Women are Leading Across the Landscape of Climate and Sustainability

Inspiring Women Entrepreneurs: Andy Blair in Conversation

Andy Blair:

It just seems that traditional pipelines for success weren't built for us. It's like we're wearing a scratchy sweater that just does not fit. And it's not going to change until we create new models of what successful leadership looks like.

I think we need to break those existing pipelines and build new ones that fit for the diverse range of people we actually need to solve some of these really big challenges ahead of us, least of all the climate crisis.

Michael Torrance:

Welcome to Sustainability Leaders. I'm Michael Torrance, Chief Sustainability Officer with BMO Financial Group. On this show, we will talk with leading sustainability practitioners from the corporate, investor, academic and NGO communities to explore how this rapidly evolving field of sustainability is impacting global investment, business practices, and our world.

Speaker 3:

The views expressed here are those of the participants and not those of Bank of Montreal, its affiliates, or subsidiaries.

Melissa Fifield:

Hi, I'm Melissa Fifield, head of the BMO Climate Institute. And today we're joined by Andy Blair, co-founder of Upflow, a geothermal research and innovation company based in New Zealand. Upflow is dedicated to harnessing the vast potential of geothermal energy to provide intelligent solutions to global industries.

Andy was selected as an awardee for the We Empower UN SDG Challenge. The We Empower UN SDG Challenge is the first of its kind global competition for social entrepreneurs who are advancing the UN sustainable development goals, and inspiring entire communities to act, to create the world we want by 2030. Welcome, Andy.

Andy Blair:

Kia ora, Melissa. Hi, everybody.

Melissa Fifield:

To start, can you please give our audience more background about yourself and Upflow?

Andy Blair:

Sure. So at Upflow, we want to inspire people to use STEAM to solve the world's most pressing problems. And I mean that in two ways. STEAM, the acronym for science, technology, engineering, arts and math. And steam, the superheated water vapor that we all know.

Upflow is a research and innovation company from the geothermal energy sector. So in English, it means that we take gifts from the earth and use them to build bridges between pure science and the business world. So we are solutioneers. We do the really hard, complex stuff that allows science to solve real world problems. We really like difficult problems.

Now, there's two big problems, climate change and hunger. We are working with a Maori organization that owns geothermal assets. Maori, the indigenous people of New Zealand, demand more than economic outcomes. So social, cultural and environmental outcomes are as, if not more, important than dollars.

We've sourced two microorganisms from their geothermal ecosystem. Now these bugs work together symbiotically, eating greenhouse gases and producing single-cell protein. Yes, food. So what starts out as carbon dioxide and methane ends up as food. Now, right now it's for animals, but someday for humans.

Now, I won't say that it's easy. Our scientists and engineers are scratching their heads all day every day. But they love it.

Now me, I have always been the translator in between business, science, and community. I'm curious about people in the world. I feel confident in the gray, that space of uncertainty. I'm okay with being wrong. I'm okay with making mistakes. Because as we all know, you have to be brave to try new things.

And also, being wrong doesn't mean the end. And no doesn't mean the end. It just simply means you have to find a different way around it. It's not easy to raise money for R&D, it's a risky endeavor. But the tough problems need the most clever solutions and the most daring to create them. And that's our sweet spot, the hard spot.

And with support, we'll keep solutioneering and solving problems with steam. Both kinds.

Melissa Fifield:

I love your story, Andy. I think what you're doing is absolutely incredible, and I love that there's multiple benefits to the work that you've done and the solutions that you've uncovered. As you are looking to pursue the business, what factors influenced you to focus on sustainability in particular?

Andy Blair:

Thanks, Melissa. Yeah, I've always been interested in science and the world. And when I joined the geothermal industry 17-odd years ago, I saw how transformational geothermal projects are for the communities that surround them. And when you think about typical geothermal and volcanic environments, they're usually in rural, low socioeconomic locations.

And geothermal projects offer access to energy, minerals, and other resources that enable economic development. They provide food security, provides access to water, and a raft of other opportunities that can help people prosper.

A really cool example of this is in El Salvador, in Ahuachapan Geothermal Plant, they use the water from the geothermal cooling tower to water cacao and coffee plants for a commercial operation. And here they hire over 600 local women. And why they focus on women is because they know that if you lift up women, she will take everyone around her, with her.

And I don't have children, and I feel like I have a moral obligation to try and make the world a fairer, more equitable place for everybody's children. And so at Upflow, our why is we want to do good stuff with great people for the good of the world. And the core of that means sustainability for humans and the planet.

Melissa Fifield:

That's incredible. From your experience as a woman business leader, how do you see women navigating the barriers and challenges that they may face when working to participate equally from an economic perspective?

Andy Blair:

Yeah, that's a really, really big question. And the institutionalized bias is so hard to see that we live in. And so we're always doubting whether there is bias or not bias. We see a lot of women, when they're hitting brick walls as they climb ladders in the corporate world, we get frustrated about how we don't fit. We feel like our contributions aren't being valued to the extent that our male colleagues are. Our values start to be more challenged by the success equals profits equals success equation. We get caught in that likability versus competency dilemma, where women can be either of those things but men can be both.

And also, we really feel really heavily that burden of being the only woman at the table. And oftentimes we just don't see a clear path forward, or people that look like us at the top. It just seems that traditional pipelines for success weren't built for us. It's like we're wearing a scratchy sweater that just does not fit.

And it's not going to change until we create new models of what successful leadership looks like. I think we need to break those existing pipelines and build new ones that fit for the diverse range of people we actually need to solve some of these really big challenges ahead of us, least of all the climate crisis.

So I think my advice is to women out in the world, out there, is push really hard from wherever you are. You have allies that you don't even know about yet. But if you push, they will make themselves known to you.

Be intolerant of unfairness. Call it out, shine a light on it. Because even if you don't get that immediate response you were looking for, people often won't say, you are right, I'm wrong. That was bad. You will feel empowered and good about yourself, and this will also make you braver to call it out the next time you see it, and empower those around you to call it out and do the same.

And I think the most important thing is that if you are in a position to climb, do it. Get to the top as fast as you can. Who caress if you filled a quota, or you were promoted because you were a woman or the diversity hire. We need every single one of you at the top to dismantle the infrastructure, and start throwing ladders down to those coming behind us. We need to do it now.

And we need all genders to help us get there. This is not a woman's problem, this is a societal problem. And we can't simply wait and hope for fairness because it's not working. So that would be those comments for women out there who are listening in.

Melissa Fifield:

Those are some fantastic gems. I love the analogy of a scratchy sweater. But also just the image of throwing ladders down, I think that's so important is to use our physicians to help uplift others. Which you're obviously doing an incredible job at.

Shifting gears a little bit, what do you see your business would need, and perhaps other businesses that are also working toward a more sustainable future, what would they need to achieve more widespread impact?

Andy Blair:

Yeah, I think we all need oxygen. And by oxygen I mean money. All we need, is just some oxygen to breathe and move. And if I think about MySpace and all that entrepreneurial, tech R&D space, that the current funding models, the pre-seed R&D grants, model funding streams, they just take so long to work through a funding path, that when you're a startup business cashflow, you live and die on your cashflow.

And those long, burdensome administrative processes are just so heavy that you see a lot just opt out. Also, these groups of funders, they're really risk-adverse. And these solutions and things that we are coming up with, this new tech, this new climate tech, they just don't fit the norm.

Because guess what? The norm got us here. So of course they're not going to fill the traditional commercial requirements, the structures, project pathways, timelines, et cetera, that traditional projects will be able to do.

Every key element of delivery is going to be different. So either we have to fit ourselves into those commercial boxes and reduce our focus on purpose, or we have to spend so much time trying to educate grant managers, funders, investors and banks, and other gatekeepers on why what we're trying to do is the right thing to do, and that the impact will be great and important. I mean, that's an ongoing rhetoric we have to keep spouting.

But are people important? Is the climate important? Yes. But where are the dollars? So we need more focus on that quadruple bottom line that profit, people, purpose, and planet. And as much as we hear the people from those institutions saying, "we are focused on that, that's true." It's not true.

Basically, what are demanded of us is that not only do we have to have all the financial requirements of a traditional investment, but we all have to add on top the burden of environmental outcomes, social outcomes as well. So it's weighed heavier.

So research and development, that entrepreneurialism, and that creativity gets suffocated in the administrative burden and the risk-adverse funding pathways. And so we often opt out of the corporate space to do things. But the massive gender bias in the VC space means that if you're a woman capital raising, it's almost defeat before you behind. I think last year it was 2% of VC funds went to women in the Americas, and 0.9% in Europe. So it just feels like defeat before you start.

And I think what we really need is for people to realize that this is urgent, that governments and large funds are being cautious, and risk-averse, and saving for a rainy day. Well, guess what? It's raining. Start spending the reserves because we have zero time left.

If it takes two years to get seed funding, it means that we are five to 10 years away from real, commercially-scaled decarbonization technology and products. We do not have that much time. 2030 is seven years away.

So in order for myself, my company, and people around me to really get moving and put solutions in play for our climate goals, we need these groups to start spending this money, start supporting founders, and understand they know how to make their projects work and live in the real world. No one more than them wants their business to succeed, so we'll do what it takes. So just believe us, and give us some oxygen.

Melissa Fifield:

Wise words. I think sometimes sustainability and climate issues can feel really intimidating, and really big. You've already made the point that we need to start spending those reserves and accessing capital to help advance the research needed to bring some of those solutions online.

From your perspective, what do you see ... I think sometimes we think that maybe only the biggest actions have the most effect. But from your perspective, what are the ways that individuals can have the most impact on climate change?

Andy Blair:

Yeah, it can sometimes feel really overwhelming how big the challenge is. And the fact that we need to halve our missions by 2030 to achieve net-zero by 2050 just sounds like a lot. Because it is a lot. I think about a quote that actually Theodore Roosevelt says, which is, "Do what you can, with what you have, where you are."

This is not environmental crisis, it's a human crisis. The planet's going to live on without us. It's us that want to live on. And so we have to go together through this, and we have to bring everyone with us. I think we all need to start realizing, this is urgent. And that we need to look at the problem now and act. We need to adopt a disruption mindset. I think everybody does in their everyday life.

It doesn't matter whether you are buying groceries for your household or you're procuring goods and services for your business. If you're organizing an event and saying, well, what sort of cups and plates are you using? How are you going to distribute our goods?

Everywhere where you are can make a difference. There is no silver bullet, there's no one answer, there's no perfect place. There's paralysis if we look for perfection. We must all act imperfectly, and use our ability to influence where we are, and stop seeking perfection. Just get moving. Let's just get on the path.

And then we'll be able to move in small increments, and get to the right place. But we can't stand still anymore. We have to move. And we can do it. I have so much optimism about this. If you could meet all of the smart people that I meet in this tech space, you would believe we could do it. But we need everyone to come with us, and not sit back and wait for perfect.

We just need to break the existing frameworks of the old, and do things differently. And just like when the digital age transformation happened, we just need everything to break and move. We need to be bold, and ambitious, and demand more of each other, and encourage each other.

And I think when we saw with Covid, what happened was, people saw an immediate problem. And we all came together and sought solutions. And I think we need that kind of urgency and focus to get to where we need to go, to really achieve our climate goals. And I absolutely believe we can do it.

Melissa Fifield:

Absolutely. Is there anything else you want to add to our conversation?

Andy Blair:

No, just that ... No, meaning yes. That's a thing we say in New Zealand. We say, yeah, nah, which is a confusing statement.

I would just like to add that the solutions are out there. And they are not going to suit the traditional ways we've done things. And if you are sitting inside a traditional system of funding, or other kind of support that can help tech, start spending the money. Stop being so risk adverse. It's time to move.

And also all of you women, you wahine out there, it's time to stand up and push. We can't wait anymore. So hopefully I get to see more of your faces in the sunlight, and standing in front of some amazing tech. And kiora to BMO and our partners who have supported us in the We Empower awards. We've just had our minds blown from the support. We need more of what you are doing to support women, and help get us where we need to be. So thanks very much, kiora koto.

Melissa Fifield:

Fantastic. Andy, thank you so much. You're an inspiration and we're so grateful to have you on our podcast today. And look forward to watching all the incredible things that you're working on, and seeing them come to fruition. Thank you for joining us today.

Andy Blair:

Thank you so much.

Michael Torrance:

Thanks for listening to Sustainability Leaders. This podcast is presented by BMO Financial Group. To access all the resources we discussed in today's episode, and to see our other podcasts, visit us at bmo.com/sustainabilityleaders.

You can listen and subscribe free to our show on Apple Podcasts or your favorite podcast provider, and we'll greatly appreciate a rating and review and any feedback that you might have.

Our show and resources are produced with support from BMO's marketing team and Puddle Creative. Until next time, I'm Michael Torrance. Have a great week.

Speaker 5:

For BMO disclosures, please visit bmocm.com/podcast/disclaimer.

Inspiring Women Entrepreneurs: Susan Blanchet in Conversation

Susan Blanchet:

My vision is a building with a huge glass biosphere with air inside the building circulated through our multi barrier filtration, including our genetically enhanced plants. We could recirculate at least 80% of the air, which would mean a 40% decrease in greenhouse gases.

Michael Torrance:

Welcome to Sustainability Leaders. I'm Michael Torrance, Chief Sustainability Officer with BMO Financial Group. On this show, we will talk with leading sustainability practitioners from the corporate, investor, academic and NGO communities to explore how this rapidly evolving field of sustainability is impacting global investment business practices and our world.

Speaker 4:

The views expressed here are those of the participants and not those of Bank of Montreal, its affiliates or subsidiaries.

Melissa Fifield:

Hi, I'm Melissa Fifield, head of the BMO Climate Institute. Today we're joined by Susan Blanchet, CEO and founder of Origin Air. Origin Air provides an innovative plant-based indoor air purification solution, and I had the pleasure of meeting Susan during New York Climate Week in September when she was selected as an awardee for the WE Empower United Nations SDG Challenge. The SDGs are the sustainable development goals adopted by all United Nations member states in 2015 that provide a blueprint for a better and more sustainable future for all by 2030. The WE Empower Challenge honors innovative women leaders from around the world who are pushing the SDGs forward through sustainable business practices and inspiring others to follow suit. I'm so excited to have you on the podcast today, Susan. Welcome.

Susan Blanchet:

Thank you, Melissa. It's a pleasure to see you again.

Melissa Fifield:

So to start, can you please give our audience more background about yourself and about Origin Air?

Susan Blanchet:

Yes, definitely. As a teen, I read Rachel Carson's Silent Spring and I was horrified that toxins in our environment accumulate in our bodies. I wanted to do something about it. So at first, I became an environmental lawyer and I was holding operators accountable for contaminated sites. Unfortunately, at only 51, my father was diagnosed with early onset dementia. He was so healthy. He ran every day. He ate right. There were no genetic markers and there was no family history. He'd been a civil engineer working in wastewater treatment plants, notoriously bad air. And because of my experience in contaminated sites, I did research. If his dementia wasn't genetic, it was environmental. But how do you prove that? Air moves, it's difficult to measure.

So eventually I decided if I couldn't litigate better air, I would learn how to clean it. Origin Air, my company, purifies indoor air. We've combined mechanical air purification with genetically enhanced super plants, a beautiful biofilter that removes volatile organic compounds. These plants metabolize airborne toxins into oxygen and plant growth. And the beauty is if you treat them right, they work continuously and they will never end up in landfills where you find every other filter. But we're just beginning, because something that really bugs me is that we treat indoor air at the expense of our planet.

Before Covid buildings represented 20% of our greenhouse gas emissions. A building's air is pulled in from outside, but the expense and the carbon footprint come from the cost to heat and cool that air. Facility managers, when Covid happened, started to pull in more and more air exchanges, but instead of recirculating that conditioned air, they just dumped it and pulled in more, like a bathtub without a plug. It's having a faucet run all day every day, and those greenhouse gases doubled.

So my vision is a building with a huge glass biosphere with air inside the building circulated through our multi barrier filtration, including our genetically enhanced plants, we could recirculate at least 80% of the air, which would mean a 40% decrease in greenhouse gases. At Origin Air we call this our quadruple bottom line, people, planet, profits and plants. So that was actually my pitch from the United Nations SDG challenge that I did in New York at Climate Week. So I thought it would be a great way to share it with the listeners to get inspired as we all were in New York City last month.

