Good afternoon, welcome and thank you for joining our 2022 Climate Forum.

I'm Chris Wolf, Chief Investment Officer of First Republic Private Wealth Management.

This year's forum is a two-part webinar series focused on the future of energy and agriculture.

It features leaders in these fields who seek innovative, short and long term solutions to address key climate concerns.

We hope that you'll walk away from this forum with a greater understanding of the innovations underway to support climate change, and that you'll feel better informed about the opportunities that lay ahead.

Today's session is dedicated to the future of energy, climate, policy, and innovation.

As this movement to net zero continues, we will explore how governments, innovators, and industry leaders are tackling climate change driven by economics, policy, and demand.

We'll also discuss the investment opportunities created by this energy transition.

Now at First Republic, we are dedicated to managing our impact on the environment.

Here are a few of our proudest accomplishments over the past year.

We reached carbon net neutrality for the first time, we purchased a hundred percent renewable energy for our operations, and we formalized our longstanding position of not lending to fossil fuel companies by updating our loan policy to restrict lending to those industries as part of our commitment to creating a more sustainable future.

Now you can learn more about the environmental efforts of First Republic in our corporate responsibility report, and we will post a link to the report in the chat section where you can find the report at the website, at our website at firstrepublic.com as well.

Now to lead today's conversation, let me introduce you to my colleague Kelly Johnston, President of First Republic Trust Company.

Kelly has over 28 years of experience managing multi-generational family wealth, overseeing the administration of complex trust and estates, and leading several family wealth service initiatives.

Kelly is passionate about the environment so she is the perfect person to lead this discussion.

Kelly, it's great to see you and thank you for joining us.

- Thank you Chris, and good afternoon everyone.

I am delighted to join today's discussion on the future of energy.

In this session, we'll focus on three main topics.

Climate, policy, and innovation.

We're eager to hear what's on your mind so if you have questions during the session, please pop them into the Q & A bubble that's at the bottom of your screen.

Now it is my pleasure to introduce Dr.

Michael Webber who has dedicated his career to energy.

He's the Josey Centennial Professor in Energy Resources at the University of Austin, and CTO of Energy Impact Partners at Clean Tech Venture Fund.

His expertise includes research and education, which focuses on the convergence of engineering, policy, and commercialization.

Dr.

Webber has authored over 400 publications and holds six patents.

Welcome, Dr.

Webber.

- Thank you so much.

- It's good to be part of this conversation with you.

- Thank you.

Well, in addition to our sharing a passion for sustainability, Dr.

Webber and I both value promoting environmental stewardship.

And in preparing for this session, we realized we have something else in common.

We both just bought a Ford Mustang Mach-E.

So before we get into the meat of our discussion, Dr.

Webber, I have a practical question.

I'm sure there are many people with us today who are also considering an EV.

Will you share with our guests what you told me about your analysis and the savings you've calculated in choosing your Mustang? - Yes, happy to.

See, I've got a Ford Mach-E electric Mustang.

I just took delivery in May.

It is the best car I have ever owned or driven.

I love it.

I can't imagine any better.

There's a little bit of backstory, which is when my wife and I were first dating, we've now been married 27 years.

We dated for several years.

She had a '67 Mustang convertible.

It was a great car but it was kind of a piece of junk by the time we had it 'cause it been decades, it was falling apart.

So we had to spend hundreds of dollars a month just maintaining it.

And then we got married and moved to California.

I was there for 11 years in grad school and all of our kids were born in California, and we decided that the Mustang could not make the drive to California.

It would not survive, it would fall apart so we sold it and we've regretted that ever since 'cause if you're ever gonna own a convertible, California is a great place to own a convertible and it's just a great car and we just missed it.

And so we had the chance when this electric Mustang came out and the reviews were fantastic, and I actually got to see it at the Consumer Electronic Show in January 2020 in Las Vegas before it was really available.

I looked at it and loved it.

So I put down a deposit in January 2020.

I didn't know at that moment I was probably getting infected by COVID by the way in Vegas.

I was an early adopter of COVID, but I put down my deposit end up actually like placing the order in January 2022, and took order in May 2022.

So I've had it a few months, and it's just a fun car to drive.

It's got so much zip and acceleration, it's so quiet, it's so smooth, it's so comfortable, but it's a huge sort of financial benefit in addition to being an environmental benefit.

I did a sort of analysis on just the fuel savings that the cost of the energy for gasoline for a car I was driving before, a Ford C-Max, a hybrid, I did about 40 miles per gallon compared to the electric vehicle, and the time it takes to fuel up.

And I conclude I'll save about $900 a year just on fueling for the car, and I have solar panels and solar credits.

I'm not gonna have to pay for the energy of the car for another few months.

So it's about $900 a year just on energy savings 'cause electricity is so much cheaper than gasoline.

And there's also a time element.

When I go fill up with gasoline, it takes like five minutes to fill up the tank, which is quite fast, but I have to go stand there and fill it up for five minutes.

And at home when I plug in it takes like 15 seconds a day to take the cord and plug in the car and unplug it every day.

And I do that about five times a week and I added up all the time at plugging and unplugging versus fueling over the year, and it's like an hour a year to plug and unplug the car if I do that 260 times.

But it takes like two and a half hours a year just to fill up my car with gasoline, and that's 'cause I have a gasoline station on the way home.

If I had to go like 10 minutes out of the way to get gasoline it'd be even more time.

And let's say say my time's worth 50 bucks an hour or something.

Well, that's like another $125 an hour per year of savings on time 'cause I can fuel up a home while I'm having dinner, or sleeping, or something.

So it's big savings and then the maintenance is cheaper.

It's like 3 cents a mile to do maintenance on an electric vehicle and about 6 cents a mile for a gasoline or combustion vehicle.

So it's half the cost.

So you add that up, and that's another several hundred dollars per year in maintenance savings.

So well over a thousand dollars a year I'm gonna save on time, maintenance, and energy for my electric vehicle.

And it's a more fun car and it's cleaner for the environment.

So it was fun to sort of realize we had this in common.

Apparently, we both like fast cars and we like doing sort of things that are good for the environment, but it's gonna save us a lot of money as well.

And the car, if you look at the EVs that are available, electric vehicles today, you can get them for under $40,000.

A Chevy Bolt or Chevy Volt.

You don't even have to pay more up front anymore the way maybe you would've had to have done a decade ago.

So it's kind of satisfying in many ways.

- I feel that same satisfaction, and now you've given me so much more confidence in my choice.

So thank you for that and for joining us today.

As I mentioned earlier, we're gonna talk about climate, policy, and innovation.

So let's start with climate.

You live in Texas and endured last year's deep freeze.

I'm out in California where we have some of the hottest temperatures on record just a few weeks ago.

So all of this really brought to light how fragile our electric grids can be.

But the aging of our energy infrastructure, more focus on alternative options like electric vehicles, it appears we're just piling more onto an already stressed system.

So how are scientists and innovators like you addressing better options for our infrastructure? - Yeah, that's a great point.

So there's two things.

One is we're putting more stress on the system because we're adding electric vehicles, and computers, and smartphones, and all these electric devices.

Electricity is the preferred fuel of the rich so to speak, and as we get richer we buy more electric devices that are clean, and fun, and easy to control.

So that will put stress on the grid from the additional load or additional demand.

We're adding other stress to the grid because we're using more wind and solar, which are very clean but they're variable.

So we're adding more variability on the supply as we add more demand from our electric vehicles and other appliances.

And then they're all operating in a context of a changing climate, and I think that's key.

And it means different things in Texas and California than say Europe or wherever you are.

So the old days, if we back up like 80 years, we used to put power plants in the middle of cities because that's where we needed the power for street cars and lights and buildings.

But then because of the pollution, we moved those power plants outta the city maybe 75 miles outside of the city so the pollution will be somewhere else.

And then as we add wind and solar, they tend to be more remote areas.

Maybe now they're like 200 to 500 miles away, or maybe it's hydroelectric in the American west.

It's hundreds of miles away.

So the sprawling size of the electrical infrastructure has grown geographically.

At the same time, we're adding additional appliances and we're adding more variability.

All of that's wrapped up within a changing climate, which is the weather's different now than when we built the system in the '70s and '80s.

The California system, some of those wires and poles are like a hundred years old, but most of the power plants we built were in a wave in the '70s and '80s.

So now they're like 40 to 50 years old.

The wires and poles are old, it's kinda creaky, but they were built in the '70s and '80s, which was relatively mild era of climate.

We didn't have great heat waves and floods and droughts and just happened to be kind of mild weather then.

And now the weather's different because of climate change and just the variability in nature.

And that means in California, you have more severe drought which makes the tree areas, the wooded areas like a tinder box when they catch on fire.

In Texas that means hotter summers so more demand for air conditioning, you got more load in the system.

But also the wires and poles actually physically sag, they're more likely to arc, they have trouble when it's really hot out.

But in addition to being warmer, we get these polar vortices where you get these cold snaps.

So in Texas we have warmer winters but colder deep freezes, which is kind of bizarre.

What happens is the polar regions warm faster than the mid latitudes and that makes the jet stream, which is sort of the movement of air along the border of Canada and United States a little more wobbly, and those wobbles down or polar vortex breathe cold air further south as far south as Texas.

And so we're having warmer winters but colder cold snaps, which cause everything to fail.

On February 2021, the gas system froze, power plants froze, wind turbines froze, you name it.

At the same time, you have a tinder box in California.

So all of this is stressing the system and it's cause for concern that if the system's fragile and we're putting more stresses on it from climate in usage patterns and sprawling wires and poles to reach wind and solar, and more variability, it could break.

We've already seen a break in California preemptively, or after the fact, break in Texas.

And California and Texas are rich, and we got a lot of money in sophistication and technology and a lot of energy.

And if it's gonna fail for us, that means even poorer areas might have some severe troubles as well.

So I think that means we need to be thoughtful with our investment, probably time to invest in more reliability, more resilience, more energy storage.

Things like demand response where we can turn off our demand, maybe turn off pool pumps, or water heaters, or industrial facilities to help balance the grid.

It's an opportunity for new technologies, it's an opportunity to build more power plants.

There's a lot of things we need to do to make it better, especially since we probably need to double the electric grid just to accommodate our decarbonization goals along with our economic growth goals.

So there's a lot happening at once, and in Texas we don't really invest in reliability.

We tend to go with whatever's cheapest, and so the grid failed.

In California, there was preemptive work.

Turn off the grid to avoid sparking a wildfire, which is, you know, really miserable for those who go without power.

