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Alicia Seiger

Managing Director, Sustainable Finance Initiative

Stanford University

January 3, 2023
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Ep 74: Alicia Seiger - Managing Director, Sustainable Finance Initiative, Stanford University
00:00 / 01:04

Michael Crabb [00:06:37] Well, hello, everyone. Welcome back to the next episode of the Energy Impact Podcast. We're joined today by Alicia Seiger, who's the Managing Director of Stanford's Sustainable Finance Initiative. She's a lecturer at the Law School. And there's probably three other titles that I could have used... We'll get into that. Alicia, great to have you on.

Alicia Seiger [00:06:55] Thanks for having me. Pleasure to be here.

Michael Crabb [00:06:57] Okay. Well, before we get into all of those cool titles and cool work, tell us about yourself. Where are you from?

Alicia Seiger [00:07:03] I was actually born at Stanford Hospital. I grew up in Menlo Park in Los Altos Hills. So Silicon Valley native and lived the bulk of my life here in this collection of zip codes.

Michael Crabb [00:07:17] Yeah. Kept it close to home.

Alicia Seiger [00:07:19] Yeah, I did.

Michael Crabb [00:07:21] What was life growing up then? Were you always preordained to be at Stanford at some point or how did that go?

Alicia Seiger [00:07:28] Well, the birth story is compelling. I mean, I was always compelled, you know, universities are fun places to be around. So, you know, I went to sports camp and stuff growing up, but... And I went to middle school... Well, elementary school, middle school and high school with the children of Stanford faculty. But my family had no affiliation to Stanford growing up, so it wasn't preordained. But I certainly had the sights set at some point and missed it for undergrad, but had the gift of going there for graduate school. So that was a pleasure. I did leave the state of California for my undergraduate degree, so I spent some time in North Carolina and then... At Duke, though not for any USC fans that got excited there. Don't get too excited.

Michael Crabb [00:08:13] My sister was a Tarheel, so I won't hold it against you.

Alicia Seiger [00:08:14] Well, there you go.

Michael Crabb [00:08:16] Okay. So you grew up on the West Coast and you're like, I want to go somewhere different or, you know, how did Duke come about?

Alicia Seiger [00:08:24] Interesting story. And as I have friends now who have kids who are going through the college admissions process, which is a brutal thing. I had been a good student and I was a student athlete. I did lots of extracurriculars, thought I might have my choice of an undergraduate institution and got kind of hammered in the undergraduate admissions process. Checked a box on a common application for Duke because I was looking for more schools where I could play soccer, which actually was Division Three, but I was going to fill out the form for just one or two schools, so I thought I'd just check the box for Duke. Might as well. And as it turned out, as the admissions letters came in, Duke became a top choice. And I remember touring it. I went up to visit Middlebury in middle of April, and it was snowing. And I was like, "What is that about?" And came down to Duke and people were playing Frisbee on the quad and it was about 70 degrees. And I said, "This will work." Yeah. So felt like Stanford, but 3000 miles away.

Michael Crabb [00:09:25] Oh, amazing. Okay, so you played... Did you end up playing soccer at Duke as well?

Alicia Seiger [00:09:29] I played club soccer at Duke. Duke, when I was there, was number two in the nation and was a little beyond my capacity. Yes.

Michael Crabb [00:09:39] Spending time in the classroom.

Alicia Seiger [00:09:40] Yeah. Right.

Michael Crabb [00:09:42] So what did you study and why?

Alicia Seiger [00:09:45] So that was interesting. I actually... I thought I was maybe going to be pre-med. I was interested in... I guess in medicine at that time. But it felt strange to decide your future when you're 18 by going into a pre-med track. So, kept my mind open to possibilities. And my freshman year, I took a seminar where the required reading was Al Gore's Earth in the Balance, and I just became transfixed with this question of how to maintain biological... Stability of biological and human systems. And that just hooked me. And I think there was a little part of me, too, trying to find my identity in college. You know, as the Californian, I was more about nature and the environment. And so that sort of started to shape my identity in some sense. And then as I was trying to figure out my major, I discovered this program that Duke has called Program II where you can design your own curriculum. So the entrepreneur in me stepped out and built my academic experience. So I combined environmental science and policy and cultural anthropology into a environmental policy and anthropology major. I'm the one and only person who has that degree from Duke... And combined that with a study abroad to Australia studying Aboriginal studies and reef ecology and sort of combining that kind of human and natural systems questions. And wrote my senior thesis on the opportunity for intellectual property rights to play a role in cultural... In preserving cultural and biological diversity, which really was kind of a through line for my career in some ways, but hard to translate that into a career coming out of college. So there were some stepping stones between there and here.

Michael Crabb [00:11:32] Fascinating. Yeah. Did you find that the reading and like you sort of gravitated to this subject, gave you sort of more guidance or direction than your fellow classmates? I mean, it sounds like so specialized yet so broad at the same time. Right. But yeah, it's not that different than choosing pre-med as an 18 year old.

