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Speaker 2: Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Speaker 3: Hi, everyone, Welcome to the Bloomberg Business Week Weekend podcast.
Speaker 3: Tim is out this week with me in from London.
Speaker 3: Lovely to have Stephen Carroll, He's co host of Bloomberg
Speaker 3: day Break Europe on Bloomberg Radio. Really nice to have
Speaker 3: you here in a week having so much.
Speaker 4: Was going on.
Speaker 5: Gladly and I from important events.
Speaker 3: He does, he does, so I hear well our backdrop
Speaker 3: on this busy past week. Gridlock in New York City,
Speaker 3: no doubt about that. This as the seventy ninth Annual
Speaker 3: youn General Assembly was in session, coinciding with New York
Speaker 3: City's annual Climate Week summit with global leaders in town.
Speaker 3: Bloomberg and Bloomberg for Lanthropy is both founded by Michael R.
Speaker 3: Bloomberg hosted the Bloomberg Global Business Form an Earthshot Prize
Speaker 3: Innovation Summit at the Plaza Hotel, which we did a
Speaker 3: live broadcast.
Speaker 6: Yeah.
Speaker 1: Over the next two hours will bring you some of
Speaker 1: our conversations and highlights from the event. These are discussions
Speaker 1: focusing on innovation and opportunity in the climate space, as
Speaker 1: well as tracking where the investment is going and how
Speaker 1: it all fits into the state of the global economy.
Speaker 1: On that, we have an update on Latin America and
Speaker 1: the Caribbean with Inter American Development Banks Jordan Schwartz, and
Speaker 1: the latest on the surge in wind power with the
Speaker 1: CEO of the Global Wind Energy Council Bend Backwell.
Speaker 3: And later on the Australian billionaire who is spending billions
Speaker 3: on EV trucks. First up this hour. As Managing Director
Speaker 3: of the International Monetary Fund, Kristallina Giorgeva is a leader
Speaker 3: on the world economy, its growth, it stresses, and its
Speaker 3: complicated relationships and so coming off of the Federal Reserves
Speaker 3: halfpoint interest rate cut decision last week, she told us
Speaker 3: the Fed broadly got it right. Here's more from the
Speaker 3: Bloomberg Global Business Forum in New York.
Speaker 7: Oh The global economy has been remarkably resilient despite the
Speaker 7: horrendous shocks of the last years, despite of interest rates
Speaker 7: fighting inflation. For the last more than a year, we
Speaker 7: have seen global rock growth holding. We project three point
Speaker 7: two percent this year three point two percent next year.
Speaker 7: The two engines of this performance US economy and most
Speaker 7: of Emerging Asia, especially India. Assian We are now seeing
Speaker 7: interest rates in most economy is going down, and rightly so,
Speaker 7: because we also see the price being paid for interest
Speaker 7: rates being high. It is affecting somewhat prospects for growth
Speaker 7: in major economies. Two very important points for your audience.
Speaker 7: Number One, yes, growth is holding, but by historic standards
Speaker 7: it is not high enough to retain good prospects for
Speaker 7: our economies before the pandemic average growth three point eight percent. Two,
Speaker 7: we also have very high debt levels, and that combination
Speaker 7: of slow growth and high debt is something that we
Speaker 7: at the Fund worry about. What we want to see
Speaker 7: is countries taking seriously the importance.
Speaker 4: Of fiscal prudence.
Speaker 7: So the center banks have done their job, they fought inflation.
Speaker 7: Inflation is going down, rates are going down. We need
Speaker 7: the fiscal site to be equally committed, and of course
Speaker 7: we want to see more attention as to what drives growth.
Speaker 3: I want to go back to inflation now with the
Speaker 3: Fed finally making that big move last week that have
Speaker 3: a point card. Inflation defeated, mission accomplished, done or would
Speaker 3: you say not necessarily yet watch it.
Speaker 7: Yes, we are in a very good place. We have
Speaker 7: been predicting soft lending. We would see inflation down and
Speaker 7: growth still remaining firmly in positive territory. This is where
Speaker 7: we are. We know that in the services inflation is
Speaker 7: still flaring a little bit more so the FAT is
Speaker 7: going to watch it. But broadly we think that the.
Speaker 5: FED got it right.
Speaker 7: And we would see how that evolves in the next
Speaker 7: meeting of the FAT. Not to exclude that could be
Speaker 7: more cuts. But again, why is the FAT successful Because
Speaker 7: it is data driven, so they would watch incommun data
Speaker 7: very carefully.
Speaker 1: I take note that you're worried about the fiscal side, though,
Speaker 1: how big a risk is what you're hearing in the
Speaker 1: US election campaign that's going to have a huge impact
Speaker 1: on US RISCO policy.
Speaker 7: Look, I mean, let's first give credit where credit is due.
Speaker 4: The US has helped.
Speaker 7: The world economy to stay afloat in this very difficult time.
Speaker 7: So when we think about the response to the pandemic,
Speaker 7: the response to the war in Ukraine, these spike of
Speaker 7: energy and food prices. Having the US economy to perk
Speaker 7: in the way it did a very good news for everybody.
Speaker 7: This being said, we have to all think of the
Speaker 7: beast that may be around the corner. What we learned
Speaker 7: in these last years is that we are in a
Speaker 7: more shock front world and having fiscal space to act
Speaker 7: should that become necessary. Is a message we send to
Speaker 7: all our members is.
Speaker 3: That our number one risk the fiscal position of the
Speaker 3: United States and other well, I.
Speaker 7: Mean, the United States has the ability to fund itself
Speaker 7: in a fairly comfortable manner. What we see in some
Speaker 7: other countries they don't quite have that privilege. So the
Speaker 7: pressure for imminent action, of course, differs in different places.
Speaker 7: We do we have been saying that make sure that
Speaker 7: you are not pushing prices up by getting more money
Speaker 7: into the economy. The economy the economy can handle, so
Speaker 7: be careful.
Speaker 3: But you don't worry about the US Federal Bank in
Speaker 3: particular that by that half a point content there maybe
Speaker 3: are putting a little bit more stimulus when the economy
Speaker 3: seems to be doing well.
Speaker 4: Right, there's growth, Yeah, the economy is doing well. Haber
Speaker 4: markets still as.
Speaker 7: You actually are reporting in your program that consumers seem
Speaker 7: to be saying, well, you're not as confident as we
Speaker 7: were before. Let's remember that when you have interest rates
Speaker 7: so high, that has impact, and it is the desired
Speaker 7: impact to bring inflation down, and the accompany not so
Speaker 7: desired to impact on consumer and business confidence. So my
Speaker 7: message is the following. We have to all be very
Speaker 7: watchful of whether there is risk of inflation to flare
Speaker 7: up again. What is happening around the world. So we
Speaker 7: are not I mean, as the movie would go, we
Speaker 7: are not in Kansas anymore. We're in a different world,
Speaker 7: more shockpron more unpredictable. Keep your powder dry, don't use
Speaker 7: all of it at once.
Speaker 1: One of the shocks that did open the global economy
Speaker 1: is Russia has wore in Ukraine and the Fund was
Speaker 1: criticized recently for planning to restart annual economic consultations with Russia.
Speaker 5: Whose idea was that.
