 Welcome everyone, thanks for joining us. I know you have a lot of choices for how to spend your time on campus and appreciate you being here in real time. I know people have intentions of being in real time and then punt to the video. So you get extra bonus points for being here and you also have the added benefit of being able to ask questions in real time, which will make for a good discussion at the end. My name is Alicia Seiger. I'm the managing director of the Sustainable Finance Initiative at Stanford, which is part of the Doerr School for Sustainability. And I am very pleased and have the privilege of introducing my colleague, Julian Mada, who is going to put me through the ringer trying to pronounce all kinds of French names and his schools and things, which as I confess, my high school French teacher would be horrified to hear me try and do here. So forgive me. But Julian is a research fellow at the Sustainable Finance Initiative. He received his master's degree in economics from Ecole Polytechnique and NSEE and HEC Paris and graduated from ENS, which he explained to me, these are all small schools that collaborate together on various master's programs. So multiple institutions coming together to make up his degree. He previously held research positions at the World Bank, the Peterson Institute for International Economics and was involved in various research projects that you see Berkeley and MIT Sloan. And I'm so excited about the topic he's gonna cover today. It is near and dear to all of our hearts in terms of folks who've been tracking the climate action story and in particular, the evolution of the narrative of big oil and gas as the primary obstruction and target of climate action to financial institutions becoming squarely in the crosshairs as both potential obstructions, but also as potential targets for driving change. And so this theory of change that has evolved over the last decade has been one of optimism that financial institutions can accelerate global decarbonization by aligning portfolios with Paris targets and transition pathways. And there has been a lot of momentum around this theory of change. And while the end goal is one we all share, our team started to dig into questions about the efficacy of this theory of change and the data sources, tools and frameworks that undergird it. And so this presentation Julian's gonna walk us through can traces the progression of action from the use of IPCC scenarios to corporate target setting using the science-based targets initiative primarily, although there are others which we'll walk through and employing financial institutions portfolio alignment methods. This collection of tactics exposes four flaws that are essentially critical weaknesses in this theory of change. And those are the unstable foundation of emissions counting as opposed to a rigorous accounting, a reliance on centrally planned pathways, implicit divestment driven approaches and potential tensions with fiduciary duties. And these are all issues that Julian and our team uncovered in research that really call into question the ultimate efficacy of this theory of change of financial institutions. The good news is there is an alternative pathway and that pathway is along the lines of the work we've been doing with emissions liability management which treats emissions as liabilities to be matched by removal assets, allowing firms to maintain emission solvency so that rather than chasing these pathways Elon provides incentives for emissions reductions and removals consistent with shareholder obligations. So that's the abstract, if you will. Julian's gonna take us through and detail this paper or the research and our findings and we look forward to your questions and discussion at the end and Julian, take it away. Hello everyone and thank you Alisha for the introduction. I'm pleased to present you today our paper co-authored with Mark Costin, Alisha Sayger and Tom Heller, Pathways vs. Incentives Climate Activism to Climate Outcome. In the past few years, financial institutions have become the primary targets of climate activists and various stakeholders, such as NGOs, regulators, et cetera to accelerate global decarbonization. Behind lies a theory of change. Under stakeholder pressure and regulatory oversight, financial institutions might effectively incentivize decarbonization by lining up portfolios with Paris Alliance, Pathways, Targets and Plans. This theory of change underpins the Glasgow Financial Alliance for net zero, GFANS. GFANS is a global coalition composed of financial institutions such as banks, asset owners, asset managers and GFANS was created during COP26 in Glasgow in 2021. And GFANS has become the leader for financial institution in terms of climate finance. By September 2023, GFANS has assembled more than 550 financial institutions across 50 countries and representing more than 150 trillion dollars of assets under management. So in our paper, we aim to understand the progression from the Paris Agreement to GFANS and financial institutions as change agents. So to understand this, we analyze carefully each step. So first, the Paris Agreement sets constraint on rising temperatures, stay below tier two degree and ideally below 1.5 degree Celsius. Second, the IPCC and the I develop climate scenarios and sectoral transition pathways by allocating a carbon budget across the global economy. Third, the science-based targets initiative, SBTI, step in to facilitate alignment of corporate net zero targets consistent with transition pathways. And fourth, GFANS now oversees in cooperation with the various groups such as SBTI, the transition