Transcript by Kensho

Lindsey Hall: Hi. I'm Lindsey Hall, Head of Thought Leadership at S&P Global Sustainable1.

Esther Whieldon: And I'm Esther Whieldon, a Senior Writer on the Sustainable1 Thought Leadership team.

Lindsey Hall: Welcome to ESG Insider, an S&P Global podcast, where Esther and I take you inside the environmental, social and governance issues that are shaping the rapidly evolving sustainability landscape. 

I recently went to Davos, Switzerland, during the World Economic Forum's annual meeting. For 1 week in January, this tiny, picturesque town in the Swiss Alps is taken over by leaders from business, government and civil society as they convened to discuss solutions to some of the biggest challenges facing the world.

Well today, we're going to be covering an idea that struck me in my interviews all around Davos, the importance of working together across silos to address the world's big sustainability challenges. This is part of a special miniseries we're calling Breaking Down Silos. Each short episode will bring you a different perspective on how collaboration across silos happens in practice.

Today in Part 1, we'll be hearing the perspective of an academic with a policy background in my interview with Jason Bordoff. Jason is a faculty member at Columbia University School of International and Public Affairs, and he directs the Center on Global Energy Policy, which is a thinktank he created inside the university.

And in this miniseries, we'll be covering the idea of collaboration across silos as it relates to some of the biggest topics in the sustainability space, including climate change, energy security, transition strategy, supply chain, circularity, finance and, of course, AI. As we covered in a past episode of this podcast, AI and nature were some of the biggest topics on this year's Davos agenda and we'll include links to those episodes in our show notes.

Esther Whieldon: This topic of Breaking Down Silos is something we hear a lot of this podcast and in sustainability circles. At Climate Week NYC 2023, for example, we heard again and again about the need for the public sector, private sector and policymakers to work together. We heard about this at COP28 as well, the UN's big climate change conference in late 2023.

Business leaders from a variety of sectors stressed the importance of sharing supply chain data and sustainability best practices with peers. The finance community, economists and climate scientists underscored why collaboration is key to finding a common language to deal with the climate crisis.

Lindsey Hall: And it kind of seems like a no-brainer in some ways, right? The idea we should play nice with others, that everyone should work together, that's something a lot of us have been learning since grade school. But in practice, much harder to pull off.

For evidence, just look at the World Economic Forum's annual Global Risk Report, which identifies the most severe risks facing the world. This report is released right before Davos and really sets the tone for the week. The 2024 report found that over the next 2 years, the top risk is misinformation and disinformation, followed by extreme weather events.

Number three on that list is societal polarization. However, the divisive factors like political polarization and economic hardship are weakening trust and a sense of shared values and the erosion of social cohesion is opening the door to new and evolving risk.

So the stakes are really high. And while this idea might seem kind of high level or theoretical, it's not just a topic for discussion at Davos. It also has real-world implications for many of the companies around the world that are trying to form a sustainability strategy.

To do that effectively, it requires bringing together a lot of different stakeholders from many different backgrounds. I'm talking executives, Board members, commercial finance product teams, government affairs, legal, HR, you name it. And while we're not going to solve all the world's problems in a podcast episode, I'm hoping that in this series, we're going to hear some useful ideas about how some stakeholders are working across silos. Okay. Let's turn to today's interview.

Jason Bordoff: I'm Jason Bordoff. I'm on the faculty at Columbia University School of International and Public Affairs. I direct the Center on Global Energy Policy, a thinktank created inside the university and served in government before, most recently as President Obama's Energy Advisor at the National Security Council. We're thinking a lot about how to accelerate the clean energy transition and about what some of the policy requirements will be to do that.

And particularly, given my background at the National Security Council, a lot of thinking about how broad forces of geopolitics, national security, international economics might accelerate or might create headwinds to a faster transition and what we can do to sort of derisk the energy transition so we could start to get on track for goals like net zero by 2050, which lots of companies and countries have pledged to achieve, but we are not on track for it today.

