Season 4, Episode 138 : James Close

Will Richardson 00:05
Welcome to the Green Element podcast where we meet business leaders and innovators transforming their operations to be more environmentally and socially sustainable, and in the process help you on your journey of sustainability. I'm your host, Will Richardson. Today we are speaking with James Close, the head of Climate Change at NatWest. NatWest's ambition is to be the leading bank in the United Kingdom in the Republic of Ireland's helping to address the climate challenge. Their purpose is to champion the potential of people, families and businesses. NatWest is the principal partner and banking sponsor of COP 26. James has had a broad range of experience throughout his career, and has worked for several high profile accounting firms, including Arthur Andersen, Deloitte, Ernst and Young to name a few. In January of this year, he became the head of Climate Change at Natwest. Group. James, welcome.

James Close 00:57
Thank you, Will. It's great to be with you.

Will Richardson 00:59
Let's start off a bit about you. If I may, you transitioned from financial and strategic roles into sustainability leadership roles. How did that come about?

James Close 01:09
Well, it's a really interesting question that I've been thinking about a little bit recently. I started off in finance, partly because I studied chemistry at university and realised that I needed to understand business if I was going to achieve my career objectives. And then I found myself drawn to working with utilities in the power sector as well. So I got into energy really, at that point. And then I spent a bit of time at the Treasury where I was working on public private partnerships. So I've got this sort of relationship between public and private and the role that energy plays. And as I was exploring that, more and more, I was invited - I think it's about 15 years ago - now to Sheffield to hear Al Gore, give his speech on An Inconvenient Truth. And at that point, I thought, you know, why aren't we doing everything that we can to address climate change? And what can I do personally, to get involved and to help support that work? So I went back to the managing partner EY and said, 'Look, you know, I think this is really serious, it's great opportunity for us as a business, what should we do?' And he invited me to work on building a climate change and sustainability services practice. And we did some amazing work for the Mayor of London, who was Boris Johnson, now the Prime Minister, of course, on London as a low carbon capital, and we did some work on the UK's comparative advantage of green business. But at that stage, it was quite hard to make a business case around sustainability. So I thought I would try and see how I could broaden my perspective, and also link what I was doing in sustainability to what I think is the biggest challenge that we face, which is the real inequity that comes from failing to address climate change. The poorest and the most vulnerable, who've done the least to contribute to emissions are the ones who are going to be most affected by climate change. So I thought I would work with the with the World Bank, I was very lucky to get a job there. And within a year, I was appointed as director for climate change. And that really got me at the heart of the conversation we were having at the World Bank about how finance is a means for achieving our objective of eradicating extreme poverty, but also using it to mobilize climate solutions, and build a resilience in economies. Ahead of the Paris Agreement, we committed to increasing our climate finance to 28% of our total annual lending from about 15%. So we spent four years really increasing our lending building climate change into the whole system and the way in which we lent and I saw some amazing results as a consequence of that, both in terms of how countries like Morocco were prepared to put this right at the heart of their economic plans, and how Pacific Islands really needed to think about this finance to address the existential threat of rising sea levels and build adaptation in their coastlines in the way in which they work and they live. And it just brought home the power of finance and I've always believed that finance should be purpose led. So when when NatWest came calling and said they were building a purpose led bank and they wanted to put climate change the house minute, I was really excited to hear about their plans and delighted when they offered me the job as Head of Climate Change. And it's been great to be here for the last four and a half months, working with the team to build out the ambition that we've gotten really embedded in everything that we do and take advantage of the fantastic opportunity we have with sponsoring COP.

Will Richardson 05:13
And it is amazing what turnaround we've seen within that list with regards to climate change. I mean, we can't pretend that that there is no history. But it's now being recognised as one of the leading big banks in this space.

James Close 05:30
Yeah, it's incredible. And there is a certain, there is something about being part of the problem of the previous financial crisis, which of course RBS was caught up in, and then building a bank that can be part of the solution to the next crisis and we've dealt with COVID quite well, in terms of the support that we provided for our customers. And obviously, they've had some terrible times, but we've been alongside them to support them. But we're aware that, you know, climate change is, you know, something that we've got to be on top of for the next, you know, decisive decade that people are talking about the 2020s being the size of decade when we have emissions so that we can get ourselves onto a net zero journey. And that's what our ambition is, we want to halve the climate impact of our financing over the next - by 2030. And that's really galvanizing in terms of the organisation's energy. We harness the amazing leadership of our chief executive Alison rose, and the full, you know, commitment of the board and the executive get behind it. And so it's a great opportunity to embed climate in everything that we do and see the opportunities that come from climate, we've got to finance this transition. We've got to figure out how we're going to get money to mobilise a new hydrogen economy, for example. I mean, how are we going to retrofit the homes in Britain that are cold and leaky as a result of, of the fact that they've been built in many in Victorian times. So it from that point of view, mobilising the finance to support our customers is a fantastic opportunity. And we're really delighted to be part of that, and working in partnership with so many other great organisations who are alongside us in this endeavor.

