TOP 100 MAGAZINE

Karl Pettersen

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In the competitive landscape of corporate finance and sustainability, Karl Pettersen stands out as a visionary leader. As the founder and CEO of Pettersen Analytics, a New Jersey-based advisory firm established in 2023, Karl has seamlessly integrated his extensive experience in finance with a deep understanding of sustainability analysis. His firm provides advanced advisory services that combine corporate finance acumen with sustainability insights, addressing the urgent need for optimizing and delivering on sustainability targets.

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Pettersen Analytics prides itself on its market-leading approach to data interpretation, mechanics, and the science behind finance and sustainability. The firm’s mission is clear: decode what the data truly reveals and help clients optimize their sustainability cost curves swiftly. Karl emphasizes that without rapid and efficient management, sustainability goals risk becoming both unaffordable and unattainable—a societal miscalculation he is determined to rectify.

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Karl’s journey to founding Pettersen Analytics is rooted in a distinguished 25-year career in finance, spanning Wall Street, Western Europe, and Russia. His roles have included chief sustainability officer for the Americas at one of the world's largest investment banks, and the architect of corporate rating methodologies still utilized by Moody's Investors Service. With a B.A. in economics from Yale, Karl’s academic foundation complements his professional achievements.

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What sets Karl apart as an advisor is his understanding that emotion drives behavior, often outweighing rational thought. Finance and sustainability can induce significant anxiety among decision-makers. Karl’s strategy involves addressing and resolving these emotional factors, which in turn facilitates clear, rational decision-making. His approach aims to bring vibrancy to clients’ risk profiles by acknowledging vulnerabilities, demonstrating mastery of the subjects, and highlighting opportunities.

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Pettersen Analytics' tools and models are designed to be comprehensive and user-friendly. They offer full traceability, are shareable between teams, and generate metrics that resonate with both finance and sustainability professionals. This integrated approach ensures that the firm’s advice is not only practical, but also exciting and engaging for clients.

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Karl’s reputation as a market leader is well-earned. He has been recognized globally in both corporate credit risk analysis and sustainability, earning nominations for prestigious awards. His ability to build strong relationships with some of the biggest names in the industry, including policymakers, underscores his influence and credibility.

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As Pettersen Analytics continues to make waves in the intersection of finance and sustainability, many are eager to learn more about the insights and strategies that drive Karl's success. To delve deeper into his vision and the innovative work being done at his firm, we sat down with Karl for an exclusive Q&A session.

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Karl, what inspired you to start Pettersen Analytics after such a long and successful career in finance?

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For 25 years in finance, I advised very large, well-known companies, which gave me a deep understanding of how these giant corporations operate. Decision-makers in these organizations juggle numerous responsibilities and often face chaotic situations where decisions are driven by anxiety and incomplete information. Much of my work involved helping these companies develop frameworks to navigate difficult questions and weigh various options, each with its own set of justifications.

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Initially, my focus was on advising companies about their credit ratings. During my time at Moody's, I authored key methodologies still in use today. On Wall Street, the industry often convinces itself that abstract, arbitrary concepts are the real world, creating an environment ripe for interpretation and storytelling. However, actual decision-making is much more emotional and driven by how compelling an idea seems to the decision-maker. But this may not be the answer that creates the right emotional response in your audience, such as your investors, or a Wall Street research analyst. So, the work becomes about solving for the most powerful emotional content by using a technical lexicon.

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In my last role, I focused on sustainability at a large bank, which was incredibly exciting. I formed strong relationships in the market and directed the build-out of much of the bank’s sustainability platform in the Americas. However, as the company culture and C-suite changed, my ability to implement my vision became increasingly restricted. My strong opinions didn't align with the new culture, so I decided to branch off and start my own firm. Pettersen Pettersen Analytics was born out of a desire to provide a space where I could fully integrate my experience in corporate finance and sustainability, offering clients comprehensive, innovative advisory services.

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What makes Pettersen Analytics so unique?

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Pettersen Analytics offers a comprehensive framework that integrates financial and sustainability data from various sources, including public domain information. Our approach is theoretically advanced and elegant, designed to provide clear, actionable insights in these fields. Many believe finance is purely about algorithms, but it's not—numbers are just numbers until you weave a compelling narrative around them. The same applies to sustainability, where the numbers are even more elusive, requiring thoughtful storytelling to make sense of them.

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Currently, the fields of finance and sustainability lack a common language to merge their insights effectively. Simply combining financial and sustainability data without a coherent framework results in confusion and ineffective outcomes. What we do at Pettersen Analytics is develop powerful, refined constructs that align these data sets, revealing valuable insights and actionable strategies.

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Nearly half of the world's largest companies have pledged to reach net-zero carbon emissions. However, these commitments are often made without a clear understanding of the associated costs or how to finance them. The mainstream conversation has focused primarily on climate science, resulting in well-developed carbon removal curves but a lack of corresponding economic and financial analysis. Our firm addresses this gap by providing tools that enable corporations to analyze both sustainability and financial actions simultaneously, identifying the most beneficial strategies for achieving their goals. This unique blend of finance and sustainability expertise sets Pettersen Pettersen Analytics apart in the industry.

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Your cutting-edge toolkit is the product of 25 years of work. Tell us what it does and how corporations are benefiting from it.

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I developed a comprehensive toolkit that integrates 25 years of experience in finance and sustainability into a single, user-friendly model. This model incorporates theory, cost curves, default values based on academic research, 44 different decarbonization technologies, 15,000 equations, and extensive mathematical analysis. Companies can input their data to determine which sustainability or decarbonization actions will provide the most financial and environmental benefits.

