1 00:00:03,930 --> 00:00:06,869 Sean Aylmer: Welcome to the Fear and Greed business interview, I'm Sean Aylmer. 2 00:00:07,140 --> 00:00:09,689 Sean Aylmer: Regular listeners would know we've spoken a few times to 3 00:00:09,690 --> 00:00:14,190 Sean Aylmer: Rich Nuzum from global investment giant, Mercer, as Mercer's Executive Director, 4 00:00:14,190 --> 00:00:18,239 Sean Aylmer: Investments and Global Chief Investment Strategist. He's got terrific insight 5 00:00:18,239 --> 00:00:21,330 Sean Aylmer: into the forces affecting financial markets right around the world, 6 00:00:21,570 --> 00:00:24,360 Sean Aylmer: and of course what that means for investors. He usually 7 00:00:24,360 --> 00:00:26,400 Sean Aylmer: joins us from the US but he's in Australia for 8 00:00:26,400 --> 00:00:30,389 Sean Aylmer: Mercer's Global Investment Forum. So a great opportunity for a chat. Remember, 9 00:00:30,389 --> 00:00:33,570 Sean Aylmer: this is general information only. You should seek professional advice 10 00:00:33,570 --> 00:00:37,020 Sean Aylmer: before making any investment decisions. Rich Nuzum, welcome back to 11 00:00:37,020 --> 00:00:37,680 Sean Aylmer: Fear and Greed. 12 00:00:38,490 --> 00:00:40,170 Rich Nuzum: Thanks for having me, Sean. It's great to be with you. 13 00:00:40,769 --> 00:00:43,560 Sean Aylmer: Are you enjoying your time in Australia, Rich? 14 00:00:43,860 --> 00:00:46,170 Rich Nuzum: It's wonderful. I was warned that it's winter here, but 15 00:00:46,170 --> 00:00:48,509 Rich Nuzum: it's been beautiful and we got to spend two days 16 00:00:48,509 --> 00:00:50,700 Rich Nuzum: with our clients and our investment management partners at our 17 00:00:50,700 --> 00:00:52,889 Rich Nuzum: conference. It's just been a great trip so far. 18 00:00:53,760 --> 00:00:58,110 Sean Aylmer: Fantastic. In Australia, we're heading into earnings season that kicks 19 00:00:58,110 --> 00:01:01,140 Sean Aylmer: off properly next week. In the US, we've got June 20 00:01:01,140 --> 00:01:03,960 Sean Aylmer: quarter earnings coming out across the board. Just sort of 21 00:01:03,960 --> 00:01:07,139 Sean Aylmer: before we take a look ahead, what have we seen 22 00:01:07,139 --> 00:01:11,548 Sean Aylmer: in the past six months or so globally for investors? 23 00:01:12,840 --> 00:01:16,979 Rich Nuzum: Well, the overriding concerns remain the same as a year ago, 24 00:01:17,100 --> 00:01:19,979 Rich Nuzum: will monetary authorities be able to reign in the wage 25 00:01:19,980 --> 00:01:24,298 Rich Nuzum: price spiral without triggering a recession? What will happen with 26 00:01:24,300 --> 00:01:28,020 Rich Nuzum: the Russian invasion of Ukraine and its impact on energy 27 00:01:28,020 --> 00:01:31,170 Rich Nuzum: and food prices and then all things related to China. 28 00:01:31,770 --> 00:01:34,380 Rich Nuzum: But the outlook is a lot rosier than it was 29 00:01:34,410 --> 00:01:37,800 Rich Nuzum: even six months ago in February. And February consensus wisdom 30 00:01:37,800 --> 00:01:40,169 Rich Nuzum: was that monetary authorities would have to put us into 31 00:01:40,170 --> 00:01:45,180 Rich Nuzum: a significant recession with associated equity and other capital market 32 00:01:45,360 --> 00:01:49,500 Rich Nuzum: corrections to cause unemployment and to get wages under control 33 00:01:49,500 --> 00:01:52,470 Rich Nuzum: and to get inflation under control. And except in China 34 00:01:52,470 --> 00:01:56,880 Rich Nuzum: that hasn't happened. Inflation has been coming down while unemployment 35 00:01:56,880 --> 00:02:00,570 Rich Nuzum: remains near historical lows. And as a result, stock prices 36 00:02:00,570 --> 00:02:04,770 Rich Nuzum: are up 18%, 19% year to date. You mentioned earning season, 37 00:02:04,770 --> 