 So, good morning, good afternoon, and good evening to all our viewers from around the world. Welcome to the Stanford Global Energy Dialogue. Over the last three and a half months, we have had seven unique and extraordinary dialogues with hot leaders and energy that covered a wide range of topics from impacts of COVID-19 to energy access and climate change. The videos of these dialogues can be found at gef.stanford.edu. Today's dialogue is dedicated to the memory of Jim Mahoney, who was an executive and a champion of sustainability at Banco America, and a close friend and partner of Stanford Energy for more than a decade. Let me introduce my co-host for this dialogue, Alicia Seiger, who is the managing director of the Sustainable Finance Initiative of the Precourt Institute for Energy. Alicia will introduce our guest today. Over to you, Alicia. I have the honor of welcoming today's very special guest, Ann Finucan is vice chairman at Banco America. She also serves as chairman of the board of Banco America Europe, Ann is responsible for the strategic positioning of Banco America and leads the company's environmental, social and governance, sustainable finance, capital deployment and public policy efforts. In recognition of her leadership, Ann has regularly been named to Forbes, Fortune and American bankers most powerful women's lists. I'm also pleased to welcome Richard Kaufman, who will be engaging Ann in this dialogue. Richard is the chair of Generate Capital, among his many significant contributions to energy and finance. Richard has served as New York state's first energy czar, overseeing the state's energy agencies and as senior finance advisor and secretary choose department of energy. In another life, Richard was a partner at Goldman Sachs. After the Ann and Richard dialogue, we will have a student asking questions. And finally, Arun and I will return to manage questions from the audience. But before we begin, our speakers wanted to gauge the level of optimism this audience has for the current global policy landscape. So our question is, how likely is it that the European Union will hold together on the ambition of their green deal? See where we are. Okay, feeling somewhat optimistic here, somewhere between likely and somewhat likely. That's great. And then turning back to the US, our next question. What are the chances for major US climate action in the next five years? Okay, let's see where we're at. Still in the relatively optimistic, closer to 50%, maybe even more than 50%. All right, so now that we've taken the temperature of our audience, over to you, Richard. Hi, Salisha. So Ann, I understand happy anniversaries in order for you. Yeah, thank you. 25 years at the bank. So I hope they're going to send you some chocolates or some flowers. What do you get after 25 years at Bank of America? Another day's work. Well, no good deed goes unpunished, for sure. So so much to talk about, so many cross currents and energy. Certainly seen all the fires in the West, which are the latest examples of more concerns about climate change. There's been dramatic increases in ESG investing. The divestiture movement continues to gain steam and there are continued declines in the cost of wind, solar and batteries. And even oil and gas companies are talking about carbon emissions reductions and selling off some of their oil and gas assets. But on the other hand, electric vehicle penetration is pretty low. We're well off target for emissions reductions to achieve under two degrees C. The United States has become an oil and gas global powerhouse and China has stepped up now again, it's building of coal power plants. So where do you think the needle is headed on energy transition and where do you think we are at this moment? Well, thank you, Richard, and thanks everyone for having me. And thank you for making this in the memory of my dear friend Jim Manning, who really began this process more than 15 years ago. When we signed on with Stanford and other universities and with other like-minded companies to try to tackle the issue of greenhouse gas, emissions, climate change, and what the business community could do about it. And the transition over that time has been enormous. Let me just speak a little bit about some of the touch points you noted, Richard. So I'd say the first piece of good news is that the business community in general, particularly multinationals, see the issue of environment, climate change, greenhouse gas reduction protocols and the need for them as a growing concern and probably also a business opportunity. So to be specific in the banking industry, more and more companies, our clients, are coming to us and looking for help in dealing with reduction in scope one and two and ultimately in scope three in terms of the greenhouse gas protocol. Why are they doing it? Because they're multinationals, they believe that the European deal, Green Deal will happen. Now, whether it will happen this year or next year is for anyone to debate, but we do think it will happen. Once it happens, if you're a multinational company, you then have to look at how are you going to deal with the landscape of your company? You're not going to attend to something in Europe and then leave it for the US to be different. So you start to make change in anticipation of that. I would also say, but because of the Paris Agreement, a company like ours who signed on to the Paris Agreement in 2015 and 2016 in implementation, in order to make good on these promises, it takes us years to do it. So the fact that this administration may be less favorable to legislation or research and development in terms of reduction of greenhouse gas emissions. The fact is that we had already begun it and we and many others. So you see GM, Mary Barre, with just an analyst meeting talking about their commitment and their progress on electronic vehicles, electric vehicles. You've seen the same for VW and out of Germany. So what I mean to say is we see both business opportunities as well as commitments we made that it took or take a long time to make happen, make possible. So I'm optimistic. Now, what I am I think concerned about like everybody else is that the pace is too slow. There's not an agreement globally. China is, as you say, developing more in the area of oil and gas. I do think if the EU passes the EU Green Deal, the US will, as I said, through multinationals, start to have a bigger movement. China will follow the US. I think that they have already done a pheromone in terms of R&D, carbon capture. They have looked at the technology. If they are not doing it itself, they're looking at the technology of carbon capture, the value of hydrogen, et cetera. But of course, they're not feeling the pressure that they might otherwise have. If the EU had passed the Green Deal, if the US had either legislation, regulation, or even investments out of the government to do more here. But I think this is all on the come, whether it is in the US four years from now because the Trump administration will prevail. Or four months from now if the Biden administration is in place. All right, so I'd like to drill down more on the EU Green Deal. Because maybe not everybody's familiar with it. And you're proposing something that could really be a game changer if US multinationals need to comply with European rules. So maybe you can talk a little bit more about what the EU Green Deal would mean. And where it is, you said it could be a year or two until it gets enacted into law. So maybe you could talk a little bit more