September 26, 2024 • 22 mins
Standard Chartered’s Bill Winters joins David Merritt and Francine Lacqua to talk climate finance, the UK’s Autumn Budget, and European M&A from the United Nations General Assembly.
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Speaker 1 (00:03):
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:12):
Welcome to the City of London, the city of the
City of the City of London.
Speaker 3 (00:19):
Please mind the gap between the tree and the platform, the.
Speaker 2 (00:23):
Financial hearts of the country, the city, the city.
Speaker 1 (00:31):
Welcome to in the city, stand clear of the doors.
Speaker 2 (00:37):
Pea.
Speaker 3 (00:39):
Welcome to in the City of Podcasts from Bloomberg about
the story is important to the City of London and beyond.
Francis Lacua.
Speaker 2 (00:45):
Yeah, and we are beyond. Sorry, this is David Merritt.
We are beyond. We are in the city of New
York rather than London.
Speaker 3 (00:51):
We're in a rather noisy actually Plaza Hotel during unj
So what's happening at the Plaza.
Speaker 2 (00:56):
Hotel, Dave, Well, what isn't happening at the Plata? We have?
This is the Bloomberg Philanthropies Earthshop Prize and Global Business Forum.
It is Pats to the rafters here with business people,
with financiers, with people covering climate, a whole program of events,
all making the most of the fact that everyone is
in town, of course for the UN General Assembly and
(01:19):
the UN Climate Week, the other big gathering of climate
specialist around the world. Apart from kop and that's why
we've got some of the most important people in finance
here as well, including of course our guest today.
Speaker 3 (01:32):
I'm excited about Bill Winters, so we're speaking to him
shortly now. He's the chief executive, Sandra Charger, but also
he was a regulator. You understand, he's part of the
task force to understand of course some of the green financing,
so he understands the business of finance and banking, but
he also understands what it takes to have this screen transition.
Speaker 2 (01:50):
Yeah, and we're going to talk a bit about climate finance.
But also you know they're a very international bank. They
have a huge presence in Asia. I think more than
half their revenue comes from Asia. Don't understand his lens
on particularly China, where we've seen a lot of news
this week about government stimulus, a weakening economy. And then
of course back to Britain as well with the Labor
Party conference is going on this week. It's been a
(02:12):
rock a few weeks for the Labor government. We're all
waiting for the budget, fascinated to hear what Bill thinks
about the business friendliness or otherwise of the new administration.
Speaker 3 (02:23):
Bill Wonder Thank you so much for joining us. This
is in the city.
Speaker 2 (02:25):
I thought we've ranged around the world really to get
your lens on everything that's happening, but maybe clicking off
because we're here at the plaza where we've had the
Earth Shot Prize talking about this question of climate finance,
and you're involved with standard Charter. What's the state in
the industry.
Speaker 1 (02:40):
Well, we're very involved, I think is a short summary.
And look, I think at this point most rational people
understand the problem. I know there's still some naysayers, but
they're few and far between right now, although you probably
don't have to spit too far from this building right
now to get a few of them. But the challenge
is getting the right programs in place that can make
(03:03):
the most difference. And then, of course, as always, the money.
It was clear there's no shortage of money. There's plenty
of money available, and it's not just general money. It's
ESG money or sustainable finance on your transition finance money
that's available. But I wouldn't say it's highly sophisticated in
the sense that it's not geared up to do the
heavy lifting around oftentimes quite complicated projects.
Speaker 3 (03:24):
Bill it was my understanding that there's a pool of
money that actually needs to go to the transition, but
actually that pool of money is maybe not as committed
to it as it was four or five years ago.
I don't know whether it's crisis or whether they have
other priorities. That there's money, but it's not necessarily going
to where it needs to go.
Speaker 1 (03:39):
It's an open question, and in a way, I wish
we knew for sure that the money was thus committed.
But I think we've got a problem before we even
get to that point, which is coming up with the
right projects that have the right assembly of risk takers.
And by that I mean a project for reforestation in
the Democratic Republic of Congo. There's a lot of political risk,
(04:01):
there's the technical risk of surveillance and monitoring, there's the
use of pro what's the money actually being used for?
Is being used for what was intended bribery, corruption, et cetera.
And so before you even get to the point of
delivering the money, you've got real technical problems that have
to be overcome. And the good news, I think is
is that there are everybody's kind of aware of this,
(04:23):
and a big part of what's going on this week
and Climate Week will be things like a bang at
the World Bank, who are very focused on saying out
there are some risks that were really best place to take,
and we've got money set aside to do that, and
we can provide catalytic capital. We can take some of
the risks that a private sector of financier just can't
handle or hasn't yet been able to handle, take them
(04:46):
off the plate, and then allow the market to come
in and do the heavy lifting behind that initiative. So
those things are happening, and that's what we're talking about
this week, but it hasn't happened yet. But to your question,
is the money less committed? First of all, money's always
committed to things that generate a decent return, right. I mean,
if if we can offer a decent return, risk adjusted return,
(05:08):
there's plenty of money. And I think the only way
that we're going to be successful in the fight against
climate change is to offer people an acceptable, acceptable return.
It doesn't have to be a grotesque return, just acceptable.
That's the only way to move trillions and trillions.
Speaker 2 (05:22):
I mean, Climate Week, I guess, alongside cop is the
big sort of global gathering for people to come together
and try and think of solutions. Do you see this
week as achieving any of that. Everyone's here in New
York attacking the problems that you just outlined. Do you
think we'll see some progress this week fixing some of
these issues?