But the wildfires are miserable too.

So we're making some pretty tough decisions when it comes to these trade offs.

- Well, there's a a lot of great solutions you mentioned in there, and of course they all come at a monetary cost.

So what do you think the key challenges are in funding these changes? - I think that's great.

So in Michael Webber's view of the world, my view of the world, I feel like we need alignment on a lot of things.

We need funding like the markets to point the same direction as policy, to point the same direction as technologies, to point the same direction as individual behaviors and consumer preferences.

And these have been in conflict when it comes to energy for the last four decades.

They haven't really been aligned, and I think we're starting to get that alignment, which is really exciting.

Consumers are starting to demand cleaner, more reliable energy.

We see it especially with younger generations who are more picky about them.

We're starting to see it with technologies already.

A lot of the technology solutions I just mentioned, demand response, wind, solar, storage, things like that are cheaper now than they were a decade ago.

They're higher performing, they're made better.

That's good news.

The markets are ready.

We have ESG investor criteria pushing for cleaner solutions.

Chris kind of made an allusion to that earlier.

So the investor class is ready to invest in cleaner things, the money's going that direction, and now it seems like policies on board.

At least at the national level in the United States, we already had regional and local policy on board.

Certain cities, certain states said, hey, we gotta be serious about the future.

But now we have federal policy putting money into the system and sending a market signal which opens up the private money as well, and the private money is much bigger than the government money.

So we're starting to see some big investments.

The federal government just with the Inflation Reduction Act is over $300 billion of direct injection, and things like hydrogen, and carbon management, and they harden the grid and expand the grid and you name it.

Batteries, and domestic manufacturing that's happening.

That was a partisan bill with a partisan process.

But before that was the Infrastructure and Jobs Act, which was a bipartisan bill with a bipartisan process.

So there's actually even some bipartisan agreement in there that we need to invest more in the future.

So the money's starting to flow, the policy signals are clearer, that opens up the markets, the private investors are already, the consumers are ready.

I think it's starting to happen.

I'm really like more optimistic now over the last few months than I've been in a long time because of the alignment of these things.

And we're gonna see a wave of trillions of dollars, maybe tens of trillions invested over the next one or two decades.

So it's gonna be improving the performance of the energy system while decarbonizing, but also making a lot of money for people in this.

Like, I think it's a wealth creation moment for the nation, for the world.

- So can you talk about the progress in infrastructure to recycle green materials like solar panel batteries, metals used in EV? - Yeah, this is sort of a great point you're alluding to, which is if you think of like the old world which we're still in, so it's not really the old world.

Present day is we use a lot of fuels, coal, or wood, or natural gas, or nuclear fuels or whatever it is.

We have different fossil fuels we're using to operate our cars and our power plants, and we have to use materials like steel or cement or other things to make the power plant.

But then most of the waste is actually from burning the fuel we dump into the atmosphere.

And as we switch to wind, and, solar or molybdenum, or batteries, we're gonna shift from using fuels to using more critical materials, more solids.

Copper, tin, arsenic, you name it, gallium, and things like that.

And so we're gonna have more materials in the construction of the things we use, and then we have to deal with those materials at the end of life when the wind farm retires after 25 years or whatever it is.

And so we've got bigger land impacts at the start and end of life, but no fuel impacts in the middle.

And if we look at a coal plant, you have impacts to build the power plant, impacts to retire or recycle the power plant, and the impacts of burning coal for 50 years in the middle.

With the wind or solar farm, you eliminate those impacts in the middle but you still have the impacts at both ends.

The beginning to end and those impacts are bigger per gigawatt or gigawatt hour.

So we're using more of these materials but it's still less waste overall, and we're not dumping waste in the atmosphere along the way.

But it's a challenge.

The solar panels are kinda difficult to recycle, batteries we can recycle, metals are easier to recycle, you can melt them down.

Wind turbine blades are these special composites, hard to recycle.

However, there are new policies in Europe demanding end of life recyclability or circularity, where we can use the wind turbines, chop 'em up, use them again, or recycle 'em again.

So that's starting to happen.

The major manufacturers are GE, and Siemens, and Vestas.

They're all making recyclable blades or launching those soon.

So this is on people's minds, and it's still kind of slow.

Feels like we're moving too slowly on that in terms of how quickly we're building wind and solar.

We're not building the recycling or reuse capacity quite as fast.

So that's a problem for wind and solar, although hopefully we catch up.

Having said that, it's like over decades maybe the world will generate 40 million tons of wind turbine blades in 20 years.

Well, in the United States we generate a couple hundred million tons of CO2 missions from coal plants alone every year, not over 30 years.

And we generate about a hundred million tons of coal ash every year.

So the waste streams for wind solar are still much smaller.

And then I mentioned capacity, this alignment, we're not building recycling capacity for wind and solar as fast as we're building wind and solar.

But we have done it for batteries.

We actually have a lot of battery recycling capacity right now, but it's not operating at full use because the batteries aren't being recycled yet.

So sometimes you can get out of sync the other way around where you have more capacity recycle than you need the recycling.

Sometimes you don't have enough recycling capacity like we do with wind solar.

So it's a little out of balance.

I feel like that the markets will solve that, they'll figure it out based on price points.

We'll get there.

It's a real technical challenge.

You have to think about the materials, and manufacturing, the special like composites, or glues or adhesives you might use.

You might have to worry about how you extract the lithium back outta the battery.

Maybe you can reuse the battery, you use it in a car for a while or a bus, and maybe then you put it in the desert and it backs up the grid or something.

So we wanna use them until we're really done and then recycle them.

But this is my long way of saying we've got a lot of work to do on this.

There's a lot of progress with some good policies but we're not quite there.

- Oh that's exactly what I was thinking.

So the Reduction Act, there's a lot of good wins in that policy but there's still a lot of work to be done.

One thing that I hear clients talk about all the time is charging stations and the need for those to be more accessible across the country.

So what opportunities do you see for policy or maybe private and public investment in the infrastructure bill? - That's great.

You mentioned charging stations.

Mine is easy, I have a home with a driveway.

I can put a charger in my driveway.

I had to pay to do it.

It costs like 600 bucks for an electrician to come out and do it.

But if you live in an apartment, if you're a renter, there are many places where it's not easy for you to charge in.

And in that case, you might depend on public infrastructure, maybe at parking lots, or strip malls, or every Starbucks or maybe just along streets and highways.

The Inflation Reduction Act actually put money in specifically for like highway charging because one of the weak points for you and me with our electric car is doing long road trips.

Fine for my day to day driving.

I can drive from Austin to San Antonio and back no problem.

But Austin to Houston or Austin to Dallas and back, I gotta charge up for several hours to make it.

So public infrastructure is sort of the weak point.

Coming along quickly but the Inflation Reduction Act helps.

There's actually probably some private equity or other investment opportunities there to build out the infrastructure, and then make money on people using it.

And I think a big investment opportunity there.

Maybe 10 years ago, there was probably venture investment opportunity in charging, but now it's more mature as a technology and needs deployment more than it needs innovation.

And that can be a mix of public money at city, state, or federal level.

It could be the private markets to roll it out.

It could be the Walmarts of the world pay for it because they want customers to charge up while they're shopping at Walmart or something.

I mean, so we don't really know who's gonna pay.

It is not a lot of obvious benefit for governments to pay right now other than they get some indirect benefit of better air quality locally or something like that.

The city of Austin will do it because the city of Austin owns its utility like Los Angeles does and will make the revenues from the sales, but at a lot of places that's not true.

So there's this kind of like a mixed agency issue like who pays might not be who benefits.

That's a real problem, but I think there's opportunity for private build out of this infrastructure.

Now one more comment I make on that is Tesla built its own system.

It already has a national network of fast charging that Tesla owns and you can use it with Teslas, but you and I can't use it with our Ford.

And so there's also some battle over the standards over is it an open standard or closed standard.

So that there's like a technical issue there, but then also who's gonna pay and who's gonna benefit and are we gonna charge? If you back up 20 years or so, you could get wifi at Starbucks.

I keep using Starbucks as an example, but I'd say they charge like 10 or $20 with T-Mobile, whoever it was.

You would get a $4 coffee and then pay 10 bucks for wifi.

But now a lot of these places provide it for free just as a reason for you to come buy coffee from them and stay there.

So we could even evolve their model where a lot of people just provide it for free because they want you to come be their customer or hang out with wherever it is.

So we'll see.

We have not sorted it out.

I think it's gonna be pretty bumpy for a couple years, but by a decade from now I bet it's sorted out.

Especially if you look at the amount of places we have, the number of places we have electricity around the city with street lights and everything like that.

We actually have electricity in a lot of places.

It's a matter of getting the plugs set up.

- Makes sense.

So to your point on private versus public investment, in your opinion, is it an 80-20 private to public, or who's really gonna fund this? - I mean, so the government money usually is smaller by about an order of magnitude.

So it might be 80-20 or 90-10 or something like that.

Government money except for like things like national defense, that's like almost all government money.

But for things like this, it's mostly private money.

Probably the way it should be.

Government money is really good for being the early money to help create the field, to create the sector if you need it for some common reason, some common benefits on a pollution that's avoided or water that's avoided.

There's some role for government money to help accelerate something if that's considered of national importance.

So that's a good place for government money.

Government money is also great for places where the markets can't serve for ready reasons.

It might be a market failure.

This was especially true with rural electrification.

The early power plants and power companies a hundred years ago would build a power plant, Pearl Street generating station by Thomas Edison right there near Wall Street because there are a lot of customers there, but they wouldn't serve the rural areas.

And so the Rural Electrification Act or these rural broadband acts today for telecom would say well there's a market failure.

We use government money to reach those pockets where maybe the market doesn't serve it well.

But, you know, these people deserve access to electricity and information just like anyone else.

So there are places where government money is really helpful and critical.

But generally speaking, the private markets and the private money is more efficient and better use of taxpayer dollar in the end.

So let the private markets do that.

So you get a little bit about, I guess it's like 10 to one or something like that the way you said it.

- So decent opportunity for private investment.

So then what market trends do you see that support the 2035 carbon free goal? - That's great.

There's a variety of market opportunities, and the 2035 carbon-free goal is interesting.

Usually that's for the power sector so when people talk about getting to net zero for the United States, or Europe, or Japan or wherever the goal is, that's usually net zero for the entire economy by 2050.

And it's net zero, not zero.

Net zero means you might still have emissions at your refineries, or cement facilities, or steel mills, but then you have scrubbers that takes CO2 outta the atmosphere and take it somewhere else.

