Holding Companies Accountable for Net Zero Promises ft. Kyra Bell-Pasht (Investors for Paris Compliance)

Do we ever have a great episode for you. 

If you or your company are interested in reducing your environmental impact, you have likely already heard the term “Net Zero”. These commitments to reducing emissions can be made by organizations, municipalities and even counties. 

Furthermore, if you are someone who is looking to invest in environmentally-responsible companies, this is likely a term that you are on the lookout for.

That being said, reading through countless corporate sustainability reports can be a very long, somewhat confusing process. Even the best intentioned investor might not have the full time or understanding to decipher real, meaningful commitments from straight up greenwashing.

Enter the world of climate shareholder activist organizations.

In this episode, our guest Kyra Bell-Pasht, Director of Policy and Research at one such organization, dives into what Net Zero means, the steps organizations like hers take to hold companies accountable for their pledges, what steps leaders can take to get started on their sustainability journey, and the fascinating overlap of law, capitalism, and climate mitigation. 

Kyra is a wealth of knowledge, and I hope that you enjoy this episode as much as I did recording it!

[Host: Lauren Scott] Welcome to The Resilience Report, Kyra. I'm so happy to have you here today with us. 

[Guest: Kyra Bell-Pasht] Thank you, Lauren. Thanks for having me

So, to get started, would you mind providing a little bit of a background as to how you started in your career, how you got to where you are today.

I originally started out as a lawyer, with the classic intention of using those skills to fight for social justice and help make the world a better place. I tried a few different types of law on for size: public defense, refugee, law, and environmental law. It was this latter that was best suited to me, and after a few years of practicing public interest environmental law, I became jaded about how ineffective the traditional practice of law was at actually protecting the environment.

 And that's where my focus on climate change mitigation really began in earnest, because I moved to where the laws were made. I moved into government itself, first at Ontario's environmental watchdog where I worked to ensure the province was following through on his climate commitments.

And then, when right wing Populist government came into power, I moved to where I could have more influence working with cities across North America and helping them design their climate plans.

But in the background I was growing increasingly interested in the potential to encourage a shift in private capital from unsustainable to more sustainable finance. That that might be where I could have an even bigger impact on greenhouse gas emissions.

And one day this report came up on my LinkedIn feed about  Net Zero best practices in the Canadian banking sector. And you really know your climate nerd when a title like that actually gets you to click through.

It was produced by an organization called Investors for Paris Compliance, which I had never heard of before. I was impressed with how clearly and convincing this technical report had been written. So I found the author on Linkedin. His name is Matt Price. I sent him a message. I said I'd love to support the work their organization was doing. And that, in a nutshell, is what led me to where I've ended up today as the Director of Research and Policy at Investors for Paris Compliance.

When you're reading the news right now, ESG is certainly top of mind, and yet you've been in this space for over a decade now. Can you walk us through this journey?

That's a big question, and I'll give my best attempt at a short answer, because I'm really not even 100% sure myself how I ended up here, but I've always felt a duty to help in some way, to give back to society in the work that I do.

And, when I was younger I wasn't sure what I was best suited for. There were many things that attracted me. But the best advice I got as a student was that the way to figure out what you're best suited for is to try as many things on for size. Anything that attracts you. Give it a go, try it out.

So, as I mentioned before, I did try out various types of law, for example, and it was environmental law that felt that it suited me best, that my personality was most adept at working in. In retrospect, it's not that surprising. My oldest memories are walking through the forest with my mom, her pointing out different flowers to me, pointing out bugs, me helping her with compost, and finding such joy and solace in those activities in a way I couldn't find anywhere else in my life. 

So, stepping into public interest environmental law, and then policy, and then regulation and now climate, finance. It always sat well with me in a deep way. It’s felt aligned with my values.

And before we dive in further as to what you're doing today, I would love just a level set for the audience. Would you mind explaining exactly what it means when we're talking about the concept of Net Zero?

That's a great question. 

When a company commits to  Net Zero, it's committing to reduce its greenhouse gas emissions as much as possible, and then offsetting whatever remains. I'll explain that in a minute. But when you talk about greenhouse gas emissions, it's not just the emissions associated with the 4 walls of your business; within the building in which you operate, but also the emissions associated with the products you use for your business and the products your business produces.

A more technical way of saying this is  Net Zero is not just for your operational emissions, but also for your significant upstream and significant downstream emissions. So, for example, if you are a commercial real estate business, your upstream emissions are those associated with maybe the production of steel and cement that go into your building. And if you're an oil and gas company, then you're also responsible for achieving  Net Zero in your downstream emissions associated with the smoke coming out of car tail pipes, trucks, ships, planes, and from industrial smoke stacks that are using your product.

