ESG Matters @ Ashurst episode 10

ESG Matters episode 10: transcript

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Anna Marie Slot:
Hello, and thank you for joining me in the latest episode of our 30 for Net Zero 30 Series. I'm Anna Marie Slot, Global Sustainability Partner at Ashurst. And today, we're joined by Lord Barker, Chairman of En+ Group, a global leader in low-carbon aluminum and renewables and the former UK Minister of State for Energy and Climate. Thank you so much for joining us today, Lord Barker. Could you maybe give us a little more of your background and tell us about yourself?

Lord Barker:
Sure. Well, it's great to be with you, Anna Marie, and what a great series this is. So, as you said, my main role in politics, of which I am well out now, was to be the UK Climate Change Minister under David Cameron and before that, held that brief in opposition for nearly five years as well. So I had pretty much a five-year run in, and then nearly five years doing the job, which was a fascinating time of highs and lows. And rather unusual for British politics, during my 15 years in the Commons, I was really focused all the time through one lens or another on the environmental agenda and most of all on climate issues.

But I left politics in 2015 to return to the private sector. And as you said, I now lead the world's largest producer globally of low-carbon aluminum and we also are the world's largest private sector hydropower. To put that in context, we produce around 16 gigawatts of clean electricity from our hydro installations. That's more than the UK output from the UK nuclear power stations. And if you consider that the Hoover Dam, which people know in the States produces two gigawatts, we produce 16. So that gives you some idea of the enormous scale of the clean energy resource that we draw on to make that aluminum. And aluminum is a very important metal for the low-carbon economy, particularly seeing strong growth from electric vehicle manufacturers, sustainable construction companies, and also renewable packaging. So, it's great to be at the coalface, if I can use that metaphor, in business, having previously been more focused on policy.

Anna Marie:
That's an interesting choice of words. I mean, obviously, that organisation did not arise overnight, but have you been seeing any shift lately in how people are approaching sustainability kind of in the last two years or so? Your history obviously goes back a lot further.

Lord Barker:
Huge. In the last two years, there's been a massive change, particularly in the investor community. When I did my first round of investor meetings in 2018 following the successful IPO in London, and we were the biggest IPO that year and the biggest foreign IPO, I think, for three years back in 2018.

At that point, our strong sustainability credentials then, our low carbon emission were a nice add on, a good USP, but fundamentally, people were interested in us as a commodity play and a hedge on the aluminum market and were very focused on the conventional metrics in our financial statements. Fast forward three years, and it doesn't matter who the investor is, overwhelmingly, they're very focused on our sustainability leadership, on the way that we are really trying to drive, not just for us, but for our sector, a different approach to climate change and a much more ambitious agenda for transforming our business, so it's a very exciting time to be in the aluminum sector, but we need to go faster and further at real scale.

Anna Marie:
Interesting point, faster and further, that's kind of the point of a lot of these conversations. So, maybe you could elaborate, what particular things do you think need to be done here in the next two to three years, because I think that really is the window to accelerate transformation of industries?

Lord Barker:
Absolutely. Well, in the aluminum sector in particular, we are one of the seven hard to abate heavy industries that's been identified by the United Nations as absolutely critical to the transformation of the global economy onto a low carbon basis. If those seven hard to abate sectors, so aluminum, iron, steel, chemicals, cement, et cetera, if these key industrial behemoths don't shift, then you're not going to shift the foundations of the global economy. The aluminum sector, for example, we are by no means the largest of these big emitters, but we as a sector, pump out more carbon dioxide than Germany. If we were a nation state, we would be a member of the G7, so getting the emissions profile down of the aluminum sector is absolutely critical.

And for this particular metal, there has been, until pretty recently, perhaps even now, a degree of complacency, because it has so many other practical uses from a sustainability point of view. It's almost infinitely recyclable. So extraordinarily, over 70% of all the aluminum that's been produced in the modern industrial era, is still in circulation. Now, aluminum was driving the circular economy before anyone even thought to use that term. And as a result of its recyclability and its application in so many sustainable uses, I mentioned electric vehicles already, but it's also being used in renewable energy, about 80% of a solar installation will actually be comprised of aluminum, its use in the transmission of electricity and the electrification of grids is critically important.

