Episode 22: Alicia Seiger, Stanford University
Today’s guest is Alicia Seiger, a lecturer at Stanford Law School who leads sustainability and energy finance initiatives at Stanford Law, Graduate School of Business and the Precourt Institute for Energy. Alicia serves as Managing Director for both the Stanford Steyer-Taylor Center for Energy Policy and Finance and the Sustainable Finance Initiative. Her work focuses on business and financial innovations to accelerate the transition to a decarbonized and climate resilient global economy.
In 2018, Alicia was appointed by New York Governor Andrew Cuomo and Comptroller Thomas DiNapoli to serve on the first-ever Decarbonization Advisory Panel for the $209 billion New York State Common Retirement Fund. She also serves on the boards of Ceres and PRIME Coalition, and co-founded Stanford Professionals in Energy (SPIE). In 2014, she created Investing in a New Climate, an investor workshop series to help asset owners manage climate risk and capitalize on innovation opportunities.
A serial entrepreneur and pioneer of new business models, Alicia has been designing and executing climate and energy strategies for businesses, foundations, investors, and NGOs since 2004. She has served on the management teams of multiple startups, including at TerraPass, a pioneer of the US carbon offset market, and Flycast Communications, one of the world’s first web advertising networks.
If you are very concerned about climate change and not sure where how to help or where to start, this one is for you. Enjoy the show!
You can find me on Twitter @jjacobs22 (me), @mcjpod (podcast) or @mcjcollective (company). You can reach us via email at info@mcjcollective.com, where we encourage you to share your feedback on episodes and suggestions for future topics or guests.
In today's episode, we cover:
The type of work Alicia does at Stanford with the Stanford Steyer-Taylor Center for Energy Policy and Finance and the Sustainable Finance Initiative
How the financial world is thinking of climate change, including the disconnect between valuations and climate risk
Where the US stacks up against the rest of the world in terms of sustainable investing
Advice for people trying to figure out how to find their place in the climate fight
What Alicia would do with a big pot of money, if she could put it to work to maximize its impact on deep decarbonization
Edited notes from Alicia:
I failed to mention “minimum standards”, which was the third headline of our report. To read more on this check out the NYCRF climate action plan or our panel’s recommendations.
NYCRF did everything except adopt the headline. They didn’t actually publicly commit to 100% sustainable assets by 2030, but they started on the road towards that goal.
-
Jason Jacobs: Hello everyone. This is Jason Jacobs, and welcome to My Climate Journey. This show follows my journey to interview a wide range of guests to better understand and make sense of the formidable problem of climate change, and try to figure out how people like you and I can help.
Jason Jacobs: Hey everyone, Jason here. Today's guest is Alicia Seiger. Alicia is a lecture at Stanford Law school and leads sustainability and energy finance initiatives at Stanford Law, Graduate School of Business, and the Precourt Institute for Energy. She's also managing director for both the Stanford Steyer-Taylor Center for Energy Policy & Finance, and The Sustainable Finance Initiative. Say that three times fast. Her work focuses on business and financial innovations to accelerate the transition to a decarbonized and climate resilient global economy. Alicia was a terrific guest. Like me, she's more of a generalist where she's got her hands in a number of different things, and overall she's having a huge impact in the climate fight. We covered a number of topics in this episode including her history and what led her to the work that she's doing today. We talked in depth about the work that she's doing today across her portfolio of activities and how she prioritizes that work.
Jason Jacobs: We also talked about the intricacies of how the financial world is thinking of climate change, including the disconnect in the financial world between valuations and risk. We talked about where the U.S. stacks up against the rest of the world in trends of sustainable investing. And finally, we talked about specific actions that Alicia would take if she had $100 billion to put towards the climate fight. And her advice for anyone else who's also looking to get involved. I found Alicia to be a terrific guest, and I hope you do as well. Alicia Seiger, welcome to the show.
Alicia Seiger: Thank you. Thanks for having me. I'm honored to be here.
Jason Jacobs: I'm psyched to be here, and it's a shame I'm just popping into campus and popping up. But we're sitting here on a gorgeous day in Palo Alto on Stanford's campus and I'm not even going to get to enjoy it.
Alicia Seiger: Well, I was going to say lucky us.
Jason Jacobs: Not that I'm not enjoying this.
Alicia Seiger: Yeah, well you'll get to exit and walk to an Uber.
Jason Jacobs: We met here once before for lunch.
Alicia Seiger: That's right.
Jason Jacobs: We've talked a few times since then, but I feel like you've got your tentacles into so many different things in the climate fight. But you also have a story that resembles mine in some ways given that you started on the .com and then found your way into doing some different things in this world. And then it evolved and that's, I haven't done that yet, but that's what I'm trying to do.
Alicia Seiger: You're doing it.
Jason Jacobs: Selfishly. It's like we sit here for an hour and I get to ask whatever I want. That's why I do the podcast. It's not for the listeners. But yeah, no I'm psyched for this discussion. And maybe a good place to start is just what you do?
Alicia Seiger: Yeah, it can be confusing cause I have a lot of titles. But I solve problems and connect people in and around climate change. So I deploy my superpower as a connector to bring people and ideas together in pursuit of de-carbonization and climate resilience.
