WEBVTT - Bonus: Exploring opportunities in a circular economy–Morrison

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<v Speaker 1>You're listening to a share these podcast, any kind of

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<v Speaker 1>broader trends that you see out there that are informing

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<v Speaker 1>your portfolio.

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<v Speaker 2>We think a lot about growth of data. We think

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<v Speaker 2>a lot about decarbonization. The next extension of decarbonization really

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<v Speaker 2>has been thinking more about a circular economy and what

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<v Speaker 2>opportunities come from that, which again is not just an

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<v Speaker 2>esg idea, it's actually also just an economic rationalist idea.

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<v Speaker 2>Why I use things once and put them in the trash.

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<v Speaker 2>So I give an example of a really interesting business

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<v Speaker 2>we've invested in for one of our funds. It's called

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<v Speaker 2>viscount Reuse. So when you go to the supermarket, we

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<v Speaker 2>love investing in all the things that you hopefully you

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<v Speaker 2>don't need to have heard of Morrison, You don't even

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<v Speaker 2>need to even realize you use the products you're invested in.

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<v Speaker 2>But when someone mentioned you go, oh that thing, I

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<v Speaker 2>use that every day. I never even thought about the decision.

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<v Speaker 2>So when you go to the supermarket, fruits sometimes comes

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<v Speaker 2>in those cardboard crates which get scrunched down, and then

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<v Speaker 2>when you're moving house you go to the supermarket and

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<v Speaker 2>pick them up from the back. Increasingly around the world

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<v Speaker 2>supermarkets are trying to get away from that and use

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<v Speaker 2>reusable plastic crates. And what's the best way for a

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<v Speaker 2>supermarket to do that. It's to have one pool provider

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<v Speaker 2>so that all of their suppliers are using the same

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<v Speaker 2>kind of crates. They come into the supermarket, then they

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<v Speaker 2>get broken down, sent back to you to clean, and

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<v Speaker 2>then you send them out to their suppliers, and so

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<v Speaker 2>you end up with this very infrastructure like business. You know,

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<v Speaker 2>something which is going to keep being used in the

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<v Speaker 2>next ten years. You're locked in as the sole supplier

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<v Speaker 2>to one of a duopoly or oligopoly the supermarket providers,

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<v Speaker 2>and you can add on some other customers. So that's

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<v Speaker 2>a business we've invested in that ultimately its growth will

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<v Speaker 2>come from the world wanting to be more circular, and

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<v Speaker 2>the supermarkets want to be more circular, partly for ESGM,

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<v Speaker 2>partly because it increases their margins. Up with this really

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<v Speaker 2>downside protected infrastructural like business, but something you never thought

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<v Speaker 2>of as infratructure.

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<v Speaker 1>It's a place comes in where there's real value in

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<v Speaker 1>standardization exactly. It's otherwise where do you send them back

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<v Speaker 1>to exactly?

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<v Speaker 2>And then think of all the ways you can start

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<v Speaker 2>improving that, like make those traceable, allow the supermarket to

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<v Speaker 2>know what temperature that product's been at all the time,

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<v Speaker 2>so they know that has this milk been tainted because

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<v Speaker 2>at some point in the supply chain there's a failure,

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<v Speaker 2>they can work out where it was. So the whole

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<v Speaker 2>lot of ways you can use technology to keep making

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<v Speaker 2>this dumb things smarter and add value to the customer.

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<v Speaker 1>Well infrastructure everywhere. So we've talked a little bit about

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<v Speaker 1>renewables and especially New Zealand's history with renewable but how

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<v Speaker 1>do you see that transition going throughout infrastructure investment throughout

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<v Speaker 1>Australia and New Zealand.

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<v Speaker 2>I'll admit something to my shame, having grown up in

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<v Speaker 2>New Zealand they moved to Australia, and having been on

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<v Speaker 2>the board of Tilt Renewables when we created it all

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<v Speaker 2>the way through to when we sold it, I didn't

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<v Speaker 2>think much new renewable energy development was going to happen

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<v Speaker 2>in New Zealand. Kind of thought, oh, well, we're kind

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<v Speaker 2>of done. Know we're at ninety percent. And what I

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<v Speaker 2>hadn't factored in was the rest of the electrification of

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<v Speaker 2>the economy. So how do you go from Fonterra burning

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<v Speaker 2>coal to turn milk into milk powder to using renewable electricity,

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<v Speaker 2>cars running on renewabal electricity. See realized there's actually all

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<v Speaker 2>of this demands. Even when you're at nine percent renewables,

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<v Speaker 2>Probably in New Zealand will still double its renewable energy

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<v Speaker 2>capacity over the next few decades. Australia has gone very

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<v Speaker 2>slowly and is now starting to make progress at getting

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<v Speaker 2>towards sixty seventy renewables, and that won't actually be driven

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<v Speaker 2>by policy. That'll be driven by old coal plants breaking right,

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<v Speaker 2>so that reaching end of life. So that's kind of inevitable.

