Levelling the playing field for sustainable, green investments

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Levelling the playing field for sustainable, green investments


This content is contributed or sourced from third parties but has been subject to Finextra editorial review.

“Our point is now, the real place this world is going is not back to 1950. In fact, we're going to a clean world, a sustainable, a healthy world, and a safe world. That's where we're going. And it's inevitable. So, you might as well get on the train and make some money.”

That’s Tom Steyer’s message, in response to an audience question on the role of banks in encouraging climate-tech and other emerging companies during an Earth Day webcast. He said it with confidence and as a direct challenge to those who say tackling climate change can’t be done, that renewable energy investments aren’t profitable enough to compete with fossil fuels, or that many of the world’s clean tech companies don’t offer solid opportunities for growth.

Seattle native, Silicon Valley pioneer, and multi-best-selling author Po Bronson hosted co-founder Tom Steyer and founding partner and head of growth stage investing Saloni Multani of Galvanize Climate Solutions for the online chat. It was a fast-paced discussion among three successful businesspeople and deep thinkers focused on clean technology investments for their own firms and strongly encouraging them for others. Though they graduated years apart, each received their MBAs from Stanford Business School before continuing very successful careers.

The main purpose of the interview was to discuss Steyer’s forthcoming book, Cheaper Faster Better: How We’ll Win the Climate War. Yet the conversation Bronson moderated with Steyer, a billionaire California climate tech and renewable energy activist and former US presidential candidate (2020) and Multani, a longtime private equity, venture capital, and sustainable finance investor, went far beyond the confines of the book alone.

Multani, who most recently served as CFO for the Biden for President campaign in 2020, and Steyer, the sustainable bank co-founder and former multi-billion-dollar hedge fund operator – including investments in fossil fuels and other environmentally-challenged industries that he later renounced - have been pounding the pavement and twisting arms of friends and colleagues in the investment and political world. Their mission? To spread the word that companies and investors should act with an environmental and social conscience – and also with their best financial interests top of mind.

As Steyer noted in one recent LinkedIn post, an epiphany almost exactly two decades ago changed the course of his business and personal life. It occurred, according to an interview with CNBC in 2021, when he returned to Alaska in 2004 with his family several decades after working one summer post-college in an area absolutely covered in glaciers. Expecting the same on his return visit, instead, the area was now almost bare of any snow or ice, and Steyer was shocked. “My family and I came to the conclusion that we needed to play our part in stopping the deterioration of the natural world.”

Since then, the New York native, Yale and Stanford Business School graduate, and long-time San Francisco resident, together with wife Katherine “Kat” Taylor, a Stanford Law and MBA graduate and social activist, have put their combined minds and money to work in earnest. They’ve researched, lobbied, and cajoled intensively, around the country and beyond, to champion climate change mitigation and social justice causes.

One of the couple’s investments in 2012 eventually became Beneficial State Bank, a community-focused institution now operating in California, Oregon, and Washington as one of very few B-Corp (certified environmentally and socially-focused corporation) and nonprofit-backed commercial financial institutions in the U.S.

Galvanize is Steyer’s most focused climate-risk endeavour yet, designed to force the world to take notice of clean tech innovators that also bring substantial financial upside potential. According to its website, the firm is “purpose-built to invest in and support the companies and teams positioned to lead the climate transition and deliver both climate impact and compelling returns.”

It was started in 2021 by Steyer and Katie Hall, his longtime friend going back to their early days as analysts together at Morgan Stanley over thirty years ago. Hall is a risk arbitrage expert, and serves as an investment advisor and philanthropist. Her firm Hall Capital Partners manages a $40 billion plus portfolio, and she serves as a director on multiple foundation, nonprofit and institutional boards. The former chair of the board of Princeton University, her alma mater, Hall teamed up with fellow Stanford MBA Steyer to create Galvanize as a for-profit company to help tackle what she called the “existential crisis” of climate change. Mark Benioff of Salesforce and Laurene Powell Jobs are just two of many well-known business and community leaders who have come onboard as investors with the company.

Steyer kicked off the show by sharing one of his book’s key messages with Bronson. “The reason I wrote the book was I felt that the conversation around climate in the United States had two dominant themes, both of which I disagree with. The first one is that we have a society that is dependent upon fossil fuels, and will always do be dependent on fossil fuels. And that anybody who's talking about reducing emissions and getting off fossil fuels is naive. That's not true.”

