KATE WALSH: Hello, and welcome, everyone, to our Cornell SC Johnson College of Business Deans' Panel, the new threshold for business, preparing our students and creating new knowledge through data analytics. I am Kate Walsh. I'm Dean of the Cornell Nolan School of Hotel Administration. And I'm very happily joined by my fellow deans, Mark Nelson of the Samuel Curtis Johnson Graduate School of Management and Jinhua Zhao of the Charles H. Dyson School of Applied Economics of Management.
Now, we're all here with some of our faculty to welcome you to our new space in New York City and to offer you a quick teaser about cutting edge research and teaching that we're offering across our three schools, focusing on CSR impact and preparing and empowering leaders for the future, including, and especially on this Veterans Day, our community's many members of the US Armed forces. Thank you all for your past and current service. We are especially keen to highlight this work in our college's second New York City footprint 570 Lexington Avenue in Midtown Manhattan.
Now, at 4:00 PM today, we'll be handing over the program to Dean Andrew Karolyi in one of the meeting and classrooms in our newly-minted space. But for now, I'm very pleased to ask Dean Mark Nelson to kick us off and share a little bit about the latest developments at the Johnson Graduate School of Management, which is in the midst of celebrating its 75th anniversary. Mark, over to you.
MARK NELSON: Well, thanks so much, Kate. There's certainly a lot happening at Johnson. It was tough to figure out what exactly to narrow it down to. But I thought I'd highlight a few specifics that tie into what's happening today. Both are focused on New York City, but also are focused on ESG and on analytics.
So first, ESG, I want to acknowledge to Johnson faculty members, Glen Dowell and Mark Milstein, who will be joining us from COP26 a little bit later in today's program. Glen is Johnson's Associate Dean for Academic Affairs. And Mark leads our Center for Sustainable Global Enterprise.
Both are active researchers in ESG-related topics. But the thing that I want to highlight is that both have worked together to broaden access to Johnson's sustainability curriculum. Specifically, we now have a seven week SGE intensive that students can take in their first or their second year. And this enables our second year MBA students to complement a first year immersion and gain perspective and exposure to this critical topic.
So we see this as a first step to really broadening the exposure that our students are having in this critical area. So we'll all look forward to hearing more from Glen and Mark later on this afternoon. The second thing that I wanted to do is to think more about what Johnson's been doing in New York City, because we've actually been pretty active. There, a lot of the activity has taken place on the college's first footprint in New York, which is the Tata Innovation Center on the Cornell Tech campus.
And we actually have some significant staff and classroom space. So there, we teach our metro EMBA program. We also teach our health care leadership and SMBA program, which is offered in collaboration with Weill Cornell Medicine. We also have our one year Johnson Cornell Tech MBA program, in which students start in Ithaca and then transfer to the Cornell Tech campus for a year in that studio curriculum.
And we feature intensives in fintech and digital marketing, once again, in which Ithaca-based students can spend some time here in the city. And we have something called the Sabanci Bridge, which is a technological bridge that links classrooms in Ithaca and New York for the benefit of all students. So there is a lot going on.
In terms of things that we're working on right now, there are three that I'd really like to highlight. One is that we're piloting what we call the 1 plus 1 program, in which an Ithaca-based two year student can start off in Ithaca. So they do their core in an immersion in Ithaca. Then they do a summer internship, and then they spend their entire second year at Cornell Tech. And we're really excited about that in terms of a new opportunity for folks in Ithaca, but also as a feeder for Cornell Tech.
The second, we recently won an Empire State bio entrepreneurship grant. That's going to team MBA students with life scientists at Weill and other parts of Cornell. There will be workshops in both Ithaca and New York City, including in this facility, in which the teams develop their own life science startup. So it's a great addition to our entrepreneurship programming in both Ithaca and New York and a great example of one Cornell.
And then third, I'd really like to spotlight a really innovative new program called the Masters of Science and Business Analytics, or MSBA. And leading that program is my colleague, Vishal Guar, who's Emerson Professor of Management, and who also does research that addresses ESG topics. So Vishal, can you tell us a bit about the MSBA?
VISHAL GUAR: Yes, Mark. Thank you for having me to describe our new Master of Science in Business Analytics Program. This is a program that we are starting from May of '22. And it is designed for working professionals. So the degree is set up as an online degree program to be taken part time. And the curriculum of the program is structured in such a way that working professionals can take this degree over a period of 16 months without having to leave their jobs, and while taking the courses at a load that is possible to take care of along with their work.
Analytics is, indeed, just such an important part of the organizations today. And when we talk to our alumni or to our industry partners, they all point to a need for greater analytics in business. And what's really impactful is that business analytics is also essential for solving the problems in environment or sustainability and other societal aspects that we face.
And data is just so central to solving all of these problems. So our Master of Science in Business Analytics Program is designed to give our graduates analytics skills, and also to make them responsible problem solvers and responsible users of data and analytics for tomorrow's world. So our program has three pillars to it.
The first pillar is a full business school so that our graduates develop business fundamental skills that they can use for applying analytics. The second pillar of this program is an analytics skill set, which is taught within the context of business problems and business data sets so that students are learning their skills, and at the same time, they are also applying them to the real world problems that they're going to face in their jobs. And the third piece is communications skill set so that they are working together and innovating with each other to solve problems and to communicate their ideas to others.
For example, we have faculty who work in the area of food waste or in traceability in blockchain and in sharing economy. All of these are topics that require data and are hugely relevant. So please reach out to us if you would like to learn more about our new Master of Science and Business Analytics Program. And thank you very much, Mark and Kate, for this opportunity.
KATE WALSH: Thank you so much, Vishal. It's a great program. We're so excited to see it unfold. And it just will fill such an important need for professionals. I'm actually so excited now to turn our program over to Jinhua Zhao, our Dyson Dean. He's actually also in the midst of a dynamic new educational initiative to enhance our college's portfolio of experiential learning that is part and parcel of our college's mission. Jinhua.
JINHUA ZHAO: Thank you. Thank you, Kate. As you said, there's a range of activities that Dyson is really ramping up. And one of our signature programs is our Grand Challenges curriculum that is really increasing in the scale and in scope.
So the Grand Challenges curriculum was designed in alignment with the 17 United Nations sustainable development goals. And it's basically complements large scale business training with an awareness and understanding of our impacts on society. And so, through this program, we train our students these critical engagement skills.
For example, client relationship, communication, critical thinking, creativity. And we do this through a three year program that culminates in the senior year, which is a capstone project. This is one, we have students divided into small groups, typically a group of students, a group would include four or five students with the faculty advisor getting engaged with a real world entity, be it an NGO, a government agency, small firms, startups in emerging markets, et cetera, et cetera.
And the students would come in and really engage in immersion learning and consulting. And so some of the projects ranged from helping the city of Ithaca in their efforts to develop electric bus or electric public transportation system, to helping mom and pop shops in social media presence, to helping really women businesses in South Africa that brings food to market. And the scale of that program is increasing rapidly.
Last year, we had 14 students going through the capstone project phase. This year, the number is 105. Next year, every graduating senior will go through the capstone program, 269 students.
So this Grand Challenges curriculum is an example of the Dyson approach of instilling our ethos of making the world a better place into the entirety of our curriculum. And this is curriculum, cultural activities, but it's really the ethos of making the world a better place being reflected regardless of the area that a student is choosing. Now, so that is one example of this overall approach.
And then of course, in the different areas we are also taking efforts to, again, instill our ethos, making the world a better place into the curriculum, into what we are offering. So one example of that is finance. Today, I have a Professor David Ng, who is part of a group that is really engaged in expanding the impact finance offerings. So David, can you elaborate on your efforts in this area?
DAVID NG: Yeah, sure. I'll be very happy to talk about it. So I have a class on impact finance. Really, as Jinhua mentioned, the key is, now, for Dyson School, the model is, our world is-- our business is a better world. So for us, the key is to understand how to finance this better world.
And in my class, what I try to do is to explore ways that are incentive-compatible for the investors and also for the needs, and bring things together, so that products would develop. So we help survey existing financial products that are in the market, like ESG funds or green bonds, or things like that, and explore, examine their potentials and their shortcomings. And then we also think about things that really have taken off over the years, that have really improved people's life, like insurance, funds, and other financial innovations.
And we try to think about what, really, are the innovative financial structure that could potentially take off, that can really help people who are combating climate change, who are addressing important social needs, that really improve the lives of people. So for example, we have an alumni in California who look into preventive measure for preventing forest fire.
And basically, in our class, we explore these kind of creative endeavor to bring together stakeholders who may have a stake in preventing these forest fire down the road, for example, the nearby landowners or the water or electric utilities that operate in nearby areas, and get them to come up with early financing for trimming down the forests that could really help down the road to reduce forest fire.
And if forest fires is, indeed, reduced down the road, then these people's early money will get paid. So these are kind of the type of win-win situation that we want to introduce to the market. And aside from that, we have other areas that we are exploring. On Impact Finance Lab, I basically bring together 10 or so PhD and masters and undergraduate students to create new knowledge in this area, to think about whether insurance has any role to play in combating climate change, whether ESG companies are really environmentally friendly, and whether they are financing needs of non-profits that innovative financial structure can potentially help to address. So basically, we want to put together ways to finance a better world.
KATE WALSH: Thank you, everyone. It is just really exciting to be a part of this college and see all that's happening across our three schools. And we have just a couple of minutes left to share some happenings in our newly-named Cornell Peter and Stephanie Nolan School of Hotel Administration, in which we are about to start celebrating our 100th year anniversary.
The Cornell Nolan School historic focus on the hospitality and real estate industries. And we say the services industry, broadly defined. It really translate into some incredible opportunities to provide meaningful thought leadership for our next century. And I am so excited to be joined by two of our colleagues who are going to describe a little bit about the research and the work being done to build out this thought leadership.
The first is Professor Elena Belavina. She is part of our operations and technology and information management area. And she's going to talk about her research on sustainability. Elena.
ELENA BELAVINA: Thanks. Thanks so much, Kate. I'm excited to work on a new area within the sustainability, in which is food waste. So food waste is such a tremendous issue as far as carbon footprint goes. It's really about, we waste about roughly one third of all the food that we have produced for human consumption is wasted. And just this wasted food alone is equivalent to about 8% of total greenhouse gas emissions associated with humanity.
Now, when we start digging into what are the drivers, who are the main culprits within this space? It's really the consumer-facing businesses. It's us, it's the hospitality space, restaurants, hotels, et cetera, et cetera. They contribute to about 40% of all the food that's being wasted.
And now, within the space, one of the biggest challenges so far, as far as food waste reduction is concerned, has been inability to accurately measure, and kind of at a granular level, to measure what's being wasted, and hence, take action, because there's just so many things that are happening together at the same time. So over the last several years, I've been working with an exciting startup to really bring artificial intelligence to these measurement tools powered by artificial intelligence, to enable with computer vision and new machine learning techniques, to really being able to accurately, at the granular level, record what's happening within our commercial kitchens, so that we can take action.
And it's really exciting that now we can report that just by implementing this technology across a variety of different commercial kitchens, hotels, restaurants, cruise ships, et cetera, et cetera, really, a variety of different outlets.
What we're seeing is that just within first four months or so, these businesses are able to decrease their food waste by about 30%, which is huge, exciting in itself. But there's the next steps we're really seeing opportunities to develop field experiments, to really understand what's the value of computer vision in all of that or this artificial intelligence that we are bringing in. How can we design this system? How can we improve this system and user engagement experience? And what kind of nudges we can create so that the kitchen staff can interact with the device better. And we can enhance the potential of this technology.
With the data that we're collecting, we're also hoping to shed light on the impact of COVID on the space overall. We're really getting in all of this exciting data. And hopefully we'll be able to see how COVID has shuttered the opportunities to reduce food waste.
And for me, what's most exciting is really, as we develop in partnership with Statler Hotel and other outlets on campus, we will be able to bring our students to partake firsthand in this experiment and learning how to collect data, analyze data, and create better outcomes. Thanks so much. That's all I have. Kate, back to you.
KATE WALSH: Thank you so much, Elena. I get so excited hearing about your research, because faculty like you across the College are studying things that move the needle and provide relevant answers for our leaders in the industry and industries across the College. So thank you so much for that. And we're actually going to close with bringing it all home a little bit with our own Linda Canina, who's a professor of finance.