So on net at zero but you might still have emissions.

While many places have a net zero by 2050 goal, there's also sometimes a sub goal of the power sector getting to zero by 2035.

The power sector is one part of the whole economy.

It's like 40% of the economy in terms of energy.

But it's a big part, and the reason why the Biden administration or other groups talk about getting to zero by 2035 is because most of those power plants I mentioned earlier were built in the '70s and '80s.

Most of 'em were supposed to retire by 2035.

And so if we just don't build the same dirty stuff, we'll get there.

Or if we're gonna have to build something that has emissions for different cost or performance reasons, add carbon capture or scrubbers or some way to remove the CO2.

So we can think about net zero by 2050, hopefully earlier.

We can also think about zero in the power sector by 2035.

This means investments in more low carbon power generation.

Low carbon meaning doesn't emit much carbon.

Nuclear, hydroelectric, geothermal, wind, solar, some forms of biomass even like in some places tidal energy the tides with water up and down.

There are a variety of ways to have cleaner energy, or even natural gas or coal with carbon capture in some cases.

So I think there's gonna be a lot of investment opportunity just in the power plants 'cause as those power plants retire, we have to replace them but we also have to build more power plants because of the electric vehicles we discussed earlier.

So a lot of opportunity in the power plants, a lot of opportunity in the grid.

The wires and poles, we still have to move power from one place to another so that's an opportunity.

And then there are a lot of technical plays or technologies, energy management, domain response, smart sensors, efficiency readouts at home, games to help you, to save your bill, this kind of thing.

So there's a lot of technologies that support this as well that might face the consumer or the utility operator, and then there's other things you overlay on top like cyber security concerns.

So there's a lot of investment on the power sector up and down the chain, the supply chain.

And then if you look at the fuels world, natural gas, or gasoline, or petroleum, there might be a lot of opportunities.

We've already seen money going into it around hydrogen, carbon capture, carbon management, carbon sequestration, maybe other low carbon fuels like ammonia or methanol or formic acid, which are hydrogen carriers.

I was on the phone yesterday with Exxon Mobil.

Exon Mobil is building the largest hydrogen facility in America in Baytown right next to the largest refinery in America.

And half of that hydrogen is for their own use to decarbonize their own operations.

The other half they will sell onto the gas grid to decarbonize heavy duty trucking, or maybe for other customers who want hydrogen as a building block for chemicals.

So there's a lot of investment and big companies who make good decisions and are very profitable are putting money into the space.

But there's also venture investors, private equity investors, personal investors, and then the customers who are doing it.

So there's kind of just a lot of money, and a lot of this is just because energy overall is very capital intensive.

The sunk capital in the energy industry around the world is like, I don't know, a hundred trillion dollars or something.

It is so much money, maybe that depreciated value is 40 trillion.

That's tens of trillions of dollars, and that's gonna have to be reinvented in the next couple of decades.

So you kinda pick your spot where you wanna be, and there's probably an opportunity for you to get involved.

- Well, you just mentioned the rest of the world, and one of our audience members sent in a question.

"You know, while we can see the US population generally wants to solve climate change, how about the rest of the world? Can the US make a realistic dent on our own? I get that we need to start regardless of efforts by the rest of the world." - Yeah, this is a great question.

So we are about 15%.

We in the United States are about 15% of global emissions.

We were 20 or 25% for a while, but now China has become such a big emitter that the US contribution is relatively smaller.

So we're like a seventh of the emissions.

So yeah, if we can reduce our emissions that reduces world's emissions by a seventh.

That makes a difference.

Clearly won't solve the whole problem but it's a step in the right direction.

But there's something else that happens that the United States, despite all of our problems and dysfunction, we're still a cultural leader.

We still establish a lot of the trends for other places around the world.

We're not the only cultural leader but we're one of them.

And so if we do it, other people might wanna do it because that's where the innovation is.

But also as an early adopter, as a rich country that would adopt these technologies, we can help buy down the costs essentially by helping 'em ramp up and achieve economies of scale or technological learning or just more deployment.

We can help drive down the cost which helps other countries adopt as well.

So our leadership position will not only absolutely and relatively reduce emissions around the world, we'll make it easier for the other people to do it and give them some desire to do it just to be a part of, you know, the leadership brigade so to speak on this.

Absolutely not enough for just the United States to engage, but I also think the world can't do it without us.

So we're critical, we gotta be on board, and we can start it but we can't finish it.

- Okay, thank you for answering that question.

Would you please also comment on the role and importance of nuclear energy? It's kinda a buzz word for people right now, but there are positives.

- I love it.

It's a great question about nuclear 'cause I didn't really talk about it in my other comments earlier.

So nuclear, I say I gotta remind you, and everyone will say I'm an engineer, and engineers tend to like nuclear.

An engineer will look at nuclear as clean, safe, reliable, base load power.

That's the way an engineer looks at it.

A lawyer will look at nuclear as a liability waiting to happen.

An investor might look at nuclear as a financial risk because of cost overruns and things.

So depending on who you are and what your background is, might affect how you look at nuclear.

But I tend to like it, I like it that it's 20% of the power sector in the United States.

That's a lot of low carbon power generation.

It's pretty safe, it's pretty reliable, it's hard to build new nuclear.

It comes in over budget and over schedule, but I would like to have some more nuclear to replace the nuclear that is due to retire because it's been running for 50 or 60 years.

So I'd like to see more nuclear.

And just like to comment on that, I lived in France for several years as chief science and technology officer at NG.

NG is one of the world's largest energy companies, and I was their C-level executive in charge of research and innovation.

So I had a team of like 450 people reporting to me in labs in Paris, and Brussels, and Chile, and Singapore.

And we were thinking about decarbonization, and we were thinking about all these things and we were thinking about nuclear, but I got to be in France for this.

And France, like 75% of their electricity comes from nuclear.

In the 1970s, when the oil crises happened in the '70s and oil prices became expensive, and oil became scarce in the United States, we used a lot of oil for electricity back then.

We switched to coal, nuclear, and natural gas.

In France which used a lot of oil imports from the Middle East and had problems, they switched very heavily to nuclear.

Not so much to gas and coal.

And so the French nuclear fleet is in response to the security problems.

But the French nuclear fleet is wholly different than the Americans.

In America, we have a hundred nuclear reactors but they're all different basically.

In France, it's like 45 reactors, they're all the same.

So they get economies of scale across their fleet, and higher performance and they also get learnings from one or the other.

So if they ever have a problem at one maybe with a weld, or a valve, or a pump, or something like that, they will fix it at the one and then preemptively fix it at the other 40 or so.

So they just get better reliability, and it's just much cheaper and sort of operates better in France so to speak.

It's a little bit like Southwest Airlines only flies Boeing 737s.

Every mechanic and every pilot and every flight is they all know the plane.

They get some learnings across the homogeneity of the fleet so to speak.

That's the French approach.

We don't do it that way in the United States, and that's why we get some of these cost overruns, and that kind of thing.

However, there are these small modular reactors, much smaller like a fourth the size or a fifth size of the large nuclear reactors that are just now getting their licenses to build and operate.

And that we might have one of these small modular reactors on as soon as like 2025 or 2026.

Because these reactors are smaller, they can make many of them in a factory.

By many I mean like dozens, maybe hundreds, rather than each one being sort of custom built on site.

And that should drive down the cost and improve the performance.

And so I'm pretty excited about small modular reactors as a way to keep nuclear in the mix going forward without the big lumbering over budget, sort of over schedule whatever delayed schedule nuclear that we we have right now in the United States.

So I think nuclear's important.

I'd like to keep it in the mix to some degree.

About a fifth of the mix seems about right because we have other options as well.

And if we retire all our nuclear, we will regret it from a pollution and emissions perspective.

But also in Europe, Belgium and Germany decided to retire nuclear and now they regret it because of the situation with gas cutoffs from Russia.

So they're actually reviving some of the nuclear or are delaying their retirement.

So I think nuclear adds a lot of value.

I'd like to keep it in the mix.

- So how about fusion? There's almost 40 startups worldwide.

We're into innovation now, by the way, but, you know, 30 just in the US.

So what are your thoughts on fusion? - Fusion's a...

So the simple story, I'm oversimplifying, so if there are nuclear scientists on the call you'll wince when I say this, but there's two approaches to nuclear energy.

One is fission, one is fusion.

Fission you're splitting the atoms, fusion you're bringing the atoms together but it releases a lot of energy.

Fusion is not the way we do it today.

Today around the world, nuclear energy is fission.

But we know fusion works, we've done it for weapons, but also the sun operates on fusion.

So the sun tells us that you can make fusion work.

The sun has a lot of mass helping it out, and so the question is can we replicate the sun on earth with fusion in a way that makes more energy than it takes, and could be sustained and is economic.

And we haven't done really any of those for very long, but there's more and more action around here because they don't have the waste products of CO2.

It doesn't require as much mass.

It is just like better for the environment if you can make it work.

It's not there economically yet, and there's still a lot of technology to sort out.

But now we're seeing all these startups.

You mentioned 40, right? There was like eight that have been covered in the Wall Street Journal.

It's a Wall Street Journal story now.

It's not some technical thing in just popular science, it's actually an investible property.

And big name former cabinet officials, former secretaries of energy, are on the boards of some of these fusion companies.

And it's just 'cause the stakes are so high, it's still pretty risky though.

I mean, these are startups, they're getting venture capital, they're not a private equity, they're not at bank loans, they're not at like safer conservative capital.

They have a lot of risk, but the rewards are so high if it works and they're worth a billion dollars and they don't even have a prototype.

So it's a wild, wild world, but very exciting because if it works, it solves so many problems for us.

So we gotta give it a shot.

- I think it's very exciting to see so much innovation in this space.

And you mentioned there are at least five main alternative energy solutions out there.

Let's talk about that a little bit.

So how important is it for us to have diverse alternative energy solutions, and maybe share some more pros and cons of the ones we haven't covered yet? - Yeah, and that's a great point.

I mean, I think diversity is a good strategy for all sorts of things.

For how you build your team at work, for how you think about your customers, for how you make your investments.

You wouldn't put all your investments in one stock or one asset, and how we build our energy system because all the energy fuels and technologies have some benefits and they have some disbenefit.

They have some upsides and some downsides.

And if you only have coal, or only have wind, then you're really exposed to the risks of the downsides of coal and wind or whatever it is.

And so building a suite of options that have diverse mix of solutions will be better because then if one fails, maybe it's wind because it's not windy, maybe you have solar or geothermal or nuclear or something else providing energy when you need it.

