Will India's development while decarbonising serve as a model? - Vikram Gandhi, Harvard Professor of Business

Vikram Gandhi  argues why private capital is needed to create a sustainable world. He explains why do Harvard students look at sustainability challenges as business opportunities, what the key lessons from India are about developing while decarbonising and gives insights to addressing the climate crisis as a collective action problem.

Vikram is a professor at the Harvard Business School. With a background in investment banking he has extensive experience in the international markets and an interest in public policy and philanthropy. At the Harvard Business School he teaches in the MBA and Executive Education Programmes.  He has developed two MBA courses in the MBA – Sustainable Investing and Development While Decarbonizing: India's Path to Net Zero. He advises the public, private and social sectors to bring Institutional, high net worth and development capital to India and Asia. He is actively involved in impact investing as a professor,  investor and policy advocate.

NOTES

4:20: about Asha Ventures: https://ashaventures.in/people

5:00: what makes one successful in investment banking and then turning them to academia and philanthropy

6:20: without private capital at scale, philanthropy and government spending on their own will not create a sustainable world 

8:55: fiduciary capital vs. value based investing

11:40: how to focus on the ESG metrics that really matter

19:30: about the Harvard MBA course: Development while Decarbonising - India's Path to Net Zero 

20:00: how does India’s carbon emission is built of power generation, steel and cement production, agriculture, mobility and real estate

21:20: how do you achieve low emission growth 

22:00: how India became a renewable energy giant by having 50% of its total energy production capacity of renewable sources

26:13: those companies getting ahead of the curve who realise that sustainability is a business opportunity, not only an obligation enforced on them by government

29:00: much of India’s flourishing start-up ecosystem is around cleantech

32:20: Rapid fire quiz:

- Mitigation (vs adaptation)
- Microplastics
- Market failures

34:00 solving the microplastics crisis requires a public - private partnership approach

34:50: problems occurring of short-termism

36:10: about the tragedy of the horizons problem, and the tragedy of the commons problem 

37:30: a significant portion of my students are looking at starting companies that are part of the energy transition, new technologies, or infrastructure building 

38:00: about the Inflation Reduction Act of the USA: https://www.energy.gov/edf/inflation-reduction-act-2022

38:30: US companies still going ahead implementing their sustainability plans

41:35: how to address the climate crisis as a collective action problem

44:25: similarly to the tobacco industry, investors, might divest of oil and gas if they see that the actual litigation risk is high  

If you liked the episode, make sure to follow Ready, Steady, Green! on your favourite podcast channel, share the episode with your friends and invite others to listen. You can catch up with our earlier episodes and tell who would you like to hear next. Help us get the message through: We must act on sustainability now!  
This was Gabor Sarlos, with Ready, Steady, Green!

podcasting: Ready, Steady, Green
news and views: LinkedIn
action: COPmitment

Transcript

Vikram Gandhi 0:14

The key thing that I kind of realized very quickly after leaving is that if I wanted to address all the things that you said right at the start of the podcast in terms of sustainability, make it sustainable, inequality, all the other kind of societal issues that exist in this world, while you can't do it through philanthropy and government spending, unless we bring in private capital at scale to address those issues, in my view anyway, that those issues will not actually get addressed in the way they should be, in a way long-term and sustainable way. Like what does sustainability mean? Sustainability means that you're focusing on the three or four key sustainable metrics which matter for your business, which are going to create long-term value in terms of upside and minimize long-term downside risk. If I look at my student body, a significant portion of them are looking at startups or going and looking at companies that are in some shape or form part of the energy transition. Now, whether it be in new technologies, whether it be in building out infrastructure, a whole spectrum, right? From startups to massive infrastructure projects and everything in between. This climate and sustainability is always talked about as it's a risk, it's a good thing to do for the world, it's important, you know, otherwise we won't be able to breathe and all that. All important. But this is a once-in-a-lifetime generational investment opportunity and a business opportunity for people who are in their 20s.

Gabor Sarlos 2:13

Welcome to the latest episode of Ready Steady Green. In this podcast, we're discussing challenges and opportunities of turning climate awareness to climate action. In other words, making sustainability sustainable. This is not intended to be a specialist podcast of sustainability experts. Instead, it aims to broaden the discourse and help everyone realize how closely topics such as sustainability, climate, health, quality of life, equality of chances, innovation, technological development, prosperity of business, mindset change are all connected. The episodes from Ready Steady Green aim to inspire everyone to step up and step out in their lives and in their communities. Make sure to follow us on your favorite podcast platform, share it with your friends, and invite others to listen. You can also listen to our earlier episodes and feel free to send me a message. Who would you like to invite as our next guest for the show? Our guest for today is Vikram Gandhi, a professor at the Harvard Business School. Vikram is an investment banker with extensive experience in the international market and an interest in public policy and philanthropy. At the Harvard Business School, he teaches in the MBA and executive education programs. He has developed two elective courses in the MBA program Sustainable Investing and Development while decarbonizing India's path to net zero. He advises the public, private, and social sectors to bring institutional high net worth and development capital to India and Asia. Also, he is actively involved in impact investing as a professor, investor, and policy advocate. Welcome to the show, Vikram. Already, steady, and green is something close to my heart. So I look forward to this conversation. Thank you. That's very kind of you. Did I perhaps miss something important in the introduction to you?

