Total time: 12:56

Bob Smith: Hello, this is Bob Smith, President and Chief Investment Officer of Sage Advisory Services. I'm here today to talk to you about the latest installment of our ESG perspectives report which covers environmental, social, and governance issues important to investors today. Our new report is entitled, “Is There a Future for Nuclear Power in America?” I'm joined today by two really smart members of our ESG research and portfolio strategy team, Andrew Poreda and Emma Smith, who are the authors of this new report. And I'd like to interview them today to kind of get their thoughts on the future for nuclear power in America. I'd like to start my first question with Andy; what made you focus on nuclear power?

0:48

Andy Poreda: Well, we've been seeing after the last few years that the consensus in the public for global warming has become stronger and stronger. And so, because of that, I think the investment community is starting to take even more of a focus on what our risk exposure is to energy sources across all companies. And so, since in the U.S. about 75% of human related greenhouse gas emissions are related from energy consumption, we really thought that this was the area to focus on. And as we all know, renewables right now are very popular; their costs have become a lot lower, and they're doing a great job on a smaller scale. However, we have a concern that if we're trying to actually increase our renewable usage, there's really a few limitations that we can't get over. And one of those is, you know, look at what the intermittent capacity is if the sun sets or winds calm down. That solar or wind power plant is not going to be able to get that full capacity that it's rated at. And so, what that means is we either have to augment with a natural gas or coal, or we need to find a way to store massive amounts of energy. And so that's really why we started to look at “is there a better option?” And we think nuclear energy is that option.

1:59

Bob Smith: That’s really interesting. So what you're saying is that Mother Nature herself presents some significant limitations in terms of the ability for renewables to really be a 24-hour kind of solution to reducing greenhouse gases. And I guess what you're saying is, you know, being able to store the power that’s generated is also a pretty significant limit with what we have today in terms of our technology. Am I right?

Andy Poreda: Absolutely. And you'll see in our report, MIT did a great study on what that cost would actually be. And they took a greater look, just as we see in California, they're pushing for renewable mandates needing 80% by 2030. And so just that cost alone, they estimate approximately two and a half trillion dollars over that time. And that's just a lot of money. And so we think it's cost prohibitive.

2:48

Bob Smith: Yeah, those numbers seem to get lost in the dialogue when we talk about renewables. I think it's more of a focus on generation. And once it's generated, the question is, how much of it can I store? Where am I going to store it? But I'd like to go even a little deeper if I could, because one of the things that seems really troubling here is the fact that nuclear power has been often overlooked as a sustainable energy source and in the dialogue of America today. And maybe Andy, you could give us some reasons as to why that might be.

3:20

Andy Poreda: So I think if we look at it you can obviously see in the media, if you look at shows like Chernobyl that really kind of play at the heartstrings of what happened in that catastrophe, just the human element of how much power that nuclear radiation can cause in the lives that were lost in Chernobyl, I think pull at the heartstrings. And it really was a sad sight to see. You also look at Fukushima, you realize that it's just the human element that's tied to it. And they realize that they don't want to have that happen to their fellow brothers and sisters across the globe. And so, I think that public sentiment has basically caused both governments and corporations to really go sour on nuclear power because they just don't see there's a future – if there's no public support there's just no need to continue investing in it. However, if we kind of look back and you know, see, actually the history in the United States, at least of how safe nuclear power has been, it's really one of the safest sources that we actually have terms of civilian operations. There's been zero deaths attributed in the U.S. to nuclear power. And so, we kind of wanted to give it another look. And right now, we do realize that because of natural gas and how cheap it is, nuclear power is not the cheapest source of energy. But if we start factoring the externalities of greenhouse gas emissions, we think that that distance comes a lot closer.

4:34

Bob Smith: You know, it's interesting because I'm not sure people really sit down and think about the relative safety factors associated with all the other renewable sources for energy. And I know in the report that you focused a little bit on those considerations. Why don’t you talk about some of the other, you know, unfortunate circumstances associated with hydroelectric, and perhaps, wind turbines and so forth because I think it's important to put things in context and perspective.