Alicia Seiger [00:11:53] Right. Well, I would argue it was. I mean, certainly in the sense that, like, you know, you're pre-med at 18 you know you're going to be a doctor and you know you've got decades of study ahead of you. And, you know, you've made that decision at that age. I think that the course that I set out in college was one that was very expansive and unknown and very unclear how to translate that into a career. And that I really found when I graduated and I came back, you know, here I've been living in Durham... Came back to to my family in Los Altos Hills and looking around thinking what... You know, I can work for a nonprofit or an NGO and get... which wasn't satisfying to me at the time. And I also felt like I would be sort of getting coffee for people rather than doing the real work that compelled me. And so at that time, this was 1996, the Internet was, you know, existed, but it wasn't, nothing what it is today. And this thing called web advertising was something no one had ever heard of and had no idea why you would ever want to do that. And I found this very early stage startup where I was the ninth employee and built what was the beginning, you know, the foundation of what is, you know, pervasive now, terms of auction based real time, real time auction based web advertising platforms and that. So that really sparked my interest in entrepreneurship and my sense of place on the frontier of markets and in early stage ventures where you've got a meritocracy, where your creativity and effort and curiosity propels you to, you know, without limit. And that was a sweet spot that I knew I wanted to stay in.

Michael Crabb [00:13:36] And was that kind of a happy accident then? Or was there a tie somehow to the, you know... A very cool business, right? And very cool evolution of a market, but seemingly unrelated to IP and biodiversity.

Alicia Seiger [00:13:48] Totally unrelated. And I actually spent the summer working in a bike shop on Nantucket after I graduated, was not thinking about a career, came back here and really struggled to find my place. And so I had to kind of let go of this passion of purpose and find the passion of process and like this experience. But it took a while and I remember at one point being really down and my dad turned to me and he said, "You just got to get proactive." Which, being proactive is, I think, actually a real theme and core value of climate work and work in general. But I just went out and found the place that fit in that moment. But, you know, three and a half years in, almost four years in, when I was applying to business school, when the bubble was still building and hadn't yet burst, this idea of leaving, you know, a business development job in a rapidly growing Web advertising firm to go back to school seemed crazy when everyone in school was trying to get in. And I just felt like, "Boy, I've had an incredible experience. But keeping the Internet free is not the purpose and the mission that I want to spend, devote my life to. So let me cash this experience in for an MBA so that I can develop the toolkit and the confidence and the network that I want to have to go out in the world and build this intersection I haven't found yet of sustainability and entrepreneurship and impact. And so if I can't find it, I guess I'll have to make it." And so that was kind of the the transition back to business school.

Michael Crabb [00:15:28] Yeah, the essay kind of writes itself.

Alicia Seiger [00:15:30] That was it. Actually, I was on a run and trying to think about what... The question is, what matters most to you and why? Which anyone who's gone to the GSB has written that essay. And I had just seen a headline in The Times about unsustainable harvesting practices leading to a global chocolate shortage. And I'm very addicted to my chocolate, and that was a very concerning headline. And that's it. I'm going to write about chocolate. Yeah. Took a flier there hoping someone in the admissions office might also be passionate about chocolate.

Michael Crabb [00:16:01] Well, and it requires extensive market testing, I think.

Alicia Seiger [00:16:04] Yes, for sure.

Michael Crabb [00:16:06] So did you have some sense of what that intersection looked like when you went back to business school? Or was the plan sort of like, "Hey, I've got two years and a bunch of smart people to like brainstorm for what that'll be."

Alicia Seiger [00:16:19] The latter. Very much so the latter. And it's interesting because I now meet students in my role as a teacher and advisor who know exactly what they're doing. They come in, they know exactly what venture they're trying to build or what sector they're trying to... And that was not me. And it was also a very different time. There wasn't.... Climate tech wasn't the thing. Clean tech wasn't a thing. Even energy tech, you know, there wasn't... It just wasn't a thing yet. People sort of knew what climate change was, but it was way, you know, it was in the turn of the next century. People weren't really seriously putting attention to it, let alone building ventures around it. So it was...

Michael Crabb [00:16:55] This was late nineties?

Alicia Seiger [00:16:57] This was... '02. I matriculated in 2000.

Michael Crabb [00:17:02] So this is still like people are figuring out...

Alicia Seiger [00:17:05] This is 1.0. This is web 1.0 and people are figuring, yeah.

Michael Crabb [00:17:10] Okay, okay, okay. Very cool. So what was... Walk us through that process the. You're like, "Let me go to an MBA and figure out how I can, like, match this business skillset with your passion." How did that go?

Alicia Seiger [00:17:24] That was it. Well, I mean, it's great. The GSB is a pretty lovely place to be. I mean, it was like sports camp but with really smart people. So I definitely got that itch scratched. And then, you know, I just met incredible people. I expanded my horizons in every direction, really, so much more even than as an undergrad. And, you know, I was the president of the Environmental Management Club, the Co-President with the other member of the Environmental Management Club. I mean, that wasn't also wasn't the same on campus. You know, now the GSB Energy Club is the biggest, if not the second biggest club in the community. And I loved it. I made incredible, lifelong friends. I learned a ton. I lived experiences I never imagined. But I didn't come out like, "Okay, and now I know exactly what I'm doing." And so I had the great fortune of becoming a case writer for the Center for Entrepreneurial Studies, which is just a gift of an experiential MBA on top of the curricular one. And I got to work...