Speaker 7: Look, I mean, we do have an articles of agreement
Speaker 7: and they say you have to have regular consultations. The
Speaker 7: Russian case is a very complex case. This is not
Speaker 7: your normal article for so as you know, we have
Speaker 7: said we need to see whether we have all the
Speaker 7: data we need to see whether we are ready, and
Speaker 7: at this moment.
Speaker 4: We are not.
Speaker 1: What does that damage the Fund's reputation having that sort
Speaker 1: of confusion around starting and then stopping.
Speaker 7: I think that the Fund has been incredibly strong over
Speaker 7: this period of time of shock upon shock upon shock.
Speaker 7: We have supplied liquidity to countries that need it. We
Speaker 7: boosted reserves for countries so they can go through these shocks.
Speaker 7: And I think our reputation speaks for itself by the
Speaker 7: fact that our membership is increasing. We just got our
Speaker 7: one hundred ninety first member, the tiny country of Liechtenstein
Speaker 7: joining us. Why because we are an anchor in a
Speaker 7: sea of trouble. So I would argue that when you
Speaker 7: look at the Fund, you have a credible institution. We
Speaker 7: have come true. We help the world economy to steer
Speaker 7: through very difficult times. We will continue to do that.
Speaker 3: But is it tricky considering the war and in terms
Speaker 3: of advising Russia, like how to survive through this when
Speaker 3: most of the developed world, as you.
Speaker 4: Now of course, cities as a horrible war. Heart bleeds for.
Speaker 7: The people in Ukraine that have been so harshly hit
Speaker 7: by Russia's war. I want to see the war ending
Speaker 7: for the sake of Ukraine and for the sake of
Speaker 7: the global economy. It was incredibly damaging to the whole world.
Speaker 7: When we think of this, is it is it possible
Speaker 7: to do Article four without enhancing Russia's capabilities? We have
Speaker 7: to sit back and think twice.
Speaker 5: And this is what we're.
Speaker 4: Doing right now.
Speaker 5: How long will you wait before that is.
Speaker 7: And why are some of our members, I mean, this
Speaker 7: is our the levels. Some of our members are saying, please,
Speaker 7: if you're the only institution, no treasure. Other members they're saying,
Speaker 7: you're the only institution that can come up with some
Speaker 7: credible assessment what is happening in Russia. So that is
Speaker 7: also something that is in the equation. But I'm telling
Speaker 7: you this is not an adventure we would take ever likely,
Speaker 7: and I care very deeply for the trust of my membership.
Speaker 7: We need to be there as an institution that holds
Speaker 7: strong in a world that has more trouble.
Speaker 3: I want to ask about Argentina because you guys have
Speaker 3: put in there are some complaints by the Argentinian president
Speaker 3: about the IMF negotiator. You put in a new negotiator,
Speaker 3: and we do wonder about, like, what does that signal
Speaker 3: to other countries when they're maybe not happy with negotiations
Speaker 3: or policies or the imafs.
Speaker 7: So the answer is very simple. It is the negotiator
Speaker 7: himself who found the situation being propagated. Yeah, how do
Speaker 7: you negotiate with somebody who does not trust you at all?
Speaker 7: So it was that negotiator that looked into the situation
Speaker 7: in Argentina. Does Argentina needs help from the fund?
Speaker 8: Yes?
Speaker 5: Do they need our advice?
Speaker 9: Yes?
Speaker 7: Let me send somebody who the president would listen to.
Speaker 7: And I can tell you that that was a mature judgment,
Speaker 7: and I stand by this judgment of my staffer, great professional,
Speaker 7: great professional, Rodrigo Valdez. I admire him for the maturity
Speaker 7: it has shown in that environment.
Speaker 1: And are you hopeful for improved relationships with Argentina as
Speaker 1: a result of that change? Will things proceed more smoothly
Speaker 1: with the IMS relationship there Argentina?
Speaker 7: Argentina faces very very tough problems to solve, and I
Speaker 7: know that Argentina would only benefit of having the IMF
Speaker 7: analytically to stand by Argentina and financially to stand by Argentina.
Speaker 3: And I'm justire, I don't know if you realize it,
Speaker 3: but there's an election going on in the United States.
Speaker 4: I am curious.
Speaker 3: You've got two candidates with radically different positions on a
Speaker 3: lot of different issues, whether it's trade, immigration, the US's
Speaker 3: position on the global stage on economic policy. What's your
Speaker 3: advice for the next president of the United States.
Speaker 7: Look, I mean the elections in the United States. This
Speaker 7: is the choice of the American people. They make this choice,
Speaker 7: they have a president, and then this president sets up
Speaker 7: an agenda for the country. We are always there for
Speaker 7: our members to give them our best shot advice.
Speaker 4: So you remembers worried about the outcome of the US election.
Speaker 7: The whole of the membership is now facing a work
Speaker 7: in which sixty percent of people are going to the polls. Yeah,
Speaker 7: you ask different countries. They have different worries. But I
Speaker 7: also very amazing stories that I hope you would tell.
Speaker 7: I was with Professor use of Bangladesh. Here is a
Speaker 7: country in which the youth of the country said, no
Speaker 7: more corruption, We want to turn a page. And for
Speaker 7: us supporting this country to turn that page to get
Speaker 7: a good growth and good prospects for their people amazing.
Speaker 3: So listening to the younger population always important. Chris allnigior Gava,
Speaker 3: thank you so much. We so appreciate your time here.
Speaker 3: Managing director of course at the International Monetary Thought, thank
Speaker 3: you so much.
Speaker 2: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 3: We are very global all this week here on Bloomberg
Speaker 3: Business Week, and we've had this week the opportunity to
Speaker 3: focus on economic issues in different regions of the world
Speaker 3: and how the changing climate is altering many country these trajectories. Well,
Speaker 3: the African Development Bank finances projects across the continent in
Speaker 3: areas including agriculture, energy, also the private sector development, and
Speaker 3: we know those African countries, something we talk about a
Speaker 3: lot here at Bloomberg, are among those most affected by
Speaker 3: climate change. So that is some of what we wanted
Speaker 3: to talk about here on Business Week.
Speaker 1: Yeah, indeed, to discuss that. We're joined in the Interactive
Speaker 1: Broker studio by doctor a Can wimen at Asena, who
Speaker 1: is the President of the African Development Bank. Thank you
Speaker 1: very much to see We've also got Blomberg Chief Africa
Speaker 1: correspondent Jennifer Sabasagie with us in Studio two to join
Speaker 1: the conversation. Doctor Absina, Welcome to New York.
Speaker 5: Great to have here.
Speaker 1: You're here having conversations with global leaders for Climate Week
Speaker 1: and you and General Assembly. What are you trying to
Speaker 1: get out of this week?
Speaker 6: Well, first and foremost is just for bakeshore.
Speaker 10: Africa's is used on at the top of the agenda
Speaker 10: because when you talk about climate change, Africa only Accouncil
Speaker 10: no more.
Speaker 6: Than three percent of emissions.
Speaker 10: But actually so for us to proportionately from a negative consequences,
Speaker 10: it loses fight seven to fifteen billion dollars a year,
Speaker 10: and the current trend continues, that's going to rise to
Speaker 10: fifty billion dollars a year. But it's not getting the
Speaker 10: amount of financing that it needs. You know, Africa needs
Speaker 10: roughly about two seventy seven billion dollars a year to
Speaker 10: tackle climate change, but it gets to know what a
Speaker 10: thirty billion dollars.
