WEBVTT - Sustainable Finance Gets Organized 0:00:00.280 --> 0:00:03.280 Hi, This is Dana Perkins and you're listening to Switch 0:00:03.279 --> 0:00:06.000 It on the B and E F podcast. Today, we're 0:00:06.000 --> 0:00:07.800 going to welcome back to guests who have been on 0:00:07.840 --> 0:00:11.959 the show before, Maya Galdemar and Mallory to Gliano. They 0:00:12.000 --> 0:00:14.360 write about sustainable finance for us at b NF, and 0:00:14.400 --> 0:00:16.480 they're going to provide us with an update on what's 0:00:16.520 --> 0:00:19.120 going on in their space. One of the key developments 0:00:19.160 --> 0:00:21.760 since we spoke to them last are the proposed rules 0:00:21.800 --> 0:00:25.159 to enhance and standardize climate related disclosures by the U 0:00:25.280 --> 0:00:28.600 S Securities and Exchange Commission, or SEC for short. We 0:00:28.640 --> 0:00:32.040 go through some important aspects of the proposed rules and 0:00:32.080 --> 0:00:34.760 how this might play out in the coming weeks. We 0:00:34.800 --> 0:00:38.519 also discussed the EU taxonomy for sustainable activities and some 0:00:38.640 --> 0:00:41.800 of the recent updates regarding nuclear and gas. And we're 0:00:41.840 --> 0:00:43.960 going to end today's show with an overview of the 0:00:43.960 --> 0:00:47.960 Glasgow Financial Alliance for Net Zero. The next episode following 0:00:48.000 --> 0:00:49.960 this one will be part of a special series with 0:00:50.040 --> 0:00:53.120 external guests from our b NF summits and will include 0:00:53.120 --> 0:00:55.600 an interview with Mark Karney, the chair of the Glasgow 0:00:55.640 --> 0:00:58.320 Financial Alliance for Net Zero or g FANS for short. 0:00:58.560 --> 0:01:00.920 Note that b and EF does not provide investment or 0:01:00.960 --> 0:01:03.960 strategy advice, and a complete disclaimer can be found at 0:01:03.960 --> 0:01:05.560 the end of the show. If you want to read 0:01:05.600 --> 0:01:08.840 more of b NF sustainable finance research, clients can read 0:01:08.880 --> 0:01:11.399 it at b NF on the Bloomberg terminal, at BNF 0:01:11.440 --> 0:01:14.000 dot com, or via the BENF mobile app. If you 0:01:14.040 --> 0:01:15.720 get to the end of the show and you like 0:01:15.800 --> 0:01:17.480 what you heard and maybe you want to listen to 0:01:17.520 --> 0:01:20.039 the next one, don't forget to subscribe to our show 0:01:20.080 --> 0:01:23.360 on your podcast player. Now let's get to today's podcast 0:01:23.560 --> 0:01:31.960 on sustainable finance. Maya and Mallory thank you so much 0:01:32.000 --> 0:01:33.520 for coming back to the show and talk to us 0:01:33.520 --> 0:01:37.840 a little bit today about sustainable finance and regulations. So Maya, Hi, 0:01:37.959 --> 0:01:41.560 Hi everyone, and Mallory Hi, thanks so much for having us. 0:01:41.800 --> 0:01:44.320 We've got three female voices on here, so who wanted 0:01:44.319 --> 0:01:46.520 to make sure you know who was who. We've got 0:01:46.520 --> 0:01:49.680 a lot of ground to cover, so typically on the show, 0:01:50.240 --> 0:01:52.000 one of the things we do is we think about 0:01:52.440 --> 0:01:56.320 one piece of research that our analysts have covered in depth. 0:01:56.400 --> 0:01:59.000 We dive in and we get into some of the 0:01:59.040 --> 0:02:01.600 different things that were at up during that research. And 0:02:01.760 --> 0:02:06.760 today we're actually addressing three pieces of research, of which 0:02:07.000 --> 0:02:09.400 one is actually quite long, so we'll see how much 0:02:09.400 --> 0:02:11.600 ground we can cover. But well, let's start in the 0:02:11.720 --> 0:02:15.080 US because there's been some interesting developments and I'm going 0:02:15.120 --> 0:02:17.600 to be honest, I am not quite sure what they mean. 0:02:17.760 --> 0:02:20.640 So I hope you can shed light on that the 0:02:20.840 --> 0:02:27.040 SEC has proposed some regulations. I'm thinking that similar maybe 0:02:27.120 --> 0:02:29.440 in some respects to what the EU taxonomy is doing. 0:02:29.800 --> 0:02:31.440 Let's see if I'm right or if I'm wrong, what 0:02:31.560 --> 0:02:34.160 is it that the SEC is proposing. Basically, to break 0:02:34.200 --> 0:02:37.280 it down, the SEC has proposed a new rule, so 0:02:37.320 --> 0:02:40.519 it's not finalized yet, but they have voted to sort 0:02:40.520 --> 0:02:43.720 of bring forward a rule that would change the way 0:02:43.919 --> 0:02:48.480 registrants sort of filers with the SEC have to disclose 0:02:48.560 --> 0:02:51.560 things like climate related risk. And in my mind this 0:02:51.639 --> 0:02:55.280 is really a watershed moment because the US is not 0:02:55.440 --> 0:02:58.080 a super strong player as of right at all in 0:02:58.200 --> 0:03:03.600 terms of regulating setting policies for sustainable finance or e 0:03:03.720 --> 0:03:06.200 s g. Environmental, social and governance. You might hear that 0:03:06.240 --> 0:03:09.320 acronym a lot disclosure. You know, on a global scale, 0:03:09.400 --> 0:03:13.480 they're well behind regions like the EU. So what this 0:03:13.600 --> 0:03:17.000 new proposed rule would do if it comes into effect, 0:03:17.000 --> 0:03:19.920 in a similar form to the proposal, which is over 0:03:20.200 --> 0:03:23.440 you know, five hundred pages long sort of describing the 0:03:23.520 --> 0:03:26.960 reasoning for their decisions, and a lot of detail is 0:03:27.000 --> 0:03:30.600 it would require registrants. I'll use that word a lot. Basically, 0:03:30.880 --> 0:03:33.639 you know, folks that are registered with the SEC to 0:03:34.000 --> 0:03:38.440 a detailed existing and potential climate related risks, the impacts 0:03:38.480 --> 0:03:41.520 to their business, and sort of the oversight and management 0:03:41.520 --> 0:03:43.320 of those risks as they see. They'd also have to 0:03:43.400 --> 0:03:46.720 detail any transition plans that they've made. So like a 0:03:46.760 --> 0:03:49.520 company who set you know, a public net zero target 0:03:49.560 --> 0:03:53.360 for you know, meeting net zero emissions by saying or 0:03:53.440 --> 0:03:56.240 something like that, they'd actually have to sort of detail 0:03:56.440 --> 0:03:59.600 in their typical filing documents there, you know, what are 0:03:59.680 --> 0:04:04.760 usually financial risk related documents with the SEC, what those 0:04:04.800 --> 0:04:08.960 plans mean, how they're planning to achieve those goals over time, 0:04:09.040 --> 0:04:12.240 what they've been doing, whether they're using carbon offsets. You know, 0:04:12.280 --> 0:04:14.600 a lot of detail in there. And then one of 0:04:14.640 --> 0:04:19.040 the I think the most anticipated or unsure elements. You know, 0:04:19.040 --> 0:04:21.799 it's something that was really a bit more contentious going 0:04:21.839 --> 0:04:24.280 into this, although all of it is really quite important 0:04:24.600 --> 0:04:28.039 is that they'll also have to disclose their greenhouse gas emissions. 0:04:28.680 --> 0:04:32.120 And I mean that's a pretty big deal in my mind. There. 0:04:32.200 --> 0:04:35.000 You know, entities are going to have to start putting numbers, 0:04:35.040 --> 0:04:38.120 you know, into the public. Many already do, but you 0:04:38.120 --> 0:04:40.080 know they'll have to do it in a uniform of 0:04:40.120 --> 0:04:44.520 what they're emitting. Scope one really direct emissions. Scope two 0:04:44.520 --> 0:04:46.760 emissions which are more indirect things like you know, from 0:04:46.839 --> 0:04:50.960 electricity and heating, and then Scope three for most entities, 0:04:51.279 --> 0:04:53.440 will also have to be disclosed. Those are the super 0:04:53.480 --> 0:04:56.400 indirect emissions in many cases, you know, like what's being 0:04:56.440 --> 0:04:59.880 emitted by the products you know, put out by customer, 0:05:00.200 --> 0:05:03.440 or what's in the value chain, or emissions from travel 0:05:03.520 --> 0:05:06.479 of employees and and things like that. So there's there's 0:05:06.520 --> 0:05:09.240 a lot included in this new proposed rule. Then the 0:05:09.279 --> 0:05:12.560 proposal is still in some respects and its infancy, is 0:05:12.560 --> 0:05:14.880 it not? So when we're talking about Scope three, have 0:05:15.040 --> 0:05:19.480 they defined what that actually entails? And I know this 0:05:19.560 --> 0:05:21.320 is one of the more tricky things to measure for 0:05:21.440 --> 0:05:24.680 many companies. Oh yeah, And my understanding is that there 0:05:24.760 --> 0:05:28.240 was quite a lot of deliberation between the SEC commissioners. 