So they really help from a reliability perspective, which is really critical for electricity especially.

So it helps from a reliability perspective, a national security perspective, but it just kind of reduces volatility as well, as opposed to being overly exposed to just one thing.

So diversity is key not just on the fuels, but also the technologies.

Are you burning it? Are you reacting it? Are you passively collecting it? There are many ways to go about the conversions, and I think that's the key thing to keep in mind.

We go back to the old Aesop's fable, you shouldn't put all your eggs in one basket 'cause you might drop the basket.

The same is true for energy.

- Very, very good.

Can you talk a little bit about the carbon offset pack...

Excuse me, tech platforms, are they really making a difference? - So the short answer is no.

That doesn't mean they can't in the future.

But these platforms, these trading platforms are exciting because it's a way to get the power of the markets, and traders, and financial activity aligned with either avoiding CO2 emission of the atmosphere or removing CO2.

And a lot of the offsets are for CO2 avoided, which is pretty cheap.

I don't know, five to $20 a ton or something like that.

And then you have ways to remove CO2 maybe by planting trees, or doing a forestation, or some soil management.

And those are worth 10 to $50 a ton because they're less permanent.

And then you guys should do carbon scrubbing from the atmosphere where you remove CO2 from the atmosphere or turn it into a rock and sequester it geologically.

And that's like a thousand dollars a ton, but it lasts billions of years.

So there's different values depending on whether you are actually removing the CO2, if you're removing the CO2 in a permanent way or in a temporary way, or whether you're just avoiding the CO2 emissions in the first place.

So these prices are anywhere from $5 to a thousand dollars a ton.

And these markets exchange are a way to bring the buyers and sellers together just like Uber brings together riders and drivers, or eBay brings together buyers and sellers.

And so these exchanges are an efficient way to harness the power of markets.

I think it's great.

There's a lot of inconsistency on the standards for MRV, measurement reporting and verification, about whether these are actually being avoided or actually removed.

So there's still some room for improving the standards to really get efficiency in the markets like that.

The rules for reporting in the financial world are written down.

The SEC says here's how you do it.

And by the way, the SEC is starting to write down rules around carbon dioxide emission.

So we might have some more kind of guidance and clarity on that.

But I'm just a big believer personally in the power of markets and the efficiency of markets if the trading exchanges are transparent and clear and then we'll get there.

So I think there's a lot of opportunity, there's a lot of people made markets, there are a lot of collateral damage and, you know, whatever on the side of the roads there are all these dead carbon exchanges.

The Chicago Climate Exchange and others because they depended on certain policies like Waxman-Markey.

I don't even know what Waxman-Markey is.

That was a big cap and trade climate bill from 2009 or '10.

So there are these old legislations versions or language we considered for cap and trade or to deal carbon, and exchanges were built around the policy but then the policy died and so the exchanges died.

So we need something more like the New York Stock Exchange, or NASDAQ, or Chicago Mercantile or whatever it is.

We need something that's got a little more stable, a little more clarity and then we can harness the power of markets to get there.

So I'm ambitious and optimistic about the value of the trading platforms, but they really haven't done much yet I would say.

- Well, another example of the importance of aligning between policy and technology.

- Absolutely.

That's right.

- So what about micro grids? Can you comment on on those? They're being explored as alternative to traditional power grid in California and elsewhere.

- Yeah, I love it.

At the University of Texas right now where I'm a professor.

I'm in my office although you can't tell that, and the University of Texas has the world's largest micro grid.

It's about 140 megawatts.

Your house, just to put it in scale, is maybe like five kilowatts.

So your house is, I don't know, 30,000 times smaller than a micro grid at the University of Texas.

And a micro grid could be from the scale of your house or to like a university campus like this, a hundred thousand people, something like that.

Above that it's not really a micro grid anymore, it's just a grid.

And the micro grid approach, which is not new, University of Texas has had it for decades, is generally around things like having more control of your system, the ability to have better reliability by islanding, by disconnecting from the bulk grid around you.

If the grid goes down, you can keep operating.

So there's value there.

It lets you avoid some charges for transmission.

So in Texas and California, if you're moving the electrons from a wind farm or solar farm hundreds of miles away, you have to pay for that.

And if you generate the solar instead at your rooftop of solar panels and using your micro grid, that might be a lot cheaper 'cause you avoid those costs, but also you get better reliability.

So there there's some cost driver to avoid the transmission or distribution costs.

There's some reliability or resilience driver where you want your home, or your building, your campus to keep working even if the bulk grid goes down.

And those are what driving a lot of the uptake of micro grids, and they're very popular.

And I think they're gonna grow, especially in California where these wildfires are a risk of transmission or in Texas where that's for a lot of the growing cost is in transmission.

Micro grids will grow but they don't replace the bulk grid.

They'll grow from less than 1% of the grid to maybe, I don't know, 10%, 30%, some large number.

But you still need the bulk grid and then the micro grids kind of fit in around that.

And I think in California it's so hard to build new transmission lines.

You might need to have more micro grids like California the land is beautiful, it's mountainous, you have to worry about, you know, scarring the land.

Maybe in west Texas you don't care so much about scarring the land as you do in mountainous California.

You know, but we even have trouble building transmission in Texas because it's just people are tired of seeing the transmission lines or you're trampling on someone's property.

So I think that is a motivator to keep micro grids growing, but it's hard to run the entire nation off millions of little micro grids connected together.

We went to a larger grid for economies of scale, but also for reliability.

'Cause if your power goes down in Georgia, you can import it from Florida or another state nearby North Carolina or something like that.

So I think there's just some trade offs and I'll see micro grids grow, but it's not gonna replace everything else.

- Okay, great.

Thank you so much.

So there's another question from the audience here.

"We have a number of existing technologies like wind and solar when we think of renewables.

Do you think we'll end up expanding the technical diversity to include things like advanced geothermal, or will storage be able to make the traditional renewables dispatchable?" - That's a great question.

I think wind and solar will continue to grow, but they'll start to hit their limits because of variability and just siding, and people don't wanna see it.

It blocks their view.

And so I do expect geothermal, advanced geothermal, to really pick up.

But there's different types of geothermal.

Geothermal basically you drill down below ground, you get access to heat, hot water.

There's a lot of it in California, and Nevada, and Iceland, and Hawaii.

Places where you have volcanic activity tend to be places where you have the cheapest or easiest access to geothermal activity.

But frankly, there's hot stuff somewhere below the ground everywhere.

It's just a matter of how deep you have to drill, and the deeper you have to drill the more expensive it becomes.

But geothermal is a universal resource.

It doesn't have the weather variability like wind and solar do.

So it could be a 24/7 base load generator.

It doesn't usually emit CO2, although some geothermal wells actually do vent CO2.

So it depends on where you are.

So it tend to be pretty clean and reliable and we know it works.

We know that these countries like Iceland have 25% of their electricity from geothermal.

We actually have more geothermal in America than anywhere in the world, but we consume so much and we're such a populous country, it ends up being a small fraction of the overall.

But I think geothermal's time has come because we need something a little more stable, and geothermal ends up having a better performance curve than wind or solar plus storage, and batteries take up a lot of space.

You have to worry about the materials like we talked about earlier.

The geothermal could be taking hydraulic fracturing techniques from oil and gas to fracture the rock to get more hot water.

It could be closed loop systems where you drill down and then come across, and then come back up, and you inject water can stop on the way back up.

There's hydrothermal, there's many different techniques I've been looking at and probably all of them get some traction I would say.

And I think geothermal's kind of the sleeper renewable that people forget about.

But the Inflation Reduction Act had some policy support for geothermal, some tax credits in a way that is often forgotten.

So I think there's more policy support for geothermal, there's a lot of startups, there's investor support.

So I expect geothermal to really take off.

It takes years to build, slower to build than wind and solar.

So we're talking 2025 and beyond, but it's happening.

- Well and again, you know, the diversification in solutions is going to be important as we continue to combat climate change.

We spoke before the session and we discussed how people are often feeling overwhelmed by the topic of climate change.

They worry that it presents an almost insurmountable challenge, which I can certainly understand.

I was so encouraged when you said that even in the face of all those challenges, you consider yourself a climate optimist.

So tell me a little bit more about your reasons for your optimism.

- Sure, and first of all, I say that this sense of despair is often stemming from a lack of empowerment where climate change is such a big issue.

It was a century or two in the making, it's global, it affects billions of people.

What can I do as just one person? So that sense like I'm so small, this problem's so big, how can I fix it? And that creates a sense of unempowerment, which leads to despair, which is like, well might as well not do anything.

And I would say actually frankly, you can do something.

We can do something.

If each of us do it, multiply that by billions, it makes a huge difference.

So we shouldn't feel despair, we should feel like we can do what is within our reach.

So we should take action.

But beyond that, or even aside from that, I'm a climate optimist for a variety of reasons.

One is, as a professor, I have the privilege to work with and teach thousands of students, and I've done this for 15 years.

And the students, they're not messing around, they're pretty serious about this.

This is their Cold War, and by that I mean their three decade global challenge.

They're gonna have to solve it 'cause for them it's peace and prosperity are on the line, which is what we say with the Cold War.

With the Cold War, like we don't care at some point how much it costs.

We have to win because peace and prosperity are on the line, and that's what younger generation is saying.

Gen Z and even millennials about climate change.

Like, we gotta win because it's our future on the line, our kids' future.

Doesn't matter what it costs.

So a lot of that's just like a generational thing.

The younger generation's more committed and serious, but then there are these other things.

The investors are ready, the consumers are ready, employees are demanding it.

So if you want to recruit and retain top talent, you need to have a net zero plan on your website.

And even better, you need to believe in it.

And so the employee pressure, the consumer pressure, investor pressure, and just younger generation pressure is all causing things to accelerate.

Now we have new policies that are aligned with it, the technology seem mature, the investor capital's flowing.

I just feel like it's all coming together, and now what I go around telling people maybe I'll look very foolish in a couple of decades, is I think we're going to get to net zero more quickly and more cheaply and more easily than people expect.

It's just gonna happen by momentum at some point.

I think we've already turned the corner, frankly, we're on the way there.

So it's pretty exciting.

I'm pretty optimistic.

I mean, there are still plenty of things to be worried about in society with floods, and energy poverty, and people who are hungry and everything else.

So we still have a lot to worry about, but I feel climate change, it's not solved, but I see how it will be solved now and I think that it's the inertia is with that direction.

