Finance as a Force for Energy Transition
In our Zoom for Thought on February 9th, 2021, UCD Discovery Director Prof. Patricia Maguire spoke to Keith Tuffley, Global Co-Head of the Sustainability & Corporate Transitions group at Citi, about “Finance as a Force for Energy Transition”. In case you missed it, here are our Top Takeaway Thoughts.
Inspiration
Tuffley’s role at Citi is to help companies worldwide to align with the Paris Agreement and Sustainable Development Goals. “It's a combination of products, services, advice and solutions. Sometimes it's actually about inspiration; trying to really get them to realise that it's not just good for the world, it's good for their business.”
Role of Banks
Finance has “a huge role to play” in achieving a net zero outcome (when greenhouse gas emissions produced equal the amount removed from the atmosphere). Citi is the second largest financier lender to the fossil fuel industry, “...so we have a major responsibility. We have to transition our own loan book to achieve it”. The Paris Agreement says the world cannot exceed a 1.5 degree temperature increase. “That requires us to shift our entire economic system globally to achieve net zero emissions by 2050 from about 40 gigatonnes per annum today. We can't wait for the thirty years, we have to bring those emissions down from today.”
The Tesla Effect
Businesses used to see environmental sustainability, social and governance (ESG) issues as being about box-ticking compliance. But in the past two years there has been a growing correlation with financial performance. Electric car manufacturer Tesla, for instance, now has a market capitalisation evaluation ten times greater than that of Daimler Mercedes Benz. “The CEOs are saying, ‘Oh, this is good for my bottom line, good good my share price’. Capital is shifting to those businesses that now seem to have long term megatrend opportunities.”
Businesses of the Future
Tuffley advocates for raising new forms of capital to shift to businesses of the future, such as “...green hydrogen, blue hydrogen, direct air capture, plant based protein, dairy alternatives...” Banks can help provide this capital. “That's the essence of what I think we as a bank can do in terms of using finance as a force for energy transition”.
Sustainable future
By working in a bank “you can really influence how you use the capital”. There is “now objective data demonstrating that companies that are doing better on sustainability are actually outperforming, over time, financially, those companies that are not… It's not there yet, but at least the system is now starting to really superdrive the road to a more sustainable future”.
From Goldman Sachs to Saving the World
Tuffley was once Managing Director, Partner, and Head of Investment Banking of Goldman Sachs (GS) in Australia. His transition to climate activism has been a “road of discovery”. While working at GS, “the more I read, the more I realised that we were doing a lot of damage to the planet. And it was unsustainable”. This was fifteen years ago and he found it “very tough then to convince people internally at Goldman Sachs that we needed to use our efforts and skills to be more of a positive change. I was finding myself spending a lot of my time doing deals and helping clients in anything but my sustainability interests, so that's why I decided to retire from Goldman Sachs and then spend the last ten years just focused entirely on sustainability”.
Mary Robinson, Mentor
Tuffley joined an NGO called The B Team and former Irish President Mary Robinson was a director. The goal was to mobilise CEOs around the world to get behind the Paris Agreement.
“Mary Robinson has been so vocal. She's looking after those people in the world who are most vulnerable to climate action, or current climate change”, including people who “will lose their jobs because we're shifting to new forms of energy”.
Tuffley realised he could bring the worlds of finance and banking together with the world of sustainability and action, “making banks more activist and more solutions-orientated and try to create the movement inside a place like Citi group to mobilise people internally here to effect that change”. He is also Chairman of the Global Footprint Network, which promotes Earth Overshoot Day, the day when humanity has exhausted nature’s budget for the year.
Weakness in the system
There are still systemic challenges in our capital system, one of which is in an accounting system that does not recognise the pollution caused by companies, “...whether it is emissions or chemical pollution, air pollution, water pollution. It doesn't put a price on that, it doesn't actually embed those externalities”. But there is a movement under way to correct that, led by Prof George Serafeim at Harvard University and Sir Ron Cohen, “the father of venture capitalism in the UK”.
Biography
Prior to Citi, Keith was the CEO of The B Team (2014-17), an NGO comprised of a group of 25 CEO’s of global companies, leading entrepreneurs, and civil society leaders to drive a better way of doing business. Keith was an active participant in the Paris Climate Agreement process and the
development and launch of the UN Sustainable Development Goals in 2015.
Earlier, Keith was Managing Director, Partner, and Head of Investment Banking of Goldman Sachs (“GS”) in Australia. He co-led the negotiations on behalf of GS for the successful merger of GS Australia and JB Were in 2003, and then led the merged Investment Banking business for the subsequent four years to 2007 as it grew to a top 3 position in the Australasian market. Prior to joining GS in 2002, he was a Managing Director at UBS in Australia (2006-2002) and prior to that at Bankers Trust (1991-96). Keith commenced his career as a commercial lawyer for Allen Allen & Hemsley (1989-91).
Keith is the Founder of impact investing company, NEUW Ventures SA. NEUW invests in and creates early-stage businesses which aim to reduce the human ecological footprint and to accelerate the world’s transition to a sustainable economic model. NEUW also provides advice to CEO’s on corporate strategy focused on climate change and sustainability.
He is the Chairman of the Global Footprint Network (an organisation that produces the national footprint accounts and promotes Earth Overshoot Day); a Governor of WWF-Australia; a Global Ambassador to the Wilderness Foundation Global; a Senior Advisor to WILD11; and a member of the Rewilding Europe Circle. He was previously a Board member of: the Great Barrier Reef Foundation; Bush Heritage Australia;
and the global climate change coalition, We Mean Business.
Keith is a passionate explorer, mountaineer, skier, cyclist and sailor. In 2016, he became the first person to cycle, unassisted and unsupported, on a new route to the South Pole, having skied to the North Pole earlier in the year.
Keith holds degrees in: Bachelor of Economics (BEc), Bachelor of Laws (LLB), Master of Laws (LLM), Advanced Management Program (INSEAD), Non-Profit Leadership Program (Harvard University), Master of Studies in Sustainability Leadership (MSt - Cambridge University).