Transcript provided by Kensho.

Linsdey Hall

I'm Linsdey Hall.

Esther Whieldon

And I'm Esther Whieldon.

Linsdey Hall

Welcome to All Things Sustainable. A podcast from S&P Global. As your host, we'll dive in to all the sustainability topics that are reshaping the business world.

Esther Whieldon

Join us every Friday for in-depth analysis and interviews with leaders from all around the globe. Together, we'll break big sustainability headlines and cut through the jargons.

Linsdey Hall

In conversation across the sustainability world, there are some key phrases we're increasingly hearing, and we're going to explore those with 3 guests across this episode.

The first phrase is back to basics. And the context I'm hearing this in is financial institutions saying that in the current very fraught landscape for sustainability, they're really taking a hard look at their business to make sure they can make a clear connection between their sustainability strategy and their financial decision-making. For example, last week on this podcast, we heard big bank, HSBC, talking about the need to ensure the commercial value of energy transition strategies. That interview was with Sir Danny Alexander, who was a keynote speaker at the annual S&P Global Sustainable1 Summit, which took place on April 30.

Esther Whieldon

This year, the event was hosted in London, and we sat down on the sidelines with speakers from across industries to talk climate change, energy transition and navigating the current tumultuous sustainability landscape.

Linsdey Hall

I was emcee at this event, and the idea of going back to basics came through in other panels as well, including today's first guest, Jessica Fries. Jessica is Executive Chair at Accounting for Sustainability or A4S, and that's a not-for-profit established by the U.K.'s King Charles III over 20 years ago when he was the Prince of Wales.

As you'll hear Jessica describe, A4S works with financial decision-makers to drive sustainable outcomes. Later in today's episode, we're going to unpack some of the other key phrases we're hearing, pragmatism and realism. We'll talk with a leader from the Energy Transition Commission. This is a global coalition of leaders across business, finance and the NGO space committed to reaching net zero by 2050. And we'll hear directly from an energy company that's actively grappling with the energy transition. Norway-based Equinor is the largest supplier of energy to Europe and has a portfolio that encompasses oil and gas, renewables and low-carbon solutions.

First up, though, what does it actually mean to go back to basics? Here is Jessica from A4S, who starts off with some explanation of the organization's goals and how it works with the financial community.

Jessica Fries

We work with all parts of the finance world, all the way through from asset owners and asset managers, banks, insurers through to companies and particularly within the real economy and within the corporate sector, the CFO and finance community. When His Majesty set up A4S, he really talked about how we could modernize a lot of the decision-making tools and reporting frameworks that we were using to make them fit for purpose for the 21st century. And it was really clear at the time that things really hadn't evolved very much. So you had sustainability happening really in a silo from finance. And a lot of the stakeholders we were working with really struggled to see what their role could be.

So fast forward 20 years, things have obviously moved on a huge amount, but we really focus still on 3 key overarching aims. So how can we support finance leaders to take the kind of actions that they need to take to achieve a sustainable future. How can we really work with them and their teams to transform financial decision-making and equip organizations with practical tools that really work for finance? And then finally, how can we scale up action? We know that we face some really major challenges. So how can we really make sustainable business, business as usual in the face of, particularly at the moment, a really rapidly changing global context, which is putting a lot of pressure on those sustainable decisions?

Linsdey Hall

I was going to say this is quite the moment to be having this conversation. Tell me what are some of the challenges you're hearing about from the organizations and stakeholders you work with?

Jessica Fries

We've just finished the latest series of quarterly meetings we have with all of our senior stakeholders. So whether that's the chairs of pension funds, the CFOs, members of our Advisory Council, which also includes regulators and others. And I think that everyone is grappling with how to continue to focus on their long-term sustainable goals and whether that's around climate, nature or people in the face of some very challenging near-term context.

And I think that, that's always been the challenge in terms of how to balance the long term in the short term. We've just had Mark Carney reelected as Prime Minister of Canada. And one of the things he said a few years ago was the tragedy of the horizon. And of course, so that underlines that it's always been hard to balance long term with the short term. But in the current context, I think that, that is really coming to the fore.