Vikram Gandhi 4:12

No, I I think you covered it well. I I would just add that you know I also have an impact fund called Asha Ventures, which invests in early stage um both sustainability and impact-oriented uh companies. But otherwise, I think a combination of teaching, investing, and advising is what I do.

Gabor Sarlos 4:31

Okay, so I did my homework. Now it's no secret now. It's no secret that we have known each other for very many uh years. And I remember after university when I followed your career, it was definitely in the field of investment banking and finances and the practical business-oriented world. In a nutshell, what makes someone being successful in those fields then later on make a significant turn in their life and move towards academia?

Vikram Gandhi 5:01

I spent 25 years in investment banking, as you mentioned, uh around the world, uh largely in the US and then a little bit in Hong Kong and India as well. Um and I the, you know, the skills that you develop during that period of time are the typical business skills of running businesses, growing businesses, dealing with capital allocation, dealing with human resource issues. And so the skill set, if you think if you uh think about it that way, that was built was essentially building sustainable businesses and making good investments and developing uh human capital. So those are the three things. And so when I decided uh after 25 years, this is about 14 years ago, to leave investment banking. I had a very successful and very fulfilling career, but that's at that point I'd just turned 50 and I said, well, okay, I need to do something different now. I've done banking for, as I said, nearly 25 years. And I started that after I graduated and did my MBA at the Harvard Business School. So I'm an alum there in addition to being professor. The key thing that I kind of realized very quickly after leaving is that if I wanted to address all the things that you said right at the start of the podcast in terms of sustainability, make it sustainable, inequality, all the other kind of societal issues that exist in this world, while you can't do it through philanthropy and government spending, unless we bring in private capital at scale to address those issues, in my view, anyway, that those issues will not actually get addressed in the way they should be, and in a way long-term and sustainable way. So that's how I essentially said, Well, I'm going to take the skills I learned in my career and apply them in a business for-profit setting to solve important problems. And that's when I set up an impact fund. I really had no vision of being a professor or anything, but I was spending time at the Harvard Business School because my daughter was doing her MBA there. And so I started talking to some of the faculty members there on sustainability issues and whether you know there were things in the curriculum. And before you know it, I teamed up with a finance professor and we wrote 25 new Harvard Business School cases and launched a course, and now I've been teaching there for 10 years in a variety of ways. So I think the key thing is that, and I'll stop there, is the key thing is that at the business school, at least at Harvard and some other business schools as well, about a third of our faculty are like me, are like practitioners who are who bring, have worked, kind of had careers, and then come and teach the MBAs. And where the MBAs get benefited is that we're bringing our practical experience to the classroom discussion.

Gabor Sarlos 7:32

Okay. Well, thank you for this insight. And I'm not saying it's very far from my journey or my experience when moving from running my own business into academia and helping young people uh benefit from all of those things that I did rightly or wrongly at the stage. But uh work with young people, I think that is that is essential. Now, one of the things that I note is that I read a lot of literature about the importance of responsible investment. Everyone agrees and everyone uh claims that how important it is and that they are doing so. However, when I myself try to help someone in their investment decision, not that I am qualified to do that, but they were just interested in my views. I found it was very difficult to get actual uh credible information and 100% bulletproof information and confirmation whether investment is uh sustainable or not. Uh what could be the guide points here? So I I think the first thing is like what does do people actually mean by a sustainable investment? And I mean that itself is such a wide, it's subject to so much interpretation. Like, what is sustainable actually even mean?

Vikram Gandhi 8:44

The way I think about it is that you know you have basically got two pools of capital in this world. One pool of capital is what I call fiduciary capital, which is the majority of capital in this world, which is and I'm talking about the private side, private capital, is essentially that needs to earn its commercial rate of return. So, for example, pension plans, insurance companies, family offices, the asset owners, I would say, the people who actually ultimately own the money. And sovereign wealth funds would also fall into that category. And so their kind of mission is to earn a fiduciary return, which is that they can't sacrifice the returns in the name of public good and social return and all that. So there, so that's one. The other pool of capital is where you know you have more values, could have values-based investing, which is that for achieving a certain societal goal, I'm willing to sacrifice some return, uh, but I want to have a measured impact. And so there are family offices and some sovereign wealth funds, et cetera, fallen. And even governments actually are starting to do that. So I think when I think about sustainable investing, is where those investors, particularly the fiduciary kind, are intentional about the fact that in addition to the financial return, which is very important, they've identified two or three key criteria of impact of sustainability, whether it be climate change, inequality. I mean, you know, there's a whole slew of ESG kind of metrics. But they've been pretty intentional about the fact that they are going to measure those metrics in addition to financial metrics. And so I think that's where in my mind, when investors are looking at sustainable investing, is to really look at, well, in addition to the financials, how are these companies or these funds or whatever the ETFs where that you might be investing and, you know, how are they actually measuring the impact having and are they intentional about it? I mean, that's I think is the key difference to think about.

