R.A.C.E - Building Sustainable Capital Markets

foreign [Music] ly we are one man down but we were speaking backstage and I think we have more than enough to uh to talk about over the next 25 minutes so for the benefit of the audience could you just introduce yourself and the perspective that you're bringing to this discussion yeah hello everybody Dave Rouse from carbon click uh we're a carbon offsetting platform for the voluntary carbon Market which you'll generally see us as a little green button on the checkout of e-commerce and Airlines and so on um it's a pleasure to be here today I come from New Zealand um and I guess I've been an environmentalist my whole life so it's awesome to see the interaction between environmental and capital and financial markets coming together for greater impact I'm Ben Worley from Spiro carbon thank you very much for having me here it's great to see all of the people interested and focused on this race towards decarbonization our platform at Spirit carbon utilizes technology to remove the friction in the monitoring reporting verification and certification process so all other things that we've been talking about here today are very important near and dear to my heart and and to our company so very excited to get to expand on that a little bit more great um bonota bus naika thank you so much for having me I'm the president of aspiration in the Middle East aspiration is a global leader in climate Solutions and what we do is we have a portfolio of high quality nature-based carbon offset portfolio around the globe fabulous so maybe we start from the demand side then and just talk me through if you're seeing an increase in inbound queries from clients customers Etc I think that'll be a consistent yes across all of us but why don't you go first yeah sure that's actually an interesting question because I think there's probably three distinct types of demand that we're seeing so we we consult with governments like countries organizations such as sports franchises corporations and non-profits and then also we do a little bit with consumer-based demand which I know is is that your expertise um and it's interesting to unpack where the demand is coming from so with the international demand a majority of what we're seeing is there's pressure on countries to take account of their carbon Footprints and that's happening throughout the International Community and and I think most countries are now understanding that they need to make see changes in the way that they do business in order to be accepted by the International Community on the corporate side what we're seeing is there's been a huge increase in corporate demand so we were responsible for making teams in the MBA teams in Major League Baseball large companies such as Lyft and Deloitte carbon neutral but a lot of that demand is actually consumer driven so the consumer demand is forcing corporations to take action and that's the one thing you know in terms of how can individuals make an impact it's putting pressure on corporations to actually take account for their footprint and that's a lot of what we're seeing in the increase of demand yep but I guess in some senses it doesn't really matter where the demand is coming from right like the consumer demand is still going to have the same impact if it drives the corporate to make changes yeah and I think we're seeing so one of the I believe underserved markets in this is the SME market and you talk a lot about the large corporates and the big brands that are doing this and then at the individual level people who are really driven to do that but there's not a lot targeting that and we work with a lot of nature-based solutions our background is in ag Tech so we work with smallholder Farmers from you know maybe uh one acre or less all the way up to really large corporate farms and what we're seeing is is that Demand on the large corporate side they're getting a lot of pressure from their buyers so the large grocery stores who are in turn getting pressure from their consumers to do it and they have no idea where to start and so really there's this education Gap too because again the big corporates have been doing this for years and they've had some time to acclimate but it's really hitting this SME Market kind of out of nowhere uh and there needs to be simplified solutions to be able to facilitate their air kickoff into these sustainability strategies which means that we need to create sustainable Capital markets to support the creation of those offsets and the reduction in decarbonization internally for them that's affordable that they're not having to compete necessarily with the major corporates that are gobbling up you know what offsets are available we actually heard I think it was Sharif in the opening panel he made that many companies don't even know what their Baseline is or where they are so what sort of guidance could you give on that front for helping companies understand I I guess from a guidance perspective um it's a case of standardization and and this is a real problem that we have right now is uh there are a number of ways of determining your carbon footprint a number of methodologies and they don't all produce the same results as a question of whether you're only reporting one and two or whether you're including scope 3 as well and when you're reporting your emissions how does an investor understand how does a consumer understand how the company is performing unless they actually know and can compare apples with apples that that's a major problem part of that will be addressed by initiatives like certification