The Fintech Espresso Break Ep. 13 – Matt Bullivant, Director of ESG Technique, OakNorth

Hello guys. Welcome to the Fintech Espresso Break. I’m your host Isabelle Castro. 

A number of weeks in the past, I sat down in London with Matt Bullivant, OakNorth’s, Director of ESG technique.

Within the race to satisfy Web Zero targets, greenwashing has been cited as the final word enemy, and an absence of transparency in ESGs has been fueling the flames of skepticism. For fintech, scope three carbon emissions is an space the place firms could make a major impression on reaching sustainable targets. 

OakNorth has been notably centered on supporting sustainable progress inside their very own firm in addition to offering instruments to shed a lightweight on others’ impression on the surroundings. They kind part of many worldwide consortiums campaigning to do the identical. 

I spoke to Matt in regards to the points with ESGs, the ability of scope three emissions, and why fintech might be integral to assembly Web Zero targets.

Matt Bullivant – I’ve obtained a espresso as a result of I had a chilly final week, which is nothing to write down dwelling about, however Tom will know that yesterday I got here in, and my voice was in all places. It simply form of began to get again to regular. 

Isabelle Castro – Effectively, it’s the espresso break podcast.

Matt – Effectively, precisely. It could be silly of me to not have one.

Isabelle – Sure, precisely. Okay. Hello, Matt. Good to see you. 

Matt – Hello, morning. 

Isabelle – I’m actually joyful to be right here on the OakNorth workplaces. To start with, I simply need to know what will get you up within the morning,

Matt – You imply apart from many alarms and huge quantities of espresso. However severely, I believe with out being too cliched, working in ESG and sustainability means you by no means actually know what you’re going to come across from in the future to the subsequent. There are such a lot of thrilling improvements and inspirational folks on the market doing unbelievable issues to realize extraordinary optimistic outcomes. And it truly is price getting up for.

Isabelle – I agree. I agree. And also you guys are one among these folks. What attracted you to trying on the sustainable facet of finance and to come back into OakNorth?

Matt – Yeah, so initially, my background was in mainstream banking and finance. And I first began sustainability from an investor perspective. And what turned very obvious to me is that sustainability in any enterprise had gone from being a pleasant to should a have to have, each by way of rising stakeholder consciousness and expectation on social and environmental issues, in addition to large generational challenges like local weather change.

Banks actually are uniquely positioned in that their financing can affect an entire array of shoppers that they assist, protecting a number of sectors and industries throughout the entire economic system. And OakNorth has a very refreshing stage of ambition in relation to sustainability and local weather change. As a result of not solely had been they a company that already had a number one local weather product inside their credit score intelligence software program, however an actual need to have a very optimistic impression, and quick. 

You may see that by way of issues like our 2035 Web Zero goal, which covers every little thing we do. And that’s one of many punchiest targets of any financial institution on the market. And that basically attracted me to OakNorth.

Isabelle – So once I first noticed you, it was on the Innovate finance, Fintech for Good discussion board. And there you had been speaking about scope three emissions. To start out off, can we simply get an outline? What are scope three emissions? How do they differ from different scopes?

Matt – Yeah, certain. So scope one emissions are these you may instantly produce by way of burning fossil fuels. And until you’re an influence firm, for instance, burning coal, for many firms, that’s issues just like the petrol or diesel in your organization vehicles, for instance. 

Scope two is the oblique emissions from the acquisition of vitality energy and heating. In order that’s issues like your electrical energy payments. 

Scope three basically is every little thing else that you simply not directly affect. And that is perhaps emissions out of your provide chain out of your waste and water use, the journey and commuting of your folks, the services you promote, and notably for monetary companies corporations like us, the emissions of these prospects you fiscal by way of loans or investments, which is by far the biggest contributor to any financial institution’s total emissions.

Isabelle – So it’s very, very large. That have to be actually sophisticated. Why are they related? FinTech would you say? 

Matt – Yeah, I imply, fintechs generate scope three missions like some other enterprise, although, for us, we are inclined to have normally extra easy provide chains than, say a retail or manufacturing enterprise. And people is perhaps particular identifiable sources, like server use our software program, which helps. 

