Listen: On the ground at CERAWeek: Where the energy world stands on the low-carbon transition

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Lindsey Hall: I'm Lindsey Hall, Head of thought leadership at S&P Global Sustainable1.   

Esther Whieldon: And I'm Esther Whieldon, a senior writer on the Sustainable1 Thought Leadership Team   

Lindsey Hall: Welcome to ESG Insider, a podcast hosted by S&P Global, where we explore environmental, social and governance issues that are shaping investor activity and company strategy. 

Esther Whieldon: So Lindsey, I'm just back from Houston, Texas, where I attended S&P Global CERAWeek Conference. It was my first time at this big annual energy event, and it features more than 1,000 speakers, ranging from CEOs of oil, gas, mining and electric companies as well as energy ministers, finance executives and companies focused on low carbon technologies. And Lindsey, I understand that while I was in Texas, something else happened. We had a huge landmark on this podcast.

Lindsey Hall: Yes, that's right. Well, first off, welcome back Esther. And last week, we hit 1 million downloads. That was a big achievement for us, and it was made even more special because it happened in the midst of our series focused on women in leadership. And we'll include a link in our show notes to that series if you'd like to learn more.

Esther Whieldon: Indeed. Lindsey, I have to tell you, I was so excited when I saw we surpassed the 1 million mark that I pretty much told everyone I talked with that day at the conference about it, possibly even my cab driver.

Lindsey Hall: All right. So speaking of which, how was CERAWeek? What did you see? What did you hear?

Esther Whieldon: Thanks, Lindsey. This conference is a massive event. Sessions run basically from early in the morning until like 9:30 at night with many panels happening simultaneously. To give you a sense of scale here, CERAWeek takes up 4 floors of a major hotel as well as an entire floor of a convention center that's connected by an enclosed walkway. I had someone described it to me as a philharmonic concert in the hotel with CEOs and government officials buzzing about. Well, over in the convention center, it felt more like a rock concert festival, like full of organized chaos.Also, we had rooms where energy technologies were on display for companies. For example, I got to try out a VR experience to see what technologies Exxon uses to monitor methane emissions. 

Now you know Lindsey, many of these events we cover on this podcast are focused on ESG and sustainability. And CERAWeek is different in that this is predominantly an oil and gas energy conference, although it also includes many sustainability focused sessions as well.

And one of the major themes that emerged during the week is this need to balance sustainability goals with energy security needs. What I heard at the conference is that the oil and gas industry has to be part of the solution. John Kerry is the U.S. Special Presidential Envoy for Climate, and he spoke at the opening day of the conference, and I think he summed it up well.

He said the oil and gas industry knows how to organize itself in a way that gets things done. And he said, "If we can get people moving in the same direction, the same sense of purpose with the same sense of urgency, I absolutely guarantee folks, we can win this battle, but we could also lose it if we just continue business as usual."

Lindsey Hall: Okay. So I'm hearing the need to bring the oil and gas industry along. The idea that business as usual isn't a feasible option. What else did you hear?

Esther Whieldon: Well, there are a few other overarching themes that stood out to me, and we'll hear more about that in interviews shortly. One is an acknowledgment that the pace of decarbonization will vary by region and big hurdles remain in getting finance and technologies to emerging markets.

Another theme was really around the emerging technologies in energy as well as agriculture and industrial applications. And a final theme involved how to attract the next generation of skilled workers and also ensure diversity, equity and inclusion are considered in the energy transition as well as within companies. 

We'll hear from a lot of guests today, including the Head of the U.S. Department of Energy's Loan Programs Office, and we'll talk to the Global Head of Oil & Gas and Chemicals at the British multinational bank, Standard Chartered. 

We'll also talk with someone from the Energy Trade Association, the American Petroleum Institute as well as the Head of Sustainability from the world's largest chemical company, BASF. And from the energy sector, we'll hear it from an executive at the U.S. and U.K. utility National Grid.

Lindsey Hall: Well, so it sounds like we've got so much to cover in this episode.

Esther Whieldon: It also means this episode is a lot longer than our usual, but I just had so many great conversations, I couldn't help but include all of them. Okay. So let's dive right in with my interviews.

Let's start off with a quick overview of how CERAWeek has changed over time, especially in the last year. It's worth noting quickly that CERAWeek in 2022 happened shortly after Russia invaded Ukraine, which also means that a lot has happened in the energy space over the last year. To learn more, I talked with David Victor, who has attended CERAWeek for a long time. David was a convening lead author for reports from the Intergovernmental Panel on Climate Change, or IPCC, and he is currently a professor of innovation and public policy at the School of Global Policy and Strategy at UC San Diego in California.

By the way, you'll hear David mention a few different noteworthy U.S. laws. One is the U.S.' recently passed Inflation Reduction Act, or the IRA. As a reminder to our listeners, the IRA dedicates nearly $370 billion in federal spending to decarbonization efforts over the next decade. And Lindsey, there was a lot of buzz at CERAWeek about the opportunities that investors and companies see coming from IRA. We'll include a link to our episode on the IRA in our show notes in case our listeners want to learn more.

David also mentions the CHIPS and Science Act. That was a U.S. law passed in 2022 that provided roughly $280 billion in new funding over the next 10 years to boost domestic research and manufacturing of semiconductors in the U.S. Okay. Here's David who I caught up with on last full day of the conference.

David Victor: I've been coming here for a long, long time. This used to be principally an oil and gas activity. Then it became a big electricity activity. It was a whole day devoted to electricity. And now I'd say that it's oil and gas and then it's all these other lines of business that are in energy, but you wouldn't have expected it.

There are tech companies. There are service companies. There are all kinds of folks who are using a lot of energy but trying to figure out how to make it as clean as possible. We have other kinds of attributes. It had a huge forum presence. There's always been a forum presence, but I think the forum presence here is even greater.

I think clearly, since the last year, a lot has changed. We had the war in Ukraine, which if we rewind the tape of history and go back a year ago, folks weren't sure whether the Ukrainians were going to be able to keep the lights on. They had just synchronized the Ukrainian grid with the European grid. A lot of concern, anxiety about that. A lot of concern about whether Ukrainian military would collapse, whether NATO would hold together.

I mean, what we've seen in the last year is just truly extraordinary. NATO is stronger, held together better, I think, than most people expected. The German kind of muscular German response even with a center-left government, kind of a surprise to a lot of people. It makes sense once it's happened, but it wasn't obvious it was going to happen that way.

The Russians are persevering. We've had many of the disruptions that have been feared in the energy markets, both on the liquid side and the natural gas side. The markets have been more responsive to the expectation of that than I think the physical reality of it, but the physical realities are happening as well. You've got the American Inflation Reduction Act, which was almost unfathomable a year ago in terms of the volume of money and the fact that it went through Congress.

We had the Bipartisan Infrastructure act. We had the CHIPS Act, a huge amount of that money is going to be going into science related back to energy in part because energy is no longer as kind of the own corner of the economy. Energy is high tech in various ways, manufacturing photovoltaics, manufacturing supply chain kinds of questions and so on. Plus, of course, the Inflation Reduction Act.

Put all that together, when you see this year, almost a swagger on the American side that America is back. The part of it that concerns me really a lot is that the political situation in the United States is such that you can't get votes for those kinds of programs without them basically being America-First programs, a lot of onshoring, a lot of ambiguity and concern about what the exact rules with regard to which flag has to be on which kinds of materials and supply chains, can you quickly onshore copper, onshore lithium and so on.

