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Microsoft’s Former Sustainability Chief Explains Why Private Equity Can Help Win the Race Against Climate Change: Q&A

(Bloomberg) —

Microsoft Corp.’s former chief environmental officer, Lucas Joppa, was one of the architects of the software giant’s plan to remove more carbon than it emits by 2030 and set up a $1 billion climate investment fund to back emerging carbon-removal technologies. Brian Sheth, co-founder of Vista Equity Partners, has taken notice.

Sheth has tapped Joppa, 40, to serve as chief sustainability officer and sit on the investment committee at his new private equity firm, Haveli Investments, and given him a remit to help companies set meaningful sustainability goals. Haveli’s first fund will focus on gaming and is targeting a $750 million size, according to a person familiar  with the company’s plans who asked not to be named discussing private financial details. The company expects to expand into other areas in the tech industry in the future, the person said. Bloomberg Green spoke with Joppa about his new role.

Why did this role appeal to you?

I’ve always had a thesis of impact — prove that a company can take sustainability and begin to put it at the core of how it operates. That was what I was motivated to do when I joined Microsoft, it was almost like debugging that corporate operating system to be like, “Hey, can you actually get this thing running in the same direction, but running a little bit differently, a little bit more efficiently?” And if you’re going to try to get a company to do something, you might as well try to get a big, powerful company to do something.

So I was super lucky to have the opportunity that I did at Microsoft. It was the opportunity of the lifetime at that point in my life, and I think it ended up being hugely transformative for corporate sustainability globally. But then the second phase of the strategy was always, “Well, prove that you can replicate this.”

Why try to replicate it through a private equity firm?

If you want to replicate something you can either do it serially or in parallel. Parallel is to say, how would you operate across multiple companies at the same time, but in a way that is sensitive to what sustainability really requires at this point. It’s a longer duration of  engagement, a deeper engagement model and an engagement model that allows you to think about corporate operations and governance and ownership at the same time. When you follow that logical sequence, private equity is where you end up.

What made you think this was the right time to move?

Coming out of COP26 [last year’s global climate talks in Glasgow], the number one thing I came away from that event thinking was, “Wow, the money is starting to move.” I kind of knew this because I was moving money at Microsoft, but I really came away with, “The second sustainability wave has begun.” The first wave was all about big corporates setting meaningful commitments and showing progress on their pledges. The second was that corporate leadership was then going to start getting resources flowing across the economy. 

There’s a lot of corporate greenwashing. How seriously are companies really taking climate change and their own sustainability targets?

One of the reasons I went into this sector is because I am worried about the fact that we have to do this for real, and I hope people like me, who specialize in doing this for real, start moving into this space and start helping the sector out. That was really the part of the equation that led me to private equity. There’s a lot of early stage VC companies that want to get in the climate space — you have this tiny little minority ownership stake, you’re kind of vocal, you send this management team your thoughts and they maybe read it, or don’t. But what you really are looking for is that deeper engagement model that private equity and majority ownership allow you to have. 

We’re also seeing a backlash in some US states against ESG. What do we do about the ways in which these issues have become victims to the political divide?

What I’ve tried to do, over my career, is strike a really balanced tone. It’s obviously politically tone deaf to say this isn’t a political or partisan issue. But in reality, it isn’t. We’ve chosen in certain cases to make it that way, but ultimately, we know that companies today, particularly in Europe and in the UK —  and we’ll see what happens in the United States — the trend is going at the very least around more transparency in emissions, numbers reporting and things like that. So, base level, just the cost of doing business now includes doing this.

We’ve obviously seen a lot of extreme weather this summer, how do you remain optimistic that we can fix things before it’s too late?

I’m an optimistic person with a strong pessimistic streak. I would reframe that question — it’s already too late. The day we started to permanently manipulate our climate and broader environmental systems, it was too late. If you would have asked me two years ago, things were bad. If you asked me today, things are worse. 

How do we get to the solution space as fast as possible? Now that the ships have been redirected, it’s time to do this as quickly as possible. There is always a silver lining in these really negative events — our historical inaction on climate has shown us that, societally, we’re not going to do anything, we’re not going to be willing to pay the price, until we really meaningfully feel the impacts. The reason I remain optimistic is because that inflection point will occur before it is existentially too late. It’s unfortunate, because it means that we have to learn from our mistakes. I would much prefer we didn’t make the mistakes and then have to pay the price.

Will we make it?

I am very optimistic that we, as a species — we, as a global society — will respond to the inputs that are coming into our system. And the good news is that the solutions are starting to get built. The financing is now available. All of that’s happening. Sure, it’s a race against time, but I remain optimistic that it’s a race that we’re going to win.

This conversation has been edited and condensed for clarity

To contact the author of this story:
Dina Bass in Seattle at dbass2@bloomberg.net

© 2022 Bloomberg L.P.

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