Lindsey Hall: Okay. So a lot of the conferences and events that I attend are sustainability-focused, but this one is a little unique. It's not a sustainability gathering, but certainly, topics like climate are on the agenda. Can you talk to me about how you're seeing sustainability come on to the Davos agenda?

Jason Bordoff: Yes. Sustainability and climate have been high on the agenda for Davos for many years. I think it's particularly important because, of course, there are many, many significant climate convenings around the world. We just had one in Dubai, where nearly 100,000 people came together at the UN conference to talk about how to accelerate a clean energy transition.

But in order to have this transition move at the speed and scale we need to, it's also important to be having the conversation about climate change and decarbonization in a context talking about the global economy or in context talking about international security, global convenings like the Munich Security Conference, things like that.

So I think it's especially important that at a place like this where some of the world's most important companies, policymakers and leaders in civil society have come together that we're talking about climate change, sustainability and increasingly in the last couple of years talking once again about energy security, which, of course, was put on the agenda in a high-profile way after Russia's invasion of Ukraine and cutting off gas supplies to Europe.

But we can't have a clean energy transition if we don't ensure reliability and security and affordability along the way and how do we make sure that we get both of these things right, not just in places like here in Davos or in Europe or in the U.S., but thinking about the emerging and developing economies, the hundreds of millions of people with no access to energy at all and the billions more who have very little energy relative to the amounts we take for granted and the amounts you need for meaningful levels of prosperity.

Lindsey Hall: Okay. A lot of our audience will have not attended Davos before. So what do you think they should understand about this gathering?

Jason Bordoff: The World Economic Forum at Davos is sort of famous or, in some circles, infamous. It has a lot of connotation of just a lot of talk and rhetoric or maybe some of the parties that people go to at night. But I think it is actually a fairly unique place.

There's very few places in the world that bring together this level of leadership from the private sector, from the public sector, from civil society, experts from academia, maybe like myself or some others, so elevating certain issues on the agenda and the mindset and thinking about how corporate world and the policy world can engage, which is what we spend a lot of our time doing.

I mean, to their credit, the World Economic Forum is able to bring together a caliber of leadership around the world that you don't often find. So for many people, it's a very efficient way to see a lot of people in a very short time frame because a lot of people are here, so they can do meetings and whatever else.

But certain issues rise to the top of the agenda. We see a lot of discussion of artificial intelligence this year, for example. And I do think it's important that we continue to elevate as much as we can issues of sustainability, climate change, decarbonization, particularly at an era where there is a little bit of growing concern among the private sector in talking about ESG.

There's been some political backlash to it. There's a little more nervousness about it. And people have to be sensitive to how they do it, but it is clearly the case that the corporate community and companies have a significant responsibility as we think about how we're going to accelerate the pace of decarbonization. So it's important to elevate these issues on the agenda here.

Lindsey Hall: Esther, this comment from Jason reminded me of what we recently heard from your interview with Aniket Shah, Managing Director at financial services company, Jefferies Group. As you'll recall, Aniket said ESG as a stand-alone part of the financial and business community may go away in the near term. And that's going to happen at the very same time as the underlying environmental, social and governance issues have never been as important as they are today for investors and for corporates. So I pose that idea to Jason and asked for his take.

Jason Bordoff: Well, again, there has been a bit of a politicization of the term ESG and companies that have a responsibility to their shareholders may be thinking a little bit differently or cautious about how they engage with the issue.

But the term itself is less important than the fundamental principles that underlie it. Whether you call it ESG or something else, we can't grow the supply chain for clean energy or the critical minerals and all the mining we need to do for the transition for things like nickel and copper and lithium unless you respect the environment and respect indigenous communities and local communities along the way.

We want to lower the cost of clean energy like how we manufacture solar panels and batteries, but we don't want to be using forced labor in the process. We need to make sure that we're trying to move as fast as we can to decarbonize supply chains.

We're talking about artificial intelligence here. Among other things, artificial intelligence uses a huge amount of energy, and we want to make sure that we're growing the supply of clean electricity to meet that need. So whether we're using the phrase ESG or not, it's important that the fundamental principles that underlie that concept continue to be elevated in forums like this one.

