1 00:00:00,320 --> 00:00:03,280 Speaker 1: This is Dana Perkins and you're listening to Switched on 2 00:00:03,600 --> 00:00:07,320 Speaker 1: the B and EF podcast. The first quarter of twenty 3 00:00:07,360 --> 00:00:11,400 Speaker 1: twenty four has seen a flurry of sustainable finance policy activity, 4 00:00:11,560 --> 00:00:14,840 Speaker 1: with a wave of new mandatory reporting rules and no 5 00:00:15,040 --> 00:00:18,119 Speaker 1: let up an anti ESG sentiment in the United States. 6 00:00:18,400 --> 00:00:21,479 Speaker 1: It's such a rapidly changing environment, so keeping abreast of 7 00:00:21,560 --> 00:00:24,120 Speaker 1: all of the global policy updates can be a tough task. 8 00:00:24,400 --> 00:00:28,280 Speaker 1: But to help, BNF recently released its inaugural Sustainable Finance 9 00:00:28,320 --> 00:00:31,360 Speaker 1: Policy Quarterly Report, and this gives an overview of the 10 00:00:31,400 --> 00:00:34,840 Speaker 1: most significant policy developments in Q one for twenty twenty four. 11 00:00:35,120 --> 00:00:37,839 Speaker 1: This is across G twenty markets and a few other regions. 12 00:00:37,920 --> 00:00:40,959 Speaker 1: And to discuss this report and its findings today, I'm 13 00:00:41,040 --> 00:00:43,760 Speaker 1: joined by the author, Maya Goonomer, who is a Senior 14 00:00:43,800 --> 00:00:47,800 Speaker 1: Associate for the Green and Sustainable Finance Team at BNF. 15 00:00:47,840 --> 00:00:50,600 Speaker 1: We review the climate policy environment since the beginning of 16 00:00:50,600 --> 00:00:53,599 Speaker 1: the year and talk about the introduction of the Corporate 17 00:00:53,640 --> 00:00:57,120 Speaker 1: Sustainability Reporting Directive in the European Union and we go 18 00:00:57,160 --> 00:01:00,760 Speaker 1: through the potential impact of wider reporting standards. We then 19 00:01:00,840 --> 00:01:03,760 Speaker 1: turned to the US and we review the anti ESG 20 00:01:03,880 --> 00:01:08,360 Speaker 1: movement and the ramifications for green and ESG aligned investments. 21 00:01:08,680 --> 00:01:12,319 Speaker 1: B and EF subscribers can find Maya's Sustainable Finance Policy 22 00:01:12,400 --> 00:01:15,520 Speaker 1: quarterly at BNF dot com or at BNF go on 23 00:01:15,520 --> 00:01:18,360 Speaker 1: the Bloomberg terminal. Make sure to subscribe to switched on 24 00:01:18,360 --> 00:01:21,839 Speaker 1: on Apple Podcasts, Spotify or wherever you get your podcasts, 25 00:01:21,880 --> 00:01:23,600 Speaker 1: and if you give us a review on any of those, 26 00:01:23,640 --> 00:01:25,960 Speaker 1: that will help share us with others. But right now, 27 00:01:26,040 --> 00:01:39,880 Speaker 1: let's talk to Maya about sustainable finance policy. Maya, thank 28 00:01:39,920 --> 00:01:41,559 Speaker 1: you for coming on the show again today. 29 00:01:41,760 --> 00:01:43,440 Speaker 2: Hello Dana, thank you for having me. 30 00:01:43,680 --> 00:01:46,959 Speaker 1: We're going to talk about some emerging policies that have 31 00:01:47,080 --> 00:01:49,520 Speaker 1: actually well, well we've seen a wave of policies that 32 00:01:49,520 --> 00:01:51,840 Speaker 1: have really come through fairly recently, and we're going to 33 00:01:51,840 --> 00:01:54,160 Speaker 1: get into this policy discussion as well as a new 34 00:01:54,240 --> 00:01:56,640 Speaker 1: tracker that we've made at BNF which is a US 35 00:01:56,720 --> 00:02:00,240 Speaker 1: anti ESG tracker. But before we get to the ANTIESG parright, 36 00:02:00,320 --> 00:02:02,960 Speaker 1: let's talk about these policies. What would you say have 37 00:02:03,000 --> 00:02:05,080 Speaker 1: been some of the developments or you know, really when 38 00:02:05,080 --> 00:02:08,280 Speaker 1: you're speaking to people who are looking closely at ESG, 39 00:02:08,639 --> 00:02:12,680 Speaker 1: what are some of the frameworks and potentially conflicting parts 40 00:02:12,680 --> 00:02:15,280 Speaker 1: of frameworks that people are discussing at the moment. 41 00:02:15,800 --> 00:02:19,360 Speaker 2: I think we're reaching that point where we have so 42 00:02:19,440 --> 00:02:23,840 Speaker 2: many of them. So what's keeping sustainability professionals up at 43 00:02:23,919 --> 00:02:28,120 Speaker 2: night is trying to basically reconcile everything that they are seeing. 44 00:02:28,720 --> 00:02:31,800 Speaker 2: Most companies and firms are global firms. So one of 45 00:02:31,840 --> 00:02:33,960 Speaker 2: the key developments we've seen in the past quarter is 46 00:02:34,000 --> 00:02:38,960 Speaker 2: the USSEC, the Security and Exchange Commission passing finally its 47 00:02:39,000 --> 00:02:42,600 Speaker 2: climate role or reporting for companies. But that has been passed, 48 00:02:42,639 --> 00:02:45,839 Speaker 2: and then straightaway has been posed because of so many 49 00:02:46,440 --> 00:02:51,120 Speaker 2: legal issues and potential lawsuits to prevent it to see 50 00:02:51,120 --> 00:02:53,920 Speaker 2: the light. And then in the EU there were again 51 00:02:54,200 --> 00:02:59,440 Speaker 2: more policy development targeting companies around disclosure, around integration of 52 00:02:59,440 --> 00:03:05,119 Speaker 2: sustainable matters. They are conflicting reporting standards that are basically 53 00:03:05,280 --> 00:03:09,680 Speaker 2: popping up around the world. The International Sustainability Standards Board 54 00:03:10,000 --> 00:03:13,560 Speaker 2: built a framework called the IFRSs one and S two. 55 00:03:13,720 --> 00:03:16,040 Speaker 2: I'm so sorry, but these are the names. Actually there 56 00:03:16,080 --> 00:03:18,480 Speaker 2: is not a longer name than that, and it's basically 57 00:03:18,480 --> 00:03:22,160 Speaker 2: a sustainability reporting standard that is looking at sustainability risk 58 00:03:22,160 --> 00:03:25,600 Speaker 2: and climate risk. That is a key standard where the 59 00:03:25,639 --> 00:03:29,480 Speaker 2: same way we build the IFRS, accounting we're building that new, 60 00:03:29,560 --> 00:03:34,079 Speaker 2: big global standard, so that after countries are implementing. 61 00:03:33,520 --> 00:03:35,720 Speaker 3: It, but everyone is implementing it a tiny bit that 62 00:03:36,000 --> 00:03:38,960 Speaker 3: like differently than the other, you know, and you add 63 00:03:39,000 --> 00:03:43,520 Speaker 3: all these layers of complexity, and you're like, when I 64 00:03:43,560 --> 00:03:46,440 Speaker 3: took to sustainability professionals, whether they are in a bank 65 00:03:46,560 --> 00:03:48,360 Speaker 3: or they're in a company, they just are. 66 00:03:48,160 --> 00:03:50,920 Speaker 2: Like, where should I start from? Like which one should 67 00:03:50,920 --> 00:03:54,240 Speaker 2: I report against the first? Which one is the most important, 68 00:03:54,280 --> 00:03:56,600 Speaker 2: which one is the most complicated? And I think the 69 00:03:56,720 --> 00:04:00,680 Speaker 2: key ones are, Yeah, these ISSB developments, the us SEC, 70 00:04:00,840 --> 00:04:03,480 Speaker 2: everyone had all their eyes on it. And in the 71 00:04:03,840 --> 00:04:07,880 Speaker 2: you there were two key policies, the Corporate Sustainability Reporting 72 00:04:07,920 --> 00:04:13,119 Speaker 2: Directives CSRD and the CS three D, the Corporate Sustainability 73 00:04:13,320 --> 00:04:17,320 Speaker 2: Due Diligence Directive, which this one is about sustainability, integration 74 00:04:17,480 --> 00:04:21,479 Speaker 2: and really actionable stuff. But then people are basically asking 75 00:04:21,520 --> 00:04:23,880 Speaker 2: us what's the most important and how do they interact 76 00:04:23,880 --> 00:04:24,520 Speaker 2: with one another? 