1 00:00:00,480 --> 00:00:03,120 Speaker 1: This is Tom Rowland's Rees and you're listening to Switched 2 00:00:03,160 --> 00:00:06,920 Speaker 1: on the podcast brought to you by Bloomberg NIF. Sustainable 3 00:00:06,960 --> 00:00:09,520 Speaker 1: finance has entered what you might call its messy middle 4 00:00:09,840 --> 00:00:13,239 Speaker 1: after years of rapid policy expansion. Twenty twenty five saw 5 00:00:13,320 --> 00:00:16,960 Speaker 1: twenty major sustainable finance developments globally, but four of them 6 00:00:16,960 --> 00:00:21,320 Speaker 1: were rollbacks. The EU we can flagship corporate reporting rules, 7 00:00:21,600 --> 00:00:25,360 Speaker 1: the US withdrew its last major federal ESG guidance, and 8 00:00:25,480 --> 00:00:29,600 Speaker 1: other markets signal pauses or simplifications, even as Asia Pacific 9 00:00:29,680 --> 00:00:33,000 Speaker 1: continue to push forward with new standards and taxonomies. So 10 00:00:33,120 --> 00:00:36,240 Speaker 1: are we witnessing a retreat or simply the growing pains 11 00:00:36,240 --> 00:00:38,800 Speaker 1: of a framework that has become significant enough to face 12 00:00:38,880 --> 00:00:42,960 Speaker 1: real political and financial pushback. And as reporting standards consolidate 13 00:00:43,000 --> 00:00:45,839 Speaker 1: and investors continue to demand better data, what does this 14 00:00:45,920 --> 00:00:49,040 Speaker 1: next phase mean for the future of sustainable finance. On 15 00:00:49,120 --> 00:00:52,640 Speaker 1: today's show, I'm joined by Maya Messenger, a BIONIF specialist 16 00:00:52,640 --> 00:00:55,760 Speaker 1: in finance policy and transition risk, and together we review 17 00:00:55,800 --> 00:00:59,680 Speaker 1: findings from her note Sustainable Finance Policy Quarterly four Q 18 00:00:59,720 --> 00:01:03,880 Speaker 1: twenty BNEF clients can find this note, along with other 19 00:01:03,920 --> 00:01:07,000 Speaker 1: sustainable finance and policy research by heading to BNF go 20 00:01:07,120 --> 00:01:09,880 Speaker 1: on the Bloomberg terminal or BNF dot com. If you'd 21 00:01:09,959 --> 00:01:13,000 Speaker 1: like to learn more about how BNF approaches strategy research 22 00:01:13,040 --> 00:01:16,640 Speaker 1: on the energy transition, including developments and commodity markets, trends 23 00:01:16,680 --> 00:01:20,160 Speaker 1: across different sectors, and the cross cutting technology shaping the future. 24 00:01:20,280 --> 00:01:22,920 Speaker 1: You can find more information on BNF dot com, and 25 00:01:22,959 --> 00:01:24,320 Speaker 1: if you'd like to speak with a member of our 26 00:01:24,319 --> 00:01:27,200 Speaker 1: team about becoming a client, email us at Sales dot 27 00:01:27,240 --> 00:01:30,800 Speaker 1: BNF at Bloomberg dot net. But for now, let's dig 28 00:01:30,800 --> 00:01:43,880 Speaker 1: into how sustainable finance is evolving from here. Ryer, Welcome 29 00:01:43,920 --> 00:01:44,680 Speaker 1: to the podcast. 30 00:01:45,040 --> 00:01:46,800 Speaker 2: Hi Tom, really happy to be here. 31 00:01:47,319 --> 00:01:51,640 Speaker 1: So we are talking about sustainable finance today and sustainable 32 00:01:51,640 --> 00:01:55,280 Speaker 1: finance policy. As suppos sustainable finance is one of these 33 00:01:55,320 --> 00:01:58,880 Speaker 1: things that sounds very simple. You know, we know what 34 00:01:58,960 --> 00:02:01,920 Speaker 1: sustainability is, we know what finances, so surely we know 35 00:02:01,920 --> 00:02:04,920 Speaker 1: what sustainable finances. But it's a little more complicated than that. 36 00:02:05,120 --> 00:02:08,560 Speaker 1: And I'm assuming that there's a range of expertise amongst 37 00:02:08,600 --> 00:02:11,520 Speaker 1: our listeners. There's probably some of the like the sustainable 38 00:02:11,560 --> 00:02:15,080 Speaker 1: finance ogs, who are listening as much as anything to 39 00:02:15,240 --> 00:02:17,560 Speaker 1: hear whether you give them a shout out or not. 40 00:02:17,840 --> 00:02:20,400 Speaker 1: Maybe some people who are less familiar with the subject, 41 00:02:20,480 --> 00:02:22,799 Speaker 1: who you know, know, like I say, what the word 42 00:02:22,840 --> 00:02:26,080 Speaker 1: sustainable means, what the word finance means? So maya before 43 00:02:26,120 --> 00:02:28,480 Speaker 1: we kind of dive a little bit deeper into some 44 00:02:28,520 --> 00:02:32,080 Speaker 1: of your latest research into sustainable finance, can we just 45 00:02:32,280 --> 00:02:35,560 Speaker 1: clarify for everyone and maybe to some extent me, what 46 00:02:35,680 --> 00:02:37,679 Speaker 1: we really mean by sustainable finance. 47 00:02:38,120 --> 00:02:40,520 Speaker 2: Yeah, sure, it's almost we could do a podcast just 48 00:02:40,560 --> 00:02:43,600 Speaker 2: on this because this has been questioned quite a lot recently. 49 00:02:44,040 --> 00:02:44,920 Speaker 1: All right, let's do it. 50 00:02:45,600 --> 00:02:49,880 Speaker 2: Yeah, I'd say it's basically the there are two sides 51 00:02:49,919 --> 00:02:55,079 Speaker 2: of it. It's it's the integration of sustainability matters related 52 00:02:55,120 --> 00:02:59,880 Speaker 2: to UNRON mental sustainability matters, social and governance matters in 53 00:03:00,000 --> 00:03:06,800 Speaker 2: integrated within the decision making processes of financial institutions, which 54 00:03:06,919 --> 00:03:10,079 Speaker 2: also means that companies have to take it into account, 55 00:03:10,400 --> 00:03:14,639 Speaker 2: report on environmental, social and governance matters and their performance 56 00:03:14,720 --> 00:03:17,960 Speaker 2: so that action can be made by financial institutions off 57 00:03:17,960 --> 00:03:18,520 Speaker 2: the back of it. 58 00:03:18,919 --> 00:03:21,320 Speaker 1: So what does that look like? Does that mean that 59 00:03:21,360 --> 00:03:26,160 Speaker 1: there is certain definitions created around finance that kind of 60 00:03:26,360 --> 00:03:31,399 Speaker 1: rate its sustainability along those different metrics, and then companies 61 00:03:32,320 --> 00:03:34,840 Speaker 1: have targets or expected to report on them. 62 00:03:35,240 --> 00:03:36,200 Speaker 3: It's a great question. 63 00:03:36,440 --> 00:03:40,960 Speaker 2: So to have integral violence, you need to have sustainability reporting. 64 00:03:41,080 --> 00:03:44,600 Speaker 2: That's also why policy is so important and effectively, for 65 00:03:44,640 --> 00:03:47,760 Speaker 2: a longest time, we had a lot of voluntary framework 66 00:03:47,880 --> 00:03:53,280 Speaker 2: that promoted reporting from companies on these particular topics, and 67 00:03:53,320 --> 00:03:57,520 Speaker 2: then progressively that came into law, and the goal was 68 00:03:57,560 --> 00:04:00,920 Speaker 2: to have standardized data so that we could eight companies 69 00:04:01,040 --> 00:04:04,480 Speaker 2: of the back of their sustainability performance, and so that 70 00:04:04,800 --> 00:04:09,760 Speaker 2: fincial institutions could effectively take this into account and start 71 00:04:10,040 --> 00:04:13,520 Speaker 2: ranking analyzing companies off the back of it. Once you 72 00:04:13,560 --> 00:04:15,960 Speaker 2: get that data. I would say that the second step 73 00:04:16,080 --> 00:04:20,480 Speaker 2: was to define sustainable finance, so created frameworks around what 74 00:04:20,520 --> 00:04:24,159 Speaker 2: we call green, what we call sustainable, what then we 75 00:04:24,200 --> 00:04:27,240 Speaker 2: could consider to be a green bond, which is like 76 00:04:27,279 --> 00:04:30,560 Speaker 2: a green piece of debt that is publicly traded or 77 00:04:30,640 --> 00:04:34,000 Speaker 2: somewhat publicly traded, or a green loan. So it was 78 00:04:34,040 --> 00:04:38,280 Speaker 2: about creating all of these classifications, which are often referred 79 00:04:38,320 --> 00:04:41,640 Speaker 2: to as like taxonomies of what we call green or 80 00:04:41,680 --> 00:04:45,240 Speaker 2: sometimes sustainable or sometimes social depending on the market. All 81 00:04:45,279 --> 00:04:48,640 Speaker 2: of this got really important, and that's also why we 82 00:04:48,720 --> 00:04:52,720 Speaker 2: also started having like what we call financial instruments standards. 