Disruptors

Climate-led Investing: What’s Next 

SPEAKERS

Dr Lisa Ashton, Clara Barby, John Stackhouse

John Stackhouse  00:00

Welcome back to Disruptors, and Happy New Year. I’m John Stackhouse, and this is the start of season 10. We’re kicking off this year with climate because 2025, was a year of proof and pressure, proof that the transition is scaling pressure, yes, on grids, prices, policy and frankly, public support. To capture where we’re at, The RBC Climate Action Institute has just published its annual assessment of Canadian progress. We call it Climate Action 2026 and in it you’ll find some remarkable deep dives, as well as real life case studies on policy changes, capital mobilization, industry action and consumer reality. So to get a better picture of where the opportunities and challenges may lie in the year ahead, I wanted to talk to one of the world’s most sophisticated and respected climate investors, Clara Barby is a senior partner at Just Climate. Now, if you haven’t heard of Just Climate, it was created by Generation Investment Management. That’s the climate focused firm that was co founded by Al Gore and David Blood, a pretty sophisticated investor who previously ran Goldman Sachs Asset Management, Clara and her team are trying to scale what they call climate led investing. And her firm, Just Climate is scaling quickly, including a major industrial strategy that we’ll hear about alongside a natural climate solutions strategy that focuses on land use and agriculture that’s backed by institutional investors, including RBC, who want to accelerate practical solutions that cut emissions now while strengthening the systems we rely on.

John Stackhouse  01:51

Clara, welcome to Disruptors.

Clara Barby  01:53

Thank you so much for having me.

John Stackhouse  01:54

Well, this is our first episode of the year, brand new year 2026 and we’re talking about climate and clean tech in the state of the world, frankly, the mood is a bit grim on climate. There’s not a lot of enthusiasm, as our new report Climate Action 26 shows in Canada, it’s not a top priority on people’s minds. I don’t think that’s a surprise. One of the things that actually encourages me is the amount of funding that actually is still going into climate both private capital and public capital. Clara, I wanted to kick off with your New Year’s view of how you’re feeling going into 26

Clara Barby  02:32

Well, I’m glad I’m your first guest of the year, because I am not optimistic in a foolish way, but I think I’m more determined than ever, John, and some of that determination is driven by the mission of what we need to achieve as a global society, but some of it is also just driven by the economic opportunity that I see every day as an asset manager focused on solutions that are low or no carbon, and a lot of the solutions that we see are indeed just better products or services or systems than the ones we’ve had historically, and so that so part of the determination is fueled by just that very practical observation that some of these things work really well and actually will lead to better Financial and societal outcomes, in our view.

John Stackhouse  03:22

Is there a product or service that most excites you right now, as you watch it both go to market and expand in market?

Clara Barby  03:29

We should talk about the land transition, because it’s such a ripe opportunity for Canada. Part of the way we think about the land transition is that historically, when you think of the way capital markets have organized their strategic asset allocation and even their teams around natural capital, it is typically gravitated to real assets, to holding assets and managing land that continues to be an important area for capital deployment. But actually the really promising opportunity we’re seeing is in the growth equity opportunity of the land transition. And what that means is investing in the products and services that the landowners, the industrial farmers, the forestry managers that they need in order to decarbonize their land and even make it regenerative, which means it can sequester carbon as well. And so that takes you actually to bio pesticides, bio fertilizers, precision agriculture, waste to value, water management and even some of the newer restoration opportunities. So that’s the area of focus for us, and I think bio pesticides stands out as an example of that, where you’re starting to see product come through. We have a portfolio company, and it’s using an RNA based method, and it’s just better. It is a drop in solution. It doesn’t require behavior change, it doesn’t command a green premium, and it delivers very precise, targeted pesticide to solve for what farmers need. So that, for me, is a good example. John, to your question.

John Stackhouse  04:58

 Well, I want to underscore two things you just said. It doesn’t require behavior change and it doesn’t come with a green premium. Those should be real filters on a lot of policy thinking. You were at COP 30, which seems a lifetime ago, but was just a couple of months ago in Brazil. What was your big takeaway? And what are you traveling with going into 26 from there?