about the process too. OK, well, the process is, I'm not an expert on EU legislative bodies, but the basic process is that the taxonomy has been passed. So what to call what has been passed? The EU Commission has made its points, it's issued its papers. It has gone to the EU Parliament. The Parliament will vote sometime before the fourth quarter, I think. Of course, it could be delayed, it could be the first quarter of next year. But within the next 12 months, the member states then vote. The 27 member states then vote. And there'll be some parlay between the two Parliament and the member states to come up with an agreement. But the end game will be that there is an agreement to get to net zero by 2050. And there'll be benchmarks along the way. Some as aggressive as saying that they'll get halfway there by 2030. So just suspend disbelief and say they will do it by 2030. And you'd have to get halfway there. Well, the amount of action that would have to take to get us to net zero by halfway there by 2030 is pretty enormous. And I think that you will see both the carrot and the stick, meaning the stick will be the legislation and the regulation that requires companies, entities to get there. And the carrot will be perhaps tax incentives or tax credits or some sort of mechanism to speed up the process. Now, we had these kinds of tax equity kind of incentives that are just sunsetting this year out of the Obama administration, which, by the way, were very attractive, meaning that there were tax incentives for companies to do energy efficiency audits and to begin to reduce their greenhouse gas emissions. So you can imagine that if this came out of the EU in the past in 2021, then you have nine years to get to 50% to net zero. That puts everyone on a pretty quick trajectory, whether you're a manufacturer, a service company, or an oil and gas company. So I'm curious. I can understand that I know that there are active green parties in Europe. And I'd like to talk a little bit more about the support of the business community for the Green Deal. I was wondering whether how much the business community or political leaders are thinking about this as an economic opportunity for the promise of new companies and new industries and how much of it is more existing European companies that think that they're looking at the tea leaves and want to develop a strong domestic market within Europe for their products and services that then they can take internationally to give competitive advantage. Well, I think first remember then in Europe the issue of climate, greenhouse gas emissions, methane, et cetera, this isn't political in Europe. It's uniquely political in the US. So the business community is not fighting it. The business community is simply trying to figure out how to do it. And they need help, obviously, in doing it. As a financial institution, we see that as an opportunity because it'll need financing. From everything from getting to an energy audit to their own activities to solar panels, wind, et cetera, to reduce greenhouse gas emissions. So I would say the business community, and I get this from the International Business Council, the World Economic Forum, and even some study groups that come out of the UN with the business community. I would say the European business community sees it as inevitable. Many of them have already begun this process. They do need financing. They do need help. I could get into where I think BP and Shell, who are committing to being net zero in 2050, which essentially says they will be out of the fossil fuel business and they will have developed technologies in the renewable carbon capture, methane capture, et cetera, that will reduce and then get them to net zero. I mean, they will have to commit to this because they're European companies. And I would add that despite the fact that the UK will have completed Brexit, let's assume, the UK has already pledged that they will essentially have a like bill and like regulation in around the same time as the EU. So again, I would say we see this as not political in Europe. And then just to play that out, if you're a multinational, you would be looking at this as the first step. Also for the EU, which often doesn't lead in economic matters, it's seen as an aggregate, slow growth, slow population, not on the cutting edge of world matters. It changes for the EU. For the EU, it now means that they are on the cutting edge. They will set the agenda on climate and the rest will follow. And I think it's remarkable, but I also think it's true. And so you think this could be really enduring because there's private consensus. Yes. I can't imagine that it isn't enduring. I think that people may miss their marks by 2030. I think that there will be delays along the way because technology, the investment in technology will be in some way not as fast as it needs to be. But I absolutely believe that it is inevitable. And I believe because it's inevitable, multinationals, particularly US multinationals, will move more quickly. And meanwhile, I think we see opportunities. We certainly see opportunities in everything from hydrogen to capture to wind, solar. You see this kind of activity. And just as a very basic thing, if you're a company that can get to, there are three scopes, this greenhouse gas protocol that the World Resource Institute and the World Business Council for Sustainable Development have agreed to. There are these three scopes. One and two is essentially your own activity, what you do as a carbon emitter. And it is addressing that. So you buy renewables, you reduce your water usage, you use solar or wind instead of traditional energy sources. Let's say you can get through all of that. You still probably need some sort of offset. If you need some sort of offset, you need to buy it out in a marketplace. Once you have to buy it out in the marketplace, what is available to buy? Right now, it's mostly nonprofit. So it's a nonprofit that's reforesting the Amazon or creating solar in villages or something that's in the nonprofit world. But that's too finite. It's too small. So there'll be a business community that is built up on this offset world. And I think that's a marketplace. So we see this already. This is happening before the European Green Deal has happened. So when you talk about additional offsets, you're talking about carbon sequestration, taking suits in from the air. What are you talking about there? What kind of technologies? You name it. I mean, it won't be one thing, because it will have to just be something that passes muster. So use of hydrogen, more in EV, more in terms of carbon capture. And part of it will be actually, I think, aggregating smaller companies, putting research behind it, and getting some sort of carbon pricing for that. So that also is, that's a little nascent right now, the whole issue of carbon pricing. But that will become much more day-rigger. It will become something that I think people will accept. OK, so maybe you can talk a little bit more about the role of banks. You talked earlier about companies coming to you about Scope 1, 2, and 3. So what's in it? So there's a whole variety of business opportunities I can see for the bank. But in addition, what's your role in terms of compliance under the EU Green Deal? Well, whether it's the EU Green Deal or this greenhouse gas protocol, there are these three scopes, 1, 2, and 3. Three is where financial institutions have a heavier burden and maybe a bigger opportunity, as well. The heavier burden is that we will then