came, is a country that is at I think $550 per capita income, right.

Greg Dalton: And a huge colonial legacy there from King Leopold, terrible, terrible.

Ani Dasgupta: Right. So, that country if you think about it absolutely needs growth, economic growth, employment, livelihood increases up its people so that income rises, that is a political leadership that is the primary occupation to make sure a country that actually can grow. So, we need to not just talk about decarbonization, we should be talking about what is modern industrialization look like at this moment for this country. What would create employment will there be green nature positive that can protect the absolute treasure of tropical forests that the Congo has the Congo basin has a lot of it is in DRC.

Greg Dalton: So, what's an example of a model that is a just transition? Where is a case study that you say this country or this locality got it right? What’s the shining model?

Ani Dasgupta: I don’t think there’s a country that in the Global South, I can say. I do think there are examples of what could it look like. I’ll give you one very specific example that’s very fresh in my mind. Vast amount, 60% of Africa’s land is degraded. So, there’s a huge potential and a massive amount of people, more than 60% of people are dependent on land for their employment. So, you can imagine you can make the land productive it’s a huge impact for us. So, one of the programs that we are doing with the African Union is how to restore this land. So, that would seem like a good thing to do. I met an entrepreneur very small entrepreneur, three-women firm that it seems could not raise any money but got a small amount of money from this project that we are doing. Not much money, like hundred thousand or something. And what they do is they buy macadamia nuts from farmers, process them and sell macadamia nuts to the world as a commodity. So, that's what they do. And by doing this with farmers they are able to restore land because provide healthy growth of macadamia trees which is once you grow them it’s a multi. Supporting farmers to learn how to do them and take care of macadamia trees they have now 7,000 farmers they are supporting. This small firm of three people and their ambition is to support 180,000 farmers like that. This is an example for me, Greg, where you’re creating an economic opportunity to 7,000 farmers doing it sustainably providing income, creating new business that has own cycle own virtual cycle of growth. Because as I said these three women have ambition plan to grow. They just raised a million dollar in private capital. These are the kind of things we need to be seeing across the world that we actually have a plan of economic developments so people have an option otherwise we will be dependent on destroying the forest they have because there’s no other opportunity for them. That's a very visceral example for me when I met this team or this firm that what needs to happen. But one small unit at a time. There is not one silver bullet. You do this and it's done but how do you grow this new kind of economy that is supportive of the recovery we need and the shift to a low carbon future.

Greg Dalton: Right. And that million dollars is kind of it’s not microfinance it’s not big dollar project finance. And there's money out there, but there seems to be gaps in like how do someone --

Ani Dasgupta: How do you get that -- you need to do that for a million people, right, that million dollar.

Greg Dalton: Right. Yeah. And how do you find all those people and what’s the infrastructure to get to match the people with the money that's what's missing here.

Ani Dasgupta: There’s a very, very, very fantastic program we are part of it’s called AFR100 Africa Restoration Project, 100 million hectares of land that the government have agreed, actually, they have agreed to restore 121 million hectares, 31 countries are part of the African Union. This is the kind of way I feel and I want to highlight this example simply because I think too much of the just transition or transition is very focused on energy which is needed. Because every time you hear about climate you hear about energy which is obviously important. But I must point out that it’s just half the story. Most people in the world are employed on land and agriculture. And agriculture produces 35% of emission in the world. That transition is as important as energy transition.

Greg Dalton: Right.

Ani Dasgupta: And more connected to livelihoods than energy transition.

Greg Dalton: Personally, I'm worried that the underlying problems of human greed and capitalism itself are such that tinkering with the financial rules are not gonna be enough. What's your take on capitalism and can it really can we solve this energy transition and this equity transition within the structure that we have?

Ani Dasgupta: The current system of how we allocate capital is not producing the results we want at all. Because actually if you look at last every country in the world including the United States the division between rich and poor actually increasing. Our society are becoming more unequal as we go forward. But my answer to your question is I actually do not think I am viscerally against capitalism. Which means a market's ability to allocate capital to the right places that is needed. What is not happening are that is what it’s that our capitalism is not valuing the right things. It is only valuing profit of a particular kind while we are extracting from labor and from nature at free cost. So, if we had a capitalism that actually valued the atmosphere we are destroying, or the pristine tropical forest we’re destroying to produce soya bean in Brazil or labor we extracting without paying for it. We need that capitalism.

Greg Dalton: Yeah, the capitalism that values the pollination that bees do for us that helps our food without it we can’t have our food.

Ani Dasgupta: Exactly. Or biodiversity. That is critical. So, World Economic Forum published a report I think two years back saying out of the $80 trillion of global economy $44 trillion dependent on nature providing the services providing. Think about that for a second. More than half of the capital of the world is dependent yet our system that we have doesn’t reward doesn't penalize or reward you for taking care of nature or destroying it. It’s just ambivalent. So, my answer to your question, Greg. Yes, it is not we don't have a system right now that actually allows us to produce a world that would be sustainable. And all of us all seven and a half billion people will be equal parts of it. It’s just extracting one part to reward another part both of people and of nature. And we have to have a system that doesn't do that.

Greg Dalton: You have a book coming out in the fall called The New Global Possible: Seven Reasons to Feel Optimistic about the Planet. What’s your personal number one?

Ani Dasgupta: My personal -- that’s why it’s called seven, Greg.

Greg Dalton: I’m asking you to pick your favorite child.

Ani Dasgupta: My favorite child is our ability, the book is about looking backwards and seeing the mountain we have climbed that things we have done to get us here. We don't realize it. We take it for granted. That the UNFCCC look at this or we can actually count carbon. And so, the book is about that we have actually have done difficult things as a society as a human race. We need to do more difficult things. My optimism about the book is about coming together and solving problems. So, my biggest, I think can I get two?

Greg Dalton: Sure. Okay.

Ani Dasgupta: My biggest is our ability as a world to come together to solve problems.Everyone when Ukraine war took place, every article in the world said how the world is in the fragment and we will have regionalism. Remember China and Saudi Arabia selling oil and not in dollars and all this. However, by the end of the year in December the world came together in Montréal for the biodiversity conference every country actually came to get signed up to an ambitious outcome that we didn't expect it was even more ambitious than we expect. The fact that in a year that was a really difficult year of distressed war inflation that countries could come together and see the higher good the bigger good the bigger beyond us that the world needs. And it gives me hope that we can come together.

Greg Dalton: Ani Dasgupta is President and CEO of the World Resources Institute. Thank you so much for sharing your insights in your travels with us.

Ani Dasgupta: Thank you, Greg. Thank you for having me.

Greg Dalton: On this Climate One... We’ve been talking about the complexities of a global transition to a healthier and more equitable future.

Climate One’s empowering conversations connect all aspects of the climate emergency. To hear more, subscribe wherever you get your pods. Talking about climate can be hard-- AND it’s critical to address the transitions we need to make in all parts of society. Please help us get people talking more about climate by giving us a rating or review. You can do it right now on your device. You can also help by sending a link to this episode to a friend. By sharing you can help people have their own deeper climate conversations.

Brad Marshland is our senior producer; Our managing director is Jenny Park. Our producers and audio editors are Ariana Brocious and Austin Colón. Megan Biscieglia is our production manager. Wency Shaida is our development manager. Our theme music was composed by George Young (and arranged by Matt Willcox). Gloria Duffy is CEO of The Commonwealth Club of California, the nonprofit and nonpartisan forum where our program originates. I’m Greg Dalton.

17:35 Ani Dasgupta on employment transition and labor mobility

24:55 Coal-fired power plant decommissioning in South Africa story by Elna Schütz

33:45 Lithium mining and EV industry in Bolivia story by Amy Booth

45:50 Ani Dasgupta on mining for clean energy materials

49:20 Ani Dasgupta on land restoration in Africa

Play

Countdown to COP27: Feeling the Heat

Otto Pilot — Fri, 14 Oct 2022 07:01:00 +0000

Countdown to COP27: Feeling the HeatOtto Pilot Fri, 10/14/2022 - 12:01 am

The United Nations Conference of the Parties, or COP, is the annual, international climate summit that began in Rio de Janeiro back in 1992. This year will be the 27th COP — hence COP 27 – held next month in Sharm El-Sheikh, Egypt.

This year’s conference is taking place at a time when countries across the world have been experiencing raging wildfires, unprecedented heatwaves, and catastrophic floods and hurricanes. The urgent need for action has never been more clear.

The Paris Agreement requires all signatory countries to declare their own Nationally Determined Contributions (NDCs), each country’s voluntary plan for getting off fossil fuels. The plans are supposed to show that their climate targets are in line with the international goal of limiting global warming to under 2 degrees Celsius - and ideally under 1.5 degrees. But as recent reports have shown, most countries are far from actually delivering on their promises.

“At the end of the day, the question is not only are we doing enough, we clearly aren’t,” says Jonathan Pershing, deputy special envoy for climate in the Biden administration. “But are we making progress? I believe we clearly are.”

This year, the U.S. has a stronger standing on the international stage in terms of its climate commitments, thanks to the passage of three major pieces of legislation: the Inflation Reduction Act, the CHIPS and Science Act, and the Bipartisan Infrastructure Law.

“It's not a pledge, it's not a promise, it's not a regulation that might be flipped on its end. It's a congressional agreement that gives it substantial standing,” Pershing says.

Omnia El Omrani is a medical doctor in Egypt and Youth Envoy for the COP 27 President. She says the world needs to approach climate like it did the covid pandemic:

“We need the same seriousness, we need the same political will, and we can only do that when there is a health emergency. And climate change is no different.”

She’s hopeful her role will allow her to ensure the youth perspective is more fully integrated into the work of the COP negotiators. “We want to promote the concept of intergenerational dialogues where it's not young people speaking to one another and policymakers speaking to each other; it's a conversation that goes back and forth on adaptation, mitigation, and so on.”

As we look forward to this year’s summit, we can already see certain issues rising to the fore: Finance and Loss and Damage. In the context of these international negotiations, finance refers to money for everything the world needs to do to reduce emissions and adapt to future climate disruption.

Loss and Damage refers to money theoretically owed by the countries that caused the problem to the countries that are already suffering. The world’s 20 biggest economies are responsible for 80% of all climate disrupting emissions. But that doesn’t mean they are willing to accept that responsibility - especially if it means they have to pay.

Contributing Producer: Rabiya Jaffery

Related Links:
Egyptian COP Presidency Website
YOUNGO - The UN Youth Constituency on Climate Change
Climateinarabic.com

Guests

Omnia El Omrani

COP27 Youth Envoy

Jonathan Pershing

Former Deputy Special Envoy for Climate at the U.S. Department of State

Wael Aboulmagd

Special Representative of the COP27 President

Countdown to COP27: Feeling the Heat

10/14/2022

Note: Transcripts are generated using a combination of automated software and human transcribers, and may contain errors. Please check the actual audio before quoting it.

Greg Dalton: How many climate summits does it take to rein in climate disruption? I’m Greg Dalton.

Ariana Brocious: And I’m Ariana Brocious.

Greg Dalton: COP 27 will be held in Sharm El Sheikh, Egypt.

Ariana Brocious: This year’s conference is taking place at a time when countries across the world have been experiencing raging wildfires, unprecedented heatwaves, and catastrophic floods and hurricanes. The urgent need for action has never been more clear. And yet, here we are holding annual talks for the 27th time. Today we’ll be taking a hard look at the upcoming summit and whether past promises are finally being put into action.

Greg Dalton: The Paris Agreement came out of COP21. That deal requires all signatory countries (pretty much every nation on earth) to declare their own Nationally Determined Contributions — or NDCs — basically each country’s voluntary plan for getting off fossil fuels. The plans are supposed to show that their climate targets are in line with the international goal of limiting global warming to under 2 degrees Celsius - and ideally under 1.5 degrees. But as recent reports have shown, most countries are far from actually delivering on their promises. And again, they’re voluntary.

Ariana Brocious: As we look forward to this year’s summit, we can already see certain issues rising to the fore. The central problem is that everything that needs to be done costs a lot of money. That includes transitioning to clean energy to building resilience and adapting to the temperature rises that centuries of emissions have already baked into the system. It could cost as much as $5 trillion a year by some estimates. So who’s gonna pay for that?

Greg Dalton: The money questions already swirling around COP27 come in two broad categories: Finance and Loss and Damage. In the context of these international negotiations, finance refers to money for everything the world needs to do to mitigate (that is, reduce emissions) and to adapt to future climate disruption.

Ariana Brocious: Loss and Damage, on the other hand, refers to money theoretically owed by the countries that caused the problem to the countries that are already suffering.

Greg Dalton: Right. If your factory spilled toxic waste on my farmland, it seems only fair that you should have to pay for the loss and damage I suffer. That’s the argument here. The world’s 20 biggest economies are responsible for 80% of all climate disrupting emissions. But that doesn’t mean they are willing to accept that responsibility - especially if it means they have to pay.

Ariana Brocious: So these are the central issues facing the nations of the world as they gear up for COP27.

Greg Dalton: At last year’s climate summit in Glasgow, countries that make up about two thirds of the global economy committed to reducing emissions enough to try and limit global heating to 1.5 degrees celsius. The Biden administration and U.S. Special Presidential Envoy for Climate John Kerry have since been focused on getting the other third on board.

Jonathan Pershing recently served in the White House as John Kerry’s Deputy. I asked him what progress has been made in getting that other third of the global economy–China, Russia, India, Indonesia–to raise their ambition?

Jonathan Pershing: I think there's a couple of different things to unpack here. The first one is that these are countries that are significant contributors to the total. China by itself is the better part of 30% of the world's emissions. So if you think about where they are, you need them to move quickly if you wanna solve the problem. The second is that these are not countries that are not acting, or at least not all of them. It's not as if China hasn't taken any steps. China is the world's largest producer and developer of renewable power. China is the world's largest producer and developer and purchaser of electric vehicles. And in fact, if you add up the electric vehicles in China, they are the equivalent of the electrical vehicles in the rest of the world combined. Having said that, China's also developing its coal. China's moving forward on that, partly for near term demand, partly to meet reliability questions that it's got. And unless it shifts away from that, you won't be able to solve this global problem. So you've got this real tension. There are others who are much, much more recalcitrant. Countries that have perhaps taken on a public commitment but have not yet begun to take domestic action. I'd put a country like Brazil in that box, frankly. A country which has indicated its intent to get to zero carbon emissions and yet continues with a radical and rapid rate of deforestation. Now, that might change in the context of the election that's happening, but it might not, and there's an interesting question about whether that implementation is appropriate. At the moment, from a climate perspective, it isn't.

Greg Dalton: And there's other countries, India was one of the last ones to come on board for Paris. What are they doing?

Jonathan Pershing: So, I think India's fascinating. India's put itself with a 10 year lag behind. And China put itself with a 10 year lag behind the US so that means that the US is committed to getting to zero by 2050. China is committed to getting to zero by 2060, and India said we'll get there by 2070. Now, if India actually gets there by 2070, it's probably too late. And that's assuming they do get there. But let's separate now, and this is not just the case for India, but for others, what is their commitment in a public setting, like the climate negotiations, and what kind of actions are they taking domestically and what kind of trajectory are they on? India is actually ahead of itself in some parts of their domestic work. They're doing more work on renewables. They've committed, for example, for this massive, massive increase in renewable energy domestically. If they meet that number, they probably exceed by at least a decade, their 2070 target. So do you think about the fact that target is wrong, or do you think about the fact that the emissions commitments at home and the policy development is not yet robust enough, but is right? That disconnect shows up in other places as well. Countries are prepared to do more often than they're prepared to commit to in an international arena.

Greg Dalton: When President Obama went to Paris, he had two policies in hand, two pillars basically. He had the CAFE standards and the clean power plan that focused on coal fired electricity. President Biden goes to Egypt with several big laws on the books, The Inflation Reduction Act, the landmark climate and budget legislation combined with the CHIPS Act and the bipartisan infrastructure law. How has that changed the geopolitical landscape?

Jonathan Pershing: I think we're just beginning to see the changes. But let me back up one step because I think one of the things that's fascinating is to think about the implications of what Obama went with and what's happened since then. So, as you know, he had that CAFE standard and he had that clean power plan. It turns out that America not withstanding the challenges, has actually exceeded the targets set, particularly in the clean power plan. So if I'm looking at the United States from a perspective of another country, and I say, Well, you're erratic. You come with a regulation and the next administration overturns it. That's certainly true, but you're also consistent. You come with a regulation and five, 10 years later, you've actually exceeded the commitments that you made in it. So from that perspective, maybe not quite so uneven. Now compare that with what Biden's got, and it's a big advantage for Biden. Huge advantage. He's not coming with a regulatory program. He's coming with a congressional mandate. And in that congressional mandate is money and an extraordinary amount of money to implement a US provision, a US program to really reduce emissions. Perhaps helpful to briefly unpack the three pieces. The CHIPS Act, which is called Chips and Science Act, essentially has a big piece on research and development runs into programs for basic science. One of the interesting elements of the climate conversation is that a lot of experts believe that we're still missing some of the technologies that we'll need to have to implement the agenda at a price we can easily afford. It doesn't mean that technologies don't exist at all. It means they're still a bit too expensive, and so a technology focus that drives that price down feels like it's gonna be a critical component of the end use. All right, that's CHIPS. The second is infrastructure. Major, major commitments. Now, it might end up going into pretty conventional things like expanding the highway across the street, but it could also go and it's explicitly designed to open the door to go to vehicle recharging infrastructure for electric cars, to extending grid connections for large scale utilities. That means it's possible to move electric power from renewables into cities and towns where the power is needed. Basic infrastructure provisions and there are literally hundreds of billions of dollars for that infrastructure. Now add the third piece, which is this inflation reduction act, and that has come with the, the numbers that are often cited just under 400 billion dollars for climate change programs in virtually every sector. So it can build on the new R and D. It can build on the infrastructure that's coming, and it can now be incentives for companies and for individuals to purchase the things and make the things that are required. I can now get resources for my electric car, and I've got a charging infrastructure that's gonna be available. I can get subsidies and support for renewable energy, and I've got a grid that'll make that work. I can get policy support and financial support if I'm a city or a state, designing new programs that might help low income communities access some of those capacities. And now on the other two bills, there's infrastructure support for it. I can do school buses and there's support for it. So it's an enormously diverse and comprehensive set of policies. I look at that now from an international perspective, and I say the US is no longer just promising something. The US has put money on the table to deliver it, and that enables someone like John Kerry as our Envoy or President Biden when he goes out at the G20 to have a very, very different point of departure. It's not a pledge, it's not a promise, It's not a regulation that might be flipped on its end. It's a congressional agreement that gives it substantial standing.

Greg Dalton: right, and kind of protects it against a change in 2024. So it sounds like Biden's in a stronger position for reasons you described. Have any countries raised their ambition since the US passed the IRA?

Jonathan Pershing: Well, it's only been a couple of weeks. Um, so we should be clear that it takes countries a little while to think about things. I think there are a few things that have happened. I would've chosen less the IRA and more Glasgow, because Glasgow, which is last November, ended up setting the stage for really an increased level of ambition. We've seen a few countries act unsurprisingly, in some cases probably most notable is Australia, which had an election, and the election turned the politics, uh, toward a much more ambitious climate agenda. In fact, that's part of the grounds for the change in the government. There was a vision that they wanted to do more on climate. They've now announced a new target which didn't exist in the old government and therefore wasn't being presented in Glasgow. Very few others have moved at a national level. But companies are beginning to move. Investors are beginning to move. We're seeing a change in the banking sector as it looks to profitability. That's beginning to change. That quick shift and quick turnover is where things would start. I think we'll see in Egypt at this next international negotiation, whether other countries might be prepared to add to the formal level of ambition in their public statement.

Greg Dalton: So COP 27 coming up in Egypt is called the implementation summit. Countries have pledged to reduce their emissions and some have produced plans for doing so. But despite all pledges, emissions keep rising. Rebounding from the covid dip and climate induced disasters keep increasing. So what's it going to take to get countries to make good on their pledges and promises?

Jonathan Pershing: So I think there again, here, more nuance is helpful. At the end of the day, the question is not only are we doing enough, we clearly aren't, but are we making progress? And I believe we clearly are. It's extremely difficult to look at what the world would've been like had we not done what we've currently done. But that's an important thing to think about. We spent 25, 30 years now, and I believe the trajectory has come down virtually every year. If you look at the scientific assessment of where we were in the early 1990s, we were looking at temperature increases on the order of five or more degrees. If you look at where we are now out of Glasgow, less than a year ago, but with the work that was done in that 25 or 30 year period, we think that temperatures now will rise at most only about three degrees. Now– Three is too much. It's an extraordinary level.

Greg Dalton: Horrible. Horrible. That's a horrible world. It is. No one wants to. It's horrible. No one wants to live in that world.

Jonathan Pershing: But we brought it down by 60%. So we should be clear that it's not that we have failed, we're not succeeding fast enough. We have more to do, but we should not look at the policies and the initiatives and talk about failure. We should look at rates and talk about what more is still to be done as opposed to castigating ourselves for falling. Having said that, there are a couple of really, really big things, both on the positive side and on the challenges side to look at. On the positive side, we are seeing the prices of some of the critical technologies now cheaper than the conventional ones. In particular, it speaks to renewable energy. There was a very interesting study, which suggests that solar power, even in places like China now, may be cheaper than coal. That changes the dynamics. It is already the case in the US that solar and wind make up the vast majority of every single new power plant installed in the United States. And it's not only because there are some regulatory changes No, no, no. It's because the prices come down and it's cheaper. So I think those kinds of shifts are beginning to really permeate, and the rate of change is extraordinarily fast. Usually it takes a generation 30 to 50 years for a new technology to move. We're seeing this accelerated into 10 or 20 year horizons. So very much faster to get to net zero emissions by 2050.

Greg Dalton: To get to net zero, the UN estimates the world needs to spend between four and $5 trillion per year on clean energy. Recent levels have been or below 2 trillion. So that's a doubling of the rate of investment, massive numbers. What needs to be done to mobilize that amount of capital and where will it come from?

Jonathan Pershing: So I think, you also have to think not just about the amount is for renewables, but how much is the world investing in energy across the board. Actually, it's the better part of the same number. It turns out that the increment is not 4 trillion. You have to change the current investment into a new investment. So we need less than a trillion of new investment. We just need to shift the existing investment into a friendlier, greener scenario. And we are seeing that one of the more interesting developments in my mind over the course of the last year in the Biden administration has been the work that Janet Yellen and others have done in trying to capture an understanding of risk. Because when I look at risk, and I'm a company and I look at the risk for the physical changes in climate and for the policy, all of a sudden I recalibrate where my investment is going. So if I'm a company looking at making an investment in a fossil intensive sector, I'm rethinking that. That's not a good place to go. So I'm pushing my investment now into a greener alternative, into a lower carbon future. And those are becoming increasingly binding. We're seeing binding commitments in the part of Europe. We're seeing increasingly binding frame in Chinese financial markets, and we're seeing structures in the US, the Securities and Exchange Commission, the SEC to contemplate rule making in the United States. Those are shifts that will lead to exactly this change in where those trillions are going, from what used to be conventional fossil technologies into these new low-carbon alternatives.

Greg Dalton: Youth climate activists are some of the loudest voices at the COP–demanding urgent action to save their own future. But as Rabiya Jaffrey reports, engaging with climate takes different forms in different parts of the world.

Rabiya Jaffrey: For a young climate activist in the US, this is what a typical Friday may sound like

Sounds of climate march

Rabiya Jaffrey: But for Lina Yassin, a young climate activist from Sudan, Fridays sound quite different.

Sounds of Adhan, family having lunch

Rabiya Jaffrey: Lina is 24 and first got involved in climate work more than 10 years ago, when floods hit Khartoum. Lina is easily one of the most influential youth from the Arabic-speaking world involved in climate action but at the end of the week, Lina will not be found at a Fridays for the Future demonstration.

Lina: Friday is a day where I used to go to my grandma's house, with my parents and we spend the whole day at the grandma's house - and the rest of the family would come and we would connect as a family. It's also a day off. No one had to go to school, no one had to go to work. It is a holiday where people pray the Friday prayer and then just go to their families and reconnect.

Rabiya Jaffrey: So for Lina, regular Friday protests just don’t make sense in her part of the world.

Lina: I think the Friday for future is, um, a great movement and it has managed to create, um, global attention towards the climate change issue. It created a global momentum and it really did make a difference on an international level. I don't think that movement specifically can work in this part of the region because, um, it doesn't fit with our cultures and it's honestly tone deaf.

Rabiya Jaffrey: It is not just that those protests occur on the wrong day of the week. Most Arab countries are quasi-state systems and semi-authoritarian governments where protests, even peaceful ones, are prohibited by law. Lina personally experienced the risks of protesting in the Arab world when she was involved in the Sudanese Revolution in 2019.

Lina: I've seen multiple times, people being shot and I've been tear-gassed and just going out every day, knowing that there's a possibility that you might not make it out alive. There's a possibility that you may be shot or there's a possibility that you may be arrested, and tortured, or even more horrible things, that you can't even speak of.

Demonstrations are not– it's not always peaceful. Actually. It's never peaceful in, in many, many countries in many Arab countries due to the political context. And the fact that governments do not allow this - it's a red line that people can not cross and therefore no one - or the majority of people - will not be willing to risk their lives, to risk their futures, or risk their children's future by allowing them to go out and protest.

Rabiya Jaffrey: But Arab youth’s involvement in climate action matters. Young people currently account for nearly half of the population in the Middle East / North Africa region. They have historically been agents of change and have the potential to push for policy-reforms and necessary climate action. And this may be why Lina feels so strongly about putting her own energy where it might be most effective.

Lina: When I wanted to do climate activism, I started writing because for me, writing was the way to get to my community. And it was the way for me to get my message out there and do something.

Rabiya Jaffrey: But in a country with a stifled press, journalism is no less risky than a public demonstration .

Lina: Before the revolution in Sudan, whenever I had to write an article where I had to criticize the government or criticize any of their actions, my editors would either cut it out or ask me to leave my name out of the of the article for my own safety. But what I believe in is that these journalists understand their local context. They understand the challenges and they they also know ways around it.

Rabiya Jaffrey: One such journalist is Ahmed El Sabaa

Skype/Zoom dialing sounds

Ahmed: Hi, it has been so long. How are you?

Rabiya Jaffrey: As a young journalist, Ahmed had the opportunity to cover the 2018 UN Biodiversity Conference, which also took place in Egypt. He was hopeful that this opportunity would allow him the chance to establish himself and to bring issues on climate change and nature to the front pages of local newspapers.

Ahmed: I have been interested in climate change since 2018 because it is a humanitarian issue, and because climate change poses a severe threat to societies, and climate change does not have entry visas or passports and does not recognize borders, and affects the large and small, the rich and the poor.

Rabiya Jaffrey: At first, Ahmed was one of the five or so Arab journalists attending the 2018 conference. By the end, he was the only regular one. Editors just wer not really keen on publishing on these issues.

Ahmed: I challenged myself and left working for newsrooms that didn’t want to publish on climate.

Rabiya Jaffrey: Ahmed started reporting as a freelancer on climate for whoever would publish. He also took on a lot of climate reporting training opportunities, whenever he could. And then - just months later - he launched climateinarabic.com.

Ahmed: I wanted to support my other young journalist friends. I want to help them be able to write more on climate action. I also wanted to contribute to enriching the available knowledge and information on climate in Arabic. We have been able to work on some important reports in Arabic because of the support of many grants.

Rabiya Jaffrey: Today, climateinarabic.com is one of the most exhaustive sources for climate change news and information in Arabic. It has been read by over a million Arabs and is doing what many young Arab climate activists consider the absolute priority - bringing some much needed media coverage and attention to climate change in a region that doesn’t fully grasp the urgency of the issue. And, all of this, stemmed in part from the opportunity to attend a UN Conference and interact with people involved in climate action from around the world. In spite of the challenges, Ahmed and Lina are hopeful that the two upcoming climate conferences will bring in opportunities and access to Arab youth who are interested in climate action, but in a way that fits with their culture and countries. For Climate One, I’m Rabiya Jaffery.

Greg Dalton: Now let’s hear from another young person, this time on the inside track of the conference of parties. Omnia El Omrani is a medical doctor in Egypt and Youth Envoy for the COP27 President. She talked with Climate One’s Ariana Brocious. Dr. El Omrani says she became a climate activist because she feels an ethical obligation to respond to the biggest global health emergency of the 21st century.

Omnia El Omrani: When we think about climate change and what leads to climate change for example, global carbon emissions that lead to air pollution, which leads to the death of 7 million people every year. And then when we look at food and water insecurities that has been accelerating and becoming more acute as right now in 2020 alone there was an additional 68 million people who had acute food insecurity because of climate change, also because of COVID and conflict. And then this leads to malnutrition for children it leads to the stunting of their growth and it impacts their development. And then when you start to think about the extreme weather events that we're seeing whether it's the flooding in Pakistan, for example, the hurricanes and all the different extreme weather events which leads to people losing their lives getting injured, losing their homes losing their jobs, which means that they also lose access to healthcare services. And then in Africa specifically we also see an increase in infectious diseases because now the temperature is increasing, the vectors are increasing in their capacity and in their livelihood and they’re transmitting more diseases. But what I have seen personally now being a doctor in Cairo in one of the biggest public hospital that we have. I work with patients every day, especially in the summer that suffer from acute heat stress, exacerbations of asthma because of air pollution. But also, and most importantly, as a climate activist, I see many young people like myself suffering from anxiety because of their worry about the future, suffering from PTSD because of being exposed to such extreme weather events. And also, depression because of the worry about the future and being you know the most impacted with the least decision-making influence in climate policy.

Ariana Brocious: And we’ll get into the climate anxiety in just a minute here because I wanna ask a little more about that. Taking all of what you just said, how does viewing the climate crisis as a health crisis inform what the response should be?

Omnia El Omrani: As we know there is the IPCC report which is the Intergovernmental Panel on Climate Change that is released every year. And this report is the scientific evidence that we use in our negotiations, especially when countries align during COP. And for the first time this year they refer to climate change as a threat to human well-being and human health. And it was said that it was a code red for humanity. And this is what we learned from COVID, for example, when the COVID-19 crisis hit, countries acted with urgency, they put on lockdown and they did a lot of measures in no time. And this is what we need for the climate crisis. We need to see the same seriousness; we need the same political will and we can only do that when there is a health emergency. And climate change is no different, especially climate change is also a justice issue which disproportionately impacts the health of the least developed and the less developing countries who are the least contributors, but also it impacts women more than men. More women are exposed to indoor air pollution than men. And most importantly, when we think about intergenerational justice because children and adolescents are also affected by climate change, health impacts in a disproportionate way similar to also the elderly population, especially when it comes to acute heat stress.

Ariana Brocious: Yeah. So, here in the US when a group of doctors tried to frame gun control as a public health issue. They were basically told to stay in their lane. So, I’m curious what's been the response in Egypt to framing climate as a health issue.

Omnia El Omrani: So the first challenge when it comes to addressing climate change in a health frame is actually from the health community. Because you need to transform the way climate change is seen and bring it closer to the medical community. Once they understand how our health as humans is linked to the health of the environment it is what sustains us. And health is not about treating disease; it’s about prevention and it's about the determinants of health, social, environmental and economic determinants. And right now, as I always say that it is an obligation, ethically, not just to treat my patients but to promote and protect the health of our communities. As doctors and as the health community we are the trusted voice and the trusted messengers. And we need to be the advocates for the biggest health threat of our century. In addition, it's not just about the health impacts of climate change. It's also about the health core benefits to climate action. When we promote sustainable solutions or behaviors like for example if I choose today not to take my car, I'm going to use public transport I'm going to walk or I’m going to cycle. Not only is this good for the environment because I'm reducing my carbon footprint. It's also good for my health, my physical health is better the risk of noncommunicable diseases decreases and then my mental health is also better because I choose to do physical exercise. And the same goes for example, investing in renewable or clean energy. This means cleaner air, less respiratory diseases, better physical and mental health.

