24: Acceleration is key

Anna-Marie

Hello, and welcome to our latest episode of 30 for Net Zero 30. I'm Anna-Marie Slot, Global Sustainability and ESG partner here at Ashurst, and we're speaking with 30 changemakers around the globe about actions to take today to deliver on 2030 goals. Today, we are lucky to be joined by Denise Odaro, Head of ESG and Sustainability at PAI Partners. Thank you so much for joining us today, Denise. You have such a fascinating background in the world of sustainability. Perhaps you could start by giving us a little bit about the various things that you've done and how you came to PAI Partners?

Denise

Thank you, Anna-Marie. So, as you said, I recently joined PAI Partners, and it truly is in my opinion a transformative opportunity in terms of taking sustainability where it needs to go, to the heart of changing business models. And we can talk a little bit more about that, but in terms of what my background is, I will say it's sort of, or rather my partner tells me this, I've been married to sustainable finance for the last 12 years, and by that I mean I've lived and breathed it. I was at the World Bank Group's private sector arm, IFC, for that period, where I worked extensively on integrating ESG into public capital markets. I was the Head of Investor Relations and Sustainable Finance Coordination, and in parallel, I was a founding member of the Executive Committee of the Green Social and Sustainability Bond Principles, which I left only a couple of months ago as the chair for the last couple of years.

And even before that, I would say that whilst I perhaps have been married to sustainable finance over the last 12 years, as I said, I was joined at the hip. Because before that, we had perhaps courted a while but I didn't know its name, let's just say that. I mean to say that there were aspects of sustainable finance in my earlier career, but of course it wasn't called by the name we know it as today. Just to wrap up, I would summarise by saying that my career has been building blocks of bringing finance and sustainability together to this point where I am now, which is assisting private sector companies to actually implement their sustainability journeys to net zero.

Anna-Marie

A fascinating background. And so, clearly, you've been in this for a while, so what is the biggest shift that you might have seen particularly over the last 18 months? Because I think that's where a lot of change has started to happen. And we've talked about COP26 in the past, but what maybe, here we are right in the midst of COP27, what would you expect or would you like to have come out of COP27?

Denise

I'm going to cheat and say two things here, and the reason being it is my personal mission to have the sustainability messaging go beyond environmental. At the core of this in the end is that climate change is in fact a social problem, so to me the biggest shift I celebrate over the last 18 months, two of them have been, one, gender balance. So, the EU law of course to improve gender balance on company boards, and that directive, which I'm sure you're familiar with, which will have to be transposed into international law of course, but that lays down that 40% of non-executive director positions in listed companies should be held by members of the underrepresented sex by 2026. So, whilst it doesn't state women, because as you may also know when we talk about sustainability in ESG, there are certain professions where you do see a higher representation of women, but the idea here I hope, is to ensure a level playing field, and it does that by addressing transparency in shortlisting candidates, et cetera.

I'm a fan of that, because as you know, I think just for the listeners' purpose, in the EU, fewer than one in 10 chief executives and board chairs are female. It's essentially a really dismal number that has continued to remain so in as far as, as long as it has, in fact. So, the second thing I would say is the plastic treaty, or rather the makings of it. So again, in Nairobi, we saw 175 countries agree to establish this committee to bring about what will be a legally binding treaty to tackle the plastic scourge, shall I say. And I always think it's nice to add context to this, and we know this, that the statistics, 11 million metric tonnes of plastic waste ends up in water every year, and that number's expected to triple by 2040. And I need not paint what that looks like in terms of how that impacts the oceans, our bodies in facts with microplastics, et cetera.

And so that treaty will bring about cutting plastic waste through recycling, sustainable package and design. These are things that of course that in my current role I'm working with our portfolio companies to implement limiting production of virgin plastics in the first place. So this treaty, what's exciting about it is that it's meant to be in place by the end of 2040, 2024, excuse me, and that's really a rapid timeline, because most global treaties take five to 10 years. So those are the two things that I would say that I'm really excited about and I've seen this shift in the last 18 months. As to COP, well what was your question again Anna-Marie?