have to report out on our clients, their behavior, their greenhouse gas emissions, their carbon footprint, et cetera. So if you're trying to get to net zero, we are then responsible for their behavior, as well. Once that happens, and that is, within the next three years, our company will have picked one category, let's just say real estate, and start to try to dissect that. And in doing that, we'll then portend what we could do for other industries. But the point is, then we're responsible for any client's behavior, as well. Well, as soon as you get into that, then you start thinking about, who are you banking? Because if there's no movement in that category or that company, eventually you're going to be out of compliance. Now, initially with the EU, but as I say, I think that it is just common sense that we will eventually see US legislation and regulation. Once that happens, I think China follows. So the point is, we see both the risk of banking as a company that is just ignoring all of this. And we see the opportunity of those that aren't so that we can help underwrite new activity. Well, what you're describing are some pretty powerful, maybe even kind of, at least for many of us, not fully thought through things that are really going to move the needle, the combination of the role banks and compliance and who you're going to bank and who you're not, what multinational companies are going to need to do to be in compliance and the EU Green Deal. And so what you're also saying is that the US is really going to be maybe dragged into having legislation because the US multinational companies and major financial institutions are going to be leading. I think that's the case. I think the EU is leading. I think the multinationals will come along because it's common sense. Many of them have already made movement. You have millennials who are a larger population than the baby boomers and have more heft, and they expect this to be part of the equation. I mean, it's any number of factors, but these very basic things are really important. And I do think the US will follow the EU. I think it will be a fast follow with one administration and a slower follow with the other, but I think it's happening nonetheless. And then I think China, which has invested in the technology and may not be using it, may come along more quickly as well because then you're creating a marketplace. And once you create a marketplace, as opposed to we'll all abide by the rules, but rather that you're creating a marketplace at the same time, I see real activity. I don't know that every nation and every continent is going to be equal here, so I do think there will be laggards. So when you talk about a marketplace, what do you mean by marketplace? Well, if a marketplace, if you have to get to net zero, you name the company, you have to get to net zero, you have to figure out how you're doing it. So first, you do the marketplace. You have third parties that help you evaluate your carbon footprint. You have companies that help you install technology that will reduce your carbon footprint. You have companies that help you with the offset. I mean, there's just a marketplace here that doesn't really exist now. So you talked also about oil and gas companies, and they have these major objectives that they're going to have to achieve. How likely is it that some of the majors are going to be able to do that? Is Equinor and Orsted, are they the models, or are they the exception that prove the rule? Well, I think they're, I'm not sure I would use them as the models because they're state-owned. I think you're better off looking at models like BP and Shell who are not state-owned and they're publicly traded. And I think they're just a better indicator, which is not to denigrate the others. It's just my own view is that if it's state-owned, it's a little different. Well, first of all, BP and Shell I think are doing some very impressive things. I know you had chat holiday on, so you have a sense of that. But the amount of money that they're putting into their R&D, their EV work, carbon sequestration, it is powerful. And I think that's what the indicator is. Are they saying they will get to net zero by 2050? Are they giving a blueprint? Are they investing in the R&D? Are they showing early signs? In both cases, they are doing that. I think there are other oil and gas companies that will simply wait for regulation. They're doing some things, but not as much as perhaps these two. OK. So let's talk about ESG. That's one of the areas that you're responsible for at Bank of America. OK. One of the things that we've been talking about, how does that change the ESG investing if multinational companies need to be in compliance? Does this mean more reporting? Certainly, there's a lot of reporting now. Does it mean more money flowing into ESG funds, or does it mean something more than that? Maybe a change in how mainstream investors value energy transition and climate risk. Because arguably, maybe we're in a carbon bubble when it comes to how most mainstream investors evaluate climate risk. So I think we are at a pivot point. ESG was nice to do, good to do. People did it for various reasons. There's enough research, first of all, now. Let's just say what I would argue is maybe five years later, that those companies that have applied true ESG governance to their companies. And what I mean by that is they have begun on the journey and can demonstrate it because they have published a TCFD report, or they are being evaluated by the alphabet soup of organizations and such that are looking at them, that they are demonstrating some development. But if you look at these companies now, they are generally less likely to be bankrupt. They are, in general, trading at a high multiple. They are more appealing to their customers and to their employees. So we see real value in having strong ESG metrics, ESG behavior. The E is obvious. It's what we're talking about here. The S is the social contract with both the customer and your own employees. What is the minimum wage? How do you treat people in terms of maternity, paternity, LGBTQ issues, you name it? And then on governance, it's how well do you govern? What does your organization look like? And what do you look like in terms of diversity, both in terms of gender and race? Those things, I think, were just seen as being generally good to do. But now there are companies, our own research department, Merrill Lynch Research. So this is apart from our company. It's what we essentially sell to our clients indicates that those companies that have good ESG practices are just better companies. They perform better. That has been valuable in terms of making the argument. What's also valuable are millennials because they are forcing an argument. And then in terms of where is the money coming from, the more that we see this as being real, the reality is that private capital does exist to do more in the areas of environment and then generally on the sustainable development goals, whether we're talking about pension funds or insurance companies or wealth managers or banks, there are trillions of dollars available to invest. And if an asset management company or the investor before that, if a pension fund tells the asset manager that they do not want any investment in a fossil fuel company that is not making a turn, that's going to make a huge difference in behavior. And we're beginning to see that. Now, I think we'll see more of it, but we're beginning to see it. Well, I guess what I'm trying