Ariana Brocious: Yes. So, how have you personally been affected by climate disruption?

Omnia El Omrani: It started when I was doing actually an internship in Miami. I was doing emergency medicine. And it was my first time ever to go to the US. And I was on my own and during the second weekend of my training there was Hurricane Irma. It’s the first time for me to be exposed to an extreme weather event and I had to evacuate my home. And then I went to the hospital and I started to see the impacts. We do not have mortalities, we had a lot of injuries coming into the hospital. But what I also saw that many people had their either their houses were lost or were destroyed or they lost their jobs because also their workplaces were destroyed by the hurricane. And this impacted their access to the basic services that they need which also affects their health. And this was the turning point for me because during that year I went to the climate change conference in Poland because I was really interested to learn how I can contribute and tackle this issue.

Ariana Brocious: I think it's interesting that the example you cite of experiencing climate disruption was in Miami in the US here rather than in Egypt, which is I think for listeners, you know, it just drives home the point that we’re seeing this everywhere. It's obviously not limited to any particular part of the world, though, as you said some parts of the world are suffering more right now because of lack of resources and other issues that are gonna be brought up at COP. As you mentioned, young people all over the world are increasingly suffering from climate anxiety and other climate-induced mental health issues. So, as a doctor in Egypt what are you seeing and is this being discussed and addressed by the medical community there?

Omnia El Omrani: So, I remember when I started working on climate change the very obvious thing that we all address is always related to air pollution or food and water insecurity. And it was very challenging to talk about mental health because there was not enough scientific evidence or research done to explore how climate change affects mental health. And then in Egypt specifically, young people learn about climate change. They learn about its impacts through how interconnected we are with social media and how we talk to one another. But then it's very uncommon to see climate solutions being discussed and what they can do on an individual level, what they can do with their community, with their friends, with their families. And that is why climate education is so important to address eco-anxiety because, A, you empower children and adolescents and young people to understand what this climate change and their role in this crisis and then what they can do together to address the climate change and this really helps them cope. And now because COP is happening in Egypt, which is an amazing momentum for every host country where there are so many grassroot initiatives being led especially by the health civil society organizations, youth-led organizations. Right now, we are organizing the conference of youth which is going to happen right before COP. We have organized already six local conferences over six cities in Egypt that look at climate change across all disciplines. And they are going to have the conference of youth which is COY, right before COP in Sharm El-Sheikh in collaboration with the Youth Constituency YOUNGO. And this really brought in a lot of interest and personally my university has reached out to me to work together to integrate climate change in the curricula of doctors and healthcare professionals. And we have already started developing the course and we had another opportunity to integrate this course across all African universities.

Ariana Brocious: So, you're talking about there being lead-up events to COP 27 how much space is going to be given do you think to youth and other members of civil society during the conference in the lead up in the weeks leading up and maybe after in Egypt itself for climate concerns to be addressed.

Omnia El Omrani: Yhis year one of the key priorities that we had as the presidency is to bring in a transformation shift when it comes to the engagement of, A, civil society organizations, B, youth-led organizations. Because we believe that it's not only about their presence or their participation; it’s about their meaningful engagement and the delivery of their inputs into the negotiation process. And that is why, for example, I myself it's the first time ever, the presidency creates a position for a young civil society representative to be part of the team as the first ever envoy on youth to be the link. And to bring in the perspectives the solutions and the calls to action of youth both in Egypt, Africa, and globally, and feed it directly into the work of the presidency. Because normally during each COP, there is the conference of the youth and then there is a statement being developed and then the statement goes to the presidency. And that is the only way where young people engage with the presidency. But this year in Egypt we wanted to bring in a new and a consistent and a meaningful shift in how youth perspectives are integrated for future COPs to have future envoys. And this is what we want to promote the concept of intergenerational dialogues where it's not young people speaking to one another and policymakers speaking to each other. It's a conversation that goes back and forth on adaptation, mitigation, and so on. We have also collaborated with civil society in Egypt and our ministry of youth has launched a caravan that is going right now to 26 cities all over Egypt. In each city the caravan works with all the different UN agencies in Egypt and young people and together we build that capacity. We do a lot of capacity building initiatives, activities, creative thinking, arts, performances to really build climate awareness and understanding and mobilize the climate advocacy with the civil society, government and the communities including youth leaders all over the 26 cities in Egypt.

Ariana Brocious: That’s a lot. How important is it that this year's summit is being held on the African continent?

Omnia El Omrani: So, it’s the first time in six years that COP is in Africa. COP 26 had an incredible achievement when it came to the goals of mitigation. But it was not the same for adaptation for example, and this is what we want to bring in is to have commitments and implementation mechanisms for the goal of adaptation and climate resilience as well as loss and damage. Because in Africa also the continent with the most youthful population where we have over 400 million young people, but we also have one of the greatest you know vulnerabilities to the impacts of climate change. And we need to have and to mobilize climate finance not just for mitigation but also for adaptation because until now only 2% of climate finance from the private sector is allocated for adaptation.

Ariana Brocious: So, in your role as a youth ambassador, how do you plan to help put finance and loss and damage at the center of the COP 27 agenda this year?

Omnia El Omrani: So, what we’re doing first is to build the capacity of already the young delegates who are going to COP but also youth in Africa, especially. So, that if they’re not going to COP, they will be able to influence the position of their countries who will be there. And then during Africa climate week I did a consultation with the African youth. We had around 100 young leaders and we started discussing how can we have a meaningful role in driving our priorities, which also includes increasing investment and increasing commitments and implementation mechanisms for loss and damage for adaptation and the issues that impact our continent most. And then what I'm planning to do with the presidency team is to utilize all these inputs and feed them into the global youth statement which will be presented at the conference of youth and then presented to the presidency, which is going to be the key advocacy tool that the young delegates who will be there at COP will use with their heads of delegations with the different organizations parties nonstate actors to drive the agenda towards adaptation, towards increasing climate finance and loss and damage.

Ariana Brocious: You’ve participated in past COPs and Greta Thunberg has famously described them as “blah, blah, blah.” What do you think of that assessment by her that these annual summits are basically just talk and not enough action?

Omnia El Omrani: I understand how negotiations and the climate policy making space is very slow. And you have to be very patient, persistent. But I believe that as young climate activists and advocates we have to be part of this agenda and this conversation and these conferences. Because what countries agree on at the conference they implement when they go back. And even if they do not implement, we as young advocates we can hold them accountable. We can ask them, and we can work with them to implement their own commitments. Being at these conferences you will not see instant change but you need to be part of the policy change and contribute to you know seeking, A, the evaluation of the progress. B, the implementation of the commitments. And it’s very important to acknowledge that it's not just about COP it's about what happens before COP where all the decision-making where all the consultations that countries do on a local level then translate into their position at COP.

Ariana Brocious: You're 27 years old. This is COP 27 this year. These UN conference of parties on climate have been going on for your whole life. How do you feel about that?

Omnia El Omrani: For me personally I always love; you know, I recognize that there are many challenges that we face. But for every challenge there is a solution. And for every solution we need to be patient to see the impact that we do, especially in the climate space. I understand how you know the political inaction and how slow policies are especially in the climate space are moving is also challenging especially that I work as a doctor and I see the health impacts and I understand how it's such an emergency to address. But then with the COVID-19 pandemic I saw, I felt that there is hope because I saw the political will that the climate crisis can have. And now the narrative is shifting and I am very inspired to see that one of the reasons why the climate movement was completely changed and amplified was because of grassroots youth efforts. Climate space is an example of how youth can be meaningfully engaged in the policymaking process but also being you know, leading their communities. And this is so important for me and this is why I love advocating for climate change because I see that I worked in different areas my whole life but climate change for me is the biggest challenge of our time, but also an opportunity for a healthier world for me for my children and grandchildren. And it's an obligation we need to give them the world that they deserve and to really promote and protect their health, so that they can live in prosperity with the future that they deserve.

Ariana Brocious: Omnia El Omrani is a medical doctor and the official COP 27 President Youth Envoy. Thank you so much for joining us on Climate One today.

Omnia El Omrani: Thank you for having me.

Greg Dalton: At this year’s climate summit the issue of who should pay for loss and damage caused by climate change is expected to be a central focus. Just 20 countries are responsible for 80% of the world's greenhouse gas emissions. By and large, these wealthy large emitters are better positioned to weather the impacts of climate change than the poor countries who haven't contributed to the problem. In my conversation with former Deputy Special Envoy for Climate Jonathan Pershing, I asked him how he views this larger question of what is owed to nations facing the brunt of climate impacts.

Jonathan Pershing: I think it's useful to think about a spectrum. John Holdren, who used to be President Obama's science advisor, I think really put it beautifully. He said, There are a series of ways to look at climate. You can mitigate. That's what you do if you're trying to reduce emissions. You can adapt, that's what you can do to successfully manage the increase in both temperature and associated climate risks. Or you can suffer. Suffering is what happens to the stuff you can't mitigate, and to which you cannot adapt. I would put Pakistan into the suffering category. I would put Florida right now into the suffering category. What do you do? There's two timeframes. There's the timeframe of the immediate catastrophe. In as a hurricane is a perfect example. Immediate recovery is clear and the US and other countries in Pakistan, and these examples of mega droughts and deep crises actually come to the aid in the immediate aftermath of a crisis. The problem comes longer term. In three months how much resource will be available? If we look back at Hurricane Katrina, how much is available today as that region is still recovering from a storm that's the better part of a decade ago, and we have resources. We're a wealthy nation. What does it do to a country in the Caribbean after the third storm in 15 years comes through and every five years it's wiped out? What does it do when 30 million people are displaced in Pakistan and there'll still be displaced in enormous numbers five years from now? That's where this thing comes in. But now you have a problem. Because most countries that have resources don't think to make scaled transfer of resources from their own coffers to those of someone else. Our development assistance is relatively small in the context of these damages. All development assistance is measured in numbers that are around a hundred to 200 billion a year. The Pakistan example, one country is between 30 and 50 billion just for this one event. There isn't a resource scaled appropriately, so we'll have to find new ways to think about managing these crises. I don't think that the meetings in Egypt or the conversations so. Have moved into these practical solutions. I don't know even what they all are, but the problem now is it's very much in the red here and the kind of advanced space of, we need help, we need money. And not in the space of here's how we can think about this creatively to find long term workable solutions.

Greg Dalton: Yeah, it's a really tough thing. Politicians are not usually inclined to send money to people who can't vote for them. John Kerry got a little testy on this subject of loss and damage at a recent New York Times event when an audience member challenged him to “step up and actually put money into loss and damage.” You worked for John Kerry. Let's hear a little bit of his response and get your reaction on the other side.

John Kerry: And you can’t just set up a facility in six weeks. Let’s be serious about this. We got to talk about how we're going to do it, how do you measure it, how do you allocate what do you allocate, where's the money coming from? you think this Republican Congress where we couldn't get one vote for this legislation is going to step up and do lost and damage good luck. so I'm in the zone of reality. If we don't lower our missions we're croaked. Absolutely croaked and if we don't adapt starting now the things that we can adapt to a whole bunch of people are going to be hurt. 15 million people die every year right now because of the air quality that we have today. 5 million people are dying every year because of extreme heat. That's going to get worse. So I want to mitigate. And there's plenty of time to be arguing, pointing fingers and doing whatever but the money we need right now needs to go to adaptation, it needs to go to building resilience, it needs to go to the technology that's going to save the planet.

Greg Dalton: Jonathan Pershing, as John Kerry's former deputy in the White House. What's your reaction to that? Is loss and damage on the table? Should it be a topic of discussion?

Jonathan Pershing: Well, we should be clear. It is on the table. I think the question, the right question to me to ask is how do we cope with it? And I think what John Kerry was saying is one of the ways you cope with it is you think about putting into context. It is one of a set of things. If it is the exclusive thing about which we are having our conversation. I don't think we'll succeed. Now, it doesn't mean that you don't do anything. You're gonna have to figure out some way to manage these damages to which you cannot avoid and which you can't mitigate. So what do we do with some of those really catastrophic circumstances? I've heard a couple of interesting ideas that are beginning to percolate in the system over the course of the last few. So, for example, uh, one of the ideas that's there is as a country tries to recover from one of these massive catastrophic events, could you suspend its debt payments? Well, that's an interesting idea. Maybe you could, Here is a model that says you don't forgive them because ultimately you want the country to come back and be part of the dues paying global society, and you can't borrow money and expect just to never have to pay it back. But is there a mechanism where you could suspend it for a year or two while they recover from a catastrophe? That's actually plausible. Could you imagine a model in which you look at recovery in a somewhat different way, not just the immediate post-disaster recovery, but are there insurance kinds of funds that could be scaled up, perhaps in part underwritten by government, perhaps underwritten in part by the World Bank or the International Monetary Fund, where those kinds of instruments and institutions could create some scaled capacity? We do this from time to time. We've done it in the debt crises that we've seen over the last several decades where the IMF does step forward and help countries manage those debt issues. They're gonna go into debt to recover from these crises again. Maybe this is an intersection that we could explore. It is gonna be a discussion that will be contentious. It is tied up in so many issues of historic interest and concern that make it a fraught conversation at best. But we're gonna have to start thinking creatively. We're not yet there. I don't think we'll be there at the Sharm el Shiekh meeting in Egypt either.

Greg Dalton: So Jonathan, I have the privilege of talking to lots of different people from different perspectives. And yesterday I spoke with a woman from the global South, from American Samoa. And you know, if I were to anticipate how she would respond. Answer about the north saying, We will suspend your debt payments, the rich countries' loaned money to a developing country, and we'll suspend your, your interest payments, et cetera. Someone from the global south or Pakistan might say, What about the debt that's been inflicted on us, the costs of climate change that we didn't cause and where is, you know, how is that measured? That's not on the balance sheet of the IMF and the multilateral institutions. People in the South have, are suffering something? Where is that accounted for? Is there, um, a moral obligation for us to recognize the cost that we have inflicted on the global south? My lifestyle, yours, everyone listening to this, our lifestyles have inflicted cost and damages on people, but it's not showing up on the balance sheets.

Jonathan Pershing: So listen, I think that there's always two sides of every argument, and I think that's one of the sides of this argument. Uh, and one of the real issues around assistance is how to think through support for countries that had virtually no contribution to the problem and bear so much of the impact. Having said that, the other side is the political reality of the unwillingness of countries to make transfer payments.

Greg Dalton: Yeah, yeah.

Jonathan Pershing: And it's not as if by saying we wish it were different, that it becomes different. It doesn't mean that we excuse it. It means that we have to recognize the space in which we operate. And so what I've often tried to do is to find the practical places that you can make. I believe there is progress to be made on all three of these buckets. I believe there's progress on mitigation. We're beginning to see it. There's less on adaptation, but I think people are beginning to think that through. And there is now some interesting thinking on this suffering piece. And that suffering piece directly speaks to this moral question, as well as the practical realities of managing in the aftermath of what are gonna be more frequent. More regular and more severe consequences,

Greg Dalton: in his opening remarks at the most recent UN General Assembly, Secretary General, Antionio Gutteres, accused oil companies, quote “of feasting on hundreds of billions of dollars in subsidies in windfall profits while household budgets shrink and our planets burn.” He called for developed countries to tax the windfall profits of fossil fuel companies and redirect it to countries suffering loss and damage caused by burning their product. What do you think of that idea?

Jonathan Pershing: I think it's got both an appeal and a set of problems. There are very clear indications from the economics community about much better ways to pass revenues around. If you really wanted to offset the cost for low income communities, you wouldn't subsidize oil and gas. You'd subsidize renewables, you'd subsidize local access. Yet we don't because there are political power systems in place that preferentially treat certain kinds of outcomes. So I think we can wish this and we can push for this and we can fight through power of the streets and through our elected representatives and through pressure to try to shift some of the power dynamics. But we also need to be clear about what else we might do that would have a better chance of longer term successes.I think there are a few. I think we ought to be pushing back on these same companies to have regulation that requires them to decarbonize. There's an enormous amount of money in the decarbonization agenda. These companies, in some cases, are the right ones to move things around. I'm gonna have to move hydrogen around. These companies can do that for me. I'm gonna actually have to move carbon around and sequester it. These companies can do that for me. I'm gonna need to think about renewable options at scale and supply chains that are global in nature. These companies could do that for me. So I think we wanna think about opportunities. I think the sticks, while they're very attractive politically, have very seldom been implemented, and we might wanna find some other models for more success.

Greg Dalton: So yeah, encourage the positive rather than punish the negative. Uh, The Kigali Amendment to the Montreal Protocol was recently ratified by the US Senate. This is huge on so many levels. Didn't get as much attention as I think it deserves. First, the international treaty phases out the production and use of hydrocarbons or HFCs. These are chemical refrigerants and powerful greenhouse gasses, so powerful that if Kigali Amendment were fully implemented, this would reduce global warming by half a degree celsius. That's huge. It's also big news because it's the first time in 30 years the US' Senate has ratified an International Climate Treaty and it was done in a bipartisan way with 21 Republican votes joining Democrats. So what does this tell you about the potential for more bipartisan and multilateral action on climate?

Jonathan Pershing: So, I think it's fabulous. I think it's extraordinary. Um, a few things about this. The first one is that the bill itself required domestic legislation. The domestic legislation was actually passed in 2020. It was passed under a Republican controlled Senate. It was passed under a Republican president. We're now ratifying a treaty, which is, requires the domestic implementation, and that was ratified under a Democratic controlled house with a Democratic Senate and a Democratic president. What you've got is this fascinating model in which both parties have agreed you can do this. It's not the only one. The act itself was not just about Kigali in 2020, it included some of the precursors to the infrastructure bill. The infrastructure bill itself was passed with bipartisan agreement, and the science and CHIPS act was passed with bipartisan agreement. So clearly we're in a place where now you can move on a bipartisan basis going forward. The other piece which I would take note of is that a treaty has enormous standing. It is startling and quite disappointing that it's taken 30 years between the last climate agreement, which was in 1992, and this one in 2022. And yet I think it does begin to show that the US could be an active partner, a successful partner in a multilateral regime, a multilateral system; that gives me quite a lot of hope.

Greg Dalton: How are you feeling right now about climate momentum and what do you personally hope and expect will come out of COP 27?

Jonathan Pershing: So I think that I look for the pragmatic. So to me, the question is not what would I love to do if the world were perfect, but what can I do in this world as we have it? And in that context, I am seeing progress. I think the tension is not just are we moving or not, the tension is are we moving fast enough? And the clear answer is no. We are not moving fast enough. If we had 50 years instead of 25 years, I'd be incredibly optimistic about the progress we're making. That 25 or 30 years of difference in time means we're probably going to face much greater risks than I would like to see. So the question for me now is where are all the steps that we could take to do that next thing that would move us in the right direction? How do I incentivize companies to make more investments in zero carbon options? How do I get people to make those choices? What am I doing for the farm community, not just in the us? But globally, how am I thinking about how I recover from damages that are likely to get more severe and continue to enable our economies to advance on a zero carbon trajectory instead of taking all of those resources and paying for the damages? Here's a very narrow case. Look at the consequences now in Europe, because of the Russian invasion. One of the things that we're seeing is that development assistance that had been available to go outside of Europe is now turned to refugee crises and economic constraints inside of Europe. That's an immediate crisis in Europe that is gonna slow down what might have been a rapid transition to zero carbon globally. And yet, with that, Europe is also using this war as part of its rationale for accelerating its transition, because in fact, security and energy supplies is lower if you're on a renewable trajectory than if you rely on gas from Russia. So here is how the complexity plays out. It's both good and bad. Let no crisis go to waste, right? No opportunity should be foregone. But deploy those moments, use those moments, accelerate wherever you can.

Greg Dalton: Jonathan Pershing is former Special Envoy for Climate Change with the US Department of State and now program director of her environment at the William and Flora Hewlett Foundation. Jonathan, thank you for that fascinating walk around the world.

Jonathan Pershing: It's been a great pleasure. Thank you.

Greg Dalton: COP 27 is being framed as “the implementation COP” where the stated goal is to move from negotiations and planning to action. Negotiations are notoriously slow, because the COP follow a consensus process, where every country has a voice – and therefore essentially veto power.

Wael Aboulmagd is Egypt’s ambassador to Brazil and the Special Representative of the COP27 President. He joined us from Cairo. I asked him if the shift in focus from negotiation to implementation means that the process will be even slower this year, because implementation is hard.

Wael Aboulmagd: No, actually I’ll surprise you with some good news. We need to have a lot of good news coming up. The pace that which multilateral negotiations go forward is the slowest imaginable simply because the fact I just mentioned. Essentially that you’re seeking the lowest common denominator that will enjoy these 190 sovereign states with varying interest and understandably so. So, we’re not kidding ourselves we’re part of this and we know how it works. The action agenda the implementation side doesn’t suffer from that ailment because you don’t require every single entity or government come on board. So, with the methane pledge for example, which is an implementation tool, obviously, and other initiatives that we’ll be watching. You’re welcome to join, if you don’t like it, don’t come but we like everyone to come on board. So, you’re not waiting for the 190 disparate voices to come on board. You’re willing to start with the few who are convinced that this is something they’re willing to commit to. And you can use that and compare with a number of the initiatives that we’re launching. We’re launching something on agriculture. Something on water resource management. We have something dedicated to Africa, you mentioned that earlier on. We have a very successful social security kind of program for industries and multiple people that are affected by climate change that we’re scaling up. It’s been implemented that is called decent life. And this is being scaled up for Africa and we’re presenting it. There’s a waste management initiative. Waste management is of course an environmental issue but also has emissions sides to it. So, and that’s for Africa as well. So, there are a number of initiatives these are all action oriented. That's why we call it the action agenda and that is the definition more the implementation of the implementation narrative that we’re talking about.

Greg Dalton: That action costs money and yet investment tends to go to countries that need at least because they’re perceived to be less risky. So, what could be done to encourage private capital flows to be directed to fuel that implementation you’re talking about?

Wael Aboulmagd: You’re spot on on the finance side. But in tailoring all of our action agenda aspects we did nothing alone. We held workshops and seminars in Cairo in our building here for the MDBs, for private sector and for governments from around the world. We had two or three rounds of these talks and we tweaked and fine tune some of the narratives that we were creating to ensure the broadest buy-in by as many partners from outside governments. Of course, we have the beneficiary governments but you want the development partners and the developed world to come on board. We want to the MDBs to be there and you want private business to come in. But to your point, there is a problem with global climate finance. And the reality that you just pointed to is fully accurate in private business is defined by seeking profit. So, there are opportunities and the overwhelming percentage of private business goes to be invested, A, in developed countries and, B, in mitigation efforts which is fine, that is good. We need to reduce emissions. But what is the flipside of that is that adaptation is completely starved of private investment. And this threshold or yardstick of bankable projects that everyone is preaching to the world just doesn’t apply to adaptation or a very, we need to stretch your definition of adaptation to find a project in protecting Egypt’s delta from the rise of sea level where there’s a profitable project. So, we need to find the formula that ensures that whatever non-profit driven monies are focused more on the adaptation side. I had this conversation a couple of weeks ago with philanthropists. The world’s largest philanthropists were there and I told them you guys are not there in it for profit. You’re benevolent, you are noble, you want to make a difference. Yet, A, and these are figures from the US in particular, about 2% of all US giving is going to climate, okay. That’s number one. Number two, whatever money is going to climate is going to climate in the US in the country of source. C, or three, it’s not going to adaptation. I looked at charts that are identical to those of the private sector and I thought, you know, you guys should be the flipside of the private sector. You should be going to where the need is most and no one else is going and say I’m making a difference. But if you’re philanthropy money goes to where the private money goes, it’s a drop in an ocean because you’re a fraction of what is being becoming available from the private sector. So, why not increase the impact by going where they can unlock technologies, we didn’t mention technology finance is important. But to move to renewables or to adapt technology is key. And you mentioned it with the price when the price dipped of renewables, that’s when Egypt started building our one of the world’s largest solar farms. If the prices had not dipped, we wouldn’t have been able to set those targets. So, philanthropists’ private money that’s part of the finance.

Greg Dalton: Wael Aboulmagd is the Special Representative of COP27 President. Find our full interview with him on our podcast feed. Climate One will be on the ground in Sharm El Sheikh. Subscribe to our podcast to catch all our episodes from the climate conference.

Climate One’s empowering conversations connect all aspects of the climate emergency. To hear more, subscribe to our podcast on Apple or wherever you get your pods.Talking about climate can be hard-- but it’s critical to address the transitions we need to make in all parts of society. Please help us get people talking more about climate by giving us a rating or review if you are listening on Apple. You can do it right now on your device. You can also help by sending a link to this episode to a friend. By sharing you can help people have their own deeper climate conversations.

Brad Marshland is our senior producer; Our managing director is Jenny Park. Our producers and audio editors are Ariana Brocious and Austin Colón. Megan Biscieglia is our production manager. Our team also includes consulting producer Sara-Katherine Coxon. Our theme music was composed by George Young (and arranged by Matt Willcox). Gloria Duffy is CEO of The Commonwealth Club of California, the nonprofit and nonpartisan forum where our program originates. I’m Greg Dalton.

Climate on the International Stage

8 Episodes

Play

Molly Wood on Tech, Money and Survival

Otto Pilot — Fri, 16 Sep 2022 07:01:00 +0000

Molly Wood on Tech, Money and SurvivalOtto Pilot Fri, 09/16/2022 - 12:01 am

After a 20-year career as a tech reporter for CNET and the public radio program Marketplace, Molly Wood has come to see the climate crisis as an engineering problem requiring a lot more investment. In one of her last journalism projects, she produced the acclaimed documentary podcast “How We Survive” for Marketplace.

Among the many stories in the podcast, she visits a brutally hot squatter’s community on federal land in Southern California known as “The Slabs,” where people are barely surviving. She also tells the story of human generosity during the aftermath of Hurricane Ida in New Orleans, where one man with solar panels and batteries lent his electricity to those in need during the days-long power outage. In the final episode of How We Survive’s first season, Wood says that there's one possible future where we adapt to climate change and avoid the worst impacts. And there's another possible future where we don't.

She says framing the climate crisis as an engineering problem gave her a path to explore resilience, adaptation and solutions.

“That's why I called that series ‘How We Survive’ because the eight-episode podcast was the culmination of about four years of ongoing reporting under that name. And it really was a very literal approach to, okay, well, how are we not gonna die when things start to get more and more terrible.”

Now, she’s moved out of journalism and into venture capital, where she sees greater potential for climate solutions through focused investments. “Money can actually enable a solution to be born,” she says.

“We always talk about how capitalism is the disaster, it is the market failure, it's the thing that's created this problem. Greed is the reason that we’ll never get out of it,” she says. “But also, [the climate crisis] seems like kind of a big business opportunity.”

“There's something very clean about venture capital. And it's like if it works, it makes a lot of money and if it makes a lot of money, it works. And when you look at that scale of the change that needs to happen, it needs scale. It needs to be consumer solutions that everybody adopts, not because they feel good about it but because it's the best possible thing to buy and do.”

She calls the Inflation Reduction Act “an absolute game changer,” because it will fund basic scientific research, which, once proven, can then allow venture capitalists like her to create a path to commercialization for new technologies.

“At some point, extinction is a really powerful motivator,” Wood says. “We might lose a lot of humans before we get to the point where we have to fix it. I do not want to sugarcoat that.”

And yet she is genuinely hopeful about human ingenuity finding ways to survive, and perhaps even be better off in the future.

Guests

Molly Wood

Climate Solutions Investor, Podcaster

Molly Wood on Tech, Money and Survival

09/16/2022

Note: Transcripts are generated using a combination of automated software and human transcribers, and may contain errors. Please check the actual audio before quoting it.

Greg Dalton: How much can capitalism help address the climate crisis? This is Climate One, I’m Greg Dalton

After a 20-year career as a tech reporter for CNET and the public radio program Marketplace, Molly Wood has come to see the climate crisis as an engineering problem requiring a lot more investment. In one of her last journalism projects, she produced the acclaimed documentary podcast “How We Survive” for Marketplace. She recently left that program to begin a new career in venture capital.

Molly Wood recently joined me for a conversation recorded in front of a live audience at the Commonwealth Club of California.

In the final episode of How We Survive’s first season, she says that there's one possible future where we adapt to climate change and avoid the worst impacts. And there's another possible future where we don't. She visits a squatter’s community in Southern California known as “The Slabs,” where people are barely surviving. I asked her what it felt like to be in a place where collapse has already happened.

Molly Wood: A lot of my reporting and thinking in life is inspired by sci-fi. And one of the things that I had read as part of sort of developing this series was Octavia Butler's Parable of the Sower trilogy. And we were planning this trip to this area of Southern California because we were visiting these big lithium deposits and doing these stories on battery technology and sort of realized that there was very nearby this community known as The Slabs. It’s federal land where people live for free. When you kind of head out there there's a sign that says it's the last free place. And it's outside of Palm Springs. It's unbearably hot. The people who live there measure their time in summers. They say you know if you’ve been here four summers for example that means you’ve been there four years because the summers are the hardest to survive. And people are there for various reasons. None of them are good. Some people go because they want to sort of test their survival skills but that's very uncommon it's you know, in the case of the people that I interviewed at the Slabs they were there because of you know domestic violence induced attempted murder and they were fleeing the person who had attacked them. And so, it's this kind of Parable of the Sower story come to life to be there but also to see people surviving and figuring out and really innovative ways to survive in the most extreme, you know temperatures that America at least has to offer.

Greg Dalton: In the middle of this blistering desert, Peter, Ryan and Jesse, these “slabbers” they call themselves or they’re called have cobbled together a little camp they call RabbitSide out of wood, an old RV odds and ends, and eight solar panels This and a bunch of golf cart batteries has to provide all their power needs. Let's listen to a bit of this episode, which we’ve edited for time.

[Playback]
Ryan: We have to cart in every calorie or drop of water that this takes to survive. And then, including like the water isn’t even out here naturally. So without that canal, without our hands doing all this and transferring that water around, none of this would last three months. If we were to just walk away, all of this would just dry up.

Molly Wood: How much time, as like, a relative percentage would you say you spend talking about powering your home?

Peter: I mean, it kinda feels like it comes up once a day.

Ryan: At least, yeah.

Peter: It’s often related to like, oh, do we need to turn off these items, or like, can we keep running this thing right now or does it need to be turned off because we have to conserve to last us overnight?

Ryan: You gotta do a lot of stuff. A lot of learning and it’s, it’s a constant battle, but it’s good to learn now before everybody has to learn real fast.

Molly Wood: Before everybody has to learn real fast, because like I said when I got to Slab City, this is what the end of the world looks like.

Peter: This place, ultimately it’s just kind of like the last default option for a lot of people. So like some people, like they’re on the run from something, some people like they couldn’t take care of themselves in any other situation, so like they, they lost their housing or whatever.

Molly Wood: And while Rabbitside is a triumph of invention, ingenuity, art, it’s not a utopia. It’s a future that we should try hard to avoid. Out here, says this little group, you have to have dogs to warn you if someone’s coming or to protect you if they do. There’s a baseball bat by the makeshift door. If you hear screaming at night, you don’t go outside. This, Jesse says, is the worst kind of preparation for the worst case scenario.

Jesse: Eventually it’s gonna end up being kind of every man for himself. That’s what it looks like. We don’t want to be in a bunker. Um, and you know, and just be eating rations and pretend like we’re already living in end times. But we do want to set ourselves up in case it does become every man for himself.
[End Playback]

Greg Dalton: So people don’t have to learn real fast. How likely do you think that scenario is and for how much of the world?