Speaker 5: It's a big gap there.
Speaker 10: So, but most of what is needed there it's really
Speaker 10: to adapt to climate change. It's not so much of mitigation,
Speaker 10: but it's adapting to climate change. Other things that I
Speaker 10: wanted to get out of. Most of this is actually
Speaker 10: how we tackle Africa's debt issues, because at the end
Speaker 10: of the day, you know, you can run up a
Speaker 10: heel if you're carrying a back back of sand, and
Speaker 10: so you can have development in which you have highly
Speaker 10: in deatd countries. And so we have to make sure
Speaker 10: that African countries facing a lot of challenges in terms
Speaker 10: of climate, in terms of also conflict, also in terms
Speaker 10: of high inflation, and strength in fiscal space, that they
Speaker 10: have the space they need to be able to invest
Speaker 10: in education, health, water, sanitation, gals, education and all of
Speaker 10: those things. So dead climate for me a very very
Speaker 10: important part of my conversation here this.
Speaker 11: Week, and doctor Orgerstina, I mean part of that. I
Speaker 11: want to start with climate change, maybe because you have
Speaker 11: talked a lot about in particular the IMS special drawing
Speaker 11: rights and channeling more of those towards addressing climate change
Speaker 11: on the continent. Where is the progress on that? Did
Speaker 11: you make any progress this week while here in New York?
Speaker 10: Well, actually, just to think about the speciat of doing
Speaker 10: rights at the IMF. You know, when we started, everybody
Speaker 10: for well, sers were things you put on the balance
Speaker 10: sheets essentially as reserve assets of central banks. But we
Speaker 10: felt that actually these assets were actually simply latent assets
Speaker 10: that I was convinced that we can actually do better
Speaker 10: in terms of seeing how we can turn those into
Speaker 10: assets that can lock a lot of capital through the
Speaker 10: most lateral development banks. And the model that we develop
Speaker 10: basically was, you know, to see, okay, if you actually
Speaker 10: reachannel the SDRs to us as strip or air rated
Speaker 10: financial institutions, that's actually a hybrid capital that we can
Speaker 10: use and say perpetual in that stage on a balance sheet.
Speaker 10: So we can actually leverage now four times, it can
Speaker 10: even go to photo eight times. And so we're very delighted,
Speaker 10: myself and the president of Inter American Development Bank. We
Speaker 10: walk together very collaboratively to solve some of the technical
Speaker 10: So there are some technical issues about whether what's the
Speaker 10: reserve assets status of it and if you want to
Speaker 10: collect it back, how can you get it back?
Speaker 6: So we had to deal with some technical issues.
Speaker 10: We solve all those technical issues, and I was delighted
Speaker 10: that the IMA board actually approved twenty billion dollars of
Speaker 10: SEIS to be do channel through the most lateral development
Speaker 10: banks as hybrid capital. Now, now the issue is now,
Speaker 10: how do we get that money? To get all that
Speaker 10: money out, yeah, exactly. You know, we had to actually
Speaker 10: put together a group of five We need five SDI
Speaker 10: rich countries that will agree to rechannel that through the
Speaker 10: African Development Bank and the Inter American Development Bank. But
Speaker 10: also we have to make sure we have a group
Speaker 10: of others that are in Europe. For example, European countries
Speaker 10: can't do it because of restrictions by the European Central
Speaker 10: Bank on monetary policy outside of the EU and so,
Speaker 10: but we set up a very nifty structure which is
Speaker 10: called Liquidity Support Agreement, which they can just essentially guarantee
Speaker 10: those that have given it to you. Okay, that's still allowed.
Speaker 10: So that's where we are. We're making progress in terms
Speaker 10: of the countries. We're talking to them, and I'm hoping
Speaker 10: that you know, by the time we do G twenty,
Speaker 10: we'll have gone along way in making sure that way or.
Speaker 4: Will you actually have access to the funds?
Speaker 10: Well, actually, you know the long ways to get access
Speaker 10: to the funds, so which means there has to be
Speaker 10: agreement that that thing. It's not just easy just like
Speaker 10: give it to you. The legal things they have to
Speaker 10: go through in their countries to make sure that that
Speaker 10: gets done.
Speaker 6: So we we know.
Speaker 10: That President Lula as the presidency of the G twenty,
Speaker 10: as I spoke at the event just yesterday, that the
Speaker 10: stars US Okay for hybrid capital and getting it out
Speaker 10: to US is top on the agenda for G twenty.
Speaker 5: This is something that's I mean, we're deep in the weeds.
Speaker 1: Of international financial machinery here and had the money we
Speaker 1: like to do public This is something you know, I
Speaker 1: was at the EU African sulmost two and a half
Speaker 1: years ago when this idea was sort of advanced to
Speaker 1: a level where the reallocation would be able to happen.
Speaker 1: Political will was there from under a manual macro all
Speaker 1: the time. Is the political will still there to action
Speaker 1: this and to make sure that that transmission happens as
Speaker 1: quickly as possible.
Speaker 6: And remember there are two things we're talking about here.
Speaker 10: That is the one in which you you know, there
Speaker 10: was a request to make sure that some amount of
Speaker 10: money actually given okay through the IMF. You know three
Speaker 10: is property reduction and growth trust and residence and so
Speaker 10: salability trust. So that's that's money that's been given to
Speaker 10: IMF that's that's a different thing the one that I'm
Speaker 10: talking about, and that's going very well. I think they
Speaker 10: have probably one hundred billion dollars they're looking for of SDR.
Speaker 10: The one we're looking for is how the seas gets
Speaker 10: re channeled through the multilateral development so we can actually
Speaker 10: leverage that. You know, the thing is that you know
Speaker 10: when you when the money goes to im F. IMF
Speaker 10: is very very great, Crystalionam sister has been mostly helpful.
Speaker 10: But you know, for us, it's a it's a wonderful thing.
Speaker 10: You know, every dollar becomes forth, it's good for you
Speaker 10: as a shareholder, it's good for a tax for us,
Speaker 10: and you don't lose all the money. And so the
Speaker 10: progress has been made is phenomenal. Progress been made. But
Speaker 10: I think we just have to tie the knots and
Speaker 10: make sure the money actually comes home and we can
Speaker 10: continue to do. I just tell you one thing that
Speaker 10: I can do. I take the case of you know,
Speaker 10: our Jai Banker, President of the World Bank and I
Speaker 10: go together during the Spring meeting and we say, look,
Speaker 10: I said, we still have six hundred million Africans that
Speaker 10: don't have access to electricity.
Speaker 6: That doesn't make any sense.
Speaker 10: You can't grow in the dark, you can't industrialize in
Speaker 10: the dark, and you cannot be competitive without electricity. So
Speaker 10: I said, we're going to have to deal with it,
Speaker 10: and so we both agreed and we launched what's called
Speaker 10: Mission three hundred, which is to connect three hundred million
Speaker 10: Africans to electricity by twenty thirty. Now, universal access to
Speaker 10: electricity in Africa is going to require one ninety billion dollars,
Speaker 10: okay by year. Now here's where the SDR connection comes in.
Speaker 10: Because if you actually have fifty billion dollars of SDRs
Speaker 10: and you can leverage it at four times because they
Speaker 10: have r capital for you, that means that problem is
Speaker 10: solved once and for all.
Speaker 6: That is two hundred.