77 00:04:24,839 --> 00:04:27,279 Speaker 1: So for we're thinking about the fact that these are 78 00:04:27,680 --> 00:04:30,839 Speaker 1: mandatory that are coming through more often that is essentially 79 00:04:30,880 --> 00:04:32,800 Speaker 1: calling people's hand when they're thinking, well what do I 80 00:04:32,839 --> 00:04:35,680 Speaker 1: start with? It's the governments are defining what is the 81 00:04:35,720 --> 00:04:38,520 Speaker 1: imperative most immediately. But why do you think that is. 82 00:04:38,520 --> 00:04:41,800 Speaker 1: Is it showing a sign of sophistication within this market 83 00:04:41,960 --> 00:04:43,839 Speaker 1: or is it showing more a sign of what you 84 00:04:43,880 --> 00:04:46,760 Speaker 1: were just actually talking about, which was that there is 85 00:04:46,839 --> 00:04:50,080 Speaker 1: so many different frameworks that someone has to essentially say 86 00:04:50,120 --> 00:04:52,160 Speaker 1: this is what matters and this is what's optional. 87 00:04:52,400 --> 00:04:55,680 Speaker 2: There is sophistication arriving in this market. There is a 88 00:04:55,760 --> 00:04:58,640 Speaker 2: need for standardization. We've talked about it so much, but 89 00:04:58,800 --> 00:05:00,560 Speaker 2: up until now it was like, oh, we're going to 90 00:05:00,560 --> 00:05:03,240 Speaker 2: create a standard and then people can abide with it 91 00:05:03,400 --> 00:05:06,400 Speaker 2: or not, but you need to impose it effectively. We 92 00:05:06,520 --> 00:05:08,400 Speaker 2: used to have so many different for instance, on the 93 00:05:08,400 --> 00:05:11,120 Speaker 2: corporate level, so many different reporting standard I'm going to 94 00:05:11,240 --> 00:05:14,440 Speaker 2: name abbreviation, but it's just to give an idea to people. 95 00:05:14,520 --> 00:05:16,960 Speaker 2: It's like you had the TCFD task for some client 96 00:05:17,040 --> 00:05:20,599 Speaker 2: related financial disclosure, you had CDP, you had gr I, 97 00:05:20,800 --> 00:05:23,440 Speaker 2: you had says by like, so many to choose from, 98 00:05:23,520 --> 00:05:25,840 Speaker 2: and effectively, if no one says okay, that's the one, 99 00:05:25,880 --> 00:05:28,240 Speaker 2: everyone is going to follow, well you just get a 100 00:05:28,360 --> 00:05:31,239 Speaker 2: range of reporting that are all different from one another. 101 00:05:31,400 --> 00:05:33,320 Speaker 2: And then if I'm an investor or a bank and 102 00:05:33,360 --> 00:05:35,280 Speaker 2: I want to make action on the back of this, 103 00:05:36,000 --> 00:05:37,880 Speaker 2: then you need to spend an extra amount of time 104 00:05:37,920 --> 00:05:40,760 Speaker 2: to standardize all these data and compare it to one another. 105 00:05:41,000 --> 00:05:42,599 Speaker 2: And then because at the end of the day, you 106 00:05:42,640 --> 00:05:44,719 Speaker 2: just want to compare one company to another on the 107 00:05:44,760 --> 00:05:48,320 Speaker 2: back of their environmental, social and governance factors and performance. 108 00:05:48,760 --> 00:05:52,240 Speaker 1: But presumably wouldn't these different reporting frameworks being speaking to 109 00:05:52,360 --> 00:05:54,960 Speaker 1: from the company standpoint to different parts of the financial 110 00:05:55,040 --> 00:05:58,159 Speaker 1: services community and designing that reporting in a way that 111 00:05:58,240 --> 00:06:01,400 Speaker 1: is most digestible to different and financial end players which 112 00:06:01,560 --> 00:06:04,000 Speaker 1: do have different strategies and are looking at things differently. 113 00:06:04,040 --> 00:06:06,040 Speaker 1: So what equities are going to need to be able 114 00:06:06,080 --> 00:06:09,400 Speaker 1: to ascertain, you know, what, compare one company to another. 115 00:06:09,480 --> 00:06:11,679 Speaker 1: It's going to be different than what the credit market 116 00:06:11,680 --> 00:06:14,159 Speaker 1: actually needs in order to be able to make those comparisons. 117 00:06:14,560 --> 00:06:16,599 Speaker 2: It could be it could be something like that. I 118 00:06:16,600 --> 00:06:20,120 Speaker 2: think it was more like appealing to different companies depending 119 00:06:20,200 --> 00:06:23,520 Speaker 2: on their type of service or the thing they wanted. 120 00:06:23,240 --> 00:06:23,839 Speaker 1: To report on. 121 00:06:24,000 --> 00:06:26,880 Speaker 2: They would choose TCFD, if they wanted to report on 122 00:06:27,000 --> 00:06:30,440 Speaker 2: their exposure to climate risk, they would choose SISB, or 123 00:06:31,440 --> 00:06:34,760 Speaker 2: to report on their overall sustainability performance, or they would 124 00:06:34,839 --> 00:06:38,680 Speaker 2: use CDP to report on their climate performance. Now what's happening, 125 00:06:38,760 --> 00:06:42,480 Speaker 2: and in particular in you with the Corporate Sustainability Reporting 126 00:06:42,640 --> 00:06:45,880 Speaker 2: Directives ESORD, so they're like, you need to report on everything. 127 00:06:45,960 --> 00:06:47,920 Speaker 2: You need to report on social you need to report 128 00:06:47,920 --> 00:06:50,560 Speaker 2: on governmance, you need to report on the environmental side. 129 00:06:50,640 --> 00:06:54,000 Speaker 2: It's a double materiality framework there there it is the 130 00:06:54,000 --> 00:06:56,400 Speaker 2: big word have been said, which is like looking at 131 00:06:56,440 --> 00:07:01,479 Speaker 2: both how much climate how much social factors are affecting 132 00:07:01,560 --> 00:07:05,320 Speaker 2: the profitability of a company, the profitability in good or bad. 133 00:07:05,560 --> 00:07:08,120 Speaker 2: So that's the financial materiality, but it's also looking at 134 00:07:08,160 --> 00:07:11,880 Speaker 2: how much the company's operation are affecting the environment or 135 00:07:11,880 --> 00:07:15,880 Speaker 2: effecting society. So that's CSRD, but that means more than 136 00:07:15,920 --> 00:07:19,080 Speaker 2: one thousand and two hundred data points. On the other side, 137 00:07:19,120 --> 00:07:22,840 Speaker 2: you have ISSB, which also tried to encompasses all these 138 00:07:23,400 --> 00:07:27,280 Speaker 2: like metrics. So the ISSB framework is looking at both 139 00:07:27,320 --> 00:07:33,080 Speaker 2: sustainability risk. So that's the IRSs one and the IRSs 140 00:07:33,160 --> 00:07:36,800 Speaker 2: two looks at climate risk disclosure and the IRSs two. 141 00:07:36,920 --> 00:07:38,960 Speaker 2: I keep on saying this to client and makes them laugh. 142 00:07:39,000 --> 00:07:41,320 Speaker 2: When I saw it, I thought it was TCFD, Like 143 00:07:41,400 --> 00:07:43,720 Speaker 2: I was just like, can't be that everyone is talking 144 00:07:43,760 --> 00:07:45,880 Speaker 2: about this thing, and I just don't understand, like it 145 00:07:45,880 --> 00:07:48,239 Speaker 2: seems like it's like, you know, like when you feel 146 00:07:48,240 --> 00:07:50,880 Speaker 2: like a groundhout day, Like you know, it's like I've 147 00:07:50,960 --> 00:07:54,320 Speaker 2: seen this before and it's effectively TCFD, But then looking 148 00:07:54,360 --> 00:07:57,480 Speaker 2: at climate and looking at sustainability matters. 