1 00:00:00,080 --> 00:00:02,719 Speaker 1: Today Climate Finance Day here at COP twenty eight, senior 2 00:00:02,720 --> 00:00:04,840 Speaker 1: figures in the world of finance have really been calling 3 00:00:04,840 --> 00:00:08,080 Speaker 1: for better data around emissions and of course the viability 4 00:00:08,080 --> 00:00:11,159 Speaker 1: of green projects in order to unlock more investment. Well, 5 00:00:11,160 --> 00:00:13,400 Speaker 1: I'm very pleased to be joined by Philip Hildebrand's advice 6 00:00:13,480 --> 00:00:16,439 Speaker 1: chair of black Rock. Look, thank you for joining us. 7 00:00:16,480 --> 00:00:18,240 Speaker 2: I mean we always talk an afternoon. 8 00:00:18,480 --> 00:00:21,720 Speaker 1: That's so good morning for our London users because they're 9 00:00:21,720 --> 00:00:24,040 Speaker 1: the ones that's tune in the most when you look 10 00:00:24,079 --> 00:00:27,080 Speaker 1: at some of the climate initiatives here. I know there's 11 00:00:27,080 --> 00:00:29,200 Speaker 1: a lot of questions about you know, phasing out of 12 00:00:29,240 --> 00:00:31,920 Speaker 1: fossil fuel, there's a lot of questions on the carbon markets, 13 00:00:31,920 --> 00:00:34,040 Speaker 1: on carbon credits. But then we have a loss of 14 00:00:34,120 --> 00:00:36,720 Speaker 1: damage fund. So are you optimistic that you know, we're 15 00:00:36,760 --> 00:00:38,720 Speaker 1: day four and we've already achieved something. 16 00:00:39,520 --> 00:00:41,120 Speaker 2: I think we've achieved something. I mean, this is like 17 00:00:41,440 --> 00:00:43,920 Speaker 2: a huge Greek play with lots of different activists, so 18 00:00:44,000 --> 00:00:45,960 Speaker 2: it's hard to tell, you know where it concludes or 19 00:00:46,000 --> 00:00:49,559 Speaker 2: running concludes. We're about halfway through. I think there are 20 00:00:49,600 --> 00:00:52,639 Speaker 2: some positive elements. To me. The most important one perhaps 21 00:00:52,760 --> 00:00:58,560 Speaker 2: is we're beginning to see actual private capital formation designed 22 00:00:59,120 --> 00:01:03,320 Speaker 2: to go into the world in order to invest in 23 00:01:03,360 --> 00:01:05,600 Speaker 2: the in the climate transition. I think that's you know, 24 00:01:05,640 --> 00:01:08,080 Speaker 2: to me, when you look at the overall challenge, if 25 00:01:08,120 --> 00:01:11,920 Speaker 2: we can solve for that, then we won't make it. 26 00:01:11,959 --> 00:01:14,640 Speaker 2: So this is the key piece of it. And now 27 00:01:14,680 --> 00:01:17,440 Speaker 2: we've moved from just talking about it, recognizing it as 28 00:01:17,480 --> 00:01:21,319 Speaker 2: a problem, to early stages, early signs of capital formation 29 00:01:21,480 --> 00:01:24,440 Speaker 2: out of the private sector to be mobilized for the transition. 30 00:01:24,600 --> 00:01:26,440 Speaker 1: But then we need to put it somewhere so the 31 00:01:26,480 --> 00:01:28,880 Speaker 1: capital form, like how hard is it to find the 32 00:01:28,920 --> 00:01:30,800 Speaker 1: right projects at speed? 33 00:01:31,160 --> 00:01:33,840 Speaker 2: Exactly? So I think that you know, first was recognizing 34 00:01:33,840 --> 00:01:39,240 Speaker 2: it as the main problem. Now various announcements from the hosts, 35 00:01:39,240 --> 00:01:42,080 Speaker 2: from Singapore, from many other places we were involved in it, 36 00:01:42,360 --> 00:01:45,679 Speaker 2: you're beginning to see private capital being kind of created. 37 00:01:45,800 --> 00:01:48,880 Speaker 2: Formation of private capital now comes the big questions were 38 00:01:48,880 --> 00:01:51,160 Speaker 2: the products. How do we make sure it goes into 39 00:01:51,200 --> 00:01:54,320 Speaker 2: the right projects, into the weakest regions in a sense 40 00:01:54,320 --> 00:01:56,480 Speaker 2: in this and that's going to be to me, that 41 00:01:56,640 --> 00:01:59,160 Speaker 2: is the key message coming out of here. If we 42 00:01:59,240 --> 00:02:02,320 Speaker 2: can solve for them, we're not going to tackle this, 43 00:02:02,320 --> 00:02:04,240 Speaker 2: this existential problem of climate. 