Molly Wood: I mean we’re talking every year there are some new crescendo of climate events. We’re talking at a point when 33 million people in Pakistan are learning that right now. I spend some time on Monday, you know, I’m great in the relative scheme of things and spend some time on Monday night sleeping outside of my house because the power was out for seven hours and it felt unsafe to be in the house. And so, at least I went outside where it was only 95 and you know could feel like somewhat legitimately scary. I think people are getting closer and closer to these realities all the time and starting to experience them with increasing regularity and no one is 100% immune.

Greg Dalton: And so, collapse can happen incrementally in different places at different times. Kind of one sort of pile at a time.

Molly Wood: Or was that famous ride slowly at first and then all at once.

Greg Dalton: Right.

Molly Wood: It’s not gonna be a bummer the whole time.

Greg Dalton: Yes. For sure. That’s because I promise talking about light and dark, we’re gonna do both.

Molly Wood: Everyone’s like whoa.

Greg Dalton: Yet it’s real.

Molly Wood: Yeah.

Greg Dalton: Pushing it away doesn’t make it go away. There's another set of scenarios where it's not every human for themselves where people use technology. We already have to help each other. You tell a story about Hurricane Ida in New Orleans last year when the storm hit there were about 200,000 people who did not evacuate, including Devin De Wulf, who stayed because his wife is an ER doctor. For many in the aftermath of the hurricane was even worse than the 150 mile an hour winds. Here's Devin De Wulf talking with you in How We Survive.

[Start Playback]
Devin De Wulf: We were without power for 10 days. Every day it was easily over 110°. That is really challenging when you can’t cool down anywhere, living without air-conditioning, you know it's fatal, potentially.

Molly Wood: At least 10 people died in New Orleans just from the heat.

Devin De Wulf: The worst thing, what I personally think was the worst was just looking at elderly people sitting in the shade kind of quietly suffering. The heat, you know, it took a toll on my 36-year-old body, but you know if you’re 80 or 90 years old that is really, really, really difficult to get through.

Molly Wood: Then there was a shortage of food and water.

Devin De Wulf: There are supply chain issues. No one has gasoline. People start to go hungry and at the same time there is massive food waste happening all around you. The longer you go in that situation you start to see people on edge, losing their temper a little bit. People are more and more stressed out, they are getting more and more desperate.

Molly Wood: But Devin did not lose power. His house was the only one in the neighborhood where the light stayed on because it runs on batteries.

Devin De Wulf: Our house has solar panels and two batteries. My house went through 10 days with no power easy-peasy because after the hurricane the sun will rise again.

Molly Wood: Devin’s house became the neighborhood charging station and literally help save lives.

Devin De Wulf: Mr. Roy needed an oxygen machine so I ran an extension cord from my house to his house to take care of that. I’ve got another elderly neighbor and I hooked up his refrigerator during the daylight when I have solar. And then on the front porch I just put an extension cord connected to a power strip and just a little sign that said, you know, phone charging station open 7 AM to 6 PM every day. And easily hundreds of people came by to charge their devices.

Molly Wood: And it's a good thing Devin had the solar panels and the home batteries because he says outside help never came.

Devin De Wulf: There's no police, there's no 911. There's no any support of any kind. We never saw any FEMA or city government or state government show up at all.

Molly Wood: Devin says you have to fend for yourself in almost every way and that includes generating your own backup power when the grid fails.

Devin De Wulf: So, I think the smartest thing we can do in Louisiana is just start to install solar panels and batteries everywhere.
[End Playback]

Greg Dalton: Molly, I hear in that a mix of technology, self-sufficiency, and altruism working together. But elsewhere in the series you expressed some skepticism about altruism, saying humans are humans. I’m curious how much do you think people will choose that path of putting their electricity out to help others rather than hoarding and thinking about themselves only.

Molly Wood: I mean I think that, you know, that Mr. Roy story makes me tear up every time I hear it, including now. I think humans really do want to help each other right up until the point where it gets too dangerous to do so, you know. And I think you sort of see that over and over in fiction and in real life, and I mean that’s like seems to be the entire plot of The Walking Dead which I'm too scared to watch. And so, as with everything I think there’s probably not one answer. It's where you are, what community you happen to be in, what works, what doesn't work, how dangerous the situation is. But certainly, what he described and he was gentle in our conversation but what he was saying was that they had managed to create sort of an island of cooperation and a really magical scenario, but that there were other things happening in the city during those 10 days that were incredibly dangerous.

Greg Dalton: Yeah, I think as climate kind of collapse unfolds, we’ll see the best and worst of humanity. I think of the Cajun Navy, these people when Louisiana floods and they drive around their boats and they’re taking grandma out of the house and like it’s like wonderful. And then there's others who are trying to exploit the volatility and profit and extract to make suffering people even worse off. We see both of those. You were a tech reporter, then a finance reporter before covering climate. Was there an aha moment when you realized you needed to be talking about climate? You’ve been in Silicon Valley longtime, when did climate really get you?

Molly Wood: I can't sort of pinpoint the moment when I started to it just sort of over the year started to feel really acute, like a story that I wasn't able to talk about and it was getting more and more frustrating. Because I feel like my entire adult life it'd been part of my conversation when I was a kid. It was like the ozone layer, and I was you know, kind of the early 90s. And so, our hairspray made us feel really guilty because there was lot of it. And it was always this kind of low-level awareness that got more and more and more acute as it became obvious how much worse it was gonna get. And then I had this I'm lucky enough to share a hairdresser with a really famous climate scientist from Berkeley, Inez Fung. And she was telling him, he relayed the story to me, I went on to interview her for the series, but he was telling me that you know in this conversation with Inez Fung who was one of the recipients of the Nobel Prize with Al Gore for Inconvenient Truth. She was saying, you know, I can write IPCC reports until the end of time, but the truth is we have already tipped. There are certain parts of the climate emergency that are not going to be avoided. We now know that the most recent I think IPCC report laid that out as clearly as ever, but this was 2015 or 2016. And she said so she was sort of laying out this plan to devote a big part of her career to studying the hundred-year effects. And she said she made this offhanded comment, she said it's an engineering problem now. And when he was telling me the story that was the moment, the aha moment where I said that makes it my story. Because I had been a tech reporter and sometimes when you cover tech and the world is happening all around you, you know, I covered business which is obviously a huge driver of many things but you feel like you're outside the main story. And that comment made me realize and I'm a pretty solutions-oriented person by nature too, it made me think like maybe there’s just a different way to look at this may be there is a tech story here and maybe there is a survival and the solutions are in. So, my initial entrée was actually adaptation and resilience. That's why I called that series How We Survive because the eight-episode podcast was the culmination of about four years of kind of ongoing reporting under that name. And it really was a very literal approach to like okay, well, how are we not gonna die when things start to get more and more terrible. And I had read Kim Stanley Robinson's New York 2140 which is about New York City post two fifty-foot sea level rises. And he makes this offhanded note in his book about diamond coating around the bottoms of buildings in submerged Manhattan to keep the water out so that they can still keep doing business, you know, it still is like the global financial center. And it was those I really started thinking to myself was anybody working on the diamond coating? Because if they are, I want to talk them. And that's what set me on this road.

Greg Dalton: This is Climate One. I’m Greg Dalton, and we’re talking with investor Molly Wood, about tech, money and survival in the climate crisis. Our podcasts typically contain extra content beyond what’s heard on the radio. If you missed a previous episode, or want to hear more of Climate One’s empowering conversations, subscribe to our podcast wherever you get your pods.

Molly Wood spent years at Marketplace, a show focused on business and economics. I asked if there was resistance to covering climate, which has been seen as an environmental and scientific story.

Molly Wood: It helped that I wanted to come at it from a tech angle. It also helps that I had almost complete editorial control over Marketplace Tech, the show that I hosted at that time. So, it was a very easy thing to start doing. It was hard to find startups and investors. And you know, it was sort of a slow, we were asking questions that people weren’t yet starting to answer in a really real way. And it probably took a solid year and a half to two years to really even launch the reporting because it took so long to convince people that it was gonna be worthwhile to go to Silicon Valley and knock on doors and say, hey, you guys promised us you are gonna save the world what are you doing about the world? Because reporters and editors have a kind of an aversion sometimes to questions that don't have answers.

Greg Dalton: And I wonder at Marketplace which is, you know, it’s the kind of business show on public radio, which is it follows the markets obviously believes in markets. If there was, you know, when did you come to think that like wow markets are part of the problem, capitalism. You know, climate is the ultimate market failure because we don't pay, we use the sky as a unpriced sewer. We don't pay the full price of the things that we do and the things that we buy. It's a market failure. So, did that ever get uncomfortable for you when did you start to realize that that connect?

Molly Wood: I think if anything, it was the opposite. I think what I found was that so many of the conversations about climate in media because media you know, even you see it still, heaven help us and figure it out editors. There is this sense that climate coverage is like vegetables. Like it’s the kind of bummer thing that you have to put on the plate and audiences don't respond to it. That's a big reason why it took me so long to start doing climate coverage in earnest because people thought no one was gonna listen to it.

Greg Dalton: Chris Hayes tweeted once that climate episodes are, they get terrible ratings.

Molly Wood: Right. Like if you want to not fill a room, talk about climate, or if you want to not have anyone listen to your story, talk about climate. So, I started thinking okay well, we always come at it from this huge recitation of unsolvable problems. We always talk about how capitalism is the disaster, it is the market failure, it's the thing that's created this problem. Greed is the reason that we’ll never get out of it. And I started thinking well, what if we thought about, one, technology and literal survival because it's here; figure out how to not die. But also, it seems like kind of a big business opportunity.

Greg Dalton: Well, John Doerr said this is the biggest opportunity for wealth creation of our lifetime, right, legendary.

Molly Wood: Yes, absolutely. And when you have a you know, potentially affected market which I now know as an investor we call it total addressable market of an entire planet, there's a lot of incentive. And when money is an incentive change can happen. And so, I really started pitching it as a business story like what is the business here. And there always being, you know, a big thing we talked about at Marketplace a lot was winners and losers. And in every big developing story or trend or disaster. There are winners and losers. And so, we thought it's a good framing for who to talk to and how to create stories. And that really led me to sort of look at it more and more as a who are the businesses who think that they can make money and make change.

Greg Dalton: Right. And now that’s pretty well-established. Wall Street is onboard, has been for a while. How did reporting How We Survive affect you personally?

Molly Wood: It should have provoked more climate anxiety than it did and it did in some cases. Certainly, members of the team, producers, got really upset about it, I think at that point I had been doing three or four years of climate coverage anyway so I maybe had some scar tissue although there are plenty of climate reporters who will tell you that they've had to stop covering it. But I genuinely, the more we talked about it and I think it's because of the focus felt and feel optimistic talking about solutions. It is encouraging to me and this might just be my personality, but to be able to take a problem and break it down into its component parts, like we know that the use of fossil fuels is it, right, that sort of the whole ballgame like what do we need to transition away from fossil fuels. Increasingly, experts are like oh, we need to electrify everything okay how do we do that? We do that with renewable energy. However, there was this realization that renewable energy was intermittent. You have to store it if you want it to be effective for a long time and then to store it, you need batteries and electric cars run on batteries. Okay, what's in batteries? Lithium, cobalt, right? It is actually an encouraging process to say any problem I want to solve I make it smaller.

Greg Dalton: Well, and psychologists say that doing something makes you feel better.

Molly Wood: Yeah, and that’s probably it. And we are making beautiful music for our podcasts and scripting and you know, and it was and we were out in the field reporting and talking to people and some of them are helpful. Now, none of that is to say I would say the greatest the biggest take away for me doing How We Survive was that you know people are always gonna be the enemy of people. That the hardest thing about tackling the climate crisis is gonna be like all the humans involved in tackling the climate crisis.

Greg Dalton: Humanity, well, this is a human-created problem, right?

Molly Wood: Yeah.

Greg Dalton: So, humans that's why the cognitive part of that. So, since producing How We Survive, you've pivoted from journalist to investor. Why?

Molly Wood: Yeah. I started my time as the host of Marketplace Tech with a big series about venture capital and how it works, and got to know a lot of VCs. We did a lot of reporting for How We Survive on the venture capital industry and how it, you know, had or had not tackled climate over the years. And I think it was sort of a combination of timing and a feeling that I wanted to be more proactive. Like I wanted to actually be implementing solutions. I wanted to have boots on the ground.

Greg Dalton: Dispersing information was not sufficient.

Molly Wood: Right. I sort of felt like I don't have time to change minds.

Greg Dalton: Or inform people. And so, your transition was from information to money and action. And you’ve been exposed to these people.

Molly Wood: Right. I happen to know one who wanted to hire me to write checks. So, I lucked out there.

Greg Dalton: That helps. So, what can money do that information can’t?

Molly Wood: Money can actually enable a solution to be born. I mean every day I talk to these; I’ve use this really messed up metaphor sometimes for all the companies that we talk to because I'm a very early stage climate tech investor. And we call them baby turtles, I call them baby turtles. Because we just we send them out toward the sea and we hope they make it.

Greg Dalton: And you know most will die.

Molly Wood: And we know most will not make it. But we hope that they will. But I will tell you that despite and we will get to talk about capitalism and we will talk about its ills and the problems that it’s caused. This is the most hopeful job I have ever had. I sincerely and I say that with respect to my former colleagues, particularly in contrast to journalism, where the job of journalist is to be skeptical, but the orientation of journalists has become to be only skeptical. And it is so frustrating and tiring to have to find everything that's wrong.

Greg Dalton: Yeah, my wife tells me all the time you're a downer. I’m like journalist write about the planes that crashed, they don’t write about the planes that land safely.

Molly Wood: Right. But then they start to expect that every plane is gonna crash and they start like looking around the plane for what's gonna go wrong. And it’s so wonderful to be in and it seems I know it seems antithetical to what you know about venture capital but it is sincerely an optimistic industry. We sit around and instead of you know, I don't know, laughing at the naïve absurdity of people who think that some things are gonna be like this because our 20 years of reporting tells us it's for sure gonna be like this. Like I remember listening to a series of presentations by founders in our office. And a woman got up and started speaking and she didn't seem very prepared and she was kind of awkward and she had a little bit of a strange delivery. And our general partner our boss, Jason, who you know a lot of people know is sort of a really brash like --

Greg Dalton: Swashbuckling.

Molly Wood: Yeah, not everybody loves him, sent us all the slack that said, never underestimate anyone. And we invested in her. And it truly is and especially so that’s like investing writ large. I’m talking to people who are trying to save the world. I’m talking to people who are like I'm taking this food waste and I'm using mushrooms to convert it into a gluten-free flour because I was inspired by the fact that my mom is diabetic and there's all this food that she can’t eat. And it turns out mushrooms can, you know, convert just about anything into anything else. And so, we’ve created a new feedstock at a time when we might not be able to grow food in huge portions of the world.

Greg Dalton: Right. And yet social impact investing seeking profits as well as social benefit is a growing part of capital markets these days. Yet, you decided not to join that realm and even rejected a company because they were a B corporation that's bound to pursue financial and social benefits. So, I'm curious why you didn't choose the sort of social impact path given that you are so climate mission driven. Was it because just you kind of fell into it and Jason offered you a job?

Molly Wood: I mean sure that’s definitely a part of it. There is who is trying to hire you at any given point. It has been, however, really interesting to then have those conversations since then and to, there's something very clean about venture capital. And it's like if it works it makes a lot of money and if it makes a lot of money it works. And when you look at that scale of the change that needs to happen it needs scale. It needs to be consumer solutions that everybody adopts not because they feel good about it but because it's the best possible thing to buy and do. Not in a moral way or not in a, you know, in a way about of caring about the world but just like it's the cheapest, best, most awesome thing. All my friends are doing it. Teslas look super cool. I do not have one for all of the reasons, but it worked. That worked. That created scale.

Greg Dalton: And so, you think you're going for like the real Alpha model because they’ll make the biggest things happen fastest.

Molly Wood: I think that if you look at lasting, times when there has been lasting change in certainly America and across the world. It’s always included a combination of awareness, activism, and economics. And I spent six years on a business show and I think economics really matters. It is in no way do I think we need to get rid of every other solution, but capitalism is a very effective global solution for making huge change. Good or ill.

Greg Dalton: So, Silicon Valley and the venture capitalists have funded have sold us on a lot of stories that didn't quite turn out to be as they presented.

Molly Wood: You journalist you.

Greg Dalton: So, for example, the Internet will democratize information. Now we know it's dominated by the FAANG companies, you know, Facebook, Apple, Amazon, Netflix and Google. Another VC story Silicon Valley that ride-hailing apps will reduce car ownership and congestion. We know that Uber and Lyft increased congestion. So, why should we believe them this time when they're saying we’re going to solve this energy problem, we’re gonna solve the climate problem.

Molly Wood: Oh my god, who am I right now? Because those are edge cases in an entire world filled with companies that venture capital has created that aren’t ruining everything. There will always be unintended consequences. There’ll be terrible outcomes. God help me, I'll probably back somebody who is awful. I hope not, but it could occur. But it doesn't mean that I should do nothing and it doesn't mean that you know these solutions can’t be born and be incredible. I mean this is also the industry that has produced Impossible Foods and Beyond Burgers and you know I mean like there are 42 climate tech companies that are worth over a billion dollars 42 climate unicorns. Some of them will have bad end and capitalism is basically like any other organism unregulated and left to grow unchecked, it will hundred percent kill us all. A hundred percent, I have no illusions about that. I do not think this is like the winner, but it's the system that we have on the globe at the moment that has produced the most outcomes.

Greg Dalton: So, are you personally conflicted about becoming more of a capitalist? You used to cover capitalist now you’re becoming one.

Molly Wood: Definitely. It’s a really confusing time in my life. I mean it’s not just that I went from journalism to venture capital. I went from public radio to venture capital like I legitimately I've been keeping this audio diary of you know, like entering the white-hot center of the culture wars and become a capitalist at the same time. And it's a really weird time I'm not gonna --

Greg Dalton: And super dominated by tech bro, alpha and testosterone land.

Molly Wood: Oh, for sure. I resisted venture capital for a lot of years for that exact reason. I was like do I really want to go to parties with the worst people in the world? Sorry, new colleagues wherever you are. I don’t mean you.

Greg Dalton: So, but that’s where we are and rather have them with us than against us, right?

Molly Wood: Well, and that to be fair, that is before I knew like when Jason, you know, made an overture about me coming to work there. I said what do you think about doing climate tech investing? And he was like yeah, let's do it. I'm all for it. So, had I gone to venture capital earlier I might have felt much more conflicted. But the more there's been this incredible rush of people going into climate investing and they’re amazing. I mean they are really are genuinely phenomenal people. So, I feel like I'm actually in a cohort of this industry that, yes, like everybody who is doing it understands that the goal is for everyone to make a lot of money, but also create something incredible. I was talking with my dad about this, I mean this was like not something that would ever occur to me. But my dad was like, I love to hear this is so amazing there's like there are gonna be companies, you’re creating jobs. And I was like, actually that's true. We have an internal slack for founders for the people that we have funded. And they have a channel in this I called small wins. And they'll post things that just are incredible like we made our first hire today. We hired five people today, this is, you know, so we’re actually doing it we’re growing we’re creating a real thing in the world. Some of it, you know, and I don't think that making stories and making videos and making podcasts. We creators we are making a real thing and a real product. This is that times….

Greg Dalton: It’s different. Yeah.

Molly Wood: It’s just a real.

Greg Dalton: Right.

Molly Wood: We only hear about Adam Neumann and Travis Kalanick and the people who you know don't have any morals or like do these terrible things in the world or get out over their skis and commit fraud trying to cover it up. But founders as a class of people are phenomenally hopeful. And my God do they work harder than any of the rest of us.

Greg Dalton: According to Bloomberg, venture capital and private equity invested more than 53 billion in climate tech last year. Where is that going how much of it is motivated by absolving guilt, fear?

Molly Wood: That’s the one I’m talking about. So, the pandemic happened. And a lot of people I think realized that the worst case can occur. And all of a sudden that really did genuinely catalyze I think a lot more awareness and a lot more money around climate. Like they said okay, well, the next apocalypse, right, we just had one and the next apocalypse is climate change. And a lot of new people and new money came into climate tech investing which is wonderful. I do not doubt at all that fear is a huge part of that. But if you think venture capitalists are sitting around feeling guilty about stuff, no.

Greg Dalton: No, there’s huge opportunity.

Molly Wood: Definitely not.

Greg Dalton: Huge opportunity in disruption, wealth creation.

Molly Wood: And some are. I’m being very flip. Some are, some really, I know of several venture capitalists who actually retired early from you know, just being VCs to start to work on climate. To say okay I got to do something good with --

Greg Dalton: Right. I think this is before you were in this. But I'm old enough and been in this long enough to remember when, you know, Kleiner Perkins had their first green tech fund and Vinod Khosla was out there talking about this, you know, the Google founders were saying renewable energy is less than coal and this is not the first time Silicon Valley has said we’re big on climate. But for the first time they did it they got burned because they realized that steel and concrete is not software and it's harder capital investment and it's regulated it's harder than they thought. So, you think they've learned this time that like from that first time that to do it this time?

Molly Wood: There's certainly more interest in software, than I wish was the case. Although what I think we’re gonna find, we probably have learned that lesson and then there will be 50 other things we screw up. That's just sort of the nature of cycles. But, you know, it's been interesting that John Doerr for example Kleiner Perkins invested I think a billion dollars in various solar technologies and other renewable energy. It was really, really focused on renewable energy that early boom. And I think the life of a venture capital fund as a legal structure is 10 years. That's why VCs I always talk about this 10-year life cycle of things. And it's because there literally is an end date of 10 years when investors want their money back plus hopefully all of the money you’ve made them in that time. Over 20 years, though, John Doerr’s investments made Kleiner Perkins $2 billion on the original billion. So, you know we talk about it as a really big failure, but a lot of it --

Greg Dalton: It took longer than expected and ultimately like, yeah.

Molly Wood: Yes. But a lot of those businesses still exist and, you know, I think you could argue that that is when the solar industry was born and although it was like awkward baby deer steps now we have something that's pretty mature and that's a good thing overall. What I think that we are going to now figure out is that a lot more entities are finally getting serious about climate, including governments, including businesses, including Wall Street, you know, the SEC, central banks will probably create a lot more change than we even realize they are even more than governments because politics is messy about all this. We might find that there are certain categories that venture capitalist is better suited for, and maybe some of that is software. And that's fine and maybe it is better for governments and universities to fund hard science and deep research. And I've met with several companies that are trying to do like really complicated things about microbes and alternative rocket fuels and really phenomenal things that might be outside my scope or ability to invest in because they will take longer than 10 years to pay off. But there are also a lot more funds dedicated to that kind of investing now. And they have longer fund structures or they have different kinds of investors who are willing to wait longer. So, I think there's more diversification in the types of investing that VCs are going to do and we might just be trying to figure out like what's the part that we should do compared to the part that governments should do.

Molly Wood: That is an absolute game changer. It is a huge deal. Because all of that is the research that the reason that scientists are coming to venture capitalists which shouldn't be happening is because governments haven’t been funding science.

Greg Dalton: Right.

Molly Wood: You know, we all know that that's not the right model. That we are gonna have to say like I'm really sorry this is a genius idea could probably change everything but I just don't have that kind of time and my investors don't want me to do that. That's an awful thing to be saying, but it's also 100% true. It's the job of universities and governments to fund basic science and basic research. And the fact that we’re gonna now do it and then create a path and then I'll be there at the end to create a path to commercialization for these phenomenal technologies. That's a healthy ecosystem. That's what should be happening.

Greg Dalton: Right. And that's what happened with semiconductors they did so many things that’s happened before. We proved that that works in other realms.

Molly Wood: Yeah, it's another. It's truly amazing like there is really genuine hope and celebration about this.

Greg Dalton: How do you view the role of the climate billionaires, Tom Steyer, Mike Bloomberg Bill Gates, John Doerr, Richard Branson, these people. Some people look very like hooray like you know these big players are now putting their muscle and their celebrity and brand into the game. And other people say like, distrust them because they’re such creatures of this, you know, hyper capitalism.

Molly Wood: I mean, right, call me when you guys live in like a tiny house or your consumption is not a, what is it, 65,000 square-foot house in Seattle that Bill Gates owns.

Greg Dalton: He buys offsets. He flies a lot of private jet miles and he buys offsets. So, but, you know, these guys have a lot of smarts and they definitely attract attention and capital.

Molly Wood: I'm all for it. I mean, I really like there's a lot to be cynical about and we should. And also, everybody get in the pool. I want it all. I want everybody talking about it. I want everybody funding it. I want every, you know, like there is no one that I'm going to turn away at this point. I'm thrilled that that's happening because you know I sort of can't level a moral judgment about the world that we live in, in that regard. Like maybe I don't like everything or anything about Bill Gates. But if Breakthrough Energy fund can create the you know little tiny nuclear reactor in a backpack that allows us to desalinate enough water on the California coast to survive, great. Please do it.

Greg Dalton: Right. The way I look at those guys is people will listen to them who will never listen to Al Gore or others. Like certain people, they’re trusted messengers in important circles.

Molly Wood: Well, they know how to make money and money gets solutions. Money, it works.

Greg Dalton: Right. What sector of technology do you think will give us the best hope of survival? What are you most excited about?

Molly Wood: Well, I'm really genuinely excited about the basic research. I think that some of that and whether I can invest in there or not I think there are some incredible things happening around using nature-based solutions. And there is, you know, apparently there are like thousands of microbes that we don't even know anything about, but you can, to take these microbes and turn them into like different kinds of fertilizer that don't use nitrogen. I mean there's really --

Greg Dalton: The soil people are the biggest optimists that I come across.

Molly Wood: Yes.

Greg Dalton: And it’s like soil is sexy. Soil is a big deal. It’s like, if the soil people are right and those things can really scale, we can all breathe a little easier.

Molly Wood: Soil is super sexy. There is a lot of really incredible regenerative agriculture technologies coming out all the time. There is a company that I'm really trying to figure out how to invest in that is making seeds, literal seeds to sort of go up against Monsanto that can signal… they’re bioengineered to signal when they're sick before they are dead. And you can see the signal from space. And then you can reduce dramatically the pesticides that you have to spray, right. Like now we just spray and pray crops like crazy and if we have these visual signals that are like there's a mold infestation you can treat it at the spot, you can have healthier crops overall, you can have healthier soil overall, like it's the sort of incredible flywheel effect. And the other one that I actually think is a dark horse is like what they sometimes called blue tech, but ocean technologies. So, there’s, you know, 2500 vegetables that none of us have ever gotten to eat. They just grow in the ocean. There are algae you know varieties that are effectively like total protein replacements. And algae itself is a huge carbon sink. Like it's very possible that in 50 years the thing that will be like, oh, duh, about is the ocean is the best possible solution and we hardly know anything about it.

Greg Dalton: Right. And it’s been taking the biggest hit without the oceans absorbing a lot of heating it’ll be so much hotter now and not to mention feeding the cows so they burp and fart less and that would help an awful lot. What do you think about climate philanthropy as opposed to other things? Does that have a role is that on your radar because a lot of these billionaires have a philanthropic arm as well as an investing arm? Is there a role for the philanthropy to do things that --

Molly Wood: Climate is 2% of philanthropic giving right now. 2%, MacKenzie, what’s her last name now Bezos, not Bezos anymore. Scott.

Greg Dalton: MacKenzie Scott.

Molly Wood: MacKenzie Scott has given away a phenomenal amount of money and I think that a grand total of like $5 million of that has gone to climate. That is probably one of the most frustrating failures that I can think of at this exact moment. There was actually a huge positive development in this regard, a few weeks back The Rockefeller Foundation announced that having turned its attention to vaccines and vaccine distribution, it was now going to pivot the organization toward climate, which is huge.

Greg Dalton: Right. Particularly given their legacy of, you know, that’s oil money where that wealth came from. So, that gets to, you know, the whole question of we’ve been talking about incentives you know positive making money. What role is there for pressuring companies, environmental social governance is very popular these days pressing companies to be less bad. I’m gonna divest from fossil fuels. Is there a role for that? Is that constructive or is that villainizing business?

Molly Wood: No, that's how we get change 100%, right. That's how we apply financial incentives to businesses which gets them to change. I talked to people all the time who talk about what consumers want now that they didn't used to want. And when I think actually about sometimes, I joke actually that I’m one of the last investors in the climate space who really believes in the consumer. I really profoundly believe in the power of the consumer to drive change. We always talk about this collective problem and how individuals can possibly have an impact and that lets us kind of off the hook for it's just business’s problem to fix which it is and also ours, right. Everyone in the pool and I look at something like high fructose corn syrup as an example. We had activism and awareness that let us know that high fructose corn syrup is like poison in any amount. And so, as a body of consumers, a collective made up of individuals. We said we don't want that in our food anymore. And for the most part it went away. And I believe so powerfully you see all these companies who are doing circular economy type things. They’re creating a way to take back used goods for example, or tell you what to do with their packaging when you're done with it. All of that is the result of consumer pressure. And so, and then you look at something like the Exxon board takeover. There were activist shareholders who took two or three board seats at Exxon who did it not because they said you know we’re just do-gooders and we want to do the right thing.

Greg Dalton: No, those are hard-nosed business people who think there's a better way to use that capital.

Molly Wood: Yes. It's bad economics to be a bad actor around the climate. And I 100% think that that message can come from consumers, from other businesses. There's no, you know, we’re seeing another I also share a hairdresser with a renowned economist. My hairdresser is like a nexus. I'm his like loser client in terms of who he cuts the hair of, who said, you know, everybody came out of COP 26 really bummed out because governments didn't make the big moves that we were hoping that they would. In fact, even if every government agrees to every promise they made at COP 26 we still won't make 1.5° of warming. But the thing that did come out of COP 26 was a whole bunch of banking. A whole bunch of financial institutions starting to make major changes in regulations because risk is a really big motivator. And we are to the point where from a global financial standpoint we’re talking about a risk of zero. We’re talking about like insurance and reinsurance companies saying there are entire parts of the globe that will not be insurable. Meaning there's no economic activity there you can't build there no people can live there there's climate migration. Like that risk is behind-the-scenes regardless of what governments are doing driving trillions of dollars in the right direction.

Greg Dalton: Right. They’re starting to see that and in meaningful timeframe that’s coming in closer. Still, we’re talking about compounded quarterly earnings growth. That's what drives earnings. That's what drives the markets. Eventually the companies you’re investing in wanna have an exit they want to go public or be bought. Can we continue to have compounded quarterly growth of more, more, more, more stuff on a limited planet. Because you did the mining story you admitted I think, like you had this sort of wonder and kind of fear of a 14-year-old looking at that the mining operation. So, we’re still locked in a system of more.

Molly Wood: We really are and that is --

Greg Dalton: Never enough.

Molly Wood: -- the paradox that I completely acknowledge. I don't know how we I think all of these things have to happen in tandem. We are realizing that again growth of any organism would kill you.

Greg Dalton: Cancer is the only thing that grows perpetually. So, that’s why there’s degrowth there.

Molly Wood: Right. So, there’s this conversation about degrowth. There is an increasing conversation about stakeholder capitalism. There are conversations about changing the way that companies report the way that they think about profits, all those things have to happen at the same time.

Greg Dalton: So, summing up here. You've been nine months from your shift from reporter to investor. Has it changed you personally how you feel about the future?

