‘Keeping it Clean’ with Nick Stewart, Partner & Climate Change FS Lead for Baringa Partners

I first came across Nick when I saw a post he wrote about his daughter on LinkedIn, which both made me smile and also reminded me very much of myself at her age. I was then introduced to him by my colleague Adam, and found out the whole story — it’s great!

Nick grew up in Scotland, and moved down to Newcastle to study Law, graduating in 2001 and embarking on a consulting career with Arthur Andersen, and then Deloitte before moving into the Banking world. He then went full circle joining EY in 2014 and then making the jump to Baringa in September last year, to become a partner growing the climate change capability and the leader for the CFO business.

In his role at Baringa, Nick advises clients on embedding climate change from a strategic perspective — ranging from new product and growth opportunities, into the risk, regulatory and financial reporting aspects.

Can you tell me a bit about yourself?

I was born on the coast of Scotland in the little village of Longniddry, then moved to Edinburgh with my mum and brother, where I stayed until I moved to Bristol to work for Arthur Andersen in my gap year. According to my mum, that’s when I ‘grew up’!

I married Nat, my childhood sweetheart 6 years after we met at a Judge Jules concert in Newcastle Union in our first year of university in 1999. She had the Spice Girls Buffalo trainers on, and I was wearing my trusty Paul Smith moleskin trousers. We have 3 wonderful daughters, Mimi who arrived in 2008, Cesca in 2011 and a little welcome surprise of Bella in 2017.

I’m fairly sporty, love running, HIIT workouts and generally being active. I’m a believer in the link between activeness and mental strength and agility. I’m always more productive, efficient and focused when I’ve exercised before work. I also love to travel and explored some of the further corners of the world when I was younger. Since having kids we’ve been on some great trips, including the long drive from San Fran, to Santa Barbara, LA, Disney and Orange County, which was an amazing family experience.

You’ve gone full circle, consulting, to banking, to consulting — how did you get into the consulting game at the start?

I did a gap year as a ‘Bean Counter’ at Arthur Andersen between school and university. I then went on to study Law at Newcastle and then went back into professional services at Andersen, and then Deloitte, where I spent 6 years, initially qualifying as a chartered accountant. Back then I was a bit of a techy geek and worked on technical accounting to help banks innovate new financial products, and really enjoyed it.

I then moved into the Banking world, working for Barclays, or BarCap as it was then, and spent the next 6 years there, half within Finance and half in more cutthroat Front Office Sales and Structuring. It was an exciting time in the bank! I then spent a couple of educational years at Deutsche Bank doing a similar role, partnering with CFOs and Treasurers of both financial services firms and corporates. The interesting and innovative products in banking were shrinking, and it seemed like the perfect time to move back into advisory.

I almost went back to Deloitte but was swayed by the entrepreneurial, people-based culture of EY, which offered the opportunity to build up the CFO advisory business. It allowed me to utilise my banking knowledge in consulting and after the challenging, but enjoyable process, I made Partner, and had a great 5 years as a CFO advisory partner. We built the business from 45 to a big 250-person machine of a business. At this point much of the planned growth was offshore, rather than the onshore, recruiting, developing and building of businesses that I thrive on. It’s that entrepreneurial, fast growth environment that really makes me tick.

So why Baringa and why Climate Change?

It was through working in regulatory change I started getting into ESG, looking at climate change and the impact it will have on big banks. This was back in 2017 when ESG was certainly a topic, but wasn’t yet ‘on the agenda’ of boards or at the forefront of future planning.

I’d known Baringa since 2013, but it was at this point I met with Adrian, the Managing Partner who invited me to come across and build out capability in CFO and ESG. I really liked the idea of moving somewhere that took me back to focusing on the origination of clients and building teams. I was excited by the growth opportunity, but it was the people at Baringa who swayed it for me, and they are still are the main driver. I started in September 2019 with a fresh mindset after taking a few months off to focus on family, and also to rest professionally which is often overlooked.

And how’s it going so far?

