May 8, 2024 • 52 mins
Technology’s role in decarbonization is evolving, with many developments still in the making. In this episode of the ESG Currents podcast, Shaheen Contractor, Bloomberg Intelligence’s senior ESG analyst, interviews Daniel Hanna, head of Sustainable Finance at Barclays, Kelly Becker, president of Schneider Electric UK & Ireland, Mikkel Bülow-Lehnsby, co-founder and chairman of Urban Partners and Chris Dodwell, global head of Policy & Advocacy at Impax Asset Management, at the Bloomberg Sustainable Business Summit in London. They discuss how climate tech can be deployed and the risks and opportunities ahead.
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Speaker 1 (00:07):
PSG has become established as a key business theme at
its companies and investors seek to navigate the climate crisis,
energy transition, social megatrens, mounting regulatory attention and pressure from
other stakeholders. The rapidly evolving landscape has become inundated with acronyms,
buzzwords and lingo, and we aim to break this down
(00:29):
with industry experts. Welcome to ESG Current, brought to you
by Bloomberg Intelligence, your guide navigating the evolving ESG space,
one topic at a time. I'm Shahan Contractor, Senior ESG analyst,
and today we're recording this episode at the Bloomberg Sustainable
Business Summit in London, which brings together leaders and investors
(00:51):
to discuss some of the most pressing themes such as
the changing political landscape when it comes to sustainability, and
also topics like god, just and inclusive future. Now, the
conference has a number of fantastic speakers and today we're
interviewing four of them to take a little bit of
a deep dive into the exciting world of climate technology.
(01:12):
We're going to focus on technology enable decarbonization and how
this can be deployed through various facets, particularly in how
to abate sectors like steel or cement, and also through
innovative products and structures. Now, for this exciting discussion, we're
going to pick the brains of four experts. We have
(01:34):
Daniel Hannah, the head of sustainable Finance at Barclays, Kelly Becker,
the president of Schneider Electric UK and Ireland. Miquel the
co founder and chairman of Urban Partners, and Chris Dadwell,
the global head of Policy and Advocacy at Impacts Asset Management.
(01:55):
So let's stick straight in with Daniel Hannah, the global
head of Sustainable find at Berkley's. So danil movie give
us a quick introduction into how sustainability factors into your.
Speaker 2 (02:06):
Role well as the head of sustainable finance for Berkeleys,
if you like, I've got two or three sort of
significant mandates that I feel really quite honored and privileged
to drive. One of which is we've made a commitment
to mobilize a trillion dollars of sustainable and transition finance
by twenty thirty. So we're rolling out new products, engaging
(02:27):
with clients to really scale that up. We did sixty
eight billion of mobilization last year. The second is that
we're investing five hundred million pounds in early stage climate
technology companies by twenty twenty seven, and we've already deployed
over one hundred and twenty million into more than fourteen
different companies around carbon capture, hydrogen reducing emissions in sectors
(02:51):
like aviation. And the final thing is we're working very
hard to align our financing towards a net zero pathway,
and we set out a number of twenty twenty five
and twenty thirty interim targets our energy what's called financed emissions.
So the impact our financing has on emission generation and
our clients has dropped forty four percent since we set
(03:14):
that target in twenty twenty.
Speaker 1 (03:16):
That's very interesting. So Daniel, I feel like in your
role you have this bird's eye view into everything transition, finance,
And my question is when it comes to climate tech,
I think it's very clear that we need this new
wave of technology is of course alongside renewables. So my
question is what are these technologies that we need and
(03:39):
where are they needed? If you could give me some
examples also, that would be great.
Speaker 2 (03:43):
It's a great question, and I think I mean a
really bird's eye view, right, what we've got to do
is in some ways simple. We've got to electrify what
we can, we've got to power that by renewables, and
then we've got to scale new climate technologlogies to tackle
these hard to abate sectors. As you say, so these
technologies where there isn't currently a commercial pathway to a
(04:09):
technology that's really going to put them on a net
zero trajectory. And so I think if you think about
the types of technologies that we're seeing really come through,
one is hydrogen for example. So we last year closed
a two hundred and fifty million equity raise for a
(04:29):
company called Omnium, which it's involved in the green hydrogen space.
That was actually the fifth hydrogen deal that we've done
in the last thirteen months. And obviously this is a
big area of focus in the US with the Inflation
Reduction Act. In Europe there's been a lot of talk
about this as well, and hydrogen is seen as something
that in these sort of hard to abate sectors can
be deployed to move them further down if you like
(04:53):
the emissions.
Speaker 1 (04:54):
Curve like steel, right, I hear a large exactly.
Speaker 2 (04:57):
So I think it's the be a little bit of
caution around this, because hydrogen is not a magic bullock
that's suddenly going to solve everything. But as you say,
I think in certain technologies like for example, steel, and
we've seen in Europe H two green steel being set up,
the use of hydrogen can combined with recycling and electric
(05:19):
arc furnaces, you know, significantly reduced emissions from where we
are seeing and I mean we're talking about sort of
ninety percent reduction. So the question is can we get
that to a scalable price that actually then becomes commercially competitive,
or can the greenium if you like, the amount that
people are prepared to pay on top of normal steel,
can that be increased, or whether we see these sort
(05:39):
of carbon prices evolving. So that's quite a good example.
But we've also seen other areas like cement. I think
last year we saw almost three billion deployed into low
carbon cement in energy efficiency. And then I think one
of the other areas where we've seen a significant ramp
up is in carbon capture. And so where the technology
(06:02):
really isn't there at the moment to decarbonize, what can
we do to capture the carbon that is being emitted
and sequester it away in a robust and stable place
that can really get monitored. And actually one of the
companies that we've directly invested in through our early stage
climate technology effort is called NOADA, which uses technology to
(06:26):
try and provide a cost efficient way of capturing carbon
in industries where they're still using chimney pipes. So obviously
you prefer that they didn't and that there wasn't any
but in that absence, deploying something that's cost effective and quick,
you know, can make a difference in terms of trying
to reduce emissions.
Speaker 1 (06:41):
And Daniel, I guess when it comes to these technologies,
what are the challenges holding them back? I think you
mentioned one like you know, scalable price for hydrogen, But
what today have we not sold for and what do
we need to do today?
Speaker 2 (06:57):
No, it's a great question, I mean, I think actually
only if you think about the IA net zero pathway,
thirty five percent of the emissions reduction implied in that
relies on climate technology that we need to scale so
that we haven't scaled, so it's solar wind sort of
the maturer industries around. Nerle absolutely plays the critical role,
(07:18):
but beyond that, you start getting to these questions like
you've raised around how do you get either a new
technologies that can.
Speaker 1 (07:26):
Get so the rest is all new technology.
Speaker 2 (07:28):
Well, this thirty five percent absolutely is absolutely key to
that pathway. And so we have some technologies, but they
need to be proven at a price that people are
prepared to pay, and so they need to like we've
seen in the significant reduction in solar come down in
its deployment, we just need to see that in other
technologies but ideally happening quicker and in some of their areas.
(07:51):
We actually need to discover the right technology as well.
And so I think one of from a from a
finance perspective, what we see a lot with our clients
is actually at the moment, there is actually quite a
lot of venture capital out there. So for really early
stage ideas, you know, with the right with the right products,
(08:11):
with the right technology, you can find money. And at
the more mature stage, at the you know, once you've
really got to scale. Actually, if you look at these
infrastructure funds, the amount of dry powder, so the amount
of money that they've got in their funds but they
haven't spent, went up last year and so you've kind
of got capital at the beginning and capital when you're
really scaled. The challenge is this middle and we sort
(08:34):
of see a missing middle of capital at the moment
where you've gone through your early stage, you've got the
technology kind of largely de risked, and now you need
to scale it. And one entrepreneur said to me, it's
like scaling the dunes of doom, because with climate tech
it's so capital intensive. You do your first plant, then
you've got to do five more, Then you want to
(08:55):
do ten more, then you've got to do fifty more,
and so the amount of capital that you're deploying just
is grown almost exponentially. And in some ways, the finance
industry has kind of got stuck on scaling facebooks and
social media, where the incremental amount of capital required for
someone like a social media company to add to go
from ten million to one hundred million users actually is marginal,
(09:17):
whereas in climate tech to do that actually it's a
really significant ramp up. And so there I think we
need almost a new way of thinking about how we
do that. From our perspective, it's partly working with public
sector partners. So we recently closed a fifty six million
round for Giapora, which s is the UK's largest producer
(09:38):
of green hydrogen at the moment with UK investment back
infrastructure banks sorry, and we're working with in the tax
credit space in the US. We did a very large
tax credit deal in Louisiana recently, so looking at what
sort of government support is there and then how you
can blend it with commercial capital to come in. But
(10:00):
beyond that, I think we need to think about how
we can play the insurance industry in I think we
need to look at, particularly in saying some of these
earlier technologies, how do you help what's called the off take,
so where that product is being sold to, how can
you strengthen the credit quality of that So can we
look at guarantees for off takes and others. So we're
(10:20):
looking at a number of different ideas around how we
can kind of sort of structure these things to bring
more capital and to tackle this missing middle.
Speaker 3 (10:30):
And we're also looking at how we can bring in
different types.
Speaker 2 (10:32):
Of investors, so in solo and wind for example, but
let's pick on solar for a second. There's also been
a lot of focus around the impact of renewable companies
and their valuations in terms of interest rates, and we've
seen significant impact there. We are now moving into thinking
about how we can use securitization to open up different
types of investors. And actually we've recently closed Europe's largest
(10:56):
abs securitization in the solar space. And so I think
again it's sort of taking either traditional types of financing
that haven't been applied in this space before, or looking
at whole new structures.
Speaker 1 (11:08):
And I want to dig into that a little more,
this space of securitization. So I keep hearing of different
instruments like transition bonds, and then they're more complex structures
like you know, bonds that pay out with conservation things
like that. So should we be creating such structures? And
I guess what products are the need of the art today?
Speaker 2 (11:30):
Well, I think, I mean it's a great question because
I think in some ways you don't want to create
huge number of completely new products that can be overly complex,
that could create some confusion, maybe lead to some greenwashing concerns.
But at the same time, we've clearly got a financing gap.
(11:51):
So how do you kind of, I guess, do both
of those things at the same time deal with both
those types of issues, and so the one area where
we spent a lot of time is around transition finance.
So I think at the moment sort of everyone understands
and has a pretty good idea. I think of what
green finance looks like and social finance, but there's a
lot less agreement around what decarbonizing these hard to abate
(12:13):
sectors really can be. And there are some understandable concerns
around greenwashing and the likes that you know, are you
and so how do you tackle that? So we've put
out with the first major bank to put out a
transition finance framework that says, quite transparently, these are the
types of activities which are aligned to an IA at
zero pathway that we feel confident if we're financing we
(12:35):
can call transition because we need to grow that space,
and we're starting to see more and more kind of
that sort of concept being brought into different transactions. So
for example, we work with SNUM Italy's gas company to
do the first EU taxonomy aligned transition bond as well.