Alicia Seiger: And I happen to do that from the Stanford campus. So I have many titles. As I said, I'm the managing director of the Steyer-Taylor Center for Energy Policy and Finance, which is a joint initiative of the business school and the law school here. And I run something called The Sustainable Finance Initiative, which is a new initiative out of the Precourt Institute for Energy that has really the same mission as the Steyer-Taylor center. And you can kind of think of them as an evolution. So the Steyer-Taylor center was established in 2011 on a term endowment to be spent down over an eight to 10 year period. And you can think about a term endowment's measure of success as you either solve the problem and you go home or you demonstrate that you can't solve the problem and you go home, or you demonstrate that you have capabilities and there's more work to be done, and you get the next tranche of money.
Alicia Seiger: We did that, we just did it by earning the next tranche of money from another benefactor to another part of campus. So that's The Sustainable Finance Initiative. Both bodies of work are in pursuit of de-carbonization of the global economy and increasing climate resilience, leveraging solutions in the social sciences. So that's really the innovation.
Jason Jacobs: And how are they different from each other?
Alicia Seiger: Well, Steyer-Taylor's business and law, sustainable finance is out of Precourt, which is the Institute for Energy, which is affiliated with the engineering school. But institutes stand alone. There are five of them on campus. So we have kind of different platforms in different permissions and opportunities to develop research, and teaching, and programming within the two initiatives and programs. But I think of them, I can't divide myself in half. And the faculty director who I work with on both, we both have the same positions on the two platforms. So I really think of it as a cocktail. It's the same body of work, just taking advantage of the multiple platforms to get as much as we can done and galvanize as much of campus as we can.
Alicia Seiger: So in addition to those two titles on campus, I also teach. So I've done that for the last two years. I designed a new course which I teach over at the law school. The enrollment for the course is business law and engineering graduate students. And the courses on climate, politics, finance and infrastructure. It's basically a fire hose that students can drink from over the course of a quarter. Sort of like your climate journey where I hope-
Jason Jacobs: I want this course.
Alicia Seiger: Yeah, well I'm happy to share the syllabus. Anyone can follow along at home. It's the arc of climate past, present, and future on the pillars of politics, finance, and infrastructure. Infrastructure being both physical assets and the institutions that play in politics and finance. And my goal and the reason I take on this volunteer service is that I hope that at some point over the course of the curriculum of the quarter, that students have their aha moment and they realize that they have some authentic pathway to intervene on climate, and that they don't have to have a PhD in hard science to be part of the solution set. That whatever it is that they're interested in, whatever their skill sets are, their pathway will intersect with climate. And they can either be part of the solution, or they can go on with business as usual. And it's really rewarding because I have had, by the end of the quarter, students come up to me and say, "I'm going to do this differently," or, "I'm going pursue X when I thought I was going to do something else because I understand this and I understand how I can be a part of the solution." And that's really rewarding.
Jason Jacobs: I think one tricky thing though is that now I understand listening to you talk about what you do, why you have students that come across your desk that want to get involved in climate and don't have the typical climate skill sets and you don't know what to do with them. I think the challenge though is that you want to send them to me, but I have similar people coming to me and I want to send them to you.
Alicia Seiger: Yeah, it's funny. I had a conversation the other day with a woman, I realized I think I might be one of the chief recruiters to the climate army. I do have a lot of these conversations, and I'm so grateful to you for establishing this scalable solution because I can only have so many coffees and calls. But if I can send them to you and to listen to these episodes, there's so much more content.
Alicia Seiger: But yeah, I think this comes back to the super power of being a connector. You can hear content and someone can talk to you. They can talk to me. But you never know, and this has happened to my career, I'm sure it's happened in years. When that coffee or conversation is going to be the one that's going to connect you to the path that you can pursue for some period of time. So I really delight in connecting people. So when you have these conversations, and it's funny to be on the talking end of this one. I'm usually the one asking the questions, trying to understand what this person is good at, what they like to do, what they're, usually those are the same. What they're interested in, where they're heading, and then figure out in my Rolodex of people and opportunities where they would be best suited or where they might find the most joy and the most flow, and have the greatest impact. Because again, those are connected. So can feel like a little bit of a pinball machine, but you never know which levers are going to launch into the place where you want to be.
Jason Jacobs: I mean, I find that I'm struggling with that in the sense that I'm only seven months in, six weeks or so into the podcast. But I feel like my efforts so far gave, in some cases helped inspire people to start their learning journeys. In other cases, they've found people somewhere on their learning journeys that are using my efforts to accelerate their learning journey. But one thing I'm struggling with a little bit is deployment.
Jason Jacobs: So okay now, and for myself included, although I guess I'm booked on this podcast. But it's like okay, now I'm starting to understand the problem better and I want to help. But how do you think about that? So when you have people with diverse skills, I mean on the one hand we have, there's so many different places that people can help. But on the other, it's actually pretty non-obvious where to put people, where the rubber meets the road in terms of what they'll actually do, how they'll actually have a livelihood, where they'll actually go to work every day. What have you found has been most effective in connecting those dots?
Alicia Seiger: Yeah. Well again, it's going to depend on the person and the circumstance and in some cases, you use the term livelihood. In some cases it may not be their livelihood. Climate will intersect their livelihood, so it's understanding those intersections and optimizing those intersections towards progress. So starts with talking about it.