Melissa Fifield:

Susan, you have an incredible story and it sounds like a lot of factors influenced you to focus on sustainability in your business model. From a business perspective, how did your focus on sustainability and climate evolve as you were building the business?

Susan Blanchet:

From the outset, sustainability has always been one of our core values. We have grit, sustainability, innovation, and diversity as our core values towards our mission. When I negotiated the rights to the plants, I have global exclusive rights to distribute these genetically modified plants, at first, I didn't have enough plants to do my vision of a biosphere on the roof of buildings. So we started with a commercial unit that has 32 plants in it, and that has been commercialized and is across Canada at this point in a lot of the major centers and included in that with really large customers, Telus, BentallGreenOak, Hudson Pacific Properties. So that's been our initial target, but our goal has always been to grow the plants as quickly as we can to develop this biosphere. Because if I'm cleaning air in a boardroom, I'm not going to make the facility manager turn down the HVAC system, and that really is half of our goal. Half of it is to clean the air, the other half is to make a impact that will assist in us meeting our climate targets.

Melissa Fifield:

Fantastic. From your experience as a business owner, how do you see women navigating the barriers and challenges we may face when working to participate equally in the economy?

Susan Blanchet:

Great question. Because of my background in law, I was in the first class of 51% females in 1999 when I started my law degree. And because of that, I had this false impression that women were really creating equality in the workplace. When I started my company four years ago, at first raising up other females wasn't something that I thought that I would need to be doing. But it quickly became apparent that women received less than 2% VC funding, but as I got into sales it became more apparent than even worse than that women received less than 0.05% of procurement, and that is just not okay.

So one of the things that we've done is become part of really large women organizations in Canada. We're part of Women Business Enterprises, which gives us direct access to procurement decision makers, which for a new company, putting you in front of the people that make the decisions without you having to wade through months of introductions to try to get there is a huge step forward. So if I'm speaking to other new woman business organizations and businesses, I would say find these people, find the people interested in supplier diversity, I think it's the time for us to start to make a difference on this.

Melissa Fifield:

That's great advice. What would your business and perhaps other businesses also working toward a more sustainable future need to achieve more widespread impact? What do you see as being necessary for that?

Susan Blanchet:

As a new business there's lots of help with grants and other forms of non-dilutive investment that really help you through your first few years when you're hiring employees and proving your technology. So our technology was proven before I started the company in laboratory, but a lot of people wanted it to be proven in the field. Now we've done that. We've proven through funding from NRCI rep and Innovate BC that our plants removed 37% of volatile organic compounds in the field where these levels are much lower than in laboratory. In laboratory, we were getting results of 82% and higher. So we've also shown that as toxins increase, our plants work harder and metabolize them faster.

And the most interesting result we got, which might disappoint a lot of the listeners, is we also showed regular plants do nothing. They don't remove any volatile organic compounds at all. The next step that we need, once you get to that level, and now we're into commercial sales, but we're still developing and there's really a gap that I think needs to be filled by the corporations. Now there's early government funding, but corporations are now the recipients of most of the GDP and have an obligation to fight the climate crisis that we're currently going through. And a good way for them to do that is to fund pilot projects and demonstrations or become partners with innovative companies like mine. Because there's no way I can do this by myself.

Melissa Fifield:

Makes a lot of sense. It may often feel as though the biggest actions have the most effect, but from your perspective, what are the ways individuals can have the most impact on climate change?

Susan Blanchet:

I think the biggest way for individuals is to just every day use your purchasing power towards supporting diverse and innovative sustainable companies. When we hear 0.05% of procurement, that translates over to the consumer market too. Think about where you're buying. Our company for instance, is coming out with a home unit in summer of 2024, so there's lots of diverse-lead companies that you can choose to purchase from and purchase sustainably. We won't make a virgin plastic unit, for instance. We will be using 100% recycled plastic. So think about where you're buying before you buy.

And for my company, sometimes I'm like, we wouldn't even need to be cleaning the air if the air wasn't already dirty. And a lot of consumers don't even know what a volatile organic compound is, but it is in a lot of products you purchase off the shelf. For instance, air fresheners are not good for the air. Perfumes as well, not good for people to be breathing. And just educating yourself on the products that you should or should not buy. Funny story, I have three sons. My youngest comes home a few weeks ago with a Axe body spray. It's a known carcinogen. I don't know why these things are still on the shelf. And if the regulatory agencies aren't protecting us by not allowing them on the shelf in the first place, we really have to do our own education to buy products that are healthy.

Melissa Fifield:

Absolutely. Education is key. Is there anything else that you'd like to share with our audience today?

Susan Blanchet:

I think the world is changing quite a bit, and we're really becoming focused more on large corporations taking over most of the ownership of not only properties, but products that are sold. I know in my city, I live in Victoria, BC, every day small businesses are closing. So not only supporting diverse founders, but supporting the small businesses. Because from my history as a provincial lawyer for 14 years working in a really large organization, once organizations have more than even 500 employees, it becomes more of a bureaucracy. I don't want to say that's where innovation goes to die. I'll just say it. It's the small business owners that have this fire in their belly that are up at 3:00 AM trying to figure out how they're going to save the world, and that's really what we need to support. And I'm a big proponent of supporting all small business, but where you can support the ones that are diversely lead because they definitely are fighting the biggest battles.

Melissa Fifield:

Well, you are an inspiration to me, certainly, and I think to a lot of our listeners as well, Susan. Thank you so much for joining me today.

Susan Blanchet:

You're welcome. Thank you for having me, Melissa.

Michael Torrance:

Thanks for listening to Sustainability Leaders. This podcast is presented by BMO Financial Group. To access all the resources we discussed in today's episode and to see our other podcasts, visit us at bmo.com/sustainabilityleaders. You can listen and subscribe free to our show on Apple Podcasts. We're your favorite podcast provider and we'll greatly appreciate a rating and review and any feedback that you might have. Our show and resources are produced with support from BMO's Marketing Team and Puddle Creative. Until next time, I'm Michael Torrance. Have a great week.

Speaker 6:

For BMO disclosures, please visit bmocm.com/podcast/disclaimer.

Inspiring Women Entrepreneurs: Menna Farouk in Conversation

Menna Farouk:

I believe that scooters and bicycles are a great way to get around, and I want to help more people, especially women, to learn how to ride them safely and confidently and without being affected by any social stereotypes.

Michael Torrance:

Welcome to Sustainability Leaders. I'm Michael Torrance, Chief Sustainability Officer with BMO Financial Group. On this show, we will talk with leading sustainability practitioners from the corporate, investor, academic and NGO communities, to explore how this rapidly evolving field of sustainability is impacting global investment, business practices and our world.

Speaker 3:

The views expressed here are those of the participants and not those of Bank of Montreal, its affiliates or subsidiaries.

Melissa Fifield:

Hi, I'm Melissa Fifield, head of the BMO Climate Institute. Today we're joined by Menna Farouk, founder and CEO of Dosy, a tech-based scooter and bicycle riding platform for women and girls. Dosy aims to encourage women and girls in Egypt to ride scooters and bicycles by connecting them with riding instructors. Menna was selected as an awardee for the, WE Empower UN SDG Challenge. The WE Empower UN SDG Challenge is the first of its kind global competition for social entrepreneurs who are advancing the UN Sustainable Development Goals and inspiring entire communities to act, to create the world we want by 2030. Menna, welcome. To start can you please give our audience more background about yourself and Dosy?

Menna Farouk:

Sure. Hello. Thank you so much for having me today. So my name is Menna Farouk. I'm a journalist and an entrepreneur. Dosy is an online platform through which women and girls can book their scooter and bicycle classes online. And the company has been operating in Egypt. We started in 2019 and we launched our website later in the same year. So we started in April 2019 and we launched the website in December 2019. And now we're operating in three cities, in Egypt, Cairo, Alexandria, and Giza. And we have over 100 instructors and we have more than 4,000 customers. So we trained them on riding scooters and bicycles in the three locations, Cairo, Alexandria, and Giza. And now we are adding other services for our customers. So we are adding a service to which women can learn skating, women can buy or sell their used scooters and bicycles through our website as well. And we are launching an app for the startup, and the app will include a ride-hailing service and the ride-hailing service we hope that it'll be the Uber Scooter for women in Egypt.

Melissa Fifield:

That's incredible. As you were building this business, how did sustainability factor into your business plans? How did you think about sustainability in the context of your business?

Menna Farouk:

So I became interested in sustainability when I realized that the impact that human activity is having on the planet. I wanted to start a business that would help people reduce their reliance on cars and choose more sustainable modes of transportation. I believe that scooters and bicycles are a great way to get around and I want to help more people, especially women, to learn how to ride them safely and confidently and without being affected by any social stereotypes.

Melissa Fifield:

From your experience, how can women navigate the barriers and challenges they face when working to participate equally in the economy?

Menna Farouk:

So let me start first by saying that women, of course, face a number of barriers and challenges when working to participate equally in the economy. And some of these challenges include pay inequality. Women are still paid less than men for doing the same job. Lack of access to childcare, for example. Many women struggle to find affordable and reliable childcare, which can make it difficult to hold down a job, as well as discrimination. So women may face discrimination in the workplace due to their gender, race, or other factors. And in my opinion, to navigate these challenges, women can network with other women in their field. So this can help them find mentors, support and job opportunities, and they can also advocate for themselves. So women should speak about the inequality and discrimination in the workplace. And finally, women can take advantage of government programs and resources as well as private programs and resources. There are a number of government and private programs and resources available to help women succeed in the workplace.

Melissa Fifield:

That's great. What's needed? Your business or other businesses also working toward a sustainable future need to achieve more widespread impact? How do we scale these things?

Menna Farouk:

Yeah, working towards a sustainable future need to be able to scale up. So this means reaching more customers and partners and developing new and innovative products and services. Some ways that the businesses can achieve more widespread impact can be through partnering with other businesses and organizations. This can help businesses reach a wider audience and have a greater impact. Businesses can also invest in research and development, and this can help businesses develop new and innovative products and services that may help people reduce their environmental impact. And businesses can also make their products and services affordable and accessible. Businesses need to make their products affordable and accessible to everyone, not just for those who can afford to pay a premium for sustainability.

Melissa Fifield:

That's great. Finally, Menna, it may often feel as if only the biggest actions have the most effect, but from your perspective, what are the ways individuals can have the most impact when it comes to climate change?

Menna Farouk:

I think that every individual can make a difference in the fight against climate change. So every person can reduce their carbon footprint, and this can be done through making changes to their lifestyle, such as driving less, eating less meat, and using less energy at home. Every individual also can support businesses that are working towards a sustainable future, by buying their products and services. And every person can get involved in advocacy and activism, to raise awareness of climate change and push for policies that will help reduce greenhouse gas emissions. I believe that even the smallest changes can add up to make a big difference. By making changes to our lifestyles and supporting businesses that are working towards a sustainable future, we can all help to create a better future for our planet.

Melissa Fifield:

Well, you've set an incredible example for our listeners. Thank you for all that you're doing and thanks for joining us today to share your story.

Menna Farouk:

Thank you so much for having me, Melissa. Thank you.

Michael Torrance:

Thanks for listening to Sustainability Leaders. This podcast is presented by BMO Financial Group. To access all the resources we discussed in today's episode and to see our other podcasts, visit us at bmo.com/sustainabilityleaders. You can listen and subscribe free to our show on Apple Podcasts or your favorite podcast provider, and we'll greatly appreciate a rating and review and any feedback that you might have. Our show and resources are produced with support from BMO's Marketing team and Puddle Creative. Until next time, I'm Michael Torrance. Have a great week.

Speaker 4:

For BMO disclosures, please visit bmocm.com/podcast/disclaimer.

Inspiring Women Entrepreneurs: Diana Mbogo in Conversation

Diana Mbogo:

Women often face unique challenges in male dominated sectors and all other sectors in general, but my advice will be to push forward with the determination and a vision. It's essential to have a support system and choose your struggles wisely.

Michael Torrance:

Welcome to Sustainability Leaders. I'm Michael Torrance, Chief Sustainability Officer with BMO Financial Group. On this show, we will talk with leading sustainability practitioners from the corporate, investor, academic, and NGO communities to explore how this rapidly evolving field of sustainability is impacting global investment business practices and our world.

Speaker 3:

The views expressed here are those of the participants and not those of Bank of Montreal, its affiliates or subsidiaries.

Melissa Fifield:

Hi. I'm Melissa Fifield, head of the BMO Climate Institute. Today we're joined by Diana Mbogo, founder and managing director of Millennium Engineers Enterprises Limited, a renewable energy social enterprise in Tanzania that focuses on developing customized energy solutions. Diana was selected as an awardee for the WE Empower UN SDG challenge. The WE Empower UN SDG Challenge is the first of its kind global competition for social entrepreneurs who are advancing the UN sustainable development goals and inspiring entire communities to act, to create the world we want by 2030. Welcome, Diana.

Diana Mbogo:

Thank you, Melissa, for having me.

Melissa Fifield:

To start, can you please give our audience more background about yourself and about Millennium Engineers Enterprises?

Diana Mbogo:

Yes. Just to kickstart with that, I was born prematurely and faced many odds growing up. My childhood experience and my mother's unconditional love led me to believe I could achieve anything I set my mind on. And in her eyes, I kept seeing myself as a princess and a warrior. So it went from going to an engineering college and starting my company during my last academic year to leading Millennium Engineers as a single mother of two beautiful children. And currently, Millennium Engineers Enterprises Limited is proudly a hundred percent female founded and led renewable energy company that specializes in untapped energy poverty markets. We design customized solutions for specific communities, industries, or value chains, and currently Millennium Engineers is focused in addressing some of the critical challenges faced by local communities and local fishing communities of Lake Victoria. What this entails is a transition of these low income communities in Lake Victoria away from using pressurized kerosene lamps or LED lead acid power battery lamps that are usually attached to wooden flotillas towards the use of efficient, solar efficient lamps that now float a top recycled plastic flotillas.

This conversional methods not only contribute to environmental degradation, but also hindered economic growth of these communities as well. This transition significantly reduces greenhouse gas emissions from the kerosene and keeps harmful batteries out of Lake Victoria's, but furthermore, it allows for the quiet growth of trees along the shores of Lake Victoria promoting ecological sustainability. But we went further considering, which is also a women-led enterprise. For the women in these communities that are usually traditionally accustomed to unhygienic and conventional method of sardine drying, we introduce first of their kind solar drying facilities for fish. These facilities are groundbreaking across Sub-Saharan Africa and can dry substantial amounts in a single day using 70% less land space. This not only increases the yield by 70%, but it also empowers these women to and a premium market price for their produce, improving their economic sustainability and hazing food security in the region. Being considered that sardines are a vital source of protein, making this impact even more significant across the continent.

The beauty of this project lies in the holistic approach that we entail. It's not just about providing renewable energy solutions, but also understanding that the unique needs culture challenges of these communities. Millennium engineers works closely with these local communities to ensure that the solutions cater the specific requirements addressing cost efficiency, cultural considerations, efficiency and environmental sustainability. So that's just more of a quick wrap of Millennium engineers and my story behind it as well.

Melissa Fifield:

It's an incredible story. Thank you. Diana. As you were building your business, what factors influenced you to focus on sustainability?

Diana Mbogo:

The challenges faced by underserved communities due to the lack of access of energy for socioeconomic activities when a significant influence, just to go about it, again, when I started off the company, I really didn't look at it as a social enterprise or a for-profit. I was more of an NGO mindset, but I delved into the energy sector and realized the needs for different approach that addresses the majority of those most impacted, especially women. Our focus on sustainability is driven by our user-centered approach because we believe that involving the beneficiary brings out the best solutions to be approached or adapted the innovation and the commitment to creating solutions that truly benefit the communities we serve.

Melissa Fifield:

From your experience, how can women navigate the barriers and challenges they may face when working to participate equally in the economy?

Diana Mbogo:

Women often face unique challenges in male dominated sectors and all other sectors in general, but my advice will be to push forward with the determination and a vision. It's essential to have a support system and choose your struggles wisely, surrounding yourself with people who believe in your potential, and then an entrepreneur. As an entrepreneur myself, your vision, even if blurry at times, should always motivate you. Being a scholar to life and learning from the challenges is crucial for professional and personal growth as well.

Melissa Fifield:

That's great advice. What would your business and perhaps other businesses also working toward a sustainable future need to achieve more widespread impact?