Molly Wood: I am weirdly hopeful. I really am. I think that the awareness is at a crescendo and there's a lot of fear and anxiety but it is driving a lot of real change. And people are so ingenious, you know, it's really easy to think that our kids will live in this sort of terrible future because of all of this happening, but there's almost equally a chance that they could live in like an energy utopia. There was a great Bloomberg piece of sort of a thought exercise in imagining what we could do with unlimited energy. And it's pretty remarkable to think what we could solve at that point. And I'm starting to see companies design solutions that are like purpose built for the cheapest electrons on the planet and even including the intermittency. So, it's fine if the sun is not shining all the time we built a manufacturing process that works with that and is phenomenally cheaper as a result. And I love the idea of just trying to change that mindset, because it’s in no way is it a barrier, right, it's just an enabler like the 4G transition is a perfect example of what can happen when you go from scarcity. So, we had a scarcity of mobile bandwidth on 3G and there was only so much stuff we could do. And then 4G came and an entire economy was built on top of it. Like apps that we would never think about being able to exist because there was just ubiquitous broadband access on their phones. Like we started to think about what we could do with energy in that way. There's nothing we can’t accomplish. Look, at some point extinction is a really powerful motivator. We might lose a lot of humans before we get to the point where we have to fix it. I do not want to sugarcoat that. This is not a good, this is not gonna be a good future. However, we are gonna figure it out. Every time we have faced extinction before we invented fire or the wheel or electricity or penicillin or agriculture and there were terrible unintended consequences as a result of all of those things but like we the species didn't die. I genuinely think we’re gonna figure it out. And I think the sooner we do it the better off people really truly could be.

Greg Dalton: On this Climate One... We’ve been talking with investor and reporter Molly Wood about tech, money and survival in the climate crisis. Find her podcast “How We Survive” on your favorite pod app. Climate One’s empowering conversations connect all aspects of the climate emergency. To hear more, subscribe to our podcast on Apple or wherever you get your pods.Talking about climate can be hard-- but it’s critical to address the transitions we need to make in all parts of society. Please help us get people talking more about climate by giving us a rating or review if you are listening on Apple. You can do it right now on your device. You can also help by sending a link to this episode to a friend. By sharing you can help people have their own deeper climate conversations.

Brad Marshland is our senior producer; Our managing director is Jenny Park. Our producers and audio editors are Ariana Brocious and Austin Colón. Megan Biscieglia is our production manager. Our team also includes consulting producer Sara-Katherine Coxon. Our theme music was composed by George Young (and arranged by Matt Willcox). Gloria Duffy is CEO of The Commonwealth Club of California, the nonprofit and nonpartisan forum where our program originates. I’m Greg Dalton.

Play

Big Money: Investment Managers Driving Corporate Action

Otto Pilot — Fri, 06 May 2022 07:01:00 +0000

Big Money: Investment Managers Driving Corporate ActionOtto Pilot Fri, 05/06/2022 - 12:01 am

More than half of Americans are invested in the stock market, either directly or through their retirement funds, and yet most of the leverage to direct that money rests with large institutional investors – like the companies that manage those retirement funds.

“The financial risks posed by the climate crisis continued to be front and center of investors’ minds,” says Cynthia McHale, senior director at Ceres, where she leads the Climate Action 100+ initiative. She says the 700 investor signatories to that initiative continue to actively engage with companies in their portfolios, “leveraging their ownership stakes to ensure that the world’s largest corporate greenhouse gas emitters take necessary action on climate change.”

Dylan Tanner, executive director of Influence Map, says large commercial institutional money managers are followers rather than leaders. “I think the leaders in terms of the investment community are coming from the pension funds and the actual asset owners who are one step away from the money, who own the money, and they have a longer term of perspective. And they are actually driving the issue to their commercial managers who have to service them and they’re saying ‘look, we want you to act on climate change’ and that's a huge driver.”

Tanner says governments and regulators are held back from climate action policies by inertia and vested interest lobbying, including by fossil fuel companies, in spite of the IPCC consensus on what’s needed to address the climate crisis.

“The solution to climate change needs to be strong binding government regulations to limit polluting emissions, which is what’s causing climate change. Without that we won't have a solution. Finance and involuntary corporate action or citizen behavior is not gonna get us there.”

Anyone who has money invested in a mutual fund or retirement account faces looming climate risk that could dramatically impact the value of their savings. Disclosing that risk has become a chief concern of many climate-conscious investors and the Securities and Exchange Commission. According to the SEC, in recent years, about a third of corporate annual reports included some climate risk disclosure. The SEC is currently advancing a framework that would apply to all publicly traded companies. Cynthia McHale says this action is incredibly important.

“It’s essential for investors to be able to choose and price risk appropriately. Without the information available to them in a consistent, reliable way, they simply can't do their jobs well. And that affects their portfolios and every one of us, in fact, every one of us who has a pension, who has a retirement account, on down the line if you’ve got a kid in college in a 529 plan. Every one of us is affected if we don't know the risks related to climate change.”

Shane Khan with JUST Capital says that their polling shows a majority of Americans support corporate disclosure of climate data, whether it’s voluntary or mandatory.

Divesting from fossil fuels has been a strategy for a long time for those concerned about climate. But Yasmin Dahya Bilger, head of ETFs at investment firm Engine No. 1 argues for engagement, rather than divestment.

“Publicly traded companies are like little quasi democracies, they are accountable to their shareholders. So, when you buy a company, you’re not only entitled to just a share of its profits, you're entitled to the right to influence its decision-making. And this whole system is called proxy voting and it's a very powerful tool,” Bilger says. She adds that there are 20% more environmental and social-related shareholder proposals this year than last, and they have growing support.

“Twelve climate-related proposals passed last year. That's up from three in 2020 and zero in 2019,” she says.

This episode was supported in part by The ClimateWorks Foundation.

Guests

Cynthia McHale

Senior Director, Ceres

Dylan Tanner

Executive Director, Influence Map

Shane Khan

Head of Research, JUST Capital

Yasmin Dahya Bilger

Head of ETFs, Engine No. 1

Big Money: Investment Managers Driving Corporate Action

05/06/2022

Greg Dalton: This is Climate One. I’m Greg Dalton. Money managers wield a lot of power to push companies to act in the interests of their shareholders.

Cynthia McHale: The financial risks posed by the climate crisis continued to be front and center of investors’ minds.

Greg Dalton: Increasingly, active investors are making corporations quantify and address their climate responsibility in order to protect their investments.

Yasmin Dahya Bilger: When you make a strong shareholder value argument, you make it easy for other shareholders to come along with you.

Greg Dalton: But how much can tinkering with stock markets put us on the right course?

Dylan Tanner: The solution to climate change needs to be strong binding government regulations to limit polluting emissions. Finance and voluntary corporate action or citizen behavior is not gonna get us there.

Greg Dalton: Investment Managers Driving Corporate Action. Up next on Climate One.

Greg Dalton: How much can capital markets drive reductions in greenhouse gas emissions? More than half of Americans are invested in the stock market, either directly or through their retirement funds, and yet most of the leverage to direct that money rests with large institutional investors - like the companies that manage those retirement funds. So how are those asset managers accounting for climate risk? And how can they drive corporate leaders to be more accountable for their emissions today, and cut emissions tomorrow? I invited three financial industry experts to discuss these questions. Cynthia McHale is Senior Director at Ceres, where she leads the Climate Action 100+ initiative. Dylan Tanner is Executive Director of Influence Map, a think tank. Shane Khan is Head of Research at JUST Capital. This episode was supported in part by The ClimateWorks Foundation. In a recent report, InfluenceMap found European corporations more supportive in the last four years of policies in line with the Paris Climate accord. But that was before Russia's invasion of Ukraine, which has shocked and upended global energy markets and sent Europe scrambling for non-Russian energy sources. I asked Dylan Tanner about the impact of the current war.

Dylan Tanner: So, this is a trend that's been in play even before the Paris agreement. European companies feel under social pressure, environmental regulatory pressure to act on climate change and other environmental issues. And, you know, Europe does not have a huge fossil fuel production industry and the positive lobbying is coming from the demand-side and the electric power sector. So, those mechanisms remain in place and we see actually a lot of the root cause of the pivot to Russia over the last 10 years coming from the lobbying power of the fossil industry. Players like Gazprom and others who seem to have borrowed their way into the European regulatory mechanism in the German government in particular. So, we actually see that this is an opportunity for the renewable energy sector to double down on their calls for much greater ambition in Europe on their low carbon power pathway.

Greg Dalton: Right. And there’s quite a thing going out there: more fossils, more renewables. How is Ukraine gonna do that. Cynthia, coming out of the Glasgow Climate Summit last year there was momentum toward decarbonizing lending and equity portfolios of banks and asset managers, lot of work done there. How is the war in Ukraine and its effect on global energy markets impacting that momentum now?

Cynthia McHale: I mean we’re seeing just ongoing significant momentum on the part of our investors to drive corporate leaders to shift away from climate disrupting business practices. I mean the financial risks posed by the climate crisis continued to be front and center of investors’ minds. We have 700 investor signatories to Climate Action 100+ continuing actively to engage with companies in their portfolios and thus leveraging their ownership stakes to ensure that the world’s largest corporate greenhouse gas emitters take necessary action on climate change. These institutional investors believe that engaging and working with the companies in which they invest to secure greater disclosure of climate risks and robust company emissions reduction strategies is entirely consistent with their fiduciary duty and essential to achieve the goals of the Paris agreement.

Greg Dalton: Right. And we’ll get into how, there are some I think some counter pressure to those trends because the disruption that’s happening in markets now and the need to get non-Russian energy into Europe. Shane Khan, JUST Capital promotes a kinder, gentler capitalism. How is the war on a sovereign democracy in Europe impacting the conversations and companies involved with your work across a broad set of social issues?

Shane Khan: I think one of the key points that we've always remarked on from JUST Capital is the view of the public, which really does drive how we speak with companies and what are the major issues that companies should actually be taking action on. And issues such as workers issues, climate issues, issues on customers etc. they continue to be important year after year. So, we know that the public for example, they do think that climate change is an issue and companies do have a part to play in reducing greenhouse gas emissions and to meeting climate commitments overall. And I think that's the conversation that we continue to have with companies, whether or not this war has happened.

Greg Dalton: Dylan, I’d like to, you know, there's a rush to get more gas into Europe. That means you know potentially funding and building liquefied natural gas export terminals, new infrastructure, etc. that requires capital. Is there interest in capital markets now in funding these things under the veil of you know, protecting and promoting peace in Europe?

Dylan Tanner: So, I mean finance in general, investment industry I mean I think is agnostic. And if it sees a profit to be made in the short medium long term someone will come in and fund this stuff. So, the solution has to be real economy government regulations to ban or to make higher cost of the brown and polluting industries. That said, there are parts of finance which are longer-term and see those climate risks that Cynthia mentioned and that we work closely with I think that’s the engine of the Climate Action 100 process and these are asset owners, the pension funds, the wealth funds and the insurance companies who are not so transactional they’re not interested in a deal to be done today. And they are in fact often mandated by their governments to take into account climate risk. So, I think those players will step up in this instance and you know if you are investing for a 10-year horizon which you have to do with gas they will, let’s do it with renewables. And we’ve seen movements like that in the UK, where they’re pivoting towards onshore wind, which before the invasion was politically unviable because of the NIMBY factor. So, I think we’re gonna see both sides lobby for investments and putting forward their money.

Greg Dalton: So, there might be short-term energy traders who see an opportunity in this chaos to profit. But you’re saying the patient money, the long-term money, insurance wealth funds etc. will be looking at well, yeah, if we build this natural gas plant maybe it's good for a couple of years, but is it gonna be viable for 10 or 20 years is a lot different calculation. Cynthia, before we continue talking about financial markets and carbon risk. I want to get to the personal level. We talk about, it’s easy to talk about numbers up in our heads. These conversations are often that way, but bombing hospitals and other war crimes in Ukraine and people literally being burned and flooded out of their homes by extreme events amplified by burning fossil fuels. This is a very human story. How do you balance a tendency among money people to focus as Dylan just said they’re agnostic they just look at the monies? How do you balance that with the humanity of what's going on?

Cynthia McHale: Yeah, well, I think that the climate crisis is absolutely a human crisis, right. So, if we look at the many extreme weather events, hurricane, floods, wildfires, droughts, or just chronic changes in weather patterns and the devastation that that is bringing and the food shortages as we go forward in time, you know. I think that what we’re seeing with this horrible situation in Ukraine is really to some degree will be dwarfed, when you look at the longer-term climate impacts. And I think that the investors get that. I mean, BlackRock announced their goal to invest 75% of its corporate and sovereign assets and issuers with science-based climate goals. So, that is in issuers that have committed to aligning their businesses with the goals of the Paris agreement. So, that's a significant commitment for BlackRock, the world's largest asset manager, and that's an increase from BlackRock's prior goal of 25%. It’s quite ambitious and quite significant, and it will hasten this transition to a net zero emissions economy.

Greg Dalton: And we’ll talk a little more about BlackRock in a minute. Dylan, how do you cope with what you know about the climate emergency while you know Ukraine burns and the big lie thrives here in the US?

Dylan Tanner: How do I cope? I run an NGO with 50 talented team members. And a lot of them are, actually, I am the old man in the house. I double most of their age. And so, we have sessions where they actually, you know, this is to some extent all they've known, you know, the previous administration and the pandemic and now this war raging again in Europe and before then they were teenagers. So, I have to try and be the adult and say look, things in the long-term trajectory are getting better. It doesn't seem that way now, but there are forces that we are working with that want to see things done. We just have to isolate and identify the disruptors and the misinformation and people are taking advantage of the situation and try and neutralize them. And they’re mission driven people and so that's why we do our work.

Greg Dalton: Shane, do you ever worry that tinkering around the edges of late stage capitalism is akin to rearranging the deck chairs on the Titanic?

Shane Khan: Oh, what a wonderful analogy, Greg. Certainly not, I mean, I think there's a real need for the kind of work that JUST Capital does and again we’re rooted very much in the views of the American public and maybe I can bring it back to the environment conversation. We typically ask in our polls to figure out what the most important issues are. We asked the American public to make trade-offs. Is this more important than that? Is a living wage more important than the greenhouse gas emissions? And typically, we find that the environmental issues they come in closer to the bottom of the list of the issues overall, because we’re asking the public to trade up something very close to them. Do I make money? Can I put food on the table? Against something that might be slightly removed. But let's start thinking about this younger generation. When I look at our data a little bit more. I actually find there are generational shifts in how people think about this. And the youngest people, they tend to think about climate greenhouse gas emissions pollution also as issues that are much more important. So, they tend to actually think those are more important than other more immediate issues because for them they've grown up with this. They've seen wildfires, they've seen droughts. They’ve seen disruptions and soon they will start seeing increases in their home insurance rates because of storms coming up on the East Coast, for example.

Greg Dalton: Right. My home insurance was actually canceled because of the wildfires. Dylan Tanner, Pres. Obama got the Affordable Care Act through Congress by bringing on board the insurance industry, a very powerful lobby. That provided enough muscle to counter hospitals, pharma and other powerful interests. As you look at corporate America and climate, what are the big power centers and where are they aligned and intentioned? You mentioned for example, that Europe doesn't have a big fossil fuel extraction industry, the US does. What are the big power centers here?

Dylan Tanner: I’m glad you asked because this is one of our core programs measures just that. And it finds that, you know, the way lobbying works, which is what we’re talking about here how to influence government policy. The sectors or companies who are gonna be negatively affected mostly are the ones who are the most tactically and proactively involved in lobbying to stop whatever is coming. And the others just sort of do not get involved; stay in your lane and if it's not your issue then you keep your nose out as kind of the agreement between company or not, not agreement, but that's the practice. So, using our data we’re trying to encourage tech healthcare finance even to get more actively involved in lobbying the administration and the state levels for this ambitious climate policy that’s needed. It hasn't worked thus far. We've seen what happened to the reconciliation bill and in its climate measures we saw the fossil fuel industry win out yet again but that's what needs to happen in the US. And in Europe the fossil sector doesn't have the upper hand anymore in the lobbying process around climate.

Greg Dalton: InfluenceMap recently did a report on the US Chamber of Commerce. There’s been rumblings that the chamber, the most powerful business lobby in the US is shifting a little bit. Your report stated that financial firms favored disclosure of carbon risk while the rest of the chamber itself is opposed. There’s a chart in there pretty interesting that says most of the chambers opposing and J.P. Morgan and Bank of America, which have a lot of fossil fuel loans mixed and then Wells Fargo, Citi, Barclays. BlackRock’s been mentioned Prudential, all supporting financial disclosures. So, talk about the power dynamics there where you kind of have the financial sector against everybody else.

Dylan Tanner: So what goes on in the chamber in how they make their decisions as a black box even though I understand that some of their members when it comes to climate and energy policy. And this is a kind of a sector of society which is opaque but yet extremely powerful. Chamber of Commerce, its activities in both money flows and going to Congress in the Senate saying look, we represent corporate America. Unless you do this the economy is sunk is an extremely powerful influence. And it’s been in some ways hijacked and weaponized by the fossil sector. So, the chamber was opposing this stuff but powerful members have opposite opinion. So, you have this undemocratic result from the chamber that's being projected as the voice of corporate America, which is a huge problem.

Greg Dalton: Today we’re talking about the power of money managers to advance climate action. Our podcasts typically contain extra content beyond what’s heard on the radio. If you missed a previous episode, or want to hear more of Climate One’s empowering conversations, subscribe to our podcast wherever you get your pods. Coming up, the closing window for action from investors, and everyone else:

Cynthia McHale: This is the decade right now where either the US and the world moved to align with the goals of the Paris agreement to limit global warming to well below 2°C or we don't. Because once we get to 2030 there’s no going back.

Greg Dalton: That’s up next, when Climate One continues.

Greg Dalton: This is Climate One. I’m Greg Dalton. We’re talking about the power of capital markets and climate with Cynthia McHale of Ceres, Dylan Tanner of Influence Map, and Shane Khan of JUST Capital. Anyone who has money invested in a mutual fund or retirement account faces looming climate risk that could dramatically impact the value of their savings. Disclosing that risk has become a chief concern of many climate-conscious investors and the Securities and Exchange Commission. According to the SEC, in recent years, about a third of corporate annual reports included some climate risk disclosure. But the SEC is advancing a framework that would apply to all publicly traded companies. Cynthia McHale says this action is incredibly important.

Cynthia McHale: The SEC chair Gary Gensler’s goal is to provide all investors with consistent comparable decision useful information related to companies’ climate risks. And he's gone on to say investors with 130 trillion in assets under management have requested that companies disclose these risks. So, it's really important, it’s essential for investors to be able to choose and price risk appropriately without the information available to them in a consistent, reliable way they simply can't do their jobs well. And that affects their portfolios and every one of us in fact, every one of us who has a pension, who has a retirement account on down the line if you’ve got a kid in college in a 529 plan. Every one of us is affected if we don't know the risks related to climate change.

Greg Dalton: Shane, you’ve done polling on this. What do Americans think about the types of rules the Securities and Exchange Commission is developing on disclosure?

Shane Khan: Transparency is such a key issue for the American public. And we've looked at this in 2021. We've looked at it 2022. And overall a majority of Americans support corporate voluntary disclosure of climate data. Now, if the SEC does go ahead with this proposal and it becomes mandatory, Americans also support that. We do see some splits between Republican and Democrat support. Democratic support is nearly universal: about 97% of Democrats support corporate disclosure of climate data as opposed to 74% of Republicans. For myself as an ESG researcher I've been looking at the Russell 1000 data and we found that only about 57% of those companies and these are America's largest companies only 57% of them actually disclose about on Scope 1 and Scope 2 emissions so far.

Greg Dalton: Can you unpack a little bit for us Shane, ESG and Scope 1 and Scope 2.

Shane Khan: ESG refers to a field of study and research on environmental, social and governance. And when it comes to Scope 1 and Scope 2, Scope 1 refers to direct emissions from a company itself, things that you own, things that you control, such as your vehicles which deliver goods for example. Scope 2 are indirect emissions and that comes from the generation of purchased energy. Scope 3 is anything that's indirect that comes from a value chain both upstream and downstream and it includes things that such as products and how they are used and the emissions that they give off after they are bought by a consumer.

Greg Dalton: Right. Like the gas we burn in our cars, that sort of thing. But Dylan, you know, we hear that transparency is popular with the American public, well, so our background checks on guns, things that don't get into policy. There's lots of things that the American people support the don't get into law, which gets to the point about the concentration of power and lobbying that you focus on.

Dylan Tanner: Disclosure does not equal emissions reduction. You could have companies disclosing terrible emissions in a wonderful way. So, you do need to link that with some kind of force to make emissions reductions happen regulatory or in you know in the investment theory that investors would apply pressure on the companies who disclose the worst emissions performance.

Greg Dalton: Right. And Cynthia, it’s proxy season in the US and that means that shareholders will be voting on various proposals in the democracy of corporations. And one high profile proxy measure at Berkshire Hathaway would require Warren Buffet’s company to measure, disclose and reduce its greenhouse gas emissions in line with goals of the Paris agreement. So, what's generating buzz this season and what could be the result of these shareholder actions this time around?

Cynthia McHale: We have a super active season right now coming up with the AGMs. So, we’re tracking --

Greg Dalton: Annual General Meetings of shareholders.

Cynthia McHale: Yes, thank you. Annual General Meetings with shareholders. So, we’re tracking 209 climate-related proxy resolutions this year that’s an all-time record. Of them the largest percentage ask for companies to adopt greenhouse gas reduction targets. Another large percentage of the shareholder resolutions asked companies to report on their climate lobbying practices often specifically asking for report on how they’re lobbying and that of their trade associations align with the goals of the Paris agreement. Also, some resolutions filed at bank and insurance companies ask that the companies commit to stop financing fossil fuel expansion. And last but not least, investors are placing a growing emphasis on proposals seeking to address the need for companies to fully and transparently account for climate risks in their audited financial statements and holding company directors and their auditors responsible.

Greg Dalton: Auditors. That's interesting. So, just a note here this is Wall Street acting. This is not some policy government interaction. This is capitalism saying we got to get a handle on this. Cynthia, some companies agree to shareholder proposals before a vote and keep the goals private. It's kind of like a plea bargain. I was unaware of that. How widespread is that and what impact does it have?

Cynthia McHale: You know, Greg, that is a real concern of mine. The majority of investors do not disclose the withdrawal agreements that they make with companies. Without other investors, shareholders in these companies knowing what that company has agreed to for the withdrawal, it really undermines their ability to hold them accountable.

Greg Dalton: And Dylan, in the past these things have been, the shareholder resolutions have been advisory please do this not binding. Then Engine No. 1 comes along, we’ll talk to them later in this episode, and they like put in three new board members on the Exxon board. That's a whole another level of shareholder pressure and activism. What do you see as the spectrum of this kind of gentle suggestion to like you know barging into the boardroom?

Dylan Tanner: So, there are far more shareholder resolutions in the US than any other market. And I think it’s because they are advisory and so it’s just a more of a messaging thing sometimes. But when it comes to actually voting down directors that's a whole different ball game; then the fun stops in the companies because their jobs are at risk. So, I think that will become a focus in these climates’ resolutions increasingly, as if you're not performing on climate, we’re gonna vote you off the board type of thing or vote the CEO out if that can be done. So, in other markets like Australia they are binding and they have to -- so a lot of the resolutions are far more negotiations between the companies and whoever is filing is far more coming from a higher level as the CEO kind of dealing.

Greg Dalton: Cynthia, you mentioned earlier, BlackRock has increased its ambition around moving to the clean energy transition. Texas has said that no financial institution that has divested from fossil fuels can underwrite bonds or manage money for the state that affects university endowments, pension funds, municipal bonds to build bridges, roads and schools. That loss sent a chill through financial markets and prompted BlackRock to boast that it has a $91 billion invested in Texas energy companies. How do you see that Texas measure affecting of the financial markets?

Cynthia McHale: Yeah well, you know, honestly, I can't speak specifically to the Texas measure. But look, let’s be honest here, there are many states, right? And indeed, our country has a huge fossil fuel industry that continues today. And this is going to be a very tough transition for us. There are many fights to be had. Now, the reality though and this is what our investors that we work with know, is that if we don't get a handle on climate change and we don't limit the degree of global warming, these are systemic economy wide risks to their portfolios. And they will not be able to achieve their financial goals nor the goals of their many pensioners and people that rely on them if these changes aren't taken at speed. And look, the window of opportunity is closing here. This is the decade right now where either the US and the world move to align with the goals of the Paris agreement to limit global warming to well below 2°C or we don't. Because once we get to 2030 there’s no going back.

Greg Dalton: The American Legislative Exchange Council or ALEC has a model bill called The Energy Discrimination Elimination Act that is offering that Texas model to other states. Shane, Texas is disputing the idea that firms that filter their investments according to environmental, social and governance or ESG factors, and social can be the way maternity leave pay equity all sorts of things governance who’s on the board. Give some examples of ESG screens and what do these long-term studies say about the performance of portfolios that are run that way.

Shane Khan: I think overall the literature is pretty much decided that ESG investing when done right when we do it on companies that are actually performing and actually doing things that are good for the environment or good on social issues or governance issues, they actually tend to outperform the market. And the example that I could bring here is an example from JUST Capital. We have an ETF which groups together companies that perform really, really well on just issues as they are defined by the American public. And our experience with that ETF has shown that it's actually outperformed the market by about 2 1/2% over the last year and about 10% over the last three years.

Greg Dalton: That means that if ESG is good for investors, a Texas law is arguing against the financial interests of Texas. Is that a fair conclusion?

Shane Khan: I wouldn’t call it necessarily a fair conclusion because what we’re actually proving is that ESG is good, we're not saying that oil actually is bad. I think there are other pathways to get there. For example, I think the net zero asset managers for example, who support SBTI of 1.5 they put out 57 trillion under assets. They don't want divestment but they want engagement. So, they want to take companies on a journey a climate journey to get them to that point where they are net zero.

Greg Dalton: And SBTI is a science-based targets, right. Kind of grounded in science to determine exactly how much a company should reduce. Cynthia, in a recent Harris Poll, 80% of executives rated their own company above average for its sustainability work. Ironically, 58% of those same respondents said their organization is guilty of greenwashing. How can a person tell what's greenwashing and what’s real and what does it say to you about people looking at their own companies?

Cynthia McHale: Yeah, no, it’s hard to know. And what we do to support our investors’ understanding of really what's going on underneath the covers there, so to speak, is we use what we’ve developed this net zero company benchmark tool which is available on the Climate Action 100.org website. And this goes through sort of a set of indicators which are based on company disclosures around the practices and commitments that that company has made. So, if a company for example, has set a net zero commitments to achieve net zero greenhouse gas emissions by 2050 or sooner, we’ll note that. And then as we go down the indicators we’ll ask and look for indications of whether that company has revealed its plans to achieve that objective. And while roughly 70% of the companies on our focus list have made that net zero commitment, under 10% have actually revealed how they're going to achieve that goal. So there’s a lot of work to do. It’s great that the companies are saying they want to and need to do this but how they get there is really where the rubber hits the road.

Greg Dalton: Right. And that gets to kind of my theory of change question. Dylan, can capitalism reform itself? We’re trying to kind of tinker change the incentives, change disclosure which is kind of you know reform from within with some government pressure. Do you think that something more dramatic needs to happen to capitalism to change in time for the climate that's coming at us?

Dylan Tanner: Well, look, let's just listen to the scientists. The IPCC which is a group of many thousands of scientists, climate scientists, physicists, biologists, chemists and political scientists. They’re unanimous. The solution to the climate change needs to be strong binding government regulations to limit polluting emissions, which is what’s causing climate change. Without that we won't have a solution. Finance and involuntary corporate action or citizen behavior is not gonna get us there. So, that’s our kind of north star what we do and our objective is to try and force levers to make unblock what the EPA wants to do and what regulators want to do globally but they’re held back by inertia and by vested interest lobbying.

Greg Dalton: As we wrap up here I’d like to ask each of you to briefly sum up, how much leverage do money managers and investors really have in shifting companies away from climate disrupting practices, Shane.

Shane Khan: Money managers and investors have a huge role to play in really moving the needle on this. They can certainly incentivize companies and really control the cost of capital and work with companies and engage with them on a pathway to becoming net zero. And I think that's going to certainly become much more apparent in the years to come, especially with the SEC guidelines and proposals coming through. This is definitely going to be a game changer for us.

Greg Dalton: Dylan, your thoughts on how much leverage there really is there.

Dylan Tanner: I think the large commercial institutional money managers are followers rather than leaders. As I said earlier, I think the leaders in terms of the investment community are coming from the pension funds and the actual asset owners who are one step away from the money who own the money and they have a longer term of perspective. And they are actually driving the issue to their commercial managers who have to service them and they’re saying look, we want you to act on climate change and that's a huge driver. And we want to see more of that. We want to see them more empowered with information and the performance of their money managers on climate issues, which includes more transparency around the engagement and resolution process.

Greg Dalton: And when you say asset owner would it be correct to say like that's for example, that's an insurance company that owns a big downtown office building that generates a lot of rent to pay out or a pension fund.

Dylan Tanner: Yeah. CalPERS, CalSTRS, New York State Common, and in Europe it’s the Norwegian wealth fund trillion dollars in assets, massively powerful.

Greg Dalton: Cynthia, how much leverage do you see these managers have and will they really reform or they just kind of gaming the system?

Cynthia McHale: First, I agree very much with Dylan's comment. However, I would just add that the large asset managers BlackRock, State Street, Fidelity, Vanguard, it's critical to get them aligned because they own a lot of shares. And when these resolutions come to a vote or when there is a vote against the director or a vote to replace a director. We need their votes, right, we need to get a high outcome to effect change. Now, a couple of other thoughts. When C100+ launched in 2017, almost none of the focus companies had committed to net zero emissions. Today, over I’d say 70% of those companies have. So, big money does play a significant role here, but I'd also like to highlight that investor policy engagement is a critical lever for investor action through which investors lend their voice alongside other stakeholders. So, they, investors need to call for action from policymakers to address the technological and regulatory hurdles preventing decarbonization at sufficient speed. So, they need to request and inform mandatory climate disclosure requirements. They need to engage companies on their lobbying practices to the points Dylan's made and also companies on their practices related to their industry associations. And third, but really important is that investors need to support industrial policy that effectively addresses climate change. So, just having investors press on companies is not enough. They need to be very active in the policy space.

Greg Dalton: Cynthia McHale is Senior Director at Ceres where she leads the Climate Action 100+ initiative. Dylan Tanner is Executive Director at InfluenceMap. And Shane Khan is Head of Research at JUST Capital. Thank you all for coming on Climate One today and talking about capital markets and climate.

Dylan Tanner: Thank you.

Cynthia McHale: Thank you so much.

Shane Khan: Thank you.

Dylan Tanner: Wonderful, Greg. Thank you.

Greg Dalton: This is Climate One. Coming up, taking the opposite approach to fossil fuel divestment:

Yasmin Dahya Bilger: The predominant thinking for decades has been if you don't like what a company is doing, if you don't believe that they’re on the right path particularly around something like climate, you should not own it. And I think our campaign demonstrated that with a really strong argument, you can actually get a lot of change driven through the engagement channel.

Greg Dalton: That’s up next, when Climate One continues.

Greg Dalton: This is Climate One. I’m Greg Dalton. We’re exploring the world of capital markets and climate priorities. Yasmin Dahya Bilger is head of exchange traded funds at the investment firm Engine No. 1. She spoke with Climate One’s Ariana Brocious about pressuring large carbon emitters from the inside, rather than shouting at them from the outside.

Ariana Brocious: A year ago Engine No. 1 was a relatively small hedge fund that few in the industry had heard of. Then it launched a successful campaign to elect three Exxon board members over the opposition of Exxon management. So, how did that upset victory happen at one of the world's largest publicly traded corporations?

