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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, a podcast hosted by S&P Global where we explore environmental, social and governance issues that are shaping investor activity and company strategy.

Esther Whieldon: Over the past few weeks, we've brought you a special series featuring key interviews from Climate Week NYC. We'll be bringing a lot of these big ideas we heard at Climate Week to COP28. That's the UN's climate conference taking place in Dubai later this year. And if you'd like to read about these takeaways, we'll include a link to that in our show notes.

In last week's episode, we heard how investors and companies are looking for signs of progress, and there's also a sense of frustration that change is not happening fast enough. We also looked at challenges around data disclosure, and we examined how physical climate impacts are affecting the insurance sector.

Lindsey Hall: Well, in today's episode, we're diving into a few more big themes we heard at Climate Week that we're taking to COP28, and we'll be doing that through interviews with guests from a wide range of perspectives. We'll talk about the finance gap for climate change. We'll talk about the role of partnerships and collaboration in driving decarbonization, and we'll hear how credible and just transition plans will incorporate the needs and voices of local communities.

Esther Whieldon: We'll talk to Marcus Krembs, who is the head of sustainability for the U.S. and Canada at Enel North America, which is a subsidiary of the Enel Group. Marcus told us that Enel is currently the fourth largest owner and operator of renewable capacity in the U.S.

We'll hear from Julia Thayne, who is senior principal on the Climate-Aligned Industries program at RMI, which was formerly known as the Rocky Mountain Institute. RMI is a U.S.-based nonprofit focused on the clean energy transition.

Lindsey Hall: We'll also speak with Sonia Khanna, who is managing director of sustainable finance at Forbright Bank. The bank is based in Maryland and is focusing on accelerating the transition to a sustainable, clean energy economy. Forbright, as of 2022, had about $9 billion of owned and managed assets.

And we'll talk to Gerbrand Haverkamp, executive director at the World Benchmarking Alliance, which is a nonprofit that assesses and ranks the world's most influential companies on their contribution to the UN's Sustainable Development Goals, or SDGs.

Esther Whieldon: Now, one theme from Climate Week was the challenge of solving the finance gap for climate change. We heard about the challenges of de-risking projects so that more finance can flow to emerging markets and technologies. We heard that there's a lack of bankable projects and that solving the climate crisis will require getting different actors to work effectively together. There was quite a bit of discussion about this at the Sustainable Investment Forum on September 19th — how financial institutions have the dual challenge of showing progress in decarbonizing their portfolios, while also providing the financing needed for the low carbon transition across all sectors, including carbon intensive ones.

Here's Sonia at Forbright Bank, talking about that challenge.

Sonia Khanna: Another theme that I heard was this whole idea about ESG reporting and emissions reporting. I think generally, companies are trying to show this slope downward, that over time they're improving their financed emissions, especially for a bank like ours. But then there are projects out there. In order to really finance the transition, you often have to go in and finance a company that has high emissions today but is working towards some future goal. But that could negatively affect the data that you're putting out there. So that's a concern, I think, that folks have.

For example, at Forbright, we financed a fleet of school buses, a school bus company, and they are going to electrify their fleet over time. But today the GHG emissions of that fleet is very high. And when we reported our finance or when we measured our finance emissions, it was one of the highest emitters. We're doing something to advance the energy transition, but you're almost dinged for that.

Esther Whieldon: One of our podcast guests during Climate Week NYC was Chris Creed, the chief investment officer of the U.S. Department of Energy's Loan Programs Office. He talked about the role of government in helping de-risk investments in emerging and more complicated technologies. I will include a link to that in our show notes if you'd like to hear the interview.

But government is just part of the solution. We heard at Climate Week how the transition will require work across the public and private sectors. Our next guest, Julia Thayne of RMI, is working to help de-risk investments in industry and transport sectors. You'll hear her mention the IRA. That's the U.S. Inflation Reduction Act, a comprehensive energy and climate law passed in 2022.

I caught up with Julia on the sidelines of the Nest Climate campus during Climate Week, and she started off by describing her role.

Julia Thayne: I'm a senior principal with a climate aligned industries program at RMI, formerly known as Rocky Mountain Institute. We are a 40-year-old environmental NGO, and we have a little bit of a different bent than normal NGOs do in this space. We're focused on markets-based transformations, so thinking through how do we leverage policy, how do we leverage tech, how do we leverage radical collaboration, how do we leverage things like community engagement to really accelerate the clean energy transition for all?

My program is focused on what we used to call the hard to abate sectors and now just called heavy industry and transport. They are the things that together comprise about 30% of global emissions. But as we used to call them, I mean, they're hard to abate. So many of the tech that we're looking at right now, they're in not the same sort of commercially available scale that you might see energy efficiency in buildings being they require $0.5 billion investments or more. And they require these global players to make huge investments and do so with a bit more risk than financial institutions are normally ready to make. 

And so that's why we think right now, honestly, is the time, as we're ticking closer to 2030, that we really have to focus on these industries that, left unchecked, are going to make up much more of that growth in emissions than some of the other sectors are, where the tech is much more readily available, the policy is there and even communities are behind them.