44 00:02:04,040 --> 00:02:06,720 Speaker 1: Change, but for how much of a chance is there 45 00:02:06,760 --> 00:02:10,880 Speaker 1: that we do have some kind of comprehensive carbon markets, right, 46 00:02:11,600 --> 00:02:15,280 Speaker 1: even language that holds together in the next couple of weeks. 47 00:02:15,760 --> 00:02:17,760 Speaker 2: I think that's difficult to me. You know, I was 48 00:02:17,800 --> 00:02:20,960 Speaker 2: thinking in the car over here, what's kind of one 49 00:02:21,000 --> 00:02:24,120 Speaker 2: of my future takeaways, and the carbon market is something 50 00:02:24,200 --> 00:02:26,480 Speaker 2: we have to kind of wrestle with. I think the 51 00:02:26,520 --> 00:02:29,720 Speaker 2: community as a whole, that's in a sense the next 52 00:02:29,760 --> 00:02:31,680 Speaker 2: stage that has to be part of it as well. 53 00:02:32,120 --> 00:02:34,920 Speaker 2: So we have all these elements. We have reduction of emissions, 54 00:02:34,960 --> 00:02:39,400 Speaker 2: new technology, carbon markets, you know, air capture. Many people 55 00:02:39,440 --> 00:02:41,240 Speaker 2: don't like this, but that is going to be clearly 56 00:02:41,280 --> 00:02:43,880 Speaker 2: part of it. The involvement of industry. This was the 57 00:02:43,919 --> 00:02:46,920 Speaker 2: first time that really you had heavy industry, including oil 58 00:02:46,919 --> 00:02:49,200 Speaker 2: and gas that was part of this called those are 59 00:02:49,240 --> 00:02:52,239 Speaker 2: positive science. But I think at the moment I want 60 00:02:52,280 --> 00:02:55,280 Speaker 2: to kind of emphasize just the importance of getting capital 61 00:02:55,320 --> 00:02:58,480 Speaker 2: to the emerging world, and here I'm beginning to see 62 00:02:58,520 --> 00:03:01,240 Speaker 2: some progress. We need the project, as you said, and 63 00:03:01,280 --> 00:03:05,160 Speaker 2: that's by the way, where the MDB reforms MDB discussions 64 00:03:05,200 --> 00:03:06,919 Speaker 2: are going to be very important. The World Bank needs 65 00:03:06,960 --> 00:03:09,959 Speaker 2: to think of itself not as a competing agent to 66 00:03:10,040 --> 00:03:12,640 Speaker 2: the private sector, but as an enabling agent, same with 67 00:03:12,720 --> 00:03:16,320 Speaker 2: the other MDBs, And there's some progress there, particularly at 68 00:03:16,360 --> 00:03:18,600 Speaker 2: the regional level. That gives me some hope. 69 00:03:18,760 --> 00:03:20,679 Speaker 1: And it feels certainly like the new president of the 70 00:03:20,720 --> 00:03:23,320 Speaker 1: World Bank has really put this at the forefront of 71 00:03:23,320 --> 00:03:26,440 Speaker 1: what he wants to achieve, right identifying some of these projects. 72 00:03:26,480 --> 00:03:29,400 Speaker 1: The problem is that Indonesia's very different from Vietnam. It 73 00:03:29,440 --> 00:03:33,200 Speaker 1: has also local regulations. So do you think that we'll 74 00:03:33,240 --> 00:03:36,240 Speaker 1: be able to manage the transition or at least the 75 00:03:36,560 --> 00:03:38,040 Speaker 1: readaptation in time. 76 00:03:38,640 --> 00:03:40,320 Speaker 2: I hope. So, I mean what I'm a little worried 77 00:03:40,360 --> 00:03:42,480 Speaker 2: about is that, you know, there's a lot of focus 78 00:03:42,560 --> 00:03:45,200 Speaker 2: on the really big problem changing the capital structure of 79 00:03:45,200 --> 00:03:48,440 Speaker 2: the World Bank. From my experience in the public sector, 80 00:03:48,520 --> 00:03:51,080 Speaker 2: that's