plan task force, a common framework for financial institutions implementing net zero targets of their own. In our paper, we raise two key questions. Is setting climate targets informed by transition pathways an effective strategy to reduce carbon emissions? And can the financial sector drive down carbon emissions by aligning portfolios with sectoral transition pathways? So my presentation is composed of three sections. In the first section, I will explain the foundations for setting climate targets and also I will review how financial institutions attend to align their portfolios with transition pathways. I will also present the transition pathway initiative metric that aims to assess the progress made by companies in terms of transition. And we'll also review the transition plan task force that provides guidance to firms on how they should disclose a strategy to achieve their climate targets. In the second section, I will provide an evaluation of current practice regarding transition pathways and specifically in our paper, we identify four key issues. The first issue is a flood carbon accounting system. The second issue is related to centrally planned pathways that lack some flexibility. The third issue is related to implicit diversity strategies that portfolio alignment entails. And the fourth and last weakness we identify is related to fiduciary obligations and the fact that current practice doesn't consider trade-offs that are at play with emissions reductions. And in the third section, I will present emissions liability management as a system that overcome the challenges presented in section two. And ELM also enables to drive down carbon emissions for companies and financial institutions. So first corporate targets and portfolio alignment. So the goal of this section is twofold. First, I will describe the basis for corporate target setting, aligned with transition pathways and scenarios. And second, I will describe financial institution specific measures of target setting and alignment as a theory of change. This figure summarizes the foundations for transition pathways. So the two key elements are the definition of a global carbon budget and sectoral pathways. And the second element is a carbon accounting system developed by the GEG protocol. So these foundations inform corporate sector targets and portfolio alignment tools. I will also present the TPI metric for progress evaluation and planning frameworks as developed by the Transition Plan Task Force TPT. So there are a lot of acronyms involved in this field of transition pathways and I will try to explain them, explain their role and explain how they are interrelated. So first corporate targets. So SBTI, the second space target initiative sets a standard for aligning company's targets with emission reduction pathways. Over the recent years, the number of companies with SBTI approved target has dramatically increased. And in 2023, there were around 3,000 companies with SBTI approved targets. So SBTI is really a major player of climate disclosures. Specifically, the SBTI strategy takes as given a global carbon budget defined by the IPCC. So the aggregate net emissions are liable to limit temperature rise with some probability. So for instance, 1.5 degree with 50% probability. Then SBTI takes an emission scenario developed by the IPCC or the IEM. So the carbon budget distribution through time and across sectors. And finally, SBTI provides an allocation method. So how carbon budget is allocated across companies that inform how they should define their climate targets over different time horizons. So more precisely, SBTI compliant firms can use one of two methods to set their own targets. The first method is the absolute contraction approach, ACM. And in this case, this method requires companies to reduce their absolute emissions at the same rate. So at least 4.2% every year. And this method applies to sectors lacking technological pathways for decarbonization. So one example is the apparel and footwear sector. The second method that companies can use to define their climate targets is provided by the sectoral, is called the sectoral decarbonization approach, SDM. And this method requires each company within the same sector to reduce its emission intensity to a specific level by 2015. So in this case, emission intensity corresponds to total emissions of a company divided by an output you need depending on the sector in which this company operates. So for instance, in the case of the power sector, the output you need is megatron. The sectoral decarbonization approach applies to sector with well-defined technological pathways and the scenarios have been developed by the IEA. And one sector, for instance, is a power sector that can use this approach. Moreover, the transition pathway initiative that is hosted by the London School of Economics provides a complementary approach to SBTI. The TPI offers a carbon performance matrix that evaluates corporate alignment with sectoral pathways in the short, medium, and long term. This figure illustrates the TPI carbon performance matrix for a sample of companies in the oil and gas sector. So companies disclose climate targets at different time horizons, 2050, 2040, 2050. And these climate targets for each company are represented by the dotted lines. And between each date for climate target, a line is drawn. And then these dotted lines are compared to some scenarios, so national pledges, a below two degree scenario and a 1.5 degree scenario for the oil and gas sector. Here's the key unit is emissions intensity. So carbon emissions divided by megatron. And this figure shows that