We don't see business leaders and finance leaders backing down from those long-term goals. I think everyone is very clear of the consequences of a failure to act with the kind of scale and speed that we need on climate and nature. And we're increasingly feeling the physical impact of the warming planet already. And if you look at those longer-term trajectories, it becomes very clear the economic and social consequences. But how can you really translate what you've seen as a huge momentum towards setting strong net zero goals aligned with the science in the short term where you may be facing financial pressures and you certainly are facing very rapidly evolving and divergent conditions in terms of the regulatory landscape and the geopolitical landscape that you're facing in terms of those decisions.

Linsdey Hall

Yes, absolutely. I was in Washington, D.C. last week during some of the World Bank and IMF Spring Meetings, and I had a chance to hear from a lot of the world's largest banks and other financial companies. They were talking about the challenge of this current moment. They're also saying that some of this disruption could cause some needed change, maybe a bit of a reset. Are you hearing anything like that from your organization?

Jessica Fries

We had already been seeing a real hardening up of understanding. I think if you look back a few years into, say, the Glasgow COP, you saw real momentum with companies and other actors, including banks and financial institutions setting those net zero goals. But I think at the time, very few organizations really knew what that meant in practice, how to get there.

And I think over the last few years, you've really seen a lot of that deep dive analysis happening. And I think organizations realize just how challenging it is to take the kind of actions that are necessary to achieve some of those goals. So some of the things that we're doing is we really focus on the practical and what can you do and how can you do it. You're always going to get a lot of noise happening in the world. So what is within your power to influence and change.

So one of the really practical things that we've been doing is looking at how do you align your financial planning process with your transition plan. So one of the other big things that a lot of organizations have been doing is looking at what their transition plan is and increasingly having to disclose some of the details to their investors and others. And there's, of course, more and more transition finance out there to support that journey.

But how do you really hardwire it into the capital investment decisions that you're making or even the operating budgets that you might have? So that's something that we've been working with a lot of our CFO leadership network to develop, looking at what good looks like, what some of the examples that organizations are already following to really hardwire it into both the long-term and the short-term financial planning processes. And so look out for the guidance when it's developed and released, which will be in June. So just over a month away. And I think that, that kind of really practical approach is something that has continued to be needed in the current context.

Linsdey Hall

I'm hearing in my interviews, companies are perhaps changing the language they're using to talk about their sustainability commitments. At the same time, we're hearing this real focus on physical risks of climate change and the understanding that these will have real financial impacts. It sounds like this is sort of right in your wheelhouse. Can you say a little bit more about how are you helping CFOs and other financial decision-makers kind of connect the dots between climate change and physical risk?

Jessica Fries

So I think that, that guidance that I mentioned just there is a really great example because it's looking at how do you balance in your decision-making, both the goals that you might have set on GHG reduction along with increasing the integration and the resilience that you're building in through the investments that you're making and as well as the information flow. So of course, if you look at CFOs and the finance community, often within an organization, they hold the purse.

So that work on financial and budget allocation is really key. They're usually at the center of raising finance. So thinking through how do you finance those decisions. So that might be all of the work with the treasury function or indeed with the dialogue with investors through the equity markets.

And then, of course, they are often responsible for the flows of information and the management information that can help them to understand those physical risks and build out some of the scenarios that they might be needing to look at to think through where should the business go into the future.

The other thing that we haven't really touched on is the opportunity side of things. And I think that, that's something that you're continuing to see a real focus. And depending on the sector, a lot of organizations thinking through where are some of the upsides in the products that they might be developing and the markets that they can access in the context of helping to solve some of the challenges that we might face from climate. And I think you're still seeing quite a lot of innovation happening in that space and some of the products and the markets that are developing really paying very good returns. And so no backing down from that one.

Linsdey Hall

Yes, opportunities and innovation are 2 very important words in this conversation. How are companies talking about opportunities?

Jessica Fries

So maybe if I think through an example grounded in nature because that's something that we haven't really touched on as much. We've seen in the last few years much more focus on nature and understanding that we need to halt the collapse in biodiversity and that, that presents very real risks for businesses. We find that CFOs and others -- it's much harder in many cases to really get to grips with what that might mean for individual organizations.

But if you look at some sectors, so one of the organizations we work with is a very large agribusiness, and they've been doing some very interesting work looking at how do you invest in the natural environment around, say, some of the crops that they might be producing. They were definitely seeing the impact from a collapse in biodiversity and particularly things like pollinators and having to really invest in bringing in, say, bees to be able to pollinate their crops. So cash out the door. So very hard financial consequences from some of the nature loss that we're seeing.