Diana Mbogo:

On my opinion, to achieve more widespread impact, businesses working towards a sustainable future need to focus on collaboration, innovation, and integrity. We hold those as some of our business values and my personal values as well. Identifying niche markets and energy problems across different industry and communities. Then working closely with the target market to design solution that can lead to the development of innovative, impactful, and sustainable projects. Additionally, sharing findings and best practices within the industry can help drive positive change on a large scale because we can never do it all just alone. We need each other's minds. We need each other's findings, and we need each other to keep pushing this, the goals that we have for 2030.

Melissa Fifield:

Absolutely. Finally, it may often feel as if only the biggest actions have the most effect, but from your perspective, what are the ways individuals can have the most impact on climate change?

Diana Mbogo:

It's truly that every small action counts in the fight against climate change. Every small action counts and everyone counts. Individuals can make significant impact by adapting sustainable practices in their daily lives, just using energy consumption, minimizing waste, and supporting eco-friendly products and initiatives because they're all out there in our communities. Education and advocacy also plays a crucial role in raising awareness and driving change, and we need to start from the young children to adults and youth as well. By making more informed choices and encouraging others to do the same, individuals can collectively contribute to a more sustainable future, I believe.

Melissa Fifield:

That's great. Thank you so much, Diana, for joining us today. You're doing incredible work and we're so grateful to have you.

Diana Mbogo:

Thank you very much.

Michael Torrance:

Thanks for listening to Sustainability Leaders. This podcast is presented by BMO Financial Group to access all the resources we discussed in today's episode and to see our other podcasts, visit us at bmo.com/sustainability leaders. You can listen and subscribe free to our show on Apple Podcasts. We're your favorite podcast provider and we'll greatly appreciate a rating and review and any feedback that you might have. Our show and resources are produced with support from BMO's Marketing team and Puddle Creative. Until next time, I'm Michael Torrance. Have a great week.

Speaker 5:

For BMO disclosures, please visit bmocm.com/podcast/disclaimer

Inspiring Women Entrepreneurs: Karin Sempf in Conversation

Karin:

There's a team that has created AI-powered marketplace that connects customers to eco-friendly companies. There's another team that has designed a freestanding electric streetlight powered by the wind of wind turbine, and they're patenting their design and have begun prototyping in Germany. So for us, sustainability is in the core and it is already giving results.

Michael:

Welcome to Sustainability Leaders. I'm Michael Torrance, chief Sustainability Officer with BMO Financial Group. On this show, we will talk with leading sustainability practitioners from the corporate, investor, academic and NGO communities to explore how this rapidly evolving field of sustainability is impacting global investment, business practices, and our world.

Speaker 3:

The views expressed here are those of the participants and not those of Bank of Montreal, it's affiliates, or subsidiaries.

Melissa:

Hi, I'm Melissa Fifield, Head of the BMO Climate Institute. Today, we're joined by Karin Sempf, CEO and Founder of Innova-Nation, an educational lab focused on motivating and empowering the upcoming generation of entrepreneurs, innovators, and sustainability advocates. Karin was selected as an awardee of the We Empower UN SDG challenge. The We Empower UN SDG Challenge is the first-of-its-kind global competition for social entrepreneurs who are advancing the UN's sustainable development goals and inspiring entire communities to act to create the world we want by 2030. Karin, welcome. To start, can you please give our audience more background about yourself and Innova-Nation?

Karin:

Thank you, Melissa. Thank you for inviting me. I'm very happy to be here. And yes, of course. I'm Karin Sempf, the Founder and Director of Innova-Nation, and I am tuning in from Panama. Innova-Nation is an educational lab, as you mentioned, for the 21st century. We accelerate talent by offering learning programs and innovation challenges and events for children and teenagers from eight to 18. And actually, Melissa, I would have to say that 2020, during the pandemic, confirmed what we were doing, confirmed our mission. We need to rethink and we need to reinvent what education is. We exist because schools are not preparing our youth for the challenges of this world. So we have created more than 30 different programs that include leadership and mindset components and, where I think the magic happens, a take action component. We teach our students about entrepreneurship, STEAM, and sustainability, and they get to create their own projects to solve real-life challenges. So that's a bit more of a background of what we do.

Melissa:

That's fantastic. As you were looking to pursue your business and build your business, what factors influenced you to focus on sustainability?

Karin:

Well, for me, sustainability is a business imperative. We have integrated sustainability in every aspect of our business. It's actually part of our DNA and it's at the core of what Innova-Nation is. So we teach our students about sustainability. We teach them about the sustainable development goals and how businesses can, in fact, not only be created to receive income and create wealth, which of course has to be done, but also to create positive impact in our communities, so sustainable development. And the goals have been introduced in all of our programs, and we have an approach that integrates innovation and transformative learning to really take our main stakeholders, which are our students, from bystanders to active citizens that are taking action.

And for me, this was the only right decision. And now we're seeing, also, the amazing results that that has brought when we see that we are impacting both in the education and entrepreneurship ecosystem in Panama and the region. Since our students are creating innovative ideas to tackle challenges such as ... and I would like to mention, very quickly, a few of them. There's a team that has created AI-powered marketplace that connects customers to eco-friendly companies. They've signed partnerships and funding agreements. There's another team that has designed a freestanding electric streetlight powered by the wind of wind turbine, and they're patenting their design and have begun prototyping in Germany. So for us, sustainability is, as I said, in the core, and it is already giving results.

Melissa:

That's fantastic and so inspiring. Based on your experience, how can women navigate the barriers and the challenges they may face when working to participate equally in the economy?

Karin:

Well, that's a great question. I think that sorority is the answer. So sororities are those values-based social organizations that were, I think, originally founded to provide women a safe space and bring us together to share common interests, and I think that is so valid nowadays. We need to work in communities. We are navigating so many challenges, given so many roles that we have in our communities, in our businesses, in our families. So I think that sorority and being part of communities where women are empowering other women, and women are creating bridges for other women, is actually the best way to go. I think that I am here because of being part of a community. I am a VV GROW Fellow, which is a Vital Voices Fellow since 2016. And when I entered into that community, my life changed. I started receiving different opportunities and forming part of a more open community where I felt that I was supported and that I could support other women as well.

Melissa:

That's great. I love that. What would your business, and perhaps other businesses also working toward a more sustainable future, need to achieve more widespread impact?

Karin:

I think we need more awareness and more communication, and I would have to say more education. Education for me is the key, and we need to prepare our youth. So I work with the youth, I work with young people, and I see it program after program. They are coming disengaged from the learning process. They're coming disengaged. They're not loving their education, but I think it's a role that we, all businesses, have to pitch in. For instance, in my country, it's not only about the Ministry of Education. I think we have to have a wider concept. We need the companies, we need institutions to understand that we need younger people to be engaged on sustainability issues so that they can understand what's going on, form part of the discussions, and create ideas. And when they're inheriting the planet, they already understand what's going on. So for me, it's about that. More communication, more awareness, and more access to good education that really gives our youth the skills and the information that they will be needing in a very, very near future as well.

Melissa:

Makes sense. It's up to all of us, right? Yes. Finally, it often may feel as if only the biggest actions have the most effect. But from your perspective, what are the ways that individuals can have the most impact, as it relates to climate change?

Karin:

One of the things that we teach about in our programs is about how all the goals are universal, are integrated between them, and that the fact that we cannot leave anyone behind. So I'll focus on the fact that they are universal, and that means that all of us have a role to play. It's not only about governments. It's not only about corporations. It's not only about local authorities. But it's about us. And I think that we need to understand more about how climate action impacts our everyday lives. There's a lot of work to be done there so that we feel that it is a responsibility that we have. It's not abstract, it's not other people. It's not the country. It's me and how I can impact and maybe not impact all of them at the same time.

We always talk about how we can choose. There are 17 SDGs, and maybe it will feel overwhelming to start working on them all at the same time. But if I choose to work on quality of education and if I choose to work in stopping hunger, if I choose to work in health, I can choose where to direct my actions. So I think that's very important. Having those conversations and understand how climate change affects our day-to-day, and how our activities can be more sustainable once we understand the process that we can have.

Melissa:

Fantastic. Is there anything else you want to add to the conversation?

Karin:

Well, these conversations are very important. And I think that understanding that we are part of a global society, that we are global citizens, and that my actions have and could have repercussions in other countries, and we are all in this together, I think that has a lot of power. So when we come together as a community and we start exchanging ideas and inviting other people, I think that's how we achieve a more sustainable future. So I'm really happy to be part of this. I'm, of course, very honored, also, to be the We Empower UN SDG Challenge awardee for the Latin American and the Caribbean Region, where I think that this type of conversations need to happen more and more every day. So Melissa and the BMO team, again, thank you for inviting me and having this conversation.

Melissa:

Thank you so much for joining us, Karin. Appreciate it and appreciate all that you're doing to drive this education forward. It's so needed and what you've been doing has been inspiring, so thank you for joining us.

Karin:

Thank you.

Michael:

Thanks for listening to Sustainability Leaders. This podcast is presented by BMO Financial Group. To access all the resources we discussed in today's episode and to see our other podcasts, visit us at bmo.com/sustainabilityleaders. You can listen and subscribe free to our show on Apple Podcasts or your favorite podcast provider, and we'll greatly appreciate a rating and review and any feedback that you might have. Our show and resources are produced with support from BMO's marketing team and Puddle Creative. Until next time, I'm Michael Torrance. Have a great week.

Speaker 5:

For BMO disclosures, please visit bmocm.com/podcast/disclaimer.

Loan Programs Office on Financing Emerging Clean Technology

Elizabeth Wolfe:

Financing the energy transition and clean technologies is and has to be led by the private sector. But the public sector's role is critical in supporting and accelerating those efforts to meet the timeline that we're facing. This is not an artificial deadline. We need all hands on deck in rowing together to get there.

Michael Torrance:

Welcome to Sustainability Leaders. I'm Michael Torrance, chief sustainability officer at BMO. On this show, we will talk with leading sustainability practitioners from the corporate investor, academic, and NGO communities to explore how this rapidly evolving field of sustainability is impacting global investment, business practices, and our world.

Speaker 3:

The views expressed here are those of the participants and not those of Bank of Montreal, its affiliates, or subsidiaries.

Angela Adduci:

Hi, I'm Angela Adduci, senior advisor to BMO Climate Institute. And today, I'm joined by Elizabeth Wolfe, senior advisor at the United States Department of Energy's Loan Programs Office, or LPO for short. Elizabeth, welcome and thank you for joining me today.

Elizabeth Wolfe:

Thank you for having me, Angela.

Angela Adduci:

To start, I was hoping you could tell us a little bit about the DOE Loan Programs Office broadly and your specific area of focus within the LPO.

Elizabeth Wolfe:

Sure. DOE LPO is a multi-hundred billion dollars lender and loan guarantor within the federal government. LPO provides a bridge to bankability for a wide variety of energy projects, including those deploying innovative technology supported by a state or a tribe or decarbonizing energy infrastructure. Within the LPO, I work within our outreach and business development team where I coordinate our efforts to develop virtual power plants and state supported projects.

Angela Adduci:

This is really fascinating. And I imagine many listeners were not previously familiar with the concept of VPPs. So I would be curious to hear what potential do VPPs have in the overall energy transition and what role does the LPO anticipate taking on in supporting this emerging technology?

Elizabeth Wolfe:

Sure. Well, if I had $1 for every definition I've heard for virtual power plants, I would be rich. But virtual power plants are a part of a paradigm shift that's happening right now as part of the energy transition. Instead of relying solely on large, centralized baseload power generation, building more and more of it to meet increasing demand, the grid today is also making better use of distributed energy resources or DERs. Today, we're adjusting and shifting the load dynamically in near real time to meet demand reliably and affordably, even when large scale infrastructure cannot be built quickly enough. Enabled by technological advances in big data computing, machine learning, and artificial intelligence, as well as market developments such as FERC order 2222, VPPs are already playing a critical role and have been credited with significant contributions to emergency reliability responses in places like California and other early adopters.

LPO identified a number of priority technology areas and VPPs are one of them. We already closed a $3 billion transaction with Sunnova Project Hestia that was recently recognized as the 2023 asset-backed securitization deal of the year by International Financing Review. So we're excited about that. And we're hoping to announce more projects in the coming year.

Angela Adduci:

Well, congrats. And it's really cool to see all this activity out of the Department of Energy. So now, I want to zoom out for a moment. I know you've worked across both the public sector and the private sector in a variety of energy-related roles. Can you tell us a little bit about your view on the public sector programs and private capital providers working together to finance emerging technologies? Where have you seen notable success and where could the financing ecosystem perhaps be doing better?

Elizabeth Wolfe:

Well, in my role at the Loan Programs Office and also in my previous work at the New York Green Bank, a state version of the Loan Programs Office, I've seen public funding catalyze and accelerate innovation, both technological and financial needed to achieve our energy transition. Before I arrived here at LPO, the organization had already established itself funding the first utility-scale solar PV installations in the US, Tesla's first EV factory, and so many more. LPO can guarantee third party loans and de-risk critical elements to enable the private sector to develop its own ability to support projects and graduate beyond the need for public support. The public sector has come a long way toward incorporating equity considerations in its underwriting since I began in this field when greenhouse gas emissions was the new consideration beyond the prospect of repayment, which of course we all share as a concern across the private and the public sector. But the financing ecosystem could still do better in underwriting revenue streams related to energy savings and grid services and underwriting projects involving portfolios with unrated or shorter-term offtake in a more scalable way.

Angela Adduci:

That's really great insight, Elizabeth, and I really appreciate your perspective on that. So to switch gears for a moment, March is Women's History Month. And though we've made great strides in encouraging equitable participation of women in the energy sector, we do still have a ways to go. So could you please reflect on your time in the industry with respect to gender representation?

Elizabeth Wolfe:

Sure. Well, I mean at LPO and DOE, it's easy. We see women leading at the highest levels in the public sector. I mean, Jennifer Granholm is our fearless secretary of energy is a good example, and she's not even the first female secretary of energy. Bill Clinton had appointed Hazel O'Leary back in the '90s. And closer to home in our own office, our Chief Operating Officer, Sheila Moynihan, and Chief Counsel Becky Limmer are just a few of the women in top leadership roles. And while many women are also leading in the private sector, like you yourself, Angela, of course, my experience has been that there's more work to be done to move beyond outdated linear career trajectories and embrace the more flexible myriad paths to success that our newer cloud-based work style can enable.

Angela Adduci:

Thank you, Elizabeth. Your perspective on this is just so valuable. And I'm sure I speak for many women when I say it's incredible to have leaders like you, Secretary Granholm, as well as the others you mentioned to look up to in the industry. So wrapping up, do you have any final thoughts to share regarding the public sector's role in financing emerging clean technologies?

Elizabeth Wolfe:

Financing the energy transition and clean technologies is and has to be led by the private sector. But the public sector's role is critical in supporting and accelerating those efforts to meet the timeline that we're facing. This is not an artificial deadline. We need all hands on deck in rowing together to get there.

Angela Adduci:

A great final message and I couldn't agree more. Thank you so much, Elizabeth, for joining us.

Elizabeth Wolfe:

Sure thing. Thank you, Angela.

Michael Torrance:

Thanks for listening to Sustainability Leaders. This podcast is presented by BMO. You can find our show on Apple Podcasts, Spotify, or your favorite podcast player. Press the follow button if you want to get notified when new episodes are published. We value your input, so please leave a rating review and any feedback that you might have or visit us at bmo.com/sustainabilityleaders. Our show and resources are produced with support from BMO's marketing team and Puddle Creative. Until next time, thanks for listening and have a great week.

Speaker 5:

For BMO disclosures, please visit bmocm.com/podcast/disclaimer.

Financing the Transition to Net Zero: EDC and BMO in Collaboration

Jonathan Hackett:

The answer is we need everything. We need collaborations that are bringing creativity, that are bringing the full amount of risk that we can take on, that are bringing all the tools that we have in our toolbox.

Justine Hendricks:

And in enabling ESG within their business model, their thinking will not only spark Canadian innovation, but it'll actually be an accelerator to their growth.

Michael Torrance:

Welcome to Sustainability Leaders. I'm Michael Torrance, Chief Sustainability Officer with BMO Financial Group. On this show, we will talk with leading sustainability practitioners from the corporate, investor, academic and NGO communities. To explore how this rapidly evolving field of sustainability is impacting global investment, business practices, and our world.

