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ESG Challenge: Christina Herman, ICCR interview — Transcript

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0:04so welcoming Christina Herman from the
0:06Interfaith Center for corporate
0:08responsibility thanks so much for being
0:10with us Christina so by way of
0:12introduction Christina is the senior
0:14director for climate change and
0:16environmental justice at iccr the
0:18Interfaith Center for corporate
0:20responsibility she has 30 years of
0:22experience with non-governmental and
0:24faith-based advocacy organizations on
0:26human rights sustainable development and
0:28corporate engagement on sustain
0:29stability and Equity issues Christina
0:32manages a team at iccr that works with
0:34investors to encourage a just transition
0:37to a clean energy economy enhanced
0:39methane management and disclosure across
0:41the natural gas supply chain adoption by
0:44companies of science-based targets for
0:46ghg emissions reductions financial
0:49sector decarbonization and Alignment by
0:52companies of their climate lobbying and
0:54trade Association memberships with the
0:56goals of the
0:57Paris prior to joining iccr staff
1:00Christina engaged in shareholder
1:02advocacy with 14 and 500 corporations on
1:04a range of environmental and Health
1:06Equity issues she began her career on
1:08human rights and sustainable development
1:10issues in the Philippines and in
1:12subsequent years advocated on human
1:14rights and international debt trade and
1:16development issues in Washington DC
1:18where she lives with her family she's
1:20active in St Mark's Episcopal Church on
1:22Capitol Hill and holds an MA from the
1:23University of Oxford welcome Christina
1:26thank you so much for joining us oh
1:28thanks very much for having me it's a
1:29pleasure
1:31right so building on that uh
1:33introduction could you tell us a little
1:34bit about your current work at iccr um
1:38on climate finance and and how it's
1:40developed for you sure uh so um at iccr
1:45we have a well we've got a network of
1:47about 300 faith and values-based
1:49institutional investors about half are
1:53uh asset owners so the church Pension
1:55funds the labor Pension funds um
1:59smattering foundations and University
2:02endowments um and then the other half
2:04are values-based asset managers both
2:07large and small we have a number of
2:09European members uh very large funds and
2:12a number of members in Canada but I'd
2:14say most of our members are us-based
2:17um so we've been engaging corporations
2:20on a range of sustainability issues for
2:23the last 53 years um iccr was founded um
2:30really around a set of engagements with
2:33um companies operating in South Africa
2:36at the request of the South African
2:38Bishops who um you know came to the US
2:41and said your companies are propping up
2:43the apartate regime and we really need
2:45you to do something about it and so um
2:49the Episcopal Church filed the first
2:50resolution with General Motors and it
2:53went on from there um the church has got
2:56together they formed this organization
2:58under the National Council churches we
3:00later became independent and then um you
3:04know worked on so members started
3:07talking to companies issues
3:10from uh infant formula I remember that
3:13was a real issue when I was in the
3:15Philippines people not being able to
3:17afford enough of the rather expensive
3:20formula and they didn't have clean water
3:22and babies were literally dying of
3:24malnutrition uh because of the marketing
3:28around this uh labor in Supply chains
3:31Nike that whole campaign sweat shops I
3:35it goes on and on so here we are 53
3:38years later still filing resolutions
3:40with companies and talking to them about
3:43um what we're hearing from communities
3:46and from workers about the company
3:49policies and their impacts the impacts
3:51of their operations and their supply
3:53chains uh on as you know communities and
3:56workers so um I coordinate the climate
3:59work we don't work on everything because
4:01we're relatively small our members do u
4:04a lot of other work and they're part of
4:07other investor networks um there's a lot
4:10of overlap among the investor networks
4:12the principles for responsible
4:14investment PRI and series um but we're
4:19um yeah we are focused on several what
4:24we believe to be strategically important
4:27initiatives um you mentioned based
4:30targets we're working on methane uh just
4:32transition is really the lens through
4:34which we look at all of our climate work
4:36and that work is centered around uh
4:39energy utilities um and the
4:41decarbonization of that sector and then
4:44we're engaging Banks and insurance
4:46companies um part of you know we're part
