About This Conversation
Mark Nagle (Treysta’s Head of Advice) is joined by Nick Wood, Climate Risk Expert, to talk all things climate, the environment and the economic impact of both. They also discuss how financial and investment decisions could positively impact climate change.
Nick gives us a great insight and shares some brilliant stories about how he got into this field and his time in it.
Listen on the go wherever you get your podcasts:
About Our Expert
Nick is the Climate Risk Expert at Energetics and Director of Climate Policy Research P/L.
Having worked in environmental consulting for all of his post academic career, for the last 20 years Nick has been focused on understanding the economic impact of climate change.
His advice is founded on the observation that climate change is a problem of market failure with a deep complexity that presents serious challenges for society. Nick has purposely engaged with three key aspects that directly address this market failure:
- The design and implementation of pricing mechanisms aimed at emissions reduction and economic transition
- The development of effective and functional linkages between national and global climate science capability and the financial system
- The promotion of aspects of governance, transparency and rigour required to manage the complex risks presented by climate change.
Always a person who loves the outdoors, when he’s not working you will usually find Nick on a bike, in a kayak, on a sailboat or somewhere hiking or playing sport.
Recent thought leadership that can be found on his LinkedIn profile page, including the paper Nick co-authored and was published in Nature Climate Change in February 2021, the cutting-edge work on risks to agriculture he did with the consultancy Energetics for the Commonwealth Bank in 2019, and the report Climate change and corporate governance he co-authored with Bloomberg journalist Kate Mackenzie for the Australian Institute of Company Directors.
Transcript of Conversation
00:00:18 Mark Nagle
Welcome to ‘In Conversation With’. This morning, I’m very pleased to be joined by Dr. Nick Wood who certainly fits into that category of being one of the group of fascinating clients, and I hope these days also somebody that I consider a friend, and certainly a good friend to the Treysta business as well.
So, I would introduce Nick by essentially saying he exists in a space, which is on everybody’s lips at the moment really, around climate change, the environment in general, and Nick consults with a lot of very large companies in Australia around the whole variety of things, which I’ll let him go into a little more detail in the moment. But Nick is the Director of Climate Policy Research, which is his company, and via that company, he runs various consultative contracts, one particularly with Energetics, who are a leader in energy consulting around climate transition in Australia.
So, Nick, welcome. Thank you for giving up your time so graciously today, as you have done previously for us, and we’re always very grateful. You’re going to do a much better job than me of explaining your world. So, without further ado, maybe we’ll start with that.
00:01:34 Nick Wood
Hi Mark. Thank you. I’d love to have this conversation. How do we start…This climate change is obviously a very very big topic and engaging a lot of the world the energy of the sort of chattering classes in the world right now, I kind of started my own personal journey on this really at a university because I was doing arts and sciences, physics and chemistry, and I was also involved in various research projects, particularly around sort of the atmospheric pollution and various other things, and it all really comes down to observing how the economic development, particularly the energy aspects of that, starts to impact our climate and our environment. And climate change, as it emerged over the last 20 to 30 years, is the biggest, one of those, and the most strategic. So, actually we’ve got to deal with it at present. That’s the background to it. It’s a fascinating space, but I appreciate it comes with an awful lot of baggage.
00:02:25 Mark Nagle
Yeah, yeah, absolutely. I mean every way you turn, particularly there have been some further advances, of course, with the recent climate change gathering and further targets that have been imposed, and of course now companies have to shuffle off and work out how they’re going to try and help countries meet those targets. And sourcing alternative energies or offsetting their carbon footprint, of course, is the challenge for just about every significant business around the world at the moment. Isn’t it?
00:02.55 Nick Wood
Yeah, it’s an enormous challenge. I mean if you just look at the way our energy technology works, essentially it’s still mostly fossil fuel based, and climate change means no more fossil fuels past 2050, and that’s an incredible transition in the next 30 years. We’re talking about the diversion of trillions of dollars of investment to achieve that. So, that is on par with some of the biggest undertakings of the social civil societies it had to deal with. It is an enormous challenge.
00:03:22 Mark Nagle
Yeah, absolutely, and it’s a challenge that ultimately will touch everybody around the planet in just the same way as the pandemic has. It’s really a human challenge, isn’t it, and it’s not the preserver of a particular group or a particular country.
00:03:36 Nick Wood
No, it’s a social problem and one of the, maybe, strangest of climate politics is one of the things is who pays and when and how, and you can argue that, and is argued almost in every direction you can possibly think of. The end point is as a common objective, how you get there. It’s doable. Technology-wise, it’s doable. Financially-wise, it’s doable. There will be winners and learners, but there’s a political problem that needs to be solved.
00:04:00 Mark Nagle
Yeah, absolutely. And a real hot potato, particularly in Australia, which we won’t get into, but clearly the political parties here are having to really juggle the way that they approach this situation. And unlike many parts of Europe, which is sort of well down this path than politically probably, they don’t have a huge amount of resistance to climate change policy, but not quite the case in Australia as yet.
00;04:25 Nick Wood
Not yet. We’re hoping. We’re hopeful.
00:04:28 Mark Nagle
So Nick, tell us about this journey that you’ve had. Well, from wherever you choose, I mean I was a schoolboy running around Yorkshire in his shorts, freezing, or wherever, all the way through to the creation of your business..