to get at here, Ann, is whether there's the you talked about before a marketplace developing for solutions, which really hasn't really existed yet or certainly is going to be widening away from just purchases of renewable energy. And I'm wondering if there is an analogy here with on the investing side where with real, because you use the word real, with real changes going on and real commitments that have to be made, that investors will see real implications on companies' strategies and financial consequences and so that it begins to move the investing world out of, again, a lot of reporting and to different kinds of asset allocation and valuation, not just in the SG world, but amongst mainstream investors. Yeah, maybe I'm just not answering it adequately, but I already think that's beginning to happen. You've seen the sort of missives from Larry Fink at BlackRock. Shareholder votes, the proxy statements, the shareholder votes in large companies. There are many times issues related to ESG more generally. So I wouldn't say it's specific to environment, but the S and the G are certainly part of the proxy battles going on in the country, in this country, in the US. And I see we just see a change. There's a lot of pressure on companies. First of all, there's the MSCI, the Sustainalytics, the Dow Jones, Moody's, et cetera, evaluating you. That matters in terms of the valuation of your company and they're evaluating your ESG sort of standing. You've got the asset managers, BlackRock and others, who have said, we're going to, those investments that we control, we're going to evaluate you for your ESG behavior, particularly around E. The missing link is the investors themselves. Right now, shareholder return is still the number one indicator of success. When the pension funds start to really push for certain behaviors, then game over, I think you will see a sea change and I think that's coming. I guess we're agreeing, because what you're describing as the scenario of Europe is that it will start changing financial returns for companies. Yeah. OK, good. All right, so you mentioned that there's plenty of capital around. So can you talk a little bit more about that? Is there enough capital to fund the energy transition without wholesale redirection of capital from other sectors of the economy? I think we might see wholesale redirection. But I guess what I would say is in the investing community, whether it's investments from pension funds, I just was looking at some notes, there's $36 trillion in investable assets from pension funds, $18 trillion from insurance companies, $70 trillion from wealth managers, and $85 trillion from banks. If we just change the direction by 20 degrees, that will make a big difference. If part of the framework is that the companies in which you're investing must have a plan to get to net zero or to carbon neutrality in the shorter term, that's going to make a difference. No one wants to be left behind there. No company wants to be bereft of that kind of capital, so I think you'll see dramatic change. But the reason I think the EU is so important is something has to be done in black and white, and the EU is doing something in black and white. Now the fact that the US doesn't usually get led by the EU is sort of not to me the big issue. The big issue is once it's set in motion, a multinational has to address, it's a very practical thing. They have to abide by what the rules are in Europe. You don't then do it with one thing for Europe and another thing for the US and something else for South America. You just don't do it that way. You start looking at it in a wholesale basis because you recognize this is inevitable. It may be the EU today and it may be the US five, 10 years from now, but it's going to happen. And companies think in these 10-year periods, we may be evaluated quarter by quarter, but we're still evaluated in terms of what is our long-term trajectory. So that's why I see this movement. The money is there, the capital is there. I think that you will see not just on the environment, but on these social issues as well some changes so that technology has changed so much for companies. You need fewer people to do the activities that were in place 10 years ago. I'll use our bank as an example, but that also gives you an opportunity to pay your people better. So this is how you have, it's all iterative, but the EU is sort of, I think the crucial part because they are the ones that will, once they create this law, it forces focus. Okay, so we're running out of time. So I want to ask a couple more questions. So I see the building blocks that you're laying out, the EU Green Deal, multinationals, the US following, China following, banks being involved in compliance, plenty of capital available. So where is the missing link in all this? Are there new financial instruments that need to be developed or is there some other missing link that you can think of that keeps you up at night? Well, all of this is hard to do. The fact that it's logical doesn't mean that it's easy to do. It just means it's logical. So it's very complicated to do. You have to have the will to do it. I think that the US, it will take some real effort. I think China will take some effort and I think India and the countries in Africa will be slow followers because they don't have the resources, they don't have the economic factors. You've got an India 200 million people that don't even have any form of electricity. Coal is much cheaper for them. So I see all sorts of problems, but I do think we have the capital. I do think that in terms of the financial world, we have come up with how we could structure instruments, financial instruments to make this work. So I think we will apply what we know. The sophisticated world of finance will apply what it knows and develop new products. In the very basic things, 10 years ago, we started issuing underwriting green bonds or the largest underwriter of green bonds. It's actually a very boring product, but it did create capacity. Then you issue green bonds. Then you issue sustainability bonds. You can do more with that. Then you start thinking about energy efficiency financing. You do energy audits. These are not sexy products and services, but they're in place. They will grow. I do think we've got the capacity, but I think it's gonna be slow going because the EU asked to do their thing. I don't know how long, I mean, I hope it's in 2021. And then the US needs to follow in some way. I just don't think it will follow necessarily by legislation and regulation. It may be following because multinationals simply have to do it. Okay, and one last question. And since we're at a university, I'm gonna give you a fill in the answer question, all right? So the one thing that I learned in my 25, the most important thing I've learned in my 25 years at Bank of America is. To listen. So none of what we have learned over the last decade in terms of energy, energy financing came from within the bank. What happened is we listened to universities like Stanford, nonprofits, not-for-profits, consortiums on the science, on the moral imperative, on the business opportunity and we've applied that and tried to stand something up ourselves. We're a leader in financing the transition. And if, but if we weren't listeners and we weren't available for a change, nothing would have happened. So it's a pretty simple concept, but listening matters. That's great. Well, Anne, thanks very much. Now I'm gonna turn things over to Alicia for the next part of the