Speaker 1 (05:42):
I think so. I understand there's one hundred thousand people
that have come to New York Climate Week this week.
That's that's an impressive number of people. And nobody comes
here to be seen to be seen. It's not something
where you show up and flash your card and say, Okay,
I've done my bit. You come here to solve some problems. So,
I mean, just in the course of my time here,
we've had discussions with the Defense Group, which is a
(06:03):
Mark Carney initiated gathering of financial companies focus on exactly
the question that Francine you asked with the outset, How
do we get this big block of money actually put
to work. Is nice to talk about it, but until it'spent,
it's not doing any good to some really creative ideas
from the Minister of Finance in Brazil promoting a fund
(06:25):
to effectively fund the preservation of rainforest around the world
in a very creative way using public and private sector money.
Money in a creative consolation, I think those opportunities where
you're ideating maybe slightly overuse term, but but thinking through
how do you make something work. When you're sitting in
a room together, you actually come up with some stuff
(06:46):
that you don't necessarily see on emails or even a
zoom call and standard chalts.
Speaker 4 (06:49):
That is going to be a leader in this price
We are leader already are We are leader, but we're
a leader.
Speaker 1 (06:55):
For a good reason, a kind of obvious reason. One
is we operate around the world, but our major on
the ground footprint is in Asia, the Middle East, in Africa,
and when you look at the parts of the world
that are going to be most affected by climate change,
whether it's fifty degree plus days in Central India or
floods affecting Bangladesh, two of our biggest markets, our markets
(07:16):
are going to be most affected. So if we don't
do our bit to avoid the worst case outcomes, I
will have some challenges ourselves. But the flip side is
the impact of a call it renewable power technology or
it could be adaptationient. Financing in some of these markets
is much higher than anywhere else in the world, So
a dollar spent decarbonizing in India is the equivalent of
(07:39):
seven dollars spent in Europe. Why because Europe is already
largely largely decarbonized and the US is something in between.
So the markets where we operate have the least access
to finance and the most impact of an invested dollar.
But I want to be clear, this is business for us,
so we're doing the right thing. We're doing the right
thing because our stakeholders, start with our own employees, require it.
(08:02):
But we said publicly we're going to make a billion
dollars in this business income next year, and I think
that'll go to two, maybe ten percent of our income
or something like that. So it's this is to my
point that if you offer an acceptable return on capital
or return on effort, you'll get a lot of capital
and effort involved.
Speaker 3 (08:21):
But you also understand this, you know more than most
because you were part of the task for us. You understood,
you were like a regulator before. But what do you
think is the purpose of financing is because there's a
step back from a lot of the banks and saying, look,
we should not be leading the way, we should be enablers,
we should be facilitators. And it's really up to the
policymakers and the politicians to then use us in the
correct way, and that changes actually how much can be
(08:43):
done around the world.
Speaker 1 (08:44):
Look, I think in some ways it felt like we
started with governments or o their stakeholders shareholders in some cases,
saying you need to do this right, and banks and
other companies said, okay, we don't want to, but we will.
That's never going to work. That approach will never work.
The second approach that will never work is expecting governments
(09:05):
to fund the trillions of dollars necessary out of tax
payer money. It's not going to happen, right, It's just
not going to happen. So if the private sector, broadly defined,
isn't funding this with appropriate impetus from governments, we can
definitely get this done. But you know, the fact is
carbon in the environment is an external cost. It's a
(09:26):
real cost. We're going to pay for it. If not us,
then our children or grandchildren we're gonna pay for a
big time. Price up properly, price up properly. There's different
ways to do it. The Europeans have said we're going
to tax you on your carbon emissions. We're going to
limit the amount you can admit, and then you can
you can trade the creduce back and forth. It works.
But you know, the cost of carbon in Europe is
sixty to seventy dollars dollars a ton. The cost of
(09:48):
carbon in California is two dollars a ton. I would
argue that good idea. It's not working. But if governments
around the world could a carbon tax in place at
something that represents the actual external cos there would be
no climate change problem. Why don't we do it then?
Because it's hard. Who wants to tax your population? You
don't get elected. Everything's harder. Life is hard, so but
(10:10):
what's not hard is to make good investments in sound
things that generate a return for your investors and carry
on from there. That's what Center Trotter is doing.
Speaker 2 (10:21):
How much of your time is spent on this topic?
I mean you said it might reach ten percent of
your total revenue base. Sounds like you're spending a lot
of your time picking you're in New York for Climate Week?
Is it eating up a lot of your focus to
how you position yourselves in this?
Speaker 1 (10:37):
To me, it's important because I do think that corporations
have a responsibility to the communities in which we operate.
It's very important to our clients. So I mean, there's
no client meeting that I have these days where the
topic of sustainability or not zero transition doesn't come up. Literally,
it never fails to come up with any CEO, any CFO,
any treasurer I talk to. It comes up sometimes it's
(10:59):
the whole commerce. Why does it come up all the time.
It's not because they're trying to make me feel good
because I've invested some time in this. It's because they
care about it as well. They have stakeholders. Frequently it's
your own employees. Many certainly for consumer goods, it's your customers,
and that the real leaders in the consumer products area
are marketing their greenness like crazy, and and they're right
(11:20):
to because it's it's cost it's costing them something, and
their buyers should know, the consumers should know that this
effort has gone into that. But yes, I mean, it's
not a disproportionate amount of time, I don't think.
Speaker 3 (11:31):
But what else comes up in those meetings?