I’m 10 months into building up our CFO, ESG and Climate business, taking our capability to our FS customers. It’s now the biggest topic at C-suite level across all of FS. We work with insurers, banks, and asset managers to work out how to identify, measure and manage climate risk. It’s a huge step change for them, a brand-new risk that FS companies haven’t had to think about as it has never been front and centre before. It’s now fully on the agenda with media, investors, customer and more recently with the regulators.

Mark Carney has done some brilliant work escalating climate change up the agenda, and next year every single bank is going to be forced to identify, manage, measure and report on what climate change means to their business. It’s a great step forward for society.

So, to mix it up a little, let’s talk about the cat. Please can you share the story, it’s brilliant!

So, to give some context, I’m quite active on LinkedIn, particularly around the topic of ESG, we share a lot of technical market leading info and blogs, but like you, I believe that people like things that are personal, heartfelt and mean something, and with Covid this is even more prevalent. Kind things that cheer people up are the posts of the moment!

On a Friday afternoon a couple of months ago Cesca, my middle daughter, came to me in the garden and said there’d been a letter delivered. It was during lockdown and was handwritten, which seemed odd! I was about to start a conference call but opened the letter, started reading it, and was wondering who it was from, as it seemed so formal. As I got a little further in, I realised it was from Cesca, who’s dyslexic, and I knew just how much effort it would’ve taken for her to write something like that. It was the sweetest thing I’ve ever read. She works so hard to write basic paragraphs because of her dyslexia, but her speech is beyond her years and the words were so sweet, and totally melted my heart!

She was pestering to get the cat straight away, so we made a deal — I’d post the letter on LinkedIn and if she got 20,000 views we’d get the cat (I was obviously going to get it anyway 😊). So that Friday evening, I posted the letter and we both nervously waited to see who viewed it!

Long story short, 2.8 million views, 4,130 comments and 56,500 likes later we got the little guy! She chose him, because she wanted a British Blue, and like everyone, we’ve had the news on every day, so she decided to call him Boris, and he’s now firmly part of the family! He’s had such a calming influence on Cesca, it’s such a lovely thing for her to have a little companion who she races downstairs every morning to see!

I guess that leads us on to an interesting topic; the power of social media, and how we can use it to educate people on critical business agendas. Cats v’s climate if you will…

I can’t say I’ve not spent time thinking about this — how do I get 2.8 million views on my climate posts? A few things I think I’ve worked out are to make it bite sized and digestible, make it relevant to ‘people’, make it relatable and make it as personal if possible.

A great corporate example I’ve seen that fits these is a video Shell released of a child, moving from school, then university, becoming a geological professor then going on to turn oil rigs into wind farms, I guess it comes down to capturing the imagination of society, and perhaps this is the key!

What are the challenges of pushing the climate agenda?

In many ways it’s the easiest topic to get the required C-suite attention that I’ve ever worked on. They want to talk about it, and they need to talk about it! Regulators are driving it, customers are driving it, and very importantly employees are driving it. We are seeing so much input from the next generation who are so much more focused on the societal value of their actions, input and careers.

That said, it is a mindset shift, and we are leading the charge to convert the way of thinking of banks who are very established, and although are willing to change, it can’t happen overnight! In fact, it will only happen, when it is profitable; the real economy can generate returns by being sustainable and focusing on the topic, and this is required for us to see action. Purpose and profit must go hand in hand for this to embed itself in all aspects of business.

‘Climate Crunch’ — What is it? Why is it important? What’s driving it?

‘Climate Crunch’ is when the market will realise and adjust the value of all assets due to climate risk. I was in the market in 2008 when we had the ‘Credit Crunch’, which led to significant valuation changes. Climate is the biggest and most systemic thing on the horizon yet there is a remarkable lack of understanding of it in the financial markets. We are just starting to see the inclusion of climate risk as a risk metric, yet it is neither fully understood nor fully adopted. That said, the pace of it will accelerate dramatically over the next 12–18 months, and I believe will have a fundamental impact on financial services, which in turn will impact all sectors.

