You're listening to the Decarbonisation Dialogue,
a podcast from Salix. Welcome to Delivering on
Climate Change, our collective challenge. Welcome
to the Decarbonisation Dialogue. I'm Hannah Walker,
and I believe that the best way to communicate
a message is by being passionate about what you
are talking about. Today, my guest is Roli Martin,
who is Managing Director and Head of Finance
at Global City Futures. which is a consultancy
specializing in practical funding solutions for
public sector net zero projects. So, Roli works
with local authorities, for example, NHS Trusts,
as well as education estates to develop commercially
robust business cases for decarbonization, focusing
on blending public and private capital to achieve
sustainable net zero infrastructure, because,
of course, we can't do anything without the finance.
So, welcome to Roli. my guest today and really
looking forward to understanding the finance
behind these projects. I know you're a chartered
accountant with more than 20 years of experience
and you've also previously been leading a big
four corporate finance infrastructure advisory
practice so huge amounts of experience so thank
you very much for joining us today. Now really,
can you just tell us to start with a little bit
about your own career journey and what drives
you to this mission and obviously to global city
futures. Tell us a little bit about what that
is and what you do. So I began as a childhood
accountant, took that wide and well trodden path
of getting my articles and becoming an auditor
and all that kind of stuff and then sort of moved
up the ranks at a big four company at Deloitte
and got increasingly frustrated that you couldn't
get a lot done. lots of red tape, lots of things
in the way. I guess at the same sort of time,
it was an emerging industry in terms of net zero
infrastructure. Once I escaped audit, once my
experience was in the infrastructure space and
helping public sector organizations, it occurred
to me they needed a lot of help outside of the
day -to -day. So if you can imagine a hospital,
they're firefighting all day trying to treat
people in a school and firefighting trying to
teach people. Local authorities are running social
care programs. There's so much to do that is
not infrastructure and not finance and not anything
outside the core that it must be really hard.
It must be really difficult to kind of put all
this stuff together. And I was just observing
that they need a lot of help. And then as the
kind of net zero industry and clean energy industry
emerged, it was just another thing that they
were forced to be doing or, you know, stuff that
we needed to do. but had no real experience of
doing. Combined with not being able to get anything
done at a big company, I thought, well, it's
time for a change and I need to put myself in
an environment where I can get in front of the
right people at the right organisations to get
things done. Local authorities and NHS trusts
as well as education. estates are under huge
amounts of pressure, aren't they? We're always
talking about targets. We've got 20 local authorities,
got 2030 targets, NHS 2045. We've got an overall
2050 target. What do you think makes projects
financially viable? In simple terms, having the
money to do it. But we're talking about organizations
that don't have big coffers of lots of money
to invest in novel stuff, and this is still seen
as novel, which is just madness really, but it
is. The temptation is to start with the things
that generate a return. So solar panels and perhaps
EV charging points or creating your own heat
network or something like that. Something where
you can generate power or generate heat and save
money along the way and perhaps supply to somebody
else as well. They're always the first starting
points. But that leaves behind and kind of cherry
picks all the good stuff. And then you're left
with net zero neighborhood and retrofit and dealing
with huge swathes of domestic residential, which
are really hard to deal with. And there were
a lot of net zero challenges lie because that's
generating loads of carbon and is reliant so
much on fossil fuels to heat and power homes.
I suppose what makes it viable is Well, in my
view, and that's just one view, is blending everything
together where possible. Understanding what good
returning projects are, such as solar PV or wind
or something like that, and blending that with
less attractive, commercially attractive projects
to make a package of projects, a bundle of projects
in which investment can be levered. But of course,
that isn't going to work on its own either because
a lot of the private markets and the big insurance
companies, investment companies, they want more
stable investments and tend not to put certainly
debt into these projects. It's always risk equity
and therefore high cost of finance and then that
kind of scuppers the whole thing. So it needs
a public sector anchor leverage of finance to
tempt in the private money. It needs public money
to de -risk those projects first. to bring in
the private money coming afterwards. So public
money has to act as a first loss, if you like.
There are many ways you can do that. The biggest
ticket is how do you convince the public purseholders
to put that bit of money into that bit of that
bundle of projects to lever in the private money.