So they really invested then in how could they create a much more diverse nature-rich context for their crops and seeing dividends being paid as a result of that. So it may seem like really obvious stuff, but I think often investing in a very different way might be necessary. I think often you need to think outside the box a little bit. So you might need to partner with different sets of actors in a way that you haven't previously to really capitalize and realize some of the benefits.

So we're also seeing some quite interesting examples where an organization might be working, say, with the farming community to reduce some of the runoff that then a water company might be needing to spend additional money through infrastructure to then reduce and clean the water for consumption. So some of that collaboration, if you can work with the farming community to reduce the runoff in the first place, you don't need to spend as much on then the cleaning processes.

Linsdey Hall

Can you tell our listeners a little bit about sort of trends you're seeing in different jurisdictions? How are different parts of the world approaching the challenges that you've talked about?

Jessica Fries

We work a lot with big multinationals. So they clearly have exposure around the world. One of the things that you're seeing as a difference is the regulatory context. So if you look here in Europe, particularly within the EU, you've seen a huge draft of regulation coming through. And at the moment, you've got the whole Omnibus simplification agenda. So looking at reducing some of the impact of the regulations that have already come through. Now I think from organizations that we work with, they welcome the simplification, but they don't want to see a dilution in the ambition.

If you look at some of the organizations we work with in Asia, really been watching a lot of the developments elsewhere, but very close to some of the -- back to the physical impacts in quite a lot of jurisdictions are really facing the full force of climate change. And so a huge focus on them building some of that resilience and responding.

If you look at the organizations we work with in the U.S., I think continued focus on where some of those opportunities might be and how can they really respond, but focusing in on the financial drivers around sustainability. And I think back to one of your earlier questions, I think that there is that real focus on joining the dots between sustainability and finance, which is maybe something that was part of the conversation 10, 15 years ago when we first started working with a lot of these communities. And I think we're seeing that real back to basics, sustainable business, how can you really make the business case? And that's maybe globally, but I think particularly for those in the U.S. are really focusing in on how do they talk the right kind of language and really be able to demonstrate that connection.

Linsdey Hall

The term back to basics is one I've heard increasingly even just over the last month, I would say, along with words like pragmatism, realism and one bank that I heard, again, talking in D.C., he said, you can't expect that the energy transition will be successful if you're expecting the private sector to act altruistically. There have to be these returns behind the business model, which seems kind of obvious, but I think I'm increasingly hearing that pivot. It sounds like maybe you're hearing that as well.

Jessica Fries

Yes. I definitely think that, that is the case. What I think the challenge is that if everyone looks at some of the longer-term financials, it's very clear that you need collective action to be able to tackle some of the challenges. And if I think of the asset owner community that we work with, that's something that they're really focused on.

So if you look at an individual organization level, it can be really hard sometimes to make the numbers stack up in terms of the investments that they might need to make. And it's back to your point of you can't step outside market norms in terms of the expected paybacks and returns because you're going to get punished for it, frankly, in the markets. But for asset owners, they're really clear that their portfolios are impacted by a lot of the systemic risks. So if the market as a whole doesn't shift, they're going to suffer the consequences.

So for them, if you look at that narrow financial fiduciary duty argument, actually, you maybe need a different set of returns on the market as a whole to be able to protect their portfolio in the long run. And often, they are really focused on the long-term returns because their beneficiaries might be going out 80 years. You might have had somebody who's just started saving for their pension now.

So I think you are seeing a lot of that dilemma of balancing different parts of the market and what does good look like for an individual entity versus for a portfolio or the economy as a whole. And I think that these are some of the dilemmas that we're going to carry on seeing challenging.

Now one thing that we haven't touched on that I think is, again, back to some of the opportunities and the areas that people are really excited about is the potential of AI and technology to help to address some of the challenges, but also put a spotlight on some of the information that is needed to really grapple with those different scenarios and understand the kind of risks and the opportunities that organizations face. So that's another area that we're really focused on this year, looking at how do we join the dots, provide the kind of insights and how can finance best leverage some of that emerging technology or rapidly deploying technology for good.

Linsdey Hall

Well, Jessica, I've asked lots of questions. Anything that I haven't touched on that you think is important for our listeners to understand today?

Jessica Fries

Keep focusing on the long term, don't get too distracted by the short term. Easier said than done. But I think ultimately, we know that you get different cycles. And we know that there's real physical and financial impact from a failure to address climate change. So we need to make sure that we are continuing to act together to address some of these very real challenges that we face.