- Do you think we're doing enough as a society to curb the effects of climate change? I know recently major city like Paris and others were dimming lights to highlight the urgency of the problem.

So, you know, the younger people, absolutely.

I have teenagers, they care about this a lot.

Are we doing enough? - No, we're not doing enough, but I'm optimistic anyway because even though we're not doing enough, I now see a path by which we will do enough eventually.

But we're not there.

Like, the thing about climate change is it is urgent and important.

It's important meaning it reaches all of us, it has huge staked impacts on water and food.

I know your next section's on agriculture.

I mean, agriculture is at risk from climate change from droughts, and floods, and freezes, and top soil loss, and just higher temperatures diminish photosynthetic efficiency in crops.

So there's just a lot at stake, and therefore it's airport's very important.

But it's also urgent, which means the sooner we take action, the better.

The longer we wait, the harder it is to solve it.

And there aren't that many problems in life that are urgent, and important, and global.

So we have a high stakes situation right now.

We're not doing enough, but I feel like the optimism means really we're not doing enough but I see that accumulation effect is starting to happen.

And the cheaper options are now the better options.

Whereas before you might have had to pay a green premium for something better.

I think those days are over because conventional prices are so high for oil and gas.

And you mentioned Paris turning lights out, that's actually for energy security not even climate change.

That's just to save energy because of the dependence on Russia and what's going on right now with their invasion of Ukraine.

So there's a lot of that's actually important context because that means we're in a climate crisis, and an energy crisis, and a security crisis all at once.

And national security crises tend to move the needle faster than other things, and the solution to the national security crisis is quite often the same solution as for the climate crisis.

So there's a lot of reasons I feel like it's kinda coming together, but we have not done enough, we are not doing enough right now.

- Well, it's exciting to hear about all of the innovation, and I really, you know, one of the takeaways for me today is the importance of the alignment of policy, technology, funding.

That's huge.

But it sounds like the transition's already underway, and should take us to a better place with our energy system if we do it right.

We're working on that.

But I'm also taking away that there's a lot of cause for optimism both because of innovation and our younger generation's commitment to sustainability.

I think it's very encouraging.

- Exactly.

I think there's a lot of reason to be worried for the next few years with winter coming in Europe.

There's a lot of people gonna suffer, but there's a lot of reason for optimism just beyond that, and I share your view exactly.

- Well, thank you so much for this.

We really appreciate your time and your expertise.

Chris, I will turn it back to you if you have the results of our poll question.

- Well first, Dr.

Webber, thank you very much.

Kelly, very much appreciate it.

Appreciate the insights, and I think handling of the client questions was great and the conversation turned out really well.

So yes, the results are in.

And I think as a refresher we asked, in your opinion, what is the greatest challenge to solving climate change? Is it funding, is it policy, or is it lack of individual commitment? And it turns out that I think in a really good way, it's a policy issue.

So it sounds like there's an opportunity to bring things together, rather than keep it separated.

And to Dr.

Webber's point, it's all about the individual, 'cause that can be very overwhelming.

So I'm also encouraged that not many people think it's a funding thing 'cause really, we have the money to do a lot.

It's really what's the direction we wanna take things in.

So that's excellent.

Now there's another question you didn't get to, but I just wanna bring it up and that's the idea that we'll take another one from the audience and it's investment opportunity.

So how does First Republic look at investment opportunities in climate? And so I'll share a couple things.

I think first is, you know, as an investment professional, a group of professionals, we continue to look for all sorts of investments that we think are appropriate for private client portfolios.

I think what's most exciting around the conversation that, you know, Kelly and Dr.

Webber had are that climate solutions are not just one thing.

It's not just a solar panel.

There's all sorts of opportunities that are driven by not just emerging technologies, but the innovation that's driving them.

Some of it can be flow valve control, can be driven by bigger drives, it can be driven by things that are focused on efficiency, and it can just be kind of using the current technology just to a greater degree.

A lot of examples show up in the public space, public companies in particular are doing this.

And some have been doing energy efficiency for very long periods of time, and I'll just pick on Microsoft as an example.

They've been, you know, net carbon neutral for almost a decade, and that's come from purchasing carbon offsets as Dr.

Webber talked about.

They also put solar on their rooftops.

So the idea is that solar efficiency and other things continue to improve.

I think you'll see greater and greater degrees of adoption because it will bring down the cost of delivering, as Dr.

Webber said, the electrons to where they actually need to be.

So I think if you put it all together, our view on the opportunity set is it's not exclusive kick things out only or inclusive only do X.

It's a range of things, and companies that are improving, progress not perfection, look attractive.

But also beyond the public markets that are doing that, it's private market opportunities where the hot bed of innovation is.

So you'll continue to see opportunities from First Republic investment management focused on those innovation areas and venture and private equity, but also looking at public companies that are all about making their energy more efficient.

Okay, so that brings us to the close then.

We invite you, I think our listeners, to join our next session on Thursday, October 27.

And during this discussion, we'll explore innovations in the food and wine industries.

It will feature two trailblazers who have really changed the agricultural landscape.

First is, Kathleen Inman of Inman Family Vineyards.

And the second is Nona Yehia from Vertical Harvest.

I wanna thank everybody for joining us today, and we look forward to seeing you all on the 27th.

Enjoy the rest of your day.

Christopher Wolfe - Good afternoon everybody. Welcome and thank you for joining our 2022 Climate Forum. I'm Christopher Wolfe, Chief Investment Officer for First Republic Private Wealth Management, and I'm so glad you are here with us today for this second session. This year's Climate Forum is focused on the future of energy and agriculture, and it features leaders in those fields who seek short and long-term solutions to address key climate concerns. We hope that you'll walk away from this forum with a greater understanding of the innovations underway to support climate change and that you'll feel better informed about the opportunities that may lay ahead. Now, last week during our first session, we explored the future of energy through climate policy and innovation, and Dr. Michael Webber, who has dedicated his life to studying these things, shared a few key insights. First, there's a reason to be optimistic as there's a path forward to provide solutions for energy and people and policy makers that are committed to those opportunities. The second is the US can play a key leadership role on the global stage. We bring other countries along to help them lower their emissions by developing technology solutions and ultimately bringing down costs through things like economies of scale, so other countries can benefit and adopt those solutions. Think of it as leapfrogging. In fact, that was the term that he used, and if you've ever been to Singapore, you know what leapfrogging looks like. There's no telephone poles there. It's all cellular. The last is there's definitely a need for diverse solutions. This is a big and complex problem. One thing isn't going to fix it. So since there's no one answer to how we power our future in a greener more efficient way than wind, solar, nuclear, geothermal, it's all of the above. And I thought that was one of the most important takeaways from that session. We'd encourage you to watch the replay, which we can send to you via email shortly. Now, today's session is focused on the agriculture of tomorrow, the future of food and wine, one of my favorite topics. With the recent wildfires and current water shortages, not just in California, but in many places around the world, climate-related concerns are top of mind for the agriculture industry. We will explore how innovators in the food and wine industry are embracing more efficient techniques to meet increasing demand, but also implementing solutions that help address climate concerns. Conversation will also help us think about how our investment decisions could have an impact on climate in the future. Now, as I was preparing for today's session, I found some interesting statistics out there because I like those things. So for instance, did you know according to a 2021 study from Alliance for Science, which is a Cornell funded affiliate non-profit research group, that global agriculture accounts for about 25% of greenhouse gas emissions. The other thing that came from this study is that one third of those emissions are generated by the international trade of fruits and vegetables, just moving produce from one place to another. And interestingly, those emissions are double what it actually costs to grow those things locally. So I think that's kind of important. There's a lot of interesting things going on. Now that said, in today's sessions, you'll hear from professionals who are intentionally and actively changing the way food and wine are cultivated. It's now my pleasure to introduce today's host, Nicolas Gentin. Nicolas is our executive Vice President in First Republic Investment Management. He's been with First Republic for 18 years, and he oversees a couple of really important areas in our business that tie together not just what goes on the investment world, but also how it impacts many other facets of your wealth. And those are our wealth advisors and our financial planning practice. Nicolas, thank you so much and please take it away, sir.

Nicolas Gentin - Thanks Chris. And thank you to everyone for joining our Climate Forum discussion. It's my pleasure to host our guests today who are indeed really blazing a trail in their respective fields. As we get started, I want to encourage and welcome your questions. If you'd like to submit a question, please use the Q&A button at the bottom of your screen and I will incorporate the questions throughout our discussion. So let me introduce our guests. I am very fortunate to be joined by Kathleen Inman and Todd Hanna. Both really embody a drive and passion in their areas of expertise. Kathleen Inman is a leader in the wine industry in Napa Valley. She's the owner and winemaker for Inman Family Wines. As a native of Napa Valley, Kathleen started the vineyard in 2000, embracing what she calls her eco ethics, sensitive farming, natural wine making, and environmentally responsible business practices. She was the first new California luxury brand to launch using STELVIN closures. That's the trustee screw cap that hopefully all of you know and love. Kathleen has been a pioneer in the Rose movement in America. She encourages a natural habitat making home for birds of prey, for pest control, rather than using conventional meats. Her vineyard uses solar power and recycles all their gray water. One quick fun fact, the property had the first publicly available electric vehicle charging station in the North Bay in Wine Country. And for those of you who listened to our first session, similar to our hosting guest, she also drives an electric Mustang. So welcome Kathleen.

Kathleen Inman - [Kathleen] Thank you.

Nicolas - And by the way, First Republic, we have no affiliation with Ford, Mustang. We just happen to have panelists that enjoy that car, which is nice to see. Todd Hanna is the Chief Operating and Revenue Officer of Vertical Harvest. He joined Vertical Harvest a year ago to help lead the company's expansion plans, team growth and profitability model across 10 new locations. And I'm just going to describe him in his own words. He joined Vertical Harvest because, quote, "It's a chance to make a difference in the lives of people, to make an impact on our planet and in business as well. Vertical Harvest is a company that is at the forefront of the massive, rapidly-growing controlled environment agriculture or CEA industry. Vertical Harvest Farms is an urban farming force for good. We are equally committed to responding to global issues such as climate change and food insecurity, as we are to addressing local social justice issues such as inclusive access to stable and secure employment at a livable wage, housing and healthy food." End quote. Interestingly Todd is also a decorated military veteran having served two combat tours in Iraq as a marine officer. So Todd, thank you for your service. And welcome.

Todd Hanna - [Todd] Thanks for having me.