Michael Crabb [00:18:34] Can you give us a 30-second of what that is and like how that applied...?

Alicia Seiger [00:18:38] Yeah, well, how it applied is a fair question. But what it is... So, you know, the Stanford Business School is obviously synonymous with entrepreneurship and there's a lot of juice that keeps that engine flowing and that includes these incredible lecturers who teach entrepreneurship. And so they all, to teach entrepreneurship, they need cases to bring into the classroom. And so every year, one or two students is selected to be a case writer and to work with these lecturers and their networks to develop cases to use in the classroom. So I got to work with the, the legends of entrepreneurship at the GSB... Irv Grousbeck, Chuck Holloway, Joel Petersen, Mark Leslie, Jim Ellis. So this was just... That was incredible. And then I got to meet the management teams of these incredible companies and learn from their experiences. And then I got to write, which was also... It's a very important and underrated skill. And I wouldn't say I was a writer necessarily, but among MBAs I was a writer. And so that enabled me to fine tune that skill. And so... And then through this journey, I was thinking about, you know, my next steps, of course. And at that point, still, it wasn't, it was still murky. And to the extent I was finding places, I was looking actually more into medtech and biotech as a way to kind of keep this entrepreneurship theme and impact. But the energy climate, clean stuff still wasn't there yet. So I stayed on for two years actually as a case writer and then rejoined the management team I had been working with at Flycast, the web advertising firm, at for a year, which was fun and nothing wrong with that. But still, like not what I wanted...

Michael Crabb [00:20:22] I'm sensing a theme though. Chocolate, wine...

Alicia Seiger [00:20:24] Yeah, exactly. I mean, you know, you got to live your life at the same time. And then I saw this job. I actually had coffee with Rob Day who to this day is is been a great connector and friend in the in the clean tech space who's now a founder of Spring Lane Capital. And he connected me with this outfit, TerraPass, that had started as a class project at Wharton. It was one of the first players in the voluntary carbon markets in the U.S... And it was at that point like two students from the class that were going to keep the venture going after the class project, one of them was moving back to the Bay Area to be with his girlfriend, who in the small world that it is... His girlfriend turned out to be a friend of mine from growing up. I was actually, we were in the Palo Alto children's theater Alice in Wonderland production, where I was her understudy. She was the door mouse and I was I was the Three of Clubs, but also... And so I wrote this cover letter, as you can imagine, rather colorful color letter connecting those dots and became the first employee at TerraPass, which was finally that intersection that I had been looking for since I graduated from Duke.

Michael Crabb [00:21:39] And what... Yeah, what a path. What year then was this? I mean, like optional carbon accounting...

Alicia Seiger [00:21:47] Yeah, fall of 2004.

Michael Crabb [00:21:52] Yeah, yeah. So, like who... how much did you have to sell companies on this idea?

Alicia Seiger [00:21:59] This was web advertising all over again, right? Like in the mid-nineties, you're going to agencies and firms trying to explain to them what web advertising is and why they would want it. And this was the same story of like what is a carbon offset and why do you want it? I will say at the time there was you know, there was a core dedicated group of committed people. In the first... the original model was B2C. So it was selling direct to consumer. You know, we sold bumper stickers and you'd see TerraPasses on cars everywhere, which was pretty fun actually for a small company, you know, working out of like Tom's kitchen and then my living room and like, "Oh, look! Look at all these TerraPasses..." But then what I did was build out, I was business development, so I built out the kind of B2B partnerships. So building out partnerships with Ford Motor Company to have a TerraPass come with their, you know, with some of their vehicles. We worked with Sam's Club to, you know, have a carbon balanced leaf blower, like things like that. Enterprise Rent-A-Car, when you'd rent your car from Enterprise, you would have the option to check the box. You know, now this stuff is everywhere. In 2004, 2005, no one had conceived of these ideas. So built out the channel partnerships and the B2B piece of that. And at the time, you know, you have to remember that 2004, 2005 offsets just were avoiding emissions and balancing out your emissions was progress at that time. We are past that time and we can come back to it. Now we need... We're talking removals. And we were working with the Chicago Climate Exchange and doing bilateral transactions to retire credits on that Chicago Climate Exchange. We were probably one of the first targets of a Ben Elgin carbon offset hit piece who now you know, he's a reporter now Bloomberg. Newsweek or Business Week... I can't remember at the time, but I remember the day when that story came out was one of the most disheartening and disorienting moments in my career where he just tore us apart and ripped apart that that idea of offsets and some of our... and one of our projects in particular, which was upsetting and, you know, quibbling with the details, but it was really catalytic in that it launched TerraPass into an origination business where we went in and started and built out teams to originate these projects. And I, you know, I still stand by the quality of the TerraPass of that time. It was then sold to another company and brand is not what it was before... But that was... Yeah, a journey that started my journey into the intersection of entrepreneurship, sustainability, impact, into carbon markets, which I still think a lot about today and into sort of market based solutions to climate.

Michael Crabb [00:24:53] Yeah. Wild. Okay can I... I don't want to dredge up too many rough memories, but I think it's helpful to kind of explore like, people are super catty about all of this stuff. Right. And I imagine from how you described it, he was like, "No, this is good. Like this idea is good, but execution is..." Right? He was arguing that the execution of the offsets weren't actually accomplishing what you sort of said they were, right?