Because it has all of these diverse applications, people haven't focused so much on its own carbon content, but there's huge range of profiles. So Chinese aluminum typically, which accounts for about 60% of the global market, has a terrible carbon footprint. It takes about 18 tons of carbon to produce just one ton of the metal, whereas at the En+ Group, and this is what really attracted me to this business, because we have this huge clean energy resource, rather than relying on coal-fired electricity, it takes just two and a half tons of carbon to make exactly the same metals. So 18 tons versus two and a half tons, just by changing the energy input, the electricity input.

However, we've got to go further than that. So first of all, we've got to get coal off the system. Everyone's been very familiar with that mantra. We've got to drive up the deployment of clean electricity, but then we're still emitting carbon at the end of it. That's not the end of the game. And then it becomes a lot harder. And we're now engaged in putting together a roadmap that will see us go from 2.5 tons of carbon to net zero. And the more of the low hanging fruit you pick, the harder it gets, but we've got to get there.

Anna Marie:
Now that is fascinating and, I think, putting it in those numbers and explaining to people the impact of that. One question, which I always have for people when they talk about their net zero goals, when you say net zero, what do you mean by that?

Lord Barker:
Net zero is through to Scope 3 emissions and just looking at the direct emissions at the smelter or your energy input, but into that smelter, but looking at the whole value chain, production chain. And for us, that means that we're going to have to partner more effectively. And I'm sure this is a recurring theme of your programme. We need cross-sectoral partnerships. So, for a global group like ours, which has active operations in 12 countries on five continents, getting the right partners to help us decarbonise is absolutely critical.

Take transport, for example, we ship our product right the way around the world, but we don't directly control the emissions from the shipping or logistics, so it's important for us to have the right partners that share our ambition to decarbonise. And as we go through the next decade, that we have a much more stringent procurement process, not just for the inputs that go directly into our metal production process, but also, the whole value chain. And that's critical and that's why I think the UN Global Compact, of which we're a member, promotes the SDGs and one of those key SDGs is partnerships. And I think this year as private sector comes together ahead of COP26, we're going to see a lot more focus on partnerships that will drive progress through whole industrial supply chains.

Anna Marie:
So, if you had a wishlist, it's the end of the year, the holiday season is here, you've put something on your list, is that what you would be asking for to really make change, this kind of partnerships to be effective? Or is there something else?

Lord Barker:
Yeah. Well, on one hand, we don't want people to lose focus on their own business, taking responsibility for the emissions that they can actually do something about and raise the level of ambition and ensure that their own corporate commitments aren't just an increase or aren't just more ambitious, but are actually rigorously aligned with science-based targets, so that when national leaders make commitments on behalf of governments at Glasgow in November, that the businesses that make up their own economies actually are synced in to those national commitments.

And I think at the moment, there's not enough rigour. There's not enough transparency between businesses and the national governments whose economies they form part of. So, we need far greater transparency, but then we also need this cross sectoral partnership to ensure that where you do have these big global companies and companies serving global markets, that it is all connected and people are looking beyond just their own immediate emissions. It's a big challenge, but it's a shift, it's a step change in corporate thinking, really.

Anna Marie:
 It is, it is, and I agree with you. And, I think, we've been focusing on that, this idea that now is the time for corporates to really step in and start figuring out how you deliver those government goals, which are only going to increase, I think, over time. I guess, one question around that system, that system of corporation and finance, I think you might have some views on sustainable finance, maybe could you share with us your thoughts on that?

Lord Barker:
Yeah, well, we hear a lot now about shifting the financial system to support the low carbon transition. And I think in a way that the banks and the financial community get too much of a bad rap and not enough focus is actually put on the companies and businesses that are actually raising the finance and what they're doing with it, because it's my experience having also, not just at En+, but I've been chair at the other end of the spectrum of a group called Powerhive, who are the leading providers of decentralised grids to the rural poor in Africa to village networks in Kenya, or as chairman of EVN, the Electric Vehicle Network in the UK, that is Britain's largest developer of fast charging hubs for electric vehicles. I see different perspectives and my own background originally, before I went into politics was in finance.

And while I was in politics, one of the first things I did as Climate Change Minister was to start in 2010, something called the Capital Markets Climate Initiative, when it really was a problem to get finance to focus on low carbon projects. But now, to go back to your first question, over the last year or two, we've seen like a stampeding herd. The finance community really start to disinvest, actively disinvest, in high carbon projects and proactively seek out low carbon opportunities. And to my mind, the biggest challenge is not raising the finance. The biggest challenge is finding investible low carbon projects, investible low carbon corporate propositions. And I think the onus is increasingly now on the business community to actually have those really rigorous, low carbon investment opportunities, not on the banks to deliver it or on the investment community. If anything, I think, the push now is coming from the finance side and not all businesses are responding again, come back to that, at the pace and scale that we need in order to drive the transformation that we require.