83 00:04:52,800 --> 00:04:54,880 Speaker 2: So once you know what is green, you can then 84 00:04:54,960 --> 00:04:59,320 Speaker 2: define what is a green fund, what is a green index, 85 00:04:59,480 --> 00:05:02,040 Speaker 2: what is a green piece of debt? And it's true 86 00:05:02,080 --> 00:05:05,160 Speaker 2: for social and the governmance aspect, but also sustainability, which 87 00:05:05,200 --> 00:05:10,800 Speaker 2: is a broader term to basically encompass every aspect of 88 00:05:11,160 --> 00:05:14,599 Speaker 2: the fundamental social and governance impact and perform in social 89 00:05:14,640 --> 00:05:18,040 Speaker 2: company or of an institution. There are these kind of 90 00:05:18,200 --> 00:05:22,440 Speaker 2: like frameworks and policies played a big role in defining them, 91 00:05:22,560 --> 00:05:25,080 Speaker 2: even though for a long time we would still consider 92 00:05:25,120 --> 00:05:26,920 Speaker 2: it to be possy if it's for laundry. 93 00:05:27,240 --> 00:05:29,479 Speaker 1: Well, well, I kind of got a question like that, 94 00:05:29,640 --> 00:05:32,800 Speaker 1: because you know, in a way there's a sort of 95 00:05:33,120 --> 00:05:38,320 Speaker 1: an arc of where this started and where it should 96 00:05:38,440 --> 00:05:41,640 Speaker 1: ideally go. So let me let me just test whether 97 00:05:41,800 --> 00:05:43,840 Speaker 1: this makes sense to you. I mean, I always remember 98 00:05:43,920 --> 00:05:46,720 Speaker 1: in I mean maybe not everyone's seen this film, but 99 00:05:46,880 --> 00:05:49,839 Speaker 1: there's a film that there's a scene often referenced in 100 00:05:49,920 --> 00:05:52,920 Speaker 1: the film The Life of Brian by Monty Python, where 101 00:05:52,920 --> 00:05:56,080 Speaker 1: there's all these different factions. There's the People's Front of Judea, 102 00:05:56,360 --> 00:05:59,200 Speaker 1: there's the jude and People's Front, and there's the Popular 103 00:05:59,400 --> 00:06:03,279 Speaker 1: Front of gue and they all basically have the same objectives, 104 00:06:03,279 --> 00:06:05,480 Speaker 1: but they're all actually kind of competing with each other 105 00:06:05,520 --> 00:06:07,880 Speaker 1: and getting in their way. When you describe the world 106 00:06:07,880 --> 00:06:11,120 Speaker 1: where this was voluntary and there was like multiple frameworks, 107 00:06:11,320 --> 00:06:13,880 Speaker 1: you know, could you characterize that as being a little 108 00:06:13,880 --> 00:06:16,680 Speaker 1: bit like all of these different fractions, like the People's 109 00:06:16,720 --> 00:06:19,719 Speaker 1: Front of Judea. And then the ideal of where they're 110 00:06:19,760 --> 00:06:22,640 Speaker 1: getting to is where this is mainstream. I just like 111 00:06:22,640 --> 00:06:24,839 Speaker 1: the People's Front of Judea one day wanted to be 112 00:06:25,240 --> 00:06:28,400 Speaker 1: the government and in charge. Ideally there would be one 113 00:06:28,520 --> 00:06:32,560 Speaker 1: framework and it's universally adopted. And is it fair to 114 00:06:32,600 --> 00:06:35,560 Speaker 1: say that we're somewhere in the middle of that arc 115 00:06:36,000 --> 00:06:37,960 Speaker 1: in the journey, like in that transition. 116 00:06:38,480 --> 00:06:42,000 Speaker 2: I appreciate the analogy because I've never watched a movie 117 00:06:42,000 --> 00:06:44,600 Speaker 2: from the Monty Python and I am about to help 118 00:06:44,600 --> 00:06:46,799 Speaker 2: the British citizenship hopefully. 119 00:06:46,880 --> 00:06:49,279 Speaker 1: Well, you definitely have to work it. You're going to 120 00:06:49,279 --> 00:06:50,400 Speaker 1: get British citizenship. 121 00:06:50,640 --> 00:06:54,480 Speaker 2: And I think indeed everyone is like trying to strike 122 00:06:54,520 --> 00:06:57,000 Speaker 2: the same goal. And when we see everyone, then in 123 00:06:57,000 --> 00:07:01,600 Speaker 2: this particular case, we could say every market, every bals America, 124 00:07:01,720 --> 00:07:05,480 Speaker 2: every jurisdiction is trying to attempt the same goal, which 125 00:07:05,560 --> 00:07:08,560 Speaker 2: is like unlocking financing for the energy transition if we're 126 00:07:08,600 --> 00:07:11,880 Speaker 2: focus on the environmental and climate side of all of 127 00:07:11,920 --> 00:07:14,800 Speaker 2: these and when it comes to that, they they've tried 128 00:07:14,920 --> 00:07:19,400 Speaker 2: many different paths, and even within this path, like whether 129 00:07:19,440 --> 00:07:23,840 Speaker 2: it is by defining a green taxonomy or enforcing climate 130 00:07:23,960 --> 00:07:28,720 Speaker 2: risk disclosure, they all went their way instead of building 131 00:07:28,800 --> 00:07:31,720 Speaker 2: like a common framework. And that was in the first 132 00:07:31,760 --> 00:07:34,440 Speaker 2: few years, which I would say, we're like we're talking 133 00:07:34,520 --> 00:07:37,360 Speaker 2: now ten fifteen years ago the inception, and then like 134 00:07:37,440 --> 00:07:41,240 Speaker 2: there was a ramp up about like six seven years ago. 135 00:07:41,440 --> 00:07:45,960 Speaker 2: Then really important and well known central bankers got in 136 00:07:46,160 --> 00:07:48,840 Speaker 2: like a really vocal about it. Mark Carney with his 137 00:07:49,240 --> 00:07:53,000 Speaker 2: speech Tragedy of the Horizon kissing la Out followed and 138 00:07:53,040 --> 00:07:56,320 Speaker 2: then it became really popular, and then every market wanted 139 00:07:56,360 --> 00:08:00,400 Speaker 2: to have its sustainable finance road map, like police zero map, 140 00:08:00,560 --> 00:08:04,920 Speaker 2: it's unsustainable finance policy regime, and for instance, they all 141 00:08:05,160 --> 00:08:10,800 Speaker 2: require different sorts of reporting from companies and financial institutions. 142 00:08:11,000 --> 00:08:14,120 Speaker 2: What was considered green in one market was not necessarily 143 00:08:14,120 --> 00:08:16,720 Speaker 2: green in another market. One of the big examples of 144 00:08:16,760 --> 00:08:19,880 Speaker 2: that is gas. It's one of the most controversial one, 145 00:08:20,000 --> 00:08:22,280 Speaker 2: but you do find it in cement as well. You 146 00:08:22,360 --> 00:08:24,920 Speaker 2: do find it in waste management, you do find it 147 00:08:24,960 --> 00:08:29,760 Speaker 2: in the management of water. So some markets imposed themselves 148 00:08:29,800 --> 00:08:32,440 Speaker 2: a bit more and set a standard. That was the 149 00:08:32,480 --> 00:08:34,840 Speaker 2: case for the EU, and I hope we're going to 150 00:08:34,840 --> 00:08:37,840 Speaker 2: talk about why the current rollbacks were seeing in the 151 00:08:37,880 --> 00:08:43,280 Speaker 2: EU effectively has an effect globally because everyone was imitating 152 00:08:43,320 --> 00:08:46,920 Speaker 2: them up until now. The EU was one because it 153 00:08:47,000 --> 00:08:49,760 Speaker 2: was one of the most ambitious one. But also then 154 00:08:49,840 --> 00:08:54,679 Speaker 2: there have been initiative to try to basically coincide everything 155 00:08:55,080 --> 00:08:58,640 Speaker 2: into a global framework, and for instance for climate disclosure 156 00:08:58,679 --> 00:09:03,520 Speaker 2: and sustainability disclosure more broadly. One initiative in particular called 157 00:09:03,559 --> 00:09:09,080 Speaker 2: the International Sustainability Standards Board, which comes from. 158 00:09:08,960 --> 00:09:10,120 Speaker 3: The IFIRS Foundation. 159 00:09:10,280 --> 00:09:13,480 Speaker 2: So for anyone who's listening to us that comes more 160 00:09:13,520 --> 00:09:16,720 Speaker 2: with like an accounting background, or a finance background, or 161 00:09:16,800 --> 00:09:19,480 Speaker 2: is just like working in a company, they'll have heard 162 00:09:19,520 --> 00:09:23,120 Speaker 2: about that because it's a set of international accounting standards 163 00:09:23,120 --> 00:09:25,800 Speaker 2: that everyone was following. They went and they were like, okay, 164 00:09:25,840 --> 00:09:28,240 Speaker 2: we're going to try to build the same way we've 165 00:09:28,240 --> 00:09:32,680 Speaker 2: built an international standards for accounting, which did not exist before. 