Linsdey Hall

That's a great note to end on. Thank you for sitting down with me today.

Jessica Fries

It's a pleasure. Thank you for having me.

Linsdey Hall

So we heard from Jessica how financial decision-makers that A4S works with are thinking about making the business case for sustainability. In some cases, this is being framed as going back to basics. She mentioned Glasgow COP, and that's the UN Climate Change Conference of the parties that took place in Glasgow, Scotland in 2021.

She also referenced Mark Carney, who when we had this conversation, had just been elected Prime Minister of Canada. Throughout the summit, I heard people reference Carney and his concept of the tragedy of the horizon. In a 2015 speech, Carney called climate change the tragedy of the horizon. And by this, he meant that the catastrophic impacts of climate change will impose a cost on future generations that the current generation has no direct incentive to fix. It's an idea we've discussed on this podcast in the past, the challenge of balancing near-term energy priorities like security and affordability with longer-term sustainability priorities. We've heard in recent episodes that this balancing act will require pragmatism and realism, 2 more of our buzzwords today.

At the 2025 CERAWeek Energy Conference, S&P Global hosted in March, we heard many executives touting an all-of-the-above approach to energy that uses all available sources to meet the world's growing energy needs, including oil and gas, renewables like wind and solar as well as nuclear.

While our next guest talks about this balancing act and how different sectors are approaching the energy transition. Her name is Min Guan, and she talks about how to take a pragmatic approach to the energy transition in a world that's being reshaped by AI, growing energy demand and tariffs. Okay. Here's our conversation where she starts off by explaining the couple of different roles she holds.

Min Guan

So I am currently a Director at Systemiq, focusing on decarbonization of power and electrification. For those of you who are unfamiliar with Systemiq, we are a consultancy and investment firm. And what we focus on is driving what we call sustainable economic system change. And to do that, to give a concrete example, we focus on bringing what we think of as the critical technologies up the S-curve for at-scale adoption and therefore, decarbonization of sectors.

So I then spend my time across both Systemiq and one of our coalitions that we host, which is called the Energy Transitions Commission. The Energy Transitions Commission is a global members coalition consisting of about 60 leaders across business, finance and the NGO space who are all committed to reaching net zero by 2050. And we work with those members to bring about impact through bringing robust analysis and conversations to align on the pathways to net zero.

Linsdey Hall

Given the work that you do with the Energy Transitions Commission, what do you see as the right energy mix for the future? And how is this changing over time?

Min Guan

This is an absolutely topical question. So what we see is a primarily electrified energy mix for the future. And I would say that across the last years and probably even the decade, a number of different studies have actually converged on this answer. And the reason is because we believe that most of the energy-intensive sectors can be technically and economically electrified. And those that cannot, there's a role for both biofuels, carbon capture and storage and electro-fuels, which are fuels derived from electricity that could help decarbonize both sectors.

I think the stat that I would really like to share with everyone is that right now, we have about 20% of our final energy demand, which comes to electricity. In a net zero scenario, by the time we reach there, we see up to 70% of final energy demand coming from electricity. And then the remaining 30% will be split between the biofuels, electro-fuels, which is going to be hydrogen in their derivatives. And there is still a role for fossil fuels with carbon capture attached.

Linsdey Hall

And so you mentioned the work you do on decarbonization across sectors. What should our listeners understand about how things vary from sector to sector?

Min Guan

So a lot of the work that we do focuses on what we like to call the hard-to-abate sectors. So these are sectors which are very energy intensive. So we're talking about sectors like aluminum, like steel, like aviation, who consume a lot of energy to operate in their processes. And some sectors within that don't have the technology to actually fully electrify.

So let me give you an example. Aviation, for instance, electric planes are not able to fly the distance for commercial long-distance flights today. So we actually believe that the answer is going to be sustainable aviation fuel, which is going to be derived as an electro-fuel. And another example of that would be shipping, for instance. So again, electric ships have a small role to play in short distance shipping. But again, when you're talking about the transcontinental shipping routes, then really the role there is much more ammonia, which is derived from hydrogen or methanol, which is also derived from hydrogen to carry those distances.

Linsdey Hall

Min was a panelist during the S&P Global Sustainable1 Summit in London. And on stage, she described how grid capacity is evolving to meet global energy demand. In our interview, I asked her to describe the role she sees for innovative grid technologies. You'll hear Min mention the IEA, that's the International Energy Agency. Here she is again.