Speaker 4:

The views expressed here are those of the participants and not those of Bank of Montreal, it's affiliates, or subsidiaries.

Michael Torrance:

Today, we feature guest host Dan Barclay, BMO Capital Markets CEO, and Group Head. In conversation with EDC Chief Corporate Sustainability Officer, Justine Hendricks, and Jonathan Hackett, Co-Head of the BMO Energy Transition Group and Head of Sustainable Finance at BMO. Their discussion focuses on how banks, governments and companies in Canada are working to enable the transition to a low carbon economy.

Dan Barclay:

I'm Dan Barclay, CEO, and Group Head of BMO Capital Markets. Today I'm joined by Justine Hendricks, Senior Vice President and Chief Corporate Sustainability Officer at Export Development Canada, or at EDC and Jonathan Hackett Co-Head of BMOs Energy Transition Group and Head, Sustainable Finance. We're here to discuss the role of private and public finance in helping companies reach net zero by 2050. Justine and Jonathan, it's great to have you with us today. I'm looking forward to what I'm sure will be a fascinating conversation about the role of our organizations as we face, engage, and help enable a historic global energy transition. Let's dive in. So, we have some very exciting news today, which is the announcement of a collaboration between BMO and EDC to bring sustainable finance solutions to Canadian businesses and carbon-intensive sectors to help them reduce or eliminate emissions. Perhaps we can start with you Justine to describe the agreement and what it means from an EDC perspective.

Justine:

Thanks Dan. First, before I get started with that, I just want to thank BMO and yourselves. It's really neat and exciting to be here today to talk about this collaboration between BMO and EDC. So, you asked me a question, what does it mean from EDC's perspective? Well, at EDC, we see ourselves along with other financiers in Canada, as playing an important role to date, and we see ourselves continuing to play a key one from an ecosystem point of view, towards how we can better support the transitioning to a lower carbon future and doing so in a way that's very equitable, right? So, the goals are ambitious. I think Dan, Jonathan, we were all at COP26 and the debate graduated from the billions to the trillions. So, the amounts that we're facing are substantive, the opportunity is as well. And I think this is where collaboration and a partner like BMO comes into play...

Justine:

So, we know that Canadian companies need to finance these solutions in order to not only help them grow, but also while they do so while they reduce their carbon footprint. And then it can also materialize on their ESG objectives. So, essentially, from the ECD's perspective, this is what this allows us to do. Two organizations coming together, collaborating, risk sharing around some of the risks and the opportunities of this, and really being there for Canadian companies. So, let me maybe tell you, as you ask from an EDC perspective, what does this guarantee structure mean, right? So, for EDC, EDC in this sense will guarantee up to 50% of the term loan. So, it's up to a maximum of US60 million per obligor, for a period of up to seven years. So, that will provide more capacity for BMO to support their [inaudible 00:04:13] clients to low carbon transition...

Justine:

So, as we were doing this collaboration, we started to take a look at what are some of the sectors of opportunity, and we came up with nine. But maybe for the purpose of the audience, I'll name a few to give them a bit of a teaser, I guess. So, one was sustainable agriculture. We also have carbon capture and storage, hydrogen, which I know is really important as well as microgrid. So, that's, just to name a few that we're trying target with this collaboration. And really in terms of us being able to do this with BMO is an opportunity for EDC as well, to take some concrete steps and how we can help support carbon-intensive sectors. And for us to be leading by example as well as we've done in our history and fostering and doing so with an ESG mindset. And we know then I would say is, Canada's got tons to offer. We see this as a big opportunity and we really want Canada to go and seize that opportunity as we're all trying to transition to a low carbon economy.

Dan Barclay:

Well, thanks Justine. And I think like you, I was at COP26 and was struck with the amount of change that was on the table. And when I think about that fundamental role in EDC, helping Canadian companies export expertise, technology, and building businesses, this is very exciting. Jonathan, why don't I turn it over to you? And we know what EDC is bringing the table, so what are we bringing on the table?

Jonathan:

Dan, so as we think about what we've been doing over the last few years, as we've built up our approach surrounding energy transition around sustainable finance, really spurred on BMO’s purpose to boldly grow the good in business and life. We've devoted a lot of resources to thinking about how we can work with our clients, how we can understand their needs in this space. And so those capabilities are what we're really bringing first and foremost, our energy transition technical team, the depth that our lenders have built working with these companies. But we're also bringing what I would call just pure energy. We've got bankers across the organization that are focused on this, that are thinking about how they can work with their clients, how they can work with and attract new clients in this space. And we really think by having something like this, having a program that we can point to as a differentiated approach to provide capital, it'll allow us to really drive that forward and accelerate both EDC and BMO's approach in the space and get us the experience we want working with those companies today.

Dan Barclay:

So, I think I get most of the thesis as with our audience, but help me take it through Jonathan, why is this important? Why do businesses need financing that's specifically focused on transition and why does this collaboration focus on the carbon-intensive sectors?

Jonathan:

So, I'll answer the latter first and I think it helps get to the former. So, why we focus on carbon-intensive sectors is that, that's where the biggest near term impact really can be made. The reality is that we're trying to finance across the organization, technologies that are going to be low carbon solutions in the future that are really going to help build into the economy, set of solutions that allow others to decarbonize in a large way. But near term, we really need to invest in companies to make the changes that will drive large amounts of carbon out of the way they run their businesses today. That can be things like fuel switching, going from a higher intensity carbon based fuel to a lower intensity carbon based fuel. It can be about demand management, really reducing how much energy they consume. But these are all solutions that can take large amounts of emissions out of the environment over the next 10 years, 20 years. So, that when we get to a net zero economy, we're doing it with less residual impact, less emissions that are going to drive temperature change in the future...

Jonathan:

Why it's important for companies to get financing just for this, though is a bit more subtle. Really when you're working and running a smaller or medium size company, you're focused on your day to day business. And that's what you understand best. And helping companies access a set of solutions. And to finance those alongside their business is a unique opportunity because you can give them advice. You can help them understand what they can do to transform their business, but you can also unlock a cost savings usually, or some change in their operating profile. That could be beneficial to the business and give it resilience in the future if you support it with the right debt. And so because that doesn't look like they have day to day, it really does need solutions and tools to help them see how this can compete in their priorities versus other near term aspects of their business and get the focus on it. That'll allow us to drive that change in their business nearer term.

Dan Barclay:

And how does the collaboration help? What does the collaboration achieve that each of our two organizations can't do on her own?

Jonathan:

So I'll chime in first and then Justine, I'd love your thoughts on it as well. For us, some of this is just about how we take risk. The reality is that we want to be our clients’ lead partner in the transition to the material economy. And that's going to involve working with them on nascent or emerging technologies, things like hydrogen or having capture, where you're really investing in something that it exists. We've seen it operate, but we don't have the depth of expertise that we have in some of the more traditional, more carbon-intensive spaces...

Jonathan:

And so, we're really trying to think about how we can be there and be there in a more significant way for our clients. But that involves taking risk. And banks are notoriously focused on “How do we moderate and make sure that when we take risks, we're getting rewarded and taking outsize risks is something that can be challenging?” And so by sharing that balance sheet, by going with a friend, making sure that we're working on this together, we're we can devote a set of expertise and capabilities and energy that allows us to say yes to more than we could if we were operating on our own.

Justine:

Yeah, we are at a historical point in time. And the changes that are required are significant, right? So, Jonathan talked about new sectors, new risks, longer periods of time, and being able to tackle it together. So, this is for me when I think of this question, right? I think of the book of, what got you here may not get you to the next level. And it feels like we're at that moment where we need everybody's expertise in terms of what got them to this point, but recognizing the enormity of the challenge that they're ahead of us, we need to be able to come together in terms of either sharing the risk...

Justine:

I'd also say sharing the knowledge, because there'll be lots of learning along the way. And if we do that together, I think we'll be able to have a lot more impact faster because, as Jonathan mentioned, recognizing the importance of starting early, but starting now and starting to get these wins. I think was also part of the contribution to what sparked this collaboration, because we knew that we needed to be able to give that signal to the market and wanted to get started with those companies as Jonathan says, that in terms of their list of priorities, day to day, the reality is, this may not be part of it, so we can play definitely a role to incorporate it in terms of their thinking for the future.

Dan Barclay:

So, Justine let's pivot a little bit and talk about some of the target companies here. EDC has been a trailblazer in Canada's innovation story. It's one of the largest financiers of Queen Tech in Canada. And it was the first [inaudible 00:11:26] institution to issue a green bond. And the first export credit agency to commit to net zero by 2050. How does financing carbon-intensive businesses fit into EDC's mandate as an export credit agency?

Justine:

Now. That's a great question, Dan. So, I guess I start off by saying that being an export credit agency, what comes with that is that our philosophy and our belief is that we need to engage with all industries, right? And that includes industries that are carbon-intensive. So, we're looking at obviously leveraging the efforts that have already begun and also recognizing that as we've stated a bit earlier, I think some of these carbon-intensive industries within the Canadian context of a resource based economy can bring a huge contribution in terms of the momentum that we need towards achieving some of these net zero objectives that we have and respecting the Paris Agreement commitments that we made...

Justine:

So, our job as an export agency is not only to engage, but to support those individual companies and the philosophy we bring to the table is that we believe that companies invest in this and in enabling ESG within their business model, their thinking will not only spark Canadian innovation, but it'll actually be an accelerator to their growth. So, regardless of a company where it's at or the industry that it's at, or the market that it's targeting for, is very much at the heart of a ECA, as we say, as an export credit agency, to make sure that we can be there for them and in order to be able to support them in this transition.

Dan Barclay:

So, Justine, that was very helpful in terms of how you're thinking about this. But more generally, are there other types of companies that you're trying to support on this initiative or certain technologies or certain sub sectors, anything that could help our listeners?

Justine:

It's a great follow on Dan. And maybe what I can mention is, from an export credit agency where we're looking to support companies be successful internationally, right? So, certainly what I would love to share with the audience today is, if we look at some of the key markets, so we think of North America, we think of Europe and we think of Asia. There's certainly sectors that we can see that we see with high potential, right? So, if you think of the infrastructure sector, I would say clean tech goes across all of these different markets. And there's lots that Canadian capabilities have to offer. Two weeks ago, at Globe we were talking about Canada's ability to help agri-food become more sustainable globally. I would certainly articulate that there's lots that we can offer across North America, Europe and Asia in that regard...

Justine:

And it's twofold. I would say there's the technology component, all of these sectors. There's the know-how with some of these sectors are transforming. That will not only help Canada, but we can bring around the world to help others transform. And I think also in some instances in Europe, in particular, I'm thinking of our ability to become part of some of these major supply chains is also a real opportunity for Canada...

Justine:

Maybe in that, what I'd offer is, if you think of short, medium and long term, certainly North America, we can see immediate opportunity there. Europe as well to the medium term. When we think of Asia, we include India, China, and all the Asian nations. Definitely, we see that as a medium to long term investment, but as you can see, there's lots that Canada has to offer. And certainly, as Canadian companies and even partners such as BMO, work with ourselves and the Canadian trade ecosystems, such as the trade commissioners and other services, either in Canada or abroad. It can really help in terms of demystifying. I would say that the export journey of some of these companies and really help connect them to some very tangible opportunities.

Dan Barclay:

I love all of that. Absolutely all of it. Jonathan, let's put another layer on this. Why do you think these types of collaborations are important for the road to net zero and helping us and our clients mitigate the risk of climate change?

Jonathan:

Yes. I think I'll go back to a little bit of what I was saying earlier about, just the amount of emissions that we can remove ahead of getting to 2050. I go back to the steepness of those curves is always the thing that people argue about how quickly can we remove carbon. And the focus often is, can we get down towards that zero and how much is going to be left towards the end. But to me, the thing that is most meaningful, is just how do we remove the area under that curve? The area under the curve of carbon versus time really is, how much is out there in our atmosphere. And what is going to drive those risks of climate change. And so, when you see that large imposing challenge, people estimate it in the trillions of dollars a year, every year for the next 30 years, the answer is we need everything...

Jonathan:

We need collaborations that are bringing creativity, that are bringing the full amount of risk that we can take on, that are bringing all the tools that we have in our toolbox. And we use that sometimes when we're trying to think about how do we make money in new space. And sometimes people think that the path to net zero doesn't necessarily bring out the same focus and the same drive on those solutions that we used to drive revenue with our clients. And I think we need all of those same tools. We need the tools that allow solar financing to become extremely risk reduced and extremely attracted to capital...

Jonathan:

We need everything else that we can, for all of these solutions, not just on the green side, but also on those that are going to drive the transition. And so I think if we get that right, it allows us to compete. It allows us to compete for that global, multi-trillion dollar per year financing goal of, how do we as Canada or our clients more broadly across the footprint, think about their role and tools like this. Wherever we can find them, are invaluable for our ability to really drive this forward as fast as possible.

Dan Barclay:

Well, I think we've done a good job trying to bring this to life. Why don't I change up the pace of it? Let's go for some rapid fire questions. So, some real quick answers to these. Analysis suggested some 120 trillion is required through 2050 to shift the global economy's energy production to a no carbon emission source. Does the scale of that challenge represent a risk or an opportunity or both? Jonathan, you go first.

Jonathan:

I'll say both. I really think the real challenge is that if we don't hit the pace on it. The number compounds, you need both reduction and then resilience. You need to solve for, “How are we going to emit less carbon? But also, if we let enough carbon be emitted, we got to solve for, “How are we going to deal with rising sea levels, temperature changes, more adverse weather events, and making all of our infrastructure resilient to those changes?”

Dan Barclay:

Justine.

Justine:

So, Jonathan, I think took the words right out of my mouth Dan, is definitely both. And maybe what I add to that, but I'm used to Jonathan doing that. I would add to that too, is some of the new technologies that we have to test out, there're some lots of learning that we have to do, right? I think back of pre COVID and how quickly we accelerated some of the science, right? To get these vaccines, to immunize us. I see this analogy applying here where we definitely have to accelerate fast. So, what comes with that also is some risks. So, our ability to actually learn along the way and adjust and demonstrate a lot of agility, I think is definitely going to help to manage and have the right balance between the risk and the opportunity that I believe again, is for Canada to go and seize its share.

Dan Barclay:

Okay, second rapid fire. Justine, you're going to go first. Why is it important for our company BMO as a bank and EDC as a crown corporation focus and experts to work together?

Justine:

If I think about it, Dan, exporting for me is the equivalent from a country's point of view to economic prosperity. It certainly has a big feeder into it. So, we know the challenges historical, as you said, we also I think, talked about the uniqueness of our own economy. So, we need to solve for our problems and being able to solve it in partnership and through collaboration is what is required. So, I think the combination of being able to bring our know-how to the rest of the world while we solve our own problems is a mark and the ability of us to do that faster and faster, I think will allow us to transition our own economy and do our contribution. And then certainly at the same time contribute to those that could really appreciate the know-how we bring to the table and the approach by often, which we tackle some of these big challenges.

Dan Barclay:

Okay. Jonathan.

Jonathan:

So, I'll echo that. I think Justine took most of the words in my mouth. So, I'll just try and sum it up though. I think the answer for both why it works for us and why it works for Canada is scale. We, as organizations are approaching what feels like a massive problem and doing this together allows us to operate with a greater scale, be able to take on risks and pursue the opportunity in a different way. And I think that's also why this poses such a great opportunity for Canada and their clients that are exporting, which is, if we try and solve this just inside Canada, there's a target addressable market for each of these companies, it could become limited. It could actually make the economics more challenging. But if we give them access to the ability to take their solutions, bring them up around the world, we really can give them a scale that they can address that allows them to really achieve something much greater and to get to a level of economics, some of these solutions that might bring different outcomes to the market.

Dan Barclay:

Well, for our listeners benefit, I'm a really simple person. When we collaborate, we get to one plus one equals three and it creates new opportunities and new abilities. And I love the fact, we put this together. Final closing question. What gives you optimism about the energy transition? Justine?

Justine:

I could agree with you more Dan. And I guess for me, I was trying to think of one word, right? And for me, the word is momentum. Your one plus one equals three, I think is fantastic. And you can just see those trios accelerating and becoming more common to the stories we're hearing in the market. So, our ability to be able to play our part in that and do it in collaboration with a partner like BMO is what gives me huge optimism. And also the fact that I think Canada has a longstanding history in terms of innovation and the energy sector and many others. So, it's a real opportunity for us to go and seize and it's really cool to see the different industries coming together on this.