00:04:45 Nick Wood
Okay. Yeah. I mean hopefully your listeners will find it interesting. So, I kind of grew up in a very sort of science world. My parents, my mother is a doctor, and my father’s is a tropical botanist. So, really our first 10 years were spent on research stations and universities in East Africa or the Caribbean or the (05:06). I was exposed very early on to the kind of role and purpose of science and how it regards the environment. So, that was the sort of basis, if you’re kind of thinking this sort of framework of how you kind of view the world. You know, it’s still science and careers in the university. And the first time I was sort of exposed to climate change as a science was, you know, I was an undergraduate, second or third year chemistry course, and it was obvious. You go, well this is obvious, all of there is scientific bits here. We already understand it, we know, and you put them altogether and you go, that’s what happens.
So, it’s not really a surprise that, you know, even 20 or 30 years later, the message is the same, you know, climate change is impacting the system and things are getting hotter. And we’ve known that for decades, literally decades, most of my career basically. Okay. That’s interesting, but what do you do about it? It wasn’t really until global society and this all global economics or lens start to look at climate change as a strategic risk in the sort of the early 90’s. Earth somewhere in Rio is cited as the point which it became realized. And certainly for the first 10 years to early 90’s to 2000, it was reasonably of concern. And I would go, yeah, this is doable. We can do this. We can achieve. We need these technologies. But our understanding of sort of climate change was pretty limited at that point, we still thought it’s like a hundred years away.
I think as we go into this earlier sort of 21st century, there was a need to act far faster and that’s when the sort of various different political divides started to appear and the breakdown of consensus and the sort of the fossil fuel industry versus the environment world. And in fact, we really struggled. We spent 10-20 years really struggling. And I didn’t really get involved in climate change as a profession until that struggle started, and the reason I sort of got involved at that point is this is interesting. This is where essentially, we’re at this point of collision or this point where the human society has a difficult problem to wrestle with, and how is he going to do it. And it’s obviously apparent at that point, it was also a financial problem. So, some of the first work I did around in the sort of 2000-2001 on climate change was actually with very big investment banks. Here we go. And how do we do this? What does this actually mean?
So, yeah, sort of the annual (07:19) will know we exist as a company but annual back in 2000 was actually quite instrumental. It’s trying to engage one of the first big sort of proper kind of investment bank type thing that’s engaging in climate change, and that’s why they’re involved with it.
So, it’s a fascinating journey, but it’s always been about the financial impact of and consequences of all resources and financial terms rather than purely environment and science terms. And that’s still a very deep live conversation today. It got deeper and liver probably in the last year, and it’s been for 20 years, in my experience. It’s a fascinating stuff, but it’s very interesting.
00:07.55 Mark Nagle
Yeah, indeed. And Nick, I once recall having dinner with you down in Melbourne, and I was very awkwardly trying to explain quantum physics and was doing a terrible job and waffling on. You took a coin out of your pocket, took over the conversation, and demonstrated the principle of quantum physics in about 15 seconds and did a terrific job. So, on the basis of you being able to convert things to ordinary language, what are the touch points that Australians, maybe Australians that are living and thinking about themselves, their children, their grandchildren, do you see climate change starting to impact people’s lives? And if you do in that relatively short period of time, where do you see those touch points? What can Australians expect climate change to mean to them in the next 50 years?
00:08:48 Nick Wood
I think that falls into three areas or three buckets. I think the first one is let’s just talk about the physical impacts of the changing climate that are already locked into the earth’s system. So, the earth’s system has got a huge inertia that takes decades for it to respond to various drivers. So, the climate driver has been acting on the earth’s system for at least 50 years, and we’re now basically seeing the consequence of that, now manifesting itself, and the key features are very odd seasonal weather, very, very heavy rainfall, and obviously things like extreme bushfires and other things, all of which have a kind of climate fingerprint in them. So, essentially in the next 20 years, regardless of what we do with the fossil fuels, we’re going to experience this changing climate.
Now, the important point there is for most of human history, we’ve been in a stationary climate. It made the weather and climate different. We’ve been in a stationary climate. What we’re doing now is introduce non-stationarity. We are changing it, and that introduces a vast amount of uncertainty into the world that we’re going to have to deal with; otherwise, historical, actuarial models, essentially the goal, but we don’t know what’s going to happen. So, this sort of 20-year forward, the level of uncertainty from 20 years forward is a significant problem to deal with. We just don’t know how to deal with it. So, that’s the first thing, we’ve introduced uncertainty into the world and there’s going to be consequences.
The next one is really around if we don’t want to have the worst consequences, how do we change essentially the economy to avoid those? And that’s massive. That’s big infrastructure that potentially changes everything in all sorts of ways, cities, people, occupations, everything changes. And again, that’s very confronting. Humans have been to that system changes before, where it’s a very confronting thing to do. Again, we just don’t know what this is going to be.
And the third one is really around let’s call it the sort of social aspects of it, intergenerational equity, intergenerational responsibility. It’s a very strong general action divide in how people regard climate change. How do you manage that as a society? Quite literally, how do you talk to children? You know, I think some of the work that you and I, Mark, have done together with the sort of young wealthy cohort, they think about this very differently, and they’re the ones that start to look at this sort of ESGs, green portfolios, and the green bond. So, I think there’s a divide emerging across generation divide, across emerging society, which is going to be very difficult to manage, I think, especially kind of going forward. So, that’s the sort of three aspects that folks in Australia have got to deal with all three of those, and yeah, probably more so than most of the G20 nations.