Yasmin Dahya Bilger: Really, we focused very much our arguments on traditional shareholder value case. We owned at the time two basis points of Exxon very, very small ownership. But we were making a case for how that company needed different experiences on its board. People who had the ability to manage the company through what is unquestionably a huge transformation and shift happening in the industry that they operate in. And we're focusing our argument on things like the return on capital or the reality of how they perform versus their peers. What we weren’t doing was actually making sort of a climate morality argument which I think many others have made in the past. And really the success I think came from a few spaces and I think these are really interesting lessons as people think about how managers can affect change on areas in climate. The first is that size point which is, you know, we were very small. But when you make a strong shareholder value argument you make it easy for other shareholders to come along with you. And that was what allowed us to actually get a broad coalition of support and ultimately get those three board members placed on the board. The second I think what is really interesting is really around this question of divestment versus engagement and what's the right mechanism for affecting change. And I think the predominant thinking for decades, is though has been if you don't like what a company is doing if you don't believe that they’re on the right path particularly around something like climate, you should not own it. And I think our campaign demonstrated that with a really strong argument, you can actually get a lot of change driven through the engagement channel.

Ariana Brocious: So, this idea of focusing on shareholder risk and shareholder values is really interesting and as you said kind of departure or difference maybe from how things have been before last year. How much of this is a model for how you think even larger institutional investors should wield their leverage?

Yasmin Dahya Bilger: Publicly traded companies are like little quasi democracies, they are accountable to their shareholders. So, when you buy a company, you’re not only entitled to just a share of its profits, you're entitled to the right to influence its decision-making. And this whole system is called proxy voting and it's a very powerful tool. In fact, every year, investors are casting votes on tens of thousands of proposals at public companies. They're the ones who elect the board. They approve executive pay plans. And to take it even farther when a shareholder disagrees with how a company is being managed, they can engage with management. And if they still don't feel like their course of action is being heard they can do something called making a shareholder proposal which is just another course for the company to take that comes up for vote. And I think the fascinating thing is that most individual investors don't even know that actually if you’re a shareholder you in fact have the power. And the reason I think they don't know that is because most of us don't invest in individual companies. If we all were to open up our investment portfolios what we’d see is probably invested in ETFs and mutual funds.And as a result of that what that's meant is that there's actually kind of been a significant concentration in ownership amongst the largest asset managers. So, they have a lot of influence. And so, this whole system around voting and engagement is really a powerful tool.

Ariana Brocious: Earlier in this episode we spoke with Cynthia McHale who leads Climate Action 100+ Initiative and she said that there is a record of 209 shareholder resolutions this season. So, following up on what you just said, what trends are you seeing right now related to climate in terms of scope like corporate lobbying and urgency, you know, more aggressive goals within these proposals?

Yasmin Dahya Bilger: There is so many exciting things happening right now within the world of proxy voting. I have to say I think one of the byproducts of our Exxon campaign, you know, obviously the headline was climate risk is part of your business risk and if you're in an industry that’s a large emitting industry you got to think about this and how to think about how your business models will evolve. But I think a second or a secondary sort of sub line was actually we shined the light on the voting process. We made it mainstream in many ways. And I think as a result to that there's a lot of energy happening. So, one you mentioned more proposals. There are definitely more proposals. In fact, there’s 20% more proposals this year in the environmental and social space than there was last year. But we’re also seeing a lot of support for those proposals. So, here’s a stat that sort of makes me fall off my chair a little bit. Twelve climate-related proposals passed last year. That's up from three in 2020 and zero in 2019, which I think it's kind of profound that zero climate related proposals passed only three years ago. But there's a whole push right now for transparency and for goals for companies to have goals around their emissions reduction targets. And so, I think a good example of that is Costco; they had a vote in January. Their Scope 1 and 2 emissions have been increasing since 2016. They didn’t really have any plans to measure, disclose or set targets on Scope 3 emissions which is likely the vast majority of their emissions. And so, shareholders submitted a proposal for Costco to adopt short, medium and long-term science-based greenhouse gas reduction targets across the value chain. And that proposal passed with a 70% support. So, I think we’re seeing just a lot more of a push from investors on this. I will say as much as there's a good energy. The vast majority of these proposals fail. In fact, 80% of environmental and social shareholder proposals failed in 2021. And so, I do think this is why as an individual investor, you have to think about that question of how is your influence being used because when you invest in a fund, you’re actually delegating your vote, right. You’re delegating your vote that you have to the fund manager because they’re actually a shareholder in that case.

Ariana Brocious: And we should say quickly Scope 3 are the emissions associated with downstream how products are used. So, speaking of those funds. Engine No. 1 offers an exchange traded fund called the transform climate ETF. So, when you're deciding what companies to put in that fund. How do you put a tangible value on a company's environmental and social impacts?

Yasmin Dahya Bilger: I think the best way is to visualize it. Think of like a waterfall chart. And our starting point is traditional financial analysis. We’re doing all the things that other active investors are doing thinking about how to value a company. But for many while that's their endpoint, that's just our starting point. What we do then is we’re looking at the negative and positive impacts that a company has. And we’re trying to translate those into dollars, and our hope is that we’re sort of taking away the negative impacts and we’re adding the positive and we get to the other part of the waterfall chart which is the true value of a company. So, if you think about something like the auto sector, which is a space we heavily invest in. We’re looking at a company's Scope 1, 2 and 3 emissions, we’re putting them into dollar terms and that's a negative impact that’s a big negative impact. And then we’re asking the question, what is the company doing to mitigate that impact? What’s their strategy to reduce that? Because what we really want in our NETZ portfolio are companies that have the highest potential in our mind win through the energy transition. And our perspective is that you’ve got to go where the emissions are. If you’re gonna have a reduction in emissions anytime this decade you have to go to the industries and the companies that are the traditional incumbents. But we’re looking for the traditional incumbents who are actually transforming themselves. And so, that sort of a very different point of view than what you see from traditional climate strategies if you are sort to double click on most of the climate portfolios that exist today, you’d see a lot of small very green technology focused companies. We’re really going where the emissions are and our whole approach is around converting from rankings and ratings into actual dollars. And we think that’s valuable I should say for a few reasons. But one reason is when you’re engaging with management, you're speaking their language, right, you’re speaking shareholder value language. So, when so you're coming with a specific recommendation as we do with active owners to say hey you know think about this in terms of where you're going on your transition to all electric or what you're doing in agriculture we’re being able to do it in a way that's a language that they know how to use and how to understand. And so, I think that helps a lot with many of these collaborative engagements that we’re doing right now.

Ariana Brocious: Well, so for example with this fund, among the top five holdings are Ford, GM, Archer-Daniels-Midland, John Deere companies that may not come to mind right away when we’re thinking of green companies. Can you explain their role there?

Yasmin Dahya Bilger: Yeah. So, 75% of global greenhouse gas emissions comes from three sectors in our economy: transportation, agriculture and oil and gas. And so, our perspective is if you're going to reduce emissions anytime in the next decade you got to go where these emissions are, number one. Number two, many of these traditional players they have a lot of competitive advantages through this transition. They have in many cases high degrees of engineering talent. They have vertically integrated production capacity. They have resources to be able to navigate what is a fundamental shift. I mean our viewpoint is that climate investing is the largest investing opportunity that sits in front of us for the next several decades. And so, our point of view is actually looking for where we think companies have the best are best positioned and it sort of falls into two categories. The first are the traditional incumbents that have a strategy to navigate through it. So, are committed to net zero targets are making the necessary investments today to do so as well as a management team that’s really committed to that. And then the other is sort of the enablers of that value chain. So, another thing you'll see in our portfolio right now is a lot of the inputs to the transition. And so, we’re thinking about the full value chain of an industry that like what are the various touch points that need to sort of change and transform.

Ariana Brocious: Right. The fund’s tagline is don't divest, engage. Yet, divesting from fossil fuels has been a strategy for a long time for those concerned about climate. So, what do you see as the limits of the divestment strategy?

Yasmin Dahya Bilger: It’s such an interesting debate. There is no right answer. I should say part of the reason I think we were successful with the Exxon campaign is for the decades that came before us around the divestment movement. It really called attention to the companies and the issue areas and made it such that the market was there to hear our message. And so, it’s hard to say you know divestment versus engagement, but a lot of the divestment argument is really focused on sort of two things. One is about you know you sort of starve companies of capital and sort of increases their cost of capital which I think we’d argue hasn’t really proved out. The other is that you're putting a spotlight you’re drawing attention by saying I no longer own something. And in some cases that’s been an effective mechanism. But I do think that engagement is an area that people are focusing much more on now.

Ariana Brocious: The S&P energy index is up more than 40% this year. And the S&P is in negative territory. So, while energy is notorious for boom and bust cycles. Clearly this is a boom time. So, does that undercut the argument that fossil fuel stocks are bad investments?

Yasmin Dahya Bilger: Well, I think that what's been going on with some of these huge performance swings across sectors is actually it’s causing friction for investors right now, right. Because I think many of them who are in climate focused strategies are feeling like they have to sacrifice something to be in them. And we just firmly feel that’s not the case. In fact, I think that that is one of the biggest investor hurdles we have to break through. And so, absolutely what we’re trying to do is find a way to drive performance for the people on our funds. But we think that the mechanism for that is a smart strategy towards decarbonization and industries are undergoing and will continue to undergo massive change.

Ariana Brocious: The Securities and Exchange Commission has proposed new rules on transparency around climate risk. If those are enacted, how far do you think they would go toward addressing climate change?

Yasmin Dahya Bilger: Oh, I think these are very game changing. So, it would require public companies to make certain climate related disclosures available to investors. This rule has been in the making for a long time and dating all the way back to let’s say 2010. So, it's the product of a decade of work. And it’s just a proposal and I should say right now it's in the space of being commented on by the industry. So, it's still being shaped and formed. Although our expectation is it's likely to be finalized by the end of the year. What it would really do I think is a few fold. First is transparency for investors. I think with this rule there is an acknowledgment that climate related risks for public companies are important for their business. And that emissions data is important for investors when they try to make informed investment decisions. I also think there is a huge opportunity for standardization and comparability and I think it's imperative for investors. So, even the companies that choose to self-disclose right now they're struggling with what they should disclose, how they disclose it, where they should disclose it. And for investors who are trying to understand emissions data they're going to this painful process of trying to reconcile entirely dissimilar reporting frameworks. And so, hopefully this brings standardization. But I think the other thing that’s really interesting here that I think will probably be a mechanism for driving more change, I think it gives investors the ability to hold companies accountable to what they say or gonna do. And we obviously have lots of companies out in the market making very bold statements about what they plan to do in the next 10, 20, 30 years to reduce their emissions. Well, companies will need to spell out these goals. They’ll need to have projections on their emissions and with this transparency I think companies are gonna need to continuously be accountable to investors when they’re missing the mark.

Ariana Brocious: So, we've been talking about some of the bigger players, you know, shareholders people who have weight in this industry. But there's a lot of people who are invested in the stock market but in a small degree usually through retirement funds, maybe mutual funds and don't have a lot of knowledge I would say, or even deep interest in exploring exactly what their holdings are and yet they may have climate values that they want to align with. So, how can an average person who's invested in you know in a small way like in a retail way get more clarity around what's in their current portfolio?

Yasmin Dahya Bilger: It’s such a good question and it's a question I feel like we've got to crack the code on. There are $7 trillion in US ETFs. I mean the power around that is huge. But right now, investors just don't understand that they have that, right, investors I mean individual investors. So, okay here's my call to action, I guess. Listed companies, this is a good stat, account for 40% of climate warming emissions. So, public companies are playing a critical role in climate action and you know investors in those companies have an avenue through engagement or capital allocation choices how they vote. I think every investor to just a very simple thing and look at what they own on their portfolio. My guess is they own a lot of ETFs, and mutual funds, that’s probably what they own. More and more, you have to ask the question of your advisor or of your asset manager like what are you doing with those assets. What are you supporting what are you not supporting? And I should say I think the industry is gonna start making it easier for people. Because right now you as an individual investor don't even really know how your votes are being used. Asset managers can take up to a year to share that information and by the way it comes in a format I can guarantee most people aren’t gonna read. But folks like us wanna change that. We actually now publish what we vote on our website on a real-time basis. So, any person in our fund can see like what do we think about this particular issue. So, I think step one is just asking more questions. You know what is your manager doing with your money. I mean when you invest your money in a manager you think what are they gonna do from an investment perspective for me what's my belief and why I should generate returns over time. Similarly, I think you’ve got to start asking the question, like do you align with my values are you voting and engaging in a way that I believe in because we all do have a ton of influence. And so, if people are feeling like I don't have a say over how company the trajectory of companies are going in the US and I’m not happy with the progress you're making on climate or on social issues. I think people should just continue to remind themselves of the whole system is set up for shareholders that actually they do have that power and influence. It’s just a matter of asking the question.

Ariana Brocious: Yasmin Dahya Bilger is Head of Exchange Traded Funds at Engine No. 1. Thank you so much for joining us on Climate One today.

Yasmin Dahya Bilger: Thank you so much for having me.

Greg Dalton: On this Climate One... We’ve been talking about the power of capital markets in addressing climate. This episode was supported in part by The ClimateWorks Foundation. Climate One’s empowering conversations connect all aspects of the climate emergency. Brad Marshland is our senior producer; our producers and audio editors are Ariana Brocious and Austin Colón. Our team also includes Steve Fox and Tyler Reed. Our theme music was composed by George Young (and arranged by Matt Willcox). Gloria Duffy is CEO of The Commonwealth Club of California, the nonprofit and nonpartisan forum where our program originates. I’m Greg Dalton.

Play

REWIND: Reimagining Capitalism / Fossil Fuels in Your Portfolio

Otto Pilot — Sat, 26 Dec 2020 10:35:00 +0000

REWIND: Reimagining Capitalism / Fossil Fuels in Your PortfolioOtto Pilot Sat, 12/26/2020 - 2:35 am

With inequality booming and climate change looming, is it time to rethink capitalism?

“We've come to the point where making more stuff in order to sell more stuff in order to make more money is breaking down,” says Hope Jahren, Professor of Geosciences at the University of Oslo.

In her book, "The Story of More: How We Got to Climate Change and Where to Go from Here," Jahren questions whether a healthy climate can coexist with a consumption-driven economy. Rebecca Henderson from the Harvard Business School is more sanguine about the prospects for addressing climate in a capitalist economy

“We have a pricing and regulatory problem,” she says, adding that “we’re not charging the full cost of economic activity.” Henderson is the author of Reimagining Capitalism in a World on Fire and believes capitalism can be harnessed to better serve society as a whole.

“It’s fairly clear to see how to fix it,” she says. “The only thing it requires is a massive cultural and political movement changing the rules that constrain capitalism – but as soon as we can do that, we’re done.”

But short of that massive movement, can the stock market be used as a tool for climate action?

“Climate risk is investment risk,” says Brian Deese is Global Head of Sustainable Investing at BlackRock, the world's largest asset manager, “I believe that we are going to see key elements of sustainability rise in importance for companies and for governments and regulators.”

“That’s what we do in our business; we follow the carbon,” says Pratima Rangarajan, who left her job in the renewable energy industry to head up the Oil and Gas Climate Initiative, an investment fund backed by some of the world's largest oil companies including BP, Chevron, and ExxonMobil.

“Where there’s carbon it’s our job to figure out to go invest in solutions to mitigate it and then figure out how to scale it up.”

Guests

Rebecca Henderson

John and Natty McArthur University Professor, Harvard University

Hope Jahren

Scientist and Author, The Story of More

Brian Deese

Director, National Economic Council

Lori Keith

Portfolio Manager, Parnassus Investments

Pratima Rangarajan

CEO, Oil and Gas Climate Initiative

REWIND: Reimagining Capitalism / Fossil Fuels in Your Portfolio

12/26/2020

Greg Dalton: This is Climate One. I’m Greg Dalton. [pause] Universities, churches, pension funds and other organizations are divesting from fossil fuels and investing in cleaner energy. But sustainable investment alone won’t stop carbon pollution.

Anne Simpson: Simply by having a green, clean portfolio isn’t going to help us with this risk unless we actually get the real economy into a green, clean economy.

Greg Dalton: Maintaining a consumption-driven economy while keeping emissions down seems more and more like a pipe dream.

Hope Jahren: We burn fuel to grow corn, to turn it into fuel to fuel automobiles. It’s like an environmental Mobius strip

Greg Dalton: Is it time to re-think capitalism altogether?

Rebecca Henderson: The only thing it requires is a massive cultural and political movement changing the rules that constrain capitalism. But as soon as we can do that we’re done.

Greg Dalton: Reimagining Capitalism without Fossil Fuels. Up next on Climate One.

---

Greg Dalton: How can we use our investment portfolios and (our) purses to promote the values we care about? Climate Climate One conversations feature all aspects of the climate emergency: the individual and the systemic, the exciting and the scary. I’m Greg Dalton.

Greg Dalton: When institutional investors divest from fossil fuel companies, does it make a difference, or is the impact merely symbolic? Some say it’s better to keep your stock and your influence, using investor dollars to encourage change from within.

Pratima Rangarajan: That’s what we do in our business; we follow the carbon. Where there’s carbon it’s our job to figure out to go invest in solutions to mitigate it and then figure out how to scale it up.

Greg Dalton: Pratima Rangarajan [PRAH-tee-mah ran-GAHR-ah-jahn] is CEO of the Oil and Gas Climate Initiative, an investment fund backed by some of the world's largest oil companies including BP, Chevron, and ExxonMobil. She and others (with a fiduciary responsibility for managing other people's money) will join us in the second part of today’s show to talk about sustainable investing. First… With inequality booming and climate change looming, is a green stock portfolio really part of the solution, or do we need a whole new kind of capitalism?

Hope Jahren: We've come to the point where making more stuff in order to sell more stuff in order to make more money is breaking down.

Greg Dalton: That’s Hope Jahren, a professor in the Department of Geoscience at the University of Oslo, and author of The Story of More: How We Got to Climate Change and Where to Go from Here. She joins us in the first part of the show along with Rebecca Henderson, Professor at the Harvard Business School and author of Reimagining Capitalism in a World on Fire, to explore how fighting climate change often involves grappling with issues of wealth, power, and patriarchy. Our conversation begins with Rebecca describing some fundamental flaws in capitalism, as we know it.

Rebecca Henderson: We have a pricing and regulatory problem. We’re not charging the full cost of economic activity. I don’t think of capitalism as a system for producing more. I think about it as a system for producing efficient things. It make sure that the right people do the right things at the right time. And when it’s working well, it’s just fantastic. I don’t think we’re gonna solve the problems we face without capitalism. But we have to have real prices and real regulation. So let’s just take beef for example. The production of beef is responsible for a very significant fraction of agricultural emissions and takes up an enormous amount of the planet’s land. And so every time we eat a hamburger, we’re in effect causing very significant harm because we are personally participating in warming the planet. And yet, beef is super cheap we’re not paying for the harm that we’re causing. And so, every kind of light in the system says, more beef, more beef, more beef, because it’s cheap and people love it. And so, we need as a society to be able to say, you know, beef is amazing but it should be rare, it should be special, it should be offset and beef should be expensive. And so we will fix this. In fact, it’s fairly clear to see how to fix it. The only thing it requires is a massive cultural and political movement changing the rules that constrain capitalism. But as soon as we can do that we’re done. We know how to fix this problem.

Greg Dalton: Rebecca, you're quite optimistic and you point out in your book a lot of examples of companies acting in kind of enlightened self-interest and insight leaders that are doing things. Kind of on the margins, you know, the Patagonias of the world the Paul Polmans the Unilevers of the world. But companies are also doing one thing and in their very slick communications when it comes to policy they play a double game. They speak about climate change in public, but their lobbyists and their firms in Washington DC do either don't push on climate policy or they actively try to slow it down. They support the Paris climate accord, yes, they tweet about Trump backing out of Paris, etc. but they don't really put a lot of muscle or effort into climate policy where it matters inside the beltway. They’re much more concerned with taxes, immigration, those sorts of things. They’re afraid of alienating the other side. So I’d like you respond to that double game that I think companies play. Even some of the most sincere chief executives don't really leaning on policy in places where in the dark halls of power.

Rebecca Henderson: I think it's super important to differentiate between different companies. There are some companies that are behaving really badly indeed. They are funding massive public relations campaign saying we can keep running fossil fuels it’s the future, it's gonna be great and at the same time they are pumping hundreds of millions of dollars into modern day forms of climate denialism and into politics in ways that have been totally disruptive. I think there are some firms that are trying to behave better. And, yes, they’re doing things inside their own operations. So, sorry, I wanted to tell a good story. So I'm good friends with Hugh Welsh who runs the U.S. operation of a chemical company called DSM. And he is very active in introducing innovations like Clean Cow. Which is a pill you give to cows to stop them farting as often. It turns out that cow farting and cow belching is a huge source of methane. And so it’d be really good to reduce that. So DSM is funding a number of projects like that. They are very sustainably oriented they talk about it in public. And one of the things that Hugh has been doing is working with the chamber of commerce to change the chamber’s position on climate change. So there are firms that are acting consistently. Unilever for example, is absolutely front and center in pushing for change in climate policy. If you think of the alliance called We Are Still In that’s working with governors and states right across the U.S. They succeed in working in partnership with governors and local NGOs in putting in place commitments that will get the U.S. to within shouting distance of the Paris agreement. So there are firms out there that are trying. Are there firms that are saying all kinds of good things and doing bad things? Yes. Are there firms that will say they care about climate but not advocating for it? Yes. Do we have to change them? Absolutely. But I think it’s a mistake to tell all of business with the same brush.

Greg Dalton: One of the things that underlies some of that is the concentration of power. Because we have, and Rebecca you write about how the top, was it top 40 people in the world control as much wealth as the bottom 50% which is, how is that not shameful in any system that produces that amount of concentration of wealth and power. And Hope Jahren, you write about GMOs are safe for humans to eat, but farmers are forced to buy seeds from near monopolies Monsanto and DuPont. So I'd like to hear Hope talk about that concentration of power which you write about in Iowa how the small farms have gotten smaller and the huge farms have gotten huger. And we have this disparity of power that underlies all of this, Hope.

Hope Jahren: Yeah, I mean there's also a fundamental question here in the changing nature of human labor, right. So there were folks that were very concerned with population increase in the 70s and how was the earth gonna feed all these people. And a tremendous amount of research was done on plants and animals. And it resulted in a whole new set of brave new world, all new consortium of creatures really. I mean farming just doesn't take us many people because you know to get a bushel of corn you used to have to plant a basketball sized court. And now you can get it out at about a parking space. Pigs used to have five piglets a year. Now, mother pigs have 10 piglets a year twice a year, right. And so the amount of food that we can create per unit labor has just skyrocketed. And so that labor has been consolidated using you know, industrial --

Greg Dalton: Fossil fuel driven industrialization.

Hope Jahren: Yeah, I mean enhanced technology and enhanced yield, wildly enhance yield. Which is always been done through breeding, is changing the amount of labor that's needed to produce way too much food, right. And so also the seed folks are just a few people producing all of these food. But at the end of the day, we have to ask questions about, you know, is it right to have the entire country food supply concentrated into the hands and pockets of a few people to sell and withhold as they see fit, right. So by mass producing all these and way too much, you know, I mean, corn is the great example. We can’t find way, we turn it into sugar and squirt it all over everything. We can’t even cram it down our mouths fast enough, we’re having to turn it into fuel. We burn fuel to plant corn to grow corn, to turn it into fuel to fuel automobiles. It’s like an environmental Mobius strip. I mean we’re doing crazy things at this point just because we can produce so much food and we’re desperate to do something with it besides feed truly hungry people.

Greg Dalton: Rebecca your thoughts on addressing that the concentration of power in capitalism in corporate America right now that has essentially kind of taken over the government. Who’s gonna tackle that concentration of power and are we gonna solve climate because climate challenges, presents cost to some of that very concentrated power.

Rebecca Henderson: I don’t think we’re gonna solve climate change until we address the concentration of economic power. And that means both addressing inequality and changing the rules of the game. I'm sure we need to get political. I talk a bunch about genuinely free and fair capitalism. And free and fair capitalism means you compete hard against other firms. It means you don’t go to Washington and change the rules such that there just a few of you in control fixing the prices and we have increasing evidence pushing down wages. That the one of the reasons inequality has increased is because economic power has become so much more concentrated. So labor has to work for a few, you know, people have to work for one of a few firms. And at the same time that concentrated economic power is pushing back against moves like raising the minimum wage or may I get topical, guaranteed sick leave or comprehensive healthcare. I mean these moves that would really help the poorer 50% of the population that actively resisted by this concentrated power. And I think we have to fix inequality because without it we won’t generate the political momentum to address climate change and because we should fix it for its own sake let me say. And we have to fix politics. So one of the things I find myself saying a lot and I know how crazy this sounds, is the business should get actively involved in remaking of political institutions. In making democracy much more ground-level much more responsive and please in pulling money out of politics. So I think business is going to suffer immensely from the current situation and that the smart thing to do is realize that. And so okay, let’s pull the money out let’s pull ourselves out. Let’s put the government, a partnership between government and business at the heart of our society in the service of the whole society.

---

Greg Dalton: You’re listening to a Climate One conversation about Reimagining Capitalism. Coming up, challenging some deeply held beliefs about the role of markets.

Hope Jahren: Every idea is on the table. It doesn't matter how crazy something sounds, you can always get somebody who will sit down and talk about how to scale that up to the point where it changes the world.

Greg Dalton: That’s up next, when Climate One continues.

---

Greg Dalton: This is Climate One. I’m Greg Dalton, and we’re talking about Capitalism and the climate crisis with Hope Jahren, Professor at the University of Oslo and author of The Story of More; and Rebecca Henderson, Professor at the Harvard Business School and author of Reimagining Capitalism in a World on Fire. Hope and Rebecca both write about the gender barriers they encountered in their careers in science and business. Oceanographer Sylvia Earle broke the glass ceiling in science in 1970. She joined other scientists living undersea for up to 60 days. This clip from the documentary Mission Blue shows how the first group of female aquanauts was portrayed.

[BEGIN CLIP]

Male Speaker: Now a team of divers will attempt to live for two weeks as quiet residents on the seafloor. Ironically, these aquanauts are not men with extraordinary physical endurance and stamina, but five young and attractive women. The world’s first real-life mermaids. Their leader is a renowned scientist, Dr. Sylvia Earle, a marine botanist and an experienced diver.

[END CLIP)

Greg Dalton: That's a clip from 1970 talking about Sylvia Earle's and other female scientists breaking into the world of bearded men scientists. Hope Jahren, 50 years ago I know you’ve encountered some of that. We’re told at one point you’re prevented from entering your lab I think because you are pregnant. So how far have we come in that 50 years since that was recorded?

Hope Jahren: I think the problems in science in terms of sexism are part and parcel with the basic challenges of walking through the world wearing a woman's body. I mean I think the, you know, feminist theory brings us back to violence against women, reproductive rights and equal pay for equal work. And those are the three core issues that we struggle with in every profession in every field of life in every theater of being. And academia has problems around each of those. You know, we have harm, violence, rape, murder in academia and in science, right. We have problems being paid equally for equal labor and we also have tremendous awkwardness at the very least, and discrimination associated with women invoking their fertility and having children taking care of children, etc. And so, yes, I think those things are with us. They find a different expression culturally as we move through time. But I feel that this is our piece of the struggle. What I've never understood is why people are surprised to find that these truisms that are so core to surviving as a woman also have their expression within academia and within science per se.

Greg Dalton: Rebecca Henderson, you write about giving presentations in the highest heels you can imagine. And sometimes you get concerned if you start talking about values or purpose they’ll write you off as a simpering female. What’s been your experience in the business world and business education?

Rebecca Henderson: This is very controversial. But I think it's sometimes useful to think about men's way of looking at the world versus women’s way at looking at the world. And it’s controversial because of course men are very different and women are very different. So I’m talking about a central tendency a particular expression of masculinity, which I think one sees in the business world. That life is about competition, life is about the individual, life is about aggression and that that’s what we strive for. And life is also about rational force about managing the numbers about showing that you’re smart. And, as I said, I don’t need to say that that’s like men and this is like women. But that central tendency that way of being in the world has become very dominant in the business community. And in my own career, I thought it was necessary to learn that language and to be able to really participate in that conversation. And it’s one of the reasons I have an undergraduate degree in engineering and a PhD in economics. I wanted that to be absolutely no doubt that I could handle the numbers understand the bottom line compete as hard as any of the rest of them. And I still find now when my research is more than ever focused on questions of, you know, what we sometimes call mushy stuff, this drives me crazy as if that is an emotions were somehow not real or not important. When in reality, as we know now from the modern psychological research, most people are driven most of the time by their emotions and their values. And all the rational stuff we come up with is our forebrain making up excuses for what the subconscious is just cruising through. So yes, this has been a real tension in my life in the last 10, 15 years. It’s one sort of story I sometimes tell to illustrate it. So I teach students about climate change and the day it just represents and I often say, but there’s a business case as business people we can make money by developing solutions to this problem and that's really important. And again I’m generalizing horribly but many of the men will come up to me and say,, “Rebecca tell me more about that business case. I want to be really certain.” And far more of the women come up and say, wait, we are destroying the planet in the service of our bottomline. How do we stop doing that? And again it’s a generalization but that is the tension in our society that I think we all have to live inside.

Greg Dalton: Hope Jahren, I've learned from some climate justice activists about how racism patriarchy are really at the root. That a lot of the conversations I've had about changing this technology changing this policy don't get to that deeper root. And they would say that getting back to more communal community-based nurturing system away from patriarchy is essential for really solving climate. What do you think?

Hope Jahren: Well, what I run into the most is when I talk to people about overpopulation. And I've had a number of men really come up to me and with seemingly like some pretty severe neurosis about these uncontrollable women everywhere having baby after baby. And the planet is doubling and doubling beyond control. I looked into it and people have been freaking out about overpopulation basically since they were able to count each other. There’s all these writings from Mesopotamia talking about, you know, can the earth handle all these people occurring. One thing that and I did a lot of research on my last book The Story of More. And the one thing that we can see with lowered birthrates is that when the gender gap closes. That means when opportunity economic opportunity health outcomes and also political participation is close between men and women within the society, then the number of children born within a woman's lifetime is low. Low at replacement level or even lower than that. And that doesn't just apply to rich countries. It doesn't mean that there's an awful lot of opportunity there. It just means that men and women are sharing any amount of opportunity and justice and fairness there. And that is where we have the lowest number of births per woman's lifetime. So I would say that the only surefire way we can reduce population growth is to close the gender gap. And if that isn’t fundamental to reversing or slowing down the damage to the earth, I can't think of another example more tightly correlated to patriarchal inequality than that.

---

Greg Dalton: Rebecca Henderson, Professor at the Harvard Business School and author of Reimagining Capitalism in a World on Fire. We also heard from Hope Jahren, Professor in the Department of Geoscience at the University of Oslo. You’re listening to Climate One. I’m Greg Dalton. Short of rebuilding capitalism from the ground up, can the stock market be used as a tool for climate action?

Brian Deese: Climate risk is investment risk, and I believe that we are going to see key elements of sustainability rise in importance for companies and for governments and regulators.

Greg Dalton: Brian Deese is Global Head of Sustainable Investing at BlackRock, the world's largest asset manager. A former aide to President Barack Obama, Deese was recently tapped to lead President-elect Joe Biden’s National Economic Council. In this conversation recorded before that appointment, He’s joined by Lori Keith, a Portfolio Manager with Parnassus Investments, a leader in the field of socially responsible investing, or SRIs. And Pratima Rangarajan [PRAH-tee-mah ran-GAHR-ah-jahn], CEO of the Oil and Gas Climate Initiative, an investment fund backed by some of the world's largest oil companies including BP, Chevron, and ExxonMobil. Pratima spent more than 10 years in the renewable energy business. She explains why she went to go work for an investment fund run by the largest oil companies in the world.