Speaker 10: Billion dollars at least to solve that problem. So that's
Speaker 10: the connection that we are trying to make. And President
Speaker 10: Lula as President of the G twenty it's also we've
Speaker 10: raised the issue also about he has something called the
Speaker 10: Global Alliance against Poverty and Hunger, okay, and so it's
Speaker 10: the same thing. You know, you use this se as
Speaker 10: well a lot massive amount of capital to deal with
Speaker 10: all the things. We say we have a part of
Speaker 10: the future.
Speaker 3: So do you hope you think that within six months
Speaker 3: twelve months you have that capital or that you can
Speaker 3: move forward.
Speaker 10: I believe that we will because I think that the
Speaker 10: most difficult part we've gone over that. So it's a
Speaker 10: question now of how we're going to use it and
Speaker 10: how we can get it at so I think so, yes, absolutely, yeah.
Speaker 3: Well, you know, one of the other things, I'm just
Speaker 3: curious other parts of the world where you you know,
Speaker 3: look to access you know, partnerships money. You guys have
Speaker 3: been working with the Arab Bank for Economic Developments on
Speaker 3: some key projects. What can you tell us about further
Speaker 3: expansion there. We're also curious about, you know, the relationship
Speaker 3: with China and money coming in from China. What can
Speaker 3: you tell us in those those two aspects.
Speaker 10: Yeah, you know, they are a bank for ecomic development
Speaker 10: in Africa. Is a very great partner of the African
Speaker 10: Development Bank, and we have joint projects that we do together.
Speaker 6: We do more, Oh yeah, we will do more.
Speaker 10: And we work in education and water, in sanitation, in
Speaker 10: agriculture and infrastructure and so on, and so they're celebrated
Speaker 10: at fifture that anniversary. I was one of the keynote
Speaker 10: speakers to speak there. They've also invested in one of
Speaker 10: the things that we put up call it Alliance for
Speaker 10: Green Infrastructure in Africa, which is a vehicle that we
Speaker 10: just put together to mobilize ten billion dollars of private
Speaker 10: capital going into greening the infrastructure space, greening the gribbing,
Speaker 10: the green transport, green hydrogen, green Amumonia, and also making
Speaker 10: sure that we can basically have climate resilient infrastructure all
Speaker 10: across Africa. So we have a lot together. We've done,
Speaker 10: you know, together about almost eight hundred and thirty five
Speaker 10: million dollars of joint projects in the last seven years,
Speaker 10: and we've putting six hundred million dollars into that. So
Speaker 10: we have great partners and I look forward to us
Speaker 10: doing more together.
Speaker 3: What about China, You know, over the years we've talked
Speaker 3: about the investments China has done some of it. You know,
Speaker 3: they're concerned about their access certainly to raw materials, basic
Speaker 3: minerals and so on to what can you tell us
Speaker 3: on that f.
Speaker 10: Well, I think, you know, China invests quite a lot
Speaker 10: in infrastructure in Africa, and people get to ask me
Speaker 10: a lot of questions about that, you know, but the
Speaker 10: question really is that you know, Africa Africa's infrastructure gap
Speaker 10: is so massive. You know, Africa needs at least sixty
Speaker 10: two one of an eight billion dollars a year. You know,
Speaker 10: not to talk of different now, not to talk of
Speaker 10: even the challenges you have.
Speaker 6: You know, you're doing.
Speaker 10: The infrastructure and all of a suddenly you have all
Speaker 10: these cyclones and hurricanes and all these things that are happening.
Speaker 10: That's actually setting you back, right and so, but I
Speaker 10: think that what has happened is on the infrastructure space.
Speaker 10: What I just know more generally is a lot being
Speaker 10: done is by governments. And I don't think that infrastructures
Speaker 10: will always be carried by governments. I think you need
Speaker 10: to have a lot more private capital moving into infrastructure.
Speaker 10: I think you have to make sure that the debt
Speaker 10: bodings from infrastructure are reduced. I also think is very
Speaker 10: very important to make sure that the infrastructure being done
Speaker 10: in any case should be infrastructure that you can recycle.
Speaker 10: In other words, governments, if you've actually taken a lot
Speaker 10: of loans to do infrastructure, why not does do as
Speaker 10: said recycling basically just recycle that into private cycle and
Speaker 10: then free of more capital to be able to do more.
Speaker 10: And so that's how I look at it, and I
Speaker 10: think for US as African Development Bank, in the last
Speaker 10: seven years or so, we've put in more than fifty
Speaker 10: five fifty five billion dollars into Africa. We are the
Speaker 10: largest by far. What's large roo financial institution investing in infrastructure?
Speaker 12: Right?
Speaker 11: When you talk to international investors, doctor Odisinea, I know
Speaker 11: you were meeting with a few of them while you
Speaker 11: were here this week.
Speaker 4: I mean, is what is their concern?
Speaker 11: Because we hear a lot about risk in investing potentially
Speaker 11: in a lot of these infrastructure projects that you're talking about.
Speaker 11: I mean, what is it that international investors are hoping
Speaker 11: to see in order to penetrate more into more of
Speaker 11: these markets.
Speaker 10: Yeah, you know, if you take a look at it,
Speaker 10: we don't get that much of private capital moving into
Speaker 10: infrastructure right in Africa.
Speaker 6: But the issue is people.
Speaker 10: Talk about risk, well, life is about risk returns. People
Speaker 10: forget about a return part of that, and so it's
Speaker 10: a risk return world. And I take a look at
Speaker 10: Africa and I don't think Africa is risk here than
Speaker 10: any other part of the world. Don't believe me, just
Speaker 10: believe the data. There was an assessment that was done
Speaker 10: by Moodist analytics who looked at the cumulative losses on
Speaker 10: infrastructure financing globally, not just in Africa. Well, they find
Speaker 10: they look at fourteen years of non performing loans and
Speaker 10: debt and they found that in Africa the non performing.
Speaker 6: Loans was one point nine percent, In.
Speaker 10: North America it was six point six percent, in Latin
Speaker 10: America it was about ten percent, and you know, Eastern
Speaker 10: Europe about twelve point four percent, and Western Asia mo
Speaker 10: Albost four point five percent. So Africa is not as
Speaker 10: risky as people say. Perception is not reality.
Speaker 4: How do we change that perception?
Speaker 3: Because I think you've got this really smart global audience
Speaker 3: right now, and I think we think of emerging world
Speaker 3: and we think, oh yeah, Africa, what what is what's
Speaker 3: the message you would like to get out to the
Speaker 3: audience who's listening right now.
Speaker 10: Well, first informost is that you know the fact that
Speaker 10: I said, you know it's about risk return, Well doesn't
Speaker 10: mean they're no risk, you know. So first infemost is
Speaker 10: that we have the vehicles to do risk those things.
Speaker 10: So we have project risk, market risk, and whether there
Speaker 10: are also political risk insurance that we can actually provide
Speaker 10: the fact that the African.
Speaker 4: Development and say we have a little political rest.
Speaker 10: Yeah, yeah, but we can we can do risk there,
Speaker 10: so I'll stay with within my lane.
Speaker 6: But but but but.