going to be really hard. So I would encourage him, 81 00:03:51,120 --> 00:03:53,320 Speaker 2: and he's done a great job, you know in the 82 00:03:53,360 --> 00:03:55,920 Speaker 2: first few months. Encourage him to look at the things 83 00:03:55,960 --> 00:03:58,560 Speaker 2: that you can really change the mindset of the institution, 84 00:03:59,080 --> 00:04:02,040 Speaker 2: getting out of the not competing with the private sector, 85 00:04:02,080 --> 00:04:05,920 Speaker 2: but enabling empowering the private sector, making the projects they 86 00:04:05,920 --> 00:04:08,280 Speaker 2: are close to. The MDBs are closer to the projects 87 00:04:08,280 --> 00:04:11,520 Speaker 2: in many cases in the private sector, make those projects 88 00:04:11,560 --> 00:04:14,040 Speaker 2: available now that we're beginning to see some formation of 89 00:04:14,080 --> 00:04:17,839 Speaker 2: private capital. So you know, I would think it's important 90 00:04:18,120 --> 00:04:21,320 Speaker 2: to think of the reform of the World Bank not 91 00:04:21,520 --> 00:04:25,360 Speaker 2: just at the level of the capital structure and the stakeholders, 92 00:04:25,400 --> 00:04:27,840 Speaker 2: but also at how do you change the internal kind 93 00:04:27,880 --> 00:04:29,880 Speaker 2: of workings of the World Bank in that regard? 94 00:04:30,240 --> 00:04:32,560 Speaker 1: So how complex is this in a world that's ever 95 00:04:32,760 --> 00:04:37,640 Speaker 1: changing where we're seeing huge rallies and then bets on 96 00:04:38,000 --> 00:04:40,800 Speaker 1: fed rate cutch which could be imminent. I mean, the 97 00:04:40,839 --> 00:04:43,200 Speaker 1: world is volatile, the world is evolving, So where does 98 00:04:43,240 --> 00:04:45,160 Speaker 1: climate change finance and come into this. 99 00:04:45,160 --> 00:04:48,440 Speaker 2: This is very hard. Hard things are hard. You look 100 00:04:48,440 --> 00:04:51,520 Speaker 2: at these kind of newspaper articles to talk about, you know, 101 00:04:51,520 --> 00:04:53,760 Speaker 2: how little progress we've made. But we've had a pandemic, 102 00:04:54,080 --> 00:04:55,560 Speaker 2: we have a war in the middle of Europe, we 103 00:04:55,600 --> 00:04:58,720 Speaker 2: have another war, you know, in this region. So this 104 00:04:58,800 --> 00:05:01,000 Speaker 2: is this is really hard to do all this to 105 00:05:01,120 --> 00:05:03,520 Speaker 2: ensure that it's fair and just that we have growth. 106 00:05:04,200 --> 00:05:06,440 Speaker 2: Industry has to be part of this. I don't see 107 00:05:06,440 --> 00:05:09,039 Speaker 2: how you do it any other way. So this discussion 108 00:05:09,080 --> 00:05:12,479 Speaker 2: by definition is difficult. It's hard, and we have to 109 00:05:12,640 --> 00:05:15,440 Speaker 2: just chip away at it day by day and make 110 00:05:15,480 --> 00:05:18,279 Speaker 2: progress where we can again. To me, the core is 111 00:05:18,360 --> 00:05:22,800 Speaker 2: we have got to mobilize private capital for the emerging 112 00:05:22,839 --> 00:05:25,920 Speaker 2: world to fund this transition. If you look at the need, 113 00:05:26,080 --> 00:05:28,680 Speaker 2: I mean we need about a fifteen to twenty four 114 00:05:28,800 --> 00:05:31,880 Speaker 2: times increase let's say, a twenty fold increase in the 115 00:05:31,880 --> 00:05:34,520 Speaker 2: investment flows into the emerging world. That's not going to 116 00:05:34,520 --> 00:05:37,600 Speaker 2: be funded by the public sector. The private sector has 117 00:05:37,680 --> 00:05:40,560 Speaker 2: this that been private capital has to be mobilized, and 118 00:05:40,600 --> 00:05:42,680 Speaker 2: I think to me, that's you know, at least the 119 00:05:42,720 --> 00:05:45,160 Speaker 2: first few days, there's a hopeful message coming out of this. 120 00:05:45,480 --> 00:05:47,280 Speaker 1: I mean, I guess maybe it was difficult as interest 121 00:05:47,360 --> 00:05:49,159 Speaker 1: rates kept on going up. Do you think we've reached 122 00:05:49,200 --> 00:05:49,799 Speaker 1: peak rates? 