Pratima Rangarajan: A few years ago I decided to just work on climate directly. And so I started studying the data on carbon emissions. And I took home two important learnings. At that time we had less than two decades just like we have now in our carbon budget to stay under 2 degrees. And with renewables at less than 10% of the energy mix it just seemed to me that we didn't have enough time to scale renewables to cover the rest of the 90% not to mention the growth. So we have to work on the rest of 90%, you know. As I told my kids, I have to stop working the chocolate chips and go work on the cookies as well. The second realization I came to is that there are substantial sources of carbon that are emitted in this world that are not about energy. And here I can just take cement as an example we all know and love. It’s responsible for about 7 billion tons of carbon dioxide every year. It would be the third largest country if it was a country. And less than half of cement emissions come from the energy piece of cement. The rest of it is really chemistry because we take carbon emissions material and make it into cement. So it actually just emits carbon dioxide. So when you look at both of those, I realized that I was really working on a small-piece of the pie. I wanted to work on the overall climate challenge which is the carbon challenge. So one of the pleasures of my job is that I can just look this from the lens of following the carbon. That’s what we do in our business we follow the carbon. Where there’s carbon it’s our job to figure out to go invest in solutions to mitigate it and then figure out how to scale it up. So I’m following the carbon, Greg.

Greg Dalton: Brian Deese, BlackRock is the largest investment manager in the world. Also mainly an index house where you buy indices that are constructed by other companies. You think that divestment is simplistic it's the wrong frame, you know, maybe a bad title for this conversation and get your challenge on divestment. It’s too simplistic, too binary. What’s wrong with divestment?

Brian Deese: The first is that I think we come at this from the perspective of risk. And investment risk in trying to fully understand and reflect the risks that we’re all talking about here into investment processes. We did announce earlier this year that on our active portfolios, which means the portfolios where we have discretion when we’re managing our client's assets, we did announce that on that portion of where we have discretion we would be exiting all of our exposures to thermal coal producers because that was an area where we identified the risk the business model risk itself is pronounced toward that. But as we look more broadly and we look at these risks, I would make two points. One is, we’re very focused on this issue of transition in two respects. The first is, trying to understand which companies and which business models today are the most well-prepared to actually navigate effectively and in fact effectively take advantage of what we believe will be an accelerated transition toward a low carbon economy. And if you take that perspective, what it allows you to do is not look for example at the entire energy sector or all companies that are involved in traditional energy and look at them sort of monolithically. But instead say, some of those companies are making significant changes to their business model. Taking a lot of their current R&D and cap ex and investigating in different ways, and some of them are. And from a risk perspective, investment perspective those difference is really important when you’re trying to think about which companies were actually best positioned in the future. And we use that not only in terms of allocating risk capital but also engaging with companies. Where we own equity on those companies on behalf of our clients and that is connected to the work of Climate Action 100 that we are now supportive of and partnering. The last point I would make though that is connected with transition is that ultimately, the pace of the global low carbon transition will be dictated by the ambition and the effectiveness of government policy globally. And as somebody who spent a lot of time working to and getting the Paris agreement agreed to and then entered into force in 2015, 2016, I think you look at that framework and you see in it the potential for countries to increasingly increase the ambition of their national policies, their nationally determined commitments in a way that would signal long term trajectory of how the economy will decarbonize that would then accelerate massive transformations of capital and shifting of private capital. Obviously the state of global policy is not where it needs to be. I think that we will see an acceleration but the more that that ends up happening too late and in an uncoordinated way that doesn’t provide those long-term signals. But more challenging it’s going to be for capital to actually move and accelerate this process.

Greg Dalton: Pratima, I wanna ask you the whole divestment conversation focuses on publicly traded oil companies, people who know the markets deeply. Most of the hydrocarbon reserves are actually held by state owned oil companies that shareholders divestment can’t get at, China, Saudi Arabia, etc. So actually you have a window into that world because a couple of state owned or semi-state owned oil companies for Brazil and China are involved in your work. So tell us what window you have into the big part of the oil market that is not talked about in this whole divestment conversation.

Pratima Rangarajan: That’s actually right, Greg. I think divestment has done a good job in raising public awareness about climate challenge and that is important. But in terms of actual climate impact we don't really see it on the emissions. And that’s because it's not really effective, divestment isn’t such an effective tool where other forms of investment or other forms of capital are available. It’s not a great tool when you think about nationally driven, as you said, oil companies which is where a lot of this is. And it looks at all fossil fuels as the same, whereas if you really when we need to solve real problems, we have to be contextual. And we have to look at what is countries what regions are capable of and what they need as well. A one-size-fits-all approach is great on paper. But in reality, one cannot use the same approach in Europe and in Africa. In Africa 57% of the population doesn’t even have access to basic forms of energy. It just isn’t the same story. And as Brian said we cannot forget people in this. It has to be equitable and a just transition. It cannot just be financial. So, if you look for something that’s really a much stronger potent tool in getting to the core -- in answering the climate charge, I absolutely agree with Brian, it is policy. Policy can drive us to scale a lot faster and we can actually hit the carbon challenge in the timeframe we have. And the first thing there is to put a value on carbon. Two centuries of economic history tell us that we will not change behaviors unless we value what we are talking about and we need a value on carbon. That’s just plain and simple. And we need to put all our political will behind this so all our economic and political. From an investor viewpoint, I think it is much more effective to do what Brian was talking about. Which is work with the companies, work with entities, work with regions. To reward companies that are ahead of the curve. And that’s really important. We’re seeing with divestment a regime is that there are some real regions of need where we have to take a much more nuanced view. And so we’re making no progress into making substantive progress. Because all-or-nothing is not a very good option everywhere.

---

Greg Dalton: You’re listening to a Climate One conversation about using our investment portfolios for change. Coming up -- when it comes to socially responsible investing, let the buyer beware.

Lori Keith: There are a lot of firms that will say check the box, say we’re doing environmental social governance investing. But when you look behind the scenes and see what companies they’re investing in, most of those wouldn’t even meet the standards.

Greg Dalton: That’s up next, when Climate One continues.

---

Greg Dalton: This is Climate One. I’m Greg Dalton. We’re talking about investing for change with Pratima Rangarajan of the Oil and Gas Climate Initiative, Brian Deese of BlackRock, and Lori Keith of Parnassus Investments. This conversation was recorded with a live online audience earlier this year. As oil companies talk about moving into renewables, I get to thinking of the hokey-pokey -- they put one their one toe in, they pull their one toe out. It mostly seems like greenwashing and marketing. So are fossil fuel companies making real investments in cleaner energy, as a percentage of their overall capital expenditures (or cap ex)? Lori Keith explains.

Lori Keith: As investors certainly in the mid-cap space those finances mid-cap we’re not seeing that certainly across, you know, many of the shale independence in North America. We’re not seeing any movement towards renewables at this point. All of the capital expenditures are really going back into the ground to try to enhance recoveries in those existing shale wells or for additional acquisitions. And so we think there has yet to be an appetite to really shift away from fossil fuel and shale development by many of the players. Certainly there are one offs internationally and some of the very large players that are starting that route. But we think it’s gonna be a long road, frankly. And in the meantime we think there’s gonna be significant risk to many of the players particularly when we’re looking at commodity prices today, you know, certainly $20 per barrel on the West Texas intermediate today's price. At that level certainly, yeah, the Kansas City put out a projection that 40% of energy companies in North America potentially will be bankrupt within one year at this commodity price. Many of those being smaller players but we think yeah there’s very significant risk. And so as an ambassador you’re really having to bet on an increase in commodity price for these stocks to work and the economics simply aren’t there.

Greg Dalton: Pratima, Lori Keith talked about the mid-range companies. You deal with like the super majors, the global giants. We have a question from Lala on YouTube. “Will the oil and gas companies invest more or less in clean tech in 20 and ’21?” So what are you seeing I understand your fund is separate from the companies they all put some money in, it’s a separate entity. But does that trickle into larger investments by the oil and gas companies in some of the clean technologies that they might discover in your fund or learn about?

Pratima Rangarajan: Yeah, absolutely. So two points. One is that the money they put in our company is separate from what they already do. So if we look at Equinor they do offshore wind. Everyone of the companies has their own portfolio of clean technologies.

Greg Dalton: But to be fair, it’s a small part of their overall expenditure, right. I mean it’s 1%, 2% of what they spent.

Pratima Rangarajan: It is a small part but, you know, when you look at what it actually takes the cap ex that takes to go drilling for oil is not the same cap ex when you set up a wind farm. And I come from the wind side of the base, and so we just don’t run so cap ex which in general. And I think you’re gonna see the changes you’re gonna see the changes in the business models because that’s what we need. The world is gonna need it, COVID is going to, I think in some ways increase the pace because we’re going to have recovery plans. And it’s always good and sometimes crisis makes you look at things very differently. We’re not gonna come back to the same place. But in terms of our fund, the billion plus dollars that we have in our fund, obviously I commend the companies to give us that as an investment capital. But in addition to being investment capital, they also co-invest with us in some of our investments. They actually, but most importantly they are collaborators. They take our innovations they pilot them, they test them and they are actually deploying them at scale right now. So that’s really important because we need to shorten the time for commercialization, time for impact. And then when we also take on some difficult projects that’s when they become really, really important partners for us. They take it over from us. So in the U.K. we have a carbon capture utilization storage project. It’s very ambitious, C-I grew it over the last three years. And the goal is to decarbonize the entire northeast of England. And this project grew out of our capabilities as a small investment fund. And has now being taken on by five of our member courtesy of member conference. And they are going to take it out to operationalize. Now this is not a typical type of project and this is really important for couple reasons. One, it’s not a typical project that they would normally invest in. They’re doing this in order to demonstrate that we can decarbonize industrials across an entire region. When they do this, what’s the most important thing is that they will be able to transition the technologies the resources the knowledge they have into the industrial sector and allow for the decarbonization of the neighboring sector. So these are all the ways we work with them. So yes, the impact is much broader than what we do as a fund. We’re just the catalyst.

Greg Dalton: We have some questions from our listeners, from John Murphy on YouTube. “I want to invest sustainably, but I'm overwhelmed by the enormity of Googling green investing or sustainable mutual funds. Can someone please suggest information sources for individual investors.” Lori Keith, where should a person who wants to go green look for investment information?

Lori Keith: First of all I would suggest really looking at the spectrum of what the offerings are. Certainly going directly to websites offered by individual mutual funds as an example, you can really get a sense what is it that they own. Because I think it’s really important as an investor to understand what are those companies that are truly being invested in, how are they disclosing for instance their proxy policy. How are they voting as it relates to issues around climate change. Full transparency I think is really important. And so I would definitely encourage one to go out and look at the information that’s provided on those websites. See if there is a report any sort of shareholder sustainability reporting that is provided on annual basis. Engagement reports see what type of engagements that firms are involved with for us as investors at Parnassus mean we’re very actively involved in engagement efforts with a number of our investment holdings. And we report out on what we’re doing and what stage does engagement efforts are in. So I think that can be very helpful but I do think it’s really important to understand because there are a lot of firms that will say check the box, say we’re doing environmental social governance investing. But when you look behind the scenes and see what companies they’re investing in, most of those wouldn’t even meet the standards as it relates to environmental social governance standing. So I think it’s really important to understand what you own. And I would definitely recommend going directly to websites and look at the shareholder reports. Certainly, you know, for myself I just authored the recent quarterly report that will be coming out shortly. We do that every quarter and you could read through those reports in plain English and see what the strategies are and what they’re investing in. And I think that's really important.

Greg Dalton: Sometimes they are in plain English. Another useful tool is fossil free funds.org. Really useful tool you can plug in the ticker for any fund and you can see there a lot of the funds that pretend to be fossil free or low carbon there's a lot of carbon in there. Brian Deese.

Brian Deese: Yeah, I just want to pick up on this and say something said earlier about, you know, we've learned from decades of financial research that the most important decision that an individual investor makes is actually at the portfolio construction level. And one of the things that’s really exciting about the space that we’re in now is where as a decade ago it was much more that actually people's choices were constrained to a limited number of sustainable funds that were in one sector. So just equity, not fixed income maybe it took a lot of risk which might be appropriate for somebody who has a very significant risk appetite but not build a whole portfolio. Now there are a wealth of building block exposures, low cost, straightforward that an investor can start. So I would say the other thing you could do is start whether it’s with your financial advisor or websites like you’re saying and start at the initial question. If you’re building a 60/40 portfolio how can you think about embedding sustainability in the core of what you're doing. Not just in thinking about having a satellite exposure to 5% of the money in your portfolio to go into a NSRI fund. That’s a really exciting change and, you know, we’re seeing a democratization of access to underlying building blocks. Now to your point, we need to look at what below the headline label, you need to understand particularly if you're getting screened funds what they screen out. You know, I would say in fairness there is no one unified vision the definition of fossil fuel. Every company including renewable energy companies consumes energy of one form or another. But with that said, the number of choices and the quality of products has exploded recently. And I would just encourage think about that question when you start building your portfolio, not just when you’re at the end and you said I wanna get some exposure to an SRI fund.

Greg Dalton: And as we wrap up I’m hearing this conversation thinking about half of Americans don't have participation in the market. We’re in a time of severe economic distress where people have difficulty paying rents people -- unemployment is in the double digits. So I want to end and think about asking you something you’re grateful for and maybe evoke some empathy for people who feel frankly excluded by this conversation we’re having because they don't have access to the markets and retirement plans. So many Americans and others live paycheck to paycheck. Pratima, you spoke earlier about other parts of the world that are less energy fortunate than we are talking on this conversation. Your thoughts on kind of empathy and gratitude at this time of global economic pain?

Pratima Rangarajan: Greg, I think COVID has shown us some of the real gaps in our society when it comes to healthcare when it comes to social net for young people, even young people or older people. Both parts of society are finding themselves in difficult times right now. There are kids out there who are not getting their meals when schools are not open, right. And there’s some real parallels between what we’re seeing in COVID and the climate challenge. They are both going to affect the people at, you know, the difficult parts of society where the poorer parts of our society more. They’re going to affect some foreign nations more. And I think we really got to start thinking about coming out of COVID-19 as we look at our economic recovery plans. We really got to think harder about our social recovery plans. And how do we transition even to this climate in a just equitable way for all. It is where I hear the most about divestment is in the halls of Imperial and Oxford and Cambridge when I’m in London. I don’t hear about it when I’m sitting on a panel in India. There they ask please can we have gas power. Gas is too expensive for us but the coal is choking the kids. The emissions in Delhi were terrible. So it’s just the, you know, I think we do have to think about we’re very privileged and there are multiple ways, multiple lenses we should be looking at the world right now. And I hope maybe COVID has really opened our minds to some of that.

Greg Dalton: Brian Deese, your thoughts on that privilege at this moment when there’s so much pain in the economy.

Brian Deese: Look, I’m enormously grateful for the health of my kids and my partner and my family. I’m incredibly grateful and awed by the heroism of the frontline workers and healthcare officials who are not sitting as we all are in our homes facing challenges of our own, but are out on the frontlines helping to fight this physical threat to our lives and our economy. And I’m also very aware at this moment that as Pratima says, these types of physical threats are accelerants to the type of inequality that was already really hitting societies within countries and between countries. And, you know, if you live in Atlanta today you’re 15% more likely to die from coronavirus than if you live 15 miles outside in the suburbs. Because the local air quality in Atlanta is bad and it exacerbates respiratory diseases. As we move into the winter in the southern hemisphere and we see this crisis extended to emerging market economies. We’re gonna see the kind of disproportionate impact where you see the intersection between air quality and pandemic. We know the intersection between climate change and disease. It was coronavirus here but we see the extension of vector-borne illnesses as climate change and in fact, as habitats and humans start to intersect with each other. And in fact animal borne disease or diseases that initiated animals are much more likely to occur and spread as climate change forces people into, you know, into closer proximity. And so as global community we need to be much more capable of actually preparing and being in front of this. But I would say, to your point about gratitude and empathy. I would add to it urgency because even as we’re talking about this sort of how do we get to these longer-term issues. The actions that government policymakers that first responders that health professionals and that investors take in the next weeks and months will help to also reinforce whether or not we can come out of this having blunted some of the worst impacts of that or not. So, I also in addition to feeling that gratitude and sense of connectivity to these larger challenges to feel some urgency around this making sure that we're doing everything we can to not have the impacts of this crisis which already will be huge even more as we move into the next phase or phases of this epidemic.

Greg Dalton: Lori Keith, what gives you hope when you think about urgency, gratitude and empathy. What gives you hope?

Lori Keith: Yeah, I would echo much of what’s been said so far. But I think we’re very fortunate. I saw a journal article, Wall Street journal article today highlighting that only about 37% of Americans can actually work remotely. So I feel very fortunate that I’m one of those people that are able to continue my job work remotely, my three children are all able to continue with their distance learning. But frankly, there’s a whole rest of the society that is not able to do that. And so we have essential workers really on the frontline whether it be healthcare professionals, first responders grocery clerks. Many of them, you know, haven’t really been taken care of in terms of worker pay, you know, benefits, things that are now considered very essential for our society to operate. So I think this emphasis around investing in human capital management, investing in employees it got to something, you know, as we look to invest in companies that are gonna be sustainable over multiple years that is such a critical function and I do feel very strongly that coming out of that there’s gonna be this resurgence of making sure that companies are aligning their longer term strategy with really investing in their talent base. That’s really critical. So that’s one of my hopes and certainly one of the structural shifts that I hope comes out of this.

---

Greg Dalton: We’ve been talking about sustainable investing with Lori Keith, Portfolio Manager with Parnassus Investments. Pratima Rangarajan, CEO of the Oil and Gas Climate Initiative. And Brian Deese, Global Head of Sustainable Investing at BlackRock. After this was recorded, President-elect Joe Biden appointed Deese to head his National Economic Council at the White House.

Greg Dalton: To hear more Climate One conversations, subscribe to our podcast on Apple Podcasts, Spotify or wherever you get your pods. Please help us get people talking more about climate by telling a friend. It really does help advance the climate conversation.

Greg Dalton: Kelli Pennington directs our audience engagement. Tyler Reed is our producer. Sara-Katherine Coxon is the strategy and content manager. Steve Fox is director of advancement. Devon Strolovitch edited the program. Our audio team is Mark Kirchner, Arnav Gupta, and Andrew Stelzer. Dr. Gloria Duffy is CEO of The Commonwealth Club of California, where our program originates. [pause] I’m Greg Dalton.

Play

Valerie Shen

Sara-Katherine Coxon — Thu, 23 Jul 2020 02:36:00 +0000

Valerie ShenSara-Katherine Coxon Wed, 07/22/2020 - 7:36 pm

Valerie Shen is Partner and Chief Operating Officer at G2 Venture Partners. She oversees all operational aspects of the firm and fund including fundraising / LP relations, recruiting / HR, fund administration, impact reporting, legal, compliance, and marketing.

Prior to business school, Valerie was an analyst at Kleiner Perkins’ $1B Green Growth Fund, where she helped the team found G2. Before that Valerie was a management consultant at McKinsey & Company, where she worked across four continents, primarily on energy projects. She has also held positions at the U.S. Senate, X (Google’s “moonshot factory”), Goldman Sachs, Jane Street Capital, and The Wilderness Society.

Valerie holds a B.A. degree summa cum laude in Environmental Science & Public Policy and Earth & Planetary Sciences from Harvard University. She holds an M.B.A. and M.S. in Environment and Resources from Stanford University, where she was a Siebel Scholar and an Arjay Miller Scholar.

Valerie Shen

Partner & Chief Operating Officer, G2 Venture Partners

Fossil Fuels in the Ground and in Your Portfolio

Otto Pilot — Fri, 01 May 2020 11:04:27 +0000

Fossil Fuels in the Ground and in Your PortfolioOtto Pilot Fri, 05/01/2020 - 4:04 am

Can your nest egg finance the transition to a cleaner economy?

Universities, churches, pension funds and other organizations with $14 trillion in assets have hopped on the divest-invest bandwagon. CalPERS, the California Public Employees’ Retirement System, is one of the finance giants using the stock market as a tool for climate action.

“We need, we request, we require these companies to bring their emissions down typically by about 80% to 90%,” says Anne Simpson, CalPERS’ Director of Board Governance and Strategy. “So that the biggest emitters in the global economy have got to what’s called net zero by 2050.”

But it will take more than that to move the needle in a global economy. “We have nowhere to hide,” Simpson cautions. “If these emissions keep rising and causing global warming to increase, that’s going to have a knock-on effect on the world economy on communities right around the globe.

“And that means simply by having a green, clean portfolio isn’t going to help us with this risk unless we actually get the real economy into a green, clean economy.”

But when institutional investors divest from fossil fuel companies, does it make a difference, or is the impact merely symbolic? Some say it’s better to keep your stock and your influence, using investor dollars to encourage change from within. Pratima Rangarajan left her job in the renewable energy industry to head up the Oil and Gas Climate Initiative, an investment fund backed by some of the world's largest oil companies including BP, Chevron, and ExxonMobil. And to, as she puts it, “follow the carbon.”

“That’s what we do in our business; we follow the carbon,” Rangarajan says. “Where there’s carbon it’s our job to figure out to go invest in solutions to mitigate it and then figure out how to scale it up.”

“The name of the game here is change,” Simpson agrees. “We can’t sit and be the victim of the course of events. Even if we could actually construct a portfolio that looked neat and tidy and green, we’ve actually have got to be in the business of transition.”

What about those of us who aren’t managing billions in assets? What information is out there for the lone investor who wants to practice green investing?

“Full transparency I think is really important,” advises Lori Keith of Parnassus Investments. She suggests researching deeply into mutual funds by reading up on their websites, noting their positions on climate change and following sustainability reports.

“There are a lot of firms that will say check the box that says we’re doing environmental social governance investing. But when you look behind the scenes and see what companies they’re investing in, most of those wouldn’t even meet the standards as it relates to environmental social governance standing.

“So I think it’s really important to understand what you own.”

This program is generously underwritten by Bank of the West. Read more about their sustainable policies here.

This program was recorded via video on April 16, 2020.

Guests

Brian Deese

Director, National Economic Council

Lori Keith

Portfolio Manager, Parnassus Investments

Pratima Rangarajan

CEO, Oil and Gas Climate Initiative

Anne Simpson

Director of Board Governance & Strategy, CalPERS

Fossil Fuels in the Ground and in Your Portfolio

04/24/2020

Greg Dalton: This is Climate One. On today’s program - the stock market as a tool for climate action.

Anne Simpson: We need, we request, we require these companies to bring their emissions down typically be about 80% to 90%. So that the biggest emitters in the global economy have got to what’s called net zero by 2050. [:15]

Greg Dalton: Fossil fuels in the ground and in your portfolio. Up next on Climate One.

---

Greg Dalton: Can your nest egg finance the transition to a cleaner economy?

Climate One conversations feature oil companies and environmentalists, Republicans and Democrats, the exciting and the scary aspects of the climate challenge. I’m Greg Dalton. Today’s program was produced with the generous support of Bank of the West.

Universities, churches, pension funds and other organizations with $14 trillion in assets have hopped on the divest-invest bandwagon. But it will take more than that to move the needle in a global economy.

Anne Simpson: If these emissions keep rising and causing global warming to increase, that’s going to have a knock-on effect on the world economy on communities right around the globe. And that means simply by having a green, clean portfolio isn’t going to help us with this risk unless we actually get the real economy into a green, clean economy.

Greg Dalton: And while we may hope that our retirement funds can decarbonize the economy, not every country has enough energy options to use divestment as a tool.

Pratima Rangarajan: I don’t hear about it when I’m sitting on a panel in India. They ask please can we have gas power. Gas is too expensive for us, but the coal is choking the kids.

Greg Dalton: On today’s program - sustainable investing in a financially volatile world. How can we use our portfolios to promote the values we care about? My guests and I are coming to you from our homes via the internet. All four of them are involved in handling people’s money - maybe even yours.

Brian Deese is Global Head of Sustainable Investing at BlackRock, the world's largest asset manager. Lori Keith is a Portfolio Manager with Parnassus Investments, a leader in the field of socially responsible investments, or SRIs. Pratima Rangarajan [PRAH-tee-mah ran-GAHR-ah-jahn] is CEO of the Oil and Gas Climate Initiative, an investment fund backed by some of the world's largest oil companies including BP, Chevron, and ExxonMobil.

And Anne Simpson is Director of Board Governance & Strategy at CalPERS, the California Public Employees’ Retirement System. It’s the largest pension fund in the United States with more than $300 billion in assets.

With few cars on the roads or planes in the air, the world is awash in oil with few buyers. Oil prices hit historic lows and even briefly went negative. How does that affect the transition away from fossil fuels for institutional investors such as CalPERS?

PROGRAM PART 1

Anne Simpson: We are absolutely focused on the need for this transition so that we get global warming under control. If we don't do that, we’re going to be facing a wave of climate emergencies which are going to require a similar level of response. And the longer we leave it the more difficult it is. In other words, what we say is, you know, there’s a stopping distance here. It’s easier to just slow down when you can do it reasonably safely than having to slam on the brakes right before you go over a cliff.

So, you know, our view of this is the way we need to work; our theory of change if you like is that investors like CalPERS, we are owners, the co-owners of the companies that are producing these emissions. Our fiduciary responsibility is to make sure we’ve got the safety and soundness in this portfolio. So we need, we request, we require these companies to bring their emissions down typically be about 80% to 90%. So that the biggest emitters in the global economy have got to what’s called net zero by 2050. And although we’re dealing with an immediate emergency we can't, because the house is on fire with one issue, we can’t avoid paying attention to other risks which are going to undermine returns in the short, medium and long term.

Greg Dalton: Brian Deese, has the coronavirus crisis changed attention away from the longer seemingly less acute or urgent climate situation for investors? The market drop is so dramatic has it taken attention away from climate?

Brian Deese: Well look, there’s a set of immediate and urgent fiduciary elements particularly when you see the kind of market dislocation and liquidity issues that we saw in the month of March. But if you step back, I think for us, we came into this year and this pandemic crisis with similar to what Anne just described, that climate risk is investment risk. And more generally that we were on the front edge of a larger decade-old structural shift in investor preferences that really changes and up ends a lot of how traditional financial models intrusion of financial analysis assesses sustainability work. And as we look at what's happening in the current environment it actually gives us a very interesting test case to try to understand some of these convictions and some of these hypotheses that we’ve operated with.

So just two quick ones. One is, you know, our perspective at BlackRock has been that integrated sustainability into portfolios builds a component of resilience. Which means that you should see better performance in risk off environments where we have a unique and unprecedented moment here. And what we’ve seen is if you look at benchmarks, you know, 24, 26 of the major ESG benchmarks have outperformed their traditional market cap benchmark. If you look at our portfolios the sustainably integrated portfolios have really held up quite impressively during this crisis.

And then the other element is around, you know, there's been a sense of if there was a severe market downturn would investors run away from sustainability because they have to focus on other things. And if you look at flows into sustainable strategies in fact, in the first quarter you saw record flows. And flows uncorrelated with the kind of flight to safety and outflows in other market categories. So I think from our perspective, if you just look at what's happening in the market we’re learning interesting things but mostly reinforcing some of our, I’d say the convictions about the ways in which integrated sustainability can actually improve a fiduciary orientation around investing, number one.

And number two, as we come out of this crisis, I believe that we are going to see key elements of sustainability rise in importance for companies and for governments and regulators as they grapple with the longer-term implications of this crisis. A lot more to say about that but I think suffice to say that our perspective and our conviction around the importance of sustainability coming into this crisis is reinforced by what we’re seeing. And I think it's going to likely become an even more central part of the conversation going forward.

Greg Dalton: Lori Keith, your firm Parnassus has been devoted to that idea that Brian just mentioned. That sort of being good corporate citizens actually drives excellent or perhaps superior financial results. Your take on how this downturn in the market is affecting the turn toward cleaner energy, is it helping or hurting or too early to tell?

Lori Keith: We think there’s a very structural shift. We’re in an era of decarbonization right now and we think this is a multi-decade trend as companies continue to decarbonize. And we think, certainly, there's going to be in this immediate environment there may be a bit of a slowdown. Certainly, we’re seeing some disruptions right now for instance in supply chains for solar panels. Also in terms of implementation of those panels right obviously with everyone shelter in place right now there will be some temporary delays. But that by no means impacts the long term strategy.

When we look at the significant risk for environmental climate change risk we think companies certainly at the state level are taking very much a proactive role in pushing forward renewable standards. We’re starting to see that broadly across many states and certainly in Europe they’ve really been on the forefront of this. So nothing really derails that story and for us as ambassadors, you know, it’s really been a source of ALPHA to find and invest in a collection of companies that really best in class around managing their environmental social and certainly their governance factors.

Greg Dalton: And Alpha being additional return above additional risk.

Greg Dalton: Pratima Rangarajan, you were in the renewable energy business. I’m curious why you left renewables and went to go work for a group of, an investment fund run by the largest oil companies in the world and what is that fund doing?

Pratima Rangarajan: Thank you, Greg. Yes, I was in renewables for more than 10 years before I took this role. I’m a big believer that renewables has revolutionized the way we decarbonize the power sector. But, you know, a few years ago I decided to just work on climate directly. And so I started studying the data on carbon emissions. And I took home two important learnings. At that time we had less than two decades just like we have now in our carbon budget to stay under 2 degrees. And with renewables at less than 10% of the energy mix it just seemed to me that we didn't have enough time to scale renewables to cover the rest of the 90% not to mention the growth. So we have to work on the rest of 90%, you know. As I told my kids, I have to stop working the chocolate chips and go work on the cookies as well.

The second realization I came to is that there are substantial sources of carbon that are emitted in this world that are not about energy. And here I can just take cement as an example we all know and love. It’s responsible for about 7 billion tons of carbon dioxide every year. It would be the third largest country if it was a country. And less than half of cement emissions come from the energy piece of cement. The rest of it is really chemistry because we take carbon emissions material and make it into cement. So it actually just emits carbon dioxide.

So when you look at both of those, I realized that I was really working on a small-piece of the pie. I wanted to work on the overall climate challenge which is the carbon challenge. So one of the pleasures of my job is that I can just look this from the lens of following the carbon. That’s what we do in our business we follow the carbon. Where there’s carbon it’s our job to figure out to go invest in solutions to mitigate it and then figure out how to scale it up. So I’m following the carbon, Greg.

Greg Dalton: Anne Simpson, we have a question from Cynthia Kaufman on YouTube who says, “How can CalPERS justify losing our money in order to engage with fossil fuel companies that are still fighting the transition to a just green economy?” It sounds like she may be a CalPERS member. So Anne Simpson, CalPERS approach.

Anne Simpson: Yeah, thank you very much. The question is what you’re trying to do. So at the moment the world economy is about 80% dependent on fossil fuels for energy. So what we need to do is get that energy sector changed to a situation where the emissions have come down as we said by about 80%, 90% by 2050 is what we need. And I do want to fully agree with Pratima that it’s not just oil, gas. The message here. On the Climate Action 100+ list we have Heidelberg Cement the largest cement company in the private sector in the world. They are one of the companies that have committed to bring their emissions down to be in line with the Paris agreement. But also we have utilities, we have companies like Nestle, Pepsi, companies with a very long supply chain in agriculture. So we need to be open and honest about where the emissions are coming from. They’re coming from agriculture, they're coming from chemicals,they’re not just coming from the fossil fuel sector.

Now, specifically on this question so what do you do about that. Well, certainly for some investors and Parnassus is an example choosing to instruct the portfolio of other companies that make sense. But for us, we are still exposed to the risks of those emissions. We have nowhere to hide. If these emissions keep rising and causing global warming to increase, that’s going to have knockon effect on the world economy on communities’ right around the globe. And that means simply by having a green, clean portfolio isn’t going to help us with this risk unless we actually get the real economy into a green, clean economy.