Alicia Seiger [00:25:24] That and...

Michael Crabb [00:25:24] He wasn't arguing that like climate change wasn't real, right?

Alicia Seiger [00:25:27] Right. He was not arguing that climate change wasn't real, but I think he was arguing offsets are just paying for your sins. And, you know, the act of them is bad. And the actions that are being taken on their behalf are bad. So it was both.

Michael Crabb [00:25:45] And yeah. And so you're like, "Gosh." You're living this everyday, but you're like, "Huh? Well, I mean, that's a good point but impractical..." Or like, "Hey, we have to start somewhere..." Like walk through, you sort of finally found this perfect intersection right? And I know in reality, it's not really like this...

Alicia Seiger [00:26:02] Like playing my tiny little fiddle... violin.

Michael Crabb [00:26:03] Yeah, you're literally creating a new market that people don't even know they want or need yet. And then you've got someone that's supposed to be on your side coming out and, like, you know, probably making some good arguments and some B.S. arguments and like how... Walk through how you sort of dealt with that and how the team... I mean, it's easy to be like, "Oh, we just pivoted." But it's never like that, right? Like it's painful, you have to process it. Like how did you do that?

Alicia Seiger [00:26:36] Pain and process. I mean you're right. And actually back to Palo Alto being the cradle of like all things Ben Elgin went to my rival high school... So a lot of introspection, a lot of investigation to understand like what was being called into question and was that appropriate? And regardless, how do we protect ourselves from this going forward? And the postmortem, I think, was our view was actually what we were doing was appropriate but understandably open to scrutiny and concern going forward. And so we needed to... We decided to take that opportunity to become industry leaders in quality of offset projects, origination and verification. And so I think it was, you know, after the initial just gut wrenching, like soul searching, oh my God. And embarrassment. I mean, thinking about, you know, here I'm out like the sales BD person talking to my, all my network, and then this story comes out and they're, you know, you don't have a chance to offer your rebuttal to it at the scale of, this was you know print magazine days, and so embarrassed you know what my friends and colleagues were thinking of me. And so there was the regrouping, the rebuilding, which I think was, like I said, catalytic and very useful. And what continued was ongoing frustration between, you know, in the offset market, you're only as good as your worst competitor because the players that are doing the junk projects and the junk offsets, that then defines the market. And this was also another eye opening experience in that I learned that non-profits aren't necessarily better or good, they just have a different tax structure. So there were nonprofits in the space doing the worst stuff.

Michael Crabb [00:28:28] Yeah.

Alicia Seiger [00:28:29] And having to explain that we were a for profit business in this area that was called into question for its integrity. And we were for profit. So we must be the... you know. And trying to artfully and delicately walk people through, you know, the forrest of, the maze of quality, while navigating the, you know, tax structures and assumptions people have about those was was challenging, but also a great exercise. I mean, all of it helped fortify me for what I'm doing now. But, you know, drawing a few of those lessons, I think this idea of not letting the perfect be the enemy of the good in climate work is really central because we need all hands on deck, all shots on goal. They're not all going to be perfect. There are going to be missteps. What's challenging and increasingly so as we get closer to the timer going off is the rigor. You know, we also need rigor. We can't just... Don't let the perfect be the enemy of good. Let's do all this. We need to keep ratcheting down. We need the continual improvement. And so that's the tension. And you've got very well-intended people doing what they think is best or good or right. And you don't want to crush people's souls and enthusiasm, as you know, and I have that experience. But you also want to you know, we all need to keep ratcheting to refining towards impact and efficacy and efficiency and getting CO2 out of hemispheres. So like that's a tension that people in this space obviously need to continue continue to navigate.

Michael Crabb [00:30:06] Yeah. And one conversation that you continue to be a very active participant in. So I want to dig into that for sure. But let's finish the last maybe decade and change and how you went from this, you know, frontier of carbon markets to now a professor at Stanford and everything else that you're doing. Advisor and everything else.

Alicia Seiger [00:30:29] Yeah. Well there were some babies in there... Which sort of changed, you know, I had two start ups at home and didn't want to be managing a startup professionally. So shifted gears to doing independent consulting for a while where I worked with family offices and foundations and NGOs around climate and energy strategy, just packaging my experience and skill sets into different partnerships and engagements. And that was... What that chapter really taught me was the challenge of strategic philanthropy and climate. And got a real front row seat around the opportunity set and the tools and tactics of philanthropy as it related to climate and identified areas, could see quickly areas, that really needed improvement there. And that is what started me on my relationship and my number one... Earned me my number one fan post for Prime Coalition, which is a nonprofit based in Boston. And I ran... I met Ceres a few years into that journey and have been a long time champion of their work and board member now. And Prime connects philanthropic and catalytic capital with climate solutions and really efficacious in high impact ways. So that sort of started that thread. It also gave me a front row seat of seeing a disconnect between foundation endowments and foundation grantmaking. And this was kind of around the beginning of the divestment movement. But seeing kind of how disconnected the two sides of foundations can be, and in working cross-purposes with their endowment portfolios invested in destruction and their grantmaking portfolios, invested in trying to put Band-Aids on that destruction, and thinking about how to work more holistically and systemically through those challenges. And then I had seen...

