Jon Powers: Welcome to Experts Only podcast sponsored by Clean Capital. You can learn more at cleancapital.com. I’m your host Jon Powers. Each week we explore the intersection of energy, innovation and finance with leaders across the industry. Thank you so much for joining. Jon Powers: Welcome back to Experts Only podcast. I’m your host Jon Powers. We have an exciting conversation today with Marilyn Waite, who is at the Hewlett Foundation. She’s a program officer in the environment, but what she’s working on is phenomenal climate finance solutions, addressing the gaps that exist both domestically but also internationally and changing the game and how we can bring more capital into the solutions we need for climate change. Jon Powers: As we talk about Marilyn’s got a really interesting background from spending time in Madagascar to working for a French nuclear company to being part of Village Capital. She’s also an author of the book Sustainability at Work. You can get that link through our website, and I hope you enjoy the conversation. Jon Powers: Marilyn, thanks so much for joining me at experts only. Marilyn Waite: Thanks, Jon. Thanks for having me. Jon Powers: You’ve got an incredible background. I do want to talk about so many of your experiences from publishing the book Sustainability at Work to living in Madagascar and Princeton and Cambridge. Before we go down that path, I really want to explore what first got you interested in the sustainability and the sustainability place to begin with? Marilyn Waite: I’ll give you a somewhat long version of that. I had studied environmental engineering in university and was excited to apply some of that knowledge. I went off to Madagascar and worked for the United Nations on water resources primarily. From there, I really experienced firsthand our energy woes, especially in emerging economies. I went for a few months without really reliable, stable electricity. The local utility had ran out of money and ran out of the water for the hydroelectric power. Marilyn Waite: I was confronted head on with the challenges of providing clean, reliable energy for the masses globally. I shifted focus from there, from the water sector to the energy sector, went on to study engineering for sustainable development and got into the nuclear energy industry. I went to work for a recycling spent fuel plant in rural France, and from there, went through a lot of different roles, eventually working on the construction of new nuclear reactors and then working in corporate R and D on new energy technologies. Marilyn Waite: We were acquiring new firms that were in torrefied fuel pellets for biomass and concentrated solar power, which was a story in and of itself, offshore wind, we even had a fuel cell product at that point. It was really working on all of these new technologies, acquisitions, technical economic studies. It was in that position that I realized a lot of our troubles were less on the engineering and project management side and more on the financing side. Coming up against project finance, corporate finance hurdles when it comes to financing these, at that time, newer technologies. Marilyn Waite: I shifted focus there. I left France to go to China, did a bunch of things there, including a little bit of merger and acquisition work. My plan was to spend a decade in China working on these issues, And mostly because of the air pollution and the investment sector being closed off to foreigners, came to the United States and joined Village Capital to lead their clean energy practice. That’s when I was able to pick a deep dive on one part of this big capital stack, focus on the higher risk part of it, venture capital or seed capital, for companies, startups that were solving challenges in the transportation space, energy challenges in particular. Marilyn Waite: The common thread there really is sustainability, really has impact around the major issues of today, and I was the climate change as number one for that. Then two years ago joined the Hewlett Foundation to lead the climate and clean energy finance portfolio. Jon Powers: Yeah, I do want to come back to that for sure. For people that are unfamiliar with Village Capital, Village is really invest in early stage startups. Talk about some of the work you were doing there. You’ve now gone from being in the projects themselves as an engineer to looking at the opportunities in the landscape to really beginning to look at them as an investor. Marilyn Waite: Right, so Village Capital has a unique model in that the first fund really focuses on peer selected investments. The idea that the entrepreneurs that are in the trenches doing this work day in and day out know best. They understand the customers and the market and the hurdles, and so if you could get a group of peers together that are not competitors but that are generally solving the same problem just in different ways, they would probably be the best form of diligence than an external expert committee. Marilyn Waite: I set the strategy, the investment thesis for our clean energy work, and that was around increasing energy efficiency and goods movement, freight, transportation at large, and recruited firms to take part in this peer selected investment process. We made a few investments from that thesis, including Idle Smart, and there was a micro trigen company as well called M-Trigen, and there was also a electrification of tractor company called Autonomous Tractor Corporation, ATC, and that was the first round of investments made from that thesis. But really the innovation there was getting this peer selected input around investing, especially for these, I would say, real economy sectors that matter a lot to our present day challenges. Jon Powers: Right. How did that early investing viewpoint as emerging companies, how has that helped you look at things in your current role at Hewitt? Marilyn Waite: I definitely understand after that experience that not all capital is created equal. Most of our capital available actually globally, 90% of it, is in the form of bank debt, loans, lines of credit. A lot of people working in finance actually come from that