Esther Whieldon: So what are you looking to accomplish or achieve? Like what are your goals here for Climate Week?

Julia Thayne: Yes, my number one goal here is honestly twofold. In the space where I'm working, there are a number of startups. They might be companies who are 6 people who are trying to scale their technologies and use them in multi-billion dollar facilities. And so they're like facing what we call a valley of death in terms of not just growing their own company, but also trying to figure out how to work with financial institutions that are used to working with much larger entities on financing these, like I said, kind of $0.5 billion or more investments.

So what we're trying to do is honestly bridge the investment community, talk to both the venture capitalists, talk to both the growth equity funds and also some of the more traditional financial institutions that are doing more of this infrastructure finance about how do you get more comfortable with the risk that it's going to take to be able to accelerate this clean energy transition by investing in some of these startups.

It's been a great place to do that. I've found that at least, you know, again, this is my first Climate week, but there's been such a focus on both climate tech and climate finance. And I think people are starting to recognize this exact problem that I'm mentioning as that valley of death that we can kind of create a bridge over. And it's been really inspiring to see people kind of change their minds in real time about how to do this.

Esther Whieldon: Julia went on to explain what details financial institutions need to be comfortable investing in smaller sized projects and in emerging technologies.

Julia Thayne: Multiple things. One is they need to see the Inflation Reduction Act in practice, the IRA has done major things in terms of providing tax credits over the next 5, 10 years, in terms of providing grant money over the next 5, 10 years that will change the economics of some of these investments that I'm talking about. Things like sustainable aviation, fuel production facilities, things like green hydrogen, things even like carbon capture at a cement plant. 

That said, these are complicated investments. They have many component parts. And actually many of these things are linked together. And so I think what financial institutions are asking for us to see is, okay, show me again how the IRA changes the math. Show me again how these technologies are actually at a higher technology readiness level than we had previously thought. Prove out that there's going to be demand for these fuels. Prove out that airlines are really going to take SAF at the levels that we're projecting. And then also show me the documents. It's really about some of those legal documents, the offtake agreements, the supplier agreements.

And again, when you're a startup, those things are slightly harder to prove out if you're trying to work with 6 people. If you're a larger company, they're easier, but they're still sort of hard. And so that's where RMI sits is we're trying to equip folks with the things they need.

Esther Whieldon: We heard Julia talk about her efforts to help bridge the gap between the investment community and industrial companies, which fits with the next theme we're going to explore in this episode on the role of partnerships and collaboration in the electric power space. Here's Marcus of Enel North America talking about what he heard at Climate Week on this theme.

Marcus Krembs: My name is Marcus Krembs. I serve as the head of sustainability for the USA and Canada for Enel. I'm here today attending Climate Week to represent the company and to deliver messages on the role of partnerships and collaborations to drive decarbonization, including a focus on equity and just energy transition.

We are a solutions provider for renewable energy and flexibility solutions for all types of customers, but predominantly commercial and industrial business-to-business applications.

Esther Whieldon: So you mentioned you're here to talk about partnerships. What to you is the messaging around that and what are you hearing?

Marcus Krembs: So partnerships for me has been one of the 2 or 3 dominant themes here at Climate Week 2023. And for Enel and for the work that the sustainability team leads within Enel partnerships first starts with the ability to be open, to innovate, open to new ideas, open to collaborate and the willingness to sometimes fail in the adoption of those new ideas or those new technologies and to learn from those experiences to then deliver even better solutions into our products or into our communities.

Esther Whieldon: Okay, so what can partnerships help you accomplish that Enel can't do on its own?

Marcus Krembs: Partnerships, by definition, allow one to work with another, and that type of multiplier effect in energy is absolutely essential for the deployment of renewables. There needs to be a generator and a consumer of electricity. So there's inherently a partnership and a matching going on between the supply and demand of that particular product.

What has helped to accelerate the deployment of renewables over the last decade has been the entry of commercial and industrial and corporate demand and the partnerships that are driven through corporations entering the voluntary renewable energy market. And those types of products have enabled and driven the types of investments required to deploy the types of renewable installations that we haven't seen for the decade prior. And we're going to see under the Inflation Reduction Act an even greater acceleration in and adoption of new technologies and the types of partnerships in the innovation side as well that will help to address some of the gaps or inefficiencies that we're going to continue to see across all technologies in the renewable energy space.

Esther Whieldon: Another thing we mentioned at the top of this episode is the role of the individual in the transition. Now, Lindsey, I've attended Climate Week NYC for more than a handful of years now, and this year was the first time I really heard the discussion focused so much on the individual.

Lindsey Hall: Yes, I heard the same thing. One panel in particular that stood out to me was a woman talking about how consumer behavior can really drive change, and she actually quoted Taylor Swift, which was a first for me at a sustainability conference. So she said, I'm the problem, it's me, referring to the consumer.