0:05:28.240 --> 0:05:31.200 There's four Commissioners right now there I think can be 0:05:31.240 --> 0:05:34.200 a max at five. They were really trying to tease 0:05:34.240 --> 0:05:38.440 out whether or not to include Scope three, and to 0:05:38.680 --> 0:05:41.440 whom they've put in place some nuances, you know, like 0:05:41.480 --> 0:05:46.040 a gradual phase in period for these different types of disclosures, 0:05:46.080 --> 0:05:48.520 and Scope three would come a little bit later for 0:05:48.680 --> 0:05:51.839 entities than Scope one, sort of helping ease into the 0:05:51.920 --> 0:05:56.320 process by level of difficulty. But it's still very ambitious, 0:05:56.360 --> 0:05:59.920 and they use a lot of existing frameworks to sort 0:06:00.160 --> 0:06:03.760 inspire this proposed rule, Things like the Test Force on 0:06:03.800 --> 0:06:07.400 Climate Related Financial Disclosures often called the tcf D just 0:06:07.440 --> 0:06:11.200 sort of a voluntary guide for disclosure that is widely 0:06:11.200 --> 0:06:14.440 adopted and in some cases, you know, used as a 0:06:14.440 --> 0:06:18.599 basis for mandatory disclosures in in different regions, and also 0:06:18.640 --> 0:06:21.880 the Greenhouse Gas Protocol. They use that to sort of 0:06:21.920 --> 0:06:25.920 base their definitions of what is constituted as Scope three, 0:06:25.920 --> 0:06:28.840 and it would include a lot of activities. To your 0:06:28.839 --> 0:06:33.240 point about its infancy, yes, it's it's still unsure the 0:06:33.320 --> 0:06:36.479 final form that the rule will take, but I think 0:06:36.520 --> 0:06:39.919 it's anticipated that it will be somewhat similar in many 0:06:39.920 --> 0:06:43.400 ways to the current proposed rules. So basically what happens 0:06:43.440 --> 0:06:46.800 is they voted, the rule was sort of moved on 0:06:46.960 --> 0:06:50.360 to the next stage. It's now in a public comment period. 0:06:50.640 --> 0:06:54.240 They'll get those comments back at least through May twenties, 0:06:54.440 --> 0:06:58.000 if not a longer, and then they will sort of 0:06:58.000 --> 0:07:01.960 take those into consideration. How it out amongst themselves, reformulate 0:07:02.000 --> 0:07:04.520 sort of the typical process for putting out rules with 0:07:04.600 --> 0:07:08.240 the SEC, and then they will you know, put out 0:07:08.279 --> 0:07:11.560 and vote on a finalized rule. We could see that 0:07:11.680 --> 0:07:13.840 as early as the end of the year. So the 0:07:13.920 --> 0:07:18.280 US Security and Exchange Commission is voting on this and 0:07:18.320 --> 0:07:21.560 then putting it out for what did you say, no, no, 0:07:21.680 --> 0:07:24.360 you're good, so for public comments. So basically they have 0:07:24.440 --> 0:07:27.880 formulated this proposal amongst the different you know divisions of 0:07:27.920 --> 0:07:30.880 the SEC through the drafting process, and then there was 0:07:30.920 --> 0:07:35.920 a public meeting and they almost sort of presented publicly 0:07:36.080 --> 0:07:40.560 the details in a shortened form of the proposal. And 0:07:40.600 --> 0:07:44.800 then they the commissioners sort of those those members who 0:07:45.000 --> 0:07:47.920 vote on on the proposed rule. They sort of lead 0:07:48.240 --> 0:07:50.560 the SEC and they're appointed by the President and they 0:07:50.560 --> 0:07:53.840 sit for a term. They all sort of gave reasoning 0:07:53.920 --> 0:07:57.680 behind their support or opposition of the proposed rule. And 0:07:57.720 --> 0:08:01.120 then they voted and it passed through three to one, 0:08:01.360 --> 0:08:03.680 and so now, yes, it it's going. It's it's open 0:08:03.720 --> 0:08:06.280 to the public. Anybody can read the document and submit 0:08:06.320 --> 0:08:08.800 a public comment and then that will all be taken 0:08:08.800 --> 0:08:12.480 into consideration before things are sort of rehashed and finalized 0:08:12.520 --> 0:08:18.440 by the SEC. So maya, how does what the SEC 0:08:18.720 --> 0:08:21.760 in the US is proposing to do? How does this 0:08:21.840 --> 0:08:25.320 stack up with some of the existing regulations? It maybe 0:08:25.600 --> 0:08:29.320 do rate more highly. We we actually have a policy 0:08:29.360 --> 0:08:32.240 scoreboard where we actually look at countries and the different 0:08:32.240 --> 0:08:34.640 policies they have in place in comparison to one another. 0:08:34.720 --> 0:08:37.400 So that's something we look at it being how does 0:08:37.679 --> 0:08:39.800 what the US is proposing to do in the future, 0:08:40.720 --> 0:08:42.800 where does it get them in terms of stacking up 0:08:42.800 --> 0:08:46.480 with perhaps the European Commission for example. Yeah, so what 0:08:46.520 --> 0:08:49.240 we're seeing right now with the US is that it's 0:08:49.320 --> 0:08:52.720 just the necessary first step to kick off the wider 0:08:52.760 --> 0:08:56.840 strategy the US is really behind and and to be 0:08:56.880 --> 0:08:59.680 completely honest, and we agree on that with Malorie as well, 0:09:00.440 --> 0:09:04.040 this first step there's nothing compared to the EU A 0:09:04.120 --> 0:09:07.320 gent down sustainable finance and the strategy that we're seeing 0:09:07.440 --> 0:09:11.520 here in the EU it's an important and necessary first step, 0:09:11.880 --> 0:09:16.720 but for now it very much looks like mandatory tcs 0:09:16.880 --> 0:09:20.160 D reporting tcf D being what Mantery explained, which is 0:09:20.200 --> 0:09:24.760 the Task Force on Climate Related Antrol Disclosure, which basically 0:09:24.880 --> 0:09:28.720 forces company to look at the risk and opportunities that 0:09:28.800 --> 0:09:32.200 are linked to climate change and and this is due 0:09:32.200 --> 0:09:35.079 to many reasons. The first reason is the fact that 0:09:35.240 --> 0:09:39.600 the SEC, the mandate of the SEC, only allows them 0:09:39.720 --> 0:09:44.600 to look at what is financially material, then look at 0:09:44.920 --> 0:09:51.280 and create a great regulations or legislation to basically protect investors. 0:09:51.640 --> 0:09:56.600 So their mandate is much more refined and smaller than 0:09:56.920 --> 0:09:59.640 the one of the European Commission and all the Europeans 0:09:59.720 --> 0:10:03.839 pre isory authorities plus the European Central Banks, because all 0:10:03.880 --> 0:10:06.920 the regulations were seeing in the in the European Union 0:10:07.280 --> 0:10:12.440 come from everywhere. So for now, the US isn't the 0:10:12.520 --> 0:10:17.040 tier in the third tier of the G twenty country 0:10:17.160 --> 0:10:21.440 that countries that we rent so far, and it's most 0:10:21.480 --> 0:10:24.440 probably going to remain in the tier three because this 0:10:24.600 --> 0:10:30.440 is just one legislation looking at one type of organizations, 0:10:30.480 --> 0:10:34.840 which are corporations as a whole, like older registrants to 0:10:35.000 --> 0:10:38.600 the SEC. But it might probably push them to the 0:10:38.640 --> 0:10:41.240 top of that tier three, because at the moment they 0:10:41.240 --> 0:10:44.280 were more at the bottom. All right, So then now, ay, 0:10:44.679 --> 0:10:46.400 I want to ask you whether or not you think 0:10:46.400 --> 0:10:48.760 it's actually even going to happen, because one of the 0:10:48.800 --> 0:10:52.080 things I have learned over the years from discussing different 0:10:52.080 --> 0:10:55.400 regulations in the US is that you have things that 0:10:55.440 --> 0:11:00.240 are proposed and then a new administration comes in in 0:11:00.240 --> 0:11:03.120 in Washington and then things get rolled back. Is there 0:11:03.160 --> 0:11:06.680 any risk that that will happen and that any changes 0:11:06.720 --> 0:11:08.240 in the White House will have an impact on the 0:11:08.280 --> 0:11:10.880 way the SEC is actually functioning? You know, as of 0:11:11.000 --> 0:11:13.280 right now, I think it's pretty likely that it will 0:11:13.559 --> 0:11:16.720 get through. As I mentioned, there's four commissioners right now. 0:11:16.760 --> 0:11:19.840 Three of them are Democrats and one is Republican. The 0:11:19.880 --> 0:11:23.920 one Republican commissioner Hester Perse, She voted no, but the 0:11:23.920 --> 0:11:29.160 other three voted yes. And basically the appointments of the 0:11:29.200 --> 0:11:32.360 commissioner are put in place by the President and then 0:11:32.360 --> 0:11:36.760 they serve a term. One of the appointees Alison Heron Lee, 0:11:36.760 --> 0:11:40.560 who previously served as the acting chair. Her term is 0:11:40.600 --> 0:11:44.040 coming up for a close in I believe June, but 0:11:44.160 --> 0:11:46.640 she has sort of put a statement saying that she 0:11:46.679 --> 0:11:48.440 will be stepping down at the end of her term 0:11:48.679 --> 0:11:53.160 once a successor is confirmed. So it's unclear exactly when 0:11:53.200 --> 0:11:56.720 she'll be departing from the SEC. But given that you know, 0:11:56.880 --> 0:11:59.520 Joe Biden is the president and he is you know, 0:11:59.559 --> 0:12:02.960 of the Democratic Party, and there's room for more commissioners 0:12:03.240 --> 0:12:07.000 with and without commissionerly, I think it's you know, pretty 0:12:07.440 --> 0:12:10.960 much likely that whoever is or is not appointed before 0:12:11.000 --> 0:12:13.920 this finalized rule gets voted upon, because you know, you 0:12:13.920 --> 0:12:16.679 could see more commissioners appointed before that time, or or 0:12:16.720 --> 0:12:19.839 perhaps not, that it will get past in a form 0:12:19.920 --> 0:12:23.520 that is probably pretty similar to what it is now. 0:12:23.600 --> 0:12:26.840 I don't anticipate them pairing it down too much because 0:12:26.840 --> 0:12:29.360 I think the biggest hurdle was them actually putting a 0:12:29.360 --> 0:12:31.960 lot of this like scope three emissions disclosures in the 0:12:32.000 --> 0:12:34.800 proposed rule and sort of putting that out there, so 0:12:35.000 --> 0:12:36.960 you know, it kind of behooves them to to put 0:12:37.000 --> 0:12:40.280 it through. To One concern in terms of things like 0:12:40.440 --> 0:12:44.880 rollbacks is legal action. So there have already been threats 0:12:45.200 --> 0:12:49.040 for lawsuits to you know, challenging the SEC, which would 0:12:49.080 --> 0:12:51.640 happen after the rule is finalized, so it wouldn't be 0:12:51.679 --> 0:12:54.040 happening in this form because the rule is not complete yet, 0:12:54.440 --> 0:12:57.120 and you know, challenge whether or not it violates the 0:12:57.160 --> 0:13:01.200 mandate of the SEC. As Maya mentioned, you know, astuteley earlier, 0:13:01.480 --> 0:13:04.080 the SEC you know how is sort of regulating things 0:13:04.120 --> 0:13:08.240 that pose material you know, financial risks, and that's something 0:13:08.280 --> 0:13:11.559 that I didn't mention earlier. Some of these disclosures are 0:13:11.559 --> 0:13:15.680 subject to to that sort of materiality clause here. That 0:13:15.679 --> 0:13:19.000 buzzword a lot, but basically it's you know, meaning that 0:13:19.600 --> 0:13:23.199 a reasonable person would think that information is financially important, 0:13:23.520 --> 0:13:26.840 and so it's you know, it's a very strong rule 0:13:27.000 --> 0:13:29.720 in my personal opinion, but it does leave you know, 0:13:29.800 --> 0:13:33.160 some of this quote unquote materiality of what to disclose 0:13:33.240 --> 0:13:36.520 or not disclose up to the discretion of the disclosure, 0:13:36.600 --> 0:13:39.640 you know, which can you know, pose those questions are 0:13:39.640 --> 0:13:43.600 not I'm stealing so of Maya's European pessimism, but for 0:13:43.600 --> 0:13:46.720 for this, you know, I think that you know, analyses 0:13:46.720 --> 0:13:49.720 have shown that it's sort of likely that even if 0:13:49.880 --> 0:13:54.079 a lawsuits were to be waged, the rule will probably 0:13:54.520 --> 0:13:59.440 survive in you know, the form without being completely paired down, 0:13:59.520 --> 0:14:02.240 strip down, you know, to to its nuts and bolts 0:14:02.320 --> 0:14:04.720 and get through, which you know, I think would be 0:14:05.120 --> 0:14:07.400 a pretty big deal. It remains to be seen how 0:14:07.440 --> 0:14:10.200 things will go in the future, but you know, current 0:14:10.240 --> 0:14:12.880 concerns are whether or not you know, the greenhouse gas 0:14:12.880 --> 0:14:18.640 emissions disclosure components, for example, you know, violate the rule. Uh, 0:14:18.679 --> 0:14:21.040 you know, the mandates from Congress so that established the 0:14:21.120 --> 0:14:25.240 SEC of having to disclose financially material information, and whether 0:14:25.240 --> 0:14:28.840 it's sort of oversteps by requiring them to disclose too much. 0:14:28.880 --> 0:14:33.440 There's also concerns over whether it violates the Constitution's First 0:14:33.480 --> 0:14:35.840 Amendment of free speech, because the SEC is sort of 0:14:35.880 --> 0:14:39.960 allowed to compel speech to promote transparency from companies, but 0:14:40.120 --> 0:14:43.120 there have been questions over whether or not this, uh, 0:14:43.280 --> 0:14:46.560 this oversteps that that first Amendment as well. So we'll 0:14:46.560 --> 0:14:49.120 see the like. You know, it's likely that lawsuits will 0:14:49.160 --> 0:14:51.600 be waged, but I think it's also equally likely that 0:14:51.960 --> 0:14:55.440 the rule will come through sort of unabashed and and 0:14:55.560 --> 0:14:58.000 make it in a final form that looks very similar 0:14:58.000 --> 0:15:00.600 to what it is now and sort of in supreme 0:15:00.640 --> 0:15:03.400 for for quite a while now for a very short break, 0:15:03.480 --> 0:15:09.480 stay with us. So well, then let's go back to 0:15:09.680 --> 0:15:13.120 Maya and that you are calling it European pessimism. But 0:15:13.160 --> 0:15:15.600 I think she's just giving it a good dose of 0:15:15.720 --> 0:15:20.520 critical thinking and realism on some of these and she 0:15:20.640 --> 0:15:23.160 applies it to Europe as well. So let's then talk 0:15:23.200 --> 0:15:26.320 about the EU taxonomy. There have been some changes on 0:15:26.400 --> 0:15:30.440 that side and some discussion around incorporating gas and nuclear. 0:15:30.880 --> 0:15:35.560 Now I know that you have some strong opinions regarding 0:15:35.640 --> 0:15:39.080 what this may do to Europe's climate goals. So Maya, 0:15:39.080 --> 0:15:41.040 why don't you lay out what what is what is 0:15:41.080 --> 0:15:43.480 the problem here, and what is your critique of gas 0:15:43.520 --> 0:15:46.640 and nuclear in the taxonomy. So ney's try to make 0:15:46.640 --> 0:15:48.920 it short because we don't have three hours in front 0:15:48.960 --> 0:15:51.640 of us and a long debate, you know the French way, 0:15:52.120 --> 0:15:55.000 like everything hands and stuff. Anyway, I'm going to play 0:15:55.040 --> 0:16:00.720 devil's advocate here too, ready for that. So they two 0:16:01.240 --> 0:16:05.840 very different points. The inclusion of nuclear and natural gas 0:16:06.160 --> 0:16:09.640 have come together into the taxonomy. But this is more 0:16:10.160 --> 0:16:14.560 because of like diplomatic and political like reason is the 0:16:14.600 --> 0:16:17.320 fact that some countries were pushing for one some so 0:16:17.480 --> 0:16:19.720 others were like, you know what, if you're pushing for one, 0:16:19.760 --> 0:16:23.280 we're pushing for the other. So the taxonomy has been 0:16:23.800 --> 0:16:25.960 the first thing that people need to know is that 0:16:26.000 --> 0:16:29.520 the taxonomy, the first texts have been approved, they've been 0:16:29.560 --> 0:16:33.600 signed off, they've been passed, they came into force this year. 0:16:33.800 --> 0:16:38.760 Companies have been reported their inligibility percentage to the taxonomy 0:16:38.880 --> 0:16:41.480 and it's going to be full alignment next year. But 0:16:41.600 --> 0:16:47.400 then in December one, the European Commission proposed and put 0:16:47.440 --> 0:16:52.440 out an addendum to the taxonomy to basically create conditions 0:16:52.520 --> 0:16:57.000 under which nuclear and natural gas could be considered green 0:16:57.360 --> 0:17:00.200 in the taxonomy within the framework of the tex ME. 0:17:00.840 --> 0:17:05.760 And so after that the Platform and UM and the 0:17:05.960 --> 0:17:09.200 Europe of the Platform and the member states have reviewed 0:17:09.440 --> 0:17:13.119 this these conditions, and then after there was another point 0:17:13.320 --> 0:17:17.800 where the European Commission has actually approved the text that 0:17:17.920 --> 0:17:21.000 was that was proposed at the end of December without 0:17:21.119 --> 0:17:26.040 any changes, despite the despite the analysis from the Platform 0:17:26.200 --> 0:17:30.000 and the member state. So the two facts are the 0:17:30.040 --> 0:17:33.800 inclusion of nuclear in the in the taxonomy is where 0:17:33.920 --> 0:17:38.480 any new built nuclear but also maintenance of installation. The 0:17:38.520 --> 0:17:41.480 main issue with the inclusion of nuclear in the taxonomy, 0:17:41.640 --> 0:17:46.160 according to being if analysis is being at finds out 0:17:46.240 --> 0:17:49.520 that basically there is no issue in terms of like 0:17:49.720 --> 0:17:53.920 announcing the de carbonization potential of nuclear. Nuclear is a 0:17:54.160 --> 0:17:58.359 very low carbon source of electricity, well below the hundred 0:17:58.359 --> 0:18:02.080 grams seal too perclude our that is requested from any 0:18:02.200 --> 0:18:07.520 power generation plants within the taxonomy. So nuclear depending on 0:18:07.600 --> 0:18:15.320 the estimates, we range between ten grams and sixty grams. 