Linda serves as the academic director of the Center for Hospitality Research. But she's also the co-academic director of our Pillsbury Institute for Hospitality Entrepreneurship. And Linda is going to share just a few of the ways we're building thought leadership and experiential experiences or education for our students into our extracurricular programming. Linda. Oh, you're on mute.
LINDA CANINA: All right. Thank you, Kate. And thank you everyone for giving me this opportunity to share some of the wonderful things that we've been doing this year at the Nolan School of Hotel Administration. Just this past weekend, we held a hospitality hackathon, where the overall theme was about elevating the hospitality experience from both the guests and the employees' perspective.
As you all know, there's a shortage, a big labor shortage in the hospitality industry. So this was a hospitality-focused business case competition, where the participants, the students, developed solutions to real problems related to digital technologies, actually, the utilization of the digital technologies and the labor shortage shortage. The students were required to substantiate their solution through the analysis of real data supplied by Hilton and to do their analysis and develop their presentation using software supplied by Salesforce.
This data analysis and the presentation software included software that, with regard to artificial intelligence and machine learning. So the students were really, were using real data and real data analysis tools that the industry are using. This hackathon was a huge success. We had over 180 participants. 74 of them were from Nolan. We had 11 from the Johnson Graduate School of Management, 9 from Dyson, 52 from engineering, and the rest of them came from all over the entire University.
The overall winner was a group, a team called Hiltonality. And that stands for Hilton with a personality. Basically, what they did is they developed an incentive-based intelligent digital app that integrates with the existing Hilton Honors app for the guests, and also an iPad app called Hilton Hires for their employees. This hackathon that we had was the third that we've had over the past three years, excluding last year.
Now, other things that our centers and institutes are working on is the Center for Hospitality Research in conjunction with Green View published their eighth annual hotel sustainability benchmarking index. The purpose of this index is to measure energy and water usage and carbon emissions using a sample of more than 21,000 global hotels. And this index is the primary reference tool for governments and companies wanting to calculate the environmental impact of a hotel stay.
And this year the report showed that the average carbon footprint of a hotel stay decreased by 3%. Previously it was 10%. But the greatest reduction was by UK hotels. They reduced their carbon footprint, on average, by 23%, India by 14%, Canada by 13%, the US by 12%, and China by 7%.
Now, in addition to these two events, we held a sustainability webinar featuring our faculty member Aaron Adalja, as well as industry experts from Salesforce, JLL, Deloitte, and Marriott. And the purpose of the webinar was to discuss first, four topics. The first one was how hospitality companies are using technology to help quantify the indirect scope 3 emissions. So this would bring their full environmental impact into view.
And second topic was industry efforts, like the hotel carbon measurement initiative, as well as the hotel water measurement initiative, which were established to create consistent methodologies and standardized measurements. Another topic was the ways to demonstrate the value of sustainability initiatives to stakeholders, including consumers, brands, owners, and operators. And this will be accomplished by aligning the product offerings with the customer needs and finding products that are both Earth-friendly and revenue-generating or cost-saving.
Following this webinar, we followed it up with a virtual sustainability roundtable. And here, this was moderated by, again, our faculty, Aaron Adalji and Jeanne Varney. And this was attended by 21 industry experts from the major hotel brands, people from FMV, consulting, OTAs, tech, and the National Park Service.
And what we discussed here were ways to build climate commitments into supply chain contracts, how to make sustainability part of the employee empowerment initiatives to help rebuild the workforce family. Other topics included making bookings sustainable hotels easier, focusing on value added rather than cost of sustainability, marginal abatement cost curves, which those are an estimate of the volume and costs of opportunities to reduce emissions in a given year. Another example of what we've been doing is we hosted a webinar about women in hospitality and travel leadership positions, where we had experts from Lyft, Preferred Hotels and Resorts, joined our very own Dean Kate Walsh, to discuss ways to advance women to advance their careers in the industry.
And one of the main things that they focused on was taking risks to broaden the skill sets and finding mentors to assist them in advancing their careers. Another topic of that webinar was the need for better work-life balance in the industry, especially for women supporting families and other responsibilities outside of work. And we also discussed rooting out biases and supporting DEI initiatives. Thank you, Kate.
KATE WALSH: Thank you, Linda. You're a busy lady, as is everybody throughout our College. It's been-- we hope you can see in a condensed 30 minutes, some of the really exciting things going on in all three of our schools and throughout the College. And we're so excited for the collaborative opportunities before us to build something that's even greater than the sum of all of our parts.
Mark and Jinhua, thank you so much. Vishal, David, Elena, and Linda, we're so grateful that you took the time to share some of the great work you're doing. And now, I'm so excited to hand it over to our College Dean, Andrew Karolyi, who is in the large classroom of our new learning spaces at 570 Lexington Avenue. Andrew, we can see you.
ANDREW KAROLYI: I'm here. Can you hear me, Kate?
KATE WALSH: Yeah, absolutely.
ANDREW KAROLYI: All right, it worked.
KATE WALSH: It worked.
ANDREW KAROLYI: Hello, everybody. Andrew Karolyi, Dean of the Cornell SC Johnson College of Business. I know you can't tell, but I'm smiling under this mask. And I'm just absolutely thrilled. Thank you, Jinhua, Mark, and Kate for leading this fabulous dean's panel on these incredibly important topics so close to so many of our hearts among the faculty and staff and students at the College.
And I'm just, I'm now bringing you into our in-person event. It's a modest number of people that are here. But they're enthusiastic, right? Can we make a little noise?
All right. Shout out to the faculty that were part of this prior session, David Ng, Vishal, Elena, of course, and Linda. So grateful for all of you.
Ladies and gentlemen, this is a brand new learning and collaborative space here in the seventh floor of 570 Lex. It's exciting. It's uplifting. We're back. We're here. We're present.
For those of you who don't know, this is a Cornell space. There are several floors here in 570 Lex above us. We're now joining the family that's part of this cluster space here, down here in Midtown. And I'm just really, really grateful to all of you.
You know, I've been a proud member of the faculty here for over a decade now. And since becoming Dean of the College, I have to tell you that there are days, sometimes I'm walking across campus, sometimes I may be on the campus to campus bus coming down here to the city, and I just pause and I reflect on the fact that the spirit of our community, the spirit of the faculty, the spirit of the staff, the spirit of the students, is so much about this ethos of service. It's this commitment to service and to the greater good.
And I know that you all are also thinking about the fact that today is November 11th. It's Veterans Day. For many parts of the world, it's referred to as Remembrance Day. For some of you who might be on the call, you might notice I'm wearing a red poppy.
This is a reference to John McCray's poem called In Flanders Fields Forever, where the poppies blow. It talks about the immediate aftermath of the First World War. And it's-- and I just read this morning that glorious poem and this practice of wearing poppies is now celebrating its 100th year this year. 1921 is when it started.
And it's a day in which we reflect on so many of our colleagues who have served in various branches of the military in various times, and their ethos of service to all of our greater good and support. And to them, I know we all gathered here and watching online, are thinking of the many veterans that have come before and how they have committed themselves to service to our society. And so I thank them.
Today is, like I mentioned, an auspicious day. We're talking about meaningful sharing of accomplishments. We have a theme today. The theme is about climate finance, climate sustainable finance, you heard. And more broadly, the issue of sustainability, the importance of it as discipline of research for our college, college community, the importance a ways in which it translates into how we foster a community of learning for our students on these very topics.
And this space, we were supposed to have opened this during the pandemic about a year ago. But better late than never. Here we are. And it's just a fantastic thing. And when we were thinking about the theme that I've described to you that we're going to showcase here today, are showcasing, it is so apt and proper that it happens to be synchronous with some very important meetings that are happening over in Glasgow at COP26.
And many of us are hearing about the news daily, about how countries are gathering. Their leaders are committing to make net zero by 2050 a reality and binding ourselves to the commitments that were part of the Paris Accords not too many years ago. And you know, of course, this is one of the many themes, but this is a really, really important theme for our college.
And I just saw popped up on the screen, this nice surprise that we have for you at the next segment. Direct from Glasgow, Scotland at COP26 are two of our distinguished colleagues. On the immediate right, from our perspective, is Glen Dowell. He's the Henrietta Johnson Lewis Professor of Management, Professor in Management Organizations in the Johnson Graduate School of Management, and a specialist in the area of sustainable finance and business.
I'm not sure I should look at the back wall or should I look at the screen here. Mark Milstein on the left is our Professor of Practice, also in Management Organizations. He leads our Center for Sustainable Global Enterprise in the college and is a mover and shaker in this business, writ large. And I just can't tell you enough how I'm grateful.
It's late at night for you guys. Everybody wants to hear, you're there, you're taking part. You're going to come back, and you're going to bring back all the things that you're learning and you're experiencing. And I just thought maybe we could hear from one of each of you for a few minutes. Talk about the kinds of things you're seeing and what reflections you have on those things. So I don't know, Glen, you're going to go first?
GLEN DOWELL: Yeah, sure. Thanks. Thank you, Andrew. And thanks, everyone who's tuning in. It's a huge privilege to be able to represent Cornell, the College Johnson at this event. It's really an astounding series of meetings and exhibits. And it's kind of overwhelming.
We just got back, actually. We went to the last plenary session tonight, grab a quick dinner and got back. And I'm still trying to make sense of some of the things we've seen. But one of the things you asked us to think about a little bit, what we've observed at COP that we can take into our teaching, research, and engagement work. And I think there's a few things that really popped up over the last four days for us.
One is, for me, I'm lucky enough this is my second COP. I attended in 2017 in Bonn. And the tenor of the discussions from the business side, it's just totally different than it was even four years ago. This is just a complete sea change in the way businesses are engaging with climate.
So the commitments are stronger. They're more transparent. There's a real commitment to auditing, to science-based targets, to the kind of things that will give businesses a chance to, instead of being pilloried often, or seeing as dragging things back, to really lead in some cases and be out front of even what some of the governments are doing.
There's a real commitment to standardization in the way that we're measuring climate issues, greenhouse gas emissions, and so on. There's a change in tone from reducing harm to innovating and thinking about inclusiveness. And really, how can we not just fix the problems we have in terms of climate, but how can we use that as a lever to really change the dynamic between communities, for example, and to think about some things around environmental injustice that have festered for way too long, both within countries and across, of course, across countries.
And one of the things that was really interesting, I've been attending some events put on outside of the main COP venue, put on by The New York Times and by other entities. And it's really interesting that companies are saying left and right that it's not about selling these issues to their employees anymore. It's really, the employees are buying in and ready to engage.
It's about actually fostering that kind of commitment that the employees already have and focusing it on the goals, which is really refreshing. It used to be a lot more like, how this top management sell this to employees, or how do they connect the dots for people. But what we're also hearing is a critical need for employees across the spectrum of industries who understand these issues and have the skills to implement, whether it be innovation around clean tech, or things like installation.
Today is the built environment day, and a lot of that comes down to retrofitting existing buildings. And there's a critical lack of human capital that's skilled at those kind of jobs. And so it's really become an issue all the way through the organizations from top management down to frontline employees, to have the kind of skills that are needed to make the changes that every industry needs to undertake.
For us personally at Johnson and at the College, I think what it's reinforced, Mark and I have had a chance to talk about, is that this is not a siloed issue. It can't be anymore. It's got to be something that every one of our programs, and within Johnson, every one of our immersions and intensives engages with. It's just, it's not enough to have two world class experts, such as ourselves, deal with this.
We have to have every program touching on it in some way. And I know we're really excited about some of the things we're rolling out at Johnson and across the College in that regard. But for example, I went to a phenomenal session on the use of cloud computing to help tackle climate issues. And it really works in two ways.
So you move some of your data off of dedicated servers that you have and onto the cloud, you've reduced emissions, just because you've gone to a more efficient method of managing data. But it's also the fact that then the data are available for crunching big data and running the numbers and innovating. And so it's really an exciting issue for companies to really tackle.
And it obviously points to all of our digital programs that we're rolling out should be thinking about how those digital skills can be used towards sustainability. And we're seeing it, obviously, in marketing. And yes, Andrew, we're seeing it in finance. Finance is everywhere here. It's a big piece of it.