(12:58):
So I think how we can sort of merge a
sort of robust definition around transition with access to capital
markets is going to be an important tool in how
we tackle this decarbonization challenge.
Speaker 1 (13:09):
That's interesting, Daniel, thank you for being on. I think
my biggest takeaway was that you know, when it comes
to this climate climate tech, we have to not only
discover the right technology, we have to scale it at
a reasonable price that people are willing to pay. But
then your comments also on the financing gap and how
you know securitized products will fill that but still without
(13:32):
greenwashing risks. I guess that was one of the biggest
takeaways for me. But thank you so much for being on.
Speaker 3 (13:38):
Thank you very much.
Speaker 1 (13:39):
Thank you. Our next speaker is Kelly Becker. Kelly is
the president of Schneider Electric UK and Island. Kelly, thank
you for joining us.
Speaker 4 (13:47):
Thanks for having me Gene.
Speaker 1 (13:48):
Kelly, maybe just a quick brief introduction and how sustainability
factors into your role.
Speaker 4 (13:53):
Yes, so I have responsibility for all of our operations
in the UK and Ireland and sustainability is really everything
we do. So you could imagine from our own factories
and facilities and how we think about sustainability and working
on our own decarbonization journey. And then obviously sustainability is
a huge part of the business. So on the client side,
(14:16):
we're certainly looking at clients that want to look at
their sustainability from a fifty thousand foot view and then
getting into much more detailed solutions and services and products
very close to an end user process.
Speaker 1 (14:31):
That that makes sense. So, Kelly, I think it's very
clear that Schneider works very closely with industry right to
further decarbonization. So I'd love to get your thoughts in
the use of such technology and enabling decoganization and any examples, okay,
studies you have would be great.
Speaker 3 (14:48):
Yeah.
Speaker 4 (14:48):
So I think data is really changing the way we
approach our sector and we approach sort of the broader
energy challenge, and so this topic of digitization and being
able to see how a process actually works or a
building is functioning is a huge piece of our business now,
(15:10):
very much driven by software platforms that relate then to
services and what we're able to offer our clients. One
good example would be Tottenham Hotspurs, which is the football
club based here in North London. This is a great
client and they've been a client, you know, at this
(15:31):
point greater than ten years when they started planning that
football stadium, and then we worked very closely with them
as their energy partner to ensure not only were they
designing really the first sort of net zero football stadium,
if you will, but also how would they then run
that facility in the long run. So we worked with
(15:54):
them along the new construction side, but then now we
continue to work with them on optimizing the use of
the building. So how they use the facility for a
football match is really different than how they use it
for other partner events or a concert. And so we
have teams embedded at Tottenham alongside their own staff to
make sure that we're always optimizing and using the data
(16:15):
that the stadium is putting out to make better choices
and ultimately to drive more energy efficiency for the club.
Speaker 1 (16:22):
That sounds interesting, So it's a big focus on, you know,
the use of data in doing this. Absolutely. I guess
is there any other you know, big opportunity or a
market force and play that you think could really ramp
up this decoorganization effort or ramp down.
Speaker 4 (16:40):
I think what we're seeing is a huge amount of
work in public and private partnerships. You know, in the past,
I think large corporations sort of did their own thing
and you know, publish their results. Governments, you know, certainly
are here to make policy and regulation, and certainly in
some sectors you saw huge overlaps, and I wouldn't have
(17:01):
said our sector was that, But certainly as governments set
long term net zero targets, the conversations are becoming quite
deep around what do private corporations need to do? How
do we work alongside public entities? What are those conversations?
What are the different types of places that governments are
(17:23):
having to drive and make decisions. So in our world
that might be regulations around a new building, and you know,
how does that need to be driven. It also might
be help and interest in the transportation sector, and these
are the kinds of very regular conversations. I would say.
The other piece of that is collaboration is really happening
(17:45):
a lot with all sorts of corporations, alongside startups, alongside SMEs,
alongside governments, because the challenge around climate change is so
vast it's going to take everybody's great brains makes a
fact actually solve this together.
Speaker 1 (18:01):
Yeah, and you mentioned policy and regulation and that comes
that brings me to my next question. So do you
think we have the policy mechanisms in place today or
do you think policy is going to help further this
or derail this, and you know what is the need of.
Speaker 4 (18:17):
The r Yeah, I think you see you're seeing around
the world governments take different approaches to net zero and decarbonization,
and progress is absolutely being made depending on where you
look around the world. Certainly the US has had its approach,
the EU has its approach, the UK is having its approach,
(18:37):
and they've all taken a little bit different view on
how they want to go about it. But the end
game is the same, which is around solving the climate
change topic. You know, specifically in the UK, I think
we've seen a lot of work done around electric vehicle
implementation and the infrastructure associated with that. The utility in
(19:00):
the UK are doing a tremendous amount of work around
making sure the grid is ready for the future because
what's coming with sort of this all electric world of
the future is a different way that the grid has
to operate as well, and so it's a critical topic.
And then I think you're seeing governments work alongside big
companies that are investing in their regions like data centers,
(19:23):
to be very clear on what's acceptable in a certain
geography and how do we do that. So I would
say there's progress. There's certainly more that could be done,
and we will continue to push and drive on that
front to help be a part of the solution that
makes sense.
Speaker 1 (19:40):
And I guess my last question is you know, what
have we solved for and what have we not solved for?
In other words, you know, what is the challenge today?
What is the need of the eye to as you
mentioned progress? Thanks further, I think.
Speaker 4 (19:55):
I think the topic is a little bit overwhelming for people.
Speaker 1 (19:57):
It's a lot, it's a lot.
Speaker 4 (20:00):
And you know everybody, uh well not maybe not everybody,
but people are trying to solve solve climate change in
their own ways, and they're approaching it in different ways
based on their starting point. And I think what we
need to acknowledge, both as industry and governments is any
start as a good start, and where you start from
is not necessarily you know, relevant to me. What's important
(20:24):
is that as a business, you get started and you
move and what makes natural sense. And I think most
businesses that's why we see that. Certainly, I would say
on the buildings side, which you know accounts for an
enormous piece of the usage in the UK, old and
efficient buildings and some of the historical buildings.
Speaker 1 (20:46):
That we love and problem is a pretty.
Speaker 4 (20:50):
Significant issue because of certainly so many of the rules
and regulations around that, and we'll have to continue to evolve,
and I think the government is very engaged in making
sure that all buildings are driving. I would say the
easiest thing is to change regulation so no new building
is built without what you want it to look.
Speaker 1 (21:09):
Like for the future.
Speaker 4 (21:10):
And is that happening in some places? It's definitely, it's
definitely starting. I wouldn't say that there's that clear cut
regulation everywhere. Certainly the EU is driving a lot around
building regulation and requirements and they are rolling that out
very fast.
Speaker 1 (21:29):
Okay, very interesting, Kelly, Thank you so much for joining us.
I think my main takeaway was your point on the
use of data in you know, approaching these decombanization challenges.
And I think that goes a long way because you're
a data company.
Speaker 4 (21:44):
Yeah, data, data should drive your path and should decisions
that direction forward, and so much of the technology and
the market today can provide you with that data and
help pull it out of buildings and industrial sites.
Speaker 1 (21:59):
And that's just freshing, yes, And we'll leave it on
that positive now. Thank you, Kevin, Thank you for having me.
So next up we have Michel Budhau. Michuel, maybe just
a quick introduction for us.
Speaker 5 (22:10):
Yes, well, I am an entrepreneur.
Speaker 6 (22:12):
I'm the co founder and today the executive chairman of
Urban Partners. We are a large European investment platform that
invests in the urban value chain, driven by a purpose
and a belief that we can outperform by solving problems
I eat, making better green driving cities.
Speaker 1 (22:33):
Nice, So, Miguel, and past conversations, we've focused on the
use of technology to decorbanize industry and these you know,
these hard to abate sectors like steel. But you know,
as you mentioned, you're an expert on cities, so I'm
keen to better understand how can we use climate tech
to aid decobanizations within cities and within urban planning. Any
(22:54):
examples you have would be great.
Speaker 5 (22:55):
Yes.
Speaker 6 (22:56):
So, you know, we've been working on a Nitzero strategy
for quite a few years by now, and in our
work we realize that in order to create net zero buildings,
which is obviously a requirement to create net zero cities,
there is just a lot of things that needs to
be done differently, and you know, really you can look
(23:18):
at buildings from a carbon perspective, on an operational basis,
and then on an embodied carbon perspective. So the reason
why buildings have a negative carbon contribution is either through
the use of it, the use of the energy, the
up keep of it, or when you build it that
the material you use consume a.
Speaker 5 (23:36):
Lot of CO two.
Speaker 6 (23:38):
And what's very interesting, one of my favorite sort of
what I always make people aware of is I have
this slide when I talk sometimes where you can see
people in Egypt building, you know, three thousand years before
you know BZ, and then I have a picture of
people building in Bristol last year and you can see
(23:58):
the exact same scaffolding they accept, same brick layering. And
I think the point I'm trying to get across is
that this industry, of some odd reason has really not innovated.
And if you look at most other industries then you
would have seen prouctivity improvements over the last fifty years.
If you look at the construction industry, you've actually seen
prouctivity decline. And what's fascinating is that a big reason
(24:23):
of that when you look at what's been the driver
of productivity improvements in most other big industries that have
really experienced big productivity improvements, it's been technology. You know,
it's been digitization, it's been you know, doing things in
a more automated fashion, and that has not really happened
in our industry. And therefore, I think the question on
technology is that you just need to find new ways
(24:43):
and new materials in terms of ensuring that buildings eventually
end up becoming a positive contributors to the carbon accounting
and ideally also biodiversity.
Speaker 5 (24:55):
And this is really possible.
Speaker 6 (24:56):
It's a design, it's a design, and it's a supply
chain problem. And you also asked for, you know, a
few examples, so you could say, you know, we've launched
a company called twenty one fifty. It's a venture capital
company where we use our knowledge of what are the
big problems that we're lacking to solve to then identify
(25:17):
technologies that address these.
Speaker 1 (25:19):
Okay, do you have any examples? I do? I do?
Speaker 6 (25:21):
I mean, so, you know, for example, we've invested into
a company.
Speaker 5 (25:26):
So if you look at what.
Speaker 6 (25:27):
It's the biggest problem from a carbon perspective in the
build environment, it's it's concrete.
Speaker 1 (25:31):
So okay, yeah, cement exactly, know.
Speaker 6 (25:33):
Because the way you create camandas you take lime and
chalkstone and you burn it at eighteen hundred degrees and
that uses a lot of energy and it releases a
lot of suits.
Speaker 1 (25:42):
One of the most govern intensive industry.
Speaker 6 (25:44):
Yeah, it's accountable for roughly eight percent of the annual
C two emissions in the world.