Will Richardson 07:25
With your experience, do you think the financial sector is responding quickly enough to the climate emergency?

James Close 07:30
I mean, that's a really interesting question. I think what's been, again, really quite extraordinary is Mark Carney and the role that he's played both to set the narrative around what finance needs to do. And he initiated that when he was at the Bank of England, of course, through TCFD. He's been a very vociferous advocate of carbon pricing. But also as the UN ambassador for climate finance, and an advisor to the UK presidency on climate finance. He's mobilised this Coalition for net zero, the Glasgow Financial Alliance for net zero. And I think there's over $23 trillion worth of asset owners who have committed to net zero. You know, asset managers are also bought into it. You know, we hear about a lot about BlackRock and what Larry Fink is doing. And then, of course, many of the banks have also signed up to it, as well. And we were delighted to be one of the first signatories to that initiative. So I think there is a lot of momentum building, I think we have to be realistic about the scale of the challenge as well. And we also have to think about how we can best deploy our balance sheet to support the transition. And, of course, that requires some difficult choices to be made. And we've made some of those in the context of our lending to coal and oil and gas, and others are going to have to follow and we're all going to have to figure out the way to do this in a way that supports our customers, but facilitates the transition and measures the impact of what we're doing.

Will Richardson 09:18
Yeah it's really interesting that divert divestment issue and what it what banks are doing is and you know who's doing it, and we're seeing a lot of the universities now looking at looking at the same thing and going actually we need to start thinking about who we're going to be investing in, and why we should be investing in what we're doing. And I think we're thinking a lot about pensions as well at the moment. I know that we've green element have signed up to the the pension scheme, but you know, we only have ever put pensions into more ethical funds. And pensions are a big part of the finance but it leads straight back to finance again. I mean, almost all paths lead to finance, in one form or another.

James Close 09:57
Absolutely, and that's what attracted me too. No, finance can't do it by itself, we need to set long term policy that enables finance to be mobilised for the right things. And we need behaviour change from customers as well to support the transition. But it's really interesting, Will, the point you make about pensions, and some of the conversations I had with some of the thinkers, leading thinkers in the pension industry at the World Bank were really interesting, because what's the point of giving somebody a pension 30 years from now, if they can't spend it, because we're living through a climate emergency and two degrees of warming. So it is in the interests of the the the pension investor, both as an individual and as the fund manager to make really good decisions around that, then the fund manager can do it on behalf of the of the individual. And we as individuals can also request that our we're doing as much as possible to make sure our retirement isn't encumbered by having to address climate change, and that we can, you know, live in a in a stable world of a temperature rise of no more than one and a half degrees. So the acid liability matching is right at the very heart of the role that finance can play.

Will Richardson 11:17
And looking at NatWest and within the NatWest website, you have on it that you have a belief that you there must be a reciprocal relationship with society, the environment and communities. Could we delve into how you see this playing out, please?

James Close 11:36
Well, yeah, I mean, it's so I think we start here with the concept of purpose. And we worked with the blueprint for better business around our purpose and defining our purpose. And they have, you know, four different areas that are important around purpose. One is the sort of intergenerational equity piece, which is where we get into the climate change bit. You know, the other bit is communities that we're part of, and linking more directly with them and and what we do to support them, which, of course, is, you know, historically what banks have done. And it's something that we want to make sure that we're doing the most that we can to support those communities. And of course, alongside that we have our employees who are also members of those communities, and our customers, and bringing all those stakeholders together in a purpose led strategy enables us to really reframe the way in which we make decisions and how we prioritize what we do. But of course, you know, there's no point being a purpose led company, if you don't make money, and you go out of business, so we also have to, to make profits. But that leads us to some, you know, really difficult choices and trade offs that we have to make. And what we found is this purpose led framework helps us to make those choices a lot more effectively. And actually, I think we find a lot of positive energy and goodwill coming from staff members and customers as we make those choices.