The main drivers are the regulators introducing the new risk metrics, including the stress tests which will happen in 2021. The UK are one of the leading regions on that, which it’s great to see us being ahead of the curve. TCFD, the financial disclosures task force on climate, are introducing a regulatory disclosure requirement for banks to bring in a brand-new risk metric and embed it across the whole organisation. It is such a systemic market shift, to measure and include climate. Ironically, we are seeing a lot of the US Banks accelerating ahead of the UK, even though from a government and regulatory perspective, the US are behind the market. There is a significant market opportunity to make money for shareholders and divest from browner assets and invest in greener assets; a huge shift towards ‘doing the right thing’, embed it into their strategy quickly and gain a market advantage.

How do Baringa support and drive the UK’s 2050 Net Zero commitment?

As a purpose led organisation are taking it very seriously. We have made our own commitment to be Net Zero by next year, and then to start reversing our emissions beyond that, following in the footsteps of Microsoft, who are reversing all emissions back to 1970!

As a consulting firm, we have been leading on the energy transition and decarbonisation agenda for 2 decades. Advising our clients on the latest technology changes, renewable energy, carbon capture and storage. We advise on 70% of the infrastructure investments that are made globally! Pricing, advice, and strategy of renewables projects is our bread and butter, our heritage so to speak. Over the last couple of years, we’ve developed this further to build the leading global climate change scenario model to enable financial services firms to manage and measure climate on their balance sheets, and to make science driven and data led decisions.

We also help our clients to cut through the excessive amounts of information available, to be prescriptive and to evaluate and embed this into their strategy. We are in a unique position to do this, as the number one FT rated consulting firm for energy, utilities and environment. We have a strong and growing FS practice which brings together the very best minds; Scientists, Bankers, Environment and Agriculture experts, Sustainability experts, and generally passionate and driven people, like Natasha Patel leading the charge in Mobility. Bringing all of this together ensure we can support FS firms to understand, deploy and invest capital into the right projects, such as new wind farms, within this new regulatory framework.

Can you share an example or two?

A good example would be Tesco; we structured a PPA (power purchase agreement) to source energy for their entire UK real estate entirely from onshore wind farms, a cleaner, greener, and cheaper solution! Another would be working with a global sports industry to “lift and shift” their operations around the world, evaluating the entire supply chain, down to which boat is most efficient to put the kit on to cross the channel, and speeding up their Net Zero commitment. It’s really interesting stuff to be involved in.

What are some of the changes you’re anticipating post Covid?

I think many of the banks are recognising the key struggles that a large section of society will have when it comes to housing, finances, employment etc. Banks like Lloyds and NatWest are pushing to create local jobs in building eco-friendly homes, retrofitting existing homes and providing more innovative funding structures to do so. 20% of UK emissions are from housing and 25% from buildings. If we all think about our impact here, as well as our day to day impacts with things like locally source veg, heating, eating less red meat, recycling, everyone can make a difference.

Talking about our climate model to banks is key, but my other big ambition is for this to filter down to everyone in society, allowing each person to understand what emissions go into the product they are consuming; from a sandwich at Pret to the Sky TV they watch, the holiday they go on and the car they drive. Unilever are a great example of a company who have already started doing this with labelling on cans, hopefully others will follow suit quickly. How good would it be if you had a basic measure for the impact each decision we take has on the planet? It would mean we can individually, and then collectively as a society push to get to Net Zero ahead of the target. That’s both my vision and our vision as a company, to be able to have this for all companies, from the start-up with no office to the huge corporates. Danske Bank just announced a 2 day work home policy to support employee wellbeing. If a huge bank can do it, then others can and must follow suit.

There are some other big shifts coming, the CEO of Zoom recently said that in order for this to work, we need to have a societal shift, and I certainly agree. I’m excited about what the future holds. So much of it has been horrendous, but lockdown has also been an opportunity for many to rest, reflect and breathe, with everything slowed down, clearer skies and clearer minds on what is important. Let’s make sure we work together to move to towards a new greener way of living our lives.

Thank you, Nick, I think there’s a few good lessons here for all of us, especially the one from Cesca! 🐾

A few interesting and related links:
Further insight into Baringa’s climate model for Financial Services
Mark Carney on Climate Change including the ‘stress testing’ of businesses
Mark Carney on a green recovery for the UK