4:48of the finance industry and their
4:51financing is really critical to a
4:53successful transition so um our members
4:56started working engaging Banks on
5:00climate change um probably around 2012
5:04and so a lot has been done since
5:08then that's great thank you for that
5:10background and that history the long
5:14history of iccr so thank you for your
5:16continued engagement as the climate
5:18crisis intensifies and the work is still
5:20to be done uh so switching now the talk
5:24about Pension funds um so why should
5:27Pension funds perhaps in particular care
5:30about climate risk and and if you talk a
5:33little bit about when we think about the
5:34long term what's the role of what do you
5:37take the role of climate scenario
5:38modeling and helping such asset owners
5:41assess climate
5:42risk yeah it's really important so as I
5:45mentioned um I mean I'd say all of our
5:49members are concerned about long-term
5:53risk uh it's patient Capital but that
5:57half of our members that are asset
5:59owners are by and large Pension funds of
6:02one sort or another I mean the big labor
6:05Pension funds as I mentioned and
6:06certainly the church Pension funds um
6:10they have to pay out on their pension
6:12obligations in 20 30 40 50 years so they
6:17need to both make wise decisions about
6:21the Investments uh in their
6:23portfolios um and also they they're very
6:28concerned about the long term health of
6:30the economy climate change threatens
6:32that in a huge way I mean it's it could
6:36be utterly devastating and so I know
6:39there was a pension fund in Canada I
6:42believe op trust which uh did um an
6:46analysis of their ability to pay out on
6:49their pension obligations uh in you know
6:52various overv various time periods under
6:55different temperature scenarios and
6:57they've discovered that uh you know with
7:01unmitigated climate change they would
7:04not be able to pay out on their
7:05obligations I think even something I
7:08think even a temperature rise over two
7:102% I haven't seen the study I'm still
7:12trying to get my hands on it but um that
7:14that had a significant enough effect on
7:17the economy that they the returns just
7:20weren't there in the market so that's
7:24one reason why Pension funds
7:27care um the other reason I think why our
7:30members care is that we care deeply
7:31about the well-being of society and
7:36again climate change poses a a very real
7:41risk as we're seeing now you know the
7:42devastation in North Carolina
7:46Georgia um and then the fires uh in
7:50Canada in California the flooding in
7:52Pakistan I mean it just you know it goes
7:55on and on droughts in in Subs Africa
7:57which are you know pushing a lot of
7:59migration so it's it's both disruptive
8:03to it's disruptive to food production
8:05it's um just simply disruptive to
8:08people's lives there's um a very
8:11important courts mine in uh that the
8:14region just affected by the recent storm
8:17that's had to shut down and that's
8:19really essential for um you know
8:22computer chips and microprocessors
8:26so flooding in Thailand in 2012
8:30disrupted the auto supply chains of
8:33companies you know trying to make cars
8:35here you know this has been going on for
8:36a while but it's really accelerating at
8:39an alarming rate and
8:41so um there we just feel there's a a
8:46real need to to act very aggressively
8:49and uh there are some reasons why I
8:51think we're not seeing that from the
8:53banking sector but we can get into that
8:55in a little
8:56bit yes thank you for that and these are
8:59are timely comments coming on the heels
9:01of Helen and now Milton and historic
9:04storms that are becoming more
9:06commonplace and this raises the issue of
9:08public policy and this we have a
9:12question about Banks and lobbying um so
9:16have you can you share with us how iccr
9:18has engaged Banks um and on their
9:20climate lobbying if if in fact this is
9:22part of the problem and why Banks might
9:25not be taking climate action or um are
9:29Contin to expand or help support the
9:31expansion of high emitting
9:33Industries sure um and you know I I want
9:37to actually I should probably backtrack
9:39to your previous question because I
9:41realized there's a very important thing
9:45that I think well important set of
9:48information for people students
9:50especially to understand about
9:54why um why we're not seeing the right
9:58signals in the market on the climate
10:00crisis and then I can talk a little bit
10:02about what our members have been doing
10:04in their engagements with banks to uh
10:06try to get them to set targets and um
10:09and transition plans so investment
10:12Consultants to Pension funds have relied
10:15upon peer-reviewed economic research to
10:17provide analysis to P to Pension funds
