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Welcome to the Sustainable Finance Guernsey podcast page.
Guernsey Finance is a joint government and industry initiative tasked with promoting and connecting Guernsey as a leading international finance centre.
Named as one of the Green Finance Guide's top 10 must-listen sustainable finance podcasts, our broadcasts feature news, insights and discussion about green and sustainable finance, and the contribution which Guernsey, as a global leader in green finance, is making in this space.
brandon 0:05
Hello and welcome to the latest Sustainable Finance Guernsey podcast, rated one of the top 10 most useful for sustainable finance podcasts by the green finance guide. Guernsey is one of the jurisdictions leading the way in sustainable finance. And as part of this podcast series we will be speaking to and learning from some of the leading global figures in this space. My name is Brandon Ashplant and I'm Senior Strategy and Technical Executive here at We Are Guernsey, the promotional agency for Guernsey's finance industry. I'm delighted today to be joined by Ross Grier Managing Director at NextEnergy Capital. Today amongst other topics in the climate finance space, we will be focusing on biodiversity and the work that Ross has conducted with NextEnergy on the intersection between climate and biodiversity more specifically, in Guernsey, we are very proud that our regulator, the Guernsey Financial Services Commission, the GFSC, launched the world's first regulated Green Fund regime about nearly five years ago now, which now channels over 5 billion pounds into verified green and sustainable projects, one of which is the NextEnergy solar Fund, which we look forward to hearing more about from Ross today. So without further ado, welcome, Ross.
Ross 1:23
Thanks, Brandon. Really pleased to be here today.
brandon 1:26
Great to have you. Firstly, just to start off and to introduce yourself to to the listeners, can you tell us a bit about yourself, but also your background and the work you do? NextEnergy Group?
Ross 1:40
Yeah, of course. So, as you've said, I'm Rosss Grier, Managing Director of NextEnergy Capital in the UK. So NextEnergy is is a mission driven business, we focus on the transition the world needs to make to a more sustainable future through the adoption of renewable energy. And that's really at the core of everything that we do as a business. The business itself is global now. But I look after the UK component of it, we invest in the development, the construction and the operation of utility scale solar PV and battery assets across those markets. The nextEnergy Solar fund is is one of the funds that I look after in the UK space. And we'll talk a little bit more about that in due course. But it's got around 100 operating utility scale solar assets, about a gigawatt of capacity. So it's one of the more sizeable portfolios of of solar generation that exist in the market today. This means we're really contributing to the decarbonisation of the energy sector. And also, we are making material steps towards looking at how the consumer is really sourcing its power for the future. So we're really moving the needle in terms of climate change. And we'll talk a little bit more about how we integrate biodiversity into those physical assets a little bit later on. I think, personally, I've been in renewables for about 15 years. Actually, this is my 10th year with NextEnergy, unbelievably, for me that has flown past. And what's great for me is when I got into the sector, you know, we were accused of being tree huggers. And it was a very challenging investment case to pitch. Now, that's completely changed, right, we now have very sensible conversations around the economic aspects of whether it's more sensible to, to build, say, a new solar farm versus some traditional, more dirty generating facilities. So that, for me is an amazing transition to have witnessed over the decade. And I'm super excited about where we've been, but also where we're going as a business. Fascinating.
brandon 3:37
And you touch there on the energy transition piece. And I think it really is fair to say that, you know, this is something that's really come to the fore and kind of into the limelight, or the spotlight or whatever, having sort of put it over the last couple of months. And really it is it is a big question to start off with. But could you sort of set the scene a little bit on how the energy transition and the current energy crisis, if you like, affects the financial services industry?