So the reason that we’ve taken on these biggest emitters what we’re calling the systemically important emitters, is not they’re easy companies to deal with. There are strategy as to line up with the Paris goals. If we don’t do that we can have a neat, tidy green portfolio and the economy can be collapsing around our ears. So obviously CalPERS is very big but we can't do this on our own. What we've done with Climate Action 100 is team up with other investors. BlackRock recently joined which we’re delighted about. But there are investors that we are working with now have something in there over $40 trillion that they're responsible for. And because of that we’re starting to see big change at these companies, which are at the heart of this energy transition. Today, Shell making its announcement, and if you go to the Climate Action 100+ website you'll see utilities chemicals companies, cement companies, companies in the agricultural sector moving their strategy to be in line with Paris. And ultimately, that's what’s going to protect us from this risk.

I want to add one other thing quickly. Which is that when we’re thinking about climate change we can’t just think about this as some issue to do with science and finance. We’ve also got to start looking at the people who were at the heart of the impact that climate change is bringing. So something which I think we’re learning in this pandemic is to put people at the center of what we’re thinking about.

So at CalPERS we call this human capital. It’s financial capital, human capital, natural capital. And in our engagement with companies and our work at the SEC we’re saying that companies need to be reporting on issues like health and safety, employee engagement, workforce turnover. Because if we don’t take care of people in the process of this transition we simply won’t achieve the consensus from the public, the private sector and from civil society. So really, this is, the name of the game here is change. We’re too big to walk away. And even if we did walk away, we’re still gonna get hit by what’s coming down. We’ve actually got to change the course of events. We can’t sit and be the victim of the course of events. Even if we’re -- so big we could actually construct a portfolio that looked neat and tidy and green. We’ve actually have got to be in the business of transition.

---

Greg Dalton: You’re listening to a Climate One conversation about using our investment portfolios for change. Coming up, equal opportunity - why it’s important to make sure we’re lifting all boats.

Anne Simpson: Retirement security is something that should be for everyone. We cannot have an island of comfort floating in a sea of misery.

Greg Dalton: That’s up next, when Climate One continues.

---

Greg Dalton: This is Climate One. I’m Greg Dalton, and we’re talking about finances and fossil fuels. My guests are Anne Simpson of CalPers, Lori Keith of Parnassus Investments, Pratima Rangarajan of the Oil and Gas Climate Initiative, and Brian Deese,from BlackRock.

When it comes to sustainable investing, the conversation usually centers around divestment - using the stick, not the carrot. Brian Deese of BlackRock believes that framework is too simplistic, for a couple of reasons.

PROGRAM PART 2

Brian Deese: The first is that I think we come at this from the perspective of risk. And investment risk in trying to fully understand and reflect the risks that we’re all talking about here into investment processes. We did announce earlier this year that on our active portfolios, which means the portfolios where we have discretion when we’re managing our client's assets, we did announce that on that portion of where we have discretion we would be exiting all of our exposures to thermal coal producers because that was an area where we identified the risk the business model risk itself is pronounced toward that.

But as we look more broadly and we look at these risks, I would make two points. One is, we’re very focused on this issue of transition that Anne just outlined in two respects. The first is, trying to understand which companies and which business models today are the most well-prepared to actually navigate effectively and in fact effectively take advantage of what we believe will be an accelerated transition toward a low carbon economy. And if you take that perspective, what it allows you to do is not look for example at the entire energy sector or all companies that are involved in traditional energy and look at them sort of monolithically. But instead say, some of those companies are making significant changes to their business model. Taking a lot of their current R&D and cap ex and investigating in different ways, and some of them are. And from a risk perspective, investment perspective those difference is really important when you’re trying to think about which companies were actually best positioned in the future. And we use that not only in terms of allocating risk capital but also as Anne said, engaging with companies. Where we own equity on those companies on behalf of our clients and that as Anne referenced is connected to the work of Climate Action 100 that we are now supportive of and partnering.

The last point I would make though that is connected with transition is that ultimately, the pace of the global low carbon transition will be dictated by the ambition and the effectiveness of government policy globally. And as somebody who spent a lot of time working to and getting the Paris agreement agreed to and then entered into force in 2015, 2016, I think you look at that framework and you see in it the potential for countries to increasingly increase the ambition of their national policies, their nationally determined commitments in a way that would signal long term trajectory of how the economy will decarbonize that would then accelerate massive transformations of capital and shifting of private capital. Obviously the state of global policy is not where it needs to be. I think that we will see an acceleration but the more that that ends up happening too late and in an uncoordinated way that doesn’t provide those long-term signals. But more challenging it’s going to be for capital to actually move and accelerate this process.

Pratima Rangarajan: That’s actually right, Greg. I think divestment has done a good job in raising public awareness about climate challenge and that is important. But in terms of actual climate impact we don't really see it on the emissions. And that’s because it's not really effective, divestment isn’t such an effective tool where other forms of investment or other forms of capital are available. It’s not a great tool when you think about nationally driven, as you said, oil companies which is where a lot of this is. And it looks at all fossil fuels as the same, whereas if you really when we need to solve real problems, we have to be contextual. And we have to look at what is countries what regions are capable of and what they need as well. A one-size-fits-all approach is great on paper. But in reality, one cannot use the same approach in Europe and in Africa. In Africa 57% of the population doesn’t even have access to basic forms of energy. It just isn’t the same story. And as Brian said and Anne said we cannot forget people in this. It has to be equitable and a just transition. It cannot just be financial.

So, if you look for something that’s really a much stronger potent tool in getting to the core -- in answering the climate charge, I absolutely agree with Brian, it is policy. Policy can drive us to scale a lot faster and we can actually hit the carbon challenge in the timeframe we have. And the first thing there is to put a value on carbon. Two centuries of economic history tell us that we will not change behaviors unless we value what we are talking about and we need a value on carbon. That’s just plain and simple. And we need to put all our political will behind this so all our economic and political.

From an investor viewpoint, I think it is much more effective to do what Anne and Brian were talking about. Which is work with the companies, work with entities, work with regions. To reward companies that are ahead of the curve. And that’s really important. We’re seeing with divestment a regime is that there are some real regions of need where we have to take a much more nuanced view. And so we’re making no progress into making substantive progress. Because all-or-nothing is not a very good option everywhere.

Greg Dalton: Let me jump in there on the political will. The companies that have invested in your fund BP, Chevron, Exxon Mobil and some European companies are also, you know, that's like an interesting technology bet and they're trying to learn about the future and make some very interesting investments that people wouldn’t expect oil companies to invest in. And you talk about we need political will; at the same time those companies with the exception of BP which just pulled out from American Petroleum Institute they say publicly we need a price, you say value on carbon, because they don’t want to get involved in carbon tax or cap and trade. But then they also support the American Petroleum Institute, which does everything it can and spends millions of dollars lobbying in Congress to prevent a price on carbon and to oppose legislation to do the kinds of things that they publicly support. Help us understand that there's an inside game and an outside game. And corporations are not monoliths and there's different power centers and conflicting interests. But since you mentioned political will, will the industry use its political muscle?

Anne Simpson: I have a comment on that too.

Pratima Rangarajan: Anne, would you like to go first?

Anne Simpson: I mean only because you are receiving if you like venture capital funds. And what CalPERS and BlackRock and others are doing with the companies is getting this political lobbying issue dealt with. So, we’re calling for first of all with these companies’ governance of whole. It means the board takes responsibility we hold them accountable through our votes but it also means lining up executive pay and rewards with the new goals of reducing. And we do not want shareholder money being used for lobbying purposes that undermines the commitment that these companies have made to supporting Paris. So, you’ll see the companies that you’ve mentioned including Shell including BP including others which have agreed to review, revise and pull out of trade associations that are not lined up to support this. But for all those of you looking at the proxy season, you'll see there's a whole string of share owner proposals coming to other companies calling upon them to do the same thing. In other words what you say and what you do with shareholder money has got to line up.

So that’s one thing the owners have got to get this all in check. Secondly, I just want to flag that many of the investors who are involved in this work also are part of initiative called the Investor Agenda. Which is being coordinated by the same investor networks, PRIs, series, IIGCC in Europe and their counterparts in Asia and Australia. What that group is doing is focusing on a whole range of issues in the policy framework which are going to make all the difference. Because Pratima is right, this can’t be done just to engagement. So our strategy at CalPERS is three part. It’s engagement, it’s advocacy with policy makers where carbon pricing mandatory climate risk reporting are just two examples of what’s on that measure. And then thirdly, integration. And that’s where we take what we’re learning about the transition not just to manage risk but also to find the opportunities. So you’ll see even in our portfolio we have private markets something like 12 billion invested very productively in the broad theme of climate solutions. So this is not just a one-way street. This transition is opening up lot of opportunity as well.

Greg Dalton: If you’re just joining us we’re talking at Climate One today with Brian Deese, Global Head of Sustainable Investing at BlackRock, the world's largest asset manager. Lori Keith, Portfolio Manager at Parnassus Investments and Pratima Rangarajan, CEO of the Oil and Gas Climate Initiative, an investment fund backed by some of the world's largest oil companies. And Anne Simpson, Director of Board Governance and Strategy at CalPERS the California Public Employees’ Retirement System the largest pension fund in the United States.

I’d like to go to our lightning round and ask some true or false questions for our guests.

Anne Simpson. True or false, divestment from fossil fuels is a feel-good gesture that has zero financial impact on the targeted company?

Anne Simpson: Well you said it. The question is do you want to look good or do you want to roll your sleeves up and get involved in this messy business of change. I do want for the record though to say that CalPERS several years ago did sell its holdings in companies with the majority of revenues from thermal coal. However, that was after engagement process in which we, you know, decided to keep several which were involved in the transition. But the others we didn’t see the transition opportunity. So just, you know, investment decisions have to be kept under close attention. Thank you.

Greg Dalton: Thermal coal is kind of easy to get out of. Once an industry is kind of dying then a lot of people head to the doors. Pratima. True or false, battery storage is hot and sexy?

Pratima Rangarajan: Absolutely.

True or false. Anne Simpson, picking individual stocks is a fool’s errand?

Anne Simpson: Well, a fool and his money are soon parted, as has been said. Stock pickers have not been able to beat the market in the downsize, you know. When you’re outsized you cannot like a small investor construct an active portfolio. No, it’s a fool’s game. Agreed.

Greg Dalton: True or false. Pratima, mining lithium for batteries is a clean and sustainable enterprise?

Pratima Rangarajan: It can be but what lessons have we learned from history. Let’s make sure that BlackRock and CalPERS are keeping all the miners clean and making sure that they are doing this in a sustainable way for the future.

Greg Dalton: True or false. Anne Simpson, before you move from the U.K. to California you thought everyone here wore tie-dye clothes and had flowers in their hair.

Anne Simpson: Yeah, it was such a disappointment. I thought I’d be tie-dying my daytime suit in the bath. Yeah, true.

Greg Dalton: Also for Anne, today they are once again wearing tie-dye shirts and not taking showers as often.

Anne Simpson: In California I’m sure it's all very good for saving water.

Greg Dalton: There you go. True or false. Brian Deese, pension funds have returned targets that are highly unrealistic?

Brian Deese: I think there’s spectrum of pension funds, a spectrum of return targets and some of them are unrealistic and some of them are valuable resource.

Greg Dalton: Alright. Thank you for getting through the lightning round. One of the more memorable and fun parts of Climate One.

I do wanna talk about the clean side we’ve been talking about the dirty side. Let’s talk about its divest and invest. Lori Keith, we’ve seen oil companies move into renewables I've been doing this long enough that it’s kind of like the hokey pokey. They put one toe in they pull it out, one toe in. Is there a meaningful investment now as a measure percentage of their overall capital expenditures or cap ex that fossil fuel companies are going toward cleaner energy or is it just kind of greenwashing and marketing? Is there real money being put by fossil fuel companies to alternative?

Lori Keith: As investors certainly in the mid-cap space those finances mid-cap we’re not seeing that certainly across, you know, many of the shale independence in North America. We’re not seeing any movement towards renewables at this point. All of the capital expenditures are really going back into the ground to try to enhance recoveries in those existing shale wells or for additional acquisitions. And so we think there has yet to be an appetite to really shift away from fossil fuel and shale development by many of the players. Certainly there are one offs internationally and some of the very large players that are starting that route. But we think it’s gonna be a long road, frankly.

And in the meantime we think there’s gonna be significant risk to many of the players particularly when we’re looking at commodity prices today, you know, certainly $20 per barrel on the West Texas intermediate today's price. At that level certainly, yeah, the Kansas City put out a projection that 40% of energy companies in North America potentially will be bankrupt within one year at this commodity price. Many of those being smaller players but we think yeah there’s very significant risk. And so as an ambassador you’re really having to bet on an increase in commodity price for these stocks to work and the economics simply aren’t there.

Greg Dalton: But to be fair, it’s a small part of their overall expenditure, right. I mean it’s 1%, 2% of what they spent.

But in terms of our fund, the billion plus dollars that we have in our fund, obviously I commend the companies to give us that as an investment capital. But in addition to being investment capital, they also co-invest with us in some of our investments. They actually, but most importantly they are collaborators. They take our innovations they pilot them, they test them and they are actually deploying them at scale right now. So that’s really important because we need to shorten the time for commercialization, time for impact. And then when we also take on some difficult projects that’s when they become really, really important partners for us. They take it over from us.

So in the U.K. we have a carbon capture utilization storage project. It’s very ambitious, C-I grew it over the last three years. And the goal is to decarbonize the entire northeast of England. And this project grew out of our capabilities as a small investment fund. And has now being taken on by five of our member courtesy of member conference. And they are going to take it out to operationalize. Now this is not a typical type of project and this is really important for couple reasons. One, it’s not a typical project that they would normally invest in. They’re doing this in order to demonstrate that we can decarbonize industrials across an entire region. When they do this, what’s the most important thing is that they will be able to transition the technologies the resources the knowledge they have into the industrial sector and allow for the decarbonization of the neighboring sector. So these are all the ways we work with them. So yes, the impact is much broader than what we do as a fund. We’re just the catalyst.

---

Greg Dalton: You're listening to a conversation about climate change and the stock market. This is Climate One. Coming up -- when it comes to socially responsible investing, let the buyer beware:

Greg Dalton: That’s up next, when Climate One continues.

---

Greg Dalton: This is Climate One. I’m Greg Dalton. We’re talking about investing for change. My guests and I are talking from our homes via the internet. I’m speaking with Pratima Rangarajan, of the Oil and Gas Climate Initiative, Anne Simpson of CalPERS, Brian Deese of BlackRock and Lori Keith of Parnassus Investments.

We invited our listeners to submit questions during the livestream. This one came from John, asking for help finding sustainable funds and companies. What resources are out there for the individual investor who wants to go green? Lori Keith has some suggestions.

PROGRAM PART 3

Lori Keith: First of all I would suggest really looking at the spectrum of what the offerings are. Certainly going directly to websites offered by individual mutual funds as an example, you can really get a sense what is it that they own. Because I think it’s really important as an investor to understand what are those companies that are truly being invested in, how are they disclosing for instance their proxy policy. How are they voting as it relates to issues around climate change. Full transparency I think is really important. And so I would definitely encourage one to go out and look at the information that’s provided on those websites. See if there is a report any sort of shareholder sustainability reporting that is provided on annual basis. Engagement reports see what type of engagements that firms are involved with for us as investors at Parnassus mean we’re very actively involved in engagement efforts with a number of our investment holdings. And we report out on what we’re doing and what stage does engagement efforts are in.

So I think that can be very helpful but I do think it’s really important to understand because there are a lot of firms that will say check the box, say we’re doing environmental social governance investing. But when you look behind the scenes and see what companies they’re investing in, most of those wouldn’t even meet the standards as it relates to environmental social governance standing. So I think it’s really important to understand what you own. And I would definitely recommend going directly to websites and look at the shareholder reports. Certainly, you know, for myself I just authored the recent quarterly report that will be coming out shortly. We do that every quarter and you could read through those reports in plain English and see what the strategies are and what they’re investing in. And I think that's really important.

Brian Deese: Yeah, I just want to pick up on this and say something that Anne said earlier about, you know, we've learned from decades of financial research that the most important decision that an individual investor makes is actually at the portfolio construction level. And one of the things that’s really exciting about the space that we’re in now is where as a decade ago it was much more that actually people's choices were constrained to a limited number of sustainable funds that were in one sector. So just equity, not fixed income maybe it took a lot of risk which might be appropriate for somebody who has a very significant risk appetite but not build a whole portfolio. Now there are a wealth of building block exposures, low cost, straightforward that an investor can start. So I would say the other thing you could do is start whether it’s with your financial advisor or websites like you’re saying and start at the initial question. If you’re building a 60/40 portfolio how can you think about embedding sustainability in the core of what you're doing. Not just in thinking about having a satellite exposure to 5% of the money in your portfolio to go into a NSRI fund. That’s a really exciting change and, you know, we’re seeing a democratization of access to underlying building blocks.

Now to your point, we need to look at what below the headline label, you need to understand particularly if you're getting screened funds what they screen out. You know, I would say in fairness there is no one unified vision the definition of fossil fuel. Every company including renewable energy companies consumes energy of one form or another. But with that said, the number of choices and the quality of products has exploded recently. And I would just encourage think about that question when you start building your portfolio, not just when you’re at the end and you said I wanna get some exposure to an SRI fund.

Greg Dalton: If you’re just joining us we’re talking about investing in fossil fuels and cleaner forms of energy, at Climate One. I’m Greg Dalton. My guests are Brian Deese, Global Head of Sustainable Investing at BlackRock. Lori Keith, Portfolio Manager at Parnassus Investments. Pratima Rangarajan, CEO of the Oil and Gas Climate Initiative an investment fund backed by some of the world's largest oil companies. And Anne Simpson, Director of board Governance & Strategy at CalPERS, the California Public and Employees’ Retirement System, the largest pension fund in the United States.

Greg Dalton: And as we wrap up I’m hearing this conversation thinking about half of Americans don't have participation in the market. We’re in a time of severe economic distress where people have difficulty paying rents people -- unemployment is in the double digits. So I want to end and think about asking you something you’re grateful for and maybe evoke some empathy for people who feel frankly excluded by this conversation we’re having because they don't have access to the markets and retirement plans. So many Americans and others live paycheck to paycheck. Let’s start with Anne Simpson.

Anne Simpson: Thanks very much. Retirement security is something that should be for everyone. We cannot have you know an island of comfort floating in a sea of misery. CalPERS relies for its own members we have nearly 2 million members in our pension fund. But it’s absolutely good for the capital markets to have this type of long-term savings it’s absolutely right for our members that they have dignity in retirement. And that should be something that all communities can rely on. It shouldn’t be viewed as a privilege for a few. It’s good for the economy it’s good for communities and it’s most definitely good for people in their vulnerable years. So CalPERS is a great supporter of retirement security for all that’s essential.

Greg Dalton: Pratima, you spoke earlier about other parts of the world that are less energy fortunate than we are talking on this conversation. Your thoughts on kind of empathy and gratitude at this time of global economic pain?

It is where I hear the most about divestment is in the halls of Imperial and Oxford and Cambridge when I’m in London. I don’t hear about it when I’m sitting on a panel in India. There they ask please can we have gas power. Gas is too expensive for us but the coal is choking the kids. The emissions in Delhi were terrible. So it’s just the, you know, I think we do have to think about we’re very privileged and there are multiple ways, multiple lenses we should be looking at the world right now. And I hope maybe COVID has really opened our minds to some of that.

Greg Dalton: Brian Deese, your thoughts on that privilege at this moment when there’s so much pain in the economy.

And, you know, if you live in Atlanta today you’re 15% more likely to die from coronavirus than if you live 15 miles outside in the suburbs. Because the local air quality in Atlanta is bad and it exacerbates respiratory diseases. As we move into the winter in the southern hemisphere and we see this crisis extended to emerging market economies. We’re gonna see the kind of disproportionate impact where you see the intersection between air quality and pandemic. We know the intersection between climate change and disease. It was coronavirus here but we see the extension of vector-borne illnesses as climate change and in fact, as habitats and humans start to intersect with each other. And in fact animal borne disease or diseases that initiated animals are much more likely to occur and spread as climate change forces people into, you know, into closer proximity.

And so as global community we need to be much more capable of actually preparing and being in front of this. But I would say, to your point about gratitude and empathy. I would add to it urgency because even as we’re talking about this sort of how do we get to these longer-term issues. The actions that government policymakers that first responders that health professionals and that investors take in the next weeks and months will help to also reinforce whether or not we can come out of this having blunted some of the worst impacts of that or not. So, I also in addition to feeling that gratitude and sense of connectivity to these larger challenges to feel some urgency around this making sure that we're doing everything we can to not have the impacts of this crisis which already will be huge even more as we move into the next phase or phases of this epidemic.

Greg Dalton: Lori Keith, what gives you hope when you think about urgency, gratitude and empathy. What gives you hope?

So I think this emphasis around investing in human capital management, investing in employees it got to something, you know, as we look to invest in companies that are gonna be sustainable over multiple years that is such a critical function and I do feel very strongly that coming out of that there’s gonna be this resurgence of making sure that companies are aligning their longer term strategy with really investing in their talent base. That’s really critical. So that’s one of my hopes and certainly one of the structural shifts that I hope comes out of this.

---

Greg Dalton: You’ve been listening to Climate One. I’m Greg Dalton. We’ve been talking about sustainable investing, with Lori Keith, Portfolio Manager with Parnassus Investments, Brian Deese, Global Head of Sustainable Investing at BlackRock, Pratima Rangarajan, CEO of the Oil and Gas Climate Initiative, backed by BP, Chevron, ExxonMobil and others. And Anne Simpson, Director of Board Governance & Strategy at the California Public Employees’ Retirement System. This program was underwritten by Bank of the West.

Greg Dalton: To hear more Climate One conversations, subscribe to our podcast at climateone.org. Please help us get people talking more about climate by giving us a rating or review wherever you get your pods. It really does help.

Greg Dalton: Kelli Pennington directs our audience engagement. Tyler Reed is our producer. Sara-Katherine Coxon is the strategy and content manager. Steve Fox is director of advancement. Anny Celsi edited the program. Our audio team is Mark Kirchner, Arnav Gupta, and Andrew Stelzer. Dr. Gloria Duffy is CEO of The Commonwealth Club of California, where our program originates. [pause] I’m Greg Dalton.

Play

Swami Venkataraman

Sara-Katherine Coxon — Fri, 22 Nov 2019 00:50:19 +0000

Swami VenkataramanSara-Katherine Coxon Thu, 11/21/2019 - 4:50 pm

Swami Venkataraman manages the development of Environmental, Social and Governance (ESG) analytic tools, assessments and the integration of ESG considerations into Moody’s credit ratings and research. As senior vice president-manager in Moody’s ESG group, he also leads Moody’s global renewable energy task force, is a member of the Infrastructure Finance Franchise Committee, and a ratings chair for the North American utilities and infrastructure ratings team.

Before moving to the ESG team, Venkataraman was a lead analyst in the North American utilities and infrastructure team since 2014. Prior to joining Moody’s, Swami was a director of project & export finance at Standard Chartered Bank in Mumbai, India, responsible for business development and execution of project and export credit financings in Asia covering power, renewable energy, and other infrastructure sectors. One of his solar PV projects won the “PFI Asia-Pacific Renewables deal of the year” award in 2013.

Venkataraman has broad expertise in energy and infrastructure, especially clean energy, across geographies over the past 20 years. He is a CFA charterholder, with a B.Tech in Electronics and Communications Engineering from the Indian Institute of Technology (IIT), Madras and an M.B.A. in finance and information systems from the Indian Institute of Management (IIM), Calcutta.

Swami Venkataraman

Senior Vice President, Moody's Investors Service

Pauline Kalunda

Sara-Katherine Coxon — Tue, 03 Sep 2019 13:33:19 +0000

Pauline KalundaSara-Katherine Coxon Tue, 09/03/2019 - 6:33 am

Pauline Nantongo Kalunda is the executive director of Ecotrust – the Environmental Conservation Trust of Uganda. An expert in establishing and managing conservation financing mechanisms, Kalunda has successfully established a commercially viable payment for environmental services scheme, Trees for Global Benefit (TGB), which links smallholder farmers to the voluntary carbon market. TGB won the 2013 SEED Award for its innovation and entrepreneurship, its promising efforts to promote economic growth, social development and environmental protection in Uganda, and the potential of its partnership to inspire others. Kalunda sits on the board of directors for several conservation organizations.

Website

Pauline Kalunda

Executive Director, Ecotrust Uganda

Cloudy Days for Solar?

Otto Pilot — Fri, 02 Mar 2018 00:01:00 +0000

Cloudy Days for Solar?Otto Pilot Thu, 03/01/2018 - 4:01 pm

When the U.S slapped 30 percent tariffs on imported solar panels, headlines heralded bad times ahead for clean energy in this country. But the stock prices of solar installers increased because the hit could have been worse. Solar entrepreneur and advocate, Jigar Shah, said it was “good news.” Our guest and professor from University of California Berkeley, Severin Borenstein said, “there's no question, this is a policy that was designed to make renewables more expensive because it doesn't make any economic sense beyond that.” Listen to a conversation about the future of solar.

This program was recorded live at The Commonwealth Club in San Francisco on February 21, 2018.

Guests

Severin Borenstein

E.T. Grether Professor, Haas School of Business, University of California

Scott Jacobs

CEO and Co-founder, Generate Capital

Lynn Jurich

CEO, Sunrun

Cloudy Days for Solar?

02/22/2018

Announcer: This is Climate One, changing the conversation about energy, economy and the environment.

The price of solar power has declined dramatically in recent years. That’s good news for homeowners, the environment and the economy.

Scott Jacobs: The cheapest way to solve emissions is energy efficiency and it's also the largest source of jobs in the energy sector.

Announcer: But recently, the United States slapped a thirty percent tariff on imported solar panels – a move that could cost thousands of American jobs and billions of dollars in future solar investments.

Severin Borenstein: There's no question, this is a policy that was designed to make renewables more expensive because it doesn't make any economic sense beyond that.

Announcer: Cloudy days for solar? Up next on Climate One.

Announcer: Are there dark days ahead for solar energy?

Welcome to Climate One – changing the conversation about America’s energy, economy and environment. Climate One conversations – with oil companies and environmentalists, Republicans and Democrats – are recorded before a live audience, and hosted by Greg Dalton.

Renewable power now accounts for the lion’s share of new electrical generation around the world. Even Saudi Arabia’s Aramco, the world’s largest oil producer, is considering investing billions to become a renewable energy powerhouse. Here in the states prices are coming down, bringing solar within reach of more and more homeowners. But will the new U.S. tariff put the brakes on what looked like a promising trend towards greener energy?

On today’s program, we welcome three experts. Severin Borenstein is a professor at the Haas School of Business at the University of California Berkeley. Scott Jacobs is CEO of Generate Capital, a clean energy investment firm. And Lynn Jurich is the CEO of Sunrun, a company that installs solar on rooftops across the country.

Now, our conversation about the future of solar power. Here’s Greg Dalton.

PROGRAM PART 1

Greg Dalton: I want to begin with some reactions from another solar company and get his comment here. We have a person who runs a solar company, it’s really a roofing company, Jim Petersen, CEO of PetersenDean spoke out against the tariffs on CNN.

[Start Clip]

Jim Petersen: What Trump did by passing this tariff is raise renewable energy rates across the country. Period. Full stop. It's a great headline, it's a promise on a campaign speech. But ultimately I think the consumer will be hurt.

[End Clip]

Greg Dalton: Severin Borenstein, will prices go up, is this gonna be bad for consumers the 30% tariffs on imported solar panels?

Severin Borenstein: Sure. Prices are definitely going to go up. The question is how much are these going to be tariffs that are easily evaded like the last round or are these going to bite more. The fact is though that solar is continuing to come down in cost. And so, even as it is going to push up the cost it isn't going to make a huge difference in the economics of solar panels. But there's no question, this is a policy that was designed to make renewables more expensive because it doesn't make any economic sense beyond that.

Greg Dalton: But let’s be clear, I mean, it’s easy to say, oh Trump did a bad, took a swing at renewables. But this started under President Obama with some companies in Oregon, you know, this is not, you know, doesn't fit that, San Francisco liberals doesn't fit that narrative of Trump swinging at the fossils, right?

Severin Borenstein: This is a bipartisan bad policy.

[Laughter]

Greg Dalton: Okay. Lynn Jurich, between 2016 and 2017 there were 10,000 jobs lost in solar according to the solar foundation. That's a 4% drop in employment. So is this gonna put a dip, further dip in solar employment in this country?

Lynn Jurich: I mean, there's no question that this decision was unequivocally bad for jobs. I think there are, you know, 97% of scientists say that climate change is caused by humans and I think 99% of economists would say this is bad for jobs. I think similar to Severin’s point, the cost declines though are so significant that they will outweigh this. So I think of this as a short-term nuisance, but in 10 years I don't believe this will be a part of the story.

Greg Dalton: Okay. But we’ll talk about the short-term thing. So the prices are falling, this is a little bit of a push, wind in the other direction but still the downward trend in prices. Scott Jacobs, will this bring manufacturing to the United States that is currently offshore?

Scott Jacobs: No. We have, you know, we've seen off-shoring of manufacturing of all sorts of industrial equipment over the last 30, 40 years due to pure economic factors and comparative advantage of other economies to build these kinds of equipment and other industrial applications. And we don't see those jobs coming back to the United States in any significant way despite maybe some of the headlines in the media and some of the tweets from our president.

Greg Dalton: Lynn Jurich, there’s gonna be some shakeout, who’s gonna be hurt, what types of jobs, is this gonna be the installers, people working in sales, people working in manufacturing the frames, you know, they go in the roofs. Where’s it gonna be?

Lynn Jurich: Yes, you are right. So there were about 500 jobs may be in manufacturing that this could help versus about 200,000 downstream. So that's everything from installing, financing, selling it to consumers and those 200,000 will be the ones that will be injured, you know. So again, I do see it though as short-term. I think the other things and trends that could help is the states could step up. So what we've seen happen in the past is sometimes when there are these policies that are so wildly unpopular and so against what the people want, the states come in and step up similar to what they did when we pulled out of Paris. And so I'm optimistic that in many places the states will rally that's where more of the action is really happening in terms of adoption for consumers. So counterintuitively, this could be a positive.

Greg Dalton: So tell us, most of the power that comes into our homes, into our cars is regulated at the state or local level, not so much the federal level, energy is really a regional local policy issue, Lynn Jurich, tell us the story of Nevada. There was SolarCity, a competitive o yours, founded a part of Elon Musk and now Tesla, and then a big utility backed by Warren Buffet with the battle and tell us how that's played out.

Lynn Jurich: There's a lot in this story and I think it's worth it because we’ll probably spend some time about how rooftop solar is compensated. So it might be worth, you know, taking a quick step back and educating people on how that works. So what happens for a homeowner as you install the solar panels on your roof, your home uses about 70% of that power and about 30% of that power flows to your neighbor's house. So the big question is, how much should you get paid for that power that you’re selling to your neighbor? Should you be get paid the same price your neighbor would buy it from the utility? Or should it be something much lower? The policy that we put forth in this country in 40 states is called net metering and it's a very effective policy.