Min Guan

The grids really are at the heart of the energy transition given how much electricity is going to be consumed in a net zero energy system. And so a stat to really illustrate that is that the IEA did a piece of work, and they predict that the grids need to expand by more than 50% by 2050, which will mean much more hardware, but it will also mean more software and management software to control the flows across the grid.

And this is really tricky in grids because a lot of electricity grids tend to be regulated assets, which means that their business plans and their spend need to be approved by regulatory bodies. And those regulatory bodies need to carefully balance what is necessary in terms of grid spend, both to maintain and to upgrade and expand the grid and also the cost of the end users of that system.

Now the reason why we think innovative grid technologies have a major role in playing in expanding the capacity of grid is that we did analysis on a number of different kinds of technologies. And we think that if you optimize the adoption of innovative grid technologies, you could decrease grid investment by up to 35%.

Now innovative grid technologies coming to 2 buckets. I kind of think of them as the hardware bucket and the software bucket. And just to give you an illustration that the hardware bucket is capable of expanding grid capacity in total across all the ones that are being used by about 20% to 40%. So that's existing grid capacity where if you replace the existing hardware, you could already increase the amount of electricity that flows down that system by significantly more. And some examples of those technologies are superconductors, dynamic line rating.

This one is very topical, grid inertia measuring software. There is also a role for software AI and better planning, visualization and control of the grid. And so some examples of that might be a better siting of assets. And then the biggest one in my mind is actually integrating demand-side flexibility into the system. And demand-side flexibility is the ability for consumers of electricity to shift their demand according to the systems' needs, and that helps balance the overall supply and demand of electricity on the grid.

And we, at the ETC actually think that up to 30% of global electricity demand could be managed through demand side flexibility. So it's really important. And the other reason why it's so important is because typically, demand side flexibility is also a cheaper way of introducing that critical balancing power into the grid. And in order for that to integrate into the grid and in order for the grid operators to control that, we'll see a major role for AI and software.

Linsdey Hall

Okay. AI is definitely a big part of all the climate and energy transition conversations that I've been hearing and certainly came up quite a bit at the Sustainable1 Summit. How is it coming up in conversations that you're having in your work?

Min Guan

A big part of what we are looking at and it does come up is the role of powering AI. So data centers won't come as a surprise or a hot topic right now as one of the major new drivers of electricity demand. I think from where we're sitting, it's really how do you kind of supply that big driver of demand. And I think one of the reasons why it's so important is that I think it's spread across global electricity consumption, AI is actually not very big. I think it's about 1% today, and it will increase to maybe 2.5% by the end of the decade. But because the demand centers for these data centers are kind of focused in areas where there is the right qualities, if you want to build them, then they can take up much, much more of that local grid demand. So that's kind of one thing.

And then I think the second one that is a really important topic is electricity grids generally are struggling with connection. So with grid connection queues in Europe, maybe stretching out to 7 to 10 years. That is being reformed as we speak, but then there is also that question of if you want to connect the AI in the data center, new demand centers, they typically want to connect faster and therefore, what are the alternative solutions that they could look at to access power faster.

Let me take the U.K. as an example. Regardless of whether you're building a power plant, so a wind farm or a gas plant or a solar farm, as part of your planning and permissioning project process, you will need to apply to the transmission operator for a connection to the grid. Conversely, also, if you are a demand center, so let's say, you're an industrial manufacturing site, you will also need to apply for connection to either the distribution grid or the transmission grid.

In Europe, the grids have been facing congestion problem for many years. And so in order to manage the system better and prevent blackouts, the system operator has a queuing system in place for when they can offer these connections at a time when they can then say, you know what, we can guarantee that you will have 100% availability to the grid once you are connected. Plus also very high demand for electricity connections has been what's been causing these queues of up to 7 years in Europe.

Linsdey Hall

Thank you. That's a really helpful explanation. And you mentioned blackouts at a time when all the headlines in Europe this past week have been about what's happened in Portugal and Spain with their blackouts. Is that relevant to the conversation we're having?

Min Guan

I think it is absolutely relevant to the conversation that we're having. And I guess to put that into context, electricity grids in the developed economies are evolving assets. They were designed for one particular system, which is dispatchable power at certain locations. And now we are shifting to a very decentralized flexible system, which is changing the way that the grid infrastructure, which sits in between supply and demand has to manage all of these flows. It is going to turn into a, I think, increasingly complex system.

