The Fifth Estate’s Tina Perinotto joined with Climate and Capital’s Blair Palese to interview Martijn Wilder about his ambitious growth plans, the perfect geo-political storm speeding up the exit from fossil fuels and his three messages for PM Scott Morrison right now.

Martijn Wilder is known for being one of Australia’s leading experts on climate change, international negotiations and what it all means for business and investors. He was head of Baker & McKenzie’s global climate law and finance practice for decades, former founding director of the Clean Energy Finance Corporation (CEFC) and a chair of the Australian Renewable Energy Agency (ARENA).

In 2019 he founded Pollination, a specialist climate change advisory and investment firm with an initial $18 million in seed capital. In his spare time, Wilder is president of WWF-Australia and chair of the NSW Climate Change Council. He helped establish and later chair the federal government’s Low Carbon Australia finance body. In essence, he’s been busy.

We talked to him not long after the announcement of a news $70.2 million investment and minority equity stake in Pollination by ANZ Banking Group, a cornerstone investment that certainly got Australia’s attention.

Tina Perinotto: So how did the deal come about, what was its structure and, with a growing team of high-profile people such as Tony O’Sullivan, Zoe Whitton and advisor Geoff Summerhayes, what does Pollination actually want to do with all that money?

“Things have been moving fast in the sector and so has our growth. We set up about two and a half years ago to bring together a team of people with very, very deep experience and a common purpose to work together to be innovative and drive the net zero transition.

“The business has got a couple of parts to it. One is an advisory part. We’re advising a lot of clients, governments, corporates and financial institutions on the whole transition to net zero. Another part is more focused on investment platforms.

Pollination’s first such platform was the A$8.3 billion HSBC platform, Natural Capital, in 2020, which was at the time the world’s largest natural capital manager. That was followed by a number of other platforms across a range of opportunity areas.

“We didn’t build a business to be a niche player”

“Since the start, we have been working to develop both in the investment and broader decarbonisation space. The business has grown fast since 2019 and a lot of the work that we do crosses all these different areas. Along with investments we are helping companies look at how they transform their businesses. To do that you have to think about what you divest, what you acquire and how you transform entire business models. That’s very interesting.”

TP: What is the size of Pollination’s business to date and what are the plans for the future.

“Our intention is to be a serious player in the global space over the next few years.

“We didn’t build a business to be a niche player. We will have a real impact and be a really serious voice. And we want people to invest in the products that we offer, we want people to take the money that we’re offering and want to be a partner of choice in making the transition to low carbon.

We have a big, ambitious growth plan. And we want to bring together people from very different backgrounds with very different thinking to be part of what we do – engineers, scientists, economists, lawyers, policymakers. We’re about to be hiring. Some of the people you’ll see joining us are quite different and we hope that will challenge us.

“We started with a small amount of capital from seed investors who we worked quite closely with, and then we did the HSBC deal,” Wilder said. “We made a decision that we really wanted to accelerate the business and to make sure we’re able to grow fast, bring products and services to the market place and always keep a step ahead. To do that, we needed capital.

“We did a SAFE note and raised about $18 million from a wide mix of people internationally – former CEOs, a few large institutions, entrepreneurs who had been successful in their private capacity.”

Blair Palase: So how did Pollination attract investors and business clients early on?

“Investors think we are a very good business, but like all the people who invest in us, we’ve found that many are very engaged on climate and the transition and that’s really important to us,” he said. “We are always open to collaborative partnerships in building our investment platforms.”

Wilder said many of his clients are very active in the transition space and that Pollination works with them to help these clients get access to the company’s expertise and to sustainable finance. Through that combination, he believes Pollination can really accelerate action.

“That’s part of the reason for the money raised with ANZ,” he said. “We need to be able to do things besides just advisory work, or making a start on investments. ANZ will take about 12 per cent of Pollination and that will help us attract new shareholders in places like Europe and North America.”

It also puts Pollination, in a very short period of time, on level with the likes of Macquarie Group’s green finance investments.

BP: How does Pollination’s investment platforms work and who can access them?

“We are developing a series of the best platforms. Anyone in the market can access our HSBC Natural Capital funds. At the moment we are targeting institutional investors. We are developing a climate growth equity fund that includes companies that are in a growth phase and we are looking at those who can contribute to reducing emissions in the hard-to-abate sectors, particularly transport, heavy industry and shipping – that’s in development.

“We’re also looking at infrastructure assets that are going to be critical to transitioning the economy by investing in equities in that space. And we’ve got a range of other platforms. We are also focusing on very, very early stage incubation projects and companies in the decarbonization space.”

One challenge is helping large investors with low risk appetites move into the space, Wilder said.

“We think there’s a big gap in the market in helping investors understand the opportunities and the risk. We can play a big part in making this area much more accessible.