How do we finance these issues at the large macro level? The promises that were made to the lesser-developed countries, but how do we finance? How do we put together deals in new and innovative ways at the firm and at the initiative level?
And then finally, for research, I don't think you can walk around something like this without getting really excited about ideas for research data that are available. There's a new satellite coming online next year. It's going to have real time, really micro methane emission data. And methane is probably-- it's actually the first thing we should be tackling, because it's so much more potent than carbon dioxide. But it also dissipates much faster.
So if we can go after methane, we can use these new data sets that are coming online to really see where the big criminals are, in some cases, but at least the big emitters are. And we can look at some issues around how to put pressure on those companies. It's really exciting. So it's been an amazing four days. We close tomorrow. We'll see what comes out of it for agreements. But in terms of what it comes out of it for us, it's just been thrilling.
MARK MILSTEIN: Yeah. and I think what I'd add to that is, on the one side, there's a lot of opportunity aspirations and hope. But you're also getting a lot of tension from the multiple stakeholders that are both in the meeting and outside of the meeting, a lot of concern about whether or not we'll be able to meet the science and address climate change in a way that doesn't leave the world irreparable. And so there's definite acknowledgment, even in the business meeting, there's a morning meeting of business-interested NGOs.
So in our case, or business community's case, that's international chambers of commerce, local chambers of commerce, organizations like that. And this morning's had an address from a Vice Minister from the Japanese Ministry of Economics Trade and Industry. And folks there were saying that there's a lot of trust that has to be built up by the business community. There's a lot of feeling among many people here that the business community has been far on rhetoric and short on action.
This evening, right before the plenary session, there was the closing plenary session. There was another plenary session where there was a young activist from Africa, who really kind of set out a damnation of the business community for talking a lot about climate change, talking a lot about wanting to care about sustainability, but really failing on the action front. And it causes you to think through a little bit, if a business school isn't bringing sustainability to its students, what is the service it's providing society at this point? Because this is so critical across the board for so many people.
On the other hand, as Glen is saying, the amount of innovation, the amount of money that has the potential to come into the fight against climate change, is very exciting to folks. And so Secretary Carey, at a side event I was at a few days ago put on by Bloomberg, said that folks are getting concerned about whether or not governments are going to step up with $100 billion, billion with a B, $100 billion that was promised five or six years ago in Paris for less-developed nations for loss and damage suffered from climate change. He pointed out that if you take the two biggest economies out there, US and China, the best they're talking about is billions. What we need is trillions of dollars a year spent on this problem.
And only the private sector has got those kinds of resources. And so in his mind, you have to have the private sector really come in and work at this. Anything short of that will be disaster for everybody.
ANDREW KAROLYI: Yeah. That's really fantastic, actually, to hear all of these reflections. Of all the things that you said, the one that really caught my attention, Glen, was the potential to turbocharge research with big data analytics. And if there's one area in which I can imagine us just absolutely racing to the lead relative to many of our business school peers out there, is the fact that we've got this incredible pantheon of scholars focused on climate and sustainability, climate change, climate change economics, and a huge appetite for big data analytics and distillation.
Climatalytics, I guess climatalytics, is the term you-- we've got a second panel later on that's going to feature several of our colleagues that are focused on doing exactly that kind of thing. They're doing it in different ways. So did you want to add another thought on that?
GLEN DOWELL: No, just that, I think, I mean, I don't want to-- I guess no one is going to complain if I'm a cheerleader for the College at this point. But I think there's not another place that's positioned better to do this.
ANDREW KAROLYI: I can't think of one. I can't think of one. And our presence, our profile, we're just right in the position to be able to amplify all of this. So can I ask you--
GLEN DOWELL: Especially when you take-- sorry, but especially when you add us in with the Atkinson folks and the--
ANDREW KAROLYI: Correct.
GLEN DOWELL: --and the insane capabilities that we-- one of the co-authors of the IPCC report is a colleague of ours at Atkinson. And all these people, they just, it's an amplifier to the kind of things we can bring as a college. So it's Cornell and JCB and [INAUDIBLE].
ANDREW KAROLYI: Yeah, the university at large and the Atkinson is a force.
--to be reckoned with.
GLEN DOWELL: Really make a difference.
ANDREW KAROLYI: There's no question. You guys, I really appreciate you representing. You're representing us there, and so, so, so well. Thank you very, very much.
GLEN DOWELL: Thanks for having us.
MARK MILSTEIN: Thank you, Andrew.
ANDREW KAROLYI: Cheers, you guys.
I know everybody's going to appreciate you guys staying up for all of this.
GLEN DOWELL: Oh, you're just lucky I didn't break out my bad Scottish accent. That's usually what I would do.
ANDREW KAROLYI: So I think we're now going to pivot to-- one of the big things that we do and I know that we do well, is this integration between what the academy is doing and with what our colleagues in industry are doing, and to change things. And I am so, so proud to introduce to you one of my colleagues. I don't know when and how she's ready-- is she about ready to come on the screen for us? I really appreciate it.
So I'm going to start introducing her. But she's appearing before us now, also with a significant time change. This, ladies gentleman, is Hilary Maxson. She is a Dyson '99, Johnson Graduate School of Management MBA 2005. And I very, very proud to tell you that she is, within I think the last year, has ascended to become the group executive Vice President and CFO of Schneider Electric.
Schneider Electric, as many of you know, is a publicly traded company in Paris on the pack. It's a listed company. It's one of the leading companies in the area of digital transformation of energy management. Hilary, you're going to correct me if I'm not quite describing it right.
She, in her role as CFO and EVP, oversees about 4,000 different finance professionals around the globe. It's all about managing profitable growth, delivering value, mitigating risk, building trust, as a leader in Schneider. So Hilary, I can't tell you how welcome you are to join this conversation.
In addition to us, and I don't know if you can tell, we're brimming with pride at you and what you've accomplished. 2021 has been a really special year for you and for Schneider. And I'm going to dare to call it a trifecta of accomplishments. That's me coining the phrase, and I'm smiling again under my mask here.
This year, Schneider has been recognized as a top performer by Institutional Investor magazine. I think it was CEO of the year, Jean-Pascal Tricoire. You were recognized as CFO, or I think the runner up for a CFO in capital goods sector, best CFO.
And also, also on your team, [? Amidbala ?] was recognized as the top IRO by institutional magazine. That's the first of the trifecta, is just the honor from II, Institutional Investor magazine, for this company that this team is a part of. The second one, Corporate Knights, just this past September, recognized Schneider as-- are you ready for this? The number one most sustainable corporation on the globe. 8,000 publicly listed companies, number one most sustainable company.
And I guess the third thing is, I don't know if you heard us, Hilary, talking to two of our colleagues from COP, Schneider is a presence at COP26. The buzz that I'm hearing in Glasgow is all around this newly-released report. I think it's called Back to 2050, something like that. And it it's talking about the long term impact on energy usage, CO2 emissions, changing expectations, disruptive technologies, autonomous driving, decentralized clean energy, smart EV charging stations, the whole kit and caboodle.
So Hilary, here's my first question to you. Of these recognitions that are all happening, they're all just falling on you right now, why are they so important? And why are they so important now?
HILARY MAXSON: Well, thanks very much for that. And thanks for having me here. And thanks for all of the kind words. Hopefully we, myself and the rest of the team and the company, are really going to continue living up to all of that.
And I'm excited to be here speaking to some of the world's future leaders, because I think actually, it's those of us that are in University today and business school today that are really going to be the leaders that participate strongly in that next three decades towards 2050. So I think that, in fact, it won't be me, but some of the people on the call that will really be doing those, what sound like crazy steps today, that we talk about in that 2050 report.
So just a couple of things from my side. Why is the spotlight on Schneider today? And I think it's because, and we heard it actually a little bit in the session that I heard before, but it's because the world, from my perspective, is really in inflection today, and accelerated by coronavirus on a number of fronts.
First, probably most important, sustainability. And what really changed here? Because we've been talking about climate change, actually, for quite some time. I think over the past couple of years, one key thing is actually the interest of investors to see a focus on sustainability as an important differentiator for companies.
And it probably started with, again, climate change, and really more feeling forced to do something about it, whether from activists or whatever. But I think for good investors, it's moved well beyond that to a revisiting of seeing companies through a lens of short term, medium term, and long term value, versus more of a shorter term focus prior, and frankly, over the course of my career, not the longest career ever, but certainly 20 years, I think there was a time period where that focus got more and more and more on shorter term.
And sustainability, or really all of ESG, so environmental, social, and governance, I think are actually really key elements to track whether a company is paying attention to its medium and long term risks and opportunities.
And then another thing with the shock of the coronavirus crisis, which was an exogenous shock, which opposed to the other financial crises we've lived through, so very different than the other financial crises. Governments have now been either freed up or forced to pursue strategies that are more focused on impacts to the human population that are longer term in nature. So that's another inflection point.
And maybe most importantly, consumers are now focused on all of the elements of environmental, social, and governance. And companies and governments are really being held under a lot higher scrutiny than they were before. So that's around sustainability.
The second inflection, and tied to sustainability, is electrification. So one of the key areas driving carbon emissions is energy usage. Although, I agree with your prior colleagues that methane tied to energy usage, also a big issue to tackle. But luckily, the technologies for transition in energy, most of energy, to lower or zero carbon emissions is primarily already available through renewables, battery energy storage, EVs, et cetera, with a clear uptick in electrification, not just needed, but already on the way in the future.
And then the last inflection point that I'll talk to, and again, your colleagues mentioned it, is digitization. And I think you could even take that further into overall modernization of the world's economies. So unlike your colleagues, I'm not technical. But the differential in computing power speed, ability to process over the past couple of decades, has been quite monumental.
And I think it's at a tipping point for companies and consumers, now, to naturally look to digitize what's around them. So everything from industrial processes, now to construction sites, and our homes. And I don't necessarily mean full automation, but a flow of data from start to finish that can drive a lot of efficiencies in what we're doing. And this started some time ago with big electro-critical companies, oil and gas, utilities, because they had the most to gain monetarily from digitization.
But now costs are quite a bit cheaper. So it makes sense to digitize across many processes and drive a huge amount of efficiency. And for me, it's really these inflections that's exactly why Schneider is in the spotlight today. So we as a company have been building over the past years what's now a world leader in energy management, combined with industrial automation.
So we're in 4 of 10 American homes, 70% of buildings, and 50% of hospitals worldwide. And a number of years ago, starting really in 2007 with some acquisitions, we started down the path to create the digitization across that hardware portfolio. And what does that really mean from a customer standpoint? It means we have a comprehensive solution for the energy backbone, the stuff that electricity runs through, basically, making it work in your house, in the building, or in your factory, that then seamlessly flows into the automation of industrial processes, and now the digital layer across all of that, which is exactly what drives efficiency and sustainability.
So we're quite well-positioned on the themes that the world is super focused on and that the world's investors believe today are a key piece of the next decade and where a lot of money will go. And I'd say, we've also been quite visionary and early in weaving sustainability and overall ESG into the strategy of Schneider, both from an internal standpoint as well as a business opportunity. So a lot of customer interactions we have today start with speaking about what we can do for them in sustainability.
ANDREW KAROLYI: Yeah. The last part of what you described there is so poignant, because while you emphasized the pivot points that many companies are going to through, Hilary, now, and you heard Mark and Glen talk about people questioning whether this is an affirmative commitment on their part, or maybe, they didn't use the word greenwashing, but they kind of hinted at it.
The fact is that Schneider's actually had a mission statement in place for probably 15, 20 years, that talks about, what are the words that are in? There sustainability for all, core of our purpose-- I'm reading my notes here-- core of our purpose, culture, and business toward a sustainable, inclusive world. It tells you that the moment here is that you as a Schneider, are truly an affirmative commitment. It's a long-standing commitment.
And that's why I think you're in the spotlight, like you said. So can you give us a window into your life as a CFO? And tell us how this purpose statement that the firm has had in place for so long, how does it matter for your more day-to-day implementation responsibilities? Like that guiding light is on your shoulder, what is it? And how are you thinking about whether it's capital allocation decisions or capital sourcing decisions, can you give us a little insight, a little window into that world?