Speaker 5 (25:48):
So it's a it's the biggest sinner.
Speaker 6 (25:50):
And there we for example, made two investments, so one
into a company that's using fermentation to achieve the same.
So I, rather than burning lime and chalks done, you
ferment it with bacteria.
Speaker 1 (26:02):
So rather than blasting it.
Speaker 6 (26:04):
Yes, okay, because in reality, all you're doing when you
are when you're like putting it through the kiln, is
that you are re orchestrating the molecules.
Speaker 5 (26:12):
You know, how the molecules connect somewhat, Yes.
Speaker 6 (26:16):
And so what these guys have figured out is that
in reality you can achieve the same through bacteria.
Speaker 5 (26:21):
Bacteria.
Speaker 6 (26:22):
What bacteria does is it reorganizes molecules, you would say.
Another example within the same sector is a company called
carbon Cure that essentially injects carpin into the creation of
concrete and allows it Like so when you do that
at a certain temperature and certain pressure, then basically you
can substitute cement with carbon, so you use less cement
(26:45):
and you even capture some CO two as another example.
Speaker 1 (26:49):
Sounds cool, Yeah, And I guess when it comes to
these technologies, what is the biggest challenge we face in
you know, scaling it or or what is just the
biggest challenge?
Speaker 6 (27:02):
I think that there are three big challenges. Actually, interestingly enough,
I don't think the biggest challenge is the innovation or
the invention of new solutions. I actually think the biggest
challenge is what prevents the solution from being scaled, and
it's typically supply chain problems because you could say, when
(27:23):
you look at the construction of a normal building, you know,
then this whole supply chain for creating the building is
a supply chain that's been created over the last hundred years.
And it's an industry that this incentivized, say, this incentivizes
in reality for innovation because you know, construction to low
margin business, so R and D is not something that
(27:45):
you know, construction industry has the lowest R and D
of any industry you can think of, apart from farming,
and that means that you're not. There is a very
little inclination to try new things. So that's one big problem.
The other problem is when you do new things, you
need to create a new supply chain that can actually
you know, ensure that this new solution is scalable. Like we,
(28:07):
for example, some of the first in the world to
construct you know, multi residential a large project in Copenhagen
where we you know, used ninety percent waste materials, so
we basically used building waste to build new you know,
so we recycled and that was a beautiful thing. It
was great to show that this was possible to do
in a commercially viable way. The problem was just that
(28:27):
all this waste that we found, you know, was not
readily available for us to repeat it. So when I
went out and tried to convince let's do it like this,
then any logic developer would say, but hey, have you
like where you're building materials like you need to find
them first.
Speaker 5 (28:43):
That's too risk, you know. So that's one big problem.
Speaker 6 (28:45):
It's the whole It's all about creating the new supply
change that enables circularity and enable basically new materials, you
could say. And then the other challenge is legislation. So
you know, for good reason, often or not always, but
often for good reason, there is opposite legislation that is
in place in order to avoid building collapsing.
Speaker 1 (29:07):
You know, I mean like quality control.
Speaker 6 (29:10):
Quality control, you know how the materials you know, can
can concrete, you know, do the carrying load that it needs.
So there's lots of regulation that has been developed over
the last a gene hundred years. And again you know,
the regulation is not incentivizing use of new materials or
new solutions. So really what we need is we need
(29:32):
to both have a regulatory environment that is supporting doing
things in a new way, in a better way than's
happening today. And then we need in reality capital that
is willing to front run the innovation of new supply chains.
Because you know, when we build this building out of
waste materials, again we did it at commercially sort of
(29:55):
viable terms, but here I have not included the extra
time that we used as a company to source these
materials for example. So so every time we do something
in a new way, well obviously it's more costly until
you eat scale. And there we need abously capital that's
willing to essentially, you know, invest in reaching that tipping point,
and that's for example, we do with with with fifty
(30:17):
you could say, you know, and that's also what we
do then in our own construction. So we obviously try
to be also a demand generator of of these new solutions.
Speaker 1 (30:27):
Nice, I think you already answered my next question, but
it was around policy and how policy can either help
inhibit or progress this. I think you already spoke about
how it's inhibiting this. Yes, any other thoughts.
Speaker 5 (30:40):
Obviously, the best.
Speaker 6 (30:41):
Way that it can support is is to you know,
in particular, when we speak about carbon it's to make
a carbon tax.
Speaker 1 (30:48):
I see, yeah, super simple.
Speaker 5 (30:51):
Now that the problem.
Speaker 6 (30:53):
You know, I've always been a big fan of Markhani,
and he wrote this book called Values, which I think
very simply describes why we have a problem. And because
the simple problem is that the financial system, which is
essentially is the world's largest reward system on centiviization system,
was set up, you know, after the Second World War
with an objective you could say, that's different than the
(31:16):
situation where now, because back then there was not an
awareness that you know, the world's resource of plans. Resources
are limited, but they are no and that means that
the financial system we have today, you know, only puts
a value on the amazonas if it's chopped down. But
you know, I think it's very clear for us human
beings on this planet that we actually value the amazonas
(31:36):
not being chopped down. But we have a financial system
that actually incentivizes to be shopped down. So it's quite simple.
We need to make sure that these negative externalities on
how we value things are fixed and carbon you know,
tax is one very very simple measure that makes sense.
Speaker 1 (31:52):
And I guess my last question is, you know, when
I think of cities urban planning, I think a lot
of as you might know, like government and public private
dough what is it called partnerships? Yes, So what is
the rule that you know, those such mechanisms play in
furthering this or not furthering this.
Speaker 6 (32:10):
Well, I think that's what I'm why I am so
fond of city exactly because I think the city you
can if you want to create a green, thriving, will functioning, holistic,
inclusive city, then that is a very very aligned project
with the municipality. Yes, and it can only be solved
(32:32):
together with the municipality. And I think that part of
the reason why our industry has not been so good
at This is because in many parts of the world,
real estate has been seen more as an asset for
an institutional investor than a product for the users of
(32:52):
the city. And when you approach real estate as an asset,
then you're not aligned with the municipality.
Speaker 5 (32:59):
And my view, that approach.
Speaker 6 (33:04):
Basically kills like Ruin's value also financial value. So an example,
if you create a whole new part of town and
you engage with a lot of individual developers who each
are creating an asset for a pension fund, then they
will all want to create an office with a fifteen
year lease with Price Waters Coopers. Having a city with
(33:27):
twenty of those buildings is not a particularly wonderful city
to be in. Whereas a city where you have a kindergarten,
you know, where you have an ocean bath, if it's
at the ocean, where you have social housing, we have
mixed use, is a much more appealing place to live in. Actually,
(33:47):
it turns out there's tons of research on this, but
again it requires that whoever creates this actually has a
long term perspective and actually, you know, is positioned in
a way that they can also reap the benefits of
creating that much more valuable student. And that is what
you need to do in partnership municipalities who for example,
(34:10):
rather than trying to sell the land to the highest bidder,
but where whereby there's less you know, actual financial capabilities
to build something fantastic on top, maybe goes into a
joint venture with this and say, hey, we contribute the
land and then we can use all the resources on
just you know, solving these problems holistically to create a better,
holistic city. So public private partnership, in my view, is
(34:32):
essential for creating green, thriving cities. And it's a discipline
which is fairly under developed.
Speaker 1 (34:39):
That makes sense. Michael, thank you. This has been very,
very interesting. I think my biggest takeaway was your point
on the construction industry not innovating enough, and I guess
maybe the role of legislation which requires some more incentives,
and the rule that carbon taxes can pay and just
you know, furthering this long.
Speaker 5 (34:59):
So thank you those two three things.
Speaker 1 (35:01):
Nice.
Speaker 5 (35:02):
Spread that work and let's make the change.
Speaker 1 (35:04):
That's what we're here for. Thank you so much.
Speaker 5 (35:07):
Thank you, Gene.
Speaker 1 (35:08):
Next we have Chris Stardwell, who's the global head of
policy and advocacy at IMPACTS Asset Management. Chris, I'd love
to focus on energy policy and how this can drive
all these climate technologies that we've been talking about today.
So my first question is to you, is you know
when it comes to innovative climate technology, what aspect of
(35:30):
energy policy can enable this and also derail it? And sorry,
you can give a quick introduction before I forgot to ask.
Speaker 7 (35:38):
Sure, it's great to be here, so I just by
way of introduction, so I spent twenty years working on
climate policy in the UK government and then helping to
support a range of countries around the world both develop
and implement their Paris climate commitments.
Speaker 3 (35:55):
And I have been at IMPACTS, which.
Speaker 7 (35:58):
Is a specialistasset manager for focused on the transition to
a sustainable economy for the last four years. So I
think it's a great question. And the way we think
about the sort of policies that are going to affect
the energy transition is we sort of break them into
three buckets. So there's one set where they're already cost
(36:19):
competitive and ready to kind of move out at scale,
things like renewables, electric vehicles, you could even say home
energy efficiency measures in the home, but there are barriers
to things happening at scale, and policy needs to kind
of needs to kind of get those rails running smoothly
so that we can move further and faster to try
(36:41):
to hit our climate goals. The second one is areas
where the technologies are not yet cost competitive, but we
kind of know we need them, but it's a balance
of kind of chicken and egg supply and demand. How
do you actually create enough demand out there and you
end users off takers for the technologies to accelerate production
(37:04):
to the level at which you start to get economies
of scale and the cost goes down and then it
becomes cost competitive. So in that area you're talking about
kind of government grants, subsidies, you require mandating a certain
share of something to be done by a particular thing,
or in some areas, coalitions of buyers the globe, the
kind of first movers coalition that's committing to buy green cemental,
(37:28):
green steel. And then the third area is kind of
almost like the known unknowns, the ones that we haven't
quite got to grips with and we don't really understand
what the funding model's going to look like. And you
could put into that area some of the nature based
solutions where people have got ideas around carbon credits, but
they're very much in their naissance and generating revenue from those,
(37:51):
but also some other things like geoengineering direct air capture.
So coming back to your question though, I think are
really interesting example of where things can come unstuck in
the first case is around community acceptance of those technologies.
Speaker 3 (38:08):
So the real.
Speaker 7 (38:09):
Issue we've got at the moment with renewables is planning
and permitting and also grid connection. How do you make
sure that you've got or investment in the grid. How
do you make sure you've got a big enough grid
and a grid that can get the renewables from.
Speaker 3 (38:24):
Wherever they're generated to the users.
Speaker 7 (38:29):
And the issue there is that that probably is going
to involve pylons going across other people's land, or it's
going to involve the building of solar farms on farm
stuff that's currently farms. So you've got conversion of land
and local communities who are affected by that conversion. But
it's and that can cause resistance unless you work out
(38:53):
a way of getting their buy in. So another area
that is linked to that is around just trans and
how do you ensure that someone whose job was in
an old fossil fuel based industry and is now becoming
potentially there's another job, but it's in something different. How
do you get over that? It looks fine on paper
(39:13):
and from an economic perspective, but how do you deal
with the people factor? So I think it's that people factor.