Gabor Sarlos 10:46

So if I follow this well, would this mean that you believe that it is possible to actually match sustainability goals with profit motives or profit expectations?

Vikram Gandhi 11:00

Absolutely. So in the public markets, it's actually been shown over multiple periods of time because they're so that let's again break down the kind of universe of capital into publicly traded companies and private. So in the public creative, because there has been a lot of data, you know, it's been shown that, and we have a lot of research that we've we can point to, where if companies focus on the three or four ESG things that actually matter to them, which are material to their business, that they outperform. And so for I mean, it's kind of if you think about it, it actually is makes logical sense, right? So there are about six, seven hundred different ESG factors. But for every company, those six, seven hundred don't matter, right? So for what, for an oil and gas company, the the ESG matter, you know, the carbon emissions and all will be very important. For a consulting company, human capital management, et cetera, will be very important. Right. For a manufacturing company, supply chain kind of quality will be very important. So if you actually look at the company, there'll typically be four or five ESG metrics which are core to the business and if done correctly, help the business perform better. And so, you know, that's where I think the difference comes because that's why I started off with like what does sustainability mean? Sustainability means that you're focusing on the three or four key sustainable metrics which matter for your business, which are going to create long-term value in terms of upside and minimize long-term downside risk. I mean, those are the two things. And so there's enough evidence that investing in companies which focus on those rights, it's like saying, for me to grow the business, I focus on my customer, I'll focus on my margins, I'll focus on my distribution. The core things of a business model. ESG is very much part of that. If you think about it, there's been actually a four, and the research that I'm pointing to, it shows like over a 30-year period, a 6% per year, per year differential in returns of companies that focus on material ESG factors, report them, monitor them, have core part of their metrics, versus other companies that either don't focus on it or focus on ESG in such a broad way that is actually not impacting the business, and it's more what I would call greenwashing. And the private side, there are now lots of funds, you know, in major PE firms like TPG and Blackstone and BlackRock and others that have set up impact funds. They're on the second or third fund, they're very intentional about impact and sustainability. But all this has happened only in the last five, ten years. And so while there is anecdotal evidence that you don't need to sacrifice returns to have a good impact, I think we need a little more time to actually establish that as a fact. What comes to my mind is in the way you explain this, it's really convincing, and clearly a six percent difference is a very convincing factor in itself. So if it is so clear that one can achieve a significantly higher margin, how come it is not more investment funds or companies or investors who go on that route? Yeah, so I think the challenge, quite honestly, is that focusing on those factors, like for example, if I am now remodeling my business because I think climate risk is a big risk, and so therefore I need to like modify my supply chains, my manufacturing process, my distribution process, because over time climate risk becomes more and more risk, and you know, you try and get ahead of the regulation. Before regulation hits you, you know, you can try to get ahead of the curve. Or alternatively, that there are some really fabulous opportunities out there which you miss because you haven't really thought about sustainability as a business opportunity. The thing is that those are kind of medium to long-term kind of investments. So if you're going to make an investment in your business model change to deal with climate risk, it takes three, four, five years for it to materialize before you get the returns. And so the big conundrum, I think, partly, is that asset owners, and that's why I mentioned asset owners at the start of the podcast, they typically have they're multi-generational. You know, they have a 20, 30 year time horizon. You know, when they talk about quarter, they're not talking about 90 days, they're talking about 25 years. Right. So because they pension liabilities, like in UK or Hungary or US, the pension liabilities are over 25, 40 years. I advise the Canadian pension plan. They they have an actual evaluation of 70 years. And so they're thinking long-term, and climate risk and opportunity is a real long-term issue for them. Unfortunately, or I don't know, just reality is that a lot of their investments are done directly, which then they can work with the companies on long-term plans and think about how long-term investments are needed. But a lot of the investments are done through asset managers who have a relatively shorter time period. So there's a huge difference between the motivation and focus of an asset owner who has a 25-year time horizon, an asset manager who has a one or two-year time horizon because that's how their incentive systems work, or even a PE fund has a five, seven-year time horizon, a typical hold period of three or four years. So climate risk and opportunity is not going to take fold in two, three years, right? It's a longer period. So that's where the conundrum comes in, where the asset managers who are more short-term oriented are like pushing companies to kind of generate profitability in the shorter term and not necessarily invest for the longer term. And that's where the tension comes in. So I think the way that's being dealt with right now, actually, is because a lot of the investors in these funds are long-term investors. They're really pushing the asset managers that, hey, this is a real thing, and you need to kind of focus and make sure managements that you invest in are focused on it as well.