Dan Barclay:

And Jonathan.

Jonathan:

For me, it's really that we are seeing that speed part of the adoption curve. We've seen so many companies looking and saying, this is something I need to address. Not just for myself, but for the economy at large. And that's where I think it really gives me optimism that what could have felt pretty lonely and solitary a couple of years ago, really does feel like we're working with the entire economy to solve a really big problem and able to draw in tools like this with partners that are thinking about it and really drive forward a pace that I think is really encouraging.

Dan Barclay:

So, that's, a wrap. Jonathan and Justin, thank you very much. I think you've brought together something very innovative, very thoughtful, and I'm looking forward to great things from this collaboration. It's great to see us working together as two very strong and powerful institutions in Canada to bring Canadian knowledge and innovation to the world. Thanks for the efforts you put into this. And I can't wait to see the output from this collaboration. That's all for this week's podcast. Thank you for joining us. We appreciate our listeners and we appreciate you tying into what is a very important, innovative moment, as we look forward on energy transition. Thanks for your time.

Michael Torrance:

Thanks for listening to Sustainability Leaders. This podcast is presented by BMO Financial Group. To access all the resources we discussed in today's episode, and to see our other podcasts, visit us at bmo.com/sustainabilityleaders. You can listen and subscribe free to our show on Apple Podcasts, or your favorite podcast provider, and we'll greatly appreciate a rating and review. And any feedback that you might have. Our show and resources are produced with support from BMO's Marketing Team and Puddle Creative. Until, next, time I'm Michael Torrance have a great week.

Speaker 4:

The views expressed here are those of the participants and not those a Bank of Montreal, it's affiliates or subsidiaries. This is not intended to serve as a complete analysis of every material fact regarding any company, industry, strategy, or security. This presentation may contain forward looking statements. Investors are cautioned not to place undue reliance on such statements as actual results could vary. This presentation is for general information purposes only and does not constitute investment, legal, or tax advice. And is not intended as an endorsement of any specific investment product or service. Individual in investors should consult with an investment tax and or legal professional about their personal situation. Past performance is not indicative of future results.

Becoming Nature Positive in the Mining Sector

Carleigh Whitman:

We are seeking to integrate more nature-based solutions into all phases of MineLife, from exploration through operations and into closure. But I would say it is also a challenge because it implies a cultural shift in the company that traditionally we've gone to human engineered solutions to our problems or to our challenges, and now it's working with people at all levels of the organization to help them think more broadly as to whether nature can help us in the challenges that we're facing.

Michael Torrance:

Welcome to Sustainability Leaders. I'm Michael Torrance, Chief Sustainability Officer with BMO Financial Group. On the show, we will talk with leading sustainability practitioners from the corporate, investor, academic, and NGO communities to explore how this rapidly evolving field of sustainability is impacting global investment business practices in our world.

Speaker 3:

The views expressed here are those of the participants and not those of Bank of Montreal, its affiliates, or subsidiaries.

Alice Bao:

Today, we're talking about becoming nature positive in the mining sector. I'm Alice Bao, part of the sustainability office at BMO focused on disclosure and impact. I'm joined by Magali Gable, Director of Sustainable Finance at BMO, and Carleigh Whitman, Head of Nature and Closure at Teck Resources. Carleigh is an environmental lawyer with over 20 years of experience in advisory, corporate, and site-based roles in Canada and Chile. Carleigh is a senior deputy in the World Economic Forums, Champions for Nature, and a member of the International Council on Mining and Metals Nature Enclosure Working Groups. The final task force on nature related financial disclosure recommendations where TNFD were launched in September 2023. And many of us are interested to learn from companies on how they're incorporating nature into their decision making and how they operate, engage with communities, measure and monitor their impacts, and manage risks and opportunities. So we're pleased to have you Carleigh.

Carleigh Whitman:

I'm glad to be here. Thanks for having me.

Alice Bao:

First off, can you introduce our listeners to Teck Resources?

Carleigh Whitman:

Well to start, for those who aren't familiar with Teck, we're a leading Canadian mining company focused on providing products that are essential for a better quality of life for people around the world.

Alice Bao:

The mining sector has been managing its biodiversity impacts as part of its operations and permitting process for a long time. Can you start by telling us the intersection between the mining sector and nature? Has the release of the TNFD changed how the mining sector manages its biodiversity impacts?

Carleigh Whitman:

Mining is a sector that both directly impacts and depends on land and ecosystem services that provides in our operations and through our value chains. At Teck, our operations are within areas of high biodiversity value and we're committed to responsibly managing biodiversity reclamation and closure and working towards securing a net positive impact on biodiversity and nature positive by 2030. And so when you ask about the TNFD, and that's something that we piloted this year, and we think that this framework will guide ours and other sectors of the economy in better understanding the risks associated with nature.

Alice Bao:

That's great to hear. The Kunming-Montreal Global Biodiversity Framework that was adopted in December 2022 serves as the world's framework for actions to safeguard and restore biodiversity under 23 targets to be achieved by 2030. What does the global biodiversity framework mean for the mining sector or for Teck?

Carleigh Whitman:

Well, there, as you mentioned, a lot of targets and a lot of them do have relevance to the mining sector, but the one in particular I'd like to highlight is called Target 15, which directs governments to take measures to encourage and enable business to monitor, assess and disclose risks and dependencies and impacts on biodiversity. So similar to Teck's own goals, this approach is aiming to progressively reduce negative impacts on biodiversity, increase positive impacts, and reduce biodiversity related risks to businesses and financial institutions. And so we're expecting that as governments begin to regulate the global biodiversity framework into domestic legislation, that we will see some of these targets come into our own requirements and not just being individual companies having aspirational goals to achieve this.

Alice Bao:

It's very clear that the mining sector has a unique role to play in supporting a nature positive agenda. What are similarities and differences between these requirements and the TNFD'S recommendations and also the requirements from the EU's CSRD?

Carleigh Whitman:

I think for mining, because the sector has such a direct impact on land and water, most of our regulatory frameworks already address this. So from a direct impact perspective, it's similar in both. I think the emerging requirements are going to place more emphasis on landscape level approaches, though some of our permits do cover cumulative effects. That's not in every jurisdiction. So I think we'll see more emphasis placed on that. Also, really on value chain transparency and action and systems level transformation.

Alice Bao:

Thank you for setting the broader context Carleigh. I'll now turn it to Magali, the energy and natural resources specialist in the sustainable finance team.

Magali Gable:

Thank you Alice. Biodiversity has showed up the agenda in our conversation with market participant and mining and metal's role in delivering another positive future was discussed most recently at Davos. Biodiversity is one of Teck's eight strategic sustainability themes, and recently the company announced its goal of becoming a natural positive company by 2030. Carleigh, could you talk about Teck's approach to nature and the company's biodiversity ambition?

Carleigh Whitman:

Thanks Magali. And as you mentioned, we did set a goal to work towards a net positive impact on biodiversity. We did that in 2011, so we've had some experience under our belt of what works and what doesn't and what's more challenging than we might've initially thought. And that net positive impact or NPI goal is something we're working to achieve over the life of each of our minds. So that could be decades in many cases.

And so as you mentioned in 2022, we updated this to include a nature positive goal for this decade, which is to contribute to the global goal of halting and reversing nature loss by 2030. And so really for us, we define that as being by 2030, that our conservation, protection and restoration of land and biodiversity will exceed the disturbance caused by our mining activities from a 2020 baseline. And so we're taking action in three focused areas to do this. The first is nature positive decision-making guided by science and indigenous knowledge, rehabilitation excellence and conservation protection and restoration through partnerships. And we're working to achieve this through conserving or rehabilitating at least three hectares for every one hectare affected by our mining activities. And since we made our announcement last June, we've protected and conserved more than 51,000 hectares of land, including the globally rare inland temperate rainforest of the Incomappleux Valley in southeastern British Columbia with the Nature Conservancy of Canada.

Magali Gable:

This is quite a comprehensive multifaceted strategy toward the road to nature positive. Transitioning to on the ground experience, as you mentioned, Teck has been doing conservation and restoration works for a while. Perhaps, can you provide examples of what Teck is doing to achieve its goal and the challenges you have or may face along the way?

Carleigh Whitman:

Sure. So as a mining company, we are legally required to undertake restoration work at our mine sites. And so that's been a lot of our historic experience. But one of the things that we're looking to do more of now is seeking to partner in offsite initiatives that are close to our operations. For example, we've partnered with Trout Unlimited Canada to participate in environment and climate change, Canada's conservation exchange pilot with a project near Hinton, Alberta. And this is a watershed scale restoration project that is addressing stream health degradation at high priority sites, both improving and protecting spawning and rearing habitat for bull trout and Athabasca rainbow trout. It's important to recognize that before we commence restoration work or offsite work like this, that we're following the mitigation hierarchy of avoiding our impacts, minimizing them when possible, then restoring and then offsetting, which is offsite work if necessary.

Certainly it's an ongoing challenge to continue to look at opportunities to minimize impacts, which can be trickier to do than things offsite. So that is the reason that there is a mitigation hierarchy, so we try very hard to follow that hierarchy. Another thing that we've been working on are nature-based solutions. So these are approaches to challenges that harness the power of nature complimentary to human engineered solutions. So for example, restoring wetland habitat can provide natural flood mitigation, which benefits nature and our operations. And as part of our nature positive decision-making mindset, we are seeking to integrate more nature-based solutions into all phases of mine life from exploration through operations and into closure. But I would say it is also a challenge because it implies a cultural shift in the company that traditionally we've gone to human engineered solutions to our problems or to our challenges, and now it's working with people at all levels of the organization to help them think more broadly as to whether nature can help us and the challenges that we're facing.

Magali Gable:

Mm-hmm. It's a real paradigm shift in how nations, businesses, and investors view nature. Carleigh, I would like to come back to your point about decision making being guided by indigenous knowledge. One of the core components of nature work in general and a recommendation within TNFD is the engagement with indigenous people, local committees, and affected stakeholders. How does Teck engage with communities in its biodiversity management?

Carleigh Whitman:

So many of our operations are located immediately adjacent to local communities, and even our operations that are located a significant distance from communities still have the potential to positively or negatively affect communities and biodiversity in the region. So we work to maintain positive relationships with communities throughout the mining lifecycle, focused on exploring and advancing shared benefit opportunities relating to nature as well as managing and mitigating potential impacts. One example is our work with several different indigenous communities to support them in collecting seeds from native plants and establishing nurseries, which we then use in our ecosystem restoration work. We also have established a $10 million indigenous stewardship fund that will support indigenous communities and partners in developing indigenous focused environmental stewardship initiatives as well as engagement, education, capacity building, and participation in support of conservation objectives in the regions where we operate.

Alice Bao:

Can you elaborate on what Teck's key approaches are for measuring, monitoring, and reporting on nature and biodiversity? And can you share what data gaps and challenges you've had to overcome?

Carleigh Whitman:

Well, each of our sites has a biodiversity management plan that assesses impacts and risks for the different ecosystems and key species present in that region. And we're increasingly using new technologies like EDNA or environmental DNA to help identify species and track the success of our restoration. There are a myriad of metrics out there and no one answer. And so the challenge is conveying the complexity of information about biodiversity into simple but also nuanced ways that recognize the locality of the impact.

Magali Gable:

That's fascinating and indeed quite a challenge to convey complexity into simple ways, and we've really seen the shop rise of nature related data platform and services providers to meet this demand for reporting on biodiversity as well as the creation of investor engagement initiatives such as Nature Action 100, all the emergence of innovative financing structure to finance biodiversity investment. Now then Carleigh, what would be your advice for companies beginning their nature strategies and maybe specifically as it relates to resource allocation and financing for biodiversity initiatives?

Carleigh Whitman:

Well, I would say that the entry point is in developing partnerships, and the easiest way of entry is usually partnering with NGOs in this space. I mentioned the Nature Conservancy of Canada earlier that we have had over a decade long partnership with. And so for companies that are starting in this space, looking to other potential partners that can help, you don't need to have all the answers yourself about what the priorities are for biodiversity in the regions that you operate. So that entry point usually comes through community investment or philanthropy.

And for companies starting out, again, that will allow the ability to get to know the space, get to know partners in it, and start to assess the impacts and dependencies from that context. And historically, that has been the approach for most corporates with respect to nature. But to further embed our approach to biodiversity, that's really where we've been getting into predicting the impacts of individual projects that we have on nature and starting to embed these mitigation costs within each mining project's economics. So we're doing this at our projects that are ongoing right now at Highland Valley Copper in British Columbia, and Fording River Extension, which is also in British Columbia. So that's the step change that we're really looking towards as a business, that the project itself encompasses some of these things that have historically been externalities, such as the cost to the impact on water, air, or biodiversity more generally on land.

Alice Bao:

So we're battling two planetary crises, nature loss and climate change. Climate change is one of the main drivers of nature loss and nature loss contributes to the acceleration of climate change. You provided helpful ideas for companies to start tackling nature loss today. How can we address both in an interlinked way?

Carleigh Whitman:

Earth's ecosystems play a massive role in regulating climate and absorbing carbon emissions and biodiversity and ecosystem services can also help us adapt to and mitigate climate change. At Teck, our climate change approach is focused on decarbonizing our business. If there are opportunities in a nature-based solutions project that also provide carbon benefit, that's great, but our approach is to work with indigenous peoples and communities to develop priority nature conservation and restoration for each local environment. Sometimes the carbon benefit may not be quantifiable or negligible under current protocols, but it's still the highest priority for biodiversity and we can't lose sight of that.

Magali Gable:

Thank you very much Carleigh for joining Alice and I. It was encouraging and exciting to hear how Teck is working toward becoming nature positive. We hope to learn more from you and other great examples and how nature related dependency impact, risk, and opportunities are conducted for business strategies. Thank you again for sharing your valuable insights.

Michael Torrance:

Thanks for listening to Sustainability Leaders. This podcast is presented by BMO Financial Group. To access all the resources we discussed in today's episode and to see our other podcasts, visit us at bmo.com/sustainabilityleaders. You can listen and subscribe free to our show on Apple Podcasts or your favorite podcast provider, and we'll greatly appreciate a rating and review and any feedback that you might have. Our show and resources are produced with support from BMO's marketing team and Puddle Creative. Until next time, I'm Michael Torrance. Have a great week.

Speaker 7:

For BMO disclosures, please visit bmocm.com/podcast/disclaimer.

The Role of Insurance in Creating Climate Change Resilience

Natalia Moudrak:

By partnering with the right risk management and insurance partners, project developers in the space have a significantly higher probability of delivering a viable solution to protect their projects and products, and in turn, enabling investment capital, which otherwise may be unavailable. Maybe greater collaboration between all stakeholders involved in financing low-carbon transition projects from the outset would be quite beneficial.

Michael Torrance:

Welcome to Sustainability Leaders. I'm Michael Torrance, chief sustainability officer at BMO. On this show, we will talk with leading sustainability practitioners from the corporate investor, academic and NGO communities, to explore how this rapidly evolving field of sustainability is impacting global investment, business practices, and our world.

Speaker 3:

The views expressed here are those of the participants and not those of Bank of Montreal, its affiliates or subsidiaries.

Angela Adduci:

Hi, I'm Angela Adduci, senior advisor to BMO Climate Institute, and today I'm joined by Natalia Mudrock. She's the senior director North America for Aon Climate. Aon is a global professional services firm specializing in risk, insurance, and other solutions. Natalia, thank you so much for joining us today.

Natalia Moudrak:

Thank you so much for having me, Angela. I really appreciate the opportunity to speak with you today.

Angela Adduci:

So to start, could you tell us a little bit about your role at Aon and the broader role of insurance in supporting climate and sustainability?

Natalia Moudrak:

Absolutely. Well, you've already introduced me and maybe I'll just expand a bit on that. In my role, I usually wear two hats. One is helping Aon clients better understand and manage physical climate risk exposure that they may have to natural disasters, like floods, fires, hurricanes, et cetera. And then on the other hand is helping our clients finance transition to low-carbon economy and enable new investment and climate-driven growth opportunities to take place using insurance solutions.