Speaker 1 (11:35):
The economy, a standard charter bank. More often than not,
it's China. You know, what's what's really what's really going
on in China?
Speaker 3 (11:42):
What is really going on in China. We had this
massive stimulus today.
Speaker 1 (11:47):
And I don't know if it's massive, but it's it's
it's and it's a big change. It's a big change
because they they've been very incremental so far. And I
think it reflects the reality on the ground, which is
that consumer confidence and investor confidence is quite low. And
I know so the government has properly e gauged that
they need to need an impetus. So I think a
lot of things are going out in China. We know
(12:07):
the geopolitical tensions are in the backdrop. We know that
that China has built up excess capacity in a lot
of the new economy industries, sustainable infrastructure and evs and
associated components. And we know that the rest of the
world is beginning to say, hold on, we're not sure
we want to take take a lot because you're a
little bit too good at this. So Europe in the US,
(12:30):
for starters, have they're in the process of shutting down
big chunks of their market. Now there's a broader question
around how do we feel about these major impediments to
global trade. Everybody loses when we cut out cut out trade.
But I won't won't veer into the end of the
political because of course there are motivations that go beyond
(12:50):
just promoting free trade. But the I think China is
going through a massive transition from old economy to new economy,
from massive investments and property and infrastructure into massive investments
into the new economy. They will succeed in that transition, right,
I mean, I've they've got the technical components and we
know how, but they're meeting a lot of barriers along
the way, and it's a tough transition.
Speaker 3 (13:11):
Will it take longer, I mean they will, but it
will take longer that they're expecting, which means more.
Speaker 1 (13:16):
I think so. And you know, when I reflect on
the major transitions that we've gone through in the US
or in Europe or Japan or Korea, they were almost
always associated with major financial crisis and sometimes multiple financial crisis.
And I think China of course sees this. They've had
their own financial crisis if you went back to the nineties,
and it's hugely stabilizing economically, it's also disabilizing socially. Needs
(13:38):
to inequality and miscontent and malcan that's a big issue
for the Chinese leaders. So I think they're determined to
avoid that kind of a financial dislocation, and but that
means it's going to take longer.
Speaker 2 (13:50):
Is that enough a determination to prevent it? Is that
not to bet? I mean, it's been a terrible year
for Chinese stocks. People have lost a lot of money
to the bears that they're these as as you said,
or you're employed, than probably not going to be enough.
Does the government have enough far pad to prevent a
much bigger crash happening on the Chinese a colony?
Speaker 1 (14:08):
I think the government has a lot of firepower. So
there's a lot of metoric around aggregate debt levels in China.
I mean, debt levels are concerning, but they're the economy,
even despite the current woes, are still growing it probably
three and a half to five percent. Five percent look
more likely right now, it's trending more towards three, but
let's just say it's going to settle it before four
and a half percent. You can run a meaningful budget
(14:31):
deficit with four percent GDP growth and not have the
kind of spiraling of debt levels that we have, for example,
in Europe, or that we had in Japan during the
the last decades. So I think China has a huge
amount of fiscal firepower, and as they've shown today, they
have a lot of modern monetary firepower as well.
Speaker 3 (14:46):
But is there a danger that you know, their economy
is in a certain way which is very skewed towards
industries that are not doing very well. They need to
add I guess thirty percent in value add if they
want to transition to better, healthier economy by stimulating too
much now, they can't get to the one to the
economy they want in four or five years.
Speaker 1 (15:06):
I mean, I think the single most important thing for
China is to restore consumer confidence because savings rate and
China is astronomical, and we know why. In part is
that it's a largely unfunded health and mentioned system, so
people are just saving for for their for their needs
down the road. Uh, but also because they're not sure
that they're gonna have jobs and the youth unemployment is
(15:27):
quite high. And these aren't unprecedented problems by any means,
but they need to take the action to jumpstart confidence,
to get the spending up, and then to get businesses
to start investing again in the domestic economy, not just
for export that we're finding the just for export it
meets resistance.
Speaker 2 (15:45):
Can we talk about about Britain, which is Britain. We've
just we've got a new government in place, and still
that's still deftly.
Speaker 3 (15:54):
Three months right, Yeah, because the.
Speaker 1 (15:56):
Honeymoon is over.
Speaker 2 (15:57):
The honeymoon was the shortest honeymoon I think, ye to
a history. But the you know, they're talking a lot
about the need to stabilize the economy, tough decisions coming out.
We're all waiting for the budget, the rich Ruth's budget.
What's your lens on the state of the British economy
now from your purchase running one of the big bags.
Speaker 1 (16:13):
It's tough, right, I mean they've they've we have been
through ten tough years and.
Speaker 2 (16:20):
So tracing all the way back to the Brexit turmoil.
Speaker 1 (16:24):
And yeah, definitely Brexit. I mean you're dragging me into politics,
but that is I mean, with not just economically, but
the benefit of hindsight, that was a gigantic own goal. Yeah,
some would have said with the benefit of foresight, that
would be that's a long goal. I happen to be
one of them. But that doesn't matter because that's not
the way the election came out.
Speaker 2 (16:44):
But do you think this government is one that's going
to bat business. I mean, there are some doubts emerging,
aren't there. We had a big story last week talking
about the hedge funds that the wealthy who are planning
to leave Britain. That is never a good sign for
a government. And that's even before the budgets come out.
I mean, is that what you're hearing?
Speaker 1 (16:59):
My sense is that the government is taking an extremely
pragmatic approach to to engaging with the business community, broadly
with financi in particular. And you know we've seen some
concrete things like the outcome of the Buzzle three point one.