HILARY MAXSON: Sure. And that probably, for me, is that differential between greenwashing and not greenwashing, I guess, is whether those words that anyone can put on their website is really translated into something that is a real piece of your business and what you're doing. So Schneider, like you said, was really an early adopter in ESG.
We introduced our first sustainability barometer or set of internal KPIs that we were looking to achieve in 2005. And since then, we've incorporated new learnings and reinforced the commitment with a new barometer every three to five years. And originally, and even today, the goals were developed to align with the sustainability development goals or the SDGs put forth by the UN.
So if you're at all familiar, they cover quite an extensive focus beyond environmental, really into progress-driven and sort of progress for the world driven. And they're also tied to our broader commitments toward climate change with a key step of net zero CO2 in our operations by 2030 and carbon neutrality across the value chain. So that's our scope 1 and 2 and 3 by 2040.
And then full net zero across the value chain by 2050. And for me, that's not just words on a page. It's something we've actually been investing and working towards for quite some time.
We introduced the most recent barometer, or Schneider sustainability impact index, is now what we call it, in November 2020. And to give you a sense of what it is, it's across six key categories. Act for a climate positive world, so that's a lot of what we're doing on the carbon side. Be efficient with resources, so we have some aspects there around circularity.
Live up to our principles of trust. So as a CFO, that's quite important, because we also talk about things like compliance, but more embedding compliance into behaviors and the types of people we want to do business with. Create equal opportunities, harness the power of all generations. And a new one for us is, empower local communities, so getting all of our countries involved.
And these ESG metrics are really key, both to us internally, and also externally. Big focus from shareholders. And they're tied to our internal-- sorry, to our short term and long term compensation plans. Plus we get these audited, and then we audit more than just these KPIs for the ESG reporting agencies.
One point I'd make is that all of our people, we do an engagement indexing, a survey on an annual basis. And for years, our people have rated the mission and purpose around sustainability as their number one reason for joining and also staying at Schneider Electric. And I actually joined Schneider, it's almost five years ago, exactly for this reason, both its vision and tying sustainability to its business strategy, which I felt then, and I still feel today, positioned Schneider quite well in many varying outcomes of the energy transition and anything that happens around climate change.
But also I thought, and still think, and this I thought was quite rare, the management truly believes in the other aspects of ESG, so social governance, and that there's real value to be added to the company there as well. So for a CFO, I would say that purpose comes together in the fact that we fully integrate the elements of ESG in our short, medium, and long term strategies, and translate that into our financial model and then capital allocation strategies.
So a few more specific examples, maybe. In R&D, for example-- so at the executive level, we set the SSI, just to step back one. At the executive level, we set the SSI at the beginning of each of these cycles. And then we build a strategy and combined business plan to achieve both financial goals and sustainability goals, which, super important to note, is actually not that misaligned, or pretty rarely misaligned.
So in R&D good example, we're now making different decisions on suppliers of plastic and metals to begin to shift to more recycled materials. Now, costs for those types of suppliers are higher than traditional goods, maybe 10% or 15%. But we put this into the overall business case.
We look to work on offsetting innovations, but we also think green materials is a differentiator with customers who have their own sustainability goals. So we can do value add pricing as well. Another good example, very salient today, is in our supply chain, we have a goal to have CO2 emissions from our top 1,000 suppliers by 2025.
Now, of course we don't control our suppliers directly. But we launched what we call the zero carbon project earlier this year to support them on this. And more than 90% have already joined in committing to the ambition.
It takes resourcing from our side. But we're using the same technologies and educational materials to support our sustainability business with customers. So for example, we're in a partnership with Walmart on their gigaton PPA project. We're using the same technology, called our Neo Network Collaboration Platform, to give smaller supplier companies access to renewable energy solution providers.
And why I said it's salient today, it gets us a lot closer to our suppliers with a better understanding of how they do business. And a new iteration of the coronavirus crisis has been a big shortage in supply across the world, particularly semiconductors, which we use in many of our products. So closeness with our suppliers, relationships with them, has really been a key to managing through this day by day.
And I think we're learning that choosing the best suppliers for the longer term is really important. And that value component in working with companies who are positioning themselves for a sustainable future is exactly what we need to know, in terms of who to do business with. So from my perspective, CFOs of today, and definitely the future, have to be key stakeholders in driving complex strategies that balance short, medium, and long term value optimization for the company, so mastering all kinds of new metrics and KPIs as forward-looking values of drivers of value. And I'm sure fellow CFOs would agree that standardization of some of these ESG metrics by regulators across the world with rational views would be quite helpful.
ANDREW KAROLYI: Yeah. Well, our friends at IFRS are busy working away, as well as IOSCO and SEC, everybody is working on those. Gosh, you know what, I love that you brought this-- I hope it's OK I stood up here. I love that you brought this vividly, because so many people are wondering how this actually works on a block and tackle basis, that you stipulate this in terms of your engagement with your suppliers. And your customers, of course, are expecting this from you.
So I can't help, but as a finance guy, you're going to have to forgive me, Hilary. I cannot help but say, I came across knowing a little bit about you about several months ago talking about performance targets when there was an article in The Wall Street Journal that talked about more and more CFOs talking about ESG. You were featured with a quote in that article. And the quote was really built around this incredibly successful, it was a convertible sustainability-linked bond that you guys issued.
I know you were the captain of the team leading the charge. So I know that this was a big part of your early, early times as the CFO. I think it was, if I'm not mistaken, a $650 million euro bond. And embedded in this was key performance targets within some sort of time frame for some kind of EMS goals, like for example, some commitment to the fraction of women that will be part of the top management team within a period of time.
Talk about holding your feet to the fire. And then if you miss the mark, you get a premium. You have to pay some sort of penalty premium into the investors of this bond. And of course, it was incredibly well-received. Can you just share a few seconds of reflections on that experience, why that was so successful, now four or five months on? And how it fits with all of the other things you were talking about.
HILARY MAXSON: Sure. So maybe a couple of things to point to there. And this is another area, probably, which is plus minus, where there's a lot of talk about greenwashing and things like that. But actually, it's not that easy to put together the KPI-linked convertible bonds at the moment.
So we'd not participated in green bonds much in the past. Until last year, most green bonds were project-tied or project-financed, so used for a specific green cap ex purpose, like building solar or wind generation. We're really like a cap ex light company. So we have tons of small R&D projects or small things in the supply chain, nothing really big.
So our financing is general purpose and doing what turns into an immense amount of paperwork to prove all the greenness of every single project was a little bit too heavy. But we knew we needed a new financing, and we were hoping that we could start putting something together that would also just-- the whole point is not that a small penalty would force us, therefore, to more pursue these goals. But it's just another data point that we can talk to internally and externally and really get our employees excited about the ESG metrics that we have.
And the finance team got really excited about it. It's a way for them to participate, which they're still excited about. So the bank started to come to us with the ideas of doing an ESG KPI linked financing, which we were really excited about, fit perfectly in our wheelhouse. We already had a huge amount of experience in ESG KPIs including audited KPIs, because it's not that easy. In fact, even for us, it took a month and change to get the bank's auditors comfortable that these were that these were challenging enough metrics that we were going after.
And then we also didn't participate much in the convertible market, I think basically none in the past. But we noticed with the banks, that there was what looked like an extremely good pricing opportunity in the convertibles market and an opportunity to enter into this equity-linked convertible market in ESG KPI linked. So we issued the bond in November 2020. It was really a global first of its kind. No doubt, it would have been easier to just do something easier.
But we really liked the idea of having a new form of investors with convertibles, ESG-tied convertibles. And we were planning an ESG capital markets day with investors in 2020. So pairing the two together was a great opportunity.
Like you said, the issuance went quite well. I think we were able to reach a lot of new investors. The bond continues to trade quite well. I'm no convertibles expert, but the key metric I understand is implied volatility, where we're trading today at around 40% versus our actual stock implied volatility of around 33%.
So interest in the issuance remains quite high. In fact, I get quite bothered by the banks on a biweekly basis to [AUDIO OUT] on that convertible, so to issue more. So all around, we're quite pleased. And I think we're credible enough and expect to shift more of our fixed income portfolio to ESG tide over time. I'm not too concerned about the idea that we might be greenwashing. I think, again, it's very well linked in to everything that we're doing.
ANDREW KAROLYI: I think you're right. I think you're right. I laughed while you were talking about the banks, because you were one of the first out of the gate. They, of course, were also one of the first out of the gate. For them, this is potentially a huge business if it goes well. So that's why I laughed.
But we're coming to the end of our time, Hilary. And I think you've given us so much, so much to think on. It's getting late in Paris. But I can't let you go without one more thing.
So you clearly are very passionate about the company that you're working for, that it fits with your core value system. You know that the Cornell SC Johnson College of Business has this mission, vision, and values statement that talks about becoming or being the world's preeminent college focused on developing business leaders for sustainable shared prosperity. When you were here in Dyson in '99, we didn't have that mission statement.
You told me on a pre-call that you also did some work on the Statler. So talk about another trifecta. Johnson MBA, undergraduate from Dyson who spent a lot of time working in the Statler Hotel. It's fantastic.
We didn't have that mission and vision and value statement back then. But clearly there was something happening that had you thinking like this. Or you were thinking like this and you found a place that was your home at Cornell. So can you tell the audience, especially those that are maybe currently students, prospective students, about what it meant to you then and how it shaped how and what you're doing now? Just a few words would be a gem.
HILARY MAXSON: Yeah, sure. So like you said, in the undergrad, I had the opportunity to go to what's now the Dyson School and to currently work at the Statler and Banfi's restaurant. And I loved the really pragmatic and applied approach to Dyson.
So from doing case studies on Wegman's meeting its founder's son to learning about futures trading, but from large commercial farmers. And that same applied approach was exactly at that student job program at the Cornell Hotel School. So I had the opportunity to work with people from all over Cornell with permanent employees of the Hotel School, even being their manager at a young age.
And well, first, I certainly learned to work hard, but also to really listen to and respect the people around you, no matter what your background. The thing I really like about applied or sort of real life, is you learn that you can learn something from everyone. And in real life situations, not just school and academics, everyone can certainly have something to add.
[INAUDIBLE] another great experience. I had the opportunity to take what I learned in banking in New York and add a great framework of all aspects of business, from hard core MPV analysis, which is the basis of everything I talk about in value-based decision making, to more managerial techniques, more softer side. I think I also took one of the first courses the Johnson School had on sustainable management and sustainability. And one of the things we did there was reach out to a company we knew who focused on some aspect of sustainability.
And I thought of AES. And I reached out to them, a company who I knew from the bank, and later actually joined after making that contact. So indeed, I think that course may have gotten me into purpose-driven companies like, first, AES, and now Schneider.
And really, the confidence I gained at both programs was great. Cornell is a really welcoming environment without-- welcoming to everyone, not a lot of needing to one up people to prove what you are. So I think that's something I've learned and to really, again, like I said, listen to everyone around you with an open mind. Change yourself over time.
I've never been the smartest person in the room, but I've never actually seen the smartest person in the room. So listen, listen to others, figure out what to do from what others say, and be constantly looking out around you to see the risks and opportunities.
ANDREW KAROLYI: Hilary, I am so grateful that you took the time this late at night in Paris. Ladies and gentlemen, I know you're going to join me in thanking Hilary, fantastic. Thank you for doing this.
HILARY MAXSON: Thanks very much.
ANDREW KAROLYI: So we're going to now dig a little deeper and showcase some of our colleagues. We've got two panel sessions. And we're going to start to maybe encourage them to come up.
And one is led by my colleague, Mark Nelson, who's the Anne and Elmer-- I'm going to keep my notes. Don't take my notes. The Anne and Elmer Dean at the Johnson Graduate School of Management. He's going to moderate this panel. You guys can start mobilizing here behind me.
We have, of course, a distinguished graduate of the Dyson School, another distinguished graduate of the Dyson School, Lauren Taylor Wolfe on my immediate left here. She's the CEO and co-founder of an activist hedge fund focused on sustainability issues. Can you believe it? It's called impactive capital.
She's going to reflect on her student experiences, as well as what the firm is doing. And of course, our dear colleague, John Tobin de la Cuenta, Professor of Practice in the Dyson School. Gosh, what does John not do? He's the director of the Dyson Grand Challenges program.