10:20on the damages that would be caused by
10:22global warming but
10:25unfortunately what's been uncovered I
10:28think in there was a a paper done uh not
10:31this past summer but the summer before
10:34um and then an update this past summer
10:36by carbon tracker showed that the models
10:38used by these Consultants have not
10:41Incorporated climate science
10:43specifically climate tipping points um
10:46and uh there's another paper and I
10:50believe I uh we can make these available
10:53uh to students but uh there's another
10:57one done by um the uh Institute of
11:00actuaries in the UK U and Tim Lenton who
11:05um is a university in the UK wrote a
11:08very similar paper talking about uh the
11:11fact that these tipping points are not
11:13included in scenario analysis other
11:15words they're not really incorporating
11:17climate science and so the economics
11:21papers that have inform the models used
11:24by investment Consultants have been
11:26peer-reviewed but they've been
11:28peer-reviewed by other economists so as
11:31a result the conclusions drawn from the
11:33modeling have been that global warming
11:35of 2 to 4.3 degrees Centigrade will only
11:39have a minimal impact upon pension fund
11:42portfolios now that runs counter to what
11:44I was just saying earlier um in you know
11:47the analysis that uh this Canadian fund
11:50has done and that that we are certainly
11:53seeing in reality as we as we look at
11:56climate
11:57impacts this an analysis is seriously at
12:01odds with the scientific literature on
12:02the impact of these levels of warming I
12:04mean 4 point we're only at one we're
12:06barely at 1.5 now and look what's
12:09happening so um you know I mean
12:13economists have claimed and referred
12:15economics papers that six degrees
12:17Centigrade of global warming will reduce
12:19future Global GDP by less than
12:2310% compared to what GDP would have been
12:26in the complete absence of climate
12:28change now wow that just doesn't seem to
12:32make any sense um it may also be a
12:35problem with the measure of GDP because
12:37that measures the amount of economic
12:41activity that's required to respond to
12:43the disaster so it's not really a good U
12:46measure of our
12:48well-being but in any case these papers
12:51are um being used to um assess you know
12:57actual climate Risk by Financial
12:59institutions and large Pension funds are
13:02using them uh using the Consultants that
13:04are relying on these on this analysis so
13:07you know the the carbon tracker paper
13:09really points to that problem um I mean
13:13scientists claim that you know five
13:15degrees C of global warming implies
13:18damages that are quote Beyond
13:20catastrophic including existential
13:23threats um while even one degree sea of
13:26warming which we've already passed could
13:28trigger Danger dous climate tipping
13:30points so um yeah as I mentioned you
13:33know we've been seeing some of the
13:34effects of that warming to date in uh
13:36the storms and droughts and wildfires
13:39that have been ravaging the globe
13:42so um the paper the carbon tracker paper
13:46loading the dice um posits that a wealth
13:49damaging correction or Minsky moment
13:53cannot be rolled out and in fact is
13:55virtually inevitable which is a really
13:56chilling thought because that would be
14:00quite devastating the paper calls for
14:02financial Regulators who've used the
14:04same economic damage predictions to
14:07stress test the exposure of financial
14:09institutions to climate change it calls
14:12for them to drastically revise their
14:14stress test studies so this will come up
14:17in I think the um as we talk further
14:21about what's happening with the
14:22regulators and what needs to happen um
14:26because that this this is sort of at the
14:28heart of the
14:31problem so you asked how we've engaged
14:34banks on climate including climate
14:38lobbying um so initially the investor
14:41ask of the banks focused on measuring
14:43their Finance emissions so Banks would
14:46be in a position to set targets and
14:48develop meaningful transition plans I
14:50mean you can't you know it's an old
14:51trism you can't measure you can't manage
14:54what you don't measure and so that was
14:56the first ask and uh investors initially
15:00encouraged Banks to join peaf the
15:03portfolio carbon accounting framework
15:06which lays out a methodology for um such
15:09measurement so measurement of financed
15:11emissions peaf was founded in 2015 by 14
15:15Dutch financial institutions under the
15:18leadership of ASN Bank you can look this
15:20up but the initiative stem stemmed from
15:23a pledge by the Dutch government that
15:25called on banks to lead this well called
15:28on banks to lead shift to a low carbon