Unknown Speaker 4:03
Yeah, I'll maybe go even a little bit broader than that. So the starting point for me is that the energy transition and the energy crisis affects everyone in society. We've grown up in a in a generation that flicks a switch, a light comes on, you don't really think about it, you definitely don't think about where the power is coming from. In a lot of cases, you don't even think about the cost of operating, that light bulb so we're very wasteful and very, um, thoughtful about the use and our consumption of energy to save the planet. We need to consciously consume across everything, including energy, and you need to think about the impact that switching that light on has in terms of you know, what cost implications that that creates, you know, where it comes from, how its generated and all of those components that feed into to you know, you being able to to To utilize the energy, and the energy crisis has really made us think once again about the cost in a way that that we haven't over the previous, you know, decades. And so now hurts to leave the light on a little bit. And this combined with the national security implications that we're all aware of post Ukraine, and as being reliant on gas supplies from hostile economies has really drawn a different dimension to the conversation, it's really brought the energy conversation into sharp focus in a way that it hasn't been before. So I guess it behooves all of us to push more for that security, because we're looking to see that in our personal finances, and also for future generations, but also to push for more homegrown green energy than we've seen in the past. For, you know, for us to achieve that, that requires mountains of capital to be mobilized into the space of I look at just the solar sector alone, we're talking about needing a further 90 billion of capital just in the UK market to achieve our current net zero ambition. So it's a monumental amount of capital that still required to achieve the goals that we've set out how this affects the financial services industry, well, I often get asked by people, what they can personally do to influence the outcomes that we talk about. So you know, you watch David Attenborough programs, and it's very easy to get depressed about the trajectory that we've got of saving the planet, but also very difficult to think about what you can do personally to, to influence that will will actually, you can do a lot through your finances. And this is often where we encourage people to be very proactive with their pensions and also with their investment pots, to really think about how they can ESG focus for outcomes. And ESG has come to the fore in all of our conversations with investors over the last few years, where we are collectively seeking to use that capital for goods. So for the energy transition for decarbonisation, to combat climate change. And actually, as we continue as society, to force our financial institutions to drive for more, more sustainable ESG goals, more more clarity around those ESG goals, we will get better outcomes. So it's really, you know, on a personal level for everybody to be part of the conversation. And I think that's, that's really the nice part of where I see is evolving to now, obviously, we need to do more, we need to mobilize capital quicker, we need to invest faster, we also need to cut through a lot of the noise, which maybe we'll touch on later on, and things like green washing, and so on, which are drag factors in the sector. But But I think, you know, as individuals and as a finance service, we are key to achieving the energy transition goals.
brandon 7:44
Certainly. And nextEnergy has been crucial to this process. Because, as I understand it, you've been working on the transition to clean energy since 2007, which is incredible, an incredible amount of time. And you've got investments in sort of 350 solar plants and billions worth in assets under management going towards clean energy systems. Can you just talk me through some of those so you know, some of this portfolio work, you know, the funds that you've got under management and and some of the projects that you're currently investing in?
Unknown Speaker 8:14
Yeah, definitely. We talk about such big numbers nowadays, it's often difficult to understand conceptually what that really looks like. So I'll try and try and simplify that now a little bit. And so we operate across the globe with investments in solar assets, not only across the UK, but but also across the rest of Europe, we even operate as far away as Chile, and all sorts of OECD focus countries in between, we're what's called an investment manager. So we work with infrastructure investors and retail investors to direct their investment portfolios and pension funds into physical assets. So really, what we're looking to do is marry physical solar and battery assets with that capital that's looking for a reliable, consistent risked long term investment, and we are the specialists who can bring all of those pieces of that value to that chain together, de risking and deliver those long term returns back. And in so doing, we're achieving that mission that I told you about at the start of the call, which is to to really start to to drive momentum into that transition to a more sustainable future by promoting renewable energy. So that's really the core of what we do. So we have more than 200 professionals across the globe focused on everything from has the asset woken up today is every single kilowatt hour of power that we can be can be produced from this particular site, is it being produced and what action needs to be taken to make sure it happens through all of the back office administration piece right the way through to the investment teams who are finding new opportunities to invest capital and the development teams who are finding new ways in which to develop and continue the evolution of the market so we really are that one stop shop for our investors who are looking to get those very, very clean ESG goals from from underlying physical assets. The nextEnergy Solar Fund is a great example of that. So ESF is a listed entity, it's domiciled in Guernsey, hence our link today. And that was launched back in 2014, it's now got a gross asset value of about 1.2 billion, which we've invested into predominantly the UK market. There's a couple of international assets in there, but it really is UK focused. And it's ridden that wave of really creating momentum around infrastructure and solar and how solar fits into the energy mix. And now it's evolving, so that it's fit for the energy ecosystem in the future. So we're now bringing batteries into that mix, we now bring some international assets into that pot as well. So we continue to drive that transition as as the core of all of the funds that we that we operate.