And with a financial sector business like a bank, an insurance company, or an asset manager, your downstream emissions include the businesses that you finance, the businesses that you invest in, the businesses that you underwrite, what emissions you facilitate through your business. So it's complicated.

As I mentioned before, a science-based Net Zero plan means reducing those emissions as much as technically possible. And then, whatever little bit of emissions remain, you can offset them by purchasing emissions reductions from somewhere else in the economy, which opens up a whole other can of worms which we won't get into now. 

I'll end with one final point on Net Zero. It's achieving Net Zero within a certain timeframe, and that timeframe is one that will ideally allow us to have a livable future. And right now, science has agreed that a livable future means keeping global warming within 1.5 degrees and, in a really general way, that means about halving, so cutting in half emissions, by 2030 from a 2019 baseline, and achieving  Net Zero in your emissions by 2050 or sooner. 

That is super clear and definitely digestible. Another term I would love for us to look at is the idea of greenwashing, and probably our listeners are familiar with the term, but less so as it pertains to  Net Zero claims. Would you help walk us through that?

Yeah, there is a great example outside my apartment window. I live in Toronto, and the TTC has just started featuring big ads on some of its buses and streetcars. And this ad has a clear blue sky, a bright, hopeful, shining sun, and it says,  Net Zero by 2050, and it's the Oil Sands  Net Zero Pathways Alliance.

I think an average person would look at that ad and say, “Wow! How fantastic; the oil sands are working on a Net Zero future.” However, I have analyzed this plan, and it doesn't deal with the majority of their emissions: the downstream emissions that come out of the very bus that the ad is covering

And that's not the only imperfect part of the Oil Sands Net Zero Pathway, but it's the most flagrant one, in my opinion.

So, for an average person, as I mentioned, who doesn't spend their free time learning about what a science-based Net Zero pathway involves for the oil and gas sector, they wouldn't know that. So that's a great example of greenwashing and green washing can look like a lot of different things.

The companies we assess, which include oil sands companies, also banks and insurance companies and asset managers publish huge technical reports outlining their climate plans. And what I do, what Investors for Paris compliance does is analyzes those plans and helps translate them for the average investor. Even a sophisticated investor doesn't necessarily have the expertise to understand where the gaps are, what best practice is.

In the work that we do in analyzing those plans, we try not to come in, and you know, just scold the companies for what they're doing wrong, but also acknowledge and applaud when steps are being taken in the right direction, because there are great things happening that we think it's really important to highlight and emphasize.

But yeah, greenwashing is misleading environmental claims specifically with climate plans related to how they may or may not be achieving actual Net Zero.

And this really addresses your work directly at Investors for Paris compliance. Could you share a little bit more about your work there?

Climate commitments in the private sector are relatively new: emissions accounting and best practices in Net Zero planning, they're evolving.

So a big part of what we do is education. We try to work with the companies to support them in their  Net Zero journey, to help them understand what a science-based Net Zero plan for their particular sector would look like. We try to give examples of other companies that are doing better, and how. We produce reports, we make sure they are as accurate as possible, we share those reports publicly, we try to get attention from the media so that as many people as possible can benefit from the work that we're doing, from the education we're providing. We meet with companies to have conversations about where they're at in their  Net Zero journey, discuss issues we found in our research with their particular climate plans, and discuss what issues they may be having internally, and what assistance they may need. 

And often, there's a sense of gratitude in those conversations we're we're typically meeting with sustainability teams that have huge amounts of work and are trying to often shift an established corporate culture. And so we're giving them resources to help them in the work that they're doing. And that's often the dynamic of our work.

And these conversations we have, they sometimes help us understand that the company is actually working to address those gaps, and sometimes those conversations show us that the company is not addressing those gaps. In those cases, we will file a shareholder resolution.

In order to file a shareholder resolution in Canada, you need to have a certain minority stake in the company. So we purchase shares of the companies that we target. And once you file a shareholder resolution, and our resolutions typically ask for improvements in climate plans of those companies, the company is really motivated to negotiate with us for us to withdraw that resolution, because it doesn't look great on them to have these resolutions go forward in front of all of their investors at their annual general meeting.

Sometimes our negotiations result in us withdrawing the resolution and then committing to watch the company to see that they actually follow through with the commitments they made to us, and maybe we file again the next year. 