15:30economy by measuring and disclosing the
15:32ghd emissions associated with their
15:34loans and Investments so um there you
15:38know there have been some
15:40um quite forward-thinking Bankers here
15:43in the United States Amalgamated Bank
15:46has been at the Forefront here and U you
15:49know on the on the advisory committee
15:51and the board of peaf so you know our
15:55our our Network brought peaf here talk
15:59to Banks about it talk to insurance
16:01companies about it encourage them to
16:03join membership was free um and they
16:06could get a lot of good advice about how
16:08to measure um and then report out on
16:11their finan emissions so that was the
16:14first step then once Banks were in a
16:16position to understand their emissions
16:18and these are you know mostly in their
16:20supply chain their financed emissions
16:23investors asked them to set Net Zero by
16:262050 targets
16:29and because that's where the
16:31conversation was and then in subsequent
16:34years um and it was certainly recognized
16:36that 20150 is a long way off so it's
16:38really important to have more you know
16:40uh targets that are closer in so 2030
16:43particularly 2030 Targets on high
16:46emitting
16:47sectors now and they most banks have the
16:52large banks have adopted those targets
16:55although they
16:56haven't um all disclosed
16:59the high emitting sectors that they're
17:02applying to I mean there there so there
17:03differences across the banks um there
17:06differences and how they're um some have
17:09an intensity Target only some have both
17:11an intensity and an absolute Target
17:13which we think is the most useful thing
17:16to have because you really want
17:18emissions in the real economy to decline
17:22in order to make a difference not just
17:25the intensity of your emissions you can
17:27have absolute emissions go up and the
17:30intensity go
17:32down it sounds counterintuitive that
17:35it's actually you think about it it's
17:37it's really a
17:39problem um
17:42so anyway there's still discussion
17:44around the targets but um mostly the
17:48conversation now is revolving around how
17:50the banks plan to meet their targets so
17:55in this conversation investors are
17:57asking about uh their transition plans
18:00you know how what's the relative balance
18:03of fossil fuel financing with um the
18:06financing needed to help decarbonize the
18:09economy or green finance and then um so
18:13in addition to asking the banks to
18:15disclose a what we call a green
18:17financing ratio this is developed by
18:19Bloomberg um nef so you can uh
18:22investigate it there they have some
18:24papers out on this investors are asking
18:28about internal
18:30alignment and the bank's Readiness to
18:32pursue the transition paths they've
18:35developed so internal
18:37alignment is really you know what kind
18:39of training have you given um to your
18:44loan officers um what's the conversation
18:48about uh climate in the bank you know
18:51how like what's its profile um are there
18:55clear signals coming from the top that
18:56this is a a key um you know a really
19:01important risk for the bank um and that
19:05needs to be managed and are there clear
19:08guidelines about client engagement um
19:13you know banks have been saying we're
19:16going to decarbonize along with our
19:18clients which is you know a nice way of
19:21saying we're we want to continue to make
19:23money as our as the economy DEC
19:27carbonizes but you know and that's fine
19:30but
19:32uh that depends on your clients actually
19:35decarbonizing so one question is what
19:38are you doing what questions are you
19:40asking and what incentives are you
19:42providing for your clients to actually
19:44promote and speed up that rate of
19:49decarbonization um are you know the
19:51banks are often in a
19:53position access to a lot of information
19:56that perhaps some of their clients or
19:57smaller clients might not have uh you
20:00know can they really uh provide a
20:02helpful role there um are bank loan
20:05officers knowledgeable about climate
20:07risk issues um and and so investors are
20:10asking questions like those uh and we're
20:14trying to figure out
20:17now
20:19um you know within specific
20:24sectors which you know if we're also
20:26engaging companies in other sectors you
20:29know that's like utilities oil and gas
20:31companies so we're very knowledgeable
20:33about what's happening in terms of
20:35methane management and disclosure and um
20:38so we have conversations with them about
20:41that you know what uh level
20:44of do you have specific methane
20:48reduction targets for your oil and gas
20:51sector
20:52clients and do you understand the
20:55science of of methane and and how it's
20:58being being managed and what the
