Jane Goodland: Hello and welcome to the Sustainable Growth Show with me, Jane Goodland, where we talk to leading experts about sustainability, business and finance. And today I'm delighted to be joined by Rhian-Mari Thomas, who's the Chief Executive Officer of the Green Finance Institute, which is working at the forefront of finance shaping real economy transitions. Hello Rhian.
Rhian: Hi Jane, delighted to be here. Thanks for having me.
Jane: We have got a lot to talk about. So let's start with a bit of background. I'm keen to know what you did kind of life before GFI, that's the Green Finance Institute that you set up in 2019. So what did life look like career wise for you before then?
Rhian: Well, thank you. Before GFI, which seems like a lifetime ago now, I was a banker, so I built my career at Barclays. I was mostly a structured and leveraged finance banker working with private equity before I did a series of senior roles. And it was the Paris Agreement that was signed back in 2017, that really made me think there's an opportunity here for me to bring the finance and my lifelong interest in environmentalism together. So I made a decision that I was going to pivot my career. I started looking at opportunities at Barclays about how we could launch green products. So working with colleagues in the Green Banking Council, as we were called, we launched eleven products in twelve months, including one of the first green mortgages by a major high street bank, which I'm still very proud of. And once you start engaging on this topic, you'll know that Jane, you can't turn your back. It's difficult.
Jane: It's difficult to go backwards, isn't it?
Rhian: Yeah, what am I going to do every day? Use all my energies and my skills and my network to support a four degree world? No, this is what I'm doing now for the rest of my life, is focusing on how do we figure out how finance plays a key role in what we need to see in terms of transitioning our economy, in terms tackling climate change and nature and biodiversity loss. So that was the life before GFI. And there was also life before Barclays. I studied physics and I have a PhD in rare earth magnetism, which I only raise because now it's so topical.
Jane: Yeah, that sounds very mystical, actually but we might be able to get into that later. So help us understand, in 2019, GFI was kind of launched. What was the mission then, and what is it kind of doing now in 2026?
Rhian: So the background to the GFI is there was a Green Finance Taskforce that was pulled together by the government of the day, chaired by the late Sir Roger Gifford, former Lord Mayor of London and senior banker at SEB, the Scandinavian Bank. And of the thirty recommendations, the first one was we needed to set up an institute that would sit between the policymakers and the financial institutions and mainstream green finance, which sounds rather quaint. This is back 2017-18. So at the time we launched in 2019, and I was very privileged to be the first and founding Chief Executive, the strategy that I put forward was quite a departure from the prevailing wisdom at the time where there was a lot of focus on disclosures, on regulating the finance market. And instead, we decided to pursue a strategy that was looking at finance as the facilitator. So rather than greening finance, how do we finance green? So looking at real economy sectors; buildings, transport, nature, sustainable aviation fuel, carbon dioxide removals, grids, etc. What's the role of finance in actually helping those sectors transition? So now we are eighty-four colleagues. Most of us are former financiers. We work with the policy makers. We work industry. We work financial institutions. Very proud to be working with the London Stock Exchange Group. And actually figuring out what are the barriers to finance actually moving at the scale and the pace that we need into to support those environmental outcomes. My personal view is that the financial institutions are full of really smart people. They love solving problems and if they can see that they will make money from a trade, they'll do that trade all day. So if the money isn't moving to where we feel it should be, despite all the political signaling, despite all of the science, there are clearly barriers in the way and those barriers aren't going to disappear by magic. They're going to need really careful, multi-stakeholder, granular work and that is what we do at the GFI.
Jane: Interesting. Now obviously we live in a world which is interconnected kind of internationally and the UK economy is dependent on the world economy. So help me understand kind of the international angle of the GFI's work?