0:18:15.320 --> 0:18:18.639 But whatever the the exact number, it's for a bit 0:18:18.680 --> 0:18:21.760 of the freshials that are imposed in the taxonomy. So 0:18:22.200 --> 0:18:25.240 from the angle of what we call substantial contribution, we're fine. 0:18:25.680 --> 0:18:28.960 It has a potential for the carbonizing the grid. The 0:18:29.040 --> 0:18:32.120 problem that BNFC is in the inclusion of of nuclear 0:18:32.640 --> 0:18:36.440 is the aspect of doing no significant harm. So for 0:18:36.440 --> 0:18:39.320 for those who listen to us often, we did a 0:18:39.359 --> 0:18:42.240 session with Data and Mark back in the days to 0:18:42.240 --> 0:18:45.040 to explain how the taxonomy works and for the taxonomy 0:18:45.160 --> 0:18:48.879 not an issue. You prove that you're green by substantially 0:18:48.880 --> 0:18:53.879 contributing to to an environmental goal like plane to change mitigation, 0:18:54.280 --> 0:18:57.160 but you should also prove that you're not harming any 0:18:57.160 --> 0:19:01.199 other environmental goal such a protection of of econsistent but 0:19:01.280 --> 0:19:04.960 what are use waste management annicating things? So you can't 0:19:05.200 --> 0:19:09.359 You need to ensure that you're not only decarbonizing, but 0:19:09.440 --> 0:19:12.880 you're also not harming the rest of the environment, and 0:19:13.000 --> 0:19:17.080 with nuclear this has been highly contests so that was 0:19:17.119 --> 0:19:21.400 the main reason why eyebrows were raised with the inclusion 0:19:21.440 --> 0:19:26.040 of nuclear. Because of nuclear waste, because of military safety 0:19:26.080 --> 0:19:29.639 issue as we're seeing right now in Ukraine for instance. 0:19:29.960 --> 0:19:32.639 So there are a lot of points that raise eyebrows, 0:19:32.640 --> 0:19:34.840 but the main point that being at raised about the 0:19:34.880 --> 0:19:39.040 inclusion of nuclear is that whether nuclear is labeled green 0:19:39.359 --> 0:19:44.040 or not won't make change in terms of if we 0:19:44.119 --> 0:19:48.800 are financing nuclear. So whether nuclear is including in the 0:19:48.880 --> 0:19:53.760 taxonomy or not, nuclear will get financed if needed. The 0:19:53.840 --> 0:19:57.200 reason why nuclear is not finances because it's far too 0:19:57.280 --> 0:20:01.400 expensive and it's far too lon to build. So so 0:20:01.520 --> 0:20:05.679 so basically we're all saying at benish and that's the 0:20:05.760 --> 0:20:09.639 point of our report is to say, well, you've been 0:20:09.680 --> 0:20:13.520 pushing for the inclusion of nuclear, there are some big 0:20:13.600 --> 0:20:17.400 caveat in the way that do no significant harmony structured. 0:20:18.240 --> 0:20:23.880 We don't like being a doesn't put doesn't push back 0:20:23.880 --> 0:20:25.960 on the fact that it's it's a low carbon in 0:20:26.000 --> 0:20:28.440 a source of energy, but it's the risk, it's the 0:20:28.480 --> 0:20:31.439 associated potential for the two arms. I think that's an 0:20:31.440 --> 0:20:34.840 important distinction. It's potential, but not necessarily it just depends 0:20:34.840 --> 0:20:39.440 on circumstances exactly, and the criteria that we're stepped out 0:20:39.640 --> 0:20:45.680 to ensure to reduce that potential. We're two weak according 0:20:45.760 --> 0:20:49.679 to the platform and according to being a research but 0:20:49.800 --> 0:20:52.760 for it being if our angle was much more pushing 0:20:52.800 --> 0:20:55.720 around the fact that it doesn't make sense whether it's 0:20:55.800 --> 0:20:58.000 labeled ring or not. So that's the point in nuclear. 0:20:58.720 --> 0:21:00.879 The concern with nuclear is that potential for there to 0:21:00.920 --> 0:21:04.159 be harm. And you referenced actually what's going on in 0:21:04.240 --> 0:21:07.920 the Ukraine and some concerns over actually nuclear power stations 0:21:07.960 --> 0:21:11.320 being taken over. Also related very much to this, in 0:21:11.359 --> 0:21:14.520 particular in a European context, but actually very much globally, 0:21:14.560 --> 0:21:17.760 is what's happening with gas prices, which we're already high 0:21:17.800 --> 0:21:21.280 before that conflict kicked off, and now there is concerned 0:21:21.280 --> 0:21:25.480 around the security of supply of natural gas. Europe is 0:21:25.560 --> 0:21:28.439 very dependent upon natural gas at the moment, and it 0:21:28.640 --> 0:21:31.200 is in many respects. I know we don't love this term, 0:21:31.280 --> 0:21:33.240 but many have referred to it as a bridge fuel 0:21:33.480 --> 0:21:40.560 or something that can provide assistance with providing seven access 0:21:40.600 --> 0:21:44.560 to clean energy when you don't have the supply coming 0:21:44.600 --> 0:21:49.800 from either wind or sunshining at certain parts of the day, month, year. 0:21:50.520 --> 0:21:53.000 What is the issue with incorporating natural gas and the 0:21:53.040 --> 0:21:57.240 important role that it plays within you know, providing security 0:21:57.280 --> 0:22:00.439 of supply and so you know, I know, Maya that 0:22:00.760 --> 0:22:03.080 right now what you're going to talk about is really 0:22:03.119 --> 0:22:05.320 I mean an opinion that we have put forward being 0:22:05.320 --> 0:22:08.439 and yet as a house view regarding where this fits 0:22:08.480 --> 0:22:11.520 in there. And we can talk, like you said, for 0:22:11.600 --> 0:22:14.320 three hours about whether or not it should or should 0:22:14.320 --> 0:22:17.440 not be included. So within the stance that we've taken, 0:22:17.440 --> 0:22:19.040 if we press that a little bit, what is the 0:22:19.040 --> 0:22:21.679 b NF house view on why gas maybe shouldn't be 0:22:21.680 --> 0:22:25.320 included in the U taxonomy? Like all the your remarks 0:22:25.320 --> 0:22:27.600 are great remarks, and they are the ones that are 0:22:27.640 --> 0:22:30.879 pushed onto us at the moment and that are pushed 0:22:30.880 --> 0:22:35.840 onto the platform. So the taxonomy is a grain taxonomy. 0:22:36.200 --> 0:22:40.720 It's a standard to define what we call green in 0:22:40.760 --> 0:22:43.960 the European Union. It means that whether you're in the 0:22:44.040 --> 0:22:48.080 taxonomy or not in the taxonomy, you'll still get access 0:22:48.080 --> 0:22:52.359 to financing. The main stuff that it ensures is the 0:22:52.400 --> 0:22:56.520 fact that what's in the taxonomy has the potential to 0:22:56.640 --> 0:22:59.960 have access to preferential rate so that we can accept 0:23:00.080 --> 0:23:04.640 narrate the transition, right. It's not saying we're gonna make 0:23:04.800 --> 0:23:07.960 for now like the europe Incordition doesn't have the plan 0:23:08.080 --> 0:23:11.400 to create like a list of what we should stop financing, 0:23:11.680 --> 0:23:14.800 and that actually can be a different podcast at different 0:23:14.840 --> 0:23:17.240 points in time because we're also thinking about that. It's 0:23:17.280 --> 0:23:20.200 not about that. So the inclusion of natural gas in 0:23:20.240 --> 0:23:26.119 the taxonomy is out of context because nuclear is a 0:23:26.240 --> 0:23:30.040 needed source of power. I mean, for those of you 0:23:30.119 --> 0:23:33.000 who are listening to us and and know our new 0:23:33.080 --> 0:23:37.840 energy outlook, who know the European energy transition outlook, you 0:23:38.000 --> 0:23:42.520 know that from our own scenarios there is a role 0:23:42.680 --> 0:23:45.200 for gas to play in the transition to look carbon 0:23:46.240 --> 0:23:50.960 look carbon economy. So that's no no question asked on that. 0:23:51.800 --> 0:23:54.359 The main question there is is to label a for 0:23:54.560 --> 0:23:59.960 sale fuel as a sustainable investment as a green investment, 0:24:00.720 --> 0:24:05.399 and it's mixing up everything in the investors of you 0:24:05.960 --> 0:24:09.520 because what being I found out is that first the 0:24:09.560 --> 0:24:15.200 criteria that are set in the taxonomy, despite potentially being 0:24:16.280 --> 0:24:19.920 hard to meet, some of them has to have such 0:24:20.040 --> 0:24:25.159 strong caveat that the it makes them weak. So for instance, 0:24:25.520 --> 0:24:29.159 there is there is an annual capacity level of carbon 0:24:29.480 --> 0:24:33.240 and carbon emissions that is set for a certain guest 0:24:33.520 --> 0:24:36.600 power plant that is a twenty year average. But you 0:24:36.640 --> 0:24:40.359 need to report your taxonomy alignment every year. So that 0:24:40.440 --> 0:24:45.320 does that mean that you basically upload or offload all 0:24:45.520 --> 0:24:49.320 your greenhouse gas emission at the beginning of the life 0:24:49.320 --> 0:24:53.400 cycle of the power plants for ten years, and then 0:24:53.400 --> 0:24:56.840 after you'll be like, okay, after ten years, basically I'm 0:24:56.880 --> 0:25:00.760 gonna be neutral in terms of greenhouse gat shin and 0:25:00.800 --> 0:25:04.320 therefore overall over the twenty years, I'll meet that average. 