according to TPI metric, none of these oil and gas companies are aligned at least in the short term with a 1.5 degree trajectory. And also this figure illustrates pretty well the concept of transition pathways and being aligned with them. And now portfolio alignment. So portfolio alignment for a financial institution requires metrics allowing aggregation of underlying corporate targets. Financial institutions follow three steps to align their portfolio. First, they choose a climate metric. So it can be absolute emissions, emissions intensity, imply temperature rise, et cetera. I will define imply temperature rise in the next slide. Then the second step corresponds to the choice of a climate scenario. So either from the IPCC or the IM. And then finally financial institutions based on a climate metric and on a climate scenario define a climate target for their portfolio for a certain time horizon. So for instance, 2030 or 2050. SBTI offers a guidance for financial institutions and this guidance parallels transition pathways for other sectors. SBTI makes a distinction between operational emissions and finance emissions. For financial institutions, operational emissions corresponds to emissions related for instance to the energy consumed in the building or also the travels of their employees. But for financial institutions, finance emissions are far more important. And SBTI proposes three options to align financial portfolios. The first option is called a sectoral decarbonization approach applied at the portfolio level. So in this case, financial institutions estimate the finance emissions, then they choose a scenario and then define a target for the finance emissions at a certain time horizon. The second option proposed by SBTI corresponds to the portfolio coverage approach. So for instance, a financial institution can decide that 50% of companies in its portfolio must have SBTI approved targets in 2030. And the third option proposed by SBTI is a temperature rating approach. So in this case, financial institutions develop methods to establish a relationship between corporate targets and a global temperature. And so when, and then financial institutions aggregate the corporate targets in their portfolio and then can define the temperature associated with their portfolio. So for instance, a financial institution can claim that its portfolio is aligned with a 1.5 or 1.7 or two-degree trajectory. But of course, this method requires strong assumptions and is surrounded by a significant uncertainty. In addition to SBTI, GFANS has proposed four tools to evaluate the alignment of financial portfolio with the Paris goal. And GFANS emphasizes the need to engage over the investment. But the tool proposed by GFANS often felt short of reaching this objective of engagement. So the first GFANS tool is a binary target metric. So this tool is really similar as a SBTI portfolio coverage. And it encourages increasing target settings for a portfolio's holdings. The second GFANS tool is the implied temperature rise metric. And it's the same as the SBTI temperature rating approach. The third GFANS tool is a benchmark divergence metric. And it compares the company's projected cumulative emissions with a sector-specific benchmark. And it helps financial institutions to identify under and overshooting reductions at the portfolio level. And the final GFANS tools assign companies based on quantitative and qualitative factors such as criteria of stated targets by performance, disclosure, and governance. And so each company is assigned a category, so align, aligning, committed to aligning, or not aligned. PAKTA stands for Paris Agreement Capital Transition Assessment. And PAKTA is a tool now owned by the Rocky Mountain Institute. And PAKTA is technology-focused and it helps financial institutions to align their portfolio. PAKTA takes a bottom-up approach, linking financial instruments to specific physical assets. So for instance, the France Particular Steel Smelting Technology. PAKTA favors engagement over diversification. Why? Because PAKTA departs from targeting finance emissions. And PAKTA is focused on the deployment of clean technologies. So the key difference between PAKTA and SBTI for financial institutions is that PAKTA is really focused on clean technology and doesn't consider finance emissions. The Transition Plan Task Force is a new initiative led by the United Kingdom. And it helps to define transition plans for companies and financial institutions. So many companies have set climate targets, but few provide clarity into transition plans for achieving targets. And TPD has emerged as a leading force providing clarity and guidance into transition plans to meet targets. So TPD framework is composed of five key elements. So first element is foundations. So in this element, companies disclose their objectives in terms of climate transition and also describe their business model. The second key element in the TPD framework is implementation strategy. And companies disclose details on how they will reach their climate targets. So third element is the engagement strategy. And companies disclose, should disclose some elements regarding how they should engage with their value chain and also government and various stakeholders. The fourth element in the TPD framework corresponds to metrics and targets. And the fifth element corresponds to governance. And the TPD framework relies heavily on the concept of transition pathways and SBTI climate targets. So in this first section, I describe the foundations of transition pathways. I describe how companies define their climate targets and how financial institutions