149 00:07:57,200 --> 00:07:58,640 Speaker 1: It was an evolution of it. 150 00:07:58,640 --> 00:08:01,840 Speaker 2: It's an evolution of it. It's building on this framework 151 00:08:01,880 --> 00:08:05,000 Speaker 2: that has been like widely use. A lot of work 152 00:08:05,000 --> 00:08:07,840 Speaker 2: has been done by the TCFD team to promote the 153 00:08:08,000 --> 00:08:11,239 Speaker 2: use of that framework across the globe. And actually TCFD 154 00:08:11,360 --> 00:08:15,600 Speaker 2: retired because it's incorporated in ISSB now, so it doesn't 155 00:08:15,640 --> 00:08:19,960 Speaker 2: exist anymore. But the only difference is that, however, ISSB 156 00:08:20,120 --> 00:08:23,560 Speaker 2: is like free form. It's not structured, it doesn't have 157 00:08:23,680 --> 00:08:25,560 Speaker 2: key metrics you need to report on. 158 00:08:25,920 --> 00:08:29,000 Speaker 1: So in many respects, the voluntary frameworks existed as a 159 00:08:29,000 --> 00:08:30,640 Speaker 1: form of carrot. You got to pick the one that 160 00:08:30,680 --> 00:08:33,280 Speaker 1: was best for you, and it was a really more 161 00:08:33,320 --> 00:08:35,680 Speaker 1: positive way of going about the reporting. And that now 162 00:08:35,720 --> 00:08:38,040 Speaker 1: these mandatory frameworks are a little bit more of a stick, 163 00:08:38,200 --> 00:08:40,360 Speaker 1: so you're going to have to comply. And what you're 164 00:08:40,400 --> 00:08:42,800 Speaker 1: pointing out is that in some cases they're actually an evolution. 165 00:08:42,880 --> 00:08:46,360 Speaker 1: They built on these voluntary frameworks to then create these 166 00:08:46,360 --> 00:08:49,520 Speaker 1: mandatory frameworks. But we haven't necessarily retired all of the 167 00:08:49,559 --> 00:08:53,400 Speaker 1: voluntary frameworks in order to create space for the mandatory ones. 168 00:08:53,440 --> 00:08:55,120 Speaker 1: And that may be something that we do end up 169 00:08:55,120 --> 00:08:57,360 Speaker 1: seeing over time. The future will let us know whether 170 00:08:57,440 --> 00:08:59,320 Speaker 1: or not that ends up being the case. But let's 171 00:08:59,360 --> 00:09:02,720 Speaker 1: go back to this conversation around the CSRD and the ISSB, 172 00:09:03,440 --> 00:09:06,680 Speaker 1: one being mandatory and one being voluntary. Yeah, where is 173 00:09:06,720 --> 00:09:09,240 Speaker 1: the friction between the two and why is their friction? 174 00:09:09,559 --> 00:09:12,480 Speaker 1: Why would you choose one over the other. Well, I 175 00:09:12,480 --> 00:09:15,160 Speaker 1: guess you're not choosing the CSRD. The CSRD is an 176 00:09:15,160 --> 00:09:16,760 Speaker 1: imperative in certain parts of the world. 177 00:09:17,040 --> 00:09:19,440 Speaker 2: Yeah, So, I think one thing that is really important 178 00:09:19,480 --> 00:09:23,000 Speaker 2: to understand between at this shift between voluntary and mandatory 179 00:09:23,240 --> 00:09:26,400 Speaker 2: is also the state of the market. The more advanced 180 00:09:26,440 --> 00:09:28,920 Speaker 2: to get into that sustainable finance market, the more you 181 00:09:28,960 --> 00:09:31,360 Speaker 2: want to force your banks, your investors, your insurance to 182 00:09:31,440 --> 00:09:34,920 Speaker 2: take into account sustainability risk and climate risk in the 183 00:09:35,160 --> 00:09:38,280 Speaker 2: investment processes and the decision making processes, the more you'll 184 00:09:38,280 --> 00:09:40,679 Speaker 2: have to make it mondatory because they'll need the data 185 00:09:40,760 --> 00:09:43,080 Speaker 2: to do this. You can force a climate risk stress 186 00:09:43,080 --> 00:09:45,040 Speaker 2: test onto a bank and say, you know what, you 187 00:09:45,120 --> 00:09:47,080 Speaker 2: figure out with the data you've got, we're not going 188 00:09:47,120 --> 00:09:50,360 Speaker 2: to mandate reporting from companies, So that that's the ground. 189 00:09:50,400 --> 00:09:53,679 Speaker 2: And then for ISSB versus CSRD. So ISSB is a 190 00:09:53,760 --> 00:09:57,880 Speaker 2: voluntary framework, just because the IFRS foundation the same way 191 00:09:58,000 --> 00:10:00,640 Speaker 2: for those of you who have studied a accounting just 192 00:10:00,720 --> 00:10:03,880 Speaker 2: like me, as just an accounting standard, and then countries 193 00:10:03,920 --> 00:10:07,440 Speaker 2: can choose to opt on it or not. So DA 194 00:10:07,520 --> 00:10:09,240 Speaker 2: first was like, okay, we're going to build that standard, 195 00:10:09,400 --> 00:10:13,040 Speaker 2: and then after every single jurisdiction will adopt it or not. 196 00:10:13,280 --> 00:10:17,080 Speaker 2: So certain jurisdiction are making iss be a reporting mondatory. 197 00:10:17,200 --> 00:10:20,120 Speaker 2: So that's the case of Turkey, that's the case of 198 00:10:20,160 --> 00:10:22,640 Speaker 2: BRAZILA is thinking about it, that's the case of the UK. 199 00:10:23,160 --> 00:10:26,680 Speaker 2: Like there are tons of jurisdiction across the globe that 200 00:10:26,720 --> 00:10:29,680 Speaker 2: are making it mandatory. Progressively, some of them are starting 201 00:10:29,679 --> 00:10:31,760 Speaker 2: and being like okay, to start with, we're going to 202 00:10:31,800 --> 00:10:35,120 Speaker 2: make it voluntary, and then it's going to become mandatory eventually. 203 00:10:35,320 --> 00:10:37,960 Speaker 2: The friction comes from the fact that okay, we have 204 00:10:38,040 --> 00:10:41,160 Speaker 2: all these different jurisdiction adopting it, tweaking it a tiny 205 00:10:41,160 --> 00:10:43,760 Speaker 2: bit so that it meets their local requirement. And then 206 00:10:43,800 --> 00:10:48,240 Speaker 2: you have this mammoth of CSRD, which is an EU 207 00:10:48,360 --> 00:10:54,320 Speaker 2: legislation that is affecting fifty thousand companies globally EU and 208 00:10:54,480 --> 00:10:59,600 Speaker 2: non EU company public and private company SMEs because the 209 00:10:59,640 --> 00:11:02,160 Speaker 2: EU has said, okay, we're going to build this new 210 00:11:02,360 --> 00:11:06,480 Speaker 2: reporting standard, and basically any company that is domiciled in 211 00:11:06,480 --> 00:11:08,920 Speaker 2: the EU but also trades in the EU, that has 212 00:11:08,920 --> 00:11:11,120 Speaker 2: a certain amount of revenue in the EU, that is 213 00:11:11,200 --> 00:11:13,840 Speaker 2: listed in the U, all these companies are falling in 214 00:11:13,880 --> 00:11:16,240 Speaker 2: scope first years or if you're doing business in the EU, 215 00:11:16,480 --> 00:11:19,760 Speaker 2: you're most likely going to be in Yeah, exactly. So 216 00:11:20,120 --> 00:11:24,920 Speaker 2: it's phased in the implementation from now like the first 217 00:11:24,920 --> 00:11:28,079 Speaker 2: reporting or starting next year publication of reporting, but it's 218 00:11:28,080 --> 00:11:30,959 Speaker 2: starting this year, but publication next year up until twenty 219 00:11:31,000 --> 00:11:34,400 Speaker 2: twenty nine. There's going to be time. There are these 220 00:11:34,520 --> 00:11:37,240 Speaker 2: like that thousand of metrics, but for each metric you 221 00:11:37,280 --> 00:11:39,040 Speaker 2: have the right to say, actually that metric is not 222 00:11:39,120 --> 00:11:41,520 Speaker 2: material to my business, I'm not going to report on it. 223 00:11:41,600 --> 00:11:44,600 Speaker 2: So there is that flexibility around that. But it's still 224 00:11:44,640 --> 00:11:48,199 Speaker 2: a bloody mammoth, like it's massive. Some companies I'm talking 225 00:11:48,200 --> 00:11:50,480 Speaker 2: to their like we have to capture data we've never 226 00:11:50,559 --> 00:11:51,320 Speaker 2: captured before. 227 00:11:51,559 --> 00:11:53,240 Speaker 1: I mean, how many people have they had to put 228 00:11:53,280 --> 00:11:56,040 Speaker 1: on to these projects that they had to add We're 229 00:11:56,080 --> 00:11:59,240 Speaker 1: taking double digit people to actually work on this reporting 230 00:11:59,480 --> 00:12:00,840 Speaker 1: or is it single digits? 231 00:12:01,160 --> 00:12:04,080 Speaker 2: It really depends on companies, but I think, yeah, I 232 00:12:04,080 --> 00:12:07,640 Speaker 2: think there are all building teams to do that. And 233 00:12:08,000 --> 00:12:10,360 Speaker 2: when I took to companies, some of them are like, 234 00:12:10,440 --> 00:12:12,280 Speaker 2: you know what, I fall in scope for iss B 235 00:12:12,400 --> 00:12:15,800 Speaker 2: reporting n CSRD. CSRD is so stringent that I'm just 236 00:12:15,840 --> 00:12:18,960 Speaker 2: going to do CSRD and then de facto I'm going 237 00:12:19,040 --> 00:12:20,440 Speaker 2: to do my iss BE reporting. 