And I think to the latter point, it's important to note that there are various means that insurance can support transition of hard-to-abate sectors to become greener over time, to unlock capital for renewable energy projects, and really unlock the growth of cleaner, newer technologies. And the role of insurance can be catalytic in low-carbon transition, especially if we are considering upfront from the stages of project design how we can address a range of political, technological, environmental challenges that a project may face, which may otherwise deter investment or increase cost of financing for these projects in absence of insurance. So it's really that catalytic role that it can play that maybe we can talk about today.

Angela Adduci:

That's really great. I love that you bring up the idea of the low-carbon transition and hard-to-abate sectors. What I'd really like to hear more about is your thoughts around this broader theme of transitioning and decarbonizing the global economy. So from your vantage point, where do you see the insurance and risk management sectors playing a significant or even pivotal role in the net-zero transition?

Natalia Moudrak:

Well, since you said global economy in how you position this question, I think I'll latch on to the word global and one area where we see a lot of potential is in helping deploy capital to emerging markets to be part of the transition. And if we look back, world added 50% more renewable capacity in 2023 compared to 2022. And in the next five years we'll see the fastest growth yet. But lack of financing in emerging and developing economies remains to be a key issue.

When we were in Dubai for COP28 Climate Change Conference, we saw that there were about 130 national governments who agreed to work together, triple the world's installed renewable energy capacity by 2030. And then we reviewed the report by the International Energy Association that was just released in January, and it's very optimistic and it's noting that the world added 510 gigawatts of renewable energy in 2023. This is the fastest growth yet in the last two decades, but there's that lack of financing for emerging economies being an issue. And that report reflects on the fact that G20 countries right now account for approximately 90% of the global renewable power capacity today. But to achieve that global goal that you mentioned in your comments, Angela, the rate of new installations needs to accelerate in other countries too outside of the G20.

And IEA reflects that there are several challenges to scaling of finance in emerging economies. Some of it is a higher interest rate environment. There's lack of affordable financing for renewable project development in most of these emerging markets and developing economies. And sometimes there are unstable political regimes and policy uncertainties that also increase project risk premiums.

And in previous publications, the International Energy Agency estimated that if the world is to be on track to meet the net-zero target by 2030, annual capital spending on clean energy in these economies needs to expand more than seven times to be approximately $1 trillion USD annually. So as we think back now in terms of the mosaic of solutions that could be leveraged to help increase this private sector finance flows in clean energy projects in these economies, I think one of the important pieces of that mosaic of solutions has to be insurance, including political risk insurance.

Recently we worked with an investment fund who was investing into an offshore wind project in East Asia. They were concerned about local government entity not honoring power offtake agreement with a project developer that was seeking their investment. And while this fund has already secured some political risk insurance capacity from an expert credit agency, it was not sufficient and they needed to secure additional insurance capacity rather quickly. So we've placed this almost half a billion dollars over 10 years of political risk insurance for them. But this ability to move swiftly and match investor deal-making pace was possible with private sector insurance market participation.

So I think as we look forward at the need to expand clean energy investments in emerging economies seven times up to $1 trillion US annually, there will be a lot more demand for these type of solutions on public and private sector collaborating to match this risk capital need going forward and really help unlock capital going into emerging economies.

Angela Adduci:

I love this example and I love this type of collaboration and I agree with you that public and private sector partnerships can be really, really impactful. And it's interesting to hear how that plays out in an emerging market. We've definitely seen similar sentiment around public-private partnerships here at BMO as well. And one example that comes to mind from our end is our collaboration with Canada Infrastructure Bank to offer more options to building owners and property owners who are looking to execute on energy retrofits on their properties. So it's been really cool to watch that collaboration take shape and really see the impact play out on the ground. So it's really encouraging from my end to hear that this type of partnership is happening across many different industries and many different geographical parts of the world.

So to switch gears for a moment, you mentioned offshore wind just now, and this is a type of clean energy project that has been around for a while and where there's performance data pretty widely available. I'm interested in hearing your thoughts on the flip side. So newer emerging energy technologies where this may not be the case, where there may not be as much performance data available to leverage. How have you seen insurance products catalyze deployment of capital into emerging technology or into areas that are perhaps seen as risky?

Natalia Moudrak:

Angela, I think it's a wonderful question and congratulations first of all on your collaboration with Canada Infrastructure Bank. This sounds like a very important initiative to retrofit existing building stock to be more energy efficient going forward.

As I reflect on your question, maybe I will answer it in two parts and maybe start with actually the need that we have right now in addition to financing this emerging technology prototypical technology. Also, the importance of focusing efforts on hard-to-abate sectors and helping them transition to become greener over time. And there's recognition that transition doesn't happen overnight. You can't just turn off the switch and become green overnight. It can be capital intensive, impact employees, and wellbeing of entire communities that may be depending on these hard-to-abate sectors, where they operate today.

Now, there are some financiers, insurance carriers that have committed to move away capital from hard-to-abate sectors, which doesn't really entice companies in those sectors to transition assets and operations to become greener over time. Now, there is one way where we are working to help these hard-to-abate sectors to transition. And maybe I'll share one example to that end. We've created a transition performance index, TPI in short, which leverages both publicly available data and then adds proprietary analytics to essentially create evidence of let's say maybe an oil and gas client, how they are adjusting operations to become lower carbon over time. And the scores, transition performance index scores, they have been developed with input from insurance and reinsurance carriers, and they allow these carriers to better understand the impact of clients' actions and justify continued access to risk capital over time where there are improvements that are being made.

An example of that is we recently helped a client demonstrate that their investment in green technology, which helps capture and store 70% equivalent of their total carbon emissions, was quite catalytic in improving their transition performance score from what it is today to how they're projecting to improve over time. And in turn, it gave insurers confidence to provide long-term capacity to this client. So with this predictability of insurance terms over time, the client then was confident and able to continue deploying capital and investing in other initiatives that helped them transition other assets and operation over time. So it's like a virtual cycle that you create with this predictability and insurance rate and terms vis-a-vis TPI. But that's kind of a tangent.

I know you asked me about insurance solutions perhaps for emerging technology, and one example that comes to mind that is getting a lot of attention right now, a lot of interest both from project developers and financiers alike is the usage of technology performance guarantees. Technology performance guarantees can help early-stage businesses secure debt financing by ensuring against a shortfall, let's say, of renewable energy output caused by technology underperformance. So this can help smooth out the volatility in cash flows for a project so that the lender feels safer about debt payments being made on time and on target.

And an example of a solution like this that helped a sustainable aviation fuel producer secure debt financing is something that I thought would be interesting to share with your audience. So we have the sustainable aviation fuel producer launching a greenfield project. They've secured customers for the offtake of the fuel, but the technology had this emerging nature and there was a concern there could be a shortage in quantity of the committed fuel output. The producer's balance sheet wasn't sufficient to alleviate lender's concern that if there was in fact a shortage in the amount of sustainable aviation fuel produced and then sold to the customers, that the producer may not be able to meet their debt obligations. And so we structured the warranty solution that covered debt service and operating expenses and startup repairs should there be shortfall in output as a result of technological failure, and structuring this warranty solution helped the deal go from a no-go to a go decision as a function of this being available. And we are seeing quite a bit of interest in insurance solutions like that to allow commercializations of newer technologies, if you will, to take place.

Angela Adduci:

I love that example, and I'm really not surprised that there's a lot of interest in that product. So to zoom out just for a moment, I'd like to ask you, are there any areas of opportunity where you think insurers and capital providers or financiers could be working more closely together to support clients in the net-zero transition?

Natalia Moudrak:

Oh, well, I think I'll speak to my favorite topic as of late, and maybe it's about voluntary carbon markets. And I know right now voluntary carbon markets are facing a bit of a loss of confidence lately, but they are expanding and can present a significant opportunity, I think, not only to drive climate transition, but to achieve a range of environmental and social impacts around the world. For example, voluntary carbon market projects that support nature restoration projects or conservation. They not only provide carbon sequestration benefit, but they can also help with biodiversity enhancement, provide resiliency to natural disasters. For example, think about effectiveness of mangroves to help attenuate flooding and hurricane risk. And in some parts of the world where the use of proceeds or a portion of revenues from carbon credit sales goes towards local communities, they can be quite impactful with alleviating poverty as well.

So I'm quite excited about the evolving nature of voluntary carbon markets and how they can really drive that environmental and social impact on the ground. So there's a lot of interest in that topic. And insurance here as well helps boost confidence in voluntary carbon market transactions, and it also helps unlock additional capital for high quality projects. And I think this happens because through underwriting process, as insurers look at the various risks and provide a second pair of eyes on these risks on how they're being managed, if you in fact are able to ensure some of these risks away, it signals that this project is higher quality. And as such, you may end up catalyzing and accelerating capital going to these projects, perhaps even expanding the universe of investors who may be otherwise hesitant to participate in voluntary carbon market transactions and in fact, turning their interest and entertaining investments in these underlying projects if they're insured.

And lately we've seen quite a bit of interest in this topic. We have clients who are exploring a range of insurance solutions for voluntary carbon market projects, some focusing on natural disaster risks. For example, if it's an nature-based project like forestry conservation, wildfire can cause damage and destruction to the very assets that's supposed to be generating sequestration benefits. There could be concerns with environmental risks like pest infestations and disease that can similarly cause damage and destruction to these assets. Political risk is a big concern too, where government may expropriate carbon credit rights, and so you may not realize the revenues you were hoping to because these assets are, for example, expropriated. There could be fraud negligence and a range of other risks.

So there's quite a bit of interest in how can insurance play a role in catalyzing investment into voluntary carbon markets. And I think it's one area where an entire new ecosystem of players is coming together from registries to third party verification and rating companies, MRV companies, project developers, investors, lenders, corporate buyers, insurance companies, all trying to work together to make it a viable market and a viable solution to help drive decarbonization furthermore. I think it's a very exciting space, and I think this is where more collaboration can really drive environmental and societal impact.

Angela Adduci:

Well, it's just fascinating to hear your perspective on this, everything from voluntary carbon markets to physical disaster risk, to emerging technology, to political risk. It's just really, really cool to hear everything you're working on. So any final thoughts that you would like to share before we wrap up here?

Natalia Moudrak:

Well, thank you. I think one of the parting thoughts that I would share is actually leveraging something that one of my colleagues from Energy Transition Practice said. That it's extremely important to speak with potential risk management and risk transfer partners at early stages of project development, especially as we're thinking about these new prototypical clean technologies for energy transition. By partnering with the right risk management and insurance partners, project developers in the space have a significantly higher probability of delivering a viable solution to protect their projects and products, and in turn, enabling investment capital, which otherwise may be unavailable if a more conventional approach is being adopted.

Quite often, insurance is kind of an afterthought, but I think there's need for us to come together at earlier stages and be a bit more proactive in that dialogue. And again, maybe a greater collaboration between all stakeholders involved in financing low-carbon transition projects from the outset would be quite beneficial. So the question is how can we collaborate better to optimize the cost of risk, improve project bankability for these newer technology partners? How can we better stitch together capital, whether it's philanthropic grants, government incentives, venture capital, available bank loans, offtake commitments, et cetera? And where can we be more creative with insurance solutions such as some of the examples we discussed today to really optimize that capital stack? I think that's where maybe a bit more creativity would be helpful in getting engaged at earliest stages of the process, which is not quite typical today.

Angela Adduci:

This has been great, Natalia. Thank you so much for coming on.

Natalia Moudrak:

Thank you so much for having me.

Michael Torrance:

Thanks for listening to Sustainability Leaders. This podcast is presented by BMO. You can find our show on Apple Podcasts, Spotify, or your favorite podcast player. Press the follow button if you want to get notified when new episodes are published. We value your input, so please leave a rating, review, and any feedback that you might have, or visit us at bmo.com/sustainabilityleaders. Our show and resources are produced with support from BMO's marketing team and Puddle Creative. Until next time, thanks for listening and have a great week.

Speaker 5:

For BMO disclosures, please visit bmocm.com/podcast/disclaimer.

Part 1: Talking Energy Transition, Climate Risk & More with Bloomberg’s Patricia Torres

Patricia Torres:

Why is the past so important? And the reason is because even if we stop all emissions today, the earth average surface temperature will climb another 0.6 degrees, or so over the next several decades before temperatures stopped rising. So it's not only about which countries are emitting today, but also who actually has polluted the most in the past. So we need money for mitigation and adaptation, and it has to be a problem that has to be solved by everybody. This is not a local problem, this is a global issue that we have to address.

Michael Torrance:

Welcome to Sustainability Leaders. I'm Michael Torrance, Chief Sustainability Officer with BMO Financial Group. On this show, we will talk with leading sustainability practitioners from the corporate, investor, academic and NGO communities to explore how this rapidly evolving field of sustainability is impacting global investment business practices and our world.

Speaker 3:

The views expressed here are those of the participants and not those of Bank of Montreal, it's affiliates or subsidiaries.

John Uhren:

I'm John Uhren, head of products and strategy in the Sustainable Finance Group at Bank of Montreal, on today's Sustainability Leaders podcast. I'm joined by Patricia Torres, head of Sustainable Finance Solutions of Bloomberg. Bloomberg recently hosted its fourth annual sustainable finance week with BMO as a presenting sponsor for the third year, sustainable finance week brings together corporations, clients, thought leaders, all for discussion on sustainable finance, focusing on ideas innovations that really drive environmental and social improvement on a global scale. And on the heels of COP26, which brought sustainability under the global microscope, this year's sustainable finance week was well timed.

John Uhren:

2021 has been an unprecedented year with sustainable finance hitting all time high in fixed income equities and other types of investments. We've now seen over a trillion dollars in green, social sustainability and sustainability linked bonds in 2021. And that's on top of close to half a trillion in sustainability linked loans. Money continues to flow into ESG labeled funds and we're seeing our performance vis a vis benchmark indices.

John Uhren:

There's also been a heightened focus on disclosure and performance metrics, which is a direct call from investors who demand transparency from the companies they hold. They want to know more about the impact they're having on the environment and society. And with movements such as the Net-Zero Asset Owner Alliance and Climate Action 100 Plus, we know investors will continue to be keenly focused on ESG performance. And when investors face the data, they have the power and financial capital to change the world.

John Uhren:

Patricia, thank you for joining the Sustainability Leaders podcast. Let's dive right into COP26, and some of the key themes and ideas that we saw that were discussed at that conference. First, energy transition. A number of countries made commitments to end reliance on coal, South Africa, India, others. What do you make of these announcements, and what do you think about shifting away from coal and whether or not it's actually attainable for developing nations in particular?

Patricia Torres:

Hello, and thank you, John, for having me. It's a pleasure to be here with you today. So going to back to your question. So it's the first time a COP deal referred to coal. At COP26, countries agreed to accelerate the facedown of unabated coal power and speed up the phase out of inefficient subsidies for fossil fuels. Today coal fire power generation still accounts for 30% of global CO2 emissions and fossil fuel support by G20 reach nearly $600 billion in 2020, and IA made it super clear to us that 1.5 degrees is out of sight if we don't phase out at least 40% of coal by 2030.

Patricia Torres:

So now let's look at India. So at COP26, India said that they would be net zero by 2070, and this was huge. And the reason is because they promised get 50% of its energy from renewable resources by 2030, and by the same year to reduce total projected carbon emissions by one billion tones.

Patricia Torres:

So now the question is, why was this huge and how big of a lift is that for India? So if you look where they are today, so today 73% of their power generation comes from coal and renewables only represent 20% today. And as I said, they want to reach 50% by 2030. They have one of the highest power demand per capita, and then one of the lowest CO2 per capita in G20. And as you also know, India is the world's fourth biggest emitter of carbon dioxide after China, the US and the EU.

Patricia Torres:

We put together climate sovereign scores and we ranked countries on how prepared they are to reach the 1.5 degrees, and India scored 2.15 out of 10 points, ranking on the 124th out of 135 countries. So there is a huge lift that India has to go through. And unfortunately we still don't have a lot of clarity on how they're going to get there without India economy and people paying a hefty price.

Patricia Torres:

They shared that they need $1 trillion for climate finance. And in this transition, we need to think about jobs, economic growth and inflation. So this is why India could not phase out on coal, but instead they proposed on phase down. But the problem that India has is they has... Okay. So on one side, I need to think about transitioning and investing in renewables. But on the other side, I also have the problem of climate risk. I have the problem that I have to transition, and I have the problem of actually facing physical risk.