It is quite technical, but you know at the end
of the day that there were there there was a
prospect of increasing the capital requirements on banks by you know,
(17:22):
a substantial amount of money and I think without compromising
financial soundness or prudential regulation. They put it quite a
pragmatic a set of of current proposals on the table
and that was of course it was led by the
by the government of the Bank of England and the
head of the p R right, but the chancer was
there when it was presented to the banks and to
(17:43):
make it clear we're paying attention and by the way
the government as actually as it happens, it was the
previous government, but this government has embraced it completely, the
idea that regulation regulation should be in support of financial
stability but also competitiveness for the city of London. So
I'm I'm encouraged by the pragmatism. But nobody harbors any
illusions about the challenges that this government faces fiscal monetary.
(18:05):
I mean, obviously the feed is cut rates. The Bank
of England didn't. There's a reason instation has been stubborn
on the website. So there's nothing easy about the predicament
in which the UK finds herself. Only know that Britain's
been around for a very long time. It's incredibly resilient.
Speaker 3 (18:19):
That's a low bar bill.
Speaker 1 (18:20):
What do you mean from the governments?
Speaker 3 (18:21):
What do you mean it's been around a long time.
Speaker 1 (18:24):
What's been around for a long time? I mean, this
is amazingly resilience. People bounce back, you know, governments figure
out the right thing to do. Look, the budget's going
to be tough. It's not going to be an ausiority budget,
but it's probably gonna feel like an authority budget because
that's that's the way it's it's going to pan out,
the not completely Unlike China. The UK needs to reinstate
confidence so that the businesses are comfortable investing in Britain.
(18:47):
And everything that I've seen so far is supportive of that, right,
But the heavy liftings you have to come out.
Speaker 2 (18:51):
There's a lot of speculations. I mean, no one knows
what she's going to put the people talking about capital gains,
tax carried interest, people taking freight. But we're gonna have
to wait and see, aren't we, which she does.
Speaker 1 (19:00):
Yeah. But but again, the these issues can be very emotive
and I know for everybody, and of course they're very
economic as well, but not a lot of money involves.
If I understand, if I read down on Bloomberg News,
the you know, the most draconian approach to taxing, uh,
you know, private equity, carried interest, we generate a half
a billion pounds of fights not and it's not nothing.
(19:21):
But this isn't going to solve the problem. And of
course what you don't want.
Speaker 2 (19:24):
Is that's the question wipe all the I suppose, But I.
Speaker 1 (19:27):
Think I think this government, as the previous government took
it on as an issue of fairness. Just what's what's fair,
like I thank god I'm not a politician. I'd be
I'd be terrible because you've got to balance these different
constituencies and stakeholders. But what I've seen with this government
is that they're is that they're pragmatic.
Speaker 3 (19:43):
Are you still frustrated with your share price?
Speaker 1 (19:46):
I'm always frustrated with my share price.
Speaker 4 (19:48):
Yes, yes i am, but you know, not in a
better place than it was.
Speaker 1 (19:53):
Yeah, yeah, better today than yesterday. And yeah, but the
you know, the things that we can control as management,
first order are service to customers and ability to translate
that into value for sure holders should by those measures.
We're doing really well. So I'm very happy with our
with our financial performance and yeah, that will Uh the
(20:14):
outlook is bright, I would say, And you know, the
second orders, we've got to convince the market that they
should be as comfortable with our earning stream as we are. Uh.
That's I feel like we've fallen short on that bill.
Speaker 3 (20:27):
There's a lot of M and A talk in Europe.
Speaker 1 (20:29):
Well not a lot, but there's a uniful.
Speaker 3 (20:30):
Commerce bank, but every day there's talk about that deal.
Is that exciting for you?
Speaker 1 (20:35):
If there's I think it's I think it's very necessary
in Europe, and if we because the Europe is overbanked
and growth is relatively relatively low in bank banks at
this point are well capitalized and healthy, so it's necessary.
But if we needed a reminder how difficult it is
the fact that, as far as I can tell, Union
Creditor is following the rules, and German politicians and German
(20:56):
unions has said we don't like this. And maybe it's
positive running or maybe it's a real obstacle. I don't know,
but it's tough to get things done within Europe.
Speaker 2 (21:05):
Is it a test?
Speaker 3 (21:06):
I mean, if this goes through, if the rules are followed,
and if this goes through, would it make you confident
that actually, you know, things are moving in the battle sector.
Speaker 1 (21:13):
I think it's a really important litmus test, not the
only litmus test we could have. But there's industrial logic
to the transaction. There's a willing buyer who has plenty
of capital to make this kind of and there's a
there's a healthy but not thriving bank on the other side,
and Germany is overbanked, so it would seem and of
course Union Credit owns a very big bank in Germany,
(21:35):
so it seems to make sense, but you know these things,
they get political and then it gets complicated.
Speaker 2 (21:41):
Bill Winters, thank you so much, Thank you.
Speaker 3 (21:47):
Thanks for listening to this week's In the City from Bloomberg.
The episode was hosted by me Francin Laquin with Dave Merritt.
Speaker 2 (21:54):
It was produced by Somersaudi, production support from Isabella Ward
and sound design by Blake Maple.
Speaker 3 (22:00):
Brendan Frances Newman is our executive producer.
Speaker 2 (22:03):
S H.