238 00:12:20,760 --> 00:12:22,960 Speaker 1: Do you lose anything by just doing CSRD. 239 00:12:23,320 --> 00:12:26,200 Speaker 2: I don't think so. It's so complicated and thorough that 240 00:12:26,679 --> 00:12:30,720 Speaker 2: you don't. And actually, last week the two authors of 241 00:12:30,840 --> 00:12:34,160 Speaker 2: CSRD and ISSB and I'm not going to go into 242 00:12:34,200 --> 00:12:37,320 Speaker 2: the abbreviation again, but there are two author groups, some 243 00:12:37,520 --> 00:12:40,360 Speaker 2: that built CSRD and some that build ISSB. I've published 244 00:12:40,360 --> 00:12:45,680 Speaker 2: what we call an interoperability guidance, which basically allows company 245 00:12:45,800 --> 00:12:48,520 Speaker 2: to efficiently do the two at the same time and 246 00:12:48,559 --> 00:12:51,440 Speaker 2: be like, these are all the areas where the two 247 00:12:51,440 --> 00:12:55,360 Speaker 2: frameworks collide and where you can gain some time by 248 00:12:55,480 --> 00:12:57,120 Speaker 2: doing one and the other at the same time. 249 00:12:57,520 --> 00:12:59,800 Speaker 1: One of the things that's really interesting about the is 250 00:13:00,080 --> 00:13:04,800 Speaker 1: this is it is truly global. It is not just 251 00:13:04,880 --> 00:13:08,400 Speaker 1: European or just North American. You're finding it in Brazil, 252 00:13:08,600 --> 00:13:12,600 Speaker 1: Costa Rica, Singapore, Turkey, and then recent markets that have 253 00:13:12,640 --> 00:13:15,400 Speaker 1: announced that they will be reporting you in using the 254 00:13:15,400 --> 00:13:18,960 Speaker 1: ISSB framework Pakistan, Kenya. I mean, this is a truly 255 00:13:19,280 --> 00:13:23,880 Speaker 1: diverse set of countries representing different continents. Do you think 256 00:13:23,920 --> 00:13:27,080 Speaker 1: that those outside of Europe will continue to say, well, 257 00:13:27,160 --> 00:13:29,400 Speaker 1: not all of the business of all of the companies 258 00:13:29,400 --> 00:13:32,400 Speaker 1: that we are actually working with need to embrace the 259 00:13:32,440 --> 00:13:35,760 Speaker 1: CSRD because that's not necessarily where their business is. And 260 00:13:35,800 --> 00:13:39,000 Speaker 1: the ISSB will continue to remain dominant in other parts 261 00:13:39,040 --> 00:13:39,600 Speaker 1: of the world. 262 00:13:39,880 --> 00:13:43,280 Speaker 2: For many reasons. ISSB is an easylyft. It's much easier 263 00:13:43,559 --> 00:13:46,920 Speaker 2: when like from a diplomatic standpoint and a political standpoint, 264 00:13:46,960 --> 00:13:51,160 Speaker 2: when you're like a government leader to impose ISSB than 265 00:13:51,200 --> 00:13:54,160 Speaker 2: to impose something like CSRD. CSRD has been in the 266 00:13:54,200 --> 00:13:56,400 Speaker 2: work for a very long time, but ISSB is like 267 00:13:56,480 --> 00:13:59,839 Speaker 2: you know, free for much more qualitative. It leaves much 268 00:13:59,840 --> 00:14:03,840 Speaker 2: more or room for interpretation. You don't have like exact 269 00:14:03,920 --> 00:14:06,040 Speaker 2: metric you need to report on it. It's not like, oh, 270 00:14:06,080 --> 00:14:08,400 Speaker 2: you're a cement manufacturer, you need to report the amount 271 00:14:08,480 --> 00:14:11,240 Speaker 2: of Scope one, two and three emissions that you emit, 272 00:14:11,640 --> 00:14:15,000 Speaker 2: while CSADY has CO three emission. And so depending on 273 00:14:15,120 --> 00:14:18,280 Speaker 2: which stage you are at the development of the sustainable 274 00:14:18,280 --> 00:14:20,920 Speaker 2: findance market, how much the rest of the institutions within 275 00:14:20,960 --> 00:14:25,920 Speaker 2: the country want to integrate sustainability within their own requirements, 276 00:14:25,960 --> 00:14:29,320 Speaker 2: you know, like the financial regulators and whatnot, then they 277 00:14:29,400 --> 00:14:33,320 Speaker 2: probably will be more inclined to mandate ISSB reporting. Also, 278 00:14:33,320 --> 00:14:36,200 Speaker 2: if they have never mandated anything before, they are very 279 00:14:36,240 --> 00:14:40,200 Speaker 2: likely to be undating ISSB. Also, as I said, ISSB 280 00:14:40,400 --> 00:14:44,000 Speaker 2: draws a lot of inspiration from TCFD, and TCFD has 281 00:14:44,000 --> 00:14:46,760 Speaker 2: been very popular, so it's easy to say, you know what, 282 00:14:46,800 --> 00:14:49,720 Speaker 2: you've been doing TCFD for such a long time, move 283 00:14:49,760 --> 00:14:52,440 Speaker 2: on to ISSB. There are some tweaks here and there. 284 00:14:52,520 --> 00:14:54,520 Speaker 2: They are a bit different. You need to first do 285 00:14:54,560 --> 00:14:56,880 Speaker 2: climate risk reporting and then you need to do that 286 00:14:56,920 --> 00:15:01,160 Speaker 2: sustainability reporting. So just expand to other areas. I think 287 00:15:01,200 --> 00:15:04,520 Speaker 2: that's what we're going to see. But what we might 288 00:15:04,600 --> 00:15:09,000 Speaker 2: see is companies themselves saying I'm going to report voluntarily 289 00:15:09,040 --> 00:15:12,160 Speaker 2: against CSRD. So there was like a survey published last 290 00:15:12,200 --> 00:15:16,239 Speaker 2: week on Bloomberg that says seventy percent of the companies 291 00:15:16,280 --> 00:15:18,560 Speaker 2: that we're not in school for CSRD, but answered that 292 00:15:18,600 --> 00:15:22,600 Speaker 2: survey we're planning to at least partially report against CSRD. 293 00:15:23,040 --> 00:15:26,760 Speaker 2: Seventy percent. That's massive, and that's across the globe. 294 00:15:27,000 --> 00:15:30,400 Speaker 1: So I may have oversimplified the ISSB is voluntary versus 295 00:15:30,480 --> 00:15:33,760 Speaker 1: the CSRD is mandatory, because we know the CSRD is 296 00:15:33,760 --> 00:15:36,360 Speaker 1: being implemented in the U and pretty much any company 297 00:15:36,360 --> 00:15:39,080 Speaker 1: that's touching the EUS The way we're framing it with 298 00:15:39,240 --> 00:15:44,080 Speaker 1: ISSB as it being voluntary in theory when countries adopt 299 00:15:44,120 --> 00:15:46,560 Speaker 1: it and say that they're going to phase it in, 300 00:15:46,680 --> 00:15:48,560 Speaker 1: and there actually have been a number of countries that 301 00:15:48,600 --> 00:15:51,240 Speaker 1: have actually announced it that they will be implementing it 302 00:15:51,280 --> 00:15:54,000 Speaker 1: in the future. I think across thirteen markets that are 303 00:15:54,000 --> 00:15:57,880 Speaker 1: in the process of implementing this, it's no longer voluntary 304 00:15:58,160 --> 00:16:01,880 Speaker 1: in those specific countries. So can you kind of clarify 305 00:16:02,200 --> 00:16:06,080 Speaker 1: what voluntary even really means if ultimately the destiny for 306 00:16:06,240 --> 00:16:09,120 Speaker 1: some of these reporting frameworks like the ISSB is getting 307 00:16:09,160 --> 00:16:12,840 Speaker 1: adopted and becoming mandatory in certain jurisdictions. 308 00:16:13,240 --> 00:16:16,080 Speaker 2: Yeah, CSRD has been built straight away to be a 309 00:16:16,120 --> 00:16:19,640 Speaker 2: mandatory framework and being implemented is been built, so there 310 00:16:19,680 --> 00:16:22,680 Speaker 2: is a standard behind it that's been built to be 311 00:16:22,800 --> 00:16:27,280 Speaker 2: the reporting framework that is mundated by the EU ISSB. 312 00:16:27,400 --> 00:16:30,240 Speaker 2: At the beginning, it's a bit like how TCFD worked 313 00:16:30,280 --> 00:16:32,720 Speaker 2: back in the day, Like it's that framework that has 314 00:16:32,760 --> 00:16:36,480 Speaker 2: been built by a third party association, the IFRS foundation. 