00:11:22 Mark Nagle
Yeah. I mean from our perspective, I kind of have been somewhat taken by surprise at the level of interest that we have from an investment perspective in this space. You know, I thought it might be the preserve of our younger clients, but actually the age equation is really removed from the conversation very quickly. I’ve had octogenarians that have eagerly transitioned their portfolio to one that’s screened because they’re thinking about their grandchildren. And so, it really has crossed the age ranges, and we’re in the older sort of 70 percent of clients sort of expressing interest in this space. And sometimes, you know, that’s about investment returns, sometimes it’s about social conscience, sometimes it’s about a combination of both. So, it’s kind of. But one thing is for sure, I’m seeing interesting levels of people taking some personal decisions and accepting some responsibility and hoping to change a little bit and have their own influence on it by the way they invest their money because the work that you do for some of the larger companies in Australia is very much tilted towards future performance of those businesses, isn’t it? Do you want to kind of maybe speak a little bit to that?
00:12:31 Nick Wood
Yeah, absolutely. I mean we start this conversation really on, let’s call it the cost of money. So, the highest level is how well does Australia manage the sovereign risk of climate change on its entire economy. So, this conversation really starts with the capital markets and how they view the risks both in the sovereign bonds and the state-based bonds, but also in the in the corporate world itself. So, if you’re sitting in an investment house in New York or London or Zurich and you’re looking at a section of Australian corporates, you go, okay, well, they’re very fossil fuel heavy, they’re based on international flight travel, what’s the kind of risk there? So, you very quickly have to go, okay, there are issues here. And when you as an investor start to ask the leadership team with those businesses, what are you going to do, you expect a coherent answer. So, what we basically help clients with is making sure that when they want to prepare that disclosure, which will be mandatory probably in a year’s time, when they prepare that type of information, is it right? Does it make sense? Do they understand the types of technology options they’ve got? Do they understand the way in which the capital market players may be able to scrutinize the location or the asset for physical climate impacts? So, the complexity of that disclosure and intelligence has just exploded in the last couple of years, and that’s the danger of mismanaging that kind of, the chaos of the information, the capacity building, and individual companies ride up to its kind of, you know, when I work with the CSIRO, The National Science Agency, what does that mean at a strategic sovereign risk level for Australia, what’s Australia’s sovereign risk number when it comes to climate change. And yeah, it’s fascinating today, but it takes a long way to go.
00:14:14 Mark Nagle
Well, yeah. And of course it has a direct impact on Australians because what we’re talking about here is the level of foreign investment coming in to Australia. And ultimately if other sovereigns don’t like what they see from a climate risk management perspective in Australia, then that starts to impact the amount of investment dollars that flow into this country.
00:14:33 Nick Wood
Yeah. And the recent climate analysis done by the federal government to support Australia’s sort of message to the COP26 in Glasgow, part of that analysis included the risk of other credit downgrade, including the risk of paying extra basis points because of the perceived risk. Now, that’s fundamental. You know this is a financial advice. That’s like changing gravity, it changes everything.
00:14:53 Mark Nagle
Yeah, absolutely. And Nick, although it’s not necessarily your particular specialty from a subject matter perspective, but with renewable energies obviously people are very familiar with solar and we’re starting to become – you know, I was in a property the other day, where the owner had spent a considerable amount of money on solar but having significant battery storage and electric vehicle, and you know, this was an incredibly green home, and it was somewhat a glimpse into the future. But outside of that, I mean where are you seeing sustainable, renewable energies? I mean is it a combination of a variety of different areas? Do you see sort of a green hydrogen becoming something that we could really take advantage of? And where are the areas that you tripped over in your world where you think there’s real progress being made?
00:15:42 Nick Wood
Absolutely. So, it’s basic energy mix. You’ve really got three challenges in the energy system. You’ve got the generation, you’ve got the distribution, and you’ve got a concept, called energy density. So, essentially the generation, where do you get the energy from, well solar is fine, wind is fine, and that all works fine, and there’s a low density energy usage, like you might get domestic and offices. The real challenge comes with transportation and energy density. So, you can’t make steel with solar bar. You just can’t get the energy density required. So, you need a much more denser form of energy, and that’s where the hydrogen comes in. But you can make a hydrogen energy carrier. In fact, hydrogen allows you to convert low grade solar energy into high grade, high density energy used for things. So, it’s a very useful mechanism, hydrogen. So, there needs to be a lot of efforts put into hydrogen than there already is, and Australia is very well placed for that. If you go out to the Kimberley and you’re standing there and you go, it’s just some brilliant sunshine, more energy than you’ve ever seen in a system, and they’re very well placed with the gas infrastructure and other things to create hydrogen. And once you’ve got the hydrogen, you can do lots of other things. You can do basically zero carbon steel from using hydrogen to make the steel. You can use hydrogen particularly to make a fertilizer. So, we’ve done some interesting projects on the agriculture industry, decarbonization of agriculture. And the use of green hydrogen fertilizer is the holy grail. If they’re can achieve that, that’s a very very big step forward into the sort of sustainable future.