Not like mainstream banks, our largest supply of emissions is prone to come by way of the services that we fund. So our loans or investments and So we see a number of scope three there. 

The place fintechs, I believe, have a specific position to play is their capabilities round information and analytics. Scope three emissions are notoriously onerous to trace and to measure, particularly in case your counterparties are, say, small companies or SMEs, the place there actually is a acknowledged absence of accessible info. So I believe that is an space the place fintech can actually make a distinction.

Isabelle – Okay, and do you assume that they may assist cut back the scope three emissions, then?

Matt – Yeah, I imply, I believe any monetary establishment has a much wider sphere of affect than simply its personal operations by way of the companies and people that they finance. And with that, comes a accountability to try to assist transfer issues in the correct route. 

And what’s specific about fintech is linked to that information and analytics functionality. Higher information provides you a greater perspective on what motion must be taken and the place. 

So if I take into consideration OakNorth’s local weather software program, for instance, we will take an especially granular subjective view of any borrower, and on a forward-looking foundation, we will mannequin the potential impression on their creditworthiness from a local weather standpoint. And that might be carbon costs, it might be cap x required to decarbonize oil costs, coverage change, and so forth and so forth, and particular to that exact business and its personal provide chain. 

Now, our banking purchasers can use that information themselves to get a very granular view of the place their borrower local weather exposures lie, a lot higher efficiencies in assessing local weather danger, and the place they should take motion, which in the end, in flip, ought to begin to drive emissions downward throughout their portfolio. In order that’s the kind of factor the place I can see the ability of fintech to drive change, drive decarbonization, and discount of scope three emissions by way of the ability of its capabilities. 

Isabelle – There appears to be form of extra of a shift in the direction of doing this just lately. Why? Why is it taking place now? Why ought to it occur now, versus in a number of years? I can think about this requires a number of planning a number of growth.

Matt – It does. I believe to reply that, firstly, there’s the web zero transitional argument that early motion is essential. So it isn’t nearly setting Web Zero targets for 10, 20, 30 years time, it’s very well acknowledged now that the earlier we act, the extra seemingly it’s that hitting these targets, retaining warming to round just one and a half levels, stays real looking. 

Secondly, sure, regulation round carbon emissions is rising and at tempo. Regulatory frameworks just like the TCFD proposals by the SEC, and the just lately fashioned ISSB, as a result of all of us love an acronym in sustainability – they’ve all begun to have necessities to reveal materials scope three emissions. And in the event you aren’t caught by that regulation but, inevitably, it can apply to you sooner or later. So it truly is greatest to be ready now, reasonably than scrambling round to search out hard-to-obtain information when it turns into necessary. 

And thirdly, it’s an enormous alternative for fintech to showcase its capabilities and to get forward of the sport in figuring out prospects and suppliers who’re larger or decrease danger or who want help in decarbonizing and to actually stake your declare to financing a few of these trillions of {dollars} of funding that’s wanted to transition to internet zero over the subsequent decade.

Isabelle – Yeah, that is one thing that lots of people appear to be fairly involved about the price of it. And likewise the complexity, particularly given the present financial local weather. I imply, there’s been, I’ve heard various stories of individuals saying due to the local weather or the financial local weather, it’s not a viable possibility proper now. What do you say to this?

Matt – Yeah, I imply, I get it. However I additionally assume we’ve obtained to be ready to assume long run and to not fall into the entice of short-sightedness or short-termism, which actually is straightforward to do within the present financial surroundings. I agree. And with vitality costs, how they’re and the truth that these are most likely prone to keep elevated. 

The payback interval of investing in additional energy-efficient alternate options or decarbonizing your operations is quickly diminishing. And that return on low carbon funding continues to be actually robust. And we see prospects and shoppers prepared to pay a premium for genuinely sustainable choices. And if we had been to contemplate, for instance, if there have been large-scale funding, and I imply, large-scale funding in renewables ten years in the past, what may which have meant for our vitality safety and our vitality pricing in the present day? Do we actually need to repeat the identical mistake by limiting our foresight to alleviate short-term financial ache, solely to search out ourselves in related difficulties a number of years from now as a result of we didn’t put money into decarbonizing? So it’s all interconnected.