Steyer also railed against people who state that the climate crisis is unsolvable, that “It's doomsday. There's nothing we can do about it […] What I'm saying is, yeah, we have a serious problem. And it is one which is also a fantastic opportunity for us. We can and will solve this problem. We'll do it a heck of a lot faster if we pulled together.”

Steyer asserted that “in fact, we can get off fossil fuels. And the reason I called the book Cheaper, Faster, Better is the way that we're going to do it is by having better products at a lower price and winning in the marketplace. So, we move off [fossil fuels] and reduce emissions at the same time. We're increasing our standard of living.”

Bronson pointed out to Steyer that his guest was in a unique position, because of his demonstrated success and stature as an investor, hedge fund manager, and expert on climate change facts, statistics, and solutions, to make such a statement. Not everybody could be confident saying such things and be considered credible.

Steyer challenged that: “I'm certainly not the only one - but there aren't that many professional investors who dedicated a lot of years to looking at the climate crisis.” He went on to share some key, and possibly surprising facts on the topic that illuminated the opportunity available – and politics involved - with switching to alternative fuels and energy sources.

“It's not just that we're going to win. We are winning. Last year, globally - of new electricity generation - 86% of it was renewable. In the United States, […] the state which is probably (its legislators and elected officials) most loudly pro-fossil fuels – Texas - has tripled Its solar generation since 2021. [The state is] the largest wind generator in the United States. They have more solar than they do coal. The reason that they've been able to get through a series of extreme weather events is due to their renewables - and they know it.”

Steyer stated that he fully understands that just doing the right thing with investing in clean tech and climate solutions will likely not be enough to turn the tide with some investment skeptics. Profitability and returns will be important parts of the equation, if not immediately, then definitely in the short-to-medium term. He pointed out that a level playing field with existing heavily-subsidized oil and gas companies was a key requirement.

“The truth is we need to win in the marketplace. In order to do that, we need to make sure that policies are fair, that they [fossil fuel producers] don't get huge, 15% subsidies. If you think about it, assuming that there are 42 billion tons of CO2 emissions per year, just to choose a number, and you think that the US government thinks each one of those has a societal cost of $190 a ton. That's $7 trillion a year of pollution.”

Multani emphasized a point that Steyer made numerous times during the one-hour conversation, that renewable alternatives are already very competitive in the market with their legacy, and high-polluting, alternatives. It’s just that “entrenched interests” don’t really wish to admit it, or even talk about it.

“The reality is, to Tom's points on a level playing field today, in so many categories, cheaper, faster and better is greener. So, power being one of the sectors, the challenge, of course, is we can't just wait on the margin. We actually have to displace what we do today in a #brown’ [polluting] way. That's the challenge, right? There is a lot of inertia to displacing. There's even more inertia to that than there is to winning on the margin, which we are.”

Steyer added that current or expected regulatory changes will help even the odds for alternative energy. New emissions reporting standards enacted in California, Europe, and even the limited disclosure rules proposed by the SEC for larger public companies will make it easier to justify “going green”, because of mandates to do so, and because the currently high cost of capital to fund alternative investments will start to fall in the marketplace as a result of increasing awareness of their growth potential.

“As we get transparency, people (companies) are going to have to disclose their part, their emissions footprint. That's going to happen through requirements in Europe - also in California and New York. Companies doing business in New York and California, are going to start having to go through their whole footprint all the way through their supply chain. That is going to drive the companies. The big public companies which have a desire to be considered, good public citizens, are going to have a huge need and desire to drive down their footprints. [..] It's really going to be about enabling their supply chain to push through lower emissions for both the supply chain and indirectly for them. That is going to be, a very powerful driver [downward] of the cost of capital.”

Steyer and Multani, like Galvanize Climate Solutions’ s co-executive chair Hall, are determined that the company’s portfolio of “green” companies be innovative, sensible, and profitable, ultimately with a “clear route to leadership in end markets that will grow substantially in the climate transition.”

With investments now up and running in fifteen venture & growth companies (per their website), global equities, and real estate, Galvanize’ s invested funds closed at over a billion dollars last September.

Multani says they are really just getting started. “We built Galvanize to try to reflect the fact that it (the climate crisis response) is a whole of society, whole of the globe transformation that requires collective action from us as consumers, as folks who are engaged in the production of things, as […] not just businesses, but humans. As people, as technologists, as policymakers. All of those elements are required to come together to effect this systems change.”


Comments: (1)

Richard Peers Founder at ResponsibleRisk Ltd

Good to hear this Scott.  Thanks for sharing


This content is contributed or sourced from third parties but has been subject to Finextra editorial review.