123 00:05:50,560 --> 00:05:53,280 Speaker 2: Well, I think we're probably close to it. What we're 124 00:05:53,320 --> 00:05:55,280 Speaker 2: going to struggle with now is we have a lot 125 00:05:55,320 --> 00:06:00,479 Speaker 2: of production constraints globally. The geopolitics are fragmented, graphics are 126 00:06:00,520 --> 00:06:03,279 Speaker 2: putting constraints on it, which means in my mind that 127 00:06:03,320 --> 00:06:05,159 Speaker 2: it's going to be harder for es central banks. They're 128 00:06:05,160 --> 00:06:07,440 Speaker 2: going to have biggert, They're going to face more difficult 129 00:06:07,480 --> 00:06:11,520 Speaker 2: trade offs between output and inflation. So we'll probably have 130 00:06:11,600 --> 00:06:15,400 Speaker 2: more more volatility in markets, will have less trending markets, 131 00:06:15,400 --> 00:06:18,640 Speaker 2: Beta will be less of a force. So the macro environment, 132 00:06:18,680 --> 00:06:21,000 Speaker 2: I would say, is going to be in a sense 133 00:06:21,080 --> 00:06:23,840 Speaker 2: more challenging than what we've seen during the Great Moderation. 134 00:06:24,400 --> 00:06:27,200 Speaker 2: And in all of that, you know, lower trend growth, 135 00:06:27,279 --> 00:06:31,880 Speaker 2: higher volatility, higher interest rates. That's going to make this 136 00:06:31,880 --> 00:06:34,640 Speaker 2: this climate fight more difficult, there's no question about it 137 00:06:34,680 --> 00:06:35,240 Speaker 2: in mind. 138 00:06:35,279 --> 00:06:37,600 Speaker 1: But lower trend growth, not a recession. 139 00:06:38,120 --> 00:06:40,760 Speaker 2: Yeah, I don't think that's so important in a sense. 140 00:06:40,880 --> 00:06:43,560 Speaker 2: You know that that it looks like we can avoid 141 00:06:43,600 --> 00:06:47,760 Speaker 2: a recession. But I think now that that we've mostly 142 00:06:47,839 --> 00:06:51,600 Speaker 2: normalized the post pandemic distortions, inflation has come way down, 143 00:06:51,640 --> 00:06:56,080 Speaker 2: is still coming down, interest rates hopefully have peat. But 144 00:06:56,240 --> 00:06:58,440 Speaker 2: you know, the next challenge is now how do we 145 00:06:58,480 --> 00:07:01,039 Speaker 2: operate in the world that is constrained on the production 146 00:07:01,160 --> 00:07:05,080 Speaker 2: zite globally, which leads to I think bigger tradeoffs for 147 00:07:05,160 --> 00:07:08,599 Speaker 2: central banks, more difficult trade offs, probably lower trend growth 148 00:07:08,640 --> 00:07:12,280 Speaker 2: and higher interest rates and at the margin stick your inflation. 149 00:07:12,800 --> 00:07:15,640 Speaker 2: That's going to make the policy challenge more difficult. 150 00:07:16,360 --> 00:07:18,640 Speaker 1: Do you think the Fed will I mean, the market 151 00:07:18,680 --> 00:07:22,440 Speaker 1: is definitely pricing in FED cuts, maybe earlier than the 152 00:07:22,480 --> 00:07:25,040 Speaker 1: FED governors or you know, they're kind of pushing back 153 00:07:25,120 --> 00:07:27,680 Speaker 1: into the markets quite a lot, Like how they've been 154 00:07:27,720 --> 00:07:29,840 Speaker 1: pushing back for the last six months. Every six months 155 00:07:29,880 --> 00:07:32,440 Speaker 1: there's like a fear in the market. They get kind 156 00:07:32,440 --> 00:07:34,920 Speaker 1: of topped off, ledge it's fine, and then after six 157 00:07:34,960 --> 00:07:36,080 Speaker 1: months there's always this fear. 158 00:07:36,640 --> 00:07:39,120 Speaker 2: Yeah, this is a lot of this. In my mind, 159 00:07:39,120 --> 00:07:42,240 Speaker 2: I would be skeptical