00:02:07,200 Rich Nuzum: that's been a source of big concern the last few 38 00:02:07,200 --> 00:02:10,680 Rich Nuzum: weeks and earnings are actually coming in line with expectations 39 00:02:10,680 --> 00:02:13,679 Rich Nuzum: or better, which is good because the market has been 40 00:02:13,710 --> 00:02:17,099 Rich Nuzum: close to price to perfection. The measures of implied volatility 41 00:02:17,099 --> 00:02:19,798 Rich Nuzum: in the market have been trading near historical lows, signaling 42 00:02:19,799 --> 00:02:22,919 Rich Nuzum: that the market isn't too worried about things. And for 43 00:02:22,919 --> 00:02:25,830 Rich Nuzum: people like me, when the market's not worried, I worry 44 00:02:25,830 --> 00:02:30,060 Rich Nuzum: a lot because we're not positioned for any downside risk. So 45 00:02:30,060 --> 00:02:32,340 Rich Nuzum: it's good that earnings are coming in well, inflation news 46 00:02:32,340 --> 00:02:36,030 Rich Nuzum: is coming in well. We seem to be coming in 47 00:02:36,030 --> 00:02:37,499 Rich Nuzum: for a soft landing, knock on wood. 48 00:02:38,400 --> 00:02:40,529 Sean Aylmer: Yeah, I mean the most forecast recession ever in the 49 00:02:40,529 --> 00:02:44,399 Sean Aylmer: US may not actually happen, notwithstanding it's been so well forecast. 50 00:02:45,090 --> 00:02:47,100 Rich Nuzum: Yep. Well said, Sean. 51 00:02:47,910 --> 00:02:51,150 Sean Aylmer: Yeah, okay. So what about the war in Ukraine? So 52 00:02:51,540 --> 00:02:53,190 Sean Aylmer: I'm going to go through the three things. So that's 53 00:02:53,190 --> 00:02:56,038 Sean Aylmer: happening in terms of a potential of a global recession. 54 00:02:56,040 --> 00:02:58,889 Sean Aylmer: And knock on wood, hopefully it's a soft landing. The 55 00:02:58,889 --> 00:03:02,130 Sean Aylmer: war on Ukraine, it continues. Obviously we've seen in recent 56 00:03:02,190 --> 00:03:06,660 Sean Aylmer: days Russia taking a harder line about Ukraine grain exports, 57 00:03:06,660 --> 00:03:09,240 Sean Aylmer: et cetera, but the steam has come out of the 58 00:03:09,450 --> 00:03:13,258 Sean Aylmer: energy shock from it. And so notwithstanding the human tragedy, 59 00:03:13,258 --> 00:03:16,799 Sean Aylmer: which of course is first and foremost, economically, it doesn't 60 00:03:16,799 --> 00:03:18,388 Sean Aylmer: seem to be having as big an impact. 61 00:03:19,919 --> 00:03:23,460 Rich Nuzum: The human catastrophe remains front and centre and continues to 62 00:03:23,460 --> 00:03:28,889 Rich Nuzum: weigh on consumer and business confidence, particularly in Europe. In 63 00:03:28,889 --> 00:03:31,619 Rich Nuzum: terms of the impact on energy price, it hasn't been 64 00:03:31,620 --> 00:03:35,219 Rich Nuzum: as bad as was feared in terms of either impact 65 00:03:35,219 --> 00:03:41,010 Rich Nuzum: or volatility. And fortunately or unfortunately, Russia has made progress 66 00:03:41,010 --> 00:03:44,190 Rich Nuzum: in finding ways to sell its oil, finding tankers that 67 00:03:44,190 --> 00:03:48,059 Rich Nuzum: aren't registered with the coalition, making some progress in finding 68 00:03:48,059 --> 00:03:52,709 Rich Nuzum: insurance coverage that's not with western insurers. And so finding 69 00:03:52,709 --> 00:03:55,110 Rich Nuzum: outputs for its oil. And so its oil is getting 70 00:03:55,110 --> 00:03:58,440 Rich Nuzum: to global markets, which is good from an economic standpoint 71 00:03:58,440 --> 00:04:04,169 Rich Nuzum: and bad from a sanctions' enforcement standpoint. On grain prices, 72 00:04:04,230 --> 00:04:09,599 Rich Nuzum: we'd had a defacto agreement to let grain be exported and, effectively, 73 00:04:09,599 --> 00:04:12,930 Rich Nuzum: a safety corridor. And that's come under threat in recent days. 74 00:04:12,960 --> 00:04:16,980 Rich Nuzum: And a food price shock would be bad for inflation globally. 