He runs our sims program over there. Google that, and you'll learn more about how cool that is. He's the co-founder of something called the Coalition for Private Investment in conservation, co-director of the Initiative on Responsible Finance with his colleague David Ng. And Mark, over to you. Thank you.
MARK NELSON: Thank you so much, Andrew. And what a wonderful panel to follow. Hilary is a tough act to follow. I'm so excited, though, for us to have this opportunity. And I actually think Hilary was a perfect person to set this up, because I'm thinking about Lauren and her organization looking to help companies unlock value.
So it's almost like you're going after the before cases, and Schneider Electric's the after case. And John's thinking more broadly about these issues, both from a climate perspective, but also a biodiversity perspective. So a real opportunity to build on what we've already learned.
So let me start with Lauren. And just start with the idea of going to a company that doesn't have the values sort of imbued in it that Schneider Electric has. And in helping them understand how they can unlock value by expanding the extent to which they focus on ESG or undertake ESG initiatives.
LAUREN TAYLOR WOLFE: Sure. Thanks for having me. It's great to be here. So our concept is that you don't have to be concessionary with returns to achieve ESG improvement. In fact, there's a great overlap of improving ESG and driving long term shareholder returns.
So we start out with what we call the impact flywheel, which is when you think about ESG improvement and this move away from shareholder primacy to stakeholder primacy, you think about three key constituents. And that's consumers, employees, and shareholders. And it almost acts like a virtuous cycle, like a flywheel.
So to the extent you are focused on the [INAUDIBLE] you change, you're effectively attracting and retaining the stickiest customers, the stickiest shareholders, and the stickiest employees. That lowers your customer acquisition costs. It lowers your human capital costs, and it lowers your overall cost of capital.
And doing so is this sort of self-fulfilling prophecy. When you have better customer acquisition costs, you improve your profitability and returns. That makes shareholder very happy. It lowers your cost of capital, improve your multiple. That gets your stock price up. That makes employees happy. Usually you own stocks, and then rinse repeat, rinse repeat.
So I actually just flew in late last night. I was in Houston speaking to one of our portfolio companies that had been a spin out of Halliburton, so not the typical ESG play as you might think about. But they have, over the past six or seven years, transitioned the business away from energy, engineering, construction business towards government services and more sustainable business. And just using this as an example to bring it to life, they invited me into the boardroom to talk to their board members about why sustainability was so important.
We help them write their investor day. We help them link their key sustainability efforts to the long term financial plan. They'll be doubling that segment, which today is only 25% of the business. But it will be 40% to 50% of the business in the next four or five years as things like green ammonia become solutions as an alternative to fuel, for instance, for marine transportation.
But we went into the boardroom to explain why sustainability is so important as a business concept. But most importantly, we demonstrated how it can link to overall shareholder return, because I would say, there's still, certainly Schneider and actually one of my friends is on the board of Schneider Electric, so I know exactly why they're so ESG-focused. But there are a lot of boards in the US and not in Europe that are still a bit skeptical about trying to understand how ESG can link to value creation and returns. And so we've been focusing on really linking every ESG activity that we've been a proponent of or advocating. And we link it to profitability and total shareholder return.
MARK NELSON: That makes a huge amount of sense. It was interesting hearing what was happening at COP26 and the fact that business seems to be more receptive than it was previously to these kinds of initiatives. So that must be fertile ground for you in being able to approach those boards. Are there other, I guess, poster children examples of circumstances, where you've gone into an organization and you really feel like there's been that sea change in viewpoint and in undertaking initiatives?
LAUREN TAYLOR WOLFE: Yeah. So when we go into investments in companies, it's usually the ESG change that we open with, because it's a way to establish a sense of trust. You immediately sort of flag yourself as someone that's aligned to the long term, because ESG change naturally is cumulative and longer term in nature, versus capital allocation change. When we go in and we're like, spin out the segment of the business, make this acquisition, we have all those ideas. But we found that leading with the ESG ideas really allows for a sense of trust to be built.
One poster child, just as an example, it's one that I think people can relate to, is we own one of the largest auto dealers in the US. And we got very curious about their parts and services business. 10 or 15 years ago, auto dealers were really cyclical businesses. Today, they've transitioned to be more razor razor blade, where the new and used auto sale really drives the parts and services, which is 70% of the profitability of the business.
Now, the challenge is that, throughout the auto industry, auto dealers and collision centers alike, there's a huge labor shortage, which is keeping capacity utilization stuck at about 50%. So we got curious about the labor pool. And when we peel back the onion and looked at the Bureau of Labor statistics data, we realized that most collision centers, auto dealers, were overlooking one candidate pool entirely.
And the issue was mechanics were retiring faster than they can attract new talent to the space. But they were overlooking this one pool, and that's women. Women represent about 2% of mechanics in the US. However, they dominate the industry as customers, spending over $200 billion annually in auto service and auto retail.
So we said, OK, what are you doing to-- why haven't you attracted and retained women? Tell me about your policies and your plans. And so we demonstrated to them that if they just were able to attract and retain women and improve the penetration rate from 2% and just took that utilization that's stuck at 50% to 55% or even 60%, they can drive anywhere, because the parks and services business flows through it, 26% EBITDA margins relative to the single digit EBITDA margins for the rest of the business. Growing that utilization would translate to about 30% of enterprise value uplift for the overall company.
And so it was a dramatic return proposition. So we convince them they're the first publicly listed auto dealer to offer paid maternity leave. They're up to about 65% or 70% of their parts and services centers now actually have women's bathrooms. That's like a no brainer if you want to attract and retain women as employees.
And they're going to a four day workweek. They're going to two shifts during the days. That allows for things like child care and elder care, which are two things which disproportionately fall in the shoulders of women. And so they made all these investments, because we demonstrated to them, yes, it's going to take time, because it's a cultural change that you're pursuing within the organization. But you have this huge carrot in terms of $70 to $100 million of EBITDA growth available to you if you simply just focus on this one area. So this is just one of the examples within our portfolio where focusing on the S side of ESG and diversity can really drive return.
MARK NELSON: And have they used that when they're reaching out to customers? I would imagine that would be a tremendously powerful thing to female customers.
LAUREN TAYLOR WOLFE: Well, it's very-- so we connected them with, there were two, there's a woman, Patrice Banks, who runs this Girl's Auto Clinic, and [INAUDIBLE] who runs Great Bear Auto. These are two women-operated collision centers in the East Coast. And they built out these workshops that were very appealing to women. Women, typically, are the-- I think it's like 80% of the time a car is brought in for repairs, it's from a woman. And so they built these workshops.
So [? Asbury ?] is now developing these workshops for their customers. Women are usually the ones that are doing the servicing. More scheduling is happening online, but women follow up with customer service. And the female customer who had been, in the past, naturally distrusting of her mechanic who's telling her, yes, you came up with a flat tire, but you need transmission. They actually, there's a natural sense of trust. And so it actually helps the customer service. So far so good, but they're doing a lot of workshops to educate the customer, who naturally, for whatever reason, tends to trust women more.
MARK NELSON: That's great. That's great. I'd like to turn to John. And so we've talked about climate, and we've talked about gender diversity. We haven't talked about biodiversity. We haven't talked about conservation.
But that's, maybe, a twin crisis that's underway. Could you speak a little bit about initiatives underway there? I mean, we've got COP15 around the corner. What are you thinking on that front?
JOHN TOBIN: Yeah. People don't often realize, because there is so much discussion currently about climate. But at the famed Earth Summit in 1992 in Rio, the Convention on Biological Diversity was launched at the same time as the UN Framework Convention on Climate Change. And for a variety of reasons, attention to climate has attracted more attention than biodiversity has.
Biodiversity is a more difficult topic. And I would start by describing the difficulties of turning conservation matters into investable products. How do you bring the conservation mindset and the mindset of business together, such that you can extract revenues from not using a natural resource? Climate is very different.
Climate, you have a clear goal [INAUDIBLE] You have some clear metrics, like metric tons of CO2 equivalent. And it is a more easy-to-understand space than biodiversity. But the fact is climate, is just one side of the coin. And the other side of the coin is biodiversity.
And this field of biodiversity finance, conservation finance, is at least 10 years behind compared to climate finance. But we are seeing it attracting more and more attention. And actually, if you look at what's happening right now in Glasgow, you might be surprised that so much of what is being discussed is focusing on biodiversity rather than on climate. And I think the reason for that is that, as mentioned, those are two sides of the same coin.
MARK NELSON: So when we're thinking from a finance perspective, I love the idea of, how do you make money off someone not using something?
JOHN TOBIN: Yeah.
MARK NELSON: That's a really good clean way to put it. How do you? I mean, when we think about the sorts of finance products that we wish were being created or that we're hoping catch up over the next 10 years, I was really interested to hear about the convertible bonds that Hilary was describing. Are there other sorts of products or innovations that you see tying in here and that might be able to move the needle?
JOHN TOBIN: Absolutely. One of the things that we're seeing more and more of is nature-based solutions. Fact is, because of our training, because of the way engineers in particular are taught to think, they gravitate, as do policymakers, naturally towards bricks and mortar solutions to many of our infrastructure needs.
There is something inherently attractive about having a large building of one kind or another, a water treatment plant, a power generation facility. And of course, governors cannot possibly resist the opportunity to have their name on a plaque and to be able to have a nice ribbon cutting ceremony. But the reality is that sometimes nature can provide those services. Biodiversity can generate, either revenues, or what is just as important but doesn't get enough attention, cost savings that a bricks and mortar project may not provide.
And what of the most, one of the classic examples that you hear about often, is based right here in New York City and the New York City water treatment plant. When, oh, in the 80s and early 90s, it started becoming very, very clear that the city was going to need a new water treatment plant. And the price tag on that was very high.
Someone had the bright idea, with no interest at the time, I suspect, in doing anything that would reduce emissions or strictly as a business decision, they decided to set aside forest in the Catskills that would serve as a gigantic water treatment plant for the city of New York instead of that bricks and mortar facility. And the estimates right now are that the amount of money saved by doing that was somewhere in the order of $4 to $6 billion. So we're talking real money. And that's only one example.
There are plenty of other examples in which nature can provide services for us that a bricks and mortar may not, even in the area of climate. It is said-- and I have some questions about the methodology here-- but it is said that one third of what we need to do to achieve net zero could come from better management of forests and biodiversity, so either through reforestation, or in some cases, through reducing levels of deforestation where that is an issue. In that case, it's an issue of finding a different solution to a problem.
Now, nature-based solutions are just one thing. The obvious example, and one of the really has not scaled, and does it have the potential to scale? Probably not to the extent needed, but it's the obvious textbook example, is ecotourism. People paying a very significant amount of money to spend time in undisturbed nature.
So nature-based solutions, ecotourism, you take that the next step, and if you are able to-- and I'm going now to the concept of social impact bonds and environmental impact bonds. If one is able to calculate the future costs associated with inaction on an environmental or social issue, there is a strong economic argument for investing today at a much reduced cost to implement measures that will prevent the occurrence of that future cost. So even though it seems counterintuitive that you can generate economic activity and wealth from not using a natural resource, there are a number of pathways. But it is inherently more difficult than in the climate space.
MARK NELSON: That's so interesting. So we've been thinking about unlocking value within organizations. We've been thinking about creating value by preserving biodiversity. And you hinted at challenges, why this is difficult, and what impediments are to making progress in the area of sustainable and impact investing. Can you talk a little bit about that, maybe you first, Lauren? What are some of the impediments to moving faster in this critical area?
LAUREN TAYLOR WOLFE: From an investment perspective, I think ESG a bit of a salad of letters to a lot of investors. And it means, because there's a level of subjectivity, it means different things to different people. And so I think what investors are-- and there is a lot of greenwashing. And there is a lot of checking the box.
So I think the first step is some centralized set of standards. And we saw IFRS come out and do the ISSB, the International Sustainability Standards Board, I think, which is, today we have SASB, CDP, TCFD, the European agencies. And so there's just a lot of different neutral third parties that are trying to come up with some levels of standards as to what is material within the environmental, social, and governance landscape by sector, by industry.