program. Thank you, Richard. Great, thank you, Richard. And Anne, I love your last comment about listening. It's a great lesson. So let me now introduce Stanford student, Victoria Wills. Victoria is currently pursuing a joint MBA in Masters in Science at the Stanford Graduate School of Business where she co-leads the GSB Energy Club. Victoria joined the GSB with a background in utility decision-making and risk management and is passionate about designing better incentives for the energy transition. Take it away, Victoria. Thank you, Alicia. Thank you, Richard. And thanks, Anne, for joining us today. Many of the articles that I've read about you cite this fact that you consider yourself a former hippie and would have been surprised to learn that you ended up in banking and have now stayed with Bank of America for 25 years. So congratulations. And I'm sure many of the students on the line would be curious, what drew you to banking originally and what's keeping you there up until today? Yeah, thank, I'm not sure I was a hippie. I think I was a reflection of my time when I was in school, which was the early 70s and we were protesting a war in a president and Earth Day. I'm sure I would be stunned that I was at a bank, but banks make things happen. They can underwrite activity. They can finance the future. And I was very taken by that two decades ago, initially not having any idea that I would stay here, but the progress the company has made with Jim Manny, Jim, I recruited Jim to come with me to the bank. He had great insight because he came from the Federal Reserve. I felt that he understood the regulation and the legislation around banking, which I did not know. So together we came 25 years ago. In fact, I made him go two weeks before me. I finished a vacation. And we were responsible for the public policy of the company. There was no such thing as ESG. People were talking about corporate responsibility and to be responsible for the corporate responsibility of the company, the direction of public policy, how we would market the company, how we would communicate the value of the company, how we would work on issues management. That was very interesting. I recognized then that a publicly traded company, originally I was with a fleet, which was then acquired by Bank of America, but using Bank of America as the proxy to be able to represent a company with this kind of resources and with a leader in Brian Moynihan willing to really consider the future of the planet, our employees, our clients, and recognize we had to make some changes has been a privilege. So I think if I knew all of that when I was 19, I would be impressed. But on the face of it, it was sort of a leap. So given all of that, do you see the banking sector as a driver of positive change in the world? Or do you see yourself more as a facilitator of what the market's demanding? I think that's been kind of a theme of your conversation so far with Richard. Well, I think we are a facilitator, but you're either a facilitator reluctantly or you're on your front foot with that. Hopefully we're on our front foot with that. We're willing. I wanna make a point here, which is I think the financial services industry in general recognizes the role it played in the recession. I don't think it was a single reason for the issues, but it certainly played a heavy role there. And when you come out of something like that, you have to make a decision. What things are you going to change? In our case, we tried to change just about everything. We had a new CEO and he really was willing to unpack the entire company and look at it and say, where are we headed? So he focused on eight lines of business. He talked about a strategy of responsible growth, meaning that we could only grow responsibly, which meant what kind of fees are you charging to your customers? What kind of businesses are you in? What kind of employer are you? What kind of diversity do you have? And what is our role and what has become sort of framed up as the sustainable development goals? What role could we play? Either because we'll philanthropically help or because we'll behave differently or because we can figure out how to finance the future of activity that will move the planet forward. Well, Bank of America has certainly been on the front foot with ESG. And I know that Bank of America has directed upwards of 140 billion in financing for low carbon businesses as part of the environmental business initiative. And now you just called this program not very sexy, but I was going to ask how does it, including billions of dollars in green bonds, impact the environment? I'm sorry, can you just repeat that last part of the question? Yeah, so how does the issuance of billions of dollars in green bonds impact the environment? When you issue a green bond or in our case, underwrite so many green bonds, the way that a green, yeah, well, the way that a green bond acts is kind of like a municipal bond. And assuming none of you know what that is either, the idea is you're financing some activity that will make a change. Here's a pretty prosaic one, but it's illustrative. The city of Los Angeles needed to, wanted to change its lighting from traditional lighting to LED lighting. Well, that required the issuing and underwriting of a green bond. And indeed that happened. So what was the value? Well, obviously the greenhouse gas emission is reduced, but actually their energy bill was reduced too. If you can look at things in that practical way, you can imagine what you can do with school buildings and lighting and water storage and sewage all over the country. These things are not sexy, but they do make a big difference. And if there was of course a will to do it more quickly, that would be a game changer. So at least in California, we are seeing the insurance market acknowledge the financial realities of the physical risks posed by climate change, including of course increased frequency and magnitude of forest fires across the West that we're seeing now. So along those lines are there securities that Bank of America underwrites today that will not be financially sensible in the coming years. And I'm thinking of, for example, the 30 year mortgage in Sonoma or the municipal bond, the revenue bond, as you say, for a Miami airport. I think we're, first of all, we do have a risk framework we look at everything with. So it wouldn't be specific to one thing or another, but all of those things have to be considered. It also depends, it's a callable and not callable bond. So you could be, you could have issued something and if it's stays in place, you have to keep with it. I think that we have to consider everything. I know people have asked us if we would write a 30 or 40 or 50 year bond for a fossil fuel company. And in a case like that, it really depends on who and what is the fossil fuel company. If it is one that is leading, in other words, it's really, the R&D is clearly headed in the direction of recognizing the evolution of the industry and they have demonstrable R&D and carbon capture, methane reduction, et cetera. Then that's a good bet. If they're, I've got their heads buried in the sand, well, that's less of a good bet and you would have to factor that in. So are you looking at a 30 year mortgage in an eroding beach? Sure. But these are not framed up as big blocks at the moment because this is an emerging trend and obviously what we see in California or Portland, Oregon is just amazing. So I think that the concern and the risk is escalating. There was actually a