Great example in the UK at the moment is the
Portal but Steel Works where they're switching from a blast
furnace to a more efficient electric art fares and it's
going to take a three year process and there's tens
of thousands of people whose lives are affected during those
three years.
Speaker 3 (39:31):
What do they do?
Speaker 7 (39:34):
So that's where governments actually need to kind of take
ownership of those problems and work to help get communities
and come up with solutions that solve for it. So
I would say it's about clarity of direction, but also
a proper fully understood policy that deals with the broader
consequences of the change, doesn't just think about the technology,
(39:59):
but thinks about how you take society with you.
Speaker 1 (40:01):
That's interesting and I guess just a follow up to
that is is policy at a place where we're doing
that right now? Or is it you know, is that
something that's needed that.
Speaker 7 (40:12):
So interestingly, I think people are now really starting to
focus on some of these problems and how we address them.
I think the difficulties is that going to be It's
going to be quite tricky. It's going to need a
lot of political commitment and political nerve, and hopefully if
you've got cross party support for things, that will make
it much easier, because if you don't, then people will
(40:33):
make mischief with that potential division. One of the things
I was just talking about in the talk downstairs was
about Rishie Sunak's speech last year, where everyone was saying, oh,
he's doing a U turn on all of these policies.
There were some upfront policies that were actually, you know,
we're being delayed. But actually, if you read to the
(40:53):
end of the speech or you listen to the end
of the speech, he was he was really advocating that
idea around permitting reform planning, how do you speed things
up so actually you can decarbonize the grid. So you
kind of need to look at the detail of this stuff.
And there is a recognition of this, and you'll see
the same thing in Labor Party manifesto. There's a whole
bunch of financial sector figures that have been coming together
(41:18):
putting forward ideas, and this is one that everyone's agreed
on them.
Speaker 1 (41:23):
I never thought about that community aspect and how much
of a role I guess policy can play. So that's
that's really interesting. So my next question is on the
ESG backlash, which I think enlightened day. I don't know
if it enlightens your day, but so, how do you
see this backlash shifting policy priorities today or in the future.
Speaker 7 (41:48):
Yeah, I suppose the first thing to say is that
we kind of think the backlash is maybe a little
bit overplayed. Our conversations with investors in the US have
much convinced us that almost all of the things you
would be doing under a label of ESG are being done.
Speaker 3 (42:08):
You know, people are.
Speaker 7 (42:09):
Thinking about physical climate risk and how it's going to
affect their future, that the future investments, they're thinking about
the pace at which the transition happens, they're thinking about
social issues, and you know, the degree to which they're
material for financial So there's there's it's still going on.
It's just it's just kind of if you talk about ESG,
(42:30):
they're dropping the they're dropping the as.
Speaker 1 (42:32):
Yeah, definitely, that's what I heard.
Speaker 7 (42:34):
And the other thing is that even in even in
the US, again that the politics of this are that
proposals have been suggested, but when they actually get through
to the legislation gets through to sort of state legislatures,
and they've realized that what they're doing is they're restricting
their options on things they can invest in that might
(42:55):
actually mean they make less money for the pensions, they've
rejected them. So you know, there's a lot of rhetoric
but actually less action that The problem I think we've
got is that if you start to politicize an issue
like this, then you start to create tribes that will
follow different issues. And if you start to treat climate,
(43:16):
which is a really serious issue, as a sort of
political expediency, then you know, we could go the same
route as we did with Brexit, where effectively you've got
people sort of camping out and families arguing about an
issue that really shouldn't should shouldn't be politicized. So that's
where I'm That's where I'm concerned. How does it differ.
(43:37):
It differs, you know for every country, because every country
has a different approach to these issues. You know that
you're seeing quite a lot of pushback from farmers in
Europe at the moment, which maybe suggests that the message
around the role of farming and how they can be
supported hasn't been particularly well played in those countries. In China,
(43:58):
you know, actually China is just moving forward, you know, regardless,
they're like, without a doubt, doing more than anyone else
to kind of address climate change and the technologies that
they're investing in the amount they're investing in it. In India,
it's a different story, and you know, there's quite an
entrepreneurial aspect of these issues in India and green technologies
and the solar expansion part of it driven by self
(44:20):
interest because of energy security concerns. Yeah, so you know,
that's a fascinating thing about this. So I used to
work on the international climate negotiations and it was just
amazing to understand what the real interests were of different
countries and then to sort of think about how that
affected their negotiating positions.
Speaker 1 (44:38):
And I think, how different.
Speaker 7 (44:39):
Yeah, we see the same The transition will proceed in
different ways at different paces in different societies, and we
have to you know, be sophisticated enough to deal with that.
Speaker 1 (44:50):
That's interesting and I like your point on you know,
the backlash being overblown because we find the same thing.
You know, people are doing the same thing. They're not
just they're just not shouting it out from the rooftops.
Speaker 7 (45:01):
I guess, okay, so, and I guess the last thing
I would say is that we're increasingly seeing opportunities for
investment in emerging economies, so that is, you know, the
transition is gaining pace there as well, despite these policy barriers.
The economics of doing that taking forward these actions are
pretty uncontroversial, and consumer behavior is changing globally, which is
(45:27):
creating demand, so you have it's just that things would
move faster if they had policy support. Question is happening
is just happening in a clunky way rather than a
way that could be smoothed by policy.
Speaker 1 (45:40):
And it's interesting you say, the economics of this as
still you know, working and there are opportunities. So I
guess my next question is what are a few major
investment implications from this changing policy landscape? And if you
have any fun examples of case studies.
Speaker 7 (45:56):
Yeah, I mean, I guess one of the one that
immediately springs to mind is has to do with home
energy efficiency and the degree to which we've seen even
in the UK as a result of policy change. About
ten years ago, we switched to a new policy called
the Green Deal, which whereas we did have a policy
that subsidized things like loft insulation and those sorts of activities,
(46:21):
and you know the same policy would be applying to
heat pumps now, but it shifted instead to a oh no,
now you've got to borrow money, and you have to
borrow it from the government, and you have to then
secure it on your house, and it just created lots
of barriers to behavioral to that behavioral change, you know,
it was it was just about a place where people
(46:43):
were willing to do it, even though it sounded a
bit dull. You know, heat pumps and insulation are never
going to be sexy topics.
Speaker 3 (46:49):
But it now it just failed it.
Speaker 7 (46:52):
Back then, it failed to get off the sofa test,
and we saw that sector collapse by ninety percent, you know,
almost in a year, and it's not recovered since. So
what we really need is to get this to move up.
And there's lots of really good solutions out there and
businesses that will provide them, but you need to invest
in skilled supply.
Speaker 3 (47:12):
Chain, You need to have.
Speaker 7 (47:15):
You need to have the materials available in the country,
and people need to know there's demand going to be
coming from the UK and in the absence of having
that strong and people need to have the information to
know what to buy and what's the sensible thing to
buy and get that advice from government. Unless you have
policy coming in, all those investment opportunities are going to
fail and the UK will still not address a major
(47:39):
source of its emissions. So I think that's a really
good example of one where we're currently failing. But there
are places in the US, Like in the US, you know,
solar panels on rooftops, you get tax exemptions for it.
Doing the same thing to your house. It's really it's
much easier to access that finance there.
Speaker 1 (47:57):
That's true. And Chrissia mentioned that you know, each country
is on its own transition path kind of. So I
guess my last question is when it comes to, you know,
all these reporting regulation, are we ever going to have
a convergence and if not, how does an analyst or
an investor navigate this patchwork in a global society that
(48:21):
we have to do.
Speaker 7 (48:22):
So I think we're in terms of kind of financial
and corporate regulation on ESG. I think we are at
the moment of sort of mass confusion and mass divergence.
Speaker 1 (48:34):
That's a study, you know, like that mass diversions.
Speaker 7 (48:36):
Yes, So we started with a and with ideas about
problems that we wanted to address, and well, let's start
with impacts is experience. So we twenty five years ago
Impacts started up looking at this stuff and we were
we were doing it. We knew why we were doing it.
So we developed a taxonomy because we wanted to identify
(49:00):
a whole swathe of companies that we could invest in
because we were setting up an environmental markets fund we
developed we wanted to look at the risks associated with
those investments. With that understanding of physical climate risk and
of transition risks, so we've applied that. We wanted to
report back on our engagement with our companies, so we
(49:21):
developed methods for that then. So we were doing all
the methodology stuff and then we get asked to disclose
it by our clients. So what we have are these
things called beyond financial return reports that we did that
broke all.
Speaker 3 (49:32):
Of this stuff down for every strategy.
Speaker 7 (49:33):
Quite complicated, but at least we knew what the use
case for it was we understood it, and then along
came policymakers coming, Oh, we need to it's the wild
West out there, We've got to regulate all of this.
But I think what what we've had is we've gone
from this blooming of many flowers into a world where suddenly,
with all those flowers blooming, the regulators went, yes, let's
(49:55):
capture a whole bunch of these metrics and require everyone
to report. And now we're all sinking under the way
of reporting lots of data that isn't necessarily decision useful.
Speaker 1 (50:07):
It's about exactly So.
Speaker 7 (50:09):
I think if we came back to this question of
use cases and we really thought, why is it that
we are asking people to report this data and how
is it then going to be used in making an
investment decision, I think you'd come up with a much
less onerous regime. Whereas at the moment what we've got
is the European Commission kind of rushes ahead and does everything,
whereas you know, say the UK or the US are
(50:31):
being a little bit more principal base, and that allows
a bit more flexibility so that you know, you can
decide what's material yourself. The answer probably lies in between
the two. But I think if we could, if we
could identify those sort of common but important metrics and
focus on those, then I think that would be the
route to a sort of interoperable regulatory systems.
Speaker 1 (50:54):
That's a good middle ground. I guess, Chris, thank you
so much. I think my biggest takeaway was the community
acceptance and the role that policy pers Like I said,
I never put those two together, so that was my
mistake away.
Speaker 3 (51:06):
Let's hope that that's an inspiration.
Speaker 5 (51:09):
For people to.
Speaker 1 (51:11):
Yes, thank you so much, thanks so much for having me.
And that brings us to the end of our episode
here at the Bloomberg Sustainable Business Summit in London. Just
some quick key takeaways. When it comes to climate technology,
there is a financing gap that new innovative securitized products
can fill. However, we need to do this while avoiding greenwashing.
(51:35):
Today we have a lot of data and analytics to
enable decorganization. I think that's you know, a positive thing
that we see today. And then lastly, when it comes
to the ESG backlash, I think many people find that
we're continuing to do what we do, which is you know,
sustainability risk and looking at opportunities but perhaps we're doing
(51:58):
it with a different label or without the label, And
those are really at least the key takeaways for me
here at the summit. You can find more information on
climate themes and more by going to BI SG on
the Bloomberg terminal, which opens up Bloomberg Intelligence or Research Dashboard.
