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Good afternoon,
my name is Anat R Admati.
I'm a professor of finance and
economics at this Graduate School
of Business, Stanford,
where we are right now.
And I also got involved
symbolically for
now at 0% appointment as
a professor in New Doerr School
of Sustainability here at Stanford.
I'm also the faculty director of
the Corporations and
Society Initiative, CASI,
which is cosponsoring this event.
CASI relies on students,
faculty and staff effort to focus
on promoting good governance,
so they could position markets and
government can best serve society.
And organizing events like this for
the community is one of the things
that we do.
I had the pleasure organizing
this event with Michael Whare,
sitting right here, acting director
of sustainability accelerator at
the School of Sustainability,
the new school which is also
cosponsoring the event.
Michael is also the director of
Climate and Energy Policy Program
and a senior research scholar at
the Stanford Woods Institute for
the Environment.
And you'll hear from him in
the second panel today.
So the issue will be taken up
today.
This afternoon are top of mind
everywhere, but particularly in
California and the West, which
are now experiencing the impact of
climate change in some very real
ways, as catastrophic fires and
smoke ravaged large areas of
the state on a regular basis.
And where utilities,
insurance companies as well as
governments and people must face
the challenge of how to deal with
the risk of fires and
other impacts of climate change.
And more broadly, how to make sure,
that we have reliable, clean, and
affordable energy.
So we brought together a number of
experts who in the next three hours
will help us to get a closer look
and insight on the issues as
we focus, specifically on the case
of Pacific Gas and Electric.
The company providing our
electricity here today, right now.
So let's hope they're good for
that as a case study.
Before we start, I want to
introduce and invite our Dean John
Levin from the Business School.
And following him,
he will invite Arun Majumdar,
the Dean of Doerr School of
Sustainability, who unfortunately
can't be here in person., but
will offer brief opening remarks.
So the Levin, thank you.
>> Thank you Anat, and welcome
everyone to today's conference
on corporations and climate risk,
the case of PG&E which is as it has
said co-sponsored by the GSP's
corporations and Society initiative
and the Stanford Doerr School of
Sustainability accelerator.
And I particularly want to thank
Michael Whare from the Doerr School
and a knot for
organizing this conference.
Today's event is one of a series of
conferences that the business
school and
the Doerr School are co-organizing
this year.
I believe we're doing 17 in total.
Looking at issues at
the intersection of business and
sustainability.
And with the launch of
the Doerr School has spurred
a really terrific collaboration
between the two schools and
is incredibly timely given
the importance of climate and
sustainability issues for business.
One of the things that we have
recognized at the GSB in recent
years is the way that the landscape
for corporations and for
business leadership has changed in
very fundamental ways, where major
societal issues like climate change
have impinged on business.
And people are calling on business
to play a larger role in addressing
and finding solutions to some of
the big societal challenges that
we face.
And in a sense,
that raises all kinds of
fundamental questions about what is
the purpose of corporations
in whose interests do they serve?
What is the role of business
leaders?
The corporate society initiative
which are not at MIT started
a number of years ago at the GSB
and has been leading was set up
precisely to enable a broader range
of conversations about those topics
in collaboration with students and
faculty and people coming from
outside the school.
And this event is very much in
keeping with that effort and
the broader effort at the business
school to engage with issues at
the intersection of business and
government and society.
[COUGH] In fact, the PG&E is almost
an ideal case to look at actually.
Because the issue is around PG&E
are fundamentally issues about
governance and
overlapping responsibility, and
the intersection of different
stakeholders, whether it's the
regulatory agencies, the customers
of PG&E, the investors in PG&E.
And all of the rest of the firm's
that make up California's energy
ecosystem, as well as the people
who have been affected by accidents
and fires that have come from
the PG&E distribution lines, and
they're complicated issues.
As you'll hear in these panels,
these are issues with a lot
of a lot
of complexity a lot of history and
no simple solution to be realized.
And so I really look forward to
hearing from we have an amazing set
of panelists in two
consecutive sessions,
who are going to illuminate us
about the history of PG&E.
How some of the issues have arisen,
what some of the complexities are?
And hopefully point the way to
a path forward that's constructive
for everybody in this state and
involved with PG&E.
So thank you again to Michael for
having the conference, and
I'll hand it off to my fellow Dean
Arun Majumdar, who is the inaugural
dean of the Stanford Doerr School
of Sustainability.
Welcome, Arun.
>> Well, thank you, John, for
getting this started.