Lindsey Hall: Okay. So you talked about AI, which is definitely a buzzword that I've also been hearing. And you walk up and down this main promenade where we're currently having this interview, and you see AI on almost every other storefront, it seems. Any other buzzwords or big trends that you're hearing emerge at this Davos gathering?

Jason Bordoff: I may be biased just because it's what I spend a lot of my time on, but the broad geopolitical landscape in which these conversations take place, I think is also very high on the agenda. We're in the middle of war in the Middle East and the possibility and risk that the conflict between Israel and Hamas could spread more broadly throughout the region, Houthi attacks in the Red Sea, what is continuing to happen with Russia's invasion of Ukraine, and whether countries including my own, the United States, are going to continue to stand by and support Ukraine.

And for a forum that was built on the idea that you need more cooperation, integration in the liberal global economic order, a broad trend that is potentially at risk of pulling back from that. We see broad forces of protectionism, of economic fragmentation, of populism.

And around the world this year, you're going to have half the world's population voting in elections and in many parts of the world, right-wing populist parties are on the rise. And I think that broad political and geopolitical backdrop to the conversations that are happening here are really important.

I hear a lot of conversation about that because it can be a real risk to the continued integration of the global economy, which you don't want to do blindly, of course. But we're going to need to cooperate across borders if we're going to meet goals of rising prosperity, GDP, not to mention a faster clean energy transition.

Lindsey Hall: One way to accelerate the clean energy transition is via policy like the U.S. Inflation Reduction Act or IRA. This is a comprehensive energy and climate law signed in 2022 that allocated nearly $370 billion in federal spending and tax incentives to decarbonization efforts over the next decade. I asked Jason what's next for the IRA. You'll hear him mention BlackRock, which on January 12, agreed to acquire Global Infrastructure Partners, an infrastructure fund manager. Okay. Here's Jason.

Jason Bordoff: Well, one is, of course, we need to implement the Inflation Reduction Act. This is historic, by far, the largest piece of legislation ever passed in U.S. history to accelerate the clean energy transition. It is also industrial strategy. It's aimed at promoting U.S. economy and U.S. jobs and manufacturing.

We need to figure out how to implement the IRA, how to do things like permitting reforms, so we can build transmission lines or the infrastructure we need more quickly. Right now, that permitting process takes way too long to move at the scale and speed we need. We need to make sure that we can put policies in place like the Inflation Reduction Act that don't worsen and exacerbate some of the trends I talked about a moment ago like economic fragmentation or protectionism.

Potentially, if part of the rise of industrial strategy is to say we want to put a lot of money to work for clean energy as long as the activity is done with U.S.-made products or products made in free trade agreement countries. That can worsen some of these trends where other countries react negatively to that. So we need to mitigate some of those tensions.

And then this is not going to happen anytime soon. We're going to have a contentious year politically in the run-up to the November election. But at some point, hopefully, in some number of years, there'll be another moment in Washington to do something big on climate change, what comes next after the Inflation Reduction Act. And I really hope that, that is focused on using all the tools of international economics, foreign policy, development economics to really accelerate the pace of the transition and the pace of capital deployment for clean energy in the lower income parts of the world. That's where the emissions growth are going to be fastest. And right now, that's where a lot of the fossil fuel use is rising most quickly.

Lindsey Hall: You touched earlier in the interview on COP28, which took place in Dubai in December 2023. How do you go from that climate-focused UN gathering to Davos, which is a much broader business audience? How does the messaging need to change? And what is needed to kind of get the climate message across to this audience?

Jason Bordoff: Well, I think it's important for people to understand the reality that climate change is not a distant far off crisis that might affect us years into the future. It is here and now. The impacts are being felt. It is a risk to the global economy.