75 00:04:16,980 --> 00:04:20,670 Rich Nuzum: It would also be another humanitarian catastrophe because many food 76 00:04:20,670 --> 00:04:25,439 Rich Nuzum: importing nations are frontier or emerging markets without a lot 77 00:04:25,440 --> 00:04:28,919 Rich Nuzum: of resilience to increase in food prices. So that would 78 00:04:28,920 --> 00:04:31,920 Rich Nuzum: fall tragically on some of the most vulnerable populations in 79 00:04:31,920 --> 00:04:33,960 Rich Nuzum: the world, and hopefully we'll avoid that. 80 00:04:34,529 --> 00:04:36,419 Sean Aylmer: Stay with me, Rich, we'll be back in a minute. 81 00:04:42,389 --> 00:04:46,559 Sean Aylmer: I'm speaking to Rich Nuzum, Executive Director, Investments and Global Chief 82 00:04:46,559 --> 00:04:51,360 Sean Aylmer: Investment Strategist at Mercer. Okay, the third one you mentioned 83 00:04:51,360 --> 00:04:54,360 Sean Aylmer: was China. That still seems to have a big question 84 00:04:54,360 --> 00:04:55,020 Sean Aylmer: mark over it. 85 00:04:56,339 --> 00:04:59,789 Rich Nuzum: Yeah, I think there's three big questions about China. One 86 00:04:59,790 --> 00:05:03,870 Rich Nuzum: is to what extent will the Chinese government rededicate itself 87 00:05:04,020 --> 00:05:08,070 Rich Nuzum: to a focus on generating high single- digit, low double- 88 00:05:08,070 --> 00:05:12,839 Rich Nuzum: digit per capita GDP over other policy goals. And the 89 00:05:12,839 --> 00:05:19,049 Rich Nuzum: language around collective prosperity, the actions, whether it's domestic internet companies, 90 00:05:19,049 --> 00:05:23,488 Rich Nuzum: the housing sector, the education sector, so on and so forth, over the 91 00:05:23,490 --> 00:05:27,118 Rich Nuzum: last few years has caused long- term China bulls to 92 00:05:27,120 --> 00:05:30,928 Rich Nuzum: get very concerned. So that's number one, is what is 93 00:05:30,930 --> 00:05:33,120 Rich Nuzum: the policy of the government? The second is how effective 94 00:05:33,120 --> 00:05:36,599 Rich Nuzum: is that policy? China, if we rank order the top 95 00:05:36,630 --> 00:05:40,678 Rich Nuzum: 20 economies globally in terms of how well they've done 96 00:05:40,680 --> 00:05:43,919 Rich Nuzum: in getting inflation under control, China's done the best. Inflation 97 00:05:43,920 --> 00:05:47,130 Rich Nuzum: actually touched zero recently. But if we then rank order 98 00:05:47,130 --> 00:05:49,500 Rich Nuzum: them on what's going on with employment, what's going on 99 00:05:49,500 --> 00:05:52,980 Rich Nuzum: with strength of the economy, there was a general expectation 100 00:05:52,980 --> 00:05:55,559 Rich Nuzum: that coming out of COVID China came out later than 101 00:05:55,559 --> 00:05:58,169 Rich Nuzum: other economies because of the zero COVID policy. But then 102 00:05:58,170 --> 00:06:00,690 Rich Nuzum: coming out of COVID, China would experience the same type 103 00:06:00,690 --> 00:06:04,950 Rich Nuzum: of economic boom that Japan, Korea, Western Europe, North America 104 00:06:04,950 --> 00:06:08,490 Rich Nuzum: did and that hasn't happened. The official print for youth 105 00:06:08,490 --> 00:06:14,488 Rich Nuzum: unemployment people aged 16 to 24 was above 20%, unofficial estimates put 106 00:06:14,490 --> 00:06:18,000 Rich Nuzum: it at as much as twice that level. That's a 107 00:06:18,120 --> 00:06:22,110 Rich Nuzum: horrible permanent loss in human capital development in China, to 108 00:06:22,110 --> 00:06:26,549 Rich Nuzum: have that proportion of the young population in an economy 109 00:06:26,550 --> 00:06:29,219 Rich Nuzum: that has a shrinking labour force to begin with. A 110 00:06:29,219 --> 00:06:33,000 Rich