Michael Crabb [00:32:29] Beyond that, that disconnect is mission alignment disconnect between two parts of the house that effectively have separate management teams.

Alicia Seiger [00:32:38] Yes. And there's a lot we can talk about there. But this Climate Strategy Partners chapter was stirring up these kind of thoughts and questions and opportunities. And then I...

Michael Crabb [00:32:53] You must have been seeking... I mean, someone was seeking you out to solve this or were you saying, "Hey".... Were you walking in the door and saying, "Hey, guys like this doesn't make sense?"

Alicia Seiger [00:33:01] Well, so this has sort of been part of my journey too... I mean, people were seeking me out to solve other things, and then I could spot these problems. So I helped launch Advanced Energy Economy which is what... With with Tom Steyer and his team at that time. And so that's sort of what got me into the Steyer orbital, which led ultimately to the Steyer-Taylor Center at Stanford. But I went into philanthropy, worked with the Schmidt Family Foundation, the 11th Hour Project, and I got... That was the perch from which I developed my perspectives on strategic philanthropy and on alignment with endowment and grantmaking. Not necessarily... I don't mean that as a critique of 11th Hour or Schmidt. I mean, just like you're in the world and you see things you don't see otherwise. So that was... So I came in to do, you know, grantmaking or to do, you know, to develop businesses or whatever it was. But I developed perspectives that I wasn't being paid for through that journey. And I carried that with me into my next chapter in terms of the types of solutions and types of opportunities I wanted to pursue because of what I learned in that in that chapter. And then coming back to Stanford, you know, started as a consulting engagement. These centers and initiatives on campus get started, you know, with great conversations between benefactors and the development office. And then, you know, the gift comes in... They stand up a thing, they name it. And then like making a there there is another exercise. And faculty are brilliant and great researchers and great teachers, but they aren't business builders and connectors and entrepreneurs that are going to make their thing a thing. So I came into the Steyer-Taylor Center for Energy Policy Finance, which is a joint initiative of the business school and the law school around 2011 and then 2012 full time, to make it a thing. And I saw it as really a way to get back into my entrepreneurship mode. But as an entrepreneur on campus, leveraging the assets of the university to develop and deploy climate solutions through the business school and law school and the resources that were available to me.

Michael Crabb [00:35:13] Awesome. Yeah. It's like all of your experiences channel...

Alicia Seiger [00:35:17] Yeah, they came back!

Michael Crabb [00:35:19] ...channeled in to one place.

Alicia Seiger [00:35:20] Yeah. It all makes sense in the rearview mirror. I will say that to students I advise to... I couldn't, I didn't chart it but looking back at it all makes sense.

Michael Crabb [00:35:29] Yeah. What did your dad say? Be proactive. I mean...

Alicia Seiger [00:35:32] Yeah, you got to be free.

Michael Crabb [00:35:33] Yeah. I mean, it is a valuable lesson. Like it is worth us pausing and saying it out loud that like, no one can really predict where their life ends up. And so you have to sort of make decisions in the moment with the information that you have and make it what you can. So I don't know. I feel like a lot of people come into climate, come into energy and they like, they don't appreciate the scale and enormity of what we're talking about. And, you know, the two major problems are like energy access and energy impact. And it's like, yeah. Like, learn a bit about it and then... like let's make marginal improvement, like, you know, get it rolling downhill. And so it's just a great, I guess, an observation from a number of conversations. But anyway, more about you building this thing and making it a thing. Yeah. What was that? I mean, in the last decade, what was that? What was that like? What were the biggest challenges? What are you most proud of?

Alicia Seiger [00:36:31] Mm, I am most proud of the relationships I've built with the students over the years and the wind that I've been able to put in their sales and what they have gone on to do. And the grace they have shown in dropping me, you know, notes or coming back to campus to say it was your class or the conversation I had with you that launched this. That feels... That is such a gift. And makes me feel so leveraged. You know, climate is such an overwhelming problem to be working on and any one thing you're doing feels like it's not enough. But if I can launch, you know, dozens or 100 of, you know, Stanford graduate students into this conversation as the next generation leaders, that feels really good. The challenge is, you know, it's funny, working in academia is a weird place, particularly as an entrepreneur. If you are not a tenured faculty, you are not a tenured faculty. And that doesn't compute. And so you have to figure out how to get what you need out of the experience and give what you can give. Set ego aside and drive towards the impact you want to have. And so that, you know, that's a continual process of navigation. Also, it's the, you know, it's a huge bureaucracy. It is not a meritocracy, but you've sort of... I've carved my path and I've found the places that I can can have real impact and and thrive. And teaching is something that has evolved over the years. That's now my sixth year. Was not something I ever thought I would do. I'm not a lecturer. I'm a doer, you know? But I was on my soapbox for so long about the dearth of curriculum for particularly Stanford Business School students on climate risk and opportunity. And we needed to be training them. And, you know, the motto for the GSB is Change lives, change organizations, change the world. And how can we do that if our students aren't armed with the information they need and that in the data and the tools and frameworks to lead through a changing climate? So I ended up teaching and that has been, you know, that really been the sweet spot of these relationships with these students. But it also helps me learn and stay current. And as you said, you know, just a minute ago, when people come to work on climate, it's a big, complex system with lots of moving parts and lots of complexity in time, in geography, in political economy and multiple, you know, cross sectors. So the class, the seminal class that I teach is is a journey through climate, past, present and future on the pillars of politics, finance and infrastructure. Infrastructure being both the physical infrastructure, but also the institutions through which climate plays out.