I believe the final level I’ll make on that is if Companies are discovering they want help to fund decarbonizing now, given the present monetary challenges, then that’s completely the place all banks, not simply fintechs, needs to be stepping as much as provide assist.

Isabelle – No, I agree with you make superb factors. Inside this entire ESG factor is greenwashing. I imply, there are lots of people towards ESG purely as a result of greenwashing facet. How does one steer away from greenwashing? And even simply errors? Due to how advanced it’s?

Matt – Yeah, I imply, transparency is essential right here. Present approaches to carbon accounting they’re constructed on layers of assumptions, greatest estimates, inferences, and a number of the methodologies, you understand, they’re open to interpretation, or they merely have gaps in them proper now. You recognize, it’s not a case, the one measurement suits all. It’s a identified problem, notably with scope three, {that a} holistic exact and standardized method simply doesn’t exist but. So it truly is crucial that you simply’re open about the way you’ve obtained in regards to the process. 

Public confidence in sustainable claims depends upon having the ability to belief what they’re being informed. And for that purpose, it’s important to be completely clear on the idea by which you’ve measured your impression or concluded that one factor is definitely greener than one other. So what’s your methodology? The place did you get your information? Are there any limitations to it? What have you ever needed to assume or estimate in that case, how? And that’s to not say that some methodology is flawed and open to errors, as a result of some are, however in the event you’ve overtly informed everybody your method and the place its shortcomings lie, then nobody can accuse you of attempting to mislead anybody. 

And the opposite level right here is on as on information high quality. Because the saying goes, you get out what you place in. And if fintechs can lead the cost on enhancing or accessing higher high quality information sources, then that considerably reduces the prospect of unwittingly holding one thing up or sustainable with out actually understanding.

Isabelle – Yeah, no, completely. I’ve seen that OakNorth is part of TechZero. Inform me a bit about what the group does and why you assume it’s necessary?

Matt – Yeah, we turned one of many first fintechs to hitch Tech Zero again in June 2021. And it’s an motion group for tech firms who’re dedicated to combating the local weather disaster. As a result of collaboration is basically necessary to drive innovation and progress on internet zero, and that’s why we’re common and energetic contributors in quite a lot of business initiatives like this. 

So final yr, for instance, we joined GFANZ, the Glasgow monetary alliance for Web Zero through the Web Zero Banking Alliance, which additionally aligns us with the UN Race to Zero marketing campaign. And likewise members of Bankers for Web Zero, which is an initiative that brings collectively banks, companies, regulators, and policymakers, to allow banks to efficiently assist their purchasers and speed up the transition to internet zero, in addition to to ship on the UK authorities’s ambitions for addressing local weather change. 

And these types of measures and memberships additionally maintain us to account and drive progress by requiring us to measure and publish our full scopes of emissions, set out internet zero targets, and those that are accountable for attaining them and usually report again on the progress that’s been made towards them, which is basically necessary in transferring issues ahead.

Isabelle – Yeah, it sounds prefer it’ll do loads towards the greenwashing stuff. Precisely. Precisely.

What do you hope can be invented or achieved within the subsequent 20 years?

Matt – How lengthy have we obtained? I imply, joking apart, there are nonetheless some massive challenges on the market, on the carbon entrance, concrete, metal, agriculture, efficient methods to backup and retailer renewables in order that we will lastly allow section out of fossil gasoline energy and warmth. And there’s some actually modern options being developed to try to resolve a few of these issues. But in addition, personally, I actually hope we obtain some speedy restoration of biodiversity now that we’ve began to acknowledge and goal that. 