Nuzum: shrinking population to begin with, to have those potential new 111 00:06:33,000 --> 00:06:37,529 Rich Nuzum: workers not in the workforce building skills, you never get 112 00:06:37,529 --> 00:06:41,700 Rich Nuzum: that back. So as time goes on and they remain unemployed, 113 00:06:41,940 --> 00:06:44,130 Rich Nuzum: they continue not to develop skills, they continue not to 114 00:06:44,130 --> 00:06:47,339 Rich Nuzum: become more productive. It's a permanent loss to Chinese and 115 00:06:47,339 --> 00:06:50,700 Rich Nuzum: global economic growth. So what really happens with Chinese economic 116 00:06:50,700 --> 00:06:53,969 Rich Nuzum: growth is partly driven by government policy, but that's what 117 00:06:53,969 --> 00:06:56,460 Rich Nuzum: people are keeping their eyes on. And then part three 118 00:06:56,460 --> 00:07:00,810 Rich Nuzum: is the geopolitical tension. China is the world's second- largest economy. 119 00:07:00,839 --> 00:07:04,200 Rich Nuzum: If we purchase power adjust, it's the world's largest economy. 120 00:07:04,650 --> 00:07:08,309 Rich Nuzum: And China, by all appearances, wants a seat at the 121 00:07:08,309 --> 00:07:12,449 Rich Nuzum: table and defining the world order. There's a preexisting world 122 00:07:12,450 --> 00:07:17,280 Rich Nuzum: order around WTO (World Trade Organization) and United Nations and so on and so forth. And 123 00:07:17,280 --> 00:07:21,449 Rich Nuzum: so there's a struggle for whose setting the rules. There's tension 124 00:07:21,450 --> 00:07:25,229 Rich Nuzum: in the Taiwan Strait and the US government has picked 125 00:07:25,230 --> 00:07:28,590 Rich Nuzum: five technological areas where it wants to restrict those technologies 126 00:07:28,949 --> 00:07:34,350 Rich Nuzum: from flowing to China. And in those five areas, venture capitalists, entrepreneurs, 127 00:07:34,410 --> 00:07:36,270 Rich Nuzum: scientists who work in that space are quick to point 128 00:07:36,270 --> 00:07:41,399 Rich Nuzum: out something between 20% and 60% of the academic papers in those 129 00:07:41,400 --> 00:07:45,480 Rich Nuzum: areas are written by Chinese nationals. So to say, you can't talk 130 00:07:45,480 --> 00:07:48,329 Rich Nuzum: about these things anymore, these five areas of technology with 131 00:07:48,330 --> 00:07:53,070 Rich Nuzum: Chinese nationals, it actually bifurcates the global scientific community. And 132 00:07:53,070 --> 00:07:55,920 Rich Nuzum: meant some of those Chinese nationals are working onshore in 133 00:07:55,920 --> 00:07:59,610 Rich Nuzum: the US, at US universities, at US tech companies. But 134 00:07:59,610 --> 00:08:04,619 Rich Nuzum: the law that's gone into effect, criminalizes leaking those technologies 135 00:08:04,619 --> 00:08:07,380 Rich Nuzum: to Chinese nationals, not just Chinese companies, the Chinese government. 136 00:08:07,380 --> 00:08:11,820 Rich Nuzum: So we have some big issues to sort out between 137 00:08:11,820 --> 00:08:14,489 Rich Nuzum: China and the rest of the world, and it matters 138 00:08:14,490 --> 00:08:17,969 Rich Nuzum: a lot for the global economy because $1 in eight that 139 00:08:17,969 --> 00:08:20,730 Rich Nuzum: is produced or consumed on the planet is in China. 140 00:08:20,730 --> 00:08:23,489 Rich Nuzum: The economy's that big, it's as big as the Eurozone 141 00:08:23,730 --> 00:08:25,620 Rich Nuzum: post Brexit. So it matters a lot. 142 00:08:26,460 --> 00:08:29,220 Sean Aylmer: Okay. Rich, I mentioned Rich Nuzum from Mercer, I mentioned 143 00:08:29,220 --> 00:08:31,500 Sean Aylmer: that you're here for the Global Investment Forum put on 144 00:08:31,500 --> 00:08:36,179 Sean Aylmer: by Mercer. I'm just interested in what investors are talking 145 00:08:36,179 --> 00:08:38,160 Sean Aylmer: about and thinking about now, and I suppose I'm leading 146 00:08:38,160 --> 00:08:40,379 Sean Aylmer: you the way of big tech companies and AI and 147 00:08:40,379 --> 00:08:43,290 Sean Aylmer: things like that. Does that get a big run at 148 00:08:43,290 --> 00:08:44,400 Sean Aylmer: the conference, for example? 