166 00:09:32,920 --> 00:09:33,680 Speaker 3: We'll try to do. 167 00:09:33,600 --> 00:09:36,640 Speaker 2: The same when it comes to non financial reporting, so 168 00:09:36,760 --> 00:09:39,920 Speaker 2: all these sustainability matters, and that's how they've built the 169 00:09:40,000 --> 00:09:45,080 Speaker 2: ISSB framework. It was really important and really difficult because 170 00:09:45,400 --> 00:09:48,520 Speaker 2: you have different markets with different philosophies and visions of 171 00:09:48,559 --> 00:09:52,000 Speaker 2: sustainability and the energy transition that had to agree on 172 00:09:52,440 --> 00:09:55,120 Speaker 2: what companies have to report, but it got quite popular. 173 00:09:55,160 --> 00:10:00,160 Speaker 2: At this stage, eighteen markets have reporting in alignment with 174 00:10:00,240 --> 00:10:03,360 Speaker 2: that frame, we're in force, and another sixteen or working 175 00:10:03,360 --> 00:10:05,880 Speaker 2: on it. So it means that if you're an international investor, 176 00:10:06,160 --> 00:10:08,719 Speaker 2: if you're an international investor or a lender, you get 177 00:10:08,760 --> 00:10:13,120 Speaker 2: access to standardized data from many different companies across the globe, 178 00:10:13,160 --> 00:10:15,560 Speaker 2: and then you can compare them, even if you're talking 179 00:10:15,600 --> 00:10:18,880 Speaker 2: about companies that are like small Indian company and a 180 00:10:19,040 --> 00:10:22,760 Speaker 2: large Canadian company. And it also means for companies they 181 00:10:22,800 --> 00:10:27,880 Speaker 2: can report on one set of data and fit the 182 00:10:28,000 --> 00:10:33,120 Speaker 2: request of many different investors wherever they are across the glow. 183 00:10:33,320 --> 00:10:35,920 Speaker 1: So there's been real progress made, by the sound of it, 184 00:10:36,200 --> 00:10:40,840 Speaker 1: in those international standards. And you know, I'm only tangentially 185 00:10:40,880 --> 00:10:44,720 Speaker 1: aware of the journey that the accounting business has gone 186 00:10:44,760 --> 00:10:47,680 Speaker 1: on to get aligned internationally, but I know that that 187 00:10:48,040 --> 00:10:52,120 Speaker 1: was a very long and arduous progress and so maybe 188 00:10:52,120 --> 00:10:55,000 Speaker 1: there's cause to be glass half full that things have 189 00:10:55,120 --> 00:10:57,600 Speaker 1: moved as quickly as they can maybe because you know, 190 00:10:57,679 --> 00:11:01,000 Speaker 1: go back to our initial framing, might seem like things 191 00:11:01,040 --> 00:11:03,120 Speaker 1: move slowly, but it takes a lot to go from 192 00:11:03,160 --> 00:11:06,760 Speaker 1: being this fringe set of revolutionary groups to kind of 193 00:11:06,840 --> 00:11:12,840 Speaker 1: becoming a unified global standard. So I suppose then, you know, 194 00:11:12,960 --> 00:11:14,760 Speaker 1: we kind of talked a little about the history and 195 00:11:14,800 --> 00:11:17,360 Speaker 1: the kind of the framing, So let's kind of bring 196 00:11:17,360 --> 00:11:18,719 Speaker 1: it to the here and now because we are here 197 00:11:18,720 --> 00:11:21,640 Speaker 1: to talk about some of your more recent research. Twenty 198 00:11:21,679 --> 00:11:25,080 Speaker 1: twenty five is over. We're now in February twenty twenty six. Yeah, 199 00:11:25,080 --> 00:11:27,400 Speaker 1: what happened in twenty twenty five in this space. 200 00:11:27,440 --> 00:11:30,800 Speaker 2: I'll first go for the positive and then and then 201 00:11:31,040 --> 00:11:33,440 Speaker 2: I'll get a bit grimmer. But I think there has 202 00:11:33,600 --> 00:11:37,240 Speaker 2: been a lot of advancement when it comes to standardizing, 203 00:11:37,640 --> 00:11:41,400 Speaker 2: when it comes to maybe calming down a bit the 204 00:11:41,640 --> 00:11:46,679 Speaker 2: rhythm at which policymakers were publishing new rules and laws, 205 00:11:46,760 --> 00:11:49,200 Speaker 2: because I think at some point it became a bit 206 00:11:49,280 --> 00:11:52,440 Speaker 2: everything every well or at once, and therefore it was 207 00:11:52,520 --> 00:11:55,440 Speaker 2: really difficult to follow, and then it was sometimes in 208 00:11:55,520 --> 00:11:59,240 Speaker 2: as a compliance burden. It was sometimes certain posses work 209 00:11:59,240 --> 00:12:02,679 Speaker 2: ontradicting one another, and so I think we enter it. 210 00:12:02,600 --> 00:12:04,720 Speaker 3: In twenty twenty five a moment of. 211 00:12:04,640 --> 00:12:08,320 Speaker 2: Like, Okay, let's take a step back, consolidate our view, 212 00:12:08,720 --> 00:12:12,320 Speaker 2: see if what has been implemented is working, if it's 213 00:12:12,480 --> 00:12:15,480 Speaker 2: actually delivering the output we want it and the results 214 00:12:15,559 --> 00:12:18,480 Speaker 2: we want it, which is when I'm talking solely about 215 00:12:18,600 --> 00:12:22,960 Speaker 2: sustainable funds and in particular climate risk and climate investment. 216 00:12:23,040 --> 00:12:25,360 Speaker 2: At the minute on the climate side is like, has 217 00:12:25,400 --> 00:12:29,640 Speaker 2: it delivered on unlocking new financing for the energy transition 218 00:12:30,000 --> 00:12:36,079 Speaker 2: and also allowing the financial system to assess its exposure 219 00:12:36,360 --> 00:12:37,720 Speaker 2: to climate risk? 220 00:12:38,360 --> 00:12:40,800 Speaker 1: Can I ask a quick question on this, because you know, 221 00:12:40,840 --> 00:12:43,559 Speaker 1: you painted a picture of the pace has become a 222 00:12:43,559 --> 00:12:47,320 Speaker 1: little bit less frenetic in terms of the announcements, and 223 00:12:47,400 --> 00:12:51,080 Speaker 1: so there's maybe more time for consideration, for alignment, for 224 00:12:51,200 --> 00:12:55,520 Speaker 1: assessing effectiveness. You know, there's various different stakeholders here, the policymakers, 225 00:12:55,559 --> 00:12:59,560 Speaker 1: the financeers. I suppose those two stand out as principal stakeholders. 226 00:13:00,080 --> 00:13:02,800 Speaker 1: What extent are these people? Like, because we're talking in 227 00:13:02,840 --> 00:13:05,920 Speaker 1: abstract terms, you know that policies were made by someone, 228 00:13:06,160 --> 00:13:08,720 Speaker 1: So what extent all of these different stakeholder is actually 229 00:13:08,720 --> 00:13:12,079 Speaker 1: talking to each other, whether it's like one government comparing 230 00:13:12,120 --> 00:13:14,880 Speaker 1: notes in another government. You know, before they come out 231 00:13:14,920 --> 00:13:17,800 Speaker 1: with their contradictory frameworks, do you do you have a 232 00:13:17,880 --> 00:13:21,839 Speaker 1: sense of where the conversation is happening, like who's talking 233 00:13:21,880 --> 00:13:24,360 Speaker 1: to who here and if anyone's talking to anyone. 234 00:13:24,640 --> 00:13:26,800 Speaker 2: I think at the beginning they didn't talk that much, 235 00:13:26,960 --> 00:13:29,840 Speaker 2: but then a lot of initiatives started. For instance, we 236 00:13:30,080 --> 00:13:33,360 Speaker 2: saw a common ground taxonomy being put out like a 237 00:13:33,360 --> 00:13:36,800 Speaker 2: couple of years ago by the EU and China because 238 00:13:36,880 --> 00:13:39,840 Speaker 2: China had its own taxonomy and that you at its 239 00:13:39,880 --> 00:13:42,680 Speaker 2: own taxonomy and both represent like a big market with 240 00:13:42,760 --> 00:13:46,120 Speaker 2: companies willing to report against it or indicate of that 241 00:13:46,240 --> 00:13:49,720 Speaker 2: you having to report against it. Okay, let's put ourselves together, 242 00:13:50,400 --> 00:13:54,680 Speaker 2: create like working groups. And then they've developed this like 243 00:13:54,920 --> 00:13:59,120 Speaker 2: paperwork that was basically saying, okay, what are the commonalities 244 00:13:59,360 --> 00:14:01,880 Speaker 2: and the discrepancies between our two framework. 