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Finance involves numerous theories, some more effective than others, and the key is to find the right theory that tells the right story. Our model does just that. It allows finance teams to plug in their data and share insights across departments, from treasury to tax to sustainability. For CFOs, it provides a new set of strategic metrics to monitor daily.

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One significant advantage is that every company is judged by a few critical ratios. Our toolkit helps improve these ratios by aligning your sustainability strategy and funding strategy, positioning you favorably against competitors. It provides a clear competitive edge, making your company more attractive to investors by presenting a comprehensive and exciting narrative. With this toolkit, you not only enhance your financial metrics but also become a market leader in sustainability, becoming the darling of the market.

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Your toolkit enables corporations and policymakers to develop realistic, achievable sustainability practices while also benefiting financially. Is that right?

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Absolutely, and it goes beyond just achievable—it's about optimized sustainability practices. Take, for example, the current trend of companies investing in visible initiatives like solar panels on their factories. While this has an immediate PR effect, it often results in only modest carbon reductions. Our toolkit helps companies identify and invest in emerging technologies that can decarbonize them most of the way to net zero, though these benefits might only be realized in a few years.

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There are three key ways our toolkit makes companies more attractive and effective:

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1. Optimizing Cost Curves: One major underestimation in sustainability planning is the future cost of carbon taxes. For instance, Europe is set to impose a carbon tariff in 2026, which means companies will need to pay significant amounts if they haven't decarbonized. By investing strategically now, companies can lower their future costs significantly. It's like avoiding the equivalent of paying 100% interest on a debt each year—it's financial madness not to optimize your cost curve.

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2. Creating Value: Every company aims to create value, and a big part of that is cost optimization. By spending less on inefficient solutions and more on effective, high-return investments, companies generate better outcomes. True value creation comes from investing in infrastructure for new technologies, leading to revenue generation. Companies can achieve this in three ways:

   - Selling new, market-leading products.
  - Selling access to infrastructure, like hydrogen pipelines.
  - Selling their own carbon offsets.

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3. Strategic Investment Decisions: Our toolkit allows companies to explore and compare various technologies and strategies to meet their carbon targets. For instance, by inputting solar, hydrogen, wind, or biofuels into our model, companies can see detailed cost-benefit analyses and timelines. This helps them understand the most effective and efficient ways to achieve their sustainability goals.

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The toolkit includes 44 different decarbonization technologies, backed by 15,000 equations and comprehensive data. This allows companies to input their carbon targets and receive actionable insights on the top technologies needed to reach those targets. By exploring different combinations and strategies, companies can make informed decisions that bring both financial and environmental value.

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In short, our toolkit provides a sophisticated, user-friendly platform that guides companies through the complexities of sustainable investment, ensuring they make decisions that are not only good for the planet but also for their bottom line.

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You also have some very intriguing views on decarbonization and sustainability actions that have corporations rethinking their approaches, from both a branding and business model perspective. Will you share these with us, and how your model can help them identify new opportunities?

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Absolutely. Here are a few key points I'd like to highlight:

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Tailored Decarbonization Curves: One of the significant limitations in current decarbonization strategies is the one-size-fits-all approach. Expecting the largest logistics company, airline, or telecommunications provider to follow the same decarbonization curve is nonsensical. For instance, a large telecommunications company might consider decarbonizing its data centers, but this doesn't move the needle significantly. Instead, they should focus on areas like enabling the energy transition with 5G networks. The U.S. needs to produce four to six times more electricity to support this transition, requiring a new concept of the electrical grid. Companies can play a pivotal role by producing and selling power through distributed grids, which aligns better with their core business and makes a substantial impact.

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Investor Excitement and Singular Identity: Corporations are highly financialized, and their vibrancy, share price, and overall market presence are driven by how compelling their story is to investors. Each company needs to maintain a unique identity that resonates with investors. For example, AT&T versus Verizon or GM versus Ford—they each have distinct financial identities. It's crucial not to surprise investors or break their trust. Sustainability efforts need to align with a company's financial policies and narrative. Our model helps companies figure out the optimized way to integrate sustainability costs within their financial framework, ensuring they maintain investor trust and excitement.

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Optimized Funding Strategies: With 25 years of experience advising companies on financial policies, I've developed tools to break down complex financial scenarios. Our model takes nine different sources of funding and determines the right mix that a company can present to investors. This includes cost optimization, decarbonization strategies, and how to pay for them effectively. Additionally, the model offers insights into competitors, identifying their vulnerabilities. This allows companies to not only optimize their sustainability efforts but also position themselves strategically in the market by understanding and exploiting their peers' weaknesses.

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In summary, our model helps companies develop a tailored approach to decarbonization that aligns with their business strategy and financial policies. By doing so, they can identify new opportunities, optimize costs, and maintain a compelling narrative for investors, ultimately gaining a competitive edge in the market.

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Lastly, Karl, what do you enjoy most about your work?

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I love the discovery process. The human race has never decarbonized before, so it feels like we're exploring uncharted territory, much like the early days of physics a century ago. Being part of a new field that's maturing and evolving is incredibly exciting. I believe what we’re doing at Pettersen Analytics is the next crucial piece of the puzzle, bringing us one step closer to effective decarbonization. It's extraordinary to be a part of this journey, and it's truly a fulfilling experience.

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Karl Pettersen
Founder and CEO: Analytics
Website: https://www.pettersenonline.com/
LinkedIn: https://www.linkedin.com/in/karl-pettersen-95990b45