149 00:08:45,240 --> 00:08:49,260 Rich Nuzum: It is artificial intelligence, Sean, and in a way it's 150 00:08:49,260 --> 00:08:52,890 Rich Nuzum: not new. We've been talking about digitalisation and tech for years, 151 00:08:53,580 --> 00:08:57,360 Rich Nuzum: but it is new. It's unleashing new energy and new optimism, 152 00:08:57,690 --> 00:09:01,679 Rich Nuzum: which is really important. Because whatever the data is, whatever's 153 00:09:01,679 --> 00:09:05,700 Rich Nuzum: going on in the capital markets, the confidence of corporate 154 00:09:05,700 --> 00:09:09,630 Rich Nuzum: C-suites to invest the confidence of government policy makers that 155 00:09:09,630 --> 00:09:12,779 Rich Nuzum: things will get better, the confidence of consumers. That matters 156 00:09:12,780 --> 00:09:15,209 Rich Nuzum: a lot for driving economic growth and full employment and 157 00:09:15,599 --> 00:09:20,490 Rich Nuzum: keeping locomotive moving. So our view is that artificial intelligence 158 00:09:20,850 --> 00:09:23,790 Rich Nuzum: is net job producing, not job destroying. And we could 159 00:09:23,790 --> 00:09:27,149 Rich Nuzum: talk about that, but the basic thesis is you partner 160 00:09:27,150 --> 00:09:30,629 Rich Nuzum: AI with human beings, and the human beings become so 161 00:09:30,630 --> 00:09:34,560 Rich Nuzum: much more productive because of assistance from the AI. That 162 00:09:34,708 --> 00:09:37,019 Rich Nuzum: you end up hiring for jobs you couldn't have afforded 163 00:09:37,020 --> 00:09:39,809 Rich Nuzum: to hire for before because you're going to get so 164 00:09:39,809 --> 00:09:41,970 Rich Nuzum: much more productivity out of that human being partnered with 165 00:09:42,210 --> 00:09:46,468 Rich Nuzum: the relatively cheap AI. AI is impacting the real economy. It's 166 00:09:46,469 --> 00:09:51,540 Rich Nuzum: impacting all stages of financial services, investment management, call centres, 167 00:09:51,929 --> 00:09:56,220 Rich Nuzum: financial advice. And so it's causing corporate C-suites to look 168 00:09:56,220 --> 00:09:59,280 Rich Nuzum: at their digital strategies, their big data strategies, their AI 169 00:09:59,280 --> 00:10:02,910 Rich Nuzum: strategies again, and spend money at the margin that they 170 00:10:02,910 --> 00:10:06,030 Rich Nuzum: wouldn't have spent before. And at a micro level, a 171 00:10:06,030 --> 00:10:08,730 Rich Nuzum: given spend decision may work out or not for that company, 172 00:10:08,730 --> 00:10:10,889 Rich Nuzum: it may be a good investment or not. At a 173 00:10:10,889 --> 00:10:13,380 Rich Nuzum: macro level, when you add up that spending across all 174 00:10:13,380 --> 00:10:17,970 Rich Nuzum: those companies, it's a huge bull tailwind for the global 175 00:10:17,970 --> 00:10:21,328 Rich Nuzum: economy and for innovation and for productivity enhancement. Just one 176 00:10:21,330 --> 00:10:24,960 Rich Nuzum: more comment. When we forecast long- term expected returns to 177 00:10:24,960 --> 00:10:28,770 Rich Nuzum: stocks or bonds, real estate infrastructure, private equity, other asset classes, 178 00:10:30,179 --> 00:10:33,569 Rich Nuzum: ultimately we're looking really hard at what's GDP growth going 179 00:10:33,570 --> 00:10:35,760 Rich Nuzum: to be? And Sean, if you ask me, what's GDP 180 00:10:35,760 --> 00:10:37,708 Rich Nuzum: growth over the next 10 years, I only need to 181 00:10:37,710 --> 00:10:40,980 Rich Nuzum: know two things. How much does the labour force grow 182 00:10:40,980 --> 00:10:44,399 Rich Nuzum: and how much does productivity grow? Well, if AI brings 183 00:10:44,400 --> 00:10:46,649 Rich Nuzum: more people into the labour force and then makes the 184 00:10:46,650 --> 00:10:50,700 Rich Nuzum: entire labour force more productive, GDP growth is higher, which 185 00:10:50,700 --> 00:10:53,309 Rich Nuzum: means all of our capital market returns are higher and 186 00:10:53,309 --> 00:10:54,510 Rich Nuzum: that's great for everybody. 