brandon 10:53
Incredible. And we mentioned earlier, or I mentioned earlier, that we're very proud here in Guernsey, that NextEnergy is one of the green funds, it's listed and so forth. In that with that that kite mark. Earlier this year, as you probably know, Guernsey added to the Green Fund regime with a new kite mark, focused on biodiversity focusing with biodiversity focused funds, I should say. And that natural capital fund regime, which we hope will provide investors confidence when investing in those biodiversity funds. NextEnergy has also been incorporating biodiversity and nature into your portfolio and reporting. Before we dive into this, for those who may not be as familiar with biodiversity and the risks and opportunities around that space, could you explain what Biodiversity means and why we should be protecting and investing in nature? And how this kind of intersects with the climate piece as well?
Unknown Speaker 11:47
Yeah, sure. I love this bit. So you'll have to curtail how long I can talk to you about it. But I think it's a really important component of what we do as a business. So we were pioneers in nextEnergy in this space. So we very early on, identified the opportunity that these solar assets create in order to benefit society. So what I noticed was, we're taking these parcels of land, and we're removing them from the agricultural intensive agricultural cycle for a really long period of time. And it's 30 to 50 years, and we're controlling the traffic, we're controlling the land management, and that gives us this unique opportunity not only to generate energy, but also to restore the land and creating protected hubs that not only arrest the decline, but also enhance biodiversity, and providing vital ecosystem services to the communities in which we operate. So a whole load of jargon in there. But what does that mean, for the for the average person? Well, biodiversity is everything. I mean, it's it's literally the variety of living things that surround us on this planet that we live the world, and particularly the UK have seen catastrophic loss of biodiversity over the last 50 years. And it's perhaps not the best example. But but, you know, I'm a fan of visual things. If you think, you know, those of us who were born in the 80s, you drove a car along in the summer, and you would see, you know, a veritable smorgasbord of dead insects on it, you drive along a summer road in the summer, today, you won't get that that is indicative of what is going on in every aspect of the ecosystem. And we are wholly reliant as a civilization upon the benefits that those ecosystems providers, so they're an extremely delicate balance that do everything from, you know, maintain the predatory balance of flora and fauna in there to providing pollinator services that then feeds into how we grow crops and how we survive. And, and really, it's fundamental to the way in which, you know, the human race looks to survive out into the future, if one component of an ecosystem dies, it has huge lasting often irreparable impact on the rest of the ecosystem. So we were starting to become alive to to how important protection of that ecosystem is. And researchers believe that kind of 90% of biodiversity in each country needs to be maintained across the globe to avoid mass starvation events. The UK has dropped something like you know, 50% and continues to trend down the way So in short, we have to act now on biodiversity. We don't have the luxury of starting to wake up to a conversation and over a period of time, starting to think about how we can arrest that decline. It is an emergency alongside the climate emergency, and therefore we're looking at how we can bring both of those aspects together in our investment case to not only support that decarbonisation agenda that we've spoken to, but also to start to capitalize investment in in the protection and enhancement of nature.
brandon 14:54
Fascinating. Because it does also sometimes feel as though they are often sort of twos separate competing issues, if you like, you know, sometimes the focus is on carbon and the climate and but actually, like you say the luxury isn't that we don't have the time to talk around, or wait to talk around the biodiversity piece. And it's inherent to be picked up now, and not pushed and sort of kicked down the road, you know, into into years and decades to come.