Esther Whieldon: Can you really quickly for our listeners who may not understand what that means, what does onshoring mean?

David Victor: Onshoring in the extreme form means making sure that there are American supply chains. So right now, lithium and solar cells are the extreme cases, enormous dependence on China. That clearly was let go too long, but it also started coming unglued in ways that have amplified the existing political tension between the United States and China. We have a tariff war underway that explains some of the increase in the cost of solar panels, a lot of other things going on there as well.

So the extreme form of it is, it has an American flag on it. That's pretty extreme because that requires opening lithium mines, cobalt and so on. There's a kind of softer form, which is sometimes called friendshoring where our allies are considered honorary Americans as it were. But once you start friendshoring, then the politics in Washington erodes a little bit because it's not American jobs.

And then you go beyond that, which is to basically not have Chinese dependence, but allow the rest of the global market to kind of more or less function. That's not the way the law is written right now. There are ways of interpreting it. And as the United States has long overdue struts to actually design a trade policy that's around climate, which we're going to start to see more evidence sort of over the coming years. As that starts to happen, you could imagine it being implemented in various ways that still allow a lot of flexibility in the global markets.

I'm a huge fan of the flexibility. I think one of the reasons that the technologies that are the key technologies for the Green Revolution, like solar panels we've already seen, batteries, electrolyzers, all kinds of other hydrogen production equipment, grid control systems, distributed grid control systems, advanced aircraft, the list just goes on and on and on. Those technologies get better when the best producers can be identified anywhere in the world and they can sell to a global market.

And I'm very concerned that all the onshoring and friendshoring and the other variants of shoring as they start getting put into place, they're going to introduce chaos into those markets, and they're also fundamentally going to narrow the scope of the market away from what was traditionally a global market for these kinds of technologies.

Esther Whieldon: Lindsey, earlier I mentioned how CERAWeek is different than the types of events we typically cover on this podcast. Even the tone at CERAWeek felt different than, say, from GreenBiz or New York Climate Week. For example, I think I can count on one hand the number of times I heard the letters ESG mentioned by panelists during the conference.

Lindsey Hall: Yes. That definitely is distinct from what I was hearing at GreenBiz in February when pretty much every panel, in some way, talked about ESG. And definitely, the whole focus was on sustainability.

Esther Whieldon: Exactly. And while, as I said, there were a number of sustainability-focused discussions. I also sat in on panels where energy ministers from around the world talked about how their countries are increasing their oil and gas production or planning more pipelines in response to the Russia-Ukraine conflict.

I also heard CEOs of oil majors in plenary sessions say that while they're working on low carbon technologies such as carbon capture and sequestration, they expect to provide fossil fuels to the world for decades to come. By the way, carbon capture and sequestration is also known as CCS, which is an emissions reduction technology that power plants or industrial processes often use. I ask David Victor for his thoughts on these talking points I heard at CERAWeek from oil and gas companies. Here was his reply.

David Victor: I think we've certainly seen a renewed pressure for more investment in oil and gas and traditional energy, the Secretary of Energy said that during her speech on Wednesday here in CERAWeek. And on the one hand, emphasized heavily green energy, but on the other hand, periodically emphasized the need for also ongoing and indeed expanded investment for reasons of energy security.

I think the economy can walk and chew gum at the same time. I think the -- what I'm hearing from companies is that they know they have to do that. So you're seeing on the one hand, enormous financial returns, especially the oil and gas companies. And along with that, you're seeing a reinvestment of a large fraction of that back into the core business. But you're, at the same time, seeing a larger fraction of that investment picture going into clean energy forms.

So really big news, I think, in those companies is they're still figuring out what can they do that they're good at. Because if you're running an oil and gas company, you're good at downhole activities, you're good at refining and chemical engineering, you're good at marketing. You're not very good, frankly, at low margin, high bulk, mature technology activities like building solar fields or wind fields.

So you've got a bunch of companies that they all know or almost all of them know that it's existential for them if they don't get serious about the clean energy transition. But it's one thing to know that you got to do it, and it's another thing to actually go off and figure out what to do. And Chuck Sabel and I have a book out last fall, gave a talk about it here at CERAWeek, called Fixing the Climate.

It's all about how societies solve problems when there's a strong motivation to act and nobody knows what to do, and they -- our argument is they, in effect, run experiments. They go test lots of different ideas. They decentralize the production of knowledge and they recentralize the process of learning what works, what doesn't work, and then that becomes the investment frontier for the future.

And I think we're seeing that process go on right now in the oil and gas business, where, I mean, they're vilified by parts of, especially, the far left of many political systems, but they are also potentially a major part of the solution. And so they know they have to be part of the solution. They're not quite sure what to do. And the ones that went off and did the obvious things, which is do more solar and wind, they're frankly scaling back those plans because those plans don't generate the kinds of returns and don't rely on the kinds of risk management, chemical engineering skills that these firms are really good at doing and petroleum engineering skills.

And so what we're seeing is more companies trying to figure out what are we going to do on hydrogen? It's potentially an area where they have a lot of skills. What are we going to do with the carbon capture and storage, downhole activities? It's another area where they have potentially large skills. What are we going to do in terms of systems integration with a large project like Northern Lights.

It's a huge project in the North Sea, which is collecting all different carbon dioxide sources around the North Sea, liquefying them, putting them on ships, sending them to Norway and then injecting them back underground. That's a technological challenge. It's a financial management challenge, and it's fundamentally a systems integration challenge with downhole expertise. That's the kind of thing an oil and gas company would be good at doing.

Esther Whieldon: So we just heard David talk about how companies are figuring out how to balance recent geopolitical events such as the Russia-Ukraine war with the need to continue the low carbon transition. I also heard at the conference how there are challenges ahead for the transition, including in supply chains, permitting processes and finance as well as recent actions by governments, including the IRA.

During a CERAWeek Luncheon & Keynote, U.S. Energy Secretary, Jennifer Granholm spoke about how the IRA will help accelerate the low carbon transition. She said the IRA and other actions taken by the Biden administration have "made the United States the most attractive investment landscape for new energy and decarbonization technologies." But she also noted that issues with permitting, the workforce and supply chains could hold back much needed development if they aren't addressed.

Granholm also noted the IRA created a lot more work for DOE. For example, she listed 60 new programs, and said DOE is hiring 700 more people to help implement the law, including through the agency's Loan Programs Office.

To better understand how DOE is implementing the IRA, I spoke with Jigar Shah, who is Director of the DOE Loan Programs Office. Jigar also has a business background. He was Co-Founder and President at Generate Capital, which is a sustainable infrastructure investment firm. Prior to that, he founded the renewable energy company, SunEdison. Here he is talking about how the DOE Loan Programs Office works and how DOE can help accelerate the transition.

Jigar Shah: Our authority was expanded tremendously under the Inflation Reduction Act, right. So now we have a mandate from Congress, but also a responsibility, I think, to communicate our programs to the broadest possible cross-section of the energy industry and make sure that people are using our program if they need it, to accelerate their own announcements for decarbonization.

Like I don't know that we're necessarily getting folks to do things differently than they were going to do them, but I think we are trying to get them to accelerate plans that they had already announced for 2029 and try to get them to do them sooner.