(52:18):
If you have an ESG quantary, a burning question you
would like to ask bi's expert analysts, please send us
an email at ESG currents at Bloomberg dot net. Thank
you everyone for listening
PSG has become established as a key business theme at
its companies and investors seek to navigate the climate crisis,
energy transition, social megatrens, mounting regulatory attention and pressure from
other stakeholders. The rapidly evolving landscape has become inundated with acronyms,
buzzwords and lingo, and we aim to break this down
(00:29):
with industry experts. Welcome to ESG Current, brought to you
by Bloomberg Intelligence, your guide navigating the evolving ESG space,
one topic at a time. I'm Shahan Contractor, Senior ESG analyst,
and today we're recording this episode at the Bloomberg Sustainable
Business Summit in London, which brings together leaders and investors
(00:51):
to discuss some of the most pressing themes such as
the changing political landscape when it comes to sustainability, and
also topics like god, just and inclusive future. Now, the
conference has a number of fantastic speakers and today we're
interviewing four of them to take a little bit of
a deep dive into the exciting world of climate technology.
(01:12):
We're going to focus on technology enable decarbonization and how
this can be deployed through various facets, particularly in how
to abate sectors like steel or cement, and also through
innovative products and structures. Now, for this exciting discussion, we're
going to pick the brains of four experts. We have
(01:34):
Daniel Hannah, the head of sustainable Finance at Barclays, Kelly Becker,
the president of Schneider Electric UK and Ireland. Miquel the
co founder and chairman of Urban Partners, and Chris Dadwell,
the global head of Policy and Advocacy at Impacts Asset Management.
(01:55):
So let's stick straight in with Daniel Hannah, the global
head of Sustainable find at Berkley's. So danil movie give
us a quick introduction into how sustainability factors into your.
Speaker 2 (02:06):
Role well as the head of sustainable finance for Berkeleys,
if you like, I've got two or three sort of
significant mandates that I feel really quite honored and privileged
to drive. One of which is we've made a commitment
to mobilize a trillion dollars of sustainable and transition finance
by twenty thirty. So we're rolling out new products, engaging
(02:27):
with clients to really scale that up. We did sixty
eight billion of mobilization last year. The second is that
we're investing five hundred million pounds in early stage climate
technology companies by twenty twenty seven, and we've already deployed
over one hundred and twenty million into more than fourteen
different companies around carbon capture, hydrogen reducing emissions in sectors
(02:51):
like aviation. And the final thing is we're working very
hard to align our financing towards a net zero pathway,
and we set out a number of twenty twenty five
and twenty thirty interim targets our energy what's called financed emissions.
So the impact our financing has on emission generation and
our clients has dropped forty four percent since we set
(03:14):
that target in twenty twenty.
Speaker 1 (03:16):
That's very interesting. So Daniel, I feel like in your
role you have this bird's eye view into everything transition, finance,
And my question is when it comes to climate tech,
I think it's very clear that we need this new
wave of technology is of course alongside renewables. So my
question is what are these technologies that we need and
(03:39):
where are they needed? If you could give me some
examples also, that would be great.
Speaker 2 (03:43):
It's a great question, and I think I mean a
really bird's eye view, right, what we've got to do
is in some ways simple. We've got to electrify what
we can, we've got to power that by renewables, and
then we've got to scale new climate technologlogies to tackle
these hard to abate sectors. As you say, so these
technologies where there isn't currently a commercial pathway to a
(04:09):
technology that's really going to put them on a net
zero trajectory. And so I think if you think about
the types of technologies that we're seeing really come through,
one is hydrogen for example. So we last year closed
a two hundred and fifty million equity raise for a
(04:29):
company called Omnium, which it's involved in the green hydrogen space.
That was actually the fifth hydrogen deal that we've done
in the last thirteen months. And obviously this is a
big area of focus in the US with the Inflation
Reduction Act. In Europe there's been a lot of talk
about this as well, and hydrogen is seen as something
that in these sort of hard to abate sectors can
be deployed to move them further down if you like
(04:53):
the emissions.
Speaker 1 (04:54):
Curve like steel, right, I hear a large exactly.
Speaker 2 (04:57):
So I think it's the be a little bit of
caution around this, because hydrogen is not a magic bullock
that's suddenly going to solve everything. But as you say,
I think in certain technologies like for example, steel, and
we've seen in Europe H two green steel being set up,
the use of hydrogen can combined with recycling and electric
(05:19):
arc furnaces, you know, significantly reduced emissions from where we
are seeing and I mean we're talking about sort of
ninety percent reduction. So the question is can we get
that to a scalable price that actually then becomes commercially competitive,
or can the greenium if you like, the amount that
people are prepared to pay on top of normal steel,
can that be increased, or whether we see these sort
(05:39):
of carbon prices evolving. So that's quite a good example.
But we've also seen other areas like cement. I think
last year we saw almost three billion deployed into low
carbon cement in energy efficiency. And then I think one
of the other areas where we've seen a significant ramp
up is in carbon capture. And so where the technology
(06:02):
really isn't there at the moment to decarbonize, what can
we do to capture the carbon that is being emitted
and sequester it away in a robust and stable place
that can really get monitored. And actually one of the
companies that we've directly invested in through our early stage
climate technology effort is called NOADA, which uses technology to
(06:26):
try and provide a cost efficient way of capturing carbon
in industries where they're still using chimney pipes. So obviously
you prefer that they didn't and that there wasn't any
but in that absence, deploying something that's cost effective and quick,
you know, can make a difference in terms of trying
to reduce emissions.
Speaker 1 (06:41):
And Daniel, I guess when it comes to these technologies,
what are the challenges holding them back? I think you
mentioned one like you know, scalable price for hydrogen, But
what today have we not sold for and what do
we need to do today?
Speaker 2 (06:57):
No, it's a great question, I mean, I think actually
only if you think about the IA net zero pathway,
thirty five percent of the emissions reduction implied in that
relies on climate technology that we need to scale so
that we haven't scaled, so it's solar wind sort of
the maturer industries around. Nerle absolutely plays the critical role,
(07:18):
but beyond that, you start getting to these questions like
you've raised around how do you get either a new
technologies that can.
Speaker 1 (07:26):
Get so the rest is all new technology.
Speaker 2 (07:28):
Well, this thirty five percent absolutely is absolutely key to
that pathway. And so we have some technologies, but they
need to be proven at a price that people are
prepared to pay, and so they need to like we've
seen in the significant reduction in solar come down in
its deployment, we just need to see that in other
technologies but ideally happening quicker and in some of their areas.
(07:51):
We actually need to discover the right technology as well.
And so I think one of from a from a
finance perspective, what we see a lot with our clients
is actually at the moment, there is actually quite a
lot of venture capital out there. So for really early
stage ideas, you know, with the right with the right products,
(08:11):
with the right technology, you can find money. And at
the more mature stage, at the you know, once you've
really got to scale. Actually, if you look at these
infrastructure funds, the amount of dry powder, so the amount
of money that they've got in their funds but they
haven't spent, went up last year and so you've kind
of got capital at the beginning and capital when you're
really scaled. The challenge is this middle and we sort
(08:34):
of see a missing middle of capital at the moment
where you've gone through your early stage, you've got the
technology kind of largely de risked, and now you need
to scale it. And one entrepreneur said to me, it's
like scaling the dunes of doom, because with climate tech
it's so capital intensive. You do your first plant, then
you've got to do five more, Then you want to
(08:55):
do ten more, then you've got to do fifty more,
and so the amount of capital that you're deploying just
is grown almost exponentially. And in some ways, the finance
industry has kind of got stuck on scaling facebooks and
social media, where the incremental amount of capital required for
someone like a social media company to add to go
from ten million to one hundred million users actually is marginal,
(09:17):
whereas in climate tech to do that actually it's a
really significant ramp up. And so there I think we
need almost a new way of thinking about how we
do that. From our perspective, it's partly working with public
sector partners. So we recently closed a fifty six million
round for Giapora, which s is the UK's largest producer
(09:38):
of green hydrogen at the moment with UK investment back
infrastructure banks sorry, and we're working with in the tax
credit space in the US. We did a very large
tax credit deal in Louisiana recently, so looking at what
sort of government support is there and then how you
can blend it with commercial capital to come in. But
(10:00):
beyond that, I think we need to think about how
we can play the insurance industry in I think we
need to look at, particularly in saying some of these
earlier technologies, how do you help what's called the off take,
so where that product is being sold to, how can
you strengthen the credit quality of that So can we
look at guarantees for off takes and others. So we're
(10:20):
looking at a number of different ideas around how we
can kind of sort of structure these things to bring
more capital and to tackle this missing middle.
Speaker 3 (10:30):
And we're also looking at how we can bring in
different types.
Speaker 2 (10:32):
Of investors, so in solo and wind for example, but
let's pick on solar for a second. There's also been
a lot of focus around the impact of renewable companies
and their valuations in terms of interest rates, and we've
seen significant impact there. We are now moving into thinking
about how we can use securitization to open up different
types of investors. And actually we've recently closed Europe's largest
(10:56):
abs securitization in the solar space. And so I think
again it's sort of taking either traditional types of financing
that haven't been applied in this space before, or looking
at whole new structures.
Speaker 1 (11:08):
And I want to dig into that a little more,
this space of securitization. So I keep hearing of different
instruments like transition bonds, and then they're more complex structures
like you know, bonds that pay out with conservation things
like that. So should we be creating such structures? And
I guess what products are the need of the art today?
Speaker 2 (11:30):
Well, I think, I mean it's a great question because
I think in some ways you don't want to create
huge number of completely new products that can be overly complex,
that could create some confusion, maybe lead to some greenwashing concerns.
But at the same time, we've clearly got a financing gap.
(11:51):
So how do you kind of, I guess, do both
of those things at the same time deal with both
those types of issues, and so the one area where
we spent a lot of time is around transition finance.
So I think at the moment sort of everyone understands
and has a pretty good idea. I think of what
green finance looks like and social finance, but there's a
lot less agreement around what decarbonizing these hard to abate
(12:13):
sectors really can be. And there are some understandable concerns
around greenwashing and the likes that you know, are you
and so how do you tackle that? So we've put
out with the first major bank to put out a
transition finance framework that says, quite transparently, these are the
types of activities which are aligned to an IA at
zero pathway that we feel confident if we're financing we
(12:35):
can call transition because we need to grow that space,
and we're starting to see more and more kind of
that sort of concept being brought into different transactions. So
for example, we work with SNUM Italy's gas company to
do the first EU taxonomy aligned transition bond as well.
(12:58):
So I think how we can sort of merge a
sort of robust definition around transition with access to capital
markets is going to be an important tool in how
we tackle this decarbonization challenge.