related question from an audience member. Do you see a world in which companies lacking a carbon neutral business plan might be subject to higher interest rates because of that increased business risk and when do you see that happening, if so? Yeah, maybe. I mean, I don't know if it's a higher interest. It might be the covenants are more difficult. There might be more restrictions. There might be less capital available. I do see that as a possibility and maybe a reality, but the other kinds of elements that I mentioned earlier, I think have to be in place first. In other words, I don't think it will happen organically. I think it will happen because there will be either and legislation in one part of the world that is meaningful to the US and enough pressure from both companies both shareholders and investors. If pension funds start to make enough noise, there'll be big changes. Beyond these quantifiable direct risks of climate change, do you see a moral imperative for banks to shift capital toward more sustainable businesses and away from carbon intensive industries, even when work with these sectors may remain profitable in the short term? That's a complicated answer, moral imperative. I think we're trying to do the right thing. We do have fossil fuel companies as part of our portfolio. It represents, I don't know, 5%, maybe less than 5% of the commercial enterprises of our company, so I mean, what we finance. And it's less today than it was five years ago. So we've reduced our fossil fuel portfolio. We're really trying to be a little bit more positive and that is working with those companies and we are working with the companies on where they're going, where they're headed. I mean, they're in a fight for their lives on the longer term. So these large companies, and Richard was speaking of a couple that are state-owned, but on those that are publicly traded, they do have shareholders who expect them to be able to generate a profit over the longer term, which means that they have a plan for the longer term, a short-term plan to just stick with the old themes isn't gonna work for them in the longer term. So I think moral imperative is, I'm not sure that that's the right word, but I would say that we feel that we have an obligation to the marketplace to help those companies evolve. Well, thank you so much. And I have one more question for you. And this was also echoed in the chat already. For those on the line who are getting started in their careers and who are interested in sustainable finance, do you have any advice? And what do you see as the main opportunity areas going forward? Well, I think finance is a very good category because the magnitude of the need is growing. I think it will require innovative thinking, applying some new developments, new research. So research and development is going to be big. I think that banking will be big. I think that biotech big. So I see a lot of opportunity. This is a very real opportunity. This is really where the world is going. We will evolve, whether we go too slowly and we miss our opportunities in taking care of our children and our grandchildren. I hope that's not true, but I do believe that there is a belief in the business community that we need to move more quickly and we need to coalesce around these issues. And I think that there are many companies that would benefit from the very smart students that are at Stanford and other universities applying their thinking. So I encourage you to think about banks and Bank of America, but I think there are other companies that in the R&D world, in the electronic vehicle category, just there's so many categories that this will be applied in. Thank you so much, Anne. It was great to speak with you today and I'm going to turn over to your Rune and Alisha for a few more questions from the audience. Okay. Thank you. So, Anne, again, thank you for joining us. And I mean, it was so encouraging to hear about your realistic optimism about what's going on and how this transition is going. Let me start by asking you. I know you talked about the sort of the mid to long-term trends. We are in a financial crisis now with COVID-19 and it's across the world and it's potentially and it is seems to be bigger than the financial crisis of 2008, 2009. Can you tell us a little bit of the impact of that on the climate issues as well as the investments that you talked about earlier and how do we get out of the lots of people out of jobs? What is your view on how to get out of this mess? Well, the better view on the US than I have globally, our analysts tell us that we're looking at somewhere between four and a 5% GDP negative for this year and maybe 3% plus positive for 2021. So there's, I wouldn't call it a V but there's some bounce back in the US. There's no doubt that people are out of work. It's largely in the service areas, travel, restaurants. In terms of this category that, in terms of in the environmental movement, I'm not sure that as bad as the issues are, they're not directly related to investments in the environment. Whether there are fewer dollars to be invested, meaning less private capital, less money out of asset managers or insurance companies, they nonetheless have to invest it somewhere. And if there is the imperative, potentially a political will or legislation that forces us to accelerate more quickly, I simply think that you will see more investment in this area by any one of those factors. So whether it be less than there was in 2019, yes, but it's less than, it doesn't evaporate. The unemployment trends are not directly related to this issue. In other words, where we see the greatest unemployment is not in these sectors of banking and technology. And this is a health crisis. This is not, I mean, it's a financial recession, which we seem to be slowly evolving out of, but it's not a fundamental financial crisis. It's a fundamental health crisis. So the dynamics are different. In other words, you have some patient money on the side, you have a lot of cash that is not at work right now. I think that if we can make our way to a vaccine that I'm not in any way trying to be a Pollyanna here because I'm not, I think this is very rough sledding and a whole sectors have been displaced, but even at a reduced level, a somewhat of a change in attitudes of investors would make a huge difference. Terrific. And so we're gonna go back and forth with Alicia and me. We'll try to cover about four or five questions that are coming through the Q&A, but we'll package it for you. Okay. So over to you, Alicia. Thanks, Ruan. Thanks, Anne. So we've been talking about the prospects for legislative action at the federal level and in the EU, but a lot of progress can be made under existing authority. So just last week, I'm sure you saw a subcommittee of the Market Risk Advisory Committee of the Commodities Futures Trading Commission issued a groundbreaking report finding that climate change poses systemic risk to the US financial system. We call on the Federal Reserve and the Securities Exchange Commission to take steps to manage that risk under existing authority. How significant is that report in your opinion? And do you think the Fed and the SEC will take steps under existing authority in advance of legislative action? I don't know the answer to that. I think that current Fed and the current SEC may not. I think that there is a movement in the financial world to make change for very practical reasons. We see what's coming. I think there is enormous pressure to report out your carbon