And it's very challenging, I think, today, for companies and issuers, especially in the small cap and mid-cap space, where we focus to know exactly what are the standards or what are the rules that they're trying to abide by. And we're going to see disclosure standards coming out from the SEC around both climate, and I think shortly after that, diversity. But one of the biggest challenges is really having the same set of standards that governs from both the disclosure perspective and the information gathering perspective, what issuers large corporations should be gathering in terms of the data.
I think nirvana is, there's going to be a couple of stages of that. So I think today we're still getting the standards. Companies then have to gather the data. They have to disclose the data. They have to set goals around the data, so identify what they're going to monitor set goals around it. And then nirvana will be when we can link executive compensation to those goals around the data, because as we know, incentives drive human behavior. But I think the key challenges today is actually getting folks agreed on a global set of standards so that companies can move forward.
MARK NELSON: One of the fun things in my life is an accounting professor was I was on a group called FASAC, Financial Accounting Standards Advisory Council, during, on the accounting side, the convergence process between the FASB and the IASB. And watching folks try to agree on what revenue means, I mean, it's just challenging. So I was so excited when I heard about the IASB pronouncement. I went on the website, and there was a lot of forthcoming. I think there's going to be a lot of work to do. But I completely buy that having a set of standards that take you to measures that are auditable and enforceable are just so important.
LAUREN TAYLOR WOLFE: I think that's the key thing, auditable, enforceable, and measurable.
MARK NELSON: Yeah.
LAUREN TAYLOR WOLFE: There's a professor, not at my beloved Cornell, but a different professor, we won't name the name, in Boston. But he focuses on sustainability. And he did an academic research that demonstrated the more companies disclose around ESG, the greater dispersion there is in just the rating agency. So of course MSCI Sustainalytics and ISS. And that's obviously counterintuitive, but it speaks to the fact that there are no standards. It's very subjective.
MARK NELSON: Oh, that's great. And I'll brag about a Cornell PhD student, former [INAUDIBLE], Jeff Hales was on the SASB. So we're in, we're involved. So John, would you mind sort of adding your own perspective on impediments to the changes that we need to make, not only in climate, but also biodiversity?
JOHN TOBIN: Yeah. At the risk of repeating what Lauren has said already, the importance of metrics cannot be overestimated. The fact is, we have an easy way of measuring economic returns. We do not have an easy way of measuring and assessing the non-financial performance of transactions, which is particularly important if you happen to be an investor who is values-driven and who has invested in a particular product or fund because you are looking for those non-financial returns.
In the case, again, of climate, you have that metric tons of CO2 equivalent that allows some comparison of transactions. There's a common language among investors that allows them to say, this is a successful transaction. This is not.
But in the biodiversity space, where one project or one transaction may have as its objective to save the rhino, while another is looking to reforest parts of the Amazon, and yet a third is looking to ensure coral reefs in highly-trafficked areas against damage by shipping, or for that matter, by the impacts of storms, then how do you come up with a common metric that allows you to assess whether you should be investing in one of those transactions or another? It's even-- with IFRS in the picture, we are likely to do much better. But I think there is an inherent difficulty there.
And by the way, that's not just climate versus biodiversity, because if you look at the social sphere, you have the same sort of thing that you see in the biodiversity space. In one case, you're trying to improve living conditions for urban dwellers. In a different project or transaction, you want to improve levels of education.
How do you compare those two transactions and say, assuming equal returns, this one delivered better non-financial returns? Terribly difficult. Now, that's just the issue of metrics. But there are plenty of others.
Frankly, we are at the stage at this point, where there is not enough product out there that is good and passes muster from a risk return point of view for investors to put their money in it. This is a, it's a great situation to be in if you happen to be structuring, developing, and selling some of these financial products. But there just is a demand that is unmet.
There are plenty of investors out there that are saying, we would love to put some of our wealth into products that allow us to have a positive impact. But we just don't come by very many of them.
MARK NELSON: It's so intriguing. I'm thinking about Andrew's enthusiasm earlier about the research ideas that we were talking about. We've got scholars that are focused on standard-setting. We've got scholars that are focusing on new forms of financial instruments, and that's what you guys are talking about. So I just feel really excited about different things that we can keep working on.
JOHN TOBIN: And even when you have those pilot transactions, how do you scale those up? How do you bridge that gap between the size of the project, which is often small, and the minimum ticket size of the investor, which is often of a completely different scale?
MARK NELSON: Yeah, that's fascinating. Let me, we have a little bit more time. So let me finish with a final question to both of you. It's a kind of a coming out of COP26 question.
So it's a three-parter. So one is, what would you hope we'd have coming out of COP26? And the second is, what do you think we'll actually have coming out of COP26? And the third is just, near to medium term, what effect do you think that'll have on investors? What effect will that have on the deployment of capital? So aspiration, practical, expectation, and effect. What do you think, Lauren?
LAUREN TAYLOR WOLFE: I don't mean to be a Debbie Downer, but I think it is really almost a Herculean effort to try to get a number of underdeveloped and developing countries to agree on how to get there and who's going to pay for it all. And so unfortunately, I think my hope would be that there is a plan in terms of enforcement and incentives and how we're going to finance getting to the 1 and 1/2 degree decline to achieve the Paris Agreement by 2050. And I guess the other thing I would hope for is I think 2050 and 2040 are our aspirational goals. But the real important thing is to get things to set near-term goals that can be measured and monitored.
So what I hope we actually get out of it is sort of backtracking into what needs to happen. And there's a host of things that need to happen. There's no one silver bullet. It's basically a number of different industries that can be chipping away at the issue.
So I hope that there's more near-term goals that are set for 2025 and 2030 so that we can really start monitoring and measuring things. Unfortunately, I just, I'm a skeptic. I'm an investor. So I'm paid to be a bit skeptical.
I don't know that we're going to get there. I think there was some progress made on deforestation goals. But on climate, I think we're not quite there yet. What was the final question? I forgot that one.
MARK NELSON: What was going to be the impact? What was going to be the effect on deployment of capital? And it may be negligible, given what you're thinking about in terms of outcome.
LAUREN TAYLOR WOLFE: I think people are so excited about this. And I think it really is driving, it's driving customer decisions, especially for Millennials and Gen Z. When you think about their two most important assets, which is their time and their money. They're allocating their time in a way that aligns with their values and their money in a way that aligns with their values.
That's causing them to be price inelastic for products and services that are perceived to be sustainable. And that's causing them to really choose, Mercer did a great study, they're choosing companies that are naturally lower emission companies. And Gen Z and Millennials are going to make up 72% of the workforce in the next 10 years.
So I think a lot of companies are going to, really, in the private sector, lead the way with the support of government subsidies and support. What we're seeing just on the financing side of things, today, they're about just under $100 billion, $90 billion just at BlackRock alone, of sustainable ESG ETFs and actively-managed funds. And Larry Fink, who runs BlackRock, says it's going to be a trillion in the next 10 years. That's like a 36% [INAUDIBLE].
On the bond side, there's, cumulative with the past 10 years, I think there's $3 trillion of sustainability bonds, climate bonds, green bonds. Of the past 10 years that we've had that cumulative $3 trillion, $1 trillion alone was the past 12 months. And so we're seeing that rapidly rise. And by 2025, they're expecting $11 trillion.
So I was with the corporate treasurer of a company two days ago, and they're pursuing, they want an eight basis point. They're saying we're going to, again a small issue, it's only $150 million a piece of a note, but they're saying we want to set targets alongside this debt, because we want to save.
We want to, whether it's 8 basis points or 15 basis points, that's still money that drops to the bottom line. So what I think is going to happen, I think the private sector is really going to step forward and take advantage of a lot of the financial incentives. And thank god they're linked to the achievement of certain goals, especially on the credit side.
MARK NELSON: Yeah, great. John?
JOHN TOBIN: So Lauren, you started off being pretty pessimistic, but then you ended on a rather optimistic note there with all of these--
LAUREN TAYLOR WOLFE: [INAUDIBLE].
JOHN TOBIN: Yeah, that might explain it. Now, in terms of what I would like to see come out, obviously, I'd like to see some ambitious commitments from countries in terms of their nationally-determined contributions. But what we may see, it's hard to say.
More specifically, beyond the general statement about, yes, ambitious outcomes. A couple specific things that I personally would like to see. And one is a recognition, an explicit recognition of the complementarity of climate issues with other kinds of environmental and social, but particularly environmental issues, such as biodiversity, such as nature.
It is difficult to achieve results on one side of that coin without impacting the other. And we have to keep both of those in mind. I think the UN did us a disservice in certain ways by disengaging nature and biodiversity from climate back in '92. But that's the history, and we need to live with it.
In addition to that recognition of complementarity between those two issues, there's something that has been attracting more and more attention in the past couple of years. And that is the alignment of financial flows with climate and biodiversity. It sounds very generic. You wouldn't think it says much.
But if that text gets into, at least the Convention on Biological Diversity, it could have a significant impact on how business decisions are made, for example, the business decisions and large scale policy decisions that involve capital flows. By stating that the financial flows of a country and its budgets must be aligned with nature, in such a manner that those capital flows are not nature-negative, but rather, are nature-neutral, or ideally are nature-positive, that points to a series of outcomes that might not have been expected. For example, it does not say anything about increasing or decreasing subsidies.
But it does say that when you put in place agriculture, fisheries, and other policies that favor certain groups and provide them financial incentives, subsidies for their business, that the implementation of the measures required under the subsidy schemes need to be done in a manner that doesn't negatively impact nature. So this alignment is something that financial institutions and negotiators, particularly in the context of the Convention on Biological Diversity. And I'm working with a group of people from former negotiators, some academics and senior members of the Office of the Convention on Biological Diversity, to try to get that language and that understanding into the final document that comes out.
MARK NELSON: What do you think the chances are it'll be in there?
JOHN TOBIN: I think they're pretty high at this point.
MARK NELSON: Well, I think that's a wonderful way to end. We had a positive outlook on the private sector. We had a positive outlook on upcoming pronouncements with respect to biodiversity. And from my perspective, there are so many exciting things that our college is doing and can be doing broadly in this area. And that's a little bit of a teaser for our next panel. But first off, please help me thank Lauren and John.
ANDREW KAROLYI: Way to go, Mark. Can you guys hear me? Yeah, you can hear me. Good. Way to go, Mark, Lauren. Thank you so much. That was fantastic, John.
Terrific. I could have listened to that forever, and I would love to. Now, we've got another panel session that I'm really proud to welcome my colleagues up to join us at the front here. Newly-appointed Dean of the Dyson School, my colleague Jinhua Zhao is going to join as a moderator.
Hold your applause. Hold your applause for everybody. Come on up, everybody. Come on up. And joining Jinhua to my left here is Cathy Kling. She's the Tisch University Professor and Professor of Applied Economics and Policy. Gosh, how many things I should mention about Cathy, a distinguished fellow of the National Academy of Sciences, an expert on water resource management, so many aspects of conservation and just issues writ large, with respect to the environment, as well as the faculty director in the Atkinson Center as well, I should mention.
Ariel Ortiz-Bobea, Associate Professor of Applied Economics and Policy. He's a member and distinguished contributor in the Association for Agricultural Economists and is a specialist in the area of climate as it relates to agricultural economics. So it's fantastic.
And Kara Mangone, friend of the College, friend of the University, who happens to be the head of global sustainability strategy at Goldman Sachs. So thank you all. Jinhua, all yours.
JINHUA ZHAO: OK, thank you. Thank you, Andrew. I'm really pleased to have this opportunity to welcome you to our new space in Manhattan, and also to have this esteemed company in this panel discussion. So the topic of the panel discussion, it's data analytics for sustainable prosperity, which from all of the discussions in previous panels, is really important and timely.
As we all see, the sustainability and ESG goals, it's really grabbing the attention of business leaders on an unprecedented scale. We were talking about Hilary and the Wall Street Journal reports. In one of those articles on the Wall Street Journal is reporting the scale of the sustainability-linked loans in the US up to September 16 of this year, the US companies has taken out for the loans in that area. It's $84 billion. Now, last year throughout the entire year, it's $2.5 billion.
So we are talking about a rate of increase and the kind of attention and in that area that has not happened before. And now, of course, central to all of that and all of that effort, is responsibility and accountability. And it's built on data that can enable us to measure, to track, to verify, to audit.