Speaker 3 (22:03):
Bauman is Head of Podcasts
Speaker 2 (22:05):
Special Thanks to Bill Winters and please do subscribe to
rate and review wherever you listen to podcasts.
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:12):
Welcome to the City of London, the city of the
City of the City of London.
Speaker 3 (00:19):
Please mind the gap between the tree and the platform, the.
Speaker 2 (00:23):
Financial hearts of the country, the city, the city.
Speaker 1 (00:31):
Welcome to in the city, stand clear of the doors.
Speaker 2 (00:37):
Pea.
Speaker 3 (00:39):
Welcome to in the City of Podcasts from Bloomberg about
the story is important to the City of London and beyond.
Francis Lacua.
Speaker 2 (00:45):
Yeah, and we are beyond. Sorry, this is David Merritt.
We are beyond. We are in the city of New
York rather than London.
Speaker 3 (00:51):
We're in a rather noisy actually Plaza Hotel during unj
So what's happening at the Plaza.
Speaker 2 (00:56):
Hotel, Dave, Well, what isn't happening at the Plata? We have?
This is the Bloomberg Philanthropies Earthshop Prize and Global Business Forum.
It is Pats to the rafters here with business people,
with financiers, with people covering climate, a whole program of events,
all making the most of the fact that everyone is
in town, of course for the UN General Assembly and
(01:19):
the UN Climate Week, the other big gathering of climate
specialist around the world. Apart from kop and that's why
we've got some of the most important people in finance
here as well, including of course our guest today.
Speaker 3 (01:32):
I'm excited about Bill Winters, so we're speaking to him
shortly now. He's the chief executive, Sandra Charger, but also
he was a regulator. You understand, he's part of the
task force to understand of course some of the green financing,
so he understands the business of finance and banking, but
he also understands what it takes to have this screen transition.
Speaker 2 (01:50):
Yeah, and we're going to talk a bit about climate finance.
But also you know they're a very international bank. They
have a huge presence in Asia. I think more than
half their revenue comes from Asia. Don't understand his lens
on particularly China, where we've seen a lot of news
this week about government stimulus, a weakening economy. And then
of course back to Britain as well with the Labor
Party conference is going on this week. It's been a
(02:12):
rock a few weeks for the Labor government. We're all
waiting for the budget, fascinated to hear what Bill thinks
about the business friendliness or otherwise of the new administration.
Speaker 3 (02:23):
Bill Wonder Thank you so much for joining us. This
is in the city.
Speaker 2 (02:25):
I thought we've ranged around the world really to get
your lens on everything that's happening, but maybe clicking off
because we're here at the plaza where we've had the
Earth Shot Prize talking about this question of climate finance,
and you're involved with standard Charter. What's the state in
the industry.
Speaker 1 (02:40):
Well, we're very involved, I think is a short summary.
And look, I think at this point most rational people
understand the problem. I know there's still some naysayers, but
they're few and far between right now, although you probably
don't have to spit too far from this building right
now to get a few of them. But the challenge
is getting the right programs in place that can make
(03:03):
the most difference. And then, of course, as always, the money.
It was clear there's no shortage of money. There's plenty
of money available, and it's not just general money. It's
ESG money or sustainable finance on your transition finance money
that's available. But I wouldn't say it's highly sophisticated in
the sense that it's not geared up to do the
heavy lifting around oftentimes quite complicated projects.
Speaker 3 (03:24):
Bill it was my understanding that there's a pool of
money that actually needs to go to the transition, but
actually that pool of money is maybe not as committed
to it as it was four or five years ago.
I don't know whether it's crisis or whether they have
other priorities. That there's money, but it's not necessarily going
to where it needs to go.
Speaker 1 (03:39):
It's an open question, and in a way, I wish
we knew for sure that the money was thus committed.
But I think we've got a problem before we even
get to that point, which is coming up with the
right projects that have the right assembly of risk takers.
And by that I mean a project for reforestation in
the Democratic Republic of Congo. There's a lot of political risk,
(04:01):
there's the technical risk of surveillance and monitoring, there's the
use of pro what's the money actually being used for?
Is being used for what was intended bribery, corruption, et cetera.
And so before you even get to the point of
delivering the money, you've got real technical problems that have
to be overcome. And the good news, I think is
is that there are everybody's kind of aware of this,
(04:23):
and a big part of what's going on this week
and Climate Week will be things like a bang at
the World Bank, who are very focused on saying out
there are some risks that were really best place to take,
and we've got money set aside to do that, and
we can provide catalytic capital. We can take some of
the risks that a private sector of financier just can't
handle or hasn't yet been able to handle, take them
(04:46):
off the plate, and then allow the market to come
in and do the heavy lifting behind that initiative. So
those things are happening, and that's what we're talking about
this week, but it hasn't happened yet. But to your question,
is the money less committed? First of all, money's always
committed to things that generate a decent return, right. I mean,
if if we can offer a decent return, risk adjusted return,
(05:08):
there's plenty of money. And I think the only way
that we're going to be successful in the fight against
climate change is to offer people an acceptable, acceptable return.
It doesn't have to be a grotesque return, just acceptable.
That's the only way to move trillions and trillions.
Speaker 2 (05:22):
I mean, Climate Week, I guess, alongside cop is the
big sort of global gathering for people to come together
and try and think of solutions. Do you see this
week as achieving any of that. Everyone's here in New
York attacking the problems that you just outlined. Do you
think we'll see some progress this week fixing some of
these issues?
Speaker 1 (05:42):
I think so. I understand there's one hundred thousand people
that have come to New York Climate Week this week.