So it's two things. It's convincing the private
sector that we've got a de -risked stabilized
cash flow, a pension fund can put their money
into long term. But first, convincing the public,
first holder, that this is the project to put
your money into because it will attract the private
money, but also deliver this golden ticket of
social value IRR. So it will decarbonize, it
will deliver, it will make economic uplift, it
will deliver jobs, it will make cleaner air.
And adding up all those benefits and saying,
well, look, we've got a whole gamut of benefits
here for this project. in exchange for these
benefits, purse holder and policy holder, we
would like the money to make that happen. It's
really hard because even if all of your economic
benefits stacked up massively dwarf the amount
of money they're asking for them to leave in
the private capital, it's still a real struggle
to convince them to do it because they're getting
these offers and requests from everywhere. There's
a finesse, a skill, an art and a science all
together there. And indeed we have seen incredible
progress though over the last few years and we
are making, I mean we see it at Salix all of
the time, just through one of the schemes we
deliver which is the public sector decarbonisation
scheme and we see how the funding that we're
helping deliver on behalf of government acts
as a trigger which is what you're talking about,
it acts as a trigger. to then encourage further
investment. We see incredible projects and whether
it's heat network projects, whether it's air
source heat pump projects, and how that is having
an impact on that community because you've just
talked about economic uplift and jobs, of course,
and then of course cleaner air, which has got
to be better. It's a win -win, isn't it? It's
got to be better for all of us in terms of that
environment factor. And then the comfort, of
course, which is really important to make these
buildings more modern and nicer to be in, whether
it's your library or leisure centre. Absolutely.
And that is always, but shouldn't be overlooked,
is the clean air and warm, dry homes. It's just
the connection between having those two things
and then in 25 years time not having loads of
people going to hospital is really, really direct
but hard to calculate. The preventative care
model that the NHS is attempting to move to,
which is effectively a fence at the top of the
cliff instead of an ambulance in the bottom of
it, is supposed to be moving quickly into that
model, but it isn't. But what we're talking about
is exactly that. Whether we can give people clean,
warm, affordable homes, then HS is going to have
much fewer people to treat later on. But squeezing
money out of them to pay for all of that now
is almost impossible. And from your experience,
what do you think then gives investors confidence?
in the public sector net zero infrastructure
that we have, what is it really that's going
to give that kind of confidence to lift everything?
Well, I've been doing this a long time and it's
hard not to be cynical about all this, but the
answer is stable, reliable, long -term cash flows,
which more of the big institutional investors
traditionally have invested in property and in
income strips on public buildings. anything that's
got bricks and water where somebody needs to
be in it because we're not making any more land.
They love that because they get an income strip
return because their job is to pay their pensioners
or their insurance payouts when they pay and
to make that money grow. The stringent investment
committee and regulations they have on what they
invest in means that they will only go for the
most risk. free if you like projects which net
zero projects don't really sit in that bucket.
It is of course no coincidence that the pension
funds and the insurance companies have literally
all of our money sitting in a bank grown and
grown and grown because of that attitude. If
they were just looking to pay the pensioners
then they'd probably have a little bit more than
they've got pensioners to pay out but they haven't
they've got a thousand times more than that.
Attracting their money it needs to be clean stable
and long -term growth. And do you feel, because
you've obviously got a financial head, and I'll
hold my hands up, I'm not, I don't necessarily
have a financial head, do you feel that you're
always facing that kind of a struggle, really,
with making yourself and your day -to -day job,
with making the figures work, giving people the
confidence to invest, but also talking about
that social value, which you obviously feel very
passionately about? It is a struggle but there
are lots of little wins along the way. There
are responsible investors and there are really
clever people in government that see the vision
and value the concept of a social value IRR where
you can demonstrate using the proper green book
treasury guidance and say here is a economic
benefits calculation using your guidance that
gives you a package of benefits. there are some
strong leaders in government that do recognize
that and say, okay, this is worth some capital
pump priming. Equally, there are some responsible
investors out there that want to be social impact
investors, which is more than just social impact
in front of the word investors, which many of
them are, but some of them aren't, and they do
want to. And it will accept a lower return because
they are delivering some benefit. But outside
of that, it is a struggle because commerce and
social value very rarely meet in the same room.
We have to be realistic about the fact that it's
a capitalist endeavor. And if you're asking somebody
for money, then they want some return. But looking
ahead five years, what changes do you think would
make it easier for the public sector and all
of us to accelerate the impact of climate change?