attend to align their financial portfolios with transition pathways. Also describe progress evaluation as proposed by TPI and planning framework proposed by TPD. Now in the second section, I will evaluate the current practice. So it's clear that corporate targets, methods and portfolio alignment tools share core characteristics. However, in our paper we identify four key weaknesses. The first one is faulty carbon accounting. The second one is inflexible centrally planned pathways. The third one is implicit divestment strategies. And the first one is difficult to reconcile conflicts with fiduciary obligations. Current practice relies on unstable GHG protocol foundations. So SBTI targets are expressed in terms of SCOP 1, SCOP 2 and SCOP 3 emissions. SCOP 1 corresponds to direct emissions. SCOP 2 corresponds to emissions from purchase electricity, steam, heating and cooling. And SCOP 3 emissions correspond to upstream and downstream activities. But the GHG protocol methodology raises serious credibility concerns. Only SCOP 1 emissions enters the atmosphere. SCOP 2 attempts to count another firm's emissions attributed to purchase electricity, but in fact, for short, only counting a subset of combustion emissions, as demonstrated by a recent paper written by Marc Roston, Alicia Seiger and Abby Matieson. More of SCOP 3 due to ambiguous boundaries and implementation discretion over counts emissions as proven by Kaplan and Ramana and Marc Roston. The second weakness with current practice corresponds to central planning. So transition pathways fail a reasonable test of robustness because they depend on exogenously specified deterministic technological diffusion and also because they do not depend on endogenous investment decisions or capital allocation. So transition pathways represent one possible path for emissions, economic activity and technological diffusion, but it's one possible path among different. And so transition pathways lack some flexibility. More of initiatives such as SBTI have slowly repurposed climate scenario as normative pathways, despite their origins as policy tools. So initially climate scenarios were developed to understand the impact of climate policies, such as a carbon tax on carbon emissions and economic activity. So SBTI treats scenarios as deterministic and not as flexible drivers of incentives and investments. And for this reason, current practice regarding transition pathways part of its objective of reducing carbon emissions. Moreover, under SBTI sectoral decarbonization approach, firm carbon intensities converge to sectoral targets by 2050. So financial institutions may identify holdings deviating from these pathways, but identifying deviations does not inform effective decision-making for investors and they tend to favor divestment strategies, as I will explain in more detail in the next slide. Moreover, the global emissions budget allocation defining sectoral transition pathways does not allow for economic or financial variation. So for instance, the allocation of the carbon budget might not consider adequately the barriers that developing countries face to reduce their emissions. So the definition of climate scenarios and those transition pathways may be very inadequate to reduce global emissions. The third weakness corresponds to implicit divestment strategies for financial institutions. So current practice by focusing on finance emissions tends to favor divestment over engagement. And it's important to note that the reduction of finance emissions does not necessarily translate into a reduction of actual emissions. So financial institutions by following current practice are really focused on finance emission, but by divesting from the most emitting firms doesn't mean that we reduce global emissions. And so some recent empirical studies show that a strategy is undertaken by financial institution to achieve the climate goals far short of this objective. So one interesting paper is a one of Assmark and Schu and the authors show empirically is that high cost of capital hinders bronze firms ability to fund decarbonization and encourages them to maintain returns by worsening the emissions profile in the near term. So if companies face higher capital costs so it's less likely that they will invest in clean technologies. Moreover, for choosing and further greening relatively green first may appear effective on a firm by firm basis but has limited effect on the aggregate system. And the four weakness where identify corresponds to fiduciary obligations. So Paris line firms must confront their big leg obligations to pursue climate goals while maximizing shareholder value over a given time horizon. Moreover asset managers must reconcile climate goals with obligations to serve their client interests. So to be clear reducing emissions to ensure long-term sustainability of individual firms, portfolios or even clients supports global interest. However, emissions reductions beyond a certain threshold involves trade-offs with fiduciary obligations. So if a company or portfolio manager significantly decreases its emissions, footprint or financing in the short run then short-run performance may suffer and current approaches to corporate or financial institutions alignment ignore these trade-offs. And so likely jeopardizes a success. So to overcome fiduciary concerns, companies and financial institutions must be clear about their approach to climate risk explaining trade-offs between climate risk long-term opportunities and new term returns. So to summarize this figure illustrates the weaknesses of current practice regarding traditional pathways. So we saw the issue