I want to also thank
the organizers, Michael Warren,
not the mighty and others for
putting this together and
as a partnership between GSB and
the Doerr School.
I just returned from Cop 27 in
Egypt, and my impression was it's
like the Olympics of climate
change, and it's a combination
of Olympics and Las Vegas, frankly,
of climate change.
And there are 200 nations invited
among, with broad representation
for government businesses,
nonprofits, academic institutions.
And entering that meeting it
occurred to me of the 40,000 people
there and no one was wearing mask,
I think I told someone I hope no
one gets COVID.
And guess what?
I got COVID.
[LAUGH] And I hope no one else gets
it, but which is why I cannot be
with you today.
But I wanted to also be there, and
at least in spirit, and I wanted to
make, and I was asked to make some
opening remarks, and
I'm happy to do that.
I think what was quite apparent at
this COP 27 is the scale,
an urgency of this global
transition, which the scale is just
unprecedented in human history.
And there are risks involved during
this transition that really must be
understood, and this has been
highlighted by the case of PG&E.
And there's some important lessons
to be learned from that, and
I hope in the discussion we can get
into these lessons learned.
I was able to get through part of
Katherine Blunt book,
California Burning, and
this is a remarkable and
outstanding book that goes into the
history are the electricity sector.
But really highlights in some of
the systemic issues that
are going on, and
I suspect you will be discussing
this book in more detail.
But stepping back from it
inadvertently, lesson's learned is
that every corporation government
and institution should ask
the question, are we prepared for
climate change?
Do we have any the equivalent of
caribou, Palermo, lions in our
assets or in our system?
Is there a team that should be in
place to evaluate the risks and
take urgent measures to address
them and
do they have the right incentives
to actually go out and do it.
Because, as we've seen in
the PG&E case,
the cost of inaction can be much
greater than the cost of action.
And I think that's an important
lesson that's not just for PG&E,
but for in every organization that
will face some level of risks due
to climate change.
I would also say this is not just
the PG&E case it's much more
complex as John was pointing.
PG&E an investor on utility and
it's a regulated utility that
follows the rules and regulations
set forth by the California Utility
C ommission, CPUC.
Its business model, based on return
on asset investments, is based on
that regulatory framework.
So does the regulatory
framework allow investments
in upgrading the infrastructure?
Are the regulator's sufficiently
aware of the risks of climate
change, and is there a different
regulatory framework and
business model needed to address
the risks of climate change?
It is also not whether that
the electric power infrastructure
that we have today is not designed
for extreme weather events induced
by climate change, and
this is not the electric power.
Many of our infrastructures
are the same way as you know,
this year, in early September,
we found the California grid to be
pushed to the limit,
almost to the brink of failure.
With a record-breaking,
I think roughly 52,000 megawatts of
power demand.
The only reason it survived is that
because storage did not follow the
market signals because otherwise
the grid could have come down.
But then schedule and delayed so
that it actually takes power
when the demand is not that high,
not at the peak because that's when
the market signals who tell you
that, but they didn't follow
the market signals and thanks to
call ISO and others that happened.
And also there was this very
important text alert that was
approved by the governor that was
sent out to all the citizens,
which reduced the load by roughly
3,000 megawatts.
So this raises other sets of
questions.
Do we have the right system in
place the infrastructure,
regulations, markets, the assets,
and our communication with our
customers to ride out these
extreme events?
And it is a very important lesson
learned from this that you need
a whole systemic approach
to addressing these events that
happen.
And in February of last year,
right after the Texas freeze,
I wrote an op ed in New York Times
where the opening line was we
are playing Russian roulette with
climate change.
It is not a question of if,
but when it will come to our
neighborhood.
So this is again is not a thing
that we are insulated from it and
others are not.
Everyone really, really needs to
ask these questions.
And I think we will only be
successful if you understand
the real risks involved,
take action now,
work together, and innovate and
implement our way out of it.
And the immortal words of Martin
Luther King, we really must do this
with the fierce urgency of now.
And it is with the sense of urgency
and scale that brings us together,
and this is why
the Doerr School Recently became
Stanford first school in 75 years.
This is we feel that
this is a big enough issue
that requires a big enough response
from academia from Stanford.
Which is why we launched
the school, and it was really
created to foster and be part of
collaborative effort to address
the changes, the challenges, and
the opportunities brought forward
by climate change and
broad legal sustainability.
So, again I'm so
pleased to be with you,
and that this is this partnership
between Doerr School and
Graduate School of Business is such
an important attribute to this to
Stanford's efforts.
So thank you very much, and
I really look forward to
the discussion.
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