Will Richardson 13:12
You're being asked more and more about climate change and how it's affecting your clients, businesses, I believe as well.

James Close 13:18
Yeah, of course. And it's - we want to be really proud of the work that we've been doing with Octopus to give our customers access to electric vehicle recharging networks at a lower cost, and also use it to install vehicle charging, where that's appropriate. And we're also collaborating with Microsoft to give customers access to carbon footprinting data because that that's going to be really important for them to make better choices in terms of how they, you know, change their operations to get access to low carbon energy, how they engage with their supply chain to make sure they're building a supply chain that has sustainable businesses within it, and how they can link that to the way in which their products get used by their customers. So you know, that measurement side is also really important of the partnership that we're building with customers. And we're using, you know, we know, we can't do it all ourselves, which is why we've enlisted the help of some of these leading organisations. And, you know, we've had some other great conversations. So lots more really exciting things in the pipeline, I think.

Will Richardson 14:36
And that going back to that data, I guess you're in a really amazing position because you have that opportunity to be able to help your customers pick through the choices that they make because you can see the ramifications that can potentially happen through, I guess it's about educating your commercial managers or relationship managers and helping them help their customers on their journey.

James Close 15:02
Yeah, and, again, it's we've had a fantastic response to some of the work that we've been doing with the Cambridge Institute for Sustainable leadership and the University of Edinburgh, to put together really, you know, high quality engaging programs for our staff, and then also make available refresher courses and other training that supports them in making those decisions. And, you know, it really becomes in a team endeavor for us all to educate ourselves as much as possible, and to be alongside our customers as they start on their journey, or indeed, for many customers who have already quite well advanced to take them to the next level, and also to learn from them. And, you know, that's one of the reasons why we wanted to sponsor the COP so that we could profile customers, so that other people could learn from what they're doing and how we're helping them. And and I think that's a really important part of the whole collaboration exercise, so that we can profile success and build confidence that other people can follow it. I mean, you know, it's a bit like your podcast, well, you know, we're spreading the message here. And we're all kind of engaging in the conversation in a way that hadn't happened in the in the past, so that we build up this, you know, a sense of confidence that when we act, it is going to make a difference, and it's going to be good for our businesses, good for our customers and good for the planet.

Will Richardson 16:31
I feel that it isn't, it's, it's learning off each other, understanding where we can do better and listening to everyone around us and our bank is a big part of the business that we're all running. And many SMEs are, you know, running their businesses, and to have an element of expertise coming from their bank is massively beneficial.

James Close 16:55
Yeah. Well, and, again, I think there's a there's a two way feedback loop isn't there. I mean, we need to hear what our customers need, so that we can respond to it. And we're doing a lot of market research, and market segmentation, of course. But, you know, some of the most exciting things that I've done since I joined have been sitting on some of the customer panels, where we hear what customers are doing. And it's really inspiring to hear them, share their experiences with one another, and give the feedback to us about what more we could be doing to support them. And I get a really positive sense of what is possible here. Of course, you know, turning plans into action is always the difficult thing. But I think once you can see the vision of what the future can be, you can start to bring people along with you and be part of that journey. And that I think, is tremendously exciting. And there's I mean, you know, let's not underestimate the scale of the challenge, either Will. I mean, we know that we really do need to act very quickly if we're not going to find climate change gets into a runaway situation. And we, you know, if we do it in the UK, that's great. And we can show leadership, but we need other countries to come along as well, which is obviously why it's been so important to have the US back into the Paris Agreement and some of the some of the proposals that the Biden administration are putting forward.

Will Richardson 18:30
Now. Absolutely. And this leads me nicely into the fact that you've set up a new climate Center of Excellence within NatWest. Can you tell our listeners what this is and how it will help NatWest achieve its environmental ambitions?