5:03

Andy Poreda: Absolutely. So, this is not meant to be a bashing of these other sources. It’s just kind of to put it into clarification that all energy sources are not without risk. In China, their Banqiao Dam that broke, basically lost more lives than pretty much every other energy source combined. It was a very big mishap when they had an unbreakable dam that was used for hydroelectric power, and that broke. And not only did people instantly die, but then also afterward the famine that was a result of it actually even had a greater impact. And so that's, like I said, in the U.S. our hydroelectric community is much, much safer than that, but that's just kind of to put it into perspective what we have going on. The solar industry, if you look at just even rooftop solar, for example. You know, one of the biggest things that happens, one of the most dangerous occupations is rooftop installation, whether it's just for roofing in general. So, risk mitigation is important there just as it is a nuclear power. But I mean, you can also even look at wind turbine installation has kind of the same risk. But in terms of like energy storage, for example, we also have the requirements of mining. And mining, just like in nuclear power, is also something that has its risk. I think that's just kind of a way to put into perspective that it's a complicated issue and nuclear power needs to be evaluated just like the others do.

6:22

Bob Smith: Thank you because, again, I think people have to really sit down and look at everything in context. And that's particularly important in regard to safety records and how human lives actually can be affected by various forces of renewable energy, not just on the positive side, but unfortunately, on the negative side as well. So, let me turn to Emma, and let's talk about what I would regard as almost the third rail of renewable energy. And in the sense of how some view nuclear power. And let me ask you, how does the ESG community view nuclear power? And more importantly, is it indeed an investable industry for ESG funds?

Emma Smith: Yeah, I can answer that. The community is heavily divided on this issue. Powerful investors and philanthropists, such as Bill Gates who actually launched his own nuclear startup called TerraPower, have supported nuclear power as a main way to combat climate change and global poverty. But on the other hand, you have those who do not support nuclear power, so much so that there are certain funds that screen out nuclear power entirely, some of the MSCI funds actually do this. So it's really up to the investor themselves to determine how they feel about nuclear power in their portfolio. I would say at Sage, we are supportive of investing in nuclear power, because we see it as the most viable way to shift away from fossil fuels and make a real impact on climate change.

7:56

Bob Smith: Okay, thank you, Emma, thank you very much for that. Just moving along, I've got a couple of more questions. And I think I'd like to direct the next one to Andy, and that question really focuses on, you know, the politics of this issue. Is nuclear power politically realistic as a sustainable solution given all the safety concerns that you just talked about?

8:19

Andy Poreda: Absolutely, I really do think that it is politically realistic. So, if you just take a look at what's going on, mostly in the Western world, there is that trend of divesting from nuclear power in all of our allies across the globe. However, we just look at the Democratic primary and we see that there's really no consensus, but people are actively evaluating it. There's still a lot of disagreement as to where we want to go with it, but that's a good sign because at least it's being talked about. But I think if you really look at it, though, it really is a super safe option. If you look at the United States Navy, and over their history, they have operated about 7,000 reactor years of nuclear power operations. It's really something that they have a great safety record of based on what things they're able to put in place in terms of risk mitigation. And there's really very little radiation that's attributed to nuclear reactors. And in reality when you go fly in a plane, your cosmic radiation exposure, or you go get your x-ray done for your bad back, those things actually expose you to a lot more radiation than even sitting on top of a nuclear reactor. So, I think that just puts that in context, hopefully, that alleviates the fears. And as we mentioned before, civilian nuclear power operations in the U.S. are very safe, and we haven't had a death attributed to it.

9:36

Bob Smith: That's an often overlooked factor, which is a clear demonstration of our competency in terms of handling and managing this very important power technology. In our naval forces, for now a few decades, have actually used nuclear power to send our fleet around the world and been able to carry out the interest of the United States, and without much concern in terms of running out of energy because of nuclear power. So now let's look at the bottom line. I think for most investors, who may be interested in this area, called the nuclear power industry, I'm sure they're curious about what kinds of investments in nuclear power are available. And more importantly, now, what would Sage recommend as part of a balanced ESG strategy when investors are thinking about the nuclear power industry, Emma?

10:39

Emma Smith: Well, you know, I would say it's a smaller scope and fixed income versus equity in terms of what's readily available, investment wise for nuclear power. Fixed Income really, energy companies generally, in the southeast or northeast of the United States, where there's much higher concentration of nuclear power usage might be a good place to start. But there are also really great startups that we talked about a little bit earlier that are coming up with fantastic nuclear solutions to traditional issues that have been a concern in terms of nuclear energy. So, you know, investors in the U.S. really need to review their feelings and thoughts on nuclear power and nuclear energy, and consider investing in an energy that is an essential part of the transition to clean energy that we urgently need to take place.

Bob Smith: Alright, well, thank you very much. And I think that will conclude our presentation today, and I would urge everyone listening to take a real good look at our report entitled, “Is There a Future for Nuclear Power in America?” I think you will find it to be interesting, insightful, and revealing, and will give you an expanded perspective on the renewable energy field, and one that I think is important for all of us to have. Thank you and have a good day.

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