20:59possibilities are and with utilities Gas
21:03Utilities are you you know instead of
21:06thinking about a mix of renewable
21:08natural gas and
21:10hydrogen which is going to be is
21:12estimated to be 20 times more
21:15expensive than the cost of natural gas
21:18today that's you know this combination
21:21of RNG and hydrogen is what the gas
21:24companies Gas Distribution companies are
21:26saying they're going to put in our pipes
21:28to make their gas gas systems more
21:32sustainable and um we're like that
21:37doesn't make a lot of sense I don't know
21:38how Regulators are going to support that
21:40and I don't know why customers would pay
21:42for it and so you even now you have a
21:45lot of customers leaving gas systems so
21:48we're talking to Gas Utilities about
21:51Alternatives like thermal energy a
21:53network geothermal that kind of thing
21:55how what do the banks know about that
21:57what are their what are their um you
22:01know their loan officers thinking about
22:03what are they aware of um so you know
22:06everybody's got to be kind of rowing in
22:08the same direction so that's what we're
22:09we're trying to connect some of the
22:12conversations it is amazing that you're
22:15making these connections and breaking
22:19down some of what seems to be the
22:21barriers to banks in particular just say
22:24Banks per second taking action or if
22:25there are internal barriers that your
22:27investors are addressing how what's the
22:29internal alignment do you have the
22:30professionals do you have the
22:32understanding and there's the external
22:33barriers to the extent banks are relying
22:35on utility companies or industry to
22:37figure out how they're going to
22:39decarbonize the overall just the
22:41incorporation of science or not into
22:45product management into Innovation into
22:48regulation into modeling um risk
22:51modeling and otherwise so lots and lots
22:53of barriers there great to hear that you
22:56are connecting the dots and doing this
22:58engagement um it just it's amazing that
23:02you're putting it all together and
23:04another barrier might we might talk
23:06about and perhaps I haven't HD on all of
23:08them and if I haven't please let me know
23:10but perhaps another one is the anti-g
23:13backlash and are you seeing that having
23:15a chilling effect on banks or or
23:18companies in other Industries who might
23:20have agreed to adopt certain targets
23:23sustainability targets meaning emissions
23:25or otherwise and and has this had a
23:28chilling effect on their efforts or
23:31disclosures yeah unfortunately it has um
23:36and they're it's well financed they're
23:40millions and millions of dollars going
23:42into this effort and and we really see
23:44it as um you know and it's clearly
23:48financed by fossil fuel interests
23:51although it's broader than that because
23:53they're picking up on it's a
23:55politicization of everything it seems in
23:58this country and so you know Equity
24:01issues um social justice all of that is
24:04I mean we're you know we're the churches
24:08we're being called the woke capitalists
24:10so it's like it's just unbelievable um
24:15but so it has had an effect on both on
24:22the banks and also on um investor
24:26support like large investors at large
24:29asset managers the black rocks of the
24:31world have have pulled back from uh the
24:36kind of the levels of support we were
24:38seeing
24:39for um environmental and social
24:43proposals you know resolutions that were
24:45filed with companies so our network
24:49files close to 500 resolutions a year
24:53that's a lot yeah and uh so it's
24:58um yeah between four and 500 and many of
25:02those are withdrawn right because we
25:05bring issues to companies and we have
25:07these long relationships with them so I
25:10mean some people we you know who've like
25:12moved up in the company we've known for
25:1320 years so so there's a level of
25:18respect and trust and um and and genuine
25:22conversation back and forth um not all
25:25the engagements are like that I mean
25:27clearly resolution wouldn't need to be
25:30filed if the companies just said oh well
25:33we'll meet with you and we'll do what
25:34you suggest they're not doing that at
25:36all and and fair enough I mean they're
25:38you they've got a very different
25:39perspective on their business and that's
25:41what this is It's a conversation um
25:43we're raising issues of concern to us as
25:46investors and uh that we think are
25:49affecting the larger society um so that
25:54so anyway so that's where we're coming
25:56from they plenty of um
26:01resolutions
26:03those resolutions are often asking
26:06companies to um well in the climate
26:10space we're definitely asking
26:12for uh you know faster more rigorous