Alicia Seiger: We talk about climate a lot, most people don't talk about climate enough. So it's getting the conversation going. It's integrating it in our political discourse. The 2016 presidential election had zero questions about climate change in the presidential debates. That is just cannot be, it's having the conversation. It's understanding for some people their opportunities. That maybe it's getting politically involved. It's just as simple as voting and asking questions of their local representatives, of their people who manage their money, of their companies. Everybody has their points of leverage, so it doesn't necessarily have to be your livelihood is the first point I would make.
Alicia Seiger: And then within whatever it is that is your livelihood, there are many levers where we can do better on climate risk or opportunity and in better preparing your company for climate change, in providing more solutions for employees to work together towards decarbonization or climate resilience within the context of their interaction with their companies. And then there's the next tier, which is actually being an intrepreneur within a company to design climate solutions or resilience measures within your company. Then there's building your own, whether you're an entrepreneur, coming up with solutions across any sector of the economy. Whatever you're interested in, there's some sort of decarbonization or climate resilience angle to that idea.
Alicia Seiger: And then there's the investor side, and people who are managing money and who have opportunity to innovate and evolve, where climate intersects capital markets. So I see it's a very broad menu of how to deploy and how to act on climate. And I think people can feel overwhelmed because it's so big, it's such a big problem. And the timescales feel long. Although they also increasingly feel very immediate in terms of the impacts. And people feel like they don't know enough or they aren't green enough. They haven't made the right choices. So it feels incongruent with where they are in their lives to suddenly break through and they're some judgment around, "What car do you drive and what kind of lights do you have in your home?" And all sorts of things.
Alicia Seiger: And those decisions matter, but they shouldn't be barriers. We shouldn't shame people into feeling like they're not green enough. So therefore climate isn't their thing. So I'm going to do something else. This is an all hands on deck exercise and all decisions and conversations matter.
Jason Jacobs: And the different stakeholders that you mentioned, so is the content of this course focused on all of them? Or is it certain profiles more than others? Who's the audience?
Alicia Seiger: The audience are smart leaders who want to tackle tough problems and lead through them. So graduate students at Stanford by nature of their admission qualify in that regard. And it's a heterogeneous groups. So the lawyers have one way of thinking. The business school students have another way of thinking. The engineering students have another way of thinking, which makes it a really interesting combination of students and conversation.
Alicia Seiger: The pillars are understanding the history of climate. Where have we been for the last 30 years and how have things changed from a political standpoint. Understanding the human psychology and behavior around climate, which are significant challenges and barriers, and important to understand. It's understanding how growth and climate intersect. It's understanding climate risk and opportunity. Both from a business perspective, a investor perspective, and a sovereign perspective. And then exploring some of the real innovative and exciting solutions that, or coming across campus and across sectors and across functions that are inspiring and promising. And then we do at the final session, get into the apocalypse session around so we blow the targets. What is sequestration and geo engineering look like?
Alicia Seiger: And what are the technologies, and possibilities, and moral hazards, and consequences of overshooting? So it's a lot, as I said, quite the fire hose. But it gives I hope, a broad enough perspective so that students can decide where they want to go deep. And I'm a lecturer, and I manage research and direct programs, but I'm not a member of the faculty. I don't have a PhD in any particular discipline. So I can go broad and I can introduce all of these different topics. And hope that then, the students will latch onto something and then go deep with the various expertise across campus where faculty can carry them to the next level in terms of deep research, if that's something they want to do, or help advise them.
Jason Jacobs: So given that this is so broad and touches everything, and it's just so complicated and nuanced, and thorny, and challenging to understand, let alone begin to untangle. How does one go about establishing curriculum for such a course?
Alicia Seiger: Well it started I really was inspired by the Risky Business Project. This was an effort shared by Mike Bloomberg, Hank Paulson, and Tom Steyer. And it was, gosh, 2014-ish, I think. And Kate Gordon, who I now co-teach this course with, was the founding director of the Risky Business Project. And it was the first time that climate, well not the first time, I should credit also series nonprofit. I have the honor of serving on the board of that works with businesses and investors to connect sustainability. The bottom line actually first coined climate risk. But the Risky Business Project really moved us beyond the divestment conversation and into framing climate in terms of risk, in terms of risks to the U.S. economy across sectors and across regions. And it really I think was the beginning of a shift in the frame of climate from an environmental issue, to a macroeconomic productivity and growth issue. And understanding climate through that lens.
Alicia Seiger: So as an alum of the Stanford Business School and as a former case writer and as someone who just cares deeply about this place and about the potential for our leaders who are graduating from this place to understand, the motto here is change lives, change organizations, and change the world. And my view is you can't do that if you don't understand climate risk and opportunity, and how that's going to intersect every sector of the economy and every function that any leader out of this is going to confront. So I got really fired up to develop curriculum around climate risk and opportunity. There was really a dearth of that on campus.
Alicia Seiger: And that is in part, I should say on campus at the business school and at the law school. The hard sciences have done a really nice job in terms of climate science and impacts and technology innovation. The social sciences side of campus has been in my view, still kind of punching below its weight. And part of that is because of the interdisciplinary nature of these challenges and the fact that the faculty here are their absolute best and brightest in their field. Which by nature means they're very deep and discipline, and are quick to say, "This isn't my field."