“We are still developing the products that we will be taking to funds [such as super funds].

“The super funds have tended to invest at the higher end of the capital stack. They’re starting to have a look further down at other opportunities like those of private equity venture funds but they still will not invest in the development of ideas because, they say, they have an obligation to members. I think that’s a real failing.”

Super funds have an obligation to their investors but they’re not often top of the crop

Wilder said he believes super funds have an obligation to their investors and, he would argue, a fiduciary duty to support the development of ideas and innovation in decarbonising and hopes they will begin to see the opportunities there.

“We try to have conversations with super funds to change their thinking… It’s taking time but I think they are getting there. And I think they’re going to have no choice soon because they’ll have a lot of bad luck if you just stick to business as usual. If we take coal power stations out of the energy mix, even if they are diversifying their investments, the speed of change forces them to invest in other sorts of energy. They’ll probably then have to rely on investing with good partners and we hope to be part of that.”

TP: What’s the company’s investment criteria and metrics in determining who and what to invest in?

“Firstly, for all of our funds, Pollination has a very clear set of values that we are transparent about and in what we believe in.

I think it’s very important that we stick to those values and not just about climate but about the culture of the businesses we work with. Secondly, our commitment is to net zero and to nature positive and having real impact.

“We want to make sure that anything we do in the business has an impact. We are a profit-for-purpose company and we’re on our way to becoming a B-Corp. Obviously we are here to make a return to our shareholders but at the same time, we want to make sure that those returns are a part of our impact.

“So we have real metrics to measure that impact and ensure that we deliver that on the client side.

“We work with a range of clients who want to make sure that we’re never involved in greenwashing,” he said. “The important thing is that all of our revenue and all of our investments come from activities that are core to decarbonisation. Unlike other institutions that have very significant investments in fossil fuels, we are not doing that. I think it sends a strong message about who we are.”

TP: So is Pollination more about decarbonisation than other sustainability goals?

“No, we focus on ESG quite broadly and we do look at all the different impacts of what we’re doing, but decarbonization is a big part of that.

“A lot of companies are very focused on how to get to net zero over the next period. What role technology plays. What role offsets play. But we’re also focused on the social impacts – making sure that when you transition businesses, you’re looking after the work force and people.”

TP: What are the big global trends around sustainability and climate and what can we expect from the geopolitical tensions and their impact? Is this the perfect storm speeding up transition from fossil fuels?

“Sitting in Australia we face the stark challenge of the energy transition. We’ve got the base of our coal power stations but our energy system is transitioning. It’s very fluid. It’s been a great experiment for a lot of people to try new technologies.

“And then you hear people say we are saturated with solar. The reality is, it’s just the beginning. If we are to hit in the direction of 600 per cent renewable energy – which is what a lot of organisations are calling for – we will need to close down our ageing coal plants early, which is what Mike Cannon Brookes is trying to do.

“That fundamentally changes the demand equation. There will continue to be a massive demand for renewables, stability solutions and batteries and storage.

Expect a fundamental shift in global oil production and gas

“You look at what’s happening in Ukraine and how horrific that is, but then you hear the German Chancellor say we have to get off gas; we need hydrogen and renewables.

“I think we will see a fundamental shift in global oil production and gas and a real focus on energy security. People are saying, ‘we just can’t rely entirely on someone like Russia to supply European gas’.

“That brings us back to more renewables and hydrogen and another interesting dynamic. We need rare earth minerals to deliver that, a lot of them, and many of the reserves are in Ukraine. That means there’s going to be much more focus on where we can find them in other parts of the world, including Australia.

Electrification becomes even more important

“There are so many facets to the Ukrainian issue but most of all, countries just don’t want to take Russian oil and gas. So then you move on to the Middle East because the world’s not ready to get off oil yet and that’s not a great option either. There is no doubt, this could accelerate the energy transition very quickly. It makes electrification even more important.”

BP: What’s China’s role as a driver of climate action and what’s the importance of that to Australia?

“The fact is China is a leader in many areas of climate tech, particularly around solar, batteries and electric vehicles,” Wilder said.

“A lot of it is manufactured in China, and while they have a lot of coal, they are making a rapid transition to renewables with very aggressive targets. They have a massive emissions trading scheme. India is another important one.

“Again, they have a lot of coal but we’re seeing a rapid rise of renewable energy there. At the end of the day what’s driving it? A lot of this is because investors don’t want to take on climate risk and end up with stranded assets. There is big money in low carbon technology growth and businesses want to transition and get away from the old technologies, particularly when they find it harder to raise money and they think that those assets might just be a risk.”

BP: And what about the US?

“There’s no doubt the US is really divided. Silicon Valley is now very, very deep into climate funding but politically Biden is struggling to get policies up.