So, amazing stuff, and Australia is very well placed geographically and just ecosystem-wise to do that, and there’s already signs that the real money is starting to get involved in this. The government may be supporting carbon caption stories, but private industries are supporting hydrogen and that’s a very interesting difference in view of the risks and the opportunities.
00:17:34 Mark Nagle
Yeah, that’s a fascinating point, the disconnect between politicians and political strategies and what’s actually going on on the ground, where people that you’re speaking to is interesting. But it’s also pretty clear, isn’t it, that Australia ought to be very well-positioned, if political will align with some of the things that we’re seeing on the ground from different corporations. And the conversion from what is right now a fairly dirty country, you know, per capita, we’ve all seen those stats, through to a country that actually ought to be a world leader in renewables because of our climate, because of space, and there’s a whole variety of things kind of going for us. So, it would be interesting to see if all these things come into light. I mean I’m sure they will. In your point earlier around, you know, when all of this started, there was very little opposition to climate change as a theory until of course it interfered with people’s self-interest. It’s not really climate change denial, is it? It’s the preservation of self-interest.
00:18:33 Nick Wood
Yeah, it’s self-interest, and businesses and everyone has got a right to fight their own corner. I think that’s entirely appropriate. That’s just how civil society kind of works and our society works. I think the issue really becomes the kind of moral question, and this is where the investors are very important. You, as an investor, what are you prepared to make your investment do? And I think that’s that purpose point, and I think that this is something I try to be really good at, essentially what is it you’re trying to do, the way which you manage your investments and your view, what you’ll do with that, which is that’s quite powerful. You know, money is a powerful thing. What do you want to do with it now becomes almost a moral question, and I think disconnecting the effect of investment from the purpose of investment has been a rather dangerous thing.
00:19:14 Mark Nagle
Yeah, definitely a challenge for us is always connecting the dots of what does a client want. Generating wealth is one thing, but what’s that generation of wealth for, what are the objectives at the other end of it are often things actually that a lot of people haven’t even thought through, which is kind of fascinating in and of itself. But one thing that responsible investing is driving that I found is it’s driving engagement. It’s bringing people closer to their investments, and they’re thinking a little bit more and being a little bit more involved in the conversation, which from my perspective is fantastic. And there’s that lovely phrase that it generates conversational alpha, and I think that that can’t be missed. If you create an interest, people become more engaged, and that usually lands up with a positive result. We’ll kind of maybe touch on that a little while later.
Nick, you also very very briefly mentioned sort of the carbon industry and carbon credits. The markets in Australia are probably lagging other parts of the world, where trading is kind of starting. Are you seeing momentum in Australia to kind of get that up and running, where investors might even be able to participate in that market?
00:20:24 Nick Wood
Yeah, I’d be very cautious about that. So, if you look at the emissions trading-type frameworks, they work well. They’re essentially large scale, high liquidity, large diversity of sort of demand and supply profiles, and also fully accounted. So, the European Emissions Trading Scheme is basically a fully accounted system, where the credits and the debits all add up. The Australian’s type, what’s called the Australian Emissions Trading Scheme, not the emissions trading scheme, the Carbon Credits, they come from a different type of policy space, essentially one of altered setting. And those are not really fully accounted in the Australian Scheme. So, the difference, they work in the sort of voluntary world and the sort of carbon neutrality and those type of things, but they are quite a different tool with type of economic instrument what you might see in Europe, and I think it’s important that investors don’t just look at the full price curve and go, I want some of that. You kind of really need to understand what they are, how they work, how they don’t work, and also the level of acceptability because not all carbon permits are equal, and there are some types of carbon permits that the Europeans won’t accept, as simple as that you. You don’t have a fully fungible currency.
So, it’s a tricky space, and we often have to say to our clients, be very careful what you think you’re doing, and also be very careful as to what you think where this is going to be in 20 years’ time, because a lot of the nature-based offsets, you can only do that once, you can only grow a forest once, you can only produce soil carbon and a land source once. So, if you do it now, you’re not going to have that option in the future. And I don’t think people have really explored the full optionality, the price optionality for all of that. I think we’re close to having somebody having a go at it, but right now I haven’t seen the, let’s call it the fully internally self-consistent view of what that looks like, and that’s why I’d say it would be best to be very careful. This is not what you think it is.
00:22:24 Mark Nagle
Excellent words. That non-fungible assets, of course, often cited at things like cryptocurrencies, you can kind of see the commonality between the two asset classes there. So, sage words, Nick. And it’s the space that we get asked about, we certainly keep our eye on things, of course, as you would expect us to, and I kind of rather love the luxury of having you around to have some sanity checks on these things, and you’re always such a great sounding board with this stuff. So, we’ll get back to you a little bit, Nick. So, what are you working on right now? If you’re able to disclose.
00:22:59 Nick Wood
I can certainly. I’m the master of the general nature. So, most of my work at the moment, I’m really working with the three different groups of entities. I’m working with Clean Energy Regulator, which is a federal government body assisting them on the oversight of the sort of carbon markets, which is a fascinating stuff. Assisting the National Science Agency, the CSIRO, with essentially helping it work with, thinking about working on the climate signs and the impacts on the finance sector because the prudential regulator APRA released a climate vulnerability assessment for the banking sector just earlier this year actually, this February. So, that’s obviously taking a lot of space.