26:18decarbonization um and doing that in a
26:22way that protects workers and
26:25communities so we're very concerned that
26:28we make this transition it' be a just
26:31one and that environmental justice
26:33concerns are Central in that process as
26:36well uh because we can well we're not
26:39going to have a transition if it's going
26:41to happen on the backs of workers and
26:43poor communities because there will just
26:45be an upro as there has been in France
26:47and Chile and you know when they've
26:49tried to pass policies that moved very
26:51quickly and didn't take into account the
26:54impacts on on
26:56communities um so
27:00so investors have been pulling back from
27:02some of the support we were getting a
27:03lot of majority votes for or quite a few
27:06majority votes for uh climate
27:09proposals
27:11um and now the votes have gone down they
27:14dropped by 10% in one year sort of
27:17across the board so it was a significant
27:20uh effect but we're kind of back to
27:24where we
27:26were around well when I took this
27:28position in 2015 I was doing corporate
27:31engagement before that if we got um you
27:34know a vote in the 20s or 30% that was
27:37considered a really strong vote and I
27:39think we're back to those levels um so
27:43that means that 20 or 30% of your
27:46shareholders are really concerned about
27:47this issue and it really does send a
27:50signal to companies that they need to
27:51pay attention so our support for our
27:55proposals is not I mean there's pretty
27:57solid support there um so that's one
28:00thing will is it enough to really move
28:04companies I think we do need the Black
28:07Rock and State Street and Vanguard and
28:09others to be voting for these so that
28:12level of of support is very important
28:15but they are they've been affected the
28:18most by this anti-g backlash because I
28:21suspect in part while they're doing
28:24business um for you know all companies
28:27have well big companies have Pension
28:29funds right somebody's got to be
28:30managing them so who's managing the
28:32funds of the oil and gas
28:34sector I mean probably one of those big
28:37three and so um and and there's real
28:41harassment going on I mean being called
28:43up before this house committee is a
28:46really really unpleasant process um as
28:49youo was up there for eight hours when
28:51being grilled one day uh so it's you
28:55know and they they're they're going
28:57after
28:59a number of you know they just went
29:00after all the churches recently so it it
29:03it is
29:04serious
29:06however um investors and Banks alike
29:10realize that the threat posed by climate
29:11change is not going to diminish just
29:13because the fossil fuel interests are
29:15trying to slow the trajectory of
29:17decarbonization so institutions are
29:19being less public about what they're
29:22doing some are rolling back commitments
29:24that they've made publicly some of the
29:26banks have done this but they're not
29:28necessarily changing the due diligence
29:30processes they've had in place on
29:32projects and
29:34Investments so Banks them just talk to
29:37talk about Banks now are really trying
29:39to find a way through this extreme
29:42politicization of climate risk
29:45management which is very
29:47necessary but is being made you know
29:51very difficult so that that's not easy
29:55um they want to be able to operate in
29:57red states that have targeted Financial
29:59actors that are trying to respond to the
30:01crisis uh the climate crisis and in fact
30:04the large Banks and investors are
30:06invested heavily in fossil fuel so the
30:08charges I think are a bit silly but
30:10clearly they're designed to intimidate
30:12and have had the intended chilling
30:14effect so banks are not moving as
30:17aggressively to respond to investor
30:19concern about climate risk nor are large
30:22asset managers supporting as strongly as
30:24I said you know investor efforts to move
30:26companies on climate
30:28um and you know I have to say to some
30:30extent the anti-g backlash gives Banks
30:32an excuse not to move more aggressively
30:36to decarbonize their financed emissions
30:38which they are disincentivized from
30:41doing by the regulatory mandates and the
30:43deficiencies of standard climate risk
30:45models that I discussed
30:49earlier thank you for that and uh a
30:53chilling effect that is chilling indeed
30:55it's good to know that companies
30:57investors are are perhaps quietly
31:00continuing to do their due diligence and
31:01risk management and maintaining an
31:03awareness of the real risk that climate
31:05change poses despite whatever
31:07politization maybe politicization excuse
31:09me may be happening um but I want to
31:12just double click and I also want to be
31:13Cog of time but if I may sort of double
