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Katharine Hayhoe: The number one thing that we can do about a changing climate is talk about it because when you look at public-opinion data, it turns out, across Canada and the US, just about everybody agrees climate is changing. It will affect plants and animals and future generations and even people who live in developing countries. When you ask people in the US, “Do you ever have a conversation about this?” over 75 percent of people say, “No, never.” It all begins with a conversation, not about all the little, tiny details of the science, a conversation about how climate change affects us today, also what we can do to fix it. There’s so much good news that we really can talk about, understanding that, yes, this transition is underway. Yes, we do need to accelerate it to avoid the most serious, costly and dangerous impacts of climate change, but, yes, there is a better future.
Michael Torrance: Welcome to “Sustainability Leaders.” I’m Michael Torrance, Chief Sustainability Officer with BMO Financial Group. On the show, we will talk with leading sustainability practitioners from the corporate, investor, academic and NGO communities to explore how this rapidly evolving field of sustainability is impacting global investment, business practices and our world.
Legal disclaimer: The views expressed here are those of the participants and not those of Bank of Montreal, its affiliates or subsidiaries.
Manju Seal: I’m Manju Seal, head of Sustainable Finance and Capital Markets ESG Lead. It is with great pleasure I bring you this week’s episode as a cohost for BMO’s “Sustainability Leaders” podcast series. I lead efforts in identifying impactful solutions for green or social-bond underwriting, sustainable financing activities while developing and implementing a client-focused strategy. A few weeks ago, I sat down with atmospheric scientist Katharine Hayhoe, who you heard at the top of the show. She was the keynote at the BMO Fixed Income Women’s Conference in Toronto early May. Katharine is a well-known TED speaker, Time Magazine’s 100 most influential people in 2014 and a respected scientist studying global warming today. Originally from Canada, she’s now a professor and the director of the Climate Science Center at Texas Tech University in the United States. In a wide-ranging interview, we discussed a Just Transition to a low-carbon economy, why we need to talk about climate change and the opportunities for global economies as the climate changes. Many say that starting a conversation on climate change is not always easy. So what are some of the things you find in your interactions that tells you people are struggling to have this conversation because there are certain emotions attached to them?
Katharine Hayhoe: Yes. I think the biggest emotion that comes up when we talk about climate change is fear. On the one hand, we are confronted with apocalyptic visions of what the world will look like if we don’t wean ourselves off fossil fuels as soon as possible. It’s not a case of saving the planet. The planet will survive. It’s a case of saving ourselves, our civilization and most of the living things that inhabit the planet with us, so we’re presented with these frankly apocalyptic and even horrifying scenarios from the science. I’m not talking about alarmist exaggerations. I’m actually talking about the science I do myself, but on the other hand, we also experience fear when we’re told what fixing this actually involves. We’re told that to fix this, we have to destroy the economy. We have to pull the plug on all of our energy. Everybody has to go vegan, probably stop having children, definitely never fly again, and that vision of the future is also apocalyptic for many of us. I mean, if we destroy the economy and civilization to save civilization, what have we won at the end? So we’re presented with these two opposing fearful visions of the future, and what we most need is a positive vision of the future, a world where we do have abundant energy for all where our lives are better than they are today, not worse.
Manju Seal: Katharine and I discussed the important role of energy in our lives and how the energy needs of today and over the course of the transition will be met while responding to the imperative of climate change. This requires us to consider concepts like the Just Transition, which aims to minimize the adverse impacts of the transition on workers and affected communities and to involve them in decisions about their livelihoods. It also requires us to understand the nature of the global energy mix and how important access to energy is to our quality and standard of living. Katharine, what are your thoughts on the role energy plays in our lives and how the realities of our global energy mix affect the solutions around climate change we pursue over the transition to a lower-carbon economy?