315 00:16:36,880 --> 00:16:40,080 Speaker 2: That was like, we're building the standard. Whoever wants to 316 00:16:40,200 --> 00:16:43,840 Speaker 2: use it uses it. And when I say whoever, countries 317 00:16:44,080 --> 00:16:44,760 Speaker 2: who wants to. 318 00:16:44,800 --> 00:16:46,520 Speaker 1: Use it, say, we've done the work for you. 319 00:16:46,560 --> 00:16:49,160 Speaker 2: We've done the work for you. The standard has been built. 320 00:16:49,280 --> 00:16:53,280 Speaker 2: Instead of all of you creating your own standard because 321 00:16:53,280 --> 00:16:56,680 Speaker 2: we know you're going to be willing to mundate sustainability reporting, 322 00:16:56,960 --> 00:17:01,000 Speaker 2: instead of choosing a different standard to mum d that reporting, 323 00:17:01,120 --> 00:17:03,320 Speaker 2: we're going to build one standard and then after you're 324 00:17:03,320 --> 00:17:06,960 Speaker 2: going to build laws in your own jurisdiction that moundate 325 00:17:07,080 --> 00:17:10,760 Speaker 2: reporting against the same standard, which is ISSB. So the 326 00:17:10,800 --> 00:17:13,280 Speaker 2: same way back in the day, we had countries saying 327 00:17:13,520 --> 00:17:17,760 Speaker 2: TCFD exists, we ask you to report against TCFD. That's 328 00:17:17,760 --> 00:17:19,719 Speaker 2: the law. The law is to say you need to report, 329 00:17:19,800 --> 00:17:22,480 Speaker 2: and the standard you need to choose to report is TCFD. 330 00:17:22,680 --> 00:17:24,080 Speaker 2: This is what is happening right now. 331 00:17:24,160 --> 00:17:26,639 Speaker 1: So it just has to do with the organization that 332 00:17:26,760 --> 00:17:29,359 Speaker 1: created it, having a lack of authority over countries, but 333 00:17:29,440 --> 00:17:32,480 Speaker 1: ultimately wanting it to become exactory in a number of ocations. 334 00:17:32,720 --> 00:17:35,240 Speaker 2: And then that foundation that was built to develop the 335 00:17:35,320 --> 00:17:39,040 Speaker 2: ISSB was endorsed by many different countries, including the EU, 336 00:17:39,320 --> 00:17:42,479 Speaker 2: saying okay, we need a global standard so that instead 337 00:17:42,480 --> 00:17:45,680 Speaker 2: of going all in our little corner and asking companies 338 00:17:45,720 --> 00:17:47,639 Speaker 2: to do a reporting that is a tiny bit different 339 00:17:47,680 --> 00:17:50,159 Speaker 2: from one another or completely different, then we're going to 340 00:17:50,240 --> 00:17:52,119 Speaker 2: have a standard we can all abide with. On the 341 00:17:52,160 --> 00:17:55,119 Speaker 2: other side, the CSRD relies on its own standard that 342 00:17:55,160 --> 00:17:58,720 Speaker 2: has been built by the EU themselves. It's called the 343 00:17:58,800 --> 00:18:03,840 Speaker 2: European Sustainability Reporting Standard. So effectively, when I took about CSRDVERSSSB, 344 00:18:03,920 --> 00:18:09,280 Speaker 2: it's effectively the European Sustainability Reporting Standard ESRs against ISSB. 345 00:18:09,400 --> 00:18:11,800 Speaker 2: These are the two different reporting standard. One is going 346 00:18:11,840 --> 00:18:13,840 Speaker 2: to tell you need to build that table. The other 347 00:18:13,880 --> 00:18:16,199 Speaker 2: one will tell you you need to be that other table. 348 00:18:16,400 --> 00:18:19,560 Speaker 2: That's what is different. So then in itself ISSB does 349 00:18:19,600 --> 00:18:23,360 Speaker 2: not mandate anything to anyone, but then it's being endorsed 350 00:18:23,400 --> 00:18:27,679 Speaker 2: by government and put into law in different jurisdictions. 351 00:18:26,960 --> 00:18:29,919 Speaker 1: Well, and among this list of governments that have adopted this, 352 00:18:30,119 --> 00:18:32,640 Speaker 1: there seem to be a number of emerging markets who 353 00:18:32,640 --> 00:18:34,680 Speaker 1: have actually signed up for it. And do you think 354 00:18:34,680 --> 00:18:38,040 Speaker 1: there's any particular reason that it has been popular in 355 00:18:38,200 --> 00:18:39,160 Speaker 1: emerging markets. 356 00:18:39,440 --> 00:18:43,639 Speaker 2: I think it's because the ISSB standard is an easy 357 00:18:43,640 --> 00:18:46,439 Speaker 2: lift when you're at the beginning, in the early stage 358 00:18:46,440 --> 00:18:50,320 Speaker 2: of developing a sustainable finance market. It means that if 359 00:18:50,359 --> 00:18:54,399 Speaker 2: you want companies to start assessing their exposure to sustainability 360 00:18:54,400 --> 00:18:57,720 Speaker 2: and climate risk, the ISSB is not that difficult to 361 00:18:58,080 --> 00:19:02,160 Speaker 2: get a political approval on because it's just single materiality, 362 00:19:02,240 --> 00:19:05,280 Speaker 2: so it's just looking at the financial impact of sustainability 363 00:19:05,320 --> 00:19:08,720 Speaker 2: matters compared to the CSRD that I explained earlier, So 364 00:19:08,960 --> 00:19:11,480 Speaker 2: that makes it easier. And it's also an easy lift 365 00:19:11,560 --> 00:19:14,920 Speaker 2: because it's very much like as I said, it's super 366 00:19:14,920 --> 00:19:17,359 Speaker 2: similar to TCFD, so you had already a lot of 367 00:19:17,400 --> 00:19:21,119 Speaker 2: companies that had endorsed that framework, and it's just like 368 00:19:21,240 --> 00:19:24,080 Speaker 2: expending a tiny bit the perimeter of TCFD. So that 369 00:19:24,160 --> 00:19:27,080 Speaker 2: might be the reason why. The main thing we might see, however, 370 00:19:27,440 --> 00:19:31,520 Speaker 2: is that with CSRD ISSB, all these different like reporting 371 00:19:31,560 --> 00:19:34,520 Speaker 2: framework popping up is that what I hear from companies 372 00:19:34,560 --> 00:19:37,280 Speaker 2: is companies are saying, we're happy to do all these exercise. 373 00:19:37,359 --> 00:19:39,159 Speaker 2: We know we have to report on new stuff, on 374 00:19:39,240 --> 00:19:42,720 Speaker 2: new factors. We're happy to devote the teams to do that, 375 00:19:42,960 --> 00:19:46,240 Speaker 2: to put the means towards building this. We think it's 376 00:19:46,280 --> 00:19:50,240 Speaker 2: actually representing our business a bit better. However, if investors 377 00:19:50,560 --> 00:19:53,720 Speaker 2: that have like a good sustainability performance, I'm talking on 378 00:19:53,800 --> 00:19:56,280 Speaker 2: the companies that are training, like, look, we're actually making 379 00:19:56,320 --> 00:19:58,680 Speaker 2: an effort. What they're telling us is that if this 380 00:19:58,840 --> 00:20:01,960 Speaker 2: doesn't lead in investors to invest more in us to 381 00:20:02,119 --> 00:20:05,160 Speaker 2: decrease our cost eff equity, to decrease our cost of debt, Basically, 382 00:20:05,200 --> 00:20:08,520 Speaker 2: that like not reward us on the back of the 383 00:20:08,640 --> 00:20:10,919 Speaker 2: all these efforts that we do just going to end 384 00:20:11,000 --> 00:20:14,080 Speaker 2: up doing it as a compliance stickboxing exercise. 