Esther Whieldon: What do you see is the biggest challenge then going forward in terms of implementing this and speeding up the energy transition?

Jigar Shah: Well -- and so I'd start by saying that it is very clear that this has to be a private sector-led effort with government enabled by all of our programs. The only way to get that right is through having meaningful dialogue. So people have to feel comfortable that they can tell us what's holding them back, what's holding back their Board or their CFO or whoever it is that's holding back the decision and then give us a chance to say, well, if we did this differently with our programs, would that make a difference to your decision-making process.

Now some of the changes we might be able to make, other changes where it need Congress' assistance to make those changes. But we need to know exactly what everyone is solving for so that we can actually make sure that the $0.5 trillion roughly, that authority that we have between the Bipartisan Infrastructure bill, the CHIPS and Science Act, and the Inflation Reduction Act are used to greatest effect. We're trying to create commercial lift off. So I think that level of communication is critical and important.

I think to the red tape piece, I'd say that at least the Loan Programs Office, which is probably what I can speak to the most accurately, we really do operate like a commercial bank. There's a couple of extra steps but not a lot. And so the goal here is to try to make this experience look familiar to people who go through a pretty rigorous commercial bank process.

We clearly, at the Loan Programs Office, help to solve the financing problem for all the innovators and entrepreneurs trying to do first-of-a-kind projects, right, engineering excellence projects, learning curve projects and even Wall Street securitization projects. And that gets the technology ready for prime time. And then I think there are other financing solutions from other part of the U.S. government that are helping folks then export those solutions and technologies around the world.

Esther Whieldon: So we've heard how the U.S. is moving to position itself as a global leader in the low carbon transition. But I was curious, how does the U.S. approach differ from actions other countries and regions are taking. I got my answer from Alok Sinha, who's Standard Chartered's Global Head of Oil, Gas & Chemicals. Standard Chartered is a British multinational bank and has a large presence across Asia, Africa and the Middle East. So Alok was well positioned to talk about finance and deployment gaps. And we'll hear more from him later on that topic.

Well, let's start off with his thoughts on why the U.S. is becoming a leader in the transition, including his reflections on Secretary Granholm speech, which happened right before he and I sat down for this interview.

Alok Sinha: What she was talking about is exactly what makes sense, how you approach decarbonization. Is it from a perspective of how do you incentivize people, which includes the industries, the end users and everyone to think about it as something in their day to day? And I think that's where the policymaking makes a big difference. And what they're trying to do, how they're trying to do it is much more credible.

And the fact that they are promising to basically put more people at work to expedite permitting, expedite the key permits and the decision-making in putting up facilities, that's where people begin to see the difference. Otherwise, we could talk about, yes, you can do X, Y, Z, but it takes 3 years to get a permit done. Then it's a project too far into the future.

Esther Whieldon: For them to visualize.

Alok Sinha: To visualize. Humans, by temperament, what do you like -- It's not about instant gratification, but at least you need a line of sight, right?

Esther Whieldon: To have an idea at least, yes.

Alok Sinha: Yes.

Esther Whieldon: And you were saying you think that through the IRA and some other things, U.S. might beat others to decarbonization or to the climate goals?

Alok Sinha: Yes. The reason I keep saying this is because I find that the policymaking is very rooted in commercial considerations. And what it does is it provides the industry an incentive structure to make the changes as opposed to basically trying to dictate and say a policy of exclusion saying that certain industries will get excluded from benefits, others will get some extra benefits.

Esther Whieldon: Carrot and stick think has been talked about a lot this week, yes.

Alok Sinha: Yes. Here what you're trying to say is, look, as long as everybody wants to move, here's the set of goodies that will be available to you to do the decarbonization. Obviously, the pace at which you do it then makes you eligible for a different range of payouts and what you do. That decides exactly.

And I think that's a very powerful incentive for any industry to look at it because when industries invest, people invest, the sponsors do not invest on the basis of fear. They invest from the basis of what returns they can make out of a project. Business is ultimately all about getting the returns for the equity you put in. So when you're making that easier, right, and you're giving a path out there which says, here are the ways that you will be able to recoup your investments. And by the way, it will do the world a lot of good and our own country very good, please go ahead and look at projects. It will definitely aid that whole process. 

And I feel that just because U.S. has this very open economy, people look at it from a very practical standpoint. And I've seen the response to the IRA. I've been here 3 days. I can see how excited people are in terms of looking at new projects. I've seen developers from outside of the U.S. looking to put projects in the U.S. That tells you the degree of confidence people have that this can be done here. And that's the reason I made that statement that I think the U.S. will decarbonize at a much faster pace because of its commercial approach to decarbonization as opposed to having a theological approach.

Lindsey Hall: Okay. So we've heard how the IRA is creating new decarbonization opportunities in the U.S. But what about those remaining hurdles you mentioned earlier in the episode?

Esther Whieldon: Yes, that's a good point, Lindsey. While we observed a lot of excitement and buzz around IRA, I also heard a lot of talk about the challenges of getting permits to build many of the technologies and infrastructure that IRA aims to promote. I heard the need for permitting reform come up quite frequently. And to understand this better, I sat down with Ben Wilson.

He is Chief Strategy and External Affairs Officer at National Grid and also Interim President of National Grid Ventures. National Grid is a multinational electric and gas company based in U.K. and also has operations in the Northeastern U.S. Here's Ben explaining the permitting issues.

Ben Wilson: So the permitting is not easy, right? And it can take 10 years to design, permit and then construct a new transmission line. So I thought it was great, frankly, to hear that focus on permitting. I do think we've got to be a little bit realistic though. These are long linear assets that run for hundreds of miles in some cases. They do affect a lot of people, and people are going to have views on them. And there has to be due process, People's democratic rights have to be respected.

So let's focus on permitting. Let's see if we can do stuff to make permitting more streamlined. But let's be realistic that there's always going to be a process and so where that takes you is we need to plan ahead. In a way, it doesn't matter if it takes 10 years to build a transmission line if we're thinking about what we need 15 years from now and doing it now.

So the risk with networks, if you allow networks to make long time forecast and then build against them, the risk is that network is gold-plated, that we add capacity, which turns out to be unnecessary and then ratepayers end up paying for that. So that's why the regulatory system is like it is. It's really -- you mustn't build networks until the need is absolutely clear and is right upon us. It's a sort of just-in-time methodology. But when both supply and demand are now growing really fast and it takes a long time, that just-in-time in practice, it is late.

Esther Whieldon: While much of the talk at CERAWeek was focused on the IRA, I also heard another theme we've been talking about a lot on this podcast, Lindsey. That's the challenge of getting financing for the low carbon transition to developing countries. Given Standard Chartered's footprint in Asia, Africa and the Middle East, I asked Alok about this.

Alok Sinha: The resources are unevenly distributed, right? So in some very funny ways, right, if you wanted to, let's say, carbon capture, the best resources are in the countries which currently produce hydrocarbons because you need empty reservoirs to refill. What is the incentive required to reinject? That you allow these host governments to think about using those reservoirs, which have been completely emptied off to say, okay, fine, I'll reinject CO2 into this. And I'll let the region, other economies, which don't have such similar infrastructure available, park their carbon there.

