At a moment of unprecedented attention, investment, and opportunity for the emerging field of ESG, leaders are asking: Who is best preparing their organization for the society of the future? Who is innovating today to meet decades-long environmental and social goals? Who is setting standards that catalyze their industry’s change for the better? Who is defining what bold and aspirational work looks like — and how best to advance that work in practice?
Enter NationSwell’s ESG Next, an exemplary group of social impact and sustainability leaders who are shaping business as a force for social and environmental progress, advancing — and even pioneering — the most forward-thinking and effective programs, initiatives, technologies, methodologies, practices, and approaches.
For this installment, Greg Behrman, CEO + Founder of NationSwell, sat down with Nili Gilbert, Vice Chairwoman of Carbon Direct, to talk about her personal journey to sustainable finance, why equitable solutions are only possible with cross-sector collaboration, and why she thinks ESG won’t be enough to get us to where we need to be.
Greg Behrman, CEO + Founder, NationSwell: How did your personal journey lead you to ESG? Is there a defining life experience or circumstance that drew you to social impact work?
Nili Gilbert, Vice Chairwoman, Carbon Direct: When I was in college at Harvard, I had the opportunity to design my own major, and studied the interplay between social movements and economic progress over time — of course, economics and finance also affect society and culture, creating a kind of cycle where neither ultimately exists in a vacuum.
After I graduated, I went to work for an international development organization, which was guided by the belief that if we could build strong local financing vehicles in low-income countries, we could beneficially support communities’ visions for social progress as well.
A lot of what we were helping to create was intangible value, societal value, which it’s hard to put a price on. I eventually became obsessed with the question of how we put prices on the things that we care about in the world. I thought about it all the time; I started a dedicated journal so I could write through it. And what I realized is that, somewhere out there, there are certain people who have an outsized voice in shaping the conversation of what we value as a society.
And around the time that I turned 22 years old, I said to myself, “I’m going to become one of those people.”
Behrman, NationSwell: How do you make sense of this moment in ESG? What is promising, and what are the pitfalls?
Gilbert, Carbon Direct: I think we’re actually in a moment where we’re advancing ESG. When I first started in this field, the phrase was “mission-driven investing.” That phrase grew out of the centuries-old “socially responsible investing.” In about 2005, this all evolved into ESG.
I don’t consider myself a leader just in the ESG space anymore. After years of working hard on ESG, I came to feel that it’s not going to be enough to really get us all the way to where we need to be. Because when you look at ESG, it’s a way of taking traditional business models and reframing them. Reframing isn’t going to get us to net zero. Reframing hasn’t proven successful in addressing social inequity. As a matter of fact, we’re reaching peak global inequity, and peak greenhouse gas emissions — all after almost two decades of ESG.
Behrman, NationSwell: Does this mean you’ve started to reject ESG?
Gilbert, Carbon Direct: I’m definitely not speaking from the point of view of the anti-woke capitalism movement, and I wouldn’t say this is a rejection of ESG — although there are some strategies which are classified as ESG, which could merit more scrutiny. But if you look at many ESG factors and approaches, it’s often about the measuring and the metrics of inputs. And now, I think we’re moving towards thinking more about the outputs from the process: the implementation and the impact.
I believe this is one of the reasons the net zero movement took on so much momentum before COP26: it’s measurable against a targeted outcome on the ground — reducing carbon emissions. We can ask: Have we limited global warming to one and a half degrees or not? This is the carbon budget, how much emissions are we putting out, and how do we get that number down to zero? And I hope that we’re starting to ask clear, direct questions about social goals and outcomes as well. I would say that we just need a more goal-oriented way of thinking about actual impact instead of just counting up inputs like whether there’s a sustainability report, or how many are on the board of a company.
Behrman, NationSwell: What caused this shift in thinking?
Gilbert, Carbon Direct: It happened back during the deepest part of the pandemic, before we had a vaccine. We were all sitting at home. We didn’t know what the future held for us. The social inequities that we’ve always faced were laid so bare in how different people were affected by the COVID crisis. We had people protesting in the streets after the murder of George Floyd. The climate community was originally worried that we would fall behind on our environmental ambitions because the social concerns became so overwhelming. But that didn’t end up happening. The opposite happened.
I was sitting there thinking, how are we going to get out of this? I’d felt like I’d been doing something good and useful for the world, but had this helped? Is this helping? Where is this going? How are we going to get to where we need to go?
The Rockefeller Family institutions where I chair the Investment Committees made our net zero pledges simultaneously during the pandemic. At the David Rockefeller Fund, we were more than 90% ESG aligned, and we “took the temperature” of our portfolio, as if our investments were the whole global economy, and found that we were still in line for global warming by 2050 of nearly 4 degrees — when we know that we need to limit this to 1.5 degrees. And I was like all this ESG, all this counting up the inputs, it hasn’t resulted in the outcomes that we need.