Speaker 10: We're trying to put all of our instruments, so partial
Speaker 10: risk guarantee instruments, partial credit guarantee instruments that we do
Speaker 10: for counterparties with that government private sector. We're trying to
Speaker 10: put all that together into what we call an African
Speaker 10: Insurance and Guarantee Agency, so so so private sector needing
Speaker 10: those risk instruments don't have to run every everywhere to
Speaker 10: lower their transaction costs to do it. And that would
Speaker 10: be a game changer because we also provide insurance against
Speaker 10: equity investments. If we provide insurance for you when you
Speaker 10: actually also have political insurance and ensure you against climate
Speaker 10: climate sharks. And the last thing I'll say about this
Speaker 10: particulating is just that when investors are looking to invest,
Speaker 10: they're asking the question where are the bankable projects?
Speaker 6: Right?
Speaker 10: You have to be able to have a whole series
Speaker 10: of bankable projects, and we're doing very well on that.
Speaker 10: We have, for example, an institution that I actually share
Speaker 10: is board. It's called Africa fifty is a private equity
Speaker 10: vehicle that has about now one point one billion dollars
Speaker 10: and portfolios of eight billion dollars on infrastructure assets. And
Speaker 10: basically what it does, it's a part of a company
Speaker 10: is to it's called project development company and so you
Speaker 10: develop bankableley.
Speaker 6: Projects that it can sell. Right, it doesn't matter what
Speaker 6: it is.
Speaker 10: So we're trying to make project development a business issue,
Speaker 10: not just the development.
Speaker 4: Issue, the financial the private sector involvement.
Speaker 6: Right, that's right, that's right.
Speaker 10: And the last and now I just say about investing
Speaker 10: in infrastructure, it's important of local currency financing. You know,
Speaker 10: we talk about debt just now, but if you actually
Speaker 10: look at the assets that people are investing in, the
Speaker 10: revenue streams are going to becoming in local currencies and
Speaker 10: the currencies are actually depreciating very much. So look at
Speaker 10: currency bunds are very going to be very important for
Speaker 10: financing that. And also synthetic lookout currency instruments are going
Speaker 10: to be there and as well as you know, we
Speaker 10: at the Bank, we support financial institutions in Africa that
Speaker 10: actually lend in local currency, but we take the we
Speaker 10: actually ensure you, we give you the risk you'll lend it,
Speaker 10: and we pay we be at the risk ourselves.
Speaker 11: Right, we're seeing a lot of that volatility with currencies
Speaker 11: all over the continent. Doctor Artistina, we were just talking
Speaker 11: briefly about how this is potentially this is your last
Speaker 11: UNNGA as President of the African Development Bank. I wonder
Speaker 11: how you think about your time in office over the
Speaker 11: past decade or so. You talked about how the bank
Speaker 11: looks a lot differently than how you inherited it. I mean,
Speaker 11: how would you assess it well?
Speaker 10: First and foremus is the greater honer of my life
Speaker 10: to be asked by shareholders. You know, we've got any
Speaker 10: one shareholders to go and actually you have the resources,
Speaker 10: you have the confidence, you have the support, and guess
Speaker 10: what go change it continent of my birth. And that's
Speaker 10: not for me a job, that is a mission. I
Speaker 10: take it as a mission and so that's how I
Speaker 10: look at it every single day. Now, look at what
Speaker 10: has happened to the bank since we actually started. You know,
Speaker 10: for example, you know when we started, I said that
Speaker 10: we have to have a clarity about how the bank
Speaker 10: tackles issues day to day issues of people. People shouldn't
Speaker 10: really looking at you know, you have Africa and Development Bank.
Speaker 10: The issue for me is not just the bank. We
Speaker 10: don't how to run a bank is the issue is
Speaker 10: the development part, right, And so we actually set out
Speaker 10: to actually say five priorities for Africa. Light of empower Africa,
Speaker 10: universal access to electricity, feed Africa, integreat Africa, infrastructure wise,
Speaker 10: industrialized Africa, so Africa can be competitive with global value chains, okay,
Speaker 10: and increase the share of global manufacturing. And then of
Speaker 10: course improve the quality of life of the people of
Speaker 10: Africa the things that we all care about, water, sanitation, education, skills,
Speaker 10: job for young people and all of that. So we
Speaker 10: in the last time, since the last seven years, that
Speaker 10: work has impacted on more than one hundred million people.
Speaker 10: The second is what we've done in times of raising
Speaker 10: more capital for the bank. When I was elected president
Speaker 10: first of the bank quite first time, the capital of
Speaker 10: the bank was ninety three billion dollars. Today the capital
Speaker 10: of the bank is nine three hundred and eighteen billion.
Speaker 4: Big difference.
Speaker 10: And last year last year just one point. Last year,
Speaker 10: the Afghan Development Bank was ranked as the best multilateral
Speaker 10: financiale institution in the world. And last year and this
Speaker 10: year we were ranked also as the most transparent financiale
Speaker 10: institution in the world. So I was thinking that, you know,
Speaker 10: we've done pretty well. I think my staff I've been fantastic,
Speaker 10: but most importantly, my shareholders have just been phenomenal. When
Speaker 10: I was re elected, I was re elected with one
Speaker 10: hundred percent of the votes, so which was fantastic.
Speaker 4: Well, it's certainly a part of the world that we
Speaker 4: focus on so much.
Speaker 3: Genders this as she spent so much time on it
Speaker 3: as well, Doctor Adisina, thank you so much.
Speaker 4: Thank you for finding time for us.
Speaker 3: Jens Abazagia, thank you as well for joining us and
Speaker 3: on this conversation. That's going to do it of course,
Speaker 3: the president of the Africa Development Bank. If you missed
Speaker 3: any of the conversation, be sure to head to Bloomberg
Speaker 3: dot com to hear it.
Speaker 2: You're listening to the Bloomberg Business Week podcast. Listen live
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Speaker 3: This past weeks, Bloomberg Global Business Form gave us an
Speaker 3: opportunity to hear about what is going on in the
Speaker 3: global economy, both the developed and developing worlds. Last segment,
Speaker 3: we talked about Africa. We shift now to another emerging
Speaker 3: part of the world, Latin America and the Caribbean. The
Speaker 3: World Bank forecast that regional GDP in those countries will
Speaker 3: expand by one point six percent this year and two
Speaker 3: point seven percent in twenty twenty five.
Speaker 5: Look, these rates are.
Speaker 1: The lowest compared to all other regions in the world,
Speaker 1: and they're not high enough to drive prosperity. According to
Speaker 1: the United Nations Development Program Report, the economies of Latin
Speaker 1: America and the Caribbeane are more susceptible to external shocks,
Speaker 1: with this volatility affecting this region more than other developing economies,
Speaker 1: and this.
Speaker 3: Is why this next conversation was so important. Jordan Schwartz
Speaker 3: is Executive vice President of the Inter American Development Bank
Speaker 3: and knows about the challenges of these regions. He's also
Speaker 3: Chief Operations Officer of IDB, oversees the quality control and
Speaker 3: risk management of all bank operations of financing for Latin
Speaker 3: America and the Caribbean. Once again from the Bloomberg Global
Speaker 3: Business Form in New York City, here's idb's Jordan Schwartz.
Speaker 1: Where are the economies that you're focused on now in
Speaker 1: terms of a post COVID recovery, what's the outlook?
Speaker 5: What is twenty twenty four looking like for them?
Speaker 12: It's a great set of questions.
Speaker 13: The Latin American Caribbean region is very heterogeneous, not surprising, right.
Speaker 13: We have the Caribbean Islands, relatively small economies, generally single
Speaker 13: commodity dependent.