Rhian: Thanks for mentioning that because I think given our origins are in the UK and going back to when we were first established, we are an independent company limited by guarantee and our two guarantors are the City of London Corporation, so the Lord Mayor of London, and His Majesty's Government, so in particular the Treasury. So fantastic convening power, but we're also a start-up to a scale-up. So in the last seven years we've expanded from the UK into ten countries. Each time we do exactly the same thing, which is we triage the policymakers, the financial institutions and the industry to look at specific sectors and actually look at what are the barriers and what are the solutions? And those solutions can range from anything from you know it can be policy advocacy work but more often it is setting up the right types of institutions. In the UK we worked on helping set up the National Wealth Fund for example. It can then also mean about pulling together the right financial mechanisms, capital stacks, people like to call it blended finance, structured finance is my preferred term, but it's figuring out how do you use concessional capital, government money, private capital to actually move things forward and invest in the right environmental outcomes. We only go into other countries when we're invited, primarily either by the finance institutions in country or by the governments. And the countries that we are operating outside of the UK are Spain, Denmark, Brussels, slightly different model in Brussels, but then we're also in Indonesia, we're in the Philippines, we're in South Africa. We were previously in Singapore and looking to go back and also have a team in Brazil.
Jane: Can I just ask about your funding model in terms of, particularly when you're working in international countries, what does that look like?
Rhian: That's a great question. We are philanthropically funded. So initially, we were seed funded by government. Within 10 months, we'd match that with a philanthropic contribution from one of the leading foundations in the UK. So when we go into other countries, we replicate that model, too. I would like to thank the FCDO, so the Foreign Office, for some of the seed funding that we've received to go into some other countries. But yes, our model is not primarily government funded, we're 90% philanthropically backed.
Jane: Now, thinking about kind of policy, we know that capital deployment at scale, and really that's kind of what you're focused on long term, really does need an effective policy framework. So, your role is very specific as you're operating between policy and finance. From your perspective what do you think is perhaps sort of missing from the policy framework that we have in place now? What are some of the key barriers, I suppose? What's missing?
Rhian: So we like to call this the 'transactions to transitions gap'. And bear with me, Jane. It's something that was really causing me some angst, which was governments and multilateral organisations are looking to transition entire sectors, entire economies. Financial institutions, on the other hand, are looking for their next transaction. And so we're in this situation where two really key stakeholder groups who should be working together to co-design the types of policy that we need to enable capital to flow, are kind of talking past each other. So we've got to a position now where you've got government saying, well, where's this wall of capital that the financial industry promised us was coming our way with all your net zero commitments? And you've got the financial sector saying where's the enabling environment and the investment opportunity of a generation that you promised us? So the question is, how do you ladder up from the transactions that are needed where capital genuinely flows, through to the transitions that we need to see? And so we gave this a fair bit of thought. We came out with a paper last year that has landed very well, which is when I actually think about that value chain that goes all the way from a government setting an ambitious long-term target for its nationally determined contributions, its emissions, or its nature-positive pathway, that then needs to be translated into sectoral policies. Really granular regulations that are needed by sector, by geography, then through to the institutions that need to get built to actually put forward government balance sheet or deploy development capital or whatever it is. You then need to build the right type of institutions that can deploy that government capital. That could be a green bank, or a green fund, or a national wealth fund, or there's a whole different set of types of institutions depending on geography. And then you need to make sure that that money is used efficiently with the private sector, that it's structured. You come up with the right types of capital stacks. You come with the right financial mechanisms. The aim of all this shouldn't be that we come up with whimsical pilots that take years and years for us to pull together. It should be that we're actually creating new asset classes, that we are creating opportunities for mainstream finance to invest, that are vanilla enough, that are straightforward enough, that don't require all this complexity. So you've got a real value chain there that goes all the way from setting political ambition through to creating investable opportunities. No one organisation has got the expertise to do all those steps in that value chain. So what we genuinely need to see is really radical coordination. And so that's behind our thinking of 'transactions to transitions' is really bringing deal-making discipline into this climate and political realm. It's actually defining what does a sectoral transition need to look like? What does that look like in terms of investable opportunities? If we want to create a sustainable aviation fuel industry in the UK, you start off by looking at, well, what is the macro techno economic modelling that you need to do? Does it make sense for us to actually build our own industry in the UK? Or should we just import sustainable aviation fuel? That's an option. Somebody needs to the big macroeconomic modelling and justification for why we need to do that. Why does it make sense? And once that's done, you then need to say, well, okay, what does that industry, what does that transition look like? How many plants do you need to build? You probably need to be build around five. And each of those costs between £500 million and a billion pounds to build. And then you start saying, okay well, what's it going to take to set out the right demand signals for industry to start investing and for the investors to get behind those plans? So it's a long way of answering your question, Jane, of what policy is missing? It's sectoral. It's granular. It needs to be co-designed from the outset with finance in mind. One of the things that, I mean, we both work in finance, so this will come as no surprise, but it still amazes me how many groups and really well-intended initiatives omit the finance. They talk about the policy or they talk about the standards and the metrics and all these important things that are key enablers, but they're forgetting the key facilitator, which is finance.