Clara Barby  05:19

I’m glad you’ve asked about this. I had the privilege of moderating, facilitating the Asset Owner Summit. It’s actually the first time that a cop has had a formal Asset Owner Summit as part of the program in the blue zone. And that’s a really important step, because if you step way back and look at the key actors in addressing climate change, actually it’s the universal asset owners who are inherently economy wide exposed and long term in their thinking, who are in many ways the best allies for governments in terms of thinking through the imperative to address climate change, because they’re very, very exposed. And so this time at COP, we brought together those asset owners with the multilateral leaders, the development finance leadership, and also, obviously the COP President and CEO, etc. And it was a really fruitful discussion, because there was, so there are actually seven things that came out of it, a really important one, relevant for Canada specifically, was we do need a transition framework that can be referenced by asset owners that is consistent with the macro reality. Solutions need to be a no brainer. That being said, there’s a certain amount of abatement we can do with no brainer solutions. And then you do need policy to come in. I think, in fact, your report has a great line on this where you sort of say, Look, no one actor can do this on their own, no brilliant inventor, no government, no sector, no company. Everyone needs to come together. And I think in some ways, we need to talk about the no brainers in terms of solutions that can work now and just need market force. And then we should talk about the things where you do need governments, and actually without a consistent macro framework for how you define transition finance that links to government, the sort of the NDCs at government level, the Nationally Defined Contribution goals, and those go down to local policies, sticks and carrots that actually are consistent with the NDCs, that’s consistent with the global framework. Without that coherence, I think it’s really hard for asset owners to develop policies and approaches that will not expose them to green washing, that will actually be an economic case. And so that was a real call. Can we have a consistent framework you touch on carbon storage in your report? You know, I think carbon capture and storage is a really interesting kind of case study, because if you look at what’s holding CCUS back, it’s not just one factor.

John Stackhouse  07:40

Clara, let me just jump in there on CCUS, because that’s a huge priority for Canada. Certainly those trying to get the pathways, initiative accelerating here would lead to a major reduction in emissions for Canada, but it’s gummed up for a whole host of reasons, including the ones in some ways too complex, and everyone’s trying to solve everything all at once. How can we be thinking about these massive, big, hairy, audacious challenges, as they used to be called, and de complexing them in a way that allows capital, especially private capital, to have the confidence to jump into especially first of a kind or fairly novel technologies, or technologies like CCUS that, frankly, have not been proven at industrial scale?

Clara Barby  08:28

So if we just look at CCUS as, again, as a case study, you’ve got this combination of lack of sufficiently high carbon price for adequate project returns, you’ve got high CapEx. You’ve got lack of infrastructure and sequestration hubs near the industrial emitters. You’ve got slow moving permitting, going to the example I was giving before, and then you’ve got fragmented value chain in which you’ve got your CO2 source, you’ve got capture, transport and storage, and each of them is provided by a different Counterparty, and there’s an unclear allocation of risk and liability between those different counterparties. So I hope that spells out. When we say complexity, that’s what we’re talking about. I think that CCUS is a particularly complex case. I think if we look at some of the areas where we’ve seen progress, though, you can extrapolate ways to break through these things. So if you take cement John, or you take steel, what we tend to see as a way to break through complexity is that you have to have someone who convenes all of those stakeholders around a table. Because the way in which you break through the complexity typically is to actually have the off takers. So those who are buying the cement or the steel, they have to come together with the banks, who have a hugely important debt financing role in this, but they need the confidence. You need the equity club there, and even the equity club often needs to talk to everyone. Needs to talk together. What kind of risk are you willing to take? Which one am I willing to take? How can we structure this in a smart way? And I’ll come in first. You come in next, and then you have to have the policy makers and sometimes the government led banks. When you bring that group together, they need to feel confident. You need stellar management at the company level in a first of a kind of effort. And so what we found is often having someone who’s come from perhaps a big incumbent in the industry, knows it back to front, and then actually can see the vision of what low or no carbon versions of this looks like and really have them lead is critical. If you can get everyone around the same table, you can unlock it for sure, and actually you can tranche it smartly.

John Stackhouse  10:32

We’ll be right back after this short break. Here’s Dr Lisa Ashton, interim head of the RBC Climate Action Institute to tell us more about the Climate Action Report, and I should note, Lisa is a real authority on Nature-based solutions. You should check out her own recent report Unearthing Value, how nature can play a critical role in pro growth agendas. We’ll be back with Clara Barby in a minute.