So there is an incentive structure, which can be built. Now you make it commercial enough, money will follow. If you try and say, it's very similar. If I'm going to do it only on a domestic basis without having enough, let's say, carbon to be injected in those aquifers, what will you do? You -- basically, I will look at it and say, but your capacity is 5 million tonnes, but you only have 1 million tonnes per annum that you can inject. It doesn't breakeven.

Esther Whieldon: So it's not economically justified, right?

Alok Sinha: It is not economical. So you need to find projects which can be done on a cross-country, cross-border basis, just as you exported on a cross-border basis. The concept here is a bit reverse, right? You're looking in -- earlier, you were actually exploiting it out of reservoirs. Now you're looking to reinject into them so you have to wrap your head around the fact that, okay, it is still a service. There is a need and there is a price for carbon abatement. Is that price economic enough for me to undertake this activity?

And that's where the whole finance begins to move. So if project finance has been done for conventional projects in very remote locations in frontier countries, I'm pretty sure it will follow through even here if it's economically viable. I think the piece that we are looking to do differently, of course, as a financial institution, the ultimate measure is the amount of balance sheet you put to use for your clients. But as we just discussed, right, you can't put your balance sheet to use without figuring out the economic viability of the projects you support.

So we go one step further up. We are trying to work with our clients as they are forming their transition pathways and their strategies. We are trying to give them the inputs. What from a commercial perspective will make sense? Is -- are there tweaks that they can make? So it's sort of an advisory work. We are not claiming ourselves to be carbon experts from a technical perspective. But like any other situation, we are trying to marry what is -- how do you put a technical solution into a commercial framework such that the clients have access to capital.

And that is the role we are trying to play here. We are basically trying to give advice to our clients to say, how will your capital structure evolve if you do certain things in a certain manner, which allow you to then access a wide pool of capital, right? And be it bonds, be it the loan market into bank or the export credit agencies, which are now coming up with special funding schemes.

But there are parameters required to meet before you can get there. And if you're looking only technically, you may miss some of this. So we are trying to build that bridge very early on. We are trying to work with them to make sure that they have that input available as they frame their strategy.

Esther Whieldon: I asked Alok, what role will blended finance play in the solution?

Alok Sinha: Blended finance has existed for years, right? Every developmental project in difficult markets has had blended finance and blended finance can take various forms. You can have direct financing from multilateral agencies and then co-financings by the commercial banks, or you could have the export credit agencies coming into the picture and the commercial banks coming into the picture with that.

And this is just a small sample of what blended finance can look like. So it has always existed. The question is if you have credible lenders coming into a facility structure, you will find there will be others who will believe in the credibility of that particular lead arranger or a lead financial institution to then follow through and look at it with greater interest. And that's how you expand that pool of participants. And that is the best way to create the pool of blended finance. 

If we do not get all sources of financing to get into this, it's going to be very hard to foresee that only the banks or only the capital markets will finance all of this transition.

Esther Whieldon: What's the percentage now of like involvement compared to where we need to be?

Alok Sinha: I think the involvement is very high. Where it falls short as we see it, is there aren't enough projects which are commercially viable or have, let's say, matured sufficiently to the stage where all the finance, which is waiting to be deployed, can be deployed. So it's actually a little bit of a bottleneck. There's a lot of money there, which would like to finance a lot of these projects, but the pace of these projects maturing is still not fast enough to suck up all the available finance.

Esther Whieldon: So it's like a -- chicken and egg is a wrong term, but it's basically like -- it's not for lack of interest from the financial institution.

Alok Sinha: Certainly not. Certainly not. I can vouch for this that there is more money available to deploy today in ESG-related investments than I've ever seen. It's just that you have to be patient to let -- it's an evolving sector. We all understand that. And the number of projects will only grow. So it's a bit of a patience game, and you have to wait for the sector to also evolve. And as the decision-making gets faster and more projects start getting executed, you will see a lot of that financing get taken up.

Esther WhieldonL Continuing on this theme of solving the climate finance gap, I spoke with Lance Uggla. He is CEO of a new climate growth equity venture firm called BeyondNetZero, which we'll hear him describe shortly. But first, one quick note. Before Lance helped form BeyondNetZero, he was the Chairman and CEO of IHS Markit, which merged with our parent company, S&P Global in February of 2022. Okay. Now here's Lance.

Lance Uggla: Okay. So Lord Browne, who is the ex-head of BP, myself, and Bill Ford, who's the Bill Ford, Chair and CEO of General Atlantic Partners. Both of them were on my Board at IHS Markit. And upon the sale of IHS Markit to S&P Global, decided, well, what's the next chapter? What am I going to do next? And I decided that it would be great to be able to do something in and around transition and specifically the environment.

So we had talked about BeyondNetZero as an entity within IHS Markit at the time. But post the sale, that wasn't possible, and we thought maybe we'll set up a fund. And so between John taking up the chair role, myself finishing up at S&P Global and becoming the CEO, and Bill Ford at General Atlantic that became the triumvirate in partnership that found the basis for a fund, which is $3.5 billion to invest. And that fund is focused on making an impact in terms of emissions reductions in our environment.

So anything we invest in is positive to the environment. We've invested about $1 billion. So we've invested in 6 companies. The companies have quite a broad range in mandate, but their approximate investment size is $150 million to $200 million per investment. We take a minority stake. So we're actually investing in things that are much larger. So it's probably about $15 billion of capital going to work across those 6 companies, of which we put about $1 billion into them. And that's because we're -- we back the entrepreneur. We get behind as a minority shareholder. We try to influence, use our -- leverage our networks, our Rolodex, our capability to help the entrepreneurs.

Esther Whieldon: Beyond just the finance part of it.

Lance Uggla: Exactly. Just to be even better. And they range from EV charging to solar as a service in Africa, supply chain technologies for efficiencies, a whole bunch of different companies that meet our mandate.

Esther Whieldon: And I heard you speak this morning, and you talked about how your goal is to sort of help bridge that gap between like the technologies that are fully out there and all of that now, right? Isn't that sort of -- give me a sense of kind of what the end goal is here with these.

Lance Uggla: Well, if you take, for example, utility scale, power, solar farms, they need to be designed, so they need a technology solution to help them design and optimize that solar farm. Once you have the farm designed and built, then you have other efficiencies that are needed. And so we're really focused on facilitating the larger-scale movers of the needle for climate.

We might do the same in terms of -- if you think of automotive, EVs growing at from 10% to 20% to 40%. Well, then, of course, the charging infrastructure is going to be needed. And around the infrastructure, it's the optimization, then it's the connectivity back into your home and the optimization of the home. And so there really is many forces of nature acting around an investment, and we're looking to participate in any of those post concepts, so these aren't conceptual ideas, they're real companies that need capital to grow even faster.

Esther Whieldon: Yes. So I heard you also in today's panel say a word that is sort of can be thrown out there, greenwashing. You talked about how the projects you're involved in can kind of create greater scrutiny. Is this a problem or a challenge for the growth equity fund finance sector in general and kind of as well as with you guys? And what are some of the solutions to like maintaining market and public confidence?

Lance Uggla: Right. No, it's a good question. It's really important that our fund when we're investing, people are relying us to create some emissions reduction potential, right? And so if we -- if I give you the number, it's always prone to discussion. So what we did in the fund is we said, let's do all the measurement of the ERP, let's do it with a third party. And they measure the emissions reduction potential for all of our investments and bring it down to an understandable metric that our investors can understand.