Speaker 1 (13:09):
That's interesting, Daniel, thank you for being on. I think
my biggest takeaway was that you know, when it comes
to this climate climate tech, we have to not only
discover the right technology, we have to scale it at
a reasonable price that people are willing to pay. But
then your comments also on the financing gap and how
you know securitized products will fill that but still without
(13:32):
greenwashing risks. I guess that was one of the biggest
takeaways for me. But thank you so much for being on.
Speaker 3 (13:38):
Thank you very much.
Speaker 1 (13:39):
Thank you. Our next speaker is Kelly Becker. Kelly is
the president of Schneider Electric UK and Island. Kelly, thank
you for joining us.
Speaker 4 (13:47):
Thanks for having me Gene.
Speaker 1 (13:48):
Kelly, maybe just a quick brief introduction and how sustainability
factors into your role.
Speaker 4 (13:53):
Yes, so I have responsibility for all of our operations
in the UK and Ireland and sustainability is really everything
we do. So you could imagine from our own factories
and facilities and how we think about sustainability and working
on our own decarbonization journey. And then obviously sustainability is
a huge part of the business. So on the client side,
(14:16):
we're certainly looking at clients that want to look at
their sustainability from a fifty thousand foot view and then
getting into much more detailed solutions and services and products
very close to an end user process.
Speaker 1 (14:31):
That that makes sense. So, Kelly, I think it's very
clear that Schneider works very closely with industry right to
further decarbonization. So I'd love to get your thoughts in
the use of such technology and enabling decoganization and any examples, okay,
studies you have would be great.
Speaker 3 (14:48):
Yeah.
Speaker 4 (14:48):
So I think data is really changing the way we
approach our sector and we approach sort of the broader
energy challenge, and so this topic of digitization and being
able to see how a process actually works or a
building is functioning is a huge piece of our business now,
(15:10):
very much driven by software platforms that relate then to
services and what we're able to offer our clients. One
good example would be Tottenham Hotspurs, which is the football
club based here in North London. This is a great
client and they've been a client, you know, at this
(15:31):
point greater than ten years when they started planning that
football stadium, and then we worked very closely with them
as their energy partner to ensure not only were they
designing really the first sort of net zero football stadium,
if you will, but also how would they then run
that facility in the long run. So we worked with
(15:54):
them along the new construction side, but then now we
continue to work with them on optimizing the use of
the building. So how they use the facility for a
football match is really different than how they use it
for other partner events or a concert. And so we
have teams embedded at Tottenham alongside their own staff to
make sure that we're always optimizing and using the data
(16:15):
that the stadium is putting out to make better choices
and ultimately to drive more energy efficiency for the club.
Speaker 1 (16:22):
That sounds interesting, So it's a big focus on, you know,
the use of data in doing this. Absolutely. I guess
is there any other you know, big opportunity or a
market force and play that you think could really ramp
up this decoorganization effort or ramp down.
Speaker 4 (16:40):
I think what we're seeing is a huge amount of
work in public and private partnerships. You know, in the past,
I think large corporations sort of did their own thing
and you know, publish their results. Governments, you know, certainly
are here to make policy and regulation, and certainly in
some sectors you saw huge overlaps, and I wouldn't have
(17:01):
said our sector was that, But certainly as governments set
long term net zero targets, the conversations are becoming quite
deep around what do private corporations need to do? How
do we work alongside public entities? What are those conversations?
What are the different types of places that governments are
(17:23):
having to drive and make decisions. So in our world
that might be regulations around a new building, and you know,
how does that need to be driven. It also might
be help and interest in the transportation sector, and these
are the kinds of very regular conversations. I would say.
The other piece of that is collaboration is really happening
(17:45):
a lot with all sorts of corporations, alongside startups, alongside SMEs,
alongside governments, because the challenge around climate change is so
vast it's going to take everybody's great brains makes a
fact actually solve this together.
Speaker 1 (18:01):
Yeah, and you mentioned policy and regulation and that comes
that brings me to my next question. So do you
think we have the policy mechanisms in place today or
do you think policy is going to help further this
or derail this, and you know what is the need of.
Speaker 4 (18:17):
The r Yeah, I think you see you're seeing around
the world governments take different approaches to net zero and decarbonization,
and progress is absolutely being made depending on where you
look around the world. Certainly the US has had its approach,
the EU has its approach, the UK is having its approach,
(18:37):
and they've all taken a little bit different view on
how they want to go about it. But the end
game is the same, which is around solving the climate
change topic. You know, specifically in the UK, I think
we've seen a lot of work done around electric vehicle
implementation and the infrastructure associated with that. The utility in
(19:00):
the UK are doing a tremendous amount of work around
making sure the grid is ready for the future because
what's coming with sort of this all electric world of
the future is a different way that the grid has
to operate as well, and so it's a critical topic.
And then I think you're seeing governments work alongside big
companies that are investing in their regions like data centers,
(19:23):
to be very clear on what's acceptable in a certain
geography and how do we do that. So I would
say there's progress. There's certainly more that could be done,
and we will continue to push and drive on that
front to help be a part of the solution that
makes sense.
Speaker 1 (19:40):
And I guess my last question is you know, what
have we solved for and what have we not solved for?
In other words, you know, what is the challenge today?
What is the need of the eye to as you
mentioned progress? Thanks further, I think.
Speaker 4 (19:55):
I think the topic is a little bit overwhelming for people.
Speaker 1 (19:57):
It's a lot, it's a lot.
Speaker 4 (20:00):
And you know everybody, uh well not maybe not everybody,
but people are trying to solve solve climate change in
their own ways, and they're approaching it in different ways
based on their starting point. And I think what we
need to acknowledge, both as industry and governments is any
start as a good start, and where you start from
is not necessarily you know, relevant to me. What's important
(20:24):
is that as a business, you get started and you
move and what makes natural sense. And I think most
businesses that's why we see that. Certainly, I would say
on the buildings side, which you know accounts for an
enormous piece of the usage in the UK, old and
efficient buildings and some of the historical buildings.
Speaker 1 (20:46):
That we love and problem is a pretty.
Speaker 4 (20:50):
Significant issue because of certainly so many of the rules
and regulations around that, and we'll have to continue to evolve,
and I think the government is very engaged in making
sure that all buildings are driving. I would say the
easiest thing is to change regulation so no new building
is built without what you want it to look.
Speaker 1 (21:09):
Like for the future.
Speaker 4 (21:10):
And is that happening in some places? It's definitely, it's
definitely starting. I wouldn't say that there's that clear cut
regulation everywhere. Certainly the EU is driving a lot around
building regulation and requirements and they are rolling that out
very fast.
Speaker 1 (21:29):
Okay, very interesting, Kelly, Thank you so much for joining us.
I think my main takeaway was your point on the
use of data in you know, approaching these decombanization challenges.
And I think that goes a long way because you're
a data company.
Speaker 4 (21:44):
Yeah, data, data should drive your path and should decisions
that direction forward, and so much of the technology and
the market today can provide you with that data and
help pull it out of buildings and industrial sites.
Speaker 1 (21:59):
And that's just freshing, yes, And we'll leave it on
that positive now. Thank you, Kevin, Thank you for having me.
So next up we have Michel Budhau. Michuel, maybe just
a quick introduction for us.
Speaker 5 (22:10):
Yes, well, I am an entrepreneur.
Speaker 6 (22:12):
I'm the co founder and today the executive chairman of
Urban Partners. We are a large European investment platform that
invests in the urban value chain, driven by a purpose
and a belief that we can outperform by solving problems
I eat, making better green driving cities.
Speaker 1 (22:33):
Nice, So, Miguel, and past conversations, we've focused on the
use of technology to decorbanize industry and these you know,
these hard to abate sectors like steel. But you know,
as you mentioned, you're an expert on cities, so I'm
keen to better understand how can we use climate tech
to aid decobanizations within cities and within urban planning. Any
(22:54):
examples you have would be great.
Speaker 5 (22:55):
Yes.
Speaker 6 (22:56):
So, you know, we've been working on a Nitzero strategy
for quite a few years by now, and in our
work we realize that in order to create net zero buildings,
which is obviously a requirement to create net zero cities,
there is just a lot of things that needs to
be done differently, and you know, really you can look
(23:18):
at buildings from a carbon perspective, on an operational basis,
and then on an embodied carbon perspective. So the reason
why buildings have a negative carbon contribution is either through
the use of it, the use of the energy, the
up keep of it, or when you build it that
the material you use consume a.
Speaker 5 (23:36):
Lot of CO two.
Speaker 6 (23:38):
And what's very interesting, one of my favorite sort of
what I always make people aware of is I have
this slide when I talk sometimes where you can see
people in Egypt building, you know, three thousand years before
you know BZ, and then I have a picture of
people building in Bristol last year and you can see
(23:58):
the exact same scaffolding they accept, same brick layering. And
I think the point I'm trying to get across is
that this industry, of some odd reason has really not innovated.
And if you look at most other industries then you
would have seen prouctivity improvements over the last fifty years.
If you look at the construction industry, you've actually seen
prouctivity decline. And what's fascinating is that a big reason
(24:23):
of that when you look at what's been the driver
of productivity improvements in most other big industries that have
really experienced big productivity improvements, it's been technology. You know,
it's been digitization, it's been you know, doing things in
a more automated fashion, and that has not really happened
in our industry. And therefore, I think the question on
technology is that you just need to find new ways
(24:43):
and new materials in terms of ensuring that buildings eventually
end up becoming a positive contributors to the carbon accounting
and ideally also biodiversity.
Speaker 5 (24:55):
And this is really possible.
Speaker 6 (24:56):
It's a design, it's a design, and it's a supply
chain problem. And you also asked for, you know, a
few examples, so you could say, you know, we've launched
a company called twenty one fifty. It's a venture capital
company where we use our knowledge of what are the
big problems that we're lacking to solve to then identify
(25:17):
technologies that address these.
Speaker 1 (25:19):
Okay, do you have any examples? I do? I do?
Speaker 6 (25:21):
I mean, so, you know, for example, we've invested into
a company.
Speaker 5 (25:26):
So if you look at what.
Speaker 6 (25:27):
It's the biggest problem from a carbon perspective in the
build environment, it's it's concrete.
Speaker 1 (25:31):
So okay, yeah, cement exactly, know.
Speaker 6 (25:33):
Because the way you create camandas you take lime and
chalkstone and you burn it at eighteen hundred degrees and
that uses a lot of energy and it releases a
lot of suits.
Speaker 1 (25:42):
One of the most govern intensive industry.
Speaker 6 (25:44):
Yeah, it's accountable for roughly eight percent of the annual
C two emissions in the world.
Speaker 5 (25:48):
So it's a it's the biggest sinner.
Speaker 6 (25:50):
And there we for example, made two investments, so one
into a company that's using fermentation to achieve the same.
So I, rather than burning lime and chalks done, you
ferment it with bacteria.
Speaker 1 (26:02):
So rather than blasting it.