Alicia Seiger: So I didn't fancy myself a teacher. I feel like I'm a doer more than a lecturer, but I really wanted, it was the entrepreneur in me that saw this gap and saw the problem, and wanted to develop curriculum and have someone else teach it. So I designed syllabus, and I identified potential case studies, and speaker. In fact, I could give you my list. It would be a good list for your climate journey.
Jason Jacobs: I'd love to see.
Alicia Seiger: Yeah, and then it was one of those kind of lean in moments to borrow a loaded term where I was, it was a kind of careful what you wish for moment and was then asked to teach it. And my first reaction of course was no, no, I don't do that.
Jason Jacobs: So as a consultant you were doing this work?
Alicia Seiger: No. As my capacity as the managing director of the Steyer-Taylor Center, but it's not my job. I do a lot of things that aren't my job for better, for worse. In pursuit of impact, in pursuit of trying to solve this climate crisis.
Jason Jacobs: What was the gap or the white space that you saw specifically?
Alicia Seiger: Preparing Stanford Business School students to confront climate risks and opportunities in their professional lives. And that curriculum, there aren't courses on that at the GSB. So that was the starting point. And long story short, the course is technically a law school course, which is ironic because I've never taken a law school course. Now I'm teaching one. I started that journey with my faculty director, Tom Heller, who helped me design this curriculum. He's a professor emeritus now, so he's been around the block many, many times. So helped me kind of get off the ground and then step back and said, "Why don't you continue this while I fly around the world and meet with finance ministers and solve this problem at the global level?"
Jason Jacobs: And given that we don't have a whole semester's worth of time for this podcast, but that a lot of listeners and myself included are hearing about this and probably intrigued to better understand climate risk ourselves. I'm trying to think how to word this because it's so thorny. I don't want my question to be so broad that it's impossible to answer, but if you just had a few minutes to kind of impart some things that could at least spur thinking amongst listeners about climate risk and how to think about it. What would you tell them?
Alicia Seiger: Sure. Well, I like to use the TCFD framework. So I'll explain the acronym with more acronyms. So the G20 has something called the financial stability board, FSB, which was born out of the '08 financial crisis. Mark Carney is the chair of the FSB, and he gave a speech which you should look up or link to in notes around climate risk is the tragedy of the horizon. And convened a Task Force on Climate-related Disclosures, TCFD. To develop frameworks and methodologies around climate risk. And the two pillars that I think are helpful to think about are physical risks and transition risks.
Alicia Seiger: So people often think about climate risk or climate scenarios as when are we going to put a price on carbon or what's the policy scenario, which is a total crystal ball exercise. And investors and therefore entrepreneurs tend to stay away from that because that's a guessing game. The reality is when it comes to climate, starting with physical risks, it's not a guessing game. There is no better forecast of the future than climate science models. Walk over the other part of campus and look at the climate science data, and you will get a very clear view on where temperature and weather patterns and events looking out in the near, medium, and long term.
Jason Jacobs: And where can listeners find this data?
Alicia Seiger: Well, there are various climate models and scenarios. I don't know that listeners necessarily want to go into to the actual integrated assessment models and IPCC models. The risky business reports are good. They've been updated up until a couple of years ago. The TCFD website has a lot of resources on the risk metrics.
Alicia Seiger: And what you'll see is for the physical risks you have both acute and chronic weather changes as a result of climate. And those changes, whether it's heat, or drought, or extreme precipitation. Wildfires. We're seeing this flooding, we're seeing this all over the world. And I'm sure every listener wherever they are has been touched by if not directly, then at least one degree by physical impacts of climate change.
Alicia Seiger: So that's not a guessing game. That's very real, and that's something that will affect the economy globally. So understanding those impacts and connecting the dots on the physical side is one piece of it. And then the other piece is transition risk. And that includes the regulatory piece, but it's also the technology piece and the liability piece. That's frankly very exciting when you think about how technology has changed. You look at the cost of in the electric power sector of wind and solar and how it just dropped dramatically now where those technologies are just frankly cheaper in most markets. So new build should be wind and solar and battery plus storage. And battery technology is also falling down those cost curves. You see the proliferation now of EVs, both in terms of demand, but also you're seeing mandates that are starting to pull some of those technologies through. So that's the transition piece. So to understand climate risk is to understand the physical and transition risks associated with climate change. And that's much more robust than this notion of I wonder when we're going to have a carbon tax and just wait around for that. And then once we know that, then we'll do something.
Jason Jacobs: And as you think about this risk, do you find that you have clear conclusions in terms of the most impactful things that not that any one individual can be doing or even any one government for that matter. But that just we as a species can be doing to best address this problem?
Alicia Seiger: Yeah. Well as a species is a big one. Let's make it more concrete. So one of the really interesting and rewarding exercises I did over the past year was serving on this de-carbonization advisory panel for the New York State Common Retirement fund.