And if we don't withdraw, we then - it's sort of like a Get out the Vote campaign. We start reaching out to all the major investors to help inform them about why we filed the resolution. And then it comes to a vote at the annual general meeting. 

Recently, for example, we filed at TD Bank, and our resolution received 23.5% of shareholder votes, which doesn't sound like a huge amount, but in the culture of voting to support management, voting in support of management. It's actually an impressive number, and it's influential on the directors of the company.

I will just say one last thing here, which is when we talk about improving climate plans, and when we reach out to shareholders, the underlying logic of our shareholder proposals are always based on the premise that transitioning to a Net Zero future is about reducing the company's financial risks and increasing the company's financial opportunities. Because, at the end of the day, we're dealing with shareholders that are seeking returns on their investments.

That really paints an in-depth picture. So thank you for explaining that; it's a world that I'm certainly less familiar with and I'm sure our listeners are as well, and it's fascinating.

I'm curious: are you working on a specific project right now that you're excited about?

I’m excited about all the work that we do. There are some basics that we will continue to work on at Investors for Paris Compliance focusing on the banks, focusing on asset managers.

But a new area that we're turning to now is private equity. So what's interesting about private equity? These are companies that are not listed on public stock exchanges, that aren't subject to the same level of regulatory requirements. They're not required to disclose their climate related financial risks in the same way, and there's been more and more attention to the fact that some of our economy’s dirtiest assets, or carbon-intensive assets is a better way of saying that, are starting to be privatized - are moving into private equity - to avoid some of these regulatory disclosures.

And at the same time, these private equity companies are also starting to make climate claims, so Net Zero claims.

And so the next big question we're going to be looking at, along with many other issues that we have been covering in the past couple of years, will be what does Net Zero mean in the private equity context?

That'll be juicy.

I didn't realize that transition was happening over to the private sector in terms of funding. It's very strategic on their part, and certainly underscores the need for your work. So thank you for diving into that.

Your organization focuses on the Canadian landscape, and I'm very curious: are there any specific nuances that you see in your work in Canada than, let's say, if you were doing this elsewhere around the world?

Absolutely, from my perspective, it's the oil sands that really create Canada's unique economic landscape. They make up a significant percentage of the Canadian economy, and as a result, our banks, our asset managers, and even our pensions, are more heavily exposed to the oil sands than any other economy in the world. 

It sometimes feels as if Canada is so deeply intertwined in the oil sands that we don't know how to pull ourselves out. We don't know how to transition away, and that rears its head in a lot of interesting ways in the work that we do.

You mentioned that there are some companies who are trying to make progress here, and if there is an organization that is working towards Net Zero goals or objectives, what would you say is the biggest obstacle? And then, what is the biggest opportunity that you would see for those companies? 

I think first, the biggest obstacle would be convincing management that they need to invest in measuring and understanding their current impact on the environment. I think sometimes the return on that investment is not completely obvious, but there is an increasing demand from a regulatory perspective for this type of disclosure. And there's also an increasing demand from other companies seeking your company's business for that type of disclosure, and from the public. So understanding your current environmental impact has a price tag.

But it's only by understanding your company's current impact that you can understand how you compare to other businesses in the sector, where your weaknesses lie, how you may need to transition away from those negative impacts. And once you've done that, you can then create a competitive advantage for your business.

I think, for people working within those companies trying to shift corporate culture, one of the best ways to do that is to find peers that are doing it to show their more senior folks that it is possible, and to apply a little bit of peer pressure which is quite effective.

But I am curious if someone is already working at an organization, and they want to work ground up in terms of creating this movement towards being more environmentally responsible, what would you say that they should take as those first steps?

Yeah, I think you know, I'd reiterate some of the points I just made. Finding examples of competitors that are doing more, and how they're benefiting from it, showing that it is possible. And that there is a business argument for doing it right.

Another way is , depending on what your roule is within the company,  showing the financial benefits. So let's say, savings over time, and reduced utility costs, reduced energy costs for operations, but also showing financial opportunities, new businesses that the company could pivot towards and benefit from. 

And maybe one other stakeholder in all of this equation is that of investors, and I can personally say that I'm always trying to invest in responsible companies and organizations. But it's not always the most obvious thing to figure out, really which ones are moving the needle or not. Do you have any recommendations as to how investors can get better informed?

Yeah, there's no doubt that is a tricky and kind of thorny issue.