385 00:20:14,040 --> 00:20:15,800 Speaker 1: And it's not going to drive the same level of 386 00:20:15,880 --> 00:20:18,879 Speaker 1: change that it potentially exactly, which then leads us. So 387 00:20:18,880 --> 00:20:20,359 Speaker 1: I want to make sure that we have enough time 388 00:20:20,440 --> 00:20:23,320 Speaker 1: to talk about this new tracker that we've made focused 389 00:20:23,359 --> 00:20:28,119 Speaker 1: on anti ESG legislation, specifically in the US, which is 390 00:20:28,160 --> 00:20:29,719 Speaker 1: the other side of it. So as we end up 391 00:20:29,720 --> 00:20:34,280 Speaker 1: seeing more legislation mandating reporting and trying to you know, 392 00:20:34,320 --> 00:20:36,600 Speaker 1: really rally people around, coming up with a common set 393 00:20:36,640 --> 00:20:40,240 Speaker 1: of metrics and the ability to make decisions based on 394 00:20:40,320 --> 00:20:43,560 Speaker 1: better quality data. When it comes to sustainability, there's been 395 00:20:43,680 --> 00:20:46,680 Speaker 1: this movement, if you will, across a number of US 396 00:20:46,680 --> 00:20:49,680 Speaker 1: states that have essentially said that, well, maybe that reward 397 00:20:50,000 --> 00:20:53,240 Speaker 1: in terms of performance doesn't necessarily exist and it could 398 00:20:53,240 --> 00:20:57,240 Speaker 1: be at conflict with fudiciary duty. Therefore ESG is not 399 00:20:57,320 --> 00:20:59,560 Speaker 1: allowed in our state. And even if you're not on 400 00:20:59,680 --> 00:21:02,359 Speaker 1: Walls Street in New York and the amount of money 401 00:21:02,400 --> 00:21:05,480 Speaker 1: moving there, pension funds are a big deal and states 402 00:21:05,520 --> 00:21:08,080 Speaker 1: control a lot of pension money. So can you talk 403 00:21:08,119 --> 00:21:11,040 Speaker 1: a little bit about, well, first of all, how many 404 00:21:11,080 --> 00:21:15,120 Speaker 1: of these anti ESG bills have passed? Where they are 405 00:21:15,280 --> 00:21:17,320 Speaker 1: you know, really what's happening in the US with that. 406 00:21:17,600 --> 00:21:21,679 Speaker 2: We've seen more than fifteen ANTIESG policy being passed in 407 00:21:21,680 --> 00:21:24,480 Speaker 2: the US. And when I say ANTIESG policy, there are 408 00:21:24,520 --> 00:21:27,600 Speaker 2: two kinds. Anti ESG is like the main title, but 409 00:21:27,760 --> 00:21:30,040 Speaker 2: there is one that is truly anti ISGU, which is, 410 00:21:30,080 --> 00:21:33,959 Speaker 2: as you said, it's been questioned whether undamental social and 411 00:21:34,000 --> 00:21:37,520 Speaker 2: governance factor are actually financially material. 412 00:21:37,400 --> 00:21:39,920 Speaker 1: And there is data suggesting one or the other. So 413 00:21:39,960 --> 00:21:42,199 Speaker 1: it depends on I mean, it's almost a philosophical view, 414 00:21:42,240 --> 00:21:44,239 Speaker 1: depending upon what data you're going to adopt and what 415 00:21:44,280 --> 00:21:46,960 Speaker 1: studies you actually want to evaluate. Because certainly on the 416 00:21:47,000 --> 00:21:49,840 Speaker 1: other side, there are plenty of studies that do say 417 00:21:49,920 --> 00:21:53,320 Speaker 1: that it improves financial performance, especially over the longer term. 418 00:21:53,040 --> 00:21:55,639 Speaker 2: Exactly on the medium to long term. And so a 419 00:21:55,640 --> 00:21:58,880 Speaker 2: certain state have said, you're breaching your fuduciary duty, which 420 00:21:58,920 --> 00:22:01,560 Speaker 2: to explain to our od and so if you're like 421 00:22:01,800 --> 00:22:05,320 Speaker 2: not from financial markets the future duties to duty an 422 00:22:05,320 --> 00:22:08,640 Speaker 2: investor has towards its clients, which is to make the 423 00:22:08,680 --> 00:22:13,240 Speaker 2: most profitable financial decision for them, taking into account their 424 00:22:13,280 --> 00:22:16,679 Speaker 2: preferences in terms of risk and return. And so they say, okay, 425 00:22:16,680 --> 00:22:20,760 Speaker 2: we don't want any state pension to take into account onunrontal, 426 00:22:20,840 --> 00:22:23,439 Speaker 2: social or governance factors. So that's an entire year, is 427 00:22:23,520 --> 00:22:26,160 Speaker 2: you know. The other type of flow is like much 428 00:22:26,200 --> 00:22:29,200 Speaker 2: more straightforward, which is like it's called the boycott law, 429 00:22:29,480 --> 00:22:33,880 Speaker 2: So it's basically boycotting any financial institution and sometimes even 430 00:22:33,920 --> 00:22:38,520 Speaker 2: companies that take into account sustainability and that the state 431 00:22:39,000 --> 00:22:44,480 Speaker 2: deems to support. Sustainability matters. So certain state have completely 432 00:22:44,520 --> 00:22:49,959 Speaker 2: banned numerous financial institutions in the likes of black Rock, BNP, PARBA, 433 00:22:50,400 --> 00:22:53,959 Speaker 2: a lot of European financial institutions as well, because they 434 00:22:54,320 --> 00:22:57,960 Speaker 2: deem them to be pushing a sustainability agenda. We're talking 435 00:22:58,000 --> 00:23:00,320 Speaker 2: about more than fifteen states, and. 436 00:23:00,400 --> 00:23:03,359 Speaker 1: They're boycotting the entire organization or just the funds that 437 00:23:04,040 --> 00:23:07,440 Speaker 1: actually use the SG criteria because these different desks do 438 00:23:07,600 --> 00:23:10,840 Speaker 1: operate separately from each other and have different standards that 439 00:23:10,880 --> 00:23:11,680 Speaker 1: they hold themselves to. 440 00:23:11,960 --> 00:23:15,720 Speaker 2: No the entire financial institutions, which leads them in certain cases. 441 00:23:16,520 --> 00:23:19,680 Speaker 2: There was one of the state that it led them 442 00:23:19,760 --> 00:23:24,640 Speaker 2: to basically not being able to raise their state level debt. 443 00:23:25,119 --> 00:23:28,560 Speaker 2: For financial institutions, it's actually it's beyond investors. It's like 444 00:23:28,680 --> 00:23:31,159 Speaker 2: you have a smaller list of banks that will be 445 00:23:31,280 --> 00:23:34,120 Speaker 2: able to underwrite your debt and get you the best 446 00:23:34,200 --> 00:23:36,680 Speaker 2: deal for your debt. So you end up having to 447 00:23:36,840 --> 00:23:40,160 Speaker 2: raise your debt through an auction process, which is much 448 00:23:40,280 --> 00:23:44,920 Speaker 2: less financially interesting and paying higher interest rate because you 449 00:23:45,080 --> 00:23:48,120 Speaker 2: don't have the same ability to go through an underwriter 450 00:23:48,400 --> 00:23:52,680 Speaker 2: aka a bank. Because you've banned bnppre Aby, you've banned HSBC, 451 00:23:52,840 --> 00:23:56,359 Speaker 2: you've banned Barclays and Therefore you reach a lower investor pool, 452 00:23:56,480 --> 00:23:58,440 Speaker 2: and you have less people to sell your bones to, 453 00:23:58,800 --> 00:24:00,920 Speaker 2: and you pay a higher interest because there is less 454 00:24:00,960 --> 00:24:02,480 Speaker 2: a bidding wharf for your debt. 455 00:24:02,800 --> 00:24:06,320 Speaker 1: So there are negative, arguably unintended consequences of this legislation 456 00:24:06,600 --> 00:24:08,520 Speaker 1: for the states that have passed it. But how about 457 00:24:08,560 --> 00:24:10,760 Speaker 1: on the other side, So the companies that actually want 458 00:24:10,800 --> 00:24:13,320 Speaker 1: to attract this pension fund money, are they changing and 459 00:24:13,400 --> 00:24:16,960 Speaker 1: are they essentially abandoning their ESG rules in order to 460 00:24:17,119 --> 00:24:17,600 Speaker 1: attract it. 461 00:24:17,800 --> 00:24:20,960 Speaker 2: So what we found very interestingly, and some of you 462 00:24:21,040 --> 00:24:23,320 Speaker 2: who are familiar with the market have seen this as well, 463 00:24:23,480 --> 00:24:28,360 Speaker 2: is that companies, investors' state level institutions as well sometimes 464 00:24:28,440 --> 00:24:32,920 Speaker 2: continue with these strategies. They continue to integrate environmental, social, 465 00:24:33,000 --> 00:24:36,520 Speaker 2: and governance matters, They continue to have a sustainability strategy, 466 00:24:36,720 --> 00:24:38,840 Speaker 2: they just don't talk about it or like they switch 467 00:24:38,960 --> 00:24:42,440 Speaker 2: on and off who they talk about it too. The 468 00:24:42,520 --> 00:24:45,960 Speaker 2: companies of these states, they'll still have to attract international investors, 469 00:24:46,200 --> 00:24:48,920 Speaker 2: and for that they can't negate the need to have, like, 470 00:24:49,000 --> 00:24:51,920 Speaker 2: for instance, a sustainability strategy. It's just that they might 471 00:24:52,040 --> 00:24:55,440 Speaker 2: not like present it to everyone. A key example, like 472 00:24:55,600 --> 00:24:59,280 Speaker 2: from a data perspective, we have like a concrete example. 