Katharine Hayhoe: When we look at the role of energy in our lives, we have to be profoundly grateful. If you imagine what our lives would be like 300 or 400 years ago before the Industrial Revolution, the endless drudgery that was a woman’s life, a nonstop, never-ending cycle of laundry, cooking, cleaning, getting water, preparing food, going, getting more food without refrigeration, without dishwasher, without any type of assistance whatsoever except for the fortunate few who had the servants, so fossil fuels have really changed our lives as woman profoundly. There have been tremendous benefits for us in North America, especially in Western Europe, and now they’re increasingly experiencing them in China and India as well from industrializing based on fossil fuels, but at the same time, of course, pulling the plug today would actually be worse. We can’t just pull the plug on 80 percent of the world’s energy supply, which is currently … comes from fossil fuels, so that’s where I think the idea of that sustainable and Just Transition comes in. Do not only allow the transition to be driven by economics. Do not only allow it to be driven by concerns about a changing climate, although those are certainly driving the transition. Also, consciously we need to make sure it is driven by concerns about fairness, about justice, about equity, about making sure that people have opportunities for jobs, about recognizing that as the renewable-energy industry grows, there will be new opportunities there, but at the same time, that means shrinking opportunities for the industries in the especially oil and gas that have sustained our economy and that have given us the energy of the past, so that’s why I’m so excited about organizations like Iron & Earth, which is a grassroots Canadian organization that specifically looks at helping people in the oil-and-gas industry upskill as they say or retrain to continue working in the industry energy in the new energy industry of the future. We are transitioning, and here again, in Canada, we have the ability, the know-how, the technical expertise to lead that transition, but we can only do so if we decide to do that consciously, respecting and being thankful for the past but recognizing that the future will look very different, and our choice is, do we want to be part of that future or not?
Manju Seal: How about agriculture? Because that is also a very large emitter of greenhouse-gas emissions. What are some ways to work around that?
Katharine Hayhoe: Yes, so about 75 percent of climate change is caused by combustion of fossil fuels, but 25 percent of it is caused by changes in land use and emissions from agriculture, so most of the changes in land use are driven by agriculture, so deforestation, changes in agricultural practices. Animal agriculture alone is responsible for 14 percent out of the 25 percent, so more than half, and that’s because especially cows, also sheep and pigs and a little bit chickens but not as much: They produce a lot of heat-trapping gases. Incomplete digestion actually is one of the main causes, and so I think it’s fascinating that a farmer in, I think it was, P.E.I….
Manju Seal: P.E.I. is Prince Edward Island off the Atlantic Coast in Canada.
Katharine Hayhoe: … discovered by accident that if he fed his cows seaweed that washed up on the shore … I think he was trying to be cheap, but he fed his cows seaweed, and it turns out that when he partnered up with a ag scientist from Dalhousie, he found out that it almost completely eliminated the methane emissions from the cows, so now at … I think it’s UC Davis in the States. They’re trying to figure out, how can you grow the seaweed at scale and turn it into something you could feed to cows all across North America? And then where I live in Texas, of course, there’s a lot of beef cattle there, and colleagues of mine in the ag department are looking at how … Instead of factory farming where you have all these cows in a feed lot that are being fed corn, which you also have to grow the corn, which produces a lot of heat-trapping gas emissions from all the machinery involved, if you use free-land grazing instead, which, of course, means that you can produce less cows, so it’d be more expensive meat, but if you use free grazing instead, you can actually put carbon back in the soil through the grazing practices of the cows, so there’s a huge potential for agriculture to be part of the solution, not just that, but through regenerative agriculture techniques, through smart tilling practices, through biochar, where you take agricultural residue, and you burn it at high temperatures, and then it keeps the carbon there, so it looks almost like a gray powder, and you plow it back into the soil, which people have been doing in the Amazon jungle for hundreds of years, and it’s like Miracle-Gro on steroids. It’s the most amazing fertilizer in the world because carbon in the soil is actually good for us. Carbon in the atmosphere: We have too much. Carbon in the soil: It’s fantastic. So there’s so much that we can do, and one of my favorite websites and books is called “Project Drawdown.” They list not one solution to climate change because there is no one solution. They list 100 solutions, and they rank them in terms of how much they could contribute, and these solutions would really surprise you. I want to highlight a couple of them because they’re not what you would expect. So on their list, of course, they have rooftop solar, offshore and onshore wind. They have nuclear because, of course, nuclear does not produce heat-trapping gas emissions, but here’s number three. Number three on the list of 100 solutions to climate change is reducing food waste because we currently throw away a third of the food we produce. If food waste were its own country, it’d be the third biggest emitter after China and the US. Food waste is something that we can all contribute to, and it also contributes to reducing hunger because we can use that food to feed people. Then number four is a plant-rich diet. Number six is educating women and girls in developing countries because the higher our level of education, the quicker the mortality rate of our children goes down, the more able we are to care for and support the family that we have, and we can actually make choices that are good for us, so education of women and girls, number six, who doesn’t love that? And then you’ve got solar farms, number eight, where, for example, farmers are finding that if they dedicate a small area of their land to solar, they’re able to make the same amount of money that they would off their crops in an average year. A farmer in Illinois … Illinois is not exactly the sunniest state in the US. A farmer in Illinois who farms 600 acres found that if he took 15 of those acres and turned them into solar, he would basically double his average revenue, and when his crops fail, well, he just grew his own crop insurance on his own land. drawdown.org has all these amazing solutions that involve everybody from indigenous peoples to women and girls, developing countries, emerging economies, countries like what we can do here in Canada and the US and Western Europe. We’re all part of the problem, but we’re also all part of the solution.