And the reason why I think that's contextual is because with the way these grids are designed and the new types of generation that are coming on to the grid, they will require new technologies to control the frequency that is required on that grid system. And I think this is where the Spanish blackouts becomes very topical because I guess there are 2 things, and I don't want to jump to any answers or any sort of conclusions because I know they're underneath investigation. But what we can derive is that grids are increasingly interconnected. So Europe has a target of 15% interconnection by 2030, which means that actually cascades could happen a lot faster, but also this complexity of different types of generation and different types of demand will mean that the control around the grid is going to become a lot more complex.

Linsdey Hall

Okay. So we're hearing a lot about AI. And then also in conversations about climate and the energy transition, we're also increasingly hearing the word pragmatism. How will pragmatism shape the technology needed for the low carbon transition, especially in this current rather fraught tariff landscape?

Min Guan

I think that's a really, really important question because what we're seeing in today's climate is a shift away from energy transition for the sake of decarbonization and energy transition as an enabler, a lever for energy security independence on competitiveness. And I absolutely understand the increased scrutiny on the cost transition because we are increasing in some areas looking at more expensive cost of living, and I think it is really important that cost of the transition can be made manageable for households and industry.

That being set aside, though, if we take a step back, our analysis at the Energy Transitions Commission still shows that an end-state decarbonized system is the cheapest. And so some of the statistics for sort of what we call climate archetypes are that if you are very lucky to be a Sunbelt country, you can have a system that is primarily solar-based with diurnal storage, which is storage which stretches overnight into the days. And because your climate is a much more daily variation as opposed to seasonal variation, that kind of system is incredibly cheap. So we're looking at something like $30 to $40 per megawatt hour, which is incredibly affordable compared to today's prices.

And even in climates which require a lot more balancing because they have a lot of wind generated power, which has a lot more seasonal variation and would require a lot more storage to be on the system to balance out that variation in generation. And we're still looking at power system and cost prices of around sort of $80 to $90 per megawatt hour, which is still competitive with today's power prices. So that's my way of saying that actually, primary reason is still within the energy transition because in the end, brings lower cost of power.

I think the second thing is that electrification also actually drives more efficient energy applications. One example is the electric vehicles. From an energy usage perspective, they are over 4x more efficient than petrol or diesel cars. Heat pumps are another one, 3 to 4x more efficient than gas boilers. So you actually convert much more of that energy into the end-use application.

The other thing that I would say about this, though, is that what we're seeing in our work is there probably needs to be a pragmatism around where you source that technology from because of the varying costs. So in our analysis, we have consistently seen Chinese technology being anywhere between 30% to 70% cheaper than European or American alternatives.

That being said, there is a role for near-shoring technologies, but you would need to consider the adjacent economic benefits to offset the higher costs of manufacturing locally. And so one great example, for instance, would be offshore wind because the turbines can be customized and because of the installation technologies are required, there would be a stronger case to perhaps nearshore some of the manufacturing of those technologies.

Same thing with, let's say, for instance, batteries for electric vehicles, there might be benefits to actually designing and manufacturing those actually closer to where the EVs are manufactured. But with solar, I think that the technology is very modular and there's not much security risk around solar. So our current thinking is actually that there would be limited benefits to, for instance, bring a solar manufacturing onshore. And therefore, that might be a more pragmatic technology to import.

Linsdey Hall

That's a helpful explanation. Thank you for sharing your expertise and your reflections with us. Is there anything that I haven't asked about that you'd like to share today with our listeners?

Min Guan

I guess my sole belief is that the energy transition is going to happen. It's going to happen not because of decarbonization, but because these new technologies are going to scale up because they are more efficient, more cost effective. And also, they're going to enable countries to have a much more independent energy supply. So I think it's a huge opportunity. I really don't think it's a question of whether it will happen or not. I think the clue is kind of within those technology portfolios, which are very wide, kind of which ones are going to happen sooner than others.

Linsdey Hall

When I asked Min if she heard anything at the Sustainable1 Summit that stood out to her, she highlighted the idea that the energy transition is not just one transition. She said there's a series of different transitions and also a series of different types of technology that will have to come together. This is an idea that comes across in our final interview today with Equinor. And I wanted to end on this perspective because this is an example of how an energy company actively is grappling with how to balance fossil fuels with renewable sources in the transition. And as we'll hear from our guests, this is not a straight or simple path, especially right now.