The second thing that we do is for every company we invest in, guess what, they all want to be positive to the environment. So we have every investment has to take the concept of a science-based target to set themselves up for net zero seriously, and we help them set that, help them implement that.

Esther Whieldon: How has inflation or just like the economic environment right now affected your strategy or the challenges of fundraising and all of that for you?

Lance Uggla: Well, definitely, in the middle of fundraising, the market started to collapse. And of course, the public markets collapsed first and the private markets have to follow. And so it slowed down the kind of final tail end of our capital raise. But $3.5 billion is a lot to invest. So we think we have a great first-time fund of scale that invested well, producing the returns will lead to those other opportunities. So the environment definitely slowed down fundraising.

I think the environment has also created an adjustment in valuations. Things were running really hot ahead of this correction in all aspects of investing. And so I think that in this current environment, we've got more realistic entrepreneurs that are starting to return to more realistic investing multiples, and that makes a difference. If the multiples are lower, you may invest in incremental company or so because you've got a -- your pool goes further or you'll invest larger size into those companies that you're analyzing.

Esther Whieldon: Now that we've covered the key aspects of that first theme of energy security in the low carbon transition, let's turn to the second big takeaway. 

Many times, I heard panelists say that while climate change and emissions are a global issue, the pace of decarbonization will vary greatly among regions and real hurdles remain in deploying technologies. Here's Alok of Standard Chartered again, explaining why this is the case.

Alok Sinha: We can't expect the same pace of change on the transition across various regions, right? And the best examples I will tell you is if you look at a road and you want to run a Formula 1 race because you are in a hurry to get -- complete a race, then you need a Formula 1 track for it. So that may be available in a developed country, which has a lot of resources to spare. But if you're in an emerging market where the same road is being shared by multiple users who are traveling at different pace, then the speed limit has to be lower. Otherwise, you will have a complete crash out there.

So they need to adjust. It's just an example, as I said. So you just need to adjust the pace of change to make sure that the wider set of stakeholders in that location are able to come along with it rather than cause chaos. This has the potential to create a new set of haves and have-nots as technology because it's all technology-based, access to technology and capital is essential to get there.

Esther Whieldon: Coming back to the just transition issue, right?

Alok Sinha: That's right. Just transition is not just a word. I think to me, it's a very, very crucial part of what we do, very, very honestly, because we are an emerging market bank with a big emerging market footprint. We see this all the time, and it's a conflict that we have to try and resolve.

Esther Whieldon: And yet the urgency from scientists, it's so strong.

Alok Sinha: It is a real challenge, and that's why it's a balancing act. I don't think we could give you a uniform answer for every situation we encounter. We are spending more and more time looking at every project in greater detail. You go in with the intention to support, but you just want to make sure that the support is all for the right reasons, right? And it does meet the right parameters because it's very easy to lose your way in all this heated discussion that's happening on either side of it, right? You could be too strict or you could be too lax about it.

Esther Whieldon: Lindsey, I've noted CERAWeek was massive, and it included a number of things I haven't even touched on, including book signings by authors on energy issues. One such author I spoke with was Shannon O'Neil, who wrote a book that I think fits neatly within these themes we've been talking about, how regional markets will differ in their implementation of the low carbon transition as well as how some parts of the world have really been left out of global markets.

Shannon is Vice President, Deputy Director of Studies, and Nelson and David Rockefeller Senior Fellow for Latin America Studies at the Council on Foreign Relations, which is a think tank. Shannon authored a book called The Globalization Myth: Why Regions Matter. And she and I sat down to talk about how her findings fit with the discussions at CERAWeek.

Shannon O'Neil: So I wrote the book because I started looking at the economic data. And what I found is that, one, the world is just not as global or what we -- this last 40 years is not as global as we often think. So this globalization, the hyper globalization that we talk about really has only affected about 2 dozen countries. There's only been 25 countries that have seen trade as a percentage of GDP. So trade as part of their economy, double or more, where they've really seen a transformation.

And in contrast, you see almost 90 countries where trade stayed the same or trade actually declined as part of their economy. So they actually deglobalized during this time. So one of the myths -- in the title, The Globalization Myth, one of the myth is that globalization has been all encompassing and all penetrating, has been global.

Esther Whieldon: Has been global.

Shannon O'Neil: Exactly. That's one of the challenges. The other is that when companies went abroad, when people look for suppliers or look for customers in other countries, they didn't usually go to the other side of the world. Sure some companies have. Some companies are truly global, and many of them are here at CERAWeek, that's how we see them. But more often than not, thousands, tens of thousands, hundreds of thousand companies when they went abroad, which they did, they went nearby.

And one statistic that brings us home to me is that the average good that has traded, travels 3,000 miles. So that is about the distance from New York to Los Angeles. That is not across the 2 oceans. And so that gives you a sense. So what you have found is that on the one side, not that many countries participated. On the others that when they participated, they tended to trade more often with their neighbors or nearby countries.

And what you've gotten over these last 40 years of the creation of global supply chains is 3 big regions, the European one an Asian one and North American one that today account for 90% of all global trade. The rest of the world, Latin America, Africa, the Middle East, South Asia are just 10% of trades. So we really -- when we think about globalization today, it really has been more regionalization than globalization.

Esther Whieldon: And so I don't know the extent to which you track like the energy transition itself. But how does that interpret then to like decarbonization and energy transition options?

Shannon O'Neil: So this is the history of the last 40 years. And I would say the last 10 years, we have started to see a new phase of globalization, or new phase of internationalization. This one, I think, will continue to be regional. And part of it is things like ESG, part of it is the responses to climate change because as we see Carbon Border Adjustment Mechanisms or the Inflation Reduction Act and the subsidies, whether it's the carrots and the sticks or other elements, people trying to change climate policy or change the heating up of the world. We're starting to see every extra mile that a good travels or service travels, cost money.

So part of it is climate change itself is changing global supply chain, sea-level are rising and ports need to be reconfigured or raised, and so its making logistics more expensive. But part of these reactions, the policy reactions to climate change, to environmental change are leading to, I would argue, more regionalization.

Esther Whieldon: That's an interesting point. I see a lot of energy companies talking about localized supply chains, even like GM investing in mining in the U.S., right? So do you see it getting even more -- even less regional and more localized going forward?

Shannon O'Neil: So I think some things will become more local, especially as electricity becomes a bigger part than say, natural gas or oil of overall energy matrices because it's more localized than others, right? It's like renewables are more localized versus oil markets which are more globalized. So part of it is the transition of the technology or the type of energy has a more local feel. That's part of it.

The other part is, which at least fragments is geopolitics, right? We're already seeing this. And part of the -- part of those incentives, the IRA and others are because of geopolitics, parts -- and there are other reasons as well. So I think that will have a reshoring effect or a localization effect.

But I do think what we're going to find in energy as well as a whole host of industries is that unless you're willing to subsidize industries indefinitely, which is a very few industries, maybe semiconductors, we can name a couple of others, the benefits of internationalization that we've learned over these last 40 years in terms of profits and losses, in terms of operating costs and the like aren't going to go away. So I think we will still see internationalization, but it will be beneficial in a lot of these to be nearby, both for the technology, for the geopolitics, for the climate change reasons, for a whole host of regions.