And as we've touched on today and in past episodes, technological innovation, policy, regulation and the private sector, these can all play an important role in the transition to a low carbon economy, and so can individual actors. Participants in Climate Week highlighted the role that consumer and investor demands play in driving corporate decisions and also the role that taxpayers may play in spurring government action. We also heard how the physical impacts of climate change could have stark impacts on individuals and communities.

During Climate Week, there were many discussions about the importance of considering the impacts on all stakeholders in credible transition plans. Here's Gerbrand of the World Benchmarking Alliance talking about that theme.

Gerbrand Haverkamp: If we talk about global companies and their massive impact, I think one thing that we often forget in these conversations is that those people that are mostly affected by companies through their supply chains because they're small farmers are on the frontline of global climate change. When we're talking about factory workers, or those that are actually directly affected by companies, are often the ones with the least amount of influence over companies. So it's really up to those that have that influence, whether it's investors or regulators or large civil society organizations that we take into account the voice and needs of those people when we talk about corporate accountability.

Esther Whieldon: We heard a similar theme about needing to work with communities from Marcus of Enel North America. He framed it as thinking of communities as partners in the transition. Here he is.

Marcus Krembs: One additional impactful partnership that I'd like to add is in the area of social and community and those partnerships, from property owners to neighbors to community-based organizations, all of the different individuals that are present in an area where an investment will go in. And this is true for all industries, of course, and cross sectors. But taking care of those people in those areas, especially in an energy transition context, needs to be front and center in just about every business decision that's being made. 

It begins with listening and listening to the needs of the area, appreciating and acknowledging the history of the impacts or the exposures that have occurred within those particular areas around historical industrial activities or historical policies that may have affected certain areas. And what's really great under the current Inflation Reduction Act provisions are that there are bonus credit adders for developers and taxpayers to invest in areas that meet certain criteria around socioeconomic parameters or other marginalized communities, or what the administration calls energy communities.

And so not just due to the fact that there are now clear incentives to drive investments in these areas, but really it's about maximizing the positive impact that companies can have. And the partnerships, again, will be absolutely instrumental and essential.

Esther Whieldon: Earlier we heard Julia of RMI talk about how she's working with heavy industries and financial institutions to help solve the finance gap. But she also mentioned that the philanthropies that RMI works with are becoming more engaged in helping facilitate the transition, as well as examining how their own investments are impacting communities. Here's Julia again.

Julia Thayne: The second thing that has been helping, and especially in a space like where RMI sits nonprofit, we're mostly backed by philanthropies. Philanthropies are stepping in, family offices are stepping in. And they might not be writing $0.5 billion checks all in one go, but they're writing the checks that are needed in order to seed ideas, seed people, seed investments and to further provide backstop, especially on the credit side, to make sure that these projects really happen.

And honestly, that's encouraging. That's really encouraging that philanthropy is seeing its role in a, I don't want to say, a new and different way because it's not like those things didn't happen before, but maybe in an expanded way where it's not just about supporting like individual organizations, but really unlocking these first of a kind projects and unlocking some of those benefits that are going to accrue more locally.

One of the things that I've found really encouraging is how many philanthropists are not only taking up climate, but also specifically environmental justice and thinking about community engagement. And we're seeing some philanthropies or many philanthropies that we're working with, especially at RMI, who are just expanding how they measure the impact of their own investments and making sure they understand how many communities of color did this help? How many jobs did this help to create? What is the impact to public health? How did this change the air quality, even hyper locally? And that's been really, really wonderful.

And I think what's been great too is philanthropies have done a good job, especially with NGO partners, in figuring out how do you both provide philanthropy to really local grassroots organizations who might be working on a single project on a single block because they've lived there for generations, and also then connecting them with organizations that, like RMI, are working more globally and so can kind of take that local incredible intelligence and scale it to other places and other projects.

Esther Whieldon: Today, we've covered a lot of themes. We've explored ways to help solve the financing gap for climate change, the role of partnerships and collaboration in driving decarbonization and how credible and just transition plans will incorporate local communities.

Lindsey Hall: Yes, and all these themes are going to be things we're focusing on heading into COP28. Please stay tuned for more coverage of what to expect at this big UN climate conference. And before we close out, let's turn one last time to one of our guests for a teaser of some of the themes he's watching going into COP28. Here's Gerbrand of the World Benchmarking Alliance.

Gerbrand Haverkamp: What we need to see is obviously a lot more action, but there will be a lot of focus, particularly from the Global South, not asking for handouts, in their words, but asking for a fair assessment of the situation and a fair share of responsibility based on historical emissions. So we're really seeing companies from the global South getting much more organized and much more vocal in asking the developed economies to take their responsibility, which has been a very contested issue, to pay for the loss and damage that they're facing. And this is still a very political issue, but we're hopeful that we'll see progress on that end because this is really going to be essential so that we as an entire world can move to this low carbon economy in a fair and just way.

Lindsey Hall: Thanks so much for listening to this episode of ESG insider, and a special thanks to our producer, Kyle Cangialosi. Please be sure to subscribe to our podcast and sign up for our weekly newsletter, ESG Insider. See you next time.

This piece was published by S&P Global Sustainable1, a part of S&P Global.     

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