Episode Transcript
Jane Goodland: Bryony, welcome, and thank you for joining us on Net Zero Conversations.
Bryony Widdup: Thank you very much for having me.
Jane Goodland: So you are a partner at DLA Piper. Can you tell us about your role in the firm?
Bryony Widdup: I'm a partner in the finance team, and I focus on sustainable finance and investments. I also work with banks and firms and FinTechs in terms of this whole conversation we've been having here about mobilizing capital, making investments, financing real economy businesses. So yeah, I'm a transactional partner focused in the sustainability space.
Jane Goodland: What role does FinTech have in transitioning to net zero?
Bryony Widdup: The FinTech industry suffers, I think, has suffered historically with challenges around ESG. It's amazing when we talk about FinTech how quickly the conversation can come to Bitcoin and energy usage, which is a very small area of the overall FinTech space, of the overall even digital asset space. However, it's very public. There's a lot of public awareness around that challenge.
Bryony Widdup: So energy usage and energy efficiency is certainly something that needs to be solved before FinTech can start credibly solving other ESG challenges. Transition planning in that space, as well, is difficult. So we work with some of the global networks representing the FinTech industry, and we are having to work with them to establish their own science based pathways. That's one of the sectors where that's not currently in existence. If you look at guidance set by, for example, SBTI, we have to create that and help them create that for themselves. But there's a lot of energy and a lot of commitment to doing that because this industry has great potential to actually deliver on some of the ESG challenges and net zero implementation challenges that sectors like the financial services industry are suffering.
Bryony Widdup: On things like data and disclosure challenges, I mean, the potential is really obvious. And the FCA has run an ESG sandbox over the last year or so. Some really promising businesses in there offering solutions for regulated financial services business on this data and disclosure issue. So that needs to be brought right into the mainstream. I think other opportunities, so carbon markets, the ability for blockchain and tokenization to deliver on voluntary carbon markets, that's more commonly discussed.
Bryony Widdup: Also, perhaps on the demand side, so we've heard some of the speakers here at the summit talk about the problem with the demand side. How do you change consumer behavior in order to build up the demand for net zero aligned, both real economy product, goods, but also services, net zero aligned financial services?
Bryony Widdup: I think Fintech's got a fantastic role to play on really educating people to enable them to understand, well, when I make this choice to spend this money or buy this item, this is the carbon impact. By owning this item, this is the supply chain that I'm owning in connection with this item. We don't have visibility on that really at the moment, not really. Also, potentially to own your own energy and take on that responsibility and also opportunity of owning your own energy consumption. So great opportunities around that demand side.
Bryony Widdup: And then finally, I'd also say that in the investment side, if you tokenize investments, what you can do is you can connect the outcome, so the real world outcome of the money that you put in, you can connect that really directly to the person who committed the pounds to make the investment in the first place. And it's very transparent. It's disintermediated. It's very auditable. It's enabling people potentially to own the purpose for which they committed the investment in the first place.
Jane Goodland: It's kind of really, I guess, the next generation of impact investing, in a way.
Bryony Widdup: Exactly.
Jane Goodland: But a unitized basis, to be really precise and really specific about really understanding capital and impact out.
Bryony Widdup: Exactly, in that impact sense. But a lot of the world that I work in is, you know, you are looking at investment for net zero purpose. So it's not, I don't just want to make it sound like impact in emerging markets, living standard sense, which is often when you say impact, that's kind of where people's minds go. Actually, net zero transition is an impact investment environment. You are trying to make a direct change, a direct transition towards green in this world. So the same theory applies there too.
Jane Goodland: Yeah, absolutely. And we've spoken about the role of finance, but can we just touch on the role of blended finance? And we've heard a bit about that over the last few days, about that should be a focus area as we move towards COP27. Your thoughts on blended finance?
Bryony Widdup: So blended finance is all about scaling capital flows. They're clever structures. It's using risk appetite, aligned with the kind of money that may be available for projects, and then splitting up the capital that's available to accommodate the different risk appetites of investors.
Bryony Widdup: So a very long time ago, I was a securitization lawyer. I still do some securitization work. And a lot of the learnings from that sector on [inaudible 00:11:48] of risk of how you can create investment instruments at the top of a structure that enable investors with those different risk appetites to all come together in the same structure, create a capital pool, and then onwardly invest that into underlying. I mean, in that case it was loan pools, but I mean, here in some cases you are looking at the underlying investments being loans, loans out into emerging market economies, for example, to enable businesses in those economies to borrow money, to improve technology, to invest in agritech, to invest in solar, et cetera, so that is a part of this framework.
Bryony Widdup: And when we say blended finance, we're talking about bringing the DFIs, the kind of quasi public financial institutions, alongside private finance, using public money, perhaps grants, guarantees, et cetera, DFI money, to de-risk those investment opportunities in order that the very big amounts of scaled private finance can come in and look at that opportunity and say, well, actually, the return here, if I take this senior [inaudible 00:13:01], is sufficient because the risk has been offset by what's been done on the blended end.
Bryony Widdup: I think there's great opportunity around those structures. We are working with our clients to help them to develop scalable structures. You've got to build understanding, you've got to educate the market. Then you've got to build the appetite, the familiarity of this structure.
Jane Goodland: So these aren't structures that are commonly used today, right?
Bryony Widdup: They are used. There are projects, blended finance, especially bringing in guarantees to try to offset some of the risk. That's been done. But what we haven't seen yet is this at the scale that the Glasgow financial commitments, well, really need, in order to achieve those capital flows. So it is the scale of it that really hasn't yet been seen. And that's what we're working on, trying to get the structures that can support that scale.
Jane Goodland: Yeah. And it really strikes me that the legal profession in firms like yours have got a massive role to play in really accelerating that type of practice.
Bryony Widdup: Yeah, absolutely, and bringing together as well these different stakeholders, creating trusted structures that have been tested, from the local law side, from the tax side, the regulatory side, understanding all of the different bits around the edge that you need to demonstrate have been tested in order to get these actors to the table and put the money into this pool pot. I think we have real strength and value in doing that.
Jane Goodland: Yeah, it's fascinating. And I think there's a really good opportunity for credible partnerships to really emerge right now. So one final question, if I may, as we look towards COP27, what would be the one thing that we really need to get right in order to make it a great success?
Bryony Widdup: I think this conversation on adaptation. So a lot of what I've been talking about is climate change mitigation. Even at the projected temperature rises that we will get to, if we consider ourselves to have been successful in terms of net zero goals, there is still so much that needs to be done around adaptation and resilience.
Bryony Widdup: I think supporting, enabling, lifting up that piece of the conversation, all of this investment structure piece that I've been talking about, impact and purpose, you can apply all of that in the adaptation and resilience context as well. Insurers clearly have a huge role to play there too. So really enabling that conversation to come to the fore at the next COP, I think that should be a main focus.
Jane Goodland: And particularly in the case of some of the emerging economies who are on the sharp end of some of the climate changes that we are already seeing.
Bryony Widdup: Exactly. And I was on a call the other week, we were talking to one of the island nations, and they said, the thing is, we see there's a lot of enthusiasm around climate finance, but it's enthusiasm around climate that we need. And so getting that balance probably better than we have done so far, that's going to be really key.
Jane Goodland: Great. Thank you so much for your time today.
Bryony Widdup: Thank you very much.
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