Last month, we just reached peak greenhouse gas emissions again. We reached peak coal use. That’s what I mean when I talk about this march of progress from SRI to ESG, and how I hope we’re moving more into a focus on outcomes and impact. We have to, because the idea of what happens if we don’t get this right is unimaginable.
Behrman, NationSwell: And what’s changed for you since this shift in your thinking on ESG?
Gilbert, Carbon Direct: I took the tough decision to resign from the firm that I had co-founded a decade prior because I was so worried about the world being off course. It was so very hard to say goodbye to my team, to put down something that we built. But I thought that what would be even harder is if we all end up living in a “four degree world” with extreme inequality. And so I said, “I have to try.”
That journey brought me to Carbon Direct, a company that has two separate businesses under one umbrella. One of the businesses is Carbon Direct Capital Management, which is focused on climate solutions and investing in technologies to decarbonize industry and build the new green economy. The other business, Carbon Direct Inc., supports clients on their decarbonization journeys — from carbon reductions to carbon removals.
The way I see it is, we have this high-emitting old economy, and we know that we need to get to zero emissions by 2050 in a way that also meets our longstanding social goals. We need to rebalance out of the old economy into the new one, on time. But one thing that we don’t talk about enough is that in order to get to that new portfolio, it’s not just that we need to stop doing a lot of things, we also need to build up a whole bunch of new things which will underpin the economy of the future.
So at COP26, it was amazing to be able to represent the leadership of the Glasgow Financial Alliance for Net Zero (GFANZ), in which the finance sector had come forward with over 400 net zero pledges. GFANZ now represents over $150 trillion in capital, and almost 50% of all private finance capital in the world. The private sector, in general, came forward with thousands of net zero pledges in Glasgow, and since then we have been marching from pledges to implementation. What this looks like is moving from the top-down frameworks that we have — for example, we know we need to get global emissions to net zero, which is very top down — into real bottom-up work. It’s understanding each sector’s transition plan, which is unique based upon business models, and the technical solutions that are available to them. It’s also about understanding what regional pathways and contributions will be, which is unique based upon their starting points and natural attributes.
And at the end of the day, it’s bottom-up work, asset by asset, ton by ton of greenhouse gas emissions, that will take us down to zero.
Behrman, NationSwell: What’s something about your work at Carbon Direct that other social impact leaders should know?
Gilbert: Beyond my passion for implementation and impact, I have a strong appreciation for the fact that we can’t solve big problems like climate change in isolation. We really need to emphasize a just transition, which appreciates the deep connection between our social goals and the environmental ones. It’s not really possible to separate them, partially because of the way that the fossil economy has been built on the backs of specific communities here at home and around the world.
And so, if we want to be able to solve the climate problem, we have to go to where the emissions are, which means place-based solutions and justice. We need to understand the labor transition for workers in high emitting sectors. We need to understand the intersection of climate with gender and race.
We need to think about global justice across the north and south, where two-thirds of the remaining investments that need to be made to limit global warming to 1.5 degrees need to be made outside of North America and Europe. The Justice 40 provisions in the U.S. climate bill, the Inflation Reduction Act, call for 40% of the benefits to accrue to previously underinvested communities, and to those which will be most affected by the transition. These groups are, of course, overlapping.
One of the things that I’m most proud of in 2022 is that Carbon Direct has hired Dr. Christian Braneon as our full-time Head of Climate Justice to lead us in this work.
Behrman: Who are some leaders that you admire, and whose work and accomplishments inspire your leadership?
Gilbert, Carbon Direct: I admire Christiana Figueres, the Costa Rican diplomat and former Executive Secretary of the United Nations Framework Convention on Climate Change, for her leadership in negotiating the Paris Agreement and well beyond.
Frederick Douglass is also deeply inspiring to me. He’s known for his work in abolition here in the US and was also a leader in foreign affairs. He reminds me of what it means to “make a way out of no way.”
Lastly, the mentorship of Peggy Dulany, Chair of Synergos, and the leadership lessons of her late father, David Rockefeller, are very moving and impactful to me.
Behrman, NationSwell: What works are you reading that are inspiring you right now?
Gilbert, Carbon Direct: There’s a book of poems by Aja Monet called “My Mother Was a Freedom Fighter” that immediately comes to mind. I would also mention “The Alchemy of Finance” by George Soros and “The Structure of Scientific Revolutions” by Thomas S. Kuhn as directly informing and inspiring my perspectives on transformative leadership.
To learn more about how our ESG Next honorees are shaping business as a force for social and environmental good, visit the series hub. To learn more about NationSwell’s community of our country’s leading social impact and sustainability practitioners, visit our site.