Alicia Seiger: So the New York State Common Retirement fund is the state pension plan for New York. $210 billion, with one sole fiduciary, the controller of New York, Tom DiNapoli. This started actually with a call for divestment from stakeholders in New York. The governor of New York and the controller together convened a panel to advise the controller on how to respond to the question of divestment. But the panel really pushed to broaden the scope into a question of how to decarbonize that pool and capitalize on climate opportunities.
Alicia Seiger: So six of us served on this panel for a year working with the fund and consulting experts and reports to come up with a strategy around de-carbonization. And the recommendations we made were bold. And yet within six weeks of making our recommendations, the controller actually issued a climate action plan for the fund that largely follows our recommendations.
Alicia Seiger: So what does it mean? What do you do in the context of asset owners, large asset owners? The bold headline was to pursue 100% sustainable assets by 2030. And here's where, while I'm going narrow for purposes of making it clear example, I'll also make it broad with an analogy because I think this is something we all do as a species.
Jason Jacobs: Now. It's good because it's like taking actually one specific type of thing and then saying something concrete. I mean for me it's actually helpful to have something to grab onto. Versus just, there's a lot of generalities out there that are just very hard. Like read Drawdown. I don't want to pick on Drawdown, but it's very informational. Well then what do you do with that information? You're actually saying for this type of entity, here's something concrete to do. Actually a set of things.
Alicia Seiger: A set of things. So 100% sustainable assets. For the fund, we said by 2030. What does that mean? What does 100% sustainable assets mean? The analogy that I think is really helpful is to understand that business as usual, which by the way is over. We can get into that. Climate has canceled business as usual. But the current practice of investing is that investors are investing as if we're warming to six degrees, and pricing risk as if there's no warming at all. That is in congruent. It is irrational, and it's going to lead to loss in value.
Alicia Seiger: So sustainable assets, a sustainable portfolio is to square those edges, is to have a point of view on where we are going in terms of warming. Is it two degrees, three degrees? That's a question that needs to be answered. You have to have a point of view on. Is it four or five? But whatever it is, you have to then square with the climate impacts of those temperature increases. And what that means for the portfolio and how that reprices your assets. And that's true for allocators, but that's true in your own investment decisions and where are you going to buy a house? You're going to buy a house as if what does that mean in future warming scenarios. There are lots ways this plays out as far as your question about the species.
Alicia Seiger: Back to New York common. In pursuit of a 100% sustainable assets, we made a recommendation that the fund designs for the tip of the spear and developed the muscles around sustainability by creating a new allocation for climate solutions and sustainable investing. Which by the way they did. They already have a really robust track record on these topics. So this was a great group to work with because they already had a lot of muscle built.
Alicia Seiger: So that allocation is kind of the leaning in to the transition. So developing the capabilities and expertise in this house by having staff who are dedicated to sustainability, who have investment acumen and also understand sustainability. Who can identify those opportunities across asset classes.
Alicia Seiger: So whereas now, you have the PE person who looks at 50 brown funds and one green fund and is like, "Easier to do the thing I've done all day long and not understand, and have my networks, and have my expertise." Whereas if you have the capacity to understand the intersectionality of sustainability and investments across asset classes, you can start to build this muscle and capability internally, and have more of the overall portfolio across asset classes leaning into the transition.
Alicia Seiger: There are all sorts of institutional and behavioral, and organizational barriers that make this really hard. And the rest of our recommendations kind of went through that. Part of it is compensation and incentives, and benchmarks that the current structure of these funds are such that they're kind of investing by driving the car down the road, looking at the rear view mirror, assuming that everything ahead is going to look like it did in the review mirror. So their benchmarks are benchmarks against the 20th century in terms of market mix and their energy benchmarks, their fossil fuel benchmarks. So if you make any deviation from the benchmark by investing more in renewables, you're just off your benchmark. Even if it's a better investment, you want to be tracking against the benchmark.
Alicia Seiger: So there are all these sorts of little tweaks that we need to better understand and better design so that we can release investors from the inertia and the institutional barriers that are keeping them in this business as usual scenario. So there was a whole suite of recommendations around that, but the headlines again are 100% sustainable and leaning into the transition with an allocation that is purpose built around sustainability that can help infuse that across the rest of the portfolio.
Jason Jacobs: And when they discussed internally because it sounds like they accepted your recommendation which is amazing, but what do you think the calculus was? Was it a branding thing to show that we're serious? Is it a cost savings? What motivates someone to lean into the transition in this way? It's not happening very much.
Alicia Seiger: Well it is a lot more in Europe. Boy, even in just the last six months we've seen a lot of announcements that are showing. I feel like the dominoes are coming down. But the motivation I think is taking a step back, and I have the luxury of doing this at Stanford and I appreciate that it's hard when your day job has 1,000 things coming at you to make short term decisions. But when you take a step back and you look at the climate science, and you look at what that means for asset values. You have to be alarmed. And you have to see that as I said, there is no more business as usual. And investment practices and investment decisions have to change. And we have to develop better capabilities around practices and decision making process and products. Because some of the products are emerging, but we also have to pull some of those products by asking good questions and demanding better products out of investment managers and index providers.