And then a lot of my work, my work is actually working directly with banks and the corporates via energetics. So, we’re doing three out of the five big banks at the moment, just full on engagement on climate risks, particularly in their agricultural lending portfolios, which is a sort of key priority for Australia. So again, fascinating stuff, very busy. It’s a very very steep learning curve, and we’ve got some fantastic. Sort of younger staffs coming to the business who really want to make this their career just makes this very difficult. Every day is difficult. It’s just so challenging, but it’s fascinating stuff.
00:24:05 Mark Nagle
Yeah, absolutely. And I know you spend a lot of time working not necessarily with all the big four, but certainly many of the largest financial institutions in Australia, and they’re lending policies, of course, can often drive direction, can’t it? I mean if lending to fossil fuel projects is starved, then of course getting them off the ground going forward becomes much more difficult. So, the bank’s lending programs can be very influential on the country’s direction in terms of what infrastructure or what energy projects get off the ground.
00:24:35 Nick Wood
And that very quickly becomes a sort of social political question because you then go, well does the bank have the right to do that? It’s a kind of – it’s (24:44) to its shareholders, you know, as a private listed entities, funds with the shareholder. So yes, it does. But, you know, when you’re the size of some of the Australian Banks, there is a wider social dimension to what you do, and I think that’s an argument that has not yet been played out fully. I think when the banks decide, they’re really not going to continue funding for a current entity, and that’s going to create job losses, I think that’s the point at which there’s going to be some hard questions asked, but they have to be asked, we just haven’t quite crossed that really yet.
00:25:11 Mark Nagle
Yeah, but I mean like any big corporate, of course, the banks have to remain attractive to investment via a shareholder level. And, of course, when we get people like Larry Fink come out of BlackRock and start to say that, you know, is often huge shareholders of financial institutions via BlackRock as an investment vehicle through its ETFs and various other mechanisms. They have always been passive when it comes to voting, but I think signaled that that is likely not to be the case going forward and they will potentially take socially responsible positions when they’re voting as a shareholder on some of these, which means that to some extent banks may have to be somewhat judicious around who they lend to because if some of their big investors don’t like the idea of lending to fossil fuel projects, for example, that could leave the banks being starved of investment. So, the drivers are kind of everywhere for this, aren’t they?
00:26:08 Nick Wood
Yeah. And a lot of what we see in our kind of day-to-day work is the realization that you need to focus on the opportunities more. So, a lot of the discussion currently is climate risk, climate risk, but it’s actually opportunities, and that’s where, you know, this is in the public domain world that we did for the Commonwealth Bank in 2019 in agriculture. A lot of our effort was actually working out, what was the plus side, what investment did you need to get a better agricultural system, to get better water irrigation systems, to get better adaptation, and that the way out of this is really what’s the future, not what future do you want, no, what the future do you not want. And again, it’s early days on this, but there’s been a lot of movement into that opportunity side, say in the last 18 months, and it’s great to see that’s all the way to go.
00:26:54 Mark Nagle
Yeah, I mean look, Ford Escape, probably a great example of that, you know, with Forest coming out and essentially doing exactly that, sort of looking at opportunities and thinking about Ford Escape’s future from an opportunity-based perspective as opposed to thinking about what they can’t do or what they might not be able to do or what they might be restricted in doing. Really quite a difference. And of course investors can make a very clear choice around investing in that type of business or not. So, Nick, what would you say is the most rewarding thing about what you do? I mean I guess you’ve touched on some of that, but any further thoughts?
00:27:28 Nick Wood
Well, first, I’m very privileged, and this stuff is very purposeful to me, it’s valuable to what I do. So, that’s great, to have a job that you really enjoy and where people you can enjoy working with. That’s very positive. The most rewarding stuff I did is taking the really really high level of capability Australian Science has got. Australia is punches well over its weight in science terms. I mean it’s only got, you know, 20 billion people but it’s got fabulous sort of science base, and that’s almost a strategic resource for the nation.
So, taking that strategic resource or sort of deploy it for greater social good, to use the phrase, that’s very rewarding as well. So, working with the CSIRO and bringing in, you know, directly working with the banks and the CSIRO at the same time, solving kind of the big sort of social problems, that’s very valuable. I also think this sort of younger generation, particularly in the last few years, have sort of woken up to this is kind of a real deal and also a really valuable kind of career path for them. So, four or five years ago, you didn’t see that. Now, we’ve got some really really, bright people early in their career, sort of coming to work with us because we can teach them a lot and they can kind of shape their future careers, and they can see a career in doing this type of work and basically, yeah, solving the problem. There are very valuable things built to do it. So, I’m a lucky guy.
00:28:45 Mark Nagle
On two counts, I mean having work that gives you such a strong sense of purpose is a really wonderful thing to have in your life. I mean I’ve kind of put myself in that camp as well. And it’s very fulfilling, and certainly the financial rewards that we all get in one way or another from the work that we do, it needs to be matched, I think, often by that sense of purpose to create genuine fulfillment in the workplace. So, that’s really good to hear. And the bright young things really, mean in our work that we’ve been doing with the team at Responsible Investment Australia, and the various people that we’re introduced to, I’ve kind of been amazed that the amount of tier 1 younger people that have come out of the big four accounting firms or big investment houses and are now finding themselves working in niche businesses, which are kind of a leverage to environmental or climate change projects is fascinating to see. So, I’m sure a part of that is sense of purpose, but of course, you imagine that they’re being paid pretty well as well.