of central planning related to the definition of climate scenarios. We also mentioned the invalid accounting and the GHG protocol. And I also explained the diversification strategies after incentivized by current portfolio alignment tools and the fiduciary obligations issue. To illustrate the limits of current practice I would like to take the example of two companies. So Intel declined to participate in SBTI and specifically Intel says that while Intel long-term net zero GHG goals are in line with a 1.5 degree emissions reduction scenario required by SBTI, Intel is challenged by the near-term reduction requirement without the ability to account for significant historical reductions. It's important to note that Intel's absolute emissions aren't decreasing. So that's why they cannot apply to SBTI target. But it's manufacturing output triple over the recent years. And so the Intel example illustrates the issue of central planning. So several pathways are possible to achieve climate goals and pathways proposed by SBTI might be not adequate for some companies. Intel also illustrates the issue of fiduciary obligations because in the short run, Intel has to provide chips to its clients. The second example to illustrate the limits of current practice is given by Amazon. So Amazon recently lost its SBTI approval and Amazon said that it's difficult for them to submit to SBTI in a meaningful and accurate way. So it makes reflect the carbon accounting issue because with the current GHG protocol, it's very difficult. Companies cannot estimate in accurate manner their carbon emissions. And also the example of Amazon can illustrate the central planning issue because Amazon is a very complex business and SBTI and transition pathways currently proposed may not be very well adapted to Amazon activities. And now I will start my third section on emissions liability management. So I've shown that climate target setting and portfolio alignment have fundamental challenges that will continue to limit practitioner's ability to achieve desired outcomes. In this section, I present ELM as a robust and effective approach to accelerate decarbonization. ELM relies on the well understood financial tools of asset liability matching. And thus ELM incentivizes companies and financial institutions to move from climate disclosures to climate actions. But the first step is to fix carbon accounting. So climate transition requires a system of transparent and expedient information sharing. Kaplan and Ramana in a foundational paper developed the reliability method as a functional carbon accounting system. So basically the applied principle of cost accounting to carbon emissions, passing actual emissions from supplier to customer in a similar fashion to the transfer of goods and services. This slide illustrates the reliability approach. So the basic idea is to measure carbon emissions at the product level rather than at the entity level. So if we consider two companies, A and B, the liabilities for company A are calculated the following. So the addition of start-off period liability plus purchase liability plus produce liability. Then company A transfers liabilities to company B and then the same manner as company A, we can calculate liabilities for company B. And company B can transfer some of its liabilities to end-use consumer. So this is the logic of the liability approach. Liability accounting maintains consistency at any level of aggregation across the supply chain at a regional, national, or global level. With the liability system, carbon emissions are accounting once and only once. And so liability accounting enables financial institutions to accurately calculate finance emissions and also it helps financial institutions to compare companies in terms of carbon emissions. And this is not the case with the GHG protocol. Now emissions liability management. So Mark Rosten, Alicia Seiger and Tom Heller propose ELM as a method that equates a net-zero claim with carbon balance sheet solvency. So ELM is the next step after illiability. So carbon emissions create long duration liabilities called illiabilities that the firm must defeat with duration match carbon removal assets. So with ELM, companies build a carbon balance sheet in which they match carbon liabilities with carbon assets. And so with ELM, the market price of durable removals provides a price signal to internalize the externality of emissions. So when a company emits emissions, it creates an externality. And according to economic theory, companies have to internalize this externality. And so ELM provides such incentives. So with ELM, a company has two options. The first option is to emit carbons and have illiabilities, but then the company has to buy carbon removals to extinguish these illiabilities. And for most companies, this strategy is very expensive because durable removals are very expensive. So the second strategy that companies can take is to reduce the emissions of their activity. So ELM defines a positive outcome, no additional atmospheric carbon emissions, that leads to effective emissions reductions. Regarding capital allocation, so ELM does not tie firms risk to particular climate scenarios. So contrary to current practice regarding transition pathways, ELM offers a flexibility. ELM also builds on the way financial institutions think about capital allocation. And so ELM corresponds to an additional source of capital expenses. So for a company with a lot of illiabilities, this company will be seen by financial investors as very risky because this company will have to consume a lot of capital to invest in carbon removals to extinguish