Jane: I think one of the things I wanted to pick up on as well, was you mentioned sustainable aviation fuels and I think that's perhaps one area that we've seen some progress. So is that something that GFI has worked on? Is that something that you you've observed? Tell me about the kind of the SAF move?
Rhian: So SAF is one of our flagship programmes. We got involved in it about two and a half years ago when the UK government and the EU have done something very similar, mandated that by 2030, 10% of aviation fuel in the UK needs to be sustainable. A huge demand signal and an example to your earlier question of where policy can be effective. However whilst that was a really important demand signal, it was insufficient to really kickstart investment in the industry. So we started talking to both the Department for Transport but also the potential investors, what did they really need in order to go to their credit committees, go to their decision-making bodies internally and get it signed off for them to put money into the first sustainable aviation fuel plants in this country? And there was a long list. At the top of the list was a revenue support mechanism, a bit like the Contracts for Difference that have been so successful in setting up our offshore wind industry in the UK, basically providing a floor price for the future product. This turned out to be really quite complicated to model for sustainable aviation fuel because there are different technologies, they're very difficult for us to have any kind of visibility on what the price will be like in future. And also sustainable aviation fuel can be mixed with kerosene so very easy to be for it distributed and imported so again making it very difficult to be able to forecast price. But we worked on it, we worked with industry leaders, we worked the airlines industries, we worked Heathrow and others, as well as a number of trade bodies to figure out how you would actually model this, what it would cost Treasury to support it. And we're delighted that it made its way into the King's Speech last year and it's making its way through parliament. So we will have a revenue support mechanism. But the point was once we'd solved for that, or we're in the process of solving for that, you then uncover some of the other issues, things like feedstock regulation. So making sure that there is sufficient feedstock, making sure there are sufficient off-takers. Some of the banks were saying to us they were a little nervous about a single airline being an off-taker because of the credit risk. So how do you pool that off-take? How do you pool the demand? So it's a labour of love. We've been working on this for two and a half years, as I say. We are now talking to some developers. We've signed NDAs with them around building the first plants and we're very much looking forward to being able to announce when some of these are shovel ready and have got to final investment decisions.
Jane: Now, I know that you this whole kind of notion of small scale transactions being fine, but niche, and I know that you talk about kind of that the requirement to scale that and really sort of mainstream it. So what's your thoughts around the components, what's the ingredients of going from first of a kind transactions to at scale transactions? What's needed?
Jane: Oh, that's a brilliant question. So first of a kind has a particular challenge when it comes to finance, because you don't have, by definition, it's first. So you don't have the performance data that enables more established financial organisations to be able to model what future performance will look like. So if you take sustainable aviation fuel, given that we've been talking about it. that would be a first of a kind plant that's scaling up from laboratory proven technology into commercial project. So ordinarily, things that have that level of technological or early stage risk, you'd go and speak to the venture capital community. But venture capitalists on the whole don't like taking five-year construction risk. They like things that are more asset light. So you say, so they'll point you to the infrastructure investor and community. So you're going to speak to the infrastructure investors and they'll take one look at this and say, oh no, we like far more predictable returns, we don't want to be taking what looks like venture capital risk. So you end up with this missing middle or gap. And at the moment, the way we try and solve that is through using government money or concessional capital to try and de-risk the whole thing so that you can bring mainstream financial investors in. So to answer your question, hopefully the theory is, we familiarise the market by doing the first of a kind transaction, demonstrating the technology works, the construction can be done on time, you can get the insurance in place, you can the feedstock and the off-take, all of it through pilot projects, so that then you can do a second and third of a kind. And the market eventually will be so familiar with the risks, will have invested in the skills and the necessary competence needed to assess these types of new transactions, that actually over time it becomes something very familiar, very vanilla. Because at the moment we're asking people who, you know, have been, the finance industry is no different to any other industry, it's honed itself into efficiency and so it knows how to do the transactions it does today really well. And then we're turning around as a climate community and saying, oh that's all very well, but we want you to do a whole bunch of other types of deals here in unfamiliar jurisdictions, unfamiliar business models, new sectors, no performance data. That's a huge investment of time. It's a huge investment of money. And you want to make sure that these things aren't bridges to nowhere. They need to be part of stated transitions. So going back to your point earlier about the importance of creating that policy environment to say, no we are committed to transitioning our economy, we are committed to clean energy, we are committed to sustainable fuels so that we can see that it's worthwhile for the investor community to get on board so it won't just be a first-of-a-kind transaction.