00:29:45 Nick Wood
Yeah, there has to be a career path. I mean they were not charities, and also they’re not going to solve this through charitable actions. The finance system is incredibly powerful, and if you can steer that towards solving the problem, it will be a great achievement, you’ll see.
00:29:59 Mark Nagle
Absolutely. So, there’s probably quite a few, what would you highlight as the biggest challenge you’ve had to overcome in the last couple of years?
00:30:06 Nick Wood
Interesting challenge in about four or maybe five years ago was trying to deal with the fallout from the politics, particularly at the sort of science end of things, where you’re sitting there and going, and basically the scientist said to me, “What do we do you?” And I said, you need to scare the money. You’ve got fabulous information, you’ve got fabulous insights, you’ve got the world’s best in class type science, we need to get in front of the longer term investors, people who’s got long-term skin in the game, and then go, this is your future. I mean it’s not a future you want. So, scaring the money, that was a challenge, that was a strategy we’ve had five years ago with the science community, how we’re going to scare the money.
And we’ve succeeded in scaring the money, but it was not an easy thing to do. But basically you look for allies, you look for the legal profession, and you look for the investor, you look for the investor analyst groups. Yeah, okay, you’re all going to be the people dealing with this mess. So, we’ve actually got a common interest, start to drive the awareness of these risks and awareness of the solutions into the day-to-day language of what you do. And it’s worked really well, like not too well, but the next challenge is really dealing with the chaos that follows that. We succeeded in scaring the money, it’s all now everyone’s, you know, stampeding towards ESG green funds and all sort of stuff. The next challenge is, okay, just how do we manage that chaos or that movement.
00:31:20 Mark Nagle
Yeah, I love that phrase “scaring the money”. And certainly there are many many examples where difficulties, challenges in society have been allowed to run and run and run until they scare the money, and then suddenly things get fixed.
00:31:34 Nick Wood
Yeah, that’s right.
00:31:35 Mark Nagle
And it’s a salutary lesson, isn’t it? Because the moment you’re able to do that, you certainly see activity where there was inactivity. There’s many many examples of that. So, Nick, what would you say is the best piece of advice you’ve had when it comes to business and/or finances, and why?
00:31:54 Nick Wood
I think it’s really just kind of owning it, you’re responsible for it, and have a long-term strategy. I think that’s something you definitely reinforce with this because there’s no point in kind of reacting to every event and every kind of like, you know, noise and every sort of flash bang that happens. You need to know what it is you’re trying to achieve, and you need to then stick to that strategy, and that’s the best advice I would basically say. And that’s work. It’s not a one day, one week, one year like issue. It’s a lifetime issue. Stepping (32:20) I think.
00:32:22 Mark Nagle
Right. Now, look, I know of course your lovely wife, Sophie, very well. I won’t allow you to say that the best decision you’ve ever made was to marry Sophie.
00:32:30 Nick Wood
Actually, I didn’t know you could say that.
00:32:34 Mark Nagle
Outside of that, what would you say is one of the best decisions you’ve ever made?
00:32:38 Nick Wood
I’m in Australia because in late 2007, after Kevin Rudd got elected, I got an email from the prime minister’s cabinet office to my place I was working in the UK. It went to a different Nick Wood in the company, and they sent to me, and I go, why am I getting emails from the Australian prime minister. It’s like that’s the (32:54) sentence. I said, I don’t know. I’m an expert on mission strategy and that sort of stuff. So, they’ve got my name out of some database. And then two weeks later, its cold miserable, dark Manchester, freezing cold, day in December, and we’re both having quite a hard time at work, and then the GFC, you can just feel what GFC is starting to kind of happen. Sophie said, “I really don’t want to live in Britain anymore.” And I said, “Strange you’d say that. I’ve got an email from the Australian prime minister, and let’s go to Australia then.” Yeah, that was it. Decision made in 20 seconds. It took me a couple weeks to find a job, but having the decision, 20 seconds.
00:33:29 Mark Nagle
That’s quite a story. I remember going through something somewhat similar, you know, obviously different circumstances, but I remember sort of getting here, and there was an Australian branch of the family that were living sort of in Mosman area. And I remember, their first piece of advice to me was not to move to the wrong side of Spit Bridge, which I’m kind of down the track of course. I saw the sense in that with the trafficker. But, you know, the irony of being told not to move an extra five clicks when you’ve just come from the other side of the world, this never quite lost on me. How about influences, Nick? I mean I have books, movies, albums, whatever, but anything that you feel in that genre that’s had an impact on you?