In the work that we do, we're trying to move the largest investors, the ones that you know: the Black Rocks, the global mutual fund companies at RBC, at TD, the ones that are pooling huge amounts of money. Putting pressure on individual investors to reduce their impact is maybe not the most effective way to make a change, but I do have to say that for me personally, I wanted to align my own investments with my values, my environmental concerns, which also include financial concerns. I'm concerned that if I'm invested in oil and gas companies that they might lose value in this transition to a  Net Zero future. So I don't necessarily think it's a smart investment for me to have my money invested in oil sands or oil sand dependent stocks, for example. 

But the learning curve isn't easy, and I remember when I first started being concerned about this many years ago, bringing it up with investment managers and them looking at me as if I was crazy, you know. No, they don't have a climate risk on their investment funds that they run. What is that? You know? What does that even mean? Why would they do that? They were primarily concerned with the return on investment.

And so now, many years later, you'd be hard pressed to find a mutual fund provider or an ETF provider that didn't have a sustainability themed fund or a climate themed fund.

I personally worked with Tim Nash to manually adjust all my investments. He's a great guy, and calls himself The Sustainable Economist. His company is called Good Investing, and he helped teach me how to manage my own funds in a way that aligned with my values as much as possible. I have to say it's really imperfect when your end goal is to make a profit to do so without harming anybody. It's not simple, and it's evolving.

But I would also say that there are more and more products out there now, for example, Wealth Simple, that is really easy to use. They have some climate focused funds, sustainability, themed funds that you know you can filter out oil and gas, for example.

But, I think the more people start demanding that their investment managers are considering these risks the more it will help shift culture. So I think having these conversations with your investment manager is a great place to start.

Was there a specific moment in time in your life where you realized that you wanted to be involved in the sustainability journey / environmental impact within your professional career?

I guess I am part of the environmental movement, somehow that happened. It just happened gradually over time, there was no specific moment. It was just that, every time that I tried it on a bit more, it kept feeling more and more right, and here I am.

I think I've been following in some ways where the shifting current has been moving in the environmental movement as well, and climate finance now is really in the spotlight, because I think there's a general understanding that this is where the greatest change can happen.

And part of your journey has been studying law. I am very curious, as I have spoken to a number of recent lawyers who are interested in getting into the area, as well as maybe some contacts who are mid-career and considering doing a change: would you have any advice for people who find themselves in either of those 2 situations?

I would suggest, not surprisingly, that they consider exploring the topic of climate finance. I think there are many opportunities to practice law, or use your legal skills to help companies navigate this world and also to help governments push companies to navigate this world to regulate this sector. So I think there are a lot of unique opportunities. That's what I would suggest: just exploring climate finance and also, as I did, practicing was not the only way to use your legal skills. 

It can definitely feel, for those of us in the movement, that it's not the easiest path that we've chosen. I'm wondering if you have any resources or tools that you leverage to keep yourself motivated as you're navigating this journey. 

Well, I try to have fun, to play, to fill my life with as much joy as possible, so that I have space to handle the difficult aspects of the work that I do.

So roller dancing, dancing in general, being with friends, having a rich social network is really important, community, being in nature brings me a lot of joy and calm, canoe trips, learning and studying plants and mushrooms. There's something so magical about mushrooms, and how they turn our shit, our death into this rich new life. So studying nature brings me a great sense of joy, of hope and positivity about nature's ability to repair itself if we allow it to. 

But I would also say that it's really been important for me to also find spaces to feel the sadness now and again, ideally in community, because repressing it isn't a sustainable solution.

It sounds like you have a number of incredible tools in your tool belt to be resilient. And this is a question that we ask as a last question on every episode: what do you think it will take for businesses and leaders to be resilient going forward?

Well, I think that we have to get more than lip service to the climate crisis. Ideally, individuals need to feel deeply within themselves what is happening in nature, how their companies, how their work, how their lives relate to that. And that's a big ask.

I think, in modern life, there's a big separation that people have between what they feel and what they do in their work lives, and if they're even in touch with how they feel in the first place.

I know that that has been an issue for me in the past, and something I'm working on: being more in touch with how I feel. And I try to help people in my peer group to deal with that question in relation to the climate crisis. 

And it's a tough one, which is why I also focus on the need for regulation, and demanding that governments step in and help people do the right thing when maybe they get in their own way of doing that.

It's been such an informative conversation. It's fascinating. Again, as I mentioned earlier, it's a world that I wasn't familiar with until I started following your own work. So thank you for what you and your organization are doing.

Thank you, Lauren. I'm so happy you're putting this podcast together. Good luck in your work as well.