emissions, whether it's the TCFD report or what have you. And once one of us does it, so many of the large banks in the US have issued TCFD reports and then they're evaluated for how robust are they. You're evaluated by many entities, MCSI, MSCI, Sustainalytics, this, I mean, there's a pattern. Then shareholders create proposals and then they vote on them. There is real pressure on companies to do more. So I think that if you were talking about a moral imperative, that's kind of where it's coming from. It is competitive tension, it is market opportunity and there is a reality that this is coming at us and better that we take a lead rather than just react. I do think that if the Democrats take over the Senate and the House, you'll see legislation, but I don't know what happens with the administration because I don't know who's president and I don't know if the Senate will go Democrat. I think if you see a stronger Republican push you're gonna have, I still think there's a big push on innovation and investment in technology. Just is sort of a different ideology. Thanks Anne, over to you Arun, next question. Yeah, so there are several questions on uncertainty and risk and let me just try to package that in a way. So you mentioned about scope one, scope two, scope three emissions. Scope three is hard to quantify because it's many of the embedded carbon, et cetera and there's work going on in trying to do that but there's uncertainty out there. We just at Stanford, we had a workshop recently on natural climate solutions, on how to use land use and forestation in trying to remove carbon from the atmosphere which could potentially be used for offsets but there's quite a bit of uncertainty of how much carbon you actually sequester that way. Given, I'm trying to connect that to investments and finance because any uncertainty you have in the changes the risk profile, changes the cost of capital. So I was wondering if you could tell us how to address this? What tools do you need? Can we reduce the risk? Can we reduce the cost of capital? The implications of that on the financial world. Well, that's quite a big question. I'm not sure I can answer that and certainly not in the time a lot in. The first thing I would say is this is more than any other time in our history in the financial world. This requires collaboration. In other words, we need the scientific community, we need the research community, we need the environmental community and you need the financial services industry to come together to rather than be covered into something to literally come together to try to figure something out whether that's carbon pricing, whether that's how to evaluate what could be an offset and will be agreed upon. One of the biggest problems we have right now is there are so many representatives of environmental movements and who in the end is going to be the arbiter of reality? It is unclear. There's this body of work that's going on at the International Business Council, which our CEO, Brian Mornahan, chairs. And the International Business Council is essentially saying we are willing, and this is literally international, so every nation, we are willing to be evaluated, but the problem is it's all like a Venn diagram. I meet the criteria of one entity only to find out I'm missing two things on the next and so on and so on. And you have staffs of people simply reporting out, which I guess is okay, but it means those people are reporting out rather than productively thinking about what to do. If instead we could come up with a standard that these are my words, not the IBC's words, but sort of like lead status, where if you do this amount of things, you get this standing and if you do that much more, it's silver and that much more gold and to platinum. It at least would be a bellwether for both the companies themselves and frankly, I think shareholders in the general public that to be able to categorize where the companies are. The way it is now, if you fail on one, you've been given an award by another and so how would you even know? If you can't get that basic, then the sort of math and science that you just laid out is really hard to determine. So I'm hoping that we can get to a point where we can get a agreement and the four big accounting firms are doing the metrics and they are working with, I think, SASB, TCFD and others so that this is seen as being legit, that we could come up with some sort of basic framework that at least if you could pass through that gauntlet, okay, you are sort of in the green, if you will. If meanwhile we can come up with in that same sort of continuum, what are legitimate offsets, then you have a marketplace. But for fear of repeating myself, I don't have the answers to all of this. I can observe the problem and see where we're trying to make some progress. And one of the frustrations for companies, any company in any part of the world is having is, it's just too many metrics and too many different entities evaluating you and it's hard to know, well, is that the one that mattered? So what you're saying is just to follow up, simplified, categorize it like the, kind of like the lead rating and then hopefully there'll be a race to the top and that would be good for the whole ecosystem. It would be good for the whole ecosystem. And I would just say that, just in something very specific, like in the automotive world, the fact that GM or VW was seen as not being as on the front foot on electronic vehicles, they both say cost them. And now you see the kind of progress they're making. I think that we're sometimes losing track of, even as we're evaluating each other, we do see market opportunities and we try to move forward. Certainly for us, the early days of underwriting green bonds opened up opportunities to do energy audits then to underwrite wind and solar and to join with other financial institutions to de-risk a project we wouldn't have done otherwise. These are, this is the way business works. And if you multiply that and then you have a collective will of the public and your employees, that's what provides momentum. Over to Alicia. Thanks. So building on this discussion of the confusion of ESG metrics and the alphabet soup of the Sustainable Accounting Standards Board and the Task Force on Financial Disclosures, there's questions from the audience about what individuals can do with their personal savings that align with sustainable finance and what lessons can be learned or best practices on the institutional investing side and the corporate responsibility sustainable business side that might be translated to personal finance decisions. Can you talk a little bit about that? Sure. Well, I think there are some pretty straightforward opportunities. One, in your 401k or if you have a brokerage account a brokerage account, make sure that the mutual funds or the ETFs or the direct equity that you're investing in is abiding by principles that you think work and they all issue reports or if they haven't you should look at that too. From an instant, I think from an employee perspective asking your company what their practices are they should have an ESG report, the ESG report should report out what they're doing on the environment. It should indicate those metrics that are being established and the metrics that they're going to follow. These are kind of basic things. It's what kind of company do you work for? What does your 401k investments look like? What are your or mutual funds or a brokerage account? And vote with your money by only investing in