187 00:10:54,750 --> 00:10:55,680 Sean Aylmer: And do you think that is the case? 188 00:10:57,240 --> 00:11:01,080 Rich Nuzum: I absolutely believe that's the case. I run into economists 189 00:11:01,110 --> 00:11:05,219 Rich Nuzum: who tell me it'll be net job destroying, but I 190 00:11:05,219 --> 00:11:08,070 Rich Nuzum: haven't heard any compelling arguments for that. And those types 191 00:11:08,070 --> 00:11:12,420 Rich Nuzum: of arguments have been wrong about technological advancement or digitalisation 192 00:11:13,260 --> 00:11:16,139 Rich Nuzum: for more than 30 years, technological advancement for more than 200. 193 00:11:16,740 --> 00:11:19,140 Rich Nuzum: On AI, when I talk to people in the real world, 194 00:11:20,580 --> 00:11:25,470 Rich Nuzum: people looking at turning text and interactive video or whether 195 00:11:25,470 --> 00:11:28,740 Rich Nuzum: to start up a call centre to do something or 196 00:11:29,130 --> 00:11:32,820 Rich Nuzum: whether to use and how to use drones for agricultural 197 00:11:32,820 --> 00:11:36,690 Rich Nuzum: purposes or to monitor power lines and telephone lines relative 198 00:11:36,690 --> 00:11:38,968 Rich Nuzum: to trees. And where do you have to cut the 199 00:11:38,969 --> 00:11:42,780 Rich Nuzum: trees ahead of the next storm? They're going to hire more people, 200 00:11:42,809 --> 00:11:48,059 Rich Nuzum: not less because the AI partnered with the human makes 201 00:11:48,059 --> 00:11:50,790 Rich Nuzum: the human so much more productive that the cost curve 202 00:11:50,790 --> 00:11:53,458 Rich Nuzum: goes down to where the marginal benefit is greater than 203 00:11:53,460 --> 00:11:56,880 Rich Nuzum: marginal cost. So you can find areas where AI can 204 00:11:56,880 --> 00:12:01,350 Rich Nuzum: substitute for human and a job is eliminated. It also 205 00:12:01,350 --> 00:12:06,540 Rich Nuzum: becomes a lot cheaper. And so that's deflationary, frees up 206 00:12:06,540 --> 00:12:09,510 Rich Nuzum: capacity in the economy. Everybody has more purchase power, but 207 00:12:09,510 --> 00:12:12,150 Rich Nuzum: that job is eliminated. But as I talk to people 208 00:12:12,150 --> 00:12:15,120 Rich Nuzum: in the real economy, there's a vast outnumbering of job 209 00:12:15,120 --> 00:12:17,759 Rich Nuzum: creation versus job destruction stories for AI. 210 00:12:18,359 --> 00:12:22,050 Sean Aylmer: Okay, so that's AI. What about ESG? Because that's another trend, 211 00:12:22,050 --> 00:12:25,858 Sean Aylmer: certainly in recent years that has been growing and far 212 00:12:25,860 --> 00:12:27,060 Sean Aylmer: more on investors' minds. 213 00:12:28,620 --> 00:12:31,379 Rich Nuzum: So Sean, there's a huge debate in the global investor 214 00:12:31,380 --> 00:12:34,920 Rich Nuzum: community about the best way to tackle, I'll pick climate 215 00:12:34,920 --> 00:12:39,208 Rich Nuzum: change as a specific issue. And there are many investors 216 00:12:39,210 --> 00:12:41,309 Rich Nuzum: who are trying to become net- zero in their portfolios 217 00:12:41,309 --> 00:12:44,728 Rich Nuzum: and screen out emitting companies and so forth. There are 218 00:12:44,730 --> 00:12:49,199 Rich Nuzum: other investors who take the position that that may be helpful. 