0:25:04.720 --> 0:25:07.360 This is impossible to check you here on here. So 0:25:07.480 --> 0:25:09.600 maybe we're going to have assets that are going to 0:25:09.680 --> 0:25:11.960 be labeled as green at the beginning of their life 0:25:12.480 --> 0:25:14.919 that are not necessarily green because you'll feed just on 0:25:15.000 --> 0:25:17.520 the on the big steme of the twenty years. That's 0:25:17.560 --> 0:25:21.520 one example. The problem is that it's as if they 0:25:21.560 --> 0:25:26.399 had pushed to get natural gas into the taxonomy for 0:25:26.520 --> 0:25:30.879 many different reasons why it's not necessarily in that text 0:25:30.920 --> 0:25:33.480 that it should be so in in our note, for 0:25:33.560 --> 0:25:39.600 instance benf analysis, the fact that this the role that 0:25:39.720 --> 0:25:44.240 gas has to play could be regulated by other sorts 0:25:44.240 --> 0:25:48.440 of regulations, but not by the taxonomy. The taxonomy is 0:25:48.440 --> 0:25:54.440 a sustainable like a green and roamentally friendly green framework 0:25:54.600 --> 0:25:58.560 for investor for them to be a no brainer and say, okay, 0:25:58.640 --> 0:26:00.960 if it's a line with the taxonomy, me if in 0:26:01.040 --> 0:26:04.280 my portfolio I have a line with the taxonomy, means 0:26:04.320 --> 0:26:07.720 that I had all of my investments are a line 0:26:07.760 --> 0:26:11.760 with the Paris Agreement. And now it creates doubts. While 0:26:11.840 --> 0:26:13.600 at the same time, at the beginning of this week, 0:26:13.680 --> 0:26:18.080 the European Platform and Sustainable Finance, which is the expert 0:26:18.119 --> 0:26:23.080 group that like responds to the European Commission on these topics, 0:26:23.320 --> 0:26:27.120 has just put out a transition of taxonomy. So why 0:26:27.480 --> 0:26:30.399 can't it be that because, as you explain rightly, Diana, 0:26:31.160 --> 0:26:33.920 it's a bridge fuel, it's a fuel that we need 0:26:33.960 --> 0:26:36.560 for a certain period of time. So your argument is 0:26:36.560 --> 0:26:38.480 that there is a separate taxonomy. They can take this 0:26:38.560 --> 0:26:42.120 into consideration but walk back confusing things. I don't think so. 0:26:42.160 --> 0:26:46.560 I think right now the main discussion and the reaction 0:26:46.880 --> 0:26:52.040 from from from investors what BNFC is that investors are 0:26:52.920 --> 0:26:56.399 are just saying they don't understand anymore. The taxonomy was 0:26:56.440 --> 0:27:01.360 supposed to be this kind of pure grain list that 0:27:01.400 --> 0:27:04.880 they could follow without asking themselves the questions because most 0:27:04.920 --> 0:27:07.239 of them don't have a scientific background. Most of them 0:27:07.320 --> 0:27:11.120 don't have an engineering background. They don't necessarily know when 0:27:11.200 --> 0:27:14.560 hydrogen is green, when cement's green, and that was supposed 0:27:14.560 --> 0:27:18.080 to be our common methodology, and now in the middle 0:27:18.080 --> 0:27:20.840 of all of that you have a fossil view. So 0:27:22.119 --> 0:27:25.320 it's better to have different sets of rules being I 0:27:25.440 --> 0:27:27.600 think that this came up as well because one of 0:27:27.640 --> 0:27:30.960 the biggest criticism against the taxonomy was the saying that 0:27:31.040 --> 0:27:33.880 it didn't have a shaded approach. It was either your 0:27:33.920 --> 0:27:36.400 in or you're out. So hence the need for the 0:27:36.480 --> 0:27:42.080 transition tacconas exactly. This is why the Platform and Sustainable 0:27:42.080 --> 0:27:45.280 Finance and the European Commission still have a lot of work. 0:27:47.520 --> 0:27:50.200 How much work to do? So much sure to do. Okay, 0:27:50.280 --> 0:27:53.560 so there's that that's sober looking up. So we've talked 0:27:53.600 --> 0:27:56.280 a bit about Europe. We've talked about the u S 0:27:56.320 --> 0:27:59.040 and some developments there. Let's add one more thing into 0:27:59.040 --> 0:28:02.560 the show today, which is the Glasgow Financial Alliance so 0:28:02.640 --> 0:28:06.119 g FANS, which is fairly new and it would be 0:28:06.240 --> 0:28:08.680 useful for us to just kind of quickly go over 0:28:09.280 --> 0:28:12.040 what it is, what it isn't, because it is going 0:28:12.119 --> 0:28:16.280 to be a new force within all of these different 0:28:16.560 --> 0:28:20.959 frameworks for companies and governments to look at. Absolutely, and 0:28:21.240 --> 0:28:23.239 maybe I'll jump in on that because I think it's 0:28:23.280 --> 0:28:26.959 a perfect secret data, almost as if it were by design, 0:28:27.160 --> 0:28:30.560 because you know, Maya's talking about, you know, the need 0:28:30.680 --> 0:28:35.320 for transparency and green activities and and every great point 0:28:35.359 --> 0:28:37.760 that she's just brought up, and it's the same you know, 0:28:37.800 --> 0:28:40.960 with the SEC, investors have been asking for a long 0:28:41.080 --> 0:28:44.000 time for more transparency. That's part of the impetus for 0:28:44.040 --> 0:28:46.640 putting forward any type of rule like this, you know, 0:28:46.680 --> 0:28:50.680 whether it's a taxonomy or SEC regulation or anything you 0:28:50.720 --> 0:28:53.880 know that runs the gamut is that people are saying, hey, 0:28:53.920 --> 0:28:56.120 you know, we need more information if we're going to 0:28:56.160 --> 0:29:02.160 make prudent financial or other decisions related to asks, opportunities, decisions, 0:29:02.760 --> 0:29:05.800 what have you. And the same is true, you know 0:29:05.880 --> 0:29:09.440 for the g fans, the Glasgow Financial Alliance for net zero. 0:29:09.760 --> 0:29:11.800 It is sort of like a I like to think 0:29:11.800 --> 0:29:15.920 of it like a coalition of coalitions. Basically, a group 0:29:16.760 --> 0:29:21.280 or groups rather of the financial participants, whether that be banks, 0:29:21.760 --> 0:29:26.600 asset managers, insurance companies, asset owners and many others have 0:29:26.760 --> 0:29:31.400 sort of come together in different coalitions to sign on 0:29:32.160 --> 0:29:38.240 to achieve net zero emissions by or earlier, and there 0:29:38.280 --> 0:29:41.640 are different types of, you know, additional goals that go 0:29:41.760 --> 0:29:44.000 along with that, and you know, oftentimes you hear about 0:29:44.000 --> 0:29:46.840 things like me for setting interim goals, not just saying 0:29:47.520 --> 0:29:50.360 see you in t like you know, we'll meet you there, 0:29:50.640 --> 0:29:53.240 but like you know, things coming you know, every five 0:29:53.320 --> 0:29:56.520 years or so, or at least you know, one interim goal. 0:29:56.560 --> 0:30:00.600 There's different elements of these sort of voluntary standards, but 0:30:00.720 --> 0:30:04.120 generally the gist is let's all get to net zero 0:30:04.160 --> 0:30:07.480 by and the g FANS, which was initiated I believe 0:30:07.480 --> 0:30:12.000 in April, sort of coalesced these coalitions, brought them all 0:30:12.040 --> 0:30:15.320 together under one roof for umbrella so that things could 0:30:15.360 --> 0:30:17.800 be streamlined. So basically you have all these financial institutions 0:30:17.840 --> 0:30:21.640 saying yes, net zero, me too, and then they're all 0:30:21.680 --> 0:30:24.880 working in tandem under sort of a similar umbrella to 0:30:25.360 --> 0:30:28.400 figure out how they do that. So, whether that means 0:30:28.520 --> 0:30:31.760 you know, figuring out how to call for more regulation 0:30:31.880 --> 0:30:33.880 like we've been talking about as a group, say we 0:30:33.920 --> 0:30:36.920 need more info, or whether it's about figuring out how 0:30:36.920 --> 0:30:40.960 to identify and calculate the pathways that they're going to 0:30:41.040 --> 0:30:43.440 do that. The g FANS has set up several sort 0:30:43.480 --> 0:30:46.719 of work streams or priority areas, and they released this 0:30:46.960 --> 0:30:51.600 at the time of COP last October slash November UM 0:30:51.640 --> 0:30:54.720 and you know, now they're sort of working on helping 0:30:54.760 --> 0:30:58.200 to enable that transition that many of these companies have 0:30:58.320 --> 0:31:00.800 signed onto and and they're still signing onto these These 0:31:00.840 --> 0:31:03.560 initiatives are growing. I believe at the time of COP 0:31:03.680 --> 0:31:06.120 it was announced that there were four hundred and fifty 0:31:06.160 --> 0:31:09.520 participants or you know sort of sign on across the 0:31:09.560 --> 0:31:13.440 institution types. And this is something that I