31:15click on the regulatory piece of this so
31:18you you just ended your comment saying
31:21in the absence of applied science or
31:23science being effectively integrated
31:25into risk modeling we also have a dir of
31:27regulations or regulations that aren't
31:30strong enough um and I I wonder if you
31:32might speak a little about that and
31:35perhaps about the recent SEC disclosures
31:38or the still under threat perhaps SEC
31:42disclosures sure I mean yeah we
31:44definitely need strong effective
31:46regulation that will require Banks to
31:50stop loading risk into the system by
31:52continuing to finance fossil fuel
31:54expansion so I I just want to say that
31:56because um and am not an expert on
31:59regulations but um I I know that there
32:03are signals that are being sent by
32:07either the the rules that are in place
32:09or the rules that aren't yet in place um
32:13and so you know banks will not opt to
32:16lose money while addressing climate risk
32:19because they're either making or losing
32:21that money right now and they some what
32:24we're trying to figure out is why
32:26they're not more concerned about the
32:28list the as I said this risk they're
32:30loading into the system um for the
32:32future because once we get past a
32:35certain Tipping Point or various tipping
32:37points we we don't have any control over
32:40those I mean and I think that's where
32:43maybe there's a little bit of huis
32:44acting that you know they think they're
32:46going to be able to to manage mother
32:49nature but
32:51um I know you know in recent climate
32:55stress testing by the federal reserve
32:57banks said they struggled to assess how
32:59they'd be affected by hypothetical
33:01climate scenarios because according to
33:04them climate risk modeling is in its
33:06infancy and important data is
33:08unavailable so the entire financial
33:11sector needs better disclosure for sure
33:13and and the data does need to be
33:15improved but then there needs to be a
33:18real demand for it and so I you know
33:21it's um I think this is happening but it
33:25needs to happen faster so at the SEC I
33:28mean investors press the SEC as it was
33:32you know in our comments as it was
33:33developing its climate related
33:35disclosure rule uh to mandate disclosure
33:38that would provide investors with
33:40consistent comparable and decision
33:42useful
33:43information um and we argued that you
33:47know this was really this is we need it
33:51for investment decisions this is how
33:53it's used and and I think something like
33:5598% of investors um called for this so
34:00there's not really any question about
34:02the need for it but there was a lot of
34:05push back by certain companies um and
34:08some some companies actually supported
34:10it so um but there's been Again part of
34:14this whole
34:15anti-g right-wing movement to um attack
34:20anything like this um so the Chamber of
34:24Commerce filed suit the uh business
34:27Round Table
34:28filed an amus brief that was sort of a
34:31compromise um that they said oh well we
34:34didn't join the lawsuit we you know this
34:37is what we heard from companies that
34:39were in the
34:41brt um but you know so that was because
34:45there were companies in the brt that
34:48supported the climate Rule and anyway
34:51there um that the the SEC withdrew it
34:55while the cases being
34:58discernment so we don't have a climate
35:00related disclosure role in the US yet uh
35:04California's come out with uh
35:06regulations or with you know disclosure
35:09a disclosure rule in Europe which is
35:13largely immune from this sort of
35:18um you know jocking that's going on here
35:22um and in a very
35:23different um sort of climate
35:27you know uh around climate issues um you
35:32know recently issued the csrd the
35:35corporate sustainability reporting
35:37directive it's very detailed
35:40um every company I've talked to has said
35:43wow I I'm totally you know the
35:46sustainability people I'm totally
35:47focused on trying to report against the
35:48csrd because it's so demanding um
35:53so this
35:56um Bank any large US company must with
36:00operations or any I forget the actual
36:03size but you know significant uh
36:05footprint in the EU has to report
36:06against that so in a way they're not
36:09escaping just because we don't have a
36:11rule at the SEC they're not escaping the
36:14reporting requirements and that will be
36:16available to investors so I don't really
36:19know why there's there was so much push
36:21back against the SEC rule except that
36:23maybe companies were trying to make a
36:25point but that you know this is the
36:29trajectory is toward more disclosure and
36:33better data and all of that is going to
36:36help
36:37everyone