ISO certification and inclusion of scope 3 in that certification as well um the the helensworth scope three emissions is that it makes up about 75 of most companies emissions yet it's only reported in about 10 percent of companies ESG policy and Reporting Frameworks and why is that so because it's difficult so um the difficult part being 75 of the average company's emissions means what we're only reporting on is is relatively meaningless when it comes to comparing what companies are performing well and what companies are performing poorly so this is something that regulation will fix in the um in the Commodities Market in the markets where um where companies are listed and and have to report to certain standards but in the next tier down which is private companies and large companies there is that Gap there and it needs to be addressed consumers are driving some of that as well because they're getting smarter and the companies that we see that are actually going deliberately to to science-based Target initiatives reporting including scope 3 emissions and they're able to Market that to Their audience their winning business their winning shareholder engagement and they're getting the big investment from financial institutions like banks that can help them grow and this will be a real Road other organizations that are slow to adopt this but it does it does need a lot of focus and it does need a lot of effort put in by by all of the businesses both publicly listed and private so maybe that's a nice segue to talking about what are some of the roadblocks that you're seeing at the moment the key challenges I'll I'll take this one um you know one of the the reasons that we started spherocarbon was because we worked a lot with smallholder Farmers uh mostly in Asia and some in Africa as well and the system is not Equitable the the food supply chain is not Equitable they tend to keep you know five maybe six percent of the total value of the food that they're producing these are the creators these are the people that are putting their Blood Sweat and Tears into to making this and they get so little and they have no control and no impact over the market and you look at what's happening with climate change these are also the people that are being the most affected early on that's affecting their livelihoods and the system as it stands now by creating financial markets for carbon you have an opportunity where you could create this additional stream of Revenue and lift this entire there's 500 million smallholder farmers in the world you could lift this entire group of people up but we have a tendency to conflate bureaucracy with credibility and they're not the same thing yes we need regulation but as we mentioned at the beginning of the the the day today we need Dynamic regulation that can adapt with technology that can allow for the expansion of that and the way that the system is set up now it's it's too complicated it's too expensive and it's too time consuming to do projects that that expand this so it's disincentivizing the transition to a green economy for a significant portion of the world's population and I would say probably some of the most vulnerable parts of the population so in our opinion the the regulatory process that's in place absolutely has to change in order to to fix that that is one of the biggest roadblocks to expanding transition across a huge sector that's currently being ignored and excluded and how is how could technology help with that then you know particularly in like the smallholder farmers case and you know sustainable Capital markets in general how are you seeing it so actually Technologies I think essential it's very important a great example of this is uh earlier this year aspirations started a fund with the IFC it's called the carbon opportunities fund it's a first first in class fund and what we do is we Supply invest in uh verified carbon credit projects across the globe and then we tokenize the carbon credits and I'm sure that's something that everyone is seeing across the industry but the tokenization of carbon credits has been a huge it's sort of in terms of credibility in terms of uh the verifiability of of carbon credits it's been a game changer so it's helping a lot and I'm yeah and and for us I mean that's the core of what we do we bring technology to bear on this issue to democratize that to give access to it and so utilizing the technology that exists now we can automate a good portion of that verification piece and then by utilizing blockchain by tokenizing it you can put not just you know the origins of the carbon credit or carbon offset onto on chain but you can put all of the underlying data on there and that's what we do and you make it open to public audit so now instead of having a third-party certifier that can come in and say oh yes your records look good and here's a stamp and you as a buyer you're trusting that stamp right that's a third party trust well instead why are we not opening that up why are we not making that available for anyone to come in and audit the actual records of those to say yes that that did what it said it was going to do and that that speaks to the core of of what we're doing and we believe that by doing that we can remove a lot of that friction which enables us to expand and scale almost infinitely uh if if the certification it happens at the data source as opposed to the individual project level and that ties into the grain washing aspect as well doesn't it we heard from her highness this morning and it's it's come up again and again how do you actually ensure the Integrity of the