Observations from the Field: Seth Sheldon

We recently held our quarterly meeting for the ScopeFour Climate Council and discussed key trends in climate technology investment and the increasing significance of physical climate risks. One of our council members, Seth Sheldon, shared some particularly insightful thoughts on these areas.

Seth is a climate scientist with expertise is in environmental informatics, which is the practice of using data, analytics, and computer science to influence decision-making related to the global climate. In his work at Rho Impact, Seth helps investment professionals better quantify the impact of climate technologies on carbon emissions.

Given his work, we were curious to hear about his observations on which climate solutions investors are gravitating towards. One of the segments Seth highlighted is the growing interest in recycling, specifically critical mineral recovery from electronic waste like batteries. He cited Redwood Materials as a company exemplifying this trend – they’ve recently made headlines for partnering with automakers to recycle materials from electric vehicles and batteries. As technology matures and becomes ready for scale, the focus has shifted towards innovation in repurposing waste streams into valuable resources. This movement is gaining traction, especially as consumer goods companies start to develop their own recycling programs, which is likely to influence future product design and elevate the recycling industry. Historically, the recycling industry has been seen as a cost center, but now shifting sentiment views it as a cost-saving opportunity.

The conversation also touched on the broader societal and political challenges that climate initiatives are currently facing. Seth noted the growing backlash against Environmental, Social, and Governance (ESG) and Diversity, Equity, and Inclusion (DEI) initiatives, which has inadvertently impacted climate action efforts, despite these all being distinct concepts. This conflation has led to resistance and skepticism, particularly in the context of high-profile influencers and meme culture fueling public discourse.

Despite these challenges, there is growing awareness among investors who are beginning to report on financed emissions. ?He emphasized the importance of forward-looking “avoided emissions” as a metric to help investors balance the trade-off of investing in companies expected to grow their own emissions but also expected to greatly reduce emissions across carbon intensive industries. The World Business Council for Sustainable Development (WBCSD) recently released a white paper that addresses the credibility of this approach.

At the top of mind for Seth regarding physical climate risks are complexities around wildfires, flooding, droughts, and saltwater intrusion to groundwater. All serve as prime examples of massive financial risk as well as direct, high-profile harm to asset owners, insurers, and reinsurers. Being from Ohio, Seth anecdotally shared his observations of the shifting geographic patterns of extreme weather, such as Tornado Alley creeping eastward and the northward movement of agricultural zones. Current US (and global) infrastructure is not up to the challenge of withstanding extreme weather events, which are becoming more frequent and severe.

Our discussion with Seth illustrates the need for robust and innovative approaches in climate finance and risk management. As climate risks continue to evolve, it is crucial for investors, companies, and policymakers to consider the science to address these challenges effectively. ScopeFour’s partnership with Seth and other members of the Climate Council underscores our commitment to incorporate climate science into our investment framework and ultimately navigate the path toward incorporating market rate returns with a sustainable future.

**Avoided emissions is defined by the GHG Protocol as the emissions avoided when a product is used as a substitute for other goods or services, fulfilling the same function but with a lower carbon intensity. https://globalclimateinitiatives.com/scope-4-emissions-evitees-de-quoi-parle-t-on/