Patricia Torres:

So we know that emerging markets are the most exposed to floods and typhoons and other things and devastated hazards. And this is why, for example, central banks in emerging markets like the Hong Kong Monetary Authority have asked banks to run physical risk scenarios.

Patricia Torres:

So the physical risk scenario focused on, for example, on Hong Kong's project its climate situation such as increasing temperatures, rises in sea levels and more intense cyclones. So I think to answer your question, it's attainable, but we need to ensure that emerging markets get help and get the support from developed nations to help them with the transition.

John Uhren:

I think that makes a lot of sense Patricia, I think it was almost at the 11th hour that the climate change deal was essentially amended to say, not phase out of coal, but the phase down of coal that you've alluded to in India and China and others positioned it and advocated for that change. You talk about a trillion dollars of investment needed for India, this is a massive undertaking.

John Uhren:

So to commit to phasing out entirely is almost impossible. And then you raise that, some of the social ideas as well around just transition and ensuring that they just don't have millions of people suddenly out of work and unskilled. And the final point around climate risk. I agree with you, emerging markets are so susceptible to climate risk.

John Uhren:

So it's not enough just to look at a specific sector or a specific form of energy, like coal, as an example, in a vacuum, you really have to look across the economy and across society. What are the major risks that these countries are facing and what are the ways that they need to look at all the different factors to make sure that they're making the best decision, not only for their country, but globally as we fight against global warming?

John Uhren:

So a lot of hairy issues, but we're going to circle back on a few of these themes. I want to come back to COP26 for a moment around a couple of themes that we heard a lot about around mitigation versus adaptation. And so for listeners, mitigation is around, how can we make the impacts of climate change less severe by preventing or reducing GHG emissions into the atmosphere? Whereas adaptation is really around the process of adjusting to the current and future effects of climate change. So with that, Patricia, what's the role of developed nations in mitigating climate risk faced by developing nations, such as India. And if mitigation fails, how can we help these nations adapt?

Patricia Torres:

I think it's such a great question. So I think what, let's go back to India, right? So India has, they have to think about how much money can I allocate to mitigation? So developing and transition away from coal, so reducing those CO2. Or they also have the other option is, even if I do it myself, but if nobody else does it, I still have to deal with adaptation, I still need to deal with physical risks impacting my country and impacting the jobs and the business and the GDP of the people that live in India. So this adaptation question is extremely important. So now the question is, but who should pay the price? So ultimately who is the country that is responsible for climate change and who needs to fix it? So the US has emitted more than 400 billion of CO2 since pre-industrial levels, twice as China.

Patricia Torres:

But now China is by far the biggest global emissions emitter, twice as much as US. So who should pay? The people that have polluted the most in the past or the ones that are polluting the most today? Why is the past so important? And the reason is because even if we stop all the emissions today, the earth average surface temperature will climb another 0.6 degrees or so over the next several decades before temperatures stop rising. So even if I stop today, the earth will continue warming up by 0.6 degrees. This is really important. So it's not only about which countries are emitting today, but also who actually has polluted the most in the past. So the question is, unfortunately, there's no right or wrong answer, so who should pay? I think everyone needs to join forces there. We cannot solve a problem locally.

Patricia Torres:

This is a problem that that has to be solved globally. And we need multilateral and coordinated action. We need to provide financial support to developing countries to fund the carbonization effort. So the reality is developing countries are the most vulnerable to the effects of global warming. And these countries face a huge economic impact because of this physical risk impact on their own countries. And they require a lot of capital to not only manage the transition through the mitigation, but also funds adaptation measure that will allow them to cope with more severe physical risks.

Patricia Torres:

So in the case of India, they said that they would like to have $1 trillion just for mitigation. Indonesia said that they will need 160 billion for mitigation, but we know that 1.5 degrees is no longer at reach. So with the current pledges that everybody has done in COP26 IA said that we can probably reach 1.8. Other organizations are telling us that given the pledges by 2030, we probably are on track to reach 2.4 degrees. So mitigation is there. So we need money for both, for mitigation and adaptation. And it has to be a problem that has to be solved by everybody. This is not a local problem. This is a global issue that we have to address.

John Uhren:

It really is. And it's one where there is no country, no government, no body of people, that's immune from climate change, right? And we truly are all in this together. And I started out by saying, when investors face data, they have the power and financial capital to change the world. And it's not just investors, it's also lenders, it's governments, it's all the financial actors across the market that really need to mobilize the capital. That's necessary to both developing nations as well as developed nations. And the technological solutions needed to address both mitigation and adaptation. But there's no single answer to say, we should focus entirely on mitigating this form of climate risk or climate change. It really is something that is going to change over time, but something we all need to be focused on improving.

John Uhren:

Now, coming back on climate risk, I have a question for you specifically on companies, governments, how they're measuring risk and climate risk specifically, and maybe I'll start with BMO's example before handing it off to you. We've signed on to the Net-Zero Banking Alliance earlier this year. And we made a commitment to align our lending portfolio with net zero emissions by 2050. Now I can tell you that our bank has rolled up our sleeves and we're working extensively on measuring and aligning our investment in lending portfolios with that net zero scenario. But it's a pretty involved process, right? We have stakeholders internally from credits, from risk, from sustainability, from treasury, from disclosure, from a number of different groups within the organization that are so focused on this, and really want to ensure that our portfolios are well positioned for the future. And so I'm curious, how our other companies Patricia that you've observed, or even governments, what are they doing to measure climate risk that they're facing?

Patricia Torres:

This is an extremely important is how do we measure climate risk, and how we're doing it across the board, across the buy side and the sell side? I'm not sure if you are aware, but Mike Bloomberg announced at COP26, that he will co-chair the Glasgow Financial Alliance for Net-Zero. These Alliance actually oversees the Net-Zero Alliance for Asset Owners and Net-Zero Alliance for Asset Managers, the Net-Zero Alliance for Banking, for insurance, et cetera.

Patricia Torres:

And in total, they have $130 trillion of assets and representing 450 institutions. So this problem is serious. And we really have to ensure that every single company and institution in the market knows how to evaluate the impact of climates in their books. So when we looked for example at the ECB, so the ECB published its first ever assessment of how European banks are adjusting their practices to manage climate risks in November last month.

Patricia Torres:

And the ECB concluded that the banks have taken initial steps towards incorporating climate related risks, but none of the banks is close to meeting all supervisory expectations. So before talking about climate risk model, the majority of the banks that don't have the basic data and ingredients to perform exposure based segmentation or sensitivity type scenario analysis that is required for the ECB climate stress test. And this is why we at Bloomberg, we care so much about getting the data, right? So as you rightly said, John, if you face the data, you can change the world. So what we at Bloomberg, we're trying to ensure they're providing the data that our clients needs to ensure that they are able to run the models.

Patricia Torres:

So let's break it down. How much data do you actually need? For example, you need asset level data for the companies. You also need to have their carbon data, their scope one, their scope two, their scope three. You need to ensure that you also are aware about their CapEX investment in sustainable products. You have to understand their assets. Then you have to understand climate data, hazards, floods, temperature spikes, and the location of those hazards and economic impact that these hazards had in the economy. You have to then integrate several physical and transition models like the IPCC, the NGFS scenarios, the Bank of England, the IA scenarios. Then you also need to agree on specific transmission channels in the economy and the financial system. So for example, how a carbon pricing will change a company's valuation in 2030, 40, and 50, and also how these carbon pricing will then impact the competitive landscape in that particular sector. So I think now the question is, who is right? So which model is right? So there are several people out there trying to solve this issue.

Patricia Torres:

There are several people trying to offer climate risk models, but it's important also to be aware that there's a lot of assumptions in these models. So maybe one model is not the right model. Maybe it's the combination of several models that get us there. But I think what is important to say is that it's important to start. So even though today, we only have an estimation of what the exposure is, of what the impact of the share price of the companies. And even though those outputs potentially are not 100% accurate, it's important that we across the board, we run those models and we became better and better and better. So that we're better and more sophisticated at understanding the climate risk that every single company that a specific set or their specific country has in terms of exposure and their economic impacts into their GDP.

John Uhren:

So who do you think it be leading the push to measure and report on things like climate risk? Is it something that should be government or regulatory led or is it private industry or is it Mike Bloomberg's new Glasgow Financial Alliance? Is it any one body or is it all of us together need to move towards the measurement of climate risk?

Patricia Torres:

I think it has to be all of us. So it's really important that all of us trying to tackle the problem, but it's also important that we have a standard. For example, that we have one model that people can run and everybody can run their books around those models. Of course, you probably have to tweak the models because not everyone has the same exposures globally, but in a way we have to ensure that the models are standardized, but you also have the freedom to potentially combine different models and apply a probability for a particular set of models and actually check how your book gets impacted, how your trading book gets impacted, how your lending book gets impacted, how your portfolio gets impacted by all these different scenarios. Because if you don't measure your risk, you cannot manage it. And I think at the moment, people need to realize that 1.5 degrees is still not at reach. And if you don't understand impact that 1.8 degrees has in your business, you are not going to change.

John Uhren:

And to the point you made earlier, it all comes back to data, right? It's having access to that data around asset levels and carbon and expected CapEx investments and physical and transition models. And just to plug Bloomberg for a minute, I mean, this is what you do. You're the top financial data provider in the world.

Patricia Torres:

Yes.

John Uhren:

So coming full circle, call Patricia, if you have questions related to climate risk, because you guys just house and store so much of that data about so many companies in the economy. So really interesting position that you hold as we look into the future as well from a climate risk perspective. Thanks so much, Patricia. Be sure to join again for our next episode in this two part series where Patricia and I dive even deeper into trending climate change and sustainability themes.

Michael Torrance:

Thanks for listening to Sustainability Leaders. This podcast is presented by BMO Financial Group, to access all the resources we discussed in today's episode and to see our other podcasts, visit us at bmo.com/sustainabilityleaders. You can listen and subscribe free to our show on Apple Podcasts or your favorite podcast provider, and we'll greatly appreciate a rating and review and any feedback that you might have. Our show and resources are produced with support from BMO's marketing team and Puddle Creative. Until next time I'm Michael Torrance, have a great week.

Speaker 3:

The views expressed here are those of the participants and not those of Bank of Montreal, it's affiliates or subsidiaries. This is not intended to serve as a complete analysis of every material fact regarding any company, industry strategy or security. This presentation may contain forward-looking statements. Investors are cautioned not the place undue reliance on such statements as actual results could vary. This presentation is for general information purposes only, and does not constitute investment, legal or tax advice, and is not intended as an endorsement of any specific investment product or service. Individual investors should consult with an investment tax and/or legal professional about their personal situation. Past performance is not indicative of future results.

Part 2: Talking Energy Transition, Climate Risk & More with Bloomberg’s Patricia Torres

Patricia Torres:

Face the data, because when you face the data, you understand how much work is there and left to do, and you have the opportunity to help, to jump, and to change the world. So don't shy away. Join us. Join us in the battle of climate. Join us in the battle of gender equality. Everybody has a role to play in the transition, and we need you.

Michael Torrance:

Welcome to Sustainability Leaders. I'm Michael Torrance, Chief Sustainability Officer with BMO Financial Group. On this show, we will talk with leading sustainability practitioners from the corporate, investor, academic, and NGO communities to explore how this rapidly evolving field of sustainability is impacting global investment, business practices, and our world.

Speaker 3:

The views expressed here are those of the participants and not those of Bank of Montreal, its affiliates, or subsidiaries.

John Uhren:

I'm John Uhren, head of sustainable finance products and strategy at Bank of Montreal. Welcome to part two of our two part series with Patricia Torres, head of sustainable finance solutions at Bloomberg. In part one, we talked a lot about the outcomes and previews coming out of COP26. Today, we're going to dive even deeper into the role of sustainability and climate change. Patricia, thanks for joining me.

Patricia Torres:

Hello, and thank you John for having me, for the second time. It's a pleasure to be here with you today.

John Uhren:

I want to move towards opportunities or investments or new technologies because I think this area is super interesting. Specifically, let's talk about a few different types of greenish or green investments, technologies, fuels, and maybe the importance that you see for purposes of decarbonization. I'm thinking kind of three, principally. One, carbon capture utilization and storage or CCUS. Secondly, hydrogen, and I want to differentiate sort of green hydrogen, which is hydrogen produced by splitting water, using electricity from renewable sources versus blue hydrogen, which is splitting natural gas into hydrogen and CO2 and then storing that CO2. Finally, nuclear power. I'm going to plug BMO just for a second. We just worked with a company called Bruce Power here in Canada to do the first labeled green bond from a nuclear power producer in the world. We are very supportive of the nuclear industry and investors were very supportive of Bruce Power in this most recent bond offering. But just coming back to the three technologies, what do you think in terms of how relevant each of those will be for purposes of decarbonization in the future?

Patricia Torres:

I think they're going to be extremely important. One of our research arms, BNEF, is trying to understand which technology and which regulations, which policies are being placed to help us to navigate to net zero. This team has around 300 analysts solely focus on the letter E, environment, and focus especially on the transition to a low carbon economy on a sector, but also on a country basis. They try to answer questions like, "How can we get to 1.5 degrees?" They published the new energy outlook, which called the NEO, which is BloombergsNEF annual long term scenario analysis on the future of the energy economy and we try to answer questions, how do we get to 1.5 degrees? Would it be through wind and solar? Can we reach with LNG and carbon capture? Can we use it through a modular nuclear to complement wind and solar and battery technology like in the power sector?

Patricia Torres:

The BloombergNEF team has developed three climate scenarios. They call it the green, the gray, and the reds, that reflect dominant to the carbonization technology, through hydrogen carbon capturing storage or nuclear power. The green scenario is when we believe that we are going to be reaching 2050 with a clean electricity and green hydrogen net zero pathway. Gray scenario is a clean electricity and carbon capture and storage net zero pathway, which includes a little bit of the blue hydrogen that you mentioned. And the red scenario is a clean electricity and nuclear net zero pathway. It deploys small and modular nuclear to complement wind and solar and battery technology in the power sector and add so called red hydrogen, which is the manufacturer using electrolysis as green scenario, but this time powered by dedicated nuclear power plants. We don't think hydrogen or the carbon capture and storage and the new nuclear technologies will play a meaningful abatement role in the 2020s, but getting them to scale, it's going to be critical for these decades. Not just to scale, but also to establish strong standards for its own production.

Patricia Torres:

Let me zoom into hydrogen. Hydrogen is the most abundant chemical element estimated to contribute around 75% of the mass of the universe. However, even in the green hydrogen produced from renewables can have a global warming effect when it leaks through infrastructure and interacts with methane in the atmosphere. Even if you invest in hydrogen, if we see leakage, we can actually still contribute to a global warming potential that could be estimated to be around three times larger than the CO2 over 100 year time frame. This means that we cannot just invest in hydrogen. We have to ensure that we establish strong standards for hydrogen infrastructure so that we can ensure lower leakage rates overall, to ensure that we get on track to the 1.5 degrees. It's important to invest in these technologies. It's going to be critical for our success to scale them by 2030, but we cannot forget that. We also have to remember that we have to protect ourselves from any leakage that could potentially get us even worse to where we started.

John Uhren:

That makes a lot of sense. I think using this decade to scale these forms of technologies or fuels, and importantly, the last point you made there around investing in infrastructure, it's not enough to say, on their own, these technologies or these new fuels are the ways that we are going to abate carbon and minimize the emissions into the atmosphere. If we don't have effective infrastructure around them, they're insufficient anyway. They don't actually do any good if they can't make it to the end use, which is necessary for purposes of decarbonizing. I think that's taking the long view as it relates to the types of investments we'll be needed to make into these three areas. Question for you around the main ways you're seeing companies moving away from energy intensive operations and what's the impact on their businesses. Do you have any specific examples on how companies are incorporating sort of their own new processes to move away from energy intensive to less energy intensive operations?

Patricia Torres:

Yes. I have a very interesting example that I'd like to share with you. Let's go back and just revisit what transition risk is. The transition risk is a degree to which low carbon trends could disrupt business profitability and viability. If you think about coal or oil production, they face existential threats as demand will shrink under net zero targets. They won't be able to sell their fossil fuels. They're one of the most impacting industries by this transition. They know they need to migrate their businesses away from fossil fuels or invest heavily in carbon capture and storage. Our BloombergNEF research arm, they looked at 39 oil and gas companies and how they're shifting or not shifting their business to a low carbon worlds. And for oil and gas companies shifting means investing for example, in things like renewable power or the EV charging.