That's that's an impressive number of people. And nobody comes
here to be seen to be seen. It's not something
where you show up and flash your card and say, Okay,
I've done my bit. You come here to solve some problems. So,
I mean, just in the course of my time here,
we've had discussions with the Defense Group, which is a
(06:03):
Mark Carney initiated gathering of financial companies focus on exactly
the question that Francine you asked with the outset, How
do we get this big block of money actually put
to work. Is nice to talk about it, but until it'spent,
it's not doing any good to some really creative ideas
from the Minister of Finance in Brazil promoting a fund
(06:25):
to effectively fund the preservation of rainforest around the world
in a very creative way using public and private sector money.
Money in a creative consolation, I think those opportunities where
you're ideating maybe slightly overuse term, but but thinking through
how do you make something work. When you're sitting in
a room together, you actually come up with some stuff
(06:46):
that you don't necessarily see on emails or even a
zoom call and standard chalts.
Speaker 4 (06:49):
That is going to be a leader in this price
We are leader already are We are leader, but we're
a leader.
Speaker 1 (06:55):
For a good reason, a kind of obvious reason. One
is we operate around the world, but our major on
the ground footprint is in Asia, the Middle East, in Africa,
and when you look at the parts of the world
that are going to be most affected by climate change,
whether it's fifty degree plus days in Central India or
floods affecting Bangladesh, two of our biggest markets, our markets
(07:16):
are going to be most affected. So if we don't
do our bit to avoid the worst case outcomes, I
will have some challenges ourselves. But the flip side is
the impact of a call it renewable power technology or
it could be adaptationient. Financing in some of these markets
is much higher than anywhere else in the world, So
a dollar spent decarbonizing in India is the equivalent of
(07:39):
seven dollars spent in Europe. Why because Europe is already
largely largely decarbonized and the US is something in between.
So the markets where we operate have the least access
to finance and the most impact of an invested dollar.
But I want to be clear, this is business for us,
so we're doing the right thing. We're doing the right
thing because our stakeholders, start with our own employees, require it.
(08:02):
But we said publicly we're going to make a billion
dollars in this business income next year, and I think
that'll go to two, maybe ten percent of our income
or something like that. So it's this is to my
point that if you offer an acceptable return on capital
or return on effort, you'll get a lot of capital
and effort involved.
Speaker 3 (08:21):
But you also understand this, you know more than most
because you were part of the task for us. You understood,
you were like a regulator before. But what do you
think is the purpose of financing is because there's a
step back from a lot of the banks and saying, look,
we should not be leading the way, we should be enablers,
we should be facilitators. And it's really up to the
policymakers and the politicians to then use us in the
correct way, and that changes actually how much can be
(08:43):
done around the world.
Speaker 1 (08:44):
Look, I think in some ways it felt like we
started with governments or o their stakeholders shareholders in some cases,
saying you need to do this right, and banks and
other companies said, okay, we don't want to, but we will.
That's never going to work. That approach will never work.
The second approach that will never work is expecting governments
(09:05):
to fund the trillions of dollars necessary out of tax
payer money. It's not going to happen, right, It's just
not going to happen. So if the private sector, broadly defined,
isn't funding this with appropriate impetus from governments, we can
definitely get this done. But you know, the fact is
carbon in the environment is an external cost. It's a
(09:26):
real cost. We're going to pay for it. If not us,
then our children or grandchildren we're gonna pay for a
big time. Price up properly, price up properly. There's different
ways to do it. The Europeans have said we're going
to tax you on your carbon emissions. We're going to
limit the amount you can admit, and then you can
you can trade the creduce back and forth. It works.
But you know, the cost of carbon in Europe is
sixty to seventy dollars dollars a ton. The cost of
(09:48):
carbon in California is two dollars a ton. I would
argue that good idea. It's not working. But if governments
around the world could a carbon tax in place at
something that represents the actual external cos there would be
no climate change problem. Why don't we do it then?
Because it's hard. Who wants to tax your population? You
don't get elected. Everything's harder. Life is hard, so but
(10:10):
what's not hard is to make good investments in sound
things that generate a return for your investors and carry
on from there. That's what Center Trotter is doing.
Speaker 2 (10:21):
How much of your time is spent on this topic?
I mean you said it might reach ten percent of
your total revenue base. Sounds like you're spending a lot
of your time picking you're in New York for Climate Week?
Is it eating up a lot of your focus to
how you position yourselves in this?
Speaker 1 (10:37):
To me, it's important because I do think that corporations
have a responsibility to the communities in which we operate.
It's very important to our clients. So I mean, there's
no client meeting that I have these days where the
topic of sustainability or not zero transition doesn't come up. Literally,
it never fails to come up with any CEO, any CFO,
any treasurer I talk to. It comes up sometimes it's
(10:59):
the whole commerce. Why does it come up all the time.
It's not because they're trying to make me feel good
because I've invested some time in this. It's because they
care about it as well. They have stakeholders. Frequently it's
your own employees. Many certainly for consumer goods, it's your customers,
and that the real leaders in the consumer products area
are marketing their greenness like crazy, and and they're right
(11:20):
to because it's it's cost it's costing them something, and
their buyers should know, the consumers should know that this
effort has gone into that. But yes, I mean, it's
not a disproportionate amount of time, I don't think.
Speaker 3 (11:31):
But what else comes up in those meetings?
Speaker 1 (11:35):
The economy, a standard charter bank. More often than not,
it's China. You know, what's what's really what's really going
on in China?