It is a risk to corporate profitability, if companies are not thinking about the physical impacts of climate change and not thinking about how quickly society's expectations of them and stakeholder engagement is shifting. I think companies broadly know that, but continuing to remind them and engage in dialogue with them about the role of the private sector, which has to be facilitated by policy. I wouldn't have -- if I didn't believe that I wouldn't have spent my career in policy and have built a policy center with the right policy landscape. It is going to be more private capital than government capital that's going to make possible the trillions of dollars we need for the clean energy transition.

And so I think really helping in an international economic gathering like this, all the participants understand both the physical reality of climate change that is here and is going to worsen quite quickly. And as that happens, the idea that you can continue with business as usual or this could be a very gradual and long-term transition, that's just not consistent with the science of how quickly we need to move to net zero.

Lindsey Hall: One thing you said there stood out to me. We heard a lot throughout 2023, including from a lot of guests on this podcast, this idea that the energy transition is going to be private sector-led and policy-enabled. How would you respond to that idea?

Jason Bordoff: I think broadly speaking, that's right. We need something like $3 trillion, $4 trillion a year in investment in clean energy between now and 2050 to meet our climate goals. There's just not enough government capital available and probably not enough political support in an era of higher cost of capital, higher interest rates, governments struggling around the world with increasing debt burdens to do that.

Whether it was the oil and gas revolution of decades ago or the clean energy revolution that's coming, most of the capital that's going to be deployed, particularly to build the infrastructure that we're going to see -- we just saw BlackRock spend $12 billion for Global Infrastructure Partners -- it's going to be private capital.

But private capital has to be able to earn a return for shareholders. We've seen challenges with some parts of the energy transition for that. And that's the role of policy. I mean, the reason government policy exists is to correct market failures. So I think an integrated global economy based on market principles is sort of the best organizing principle. That's sort of a fundamental tenet that underlies the World Economic Forum gathering.

But we know there are market failures. I mean, market participants don't internalize the cost of pollution or think about how our activity might impact negatively those around us. And so that's why we need government policy to account for the cost of carbon pollution through a carbon tax or some other regulatory mechanism, try to level the playing field between hydrocarbons and clean energy. And then hopefully, market forces can do a lot of the work.

Lindsey Hall: Great. Well, I've asked you a lot of questions today. Anything that I haven't touched on that you'd like to highlight or you think is important for our listeners to understand?

Jason Bordoff: I think that we are not on track for our climate goals. So while the climate meeting in Dubai led to a lot of pledges and targets being put forward, what we need to do now is implement them. We need national action. We need to actually meet our pledges with real action.

But at the same time, if you had asked someone 10, 15 years ago, "Where are we headed in terms of our climate trajectory?", they might have said 3.5, 4 degrees Celsius warming by the end of the century. Today, somebody would probably say 2.5% to 3%. That's not 1.5 or 2, which is where we need to get to, but it is a reminder that progress is possible.

And if we continue to come together and try to elevate understanding and improve the technology and improve the policy landscape, we just have to keep our foot on the gas to try to move as quickly as we can. And every 0.1 of a degree matters. So the closer we can get to 1.5, even if we don't get all the way there, makes a big difference.

Lindsey Hall: Well, that's a great note to end on. Thank you, Jason, so much for sitting down with me.

Jason Bordoff: Thanks for having me.

Lindsey Hall: We heard Jason say that climate change is not some distant crisis that will happen far off in the future. It's here and now, and it's posing a risk to the global economy and to corporate profitability. So the transition needs to happen, but Jason also talked about the importance of ensuring energy reliability, security and affordability alongside the energy transition. Doing so, he said, requires the private sector and also needs to be facilitated by policy.

Esther Whieldon: So there's a lot to unpack here and a lot of different stakeholders who need to play a part. In our next episode of this Breaking Down Silos miniseries, we'll hear from one of the world's biggest software companies about the role of regulation, policy, the business community and technological innovation in enabling solutions to climate and nature challenges. So please stay tuned.

Lindsey Hall: Thanks so much for listening to this episode of ESG Insider. If you like what you heard today, please subscribe, share and leave us a review wherever you get your podcast.

Esther Whieldon: And a special thanks to our agency partner, The 199. See you next time.

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