carbon projects like are they actually impacting CO2 and Emissions where does that come in yeah I'm happy to answer this one um so greenwashing comes from both ends of the spectrum the first end which I mentioned earlier was what is the business disclosing its emissions actually to be under what framework what emissions are they covering you know scope one two three so first of all you've got to Define and not mislead people that your carbon footprint is x amount the second part of that is what are you offsetting sorry the second part is actually what is your path to Net Zero how are you decarbonizing because we can't offset our way out of this problem offsetting is a valuable and critical part of it but it has to start with the decarbonization journey first so that's the second part and then the third part is Meaningful quality carbon credits so we know there are poor quality carbon credits out there and there's a number of us that are all trying really hard to raise the bar on exposing the poor quality credits and exposing the good quality carbon credits for what they really are and there are four kind of key criteria that need to be looked at the first is the additionality would this project have happened without the carbon credit investment in it and this is particularly a question that gets asked in some nature-based solutions like afforestation or avoided deforestation so would that Forest really have been chopped down if we hadn't paid them money to keep it there so that's a big and difficult question and we spend a lot of time analyzing this the second one is permanence so is this project going to continue to sequester or is that carbon going to continue to be sequestered for generations to come or is it just temporary the third thing is and these are co-benefits that go along with it and this is what makes a really good carbon credit stand out from a good carbon credit and this is biodiversity and social impact so are we planting a whole lot of pine or a whole lot of monocrop species which don't enhance the goals of organizations like World Wildlife Fund they don't help to start our ecosystem of food supply and help to generate connection with humans Back To Nature that's the biodiversity part that can really be dragged along with carbon to fit a lot of other problems in the world and then there's social impact and this is where you get into sustainable and regenerative agriculture and starting to fix the world's food supply systems as well so so really in all of this you can go from green washing and very little impact to actually changing the world through uh through the voluntary carbon markets and and compliance markets if done well and actually that ties in very nicely to the sustainable part of the sustainable Finance how do you actually ensure that the voluntary carbon markets are sustainable and they're actually on an appropriate scale yeah I I think that that's critical when we talk about sustainability we really want to talk about holistic sustainability so you know I've heard it said probably a dozen times just in the last hour it's not just the E and ESG right there's there's an S and A G but but when you look at the UN sustainable development goals there's 17 of them and we focus so much on climate action and don't get me wrong I mean that's that's absolutely critical it's an existential issue for our species um but those other 16 sdgs are very important too and I think that when we design Capital markets uh to support these carbon initiatives or climate initiatives we need to account for that and I think that there are mechanisms that the market can can do that they're going to reward carbon offset programs that have a biodiversity impact that have a social impact you know our the carbon offsets we do with small folder Farmers they keep 80 to 90 percent of the revenue from that which is which is huge I mean that's 20 increase in income for a farmer you know over what they were making before that that's a serious substantial um impact and I think that you're going to see the markets begin to reward that especially when we have this consumer driven push for sustainability because consumers are not going to want just the bare minimum they're going to want you to do more what else are you impacting are you impacting the soil or impacting the air are you impacting Equity gender equality all of those things are absolutely critical and we have to approach sustainability or carbon and climate from a holistic sustainable approach and actually just to piggyback off that I think that's a great point and I think one of my sort of one of the things that I find the most fascinating is that in order to to deliver on the sustainable development goals the cost over the next decade would be close to 90 trillion dollars so there's no country no company there's just no way to achieve those without substantial impact from the capital markets so I think that's sort of really ties it together in terms of how much Capital needs to be Unleashed for us to make the sdg goals a reality so it's absolutely a sort of on all of the above solution not any one thing so how can green Finance then ensure the quality of carbon credits um so so green Finance if if done well right uh can ensure that the credits that will come out of the financing activity so you've got an initial start which is the investment to actually kick off the project this is generating future credits that's where it begins with making sure that we're planting the right species for example and and those those green bonds and other mechanisms and instruments are done responsibly but then