Ross 15:19
It's always it's always a problem in this space, isn't it? There's always so much so much good intention, which turns into lots of dialogue, before anything actually happens. And we don't have the luxury of that time.
brandon 15:29
Definitely. And on that, can you tell me how NextEnergy is integrating nature into the business and portfolio and perhaps actually, in particular, where you see kind of revenue streams coming from in, in the protection of nature in for one for a better word.
Ross 15:45
So what I mentioned before is this concept of a protected hub. And that's really how we view our our assets. So what we look at doing is creating targeted measures with our in house Environmental Impact Manager and our ecologists to, to service the or rather to arrest the decline of what is going on in the local area. So all local planning agencies in the UK have a good understanding of what is suffering the most in a particular area. And it's quite easy to tap into that wealth of knowledge locally and to do very targeted measures in each one of our assets that benefit the local community from from that perspective, as well. And what we're trying to do is to integrate better land management thinking into our entire asset lifecycle. So if I think about how our business and our sector has evolved, you know, we we have learned a huge amount about how to generate, you know, renewables in the very best way from a very concentrated piece of land. And other aspects of the supply chains have been maturing alongside that learning. And actually, land management is one of the slowest things to catch up. So what we're trying to do is to drive the evolution in that in that that component of the of the sector to start thinking more about how we can not only reduce operational costs, so OPEX, through better land management, but how we can also foster these, these incremental benefits from a biodiversity perspective, as well. I guess to add a layer of complexity to the conversation, to win the Climate War, what we need to produce is cleaner, cheaper electricity, and then start using it in all aspects of our lives. So you know, the good examples are always you know, switching from traditional petrol or diesel car to an electric car thinking about, you know, avoiding using gas heating and start to electrify your heat, and so on. And also the same in terms of industrial processes, which are quite reliant on on gas, as well, as all of that requires this the cheapest energy that we can produce and the cleanest energy that we can produce. One way that I believe we can achieve incremental benefits is by thinking about additional revenue streams as part of the solar. So we're not only being paid for the energy that we generate, but we're also thinking about monetizing those natural capital benefits that we bring through that protected hub environment. So there are concepts emerging around biodiversity credits, for example, you were all aware of how carbon credits work, and so on, there is an opportunity for us to build a stack of different revenues together to monetize alongside the renewable power that we generate, it's a really exciting opportunity. It's actually not why we got into this in the first place that actually it was because we saw the opportunity to do the right thing, that we started our journey around biodiversity. But we're in the process of ensuring we've got really consistent metrics and baseline understanding of the type of land that we've taken on and the impact that our measures are having on the ground as well. So we're trying to ensure that we are in some way accounting for the biodiversity benefits that are created. And I hope at some point, we can feed that into the mix and and pair it up with the climate benefits that we're having in order to create a conjoined business case. And I also think that is one of the very best ways that we can speed up that conversation around investing in natural capital as well because it isn't a standalone investment, it is effectively an evolution of the climate investing that is already happening at scale.
brandon 19:23
Now, at the conclusion of COP15, it sort of felt like the nature sort of finance community was very relieved that that final text of the Kunming- Monteral Global Biodiversity Framework had been sort of agreed and sort of, you know, brought to bear as it as it work. Do you see many similarities from sort of previous climate cop agreements such as the Paris Agreement or or the clip conclusions from COP26?