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<v Speaker 2>So there's a lot of opportunity in Australia. Probably the

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<v Speaker 2>biggest constraints in the moment in Australia is just the

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<v Speaker 2>scale of the transition required means you're rewiring the whole country.

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<v Speaker 2>So in one of our other portfolios, Utilities Trusts of Australia,

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<v Speaker 2>we are a shareholder in Transcrid the poles and wires

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<v Speaker 2>of New South Wales and Electronet the poles and whis

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<v Speaker 2>of South Australia. Those businesses are literally investing billions of

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<v Speaker 2>dollars to rewire from a system that was based around

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<v Speaker 2>generating in a few small coal a few big coal

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<v Speaker 2>power plants, to one where actually there's renewable energy all

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<v Speaker 2>over the state and you need to connect up your

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<v Speaker 2>states to manage intermittency, so all of that stuff has

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<v Speaker 2>to get worked through. So that'll mean there's short term

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<v Speaker 2>difficulties friction points in Australia, but long run will look

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<v Speaker 2>really interesting. And then you look globally, whatever happens out

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<v Speaker 2>of the big beautiful bill that's going through at the moment.

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<v Speaker 2>One where another US is going to build a enormous

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<v Speaker 2>amount of renewable energy just because it needs the power

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<v Speaker 2>in it is brood economics. The lowest cost form of

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<v Speaker 2>power is solar or solar plus batteries in the US.

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<v Speaker 2>Europe's got an energy independence issue, so it's not just

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<v Speaker 2>about renewables there, it's actually how do we reduce our

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<v Speaker 2>dependence on Russian gas, so you need to all have

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<v Speaker 2>your own renewables. And then Asia you've got growth of

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<v Speaker 2>demand for energy as well as you know, as people

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<v Speaker 2>get wealth there in the economies industrialize along with decarbonization pledges,

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<v Speaker 2>so you think all around the world you see different

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<v Speaker 2>reasons for people to be doing a lot more. The

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<v Speaker 2>really unidealistic way to think about renewable energy, Like you

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<v Speaker 2>can think about it as an idealist, and I do,

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<v Speaker 2>but the unidealistic way to think about it just as

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<v Speaker 2>an investor is actually it's an option strategy. So you

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<v Speaker 2>know that you can have complete confidence in the trajectory

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<v Speaker 2>of the world. Over the next two three decades, a

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<v Speaker 2>lot more renewables will be built. It's really hard to

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<v Speaker 2>be certain in the next twelve months which specific solar

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<v Speaker 2>farm or wind farm will get built because there's a

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<v Speaker 2>change in energy prices or a change in regulation. You

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<v Speaker 2>can have renewable energy development options in as many places

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<v Speaker 2>as possible, with great teams working on them, and then

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<v Speaker 2>optimize at each point which one you should be putting

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<v Speaker 2>your two three hundred million dollars into. Actually taking from

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<v Speaker 2>being a plan to being reality, you'll find that you're

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<v Speaker 2>constantly surprised on the upside, rather than kind of having

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<v Speaker 2>like a single pinpoint bet on one company or one

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<v Speaker 2>project of that.

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<v Speaker 1>Do you think that we can be leaders in the

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<v Speaker 1>field of how that develops.

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<v Speaker 2>I think we already are. Like if you think about

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<v Speaker 2>New Zealand, had this ADVANTAGEHI built from its disadvantage artists

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<v Speaker 2>from not having a lot of coal and gas. It

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<v Speaker 2>got really good at wind generation. And then for Morrison,

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<v Speaker 2>we took that idea that we've been working on the

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<v Speaker 2>nineties in New Zealand and started getting options in Australia

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<v Speaker 2>in the late nineties that we created Tilt Renewables, which

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<v Speaker 2>we which an infertal investment that we sold twenty one

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<v Speaker 2>twenty two. Out of that experience, we set up Long

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<v Speaker 2>Road Energy for intilling the New Zealand super Fund in

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<v Speaker 2>the US. That's been a phenomenal investment now worth several

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<v Speaker 2>billion dollars. Took that to the Europe, took it to Asia.

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<v Speaker 2>So yeah, and that's just really kind of slowly over decades,

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<v Speaker 2>reinvesting in the fact that you've got to hit start

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<v Speaker 2>on the world and something they need more of.

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<v Speaker 1>Investing involves risk you might lose the money you start with.

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<v Speaker 1>We recommend talking to a licensed financial advisor. We also

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<v Speaker 1>recommend reading product disclosure documents before deciding to invest.