Esther Whieldon: So I'm going to be talking with a couple of people on this -- at this conference about South America, Latin America. So can you give us like a high level sense of where they are in the energy transition? Obviously, there's a lot of countries as well to account for.

Shannon O'Neil: So South America and Latin America on the one side have a pretty good head start, right? This is a region of the world where half of the electricity that's produced is already clean energy, it's already renewables. They are a place with an incredible bounty in terms of sun and wind and geothermal and all kinds of other renewable energy. So there's a lot of potential there.

It is also a place in the world that has a whole abundance of the critical minerals that go into the green transition. So copper and lithium and graphite and manganese and cobalt, many of those, lots of those, almost all of those are present in the Western Hemisphere, particularly in South America and Latin America. So there is huge opportunity for the region in this.

There are big challenges though, as well. The 2 biggest economies until very recently have been going backwards. We have Brazil that was -- a former president, who was allowing deforestation to increase, was not interested in combating climate change or following any sort of policies with the COP and any of those others. In Mexico, we have a president who continues to do this, who is really doubling down on fossil fuels and his biggest public spending initiatives include refineries. So this is a different focus than the green transition.

So I guess what I would say is there are a lot of countries in Latin America. So each one is different, but it's a region that begins with great promise and are pretty far down the path. But like many emerging markets, it is also that they need hundreds of billions of dollars to transform its energy matrix. And that -- they're searching for financing like so many others. So much potential but lots of challenges.

Esther Whieldon: What Shannon said about how markets are evolving was something I haven't really heard before. Another aspect that really stood out to me at this conference started with a conversation I had on the first day of the event when I sat down next to Dr. Mike Howard, who is Chair of the World Energy Council. He explained to me that the World Energy Council takes all this technology innovation that is happening and helps figure out how the technology can be used at the local level, especially given the challenges each local area faces or country faces.

Here he's explaining what the Council is and does. Lindsey, you had a screaming bird at GreenBiz, but we were next to a coffee shop. So we heard the occasional noise of grinding of coffee in the background. Okay, here's Mike. 

No, but seriously, Lindsey, every time they'd get to a good point. (Makes Grinding noise)

Lindsey Hall: I love that, yep.

Dr. Mike Howard: The Council, we started, well, right after World War I to really get energy leaders together and talk about what's needed for society in terms of energy. And instead of having global conflicts, some of them like H.G. Wells was heavily involved. The first Congress they had where leaders came together, Albert Einstein was there. I mean, so it's been a very distinguished group of global energy leaders that got involved.

And the whole purpose is really to create a community of dialogue that allows people to share ideas, come together, discuss issues without shooting each other, right? And it's all energy. It's not just oil or gas. It's all forms of energy, certainly including electricity as one of those.

Esther Whieldon: Yes. And when I met you, we were just both sitting on Monday of the morning session and we met and you mentioned something that was really interesting to me, which was how you kind of hope at the intersection of, okay, here's what's being deployed, but where -- what does it actually take to get that on the ground? So explain maybe sort of how the Council does that and kind of some examples like that?

Dr. Mike Howard: Right. So there are many excellent organizations that focus on technology innovation, developing and accelerating unique technology. And where the World Energy Council focuses is how can you help that technology be better by ensuring that it's used and useful, adaptable at the community level. And so I've been involved in -- my PhD is engineering, and I've been involved in technology innovation pretty much my whole career.

But the part that's really missing is how does that technology get used? How can it best be used given the constraints that the community, and community could be a neighborhood or it could be a whole country. Each country, each neighborhood, has its own unique skills and capabilities and all kinds of other issues, which you have to think about how will that technology be deployed and deployable within the community? And that's where the World Energy Council spends most of its time.

Now you definitely have to understand the technology so we're technologists, but we're also thinking about the social issues as well and working with the community, working with the technology, the infrastructure development and so on to say  what do you need to ensure that this can be adopted and used and ultimately beneficial to the community? Deploying a technology in somewhere in Latin America versus North America and Europe and Southeast Asia and so on, is totally different. And you really have to understand what the capabilities are, really the social capabilities, infrastructure capabilities of the community is to get the most benefit out of the technology.

Esther Whieldon: So give me an example of like the social capabilities or limitations on that.

Dr. Mike Howard: Yes. So one that was talked about a lot is large-scale solar and energy storage. There are some places that can support that because they have the transmission system. They have the engineers to help continue to refine its use in making sure that, that energy can be deliverable. There are some places in the world that don't have a transmission system to even connect it to.

So if you want to kind of deploy these large-scale technologies in an area that primarily is based on maybe a local distribution system is not going to work. I mean, that's an extreme case. But there are many -- in every technology that is deployed, there are multiple constraints that need to be overcome.

Esther Whieldon: Is part of it also skill sets? Like whether you have people with the skill set to maintain regionally in that the type of technology or that kind of thing? Is that also a challenge?

Dr. Mike Howard: That's right. If you have to import the skill set to be able to use it, that's less beneficial to the community. You want to be able to -- and so you have to think about what are the skills that's needed. Now an extreme example of that is nuclear power. You need some very unique skills to be able to deploy and sustain nuclear power plants. You need to make sure you have an electrical engineering, a mechanical nuclear engineering program that can develop those skills within the community. If you don't, you're going to have to import them. Then if you import those, then you have to question what is the ultimate benefit to the community.

Esther Whieldon: Right, other than carbon reductions.

Dr. Mike Howard: Other than carbon reduction, right. But -- so you need to plan ahead and think if that's what we want to do, then how do we think about that technical capability. But it also gets to the health care industry. It cuts across everything, the security, and so on. But that's the social issues that the World Energy Council tries to instill in your thinking about deploying the technology.

Esther Whieldon: Does the sustainability -- I mean you guys have obviously been in the intersection of sustainability and energy for a very long time. But does the increased attention to sustainability and the social issues in general in the last few years, has that helped you get the message out or helped you in any way? Or hurt you in any way?

Dr. Mike Howard: Well, it certainly has brought it to the kind of the front page of the newspaper in terms of how will this help address a multitude of environmental issues. How sustainable is this? Are we creating other problems? Are we creating water problems for example? So you're now all of a sudden starting to really dive deep and try to think about those issues that no matter where you go, people are talking about that.

Even the use of plastics. Is this going to create more issues around other products like plastics. How do we deal with it? Cardboard and other things. So it's a whole set of issues now that has come to the forefront over the last few years that we put in a big bucket called sustainability. In fact, we many times refer to what the World Energy Council started probably 15 years ago, the Trilemma. Now it's very popular.

Esther Whieldon: It's a common phrase.

Dr. Mike Howard: It's a common phrase, Trilemma, but it's really focused on making sure that you balance security, sustainability, environmental issues and the whole equity and affordability issue. And so from a social perspective, how can you balance all of those? How will the technology help that? So you want to ensure social well-being and improvement using the technology, not having a technology and then trying to figure out what the benefit is.

Esther Whieldon: I found my conversation with Mike really valuable because it shows how there have been organizations around since World War II that have been thinking about how to deploy technologies and in a way that benefits the local communities as well as in a socially responsible manner.