illiabilities. Moreover, ELM provides a sound basis for stakeholder engagement. Financial institutions might pressure capital allocation toward emissions reductions and activate and align financial investors with pressure firms to increase their stated liability duration. So what does it mean? So when a company emits carbon, carbon remains in the atmosphere for many, many years. And so in practice at the beginning, if companies decide to implement ELM, they might choose some carbon removals with a duration of 50-100 years, but with a duration that is shorter than the duration required to completely extinguish illiabilities. And so activists and financial investors really can put pressure to increase the stated liability durations of companies. To conclude, current practice defining transition pathways faces fundamental challenges. So the reliance on flow carbon accounting methods, rigid and technological prescribed pathways, implicit divestment strategies and tension with fiduciary obligations. The current theory of change is unlikely to fulfill its promises of emissions reductions. And so we need to move forward and to adopt methods that enable real emissions reduction. And ELM and carbon solvency provide a sounder basis for climate action. So market price of durable carbon removals incentivizes emission reductions and reframing climate risk in terms of capital requirements, cost of capital and asset liability management aligns with financial institution expertise. To conclude, ELM offers a more robust strategy to activate financial markets as change agents. Thank you for your attention and I would be happy to answer your questions. Terrific work, Julian. And thank you all for sticking with us. It is a lot of content walking through the full landscape of portfolio alignment tools, a thorough investigation of the ways in which they're gonna struggle to add up and then the introduction of two big new concepts around rigorous carbon accounting and emissions liability management. And as you heard me fumble through a few words in French at the beginning, Julian has done this all researching another non-native language and writing in it too, which is really truly remarkable. So thank you, Julian. While we're waiting for folks to get warmed up, Mark, did you wanna chime in? You looked and I see Holmes as a hand raised. Holmes, go ahead. Nice to see you. Thank you. Thanks. I didn't have my video on but I was screenshotting madly so that I could return and tap through again without watching the video. Julian, thank you for laying out in step-by-step fashion just as Alicia made the compliment. One thing that a person like myself climbing a steep learning curve to catch you on the journey would benefit from is a kind of illustration or a demonstration of the dance moves. And I wonder if you're able to do that by reference. For example, that you had at different times acknowledged potentially their good examples in the footwear industry. I saw that at one point. Could you name for us individual corporations or contexts in which we would recognize these tools being used in the sequence you've described? So basically what companies do is in their sustainability reports they say that they end to achieve some climate targets by 2030 and usually it's approved by SBTI. I don't have all the names of companies with SBTI targets but really it works at the sector level. So basically SBTI has developed guidance for each sector and to inform how these companies can define their climate targets. Holmes added ELM adopters. But so for instance for each sector SBTI recommends one of the two approach. So the ACS are reducing the absolute emissions for sector without technological pathways. And the second method is the sectoral decarbonization approach and really focus on the carbon intensity of companies. So depending on the sector companies can choose one of these two methods. On the train Andrew I answer correctly your question. Yeah Holmes maybe I'll jump in a little bit here too. And Erin I was wondering if that was the real Erin Craig. Nice to see you. So we actually have a case study and I was looking around to see if XJ's jumped in on here but he's not he's a recent MSX graduate who took the deep dive into the case study of this analysis. Which shows how a tire company Pirelli Tire was able to get SBTI targets approved for their operations by looking at their scope one and two emissions because scope three is considered essentially out of scope and optional for a downstream tire manufacturer. The problem is of course the conflation with upstream and downstream scope three. So the long story short on the target setting is because of the confusion around scopes Pirelli is able to set a target that doesn't look at its largest sources of emissions upstream because those are scope three. And so the target that they're able to set is so much lower than what they really could and should do and have control over and they were able to get approval for a target that was lower than the stated minimums at SBTI. We don't say this to be critical of any of the companies involved. It's just like how this is happening in practice. And so you've got this kind of perverse and outcomes through the existing process with SBTI target setting and approvals missing kind of the biggest pieces of the decarbonization opportunity for particular companies. And then in this case study, we walked through how reliability accounting gives you the information you need to understand the emissions from supply chains and how ELM applying carbon solvency through specific duration would, what the impact would be on EBITDA for that company