Alicia Seiger: So I think for New York, it's an understanding of the climate science and impacts and what that means for the local economy, the national economy, and the global economy. And how those impacts are going to affect their asset values, and wanting to preserve the value of those pensions. These are people's retirement savings, this is their nest egg. If anything, the global financial crisis of 2008 helped people realize that houses of cards come down. And we need to be better prepared for that to minimize the downside. And that the flip side of this, and I think frankly and my bad for not bringing this up earlier, is there's tremendous opportunity to capitalize on that transition, right? There's going to be so many new businesses and new business processes, and new technologies that are going to be driving this transition.
Alicia Seiger: We either are going to cook ourselves, or we're going to turn this ship around. And in turning that ship around, we're already seeing this. There's just tremendous wealth creation opportunities. So people who are thinking about these questions, designing the organizations to better understand them and better process information are going to be the ones that are going to capitalize on that transition. So that's another driving piece, certainly for New York common. And I think for all investors that are woke on climate, it's both the risk and the opportunity.
Jason Jacobs: So it's [inaudible 00:28:28] world unknown. Would you worry at all if you were the one that were sticking your neck out on the line as one of the first ones in that from a timing standpoint, on the macro scale, our timelines are very short. But from an investment cycle standpoint, maybe they're quite long still so that the first one's in maybe start setting the table, but then are the ones with the arrows in their back. And then it's the next wave five or 10 years out that are going to actually hit the timing right.
Alicia Seiger: Yeah. Well, we lived that already. That was Cleantech 1.0 and there are plenty of people with arrows in their backs. And I think there was a lot that was learned there. And back to tech, there was tech 1.0 too. People got back in pretty quickly. I was a big part of that. Yeah, I did that. I didn't get back into tech.
Alicia Seiger: So you have to be smart about it, and you have to understand the dynamics. You have to understand the difference between energy technology and information technology. But I think lessons have been learned. And by the way, sustainable investing is not clean tech venture and hard tech. That's hard. And there are great new organizations that have developed around supporting that early stage hard tech climate solution innovation ecosystem. And I'd love to spend some time talking about that. I know you've had both Matthew Nordan and Sarah Kearney from Prime. Big fan of Prime and I serve on their board. There's Cyclotron Road. There's all kinds of accelerators and incubators that have popped up to really build out that ecosystem, because there is a need for different types of capital for that innovation.
Alicia Seiger: But in terms of investing in the transition, there's so much more than hard tech, clean tech. So that's an important distinction to understand. There's deployment opportunities. There's retrofits of buildings for energy efficiency. There's opportunities across agriculture for business process improvement and technology improvement. There's so much more than trying to make a hard tech early stage investment be an IT play.
Jason Jacobs: In the fund landscape, what percentage of the funds have followed suit in a similar way to New York. It's still pretty small?
Alicia Seiger: Well in the U.S., I think New York I would put out has been a real leader and it was an honor to serve on that panel and to work with that team. CalPERS and stirs have been leaders in their own right, and CalPERS has demanded climate competent boards for the companies that they invest in. There's talk around disclosure mandates. There's France now, if you're an asset owner in France, you have to disclose the climate risk in your portfolio. The Scandinavian pensions and Canadian pensions have done a really good job of designing teams to capitalize on innovation and opportunities for deploying technologies that are lower carbon. In terms of climate infrastructure. The rest of the world is, I'd say more woke.
Jason Jacobs: Is it still the exception more than the rule though? From a percentage standpoint, if you look at just the total assets?
Alicia Seiger: Yeah. I mean you see big numbers of assets that are sustainably invested. I find some of those headlines, it's encouraging if it gets people to think differently about what it means to invest sustainably. But not sure about how authentic some of those numbers are in terms of what underlying products are and how ultimately sustainable they are.
Alicia Seiger: So I'd say it's, I hate to say it's the exception more than the rule. I would say it's a small and rapidly growing collection of asset owners. And the other thing I would say is, and I find this interesting sitting in a university with its own endowment. So there's university endowments, which have been the targets of divestment campaigns. And foundation endowments who they have a mission around solving social problems. Many of them have a mission around solving climate change and yet their principle assets are invested in funds and technologies and companies that aren't necessarily working towards the same end.
Alicia Seiger: And then you have the pensions. And in some ways my experience, the pension fund investors who get paid a fraction of what their even university endowment and foundation endowment, and certainly then like they would on Wall Street for similar roles. Have more of a listening posture and are more willing to admit what they don't know and be curious and kind of understand and develop new models around investing large pools of capital. I find some of the university and foundation endowments feel like they already know what they're doing. They got it. And they're either maybe on the foundation endowment side overcompensating because they work at a foundation endowment and they're the people who are supposed to think their heads and not their hearts. So we don't do that sort of thing. Or they are employing the Yale's endowment model and all disciples of David Swensen who have their ways of doing things and just aren't thinking about how the world is changing and how that traditional endowment model intersects with climate.
Alicia Seiger: So I've been impressed frankly by the pension fund community and insurance for different reasons because they're more on the front lines. Being more willing to adapt and change and understand how climate intersects what they're doing than some of the traditional university and foundation endowments, with all due respect to my friends who work in those fields. But that's been my observation.
Jason Jacobs: So what are the one or two, or handful of things that could be done that you think would dramatically unlock the rest of this capital following suit?