But we're looking at kind of averting the worst,
aren't we? What do you think? Do you think it
looks like? It needs change at all levels. So
in changing communities where people come together
and optimize all the things that they're doing
from house to house, community to community to
minimize their waste, minimize their carbon and
minimize their footprint in that regard. And
there are community, great community groups that
do that. But then they're limited. They stop
at a certain threshold because they don't have
the money or the reach or the growth potential
to do anything further. So that's one level.
And then you've got all the businesses But businesses
want to make money because they're in business.
So they need to be forced. And then you've got
investors and governments and investors want
to make money and governments want to govern.
So they need to be forced too. So I don't know
what the answer is, but is it concessionary loan
rates for all Net Zero projects as part of a
giant spearheaded program to get solar panels
on every single building in every single place
to make a dent in it? I mean, I think it's the
size of Spain. We have to build a solar panel
the size of Spain in the Sahara Desert, and that
would be enough power for everybody forever.
And that would cost the same. I haven't heard
that. It's about that. I mean, I'm paraphrasing.
And the cost of installing that in the Sahara
Desert would be the US defense budget for the
next eight years. But someone's got to force
that to happen. But at a practical level, concessionary
loan rates to developing countries industries
in this country trying to deliver panels and
heat networks and everything else mandated on
those investors. I'm not talking silly. You have
to lend at 1 % or whatever it might be, but just
something that is deeply concessional to what
they would normally lend at so that it doesn't
break the model. So we don't need to double everybody's
heat and electricity price to go in at zero.
So it can be something manageable for the end
user. You're having these conversations all the
time. You're having these conversations with
government. You're talking all the time about
how you can finance this work and bring people
together. But do you think the average person,
like me, do you think people on the ground actually
appreciate that getting that financing framework
right is key to how we tackle our climate? No,
I think they just think the government should
pay for it all. And there is money for them to
do that. And I dare say there is a lot of money
that's probably placed in the wrong places like
defence or attack or whatever the ministry does
these days. But there's money to be spread into
different places as part of policy control and
short -term governments but it never gets there
and but yeah i think the average person thinks
the government should pay for it all because
it has a responsibility and a duty of care to
the people over whom it governs so i think that's
what the average person thinks i don't think
they realize that there just isn't any capital
sitting in a pot somewhere waiting to be spent
and it's and they're choosing not to do it i
think they just think it's there they don't realize
that um you know all of our cash is tied up in
financial funds. Financing aside, what next for
you and your own career and of course for the
Global City Futures? What next for Global City
Futures? The strategy over the next year or so,
but what about you? Where do you see your future?
Here, but forwards. I want to keep expanding
our business, but not for the sake of expansion.
We want to expand to do more of the right projects.
and be able to continue to do more of the right
projects. So we want the space and freedom to
back sustainability and affordable housing programs
that make the difference. I'm not going to see
a pipe and a spade in the ground or whatever
it is on a more frequent basis and at a higher
scale. And I want to be part of that. And I've
got an amazing team of people behind me that
are way brighter than I am and way more capable.
And they're all with every day learning to be
to be better than they were yesterday and you
know before long they're all going to be doing
the job i do which is exactly what i want so
and then i'd like to make new hires and have
that grow underneath them and you know expand
in that way but um it's a process it is and that's
a wonderful thing isn't it to have fantastic
people around you but to be in this area where
there is so much change so fast whether it's
technology whether it's financing whether it's
skills But we are, for one thing, there's a huge
amount of passion and by working together, all
of us actually, we're kind of making a difference.
We are making a difference. Thank you very much
to Roli Martin for joining me today and for
providing such insight. There can be no doubt
that climate change is the biggest challenge
of our time. Today, we must reduce greenhouse
gas emissions to slow global warming. Today,
we must act for tomorrow, adjusting our lifestyles
to current and future impacts of climate change.
Today, we must use our collective wisdom to deliver
on our climate commitments. Today, we work for
tomorrow's world. Don't forget to tune in to
our podcast channels and do email us at podcast
.salixfinance .co .uk with your ideas. Thank
you very much again to Rolili. Thank you. Thank
you. You've been listening to the Decarbonisation
Dialogue, a podcast from Salix. For more information
about our work and to find more content, please
visit salixfinance .co .uk forward slash podcasts.