think we're 0:31:13.480 --> 0:31:16.400 seeing more and more. Is you know, I like to 0:31:16.400 --> 0:31:18.400 think of it as like a bit of a wave. 0:31:18.600 --> 0:31:20.520 It's like you start out with something like you know, 0:31:20.640 --> 0:31:23.000 green Finance or the Call for Disclosure, and it's a 0:31:23.040 --> 0:31:27.640 few voices and it's you know, not necessarily put into 0:31:27.720 --> 0:31:29.560 action very quickly, a couple of people are sort of 0:31:29.560 --> 0:31:32.080 crying out in the wilderness saying we need more of 0:31:32.080 --> 0:31:34.760 this or we need to set just in that little 0:31:34.840 --> 0:31:38.280 tiny voice too, I'm really I hear that from the 0:31:38.280 --> 0:31:44.120 financial services community exactly. That's how they speak outward. Yeah, 0:31:44.160 --> 0:31:46.440 and then it like swells, you know, all of a sudden, 0:31:46.480 --> 0:31:48.760 all these voices join on. It becomes more of a roar. 0:31:48.800 --> 0:31:54.680 I'm not going to do that voice preserved some of 0:31:54.720 --> 0:31:58.000 my dignity while we discussed this. But basically, then you 0:31:58.040 --> 0:31:59.880 have this sort of swell where a lot of d 0:32:00.040 --> 0:32:02.360 these are calling for the same thing. Maybe they're setting 0:32:02.360 --> 0:32:05.360 out frameworks, they're trying to figure out their footing. Us 0:32:05.360 --> 0:32:08.040 they paved the way toward the future, and it becomes 0:32:08.040 --> 0:32:10.880 a bit confusing. So you start out with not enough guidance. 0:32:11.080 --> 0:32:13.640 You get to everybody wants the same things. So there's 0:32:13.640 --> 0:32:15.920 all these different avenues and now we're sort of in 0:32:15.960 --> 0:32:18.560 the last part of the wave where it's starting to 0:32:18.640 --> 0:32:21.680 funnel down again, but with more clarity. So you take 0:32:21.720 --> 0:32:24.440 all of those voices, all of these frameworks, all of 0:32:24.440 --> 0:32:27.680 these coalitions, and you're putting it under one roof so 0:32:27.720 --> 0:32:32.080 that you're not having everybody doing things with a different methodology, 0:32:32.120 --> 0:32:34.800 which is super important. You have to, you know, make 0:32:34.840 --> 0:32:38.480 sure that calculations are similar, otherwise things will be completely 0:32:38.520 --> 0:32:42.040 incomparable and will sort of wind up with, you know, chaos. 0:32:42.400 --> 0:32:47.800 Now for a very short break, stay with us. Yeah, 0:32:47.840 --> 0:32:51.040 it makes it impossible for the investment community to compare 0:32:51.800 --> 0:32:55.120 different companies within their portfolio to one another and make decisions. 0:32:55.160 --> 0:32:57.680 And for Emmy and for us the public as well, 0:32:58.240 --> 0:33:01.160 that's exactly right, And something like the g FANS serves 0:33:01.240 --> 0:33:03.920 as a funneling exercise like that, it takes a bunch 0:33:03.920 --> 0:33:06.080 of coalitions and says, hey, let's get on the same page. 0:33:06.120 --> 0:33:08.920 Because you can also imagine one financial entity, you know, 0:33:09.040 --> 0:33:11.040 bank for example. You know, they might have an asset 0:33:11.080 --> 0:33:13.920 management arm. It makes sense for them to be doing 0:33:14.040 --> 0:33:18.280 something that is comparable across their different types of activities, 0:33:18.360 --> 0:33:21.000 so that calculations are similar. And that also takes away 0:33:21.040 --> 0:33:23.600 some of the burden of things like reporting and trying 0:33:23.600 --> 0:33:25.400 to meet goals because everybody is sort of on the 0:33:25.440 --> 0:33:27.880 same page, and even if it's between entities, it's not 0:33:27.920 --> 0:33:30.440 the same entity. It just like you said, it helps 0:33:30.560 --> 0:33:34.560 folks that are on the outside understand what things mean 0:33:34.840 --> 0:33:37.200 and things like a taxonomy so that everybody's on the 0:33:37.240 --> 0:33:39.840 same page about what is or is not considered green 0:33:40.120 --> 0:33:43.920 SEC regulations, so everybody's sort of disclosing information the same 0:33:43.960 --> 0:33:46.600 way instead of just here and there with different parts 0:33:46.640 --> 0:33:49.080 included in different units, you know, in there in there. 0:33:49.160 --> 0:33:52.240 It helps read that level of transparency that then will 0:33:52.280 --> 0:33:55.360 help us understand not only what the goals are things 0:33:55.400 --> 0:33:58.200 like net zero, but also how far are we on 0:33:58.280 --> 0:33:59.760 the way to get there because we can sort of 0:33:59.800 --> 0:34:02.520 come pair as a group. So actually, I I have 0:34:02.560 --> 0:34:05.880 a question for both of you who really spend a 0:34:05.880 --> 0:34:08.759 lot of time thinking about sustainable finance. That is that 0:34:08.880 --> 0:34:11.480 is the job after all. So my question is, actually 0:34:11.560 --> 0:34:15.200 we're talking about g FANS, which is trying to consolidate 0:34:15.239 --> 0:34:18.080 and look at different frameworks. Invariably, the TCFD was looking 0:34:18.120 --> 0:34:20.600 to do the same thing. There are not the same thing, 0:34:20.640 --> 0:34:24.080 but was also looking to consolidate various different frameworks that 0:34:24.120 --> 0:34:26.200 are driving to an end. We are at a place 0:34:26.200 --> 0:34:33.719 where there are these moves to consolidate information data frameworks 0:34:33.800 --> 0:34:37.080 create alignment as we head into world where E s 0:34:37.160 --> 0:34:40.799 G is becoming less niche and becoming more mainstream. And 0:34:40.800 --> 0:34:44.920 the main question within this is is this consolidation happening 0:34:45.000 --> 0:34:48.640 quickly enough that we will be able to capitalize on 0:34:48.719 --> 0:34:52.920 the amount of energy and interests that is coming from 0:34:52.960 --> 0:34:56.600 the financial services community at the moment because there are 0:34:56.680 --> 0:35:00.400 so many companies that are looking to better under stand 0:35:00.480 --> 0:35:03.320 what their E s G strategy should be going forward 0:35:03.719 --> 0:35:08.160 and probably formulating their own methodology, they're buying data, they're 0:35:08.200 --> 0:35:11.680 coming up with their views. All of these frameworks going 0:35:11.719 --> 0:35:13.960 to get there in time. Will they be additive or 0:35:14.360 --> 0:35:16.960 will they be a moment too late. I think that's 0:35:16.960 --> 0:35:21.080 the main issue. I was actually having a moderating and 0:35:21.200 --> 0:35:24.120 conferences today on the topic, and I think that's going 0:35:24.160 --> 0:35:28.720 to be the main concern of everyone, because, let's be honest, 0:35:28.920 --> 0:35:33.000 we create all these data sets, and we build all 0:35:33.080 --> 0:35:38.040 these new regulation so that financial market participants can act 0:35:38.120 --> 0:35:42.000 on it, so that corporations can act on it, but 0:35:42.080 --> 0:35:47.279 in particular investors and lenders, and ensuring that they take 0:35:47.320 --> 0:35:51.759 into account social and environmental. In this particular case, whe 0:35:51.760 --> 0:35:54.160 we're mostly talking about environmental, but there is the whole 0:35:54.160 --> 0:35:59.040 part on social. They've taken too account environmental impact of 0:35:59.080 --> 0:36:02.560 their investments. Not only do they take into account the 0:36:02.680 --> 0:36:06.960 risk that the like climate change fairs on their investments, 0:36:07.040 --> 0:36:09.799 but all their investments is bearing on the environment as 0:36:09.840 --> 0:36:13.400 a whole. And the problem we're seeing is that the 0:36:13.480 --> 0:36:16.600 same way we've been talking about the EU taxonomy, but 0:36:16.840 --> 0:36:19.960 at the moment we're talking about this taxo mania, because 0:36:20.000 --> 0:36:22.880 so many taxonomys are created around the world. Is that 0:36:22.960 --> 0:36:25.719 the technical term for it. Tax so Mania. It's a 0:36:26.080 --> 0:36:31.000 term that has been like spreading in the in the 0:36:31.400 --> 0:36:34.520 in the market. Yeah, the one that has been used 0:36:34.680 --> 0:36:39.240 and basically that that tax so Mania. It's great because 0:36:39.280 --> 0:36:43.000 it shows that we're creating this common language, but there 0:36:43.000 --> 0:36:46.799 are some small discrepancies between one country and another, like 0:36:46.840 --> 0:36:51.520 we saw the Russian taxonomy or the China taxonomy, EU taxonomy. 