Lindsey, we've talked a lot about energy so far in the episode. And I think it's important to note that this conference included panels and guests from other sectors as well, including agriculture and chemicals. I sat down with Jessica Monserrate, who is Head of Sustainability North America for BASF. BASF is the world's largest chemical company and its portfolio ranges from chemicals, plastics and performance products to agriculture products. Here's our conversation.

So give me a sense of what kind of projects you're working on, what kind of -- because we're talking about like carbon sequestration in the soil or...

Jessica Monserrate: A bit of that. We don't want to do too much of a focus on carbon because it really is -- there's more to offer to a grower when it comes to sustainable agriculture. It really is that nurturing the land, which, of course, our growers do, do, but viewing it from a different lens, not just focusing on yield, yield, yield, but focusing a little bit more on the soil health, the soil dynamics, porosity — water holding potential — and soil organic carbon.

And so of course, when carbon is in the ground, a lot of that makes it more available and readily available for the next growing season. So we're really trying to take a look at our products and how they contribute to that, those components of soil health and soil organic carbon.

Now thinking about how it relates to carbon, carbon markets, it seems like there is now a great opportunity to monetize all of these efforts. And so we're trying to build this win-win scenario where a grower can really think about economizing their sustainable practices and really seeing that fertility nurtured in the ground for successive rounds of generations.

Esther Whieldon: So CERAWeek is very much like energy-focused, but obviously, it has sustainable solutions and all that. Kind of where do you see your role in this bigger decarbonizing the energy sector and the low carbon transition discussion?

Jessica Monserrate: I love this question because I didn't even realize how this job was really kind of the convergence of very important interests of mine. One is to be very eco-sided and minded. And the other is just I love biotechnology. I love science. I love technology. I love innovation. And so it's really just the pairing of the two. What I see here are opportunities to really kind of imagine business models, imagine value propositions with that eco impact in mind and monetizing those efforts.

Esther Whieldon: So would it be like to offset like emissions for companies? Or kind of how does that connect back?

Jessica Monserrate: So at the moment, the carbon markets are a great way for quick monetization paths. Those have specific protocols in place, and there is a strict adherence to them, and that's the best way at the moment to really kind of jump start that conversation.

What I'm very excited about being here is really looking at that value proposition for a low-emission commodity and see if the biofuel sector as IRA legislation comes through, how do those play out as sort of a green premium so that growers do have this long-term view of what their practice and what their agronomic understanding of what they're contributing to carbon capture, carbon sequestration, soil health, soil fertility and what that value is incorporated into the commodity and which value chain would like to receive that.

So biofuels, at the moment, have the opportunity to really get some potential tax incentives if they look for that carbon intensity score to be pretty low. So again, we'd like to help these growers achieve that low carbon intensity score so that, that value is baked into their commodity and there is a market side.

Esther Whieldon: I didn't know that was in the IRA where you have to have like a carbon intensity level to qualify. I've been surprised, I guess I shouldn't have been by how much the IRA is like literally the phrase that comes up in everything I attend. Like it's literally everywhere.

Jessica Monserrate: Yes. I really appreciate a lot of things, particularly the USDA grants where they are trying to just fund a bit of research, innovation and then trying to find a path through private involvement for scale, right?

So this gives us a chance to work with certain growers and try new technologies like the ones I was just talking about before pairings s of certain products. I don't know if the registries would accept that. I wouldn't want to commit a grower to test out these 2 products for the registries to reject them. That would be horrible.

So we're doing research, but we do our research in certain regions and certain types, but really getting on-farm data in these large production fields, that's where really there's a lot of scalability and economics start really kind of coming to light. So I am very much appreciative of the IRA and all of the efforts that Congress put into to release those.

Esther Whieldon: It sounds like you're saying it really reduces the risk of sort of the emerging technology side.

Jessica Monserrate: Right. And really helping us unroot the true sustainability aspect and give growers some sort of financial compensation for testing this with us.

Esther Whieldon: Which is definitely one of the biggest nuts to crack on that one.

Jessica Monserrate: Right.

Esther Whieldon: Yes. And what do you think are the other challenges for the ag sector then -- or opportunities as well beyond that? Or have we kind of covered the biggest ones there?

Jessica Monserrate: So yes, when it comes to opportunities, again, just reimagining what business models look like with environment in mind and then throwing in biodiversity, love that opportunity. So for me, the biggest challenge I see right now is alignment and agreement on like the vernacular or the conversation like what are we seeing is carbon intensity? How are we calculating greenhouse gas emissions?

I mean I feel confident that BASF is doing it properly with the highest degree of rigor. We've been doing over 10 years of LCA modeling. But -- is that going to be acceptable to certain certifying bodies? Are those going to be acceptable to other types of national bodies?

Esther Whieldon: And they all have their own things, right?

Jessica Monserrate: Everybody has -- oh my gosh, there was a fantastic quote by somebody, everybody has a standard. Everyone has a toothbrush, for example, but nobody wants to use each other's toothbrush. That was hilarious, but 100% true. Everyone has a standard, but no one wants to share, right? And we can't be chasing 500 different models, 500 different simulation paths, all these things anyhow.

So I think when it comes -- it's so important for us to align and agree upon what are some benchmarks, what is the conventional or status quo benchmark, and then what's the idealized benchmark. And that's how we can start working our way down to reaching that lower emission goal. And I think what's important that we do that first step because once we do that first step, we start realizing, okay, this is how we have to flex our behavior, and this is how we have to work together in that flexing. And in that understanding, you start realizing gaps and where innovation needs to fill.

Right now, I hear all kinds of interesting innovations from sustainability, but they're not filling what I think are the gaps. So it's just -- it's confusing and it's just a loud, busy world, and we just need to stop to really start quantifying and ensuring that we're hitting those quantified targets.

Esther Whieldon: Jessica went on to say that knowing those details will also enable the industry to let policymakers know what is realistic. 

Continuing on the topic of the transition and technologies, I spoke with Allyson Anderson Book, who is Chief Sustainability Officer at Baker Hughes, that's an energy and industrial technology company that works with companies across their upstream, midstream and downstream operations.

Lindsey Hall: And Esther, those terms you just mentioned, for any listeners who aren't familiar, do you mind defining those?

Esther Whieldon: Sure. Upstream refers to basically where oil and gas exploration like drilling and extraction occurs. While midstream is the side of the business where products are shipped. They're basically transported via pipelines and stored as well as the wholesale marketing of that oil and gas. And the side where the products are refined and distributed to customers, basically right before the point of sale, is the downstream part of the industry. Okay. Here's my conversation with Allyson.

Give me a sense of how is Baker Hughes helping with the low carbon transition?

Allyson Anderson Book: So we're helping from several angles, right? And so I was on a panel today at CERAWeek, where this question came up like should we be looking towards the future? Or is it about your core business? And it's both. We're looking at both things. 

So starting with the core business, you don't hear enough about what can be done in the extractive industries through the midstream and the downstream. And we have solutions on that sort of inspection side, making sure we don't have leaks.

So like I was just at one of our facilities and saw our Waygate, that's like a little tractor almost that goes inside a pipeline or inside a thing and basically inspects from the inside out. And then we have the reverse where we can look at something like a piece of technology and inspect it for flaws from the outside to look for defects.

So whether it's an inspection paradigm or it's related to having less emissions while we're operating and looking for ways of taking that down. So there's a lot to be gained on the efficiency side. I don't know what happened over the last couple of years. It used to be -- like when the EIA first 10, 15 years ago, rolled out, efficiency was the biggest thing. And today -- yes. And today, I think there's some realization that people came to like, oh, people have to make better choices. And it's hard to get people to change behaviors.