Speaker 12: In this case, of commodities often are tourism, if you will.
Speaker 13: And we have big, complex economies like Mexico, Brazil, Columbia, Argentina.
Speaker 12: So it's a heterogeneous region.
Speaker 13: But it's a region that has been i think struggling
Speaker 13: to maintain and to increase its level of economic.
Speaker 12: Growth of GDP growth over the years.
Speaker 13: To provide the kind of opportunities and services that the
Speaker 13: population has grown to expect. It's a middle income region overall,
Speaker 13: but it still has vulnerability, important vulnerability. It has a
Speaker 13: few low income countries Haiti for example, Honduddhas and others,
Speaker 13: but it's generally a middle income country. And I would
Speaker 13: say a theme of the day for us, a theme
Speaker 13: of the multilaterals that work in the region, particularly the
Speaker 13: Inter American Development Bank intermeding on the intermediating on the
Speaker 13: capital markets. Trying to bring long term financing for development,
Speaker 13: both public and private, into the region. Is how to
Speaker 13: help the region take advantage of its comparatives. It's comparative advantages,
Speaker 13: to leverage its comparative advantages. It's food production. For example,
Speaker 13: the region already produces probably three times as much of
Speaker 13: as a food at it consumes itself. It produces energy,
Speaker 13: It has a very green matrix. It has a large hydrobase,
Speaker 13: it has geothermal, it has all kinds of renewable resources.
Speaker 5: It can be.
Speaker 13: Part of the solution to the global energy transition, part
Speaker 13: of the solution to global food security.
Speaker 12: And to be able to see investment into those areas.
Speaker 13: And the growth of those areas I think will be
Speaker 13: part of helping the region return to higher level of
Speaker 13: growth in the years ahead.
Speaker 14: Jordan.
Speaker 4: What holds it back?
Speaker 8: Then?
Speaker 3: Is it the case that over the years, over the decades,
Speaker 3: because I feel like we've been talking about let's take
Speaker 3: Latin America in particular, or even a nation like Haiti
Speaker 3: gets caught in the policies of other countries.
Speaker 4: What is it that holds it back? I would say,
Speaker 4: and I hate to love them all in one back.
Speaker 5: Yeah, that's a negative question.
Speaker 12: I find a way to make this positive.
Speaker 4: No, no, no, I'm not trying to be negative. I'm trying to
Speaker 4: be smarter. How do we find a smarter way forward?
Speaker 13: I think part of it is regional integration, so the
Speaker 13: economies of scale and scope that come with greater interregional trade,
Speaker 13: with the trade of energy, with the trade of goods,
Speaker 13: so that you can tease out the productivity, the competitive
Speaker 13: potential of the economies. It has overall been a region
Speaker 13: that has been somewhat atomized and hasn't brought it together
Speaker 13: its own trading systems.
Speaker 12: That's probably part of it. I would say it's a
Speaker 12: vulnerable region. It's vulnerable to.
Speaker 13: Climate, to whether it affects in general, particularly the Caribbean,
Speaker 13: Central America, but also increasingly, as we know, those commodity
Speaker 13: exporting countries that are suffering from drought, suffering from flooding,
Speaker 13: often suffering from flood.
Speaker 12: And drought increasingly at the same time in large weather events.
Speaker 13: So it's a vulnerable region. It has more to do
Speaker 13: in terms of bringing itself together.
Speaker 8: And I think.
Speaker 13: Probably there's a whole theme we could get into if
Speaker 13: we had another six minutes sometime to talk about competitiveness
Speaker 13: and the way in which the economies could encourage greater
Speaker 13: competitiveness comparative.
Speaker 1: We're very focused on climate here today obviously to have
Speaker 1: the art shop innovation, some of it earlier on the
Speaker 1: globe of business form happening as we speak. When you're
Speaker 1: looking at projects to supports across the various countries that
Speaker 1: you work with climate resilience, what are you looking to ask?
Speaker 1: What sort of projects that you involved in, where are
Speaker 1: you seeing success?
Speaker 12: It's a brilliant question. Listen. For us, we look sort
Speaker 12: of at two sets.
Speaker 13: Of challenges at the same time. One is the box
Speaker 13: the asset, the investment. What can be done in order
Speaker 13: to better manage the.
Speaker 12: Risk associated with investors?
Speaker 13: What role can the financial intermediates, the multi level development
Speaker 13: banks with long term finance, with guarantees, with our own.
Speaker 12: Sort of toolbox for investment. What more can we do
Speaker 12: in that space?
Speaker 13: But then we also look at the systems and the utilities,
Speaker 13: the policies, the pricing, the quality of regulation.
Speaker 8: The ability of the utilities.
Speaker 12: To off take that investment.
Speaker 13: What needs to be done in order to make prices
Speaker 13: more self sustaining financial the financial sustainability of the utilities,
Speaker 13: the capacity of the transmission systems to off take to
Speaker 13: absorb all of this energy that's coming, and to deal
Speaker 13: with the intermittency of renewables. We are both a policy
Speaker 13: institution and investment institution, and we're helping our client countries
Speaker 13: when we're deal link with both things at the same time.
Speaker 13: What goes into that investment and the environment in which
Speaker 13: the investment is being made.
Speaker 3: Do you have all the financial instruments that you would
Speaker 3: like to be able to tackle some of the issues,
Speaker 3: especially when they're cross border issues and you're dealing maybe
Speaker 3: with a couple of different countries.
Speaker 13: It's the cross border issues oftentimes are not solely.
Speaker 12: Financial.
Speaker 13: It's about the integrity of contracts, about regulatory integrity and
Speaker 13: the ability to trust and maintain the purchase back and
Speaker 13: forth or the trade back and forth ad energy as
Speaker 13: an example. The question about financial instruments is really interesting
Speaker 13: to me because we have been focused on financial innovation
Speaker 13: even as we are trying to assure the impact of
Speaker 13: the investments that we make. Right, because there's sort of
Speaker 13: two things. So is the instrumentalization How do I spread
Speaker 13: out risk and manage risk better? What are the tools
Speaker 13: that I can I can use to do that. When
Speaker 13: do I deploy credit enhancements, guarantees off take are strengthening
Speaker 13: of all the agreements, termination payments for power. But at
Speaker 13: the same time, what do I need to do to
Speaker 13: protect the consumer? What do I need to do protect
Speaker 13: the natural capital of the investment, in the environment of
Speaker 13: the investments. What role does multilatterle have to make sure
Speaker 13: that whatever money we've mobilized can actually be paid back
Speaker 13: over time? It's actually driving economic growth, the capacity consumers
Speaker 13: and taxpayers to pay back all that fine and.
Speaker 4: To encourage more investment.
Speaker 12: And to encourage more I think that's important.
Speaker 1: I'm not sure you're working with private investors to crid
Speaker 1: funding for projects as well. I'm wondering if we can
Speaker 1: engage investor appetite in some of the projects that you've
Speaker 1: been support.