Dr Lisa Ashton  10:59

Thanks, John. Every year, our research team takes a pulse on Climate Action in Canada and its key economic sectors, from Agriculture to Energy. We’re not just looking at targets, but results. And today, we’re releasing our new report Climate Action 2026 Retreat, Reset or Renew. 2025 was the first year since our 2019 baseline that national climate action in Canada fell, primarily driven by rollbacks on climate policy, capital investment and consumer action, a signal of retreat diving deeper we go sector by sector, agriculture, buildings, electricity, heavy industry, transportation and oil and gas, to identify where progress is made or not on climate action and why. Canada’s climate action picture is complex, but Climate Action 2026 can help you navigate this important issue if you want the charts, the sector scorecards, the case studies and our idea of the year, please visit rbc.com/cai

John Stackhouse  12:09

And we’re back. Another issue we get at in our report, which is electrification. Electrification certainly for Canada, but I suspect for a range of countries, is the biggest opportunity, also maybe the biggest capital need billions, trillions of dollars, in fact, globally, needed some progress being made, fits and starts, but real challenges on the return side in electrification, because someone has to pay for it at the end of the day. And as we look into 2026, and hopefully a better year of electrification. How are you thinking about the challenges, but also the opportunities?

Clara Barby  12:48

Gosh, that’s a huge question. Actually, in some areas, and particularly because of AI, we’re starting to see things that we thought were broadly getting on track now becoming more off track. So when you look at climate technologies. If you’re a growth equity investor like us, our interest is in areas where you have very high levels of emissions, which is why we’re interested in things like steel and cement and critical materials for batteries. The cost curve of the technology that can address those emissions is yet to come down, and so you have this up. So there’s not binary technology risk. The mouse trap works, but it hasn’t yet been scaled up. And so you have this opportunity to really bring come down that cost curve. If you look at something like offshore wind in the UK, that was the story. If you go back over a decade, and then actually it came all the way down and became cost competitive. And so we haven’t, as an investor, started out looking at things like that. There’s core renewable areas because they they were more on track. But actually what we’re seeing with the rise of AI in particular is that there is now going to be more work to do. And so we are particularly looking at data centers. John, for that reason, I think it’s an area where we’re particularly interested in which geographies are most ripe for data centers, and how can we be really smart about that? And it may be some of the areas that are less you know, are less obvious, but that’s an area of huge interest for us as we look at 2026

John Stackhouse  14:15

And when you’re looking at data centers, is it for the opportunity around data centers as a category, or is it the decarbonisation of data centers?

Clara Barby  14:24

For us, it’s the decarbonisation of data centers, we think is a really important area, including water management.

John Stackhouse  14:33

Well, that’s a perfect segue back to the focus we both have on nature. We did a an episode last season on data centers and what’s going on in Alberta. So listeners can check that out on our site or their podcast stream. And the focus was on abating natural gas, which in Alberta will probably be what powers a lot of the data centers there. For this conversation, pulling in capital, especially private capital, for water and nature solutions around data centers, is really interesting. Canada’s got a lot of water. We got a lot of power. Therefore, we should be probably taking advantage of this and using nature, to put it crudely, as an asset class, a bit more to help with the the economics of of this. Help our listeners think more broadly about the role that nature can play to allow us to do other stuff, like build a data center that is going to need a lot of water.

Clara Barby  15:34

Yeah, and I might just for a moment, talk about language as well, because it’s sensitive this. You know, I was speaking to an Aboriginal leader, actually at the COP. And there’s a resistance to talking about natural resources, but the reference to them as sacred elements, rather than nature, is incredibly important in some of these conversations. And so I just want to acknowledge the delicacy of this upfront at the same time to your point on, how do we invest in this? I do think we need to carry over some of the paradigms from our existing investment practice. I look at natural resources groups, for example, and I wonder whether they will evolve to include looking at nature as part of how asset allocators think about what they formerly called natural resources, because water and soil health, soil richness are indeed key natural resources for the economy. And so I think we’re going to be on a journey with how nature is seen. I think it’s, it’s historically perhaps, you know, you use the term nature, and people might think of a, you know, a book of botanicals by the bath. And we’re so in a different place now talking about the importance of land waste water, and how it fundamentally drives economic value. So in some ways, I’m pleased we’re having the right conversation. I think Canada should be a leader here because of the structure of the country. I think we will see much more on the solution side there. I also think for those of us who own large public companies, the risks associated with this in large corporations is going to keep rising. And I think if you look at the way climate disclosure has unfolded, so Canada, you have the Standards Board in Canada, so you’ve got, you’re starting to get the teeth around that in terms of climate disclosure, John in Canada, but nature’s following really quickly, and in some ways, is seen as more of a bipartisan issue. I think nature is seen to be very important to a wide range of political views, and I very much expect nature related risk and opportunity disclosure to follow suit of climate and to that to be expected of a lot of those large companies as well as we go forward. And that’s important to mention, because that will then, in turn, drive more demand for those solutions again, which creates more opportunity for private market capital to flow into them.