Nicolas - So just a quick snapshot of what's to come today. Our session will include a historic perspective from Todd and Kathleen on how climate has shaped their business. We're going to discuss some challenges and successes they have seen. We'll talk about their vision on the future of sustainability, and we'll close out with a few takeaways to help address climate change. So let's get started. I'm going to start with you, Kathleen. Wine vineyards obviously have a rich history. They go back thousands of years, but would love to hear from you what was the spark that ignited your vision for wine making? What was the aha moment that got you excited about what you do?

Kathleen - Well, it wasn't so much an aha moment as it was a gradual process. I grew up in the Napa Valley, and you might think as a result, wine was part of my life, but my family were teetotal. They didn't drink alcohols. They farmed prunes, not grapes. And so it wasn't until I went away to university that I started to learn about wine like so many university students, but actually I was a little snobby about it. I wanted to learn more about wine from the Napa Valley. And I started doing, it was nothing I was studying academically. It was just a social interest. And I came after doing some local wine tasting classes that a wine merchant offered. When I came home for my summer holiday to Napa, I thought it'd be kind of cool to get a job in a winery and learn a little bit more about how it's made. And so I did. And I learned that wine making, most of the time you're cleaning things or moving heavy things around and a little bit of drinking beer and that it wasn't the sort of thing I ever imagined as a career for myself. So I actually trained as an accountant. I have an MBA in corporate finance and did mergers and acquisitions work in the UK and then became a headhunter. But in 1997, I guess this was maybe the aha moment, we were visiting family in Napa Sonoma and then having a little holiday in Mendocino. And we had this hair-brained idea, temporary insanity, that made my husband and I decide we would give up our careers in the UK and move to California. So my husband didn't really give up Pittsburgh, he's still an attorney, but I bought a piece of, we bought a piece of land and I put in a vineyard in 2000 and made my first wine in 2002. So it was over the course from 1982 when I first worked in a winery until 2002. It was a gradual process.

Nicolas - Thank you. Interesting. Okay, we're going to switch from wine to food and Todd would love for you to share what the catalyst was that brought Vertical Harvest from idea to reality. And tell us a little bit about Vertical Harvest.

Todd - Yeah, so, you know, Vertical Harvest, I live in Jackson Hole, Wyoming, which is where Jackson, or excuse me, where Vertical Harvest is headquartered. And the genesis, which I deserve no credit for, belongs to, the credit belongs to three amazing women who here in Jackson came together, a little bit through chance and then through a lot of intention. So our current CEO, Nona Yehia, has a background and is an architect. And our other co-founder, Caroline Croft Estay, has a background in serving people with disabilities. And then a third co-founder, Penny McBride had a background in farming. And there was a, essentially an unused plot of land in the, what I would, I mean, as much as Jackson Hole has an urban core, right in the middle of downtown Jackson Hole. And these three women, through a process of discovery and intention came together and said, there's gotta be something we can do that serves the people, the planet and the public goods simultaneously. And so when you take an architect and that creative mind and you take someone whose background is in serving people and in supporting people with disabilities and someone whose background is in farming, and you put all that together, what ended up coming of that was the first vertical greenhouse in North America. And so that genesis through many, many years, kind of like Kathleen just described of intention and grit and persistence and all of the red tape and mines that needed to be changed, you know, resulted in a facility here in Jackson, which is, you know, frankly a relatively small facility. But through that, I would call it almost prototype has led to what is now a company committed to building at least 10 of these across the country in the next 10 years as part of, as Chris mentioned at the beginning, a desire to solve environmental as well as food challenges that are not just in the US and certainly not just here in Wyoming, but global.

Nicolas - Thank you. Well, the last time I was in Jackson actually stayed in the hotel across the street from you. And I did not though, that was a small facility. It's impressive, the size and scope of the facility, but interesting that that's considered small. Thank you both for that history. I'm going to jump right into some challenges that both of you face and Kathleen start with you. We'd love to hear what the top challenges you have in addressing sustainability in your business.

Kathleen - Well, there are a lot of challenges in farming and also in wine making. So I have 10 and a half acres right in the heart of Sonoma County's Russian River Valley that I planted in 2000. And I grow mostly pinot noir, but I also grow a little bit of pinot gris. And so there are, you know, challenges when I started in 2000. There were very few people around me doing any organic farming. It was very much all conventional farming. And so the challenges I initially had involved finding the right products to use to, for example, weed control. I did all sorts of research. I used crazy things like University of Iowa had done some research with using cornmeal like polenta to inhibit the growth of grass weeds and things. And I used that as a, with my compost, as a way to try to retard. It wasn't successful, but I gave that an expensive try. I must have piloted for a couple of companies, three different types of eco-friendly weed killers from starting with basic things, you know, to like vinegar and clove oil to having to using some more complex recipes that people were trying. And so finding the right product was one big challenge. And on the wine making side, I think the biggest challenge I had was when I built my winery. I had a vision for, I've always been very keen on recycling and growing my, having my garden be organic and, you know, growing the food that we eat. And when it came to building the winery, I wanted to, you know, use, reuse the wastewater, for example, that I wanted to put in a system that reused and stored it, but the county and state wouldn't allow me to use that to flush toilets. They said I had to have potable water, which just seemed ridiculous when I had 16,000 gallons of a storage for or cleaned, you know, recycled. And in some countries they use the water at the grade that I was recycling at, they use it for drinking water, it's pure enough. But they wouldn't let me flush toilets with it. They wouldn't let me put composting toilets in. They had all sorts of rules and regulations that made it hard for me to innovate. So those were challenges I had to overcome as well as, you know, the, I really fancied when I, 10 years ago when I, well, 12 years ago when I did the winery of getting it LEADS certified, you know, for, and I found that as a small person I was saving up all of the points I was accruing with all of the things. I mean every aspect of my business from the recycled steel of the structure to recycled aggregates, all these things I was getting points for. And then I found I had to pay $60,000 or something for somebody to present my thing. And, so it was very hard as a small person starting out to act who was actually trying to do the right thing to get any recognition for doing that either. So those were a few things. I mean the list is huge of challenges, but those are a few that came to mind.

Nicolas - Oh, good examples and an entertaining use of polenta that I have never-

Kathleen - I Know. Well the funny thing is the compost I use comes from San Francisco's table scrap program that's now spread around the Bay area. So old food scraps were make the compost and so it was, they called it four course compost. So I was making four course compost plus polenta. It's kind of a strange thing. It was with the Pinot.

Nicolas - And Todd, what about for you and Vertical Harvest? What have been the biggest challenges in addressing sustainability in your business?

Todd - Yeah, I mean, specific to sustainability, I think the biggest challenge for us, and I don't think it's unique to Vertical Harvest in the industry, but certainly for us, is doing what we're doing at scale, right? So I was talking about facility size. So in Jackson, our facility is roughly 15,000 growing square feet, which to your point looks big, and I don't mean to demean it, but our next facility that's under construction is about 200,000 growing square feet. So we're going from, you know, 50 to 100,000 pounds of produce a year to a little over 2 million pounds of produce a year. And to do that at scale sustainably is not easy. So that would be my first answer is translating what is done in, I would call it just on a smaller level to not only larger by facility, but then multiple facilities across the country. So I would say that's probably the hardest part, when it comes to sustainability specifically, I think, again, I'm not sure this is unique, but certainly for us, you know, the largest component of our business, meaning controlled environment agriculture, is energy, right? So while we can say that we don't have carbon emissions or we don't have many as a company in our facility, specifically, it's important that we look up and downstream and ask ourselves, what is the sustainability across, not, you know, across the inputs into our system and the outputs in our system. So making sure that we're in locations that have green energy, that have enough energy to supply our facilities, and that in and of itself is a challenge. And then, you know, again, depending on how far you want to go downstream, you know, sustainability when it comes to packaging and things like that that we were talking about, that's certainly a challenge, especially in a lot of the channels that we want to be in. You know, the retail channel specifically, it's hard to find packaging that is quote unquote "sustainable". And then I think the third or whatever number I'm on, Nicolas, is I think scale and sustainability requires funding. And this is a new industry and it's an emerging industry and it's finding, I don't know if I'd call them alternative, but sources of funding, this is not an inexpensive business and to find investors and or debt type funding. So I guess to wrap that in a bow, I would say our biggest challenge are scaling, you know, clean and sustainable inputs and outputs out of our facilities and funding.

Nicolas - Thank you. I'm glad to see we've had a one or two questions in comments come through, which is good. I want to encourage people to continue to use the Q&A to do that and I'll leave those questions into our discussion. Todd, you just mentioned packaging and transport and the challenge with that and for Kathleen that is a well known issue in the wine industry, particularly, you know, for some of us who may be ordering one bottle at a time, that obviously is not good. Tell us a little bit about how you package and transport your wine and what you see as the efficient or better ways to do that in the industry.

Kathleen - Yeah, so my business is a direct to consumer model. So shipping wine from California to most of the 50 states is how I sell my wine. And so one of the first things I made sure that I did was to source locally produced. So glass that's locally produced in California that's primarily recycled and also choosing lighter bottles. I mean so often fine wine and my wines are, you know, not inexpensive, but fine wines are often in big bottles with giant punts. And people have this view, oh it's heavier, it must be a higher quality, but the extra cost, and I'm sorry I don't have the exact figures. I worked it out a few years back because I was interested in the actual numbers and it's an enormous amount of weight when you're gradually, you know, shipping case, you know, 3,800, 4,800 cases of wine that if you can reduce the weight by 15 or 20% of each bottle, you are reducing the fuel used by the vehicles that take it. So that was one thing that I looked hard at. I've also used my shippers, no Styrofoam leaves, Inman family wines. We use all cardboard that is from recycled material and we actually tell people on the packaging, remember this is compostable and you can put this in your home compost pile and let it become part of your garden instead of Styrofoam, which is hard to even get the garbageman to take that away. So those are things I've looked at. I use water based inks on my packaging, but I'm really interested in one of the things that one of my colleagues in the industry is doing, and she has launched a brand where they're actually washing and refilling people's wine bottles. Now the problem is when you're small, the amount of warehousing facility you would need to collect those bottles is enormous. And so that is something that I haven't been able to do. But for the few restaurants that I supply locally, I put my wine in kegs for them and I, you know, there are not many $75 a bottle wines that you can get glasses of in kegs. But that saved me, you know, each 20 liter keg saves you quite a few cases of glass and cardboard. So those are a few of the things, you know, vegetable-based inks, you name it, I've been trying to solve a lot of the problems, but I'm only a tiny, I'm the, at the other scale of I kind of wanted to non-scalable. I think lots of improvements can be made by individuals making choices about the packaging and of the choices of the products. So, you know, small scale can make an impact as well.