Patricia Torres:

When we look at the 39, the best company out of the pack was Royal Dutch Shell. Why? Well, not only Shell has made huge divestments in the last five years around 50 billion, but they also invested eight billion investment in clean energy. They are the leaders in battery storage capacity. They are the leaders in EV charging points. They are the leaders in carbon capturing storage projects and also in digitalization. We also look at them in a different projects. The BNEF also runs a net zero target project. We look at all the companies in the oil and gas, and we look at Shell, how do we score Shell from a net zero perspective? When we look at Shell, actually, they had the second best score of all the other companies in the oil and gas. We score companies based on their base dates, their target based dates, if they have a hard or a soft target.

Patricia Torres:

If they are absolute cuts or intensity targets, we look at the horizons if they have targets in the short term, medium term, long term, if they cover all the scope or not, if they're global targets, et cetera. The reason why Shell had one of the highest scores is because they actually have issued hard targets. They have targets in the interim, not just at 2050 targets and their targets were global and they addressed the three scopes. But even doing after all of these, when we run Shell's data through our temperature alignment score, Shell is still aligned with a 2.51 degrees for scope one and two in the next five to 15 years. But if you look at the long term and including scope one, two, and three, their score becomes much better. They'll have a score of 1.28 degrees Celsius, much better aligned with the 1.5 degree world.

Patricia Torres:

But now the question that our investors have to make is, "But what should I do?" Let's say that the investment cares only about scope one and two and they look at Shell in this context of five to 15 years, they still see the company is aligned with a 2.51 degrees. They also a part of the Net Zero Alliance for asset managers or for asset owners. And they say, "Should I have Shell in my portfolio? Or should I divest from Shell? Or should I ask Shell to sell their portfolio to private companies?"

Patricia Torres:

Do we help them finance with the transition or not? It's a very difficult question to solve because if you divest from Shell, you are not helping to solve the problem. And if you are asking them to also divest from their portfolio and sell it to private companies, you are actually moving those projects from a very huge scrutiny where they operate at a very high standards and you are relying these assets to be managed by private sector, a sector that potentially does not face the same investor scrutiny and does not have the same ESG reporting obligations. There is an argument that keeping the assets with these companies could be the best outcome while they transition to clean technologies.

John Uhren:

I was thinking, as you were talking around this theme of transition and whether or not it makes sense to, you're right, completely divest from certain companies in certain sectors, or if working with them through their transition. You mentioned a lot of the eight billion that Royal Dutch Shell is investing in clean energy and their leaders in battery storage and EV and CCUS projects and digitalization. These are material improvements that the company will make over time, they've invested and put money behind it. When I think about transition, it's a bit topical right now around this concept of transition labeled bonds, for example, and you may be familiar, ICMA came out earlier this year with its climate transition finance handbook. It was actually in December of 2020, really with the idea being, how can you finance companies as they attempt to decarbonize their operations in line with a long term transition strategy that ideally aligns with Paris as an example.

John Uhren:

I think the right approach, and certainly what we've seen, from Bank of Montreal's position, is really to work with companies that are truly committed to decarbonizing their operations, and if necessary provide financing, but provide financing in a way that allows them to achieve those medium and longer term goals. We're natural resource-intensive economy here in Canada, and to say that BMO and the other major banks don't have a decent amount of its lending book associated with oil and gas companies or agriculture companies or certain mining and metals companies. It would be silly to say that. We're a 200 year old bank and we've been supporting Canadian borrowers for a long time. But I do think this idea around transition and specifically transition bonds, I do think this is an area where, we as lenders and certainly investors, as they're thinking about buying a label transition bond, or buying a sustainability linked bond, they do need to, and we do need to, look hard at whether the borrower is meaningfully committed to transitioning its operations.

John Uhren:

To your point, whether they're setting really hard milestones along the way. It's not enough just to say, "By 2050, we're going to align with a one and a half degree scenario." That's not enough. We need to know the checkpoints along the way, and you describe that with a Shell example where they have taken the time to do that. And if you're looking in over the short term and they're still in that two and a half degree scenario, then that's one thing. But over the longer term to get to that 1.28, I think you said, degree scenario, that is something that they will need to be checking in and being very transparent in disclosing their progress towards that goal over time. To me, the transition bond labeled market, but just generally transition finances should be really focused on supporting companies as they try and improve over time.

Patricia Torres:

I couldn't agree more with you. At transition bond, it's there to allow the carbon intensive companies and industries, such as cement, steel, oil, and gas to finance the gradual shift away from fossil fuels. They are intended to signal the transformation of having emitting industries or activities, enable to be fully classified as green. I think this is the critical piece is that we know that these sectors need to transition away. We know that they have assets. We know that they have to invest heavily in that transition and we have to support them. I think the question is there, but we need to ensure that the money and the funding is going to the right place. In terms of transition, you see the transitions bond that can be issued-based or activity-based depending on what it characterizes them. The first transition bond, just to give you an example, was issue in 2017, it was a Hong Kong's main electricity generation company called Castle Peak Power Company Limited.

Patricia Torres:

The reason why they came to market and asked for money was to finance a need to build a gas fired unit, to replace coal at the time. It's still a gas fired unit though, back in 2017, but the reason is they wanted to move away from coal. It took two years for the second transition bond to be issued, which reflects that hesitation of, should we fund that transition and what classifies as a sustainable transition? This year we saw quite of a lot of issuance. We reach around 6.2 billions issuance this year. We saw a lot of issuance from Italy, China, and Hong Kong, like in Japan. But the problem that we still have in this market is the clear definition of what transition finance actually means and to what extends such instruments are environmentally sustainable. I think that we have to think about market standards.

Patricia Torres:

If you think, for example, you talked about ICMA, we also saw the Monetary Authority of Singapore also have tried to develop standards for transition finance. We also saw other classification like private classification, like the ones developed by Natixis and Cicero, and if I'm not mistaken, also CBI also came out with a definition for transition bonds. I think that I probably see a market that will develop over time. But again, it goes back to the same problem, which is we have to ensure that we have a standardized version of what the transition finance means or a transition bond means to ensure that it's credible, and we have a wider adoption, because let's be clear, we need to fund these industries to move away from fossil fuel. And this could be one of the solutions, but we need to have a standard that we can use across the globe so that people feel that the money is going to be funding credible transitions.

John Uhren:

Well-put, and I know the EU is looking at its own definition of what constitutes transition and certainly here in Canada, there's been a lot of work done on establishing a transition taxonomy that identifies exactly what you've described, the types of activities that would qualify for a transition use of proceeds type instrument. The work's been ongoing at the Canadian level. I think now there's some alignment with the sustainable finance action council or SFAC here in Canada, that sort of bringing the transition taxonomy, the current draft of its under its wing and is going to figure out what the next steps are as it relates to getting this document to market.

John Uhren:

But I agree with you, there's the need to have the consistent market standards and guidelines out there so that both issuers and importantly investor are on the same page as to what constitutes transition. Patricia, we focused a lot on energy and I just want to hit one more theme that I saw coming out of COP26 and that was really related to biodiversity and specifically, themes around agriculture and food production. Agriculture, forestry, and other land use account for almost a quarter of greenhouse gas emissions globally. But nevertheless, we need agriculture to feed people and we need forestry to build things. How do we mitigate climate change while still providing the level of food and nutrition that that people need?

Patricia Torres:

I think it's a great question. I don't have the magic answer, unfortunately, and there are so many different components to actually get it right. You have to think about govern policies. You have to think about the carbon markets, ESG policies embedded in supply chains, communities and so many other factors. As you may know, like we saw the first ever day focus on nature at COP26. One message was extremely clear from that COP26 day, is that we need critical alignment of climate and nature and international coordination if we want to protect, conserve, and restore the planet. Trees and forests are one of our major defenses in the warming worlds. They suck carbon dioxide out of the atmosphere acting as the so-called carbon sinks. They absorb around one third of global CO2 emit each year. As you shared, agriculture emits 14% of greenhouse gas and another 6%, if you include what agriculture does to forest.

Patricia Torres:

That percentage increases to 25% when you consider the entire food system, including processing, packaging, transport, and retail. Unfortunately, at every minute, we are losing an area of the forest of the size of 27 fruitful peaches. One of the biggest causes of forest lost, for example, in Brazil, is to grow soybeans, much of which it goes to China and Europe for animal feed for pigs and chickens. I think is it goes back to, is the solution that we all turn vegan? Look, I don't think that's the answer. When we look at Indonesia, for example. Indonesia is the world largest exporter of palm oil. A product found in everything, from shampoo to biscuits and for a long time, palm oil was the key reason for deforestation in Indonesia, but in 2020 deforestation within palm oil concessions was the lowest in Southeast Asia during the past years.

Patricia Torres:

The reason, it's because there were government policies were put in place, and we also saw that the buyers had no deforestation policies forcing their supply chain to adhere to that policy. Now if you think about why we're losing so many forests, we're losing it because of our agriculture, being it palm oil, coffee, or cocoa. The reason is because they actually provide a better source of living to small holders that leaving forest standing. Let's not forget that 36% of the area and their oil palm concessions in Indonesia, they were managed by small holders. For many small farmers, deforestation is a strategy to survive. For them, they're not thinking about CO2. They're not thinking about forests being the carbon sinkers. They are thinking about having food at the table for their kids, being able to provide education for their families.

Patricia Torres:

I think is we need to take into consideration that also biodiversity, for example, is another like important topic. Biodiversity, 5% of our population protects 80% of our biodiversity. We need to look after those communities and for us to be successful, I think we need to think about three things. The first one is, how can we increase crop yields? How can we produce more goods with the land that we have? How can we educate the small farmers to be better at what they do? How can we actually protect them, as well, to ensure that they actually have the means to survive, not just by cutting forests and also how can we reward their words and actually turn forests in terms of carbon sequestration. I think the answer is, as I said before, we need to think about government policies, we need to think about the communities. We need to think about the farmers. We have to educate them. We have to reward them with better crop yields and we also have to reward them for keeping the forest there and ensuring that the forest continue doing their work of carbon sequestration.

John Uhren:

To me, this is another example, just circling back on some comments you made earlier around how the developed nations can be supporting developing nations. Because a few of the examples you gave were palm oil from Indonesia as an example. When we think about things like improving crop yields or carbon sequestration technologies, like these are areas where the developed nations can create these technologies, scale them and then bring them to developing nations so that they be used in a meaningful way to support the communities in which the producers are operating. Because it's not enough just to say, "Do less deforestation."

John Uhren:

Even if it means you are going to not put food on the table for your family. That's not a good outcome in any scenario, but if we can be bringing them solutions to say, "Here are ways that you can enhance your crop yields in a way that uses less water, has less deforestation associated with it, improves the overall performance of what you're producing." It's really win-win at that point. Like a lot of these themes that you've referred to are just how can we all lean into support each other to produce a good outcome, it's a good economic outcome as well for both developing and developed nations. But more importantly from a climate perspective, these are things that can really move the needle environmentally and from a societal perspective.

Patricia Torres:

Exactly. I was just going to add that I was recently at a panel with Shell and Rocket as well, and we talked about palm oil. The question is what do we do with the small farmers? They depend on palm oil. They depend on that income to support their families. The answer is not, let's just ignore them. The solution has to be, let's help them. Let's educate them. Let's ensure that they have a means to survive, but in a way that is sustainable. The answer is not just to ignore people or pass the problem to somebody else.

Patricia Torres:

We have to be engaged and it's not just a problem that needs to be solved by governments. It's a problem that has to solve by every single corporation that is out there. I just feel that this is extremely the point. This is a global problem that everybody has a role to play and you cannot be indifferent to climate risk because it's going to impact you. An impact if we don't tackle it soon, it's going to be huge, to us and to the future generations. I think you need to think about that in your business.

John Uhren:

I want to touch on the intersection between gender and climate. The UN sustainable development goals really focus on people, planet, and prosperity. Do you have any ideas or thoughts around how the SDG related gender goals can be furthered alongside the planet specific goals?

Patricia Torres:

I don't know if you were aware, but at Bloomberg we run the gender equality index. We do a lot of work on gender equality. The reality is that it'll take another 100 years to achieve gender equality based on the current rate of progress. These numbers were based on a survey run by the Global Gender Gap Report that was published this year. It's just frightening that, especially with COVID 19, this really has exacerbated the issues that we see like on gender equality. We lost a lot of women in the work because these women had to look after their kids and their families. Let me just take you through some of the conclusions and the insights that we got from the gender equality survey. The gender equality is a survey that we send, is open, is based on voluntary disclosure, and it measures companies to assess their progress towards parity.

Patricia Torres:

It allows them to benchmark against peers and also highlights their public commitment to gender equality. Why do we do this? It's because Bloomberg, we really believe in transparency. We believe in data because we know that when you measure data, you can actually manage the problem. We also know that investors care about this data, as they want to know which companies are serious about equality given the strong correlation between employee productivity, talent retention, and stronger financial performance. Last year we had 464 companies participated in the survey and we rent them. We scored them and 380 scored high enough to join the gender equality index. Three highlights came out of the data. The first one is when companies have at least 30% of women on the board, they have more women in executive roles. The second one is that it's the percentage of women in management position that drives more women in revenue producing roles and also in the 10% most well-paid roles.

Patricia Torres:

If you think about you as a company, having 30% of women on your board is great, but the thing that is really going to change and move the needle, is how many women do you have in management position roles? It's not only helpful because it's drives the amount of room that we have in the higher pay buckets, but it helps you with retention of talent because when the woman that are at the bottom, they look at the top, they look up, what they see is that they see that they have a future in that company. The last insights that we took away from the data is that if we really want to drive KPIs at your company, you need to get those KPIs linked to the compensation of the management team. What we have seen is that whenever the compensation is linked to the diversity and inclusion, and it has specific KPIs, for example percentage of women in executive positions or percentage of women in management positions, we see a much higher increase of women in executive roles.

Patricia Torres:

We need everybody's help to push the equality agenda. This equality has to be part of the board's agenda because we know that if we tackle this collectively, we can change it. I think always our recommendation is the first thing you need to do is that you need to, first of all, measure where you are, what's your starting points so that you can create what your targets, where your goals are going to be. You can define your strategy, and then you can start measuring it as you go along in your journey. But it's really important that you start measuring those issues. Otherwise, we'll never get there.

John Uhren:

And kudos to Bloomberg for taking the time to measure, and putting in the work to say, "Look, if you really are focused on gender equality and diversity in the workplace, you need to have 30% women on boards. Here are the outcomes that you can expect to see if you hit that." But I think more importantly, our last two points around women in management position roles and compensation links specifically to gender related KPIs. Those will have direct, tangible outcomes. Those will move the needle. What we can't do is nothing because of a hundred years to achieve gender equality, which is, I think what you mentioned at the beginning, that's unacceptable, and you're right. We've seen this in North America as well with the she-cession, it's called, through COVID, in the last 20 months where just more women have found themselves unemployed.

John Uhren:

It may have been a hundred years when you did that data. Maybe it's even longer now and it's like, that's not acceptable. This really has to be a call to action for all companies in the sectors. Listen, Patricia, these are big issues and I've really appreciated your time today. Obviously some of these issues, both environmentally and socially, will take some time before we start to see material progress, but it's safe to say that we, as data providers, as companies, as investors, as lenders, as market participants, we have the ability to make meaningful progress and change the world, but there's no time to waste. I thank you very much, Patricia, for joining the podcast and keep up the great work.

Patricia Torres:

Great, John. I just want to leave with a sentence. Face the data because when you face the data, you understand how much work is there and left to do, and you have the opportunity to help, to jump, and to change the world. So don't shy away. Join us. Join us in the battle of climate. Join us in the battle of gender equality. Join us in the battle of making sure that you leave this world being a fair world and also equal and also clean because we need your support to make this world a better place to live. Everybody has a role to play in the transition, and we need you.

Michael Torrance:

Thanks for listening to Sustainability Leaders. This podcast is presented by BMO Financial Group. To access all the resources we discussed in today's episode, and to see our other podcast, visit us at bmo.com/sustainabilityleaders. You can listen and subscribe free to our show on apple podcasts or your favorite podcast provider. We'll greatly appreciate a rating and review and any feedback that you might have. Our show and resources are produced with support from BMO's marketing team and Puddle Creative. Until next time I'm Michael Torrance, have a great week.

Speaker 3:

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