219 00:12:49,650 --> 00:12:52,620 Rich Nuzum: But what we really need is to invest for impact, 220 00:12:52,889 --> 00:12:56,970 Rich Nuzum: to invest in technological innovation around green tech and clean tech. 221 00:12:57,300 --> 00:13:01,140 Rich Nuzum: To invest in green infrastructure projects, really change the technological 222 00:13:01,140 --> 00:13:05,130 Rich Nuzum: facts on the ground, get costs down, make renewable energy cheaper, 223 00:13:05,400 --> 00:13:10,230 Rich Nuzum: get renewable energy into the grid. Because that impact investment 224 00:13:10,619 --> 00:13:14,610 Rich Nuzum: fixes climate change directly and the screening out may change 225 00:13:14,610 --> 00:13:17,250 Rich Nuzum: the cost of capital and have an indirect effect. But 226 00:13:17,670 --> 00:13:21,179 Rich Nuzum: as some impact investors put it to other investors, you 227 00:13:21,179 --> 00:13:23,849 Rich Nuzum: can take your portfolio to net-zero and your portfolio's net-zero, 228 00:13:23,849 --> 00:13:26,759 Rich Nuzum: but that doesn't necessarily change the world. When you make 229 00:13:26,759 --> 00:13:32,790 Rich Nuzum: impact investments that reduce the cost of renewable power generation, transmission, storage, 230 00:13:33,150 --> 00:13:35,730 Rich Nuzum: or when you invest in green infrastructure that actually shifts 231 00:13:35,730 --> 00:13:38,550 Rich Nuzum: part of the power grid to renewables, you are changing 232 00:13:38,550 --> 00:13:41,730 Rich Nuzum: the world. And so we're seeing a big interest in 233 00:13:41,730 --> 00:13:44,730 Rich Nuzum: direct deals and putting more money to work in those 234 00:13:44,730 --> 00:13:49,980 Rich Nuzum: for impact. And Mercer's actually launching a catalytic investment exchange 235 00:13:50,250 --> 00:13:53,730 Rich Nuzum: to digitally link up direct deal sponsors with investors and 236 00:13:53,730 --> 00:13:56,160 Rich Nuzum: try to get more money to work faster in these 237 00:13:56,160 --> 00:13:57,629 Rich Nuzum: types of investment thesis. 238 00:13:58,260 --> 00:14:00,659 Sean Aylmer: I mean, of course, once the momentum is growing there, 239 00:14:00,660 --> 00:14:04,650 Sean Aylmer: so presumably the more people that think about impact investing 240 00:14:04,740 --> 00:14:07,679 Sean Aylmer: and agree with that thesis, the bigger it gets. 241 00:14:08,400 --> 00:14:12,780 Rich Nuzum: Well, absolutely. And to outperform in any area of investments, 242 00:14:12,780 --> 00:14:15,088 Rich Nuzum: you need to be early and then the rest of 243 00:14:15,090 --> 00:14:17,309 Rich Nuzum: the crowd needs to decide you were right and come 244 00:14:17,309 --> 00:14:19,440 Rich Nuzum: in behind you and bid up what you've already bought. 245 00:14:19,860 --> 00:14:21,929 Rich Nuzum: And so the early movers on this stand to make 246 00:14:21,929 --> 00:14:24,779 Rich Nuzum: much better returns as others follow them. 247 00:14:25,230 --> 00:14:27,060 Sean Aylmer: Rich, thank you for talking to Fear and Greed. 248 00:14:27,090 --> 00:14:28,560 Rich Nuzum: Okay, thanks for having me. 249 00:14:28,830 --> 00:14:34,439 Sean Aylmer: That was Rich Nuzum, Executive Director, Investments and Global Chief Investment Strategist at Mercer. This is the 250 00:14:34,440 --> 00:14:37,259 Sean Aylmer: Fear and Greed business interview. Remember, this is general information 251 00:14:37,259 --> 00:14:39,839 Sean Aylmer: only and you should seek professional advice before making any 252 00:14:39,839 --> 00:14:42,600 Sean Aylmer: investment decision. Join us every morning for the full episode 253 00:14:42,600 --> 00:14:45,810 Sean Aylmer: of Fear and Greed, Australia's best business podcast. I'm Sean Aylmer, 254 00:14:46,080 --> 00:14:46,830 Sean Aylmer: enjoy your day.