on the sort of rapid you know, 160 00:07:42,320 --> 00:07:45,320 Speaker 2: rate cut story, mostly because I think a lot of 161 00:07:45,320 --> 00:07:47,120 Speaker 2: people in the market are still thinking in terms of 162 00:07:47,120 --> 00:07:49,480 Speaker 2: the old world. So we're gonna, you know, get into 163 00:07:49,720 --> 00:07:53,240 Speaker 2: weak growth. Therefore central banks can cut. My message would be, 164 00:07:53,720 --> 00:07:55,720 Speaker 2: you know, we need to be prepared for a different 165 00:07:55,760 --> 00:08:00,760 Speaker 2: type of overall macro environment, global production constraints, more difficult trade, 166 00:08:00,760 --> 00:08:03,720 Speaker 2: Also central banks less ability to respond to weakness by 167 00:08:03,720 --> 00:08:07,840 Speaker 2: immediately cutting interest rates, higher rates on average, lower growth. 168 00:08:08,240 --> 00:08:10,640 Speaker 2: So we need to think of not a return to 169 00:08:10,720 --> 00:08:13,840 Speaker 2: the old business cycle model, but kind of a new 170 00:08:13,880 --> 00:08:17,000 Speaker 2: world that is shaped by these production constraints. Now, if 171 00:08:17,000 --> 00:08:19,480 Speaker 2: we can resolve them, if we can resolve the wars, 172 00:08:19,520 --> 00:08:22,720 Speaker 2: if we can you know, make progress on the transition, 173 00:08:22,880 --> 00:08:25,680 Speaker 2: that will help to expand the production capacity of the 174 00:08:25,680 --> 00:08:28,120 Speaker 2: global economy. That's the key objective in a way for 175 00:08:28,240 --> 00:08:30,680 Speaker 2: if you look at it in a broad policy sense, So. 176 00:08:31,360 --> 00:08:32,840 Speaker 1: What does that look like? And also I was looking 177 00:08:32,880 --> 00:08:36,640 Speaker 1: at you know, figures of nshoring and investment in the US. 178 00:08:36,720 --> 00:08:38,280 Speaker 1: I mean they've gone through the roof. I mean you 179 00:08:38,360 --> 00:08:40,880 Speaker 1: literally have a chart that was flat and then it's 180 00:08:40,920 --> 00:08:41,520 Speaker 1: just taken out. 181 00:08:41,720 --> 00:08:44,280 Speaker 2: It's think of it as a rewiring of the global 182 00:08:44,320 --> 00:08:48,320 Speaker 2: economy that you know, unbounced leads to higher costs, which 183 00:08:48,400 --> 00:08:51,920 Speaker 2: leads to more production constraints, which leads to higher inflation 184 00:08:52,040 --> 00:08:55,000 Speaker 2: on average, lower growth. And so this is a more 185 00:08:55,240 --> 00:08:57,400 Speaker 2: i would say, a more challenging world. That doesn't mean 186 00:08:57,400 --> 00:08:59,920 Speaker 2: there are no opportunities. Investors are going to find great 187 00:09:00,120 --> 00:09:03,360 Speaker 2: opportunities in this, but we're going to see less trending markets, 188 00:09:03,480 --> 00:09:07,600 Speaker 2: more volatility, and for the policy world, more difficult trade offs. 189 00:09:07,600 --> 00:09:09,600 Speaker 2: Which is why it's not as simple as to say, oh, 190 00:09:09,720 --> 00:09:12,240 Speaker 2: growth is weakening, therefore central banks will be able to 191 00:09:12,280 --> 00:09:17,520 Speaker 2: cut rates rapidly. I think that's too much anchored in 192 00:09:17,559 --> 00:09:21,040 Speaker 2: the previous world. We're now in a new regime which 193 00:09:21,080 --> 00:09:23,280 Speaker 2: is a different one, and so I think, you know 194 00:09:23,320 --> 00:09:25,400 Speaker 2: that's what we need to kind of wrestle with this 195 00:09:26,160 --> 00:09:26,880 Speaker 2: new environment. 196 00:09:27,200 --> 00:09:29,360 Speaker 1: Yeah, you have these competing forces. Philip hasil always thanks 197 00:09:29,400 --> 00:09:31,800 Speaker 1: so much for joining us as Philip Hildebrand. They're the 198 00:09:31,880 --> 00:09:33,520 Speaker 1: vice chairman of black Rock