experience or let’s say asset owner-manager experience. It is very difficult to get that more risk averse capital to move into the early stage disruptive deep, decarbonization tech needed, also if it’s all climate change, understanding that capital moves in different ways, has different actors and is organized out there in the world. Marilyn Waite: It’s not just one big pile of money. It’s actually organized on a risk return spectrum, and it’s organized according to what it has been set out to do. There’s a purpose and there’s an expectation around how a mortgage loan book should look versus a project finance book. Some economies don’t even have certain asset classes. In China, there really isn’t this project finance or renewable energy asset class. Jon Powers: Interesting. I’m going to come back to the finance side and your experience at Hewitt. Before doing that though, I definitely want to talk… First of all, I don’t even know how you found the time to do this, but you ended up publishing a book, Sustainability at Work, which is really interesting for folks that haven’t seen it, check it out. Sustainability at Work really is about helping folks explore careers that make a difference. Jon Powers: For many of our listeners, we have students, we’ve got future leaders that are exploring what, even opportunities exists in sustainability, and it’s interesting that even changes a year by year now. You really help introduce people to different verticals like health care, education, media and the law and what they could do for sustainability. First of all, why did you think this book was important? Marilyn Waite: Here I was learning about sustainability and engineering, integrating it, and eventually what happens in those environments is that you think everyone else knows about sustainability and engineering or whatever it is that you’re applying a sustainability lens to. Then I got to the plant, the reprocessing plant, and then was confronted with explaining what that meant and how we were doing it actually. I, for example, was in charge of improving the overall efficiency of one of our workstreams there, a technical chemical process, and involved in that included reducing the reagencies in that chemical process and was definitely in line with making the plant more sustainable. Marilyn Waite: I was confronted with that and I thought, hmm, well this really requires an all hands on deck approach. If we are going to do more than just move the needle on sustainability, environmentally, socially climate change, you name it, then it can’t just be something we do at home or at our leisure. It has to be also at work, and that everyone, no matter what role they’re playing and their work can have an impact. I started to interview people in different fields, so whether they were nurses or pediatricians or talk radio hosts, and asking them about how they’re incorporating this in their jobs. I just developed a thesis around that, but yes, it can be embedded in every single career. Jon Powers: Yeah, it needs to be if we’re going to solve these problems. What advice do you give to folks that are looking to move into the sustainability space? Marilyn Waite: I would say read the book. Jon Powers: Yeah, read the book. Marilyn Waite: Sustainability at Work, Careers That Make a Difference, and there’s a whole framework called SURF that I introduce, supply chain, user, relationships and future orientation. There’s also an article that’s available that breaks that down and think about your strengths first as a professional, like what do you add irrespective of the company that you’re in or the field you’re in, what are your strengths and apply that SURF framework and how you can best have the impact in the type of career that you want for yourself based on your strengths. Jon Powers: Yeah, interesting. Now that you’ve built a phenomenal career in this space, I’m going to sort of transition now to the finance side, which actually a lot of this same conversation has to happen. I think there has been for a decade, ESG was just this additional metric people would occasionally look at and the climate investing was a nice to have. Now, it’s becoming mainstream. Jon Powers: Here’s Larry Fink with his famous BlackRock letter that came out the beginning of this year, but you have even Jim Cramer came out this month with basically saying that oil stocks are on their death knell, because money managers and young investors aren’t putting their money into it. It’s an amazing statement from a guy like Jim Cramer. Marilyn Waite: Oh, I agree with that. Jon Powers: How are you seeing climate finance begin to move mainstream? We need a trillion annually to get to our goals. Are we on the right path? Marilyn Waite: Yeah. Climate finance is really about financing used to fund solutions that mitigate greenhouse gas emissions. There is a data problem here. I will use the CPI, climate policy initiative, data, which says that we have just over 500 USB deployed annually and globally to solve climate change. But you’re right, we need to at least triple that, and there’s a gap. Jon Powers: Where was that data point from again? Marilyn Waite: CPI, Climate Policy Initiative, and that data is improving year on year. One of the gaps that I would mention would be transparent data and disclosure, which we need more of to really track this more closely. There definitely are positive sign coming from all of the different pools of capital, whether you’re on venture, private equity, asset owners and managers, including insurance, pension and mutual funds, and the banks and lending. Marilyn Waite: But there is a lot more work to do, and the particular gaps on the banking and lending side are flagrant, and also when it comes to passive asset management. Now, the trend is positive, but we have to accelerate that trend, and we have to really move quickly and smartly to de-carbonized our financing and investing. Jon Powers: How do you see the philanthropy role here, and can you talk a little bit about the work at Hewlett and why Hewlett is looking at this? Marilyn Waite: Yeah. Philanthropic dollars are interesting because they are very flexible. There are