473 00:24:59,359 --> 00:25:01,800 Speaker 2: For instance, in the state of Florida, there was a 474 00:25:01,960 --> 00:25:06,480 Speaker 2: law being passed where Florida Institution could not raise any 475 00:25:06,560 --> 00:25:09,600 Speaker 2: sustainable bond, so they were not allowed to raise a green, 476 00:25:09,680 --> 00:25:13,320 Speaker 2: social or sustainability bond whatsoever. And what we've seen is 477 00:25:13,400 --> 00:25:16,680 Speaker 2: that there is a county within the state of Florida 478 00:25:17,000 --> 00:25:20,480 Speaker 2: that issue the bond after this law was passed, and 479 00:25:20,800 --> 00:25:23,960 Speaker 2: it's technically a green bond because it was done for 480 00:25:24,280 --> 00:25:29,520 Speaker 2: biodiversity protection and land protection purposes. But the county, which 481 00:25:29,600 --> 00:25:33,200 Speaker 2: is Hillsboro County, has decided to not label that bond, 482 00:25:33,359 --> 00:25:36,879 Speaker 2: which was twenty seven tranches, as green, so it shows 483 00:25:36,960 --> 00:25:40,160 Speaker 2: that it's being done. The money is raised for green 484 00:25:40,240 --> 00:25:43,479 Speaker 2: purposes because this is going for land and biodiversity protection, 485 00:25:43,720 --> 00:25:45,840 Speaker 2: but it's just not being labeled as green anymore. 486 00:25:46,280 --> 00:25:49,040 Speaker 1: Well, because presumably it's a good investment and they're focusing 487 00:25:49,080 --> 00:25:50,960 Speaker 1: on it anyway. And maybe that's the argument, is that 488 00:25:51,080 --> 00:25:54,119 Speaker 1: the investments will still happen, yes, if they are good investments, 489 00:25:54,320 --> 00:25:57,359 Speaker 1: but they won't be under the guise of ESG. It'll 490 00:25:57,440 --> 00:25:58,719 Speaker 1: just be an investment like any other. 491 00:25:58,920 --> 00:26:01,480 Speaker 2: Yeah, exactly. So we're going like ten years back. 492 00:26:01,760 --> 00:26:04,000 Speaker 1: So how about the states that have a commitment to 493 00:26:04,960 --> 00:26:08,480 Speaker 1: ESG frameworks and making sure that sustainability is taken into 494 00:26:08,520 --> 00:26:11,640 Speaker 1: consideration for their pension funds, because all of these financial 495 00:26:11,680 --> 00:26:13,880 Speaker 1: institutions want to attract that money as well, so they're 496 00:26:13,920 --> 00:26:16,280 Speaker 1: kind of caught between the two. Are there the same 497 00:26:16,359 --> 00:26:20,840 Speaker 1: number more less of the pro ESG side of things, 498 00:26:21,240 --> 00:26:21,680 Speaker 1: So there are. 499 00:26:21,720 --> 00:26:24,720 Speaker 2: Less pro ESG laws being passed in the US, but 500 00:26:24,840 --> 00:26:27,439 Speaker 2: there are still a substantial amount. So what we call 501 00:26:27,480 --> 00:26:30,120 Speaker 2: a pro ESG look can be either a disclosure lad 502 00:26:30,200 --> 00:26:33,760 Speaker 2: that we've seen in California or a divestment law basically 503 00:26:33,840 --> 00:26:37,760 Speaker 2: asking pension funds in the state to divest from certain sectors. 504 00:26:37,960 --> 00:26:40,119 Speaker 2: And these are being passed in state, and there are 505 00:26:40,200 --> 00:26:42,879 Speaker 2: more in the pipeline, and maybe the presidential election is 506 00:26:42,920 --> 00:26:45,440 Speaker 2: also going to have an impact on that. So these 507 00:26:45,480 --> 00:26:49,840 Speaker 2: are being passed and effectively there's still like an unstoppable 508 00:26:50,200 --> 00:26:51,960 Speaker 2: trend that will continue. 509 00:26:52,359 --> 00:26:54,280 Speaker 1: So do you think we've seen an end of these laws, 510 00:26:54,320 --> 00:26:58,200 Speaker 1: whether pro or anti in the US? Specifically those states 511 00:26:58,240 --> 00:26:59,920 Speaker 1: that are kind of straddling the middle of the line 512 00:27:00,080 --> 00:27:02,119 Speaker 1: and not taking a stance, do you expect more of 513 00:27:02,200 --> 00:27:04,560 Speaker 1: them to essentially make a decision as to what side 514 00:27:04,600 --> 00:27:05,320 Speaker 1: of this they fall on. 515 00:27:05,720 --> 00:27:08,240 Speaker 2: No, we are seeing more in the pipeline. We're seeing 516 00:27:08,240 --> 00:27:10,840 Speaker 2: the state that have already passed pro and anti ESG 517 00:27:11,000 --> 00:27:15,200 Speaker 2: LO continue to push more lows, and we're seeing new 518 00:27:15,359 --> 00:27:18,080 Speaker 2: states having lows in the pipeline as well. 519 00:27:18,359 --> 00:27:22,520 Speaker 1: So we're seeing some of the pro ESG states being Massachusetts, Washington, 520 00:27:22,640 --> 00:27:24,919 Speaker 1: and some of the anti states being like Florida Texas. 521 00:27:25,080 --> 00:27:28,600 Speaker 1: Are they following the typical voting red and blue state 522 00:27:28,720 --> 00:27:30,360 Speaker 1: lines so largely. 523 00:27:30,160 --> 00:27:33,480 Speaker 2: Yes, with some exceptions to it, but important like red 524 00:27:33,520 --> 00:27:38,480 Speaker 2: state have passed these kind of floats such as Florida, Texas, Alabama, 525 00:27:38,760 --> 00:27:42,040 Speaker 2: which we're not surprising, and California has passed one of 526 00:27:42,080 --> 00:27:45,600 Speaker 2: the first pro ESG LOO. Indeed, there is a correlation there. 527 00:27:45,960 --> 00:27:48,480 Speaker 2: The reason why there is this trend of pro versus 528 00:27:48,560 --> 00:27:51,280 Speaker 2: anti ESG lows in the US at the state level 529 00:27:51,440 --> 00:27:54,480 Speaker 2: is that, compared to other parts of the world, in 530 00:27:54,600 --> 00:27:59,080 Speaker 2: the US, promoting sustainable finance and promoting ESG investment is 531 00:27:59,080 --> 00:28:02,720 Speaker 2: seen as a politic agenda, and that's very, very very important. 532 00:28:02,880 --> 00:28:05,760 Speaker 2: It's a big distinction compared to other parts of the 533 00:28:05,840 --> 00:28:08,480 Speaker 2: world where we're seen in the EU and in the 534 00:28:08,640 --> 00:28:11,800 Speaker 2: UK for instance, or even in Singapore and Hong Kong. 535 00:28:11,960 --> 00:28:16,440 Speaker 2: It's been seen from a prudential regulation vision first, as 536 00:28:16,520 --> 00:28:20,280 Speaker 2: in the goal and it was the work of the Carnes, 537 00:28:20,480 --> 00:28:22,479 Speaker 2: it was the work of the Christiane la Guard back 538 00:28:22,520 --> 00:28:25,920 Speaker 2: in the day to say sustainability risk and climate risk 539 00:28:26,400 --> 00:28:29,960 Speaker 2: or real risk, they pose risk to financial stability. The 540 00:28:30,040 --> 00:28:33,800 Speaker 2: financial regulators are really pushing towards like trying to prove 541 00:28:33,880 --> 00:28:36,000 Speaker 2: this out. And the way to prove this out is 542 00:28:36,200 --> 00:28:40,400 Speaker 2: seeing central banks publishing reports to say, hey, we've assessed 543 00:28:40,560 --> 00:28:44,000 Speaker 2: the reliance of our economy onto climate and how much 544 00:28:44,080 --> 00:28:46,800 Speaker 2: climate change is going to impact the profitability of companies 545 00:28:46,840 --> 00:28:49,200 Speaker 2: and stuff like that. Last week in the UK there 546 00:28:49,280 --> 00:28:52,200 Speaker 2: is the Green Fightens Institute that's just published a report 547 00:28:52,320 --> 00:28:56,160 Speaker 2: to show, oh, there is big reliance of our corporations 548 00:28:56,360 --> 00:29:00,400 Speaker 2: on ecosystem services on nature and therefore if we don't 549 00:29:00,520 --> 00:29:03,880 Speaker 2: force financial institutions to take into account nature risk, then 550 00:29:04,040 --> 00:29:06,680 Speaker 2: is going to cause like a big financial stability problem. 