0:36:51.640 --> 0:36:54.520 Now we're going to have the UK taxonomy. South Africa 0:36:54.640 --> 0:36:57.000 is working on one's well, like so many I don't 0:36:57.040 --> 0:36:59.680 even have enough time to talk about it. But it's 0:36:59.680 --> 0:37:02.520 also going to be harmonizing all of that and ensuring 0:37:02.600 --> 0:37:05.719 that investors can compare one with another. That's gonna be 0:37:05.760 --> 0:37:10.280 really like difficult the part on corporate disclosure. They could 0:37:10.280 --> 0:37:13.759 do a big effort in harmonizing all of that, and 0:37:13.800 --> 0:37:17.360 I think initiatives like I S, S, B G funds, 0:37:17.719 --> 0:37:23.640 TCND really need help with the harmonization and standardization of 0:37:23.680 --> 0:37:28.879 the type of data that we're capturing. But also I 0:37:28.960 --> 0:37:32.560 hope that could bring a bit of like ambition, you know, 0:37:32.600 --> 0:37:34.960 I don't want them to just don't do something because 0:37:34.960 --> 0:37:36.640 you're scared that the other one is not going to 0:37:36.719 --> 0:37:39.880 do or something like that. I hope it can feel 0:37:40.040 --> 0:37:43.640 like a healthy competition to ensure that we get more 0:37:43.680 --> 0:37:46.200 and more data on the e s G. Performance of 0:37:46.480 --> 0:37:49.520 companies and organizations as a whole. Yeah, it's certainly not 0:37:49.640 --> 0:37:51.840 fair to say, well, then we should do nothing because 0:37:51.880 --> 0:37:55.560 other people are working on it. There's definitely need. I 0:37:55.600 --> 0:37:58.400 was playing Devil's advocate there in a few different respects. 0:37:59.080 --> 0:38:02.479 Is invariably Idea. Definitely do see and understand the need 0:38:02.600 --> 0:38:07.399 for harmonization in this world of lots of different taxonomies. 0:38:07.520 --> 0:38:10.040 So final thought on what the SEC is doing in 0:38:10.040 --> 0:38:14.120 the US, this seems like an excellent step forward. Let's 0:38:14.360 --> 0:38:17.520 let's play both sides of this coin. Actually, so malory. 0:38:17.680 --> 0:38:20.600 How about you say, is this a good initial step? 0:38:20.640 --> 0:38:23.759 And what do you see is the change that it 0:38:23.800 --> 0:38:27.600 may spur in the future, And Maya do, where do 0:38:27.680 --> 0:38:30.600 you see this falling in terms of what additional steps 0:38:30.640 --> 0:38:35.640 do need to take place in order for the US 0:38:35.680 --> 0:38:39.600 to really be competing, if you will, with other countries 0:38:39.640 --> 0:38:44.880 with more sophisticated or let's say, developed frameworks in place. 0:38:45.080 --> 0:38:47.439 Thanks so much, Dana, I love that question because Maya 0:38:47.440 --> 0:38:50.000 and I often love to debate these kinds of things. So, 0:38:50.160 --> 0:38:51.960 you know, putting one of us on one side, one 0:38:52.000 --> 0:38:54.120 of us on the other side is is a great exercise, 0:38:54.200 --> 0:38:57.320 So thank you. I think it's a great first step. 0:38:57.680 --> 0:39:00.719 And you know, Maya mentioned earlier that we ran company 0:39:01.000 --> 0:39:04.560 excuse me countries as UM part of you know, want research, 0:39:04.719 --> 0:39:07.120 you know, research insights. We have sort of a tool 0:39:07.280 --> 0:39:10.320 ranking the G twenty on there sort of sustainable finance 0:39:10.360 --> 0:39:14.000 and E s G disclosure regulatory landscapes, and the US 0:39:14.080 --> 0:39:16.800 falls pretty low. One of the things that we found 0:39:16.880 --> 0:39:20.160 in that analysis is that often times, what for for 0:39:20.360 --> 0:39:24.920 countries or markets that you know have been developing sustainable 0:39:25.040 --> 0:39:29.120 finance related than the SU disclosure regulations. Over time, there's 0:39:29.160 --> 0:39:33.399 sort of a natural progression at the beginning picture sort 0:39:33.400 --> 0:39:35.680 of like a graph with years on the x axis, 0:39:35.680 --> 0:39:39.640 you know, looking over time. The beginning is usually across 0:39:39.680 --> 0:39:44.359 countries starting with UH corporate E s G disclosure, just 0:39:44.480 --> 0:39:46.600 like what you're we're we would be seeing with the 0:39:46.960 --> 0:39:51.280 with the SEC proposal, and then over time you see 0:39:51.480 --> 0:39:54.120 sort of a shift. There's no more of a need 0:39:54.160 --> 0:39:57.080 to put forward new policies within a given country on 0:39:57.480 --> 0:40:01.360 UM on just disclosure from co Brits because that's already established. 0:40:01.440 --> 0:40:04.560 And then you start with more investor disclosure, and then 0:40:04.600 --> 0:40:08.080 you start with mandating the incorporation of E s G 0:40:08.440 --> 0:40:12.120 into investment decisions, you get things like taxonomy. Is if 0:40:12.120 --> 0:40:15.120 we're thinking about different types of policies, you start with 0:40:15.239 --> 0:40:18.520 something usually like a corporate sue disclosure, and then you 0:40:18.560 --> 0:40:20.960 build from there. I'm not saying that, you know, this 0:40:20.960 --> 0:40:23.880 couldn't be leap frogged or incorporated into a big policy, 0:40:24.040 --> 0:40:26.279 but it seems like we're seeing something very similar in 0:40:26.320 --> 0:40:32.000 a nascent climate policy world, that is the US. You know, 0:40:32.000 --> 0:40:35.200 we're starting out with something like that that's just corporate disclosures, 0:40:35.239 --> 0:40:38.239 and they're gonna move from there. It is pretty ambitious 0:40:38.239 --> 0:40:41.399 in my mind because it's requiring that scope three and 0:40:41.480 --> 0:40:44.399 to disclose on transition plans. So it's doing a lot 0:40:44.440 --> 0:40:46.719 more than just saying like, hey, if you think you 0:40:46.760 --> 0:40:49.480 know a climate risk is important, you know, disclose it. 0:40:49.480 --> 0:40:53.880 It's it's giving more specific guidelines that help that transparency 0:40:53.880 --> 0:40:56.040 and that comparability, which we were just talking about a 0:40:56.120 --> 0:40:59.000 question or so ago. So you know, I think that 0:40:59.080 --> 0:41:02.359 this is ripe as a first step because we've seen 0:41:02.400 --> 0:41:04.960 this in other markets as well. But one of the 0:41:05.000 --> 0:41:08.239 benefits of you know, being a latecomer, even though it's 0:41:08.280 --> 0:41:12.279 not good in terms of climate stuff, is that you 0:41:12.360 --> 0:41:16.319 already have examples in place to build off of. So 0:41:16.440 --> 0:41:19.000 you know, when the EU taxonomy was being developed, there 0:41:19.080 --> 0:41:23.000 was no other you know, big taxonomy to look at 0:41:23.120 --> 0:41:25.440 as a as an example and build off of. But 0:41:25.520 --> 0:41:28.760 now we see that other taxonomy's that are arising across 0:41:28.760 --> 0:41:33.120 across the globe are hearkening to the EU version because 0:41:33.160 --> 0:41:35.160 they don't have to reinvent the wheel. There's something that's 0:41:35.160 --> 0:41:38.160 been established and they can you know, they can get 0:41:38.160 --> 0:41:41.480 through it quicker because it's already been done somewhere, and 0:41:41.680 --> 0:41:45.840 the US can leverage its position as a bit of 0:41:45.880 --> 0:41:50.560 a laggard in terms of setting sustainable finance policies because 0:41:50.600 --> 0:41:53.799 many other jurisdictions have done it already and they can 0:41:53.920 --> 0:41:55.840 use that to their advantage. I think it would be 0:41:55.840 --> 0:41:58.759 actually very prudent to look at what other regions are 0:41:58.800 --> 0:42:01.920 doing and say, okay, now we now we sort of 0:42:01.960 --> 0:42:03.560 know the landscape, this is what we're gonna do, this 0:42:03.560 --> 0:42:05.200 is what're I'm gonna do, try, you know, tried and 0:42:05.239 --> 0:42:08.960 tested by others, because it helps again not reinvent the wheel, 0:42:08.960 --> 0:42:12.719 but it also promotes that comparability, it helps you look 0:42:12.719 --> 0:42:15.920 at other regions and nowhere to align. And then the 0:42:15.960 --> 0:42:17.520 other side of that coin, I think is a bit 0:42:17.680 --> 0:42:21.080 of the SEC proposal and something they should do more 0:42:21.160 --> 0:42:25.440 of is using existing well established frameworks, whether that be 0:42:25.560 --> 0:42:29.760 mandatory or voluntary, so not just in another country's taxonomy, 0:42:29.800 --> 0:42:34.080 but also something like the tcf D. Many people already 0:42:34.239 --> 0:42:36.799 use that. You know, number of tcf D supporters goes 0:42:36.880 --> 0:42:40.439 up and up over time. And when you establish based 0:42:40.480 --> 0:42:44.920 off of a well understood and respected um, you know, 0:42:45.640 --> 0:42:48.440 something that is comprehensive and thought of as being very 0:42:48.440 --> 0:42:51.759 reasonable and sound framework, even if it's voluntary, you're sort 0:42:51.800 --> 0:42:55.600 of already ensuring some buy in because there's recognition at 0:42:55.600 --> 0:42:58.480 the beginning. You're not starting from