Alex Grant

My name is Alex Grant. I am U.K. Country Manager for Equinor. Equinor is a Norwegian energy company, majority of its revenues and profits from oil and gas, especially into Europe, where we supply 30% of Europe's gas and the U.K.'s gas. But increasingly, looking at our transition plan and our guiding star of 2050 net zero and how do we get there as a company, but also how do we help countries in navigating their transition as part of that.

Linsdey Hall

Okay. So you've started to answer my next question a bit, but what is Equinor's sustainability strategy? What should our audience understand about that?

Alex Grant

So the main guiding star is 2050 net zero. And if you start with that as an endpoint, you track back and say, how do you get to that? And our belief is that is not by one specific way. The energy transition is going to be bumpy. It's going to have different turns. There's going to be times when we need to change direction, stop, go further up, go sideways. But as long as we know where we're going in the end, that's what guides us. So what does that mean in practicalities? It means investing across the energy space.

So oil and gas, absolutely, is going to be with us for a long time. I think that is increasingly understood, but we need to do it in a more and more decarbonized manner. We need to spend the time decarbonizing our product and we spend a lot of time and money in doing that, for example, electrifying a lot of our oil and gas fields.

But then beyond that, that will not get us to net zero on its own. It is new energies. So renewables is quite established, especially in wind and solar, in particular, for Equinor because it's where our skills are. That's offshore wind, but that part of the energy mix. But then going beyond that into carbon capture technologies. We're pleased earlier this year to announce the opening of the first commercial carbon capture facility in Norway called Northern Lights, together with a couple of our partners. We've put money in to develop that, and we're pleased to announce the second phase for that.

And we're extremely pleased here in the U.K. to have announced FID, final investment decision on our East Coast cluster project, which involves capturing CO2 off the East Coast as the name suggests, but then also investing in some of the projects that will collect the carbon to inject offshore, including net zero to side. So there's another area and then indeed, other areas like batteries, et cetera. So it's investing across the space.

And for us, resilience and energy security is, of course, about looking at countries and where our friendly countries and how do you make sure that you're in control of your energy. But energy resilience is also about diversity of energy supply, and we need a diversity of energy supply, especially flexible energy supply.

Linsdey Hall

We heard that a lot at the CERAWeek conference in Houston, the big energy gathering that S&P Global hosts every March. And I heard a lot of talk about the sort of need for trade-offs. Yes, you need energy sustainability, but you also need energy reliability and energy security. And certainly, this has come to the fore with Russia's invasion of Ukraine. Talk to me about how you're thinking about that balancing act.

Alex Grant

Very good question. I think the first thing to say is it's as you have just very well suggested, it is a balancing act. One of our concerns when we look in society is it's becoming increasingly polarized. You're either in the decarbonization camp or you're in the energy security camp or you're in the lower bills affordability camp. It's not one of those. It's a balancing act between the 3. There are trade-offs between them. And that's just because there are trade-offs, that's not to say we shouldn't do one or the other. We need to balance them, as you've said.

I think one of the things that we need to come as society as a realization on is that getting to net zero is going to cost. The narrative of the green revolution will lower bills, it will create jobs and it will save the planet. What's not to love? Let's just get on with it because government step aside, let capitalism take its course. But the reality is it's more complex than that. There are balances between affordability and security and climate, and we need to balance that in the right way. It will cost, but we need to have the narrative, which is when compared to the cost of not doing it, which is climate change, society will accept those costs. But if society believes it will come for free, when it starts showing that it does cost, our worry is there will be backlash to that, and it will take us further away from achieving it. and make the road even more bumpy than it needs to be.

Linsdey Hall

One thing we've talked about on this podcast in the past is that it's easier to make the case for energy affordability or energy security. It's more in your face day-to-day. Can you pay your energy bill? Do -- can you turn the lights on? Making the case for something like climate change, it seems very distant sometimes. And so you've just sat on a panel discussion about the physical risks of climate change and building resilience to those. Can you talk to me about how Equinor is thinking about these topics?

Alex Grant

Yes. So firstly, fantastic to sit on the panel from my perspective as well to hear from a range of different people who are not corporates, in particular, on the insurance side and to understand that side of the equation and how the insurance market and reinsurance market looks at this challenge.

