ESG Matters @ Ashurst episode 2

Episode 2 transcript

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Anna-Marie Slot: Thank you for joining me for the latest episode of our 30 for Net-Zero 30 series. Today, I'm very happy to be joined by Jonathan McCullagh, founder and CEO of Arcturus. Jonathan, maybe you can give us a bit of background on yourself?

Jonathan McCullagh: Anna-Marie, delighted to be with you today, and delighted to tell you a bit more about Arcturus and myself. I'm a capital market specialist by background and I spent around 15 years in banking markets. And frankly, delighted to focus on a change in direction and build Arcturus over the last two years. We're a data analytics company that's providing objective insights on climate and sustainability risks to financial services professionals, and to institutional investors.

Anna-Marie Slot: Sounds like an interesting shift from capital markets into a founder of a startup. What is the biggest shift in your journey so far? What's the biggest thing you've seen over these last two years, 18 months, regarding sustainability?

Jonathan McCullagh: It's a wave of engagement and growing awareness around the unsustainable nature of the financial system. And a real step-change on the part of asset owners, investment managers, and the banks in particular, to try to understand the risk that's embedded in their portfolios, to try to understand how they might align towards a Paris-aligned, Paris Treaty Agreement aligned future. And we at Arcturus want to be a small part of providing some answers, or some tools to help people understand the risks that's embedded in their portfolios, and how they might be able to engage with all of their stakeholders in an impactful way.

Anna-Marie Slot: What you're trying to do, I think, gets to the heart of this change in mindset. Because obviously people are starting to think about what the impact is of what they're doing and struggling, I think, really quite a lot to quantify that. So that's in particular why I think Arcturus has some really interesting insights to help the financial markets deal with essentially trying to internalize the externality of climate that people haven't really measured till now, I think in general.

Anna-Marie Slot: But the point of this series is to give people specific actions or takeaways. What, from your point of view, would be the one thing that needs to happen over the next two to three years to really be a game changer in people delivering on their 2030 commitments?

Jonathan McCullagh: I think, Anna-Marie, that convergence in standards and moving towards a single taxonomy is something that will be a great help to all financial markets, stakeholders, and indeed to corporates that are trying to engage and trying to disclose in a responsible way as many as possible on their sustainability data. Do I think that that's a challenge that we're going to address or solve in 2021?

Jonathan McCullagh: I think it's feasible in the two to three year timeframe, but I think it's a critical component to facilitating the movement of capital to those companies that really are engaging on climate action, that really are aligning towards a 1.5 degree future. But I think it's incumbent on all of us to try to do our bit, to drive, in the case of Arcturus, more objective or predictive analytics sector by sector that can help people to take more effective decisions. But I think there's stakeholders in all parts of the financial system that can do more, rather than just waiting for those standards, which we may get two, three, or even five years out.

Anna-Marie Slot: You know, I think we are seeing that. You see recently the announcements about the International Integrated Reporting Council, the IIRC, and the SASBY, the Sustainability Accounting Standards Board, who are now announcing their intention to merge into this new entity called Value Reporting Foundation to really kind of help in that regard. It's a really interesting question, obviously, around standard setting and how people talk about it. And I think that's where Arcturus in particular, is really interesting interplay of the data side of that. Because we've always historically looked backwards when we look at accounting, right? Financial accounting and everything looks backwards, but things like TCFD look forward. What is my risk going into the future? And I think that's where having this data that you're trying to produce here is critical to that conversation.

Anna-Marie Slot: One thing we always like to ask people, was your commitment to Net-Zero, since everyone's now making public commitments to Net-Zero. So over this year 2021, where we've got COP26 happening towards the end of the year, what are you hoping to accomplish in the year?

Jonathan McCullagh: I think it's a good discipline. We should all have a very personal commitment to achieving net zero. I think at a business level, Arcturus is looking to launch its first analytics product and supporting data tools in Q1, later in Q1. But I think the work that we're looking to do, engaging with the Net-Zero Asset Owners Alliance and with [inaudible 00:05:22] and other great initiatives in the space that are really embracing high climate impact, high environmental impact corporates and some of the leading bio-lease assets in the management financial market players, if we can be helped. Where we can provide some insights and we're happy to do pro bono work. That's something that I think we can certainly commit to as a realistic goal for 2021.

Anna-Marie Slot: To be clear, these insights that you're talking about in data, are you focusing on areas of green, or is this kind of information that has more applicability across different industries?

Jonathan McCullagh: We're focused on trends around resource efficiency, around the com-credit dependency of companies really trying to get a clearer view of how consistent companies, corporate strategies and their climate action are. And we're also doing a lot of work at the asset level, analyzing brown profile companies and the carbon intensity of those assets using geospatial data and other alternative datasets. So, that won't all come to market perhaps in the next few months, so this is a multi-year challenge for us and for the broader industry. There's a lot of smart people working on this in academic institutions, in other data platforms. But certainly, we think that's an area where we can be helpful.

Anna-Marie Slot: We talk to people all the time and they know they want to do something, but they're not quite sure where they're at at the moment, and they're not quite sure what it will take to get to where they're going. And so I think that missing link of providing that actual real information is something that's going to be a massive help going forward. I guess, closing question. If you could get one person to take a specific action that you think would really make a difference, any thoughts on who that might be or what that might be?

Jonathan McCullagh: Very hard to prescribe. There's so many actions that need to be taken. But I think a clear signal from corporate is that they will all endeavor to disclose the methodology for their calculation of their carbon footprint, and include their scope three and value chain emissions based on at least a minimum level of engagement with their value chain. I think that would be very helpful. Certainly we don't think that carbon footprinting and accurate measurement of GHG emissions is the only priority here. There are many, but I think that that will be for financial practitioners and for markets very helpful to have.

Anna-Marie Slot: Transparency, taxonomy, and real fulsome disclosure all the way through the value chain. I think those are things that are definitely worth calling for in the coming few years.

Jonathan McCullagh: Absolutely. And in terms of our focus, increasingly moving towards the value chain and really understanding life cycle emissions and life cycle impacts of corporates. And frankly, engaging with the corporates as much as with institution, investors and banks.

Anna-Marie Slot: Terrific. Thanks for joining us today, Jonathan. Appreciate your time and insights.

Jonathan McCullagh: It was my absolute pleasure. Thanks again.

Anna-Marie Slot: 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 [Ashurst 00:08:49] .com/podcasts. 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.

Anna-Marie Slot: 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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