Anyway, do you wanna talk a little bit about that, about what your thesis is in terms of the ways that these new threats are gonna change the energy system?

Yeah.

So, um, it is a paper that I wrote with Derek Chollet and the team at the Center for Geopolitics at J.P. Morgan.

So it's putting together my climate, my science, my technological, my national security background, his national security and defense backgrounds to look at what is happening and shifting in energy geopolitics.

The thesis of that, of the race to resilience, is that we are now moving into a time when it's not just who has access to supply that has a resilient energy system, but it's who can actually continue to supply through what was just mentioned, through volatility.

So that resilience is now being able to bounce back post-disaster, post-conflict, post a physical event, but it's also being able to weather through all that volatility going forward.

And so it's a shift now in how people need to think about how they are building energy resilience, and it's through multiple threats.

So-

What is it that separates the organizations that are truly future-proofing their businesses from those that are merely managing short-term risks?

In the strategies that I see, I call them early adapters, people that have conviction that they need to act first or they have a low tolerance for risk or they see a market opportunity, they invest really quickly early on.

But then actually the mass majority of companies I see, they're amortizing adapters.

They're cautiously doing it over time.

They create a five to 10 year plan.

They spend slowly over time.

And that's either because of their capital requirements or because they think that a new technology might come along that will help enable that.

How can companies make investment decisions that strengthen both resilience and competitiveness in the long term?

Can we break it down a little bit? As you've just gave a nod to, there are different things that resilience can mean in different contexts.

Yeah, and that's the trouble about this, is there's many different KPIs that you can produce, from like an investor standpoint, of how one measures resilience, and it really depends on sector.

It depends on geography.

Even within energy, there's many different forms of resilience, and our report lays out many different ways of thinking about do you import all of your energy, or are you an exporter? Like for example, Japan imports the vast majority of its energy, and so if it has trade route problems, they will have an energy crisis.

That's why Japan has invested so much in efficiency over the years, is because they were trying to use as much of that energy as possible so they didn't have to import more.

You also have resilience in terms of do you have a system and a grid that has been built to be very flexible to be able to handle extreme weather risk? In certain parts of the world, like in the US here, our grid is over 60 years old in many places.

It was built decades ago, and it's past its useful life, and it needs investment to have resilience because otherwise things are breaking, and it was built for a climate that no longer exists.

But talk to me a little bit more about what you're seeing when it comes to adaptation planning specifically.

And we'll, we'll get into the, the bigger oil story maybe in, in a moment.

Yeah.

So El Niños happen every five to seven years, and it's one of the most predictable things we have in the climate system.

So right now, we are having the development of El Niño and predicted that it will peak between January, February, roughly, as it does historically.

With this El Niño, we are already seeing ocean temperatures that are above the previous very strong ones, and the predictions are that this will be the strongest El Niño since the real record-keeping, um, locally since the 1950s with the current type of technologies that we have.

So it will peak in February, expected to be the strongest we've ever seen, um, since the '50s, and it's expected to be extremely warm.

The temperatures in the ocean are already extremely warm.

When investors are looking at investing in these economies, how significant is the risk of a severe flood or severe earthquake or, or, or, or a really sort of, um, staggering heat wave? How important is in-- is that in their frame of mind? And are developing economies starting to invest in protections against this in order to encourage investment?

So when you think about this, do you think about the need to diversify supply chains away from China? Does it make sense then to use policy to try and reduce other countries' reliance on those Chinese supply chains?

When I'm technologically pessimistic, it makes me think we need to diversify supply chains and be able to build up those new supply chains for those fears.

Technologically pessimistic, I think that there won't be new technologies that are able to, um, not use those supply chains.

I think we need diversification.

We need to build them out elsewhere.

We need to create those supply chains ourselves if we're trying to avoid a choke point in a certain region or supplier or country.

When I'm a technological optimist, and I'm a scientist, so I'm prone to this, um, I think, well, actually, innovation, and there's a lot of science around this, innovation actually and creativity increase when you have some constraints.

Does that make you think then that that is going to be something which will continue to be available at some times for some technologies in the future?

Can you talk a little bit about the process of crafting those triggers and how it is or isn't done with some of this scientific knowledge on either side? I imagine you kind of have like, okay, I want the best and brightest scientists on my team so I can come up with designing this thing optimally so that it either does or doesn't have a higher likelihood of paying out.

Yeah.

And so this goes back to why it's sophisticated investors often buying these things, and also why I was asking so many questions when I was working (laughs) on the structuring is that there's a lot of science that goes into this.