Speaker 6 (26:04):
Yes, okay, because in reality, all you're doing when you
are when you're like putting it through the kiln, is
that you are re orchestrating the molecules.
Speaker 5 (26:12):
You know, how the molecules connect somewhat, Yes.
Speaker 6 (26:16):
And so what these guys have figured out is that
in reality you can achieve the same through bacteria.
Speaker 5 (26:21):
Bacteria.
Speaker 6 (26:22):
What bacteria does is it reorganizes molecules, you would say.
Another example within the same sector is a company called
carbon Cure that essentially injects carpin into the creation of
concrete and allows it Like so when you do that
at a certain temperature and certain pressure, then basically you
can substitute cement with carbon, so you use less cement
(26:45):
and you even capture some CO two as another example.
Speaker 1 (26:49):
Sounds cool, Yeah, And I guess when it comes to
these technologies, what is the biggest challenge we face in
you know, scaling it or or what is just the
biggest challenge?
Speaker 6 (27:02):
I think that there are three big challenges. Actually, interestingly enough,
I don't think the biggest challenge is the innovation or
the invention of new solutions. I actually think the biggest
challenge is what prevents the solution from being scaled, and
it's typically supply chain problems because you could say, when
(27:23):
you look at the construction of a normal building, you know,
then this whole supply chain for creating the building is
a supply chain that's been created over the last hundred years.
And it's an industry that this incentivized, say, this incentivizes
in reality for innovation because you know, construction to low
margin business, so R and D is not something that
(27:45):
you know, construction industry has the lowest R and D
of any industry you can think of, apart from farming,
and that means that you're not. There is a very
little inclination to try new things. So that's one big problem.
The other problem is when you do new things, you
need to create a new supply chain that can actually
you know, ensure that this new solution is scalable. Like we,
(28:07):
for example, some of the first in the world to
construct you know, multi residential a large project in Copenhagen
where we you know, used ninety percent waste materials, so
we basically used building waste to build new you know,
so we recycled and that was a beautiful thing. It
was great to show that this was possible to do
in a commercially viable way. The problem was just that
(28:27):
all this waste that we found, you know, was not
readily available for us to repeat it. So when I
went out and tried to convince let's do it like this,
then any logic developer would say, but hey, have you
like where you're building materials like you need to find
them first.
Speaker 5 (28:43):
That's too risk, you know. So that's one big problem.
Speaker 6 (28:45):
It's the whole It's all about creating the new supply
change that enables circularity and enable basically new materials, you
could say. And then the other challenge is legislation. So
you know, for good reason, often or not always, but
often for good reason, there is opposite legislation that is
in place in order to avoid building collapsing.
Speaker 1 (29:07):
You know, I mean like quality control.
Speaker 6 (29:10):
Quality control, you know how the materials you know, can
can concrete, you know, do the carrying load that it needs.
So there's lots of regulation that has been developed over
the last a gene hundred years. And again you know,
the regulation is not incentivizing use of new materials or
new solutions. So really what we need is we need
(29:32):
to both have a regulatory environment that is supporting doing
things in a new way, in a better way than's
happening today. And then we need in reality capital that
is willing to front run the innovation of new supply chains.
Because you know, when we build this building out of
waste materials, again we did it at commercially sort of
(29:55):
viable terms, but here I have not included the extra
time that we used as a company to source these
materials for example. So so every time we do something
in a new way, well obviously it's more costly until
you eat scale. And there we need abously capital that's
willing to essentially, you know, invest in reaching that tipping point,
and that's for example, we do with with with fifty
(30:17):
you could say, you know, and that's also what we
do then in our own construction. So we obviously try
to be also a demand generator of of these new solutions.
Speaker 1 (30:27):
Nice, I think you already answered my next question, but
it was around policy and how policy can either help
inhibit or progress this. I think you already spoke about
how it's inhibiting this. Yes, any other thoughts.
Speaker 5 (30:40):
Obviously, the best.
Speaker 6 (30:41):
Way that it can support is is to you know,
in particular, when we speak about carbon it's to make
a carbon tax.
Speaker 1 (30:48):
I see, yeah, super simple.
Speaker 5 (30:51):
Now that the problem.
Speaker 6 (30:53):
You know, I've always been a big fan of Markhani,
and he wrote this book called Values, which I think
very simply describes why we have a problem. And because
the simple problem is that the financial system, which is
essentially is the world's largest reward system on centiviization system,
was set up, you know, after the Second World War
with an objective you could say, that's different than the
(31:16):
situation where now, because back then there was not an
awareness that you know, the world's resource of plans. Resources
are limited, but they are no and that means that
the financial system we have today, you know, only puts
a value on the amazonas if it's chopped down. But
you know, I think it's very clear for us human
beings on this planet that we actually value the amazonas
(31:36):
not being chopped down. But we have a financial system
that actually incentivizes to be shopped down. So it's quite simple.
We need to make sure that these negative externalities on
how we value things are fixed and carbon you know,
tax is one very very simple measure that makes sense.
Speaker 1 (31:52):
And I guess my last question is, you know, when
I think of cities urban planning, I think a lot
of as you might know, like government and public private
dough what is it called partnerships? Yes, So what is
the rule that you know, those such mechanisms play in
furthering this or not furthering this.
Speaker 6 (32:10):
Well, I think that's what I'm why I am so
fond of city exactly because I think the city you
can if you want to create a green, thriving, will functioning, holistic,
inclusive city, then that is a very very aligned project
with the municipality. Yes, and it can only be solved
(32:32):
together with the municipality. And I think that part of
the reason why our industry has not been so good
at This is because in many parts of the world,
real estate has been seen more as an asset for
an institutional investor than a product for the users of
(32:52):
the city. And when you approach real estate as an asset,
then you're not aligned with the municipality.
Speaker 5 (32:59):
And my view, that approach.
Speaker 6 (33:04):
Basically kills like Ruin's value also financial value. So an example,
if you create a whole new part of town and
you engage with a lot of individual developers who each
are creating an asset for a pension fund, then they
will all want to create an office with a fifteen
year lease with Price Waters Coopers. Having a city with
(33:27):
twenty of those buildings is not a particularly wonderful city
to be in. Whereas a city where you have a kindergarten,
you know, where you have an ocean bath, if it's
at the ocean, where you have social housing, we have
mixed use, is a much more appealing place to live in. Actually,
(33:47):
it turns out there's tons of research on this, but
again it requires that whoever creates this actually has a
long term perspective and actually, you know, is positioned in
a way that they can also reap the benefits of
creating that much more valuable student. And that is what
you need to do in partnership municipalities who for example,
(34:10):
rather than trying to sell the land to the highest bidder,
but where whereby there's less you know, actual financial capabilities
to build something fantastic on top, maybe goes into a
joint venture with this and say, hey, we contribute the
land and then we can use all the resources on
just you know, solving these problems holistically to create a better,
holistic city. So public private partnership, in my view, is
(34:32):
essential for creating green, thriving cities. And it's a discipline
which is fairly under developed.
Speaker 1 (34:39):
That makes sense. Michael, thank you. This has been very,
very interesting. I think my biggest takeaway was your point
on the construction industry not innovating enough, and I guess
maybe the role of legislation which requires some more incentives,
and the rule that carbon taxes can pay and just
you know, furthering this long.
Speaker 5 (34:59):
So thank you those two three things.
Speaker 1 (35:01):
Nice.
Speaker 5 (35:02):
Spread that work and let's make the change.
Speaker 1 (35:04):
That's what we're here for. Thank you so much.
Speaker 5 (35:07):
Thank you, Gene.
Speaker 1 (35:08):
Next we have Chris Stardwell, who's the global head of
policy and advocacy at IMPACTS Asset Management. Chris, I'd love
to focus on energy policy and how this can drive
all these climate technologies that we've been talking about today.
So my first question is to you, is you know
when it comes to innovative climate technology, what aspect of
(35:30):
energy policy can enable this and also derail it? And sorry,
you can give a quick introduction before I forgot to ask.
Speaker 7 (35:38):
Sure, it's great to be here, so I just by
way of introduction, so I spent twenty years working on
climate policy in the UK government and then helping to
support a range of countries around the world both develop
and implement their Paris climate commitments.
Speaker 3 (35:55):
And I have been at IMPACTS, which.
Speaker 7 (35:58):
Is a specialistasset manager for focused on the transition to
a sustainable economy for the last four years. So I
think it's a great question. And the way we think
about the sort of policies that are going to affect
the energy transition is we sort of break them into
three buckets. So there's one set where they're already cost
(36:19):
competitive and ready to kind of move out at scale,
things like renewables, electric vehicles, you could even say home
energy efficiency measures in the home, but there are barriers
to things happening at scale, and policy needs to kind
of needs to kind of get those rails running smoothly
so that we can move further and faster to try
(36:41):
to hit our climate goals. The second one is areas
where the technologies are not yet cost competitive, but we
kind of know we need them, but it's a balance
of kind of chicken and egg supply and demand. How
do you actually create enough demand out there and you
end users off takers for the technologies to accelerate production
(37:04):
to the level at which you start to get economies
of scale and the cost goes down and then it
becomes cost competitive. So in that area you're talking about
kind of government grants, subsidies, you require mandating a certain
share of something to be done by a particular thing,
or in some areas, coalitions of buyers the globe, the
kind of first movers coalition that's committing to buy green cemental,
(37:28):
green steel. And then the third area is kind of
almost like the known unknowns, the ones that we haven't
quite got to grips with and we don't really understand
what the funding model's going to look like. And you
could put into that area some of the nature based
solutions where people have got ideas around carbon credits, but
they're very much in their naissance and generating revenue from those,
(37:51):
but also some other things like geoengineering direct air capture.
So coming back to your question though, I think are
really interesting example of where things can come unstuck in
the first case is around community acceptance of those technologies.
Speaker 3 (38:08):
So the real.
Speaker 7 (38:09):
Issue we've got at the moment with renewables is planning
and permitting and also grid connection. How do you make
sure that you've got or investment in the grid. How
do you make sure you've got a big enough grid
and a grid that can get the renewables from.
Speaker 3 (38:24):
Wherever they're generated to the users.
Speaker 7 (38:29):
And the issue there is that that probably is going
to involve pylons going across other people's land, or it's
going to involve the building of solar farms on farm
stuff that's currently farms. So you've got conversion of land
and local communities who are affected by that conversion. But
it's and that can cause resistance unless you work out
(38:53):
a way of getting their buy in. So another area
that is linked to that is around just trans and
how do you ensure that someone whose job was in
an old fossil fuel based industry and is now becoming
potentially there's another job, but it's in something different. How
do you get over that? It looks fine on paper
(39:13):
and from an economic perspective, but how do you deal
with the people factor? So I think it's that people factor.
Great example in the UK at the moment is the
Portal but Steel Works where they're switching from a blast
furnace to a more efficient electric art fares and it's
going to take a three year process and there's tens
of thousands of people whose lives are affected during those
three years.