Michael Crabb [00:39:28] It's like seven different dissertations all in one probably.

Alicia Seiger [00:39:32] It is, it is. And it's a class once a week for 2 hours, and each session could be an entire class. So it's definitely a firehose and the wonderful thing, and I'm so fortunate to be able to teach Stanford graduate students, is they can handle that. You know, you just fire away and they will take what they want from it and run with it. And, you know, it's not... I'm not really teaching. I'm steering, you know, I'm sort of guiding, you know, river guide for them. But they're all smarter than I am, so they they can pick up what they need and run with it. Yeah.

Michael Crabb [00:40:07] They maybe have different perspectives or different learnings. I don't know about smarter. I do want to maybe explore the thought that you had a little bit earlier. Right. Which is like, okay, you see this breadth of perspective. You're on the front lines of conversations with students, with faculty, with entrepreneurs... How do we find the right balance between kind of narrowing in on what we need to do versus leaving the top of the funnel as broad as we can?

Alicia Seiger [00:40:35] Yeah.

Michael Crabb [00:40:36] For future solutions.

Alicia Seiger [00:40:39] Well, I've been waiting this long to get into carbon accounting, which is where people are like,"Oop! Got to go and go to sleep.".

Michael Crabb [00:40:46] No, let's get into it!

Alicia Seiger [00:40:46] But let's get into it because it embodies this tension. Because we have been operating in a voluntary arena on climate action for so long, because we can't... We, the global climate community... Can't get our acts together for very understandable and like very long standing diagnosed reasons why, you know, the UNF triple C process has not resulted in the like global price on carbon for the last 30 years. So not making perfect the enemy of good, well-intended, passionate, committed climate champions have been trying to move mountains to get what we can get done in a voluntary regime. And that has evolved into this practice of net zero and climate disclosure. And I've been pushing with, you know, the broader community around these topics for decades now to try and get companies and investors to measure the climate impacts in their portfolios, disclose that, and to drive towards decarbonization out of both mitigating risk and capitalizing on opportunities. That is all very sound and logical and critical, particularly in the absence of policy. And now we're seeing patchworks of policy, all subscale, although the Inflation Reduction Act, I think, pulled me out of depression this summer and is a big, huge win. But as we all know, it's not enough. And so what we have now is a system of pledges and voluntary pledges and data that is... and tools that aren't fit for purpose in achieving those voluntary pledges. And the challenge as we ratchet and try and implement of a lack of managerial obligations to actually spend real money to achieve these targets which are going to require reallocation of capital. And at the core, at the foundation of all of this work, is the greenhouse gas protocol, which was a brilliant and necessary tool developed a couple of decades ago as a proxy for risk management, to understand, you know, in anticipation of a global carbon price, you know, what's that going to do to a firm? It was never meant as an accounting system. It was never meant to compare companies. And yet it is the tool that we've been using to measure a companies' carbon footprint... You know, we were using this at TerraPass, you know, doing our carbon footprinting for businesses and households. And so this is, gets back into the where the perfect, you know, where we need a little more perfection. And the good is not good enough. Because as we drive towards implementation of net zero pledges, we're doing it on kind of a house of cards or a sandcastle of data because the protocol is not... We need to move from counting carbon to accounting for carbon. And so the protocol is counting carbon by adding up scopes one, two and three, but that is detached from actual emissions in the atmosphere. And so... Remember our scopes. Scope one, our actual emissions in the atmosphere, scopes two and three are reassigning someone else's scope one emissions to another for the purposes of, you know, anticipating implications of carbon pricing or for the purposes of advocacy, which is important but different than an accounting system. And so what we need is a system of accounting for carbon where you understand a product or service's carbon impact from cradle to gate because that's where it is auditable and measurable. And so each time a product changes hands in a supply chain, it is the emissions associated with that... the scope one emissions associated with that product are accounted for so that by the time you have, you know, I have my iPhone from Apple, I've got... I know the emissions, and we'll call them emissions liabilities, associated with this phone. That then that creates a system on which you can manage your account. So if this is... And then this ties back into how to fulfill net zero pledges, whether this liability then transfers to me when I purchase it, or whether Apple, in its pledge to be a net zero company, retains that the emissions on their balance sheet. But by tracking emissions through a supply chain, you have a measurable, monitorable, auditable carbon value associated with every product and service that then mandates what we've called an emissions liability management function, where you have to balance those emissions that are associated with these products and services to an actual number. And that then builds a foundation for carbon market development, for increasing the cost of capital on high emitting firms, for aligning corporate, national and global carbon ledgers. You have the actual counts, you have the actual ledgers for carbon accounting. And so this is back to the sort of perfect being the enemy of the good this is a pain point. Right. This is back to that Newsweek article in 2005 or 6 where it's like, "Oh my God, I have all these people who are using the protocol to mark the start of their net zero pledges and are trying to drive down their numbers to these normative targets." Those numbers aren't real. Those numbers are double, triple, multiple countings of emissions, which if it were double counting, that'd be fine. We'd cut it in half and you'd be done. But it's not. It's an indeterminate count of emissions. So you don't actually know what emissions are embedded in your products or services, and therefore you're responsible for, which makes it very hard to to manage them down. And so we're at this moment where we need to reset to a level better than good because we've got a time test here and the activities that we're doing right now aren't going to get us where we need to go. We need actual carbon accounting, and that's a really tough spot for people who have invested so much in the development of, in the application of the protocol. We've invested so much in this in this global architecture around net zero. And, you know, the net zero pledges and all this stuff is built on this system that as people go to implement it, they're finding it's not... It's not enough. It's not working to get them where they need to go. And in particular, it's lacking the management obligations to make material investments in decarbonization of supply chains and of these technologies in industries that aren't currently, you know, in the money. And so that, what real carbon accounting would do, would be to create the managerial obligations by balancing your balance sheet that would then enable companies to make real investments in decarbonizing their supply chains. And that kind of... The missing pieces of managerial obligations and clear boundaries, which is what I was getting into with the moving from counting scopes to actually counting carbon is what are the ratchets we need to make this suite of activities around net zero targets and pledges actually land. And that's a real tough one in making you know in this sort of, "Well, we don't want to make perfect the enemy of the good..." If we know something isn't working, we don't have time to waste.