I believe, for means too lengthy, we’ve missed the vital position that the pure world has to play in restoring steadiness to the local weather. Issues like peatlands, mangroves, and seagrasses, they’ll all act as large carbon sinks, to not point out the standard and delight of our environment and the surroundings we reside in, which I believe is basically necessary. All people thinks about form of carbon emissions and numbers round CO2, however truly, you understand, we’ve obtained an unbelievable world and surroundings round us that we have to take care of and luxuriate in.

Isabelle – No, completely. I want to go into that much more. However sadly, the podcast is a sure size of time, so I’m going to maneuver on to what’s your favourite quote and why?

Matt – Effectively, I’m undecided if I name it my favorite. However the one which involves thoughts is the traditional Peter Drucker quote you can’t enhance what you possibly can’t measure. 

And this comes up again and again within the context of carbon emissions for apparent causes. And the rationale I name it out is that we have to be cautious to not lose sight of the larger image. This sentiment is true, and we have to successfully measure carbon emissions to determine the place the necessity for motion is best, to make sure we will reveal that we’re making reductions. 

However can we actually not begin doing the correct factor with out that measurement? Should you’re heating and powering a load of buildings, utilizing fuel boilers and turbines, for instance, you understand that switching them to extra sustainable and energy-efficient alternate options will make a giant enchancment to your carbon footprint. And also you don’t have to measure these emissions to know that. So, I assume what I’m saying is, let’s get on with it. And never maintain ourselves again by tying ourselves in knots round accounting methodologies and precision earlier than performing on these optimistic steps that we might be taking proper now. As a result of we will and may

Isabelle – Completely, fully agree. Earlier than I allow you to go, you might have your curveball query, which I refused to let you know earlier than. It’s a pleasant one although. 

What ebook, file and luxurious merchandise would you deliver to a desert island if all issues vital for survival are already there? Simply these three luxurious objects that you’d deliver.

Matt – I believe that’s three questions in a single.

Isabelle – I used to be gonna go together with the luxurious merchandise, however this implies you can’t select a ebook or file.

Matt – Crikey. So I actually need to be very cliched and say, you understand, a ebook can be Invoice Gates’s Learn how to Keep away from a Local weather Catastrophe can be a very good ebook to deliver alongside for somebody who’s captivated with this kind of factor. So I’ll depart that one on the market from a literature perspective. 

Report for me, it can most likely be Sultans of swing by dire straits. It’s simply one thing I can at all times calm down to, and I believe a desert island is an effective place to calm down in the event you’re not frightened about being stranded. 

And luxurious merchandise. Are you aware what, I believe on a desert island, regardless of there being a seashore, I’d nonetheless need an armchair.

Isabelle – Armchair. That’s an awesome one.

Matt – That makes me sound loads older than my years. However I’m afraid I’m not a lot of a lawyer down on seashores. I’d reasonably sit and skim stated ebook. Sure. And I believe that counts as a luxurious merchandise.

Isabelle – Sure, undoubtedly. I might say so. That’s a very distinctive one as nicely like that. How can folks come up with you or observe or pay money for OakNorth generally? 

Matt – Yeah, completely. I imply, you’ll find me by way of the standard kind of social media channels and OakNorth Please do take a look at our web site, and please do take a look at our form of weblog posts. There are some from me on there as nicely. And in the event you look on there, you possibly can completely attain out to us by way of discovering what we’re doing on this house. And, in fact, being a financial institution, how we will help finance this kind of factor if you’re decarbonizing your small business.

Isabelle – Okay, excellent. Thanks a lot on your time. I actually loved our dialog. 

Matt – Likewise, 

Isabelle – Have an awesome remainder of your day. 
Matt – Thanks as nicely.

Isabelle – As at all times, you possibly can attain out and chat with me on my private LinkedIn or Twitter on @IZYcastrowrites. However for entry to nice every day content material, take a look at Fintech Nexus on LinkedIn, Twitter, Fb or Instagram. You can even join our every day publication bringing new straight to your inbox. 

For extra fintech podcast enjoyable, take a look at the web site, the place you’ll find extra fascinating conversations hosted by Peter Renton and Todd Anderson. 

That’s it from me. Till subsequent time, get pleasure from your downtime.

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