Gabor Sarlos 16:44

Okay. And much clearer now. Thank you. One last question on this topic. Speaking to some of uh our earlier guests, there seem to be two groups of people. One who said that for an organization, for a company to be sustainable, it is primarily a technological issue. It is adapting the uh appropriate uh metrics, systems, uh supply chain, and so on and so on. The other group of a couple of people, they still claim that it's uh primarily a management issue where the human factor is essential. So whether the management and the people who work there, do they have the correct mindset to uh build a sustainable path? Which one would you go for?

Vikram Gandhi 17:24

I think it's much more the latter. I mean, I I think the technology piece, if you if people put their mind to it, and because again, technology investments and returns are a longer time horizon, right? They don't happen overnight. And that gets back to my earlier point about business model changes. Essentially, it's an investment in new technologies. And so I think it's more a mindset issue. And the mindset issue, I think the companies, again, who have outperformed the last 25, 30 years that I referred to before, have a mindset of a longer-term mindset. Again, I think that even in the US, like you know, where I teach, the fiduciary obligation that the board and and the management have is not just to shareholders, it's to the company as a whole. And that's the company's long-term sustainability is a core part of their legal responsibility as board members and managements. And so I think the companies are the ones that actually have that kind of mindset, are the ones who are performed. So I think the mindset is more important because once the mindset is there, it leads to capital allocation for new technologies, it leads to patient kind of monitoring of those new technologies and better execution.

Gabor Sarlos 18:33

All right. Thank you for casting your vote here. Now, in the next couple of uh minutes, I would like to turn our attention a little bit to India, your uh home country and a country with which you keep regular contacts, professional, personal, uh business contacts. So uh when I read about India these days, uh usually two things come up. One is that clearly it is uh turning uh to become one of the uh economic powerhouses of the world, uh rising rapidly on the rank of countries in terms of their overall GDPs and any other factor. But at the same time, I read uh quite a lot around sustainability challenges in terms of the countries facing coming from the population, coming from the energy and industry structure, and so on. What is your perception of today's India and the future of India in sustainability terms?

Vikram Gandhi 19:26

Yeah. I think this is a real challenge in India, and that's part of the reason why you developed this new course, which you referred to at the introduction of development while decarbonizing India's path to net zero. And let me just give you maybe a minute of context here. So India is this year will become the third largest economy in the world after the US and China. Now, the gap between the US and China and the third economy is very large. So it's very comparable right now in the size to the UK and uh Germany and Japan and all that, but it's going to be third. More importantly, is the is the largest, large growth economy. I mean, it's growing at 7-8% a year. And so the implications of that are that everything that kind of so-called pollutes, let's just focus on sustainability factor, everything that pollutes power is about a third of India's carbon emission. Hard to abate sectors like steel and cement are about 25% of the carbon emission. Agriculture is another 20-25%, rice particularly, and cattle, right? Huge. Uh, and then mobility uh and real estate. I mean, if you add all those up, it's nearly 90%. All those essentially, because of the growth of the 8% on a population base of 1.45 billion, uh, and not growth in population, but growth in GDP, and therefore the growth GDP per capita, is that the demand for all those things is expected to go 4x or more in the next 20 years. And so if India carries on in this path of growth with that kind of emission trajectory, it's gonna be a real disaster because the actual negative impacts on climate change in a place like India are gonna be far worse than what will happen in Europe or the US or the OECD generally, just because the infrastructure to deal with it and the money to deal with it is not there. There's a massive recognition that this is a problem and that needs to be dealt with. And so balancing this growth with a decarbonization or what I call how do you achieve low emission growth is like a key agenda item. So I'll give you one example of a success and how that potentially can be replicated going forward. And the success really would be renewables. Ten years, twelve years ago, renewables were not a thing in India. Today they are fifty percent of the energy capacity in India. Fifty percent. Fifty, five oh five zero. Five zero. Oh my god, yeah. But that's Capacity, but the actual generation from renewables is only 25% of the total. And so let's talk about those two things. The reason it got to 50% is because of the incentive systems put in by the government 10 years ago in terms of providing subsidies, one, and now taking them away while the cost curve of installing solar and wind kind of started coming down. Two was they mandated, because they are obviously a huge consumer of power, they mandated the private sector that X percent of energy being put into the grid had to be renewable. So they've forced the private sector to do it through regulation. And then the third is they've created enough of a risk-sharing mechanism that renewable producers would actually invest in that. So as a result, it's gone from literally zero or nothing to in like 10, 12 years ago to 50% today. The reason why the capacity is 50, but the generation is 25 is because storage technologies don't exist to actually have 24 by 7 seamless power. So the baseload factor is still coming from either coal or oil gas fired plants. And so therefore, investing in technologies, grid-level technologies around storage is a key issue. And that's happening big scale in India. Because once you get there, and it's happened globally, by the way, like in the US, if people talk about Texas and oil and gas state and this and that, if Texas were a country today, it would have the fifth largest installed capacity of renewables in the world. Right? It's basically China is by far number one, India uh US number two, Germany number three, India number four, and Texas number five. Who who would have told that? I I I wouldn't have no. Yeah, yeah. I mean, Texas is like this, you know, oil and gas state, and this and that. It's like it's got so much sun and wind that renewables make a hell of a lot of sense over there. So they have them. Right. But they don't have storage or they don't have enough grid. So I think technology innovation, getting back to the India thing, that's a big, big issue. And now they're trying to replicate the same thing in cement, in steel, in EVs. And I think the what's going on in the Middle East right now is actually, again, been a real massive wake-up call about energy security, you know, because India is like hugely dependent on oil imports, and mainly a lot of it coming from the Gulf and coming from Russia. And so they've basically now I think the acceleration of not just renewables, but geothermal, hydro. There's a big talk about nuclear, like really pushing the country in that direction will accelerate. So it's a challenge because you know, at the same time, you've got to have growth in terms of GDP per capita, get people out of poverty. And so there, but there are lots of interventions. There's the power side on the steel side, you know, JS, the steel companies are very focused on reducing intensity of steel emission, right? Bringing down the CO2 per ton of steel produced. But if your capacity is doubling, so I have a you know with the largest steel company is part of my course, we go and see all their steel plants and all that. But their capacity is doubling in the next five years. Even if they drive down the emissions per unit of production, if their capacity is doubling, their aggregate emissions are only gone up. Right. So this is a huge challenge. But but I think what's important is that it's recognized as a challenge and being dealt with it.