Anna Marie:
Excellent points. And I do think the banks are getting on the front end of it, in part maybe because they're the most easy to regulate.

Lord Barker:
And also just that the herd mentality. And I think the herd has been spooked by the prospect of high carbon stranded assets. The herd has been spooked and we know that sort of the risk aversion now in financial services is such that they look at regulatory risk very, very seriously, and they can see the combination of regulatory risks, changing consumer habits, the way in which supply chains and procurement are changing very quickly to adopt a low carbon model. That all of these things pose a long-term risk, if you're lending or investing for the longterm in a business that doesn't have a credible low carbon transition proposition, or isn't a new economy business. So, if you are in the old economy, it's going to be very difficult to raise finance, as opposed to if you're in the new economy, I think it's increasingly easy provided you have an investible proposition. You still got to give a return, whichever economy you're in.

Anna Marie:
That is definitely true. I was wondering, we're coming to the end of our time, if you might share with people just on a personal level, if there's anything in particular that you're doing or changes that you might be making? You talk about both the system, but also the individual, anything you want to share with people listening?

Lord Barker:
Well, first of all, I think the onus is on politicians and business leaders to make the big changes. I was very conscious when I was a minister of asking people to change their light bulbs if at the same time we were supporting the rollout of coal fired power stations in other countries through our aid programs or through our policy, so it's really important that the big leaders are doing the right things, but everyone has a part to play. I'm always cautious about holding up oneself as a sort of paradigm of best practice, but when I left politics, one of the first things I did was to launch a campaign with Paul McCartney and Stella McCartney to promote Meat Free Monday as a means of driving awareness of the importance of taking action on climate change. And we did that in the run-up to the Copenhagen Climate Summit.

And that was great. We got hundreds of thousands of people online to pledge to reduce the amount of red meat that they're eating. And I didn't go as far as the McCartney's who are dedicated vegans, but I think raising that awareness of being able to moderate one's own personal habits, and that can actually have a big effect. But of course, as the chairman of EVN Network, I'm very focused on the electric vehicle agenda, so currently have a hybrid, but I'm looking forward to taking delivery of my first fully electric vehicle as well. And then there are sort of little things at home in terms of heating that are really important. For me, it's about making a few small changes, so one could look in the eye other people and say, "However imperfect one's lifestyle, one is at least making a small point to be part of the solution as well."

Anna Marie:
Yeah, conscious decision-making, I think, between what's happening in climate change and what's happening, especially with COVID. I think that's such a resonating theme for people in the last year to just focus a lot more on what they mean and what they're doing and what that means to them, so really interesting points and thanks for sharing. Okay, in our last minute or two, if there's one thing that you could have happen in the next kind of two years, is there anything in particular that you would want somebody, if you could give a shout out to somebody about making a decision?

Lord Barker:
Well, obviously, the most important thing is COP26, the climate conference in Glasgow this November, so I want that to happen and I hope and pray that the COVID situation will improve sufficiently for it to be a really inclusive in-person conference, because having participated in so many of those conferences myself on behalf of the UK, I know that the human interaction and the interaction there, not just between the individual negotiators, but also the really important contribution of NGOs and civil society is critical.

And what has been one of the big drivers of pushing up climate and increasing ambition, it's been the way in which young people have engaged on this agenda and really made, through social media and different platforms, made their voice heard. And that really has, I think, driven a shift on the part of many governments and politicians in taking note and putting increased priority on climate and climate action. So an in-person, successful, ambitious outcome to COP26 is really top of my Christmas list.

Anna Marie:
Fantastic. Thanks a lot, Lord Barker. Appreciate your time here. I think the takeaway is for people, fantastic insights into a hard to abate sector, really taking on a leadership role in looking at transforming itself for a resilient, sustainable future. So, appreciate your time and thank you for joining us today.

Lord Barker:
My pleasure. Good to talk to you.

Anna Marie:
Thank you for listening to this podcast. We hope you found it worthwhile. To learn more about the issues we've just covered, please visit This 30 for Net Zero 30 episode is just one small part of our continuing podcast series ESG Matters at Ashurst.

Make sure you don't miss any of our future episodes by subscribing via Apple Podcasts, Spotify, or wherever you listen to your podcasts. While you're there, you can also listen to our other episodes and leave a rating or review. In the meantime, thanks again for listening and goodbye for now.

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