Michael Crabb [00:48:48] But how does perfection in this system... Right? I mean, isn't this... What did you say earlier? Just pay for your sins?

Alicia Seiger [00:48:58] Yeah.

Michael Crabb [00:48:59] I mean, it's a little bit like a balance sheet, accounting liability, without the opportunity to actually retire it with a true... I mean, are you saying you retire that with an offset or you retire it with some sort of direct capture? Right. I mean, because the only way to truly counter that liability is to suck it back out of the air and without a real energy efficient source for that... Right? Or maybe that's the implication is that price matters to your marginal price of sucking carbon out of the air, which...

Alicia Seiger [00:49:32] So you got it. You went right to where... to tying this whole conversation back together back to the offset market and how balance sheets actually create the market integrity that is missing in the current state of voluntary offsets because these liabilities are essentially permanent. CO2 in the atmosphere for hundreds of years. Nothing less than that you can do. You know, you can make these calculations according to the shelf life of the greenhouse gases. But these are much longer term liabilities than the current practice of net zero it accounting for right. Which is accounting for them as a flow. It's like, "Oh, I had these emissions this year, I buy these offsets this year. Tear 'em up, I'm good." Wait a minute. Actually, those emissions from this year are there for 500 years. And the thing you tore up might also burn up next year. And then not only did you not balance your emissions from that year, but you also created new scope one emissions that no one is accounting for. And so the balance sheet, the elegance of the balance sheet, is it creates this structure and the framework to manage these long term liabilities. And then your question is, "Well, how would you?" So you're right. The only way you permanently retire a liability today would be to suck CO2 out of the atmosphere and store in rock for 1000 years. That's many hundred dollars and, you know, $700 a ton. Whatever the latest pricing is. That's expensive. But you don't... So that creates kind of the reference asset price. And then you can... Markets will develop their forward curves around how to drive that price down through investment in those technologies. In the meantime, what we really need, coming back to offsets and nature, is the preservation of our natural carbon sinks, which we're struggling to develop the investment mechanisms to protect. If those are then priced accordingly, it creates the opportunity for investment in those assets and to hold them appropriately. So you've got a natural sync. There are now... There are questions of course around ownership of those assets. This is where the alignment of ledgers come up, right? Like if those assets are actually owned by the Indonesian government and they are part of, their preservation is actually part of, Indonesia's nationally determined commitment. So really those shouldn't be for sale. So you get into questions of what's actually for sale and who owns it, which again brings integrity to the carbon markets that's missing. But let's say here in the US you've got some forest in the northwest that meets... additionality criteria meets the legal hurdles which we need to develop and structures to develop to understand what's a salable asset. But that then becomes, you know, the asset that's matched against the liability, but it is matched, you know, annually. And if it burns, it's a new scope one emissions. And you've got to account for that and you've got to find something else to balance. But it becomes a... And so the question of quality on nature based solutions isn't... It's okay if they're not permanent, they can be priced according to their duration, but they need to be... but the balance sheet needs to balance every year. And so you create the opportunity to invest in what we know we need to invest in in terms of nature and natural carbon sinks. But we do it in a way that has integrity on the permanence issue and manages that through a carbon balance sheet.

Michael Crabb [00:52:55] Interesting. Okay. I'm going to ask a poking question.

Alicia Seiger [00:53:00] Yes.

Michael Crabb [00:53:02] Okay. Is that the lowest hanging fruit? As we sit here right now. Like I hear you. I love nothing more than market based solutions. I'm from the Midwest. I've got the street, the libertarian. I love it. You're basically... I mean, I think in order for that system to work, it needs an enormous amount of resources broadly defined around like policy change, gap in IFRS changes, like tracking and recording. Like is that... In the next three years, is that where the biggest momentum comes?