Speaker 3 (39:31):
What do they do?
Speaker 7 (39:34):
So that's where governments actually need to kind of take
ownership of those problems and work to help get communities
and come up with solutions that solve for it. So
I would say it's about clarity of direction, but also
a proper fully understood policy that deals with the broader
consequences of the change, doesn't just think about the technology,
(39:59):
but thinks about how you take society with you.
Speaker 1 (40:01):
That's interesting and I guess just a follow up to
that is is policy at a place where we're doing
that right now? Or is it you know, is that
something that's needed that.
Speaker 7 (40:12):
So interestingly, I think people are now really starting to
focus on some of these problems and how we address them.
I think the difficulties is that going to be It's
going to be quite tricky. It's going to need a
lot of political commitment and political nerve, and hopefully if
you've got cross party support for things, that will make
it much easier, because if you don't, then people will
(40:33):
make mischief with that potential division. One of the things
I was just talking about in the talk downstairs was
about Rishie Sunak's speech last year, where everyone was saying, oh,
he's doing a U turn on all of these policies.
There were some upfront policies that were actually, you know,
we're being delayed. But actually, if you read to the
(40:53):
end of the speech or you listen to the end
of the speech, he was he was really advocating that
idea around permitting reform planning, how do you speed things
up so actually you can decarbonize the grid. So you
kind of need to look at the detail of this stuff.
And there is a recognition of this, and you'll see
the same thing in Labor Party manifesto. There's a whole
bunch of financial sector figures that have been coming together
(41:18):
putting forward ideas, and this is one that everyone's agreed
on them.
Speaker 1 (41:23):
I never thought about that community aspect and how much
of a role I guess policy can play. So that's
that's really interesting. So my next question is on the
ESG backlash, which I think enlightened day. I don't know
if it enlightens your day, but so, how do you
see this backlash shifting policy priorities today or in the future.
Speaker 7 (41:48):
Yeah, I suppose the first thing to say is that
we kind of think the backlash is maybe a little
bit overplayed. Our conversations with investors in the US have
much convinced us that almost all of the things you
would be doing under a label of ESG are being done.
Speaker 3 (42:08):
You know, people are.
Speaker 7 (42:09):
Thinking about physical climate risk and how it's going to
affect their future, that the future investments, they're thinking about
the pace at which the transition happens, they're thinking about
social issues, and you know, the degree to which they're
material for financial So there's there's it's still going on.
It's just it's just kind of if you talk about ESG,
(42:30):
they're dropping the they're dropping the as.
Speaker 1 (42:32):
Yeah, definitely, that's what I heard.
Speaker 7 (42:34):
And the other thing is that even in even in
the US, again that the politics of this are that
proposals have been suggested, but when they actually get through
to the legislation gets through to sort of state legislatures,
and they've realized that what they're doing is they're restricting
their options on things they can invest in that might
(42:55):
actually mean they make less money for the pensions, they've
rejected them. So you know, there's a lot of rhetoric
but actually less action that The problem I think we've
got is that if you start to politicize an issue
like this, then you start to create tribes that will
follow different issues. And if you start to treat climate,
(43:16):
which is a really serious issue, as a sort of
political expediency, then you know, we could go the same
route as we did with Brexit, where effectively you've got
people sort of camping out and families arguing about an
issue that really shouldn't should shouldn't be politicized. So that's
where I'm That's where I'm concerned. How does it differ.
(43:37):
It differs, you know for every country, because every country
has a different approach to these issues. You know that
you're seeing quite a lot of pushback from farmers in
Europe at the moment, which maybe suggests that the message
around the role of farming and how they can be
supported hasn't been particularly well played in those countries. In China,
(43:58):
you know, actually China is just moving forward, you know, regardless,
they're like, without a doubt, doing more than anyone else
to kind of address climate change and the technologies that
they're investing in the amount they're investing in it. In India,
it's a different story, and you know, there's quite an
entrepreneurial aspect of these issues in India and green technologies
and the solar expansion part of it driven by self
(44:20):
interest because of energy security concerns. Yeah, so you know,
that's a fascinating thing about this. So I used to
work on the international climate negotiations and it was just
amazing to understand what the real interests were of different
countries and then to sort of think about how that
affected their negotiating positions.
Speaker 1 (44:38):
And I think, how different.
Speaker 7 (44:39):
Yeah, we see the same The transition will proceed in
different ways at different paces in different societies, and we
have to you know, be sophisticated enough to deal with that.
Speaker 1 (44:50):
That's interesting and I like your point on you know,
the backlash being overblown because we find the same thing.
You know, people are doing the same thing. They're not
just they're just not shouting it out from the rooftops.
Speaker 7 (45:01):
I guess, okay, so, and I guess the last thing
I would say is that we're increasingly seeing opportunities for
investment in emerging economies, so that is, you know, the
transition is gaining pace there as well, despite these policy barriers.
The economics of doing that taking forward these actions are
pretty uncontroversial, and consumer behavior is changing globally, which is
(45:27):
creating demand, so you have it's just that things would
move faster if they had policy support. Question is happening
is just happening in a clunky way rather than a
way that could be smoothed by policy.
Speaker 1 (45:40):
And it's interesting you say, the economics of this as
still you know, working and there are opportunities. So I
guess my next question is what are a few major
investment implications from this changing policy landscape? And if you
have any fun examples of case studies.
Speaker 7 (45:56):
Yeah, I mean, I guess one of the one that
immediately springs to mind is has to do with home
energy efficiency and the degree to which we've seen even
in the UK as a result of policy change. About
ten years ago, we switched to a new policy called
the Green Deal, which whereas we did have a policy
that subsidized things like loft insulation and those sorts of activities,
(46:21):
and you know the same policy would be applying to
heat pumps now, but it shifted instead to a oh no,
now you've got to borrow money, and you have to
borrow it from the government, and you have to then
secure it on your house, and it just created lots
of barriers to behavioral to that behavioral change, you know,
it was it was just about a place where people
(46:43):
were willing to do it, even though it sounded a
bit dull. You know, heat pumps and insulation are never
going to be sexy topics.
Speaker 3 (46:49):
But it now it just failed it.
Speaker 7 (46:52):
Back then, it failed to get off the sofa test,
and we saw that sector collapse by ninety percent, you know,
almost in a year, and it's not recovered since. So
what we really need is to get this to move up.
And there's lots of really good solutions out there and
businesses that will provide them, but you need to invest
in skilled supply.
Speaker 3 (47:12):
Chain, You need to have.
Speaker 7 (47:15):
You need to have the materials available in the country,
and people need to know there's demand going to be
coming from the UK and in the absence of having
that strong and people need to have the information to
know what to buy and what's the sensible thing to
buy and get that advice from government. Unless you have
policy coming in, all those investment opportunities are going to
fail and the UK will still not address a major
(47:39):
source of its emissions. So I think that's a really
good example of one where we're currently failing. But there
are places in the US, Like in the US, you know,
solar panels on rooftops, you get tax exemptions for it.
Doing the same thing to your house. It's really it's
much easier to access that finance there.
Speaker 1 (47:57):
That's true. And Chrissia mentioned that you know, each country
is on its own transition path kind of. So I
guess my last question is when it comes to, you know,
all these reporting regulation, are we ever going to have
a convergence and if not, how does an analyst or
an investor navigate this patchwork in a global society that
(48:21):
we have to do.
Speaker 7 (48:22):
So I think we're in terms of kind of financial
and corporate regulation on ESG. I think we are at
the moment of sort of mass confusion and mass divergence.
Speaker 1 (48:34):
That's a study, you know, like that mass diversions.
Speaker 7 (48:36):
Yes, So we started with a and with ideas about
problems that we wanted to address, and well, let's start
with impacts is experience. So we twenty five years ago
Impacts started up looking at this stuff and we were
we were doing it. We knew why we were doing it.
So we developed a taxonomy because we wanted to identify
(49:00):
a whole swathe of companies that we could invest in
because we were setting up an environmental markets fund we
developed we wanted to look at the risks associated with
those investments. With that understanding of physical climate risk and
of transition risks, so we've applied that. We wanted to
report back on our engagement with our companies, so we
(49:21):
developed methods for that then. So we were doing all
the methodology stuff and then we get asked to disclose
it by our clients. So what we have are these
things called beyond financial return reports that we did that
broke all.
Speaker 3 (49:32):
Of this stuff down for every strategy.
Speaker 7 (49:33):
Quite complicated, but at least we knew what the use
case for it was we understood it, and then along
came policymakers coming, Oh, we need to it's the wild
West out there, We've got to regulate all of this.
But I think what what we've had is we've gone
from this blooming of many flowers into a world where suddenly,
with all those flowers blooming, the regulators went, yes, let's
(49:55):
capture a whole bunch of these metrics and require everyone
to report. And now we're all sinking under the way
of reporting lots of data that isn't necessarily decision useful.
Speaker 1 (50:07):
It's about exactly So.
Speaker 7 (50:09):
I think if we came back to this question of
use cases and we really thought, why is it that
we are asking people to report this data and how
is it then going to be used in making an
investment decision, I think you'd come up with a much
less onerous regime. Whereas at the moment what we've got
is the European Commission kind of rushes ahead and does everything,
whereas you know, say the UK or the US are
(50:31):
being a little bit more principal base, and that allows
a bit more flexibility so that you know, you can
decide what's material yourself. The answer probably lies in between
the two. But I think if we could, if we
could identify those sort of common but important metrics and
focus on those, then I think that would be the
route to a sort of interoperable regulatory systems.
Speaker 1 (50:54):
That's a good middle ground. I guess, Chris, thank you
so much. I think my biggest takeaway was the community
acceptance and the role that policy pers Like I said,
I never put those two together, so that was my
mistake away.
Speaker 3 (51:06):
Let's hope that that's an inspiration.
Speaker 5 (51:09):
For people to.
Speaker 1 (51:11):
Yes, thank you so much, thanks so much for having me.
And that brings us to the end of our episode
here at the Bloomberg Sustainable Business Summit in London. Just
some quick key takeaways. When it comes to climate technology,
there is a financing gap that new innovative securitized products
can fill. However, we need to do this while avoiding greenwashing.
(51:35):
Today we have a lot of data and analytics to
enable decorganization. I think that's you know, a positive thing
that we see today. And then lastly, when it comes
to the ESG backlash, I think many people find that
we're continuing to do what we do, which is you know,
sustainability risk and looking at opportunities but perhaps we're doing
(51:58):
it with a different label or without the label, And
those are really at least the key takeaways for me
here at the summit. You can find more information on
climate themes and more by going to BI SG on
the Bloomberg terminal, which opens up Bloomberg Intelligence or Research Dashboard.
(52:18):
If you have an ESG quantary, a burning question you
would like to ask bi's expert analysts, please send us
an email at ESG currents at Bloomberg dot net. Thank
you everyone for listening
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