245 00:14:02,040 --> 00:14:04,880 Speaker 3: We saw a lot of bilateral work like that. 246 00:14:04,920 --> 00:14:07,560 Speaker 2: We saw it between the EU and South Africa as well. 247 00:14:07,720 --> 00:14:11,360 Speaker 2: On the taxonomy world, a lot of taxonomies globally have 248 00:14:11,520 --> 00:14:14,600 Speaker 2: also found a lot of inspiration from the EU one, 249 00:14:14,679 --> 00:14:17,200 Speaker 2: so that played the big role. They've developed something called 250 00:14:17,200 --> 00:14:22,280 Speaker 2: the International Platform Unsustainable Finance, which gathered many different jurisdictions 251 00:14:22,320 --> 00:14:26,800 Speaker 2: from all across the globe. Some regional association played a 252 00:14:26,840 --> 00:14:30,560 Speaker 2: big role. So for instance, in Asia Pacific, the Asian 253 00:14:31,160 --> 00:14:34,920 Speaker 2: Association was really really important. Some policies are at Asian 254 00:14:35,080 --> 00:14:36,640 Speaker 2: level in particular their. 255 00:14:36,520 --> 00:14:38,120 Speaker 3: Taxonomy, so that was a good one. 256 00:14:38,240 --> 00:14:43,440 Speaker 2: And then play a big role the G seven meetings. 257 00:14:43,480 --> 00:14:45,520 Speaker 2: So a couple of years ago we saw a G 258 00:14:45,680 --> 00:14:50,600 Speaker 2: seven an announcement of passing reporting against the ISSB standards. 259 00:14:50,880 --> 00:14:53,560 Speaker 2: And then the really the cherry and the kick of 260 00:14:53,560 --> 00:14:57,600 Speaker 2: all that. The ISSB, which is an international platform, which 261 00:14:57,640 --> 00:15:01,080 Speaker 2: is an international body that is not led by any country, 262 00:15:01,120 --> 00:15:05,600 Speaker 2: but some countries are actively developing the ISSB standard played 263 00:15:05,600 --> 00:15:08,640 Speaker 2: a massive role. Even like the EU that has its 264 00:15:08,680 --> 00:15:12,240 Speaker 2: own standard still was part of that initiative and it 265 00:15:12,280 --> 00:15:15,240 Speaker 2: was like really active in it because they wanted to 266 00:15:15,240 --> 00:15:17,520 Speaker 2: make sure that even though they have a different standard, 267 00:15:17,720 --> 00:15:22,120 Speaker 2: if you comply with the ISSBU, comply with their own standard, 268 00:15:22,360 --> 00:15:26,800 Speaker 2: the European Stainability standard called the ESRs, and vice versa. 269 00:15:27,520 --> 00:15:30,320 Speaker 1: It's interesting because you know, when I listen to your answer, 270 00:15:30,360 --> 00:15:32,920 Speaker 1: you know, like there's various conversations going on. I think 271 00:15:32,920 --> 00:15:34,520 Speaker 1: the thing that stands out, and it kind of goes 272 00:15:34,560 --> 00:15:36,680 Speaker 1: back to your previous point that you made earlier in 273 00:15:36,720 --> 00:15:39,840 Speaker 1: the conversation about EU leadership, is like, yeah, there's a 274 00:15:39,840 --> 00:15:43,280 Speaker 1: lot of bilateral conversations, but the examples you gave were 275 00:15:43,440 --> 00:15:46,000 Speaker 1: the EU and someone, so a lot of people are 276 00:15:46,000 --> 00:15:48,840 Speaker 1: talking to the EU, and then even the sort of 277 00:15:48,840 --> 00:15:52,280 Speaker 1: the international standard that is not being led by anyone 278 00:15:52,280 --> 00:15:55,680 Speaker 1: in particular, that EU is very active in kind of 279 00:15:55,680 --> 00:15:58,840 Speaker 1: bringing what they're doing into alignment. So I guess, you know, 280 00:15:58,920 --> 00:16:01,400 Speaker 1: I asked, you know, where where is the conversation happening, 281 00:16:01,440 --> 00:16:04,160 Speaker 1: and I suppose all sorts of different places, but it 282 00:16:04,240 --> 00:16:06,920 Speaker 1: seems like a very loud voice in the conversation and 283 00:16:07,160 --> 00:16:09,720 Speaker 1: a voice that is both heard and also a body 284 00:16:09,720 --> 00:16:12,520 Speaker 1: that is listening, as the EU is like very central 285 00:16:12,680 --> 00:16:15,400 Speaker 1: to all of this globally. Is that our first statement? 286 00:16:15,920 --> 00:16:19,480 Speaker 2: Yes, it is a fair statement, and it's you know, 287 00:16:19,560 --> 00:16:21,680 Speaker 2: initially I thought I was a bit biased because I'm 288 00:16:21,720 --> 00:16:24,960 Speaker 2: based here, because I'm based in London, and initially and 289 00:16:25,040 --> 00:16:28,520 Speaker 2: I was sprit of the EU platform Unustainable Finance, developing 290 00:16:28,520 --> 00:16:30,680 Speaker 2: the taxonomy, so I thought I was biased, you know, 291 00:16:30,720 --> 00:16:33,040 Speaker 2: and I think that the EU has a stronger voice 292 00:16:33,040 --> 00:16:36,479 Speaker 2: than it is, and there are so many other initiatives elsewhere. 293 00:16:36,880 --> 00:16:41,400 Speaker 2: But effectively, through my travels, through my interrections with clients 294 00:16:41,520 --> 00:16:44,480 Speaker 2: and my research, I've realized that, no, it's been the 295 00:16:44,560 --> 00:16:48,440 Speaker 2: leading voice. Sometimes I have clients in Asia Pacific, I 296 00:16:48,520 --> 00:16:51,120 Speaker 2: do conferences and I talk to them, and they really 297 00:16:51,160 --> 00:16:53,160 Speaker 2: want to know what's happening in the EU because they 298 00:16:53,280 --> 00:16:55,920 Speaker 2: know it's going to have a trickle down effect elsewhere. 299 00:16:56,120 --> 00:16:59,640 Speaker 2: And they know that if something is being developed here, eventually, 300 00:16:59,680 --> 00:17:02,600 Speaker 2: down line, it's going to happen elsewhere and it's going 301 00:17:02,680 --> 00:17:05,040 Speaker 2: to be replicated elsewhere. And we've seen it quite a 302 00:17:05,040 --> 00:17:08,560 Speaker 2: lot when it comes to creating these frameworks on how 303 00:17:08,720 --> 00:17:12,280 Speaker 2: to define ESD funds like SO funds that take into 304 00:17:12,280 --> 00:17:18,040 Speaker 2: consideration these unvironmental, social and governance criterias, greenwashing like standards 305 00:17:18,040 --> 00:17:21,080 Speaker 2: to prevent green washing, the taxonomy and all of that. 306 00:17:21,240 --> 00:17:23,639 Speaker 2: And so that's also why at the minute, the fact 307 00:17:23,640 --> 00:17:28,280 Speaker 2: that the EU is weakening its flagship policies. 308 00:17:28,200 --> 00:17:31,320 Speaker 1: This was going to be my question. It's in the 309 00:17:31,400 --> 00:17:35,560 Speaker 1: notes you've done in twenty twenty five, since we've established 310 00:17:35,720 --> 00:17:37,159 Speaker 1: the leader in this space. 311 00:17:37,760 --> 00:17:40,040 Speaker 2: So the EU has been a leader in this space, 312 00:17:40,119 --> 00:17:43,520 Speaker 2: and I'm often asked why, like who is the person 313 00:17:43,560 --> 00:17:45,520 Speaker 2: behind I used to have this question going a lot, 314 00:17:45,600 --> 00:17:47,320 Speaker 2: like who is that person driving it? 315 00:17:47,440 --> 00:17:52,000 Speaker 3: And I think it's you Maya, It's you, absolutely not. 316 00:17:52,200 --> 00:17:54,240 Speaker 2: And that's exactly my answer is that it can't be 317 00:17:54,400 --> 00:17:58,080 Speaker 2: one person. I think there was an alignment of stars, 318 00:17:58,160 --> 00:18:01,920 Speaker 2: like of people with the in mindset and the conviction 319 00:18:02,560 --> 00:18:05,800 Speaker 2: that first, finance has a role to play in society, 320 00:18:06,280 --> 00:18:10,600 Speaker 2: which is to invest in alignment with the values of society, 321 00:18:10,880 --> 00:18:14,119 Speaker 2: and that's this division that's developed by Mark Karney and 322 00:18:14,520 --> 00:18:18,560 Speaker 2: Christinagaut for instance, and other financial thinkers. But also, and 323 00:18:18,640 --> 00:18:24,119 Speaker 2: most importantly, climate risk represents both a risk like a 324 00:18:24,200 --> 00:18:27,639 Speaker 2: threat to the financial system, and therefore we need financial 325 00:18:27,720 --> 00:18:31,840 Speaker 2: institutions and corporations to realize that and consider it. But 326 00:18:31,920 --> 00:18:35,960 Speaker 2: it also climate and the energy transition represents an opportunity 327 00:18:36,000 --> 00:18:39,080 Speaker 2: and investment opportunity for the current decade, which is like 328 00:18:39,320 --> 00:18:41,679 Speaker 2: very aligned with what we think at bn F, and 329 00:18:41,760 --> 00:18:44,040 Speaker 2: therefore there needs to be stuff put in place to 330 00:18:44,320 --> 00:18:48,520 Speaker 2: both hedge find tal institutions and corporations from these risks 331 00:18:48,520 --> 00:18:51,320 Speaker 2: and promote the investment in there. So they've developed a 332 00:18:51,359 --> 00:18:53,440 Speaker 2: lot of stuff, maybe too many things. 