Alicia Seiger: Well, I think we need better products. There are good products out there. And this gets back to some of our recommendations with the fund. There are all kinds of practices that limit the opportunity set for new fund managers. Whether people don't invest in first time funds, or they have minimum check sizes that are just too big for first time funds to play in. So I think that's part of it.
Jason Jacobs: Better products meaning, what's an example of a good product?
Alicia Seiger: A good product is one that has deep understanding around climate risk and opportunity, and integrates that with sound investment principles and strategies across a sector or a strategy. So for example, one of the big challenges with New York, most of their public equities are indexed. They just own the market, and that's just an efficient way for them to manage big pool of capital with a small team. But owning the market means owning a whole bunch of risks that's not priced, because the market hasn't yet fully gotten woke to what the physical and transition risks of climate are going to imply for the market.
Alicia Seiger: So there are many companies now that are working on building index products and you know. It started with low carbon ETFs. Now there's this movement around transition ready indices where you've got intelligence around owning market that is oriented around the transition. We need more and better work in that area, but that's promising and interesting stuff. So that's on the public equity side.
Alicia Seiger: On the private equity side, this is one of the classic chicken or the egg. The owners will say there aren't enough good products. The managers will say we're here, but they're not listening to us. And I think it's a little bit of both. Part of what I see and one of my favorite kind of recruiting opportunities is when I see really talented investment professionals mid career who for whatever reason, swallow the climate alarm clock and realize that they could be doing more with their talents. And that they're in seats that aren't allowing them the flexibility to integrate this information.
Alicia Seiger: So I think there's still tremendous opportunity and need for people who have deep expertise as investors who come into the climate conversation and combine those skills. I think a lot of those first wave of product development where people who have smart, well-intended, capable people, but who were developing products without that investment experience. It's sort of the Cleantech 1.0 where the software investors were investing in energy commodities, and expecting venture returns. This is people who are scientists or who are old school environmentalist, or otherwise missing the 10 to 15 years of pattern recognition of investing. Is that skillset coming into the product development intersecting with climate science and impacts? That's where the magic happens. And I've had the pleasure of meeting some of those people, and I maybe give you a list of some of those people to talk to. That's exciting.
Alicia Seiger: And then that gets back to another barrier is just the career risk, particularly for investment professionals. It's just so much warmer in the middle of the herd and easier to just stay there doing what you're doing. And once you've made it in the club, it's hard to break out. So you see someone like Tom Steyer who went from being one of the most well respected members of the hedge fund club to going out on a limb in terms of being vocal and advocating around climate. And there's a whole nother political story there but, and there are more of them now that are coming out. Jeremy Grantham, Mark Carney, Mike Bloomberg, Hank Paulson. These are names that it's not Bill McKibben anymore. It's these folks, but we need more. And we need those skill sets as part of the climate fight.
Jason Jacobs: Where does ESG fit into all of this, and what are your thoughts on ESG? And what is ESG for anybody that doesn't know?
Alicia Seiger: Yeah, so ESG is environment, social, and governance. It's a form of investing born out of the socially responsible investing world where starting with negative screens and then into ESG where you're kind of identifying companies that have metrics and qualifications around the environment. Typically, that started with the recycle when they have efficient lighting or water use. Social is around child labor and worker rules, and diversity inclusion. And governance is around good governance at the board level.
Alicia Seiger: I tend to take issue with some semantics in this space, and I may be particularly sensitive to it. So things like ESG and impact investing, I can have long boring conversations about with people who want to dissect the semantics. When it comes to ESG, I get frustrated when people swap ESG and climate in the same sentence. Because to me they are very different. ESG is necessary but not sufficient when it comes to climate. ESG is often and has been traditionally used as a stamp that goes on the box after you've already made your investment decision to make it look good and smell good, and you feel good. And tends to have a different level of rigor than other investment decisions.
Alicia Seiger: I also believe that ESG has a trilateral equivalency problem. They are not the same thing. E does not equal S, does not equal G. And the skillsets involved in understanding and advocating, and measuring and valuing those metrics are very different. And I would also argue that the E in ESG is not climate. That if you drew the Venn diagram, there's a lot more that's climate than is what is E.
Alicia Seiger: So what my reaction to ESG when people swap terms is to say once you say ESG, people start to use a part of their mind that's the non-market part though. That's for good people, people who care. And climate in my mind, particularly once you're talking about capital markets and the scale of the transition that we need to effect, it's not a feel good thing. This is about real risk and opportunity. And investors need to employ the part of their brain that they do every day when they're thinking about pricing risk and capturing alpha. That's where the climate considerations need to come in. It's not the stamp.
Jason Jacobs: These funds that you were talking about, like the low carbon fund or things like that. If there's risk, there's time horizons, and there's upside. Do you believe that any of that looks different in the climate focus vehicles than it does in more traditional investing?
Alicia Seiger: Well yeah. I mean the risk is woke. The risk has that integrity around climate scenarios.
Jason Jacobs: If I'm just looking at my money and how much money I'm going to get at the other side, is my money exposed to more risk from a return standpoint? Or do I need to be more patient with that capital, or is there a lower upside where I should have the same probability of getting a return, but it might be capped relative to if I was investing in a more mercenary way?