36:39um you know manage manage the problem um
36:43more effectively I mean there are a few
36:45other things that I think really need to
36:47change one they came out I'll send you a
36:50link to the paper for um people who are
36:53interested in this but
36:55they're um
36:58I think banks have to it has to do with
37:00the um their Capital ratio so they have
37:04to put aside twice as much money when in
37:08their Reserve
37:11um in their reserves for green Finance
37:16green financing twice as much money for
37:19green projects as they do for fossil
37:20fuel projects and it's because I know it
37:24doesn't seem to make any sense but if
37:26the mo you you know the everything's
37:28looking backwards and it says oh fossil
37:31fuels are very stable it's a you know
37:33well they're not it's a very you know
37:35like roller coaster kind of sector in
37:38terms of returns but it's you know the
37:42risk is relatively
37:44low that's historically but we're not
37:47looking at I mean everything's changing
37:51and the risks looking forward look very
37:55very different from the risks looking
37:56backwards and so what happens when
38:00suddenly there are changes in public
38:04policy um which will be needed um that
38:08will perhaps remove the in um all the
38:11subsidies that we're giving to the
38:12fossil fuel sector that's going to
38:14change the equation really dramatically
38:17and so those kinds of disincentives like
38:20banks are actively disincentivized right
38:22now from you know expanding their green
38:26Finance at the expens of fossil fuel
38:29financing so that sort of thing needs to
38:31change and I my my sense is that once if
38:36people can get the models right to show
38:39the amount of risk that they're were
38:41actually facing that everybody's going
38:43to start well I hope they don't just
38:45completely panic and not be able to
38:46respond but um that you know this will
38:51suddenly things will change very rapidly
38:53and that the all of you know the signals
38:55will start going being
38:58to move Banks and other Financial actors
39:00in the right direction um and so that
39:04policy the regulation is very very
39:06important but getting Banks to act on it
39:10right now they're acting as a drag in
39:11the system so we were holding back the
39:14conversations in basil 3 you know the
39:16negotiations there much more
39:19conservative positions this even under
39:20the Biden Administration so you know
39:24this is the position of US Banks is very
39:27problematic and and really does need to
39:30change but I'm not quite sure what's
39:32what it's going to take to change that
39:34apart from that issue of the models
39:36telling us what's really going to
39:39happen well thank you for that and I was
39:42going to begin to wrap up here and ask
39:46about your last points for for those of
39:49us working in the transition space on a
39:51just transition on influencing Financial
39:54flows and on trying to address this ES
39:57dilemma um and perhaps modeling is is is
40:00part of this answer you think this is
40:02going to be uh if not sufficient that at
40:06a minimum necessary really solid
40:08modeling to um to persuade the actors
40:11who need to be persuaded and any other
40:14last points that you might leave us with
40:16as we as we uh draw to a close well I
40:20guess you know if if um I think it's
40:25really important for people to keep
40:28remembering that there are people at the
40:30other side of the
40:32table and that you know we all have many
40:35many of us have children uh us are
40:37children um and we we all care deeply
40:42about the future of the planet and and
40:46of each other and I I think trying to
40:49work together to find a way
40:52forward um and and identify what's
40:55really important
40:58that we can be building toward and that
41:00we we want to make sure that we protect
41:03um is is really important the other
41:06thing and perhaps this is the last thing
41:07I'll say is I think there's a you know
41:10the Catholics are very I'm not Catholic
41:12but I love this I love their Catholic
41:14Social teaching and um the precautionary
41:17principle I think runs through um you
41:21know all of their teaching and that if
41:26we could use that more apply that more
41:29in in our thinking uh I think we we
41:33would go a long way toward protect
41:35giving ourselves the protections we need
41:38um because we're facing a very serious
41:40crisis so thank you for the
41:43opportunity thank you so much for these
41:46thoughts um that was a great way to
41:48close and really appreciate everything
41:50that you've brought to the conversation
41:51Christina thank you so much great well
41:54thank you and all the best take care
41:57okay bye

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