were it to be carbon solvent for particular durations. What is not captured in that case study is the fact that that is if the tire pump, if Pirelli were to balance all of its liabilities with duration mashed assets and do no investment in decarbonization in its supply chain. So it's actually the findings of this case study actually are the high water mark of what these costs would be because presumably they would invest in the cheaper alternatives of decarbonizing supply chain and not owning that liability in the first place. But we have a piece of work that essentially answers your questions in very vivid detail that is dotting eyes and crossing T's, but we don't have it yet to share. Thank you for taking us through the journey we can look forward to. Yeah, thank you. Erin, nice to see you. Thank you. Nice to see you also. I'll just say briefly that I come from a standpoint of working with companies broadly to measure and then take action on their footprints. And I think the eliability, I've been following this for a little while in the background. So, and I think the eliability concept, right? The notion of having a company having a comparable system that you do for financial accounting, it's easy to understand. It's easy to communicate. People can immediately understand how it could be impactful. Like it has lots of things going for it. And also all of the issues with SBTI, even that aside. The challenge, a big challenge I see, and I'm curious if you're working on this, is that there is no way from here to there. And the benefit of some of the other systems that are being proposed that are mentioned, some of which are mentioned in your paper, which are band-aids, right? To stick on top of the corporate initiatives like SBTI that are already out there. The benefit of those is that they have incremental steps that companies can take today, tomorrow, the next day. And we work, I work quite a lot with companies trying desperately to secure good upstream information about their products from suppliers and have been doing so for many years. And the information that they can obtain is very poor. And so getting on a worldwide basis, a system in place where you are receiving trusted information that you can actually, that you actually can and should take as a liability onto your book, onto your balance sheet. I don't know how to begin. It is, it is so far from where we are because the emissions are happening in places where the companies do not have the information to communicate. So if you have a solution to that, I would love to. Yeah, we're all chomping at the bit. So I want to take it, Julie wants to take it. I'm going to hand it to Mark. There is the good news is there is an answer to that question that we are enthusiastic about. I'm going to pass it to Mark first. Yeah, so it is a great question. Is how do we get from here to there? And the, like one of the key pathways is when we have regulatory regimes talking about making reporting mandatory. And so for example, both in the U.S. and Europe, particularly in Europe, there have been pushes in the direction of mandatory disclosure. And the challenge is that mandatory disclosure under the greenhouse gas protocol can't work. It cannot be accurate. And the one of the key features of Eli abilities is that it's actually pretty straightforward to implement. If someone will mandate it. And so, for example, if we if and it's close with the German auto industry to say that Eli abilities are going to be required. And the way they intend to do the way, you know, it's in discussion to do this is to simply say, okay, look, you have three years to get actual upstream data from your direct supplier. Because remember one of the key features of Eli ability accounting is you only need your direct suppliers. GHG scope three upstream requires you estimate, you know, forever when people don't know it. So like the notion that Samsung can figure out who their tier three suppliers are is just fictional. And the idea that they could estimate their emissions is fictional. But if we all if some regulatory regime said, you know, you are required to use Eli abilities in three years. If you're not using reported Eli abilities, then we're going to stick you with the 90th percentile for what the estimate could be. And that would give very large incentives to suppliers providing accurate information. Because otherwise they know they're getting penalized and their customers are getting penalized because they're not providing the information. So, you know, and or, you know, as it just another example in a in we could imagine a situation where basically if Amazon and Walmart said, we're only selling stuff that has Eli abilities, it's done. They sell everything. But the point is right now we don't have any hope of getting real data under the GHG protocol. People are guessing. They're estimating. They are using data that, you know, no one has any ability to evaluate, to attest to, to audit. And they are it in essence disincentivizes anyone changing their supply chain because if Julian, Alicia and I are all producing the same product and you're our cut, you're our potential customer. I'm not going to I'm not going to spend more money to make my product more expensive to be able to sell it to you with lower embodied emissions when Alicia and the companies benefit from me bringing down the industry average. It's it's like convoluted incentives. So, admittedly, we ideally through even mandatory reporting regimes can get very close to Eli ability accounting in a supply chain pretty darn quickly. And I'm going to pile on Cedric. I see your hand up but just quickly