those companies that you think are doing the right thing. I mean, if everybody did that, you can imagine what kind of difference it would make. Good, thanks. There are quite a few questions on and people have picked up on what you said about pension funds. And so there are quite a few questions on that. And so I was wondering if you could elaborate on some of the metrics the pensions funds may introduce for sustainability and just the responsible investments. I mean, what do you think they would actually do and when do you think that could happen? I think we're kind of in the process of it now. Pension funds, they're representing teachers and firefighters and municipal workers. So they must make good on a shareholder return because it means that it is literally your pension, your retirement. And therefore the idea isn't to give up on performance by gesturing toward the environment. What they really need is both. I would tell you that I am part of a team that meets with our top institutional investors, including big pension funds. And they do talk about this with us and they are concerned. So I have seen a difference over the last five years in terms of attitude, in terms of issues, in terms of probing about the kind of company you are. So I think that's already beginning. For asset managers, the idea is that they are presenting to the pension funds those kinds of investments that do have some of the attributes that we're talking about, that have a good ESG record, et cetera. In other words, it's not binary. You must recognize that a pension funds obligation is to its shareholders and you have to recognize who the shareholder is. So you cannot trivialize these things. You have to really think about them and help the process. I wish that it was just easy black and white. It isn't. Likewise, with the fossil fuel companies, you could just say, oh, we're not going to finance them. But that's a mistake because half the country is fueled by fossil fuels. Better that you're helping with the transition. Better that you're helping them with how to finance toward the future. Better that you are trying to come up with solutions that will be good for all of us in the long term rather than turning your back on them. So I think these things are difficult and they're complicated and it would be easy if they were just black and white, but they simply aren't. Thank you, Ann. And so over to you, Alicia. Yeah, great. I want to build on that and turn to a question or a theme of questions that's coming up in the audience on what companies can do. So we've seen a spate of announcements recently, just this week, Google and Facebook have made announcements on their transition to low carbon energy, various innovations there. You've seen Microsoft and Amazon announce a billion dollar climate innovation funds. What in your view do you think companies can do to best align with proactive action on climate rather than just simply reacting to laws and regulations? I think we're seeing it. I mean, I would take other kinds of companies like Walmart and Target who are doing a lot in terms of their facilities, in terms of solar and retrofitting to reduce their usage of water and reduce their carbon footprint. So I mean, we see it across the board with our clients. I wouldn't say every client, but we really do see it across the board and it isn't just the tech companies who are great, but they are, and it isn't just companies. I think I gave you an example of the city of Los Angeles. It is finding vehicles for them to be able to make that transition. And they can't make money where there isn't any. And to go back to Arun's point about when you have a recession or a slowdown in the economy, that's not when you have extra cash to invest. So in many cases, this has to be a transition over time. They have to look to finance something that may in the end help them. So for the most part, when you do an energy audit of a company and you think about financing the future, the solar, the wind, et cetera, buying renewables, in the end will be less money, but the transition may be a difficult home to get over. So I would just say we are seeing it in all sorts of companies, ones that you wouldn't have expected. As I say, companies like Target and Walmart and the more pressure employees put on their companies, the more transparent a company has to be about its behavior, the more reports it files, it tends to change behavior. Good articulation of aligning incentives. And for the last question, I'm gonna turn it over to you Arun. Yeah, so, and I really enjoyed your optimism and I'm gonna leverage that. And this is about the future. And the future is really about the kids who are not yet born, who are in school and some of them are in college, some of them in Stanford. And you talked about the millennials and how important they are. So step back for a moment and use your enthusiasm and your optimism and define and if you were the energies are, define a world that you like to see in 2040, 2030, 2040, 2050, when those kids who are in school and college will be at our age. Well, I'd like to see a world of net zero. And I think it will happen. I actually don't wanna be too optimistic. I think everything I said is possible, but you have to have the will and there has to be some point of leverage. So I'm very hopeful about the European Green Deal because I think it's that point of leverage. If that doesn't happen, and I think it will. So it's a matter of to what extent it happens or whether it's delayed. I think that's the pivot point. And then it's a matter of how quickly everyone else gets on board. And for every year we don't, we delay success. But I think it's inevitable. I think that whether it's the wildfires that we're seeing or just the quality of air or just any number of issues that we will see this change. So for the students at Stanford and other universities for a high school student, for somebody at a state college or the community college, for someone that never went to college and is in high school, I would just say this is the opportunity is we are, this is a revolution that's happening. And whether it's an evolution or a revolution it's going to happen. We're going to get to a world where we're going to have many more renewables and fewer fossil fuels. I think that fossil fuels will play a role in this world for a good long time. But that is the importance of technology in terms of capture and sequestration while we build the renewables. And those that want to get on board and help it happen hats off to you because it's up to you. We can create a framework, but shame on us if we can't create some momentum for future generations to have success for the citizens of the world and in business. Thank you. And on that note, we'll bring this to an end. And thank you again for joining us today. And thank you, Richard, for also joining us. Greatly appreciate Elisha and Victoria to join us as well. And to all of you joining us from around the world, we hope you found today's Global Energy Dialogue informative and relevant during these unprecedented times. Please join us Wednesday, September 30th. It's not Tuesday, but Wednesday, September 30th, 8.30 to 10 a.m. On a Dialogue with some of our own thought leaders at Stanford on the topic of natural climate solutions and its intersection with energy. We will conclude our broadcast of today's program on behalf of the entire Stanford Precord Institute for Energy. We thank you for joining us and we'll see you next time. Thank you again. Thank you so much.