Anna Marie

What would you expect from COP27 or if that's not something that's not too positive. What would you like to have come out of COP27?

Denise

It's interesting because I wanted to know how you asked the question. I understood the content of it and the reason why is because if you were using the word expect or hope .We're approaching this COP in a year that will rank among the 10 warmest years on record. We've seen the effects of climate change. We've seen what's happened, a third of Pakistan flooded, we've had the hottest summer in 500 years in Europe, in the US, you had Hurricane Ian.

So really, no economy is immune from the climate crisis, as we know. And looking back at the last COP, where everyone calls that the finance COP, because we had all these members of the financial institutions there, who will not, it seems, be at COP27, but the achievements that we got from COP26, the phasing down of coal-fired power plants, which of course was first time that's been explicitly included in climate talk decisions, what's happened with the reduction of methane emissions, reversing deforestation, et cetera, and the pledge, by the way, to finance it, to provide more financing to developing countries. So, I'm thinking that we can "expect" to see climate adaptation at the centre of these talks based on what's happened over the last year.

But you might remember, Anna-Marie, if you were in Glasgow last year, that Alok Sharma, the UK's President of COP26, I think he put it nicely when he said that we'd kept one and a half alive, but that its pulse was weak and it would only survive if we kept our promises, and translating that into, of course, action. So perhaps that is the question, is that have these promises, have we actually started making headway to that? I don't know. Perhaps just to wrap up, I will say that we can expect that there will be talks around climate adaptation. But of course, it goes way beyond that, but I think looking back, seeing and checking the pulse to see does it remain weak? Is it dead? Are we alive? This is where it is. That's the heart of it, is the expectations and the hope.

Anna-Marie:

All really interesting. I mean, the 1.5 alive is such an interesting... Number one, it rhymes, so that's helpful for people, but it also is scientifically bounded. Your reference to all of the catastrophes that have happened, that's not something that is going to be fixed overnight. And that adaptation to all of those things that are happening in the climate will continue to happen in the climate, I think is something that no one's really talked that much about up till now. So I think you're right, if adaptations ends up at the heart, that becomes in some ways a big win in and of itself to really understand, for people to bring it home, what that's going to look like and why action should be taken now. Because that's what we're trying to get to, right?

Denise

Indeed.

Anna-Marie

The real action now and less talk, although this is a podcast. So, in terms of those actions, what would be a real driver? You've talked about delivery on the promises around finance, you've taken this new role where you're actually day-to-day engaging with those portfolio companies. Is there something that you could put your finger on and say, "Look, this is going to be a game changer if would people truly engage at X"?

Denise

I love that, because I think one needs to have, we need a systematic change, and the way that we've been approaching it and doing it in silos has not yielded much success. I don't necessarily think there's one specific action, but there are a number of them, but I will focus on this. So, heavy industry is currently responsible for around 30% of GHG emissions, and that's projected to grow for reasons that I won't get into, because I think most of you know. Now, the key to transition is really making sure that we can drive down the prices of clean methods and technologies. We need to make it commercially appealing for companies whose mandated it is, their management's mandate is what? To make money, alongside nowadays caring for the society, for the planet, et cetera. But that's their purpose, so it needs to be that compared to carbon-intensive conventional techniques, clean methods win.

Now, to achieve that, to my mind, I would say we need to see more capital channelled towards breakthroughs. Always talking about it is nice, and we love talking, we're on a podcast as you said, research is incredibly important, but we ought to work towards decarbonizing industries such as steel, petrochemicals, fertilisers, et cetera, shipping, aviation. I mean, these are not industries that there are alternatives at the moment that are, should I say, putting us on that path to one and a half.