that flows really nicely into um the other part of green Finance which is actually the commoditization of carbon the tokenization of carbon and building in all of those appropriate co-benefits to raise the profile on the right type of carbon into the markets that are going to be demanding this and driving the markets to demand this and then the second part of it is of course making sure that we're helping the businesses that are doing well to thrive by by exposing them for taking those leadership steps and on the top ization I guess that you just open up such a broader market and in terms of that have you seen any roadblocks or challenges and maybe we start on the tokenization side because that's come up but then more broadly I mean I think there are certainly roadblocks but there's going to be to the question you just asked there's going to be new instruments that come out virtually all the time over the next decade there's going to have to be new instruments and there's always going to be sort of some growing pains with the new instruments with the tokenization of carbon credits I think the overall increase in like the Integrity of Credits based on tokenization has basically made the downside risk which is essentially the risk from tokenizing anything in terms of like the duplication and all of that not not marginal but certainly less impactful because of the overall good that they can do and that's what we're finding in terms of tokenization of carbon credits globally and I'm sure that's what you guys are seeing as well yeah I mean tokenizing the the credits but then also including all of the supporting data opening that up it's all about transparency and and it's it's making sure that you have uh a good data chain of custody right as long as your data chain of custody is good and and you can trust the the systems that have produced that information by increasing that transparency and really embracing it which is not always easy for us to do but by embracing that full transparency I think the that that's going to go a long way to increasing the trust and the the overall system and in increasing the value and I think that's one of the most powerful things that tokenization uh can do in this ecosystem fabulous we do just have a few minutes left and I'm going to go Auntie what Danny did this morning where he asked what kept everyone up at night and I'm going to ask you what would help you go to sleep at night like what would give you more reassurance in this market in the carbon Market I think if if people um policymakers governments are able to take more of a lead on not worrying so much about covering their backsides and not worry so much about getting it perfect but just taking action and we know they're going to be Kinks we can work that out but we actually have to start and words only go so far we see this with cop it's the actions that are taken even the first small steps that that would make me sleep a lot better at night if if we started hearing lessons seeing more and we see some countries the most unlikely countries at times like the US under Biden making pledges now under Lula with Brazil's new president coming in and making rainforest packs with Indonesia and the Democratic Republic of Congo which by the way have more than 50 percent of the world's rainforests these kind of pacts are the actions that that start the process and yes they need to to be policed but it's those action steps they're not talking about it they're just doing it and they're worrying about the consequences later great point um I think on a micro scale what keeps me up at night is you know I have two small kids and and my fear is that one day in the future they're going to look back and say hey did Dad do enough right did we do enough did we try enough were we loud enough to get people engaged and actually take action at the macro scale it's it's much much like he said it's we talk a lot about what we're going to do and we set goals for 2030 and we set goals for 2050. and we have road maps to get there but what level of accountability are we doing you know we we come back a year from now and we're going to report on our accountability well why are we waiting that long to do it and why are we not making a bigger deal about holding people accountable to meeting those Targets in the short term right because it's really it's great to set these long-term targets but unless we're taking action immediately and unless we're being held accountable and our governments are being held accountable in our corporates are being held accountable it it's going to be too late we're going to get to those targets and people are going to be like oh well we missed it but the the stakes are too high for there to be an oops moment seven years from now and I think similar to what was said I think what helps me sleep at night actually is the huge increase in consumer individual demand and that increase in consumer demand can be seen in terms of impacting foreign policy like domestic policy and also in changing the way that corporations act and that consumer demand the increase in that is sort of the best hope that we have and you know gen Z's number one issue globally is climate change which is actually something that really helps me sleep at night because it means that the Next Generation really cares about these issues because it's the world that they're inheriting so that helps me sleep at night excellent well it's always nice to end on an optimistic note so Dave Ben and vanoda thank you so much for your time it's been interesting discussion please join me in thanking our panel [Applause]