Alicia Seiger [00:53:42] So, very good question. And as we know in all things climate, we have to walk and chew gum. Right? This comes back to the all hands on deck. We have to do it all.

Michael Crabb [00:53:50] There's always trade-offs and there's always balance.

Alicia Seiger [00:53:51] And there's always trade-offs. So here... So my like prescription. Higher frequency scope two emissions. We've got to get scope two right. Like right now annual emissions for scope two doesn't make any sense and totally destroys incentives around like decarbonization of grids. So we can get better on our scope two accounting to drive more decarbonization of the electric power sector, which we all know, we need to then electrify everything and have it be clean. So yeah, start there. And that's happening now and we can do that wisely. And at the same time we have to start to come to accept that this system of counting scopes isn't going to cut the mustard. And so we need to start to steer the tanker in the direction of E liabilities and carbon balance sheets. How do you do that? Will you do that? We're already E liabilities is just upstream scope three. We just need to do it better. And companies are already asking their suppliers far flung places of the world to report their emissions, which God help us all how that like is going to get done. But it needs to... If we're going to do this it needs to get done. The difference is with a system of E liabilities, when you get the data right, and the hardest part is stuff changing in the ground, right? Like what are the sensors and what's the monitoring and how do we actually know the carbon flux in these like... Changes to our natural system. That's going to be hard. Electricity is easy. We know that. Like but those things are... So you go all the way up the supply chain. It's hard stuff but once you... We need that innovation. We need that technology. But once you get that, in a system of E liabilities, it'll matter because you'll have the data to then carry through the chain very clearly. In our current system, there's no incentive for solving that because you can use estimates and it does... And the data is all mushy anyway. So who really knows? So, it's going to take time. But we're already doing a lot of the activities that would line up with this system. We just need to get a clear on where we're heading. So while asking for this data from the supply chain, account for it like you would cost accounting or your value added tax and do this kind of E liability system instead of adding up your scopes. And then by the time you... So then we can solve this ... cradle to gate piece. So that's fine tuning what's already being done. Then we need to kind of let go. It's the gate to grave part that really upsets people in this idea of transitioning to E liability system because it's like, "Wait a minute, oil and gas companies, car companies like all that, you know, 90 plus percent of emissions are scope three, right?" Well, of course, they are. Because they're... Well, first of all, they're counted... It's an infinite number, but it's, that's us. That's the car you drive, the flight you get on, the light you just turned on. And so what we need to come to this point of recognition that the downstream stuff... The markets are not going to solve the downstream piece. We need policy to solve the downstream piece. And you're seeing... An exciting thing as you're seeing it. You're seeing it with EV mandates, targets, efficiency standards, you know, carbon border adjustments like that's all... The wheels are turning there. And then you're still going to have leading companies that are going to say, "I care about my.... I care about my cradle to grave emissions and I'm going to just voluntarily make zero emissions product." Great. And then for, you know, we also can see how this breaks down with automotive companies. You know, if you try and force companies to manage scopes outside their boundaries where they're having to estimate data and they have no control over it, you get a ton of gaming. So automotive companies in the EU who are now having to report their scope three, they're saying, "Oh my, you know, my car that used to run for 100,000 miles, that's your warranty. It's now ten because I'm going to replace the spark plug... I'm going to put put spark plugs in that that are no good after 10,000 miles and once you replace the spark plugs it's not... The warranty is dead. So I just reduced my scope three emissions by 90%. Go me!" Like that stuff is just... It's nonsense and that's where we're heading. And to your point about how do we, you know, IFRS, ISSB. Yeah, but look what's happened in the last two years. I mean, no one was even using the word net zero four years ago. Now you've got, you know, 80% of corporate America, $150 trillion and G fans all aligned around it. You've got this new International Sustainability Standards Board... You've got like... People are talking about this stuff at levels and with seriousness no one was talking about even a couple of years ago. So we're just fine tuning it. Either people are serious and they want better tools to get it done or they're not serious. And they know that what we have now is a game and we'll say... Well, whatever we can say to look good and we know it's going to be of no consequence. But I don't want to live in that world, I want to live in the world where we're serious about this and we know we're going to have to reallocate capital. And this system would give us the tools to actually do that with clear boundaries. And real managerial obligations and dealing with these issues of timing.

Michael Crabb [00:58:59] Amazing. Well, I'm glad you're on the front lines getting it all figured out.

Alicia Seiger [00:59:04] Well, I'm the Chief Recruiter for the Climate Army because it's not...

Michael Crabb [00:59:10] It's great. The truth is, some are one and some are the others. And the people that are serious need that right path. So...

Alicia Seiger [00:59:17] Yeah. Right.

Michael Crabb [00:59:18] Yeah.

Alicia Seiger [00:59:19] And that gets back to the TerraPass story. Like, we were serious. And so, you know, it hurts to feel like you might have done something wrong or you're on the wrong path, and you got to just, like, regroup, dig deep and build the path that's the right one. We can't... We have to have humility and have to get proactive.

Michael Crabb [00:59:39] Love it. Amazing. On that note, really great talking with you. Can't wait to see you be proactive here in the next decade.

Alicia Seiger [00:59:48] Well, thanks so much, Michael. A pleasure talking with you.

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