Alicia Seiger: Yeah. So in the work for common, it's none of those things. It's just better investing. But there are other ways where you can lean farther in. So what I would say about risk and business as usual is you are taking more risks than you are being compensated for, which is the whole point of understanding climate risk. But I think what you're asking is so if I want to have an impact, so now we'll go into impact investing. Do I need to take more risk or do I need to be more patient?
Jason Jacobs: Is the capital concessionary in any way? I guess that's what I'm asking.
Alicia Seiger: So depends on what you're doing. I mean yes, there is a need for concessionary capital and catalytic capital. But to be a climate wise, I think all investment and asset owners and asset managers have a ways to go to be climate wise investors, that has nothing to do with concessionality, or patience or any of the parlance of impact investing. It's just better investing.
Jason Jacobs: So the same way than in other aspects of the world. The greater face of climate is status quo. I think what I'm hearing from you is that there's a financial risk to status quo as well.
Alicia Seiger: Totally.
Jason Jacobs: Yeah. Awesome. Well, this was super interesting. I feel like I learned a lot as I'm coming back around. So back to the students that are coming across your desk or career changers, or other people that are hearing this and saying, "Well, I've swallowed the climate alarm clock." What should we do with them? Where should we point them? What advice do you have for anybody listening who's in that camp?
Alicia Seiger: Talk to people, have the conversation. This gets back to where we started. It doesn't have to be your vocation, but we all have to be active participants. We're all right now, takers have a bad bet on climate. So we all need to start talking about it, making different decisions both on the margin and significant ones. Ask questions of your elected officials, ask questions of people who manage your money. And then for those who are really motivated to make change within their companies and/or start new ventures, there's a tremendous amount of opportunity and there's a tremendous amount of impact to be made in just getting proactive.
Jason Jacobs: And last question. If you had a hundred billion dollars and you could put it anywhere to have the highest impact on this problem, where would you put it in and how would you allocate it?
Alicia Seiger: I spend actually a lot of time thinking about this, right in the context of New York common, although that was someone else's money. So if this is 100 billion of my money.
Jason Jacobs: It's just money. It's money that you control the purse strings on.
Alicia Seiger: So I'd probably put $1 billion away in cash just for a rainy day and just set that aside. And then I would go all in, and I would not set up a foundation. I think that creates constraints around how to deploy the capital. I also think this idea of 5% payout of a foundation in the context of climate change is nuts. What's perpetuity in the context of climate? And then I would all of it per the recommendations I was referring earlier, 100% sustainable. So everything has to square on a climate point of view. And I would probably go half and half. Half, because again this is my money. Leaning in on the transition. So using that capital probably in private placement, private equity around supporting early stage R&D. Around breakthrough technologies. Across energy agriculture mobility. I would seed new managers, this was what I was talking about earliest. Trying to eliminate the career risk. Maybe establish some prestigious program that has a Fulbright where you just eliminate that career risk, give really smart, capable, talented investors a year runway to just put together fun theses instructors in the team and seed managers that way.
Alicia Seiger: I'd invest in new deployments of first of a kind technology because that can be hard to do with the types of capital that are available today. I would deploy renewables in the path of coal. There's 800 gigawatts of coal pipeline around the world, particularly in Asia, Southeast Asia. So it's not that those projects, that clean power isn't economic. It's just that there's path dependencies, or inertia, or whatever is stuck in the way of progress there. So I would be proactive on deploying renewables in the path of that coal.
Alicia Seiger: Some of that would be philanthropic. So your question around patient and concessionary. So for that I would first of all work to end fossil fuel subsidies. That is insanity. Invest in art and storytelling, and the research around human behavior and human psychology. All that stuff is not necessarily economical but so critical to the climate crisis. And then yeah, the political offense and defense just needs more (c)(4) dollars.
Alicia Seiger: And then the other half would be on the risk mitigation side and how you do the dial if it's 50 50 60 40 whatever it is. I'd have to think about. But I said half because to build those products, and this gets back to what we were talking about earlier. You need scale. You need real money to get the black rocks of the world to design the transition ready index. And through all of this, I would convene an owner's table to share ideas and best practices, and figure out ways that we can work together to pull some of these products out in the market. Because that will go a long way towards making it so that you don't have to have $100 billion to invest in these products, because we will have created them. They'll be on the shelf, and people like you and me can actually invest in them. So that's where I'd start.
Jason Jacobs: I have to say, I think that was the most granular, well-thought answer to that question. I ask that of every guest. I feel like we should do a Kickstarter to get you $100 billion so that you can put that plan to work. I like it.
Alicia Seiger: Sure. I'm all in.
Jason Jacobs: Well Alicia, you've been a great guest.
Alicia Seiger: Thank you.
Jason Jacobs: And thank you for coming on the show.
Alicia Seiger: Thanks. It's been fun.
Jason Jacobs: Hey everyone, Jason here. Thanks again for joining me on My Climate Journey. If you'd like to learn more about the journey, you can visit us at myclimatejourney.co. Note that is .co, not .com. Someday we'll get the .com, but right now .co.
Jason Jacobs: You can also find me on Twitter at @jjacobs22. Where I would encourage you to share your feedback on the episode or suggestions for future guests you'd like to hear. And before I let you go, if you enjoyed the show, please share an episode with a friend or consider leaving a review on iTunes. The lawyers made me say that. Thank you.