And so if you're thinking about sustainability, data and data analytics is an essential part of that. And so this panel really represents the kind of expertise that we have regarding the intersection of data analytics and sustainability. And so I'm really pleased to have this opportunity to have our panelists to share their expertise and their knowledge.
So let me open up with a question to all three of our panelists. Can you think about or talk about an advance in your respective area of expertise in data analytics, in empirical analysis, that has really helped make progress or move the ball forward when it comes to sustainability, climate, or the environment. So let's go in this order. Let's start with Cathy. Go ahead.
CATHY KLING: Well, thank you. Oh yeah, need this, sorry. I'm used to being in undergrad classrooms. I can probably do without. But so this is really exciting, and I'm so excited to be here. This new space is amazing.
And this collection of colleagues is remarkable too, as well as having alumni on this incredibly important area. So thank you all very much for that. The topic is sustainable prosperity and climate finance. I want to start with just a couple of really quick comments.
When we're thinking about data analytics and thinking about taking data and transforming it into information, we always want to be thinking about who's going to use that information and what's it going to be good for? So point number one is, sustainable prosperity is going to require huge engagement by the private sector, climate finance. We've heard some about that, which is really exciting.
It's also going to require serious policy change and policy innovations in a broad space. So things like pricing carbon seems a no-brainer. We better get around to doing that pretty soon.
But there are many, many other ways in which policy is going to affect agriculture through the Farm Bill, that policy is going to affect incentives for R&D. And all of those things can be informed by data analytics. And so when I talk about my examples, I'm going to be thinking about both those things that I hope will be very valuable to the private sector and climate finance, and for example, quantifying ESG sorts of metrics, as well as policy. So let me tell you something that I'm super jazzed about.
I've been at Cornell for three years. And many of you have a longer experience with Cornell than I do. And you know that it has, literally, the premier citizen science database and collection across the entire world.
I'm talking about the Lab of Ornithology and their eBird data set. This stuff is amazing. Talk about early innovators. They started 20 plus years ago with this simple fun app where people can identify birds and upload it.
They promptly realized that this was a goldmine of information about songbirds, yeah, but more, and for our purposes, critical to thinking about biodiversity. Why? Because bird abundance and health, there's very strong evidence that, ecologically, that is a broad indicator.
It's also an indicator of the quality of habitat for pollinators. So this database, they realized, was hugely valuable. And they started to implement tools and methods for data analytics that has now really gone nuts, to speak.
So for example, last year there was a paper that was published in Science Magazine that unfortunately documents that we have lost 3 and 1/2 million birds per year in the last 50 years since 1970. That's about 40% North America. It's pretty shocking.
There's been some gains and some losses. That data, however, for the first time ever, documents a major aggregate measure of biodiversity. We want to talk about ESG metrics? Here's a way to begin to think about measuring, coming up with standards, coming up with ways.
A lot of work to be done to get there. But they now have the data to do that. Related to that, colleagues of mine in Dyson started working with some of those ornithologists to think next steps. What else can we do with this data? Well, we took data on the-- US data, and we matched it with air pollution data, which is also a new type of data that is becoming much more granular and at scale.
And we were able to plausibly demonstrate causality between air pollution regulation and reductions in bird mortality. So because we've had air pollution regulations that are designed for human health, we've had less loss in biodiversity. Those are huge areas.
Two real quick ones, other, that I'm going to before I'll pass it. Cell phone data, we are now in a incredible world where we have much more understanding about how people vote with their feet. During the pandemic, huge amount of information that people went to the out of doors. They used green spaces like never before.
Think about how valuable that is when we design and talk about Biden's 30 by 30 plan. He wants to take 30% of the US and preserve it. Where should we do that? We should be thinking about where people are, where people want to go, and where we can maintain biodiversity.
And that kind of data is at a scale we've never seen before, huge, huge possibilities. And I'm not even I'm going to-- the satellite data is unbelievable that we're starting to have. So super exciting opportunities to quantify some of these new areas.
KARA MANGONE: All right, thank you. It's a pleasure absolute pleasure to be here. The school is beautiful. I wish I could bring my kids here. They would really love all these rooms.
So look, let me start with an anecdote just about the importance of ESG data today. I spent almost the past decade of my career really on the front lines of stakeholder engagement for Goldman Sachs. So I was in investor relations. I spent a lot of time with Civil Society, the NGO community, the shareholder community, equity investors, rating agencies, debt investors, credit analysts.
And where we started in all of this was very policy-focused. It was, how much are you disclosing? It was heavy focus on values. I remember sitting down with a ratings analyst who had a framework which was effectively ranking us 1 through 5 on 90 different areas. 1 through 5, like 1 is bad and 5 is good.
And a lot of it had to do with how much we disclosed. It didn't matter how well we were doing anything. It just was how well we disclosed.
Fast forward to today, and a week ago, we launched for all of our institutional investor clients and our marquee, marquee is our portfolio analytics platform within Goldman Sachs. We now have the ability to carbon footprint your entire portfolio, equities, fixed income. We can integrate forward-looking carbon commitment, carbon reduction commitments. We can benchmark to different indices, an incredible amount of advancement, and over the course of 5 to 10 years.
And I think so much of where we are today, and this tool underscores it, is really about, you can't manage towards a target or a commitment or effectively evaluate risk if you can't measure it, I think is the reality. And so, so much of the discussion has evolved from a values-based conversation to a value-based conversation. And I think there's a lot of good in that.
And we can debate. There's a lot of room, I think, for B Corps and values-based investing. But I think that is an important progression that we have made in terms of ESG. And Hilary talked a lot about this. ESG really being looked at as a driver of risk and opportunity for markets and economies.
Our first year of our $750 billion sustainable finance commitment, which is a really important part of how we're delivering on sustainability at the firm, we did over 1,300 client meetings. It's sort of an astronomical amount. And a lot of those were with CFOs and CEOs and boards and CIOs and also chief sustainability officers, critical roles, that I think just the elevation of the importance of this across all members of the capital markets, I think is really important from a private sector perspective.
Maybe the last point I'll make, just kind of on what are we doing and why, as a financial institution, one of the interesting experiences that we have on climate and sustainability is that we are not only an advisor to clients and a provider of capital. So we've talked about green bond financing, KPI-linked financing.
We're doing a lot in terms of capabilities and transforming portfolios for clients. We also have this experience as a company, as a corporate, managing the potential financial impact of climate on our business, so thinking about the potential for physical risk for our real estate portfolio and asset management, or thinking about the potential transition risk on our business if there is a price that's put on carbon.
And right now, it's unfortunately looking very unlikely. But if that happens in five years, what would that do to our lending portfolio for the oil and gas sector, for example? So to be able to effectively assess that, you need a tremendous amount of information. And there's a lot of overlap between the information that our clients need and information that we need to effectively, again, measure and then manage.
ARIEL ORTIZ-BOBEA: Hello, can you hear me? Yeah, good, great. So this is an amazing space. Thanks Andrew, for bringing us together here.
So I'll preface by saying that a lot of the research that I do is trying to understand how people cope with environmental change. And so these days, a lot of it is climate change. And so that will help you understand how uncommon, to try to answer the question.
And trying to get to the obvious, is that when you're thinking about data analytics, you couldn't have data analytics without data. So I started with a very basic sort of a comment there. And when you're thinking about climate, data on climate has exploded. So if you think about the instrumental record, we're measuring temperature, precipitation, that's like 200 years old.
But there's been an explosion of measurements from satellites. We're no longer in a linear trend about how many satellites are around the orbit. We're in the sort of exponential phase of that. And not only the data is getting more frequent and more detailed and more granular, different types of data, not only measuring weather information, but also even using sensors to detect methane and other things.
So it's not only about climate. But climate has, there's been a lot of progress on that. So we have more data than ever. And I think, when thinking about the areas where we've made progress, I say we not me, but we collectively, we humans, it's a lot of it had to do with use of data like that.
So these are georeferenced Earth observations and had helped us understand, say, how these ice sheets have been changing. Tracking, getting better at weather forecasting, knowing where the hurricanes are going. So there's been huge progress over the past several decades on that.
But a lot of that, what I'm saying here, is a lot of description of physical processes. I think over the past, say, maybe a decade or so, there's been a progressive move, in my view, of trying to go beyond that and understand how the same data can be used to understand how it's having an impact on the real economy, and especially for sectors of the economy that are directly exposed to the elements. A low hanging fruit, when you're thinking about that, is agriculture.
You take a plane look out the window, that land has been touched. It has been tilled, has been changed by machinery. And these are farmers, and they're directly sort of using weather as an input. And I think there's, nowadays, lots of tools, lots of projects out there trying to come up with early warning systems to know when these droughts are coming, what is the impact on yields, on prices. So I think there's been a lot of progress, specifically on things like that. So that's what I think a lot of the progress has been made on the climate side looking at the impacts side of things.
JINHUA ZHAO: It works now, it works now. Yeah. This session, we are opening with a very positive result, I mean, the increase in the amount of data. And this is, we had conversations about digital agriculture where a lot of the data is satellite and machines being combined to provide a rich set of data for decision analysis and for best practices.
But at the end of the day, it's really translating the data into action. So we have data developments. We have data analytics and all of that. It's really translating that into action.
So Kara, from the industry's perspective, especially given your experiences in Goldman Sachs and managing, can you give some specifics as for how the climate transition is being managed in the business world. And where are the gaps in terms of translating the data into action? In Goldman Sachs, maybe you are internal management, and also in your interactions with your clients.
KARA MANGONE: So that's a big question. But maybe let me start with a step back just in terms of, because I didn't in opening, just to give you a little bit of sense of the approach that we take as a firm. And then I'll dig a little bit more into the data piece.
As a financial institution, we, for a very long time, in fact, starting all the way back in 2005 was our first environmental policy framework, been really, really clear around the potential impacts of climate, not only in terms of the environment, but also in terms of financial markets and our business. So we've had a very clear environmental policy framework for some time. Fast forward to today, we now have what I would call the most strategically-embedded approach that we've had as a firm in our history, which is a commercially-centric approach to sustainability that starts with the work that we do with our clients.
That includes advisory. It includes provision of capital. It includes capital allocation. So it really does cut across the core of our business. All the way through to how we manage our operations. So we've been carbon neutral as an organization since 2015 across our operations and business travel.
We now have a net zero by 2030 commitment across our supply chain and a net zero by 2050 commitment across all of our business activities. I think, really importantly, it also extends toward outside the four walls of Goldman Sachs, in terms of through this experience of working with the largest corporations globally, of working with institutional investors, of working with governments, of working with pension funds, including governments and pension funds in parts of the world that today are highly dependent on traditional forms of fossil fuels. We have a lot of perspective on where there are gaps.
And so I think that third bucket is equally as important as the first two, which is, first two are really around what do we do in our business with clients, and what do we do in terms of managing our firm? The third is really around, how can we address, in the broader ecosystem, some of the challenges that we see today? And I'll tell you two primary. And Cathy, you hit on the policy one a little bit. But I do think it's really important to spend some time on.
And now the conversation goes from very positive and optimistic to pretty negative. But I think the two I would point to are the finance policy gap, and then I guess, a little bit more of the data gap, probably more germane to this conversation. But I think both are important.
Our estimates, and this is actually collaborative research that we did alongside all of our financial sector peers as part of the Global Financial Markets Association, is that it's going to take anywhere from $3 to $5 trillion in investment capital annually until 2050 to actually be able to be within the 1.5 to 2 degree Paris aligned scenario. And very importantly, there's a substantial amount of that, about a third, that today, is going to involve investing in solutions that, today, are not at commercial scale. And this is where you start to see some of the policy gap, because there is a way to get those technologies to commercial scale.
We've seen that with renewables in terms of tax credits and incentives, which have lowered the cost curve significantly. But there's also the shaping of consumer demand, which can spur a lot of-- which can actually, that's where you can actually reduce costs and get the cost curve down further. So the shaping of consumer demand and the actual incentives from a supply side are both equally important.