You have to trust the modeling.

You have to trust the data going into that modeling.

You have to trust both historic analysis of these types of events to be able to understand how do you structure it based on those expectations and probabilities of these types of events happening.

But then you also have to have a forward-looking viewpoint of, you know, if all that backward information, particularly with a-... a background of climate change continuously happening.

Can, can people apply to, like, go into JP Morgan and work under you?

Um, how optimistic are you that companies, investors, boards are building climate intuition into their decision making? Can you give me some real tangible examples?

Uh, well, Jigger may have pessimism, but I'm out there (laughs) talking to clients and having client demand asking me to come and so I'm seeing it firsthand going into boards and talking to C-suites about what they're seeing (laughs) and what they're trying to figure out.

Um, so for me it's very (laughs) real in my day-to-day and the reason I have a job is because there's demand for this.

To talk about specifics, I see it popping up first in a lot of industries where either people have experienced an issue and so they're trying to make sense of it and think through it.

So, a commodities business has recently seen a spike in one of their ...... uh, raw materials that they need and they're thinking through, "Do we do the traditional things? Do we need to do futures hedges on this? Do we need to, you know, be worried about the price volatility of this product in a way that we do with normally? Or is there something more systematic here where our access to this product or to this raw material or the volatility or the price of this is going to change over time in a way that we need to respond totally differently? Like, do we need to be thinking about geographical diversification? Do we need to get out of this product? Do we need product diversity now because that product line will not make us the money that it has in the, in the past and we need to be worried about that for our growth story going forward?" And so there's these much more nuanced conversations depending on the company and depending what they're facing.

Like with utilities, for example, part of the reason that they're so focused on the resiliency issue is because there's also regulatory requirements for businessu- resiliency and being able to come back online really quickly.

And so as a result, with extreme weather, in general, they have to be managing extreme weather but then they're seeing that their costs for that are growing.

And I'm just wondering if there's, you know, when you think of national security and you think of or just security generally globally, how, uh, how entities like the military are able to think about it and can we transfer some of that knowledge into the private sector?

Canada had this very unusual thaw one year that caused like some high percentage of basements, um, in main population areas around Toronto and, and other major cities in Canada and it was so bad that the entire home ownership real estate market was going to have a c- you know, a worse crisis than we saw here in the United States and so the Canadian government had to step in and not only work on maintaining the insurance market but they had to literally go in and invest money in sort of ways to channel the water from melting a- at seasonal times in a way that people's basements would be less apt to flood.

Uh, so to answer that, the, there was a case like that in the United States where the insurance was socialized and it's paid for by the federal government and that's the National Flood Insurance Program.

After several insurers went bankrupt in the 1960s due to s- a series of several floods, the private insurers exited the flood market and so we've had the National Flood Insurance Program which is roughly $1 trillion annually.

In the case of California right now, it is not taxpayers paying for it.

It is still funded by the pricing that they've been able to be able to figure out in the fair access plans by the private insurers but the fear is that if the premiums don't adjust appropriately to reflect the risk, that you then will have the private insurers exit that market in that state.

So-California's dealt with this before after the 1989 and 1994 earthquakes, where they then assessed what the risks were, assessed what certain types of buildings, uh, fell due to the earthquakes, and then assessed what types of retrofits were required, and then they figured out how much would it cost, who would be able to pay, would it be state, um, state-funded to be able to allow for retrofits, how long would the retrofits have to take place? And they were able to keep the private insurers in that market after doing all of that work.

So we're at this point right now in some of the states where as those costs are rising, or as the risks are rising and the damages have been experienced but the pricing hasn't necessarily gone up to reflect it because of state regulation, um, they all have to make these decisions about do you allow those prices to go up and reflect the risk? Do you start investing in resilience? Do you start creating state plans for resilience? Do you, uh, figure out how to incentivize people to be able to do that? There are all these questions now about how to stem the rising losses as well as the rising risks to be able to have the resilience and keep the private insurers in the markets.

Right, and so then to that point I was making earlier about sort of how far is it possible for a community, a region, a state to ignore climate change and growing climate risk and say, "We're not gonna think about that right now, um, this is something we don't worry, want to worry about," is there gonna be a penalty to be paid in terms of insurance? Is there going to be a point where ultimately places become uninsurable? And you talk about this risk of kind of ultimately places being uninsurable because of climate risk, or is that only a distant prospect that's a long way off and is there not really much of a kind of a sharp price signal from the cost of insurance that says, "Right here and now you do need to start worrying about climate change"?