The two, some of them are the darlings of discussions these days and some not, because you mention the word nuclear and it puts people's back up, but nuclear fission power plants of course have the disadvantage of generating radioactive waste, which is here for millions of years, as we know. Fusion on the other hand does not create any long-lived radioactive nuclear waste. And this, I'm sad to report, is dinnertime conversation at the Odaro household because my brother is a nuclear engineer, and I started off, I was the most perhaps anti-nuclear person that's been on your podcast until my brother was kind enough to explain some of this to me. I think it goes to the heart of education and how we need to educate [inaudible] policymakers, businesses, et cetera, as to what options are, what risks are, and how we can mitigate those.

At the moment, of course, fusion is not even a baby, it's an embryo in terms of being able to produce at the scale we need, but I'm confident that the more we see not only political support and financing directed to that, that we can scale that. The second would be green hydrogen, and I think both of these can play a central role in helping us reach net zero emissions by 2050. And this, of course, is complimenting other technologies, renewable power, et cetera. Offshore wind is also taking off, et cetera. I mean, technology is maturing. Those that have been in existence, of course solar, et cetera, but I really want to see these more newer and innovative technologies scale.

Anna-Marie

 So, you've kind of opened the door to my next question in your conversation with your brother. In terms of your own commitment to net zero, because there is society as a whole, but then society is comprised of all the people within it, do you have any personal commitments around what you might change or adapt in the next kind of 12 months?

Denise

Ido. I'm four weeks into my new role, which I am terribly excited about. I have a team who are young and just passionate. We're all singing from the same hymn sheet on sustainability. My commitment to net zero is empowering my team. We have fellow companies within PAI that span healthcare, industrial, food and consumer, and really, as I had mentioned, I think this is where the rubber meets the road, is making business decisions where you can have options that do better for profits, people, and the planet. I approach sustainability with pragmaticism, and so to me, my commitment in the next 12 months is building out what would be the best-in-class ESG team within the private equity sector. And I do believe that the impact there is real and phenomenal.

Anna-Marie

No, definitely. I mean, because I think in that sector there are lots of people who want to be doing something, and maybe that's true for all sectors, there's people who want to do things but they just don't know what to do, right?

Denise

Yeah.

Anna-Marie

It's such a big topic and it's such an overwhelming concept. I had this question yesterday from somebody, "How can you spend all this time talking about sustainability and not wake up anxious every morning?" And so it's really, it is empowering people to take action, to get up that learning curve so they understand, "When I say I'm interested, this is what I could possibly be doing." I think your focus on really creating a commercial viable solution for businesses to grab onto with both hands, I mean, who wouldn't as a business grab onto something that's emerging and great tech and commercially appealable?

Last question, one takeaway for listeners? I think we've talked about education, we've talked about upskilling, we've talked about the viability of various technologies and the role of finance. What do you think?

Denise

It comes back to what you just touched on, in fact. I think you need stakeholder pressure, which we've seen, you need to see that policy is working in your favour, and so my one word would be acceleration. Let's accelerate this, because even when businesses make the decision to go towards net zero or to commit to DE&I or better social practises, et cetera, there's also the issue of how long does it take to implement some of these things? Policy, getting permits to put things in place, the timeline for some of these is just outrageous.

So, I think acceleration in every way. Accelerating capital to the right areas, accelerating the education of options, but particularly risks and what the opportunities are, we need to see that. We need to see also policy accelerating, that is not necessarily driving people away by saying, "I can still operate in this safe place if I don't put my hand up to say that I want to do sustainable business. I'll just stay over there instead of having to work towards 14,000 KPIs." So, how do we do that? I think there are many, and we'll all be in jobs for a long time trying to figure this out. There's no silver bullet, however, my one word would be acceleration.

Anna-Marie

That's an excellent theme. I think we're going to have to leave on that, so that people walk away with that. Go back to your desks, or finish up your walks, hopefully you're out to getting some exercise, and think about what can you accelerate today in how you and your company are approaching sustainability? Super. Thank you so much for your time, Denise, and for your insights. I mean, it's fantastic to hear from someone who's been so integrated for so long, and I appreciate your time today.

Denise

It's been wonderful and such a delight, and I'll be happy to come back whenever you want me.

Anna-Marie

Excellent.

Denise

Thank you.

Anna-Marie

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