Gabor Sarlos 25:33

And in your experience, how do Indian businesses uh relate to this challenge of sustainability? Do they see this as an obligation which is enforced on them, or is it rather a business opportunity, or is it a mixed bag?

Vikram Gandhi 25:47

I think I think it's a mixed bag. I think there are a whole spectrum. I mean, some people just are totally oblivious of it and just don't care because once regulation, which it will happen, comes and they're not prepared for it, I think they'll be in trouble. But I would say that the ones that are more, again, getting back to your management mindset, who think a longer term, understand what the implications are, not just from a risk and regulation standpoint, but an opportunity standpoint, are the ones which you know are getting ahead of the curve. And it's being reflected in stock prices too. I mean, the Indian market has gone through a rough time here in the last three months, but largely because partly due to the Middle East uh war and therefore the oil imports, uh the oil prices rocketing up, gas not available, this, that, and the other. So it's had a big impact on foreign cash outflows and things. But I think the companies that are actually focused on sustainability, while they may have near-term earnings kind of depression, their P multiples are actually higher. Because a company, you know, investors recognize that these are the companies that are thinking longer term, both in terms of opportunity and risk. So it's it's a kind of a mixed bag right now.

Gabor Sarlos 26:55

I see. Now, one last question to India. I know that as part of your course, you do bring uh your students on a field trip to India. And I'm wondering, talking to them, what is your impression? What is the impact these visits are making? What is it that they learn? What is it that surprises them? How does it contribute to the learning curve of your students?

Vikram Gandhi 27:20

So maybe a minute on just why this course even came about. So I've been quite involved with a lot of the climate-related things at Harvard University across not just the business school, but across the university in various ways. And I have found about three, four years ago, that most of the discourse is around like what's happening in the OECD, right, in terms of climate change and impact of climate change, or what should we do about it. And not a lot, talking about the fact that you know there's a whole huge percentage of the world's population out there which are trying to get out of poverty and growing and this and that and the other. So, and they're balancing, just like the India story of balancing growth and decarbonization is critical, which is why I chose India as the course, because anything that happens in India is happening at scale, both on the upside and downside. So it's a good learning point. So we basically spent five, six, we have some classes in Boston in the fall, you know, between September and November, December, and then spent 10 days in India. And the goal is to every day we go and visit a different company. So, like we visit the steel company, we visit the largest power company, we visit a huge bunch of lots of startups. So it's a whole spectrum. It's like how are big companies like steel and power and Unilever, for example, on the plastic side, what are they doing to really reduce their carbon footprint while doubling their capacity at the same time? Right? That's the big challenge there. And how are they using technologies and business properties? The other side is what's happening on the innovation side. So, like as you know, outside of the US and maybe China, you know, India has the largest startup ecosystem in the world. And so, and a big chunk of that is around clean tech. So we go and visit companies around green hydrogen, companies that are converting methane to animal and human feed, companies that like the whole scooter EVs, like there are huge startups which are not the incumbents going from ice to EVs, but just startup EVs, innovation around battery technology. So the learnings, I think a lot of people have never even been to India before in part of this group. So one is just the that look, there is like what is that? I don't even, it's like 50% plus of the world, don't have basic access to basic power and needs. And so this is a whole different problem. So there's just that awareness that there is a whole world out there. Second, I think, is that I found that most students leave there but with a sense of optimism that this is a huge business opportunity. I mean, I think one of the key messages, which I hope your podcast listeners will take, that this climate and sustainability is always talked about as it's a risk, it's a good thing to do for the world, it's important, you know, otherwise we won't be able to breathe and all that, all important. But this is a once-in-a-lifetime generational investment opportunity and a business opportunity for people who are in their 20s. This is a 30-year horizon where the whole world is going to get rewired, just like we went from horse carriages to ice and everything got carbonized, everything is going to get decarbonized in the next 30 years. And so I think the takeaway for a lot of students, and that's what I try and emphasize both in that class as well as in the sustainable investing class, yes, this is a societal problem. Yes, there is a lot of risk. But most importantly, this is a massive opportunity. And you, as young students, shouldn't be missing out on this. You should be thinking about it. And now with AI coming in, the actual acceleration of that opportunity in terms of innovation and climate tech in a whole bunch of areas is only going to accelerate that opportunity. So I think that's the key takeaway.