James Close 18:44
Well, we're a small group of dedicated and committed professionals with deep knowledge of climate change and lots of experience around it. And we work in the strategy and ventures team. So we're really shaping the future for NatWest together with, you know, our teams who are working on environmental, social and governance issues and working on the corporate strategy as well. And, and many of our ventures, which are the businesses of the future really for us in dealing in, in financial services, but we don't we really want to be catalytic. We're there to work with the frontline business operations. We're there to help them develop their plans and implement them. We're there to coordinate the messaging that we can give, and to bring the best practice thinking that, that that's out there. And, you know, we're always trying to stay a step ahead. We're looking at things like carbon pricing and carbon markets, which we think are going to be really important parts of the future financial architecture that that's going to be in place. But we want to be catalytic. I mean, we don't, you know, we don't have this desire to take over everything, we just want to be that sort of, you know, grit in the oyster that creates this wonderful pearl of climate action across the whole business. And I think it was brilliantly conceived. I mean, it was conceived, obviously, before I joined. And I think it's working really well, we've got a lot of positive engagement with the business. And we can amplify what others are doing by taking, you know, our small group of people and applying the learning elsewhere. And then, of course, you know, we have other teams working on the education side and the training side, on the marketing side on the data and the analytics side. So you're building this whole kind of framework within the bank that enables climate change, to run through everything that we do. And that's very much, you know, what Mark Carney talks about in terms of the objective of Glasgow, that that climate change should be at the heart of every financial decision that every organisation and every individual makes, if we're going to, to really drive the ambition that we have to get us to, to, you know, climate stability.

Will Richardson 21:16
And I think you're proving that over and over in, certainly in the conversations we're having at the moment, because you've also got the Climate Accelerator Program. And I believe that 50% of all businesses you want to help having to be in the climate at the moment is 25%. At the moment. That's still an amazing ambition. And it's just helping so many businesses and having been through the program prior to those things, and watching how helpful you are on that program. And I urge any of our listeners who are smaller businesses to absolutely go and have a look at the program that we're talking about through NatWest and just apply, because you will find it massively beneficial.

James Close 22:08
Well, that's great to hear Will, and you know, thanks very much, you know, the best advocacy comes from your customers, doesn't it? And so thank you very much, really appreciate that endorsement.

Will Richardson 22:18
So if we could have a look at what NatWest are doing from an environmental point of view. So we start looking at how you engage your, you know, your staff with your mission and purpose?

James Close 22:32
Well, I think the the first thing that we're doing is, it comes from the top. So we had a climate week, where we had Alison, our chief executive very heavily engaged, she and I did a an all staff town hall to discuss what we're doing on the climate side of things. We've got an extraordinary group of mainly young people, but not exclusively young people working on the sustainable futures network, and that they're, this is one of our employee led networks, they're up to 2000 people who've joined that group, and they're really picking out the baton and driving it through the businesses, ranging from ideas around how we, you know, reduce the footprint of our operations, you know, from our branches to our offices, right the way through to how we think about investing in our pensions. And they also had do some fantastic events where they get customers along and entrepreneurs, to share their experiences and inspire people within that network. And then I think the COP sponsorship gives us a great opportunity to engage staff. So a lot of our material on our intranet is about how we're preparing for COP, the role that we're playing alongside the UK Government. And we're also as I said earlier, profiling customers, but also staff members, in terms of what does climate mean for you. So we're all becoming more conversant with the issues. And we're all connecting with it in a more deeper level, which I think gives us a great opportunity then to have different types of conversations in our communities and with our customers. So it does feel as though it's embedding throughout the whole organisation.

Will Richardson 24:28
And do you publicise?

James Close 24:29
Yeah, we do. Yeah, we do.

Will Richardson 24:31
Internally and externally?

James Close 24:33
The Climate Related Disclosures report, which we produced in March alongside the annual results, was very well received. It's very detailed, goes into a lot of information around our operational footprint, what we've done to reduce it, it's reduced quite significantly, obviously in the last year with COVID. But we went beyond that. We also looked at the footprint of our, of the impact of people working from home. And we were able to quantify that, and we bought carbon offsets to offset it. So that's all very transparently disclosed there. And we've also taken it a little bit further in our ESG report, which we call our purpose in action, which is much broader than just the climate piece, but talks about the other areas of purpose led activity that we're putting in place, and putting the whole series of information and measures around it. And it ranges from, you know, how our lending is split across sectors, to, you know, what we're doing in communities and local programmes to support our purpose. Again, we've you know, we've we've done a lot, but we've we've a lot more to do, Will, as well. I think it's, we need to be really transparent on our credible transition plans which is what we work with, with the oil and gas companies to justify continuing lending to them. And we need to continue to earn the right to call ourselves a leader and others are catching up very quickly as well. So we constantly have to challenge ourselves about what more we can do.

Will Richardson 26:17
And on the lending side, do you lend to businesses that are more environmentally friendly, or more purpose led? Do they get more favorable rates?