And in fact, if you look at the IEA net zero 1.5 degree report, which gets a lot of attention, so much of what that report says is that for us to actually reduce the dependence on fossil fuels, we actually need to have that shaping of consumer demand. And if we don't, there's going to be a tremendous amount of volatility. And so I think that policy gap is extremely important. And there's a lot that we can do in the financial sector.
In our first year of our $750 billion commitment we did $156 billion. So it's a 10 year commitment, effectively 2 times what we thought we would do. There were a lot of statistics earlier around momentum and acceleration and equity and debt markets. We see green or social fixed income price 5 to 10 basis points on average tighter than traditional bond issuance. So we are seeing that acceleration, which is great.
But it's not going to be enough. And so I think there is more that needs to happen. And then on the data side, we've made a tremendous amount of progress. But the focus, I completely agree with your opening comments, it needs to be around quality. And it needs to be around decision making.
What are the data points that we really need? And the SEC is now going through this process right now. And it's going to be very interesting, and I think this is a lot of what they're grappling with, is they are getting a lot of variance in terms of the types of information that investors ultimately want to see.
And I will just tell you anecdotally, the number one pain point that comes up in corporate client conversations and institutional investors, it is data. Corporates feel like they're being asked to disclose way too many things that don't matter. Institutional investors feel like they have to scrape all of these reports. It's not in the same place.
And so I do think some honing of the quality of the metrics and why we need them is extremely important. And then I would also just say, there's a heavy role of collaboration in this too. One of the things that we've learned for sure is that there are a lot of the ESG data providers have a ton of experience.
The ESG reporting framework, SASB and TCFD, have done an incredible job of engaging corporates and investors in the private sector and really honing those frameworks. So there's a lot that can be leveraged. But that does need to happen, I think, because otherwise, you're in a pretty overwhelming place, where you just have so much, and you're not sure what to do with it.
JINHUA ZHAO: This point of collaboration is so critical. I mean, this is the collaboration, not only between the different firms in the industry. It's not only between the different disciplines, academia, but it's also the industry and academia collaboration, understanding what is needed, understanding what is available, and understanding where's the gap and what can be done to fill the gap.
Talking about the gap, Cathy and Ariel, from your perspective, in terms of data availability and in terms of data analytics, what are the areas that is not moving fast enough? What are the areas where you think that data and data analytics progresses are needed?
And also, the areas where the gap between what we have found as researchers and what is done, either in policy or in the industry. So it's basically the gaps that you see from your perspective. Cathy.
CATHY KLING: I'm going to use an example of water. So Andrew mentioned that that's an area I work a lot in. And so this is going to be climate impacted, but it is also separate. I occasionally get calls from firms saying, we would like a metric of whether the people we're doing business with are doing a good job with water.
And I'm like, OK. Well, let's parse that a little bit more. And they are genuine about wanting something, but they don't really even know what they want. So they'll say, well, is it OK that they're using water from local-- well, of course, they need water to produce a thing.
What you really want to know is how scarce is the water at that location? How much is the drawdown if it's coming from an aquifer? How much at risk is that aquifer? What are the impacts on, perhaps, water pollution and water quality?
Are there people living in the region who have nitrates in their wells because of activities being undertaken? Those are the kinds of things that I would like to be able to point them to and say, if you're interested, you want to have an estimate, or data, that's more than just data. It's data that's converted into genuine information.
And the term I'm going to give it is a social cost of water quantity or water pollution. So the social cost of carbon is something many of you are comfortable with. We've made a lot of progress there. We've got a lot more ways to go. People like Ariel do really valuable work on that.
We have not kept up on water, water quality and water pollution. We need much better, both data and then comparable metrics, across different places of the United States. So if you're going to build a plant, a factory that has a heavy water usage, it matters where you put that manufacturing facility in terms of its impact on the quantity of water, scarcity, the ecosystem services provided there. Put it up north, and it ain't going to make any difference. It rains in Minnesota and Michigan.
Put it in Arizona, massively different scenario. So I really think we have not kept up at all with water quality and water quantity issues in finding ways to measure and have some metrics analogous to social cost of carbon.
JINHUA ZHAO: Ariel?
ARIEL ORTIZ-BOBEA: So thinking about obstacles, my sense is that the data precedes the analytics. So I feel that all the barriers are on the data side, like overwhelmingly. I have a tremendously optimistic about being able to find talent. There's so much time in a University like Cornell. I met with computer scientists, with climate scientists.
And many times, especially when you get into people who are very good at the tools, so a computer scientist for instance, they're looking for problems. They're looking for what they call domain knowledge. That's kind of their term for that. And they're actually trying to talk to people who have complex problems so that they can move forward their tools.
And so I don't have a-- I don't think the problem is on that side. We'll develop the tools that we need to analyze the data. We just need the data. And so talking about data, I mentioned there's a lot of data.
Think about Earth observations. It's very Democratic. You can go now to a website, download all these terabytes of data, very accessible. However, there's other data sets that are not accessible. Data is extremely fragmented.
It might sit in private sector hands. They don't want to disclose a lot of information because of obvious reasons. But there's also data that the government holds. There's a lot of-- think about the census of agriculture for instance. There's farm level data.
For decades, going back, and that data, it's completely, it's like, in a safe. It's easier to get data from the census, from us, than to get it from farmers. So it's as if the bar to get data from farmers is actually higher than from a normal citizen.
So I think that there's a lot of data fragmentation. And the value of analyzing data is when you start combining different types of data. And we cannot really completely capitalize on the potential if we don't bring these different pieces together. And that requires, not only people knowing how to analyze the data. There's plenty of supply of that, people who can understand the data to bring the domain knowledge. But also, we need the framework or the-- yeah, so that the conditions that allow for those data to come together so that we can really take full advantage of it.
JINHUA ZHAO: Just picking up on, Ariel, your point about data accessibility. A lot of this is really, again, going back to the collaboration between academia and industry. So if you think about the availability of data from the industry, I mean, this is just many, many cases, that is where this type of collaboration can really move the ball forward, to move us to the next phase.
So along that line, and with the time, this could be my last question to all three of you, along that line of collaboration, from the academia's perspective, what would be the kind of help that you would expect from the industry? And then from the industry's perspective, what would you expect that academia could help you to really feel between where we are now versus where we want to be? So let's start with Ariel.
ARIEL ORTIZ-BOBEA: Great. So I think this is a great question that just teed up exactly where I left off, where I ended. Identified the problem as I see it, we have all these barriers, data is fragmented. So I think if we, I think through collaborations, between academia and the private sector, we could actually be able to bring together some of these ingredients. So that not only we can bring people with the tools who are pushing the frontier on new tools, but we can really embed them in trying to understand the problem, the problem that the companies have, and apply all the raw talent that we have in academia to these problems.
So I would love that we would have a program that say, where we can have students so that, say, Goldman Sachs not only recruiting, that we can actually have researchers embedded in institutions like that, or having faculty take leaves of absence and actually spend some time in institutions like that. Or instead of going to another University and writing a book, maybe they can take their sabbatical embedded with a research team in a company like this. I think those are new ways where we can really break those barriers and bring, and really capitalize on these possibilities.
JINHUA ZHAO: Cathy, do you want to pick up on that?
CATHY KLING: Yeah. I'm just going to say that, for me, the value, the integration I would like to have from industry, is to better understand what kinds of metrics and measures would be valuable for things like these ESG bonds in financing. So what would it-- if we're going to improve biodiversity and have save pollinators, what kinds of metrics do you need in order to-- how accurate does it need to be? At what scale do you need it?
So that when I'm working with data sets and students who are looking for projects, I can say, boy, if you could come up with this, then they could actually sell green bonds based on this or something of that sort for me. So it's really about the kind of knowledge and what's viable, because the real world still has to make a profit. And so really being able to think about that.
KARA MANGONE: Yeah. I guess maybe just to close, I couldn't agree more. I think even in this conversation, I think you can feel like I'm scribbling down ideas that I have from what Cathy and Ariel said. So I think there's a lot of power in that. I think I've actually spent my career at Goldman Sachs. So it's the only place I've worked.
And so I'm poster child for the reality that, sometimes you just have a very specific view. And I'm very fortunate to have the opportunity to work with public sector and kind of do things like this in shared learning. But I do think there are a lot of us who are come from a specific, take a stand from where we're sitting, and have a particular perspective. And climate is such a meta challenge. And so the more that we can have that sharing and exchange of perspectives, I think, is really important.
The one thing I would double click on on this, that I think is really, really important, and Cathy mentioned it a little bit, which is climate and biodiversity, I think absolutely, that was a really important connection that I think biodiversity is getting a lot more emphasis now, which it should. The other, I think, side of the climate or environmental coin, it is the impact on communities. It is the just transition piece.
And I'll give you a very specific example. When you spend a lot of time in the concept of net zero, it's a lot of looking at scenarios top down, figuring out decarbonization pathways. I know more about the decarbonization pathway for the power sector than I really would like and ever thought I would as an English major.
But I think, but really, you kind of start to say, how practical is this? And there is very important acknowledgments around just transition. And when you meet with civil society or institutional investors, there's that acknowledgment. But I think there is actually, that needs to be much more a part of the way that we measure and part of the dialogue that we have. And I think that that is actually one of the very powerful overlaps, I think, between private sector, public sector, and academic institutions.
I'll also just say, I think that academia has already played a very substantial and important role in the progress that we've seen on climate and data already. And I think that's only going to continue. A lot of the examples that I walk through today, I mean, that's machine learning. That's natural language processing. It's geospatial analytics, in terms of how we as a financial institution can measure potential physical risk.
So I think a lot of that has already been adopted by the private sector. And a lot of that has come from academia. So I think there's only more opportunity to do more and more of that.
JINHUA ZHAO: Again, ending the session on the positive note. I feel extremely excited listening to the three of you talk. I see great opportunities, and I also see great opportunities, really, for SC Johnson.
We have the tradition. We have the expertise. And we have the community of alumni and friends who are really in this. So thank you very much. Please join me--
ANDREW KAROLYI: Would you mind staying for a minute? Just stay for a minute, because I'm just going to say some closing words. I don't need the microphone.
Ladies and gentlemen, thank you for that. This last segment talking about what I call it wicked knowledge co-creation. It's that you know that no one of us can do it by ourselves, but we know we have to collaborate to do so.
That theme is so, it's so Cornellian. It's so Cornellian, isn't it? And so for me, ladies and gentlemen, I hope you can see my heart is singing. And I'm just beaming with pride at the showcase of talent that we have in our college, the faculty that we have on display for you, that came before us, the incredible leadership of Dean Jinhau, as well as Mark Nelson, Kate Walsh back in Ithaca.
The future is so bright for our college and our friends, our students, our alumni are so, our precious alumni in their giving back of their time and energy. This is the first of incredible events that we'll be holding at this 570 Lex space. I hope that you find a way to come and visit us here and join us for the ones that will come after. And ladies and gentlemen, thank you so much for joining us today. Take care.
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At the intersection of sustainability and finance are the hot topics of stakeholder and impact investing, climate finance, and corporate responsibility. On November 11, 2021, Cornell SC Johnson College of Business dean Andrew Karolyi moderated this special event inaugurating the college’s new classrooms and collaboration spaces on the 7th Floor of 570 Lexington Avenue, the historic General Electric building.
Focused on climate finance and data analytics --expanding disciplines in the college’s approach to business education -- the hybrid event took place during the COP26 global climate conference, and faculty among the Cornell delegation joined in, sharing real-time insights from Glasgow, Scotland. Karolyi, school deans Walsh, Zhao, and Nelson, faculty, alumni experts, and industry leaders shared their informed perspectives on the many ways in which business education and industry can and must work together, moving forward. “This midtown Manhattan landmark is just the right location for our expanding home in New York City,” said Karolyi. “And this timing is germane to the goal of showing our expertise in the climate finance space. It’s particularly meaningful and valuable to physically populate our 570 Lex classrooms with our faculty experts, as we start to build new teaching, learning, and outreach relationships into the college’s life in New York City.”
Speakers appearing in this program include: Elena Belavina, Linda Canina, Vishal Gaur, Andrew Karolyi, Cathy Kling, Kara Mangone, Hilary Maxson, Mark Nelson, David Ng, Ariel Ortiz-Bobea, Lauren Taylor Wolfe, John Tobin-de la Puente, Kate Walsh, Jinhua Zhao.