Jane: It's quite clear though that you need some actors in that ecosystem who are willing to take that first step and do that first of a kind transaction with the help of others who are wiling to do that, so you also need a few leaders, you need a few organisations who are willing to give it a go, to innovate, you know, maybe they are the kind of innovators of our day, but I think it strikes me that you need those players as well.
Rhian: You most certainly do. I heard someone say recently that two of the most compelling drivers in financial services are compound interest and fear of missing out. So yes, it's identifying those people who are willing to go first, the pioneers willing to take that additional risk and then hopefully we see the rest of the market quickly realising that this is an opportunity they're going to miss out on. But the one thing I would say about this is when we think about risk in this context, it's defined differently by the different market players. So the financial institutions, the financial industry are the people that take the narrowest view on risk. It's very much, you know, risk-adjusted returns are calculated in a very linear way. Business, industry takes a slightly broader view of risk because business needs to maintain its market position, its competitive advantage. An incumbent will see a disruptor and think maybe I need to start looking at that, or maybe I'll need to dip my toe into investing in that area because that could potentially be a threat or a huge opportunity. But the people that can take the most risk, the people who can actually pull the levers to make sure that new sectors are profitable or that they succeed, they're actually governments. So they should be willing to take a very different view on risk to the market because it would be irrational, not saying it doesn't happen, but it would a irrational for a government to actually invest its own money, either through its wealth funds or its development funds or from its own balance sheet, into a sector that it subsequently makes unprofitable. So that's why, to your point, it does need all those different components working together. But yes, we're very grateful to those leaders and pioneers who are willing to go first, in the hopes that they're the ones that are going to show the way.
Jane: So I'm going to end with a question, which is probably a bit mean, because it requires you to have a...
Rhian: But we were going so well!
Jane: It requires a bit of a crystal ball, I suppose, is that if you were to, you know, wind the clock forward and say you're in the future and you're looking back, what would you say? You know, we've talked about the many, many changes that are needed in a radically coordinated way, but if you could sort of pinpoint three, what you would say, looking back if we should have just focused on X, Y, and Z.
Rhian: Oh gosh, that is quite mean.
Jane: It is quite mean, isn't it? Sorry. The first one I'm obviously going to say is that we really need to make sure that finance is at the table whenever we're discussing anything to do with transitioning our economy, thinking up policies, everything should be co-designed with finance in mind. I know I'm bound to say that, but I really do think that if you can't see a way of financing your idea, it's really just a daydream. So I will stick to that. The second one is really about nature. I know we've spoken a lot about infrastructure and first of a kind and things like that, but the second one would really be about considerations about nature. And nature is quite a broad term so I would probably narrow that down to discussing water and making sure that starting now, we really are viewing nature and water in particular as a critical asset that we need to underpin the success of our economy
Jane: Interesting you mention water, actually, because this has been a bit of a theme on the show. So interesting to hear your view there about kind of water being a critical asset. So what's your last one?
Jane: Looking back, I wish we'd spoken more about the opportunity and maybe less about the risk.
Rhian: Finding genuine opportunities to tackle things like the green premium, where green alternatives cost more than the current available options. Really working hard with government, with industry to tackle those. And genuinely presenting pipelines of transactions to investors so that they can get involved in investing in nature in its broadest sense, but also in climate.
Jane: I think that's been fantastic and really illuminating. Thank you so much for joining us here today. I've learnt a lot and I'm sure our listeners will have too. So thank you so much.
Rhian: Thanks, Jane.
Jane: Well, that's all from me. I hope you enjoyed that conversation as much as I did. And if you did, don't forget to rate us and follow us on Spotify, YouTube, Apple Podcasts, or anywhere else you get your shows from. And if want to get in touch with the show, you can do so by email at
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