00:34:15 Nick Wood
A variety. We do a lot of reading. I mean I think the famous phrase “if you want to stay blind, you want to study human’s (34:21). It’s certainly literature and that sort of insightfulness you get from literature and sort of arts and arts and stuff. So, the human expression is an incredibly powerful thing. I think some of the books that influenced you, you know, from my particular childhood, a book called ‘The Poisonwood Bible’.by Barbara Kingsolver, which is say in Africa in the 60’s, which I kind of, that’s where I lost myself, then resonated, and also things about the human condition. I mean nothing much past 1984 to realizing there’s a view of the dark side of humanity, which unfortunately we’ve seen a bit too clearly in the last few years. So, they’re very influential in me. And also, the sort of earlier work that links the impact on humans on their own environment. So, things like Silent Spring by Rachel Carson and those that’s called Gaia-type things, but it’s that type of idea, is that actually we are connected to our world and we’re influenced by it, and that disconnection is dangerous. So, I think that’s important influence. Yeah, those will be it. It’s about, you know, the responsibility to and for each other.
00:35:22 Mark Nagle
When asked the question, mine is always kind of Solzhenitsyn’s ‘Gulag Archipelago’ which is human condition one-on-one. It’s fascinating that we often, as people, I mean I guess it’s no accident that we would resonate so highly with books that challenge that condition and kind of understand what it means to be human. So yeah, it makes that makes a lot of sense. So, thinking across the last 12 months or so, Nick, what would be a key learning for you? What’s something that’s jumped out?
00:35:47 Nick Wood
I think the whole COVID experience has been very interesting because it instantly changed the way things had to be. A lot of the assumptions about how things were just disappeared, you know. And I think that the speed of change and the speed of adaptation, although it’s been obviously very hard for a lot of people, and we didn’t understand that at all, it demonstrates that when things really do need to change, they can change. And a lot of other people in the sort of climate world have observed the same thing, is that, you know, we don’t have to do all this commuting, we don’t have to all work in the office all the time, there are many ways we can do this. And currently, it’s been just a snapshot of when you need that dynamism, you can find it. So, that’s been the last year, but this is possible, and it’s more possible than we thought it would.
00:36:28 Mark Nagle
Yeah, I think that’s really a fascinating point. You know, COVID has driven an appetite, I suppose, or an acceptance of change, I’m not quite sure which. But another actually fascinating client of ours who’s a social scientist talks about if you can’t change things in your business now, give up, because you never will be able to do that. And it’s interesting because it does connect very much with the environment, doesn’t it, this whole experience. And the lunacy of, you know, I was talking to a colleague the other day about the population of Australia moves in and out, or did move in and out of London five days a week, Monday to Friday, and moving 20 million people in and out of the city within a fairly narrow time frame, every morning and every evening, of course, is an environmental disaster in many ways, isn’t it? And maybe the pandemic is providing us with an opportunity to rethink the way that we go about things.
00:37:24 Nick Wood
Yeah, it’s certainly, you know, from my own personal experience in all those things, it’s like, okay, what’s the value of rushing around all this? Why this? We don’t have to do this. You know, this was something we created for ourselves and maintained through our own narrative, and when our narrative changes, we change too. So, okay.
00:37:39 Mark Nagle
Yeah, absolutely. Now, Nick, as the final component of our time today dwells on or thinks about capturing what we refer to at Treysta as a money moment. And in essence, those are moments where you are impacted by something in life that has a financial implication. So, the big ones, of course, are retirement, loss of a partner, inheritance, the birth of a first child, divorce, some of course are real positives, others are negatives, and money moments can take many different forms. And you and I were chatting the other day about what the Wood’s money moment would be, and for us it was this realization of how quickly time flies, and you know, you can pick the story up in a moment, but 11 years or so ago, I bumped into these newly arrived, and as you’ve said, it was a fairly snap decision to move to Australia anyway, and suddenly you’ve landed here, and there’s that money moment where you guys sort of thought, oh, hang on a minute. There’s all that complex pension system that we left behind in the UK, but what happens now?
00:38:44 Nick Wood
Yeah, I mean it’s quite profound kind of looking back on it. At that time, you’re kind of in it and you’re kind of living it and dealing with it. But I mean the main in the UK in sort of 2007-2008 was obviously heading into a bad place. We’ve had a run on a bank, the first Northern Rock Bank in the Northern England, the first from the bank in 50 years. I mean all these signs that the top GFC would start to manifest themselves. Life was not that nice. The climate was not really good, and it’s worst and maybe actually it’s horrible. So, there’s a lot. I know the things are going to end, and environmental jobs isn’t, where we’re not that well paid in the UK. Aust a nice old place. And so, we were facing quite a leak to long-term future. So, financial reviews, the pensions would start our careers in the time when the pensions were non-transferable to family. So, we both got two or three pointless amounts of money stuck in the superannuation funds and stuff, which are non-transferable. So, my entire generation essentially is the whole 8 to 10 years where the pension system just didn’t transition from final salary to sort of defining their contributions. We were caught in it. So, they’re very bleak outlooks, or pension-wise, jobs were not going particularly well, economy not working particularly hard, and looking like it’s going to get a decade series died.
We had a chance to move to Australia. So, okay, much better salaries, better standard of living, and yeah, let’s just do it. We don’t know where this is going to go, but let’s just do it because we have to do something. So, we arrived in Australia, and we obviously signed up. We talked with you, guys, and I think it was just sort of the first, maybe four or five years, you may have found this sort of quite suspicious. And so, like a politician, what is going on here, a little bit more reserved on what we’re trying to do. But I think the longer term, you know, once you start to, you know, you keep at it, you keep working, you pay your superannuation, you kind of keep your eye on your assets and stuff, and with professional help and with professional guidance, you’ll get through it.