Speaker 3 (11:42):
What is really going on in China. We had this
massive stimulus today.
Speaker 1 (11:47):
And I don't know if it's massive, but it's it's
it's and it's a big change. It's a big change
because they they've been very incremental so far. And I
think it reflects the reality on the ground, which is
that consumer confidence and investor confidence is quite low. And
I know so the government has properly e gauged that
they need to need an impetus. So I think a
lot of things are going out in China. We know
(12:07):
the geopolitical tensions are in the backdrop. We know that
that China has built up excess capacity in a lot
of the new economy industries, sustainable infrastructure and evs and
associated components. And we know that the rest of the
world is beginning to say, hold on, we're not sure
we want to take take a lot because you're a
little bit too good at this. So Europe in the US,
(12:30):
for starters, have they're in the process of shutting down
big chunks of their market. Now there's a broader question
around how do we feel about these major impediments to
global trade. Everybody loses when we cut out cut out trade.
But I won't won't veer into the end of the
political because of course there are motivations that go beyond
(12:50):
just promoting free trade. But the I think China is
going through a massive transition from old economy to new economy,
from massive investments and property and infrastructure into massive investments
into the new economy. They will succeed in that transition, right,
I mean, I've they've got the technical components and we
know how, but they're meeting a lot of barriers along
the way, and it's a tough transition.
Speaker 3 (13:11):
Will it take longer, I mean they will, but it
will take longer that they're expecting, which means more.
Speaker 1 (13:16):
I think so. And you know, when I reflect on
the major transitions that we've gone through in the US
or in Europe or Japan or Korea, they were almost
always associated with major financial crisis and sometimes multiple financial crisis.
And I think China of course sees this. They've had
their own financial crisis if you went back to the nineties,
and it's hugely stabilizing economically, it's also disabilizing socially. Needs
(13:38):
to inequality and miscontent and malcan that's a big issue
for the Chinese leaders. So I think they're determined to
avoid that kind of a financial dislocation, and but that
means it's going to take longer.
Speaker 2 (13:50):
Is that enough a determination to prevent it? Is that
not to bet? I mean, it's been a terrible year
for Chinese stocks. People have lost a lot of money
to the bears that they're these as as you said,
or you're employed, than probably not going to be enough.
Does the government have enough far pad to prevent a
much bigger crash happening on the Chinese a colony?
Speaker 1 (14:08):
I think the government has a lot of firepower. So
there's a lot of metoric around aggregate debt levels in China.
I mean, debt levels are concerning, but they're the economy,
even despite the current woes, are still growing it probably
three and a half to five percent. Five percent look
more likely right now, it's trending more towards three, but
let's just say it's going to settle it before four
and a half percent. You can run a meaningful budget
(14:31):
deficit with four percent GDP growth and not have the
kind of spiraling of debt levels that we have, for example,
in Europe, or that we had in Japan during the
the last decades. So I think China has a huge
amount of fiscal firepower, and as they've shown today, they
have a lot of modern monetary firepower as well.
Speaker 3 (14:46):
But is there a danger that you know, their economy
is in a certain way which is very skewed towards
industries that are not doing very well. They need to
add I guess thirty percent in value add if they
want to transition to better, healthier economy by stimulating too
much now, they can't get to the one to the
economy they want in four or five years.
Speaker 1 (15:06):
I mean, I think the single most important thing for
China is to restore consumer confidence because savings rate and
China is astronomical, and we know why. In part is
that it's a largely unfunded health and mentioned system, so
people are just saving for for their for their needs
down the road. Uh, but also because they're not sure
that they're gonna have jobs and the youth unemployment is
(15:27):
quite high. And these aren't unprecedented problems by any means,
but they need to take the action to jumpstart confidence,
to get the spending up, and then to get businesses
to start investing again in the domestic economy, not just
for export that we're finding the just for export it
meets resistance.
Speaker 2 (15:45):
Can we talk about about Britain, which is Britain. We've
just we've got a new government in place, and still
that's still deftly.
Speaker 3 (15:54):
Three months right, Yeah, because the.
Speaker 1 (15:56):
Honeymoon is over.
Speaker 2 (15:57):
The honeymoon was the shortest honeymoon I think, ye to
a history. But the you know, they're talking a lot
about the need to stabilize the economy, tough decisions coming out.
We're all waiting for the budget, the rich Ruth's budget.
What's your lens on the state of the British economy
now from your purchase running one of the big bags.
Speaker 1 (16:13):
It's tough, right, I mean they've they've we have been
through ten tough years and.
Speaker 2 (16:20):
So tracing all the way back to the Brexit turmoil.
Speaker 1 (16:24):
And yeah, definitely Brexit. I mean you're dragging me into politics,
but that is I mean, with not just economically, but
the benefit of hindsight, that was a gigantic own goal. Yeah,
some would have said with the benefit of foresight, that
would be that's a long goal. I happen to be
one of them. But that doesn't matter because that's not
the way the election came out.
Speaker 2 (16:44):
But do you think this government is one that's going
to bat business. I mean, there are some doubts emerging,
aren't there. We had a big story last week talking
about the hedge funds that the wealthy who are planning
to leave Britain. That is never a good sign for
a government. And that's even before the budgets come out.
I mean, is that what you're hearing?
Speaker 1 (16:59):
My sense is that the government is taking an extremely
pragmatic approach to to engaging with the business community, broadly
with financi in particular. And you know we've seen some
concrete things like the outcome of the Buzzle three point one.