333 00:18:53,800 --> 00:18:56,120 Speaker 1: Well, so tell us about you know this. I think 334 00:18:56,160 --> 00:18:58,720 Speaker 1: you use the word watering down. The EU has. 335 00:18:58,640 --> 00:19:00,720 Speaker 3: Done so you need to unders and they've developed too 336 00:19:00,760 --> 00:19:01,120 Speaker 3: many things. 337 00:19:01,160 --> 00:19:04,800 Speaker 2: And then at the end of twenty twenty four there 338 00:19:04,920 --> 00:19:09,200 Speaker 2: was a report that was put out by Mario do Ragi, 339 00:19:09,440 --> 00:19:13,560 Speaker 2: who is then an old the previous European Central banker, 340 00:19:13,800 --> 00:19:18,240 Speaker 2: and it was about how do we keep European Union's 341 00:19:18,359 --> 00:19:22,600 Speaker 2: company competitiveness. And one of the big lever that he 342 00:19:22,720 --> 00:19:26,320 Speaker 2: raised was to say the sustainability policy, the sustainable finance 343 00:19:26,320 --> 00:19:29,280 Speaker 2: policy agenda in the EU is too heavy and too 344 00:19:29,320 --> 00:19:32,159 Speaker 2: burdens on and it needs to be weakened down. And 345 00:19:32,200 --> 00:19:35,280 Speaker 2: that had been a cool already that was raised in 346 00:19:35,920 --> 00:19:39,639 Speaker 2: a wish that was raised by some other leaders in 347 00:19:39,680 --> 00:19:44,040 Speaker 2: the EU, including Emanuel Macrim and also the German Chancellor. 348 00:19:44,280 --> 00:19:46,400 Speaker 1: Can we just define what he meant by too much 349 00:19:46,440 --> 00:19:48,159 Speaker 1: for a burden? I think when it comes to this 350 00:19:48,200 --> 00:19:50,159 Speaker 1: sort of thing, that's kind of there's two ways I 351 00:19:50,160 --> 00:19:52,960 Speaker 1: could think something could be a burden. One is if 352 00:19:53,040 --> 00:19:56,159 Speaker 1: the kind of you set the bar too high for 353 00:19:56,200 --> 00:19:59,679 Speaker 1: something to be qualify as sustainable, but it might be 354 00:19:59,840 --> 00:20:02,639 Speaker 1: very simple to report on in terms of paperwork. And 355 00:20:02,640 --> 00:20:05,320 Speaker 1: then there's the other version where it's just literally the 356 00:20:05,320 --> 00:20:09,320 Speaker 1: amount of bureaucracy involved, irrespective of how ambitious the targets are. 357 00:20:09,400 --> 00:20:11,719 Speaker 1: So when you say it's burdens, you know which flavor 358 00:20:11,760 --> 00:20:13,480 Speaker 1: of Burdenso are we talking about here? 359 00:20:13,840 --> 00:20:16,680 Speaker 2: There is the first aspect of like, oh, it's really 360 00:20:16,680 --> 00:20:20,200 Speaker 2: difficult to consider great to be considered green, and therefore 361 00:20:20,440 --> 00:20:22,080 Speaker 2: you're going to report on it, but no one is 362 00:20:22,080 --> 00:20:24,080 Speaker 2: going to be green. That was the issue with the taxonomy, 363 00:20:24,280 --> 00:20:27,959 Speaker 2: but in the particular case of that that was being 364 00:20:28,160 --> 00:20:32,560 Speaker 2: criticized already, right. The second aspect was that we're requiring 365 00:20:32,640 --> 00:20:37,879 Speaker 2: companies to report on far too many sustainability criteria and 366 00:20:37,920 --> 00:20:41,280 Speaker 2: sustainability data points and it costs them a lot of money. 367 00:20:41,400 --> 00:20:43,919 Speaker 2: And these are like two specific just to give you 368 00:20:43,960 --> 00:20:48,119 Speaker 2: an idea. Under the Corporate Sustainability Reporting Directive, which is 369 00:20:48,119 --> 00:20:51,679 Speaker 2: one of the three flagship regulations that are being targeted 370 00:20:52,040 --> 00:20:54,960 Speaker 2: by this particular request. 371 00:20:54,800 --> 00:20:55,840 Speaker 3: To ease them. 372 00:20:56,280 --> 00:21:01,320 Speaker 2: Under this Corporate Sustainability Reporting Directive, company are being asked 373 00:21:01,359 --> 00:21:04,280 Speaker 2: to report on a one thousand, two hundred data points 374 00:21:04,680 --> 00:21:07,040 Speaker 2: and they are not all voluntary, but they need to 375 00:21:07,080 --> 00:21:09,480 Speaker 2: prove that they are not material to them to have 376 00:21:09,560 --> 00:21:11,040 Speaker 2: the right to not report on them. 377 00:21:11,119 --> 00:21:13,760 Speaker 1: And is there a sort of a minimum size of 378 00:21:13,840 --> 00:21:16,359 Speaker 1: company or does this like if we started a company together, 379 00:21:16,440 --> 00:21:19,359 Speaker 1: but we have to report on these one thousand data points. 380 00:21:19,640 --> 00:21:23,760 Speaker 2: So before the weakening, under the previous version of the 381 00:21:23,880 --> 00:21:27,080 Speaker 2: law which was passed, we were talking about fifty thousand 382 00:21:27,080 --> 00:21:30,600 Speaker 2: companies that were in scoop for that reporting, including small 383 00:21:30,600 --> 00:21:33,679 Speaker 2: and medium companies that are not publicly listed. So we 384 00:21:33,680 --> 00:21:37,480 Speaker 2: were talking about large listed companies which are really used 385 00:21:37,480 --> 00:21:39,360 Speaker 2: to this, even though they were still saying it's too 386 00:21:39,359 --> 00:21:40,680 Speaker 2: many data points, but. 387 00:21:40,640 --> 00:21:43,440 Speaker 1: They can employ someone to do it. It's fine. 388 00:21:43,520 --> 00:21:46,880 Speaker 2: Yeah, yeah, exactly, they can employ They were hiring people 389 00:21:47,240 --> 00:21:49,960 Speaker 2: even though they were still hiring like big amount of 390 00:21:50,000 --> 00:21:51,919 Speaker 2: people do it because you're. 391 00:21:51,880 --> 00:21:54,360 Speaker 3: They had to do that analysis on their whole supply. 392 00:21:54,160 --> 00:21:56,000 Speaker 1: Chain as well, right, oh wow, okay. 393 00:21:56,160 --> 00:21:59,240 Speaker 2: And then after you had also non listed companies any 394 00:21:59,320 --> 00:22:03,160 Speaker 2: company that does business in the EU or is listed 395 00:22:03,200 --> 00:22:06,080 Speaker 2: in the EU even though they're not domicized in the EU. 396 00:22:06,160 --> 00:22:10,680 Speaker 2: So you can imagine how much like lobbying they got 397 00:22:10,720 --> 00:22:13,560 Speaker 2: against that. And then small and medium enterprises. 398 00:22:13,600 --> 00:22:15,000 Speaker 3: So that was the previous version of. 399 00:22:14,960 --> 00:22:19,000 Speaker 2: The role and that scoop of company were also in 400 00:22:19,080 --> 00:22:23,240 Speaker 2: scope for reporting under the EU Green Taxonomy Sustainable Finance 401 00:22:23,240 --> 00:22:26,320 Speaker 2: Taxonomy that that classification I was talking about at the 402 00:22:26,400 --> 00:22:29,879 Speaker 2: very beginning, so reporting the percentage of their revenues, the 403 00:22:29,920 --> 00:22:33,520 Speaker 2: money they make, and their capital expenditure the money they 404 00:22:33,640 --> 00:22:36,520 Speaker 2: spent that is considered to be green. And then there 405 00:22:36,600 --> 00:22:40,880 Speaker 2: was a third policy that was being tackled by this report, 406 00:22:40,960 --> 00:22:44,439 Speaker 2: which is called the Corporate Sustainability GEO Diligence Directive. And 407 00:22:44,520 --> 00:22:49,760 Speaker 2: so whilst the taxonomy and the CSRD, that Corporate Sustainability 408 00:22:49,800 --> 00:22:53,040 Speaker 2: Reporting Directive were really focused on reporting like give us 409 00:22:53,080 --> 00:22:55,520 Speaker 2: a state of play of how you're doing and everything, 410 00:22:55,800 --> 00:23:00,720 Speaker 2: the cs triple D was focusing on show us implement 411 00:23:01,119 --> 00:23:04,760 Speaker 2: the right due diligence when it comes to environmental, social 412 00:23:04,960 --> 00:23:09,080 Speaker 2: and governance, like matters all across your supply chain, even 413 00:23:09,119 --> 00:23:12,440 Speaker 2: for companies that are not e domicide but make business 414 00:23:12,480 --> 00:23:13,000 Speaker 2: in the EU. 415 00:23:13,560 --> 00:23:13,720 Speaker 1: Right. 