Manju Seal: Along with this discussion of Just Transition, what we are also seeing in the market is the rise of the renewables industry. Would you like to share some of the trends that you’re seeing in renewable energy?
Katharine Hayhoe: It was 2014, so 5 years ago, when renewable-energy installations, so new energy sources around the world, past fossil fuels, and as of 2017, it was already up to 70 percent. Then in 2017, they also saw big increases in global sales of electric cars, for example. Also in 2017, they found that renewable-power-generating capacity increased by 9 percent around the world, which is pretty significant. By 2018, renewable costs for electricity generation were actually closing in on fossil fuels around the world, even including storage because, of course, storage is a big issue. The Sun doesn’t always shine, and the wind doesn’t always blow, as they say, but storage is being integrated into many of these facilities, especially solar facilities, at cost compared to natural gas. And I live in Texas, which is, of course, the Alberta of the United States, famous for its oil-and-gas industry, but even in Texas, so far as of last year, almost 20 percent of our electricity comes from wind with a little bit of solar too. There’s over 32,000 jobs in wind and solar in Texas alone. Across the whole US, there’s more jobs in solar now than in coal. The Museum of Coal Mining in Kentucky put solar panels on their roof a few years ago, and we’re really seeing tremendous growth, and this is being led by a lot of big multinational corporations, so Walmart is the richest company in the world, and they are aiming to be 50 percent clean energy by 2025, and they’re also trying to decarbonize the global supply chain to the tune of about a gigaton of carbon, which is almost 10 percent of human emissions, which is enormous. Companies like Apple are already 100 percent clean energy, and in Texas, we have the first carbon-neutral airport in North America: Dallas/Fort Worth Airport. The city of Dallas itself is already carbon-neutral, which is incredible when you think about it. The fastest-growing job in Texas is that of wind-energy technician, and the biggest Army base in the US is, of course, in Texas. Everything is bigger in Texas. And they went with wind and solar energy 2 years ago over natural gas simply because it was the cheapest bid that they got. So we are seeing transitions happen very quickly, and again, our choice now is, do we want to … Are we able to get out ahead of this transition and lead, or are we going to be the people following behind?
Manju Seal: You’ve heard from our previous episodes how the financial industry has been analyzing climate risk, exploring new markets like green and sustainable bonds and how Europe is putting together a sustainable finance action plan. We’re also seeing that climate scientists are being hired by some of the large institutional investors to keep an eye on investments whose valuation may be affected by wildfires, hurricanes or other externalities. There is a discussion that, in the past, the externalities were not priced in, but now we have to do that.
Katharine Hayhoe: Right. Yes. Yes.
Manju Seal: What are some of your thoughts around all of this?
Katharine Hayhoe: Well, the insurance industry and especially the reinsurance industry is really leading in this area. They’ve been thinking about this for decades because they … More than any other industry, they crunch the numbers and look at changing patterns of risk, and they figured out decades ago that something was happening. The increased risk of weather and climate extremes was changing, and as our population grows, as our infrastructure investments increase, as our insurance coverage goes up, they were realizing that they are increasingly at risk as well, so I think they were very much the pioneers in the insurance industry of looking at climate risk, and they’ve made a number of headlines. For example, after the devastating hurricane season with Hurricane Sandy, Superstorm Sandy, Allstate made headlines by saying that they didn’t want to insurance homes in Long Island anymore. Farmers Insurance led a lawsuit against the city of Chicago and Cook County for failing to prepare for the impacts of a changing climate on increased risk of heavy precipitation and flood. Insurance companies around the world are starting to push cities, businesses, individual homeowners and more to make the transition for climate readiness and building resilience because they can’t afford to pick up the price tag if we don’t. The crop-insurance program in the United States, which is federally subsidized, after the 2011-2012 drought that devastated the southern part of the Breadbasket of the United States, including where I live in Texas, after that, the Government Accountability Office published a report saying, “You know, if we keep seeing incredibly strong droughts like this, we won’t be able to finance the crop-insurance program anymore at all,” and FEMA, of course, in the US just restructured their flood-insurance program because before, the way it was structured actually incentivized people to just rebuild the exact same building in the exact same flood zone that it was already in if it got damaged, but now they’ve changed it to account for rewarding people who actually take the risks into account.