Unknown Speaker 19:49
So I was fortunate enough to attend COP26 And I guess my key takeaway was, was that of momentum and enthusiasm So everywhere I turned there, were these incredible you know, passionate people super fired up about solving the problems that stood in the way of us driving forward to achieve that the next set of ambitions around around climate goals. And that felt very different. As we said earlier in the call from the conversations I've been having for the last, for the last decade, I found that really refreshing as I as I reflect back over some of those more challenging conversations we've had, over over the decade, it's often been quite a slow and painful conversation to get to where we are today, in in climate. And as we've said earlier, we don't have the luxury of that time for nature. I think the conversation progressing in the way that it is, and it has is a great thing. The fact that the cup events exist shows that there is, you know, pretty general consensus that both biodiversity and climate change are the biggest risks that face us as a society. So I think called 15, from my perspective has gained significant attention in a way that that biodiversity and nature has not before. And I think that has massive benefits in, in starting to draw interest from the investment sector and from all aspects of society to ensure we get to those to those outcomes. We've got a long, long way to go. Right. And, you know, it's definitely not without its challenges, and all of this good stuff. But what I what I really like about the journey that we've gone on with with climate change is that none of the problems that have been thrown in the way of it have been so horrendous that we've not been able to find a way to continue to evolve that landscape and continue to drive towards that ultimate goal. And therefore I've got a lot of confidence, we're going to do the same thing in in in terms of financing nature as well. So yeah, no, I think it's it for me, this the outcome of the event was more momentum than it was, you know, bits of paper and joined up discussion.
brandon 21:54
And another one of the it's probably fair to say larger news stories that came out of the COP16, sorry, COP15 on nature was the ISSB, the international sustainability standards board plans to incorporate nature into its disclosure standards. what impacts do you think this, and the global biodiversity framework will have on the sort of broader finance industry?
Unknown Speaker 22:19
So I I, you're building what I've said in the last answer, adoption of the global biodiversity framework creates consensus on conserving and managing something like 30% of the world's landmass, It centralizes nature within the conversation of finance, and operations of financial institutions and other large entities. And it's the, I guess, the starting point for forcing action alongside the frameworks that are rapidly evolving. So think of TCFD and TNFD, and the task Task Force for climate related financial disclosures and nature related financial disclosures. They establish some really good overarching principles, but then the benefit of what the ISSB are looking at is they're kind of going that next level down. So they're looking at how they build upon those pillars, and add additional granularity and consistency to the reporting and demonstrating how that reporting should flow. Why that's valuable is again, going back to something we've said earlier, it's it allows us to cut through the monumental amount of noise that's in the space. So one of my personal pet hates is greenwashing and allowing people to get away with greenwashing in the climate space. And one of the key ways to combat that is ensuring consistency of reporting and approach doesn't allow anywhere for people to hide. So you're not allowed to continue doing something terrible in the left hand, but waving in the right hand that you've done these great carbon offsets as a classic example. And I really think that what issb is bringing to the table is helping us transition quickly through that conversation, especially as that taxonomy evolves as well. I mean, the finance community has got a long way to go on as we've said to to really get comfortable in how it can bring significant financial support into to to financing nature in the way that we really need to in order to to achieve the goals that we've got but but you're really talking about trillions of investment. So the opportunity is there and and I think as we see the frameworks land and evolve, what you've got is a really good push and pull emerging in the market so financiers can see an incredible opportunity to bring new experts build careers, start to design new products for a for an emerging space that is very deep and has plenty of opportunity to continue to service to the you know, the bank and the finance communities need and the growth that we all need in our underlying investment and pension pots. meeting in the middle with with this push From from, you know, those of us who are really trying to save the planet, to to kind of create that that joined up thinking and things like these frameworks, it's not in the middle are the are the answer to making one meet the other. It's not going to be easy, though, right? And it's it especially in nature, it's very localized. It's very, it's very complicated. There's a huge amount of jargon and just keeping abreast of the developments. When I'm in the sector, I find very difficult. There's always a new, you know, acronym, or a new new entity. That's, that's, that's emerging and a new approach to things. So, you know, part of what we do as a business is, we've grown our ESG team exponentially, and part of what they're doing is ensuring we have a cohesive approach. So we set our own targets internally around achieving net zero around biodiversity. And then we standardize our approach across the business that allows us to, to bring everybody in the business on that journey through how these taxonomies evolve. And then we can educate the investor bases to understand exactly what they need, and then how we're operating and so on. So it's, it's a lot of teamwork involved in getting to the end goal. And I think what we've seen is is is, you know, the value that improving the reporting and the consistency of reporting can bring to the overall value chain.
brandon 26:14
And that leads strangely, sort of neatly into the next question in a way, because as well as ISSB. Other disclosure regimes have also been in the news recently, especially with many SFDR funds, being reclassified from article eight, sorry, from Article Nine to Article eight funds. Could you explain what this actually means for those who are not as close to sustainable finance disclosure regimes? And actually, what is your approach at NextEnergy to disclosures?