Speaker 13: The IDB has a private sector wing called the IDB Invest,
Speaker 13: and it has an early equity and venture capital branch
Speaker 13: called IDB LAB IDB invest, which is the only multi
Speaker 13: latter with that kind of of of risk appetite sort
Speaker 13: of derived from an early an early investment withek. On
Speaker 13: the IDB invest side, it has recently been recapitalized, which
Speaker 13: means that the governments that contribute to it, from Latin America,
Speaker 13: the United States, Japan, Europe have agreed to functionally double
Speaker 13: the size of the capital available in this world in
Speaker 13: which the whole concept of multilateralism is sort of being challenged. Yeah,
Speaker 13: we see a recognition that actually the private sector's got
Speaker 13: to be a major part of So we have this vehicle,
Speaker 13: we have this institution. It's going to be doubling in size,
Speaker 13: and the balance of the IDB group is basically going
Speaker 13: to change so that it will be even slightly more
Speaker 13: than half private finance and the public sector side, the
Speaker 13: sovereign guaranteed side growing as well.
Speaker 1: I wonder as well in the MDB space competition, right,
Speaker 1: you have the Asian Infrastructure and Investment Bank among others,
Speaker 1: who were also looking to invest in the same region
Speaker 1: as you as well. Is it a competitive environment? Are
Speaker 1: you all competent to kind of fund the same set
Speaker 1: of projects.
Speaker 13: It's interesting we've seen this year a concerted effort and
Speaker 13: a lot of pressure from our own shareholders to bring
Speaker 13: the multi lateral development banks closer together, to function as more.
Speaker 12: As a group as a unit, come out with platforms
Speaker 12: for investment.
Speaker 13: We are we're not competitive the way commercial banks to compete.
Speaker 5: With each other. Do you have a shared.
Speaker 13: Finance A large part of our financing co finance, particularly
Speaker 13: with the World Bank, which is very active in Latin,
Speaker 13: Latin American and the Cribean, has sort of a similar
Speaker 13: set of protocols around environmental and social safeguards, transparency, procurement, competition,
Speaker 13: and the focus on rule of law.
Speaker 12: It's a somewhat similar culture, though.
Speaker 13: We are unique in that fifty point zero one percent
Speaker 13: are owned by the borrowing countries Latin American and Cribean.
Speaker 12: The United States has thirty percent ownership.
Speaker 13: This is how in the eisenhowerd administration, this this institution
Speaker 13: was designed with this unique balance, and so we bring
Speaker 13: that to the table when we bring in other multi
Speaker 13: level development banks and of course presence in every country.
Speaker 13: We're very decentralized, very client focused institution.
Speaker 3: You talk about, you know, certainly the global country involvement
Speaker 3: and the the collaboration if you will, geopolitics or upcoming
Speaker 3: elections like I mean, we've seen them all around the world,
Speaker 3: but certainly here in the United States as well, with
Speaker 3: someone who's very involved, How does that complicate what you
Speaker 3: guys are doing.
Speaker 12: It's really interesting.
Speaker 13: We see ourselves not as a government but as a
Speaker 13: stabilizing force. Right, so when we're engaged, we're talking about
Speaker 13: the energy sector, but the same is true for the
Speaker 13: social sectors, for health education. We spend decades working with
Speaker 13: these countries to develop their social protection systems, right, their
Speaker 13: health and education systems, their power systems, and we bridge
Speaker 13: governments even when there's dramatic change in policies. We tend
Speaker 13: to help smooth the volatility of policy over time. Interesting
Speaker 13: that should be a function of a multilateral where they're
Speaker 13: as partners for the growth. And even though the governments
Speaker 13: are our intermediaries, it's really the people of the country.
Speaker 13: It's the consumers and the taxpayers that we work for.
Speaker 13: And so I think we're used to seeing changes in
Speaker 13: political parties. We're meant to survive through those changes, and
Speaker 13: so hopefully we'll play that role going forward.
Speaker 1: Can I ask you briefly about the US election and
Speaker 1: what risk DOP could put presides given that the US
Speaker 1: is such a big contrivers to your fund, dignis and.
Speaker 4: Just have about twenty seconds.
Speaker 12: No, it's good, it's a question.
Speaker 13: I mean, we get on with our business, and we
Speaker 13: know and trust that consecutive.
Speaker 12: Administrations, as has happened in the past.
Speaker 13: Support what we do and understand roughly what we do,
Speaker 13: and we hope to work with whoever comes in.
Speaker 3: Jorn Schwartz, thank you so much, Executive VP Inter American
Speaker 3: Development Bank, Thank you.
Speaker 12: So much for general's pleasure. Thank you.
Speaker 4: It's ours. This is Bloomberg.
Speaker 2: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 4: All right. We are so looking forward to our next guest.
Speaker 3: He's got a great vantage point on the global economy,
Speaker 3: global mining, climate change. Just this past week for Toscu,
Speaker 3: the world's fourth biggest iron ore miner, saying it will
Speaker 3: pay two point eight billion to replace two thirds of
Speaker 3: its fleet of houlage trucks and equipment in Western Australia
Speaker 3: with EV versions as it seeks to cut diesel consumption
Speaker 3: and meet ambitious emissions reduction targets.
Speaker 4: There's a lot going on.
Speaker 5: Yeah, they're sure is.
Speaker 1: And look we've got luck to talk to Andrew Farrest
Speaker 1: about it joins us in studio, executive chairman and billionaire
Speaker 1: of Perth, Australia based Fordescu in ten this week during
Speaker 1: the UN General Assembly.
Speaker 5: And Climate Week as well. Welcome to Bloomberg Business Week.
Speaker 4: How are you?
Speaker 5: I'm on fire?
Speaker 6: Thank you.
Speaker 5: I'm just an exciting place right now. It certainly is.
Speaker 1: And look at a time that we're going to talk
Speaker 1: about your climate transition plan in a moment, because that's
Speaker 1: a really interesting conversation. We spent all week talking about
Speaker 1: China and the stimulus efforts being made there, and this
Speaker 1: is a story that's very central to your business as well.
Speaker 1: Imported iron or used in roughly of eighty percent of
Speaker 1: Chinese steel production. Talk to us about the picture that
Speaker 1: you're seeing the Chinese economy from your side of the
Speaker 1: business and the demand.
Speaker 5: How bad is it? Oh?
Speaker 14: Oh?
Speaker 5: How good is I mean?
Speaker 15: Basically, you've had mining companies being fat, dumb and happy
Speaker 15: for a very long time because the anal price has
Speaker 15: been so good, so we're all heroes. But now, oh
Speaker 15: my god, the annual price is fallen, which means it's
Speaker 15: a lot better value, by the way for the customer.
Speaker 15: And we have to work a lot harder as mine is.
Speaker 15: We have to work harder to actually make a margin.
Speaker 15: And that's a good thing. And when people think that
Speaker 15: one throe, they think, well, how do I lower my margins? Well,
Speaker 15: one third of my cost is diesel fuel one third, right.
Speaker 6: One third.
Speaker 15: Imagine if we get rid of that.
Speaker 6: Oh, by the way, we'd also.
Speaker 15: Be going zero missions if we did that. So we've
Speaker 15: been working on this for years and years and years,
Speaker 15: and to give you an idea of how strong that
Speaker 15: demand is because people are looking hard at their operating costs. Now,
Speaker 15: we took years and years to get up at three
Speaker 15: hundred and sixty truck order. Now these are big trucks, right,
Speaker 15: You've got the hub caps starting at the roof here.