scratch. So I think 0:42:58.520 --> 0:43:01.080 that's those are a couple of good points in favor 0:43:01.120 --> 0:43:03.080 of you know, what the SEC has done, you know, 0:43:03.160 --> 0:43:05.120 in addition to just the fact that they brought it forward, 0:43:05.120 --> 0:43:07.440 which I think is a good thing for promoting transparency 0:43:07.480 --> 0:43:11.680 for investors and companies of and other financial participants alike, 0:43:12.040 --> 0:43:15.360 but also they should leverage their position as one of 0:43:15.400 --> 0:43:20.000 the bottom third countries that we rank and use it 0:43:20.040 --> 0:43:22.279 in a way, you know, as as you know, a 0:43:22.360 --> 0:43:24.400 benefit to get ahead in the future. I think we 0:43:24.440 --> 0:43:26.400 should have sort of a race to the top in 0:43:26.520 --> 0:43:30.879 terms of making ambitious policies that coordinate and at the 0:43:30.920 --> 0:43:34.320 most recent cop for you know, when countries came together, 0:43:34.360 --> 0:43:38.319 there was a dedicated finance day, So I think you know, 0:43:38.320 --> 0:43:41.960 I'll say this word again, but coalescing around country level, 0:43:42.440 --> 0:43:45.200 company level, you know, whatever else it is, investor level 0:43:45.280 --> 0:43:50.480 initiatives will only help promote the future sort of skyrocketing 0:43:50.520 --> 0:43:53.320 of these types of institutions because everybody will be working 0:43:53.320 --> 0:43:56.799 in tandem. The question here really has to do with 0:43:57.200 --> 0:43:59.480 is it enough like essentially what the US is doing, 0:43:59.480 --> 0:44:01.399 and not only is it enough, like what else needs 0:44:01.440 --> 0:44:03.480 to really trace place take place? Where do you see 0:44:03.480 --> 0:44:06.080 the gap between what the SEC has put forward and 0:44:06.239 --> 0:44:08.319 what is happening potentially in Europe and other parts of 0:44:08.320 --> 0:44:11.000 the world that are have been more developed in terms 0:44:11.080 --> 0:44:14.000 of their stance on a lot of these things. Basically, 0:44:14.000 --> 0:44:16.120 what is the gap? What is the gaptical? It's a 0:44:16.160 --> 0:44:19.120 great first step, and one thing I've realized by working 0:44:19.360 --> 0:44:22.160 with Malory is that it was a difficult one to 0:44:22.239 --> 0:44:25.800 get in the US. Let's let's put it into context. 0:44:25.880 --> 0:44:30.600 Under the Trump organization, the Trump administration, we were talking 0:44:30.640 --> 0:44:35.920 about preventing pension fund to promote E S G investing, 0:44:36.480 --> 0:44:41.360 and we're like, and now we're moving to an administration 0:44:41.480 --> 0:44:45.080 that is trying to do stuff. Even if what Mathery 0:44:45.120 --> 0:44:48.480 explained it's probably going to pass at the SEC level, 0:44:49.000 --> 0:44:52.440 there is a litigation risk afterwards. Like it's a whole 0:44:52.520 --> 0:44:56.200 different world from what's happening in the EU, where we 0:44:56.320 --> 0:44:59.560 have like like a market that is eager to see 0:44:59.600 --> 0:45:04.640 these relations coming. But yet, even if that's the circumstances, 0:45:04.840 --> 0:45:07.040 I still can't say for me that it's enough and 0:45:07.120 --> 0:45:09.759 it's big. I agree with the scope three emission, but 0:45:09.880 --> 0:45:13.040 it's only if there are material So I'm sure there's 0:45:13.080 --> 0:45:14.799 going to be a lot of like playing with the 0:45:14.920 --> 0:45:18.160 words like who it's not. It's almost like a complex 0:45:18.200 --> 0:45:21.680 complier or explain kind of legislation. It's not for everyone. 0:45:22.080 --> 0:45:24.719 So that's already like a big caveat for me. And 0:45:24.760 --> 0:45:27.120 the other thing is then what I want to see 0:45:27.200 --> 0:45:31.480 is that indeed, great first step, amazing, it's a strong 0:45:31.560 --> 0:45:34.279 first step. But now we need this to move to 0:45:34.360 --> 0:45:38.279 the investor side first and the bank side, because right 0:45:38.280 --> 0:45:41.440 now it's mostly looking at registrants, which are they're going 0:45:41.480 --> 0:45:44.200 to be reporting at the company level, So even if 0:45:44.200 --> 0:45:48.240 you're an investor, you're you're like report as an investor, 0:45:48.280 --> 0:45:51.760 but as a company, which is completely different than having 0:45:51.880 --> 0:45:55.640 legislation that are really going to force them to integrate 0:45:55.719 --> 0:46:01.360 it into their investment process, integrate sustainability in their investment process, 0:46:02.120 --> 0:46:07.000 and also stop seeing sustainability just as a way to 0:46:07.120 --> 0:46:10.479 head yourself against the risk. So what I would love 0:46:10.560 --> 0:46:14.960 to see is also having legislation like what we saw 0:46:15.120 --> 0:46:18.360 in the in the you with and s R and 0:46:18.400 --> 0:46:21.799 in the UK with s d R having legislation that 0:46:21.880 --> 0:46:26.920 says you need this angle of double materiality. It sounds 0:46:26.960 --> 0:46:29.200 like a swear word, but basically what it means is 0:46:29.239 --> 0:46:32.359 that how the US as on the first part, which 0:46:32.400 --> 0:46:40.480 is how is sustainability risk impacting your investment impacting your business? Well, 0:46:40.520 --> 0:46:43.200 at the moment they just looked at the business. In 0:46:43.200 --> 0:46:45.680 in the EU, they look out through at your investments 0:46:45.680 --> 0:46:49.440 and your lending, but how is this impacting therefore your 0:46:49.480 --> 0:46:52.880 future profits ability? And then the second angle is like 0:46:53.520 --> 0:46:59.040 how are your investments, how is your company impacting the environment, 0:46:59.280 --> 0:47:04.000 impacting the sustainability of social matters for instance, and that's 0:47:04.040 --> 0:47:06.600 the point that I wanted to and then after that 0:47:07.120 --> 0:47:10.960 having central banks stepping in the e TB. The European 0:47:11.000 --> 0:47:14.680 Central Banks just announced that they are thinking of putting 0:47:14.800 --> 0:47:18.520 capsula look like capital requirements on the back of climate risk. 0:47:20.040 --> 0:47:22.399 That is a massive step. And I wish we could 0:47:22.400 --> 0:47:24.319 see the same in the US because once the US 0:47:24.360 --> 0:47:28.439 will move oll like, it would show that everyone can move. 0:47:28.640 --> 0:47:31.560 So let's see, let's play with the different mandates of 0:47:31.640 --> 0:47:34.359 the different regulators. The SEC has one one day, it's 0:47:34.360 --> 0:47:38.120 maybe like the the executive power will play another role, 0:47:38.200 --> 0:47:41.600 and then the the US like the Federal Reserve will 0:47:41.600 --> 0:47:43.920 play another role. Like there are so many levers that 0:47:44.040 --> 0:47:46.760 we can back on. All right, We'll continue to watch 0:47:47.080 --> 0:47:50.920 these countries and the different developments they make on these 0:47:50.960 --> 0:47:54.480 different frameworks. It's sustainable finance, but it's this fusion between 0:47:54.480 --> 0:47:57.920 sustainable finance and really policy in so many ways, and 0:47:57.960 --> 0:48:00.319 how it's all interrelated that is so fascinating eating at 0:48:00.320 --> 0:48:03.080 the moment, and it does feel like there is this 0:48:03.800 --> 0:48:08.319 sense that there is change afoot all around as people 0:48:08.360 --> 0:48:10.920 are organizing and looking at E s G and taking 0:48:10.920 --> 0:48:13.520 it more seriously. So Maya and Mallory, thank you very 0:48:13.600 --> 0:48:16.640 much for joining and being giving us such clear views 0:48:17.160 --> 0:48:20.080 on what is coming down the pipe and what we 0:48:20.120 --> 0:48:22.080 should be watching in terms of a few of the 0:48:22.160 --> 0:48:24.720 changes that are taking place in the US and Europe, 0:48:25.120 --> 0:48:27.399 and well, I guess with g fans, which is in 0:48:27.480 --> 0:48:30.759 many respects global. Thank you, so thank you so much, 0:48:30.840 --> 0:48:38.920 Dana for having us. Today's episode of Switched On was 0:48:39.040 --> 0:48:41.799 edited by Rex Warner of gray Stoke Media. Bloomberg an 0:48:41.920 --> 0:48:44.360 F as a service provided by Bloomberg Finance LP and 0:48:44.360 --> 0:48:47.400 its affiliates. This recording does not constitute, nor should it 0:48:47.440 --> 0:48:51.279 be construed as investment advice, investment recommendations, or recommendation as 0:48:51.320 --> 0:48:53.600 to an investment or other strategy. Bloomberg an e F 0:48:53.680 --> 0:48:56.319 should not be considered as information sufficient upon which to 0:48:56.320 --> 0:48:59.440 base an investment decision. 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