Stanford’s new Sustainable Finance Initiative to help unleash capital needed for decarbonization

The global transition to low-carbon economies is dramatically transforming the investment landscape, especially in the enormous sectors of energy, agriculture and transportation. To unlock the massive amount of capital needed for that transition, Stanford University’s Precourt Institute for Energy is launching a research program to develop new economic and financial models to more effectively manage risk and drive successful investment.

Thomas Heller and Alicia Seiger are leading Stanford’s new Sustainable Finance Initiative. (Image credit: Courtesy Thomas Heller; Ian Terpin)

The Sustainable Finance Initiative at Stanford will work with leading public and private financial institutions, companies and governments to engage Stanford researchers in economics, law, business and computer science to accelerate the transition toward decarbonization and climate resilience. Bank of America, a founding member of Stanford’s Strategic Energy Alliance, is supporting this initiative.

“A global expansion of capital deployment in low-carbon infrastructure is one of the most important prerequisites to building economies that will serve humanity for our children, grandchildren and beyond,” said Sally Benson, co-director of the Precourt Institute and Stanford professor of energy resources engineering. “We value the support and the knowledge of collaborators like Bank of America as we all try to figure out the technologies, finance and economic structures needed for this new era in sustainability.”

For the energy sector alone, global investment needs to triple from its current level to $2.3 trillion annually through 2040 to limit global warming to less than 2 degrees Celsius, according to an International Energy Agency study.

“Significant barriers block capital deployment at anywhere near the level needed, especially investments from economically developed countries in economically developing economies,” said Thomas Heller, faculty director of the Sustainable Finance Initiative and professor emeritus at Stanford Law School.

“The fight for a sustainable Earth will be won largely in developing economies, which are now massively investing in infrastructure designed to operate profitably for decades,” said Heller, an expert in climate policies and laws as well as in economic development.

Stanford has led in advancing knowledge on climate science and low-carbon technologies, but the university can contribute much more on financing sustainable infrastructure, said Alicia Seiger, managing director of the Sustainable Finance Initiative.

“By reframing climate in terms of development, growth, productivity and risk, we aim to bring a third dimension to Stanford’s leadership,” Seiger said. “This new frame will allow us to engage faculty members across the social sciences, including some who don’t necessarily think of themselves as sustainability experts.”

Initiative direction

In a paper made public last month, Heller and Seiger articulate the opportunity and imperative for the initiative. They examine how current efforts have not adjusted to the world that has emerged over the first 30 years of climate action and they identify course corrections for future endeavors. The paper also details the “team-of-teams” model the initiative will use to better connect Stanford faculty, fellows and students with geographically situated problems and to better turn ideas into action.

Collaboration with public and private organizations that have a long-term strategic outlook will enable the Sustainable Finance Initiative to create solutions that can be deployed in the coming years and decades. The benefits of such interaction are equally important to education. Some of the initiative’s funding will support students, and research findings will be used in classrooms. This helps build the workforce and leadership needed for our future energy systems.

At the Global Climate Action Summit in San Francisco last month, Mindy Lubber, chief executive of Ceres, moderated a discussion of the initiative with Seiger; James Mahoney, global strategy and public policy executive at Bank of America; and Alex Liftman, the bank’s global environment executive. They also talked about how corporate climate action can help fulfill commitments made in the U.N. Paris Agreement of 2016. The conversation is available to watch on this Facebook Live video.

The Sustainable Finance Initiative will work closely with Stanford’s Steyer-Taylor Center for Energy Policy & Finance, which is led by former Law School Dean Paul Brest along with Heller and Seiger. Results of the Sustainable Finance Initiative’s work will be made public. For more information visit https://energy.stanford.edu/sustainable-finance-initiative.