before we have to wait for regulators, although as Mark said, there are there are ones that are that are close on the horizon in Europe. Also, as you look to implementation of CBAM, you have to start doing Eli ability. You can't do scopes for anything that has fiscal, you know, policy implications. But there's there's there's something even closer on the horizon, which is bilateral supplier contracts. There are companies, large companies that are already implementing Eli abilities. There is now an Eli ability Institute that exists for the sole purpose of piloting and writing guidance around the implementation of Eli abilities. And large companies across all sectors now the economy who see this solution is so much more rational and efficacious than what they're doing where they can actually make capital allocation decisions with real information who are implementing this in portions of their supply chain and the other good news that I will add is there is increasingly now technology to support this that just didn't exist at the time, you know, of early implementation of the protocol. So you've got, you know, as our colleague, Karthik likes to say, perhaps the most and only socially beneficial use of distributed ledgers. But, you know, you've got a blockchain and AI. You've got the infrastructure of technology to be able to capture this information from cradle to gate. There have been advances through other social movements, particularly around deep deforestation, where, you know, Unilever now has the ability to track green attributes, green tokens from, you know, small load of farmers to the first mill that first mile. That didn't exist five years ago. So there's, there is now technology to transfer this information through complex global supply chains and retain it through SAP systems. The large ERP providers are, you know, have these green tokens now as part of their product offering. So, and then this question about data, as Mark said, there is no incentive to get actual data right now. In fact, in some ways there's perverse incentive, you know, not to. And so once you start aligning incentive for improvements in emissions intensities, then you then you also improve the incentive to be able to capture that data. So data is an issue regardless, but under any liability system and ELM framework, you have the incentives of aligning to improve the data. Cedric, thanks for your patience. Thank you. Thank you, Julia, for a great presentation. First, a little remark, Alicia, at the beginning, I think you mentioned those three small schools that are collaborating. I think there is like the most prestigious French academic institution that exists. I know that Julia, but I want to establish the truth on that. Thank you. Thank you for correcting record. I appreciate that. Yeah. I think she's like a pretty technical NS and then say, and there are those three small things. No, but super nice talk. I'm curious on your slide 12, Julia, where you were showing the projection that all these are companies are reporting where are the calculations coming from? How are these projections calculated? You mean when they define their climate targets? Correct. Yeah. So basically the end. Yeah. So it's one of the weaknesses that we identify in current practices that companies has to estimate their future activity and so their future emissions. And so that's why it's surrounded by a lot of uncertainty. Okay. So it's one of, yeah. It's, it can be illustrated with a central planning issue. So basically it requires a lot of assumption and there has to be a line with one pathway, but several pathways can be possible for firms to be aligned with the same carbon budget. I see. So I, what I understand is that you're proposing an accounting like framework, obviously to talk about these emissions, right? And, and then we see L. M. Companies don't have to refer to a specific scenario. Just the principle is matching assets with E assets with E liabilities. Correct. And so one of the questions that arise kind of naturally is that equally as, you know, I'd say traditional accounting. How do you address fraud? And this kind of system, because obviously you kind of rely on. The ability to audit. There's a whole, you know, kind of CPAs that are available to do these kinds of assessment for accounting, but in the framework that you're proposing, I feel like in any kind of accounting, you open yourself to fraud or wrong reporting. How do you address those issues? Or is this something you're thinking about? Oh, I mean, with the eligibility system, so firms estimate accurately, there are carbon emissions. And this is not the case of the current methods proposed by the GHG protocol. So with the eligibility system and ELM companies can be audited easily on whether regarding their ELI abilities. Much of the much of the work of the ELI ability Institute is sort of laying the pathways for audit firms to be able to give, you know, fair and accurate audits of ELI abilities. The challenge I was having a discussion with someone about this earlier, the challenge with the current GHG protocol is that the best that any auditing firm is willing to do is say they will give it a, this is not obviously fraud. And, you know, the point of ELI ability accounting is that we can get it to the point where it is determined as fair and accurate by an audit firm. Because it is, you know, happening, you know, in transferring liabilities from party to party in a trackable verifiable way. Please join me in thanking Julian. Great presentation. Thank you all for your great questions and engagement. And we look forward to continuing the conversation.