James Close 26:27
Yeah, the so we have the green mortgage proposition for our retail customers, it's a relatively small discount from the ordering always in some really good uptake around all of that. And we've also incentivsed people when before the green grant scheme was taken away to take up that green grant with giving them some cash back. If they did that, and took some lending up with us for it. I think what's really interesting is the way in which the green bond and sustainable finance market is going to emerge in terms of sustainability linked bonds, particularly where there's either a penalty or a discount, depending on whether businesses have delivered against their, their sustainability targets. And I think that's going to become increasingly important as we look at lending and financing in a carbon constrained world because we're going to have to, you know, optimise our balance sheet for that those carbon constraints. We're going to need to know you know, what customers are emitting today but also what their future plans are because the matching of our finance will need to go alongside the the emissions trajectory each individual business has, and that's what goes at the heart of the transition. Now, it's very easy to count what we call the bright green, you know, the renewables lending. But the the, as Mark Carney calls it the '50 shades of green'. I mean, how are you moving from the darker shades to the brighter green shades? And you know, how are you helping also, brown businesses change to be green businesses, and you look at it in in, for example, oil and gas services, you know, there's a massive opportunity for those businesses to be part of the offshore oil and renewables revolution. And, you know, how do we support them, as they transition their businesses to take their core capabilities they had in supporting offshore oil and gas and applying them to, you know, offshore wind power. So, you know, lots of lots to do around all of that, I think we've got a lot of work to embed this into credit decisions as well, which is where the pricing will come into it. But they're all things that are very much on our radar and very part much part of what we're trying to deliver.

Will Richardson 28:50
That's great. I mean, that's really interesting. So have you got any advice? I mean, you've seen so many businesses, and you've worked in a variety of different sectors? And what sort of advice would you give organisations that are starting out on their journey?

James Close 29:06
Yeah, well, I think the first thing is educate yourself and your staff and your colleagues about what where we are on this kind of climate journey. I mean, understand the risks that we face if we don't address climate change and the consequences of that, because, you know, that is what is going to be really galvanizing I think for all of us. There's a brilliant Netflix documentary coming out very shortly by Johan Rockström. Now, if you've, if you've listened to anything, listening to him talk about tipping points and the earth systems and the fragility of those and how we're getting very close to some of those tipping points and indeed, beyond them, for coral reefs and maybe for Arctic and Antarctic sea ice as well. So I think that that creates the burning platform for action. And, you know, talk to your kids about it as well and the next generation because, you know, they are genuinely worried about what's potentially might happen here. And then I think the second part is to really do some of the easy things. I mean, not that anything's particularly easy, but things that may be a little easier, which is understand your current footprint, look about look to sourcing renewable energy and green energy. Think about what you're doing in terms of your waste management, look at how you can improve energy efficiency, across your operations. All of those things are things that can yield some pretty rapid returns and benefits. And then, you know, start thinking about how you embed climate in all of your propositions, and how you think about sustainability in all your engagement with customers. And see, if you can, you know, really make sure that it's in the mainstream of your business, but also think about new propositions and new opportunities that it presents. I think there's there's great scope, as well for creating more sustainable business models, whether they're, you know, circular economy, businesses that are really helping facilitate the, you know, reduce, sharing, reusing, and recycling economy that's out there. And then, you know, make sure that you're telling your story about where you've come from, and where you're heading, and how you plan to get there. Because that's, I think, a very powerful tool of engagement, it's also a very good way of learning. I mean, no organisation gets all of this right, first time through. So when you reflect on on, you know, what your expectations, you're setting for yourselves, the targets, you've got, how you're delivering against them, there's a great opportunity to learn and to continuously improve.

Will Richardson 31:59
I think that's really wise and really important to know it. I mean, I know a law firm that actually categorise their new customers now into risky clients. And if they are a client, or potential client that looks like they're not going to do anything, they won't take them on. So you've already got organisations now looking at the profile of you as an organisation, which is only going to get more and more down the line. So really wise words. Thank you so much for joining us today, James. It's been an absolute pleasure talking to you.

James Close 32:34
Well, thank you, Will, I mean, great conversation and really enjoy your podcast and the work that you're doing. It's fantastic to see the contribution you're making, I'm delighted to be a small part of it.

Will Richardson 32:45
Brilliant. Thank you very much. And thanks for listening to the Sustainable Business podcast. If you want to learn more about sustainable business and talk to other like minded professionals, why not join our online community at sustainability solved. org. Join now and find a space to collaborate, learn and inspire others to become more environmental. And if you enjoy the podcast, make sure you subscribe, so you get every episode. And don't forget to follow Green Element on LinkedIn, Twitter and Instagram.