Ross 26:40
So I'll try and keep this super, super simple. So Article Nine is associated with those funds who have sustainability, or at their very core. So take the NextEnergy solar fund, for example, what it does is directly combat climate change through the production of, of renewable energy. And article eight refers to entities that that kind of lean into or have benefits to the environment or social goals. But it's not their core goal. And therefore there is there is a kind of key delineation between the two. And we're very proud that all of our funds are Article Nine, classified and, and that's a very important component of what you get with with NextEnergy. So where we were, you know, our approach to disclosure to to kind of move on to the next bit of the question on ESG aspects is very similar to the core DNA we have around our financial reporting, we've always tried to increase transparency, and auditability of our data, we've tried to present it in a simple comprehensible fashion, that the you know, anybody retail investor can can pick up and they can cut through all of the noise and understand exactly what we're doing. That is really our ambition, as we continue to push forward into our reporting around ESG aspects and also our financial side as well. In our view, this, this sets a benchmark for others to shoot for in the sector. And, and actually, we've seen that evolution on the on the financial side. So we have continued with the NextEnergy solar fund, or rather, we've continuously with an extra set of one, improve our the clarity of our financial reporting, and we've seen peers then follow to do the same because they've had the pressure from investors to to kind of increase that transparency between the various different funds, we intend to do the same around them. ESG as well.
brandon 28:36
Now, I imagine a lot of the listeners to the podcast and, and businesses generally starting to tackle how they manage the energy transition, but also incorporating disclosures and learning about the role of nature, and might be nervous about sort of the scale of the challenge ahead. As a final question, what would you say to those starting this journey and starting the transition to zero?
Ross 29:02
Well, I guess, if I can leave a takeaway it is it is that right? It's start now, you know, be ambitious, the stakes are as high as they will ever get, you know, we're talking about the continued survival of our loved ones, you know, current and future, and, and everything, every step in the right direction that you take is, is really positive. And I think that's, that's one of the reasons why I leap out of bed every day to do what we do next. Because it feels like that, you know, every every challenge that you get faced with is, you know, a something that needs to be overcome for us to be successful. It's a fantastic sector, that being both challenging and rewarding, and, and therefore, you know, it's a journey that needs to be embraced and I think it's somewhere that people can really build the most incredible opportunities in their in their careers, and they're extremely rewarding as they do it. It's gonna be cool. is an incredible decade in both financing nature and also the energy transition as we shoot to revolutionize our relationship with the planet, the way we consume, the way we think about consuming, and the way we think about what we are leaving behind us as a legacy for future generations. So yeah, look, I think my takeaway is is great news that you're thinking about starting, have at it as aggressively as you possibly can. Brilliant. Well, thank
brandon 30:26
you very much, Ross, for your time today and for your insights.
Ross 30:29
Great, thanks for having me.
brandon 30:31
Well, thank you, Ross for your time and insights. today to learn more about the energy transition, you can read our report on private finance and its role in supporting the transition to net zero. Thanks also to you for listening. We have quite a back catalogue of interviews and panel discussions on the Sustainable Finance Guernsey podcast channel, you can check them out by searching for Sustainable Finance Guernsey wherever you get your podcasts. If you enjoyed today's episode, please leave a review or a comment. It's always great to get feedback from you. You can also find us at sustainablefinanceguernsey.com And weareguernsey.com and interact with us on Twitter at @SFGuernsey. And at @WEAREGUERNSEY. To hear more relating to news and developments coming out of Guernsey's finance industry more broadly. Check out the We Are Guernsey podcast on your preferred podcast platform. We also have links to Ross and NextEnergy Capital in our show notes as well. So check them out to hear more from them. And we'll be back soon with another edition of the Sustainable Finance Guernsey podcast.
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