416 00:23:14,240 --> 00:23:16,280 Speaker 3: It was very ambitious. 417 00:23:16,000 --> 00:23:20,120 Speaker 2: And last year then there were like at the beginning 418 00:23:20,119 --> 00:23:23,159 Speaker 2: of last year in February then the EU announced the 419 00:23:23,160 --> 00:23:26,600 Speaker 2: European Commission announced what we call an omnibus package, So 420 00:23:26,640 --> 00:23:31,240 Speaker 2: it's a set of proposal to weaken these rules in 421 00:23:31,320 --> 00:23:33,520 Speaker 2: scope in terms of the scope like the number of 422 00:23:33,560 --> 00:23:35,560 Speaker 2: companies are in scope for it, in terms of their 423 00:23:35,680 --> 00:23:40,600 Speaker 2: enforcement mechanism, so the kind of fines and penalties that 424 00:23:40,720 --> 00:23:46,200 Speaker 2: companies and directors directly could encounter if they don't abide 425 00:23:46,280 --> 00:23:49,280 Speaker 2: by these rules. And also in terms of like what's 426 00:23:49,320 --> 00:23:53,280 Speaker 2: inside the the actual regulations, so reducing the number of 427 00:23:53,359 --> 00:23:56,320 Speaker 2: data points you have to provide, reducing the stuff you 428 00:23:56,359 --> 00:23:59,040 Speaker 2: have to photo under the rules. Like in February, that 429 00:23:59,080 --> 00:24:02,359 Speaker 2: proposal was probably and it's not until the end of 430 00:24:02,400 --> 00:24:07,840 Speaker 2: the year that the actual amendment to the policies were passed. 431 00:24:08,280 --> 00:24:10,960 Speaker 1: So let me just make sure I've understood. So it's 432 00:24:11,000 --> 00:24:14,679 Speaker 1: mainly less companies in scope and a streamlined taxonomy to 433 00:24:14,680 --> 00:24:16,000 Speaker 1: make it easier to report. 434 00:24:16,320 --> 00:24:20,200 Speaker 2: I would make two baskets. The taxonomy got weakened, more 435 00:24:20,240 --> 00:24:23,639 Speaker 2: streamlined in terms of the tests, but it still remains 436 00:24:23,800 --> 00:24:26,760 Speaker 2: quite ambitious when it comes to like proving that you're green. 437 00:24:26,920 --> 00:24:29,640 Speaker 2: This scoop was really slammed in this one. It got 438 00:24:29,720 --> 00:24:33,359 Speaker 2: really weakened however, on the CSRD and the cs triple D. 439 00:24:33,560 --> 00:24:35,880 Speaker 2: And this is why they got a lot of attraction 440 00:24:36,000 --> 00:24:38,680 Speaker 2: when it comes up like interest and why people were 441 00:24:38,720 --> 00:24:42,600 Speaker 2: caring about it. The scoop was reduced like dramatically. We're 442 00:24:42,640 --> 00:24:45,679 Speaker 2: talking I think for the CSRD, we went from fifty 443 00:24:45,720 --> 00:24:49,320 Speaker 2: thousand company to less than ten thousand right now we're 444 00:24:49,320 --> 00:24:53,119 Speaker 2: awaiting the new standards. So the reduction in terms of 445 00:24:53,160 --> 00:24:55,280 Speaker 2: like the reporting they have to do under this rule 446 00:24:55,520 --> 00:24:58,920 Speaker 2: and for the cs triple D, they've reduced the amount 447 00:24:58,960 --> 00:25:01,520 Speaker 2: of companies are in SCUL and they've also reduced what 448 00:25:01,640 --> 00:25:04,879 Speaker 2: companies have to do to comply with that regulation, and 449 00:25:04,920 --> 00:25:07,320 Speaker 2: that really weakened the legislation. 450 00:25:07,920 --> 00:25:09,800 Speaker 1: Can I just ask a question. I know we've really 451 00:25:09,880 --> 00:25:11,320 Speaker 1: kind of dwelled on this a lot, and we are 452 00:25:11,359 --> 00:25:13,680 Speaker 1: going to talk about you know, I think it's because 453 00:25:13,680 --> 00:25:15,960 Speaker 1: we've established that the EU as a leader in this space, 454 00:25:16,000 --> 00:25:19,120 Speaker 1: so it kind of matters if the EU's watering down. 455 00:25:19,160 --> 00:25:21,480 Speaker 1: I just really want to understand this watering down. Do 456 00:25:21,480 --> 00:25:23,679 Speaker 1: you ever says we've gone from fifty thousand companies in 457 00:25:23,760 --> 00:25:26,960 Speaker 1: scope to ten thousand. Yeah, I'm assuming that the ten 458 00:25:27,000 --> 00:25:31,159 Speaker 1: thousand that remain are bigger companies, bigger emitters. Do you 459 00:25:31,240 --> 00:25:34,120 Speaker 1: have any kind of handle on in terms of, say, 460 00:25:34,200 --> 00:25:38,440 Speaker 1: emissions that are in scope before and after. I'm assuming 461 00:25:38,480 --> 00:25:41,320 Speaker 1: it's not a factor of five reduction like it is 462 00:25:41,320 --> 00:25:42,400 Speaker 1: with the number of companies. 463 00:25:42,400 --> 00:25:44,359 Speaker 2: It's do you have a sense of that I don't 464 00:25:44,400 --> 00:25:46,400 Speaker 2: have a sense of that, but I know that there 465 00:25:46,400 --> 00:25:49,320 Speaker 2: are research done about this. The thing is that the 466 00:25:49,359 --> 00:25:53,879 Speaker 2: cs rety was not just on emissions. It was on circularity, 467 00:25:54,320 --> 00:25:58,320 Speaker 2: it was on biodiversity, it was tackling human rights, it 468 00:25:58,440 --> 00:25:59,840 Speaker 2: was tackling governance. 469 00:26:00,359 --> 00:26:03,240 Speaker 1: It's maybe I'm using the role frame when I say emissions, 470 00:26:03,280 --> 00:26:06,240 Speaker 1: I just mean scale, you know, whether it's a number 471 00:26:06,280 --> 00:26:09,480 Speaker 1: of employees or revenue, because sometimes these things, you know, 472 00:26:09,520 --> 00:26:12,920 Speaker 1: the narrative can be like, oh, this is disastrous, it's 473 00:26:13,000 --> 00:26:16,480 Speaker 1: like gone from fifty thousand to ten thousand. But actually, 474 00:26:16,760 --> 00:26:19,520 Speaker 1: in terms of actual whatever it is we care about, 475 00:26:19,560 --> 00:26:22,199 Speaker 1: it's not a big difference. And if that's going to 476 00:26:22,200 --> 00:26:25,280 Speaker 1: be the difference that makes the policy work, then maybe 477 00:26:25,320 --> 00:26:28,840 Speaker 1: it's a worsewhile sacrifice. That's really the question I'm asking. 478 00:26:29,080 --> 00:26:32,040 Speaker 2: Yeah, I think it's a really interesting question to ask, 479 00:26:32,160 --> 00:26:34,800 Speaker 2: because I think that the market has asked itself this 480 00:26:34,920 --> 00:26:38,520 Speaker 2: question a lot this like this year, because I think 481 00:26:38,960 --> 00:26:41,400 Speaker 2: we could see it from that angle. But I think 482 00:26:41,400 --> 00:26:43,760 Speaker 2: what the whole market agreed on is, yeah, it was 483 00:26:44,040 --> 00:26:48,000 Speaker 2: over complex. It had to be like simplified, But they 484 00:26:48,000 --> 00:26:52,040 Speaker 2: could have simplified the content of the reporting rather than 485 00:26:52,080 --> 00:26:55,439 Speaker 2: simplifying the scope, because if you'd think at scale to 486 00:26:55,560 --> 00:26:59,520 Speaker 2: prevent a financial crisis related to climate risk, to enable 487 00:27:00,359 --> 00:27:04,439 Speaker 2: financial institutions to assess their exposure to climate risk and 488 00:27:04,520 --> 00:27:07,840 Speaker 2: assess their capacity to invest in the transition, they will 489 00:27:07,880 --> 00:27:11,760 Speaker 2: also need standardized data from small companies, medium companies, non 490 00:27:11,840 --> 00:27:15,200 Speaker 2: listed companies. And slamming the school even if in terms 491 00:27:15,200 --> 00:27:18,080 Speaker 2: of GDP or in terms of I would say, like 492 00:27:18,200 --> 00:27:21,160 Speaker 2: number of employees, it's less than the total scope, it's 493 00:27:21,160 --> 00:27:23,080 Speaker 2: not proportional agreed. 