It is quite technical, but you know at the end
of the day that there were there there was a
prospect of increasing the capital requirements on banks by you know,
(17:22):
a substantial amount of money and I think without compromising
financial soundness or prudential regulation. They put it quite a
pragmatic a set of of current proposals on the table
and that was of course it was led by the
by the government of the Bank of England and the
head of the p R right, but the chancer was
there when it was presented to the banks and to
(17:43):
make it clear we're paying attention and by the way
the government as actually as it happens, it was the
previous government, but this government has embraced it completely, the
idea that regulation regulation should be in support of financial
stability but also competitiveness for the city of London. So
I'm I'm encouraged by the pragmatism. But nobody harbors any
illusions about the challenges that this government faces fiscal monetary.
(18:05):
I mean, obviously the feed is cut rates. The Bank
of England didn't. There's a reason instation has been stubborn
on the website. So there's nothing easy about the predicament
in which the UK finds herself. Only know that Britain's
been around for a very long time. It's incredibly resilient.
Speaker 3 (18:19):
That's a low bar bill.
Speaker 1 (18:20):
What do you mean from the governments?
Speaker 3 (18:21):
What do you mean it's been around a long time.
Speaker 1 (18:24):
What's been around for a long time? I mean, this
is amazingly resilience. People bounce back, you know, governments figure
out the right thing to do. Look, the budget's going
to be tough. It's not going to be an ausiority budget,
but it's probably gonna feel like an authority budget because
that's that's the way it's it's going to pan out,
the not completely Unlike China. The UK needs to reinstate
confidence so that the businesses are comfortable investing in Britain.
(18:47):
And everything that I've seen so far is supportive of that, right,
But the heavy liftings you have to come out.
Speaker 2 (18:51):
There's a lot of speculations. I mean, no one knows
what she's going to put the people talking about capital gains,
tax carried interest, people taking freight. But we're gonna have
to wait and see, aren't we, which she does.
Speaker 1 (19:00):
Yeah. But but again, the these issues can be very emotive
and I know for everybody, and of course they're very
economic as well, but not a lot of money involves.
If I understand, if I read down on Bloomberg News,
the you know, the most draconian approach to taxing, uh,
you know, private equity, carried interest, we generate a half
a billion pounds of fights not and it's not nothing.
(19:21):
But this isn't going to solve the problem. And of
course what you don't want.
Speaker 2 (19:24):
Is that's the question wipe all the I suppose, But I.
Speaker 1 (19:27):
Think I think this government, as the previous government took
it on as an issue of fairness. Just what's what's fair,
like I thank god I'm not a politician. I'd be
I'd be terrible because you've got to balance these different
constituencies and stakeholders. But what I've seen with this government
is that they're is that they're pragmatic.
Speaker 3 (19:43):
Are you still frustrated with your share price?
Speaker 1 (19:46):
I'm always frustrated with my share price.
Speaker 4 (19:48):
Yes, yes i am, but you know, not in a
better place than it was.
Speaker 1 (19:53):
Yeah, yeah, better today than yesterday. And yeah, but the
you know, the things that we can control as management,
first order are service to customers and ability to translate
that into value for sure holders should by those measures.
We're doing really well. So I'm very happy with our
with our financial performance and yeah, that will Uh the
(20:14):
outlook is bright, I would say, And you know, the
second orders, we've got to convince the market that they
should be as comfortable with our earning stream as we are. Uh.
That's I feel like we've fallen short on that bill.
Speaker 3 (20:27):
There's a lot of M and A talk in Europe.
Speaker 1 (20:29):
Well not a lot, but there's a uniful.
Speaker 3 (20:30):
Commerce bank, but every day there's talk about that deal.
Is that exciting for you?
Speaker 1 (20:35):
If there's I think it's I think it's very necessary
in Europe, and if we because the Europe is overbanked
and growth is relatively relatively low in bank banks at
this point are well capitalized and healthy, so it's necessary.
But if we needed a reminder how difficult it is
the fact that, as far as I can tell, Union
Creditor is following the rules, and German politicians and German
(20:56):
unions has said we don't like this. And maybe it's
positive running or maybe it's a real obstacle. I don't know,
but it's tough to get things done within Europe.
Speaker 2 (21:05):
Is it a test?
Speaker 3 (21:06):
I mean, if this goes through, if the rules are followed,
and if this goes through, would it make you confident
that actually, you know, things are moving in the battle sector.
Speaker 1 (21:13):
I think it's a really important litmus test, not the
only litmus test we could have. But there's industrial logic
to the transaction. There's a willing buyer who has plenty
of capital to make this kind of and there's a
there's a healthy but not thriving bank on the other side,
and Germany is overbanked, so it would seem and of
course Union Credit owns a very big bank in Germany,
(21:35):
so it seems to make sense, but you know these things,
they get political and then it gets complicated.
Speaker 2 (21:41):
Bill Winters, thank you so much, Thank you.
Speaker 3 (21:47):
Thanks for listening to this week's In the City from Bloomberg.
The episode was hosted by me Francin Laquin with Dave Merritt.
Speaker 2 (21:54):
It was produced by Somersaudi, production support from Isabella Ward
and sound design by Blake Maple.
Speaker 3 (22:00):
Brendan Frances Newman is our executive producer.
Speaker 2 (22:03):
S H.
Speaker 3 (22:03):
Bauman is Head of Podcasts
Speaker 2 (22:05):
Special Thanks to Bill Winters and please do subscribe to
rate and review wherever you listen to podcasts.
Host
Francine Lacqua
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