So, it’s been quite a profound realization maybe two years ago, but we were going to be okay. So, you know, the stress of not thinking you’ll be able to afford a sort of reasonable retirement is stressful, although in the long-term. And once that kind of stress is lifted, even you know, okay you’re going to be all right, and you are much more (40:48). That was pretty profound, and that almost allows you to breathe. It’s like somebody taking the weight off your shoulders, you can start to breathe, and sort of mentally breathe, and that’s been very beneficial. So, you know, we are in a position now where, you know, if we wanted to, one of us could retire if we need to, and that’s the end of conversation. That’s a very privileged and a fortunate position to be in, but we got there because of the decision we made and the advice we got and sticking to the strategy. So, it’s a big deal. You want security, you want that security in your older age.
00:41:16 Mark Nagle
Look, and I was thinking, Nick, the last decade has meant with you guys is it’s an absolute demonstration to me that every party has to be committed and be doing the right things to get a genuinely good outcome. So, I don’t think you can be a great advisor without a great client, and vice versa. If you get the magic happen, where either you get great clients that are out there doing the right things, and you get good advisor in that loop, collectively what you can produce is incredibly strong. And you can do that. I mean 10 years is a long time, but it’s not a lifetime. It was the ability for you guys to completely – I mean I know you had some assets that you’d acquired in the UK, but you know, really we got to work quite quickly, and you guys stuck with the program, and there was where we said we would say if you guys did, and where you guys wanted to spend, you did. You know, there was that kind of mutual working relationship throughout, which I think you have to have, and I’d consider myself incredibly fortunate that the vast majority of my clients are great clients, and I hope that a lot of the outcomes that we are able to produce is because of the partnership in essence. We don’t have magic wands, alright.
00:42:30 Nick Wood
It’s just effort and diligence and responsibility.
00:42:32 Mark Nagle
Yeah, absolutely. And looking forward, Nick, I think “taking the weight off the shoulders”, what does that mean for you and Sophie in terms of the way that you look at the next 10 years?
00:42:43 Nick Wood
Oh, we think very positively because, you know, it’s not a case of being we’re going to dash down by a super yacht, it gives you the ability to do things that interest you, that are purposeful in a particular stage in life. You’ve still got all your mental faculties, mostly just, you know, you’re still reasonably fit and healthy. You can go and do stuff. I think really, you know, what do you want to do? And I think that choice, that famous expression of existentialism with time, choice, and meaningfulness. You’ve only got a limited amount of time, and choose what you want to do, just make sure it is meaningful. And that’s a great privilege and position to be in, and I’m actually looking forward to it. So, we’ll make sure it will work in all things.
00:43:16 Mark Nagle
Yeah. And look, I love the fact that people’s retirement these days is, you know, it’s not gold watch on the 65th birthday and a wave goodbye. I mean people’s retirements can genuinely be what they want them to be, if they’ve taken care of the money side of things. And the moment you’re freed of that, but you decide to continue to work because you’re enjoying it and you love the sense of purpose, and in your situation, you really can have a very strong sense that you’re actually doing some good as well, it’s quite a powerful heady combination, isn’t it?
00:43:44 Nick Wood
Yeah. You’ve got to keep checking yourself. You’ve got to make sure, again, you’re responsible to what you’re doing and for why you’re doing it, and again, that’s just I’m very privileged to be here. And yeah, I’m looking forward to it.
00:43:54 Mark Nagle
Yeah, absolutely. And look, Nick, you and I have just bought off-roaders.
00:43:59 Nick Wood
00:44:02 Mark Nagle
Yeah. Fascinating that I’m desperately trying to protect mine from stone chips, and you’ve described yours as a toy that you’re prepared to completely bash up.
00:41:11 Nick Wood
Yeah. It’s never going to be a day car. It’s bought specifically for carrying bikes and climbing gear and kayaks and going to rough places. So, you have to choose. “Choose your doom,” as they say.
00:44:21 Mark Nagle
I’m sure my twins will do more damage than any stone could anyway. So, look. Just, Nick, finally before we sort of say goodbye, just obviously for anybody listening to this Treysta, has and is continuing to build sound expertise around responsible investing, whatever that means to an individual, it can be ethically based, it can be impact based, where people were deliberately trying to invest in change, which is some of the things that we’ve spoken about today. And of course, there’s the whole ESG screening side of things, and I know, Nick, that that still has a world of problems. But it’s certainly an option that we are building out in the business. So, anybody that hasn’t been approached, that is interested, please put your hands up, and we’ll gladly have those conversations with you. And I think part of the process for us at Treysta is absolutely not jumping on the bandwagon. And if we’re going to do this, we need to do it in a very responsible manner and in a manner that is thoroughly thought out.
And, Nick, I thank you always for being able to jump on the telephone and get your opinion because you’re just so close to this stuff, and it really helps. So, thank you for that. And again, thank you for today. I mean I hope the audience is as fascinated as I have been speaking to you. It’s always great, fun, and super interesting. So, thank you for being a great client, and thank you for your time today. Here’s to the next 10 years, and may that be as successful as the last 10.
00:45:48 Nick Wood
Thank you very much. Great conversations. Real pleasure to talk to you, as always. Take care.