So one thing that is clear is if we're going to carry on, on this transition path, it is going to need insurance, banks, investors, corporates, all of them. So we need to understand how each other is looking at this challenge. I think long term, the most efficient way to make sure that, that longer-term cost is thought about now is a carbon price. That's the holy grail. If we had a global carbon tax, it will internalize the cost of this otherwise long-term external piece into everyone's decision-making. And as long as you have good accounting and good lawyers to make sure it's enforced, that clearly is the best way to achieve it.

Absent of that, then it is how do you put in place structures, et cetera, that in some way can mimic the same thing. For a corporate like us, we have an internal carbon tax price on the investments that we make. So we internalize it via an accounting methodology rather than being an actual, of course, cash tax in many parts of the world. So that's one way that we look at it.

Another part is looking about the measurement of it. We need to know where carbon is emitted, where is, therefore, the lowest cost way of reducing it rather than the way that has the best narrative. And I would comment that if you look at carbon removal technologies, the cost is almost inversely proportional to the narrative, which is unfortunate.

Let me try and explain what I mean by that. The lowest cost way of reducing carbon will be to prevent deforestation. But the narrative on preventing deforestation is very difficult. Oh, yes, sure, the money you spent has stopped those trees being cut down. If you hadn't spent that money, would they really have not been cut down? That's just greenwashing. It's a very difficult narrative for companies to spend money on. But the cost of abatement is in the single-figure dollars per tonne. Go to the other end of the scale and direct air capture, that's fantastic. We'll have these machines, which will suck CO2 out of the air and then collect it and store it underground forever. What a beautiful narrative, but the costs are in the multiple hundreds of dollars a tonne. Yes, they're coming down from, I don't know, it was $1,000 a tonne to $500 a tonne, maybe less, but that's still 300, 400 fold the cost of deforestation.

And there's everything in between, of course, there's mitigation reduction techniques. There's blue hydrogen, there's green hydrogen, there's post-combustion power, there's renewables replacing gas and coal in the mix, all of those. But if you sort of plot on the y-axis, a cost and then try and estimate on the X-axis, which ones are most acceptable to society and politicians, which one do they like the most, that's where you get this rather strange inverse curve, which, as I say, is unfortunate because we need to try and do this in the cheapest way possible. These are real costs.

Linsdey Hall

And we've heard so far today a lot of talk about the need to make the business case for the energy transition really tie it back to economics and to business basics. In this current environment, there's a lot of unrest, a lot of uncertainty, a lot of change happening in the U.S. where I'm based and really large parts of the world. How are you at Equinor navigating that?

Alex Grant

With difficulty like the rest of the world, these are very difficult times to -- because of predictability. Anyone who makes long-term investments, 10-, 20-, 30-year payback investments needs some level of predictability. Of course, things can happen. There are things outside control, but some level of guide rail and understanding of policies and what general direction things will go in. So the changing of policies and directions is difficult. And that isn't just the U.S. actually. That applies also to Europe, and it applies to other parts of the world. It's just a much more volatile geopolitical landscape, which makes long-term investing more difficult, which means the returns that you require for that long-term investment go up as a result.

Linsdey Hall

So today, we covered key takeaways from the annual S&P Global Sustainable1 Summit in London, April 30. We heard from Jessica at A4S, how some financial institutions are going back to basics, basically reassessing their sustainability strategies to ensure alignment with financial decision-making and emphasizing the importance of integrating sustainability into core business practices. We heard from Min at the Energy Transitions Commission about the growing role of electricity in the energy mix and about the role of innovative grid technologies in managing that increasing electricity demand. And we heard from Alex how Equinor is balancing decarbonization, energy security and affordability. He said the current volatile geopolitical landscape makes long-term investing more difficult. And we heard across those interviews how organizations are balancing long-term sustainability goals with immediate financial pressures, all while maintaining their commitment to climate action despite these challenges.

Esther Whieldon

We'll include a link in our show notes if you'd like to learn more or register for our upcoming summit in Singapore on June 26.

Linsdey Hall

And please tune in next week to hear the latest installment in our Terra Carta series of the All Things Sustainable podcast, a collaboration with the Sustainable Markets Initiative.

Throughout 2025, we'll be interviewing member CEOs from the Sustainable Markets Initiative. We're talking to CEOs from around the world and across industries about how they're approaching sustainability challenges and opportunities.

Thanks for tuning into this episode of All Things Sustainable. If you like what you heard, please subscribe, share and leave us a review wherever you get to podcast.

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