not a lot of rules around them and they are by nature unaccountable. It’s the part of the economy that is probably the least accountable. If you’re in government, you have your citizens, if you are in business, you have your customers and shareholders and other stakeholders. Philanthropy sits in this interesting, apart place. The opportunity of that is that you can be very flexible, you can experiment, you can take a lot of risks, so that is something that we are doing. Marilyn Waite: We are dedicating at least $75 million US dollars over five years to support mobilizing capital for climate solutions. We are really focusing on three markets with that, so where the capital is [inaudible 00:14:00] in China, the European Union and the United States. We are also focusing on certain pools of capital, venture because we still need things like seasonal storage and [inaudible 00:14:13] air capture. There’s a lot of the hard tube, the carbonized things like steel and cement and chemicals, and so we need that higher risk pool. Marilyn Waite: We are focusing a lot on asset owners and the other managers. We just issued a request for proposal or RFP around passive asset management. Now more than half of equities in the US are traded using passively managed index funds. It’s also about a half in Asia, about a third in Europe and it’s just growing, and that’s not just on the stock side. Marilyn Waite: Also on the bond side, so including debt instruments, fixed income and then a huge focus, I’d say the number one focus is on banks and lending and credit, because they are so systemically embedded in the economy, and because so much of the solutions that have to be scaled are bankable and require lending and lines of credit, so a big focus there. I can give you some examples of the types of things we’re doing in each category. Marilyn Waite: On the venture side, we have supported the Climate Impact Fund, which has a climate first thesis. We’re looking for what to do, for example, in the Chinese economy and equivalent to that perhaps. We are- Jon Powers: When you say supporting, does that mean you guys are putting capital right into that? Marilyn Waite: Yeah. Jon Powers: Are you supporting… The emergence of the thesis, I guess. Marilyn Waite: 3 million into the fund. Jon Powers: Excellent. Marilyn Waite: Directly into this very important in the supply chain of capital and getting these different technologies and interventions scaled, commercially valuable at the price point they need to be, to be commercially viable, very important capital that is tied to capital as well. Marilyn Waite: On the asset owner management side, we just issued this RFP that I mentioned that really is speaking to, for example, have all of the default options for our retirement plan be low carbon option, be Paris-aligned, fossil fuel free, all of those things, and so that there isn’t this money flowing inadvertently, but even without our consent to our own demise, to really hurt the planet and our economy. Marilyn Waite: Then on the banking side, lending, there we have for example, supported, meaning directly with their balance sheet, the Clean Energy Federal Credit Union, which is a new credit union in the United States dedicated to clean energy lending. They have the lowest rates for NEV, and for ground source heat pump, air source heat pump, solar, distributed solar in terms of residential and other- Jon Powers: Are they lending to individuals, to companies, to developers? Marilyn Waite: They are currently lending at the residential level, so to households. A brief one on one on the credit unions. Credit unions are democratically owned or member owned. They are on the front lines of really retail lending in the country. They are embedded in politically conservative to progressive districts alike. They are trusted by people across all kinds of demographics. They represent roughly over $1 trillion US dollars of AUM, and so even impacting 10% of their lending for clean energy is important, especially since we need all hands on deck for this. Yes, they are. Marilyn Waite: They can also then to small- and medium-sized businesses. They are a new credit union so they have a few years ago in the regulatory framework before they can do that lending for SMEs, but they are also selling their loan participations to other credit unions from Texas to Montana to Oklahoma so that they can begin to do this kind of lending too. It’s not just them, it’s also scaling it through the credit union system. Jon Powers: Interesting. Marilyn Waite: Yeah. They’re open for deposits, if you want to open a savings or CD with them, and they’re also open for grant capital so that they can scale at the speed we need them to, so that’s an example. Marilyn Waite: Something else that crosses these different assets and pools of capital is something called the Partnership of Carbon Accounting Financials, or PCAF, and that is really getting to that data and disclosure that I was mentioning. Essentially it’s an industry-led initiative, so banks and asset managers coming together in working groups across the globe to harmonize and approach for measuring and disclosing, not the carbon footprint of their brick and mortar branches, but of their actual core business, which is the financing, measuring and disclosing the finance emissions per asset class. Marilyn Waite: Whether it’s a project finance, listed equity, auto loans, mortgages, commercial real estate, you name it, across the asset classes, what are the tons of carbon dioxide equivalent associated with those loans and investments. Then begin to manage those numbers and data, create new products that address it and begin to decarbonize a portfolio using that now newly available data. Jon Powers: Interesting, and then when you are investing in sort of this, by the way, an amazing array from early stage capital to really transforming the data on the markets, is Hewlett publishing or helping educate folks on what they’re seeing out there? Obviously you’re out there doing things like this podcast, but is there a role that Hewlett plays in that education? Marilyn Waite: Yeah, so we make everything publicly available