Nicolas - Those are some interesting things you're doing, a couple follow ups on what you've shared. Keg and wine people don't usually put those together obviously, but can you give us a sense of, are other people also using kegs in the wine industry? And I think the one challenge I'm thinking of is when you go to a restaurant, which you've shared, it may be used for people are encouraged to, they get these huge long wine lists, right? You've got dozens, sometimes hundreds of wines to choose from. And so that's bottle by bottle that it needs to be stored in the restaurant to go to the keg model. I assume the restaurants would have to sharpen their wine list and have a much shorter list in some cases.

Kathleen - Yes, usually maybe only a dozen or so. But there are businesses built around that. There's a business called Free Flow that just packages wine in kegs for wineries and then distributes them to the, you know, the distributors pick them up just like they would pick up cases of wine to bring to restaurants and they deliver kegs all over the country. I haven't done that because I don't sell anymore to restaurants around the country. I just do on my mailing list and my website. But, you know, I think that's, that is a way to do it and in a way it's an easier way than the whole bringing bottles back and having someone fill it because that's really talking about a very localized opportunity. I mean I know we used to return our Coke bottles and things and milk bottles and you can do that, but not on such a big scale, I think.

Nicolas - One other specific action that I mentioned in your introduction that you're taking is using birds for pest control. There are different ways obviously to handle pests, but tell us a little bit about how you came about doing that and why you feel that is a good strategy.

Kathleen - Well, so one of the biggest pests we have in Sonoma County in the part of the Russian River we're in is we have fantastic sort of sandy soils that gophers really love because it's easy for them to dig and they kill, basically kill the grape vines by eating their roots. And so an owl can eat eight gophers a night. So putting up owl boxes was an important thing. And also not only for owls, but I also have kestrel houses and raptor purchase to encourage those birds. And around the perimeter of the vineyard, I mean, I'm hoping those are the meat eating birds, but I also have a lot of other birds that deal with other kinds of pest. So I planted beautiful beneficial insect plants all around the perimeter of the vineyard. And recently a birder found 32 different species of bird on my 10 and a half acre parcel. And I think it's because there's so many beneficial insects that are tasty to those birds. And so it's a pretty special place if you, you know, take care of the wildlife as well as the soil, you bring things into balance.

Nicolas - Thanks.

Kathleen - So I also, I mean the reason there was, I have to say on the picture, the reason there was a pussycat on the front is we also have cats helping with gophers as well. So that was a picture of a brand-new kitten that we're just, just adopted, looks like he's going to be a great hunter.

Nicolas - All right, let's transition a little bit and go to Utah. One of the unique aspects of Vertical Harvest is more than half of your employees are differently abled and inclusivity is a cornerstone of your business. I would love to just hear a little bit more about this.

Todd - Yeah, absolutely. So to your point, a cornerstone, I would argue a cornerstone might be an understatement. It is core to who we are as a company. and you're right around, currently around 50% of our employees have some form or self-identify as some form of a disability, whether it's a mental disability, physical disability, et cetera. And you know, the genesis of that is again, one of our co-founders in the current CEO Nona Yehia has a brother with a disability and Caroline Croft Estay has served that population for many, many decades. And what I would say is this that for us what we've learned is that while those percentages sound goodhearted, they're actually also good business. You know, I was thinking about this last night and I don't think disability has to define capability. And so we have people with all sorts of disabilities. I would argue all of us have different abilities, but we have people with all sorts of disabilities that range from mental to physical, but that doesn't and shouldn't necessarily define what they're capable of doing. And so we we're very intentional about making sure that we're providing opportunities that quite frankly might not be available to people with disabilities simply out of perception, not necessarily out of capabilities. So that program for us looks like not just the percentage of people with disabilities that we hire, but we have specific training programs, whether that's technical training related to their job, whether it's more like life skill development related to financial planning and things like that. We're really intentional about upward mobility. So it's not just hiring people that, you know, have a disability that, again, in the interest of transparency, you know, if you look across industries, there are certainly, there are certainly organizations that hire people with disabilities, but a lot of times they get stuck in one job and it's the same job for the entirety of their career. So we're really intentional about not just hiring, not just assigning people with disabilities to jobs that don't have that upward mobility. And we're also really intentional what we call customized employment. And that is fitting the job to the person, not necessarily just finding someone to fit the job. So it's core to us, it's personal to me as well. I have a close relative that struggles with the same, same issues she has cerebral palsy. So, you know, it is intentional, it's core to us. And you know, just a stat that, that I was reading the other day, you know, like I said, it's not just good hearted, it's good business, but you know, there's an Accenture study that just recently came out that on average companies who championed disability inclusion achieved on average 28% higher revenue and 30% higher profit margins. So it's not just about feel good and doing good, it is about good business. And again, for us, just to put a cliche on it, it really isn't about a handout, it's about a hand up and we're really, really intentional and serious about it.

Nicolas - Okay, thank you. I'm going to change gears to my next question for you Todd, because obviously Vertical Harvest and what you do is different from seasonal farming, right? Effectively you're growing food every day of the year. And I'm going to tie this into a question from one of our audience members too, but I'd like to hear a little bit of what the benefit is of growing every day of the year for both customers and employees.

Todd - Yeah,

Nicolas - And a related question, which I'll repeat if you skip it, but there's a question about what can or cannot be farmed vertically. So specifically an audience member asked about microgreens and so would love to also to cover, are there certain, you know, certain types of food that cannot be grown in your facility?

Todd - Yeah, sure. So your, your first question, Nicolas, just around, I think I'll just phrase it as the benefits of growing year round or something like that, right? So I would say the first and foremost answer to that is access, right? Whether that's microgreens lettuce, petite greens that we grow, you know, in places where that can't be grown year round, you're limiting the access to healthy food, right? At least locally grown healthy food to people. When it's not grown locally, there's also a couple of other, and because we can grow year round, there's a couple of other things that, a couple of other benefits. One is back to transportation, not just on the sustainability front, but on the freshness and nutritional front. By being able to grow year round in places where those things aren't able to be grown year round and they have to be trucked in, you know, 95% or about 95% of the lettuce and leafy greens in the US are grown in California and Arizona and they're trucked that 2000 miles or whatever the number is across the country, they lose about 40% of their nutritional value along that route and then they also lose shelf life. So in addition to access, we've also, I think being able to grow year rounds allows us to increase the amount of nutritional value of the product that isn't grown locally year round. And the freshness as well. I think the other piece that you touched on is it provides year-round stable employment to people and not only stable year-round, but well paying and you know, I think, we consider our employees farmers even though they're indoors and it's not your typical farm job and they're good living wage paying year-round jobs. So being able to grow year round, it's tied to freshness, it's tied to local, it's tied to sustainability and it is tied to to, you know, worker stability as well. As far as microgreens and what can be grown in the facilities, what we currently grow are, you know, there are multiple varieties of what I'm about to say, but from a crop scope we grow microgreens as one of the questions was, head lettuce so just like lettuces type, different types of lettuces. And then in between the microgreen and the head lettuce are what we call baby greens in the industry or petite greens. Industry-wide what's being grown indoors is a lot, right? I mean and there's a lot of experimentation going on, right? So that's what we grow. But there are companies growing mushrooms, berries, certainly greens, microgreens and others. And there's a lot of experimentation, you know, because airable land is on the decline, because water sourcing is on the decline and because population is growing, there's a lot of people working really hard to continue to figure out what we can grow indoors, not just at Vertical Harvest, but globally.

Nicolas - Okay, very good. And you're mentioning, both of you have touched upon the different, well different types of wine, different types of food. Tell us a little bit about just, you know, you have a sense I'm sure of what clients are interested in, what they like, how do individual customer preferences for certain tastes, certain types of wine and foods impact what you're doing?

Todd - Yeah, go ahead Kathleen.

Kathleen - Well, I mean, growing grapes is not a crop that you can easily change. You know, it takes a few years if you butt over to create something new. But, you know, the problems that we're all having with shortages of water, with changes in temperature, with fires, there are a lot of things that are making me, for example, think is it sustainable for me to be able to continue to grow Pinot noir, which likes cooler temperatures and being by the Pacific Ocean, we are cooled every night by most every night, but by the marine layer that sits off the California coast. But with weather changing as it has in the last 20 years, I've seen patterns where instead of it being one or two days a year where we don't have a marine layer, we have weeks where we don't have the marine layer cooling us down. And only this harvest last month I was working outside when it was 115 degrees, which I, a native of California, I can't remember having it be 115 degrees at that time of year. And so I decided I would this year make some grapes that tend to do well in Spain where it is hotter and where they do have drought. And I shouldn't say.

Nicolas - I'm glad, I'm glad you bring that up. And I'm sorry to interrupt because one of our questions is specifically reference thing. Spain has been a massive drought is the comment from someone in the audience. I walked across many bridges with dried up rivers and wildfire devastated areas. Their temperatures were in the hundreds in the growing season. How are these challenging and affecting our wine industry? So I'm glad that you're getting-

Kathleen - So yes, so this year I decided not to change my own vineyard, but to purchase some Tempranillo and Grenache, that can survive in hotter, they have thicker skins, they can, and I'm making it not only because my customers tend to like when I produce something other than Pinot noir as a novelty, but I want to see, am I going to need to butt over my vineyard to different varietals that won't, you know, be harmed by these 100, 115 degree days during the, you know, while the fruit is still ripening. These are important issues and water is, you know, like I said, I put in special waste water systems, but I also dry farm my property. I only use water when I'm pushing in compost teas that I brew to fertilize. So I try very hard to minimize that. But you know, it is an issue. I mean wine is one of the biggest users of water because we have to clean and sanitize the barrels, the tanks, the floors constantly. It's what you're doing. And so one of the other things I've done, and I think more people have now started doing it as well, is instead of using hot water to clean things, I use steam because for example, a barrel takes 60 gallons of water to clean it thereabouts. If you use steam, you use about six. So it's a big, big savings. And also it all runs off electric, whereas hot water usually most efficiently industrially you need gas. So I have all solar powered, so every single thing runs off of electric. And so, but we all have to think about these, you know, there's a lot of components to sustainability in respective of water and we are having less of it as we've had two big droughts in the last 20 years that have gone on for more than four years and it's a problem.

Nicolas - And Todd, for you, on the taste front, you're not using pesticides, other chemicals, which typically for most of us leads to better-tasting foods. But tell us if you're doing anything else to enhance or develop certain types of fruits, vegetables, others that you have at Vertical Harvest?