494 00:27:22,880 --> 00:27:25,120 Speaker 1: Right, When you frame it like that, it seems that 495 00:27:25,240 --> 00:27:28,000 Speaker 1: you know, almost like maybe an overreaction to it being 496 00:27:28,119 --> 00:27:31,480 Speaker 1: overburd and so is that you know, there's different leavers 497 00:27:31,480 --> 00:27:33,800 Speaker 1: you can pull. There's the scope and the content. Try 498 00:27:33,880 --> 00:27:38,000 Speaker 1: changing the content first and see if that base things work. 499 00:27:38,240 --> 00:27:40,959 Speaker 2: But I want to say something like Tom that is 500 00:27:41,040 --> 00:27:46,200 Speaker 2: really important is why these got passed so easily in itself? 501 00:27:46,320 --> 00:27:48,399 Speaker 2: Why do European Parliament passed it? 502 00:27:48,480 --> 00:27:48,919 Speaker 1: And stuff? 503 00:27:49,040 --> 00:27:51,880 Speaker 2: First of all, there are two things. They were facing 504 00:27:51,920 --> 00:27:56,399 Speaker 2: a lot of international lobbying against these legislations because the 505 00:27:56,480 --> 00:28:00,960 Speaker 2: EU was taking a lot of liberty to basically regulate 506 00:28:01,119 --> 00:28:05,960 Speaker 2: non EU companies. And so for instance, that other sustainable 507 00:28:06,000 --> 00:28:08,880 Speaker 2: finance policy that I was talking about the cs trip 508 00:28:08,920 --> 00:28:13,200 Speaker 2: of the Due Diligence Directive was actually the second most 509 00:28:13,320 --> 00:28:17,720 Speaker 2: lobbied rule in the EU over the past twenty years, 510 00:28:17,920 --> 00:28:21,320 Speaker 2: according to Political which is wild when you think about it. 511 00:28:21,400 --> 00:28:23,880 Speaker 2: We're talking about a due diligions directive, we're talking about 512 00:28:23,880 --> 00:28:28,440 Speaker 2: a sustainability directive, really important showcase, and there have been 513 00:28:28,520 --> 00:28:30,000 Speaker 2: like really strong voices. 514 00:28:30,560 --> 00:28:33,400 Speaker 3: In particular, the US has openly. 515 00:28:33,480 --> 00:28:38,200 Speaker 2: Lobbied against that policy and they've asked the EU at 516 00:28:38,320 --> 00:28:42,360 Speaker 2: multiple time to drop non EU companies from it and 517 00:28:42,440 --> 00:28:47,480 Speaker 2: to weaken it. That happened and we had a political shift. 518 00:28:47,120 --> 00:28:47,680 Speaker 1: In the EU. 519 00:28:47,960 --> 00:28:52,200 Speaker 2: The reason why these amendments were passed is because the 520 00:28:52,280 --> 00:28:55,200 Speaker 2: right wing parties made a coalition with the far right 521 00:28:55,360 --> 00:28:59,480 Speaker 2: at the European Parliament in an historical way to pass 522 00:28:59,640 --> 00:29:04,360 Speaker 2: these because these political parties deemed the ces R D 523 00:29:04,440 --> 00:29:08,280 Speaker 2: and CIS tripod to basically be too costly for company 524 00:29:08,360 --> 00:29:09,520 Speaker 2: when it comes to reporting. 525 00:29:10,000 --> 00:29:15,360 Speaker 1: Interesting I kind of think back to the Monty Python analogy. 526 00:29:16,080 --> 00:29:18,960 Speaker 1: It's that, you know, it's almost like all of these 527 00:29:19,000 --> 00:29:22,240 Speaker 1: different factions discover that as soon as they become an 528 00:29:22,280 --> 00:29:26,440 Speaker 1: actual effective political force, they face new new challenges, which 529 00:29:26,480 --> 00:29:29,880 Speaker 1: is they become a threat to other interests and suffer 530 00:29:29,920 --> 00:29:33,000 Speaker 1: real pushback, you know, compared to when they're just on 531 00:29:33,080 --> 00:29:37,240 Speaker 1: the fringes fighting among themselves. Yeah, now, what have we 532 00:29:37,360 --> 00:29:40,080 Speaker 1: seen happening around the world, You know, if you can 533 00:29:40,200 --> 00:29:43,520 Speaker 1: quickly summarize some of the key highlights in particular, that 534 00:29:43,640 --> 00:29:48,160 Speaker 1: may also be reflecting what's you know, the sort of 535 00:29:48,200 --> 00:29:50,000 Speaker 1: the knock on effects of some of the changes we've 536 00:29:50,000 --> 00:29:50,680 Speaker 1: seen in the EU. 537 00:29:51,200 --> 00:29:55,600 Speaker 2: So we've seen other markets rolling back their Sustainable Finds 538 00:29:55,640 --> 00:29:59,640 Speaker 2: Voicey agenda some of it, or delaying them or postponing them. 539 00:29:59,720 --> 00:30:04,720 Speaker 2: In particular for instance, Switzerland, South Korea, Canada, they've really 540 00:30:04,760 --> 00:30:07,880 Speaker 2: said that they're either some of them are posing altogether 541 00:30:07,960 --> 00:30:10,560 Speaker 2: the development of some of their rules. That's the case 542 00:30:10,600 --> 00:30:14,760 Speaker 2: in these three markets, and they directly claim that they 543 00:30:14,800 --> 00:30:19,920 Speaker 2: are trying to wait and see the unfolding of the 544 00:30:19,960 --> 00:30:21,080 Speaker 2: events in the e U. 545 00:30:21,320 --> 00:30:24,040 Speaker 3: And in the US, which is my next point. We've 546 00:30:24,080 --> 00:30:24,680 Speaker 3: seen New. 547 00:30:24,600 --> 00:30:28,719 Speaker 2: Zealand also passing due to also a political shift in 548 00:30:28,760 --> 00:30:32,640 Speaker 2: the government, passing a rollback right weekends the scope and 549 00:30:32,720 --> 00:30:36,720 Speaker 2: the enforcement mechanism of its climate risk disclosure. And in 550 00:30:36,800 --> 00:30:40,440 Speaker 2: the US, like since the election of President Donald Trump, 551 00:30:40,680 --> 00:30:44,560 Speaker 2: the US has like repealed all of its sustainable finance 552 00:30:44,560 --> 00:30:47,960 Speaker 2: policy at federal level, and it's at the state level. 553 00:30:48,280 --> 00:30:51,000 Speaker 2: Half of the US state have passed at least one 554 00:30:51,360 --> 00:30:56,760 Speaker 2: anti esg anti sustainability rule that prevents financial institutions to 555 00:30:56,880 --> 00:30:59,720 Speaker 2: take into accounts these matters if they can't prove that 556 00:30:59,720 --> 00:31:03,760 Speaker 2: they're financially material or affected, which means that they don't 557 00:31:03,840 --> 00:31:06,160 Speaker 2: they can't prove that they have an impact on the 558 00:31:06,200 --> 00:31:10,400 Speaker 2: profitability and financial performance of the company, or they've passed 559 00:31:10,400 --> 00:31:15,480 Speaker 2: all together boycott laws that prevents some financial institutions to 560 00:31:15,600 --> 00:31:18,000 Speaker 2: make business in their state if they are deemed to 561 00:31:18,120 --> 00:31:22,800 Speaker 2: support too much sustainability. However, despite all of these rollbacks 562 00:31:22,800 --> 00:31:27,040 Speaker 2: and these grim news and everything, we still see sustainability 563 00:31:27,400 --> 00:31:31,640 Speaker 2: like sustainable finance policy developments. In particular, we saw these 564 00:31:31,680 --> 00:31:35,120 Speaker 2: two rollbacks in the Asia Pacific region, so in South 565 00:31:35,200 --> 00:31:36,200 Speaker 2: Korea and. 566 00:31:36,080 --> 00:31:36,960 Speaker 3: In New Zealand. 567 00:31:37,240 --> 00:31:39,640 Speaker 2: But these are the only ones, and one of them 568 00:31:39,680 --> 00:31:41,840 Speaker 2: is just a postponement and the only one the other 569 00:31:41,880 --> 00:31:42,160 Speaker 2: one is. 570 00:31:42,400 --> 00:31:43,360 Speaker 3: A proper rollback. 571 00:31:43,440 --> 00:31:46,200 Speaker 2: But there are so many markets in that region and 572 00:31:46,240 --> 00:31:50,680 Speaker 2: they're all advancing their sustainable finance policy agendas. China is 573 00:31:50,720 --> 00:31:54,800 Speaker 2: working on a big sustained corporate sustainability or reporting rule 574 00:31:55,080 --> 00:31:56,280 Speaker 2: that would target like. 575 00:31:56,360 --> 00:31:57,560 Speaker 3: Public and private. 576 00:31:57,280 --> 00:32:01,000 Speaker 2: Companies and small and medium mental prices. India is also 577 00:32:01,080 --> 00:32:04,360 Speaker 2: passing a lot of like climate risk disclosure and climate 578 00:32:04,440 --> 00:32:08,760 Speaker 2: risk management rules through its central Bank and its regulator. 