that we do fund. But you have to know we exists, which most people in the world don’t know we exist. No one just automatically goes to our website, so the impact we have really a through what we fund and enable them to communicate what they’re doing is what we try to do best. We’re extremely leanly staffed, so our capacity to educate really is through enabling the different initiatives that we fund to communicate what they’re doing. Jon Powers: Oh, that’s fascinating. Now stepping out of the just the pure Hewlett role and it looking at the broader market, we’ve got… We talked about at the beginning of this podcast an amazing sort of set of trends that we’re really to see. I always go to Bloomberg New Energy Finance for data, but whether there or obviously Larry Fink’s letter. You’ve got the green bond space is just booming. You’ve got FinTech solutions moving forward, married to a transformation that’s happening in at least the US public acceptance of climate as an issue. Thanks to the efforts of folks like Greta, who are raising the cultural awareness and really stamping down the debate anymore. If the last decade was about setting the stage for addressing our climate challenges, what do you see really moving the needle over the next decade? Marilyn Waite: I think you mentioned something very key. You mentioned the movement of the masses and the youth voice. I think the voice of consumers in finance has been missing and we need to amplify that. If we amplify that, that is going to take us over the scale, that will be the one of the tipping points. I think you and I having a bank account being this passive transactional thing where it doesn’t matter. I think those days have to be over, so our money is doing something. It’s being leveraged by at least 50 to one if not more to do [inaudible 00:22:09] financing, and those things can either harm society or help. Marilyn Waite: We have to make that known to the world and to financial institutions that this matters, and move our money accordingly in a very simple way, but also according to those values and make that consumer voice heard. I think that will be a big part of this next decade in really helping us get to that tipping point. I also think disruption in the good way this time will be helpful. I’m not sure, for example, that Vanguard has ever made an acquisition. I think this could be one of its first things to do is to actually… Marilyn Waite: There are products out there. There’re new companies emerging, whether it’s Eco Capital or Newday or all of these, Open Invest, that are aligning with this new society that we have to have if we’re going to solve climate change. I think there’s room for that disruption, this disruption by itself, but also to be incorporated in the mainstream larger players today. Jon Powers: Interesting, so with that, you’ve got some of the larger players, the pension funds and the endowments, who’ve been saying the right things now for years and doing the right things on the divesting, but you’re not seeing as many yet taking the active investing space, where their actual money managers are putting money into assets or climate focus infrastructure. Do you expect that to change here in the next few years? Marilyn Waite: Yes. I would say what you said is true in certain economies, but not in others. I would say, for example, in China there’s actually been a lot on the invest side. Jon Powers: True, yeah. Marilyn Waite: Very little on the divest side, so it can both simultaneously, the biggest in terms of the capital out there, biggest financiers of both climate destruction and renewable energy. We’ve got to change that across the board. There’s not one without the other. We have to be carbonized and mobilize the capital for these solutions, and it’s not just energy, it’s also in agriculture. Marilyn Waite: We have to shift from the current status quo of industrial factory farms to regenerative agriculture, increasing soil carbon sequestration in land and soil, which also leads to, of course, healthier end products, move from annual perennials. All of those things have to happen. We also have… Transportation, we have to… High speed rail is well built out in China and Europe. It’s a complete gap in the United States. Jon Powers: Totally. Marilyn Waite: Really, market by market, these shifts have to happen and it makes economies more competitive in the medium and long run anyway. Jon Powers: No, that’s a great international perspective. I think I have a tendency to look at things domestically, and of course, the Canadian pensions, the European pensions and others are just doing really phenomenal stuff. Our folks here, we have the right path. I think from Clean Capital’s perspective, another is I want to see more capital flowing into these deals. My last question, because I know we’ve got a tight time here, is a pretty standard question I ask all my guests, and if you could go back to sit down with yourself coming out of college or out of high school and could give yourself one piece of career advice, what would it be? Marilyn Waite: Oh that’s a great question. One piece of career advice out of college. I would just say be curious about not only topics but also the people in front of you. Jon Powers: Right, really interesting. Marilyn, thank you so much for your time today and your incredible work. Marilyn Waite: Thank you, Jon. Jon Powers: For folks that are interested, you can get Sustainability at Work obviously on Amazon but also at Marilyn’s website, which is a Marilyn Waite, and it’s W-A-I-T-E, dot com. We’ll have a link from Clean Capital’s website. You can always get more episodes of Experts Only at cleancapital.com, and please share any thoughts on future interviews. I’d like to thank our producer Carly Battin for her help setting this up, and as always, I look forward to continuing the conversation. Jon Powers: Thanks for listening in today’s conversation, find more episodes on cleancapital.com, iTunes or wherever you get your podcasts. If you like what you hear, be sure to subscribe and leave us a five star review. We look forward to continuing our conversation on energy, innovation, and finance with you.