Todd - Yeah, I mean I think our R&D if we want to call it that relative to flavors is really driven by the customer. I mean, to Kathleen's point, our systems are really, really flexible and so are, and the grow cycles are really fast, right? So you're talking, you know, lettuce a little under a month, petite greens a few weeks, and microgreens, you know, a week to 10 days. So we can be pretty nimble within reason. And so a lot of our R&D it's somewhat channel specific because depending on what channel and who the consumer or customer is, they're looking for different things. So in what we would call the institutional channel around health institutions, educational institutions, hospitals, those kinds of things, there's a lot of, there's a lot of focus on nutritional value. Of course taste is a component of it, but they're really driven by the nutritional value. And so we take that feedback and we look to source seeds and things like that, that address that, you know, you get into the culinary circle with chefs and there's a combination of flavor, but also things like color because depending on the dish and so we take that feedback in and we try to adjust seasonal menus according to that. And then on the individual consumer end through kind of the grocery store retail channel, there's some of those same, there's kind of a hybrid of all three of those things. The other piece to those flavor profiles is that we spend a lot of time researching them from the consumer standpoint, adjusting to them making sure that we have a saying at Vertical Harvest that we want to be in every community we go in what we call hyperlocal. And what we mean by that is not just geographic locality, which of course is important to us, but I always say, what does it mean to be a local in that community? And so the feedback is also what are the flavors and dishes that are most common and/or unique to that community and how can we pull that information in and then make sure that we're providing the community with those complimentary flavors and profiles and nutritional values, et cetera.

Nicolas - Thank you. We have a bit of an economics question coming in from the audience that I'd like both of you to address. And it's about pricing. And I think at the same time, a little bit about accessibility. Most of us know if we go to the market, we go to the wine shop, there's a premium for organic products, right? There's just a price premium. It costs more and clearly there's a lot of trial experimentation, development, different things happening. And I would love your opinion if you think that organic food and wine will come down in price at all and become more accessible, or you think this premium will always be there.

Todd - Go ahead Kathleen. I'll go second.

Kathleen - Well, I mean, I just want to comment on that as a consumer. I feel that prices of organic produce, vegetables, meat and whatnot have gone down relative to conventionally farm things over, you know, the last 40 years since I started looking for organic produce at supermarkets, I do feel it's gone down. But then of course right now we're in a period where with all the so many economic issues, prices are rising anyway. So I think that's something to look at. In wine, it's kind of interesting. Organic wine, that's not what I do. I just grow organic grapes. But organic wine has a lot of issues that sometimes make it not, it's not necessarily always as expensive. It's not always seen as the premium that it maybe should be. I've been at tastings when I tell people, oh, this is, you know, farmed organically and they'll say, oh, this is so delicious for an organic wine. Like they were expecting it to be bad because to be an organic wine, you have to use, you have to have less than 10 parts per million of sulfur dioxide. And so there aren't that many organic wines in the supermarket and a lot of them are not very tasty, to be honest. So I think wines are a little bit different than food, but I'm interested to hear what Todd says. I feel like things are, the more people that farm organically, the more prices go down. And I know as a farmer, my inputs for the organic spray that I use in the vineyard when I was first trialing them were twice as expensive. They're still much more expensive than conventional inputs. And I think that's one of the, one of the reasons it always will be a little more expensive as long as the things that you need to use costs so much more. And there's a lot of hand work, I mean, hand weeding in the case of my vineyard. I mean, and you know, and that's and kind of intense and it costs a lot of money and we pay, you know, very good wages to people and provide healthcare even though we're small and that'll cost money.

Nicolas - It's expensive. And Todd, you mentioned also that you pay high wages. So what about for you similar view in terms of the pricing I'm glad that you pointed out the trend of it coming down broadly over the last 30 or 40 years, but Todd, any further thoughts?

Todd - I mean I'd probably just echo, I mean I think for, in our industry, I mentioned it earlier, right? I mean our pricing is associated with the cost of the inputs that go into the product for the most part, right? And as those input costs go down so too well the pricing of those products. So I think there's a two part answer to this. There's the economic part of, you know, costs of goods sold and for us the biggest part of the cost is energy, as I mentioned earlier, right? So as that goes both greener and cheaper, so does the CEA industry. I think the second part of the question around, you know, organic is there, there's a, like, I think part of that is the certification itself, right? There's practicing organic and then there's being organic certified just like lead versus in the construction world, right? And I think for us, first of all, not to get too into the weeds, well, I guess pun intended, but is, you know, we're a hydroponic vertical farm. Therefore we don't have soil and there's litigation around can a hydroponic farm be organic because part of organic certification has to do with the soil. So without getting into that, what I would say is this, our belief and what we see is that a big part of us being organic, what I think that's associated with is high quality, sustainable, healthy, pesticide-free, et cetera. That's why we place our farms in the middle of a community where people can come see how we grow regardless of the certification. They know how it's grown, they can see how it's grown. We report our metrics around sustainability and pesticides and all that sort of stuff. They know, they're farmers. So I do think there's a movement not away from organic, but the more local that your food is produced, whether it's greens or beef or wine or whatever, I think there's a trust in knowing the process with which it's grown that can either compliment or overcome, there's lots of different certifications out there. I'm not just picking on organic, so I think there's a two part answer to be long-winded. There's the economic reality of the cost of inputs drives the price, and then there's I think the other piece of organic and I think what we're talking about is healthy as well, that I think being local and knowing how your food is produced can complement that. Does that make sense Nicolas?

Nicolas - Yeah, thank you.

Kathleen - It makes absolute sense because I think, you know, integrity is a part of, you know, it's a key word in my business and I don't do the certification because it's expensive and I don't have the staff or the time to do it. And I think that our system is backwards that it should be the people who use Roundup and who use terrible chemicals, who should pay higher fees for using those things so that then you could sort of use those monies to certify small people or people doing the right thing. It feels almost like you get penalized for trying to do the right thing for the environment.

Nicolas - Thank you. You both shared some really positive examples of what you are doing to help the food and wine industry and make it more sustainable. I'm going to turn the question around a little. And for people like me or the people in the audience, what can we do in our daily lives to help address climate change and sustainability? Any advice, recommendations of what individuals can do to help? Todd, we'll start with you.

Todd - Yeah, I mean I think, you know, look, I think part of it is just being aware and educated, right? I mean I learned something every day on this topic that I didn't know the day before and that informs me. So that sounds a little bit soft, but I think first of all is being educated, informed on the issues that are out there. I mean, I kind of touched on it a minute ago. I think the more you know literally where your food or wine comes from and the closer you are to the source of that food and wine or whatever, I think that goes a long way, right? I mean you're combating the transportation costs or not cost, but effects. You're supporting your local economy, you know that it's probably fresher because it's like either straight off the vine or straight off the rack, or straight from the field. And so I think, you know, being educated, being informed, I'm in the food business, so knowing your, what I would say is like know your farmer, know your source of food and buy and eat local. I think that goes, I mean I can list a thousand things that we could all do, but in the context of this, I think that goes all really, really long way.

Nicolas - Now I think actually even growing your own food,

Kathleen - Yeah, yeah.

Todd - If everyone had a four, not everyone has, you know, a house with garden or an apartment with a balcony, but you know, pretty much you could have a small, a four by four raised bed or a plot of land could provide enough of leafy greens for a family all year round with successive planting because you know, spinach and kale and chard will grow all through the year in many places. And then lettuces and other salad crops, people could, more people should be looking at growing things on their, you know, balconies and in their gardens. And supplementing their groceries with what they grow. And I think also, you know, there's a lot of policy changes that need to happen to make it so that this is more equitable and spread out. But for people who can afford it, having, you know, adding rooftop solar to help mitigate, you know, conserving water by, you know, putting in appliances that are better. Anyway, there's a lot.

Nicolas - Thank you. I may need your consulting services because I have a four by four raised bed in the backyard, but I haven't been able to keep us going for the full year, but I have room for improvement as I'm sure many of us do. I want to help us bring us to a close before I transition to Chris. Both of you as I just mentioned have, those were some really shining inspirational positive examples of what you were doing to bring sustainability to food and wine. What struck me as you were talking where a couple things. One is this is still a relatively new area and there's a lot of room for trial, highlighting, entrepreneurship, which you both mentioned and I'm glad the two of you are pursuing it. And I think that has to continue to happen. And as you both mentioned, second point, in order to encourage all of that, we need funding, we need policy changed and hopefully we will see that in the future. So thank you both very much. You have been inspirational to us. And Chris, I'm going to hand it back to you to close out our session. Thank you.

Christopher - Great, thank you Kathleen, Todd and Nicolas for such an insightful conversation today. Really appreciate it. So I think we're going to pull up the results of the poll on the screen. And so a reminder that I think for everybody that we are talking about question we ask at the very beginning, and I actually revealed it during the middle of some of the data I was looking at. My question was what percentage of climate change is caused by global agriculture? The answer is approximately 25%. Now, according to the World Bank, agriculture is a major part of the climate problem in some ways. It generates approximately 25% of total greenhouse gas emissions. Everything from cows to transportation and addressing food waste and loss is critical to helping meet climate goals and reducing stress on the overall environment. So I think some of the conversation you heard today helps to address or can help to address some of those issues. Now as we heard from today's conversation, farming one of the world's oldest professions is increasingly at the cutting edge of science and technology. That's a good thing. And our experts like Kathleen and Todd have had a direct impact on the future of our food and our wine supply. Now the best practices result, I think as they've indicated in healthier soil and the ability to draw down carbon from the atmosphere. So that's the carbon sink function, helping to offset global warming trends. And I think it's really about consciously engineering processes and maybe accentuating what nature is already providing. Now at First Republic, we are dedicated to managing our impact in the environment. And here's a few of our proudest achievements over the past year. First, we reached carbon neutrality for the first time. Second, we purchased a hundred percent renewable energy for our operations. And third, we formalized our longstanding position of not lending to fossil fuel companies by updating our loan policy to restrict lending to those industries as part of our commitment to creating a more sustainable future. Now you can learn more about the environmental efforts of First Republic in our Corporate Responsibility Report. And you can find a link to our report in the chat and will be available on our website at firstrepublic.com as well. Thank you so much for your time and attention today. And please be sure to visit the sustainability page on firstrepublic.com where you'll find a number of resources on the subjects we covered today. A replay of today's session will be shared with you in the next few days. And if you have any questions, please feel free to connect with your first Republic advisor. Thanks again for joining us everyone. And enjoy the rest of your day.