Gabor Sarlos 30:58

I get it. Um, just out of curiosity, in this course, what is the assessment uh regime you have? How do you measure what students learned? Is it related to the field trip itself or is it broader by the?

Vikram Gandhi 31:10

Yeah, so I think it's uh it's a little broader in the sense that it's a course, right? It's a full credit class for, you know, basically to get an MBA or Harvard, you have to take 20 courses with full credit. So this is one of them. Essentially, we have each so the class is divided into teams, and each team has to do a research paper. So there's a research paper on like a hard-to-based sector. So one team works on steel, another term working on power, like how do you build out the whole renewable infrastructure, another one working on green hydrogen. So the learnings really come out of that research paper. They also have blogs and stuff, which I'm sure you've seen on LinkedIn, which we post over there. So I think is there like a more formal metric? Like I didn't know this before, and now I know this, probably not, but it comes across through the research papers and the blogs and the dialogues and the class discussions.

Gabor Sarlos 31:59

Okay. Thank you. Now uh to have a little break, I brought along uh a game. Okay. And this is a game that I've been uh uh playing with all guests on my podcast so far. So we are now in episode 13 of uh Ready Steady Green, and I would like to bring a couple of terms or words all starting with the 13th letter of the alphabet, which is letter M. The English alphabet. And I'm curious to hear uh from you in maximum one minute what uh associations or thoughts uh come to your mind in relation to sustainability when you hear this one word or term. So uh you're ready for the challenge? So the first one is uh mitigation. And especially in the context of mitigation versus adaptation, what comes to your mind?

Vikram Gandhi 32:49

Uh carbon capture and sequestering. That for me is like one of the biggest solutions and opportunities that exist. Okay. And do you see it coming or is it very much uh Yeah, the technology is there. Uh just like renewable technology was there 10 years ago. Uh just like battery technology is there right now. What is not there right now is that it can be produced or done at scale at a price point that makes sense, uh, economic sense. And so I think the work, and again, like I keep on going back to renewables, that's where renewables were 10 years ago. They were available, the technology existed, but they were too expensive. I think that's where carbon capture is right now. And I think there's a lot of work being done to drive down that cost because scale starts going up. And you also need carbon, what carbon capture means you capture the carbon and then you gotta pipe it. And if you're gonna sequester it, you've got to pump it back down into the earth and seal it off. And that takes a lot of public-private partnership and building out the infrastructure. So I think it'll get there. The technology is there, it's about scaling and cost curves.

Gabor Sarlos 33:55

Okay, thank you. Uh the second one is microplastics. Yeah. Any thoughts on this one?

Vikram Gandhi 34:01

Yeah. So microplastics are a huge problem. And I think the solutions actually that have been put in place I think don't address the problem. I mean, I this is one of those classic cases of where public-private partnerships need to work because it's a combination of infrastructure, behavioral change, incentives, carrots and sticks. And I think a lot of talk has been done around it, but I think a long way to go.

Gabor Sarlos 34:29

Okay. And the last one I think you will be especially close to your heart, it is around market and market failures.

Vikram Gandhi 34:38

Yeah. I think the uh market failures uh in my mind deal with uh short-termism. Companies and managements that have been thinking longer term, the market failures typically come about because they get pressured into doing short-term things which are not good for the long-term value creation for the company or its stakeholders. And I think that's a big issue around market failures of this short-termism of asset managers versus long-termism of the asset owners. Which I think draws an interesting parallel to one of the earlier discussions when there was word about uh the difference of time frames between a scientist's thinking and a politician's thinking. And there again, uh they might agree on many things, but uh the what they need to think about and by what time they need to reach somewhere is vastly different. Yeah, and I I mean, getting back to your India question, that's also a huge issue in India, right? I mean, it's a democracy. Every five years there's a there's a national election, pretty much there are 26 states that have state elections, just three or four of those state elections just finished a few weeks ago. So every there's an election going on all the time. And so people are voting with their pockets, you know, and again, no one like climate change is a collective action problem, it's a tragedy, the horizons problem, tragedy or commons problem. And so the politicians have to balance, like, I need to get voted again versus dealing with some long-term problem of climate change. So I think it's a big issue.