And so efficiency kind of took a back seat. But that still remains the biggest slice of the abatement puzzle that has to be tackled. So that starts today in the core business on the emissions reduction and making sure that we're more efficient. If you're more efficient, you usually save costs and reduce your emissions at the same time. They're not mutually exclusive, and they shouldn't have an additive effect and impact on your budget.

Esther Whieldon: And now turning to the final theme I heard at CERAWeek, which is about the workforce and how to incorporate diversity, equity and inclusion in the energy transition. To learn more about how the energy industry is addressing the challenges faced on these fronts, I turn to one of the main energy trade associations in the U.S., which is API or the American Petroleum Institute.

API has about 600 U.S.-based member companies that operate across all aspects of the oil and gas sector. I spoke with Amanda Eversole. She's Executive Vice President and Chief Advocacy Officer. Here's Amanda.

Amanda Eversole: Workforce is a huge issue across the economy, but even specifically within oil and gas right now. We generally have an aging workforce. And we need to think about not only the advancing talent within the industry now, but how do we recruit a diverse workforce going forward.

We know that the demographics of this country are changing and changing deeply. And in the next decade, we know that over 50% of the workforce that we'll be recruiting into the oil and gas sector is going to be people of color and women. And so, what it's important to me personally and important to API and our members is ensuring that we really put out the welcome mat and make sure that you can -- if you can see it, you can be it.

And that's something that we really try to embody and lead because I think there are a lot of default narratives about this industry, which don't bear true when you really look behind the curtain. But if we stop at the assumptions that we have about the industry, it really could be a barrier to a variety of individuals from really enjoying the incredible benefits and opportunities of participating in this industry.

The data presents that some of the younger generations really value purpose and connection to mission above compensation and many other criteria. And the way that I think about it and the reason why I personally came into this industry is that you have an opportunity to be part of the solution to some of the world's biggest problems. And I genuinely believe that. And we have some of the smartest scientists and geologists and engineers who know how to optimize molecules.

And at the core, the definition of the problem is about how do we reduce greenhouse gas emissions from the atmosphere. And this industry has that know-how more than almost anybody else on the globe. And so my call to students and to those who are thinking about a career transition is come and join us, have a seat at the table. There are lots of places where you can go, but this is a place where you can really make a difference.

Esther Whieldon: Great. And last little thing. I heard you mention the term inclusion and talk about what that means, and I was struck by you talking about like clothing and women's bathrooms. And to me, I'm like, oh, I'm just used to working in an office, right, where there's, of course, is a women's bathrooms. There's even a lactation station area, right? Like -- so is it just a matter of like the oil and gas infrastructure like the off-site platforms and things like that just haven't historically been built that way. Like how does that change? And why has it been a challenge?

Amanda Eversole: Yes, it's a great -- that's a great question. And I think when we think of these big broad terms like inclusion, it almost feels so enormous that it shuts down the ability to break it up into small bites and then advance the issue. And what I try to do is just make it real for people. And I have had so many women come up to me and say, you know what inclusion means to me. Inclusion means not having to wear 3 pairs of socks, so my boots fit in the field because they don't have shoes that fit me. Or inclusion means having a women's bathroom on-site.

These are really basic requests. And I think sometimes when we can bring -- go from concept to actual tactically what we're talking about, there's really very little disagreement. I don't think the ability to have a bathroom is something that really anybody would object to. And so I think if we can create a conversation where it's not adversarial in nature, but one where it's really about the core of this industry, which is problem solving, I think we're going to be able to make a lot of things happen because it's just good common sense.

Esther Whieldon: So Lindsey, we've covered a lot of ground in this episode, but I'd like to end with 2 final clips that I think will help fit some of the pieces of puzzle together for us. One is how this increased focus on technologies that we've heard about today has led to a sort of unified perspective across all aspects of the energy space. Here's Jigar Shah of DOE again.

Jigar Shah: One thing I would say is that I think when you think about the reception that the Secretary got at her lunch presentation, it really did feel like we were coming together as one energy industry. And it makes sense. There's so much in the Inflation Reduction Act from carbon management to figuring out how to reduce methane emissions, to hydrogen, to EV charging infrastructure, that there really is something for everyone to get excited about, both in the traditional new energy industry and the old energy industry. And so it does feel like we're now treating everyone as The Energy Industry without the designations. And that's really exciting to see because I honestly think that it's going to take all of us to get to where we want to go.

And then the last thing I'd say is that I really do think that there was a real vocalization of American leadership here, right, that America through this legislation and through this implementation and through the companies that are actually striving to deploy their technologies really is choosing to go first, and we are choosing to do the hard work to reduce the cost of these technologies to make it easier to install, to really get to a place of maturity where we can share that know-how in this technology at a lower cost point around the world. And so that, I think, is also very inspiring and very exciting.

Esther Whieldon: And lastly, I'd like to end with an answer to a question I asked many people at this conference. Given all the geopolitical dynamics the world is facing today, do energy companies remain committed to sustainability? And for this, I'm going to return to Allyson Anderson Book of Baker Hughes, who works with energy companies all the time on low carbon technologies. Here she is.

Allyson Anderson Book: So I think people still take sustainability as seriously as ever, all right? What we're seeing a bit more right now is it's turning into on the investment side as more of a hot topic for elections, okay, notably only in the United States, right? And notably, in this great state that we're sending in, right? And so all politics are fairly local in their roots. And so when you pan back out and you look at the rest of the world right now, you're not really seeing that anywhere else, the pushback, okay?

And so to say that, yes, at certain times, when people have to make tough calls about how to spend money, they might deprioritize something. But sustainability, as a concept, isn't just about the environment. It's the E, the S and the G, and we refer to it as people, planet and principles. People are at the core of what we do. They make the right principal choice for the planet. It's a system, okay?

And so you can't just say we're going to pick and choose and not -- well, you can, not do one part of that, but then you're not going to become more sustainable. You know what's bad for business? Being unsustainable. Who wants a financially unsustainable company? Not us. Who wants some sort of a work environment that has got a bad culture that's unsustainable for people? Nobody. They don't have -- we want to be on the bad company list where employees hate to work, right? We all strive to have a better workplace for people.

So my point here is sustainability is good for business. So sustainability is not going anywhere. And so if people are saying we have to sacrifice that, then they're probably not going to be operating their companies in a truly efficient and sustainable way.

Esther Whieldon: What Allyson said there about how sustainability isn't going anywhere, I'd say that was a sense I also got coming away from CERAWeek despite some of the other talking points I heard at the conference. I went to Houston trying to find out exactly where the energy world stands on the low carbon transition. And I came away with the sense that the energy sector understands it needs to make the transition, but big questions remain about how fast that will happen.

Lindsey Hall: Well, thanks Esther for so many great interviews from this event. And to our listeners, please stay tuned as we keep tracking the energy transition. We'll also continue to bring episodes in our special women leadership series for Women's History Month.

Thanks so much for listening to this episode of ESG Insider and a special thanks to our producer, Kyle Cangialosi. Please be sure to subscribe to our podcast and sign up for our weekly newsletter, ESG Insider. See you next time.   



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