What that does is it allows that homeowner to get retail credit for the power that is going to their neighbor’s house. It makes a lot of sense because it doesn't have to touch the transmission and distribution grid, the energy company doesn’t have to buy it, it makes the equipment last longer and frankly in many times the system when it's producing during the daytime, that's the time when the power is the most expensive. And so the utility doesn't have to buy really expensive peaking power at that time. The second benefit to it is that simple for customers to understand. One of the things we get into trouble with oftentimes is we make these rate structures that are impossible for people to understand, when am I gonna know if my system is producing more and exporting it to the grid. If you make it simple, it's the same price I’m buying it for, the policy works. So this has been in place in as I said 40 states.

In Nevada, the regulators decided to investigate it a bit. There's this common, I would say, I would go so far as to say propaganda, that there's a cost shift for homeowners who are getting solar and it’s a cost to everybody else in the system. So the regulators took a look at this, you know. The study that came back showed that there was actually a $36 million cost benefit to everybody in the system, again, because the utility doesn’t have to buy as much expensive peaking power, the transmission infrastructure lasts longer. Then there was another study done and that study looked very, very, very narrowly. They didn't include a lot of the benefits and that study found that there was actually this $36 million cost for the homeowners that, you know, spread out across the entire system. But at the same time they came out with that they said, but we didn't account for all of these long-term costs and environmental costs and the job benefits. And those are real but they're hard to calculate so we’re just going to go with this and whacked it back.

And so the only value you’re going to get for that exported power is the same price that we’re gonna buy it from a power plant, forgetting that there's a lot of expense in actually transferring that power out to the home. What that did was it made it not cost effective for homeowners to switch over to solar. There were 3000 jobs in the state lost overnight. And what happened was, 18 months later it was so wildly unpopular that the legislator had to overturn it and put it back in place. And this new commission and these legislators are saying, wait we should look at all these costs. There are all these benefits. Let's reinstate it and figure this out. And so we lost 18 months, we lost 3000 jobs and we just went backwards. It's now resolved and recovered, but it's an interesting story for a lot of reasons.

Greg Dalton: That come back in Nevada happened with the support of Republican legislators in the Nevada Legislature. Severin Borenstein, we just saw a big tax bill go through but tell us how clean energy sort of fared in this big tax revision that just happened.

Severin Borenstein: Well, it didn't change much. I actually have to respond to some of the things Lynn just said because I have a very different take on the rooftop solar view. There have been studies that have been looked at, dirty energy basically and on that comparison. That's not the comparison we should be making of course. We should be looking at rooftop solar versus grid scale solar and wind. And there have been good academic studies that have looked at how much is rooftop solar really saving and it does save. It saves on the distribution line losses because you don't lose power and it saves on some investment in the grid. But when you do that and you look at the price difference between grid scale solar and wind and rooftop solar, the difference between grid scale and rooftop is massively larger than the benefits of putting on rooftop.

You know, since November 9, 2016, I have realized that we have to be clear on when we’re having major disagreements and minor disagreements. We are all on the same page that we have to be moving towards reducing greenhouse gases. I think that there's a more efficient way to do it. These policies, net metering is a subsidy to rooftop solar. I know Lynn doesn't agree with that, but the studies that have looked at how much is it actually saving in grid, how much is it actually saving in line losses just don't even come close to the cost difference that we still have. We have a lot of subsidies for both and I think we should because we’re not pricing greenhouse gases and that's the major subsidy that's going on right now. But I worry that what we’re doing by emphasizing rooftop solar is raising the cost of moving away from fossil fuels which is what we need to do. So there are people who think that this is going to play a major role going forward putting it on residential rooftops and I think that that is not where we should be focused.

Greg Dalton: So are you saying that people who do rooftop solar are making bad economic decision?

Severin Borenstein: They certainly are not making bad economic decisions in California. They’re gonna save money because California has amazingly high electricity rate. But the actual cost including the pollution cost of electricity in California is very low. So the reason we have such a big gap between the cost and what we pay is because we are paying for energy efficiency programs, for those investments we made early on and very expensive renewals which were a good idea, which we’re still making in research and development. All of that and the gap that we have to fund the 30% of residential customers who are in low income programs, which is also a good idea.

But what that means is that our average residential rate for people who aren't on the low income programs which is about 22 cents a kilowatt hour is massively higher than the true cost including the pollution cost which is about 7 cents a kilowatt hour. And that makes it very economic to install rooftop solar.

Greg Dalton: Lynn Jurich.

Lynn Jurich: Yeah, I think this question, what we need to think about is, where is our system going over the next 20 years. We right now are on a utility investment binge. That's why the cost is going up so high. If I look at the last 10 years, what has happened with retail energy cost? Look at California but look at Arizona, look at South Carolina; in these markets the cost to the consumer has increased 30% over the last 10 years. At that same period of time, the cost to make that power to generate the power is down 50%. So that’s how much inefficiency is being disguised in the system right now. And we are still on that investment binge going forward because our grid is underinvested and we have more outages in the U.S. than in any other developing country.

And so what's going to happen is over the next 20 years we’re expected to spend double the amount we spent historically. But people aren’t buying more energy so that price has to spread out across everybody else. So we're going to have massive rate inflation. So what do we need to do? We need to change that system. How do you make that system more efficient? You make that system more efficient by putting the power out on the rooftop, putting the battery in the garage so that you can use the system at night and you introduce competition, which is really what we do because I go to work every day and think about how I drive my cost out so in that same 10-year period, we at Sunrun have driven 70% of our costs out to install while the utility is charging 30% more.
Greg Dalton: Scott Jacobs, let’s get you in here. We have a difference of centralized model versus distributed model where energy is generated close to where it’s used. Where do you fall down on this debate about the big industrial model or the little rooftop model?

Scott Jacobs: Well, it’s always dangerous to paint with a broad brush and as you said very clearly in your earlier question, a lot of the regulations are done at a state and local level, and we talk a lot about federal policy very often, but actually the policies that drive the energy systems as you said are much more local. And so whether you're talking about centralized generation or distributed generation, you know, big monolithic dirty energy plants or small renewable rooftops, you know, you have to really think about it at a local level.

And so the question is, are we getting economies of scale and cost reductions due to large scale big power plants, or are we getting economies of scale from large-scale manufacturing. And as we've seen in things like personal computers, consumer electronics, we've seen amazing cost declines over the last 10, 20 years. Those cost declines having absolutely nothing to do with this discussion here, the power sector, are driving power sector economics because of ancillary benefits. So PCs which have microchips are the reason why solar costs have come down in the last 10 years by 92%, 92% right? It's the economies of scale for manufacturing for the entire world's consumption of silicon modules and panels that is driving the costs in solar. And obviously there's a lot of solar consumption, but then creates the benefit of learning from experience that we’re also seeing dramatically improved in the solar market.

Similarly, you know, Lynn mentioned battery storage. Battery storage for the power market is tiny, but battery storage for your phone and other consumer electronics is going crazy in terms of demand, and supply is following that. And we will benefit in the power sector from those scale ups on the manufacturing side that will help distributed generation far more than central-station generation.

Greg Dalton: I didn't realize that until we talked recently that really I thought it was all the electric cars out there that are driving down the cost of car batteries. It’s cell phones that are driving that down. So Scott Jacobs, let's stick with that and help us understand the extraction economics and the manufacturing economics because some energy is extracted, coal comes out of the ground that's extraction, and then there's manufacturing economics. Explain those two paradigms for us and how they get to scale in driving down price.

Scott Jacobs: Well, extraction, you know, again depends on what we’re extracting but let's talk about extracting, you know, natural gas from the ground and the technology intervention that has happened in the last 10 years is hydraulic fracturing, the horizontal drilling that we can now do to pull natural gas resources that were previously inaccessible out. Now, that has been a scale game in terms of lots of drillers that have now driven down the cost because of the increasing demand for that technology. But most of the time when we talk about central-station sort of generation we’re talking about a single power plant that you have to build with a billion dollars. And then you’ve got to build another billion dollars worth of power lines in order to get it to the 10,000 consumers that will make it economical to even build that powerplant in the first place. When Severin talks about, you know, central-station generation versus distributed generation, he's assuming an existing grid. That is not the case when you're talking about new power plants in places like China and that is a very different equation, which is why I keep saying we have to talk about a particular geography, a particular regulatory regime.

But going back to the question of manufacturing scale, we built 10 solar plants, solar manufacturing facilities, sorry, in places like Malaysia and China. Well those 10 manufacturing facilities that are a billion dollars each they’re gonna serve demand for many, many, many, many years across the entire globe and drive down the cost of solar. That is not something you can ever see happen with a single wind farm or a single natural gas generation facility or worse even obviously coal facility. And in those cases not only do you have the large-scale capital expense that you need to do in order to build the facility, you have to remember that in any of these fossil fuels you’re buying the fuel every day to actually produce the power. In the case of solar, that's obviously not the case. You have the sunlight most of the time.

Announcer: You’re listening to a Climate One conversation about solar energy. Coming up: more on the debate over rooftop versus centralized power.

Lynn Jurich: Consumers have no control over these investment decisions that utilities are making. Consumers want to know where their power is coming from. They want control over this.

Announcer: That’s up next, when Climate One continues.

Announcer: We continue now with Climate One and our discussion about clean energy from the sun. Greg Dalton’s guests today are Scott Jacobs of the investment firm Generate Capital, Lynn Jurich who heads up SunRun, and Severin Borenstein of UC Berkeley.

Here’s Greg Dalton

PROGRAM PART 2

Greg Dalton: Severin Borenstein, it sounds like from computers we have gone from mainframe to PCs now handheld, lots of things have gone from a centralized model to a more distributed model, are you defending an old model by saying --?

Severin Borenstein: And lots of things are still made centralized and the right answer is to ask which is less expensive. Lawrence Berkeley Lab does studies of this every year. And their most recent study says that rooftop solar costs about $4 a watt to install, which is way down, it's down from $8 a watt 10 years ago.

Greg Dalton: That’s what I paid 10 years ago foolishly perhaps.

[Laughter]

Severin Borenstein: And grid scale solar is around $2 a watt. Now, that's the installation cost and so, yes, there are big economies of scale in doing that on a large scale basis. Now there are transmission costs and I'll get back to those in just a minute. But the other thing you have to realize is that grid scale solar is a very sophisticated system. They’re built on trackers so they tilt with the sun which you don't do on rooftop, it's not economic to. And they have much higher capacity factors.

So a watt of panel in a grid scale is producing about 30% of the time, whereas a watt of panel on a rooftop is producing in California about 15% to 18% of the time. So it's producing less power. And so when you put all that together and ask how much does it cost to produce at a grid scale solar plant versus a rooftop, it’s costing about three times more to produce on a grid scale -- or less on a grid scale. So then you have to ask, well okay, but it's way out there. How much does it cost to bring it in? And a statistic you often hear is that we’re gonna spend a trillion dollars over the next 20 years to build out the grid. And that's right. And that sounds like a lot of money until you divide it by the kilowatt hours it's gonna carry. And then it comes out to about a penny and a half a kilowatt hour. So where we are right now is grid scale solar is probably on unsubsidized costing about 5 cents a kilowatt hour and it costs probably an extra, extra couple cents a kilowatt hour to get it to your house. Rooftop solar right now, unsubsidized, is costing about 15 cents a kilowatt hour. And so there's a big gap there and it is not gonna be made up by transmission.

Now I just want to be clear, I have nothing against people who decide to put in rooftop solar. If you want to do it, that's great. What I worry about is, we need a massive change in our energy sources and the only way we’re gonna do that is, and we need to do it in the developing world, not just here, and so the only way we’re gonna do that is if we can do it cost-effectively. So there are cases where rooftop solar makes sense. In fact, there are even cases in the United States because if you're at the end of a long distribution line, it makes more sense because there's more cost to bring it to you. But if you look at the great majority of people, it's gonna make more sense to serve them with the centralized solar system or wind system. And the other aspect of it is you can't do that with wind. You’re not gonna have wind at your house.

Greg Dalton: Lynn Jurich.

Lynn Jurich: Yes, so a couple things. I disagree because I think that that treats all the innovation that's happening as static and the inefficiencies of what happens with our existing system. We have this decentralized renewable sources that are terrific for climate change, but they do nothing to help the glut of, you know, investment binge that the utilities are investing in. And at some point it will get cheap enough for the distributed solar to beat it. And so, if we ignore it and we put these punitive rates in and make it hard for consumers to understand what their savings are, when they get solar which is what's happening across the country in 260 places for us right now, if we do that right now we’re gonna continue to build in the centralized infrastructure with stuff we don't need. You just look at the power prices in 10 years in New York, you’re a consumer, you're paying about $350 on average in Westchester County for your monthly power bill from your utility. With the forecast of how cheap storage is and rooftop solar, you can get, pull off the grid for $250. So what happens then? We need to incorporate this technology, incorporate the innovation and we don't even know how good it can possibly be. Two years ago we would never have guessed that storage is now as cheap as it would've been.

The other thing I would want to offer and I'll do this quickly is, the system is economic and technological but it’s also values, and consumers want this. Consumers have no control over these investment decisions that utilities are making. In South Carolina, for example, the regulators approved building two nuclear reactors. They never got built. Every single customer now pays $27 on their electric bill for those unbuilt systems.

Consumers want to know where their power is coming from. They want control over this. And part of the reason why rooftop solar is so expensive in the U.S. is our values. It is $2 so Severin was saying $4 for rooftop solar, $2 for centralized solar. In Germany, in Europe same cost of panels, same cost of labor, $2. Why is it $4 in the U.S. versus $2 Because we have fire codes, because we pay property taxes, because we pay permit fees, because every jurisdiction wants to, you know, have their own special design. Those are values to us. We can eliminate those and the cost can come way down.

Severin Borenstein: Now you can’t put your finger on the scale here, Lynn. When you build grid scale solar plant, you have property taxes, you have permitting, you have environmental reviews that you don't have. I'm not saying that it could never be cheaper, but right now it is substantially more expensive and until we have a major breakthrough not putting panels on roofs, but having grid integrated, building integrated materials, having solar panels in the glass, those things that can actually bring down costs drastically. You're not going to make that difference. You know, you asked me if I'm defending an old model and I'm looking at you, Greg, and I'm looking at your beautiful shoes and I'm wondering did you make those shoes? You bought them from like a centralized manufacturing company.

[Laughter]

Greg Dalton: A big bad company.

Severin Borenstein: And that electric vehicle that you drive, did you make that one?

Greg Dalton: No, it was made in California.

Severin Borenstein: So there's a lot of centralized production in this economy and the reason we do it is because it's more cost-effective. There are things we do at home, we cook our own meals, most of us do because that's more cost-effective and we enjoy it maybe, and there are people who really care about where their electricity comes from, but not most people.

Greg Dalton: Severin Borenstein, let's talk about sort of you're talking very much rationally dollars and cents. Talk about, Lynn mentioned values, a lot of people who go solar want to stick it to the man, they don't like their utility, they want to be energy-independent, it resonates in some parts of the country, and there’s another aspect of this about wanting to be part of a solution, the idea that people want to do solar for the right thing. Is that something that you think, maybe economist doesn't measure that sort of warm and fuzzy benefits of those sorts of things?

Severin Borenstein: If people want to do it and because they want the panels on their rooftop, go for it.

Greg Dalton: It says something like the Prius, it’s who I am.

Severin Borenstein: Right. And if that's a statement about yourself, I'm all for it. The question is, though, if you really want to have the maximum impact in reducing your greenhouse gas footprint, you want to do it and still have money left over to donate to whatever environment, I won't plug one environmental --

Greg Dalton: Climate One.

Severin Borenstein: Yeah, Climate One. Absolutely. And the fact is that it's cheaper. It is less costly to do that at the grid scale right now. Not in every case, but in the vast majority of cases.

Scott Jacobs: So I agree with Severin that the way to maximize impact is to let the economics drive the decisions and to have freedom of choice which is what Lynn is arguing for for every consumer. And those are important points. I do want to remind us all that the cheapest way to solve emissions is energy efficiency and it's also the largest job creator in all of the energy sector and the largest source of jobs in the energy sector. And that's actually a very distributed thing, although there are energy efficiency measures we can and are doing at power plants around the country. But by far the biggest impact that we can make by reducing energy consumption is in the home, in the businesses, with our vehicles that have higher, you know, fuel economy and whatnot. That energy efficiency opportunity is a multi-trillion dollar consumer savings plan that can be facilitated by policy. But when you have energy costs only representing 4% of all of the consumer wallet spending, people don't really care. So you actually have to think about some other measures to drive these efficiencies in the system that create a consumer surplus.

Greg Dalton: I put on solar 13 years ago. I thought I was really cool and then someone said to me, you should've done efficiency first. I was like, that’s not as sexy, that’s not as cool. I mean, who wants to hear, yeah, you caulked your garage and, you know, put tape on, right? It’s not as fun to talk about it, Lynn Jurich.

Lynn Jurich: Well, I was going to offer that. I think, you know, Severin and I can agree to disagree maybe, I still go back to the fact that the cost to produce power is down 50%, yet it's 30% more costly.

So the system is broken and the system is going to get more and more expensive. So I like to rethink the system and I think technology can do that and I think decentralization is the trend. And I think storage is a really important point to add too. Because what’s happened with storage now is that you can put that battery in the garage and now if the grid really needs power, you know, let’s say there’s so much sun during the middle of the day and the peak time for power need now is 4 to 7 when the sun goes down and people come home from work. If you can store that power in the battery from all those homes we can aggregate those together and feed it back to the grid even now reduce the ton of cost of these really inefficient peaker power plants.

And storage makes a lot of sense and it’s more cost-effective; I would argue decentralized because consumers are gonna pay for part of it. There are power outages all over the place and extreme weather is making that more severe. So at any given day in the U.S. right now half a million people lose power for two hours, half a million for two hours. Again, the U.S. has the highest rate of outages of any developing country. So consumers are saying, I want my refrigerator to work, I want to have backup power when the grid goes down. So I'm willing to pay part of that money and we, and this is what we’re doing in California and New York, we can aggregate hundreds of those or thousands of those and replace the need to upgrade a substation, replace the need for a new transmission line, replace the need for a power plant. And so storage really it's one of these innovations where I can tell you let innovation happen and bring competition in you don't even know what can be developed and storage is the perfect example of that I think.

Greg Dalton: We’re gonna go to our lightning round. On the first part I will mention a name or a phrase and ask each of our guests to respond with the first thing that comes to their mind, unfiltered, completely irresponsibly. Severin Borenstein, beautiful clean coal.

Severin Borenstein: Unlikely.

[Laughter]

Greg Dalton: Phrase from the state of the union. Scott Jacobs, Energy Secretary Rick Perry.

Scott Jacobs: Uninformed.

Greg Dalton: You can see my interview with him a couple years ago on Climate One website. Severin Borenstein, EPA Administrator Scott Pruitt.

Severin Borenstein: Extremely uninformed.

[Laughter]

Greg Dalton: True or false section of the lightning round here at Climate One. True or false, Lynn Jurich, it is smarter to buy rooftop solar than lease if you can afford it.

Lynn Jurich: False.

Greg Dalton: Scott Jacobs, rooftop solar companies know the math of time and money better than their customers.

Scott Jacobs: Probably.

Greg Dalton: Severin Borenstein, true or false, fracking is amazing technology that revolutionized American energy.

Severin Borenstein: True.

Greg Dalton: Last one. Severin Borenstein, true or false, economists are people who didn't have the personality to be accountants.

Severin Borenstein: Absolutely true.

[Laughter]

Greg Dalton: All right. That ends our lightning round. Let’s give a round of applause for them for getting through the gauntlet.

[Applause]

Announcer: You're listening to a conversation about America’s solar power revolution. Coming up, tough questions from our Climate One audience.

Female Speaker: I'd be curious to hear more of your ideas for how we get solar energy to low income communities and communities of color so that we don't leave communities behind in an energy transition.

Announcer: Up next, when Climate One continues.

Announcer: You’re listening to Climate One. Greg Dalton is talking about solar power, on our roofs and in our communities, with Lynn Jurich of SunRun, Scott Jacobs of Generate Capital and Severin Borenstein from the University of California Berkeley.

Here’s Greg.

PROGRAM PART 3

Greg Dalton: Scott Jacobs, someone considering putting rooftop on their solar for economic and perhaps other values, emotional reasons, lease or buy? Or take out a home equity loan which the home equity might be tax-deductible.

Scott Jacobs: It depends.

Greg Dalton: It all depends.

Scott Jacobs: Yeah, I mean again, you know, painting with a broad brush is always really dangerous and the media loves to do it because that's what sells. But, you know, every consumer needs to make his or her own decision based on his or her own circumstances. And, you know, factors like home value, factors like your credit score, factors like your discretionary spending all will factor into consumer's decision.

Greg Dalton: Tell us, Scott Jacobs, about community solar and particularly Minnesota where there is a community, they call them solar gardens in Minnesota, who thought of Minnesota is a really sunny place, but there's a pipeline, the number of solar in the pipeline is 10 times all of the community solar that’s been installed ever in the whole country. Why?

Scott Jacobs: Well, community solar is a great opportunity for us to bring solar energy to consumers who can't put it on their rooftops and who can't maybe choose it from their utility. As Lynn was saying, consumers don't often have the choice of what kind of electrons they are purchasing when they buy power from their local utility. So what we’re seeing is a big surge of demand from consumers who live in places like apartments who can't control what's on the rooftop but would like to participate in the solar revolution for values reasons, or would like to get cheaper power in many markets where the solar power somewhat centralized but more distributed is actually offering a better economic proposition to those consumers.

Greg Dalton: Severin Borenstein, is this kind of splitting the apple there? It's bigger than rooftop but not quite industrial scale where a neighborhood can collectively put together and share solar in a larger scale way?

Severin Borenstein: Well, there are two aspects to it. One is the actual cost aspect and it has some real advantages. It's definitely far cheaper than rooftop solar. In fact, in some cases it's getting pretty close to the cost of large grid scale solar and that's great. There is an aspect and Scott sort of jumped over, there is a fight over how it should be credited. Should it be credited in the same way that rooftop solar is credited with this net metering idea which I think is just going to subsidize that as well, or should it actually be just a form of wholesale supply. And the argument keeps getting made, that well, I want a net meter my community solar. But wait a second. Everybody can net meter all of their solar why should we stop there and then nobody pays for the grid. But somebody has to pay for the grid. You know, these people who want energy independence don't want energy independence, they’re not gonna put enough Tesla batteries in their garage that they actually cut the cord, they want to use the grid as a battery. And so we need to pay for that grid still. And community solar is great, I'm all for it, but I think we have to recognize it is not eliminating the need to have wires and have that grid integration.

Greg Dalton: Lynn Jurich, there are solar scams out there. What are some tips to avoid being, you know, fall into unscrupulous, because as solar has gotten more popular, there are some, you know, shady characters who got involved in this industry. So tell us what to look for.

Lynn Jurich: Absolutely. The key is even if you don’t think you want to buy it through a service model or a lease, even if you think you want to buy it, you should get a quote from someone who is leasing it to you.

Because companies like us, we guarantee the output from the system. So you’re gonna get a true honest read of how much power the system produce on your rooftop. Often what happens is, you know, the interests are very aligned and that’s why I would argue for a homeowner, it is a better value to lease it. Every one of our executives at Sunrun we sell it and we lease it. Everyone, our CFO, everybody leases it because the risks are totally aligned. We take care of the system. We in fact get more tax benefits as a business than you do as an individual, so there's more value to go around in the system. But the key is, we will be very transparent about how much power is actually going to come off of that roof and the unscrupulous thing that I see happen most frequently is people will come in and you’ll see, this system was only 15,000 versus that one that’s 20,000. But the capacity of it is a lot smaller and they’re just over promising how much power is gonna come out of those panels.

Greg Dalton: Lynn Jurich, tell us about Puerto Rico. Terrible things happened there after hurricane Maria and you mentioned resilience and severe storms knocking out grids. So tell us how Puerto Rico, you think, can be a model not only for Puerto Rico but for other cities.

Lynn Jurich: Absolutely. Puerto Rico is a perfect case study for how game time solar plus storages right now. So when we saw it was 60 days in after the hurricane hit and there was still, the majority of the island without power, including fire stations, so of the 95 fire stations more than half could not get 911 phone calls.

They could not communicate with their communities. We came in there within one day, in one day built a system of rooftop solar plus a battery and were able to get those fire stations up and running.

[Applause]

Thank you. And as you go there and I met with a lot of the officials and the existing utility, and they have all said that we believe a distributed grid is going to be a more cost-effective way to do this, building little microgrids in communities instead of trying to ship the power. And part of it, to Scott’s point, location does matter, an island does introduce a lot of complications because it's really expensive to ship the power from where the population isn’t over all the mountains. But the DOE, I believe, and the people in Puerto Rico are very eager to make their island a showcase of how you can rebuild clean and distribute it. And I will tell you consumers there do not want to be on the grid. Consumers there want a battery and rooftop solar panels pretty definitively.

Greg Dalton: Lynn Jurich, also electric cars are often part of the equation here because they can absorb and send power to the grids, a vehicle to grid is still early days, but that kind of in a way bring you into competition with oil companies. Is that a fact? I mean, do you see that at all because Thomas Edison's industry is kind of connecting with, you know, John Rockefeller's industry.

Lynn Jurich: Yeah, it is interesting and the oil companies are actually the most interested in our business I would say. They see it, they get it. They want to be involved.

Greg Dalton: Because it’s a threat?

Lynn Jurich: It’s a threat and it's an opportunity. Whereas we see, you know, again the incumbent utilities typically the way they're engaging with us is they’re trying to block competition as a first tactic.

So the oil companies in many cases are, you know, the businesses that are funding a lot of these, you know, new technologies.

Greg Dalton: They've gotten in and out. BP they get in, they get out, they buy, they sell. Are they doing it as a hedge because there is a book written by Steve Coll who is now the Dean of Columbia School of Journalism who said, the one thing that can break Exxon's business model is an improvement in battery energy density. When batteries start to really compete with transportation then Exxon is worried.

Scott Jacobs: It is already cheaper for many consumers to buy and operate an electric vehicle than for them to use an internal combustion engine for their transportation. So we’re already seeing that transition. It's admittedly a small segment of the market. But as we electrify the transportation fleet which is really what you're talking about Greg, how we are now competing, we’re seeing really utilities compete with oil companies more with all due respect than any renewal energy company. But what you're seeing with the electrification of everything and in particular the electrification of transportation is you’re seeing that combined with the decarbonization of the grid, providing a much more compelling solution to climate change than perhaps anything else that we could talk about today.

Greg Dalton: So if it's cheaper than oil, why don't people know that? Part of that I think is because there’s no way of metric to convert miles per gallon to cents per mile, you know, it's hard to do apples to apples comparison there, Scott Jacobs.

Scott Jacobs: Well, it's not that hard. I mean, you can really actually do the math.

Lynn Jurich: For a million dollars.

Scott Jacobs: For a million dollars sure.

[Laughter]

Scott Jacobs: Again, it matters what grid is charging the car and so there are lots of economists out there studying, you know, the effect of electric vehicles and whether it's actually better from an emissions standpoint than a highly efficient internal combustion engine vehicle.

I think it's also important to think about the long-term usage of the vehicle and the decarbonization of the grid over the next 12 years; that that vehicle will be actually used is happening. It's undeniable. And we are not gonna decarbonize the internal combustion engine vehicle that will be the alternative for those 12 years. So there's tremendous change happening in the electric grid that isn't happening as much in an individual already purchased vehicle. We are seeing great efficiency gains in internal combustion engine cars, but those are new cars that will be built over the next 12 years not this car that we buy today. And so you have to think about both the grid itself, and where the grid is going as well as the vehicle.

Greg Dalton: And let's go to our audience questions. Welcome to Climate One.

Female Participant: Thanks. I’m Myla Hallsman with As You Sow. I was wondering if this panel could comment on some of the articles I've seen regarding the fallout from Trump solar tariff, regarding the fact that it will hurt utility scale solar more potentially because it makes the cost benefit analysis right now of utilities deciding whether to build the next gas plant versus a solar farm that much harder. Thank you.

Greg Dalton: Scott Jacobs, there has been reported, yeah, report that’s gonna hurt the big guys more.

Scott Jacobs: I mean, it's absolutely true that the price sensitivity or the cost sensitivity actually is highest with utility scale buildouts of energy and so the change that has occurred through the tariffs is going to have its biggest effect on utility scale asset buildout and we are seeing a consistently low price of natural gas so natural gas continues to be a really cheap source of power. And we will see a temporary slowdown in terms of utility scale solar buildout. That said, it won't be this year. This year's panels have already been purchased for any of the buildout that's really happening this year. And it's important to remember that the tariff steps down every year and the cost decline on solar panel manufacturing is faster than the actual tariff decline. So those two things combined mean that there's a little blip this year but we will see it, you know, sort of diminishingly impact the buildout of utility scale solar in this country sort of after 2020.

Greg Dalton: We’re talking about solar power at Climate One. I'm Greg Dalton. Let’s go to our next question.

Male Participant: Hey, how is it going? My name is Jason Chang. I work in commercial real estate for Madison Marquette. My question is for everyone. So Elon Musk has said that you need about 100 miles x 100 miles of solar panels to power the entire U.S. and then 1 mile x 1 mile of batteries to keep the power 24/7. So I’m just curious what you guys opinion on that and if that's feasible and, you know, what would it take to make that happen.

Greg Dalton: Scott Jacobs.

Scott Jacobs: It is a good vision to talk about what is possible and it's important to communicate the potential of the technology. The practical realities, of course, are not trivial and that assumes a regulatory system that allows power to move from wherever this 100 mile x 100 mile patch of solar panels are to all of the sources of demand across the entire grid. And actually we have multiple different grids here in the United States that don't actually talk to each other, they don't allow electricity to flow from one to another.

And so we would have to really do a whole system redesign as Lynn was advocating for before in order to make something like that possible. But in terms of whether or not it's technically feasible, it's probably technically feasible, we would have to again revamp the whole system and figure out a way to get the power from its source to its use.

Greg Dalton: Let’s go to our last question at Climate One.

Female Participant: Yes. Hi. Susan Hendershot Guy with Interfaith Power & Light. So anyway, we sort of touched on the topic of energy equity but I'd be curious to hear more of your ideas for how we get solar energy to low income communities and communities of color so that we don't leave communities behind in an energy transition. Thanks.

Greg Dalton: Thank you for that question. Lynn Jurich, get in that and also on the employment side because the industry doesn't have the complexion of America on the employment side.

Lynn Jurich: Yeah, and I would say first from moving to clean energy broadly helps those disadvantaged communities because of environmental justice, because oftentimes the dirty power plants are sited in places where disadvantaged communities live.

So just as a matter of course, just getting more renewables is going to help the issue. It is something that we’re focused on certainly and it's a great place for public-private partnerships. So in California there is a rebate, there are these green banks that can help backstop the financing. And so there are a lot of models out there, but there certainly needs to be more done. Community solar is another potential option for it but it really is a great opportunity for public-private partnership.

Announcer: Greg Dalton has been talking about the health of solar power in the United States and around the world, with Severin Borenstein, professor at the Haas School of Business at the University of California, Berkeley; Scott Jacobs, CEO of Generate Capital a clean energy investment firm; and Lynn Jurich, CEO of Sunrun a company that installs solar on rooftops across the country.

To hear all our Climate One conversations, subscribe to our podcast at our website: climateone.org, where you’ll also find photos, video clips and more. If you like the program, please let us know by writing a review on iTunes, or wherever you get your podcasts. And join us next time for another conversation about America’s energy, economy, and environment.

Greg Dalton: Climate One is a special project of The Commonwealth Club of California. Kelli Pennington directs our audience engagement. Carlos Manuel and Tyler Reed are the producers. The audio engineer is Mark Kirschner. Anny Celsi and Devon Strolovitch edit the show The Commonwealth Club CEO is Dr. Gloria Duffy.

Climate One is presented in association with KQED Public Radio.

[END]

Play