Gabor Sarlos 36:13

I I get it. Thank you. And thank you for standing up for these uh uh challenges in terms of these quizzes. Now uh I would like to move on geographically and turn our attention a little bit to the US, where you are uh based and working. Again, uh I'm an outsider, and the outsider's view is that on the one hand, the current administration uh put uh a lot of uh barriers uh in front of uh uh sustainability actions, uh turning back on a number of issues starting from the Paris Agreement and going on many other areas uh related to renewable energies and so on and so on. But on the other hand, it seems there is a thriving um uh business background which is actually seeing eyeing and using on the opportunities that that exist there in the terms of renewables and sustainable business and economies in general. So, what is actually the situation now?

Vikram Gandhi 37:08

Yeah, so I I I think that, you know, I mean, if I look at my student body as well as if I look at what's happening on the ground when talking to companies, because I spend a lot of time with companies in this area. I think the opportunity in terms of, as I said before, like if you think about this as a investment generational opportunity of changing in the next 20, 30 years, I think the companies are still very much focused on this. Uh so let me like break it up. So if I if I look at my student body, a significant portion of them are looking at startups or going and working at companies that are in some shape or form part of the energy transition. Now, whether it be in new technologies, whether it be in building out infrastructure, a whole spectrum, right? Right, from startups to massive infrastructure projects and everything in between. And I think that people see this as a really interesting business opportunity. I would also say that while, you know, there was this the act called the Inflation Reduction Act, which was passed in the previous, that that was by far one of the largest incentive systems that have been put in place by the US government, you know, since World War II. And yes, some parts of that have been taken away by this current administration because they believe that you know it doesn't, those subsidies are not justified. And you know, that's their view, and that's fine. A lot of the subsidies and incentives are very much in place. I mean, around storage, around nuclear, around carbon cap, you know, they're a significant percentage of those are very much still in place. And so I think the US, uh, you know, we're talking to companies and all that, they've they are still very much implementing the plans that they had. Again, not because they're trying to good for the world and all that, it's just because it's good for their business. So I think um, you know, while the headlines sometimes give this impression, and clearly, you know, stepping out of some of these global agreements sends a pretty strong signal to the rest of the world, that I think on the ground a lot is happening in terms of taking advantage of these opportunities.

Gabor Sarlos 39:07

So your students actually see this as an opportunity for themselves in identifying places where they want to work and where they want to start their businesses. Is that so?

Vikram Gandhi 39:17

Absolutely, absolutely. There are, I would say, I mean, I can't, I don't have a percentage, but I know because a lot of them come and talk to me because I they know this is my area of expertise and interest. And so I know, for example, like the first year students that I just finished teaching, you know, who then do the summer, and then this the elective course in India is an elective course in the second year. I know a few people going into the startup world, a couple are going into investing, like VC clean tech investing or PE clean tech investing, infrastructure investing. So it's from an investor lens. A lot of consulting firms have now this kind of energy transition vertical where they're advising companies on how to kind of plan for the energy transition. So a lot of people going into consulting in that area. And then on the operating side as well. Yeah. So I'm seeing it across the spectrum.

Gabor Sarlos 40:08

I see. Now, speaking of young people and and academia, I'm curious to hear whether outside the group of students whom you meet uh on a regular basis and outside the students of your actual course, do you have any uh experience or perception about their level of climate awareness and their readiness to act on climate issues?

Vikram Gandhi 40:31

Yeah. If I look at our generation, you know, while we talk about it, the implications for us are somewhat limited. Um I think the next generation, which is our kids, and so the students that I teach would be in that generation. I think there's a much higher realization about this issue because it'll impact them. Yes, it will, but actually the major impact of climate change as in when it ha you know comes and implicates, is going to be on their children. And I think what I found, not just outside my students, but like my kids are three of them are in that age group, right? The mid-30s to late 20s, kind of like that level of awareness is pretty high. I think they're taking more ownership of the fact that something needs to happen on this front. And then, you know, how do you actually put that in action? Like to your podcast, right? Okay, how do you take climate awareness into climate action? Exactly. And I and I think the there's a whole spectrum. I mean, there are people who are on the activist side and public policy side, but I would say the majority of the people I come across are seeing this as an opportunity and saying, okay, we have behavioral change we need to do, we need to kind of focus on public policy issues, but this is a collective action problem, and so we need to focus on what are the opportunities that come of it, whether it be on the business side, whether it be on the nonprofit side, et cetera. So I think the level of awareness is very much there, much more than it was in our generation. I just wish it were a little more cohesive because what happens is that the public discourse gets focused on the two extremes, right? So there'll be the hardcore activists who say everything should be green, shut down the oil and gas companies, blah, blah, blah. Just complete unrealistic, never gonna happen, but gets the headlines. There's the other side which says, oh, climate change is not real, nothing is happening. This is just yeah, yeah. So that's the other extreme. And those are the two extremes which get all the publicity, right? But there's a huge, like I would say, uh, if you look at the curve, like 80% of the people are in the middle, which say, yeah, it's a problem, but it's not something that can be dealt with overnight. Yes, we need oil and gas. I mean, without that, the world will come to a standstill. We can see that right now, what's happening in the Middle East. The world will come to a standstill. But we need to have a well-developed transition plan, which is a 2030 year plan. And let's think about it that way. The rational 80% that are actually doing something about it don't get the headline. It's always the two extremes. And I think that's gets lost in the PR discourse.