579 00:32:09,240 --> 00:32:12,960 Speaker 2: In Latin America, Brazil is really advanced. It's at the 580 00:32:13,000 --> 00:32:15,280 Speaker 2: top of the G twenty markets when it comes to 581 00:32:15,360 --> 00:32:19,160 Speaker 2: sustainable finance policy, right up there with the. 582 00:32:19,000 --> 00:32:19,880 Speaker 3: EU and the UK. 583 00:32:20,360 --> 00:32:23,760 Speaker 2: So I think it's going to be even more interesting 584 00:32:23,880 --> 00:32:27,520 Speaker 2: to see how the political landscape in the different countries 585 00:32:27,720 --> 00:32:32,120 Speaker 2: are going to act on the sustainable finance policy regimes everywhere, 586 00:32:32,160 --> 00:32:34,120 Speaker 2: and it's going to be what we saw last year 587 00:32:34,160 --> 00:32:37,440 Speaker 2: is that there is a lot of uncertainty coming up, 588 00:32:38,000 --> 00:32:40,680 Speaker 2: in particular when it comes to markets where there's going 589 00:32:40,720 --> 00:32:44,280 Speaker 2: to be elections, markets that have seen in a recent 590 00:32:44,360 --> 00:32:48,280 Speaker 2: election and could see some political changes. And it's not 591 00:32:48,480 --> 00:32:51,320 Speaker 2: we don't have like a global movement anymore. 592 00:32:51,880 --> 00:32:54,680 Speaker 1: It's so interesting hearing this, and you know, at the start, 593 00:32:54,760 --> 00:32:58,040 Speaker 1: I asked, you know, where are we on this arc 594 00:32:58,680 --> 00:33:02,360 Speaker 1: between going from sort of this being very much a 595 00:33:02,400 --> 00:33:06,960 Speaker 1: thing being pushed by fringe groups voluntary and then ending 596 00:33:07,040 --> 00:33:09,480 Speaker 1: up you know, the kind of the goal is for 597 00:33:09,520 --> 00:33:13,600 Speaker 1: something to be singular and universal and accepted, and you know, 598 00:33:13,640 --> 00:33:16,440 Speaker 1: where are we on that journey? And I know I 599 00:33:16,480 --> 00:33:18,360 Speaker 1: said this a moment ago, but I'll say it again, 600 00:33:18,400 --> 00:33:21,040 Speaker 1: but it seems like we're at this point where this 601 00:33:21,120 --> 00:33:24,760 Speaker 1: stuff has become organized enough, meaningful enough for it to 602 00:33:24,880 --> 00:33:28,120 Speaker 1: actually be in some ways a threat and for it 603 00:33:28,200 --> 00:33:31,400 Speaker 1: a face pushback, and that's where we are afraid. 604 00:33:31,560 --> 00:33:32,600 Speaker 2: I never saw it this way. 605 00:33:32,640 --> 00:33:33,320 Speaker 3: It's so interesting. 606 00:33:33,360 --> 00:33:35,479 Speaker 2: You're so right, is that now it can have an 607 00:33:35,520 --> 00:33:39,280 Speaker 2: impact and therefore it's worth in certain gays, depending on 608 00:33:39,320 --> 00:33:42,720 Speaker 2: your position, fighting against it because it actually has an impact. 609 00:33:43,000 --> 00:33:45,080 Speaker 1: And this doesn't I'm not trying to say that, you know, 610 00:33:45,160 --> 00:33:47,760 Speaker 1: it's destiny that this is going to get to where 611 00:33:47,800 --> 00:33:51,840 Speaker 1: it needs to get to, you know, to being universally accepted. Yeah, well, 612 00:33:51,960 --> 00:33:55,120 Speaker 1: the journey to being universally accepted. This was always going 613 00:33:55,160 --> 00:33:57,560 Speaker 1: to be a part of that journey. You know, some 614 00:33:57,640 --> 00:33:59,920 Speaker 1: of my colleagues, I can't remember it was Albert Chung 615 00:34:00,160 --> 00:34:03,200 Speaker 1: or Colin mccarrica who first used this term at BNF. 616 00:34:03,240 --> 00:34:04,720 Speaker 1: Well maybe they got it from someone else, but they've 617 00:34:04,720 --> 00:34:06,840 Speaker 1: been using this phrase to describe where we are right now, 618 00:34:06,840 --> 00:34:10,200 Speaker 1: more broadly as the messy middle. That's where we are 619 00:34:10,280 --> 00:34:13,440 Speaker 1: right now. In the mess. And this is the middle 620 00:34:13,440 --> 00:34:17,719 Speaker 1: est mess I've I've seen it. It's very messy, it's 621 00:34:17,840 --> 00:34:20,759 Speaker 1: very middle. It very much epitsomizes that idea. 622 00:34:20,840 --> 00:34:24,359 Speaker 2: Yes, yes, I sometimes I think at BENF we don't 623 00:34:24,360 --> 00:34:28,200 Speaker 2: think we don't go to catastrophist vision, which is like, oh, 624 00:34:28,280 --> 00:34:31,400 Speaker 2: everything is being rolled back. It's really bad and everything 625 00:34:31,520 --> 00:34:33,680 Speaker 2: is losing its ambition and everything, because. 626 00:34:33,600 --> 00:34:36,360 Speaker 3: It's not true. But we're also not going. 627 00:34:36,200 --> 00:34:38,839 Speaker 2: The full optimistic way, as in, don't worry. Is still 628 00:34:38,840 --> 00:34:41,279 Speaker 2: going to happen? Is there is no problem We're going 629 00:34:41,320 --> 00:34:44,320 Speaker 2: to get through. But indeed it feels like this messy 630 00:34:44,360 --> 00:34:46,840 Speaker 2: middle sometimes. You know, when we took about adoption curve, 631 00:34:46,920 --> 00:34:50,360 Speaker 2: it first like spike really rapidly, and then it drops 632 00:34:50,360 --> 00:34:52,760 Speaker 2: a tiny bit, and I think we're in that drop 633 00:34:53,400 --> 00:34:57,839 Speaker 2: for it to like grow back again, maybe differently, but. 634 00:34:58,040 --> 00:35:00,080 Speaker 1: It's still this is if it is going to go 635 00:35:00,239 --> 00:35:01,960 Speaker 1: back again, this is part of the process. 636 00:35:02,440 --> 00:35:06,000 Speaker 2: Yeah. And I don't think that investors, for instance, and banks, 637 00:35:06,360 --> 00:35:10,920 Speaker 2: AKAA lenders who consume that data, the sustainability data, I 638 00:35:10,920 --> 00:35:13,520 Speaker 2: don't think they're gonna let this like being rolled back 639 00:35:13,560 --> 00:35:16,920 Speaker 2: so easily. As soon as as the weakening of these 640 00:35:17,000 --> 00:35:18,400 Speaker 2: rules that I talked about. 641 00:35:18,360 --> 00:35:20,520 Speaker 3: Has been passed by the European Parliament. 642 00:35:20,840 --> 00:35:25,680 Speaker 2: Some big industry group in the finance industry became quite 643 00:35:25,760 --> 00:35:28,840 Speaker 2: vocal about the fact that they need standardized data and 644 00:35:28,920 --> 00:35:32,000 Speaker 2: they need reporting from all types of companies. 645 00:35:32,560 --> 00:35:35,640 Speaker 1: This has been a really fascinating conversation and I'm kind 646 00:35:35,640 --> 00:35:40,160 Speaker 1: of I walk away with a renewed understanding, not necessarily 647 00:35:40,200 --> 00:35:43,240 Speaker 1: of all the details because it is a really complex area, 648 00:35:43,560 --> 00:35:47,400 Speaker 1: but of the journey and where we are in terms 649 00:35:47,440 --> 00:35:50,640 Speaker 1: of progression here, and so yeah, thank you. It's been 650 00:35:50,760 --> 00:35:52,480 Speaker 1: a really interesting conversation for me. 651 00:35:52,760 --> 00:36:04,640 Speaker 2: Thank you, Tom. Today's episode of Switched On was produced 652 00:36:04,680 --> 00:36:08,759 Speaker 2: by Cam Gray with production assistance from Kamalas Shelling. Bloomberg 653 00:36:08,840 --> 00:36:11,680 Speaker 2: NIF is a service provided by Bloomberg Finance LP and 654 00:36:11,719 --> 00:36:14,719 Speaker 2: its affiliates. This recording does not constitute, nor should it 655 00:36:14,719 --> 00:36:18,600 Speaker 2: be construed as investment advice, investment recommendations, or a recommendation 656 00:36:18,800 --> 00:36:21,800 Speaker 2: as to an investment or other strategy. Bloomberg ANIF should 657 00:36:21,800 --> 00:36:24,799 Speaker 2: not be considered as information sufficient upon which to base 658 00:36:24,880 --> 00:36:28,040 Speaker 2: an investment decision. Neither Bloomberg Finance LP nor any of 659 00:36:28,040 --> 00:36:31,279 Speaker 2: its affiliates makes any representation or warranty as to the 660 00:36:31,320 --> 00:36:34,640 Speaker 2: accuracy or completeness of the information contained in this recording, 661 00:36:34,719 --> 00:36:37,279 Speaker 2: and any liability as a result of this recording is 662 00:36:37,320 --> 00:36:38,440 Speaker 2: expressly disclaimed.