“At the end of the day America remains an incredible canvas for the development of new technologies for the uptake of renewable energy. Some states like Texas are moving incredibly fast but others aren’t moving at all. I think there’s a huge opportunity there for the transition and for the US to play a role globally along with areas like sustainable aviation fuels, electric vehicles, green aluminium and steel and decarbonizing supply chains.”

And then there are buildings

TP: What’s the role of the built environment in the broader decarbonising picture including embodied energy, building materials and the opportunities there for carbon capture such as injecting captured carbon into concrete. As the built environment produces 70 per cent of Australia’s emissions, is that an area Pollination is interested in?

“We are doing work for building companies and we’re looking at green cement and other options like timber buildings. I think there is much more interest in this now than, say, a year ago,” Wilder said.

“I chaired Low-Carbon Australia, which was the federal government’s organisation before the CRC and its focus was on energy efficiency in the built environment. One of the lessons we had even back then was that a lot of the very large Australian property companies were actually very advanced. It’s the middle level that needs a real focus.”

“To really tackle the issue you have to have a long-term commitment to addressing it and to see the opportunity it creates.”

TP: So how do you (and The Fifth Estate) deal with big Australian companies, many of them still completely dependent on and invested in coal,  who want to get credit for their few new green things they do – or who want to attract serious investment for green programs?

“Basically, the first question is, what is your decarbonisation plan, how serious is it, what are your targets and how committed are you?  

“Is there a fundamental commitment by the board and senior management to actually transition? We’ve seen quite a few companies that have very soft decarbonisation plans or they just announce a target with no actual plan to get there and it’s telling.

“Secondly, and I think this is really critical, is to ask if there a corporate commitment to really do something different or not?  To really tackle the issue you have to have a long-term commitment to addressing it and to see the opportunity it creates.”

See if the senior management is serious and beware the greenwash and

Wilder said that you can really tell if a company will be successful in making the transition by the senior management commitment.

“If a company has been trying to move their business away from old polluting industries into the new and they’ve got a plan, and it starts to be successful, they will probably exit more quickly. It helps to be encouraging, but you want to make sure that it’s not greenwashing.”

“The size of an opportunity like this has never happened before”

BP: It’s hard not to jump next to the failure of federal leadership to support businesses to reduce emissions reduction, make the energy transition and fund innovation. With a federal election ahead, what are the top three things he’d say to Prime Minister Scott Morrison right now on climate change if he had the chance?

“Number one, climate change is now embedded in all of our systems in Australia. Droughts, floods, fires…we can’t ignore it anymore.

“That these floods are supposed to be one in a thousand years but are happening much more frequently and at great cost is obvious. We are now seeing climate change impacts everywhere and in our ordinary course of events. So, in that regard, it’s happening.

“Secondly, the world is rapidly changing. We need support for new technologies and investment and real focus because the size of an opportunity like this has never happened before.

“Number three, the government plays a critical role in all of this. The transition is inevitable, but the government can play a big role in accelerating and influencing policy. That’s really important because we have an opportunity to transform our economy and do some great stuff. And the private sector is already behind that. The government should embrace the transition. It doesn’t mean getting rid of the old overnight. But we need to be able to really think broadly about how we can transform the Australian economy.”

We wrap up by asking Wilder how important UN climate advocate Mark Carney is in the global climate picture; he seems highly influential – is he a saint?

Wilder laughs: “I think Mark Carney has played a transformative role in driving change and he has used his position [former head of the Bank of England among other roles] to do that in a very successful way. It took a lot of courage, but it was also done in a political context where he was very supported. Glenn Stevens at the Reserve Bank also tried to do that but they did get slammed whereas the UK government really supported Carney. He’s been able to use his position to drive things like the voluntary carbon markets, the Task Force on Climate-Related Financial Disclosures (TCFD).

“So I think he’s played a significant role and his role along with others who have been real drivers internationally.”

BP: What about Carney’s relatively new role at Brookfield Asset Management and its attempted AGL takeover with Mike Cannon Brookes.

“Brookfield has raised a US$12 billion dollar transition fund and they haven’t spent much of it and are in the market for projects. It’s really dynamic and I’m sure they want to demonstrate what can be done globally. It certainly adds to the excitement factor on the investment front.”

TP: So is Wilder optimistic about where Pollination is going and where the world is going on the climate front?

“Yes to both questions,” he said. “I do worry that what’s going on in Ukraine will, on the one hand, take the focus off climate change but it has certainly raised the issue of energy security.

“I think it will have a ripple effect on global economies that could spur on those economies to be empowered on both energy and transport to speed up change. This will have many people and businesses around the world thinking about how they can do things differently and while I wouldn’t wish what’s happening on the world, it could be important in speeding up the transition.”