551 00:29:06,880 --> 00:29:09,520 Speaker 2: Same in the you. So the first stage is always 552 00:29:09,640 --> 00:29:13,280 Speaker 2: that research stage to prove that it's not a political agenda. 553 00:29:13,480 --> 00:29:15,560 Speaker 2: And in the US I think that we're still struggling 554 00:29:15,640 --> 00:29:18,680 Speaker 2: with that. And therefore if you promote ESG, you're promoting 555 00:29:18,680 --> 00:29:19,840 Speaker 2: a political agenda, so. 556 00:29:19,920 --> 00:29:22,680 Speaker 1: It really transcends policy. And the fact that I even 557 00:29:22,760 --> 00:29:25,240 Speaker 1: asked that question despite living in the UK for eighteen 558 00:29:25,320 --> 00:29:27,360 Speaker 1: years shows just how American I am. 559 00:29:28,360 --> 00:29:31,280 Speaker 2: Yeah, but I think that's what is really really interesting 560 00:29:31,360 --> 00:29:32,400 Speaker 2: about this situation. 561 00:29:32,720 --> 00:29:35,440 Speaker 1: Are we seeing anti ESG legislation outside of the US. 562 00:29:35,600 --> 00:29:37,360 Speaker 2: No, absolutely nowhere, So. 563 00:29:37,400 --> 00:29:40,360 Speaker 1: Everywhere else it's either your adopting a policy or actually 564 00:29:40,560 --> 00:29:43,120 Speaker 1: just getting on with regular business and not really thinking 565 00:29:43,120 --> 00:29:43,840 Speaker 1: about it exactly. 566 00:29:43,960 --> 00:29:47,520 Speaker 2: That it's really an outlier. And actually, when we published 567 00:29:47,560 --> 00:29:50,560 Speaker 2: a report, there was this chart that I was hesitating 568 00:29:50,600 --> 00:29:53,480 Speaker 2: into including because it shows the US as the largest 569 00:29:53,560 --> 00:29:56,400 Speaker 2: number of sustainable finance policy in the world. But that's 570 00:29:56,480 --> 00:30:00,680 Speaker 2: only because they have all these anti ESG barriers and 571 00:30:01,040 --> 00:30:03,920 Speaker 2: they account for more than half of the sustainable finance 572 00:30:03,920 --> 00:30:06,440 Speaker 2: policy in the US. But it's also because of them. 573 00:30:06,760 --> 00:30:08,680 Speaker 2: We need to bear in mind that certain countries have 574 00:30:08,800 --> 00:30:12,000 Speaker 2: expanded the bund dates of financial regulators, so for instance, 575 00:30:12,040 --> 00:30:15,400 Speaker 2: in the EU, it's much easier for certain regulators to 576 00:30:15,480 --> 00:30:18,960 Speaker 2: pass policies to promote sustainable finance, while in the US 577 00:30:19,000 --> 00:30:20,120 Speaker 2: it's much more complicated. 578 00:30:20,600 --> 00:30:23,880 Speaker 1: So my last question is just really who do policies 579 00:30:23,920 --> 00:30:26,120 Speaker 1: And we're going to talk about them globally in this context, 580 00:30:26,280 --> 00:30:29,680 Speaker 1: who do they impact most? Are they targeted towards the investors? 581 00:30:29,720 --> 00:30:33,080 Speaker 1: The corporations credit agencies I know also have some policies 582 00:30:33,120 --> 00:30:35,720 Speaker 1: focused on them. What is the breakdown of who needs 583 00:30:35,760 --> 00:30:36,680 Speaker 1: to care the most about this? 584 00:30:37,080 --> 00:30:40,240 Speaker 2: I'd say up until now it was mostly corporations, And 585 00:30:40,360 --> 00:30:44,840 Speaker 2: I usually take this example for me. Sustainability data from 586 00:30:44,920 --> 00:30:49,200 Speaker 2: corporation is basically the main commodity for a healthy sustainable 587 00:30:49,240 --> 00:30:51,440 Speaker 2: finance market, the same way that we need data for 588 00:30:51,520 --> 00:30:55,920 Speaker 2: a healthy financial market. You know, corporations where the largest 589 00:30:56,320 --> 00:31:00,640 Speaker 2: impacted target group, but that's shifting away to really target 590 00:31:00,760 --> 00:31:04,840 Speaker 2: investors and banks. Now investors are the most targeted group 591 00:31:04,960 --> 00:31:07,800 Speaker 2: as of like this this quatter, but that's also because 592 00:31:07,920 --> 00:31:10,720 Speaker 2: they are not being asked just to report on ESG reporting, 593 00:31:11,400 --> 00:31:13,720 Speaker 2: you know, like to do ESG disclosure. They are asked 594 00:31:13,800 --> 00:31:17,280 Speaker 2: to then integrate ESG into their investment processes. They are 595 00:31:17,480 --> 00:31:20,800 Speaker 2: asked to do climate risk management, they are asked to 596 00:31:21,080 --> 00:31:23,600 Speaker 2: do reporting, They are asked to take into account new 597 00:31:23,640 --> 00:31:26,880 Speaker 2: sustainability preferences from their clients. Like there is a wide 598 00:31:27,000 --> 00:31:29,360 Speaker 2: range of the men that are done for them. And 599 00:31:29,480 --> 00:31:32,040 Speaker 2: then banks are also being targeted a lot banks are 600 00:31:32,240 --> 00:31:35,560 Speaker 2: very targeted on the risk side, like climate risk stress testing, 601 00:31:35,640 --> 00:31:39,440 Speaker 2: climate risk management, climate risk disclosure, which is necessity to 602 00:31:39,640 --> 00:31:43,240 Speaker 2: prevent that economic meltdown if they don't take into account 603 00:31:43,280 --> 00:31:45,600 Speaker 2: these risks. But it can also have a great impact 604 00:31:45,640 --> 00:31:48,120 Speaker 2: on the energy transition, and that's like one of the 605 00:31:48,200 --> 00:31:51,120 Speaker 2: goal at BNF. The way we see that research is 606 00:31:51,400 --> 00:31:55,920 Speaker 2: how are all these policies eventually supporting the energy transition, 607 00:31:56,240 --> 00:31:59,320 Speaker 2: how are they driving new investment and effectively asking to 608 00:31:59,400 --> 00:32:02,240 Speaker 2: take into account climate risk and sustainability to risk in 609 00:32:02,320 --> 00:32:04,840 Speaker 2: our view is to say, okay, then there's probably going 610 00:32:04,920 --> 00:32:07,520 Speaker 2: to be a shift in investment. If you start taking 611 00:32:07,560 --> 00:32:10,320 Speaker 2: into account climate risk, then you will probably shift your 612 00:32:10,360 --> 00:32:14,600 Speaker 2: portfolio towards more climate resilience, energy solutions, and solutions for 613 00:32:14,720 --> 00:32:18,600 Speaker 2: the future. So to answer your question, corporations, investors and 614 00:32:18,800 --> 00:32:23,400 Speaker 2: banks with now a few posts looking at credit rating agencies, exchanges, 615 00:32:23,640 --> 00:32:27,040 Speaker 2: data providers, all these kind of intermediaries that make a 616 00:32:27,120 --> 00:32:28,160 Speaker 2: healthy financial market. 617 00:32:28,280 --> 00:32:31,840 Speaker 1: But that's a much smaller so much more diction. Indeed, Well, 618 00:32:31,920 --> 00:32:33,840 Speaker 1: maya thank you for clearing things up for me on 619 00:32:34,080 --> 00:32:36,800 Speaker 1: this recent wave of policy that has come through and 620 00:32:36,920 --> 00:32:38,400 Speaker 1: kind of some of the things that we need to 621 00:32:38,480 --> 00:32:41,160 Speaker 1: know we didn't even get into the taxonomy changes that 622 00:32:41,240 --> 00:32:43,080 Speaker 1: have gone through, so there's always a need to have 623 00:32:43,160 --> 00:32:44,920 Speaker 1: you back to clear things up for us. And thank 624 00:32:45,000 --> 00:32:46,680 Speaker 1: you for joining today to talk us through. 625 00:32:46,920 --> 00:32:47,720 Speaker 2: Thank you so much. 626 00:32:56,880 --> 00:32:59,920 Speaker 1: Today's episode of Switched On was produced by Cam Gray 627 00:33:00,240 --> 00:33:03,840 Speaker 1: with production assistance from Kamala Shelling. 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