John Stackhouse  17:44

Well, my conservative friends like to say nature was our issue, and still is, and that’s the whole idea of conservative, conservation. Not to be crass, but there’s an important economic opportunity here. It’s about integrating nature, both for sustainability reasons, but also for prosperity reasons. Help us understand how that plays out in the real economy.

Clara Barby  18:09

I don’t think it’s crass at all to point out that economic opportunity and what is better for society, especially if you are a long term economic actor, what we’re seeing in nature, just to give a couple of real world examples, you know, when we looked at the cement opportunity, it was really clear to us that there’s two real factors you need to focus on. One is applicability of the way in which you produce low carbon cement for emerging markets, because 90% of cement use in the next decade is going to be in emerging markets, where they’re developing infrastructure at a faster rate than in mature markets. So that’s a people oriented question. But then secondly, from an environmental perspective, the inputs for that new version, that better version of cement, must be careful about what those inputs are. They can’t come from coal in the way they have historically, if that’s not an asset of the future. And so how do we make sure they come from something that’s widely available, that’s not going to disrupt nature in a way that actually, you know, causes more emissions. And so we spend a lot of time on that. And for us, that’s economic. That question is not just about the science or the sustainability. And so we found a solution that could it actually can process any kind of crush rock. It’s an amazing solution in that respect, because it can actually respect nature in the process of doing so. So that’s one example. Another one would be on how we think about but transmission lines, we have companies that require significant power. Now it’s renewable power because we’re investing in low carbon solutions, but nevertheless, it’s significant power, and that typically will mean transmission lines running to substations, often a very, very significant scale. And one of the things that has surprised me is that investors aren’t doing more direct community engagement to understand in their diligence processes, what are these different admissions lines going to mean, especially if you’ve got indigenous communities using the land that you’re on. So I think that we just need to be more front footed as investors about engaging with all of these issues. They are economic.

John Stackhouse  18:55

Clara, what you and the team at Generation more broadly are doing along with Just Climate is really important, and we’re lucky to be partners with you and be able to invest in natural climate solutions and a huge opportunity for Canada as one of the world’s great kind of stores of natural assets. A lot of this episode, Clara has been talking about investing in market opportunities at macro level, it’s been a couple of tough years for certainly clean tech investing. How are you feeling as we get into the year about the investment environment and opportunity for clean tech and, more broadly, nature based investing opportunities?

Clara Barby  20:59

So one of the strange things about being an investor is that at times when there can feel like strong headwinds in sectors that you’re focused on, valuations come down, and it can actually be very interesting time to deploy capital. And so as we go into 2026 that’s really where we find ourselves, we’re looking at companies which may have been overvalued or it just may not have been as financially interesting to go in, and now we’re finding that valuations are coming down and actually going in now and then watching different scenarios play out. Could make it, in retrospect, a very ripe time to invest as a climate investor.

John Stackhouse  21:43

That’s probably the best message to keep in mind as we go into 2026 when things seem grimmest or loneliest in any market opportunity, but certainly in policy as well, that’s often the time to do things when there isn’t a crowd, when there isn’t a bubble, and when you can actually take advantage of good, practical opportunities and work with as you articulated. Clara, thank you again for being on Disruptors. It’s been a great conversation.

Clara Barby  22:09

Good to see you, John, thank you.

John Stackhouse  22:10

If you’re interested in climate action in Canada, there’s no better place to find out more than our annual assessment. In the report, you’ll find that climate action barometer that I talked about, as well as indices for our six major heavy emitting sectors. You’ll also find case studies exploring how companies and communities are advancing climate action, often in small but really meaningful ways. And you’ll find interesting measures of how business and governments are thinking about climate policy as we move from 2025 into 26. Find it on the climate action Institute’s LinkedIn page or at our website, rbc.com/cai, a big thank you to the team at the Climate Action Institute and all the contributors who provided so many invaluable insights. You’ve been listening to Disruptors an RBC podcast. If you like what you heard, please rate review and follow us on your favorite podcasting platform that will help others discover these great stories of innovation and promise and grow our audience. If you have an idea for an episode, just drop us a line in the comments. I’m John Stackhouse, thanks for listening.