Manju Seal: So far, we have talked about the risks and transitions in climate change and the need to plan ahead while making investments for the long-term future. Let’s now talk about the opportunities. What are some of the opportunities that climate change presents?
Katharine Hayhoe: So some of the biggest opportunities, I think, are actually in the energy industry. We are, again, at a place of enormous change. We haven’t seen a change this big really since the dawn of the Industrial Revolution, so every change brings winners and losers, of course, but it also brings enormous opportunities for figuring out ways to get energy more affordably and more cheaply without, especially in the cases of wind, Sun and tides, without having to pay for the fuel. Also, there are new opportunities looking at how to suck carbon out of the atmosphere. Now these are not financially viable yet, but there’s an organization called Climeworks based out of Switzerland working here in Canada. In B.C., they developed the first plant that can actually suck carbon out of the atmosphere and turn it into fuel, which would be carbon-neutral because when you burn it, you return the same carbon to the atmosphere. There’s a lot of investment in alternative biofuels to replace carbon-based fuels in airplanes, in shipping, in other areas where it’s a lot harder than the power sector, so in hydro and in electricity, it’s actually fairly straightforward to replace fossil fuels, but with airplanes, it’s a lot harder. Turns out that you can develop biofuels from agricultural waste or from algae that can run in the same engines. You don’t have to modify the aircraft at all, but it doesn’t quite have the energy density yet, so there’s a lot of R and D being done right there. Once somebody really figures out how to make jet biofuel out of algae at cost, that’s going to be the next big company in the world. The Rockefeller Foundation, of course, Rockefeller made most of his money by helping the world transition from whale oil to actual oil, and they recently announced that they were focusing their investments on clean energy because they think that is what Andrew Rockefeller would do if he was alive today. There’s also tremendous opportunities in efficiency, and this is more an internal issue, but internally there’s a lot of money to be saved in looking at building efficiency, operational efficiency, and then there’s also opportunities, and I’ve talked to farmers and producers about this, about looking ahead and saying, “Well, my family has always farmed these certain crops in this certain place, but as climate changes, we’re going to look further south and figure out what they grow there and how they grow it, and we’re actually going to start to transition what we do so that we are ready to succeed as climate changes rather than being hit by the impacts if we just keep on looking backwards and doing things the way we always have.” So we have so much opportunity for ingenuity and creativity to build resilience as well as to assist this Just Transition to a world as we talked about that is not worse than the one we have today, a world that is better, a world that we want to live in.
Manju Seal: Well, I think that brings us to the end of our conversation today. This has been extremely enlightening, and, you know, the number of examples and facts and figures that you share is always so helpful to the folks like me who love numbers. Tremendous thank you to you for being with us today. It was a pleasure to have you with us, and we appreciate the time you’ve taken.
Katharine Hayhoe: Thank you so much for having me.
Michael Torrance: Thanks for listening to “Sustainability Leaders.” This podcast is presented by BMO Financial Group. To access all the resources we discussed in today’s episode and to see our other podcasts, visit us at bmo.com/sustainability leaders. You can listen and subscribe free to our show on Apple Podcasts or your favorite podcast provider, and we’ll greatly appreciate a rating and review and any feedback that you might have. Our show and resources are produced with support from BMO’s marketing team and Puddle Creative. Until next time, I’m Michael Torrance. Have a great week.
Legal disclaimer: The views expressed here are those of the participants and not those of Bank of Montreal, its affiliates or subsidiaries. This is not intended to serve as a complete analysis of every material fact regarding any company, industry, strategy or security. This presentation may contain far-looking statements. Investors are cautioned not to place undue reliance on such statements as actual results could vary. This presentation is for general information purposes only and does not constitute investment, legal or tax advice and is not intended as an endorsement of any specific investment product or service. Individual investors should consult with an investment, tax and/or legal professional about their personal situation. Past performance is not indicative of future results.