Gabor Sarlos 43:06

I see. Well, yes, absolutely. Here in the UK, also you hear a lot about the extremes, especially on the on the activist and uh movement side that hits the headlines. But the big center part is quiet, and you don't know.

Vikram Gandhi 43:22

Let me give you an exact example, right? So I advise the Canadian Pension Plan. It's a $750 billion pension plan, and they've got global investments everywhere. And they're Canadian, they're they're managing Canadian pensioners' money. And so they invest in oil and gas companies because they believe is that they can engage, they can provide long term capital as these companies transition from a very carbon-based business model to a non-carbon space. And that's their view, and that's how they're operating. And they at the same time, they're looking at decarbonizing their whole portfolio. But because of that, they'll have people standing outside their offices with placards or selling. Oil and gas, sell this, sell that. So most people get all the headlines.

Gabor Sarlos 44:05

Yeah, but there is a genuine and valid movement, actually. Also, for example, with universities. Again, here in the UK, there are cases where uh universities are pushed to divest from oil and gas companies or anything to do with the fossil industry simply for the same conviction.

Vikram Gandhi 44:24

Yeah, I personally disagree with that. If you can actually provide the capital, uh, first of all, you can make a strong argument that that goes against the fiduciary obligation of the investor, right? If as soon as you reduce the universe, unless and the people who have actually who are fiduciary investors who have divested of oil and gas, they use the same uh logic as tobacco. That the actual litigation risk is so high, the down there'll be stranded assets, therefore we are not investing. And that's fine if that's what they believe. But if they're not investing just because oil and gas companies create emissions, then I just think that's the wrong reason not to invest. My view, anyway.

Gabor Sarlos 45:03

Okay. Now, in the last few minutes that we have left, I'm really curious to hear a little bit about the future. And it's not that I'm asking you to tell what the future brings, but I'm interested in your personal plans or some exciting project that you have in mind. Is there perhaps uh another course in the pipeline that you are planning, or where do you want to take it from here?

Vikram Gandhi 45:24

Yeah. So I think uh the one of the key courses and work we're doing, you know, ultimately, if you think about, if you zoom out, this solution or the solution to these problems around sustainability, like has been in any problem in the past, ultimately is about creating new technologies which can be adopted at scale and that makes economic sense. And clean tech has got its own issues because, unlike other investments, it's about investing in new technologies, but also being able to scale them before those technologies are actually proven in terms of building the manufacturing capabilities and et cetera. And so I think a lot of my work and some of the new courses really be about tough tech investing in new technologies, whether at the early stage, later stage. The other big one is infrastructure build out around AI. You know, so two years ago, we weren't even talking about AI, but the fact is that like aggregate emissions in Europe and the US have been coming down the last two years. You know, I fear that with AI, and it's gonna happen, that a lot of the AI data centers are being fired up by gas and others, and because again, the renewable technology does not work 24 by 7 in terms of reliable energy, that tend is going to reverse. And so my hope is that investments in technologies that can result in data centers being fired up by renewables, whether it be nuclear, renewables, other forms of cleaner energy, kind of accelerates. So that's a lot of the exciting work that I see happening in the next five years.

Gabor Sarlos 47:04

All right. Well, thank you very much. This has been a very inspiring discussion. I really appreciate your thought and our uh travel around the world, including uh India and the US. And I wish you uh all the best uh for your endeavors with your students and with your projects.

Vikram Gandhi 47:22

Thank you so much, Gabor. Thanks for hosting the show and thanks for having me on it. This is terrific that you're doing this.

Gabor Sarlos 47:27

Thank you. And thank you everyone for listening to our podcast today. If you liked it, make sure to follow us on your favorite podcast platform, share it with your friends, and invite others to listen. You can also listen to our earlier episodes and feel free to send me a message. Who would you like me to invite next? Help us get the message through. We all need to act on sustainability now. This was Gabo Taros with Ready, Steady, Green. Bye for now.