Speaker 15: And we signed another hundred and got walk ins for
Speaker 15: another four hundred in our day. So from three or
Speaker 15: four years for three sixty for a day for another
Speaker 15: five hundred. So this is showing you that the mining
Speaker 15: industry is saying, hey, we've got to really look at
Speaker 15: operating costs and forscu A middlea is driven because it
Speaker 15: wanted to go zero missions because we bloody will have
Speaker 15: to as a human race. But then we also have
Speaker 15: to prove that it's highly commercial. And what you're seeing
Speaker 15: happen yesterday and today is that going zero missions is
Speaker 15: highly commercial. To just say you're not worried about China,
Speaker 15: I mean, I've just come from China, and I've just
Speaker 15: I mean, I get accused when I'm in Chinese, when
Speaker 15: I'm a China being very pro North American. When I'm
Speaker 15: in North America, I get accused of being v being
Speaker 15: very pro China.
Speaker 5: So no, but this is interesting, and love you both.
Speaker 5: The narrative is so negative and has been for so long.
Speaker 15: The problem, I'm afraid you're wrong.
Speaker 6: You are wrong.
Speaker 15: I mean, here in North America you have a completely
Speaker 15: different system. You get lag effects and lowering interest rates
Speaker 15: and things like that, and it's macroeconomic policy and it
Speaker 15: works really well over a long time. If they want
Speaker 15: to hit the accelerator, hit the brakes, you know, you
Speaker 15: see the impact straight away. So they did a little
Speaker 15: bit of priming, not much. I going to say as
Speaker 15: a percentage of GDP, you'd be hard to measure it.
Speaker 15: But that is kicked investments straight away. It's kicked the
Speaker 15: iron or price's kicked iron or demand.
Speaker 5: It's a five percent growth nart a concern. It's going
Speaker 5: to happen.
Speaker 15: Look, I'm completely not worried about it. And by the way,
Speaker 15: if it's four or six, I know big countries who'd
Speaker 15: love to get two or three. So you know, for
Speaker 15: our demand, I'm seeing the iore price come down and
Speaker 15: I'm saying good.
Speaker 3: So Andrew, Basically what you're saying is China's like, Okay,
Speaker 3: if it still isn't enough, we're.
Speaker 4: Going to do more.
Speaker 6: Yeah.
Speaker 15: And also, you know, I love North America because we're
Speaker 15: aligned with North America. I love China because they're actually
Speaker 15: leading the world on going green. I mean, they are
Speaker 15: way ahead of their own plan. And everyone I'm in
Speaker 15: North America and China kicking the hell out of each
Speaker 15: other is really bad for the overall human race. This
Speaker 15: geostrategic war between North America precipitate, I want to put
Speaker 15: it bluntly by North America. And look, China does all
Speaker 15: these things wrong too, And you can jump on their toes,
Speaker 15: but you jump on their toes in private. You don't
Speaker 15: do it by shouting at them from New York or Washington,
Speaker 15: d C.
Speaker 3: Well, does that then worry you about who's in the
Speaker 3: White House?
Speaker 15: Come November Fortescue has a policy that we deal with
Speaker 15: any elected leadership that usackers want to put up. Right,
Speaker 15: So you know, if you want to put up Trump,
Speaker 15: I've got to say this Ukraine badge. If there's a
Speaker 15: deal cut which rewards an invader for invading a country
Speaker 15: which you've had as an enemy for eighty years, and
Speaker 15: you go cut a deal and reward a bad guy
Speaker 15: for being bad, We're down in the Pacific and we're
Speaker 15: going to say hold the phone. If you're going to
Speaker 15: trade Ukraine against Russia, where do we sit with North America?
Speaker 15: I mean, where do we sit? I mean who do
Speaker 15: we now call a friend? If you're going to turn
Speaker 15: around and do that to you Europe.
Speaker 1: Right, I mean, you're obviously very plugged into geopolitical tensions
Speaker 1: because it's part of what affects your business as well.
Speaker 1: When you're thinking about global climate solutions and you gave
Speaker 1: us some of the outlines of your plan there as well.
Speaker 1: There's some people that are going to think it's highly
Speaker 1: ironic that a mining company would be looking at a
Speaker 1: green transition. Agree with them, what you know, green iron
Speaker 1: or what is that is that? Do these things really
Speaker 1: make a difference when it comes to the bottom line
Speaker 1: of limiting climate change.
Speaker 15: Let's start with three million tons of carbon docks, so
Speaker 15: I'm not going out in the atmosphere. I mean, let's
Speaker 15: just start there. And then let's realize that no one
Speaker 15: say ever going to make green iron or green steel,
Speaker 15: which is ten percent of the carbon budget. Now we're
Speaker 15: talking huge, and let's just start with green iron or
Speaker 15: So the fact we're going to green iron or within
Speaker 15: a few years means that we can then go to
Speaker 15: green iron or green steel. Now that's starting to have
Speaker 15: a massive impact because we do that economically. Then the
Speaker 15: pollution which is currently suffered all over the world, particularly
Speaker 15: in China, where they put their steel mills on the
Speaker 15: outskirts to their city's central plan, but their cities grew
Speaker 15: so much bigger. So now the steel was inside the city,
Speaker 15: we send them totally pollution free metal. Their pollution problem
Speaker 15: goes out the window. So that there is a really
Speaker 15: big impact on this slow lethargic backward industry called mining,
Speaker 15: ironically leading the world to go green, and it's hitting
Speaker 15: where the pollution is worse, and it's not saying, oh, well,
Speaker 15: we've got to continue burning all in gas because there's
Speaker 15: such lovely people and we have to look after them.
Speaker 15: We're saying, actually, oil and gas has got us into
Speaker 15: this manure. We've got to stop doing what we've always done.
Speaker 15: If we want a different result, and switch off the
Speaker 15: oil and gas, and then we'll get a different result.
Speaker 15: And that's like green steel, that's like green shipping exactly.
Speaker 3: Though, is green iron ore? And what does it cost
Speaker 3: versus other iron ore? And is it cost competitive?
Speaker 6: Yeah?
Speaker 15: No, it's going to cost less, man, because we can
Speaker 15: make it for less because we're not chopping through a
Speaker 15: billion a billion leaders of digey like nearly five million
Speaker 15: gallons of diesel. We're not going to buy anymore, you know,
Speaker 15: because we're making it ourselves.
Speaker 4: So is it cost competitive already?
Speaker 15: Yeah, yeah, yeah, yeah, that's the beauty of it, which
Speaker 15: is why I'm saying, listen, stop looking at going green,
Speaker 15: stop looking.
Speaker 5: At zero missions.
Speaker 15: Is Oh, you're a really nice guy, What a lovely
Speaker 15: chief executive, what a lovely politician thinking of the kids
Speaker 15: not himself. Actually, get out of your whole This is
Speaker 15: a great investment. You should be doing this for your shareholders.
Speaker 15: And if you say you can't go green, well you're right.
Speaker 15: Get off the stage. And let on someone smarter who can.
Speaker 1: But why isn't everyone doing it? If the case is
Speaker 1: that simple and done it sooner?
Speaker 15: Because everything starts somewhere, right, everything starts somewhere. I'm in
Speaker 15: the suit. You're you're getting started with a thread, mate,
Speaker 15: It turned out to be a suit. So we're the thready.
Speaker 1: Talking about the conversations you're having here in New York
Speaker 1: as well. Are people getting the message?
Speaker 5: People are getting the message?
Speaker 6: Yeah?
Speaker 1: I mean, you know, we look at we look at
Speaker 1: the pullback on green agenda and so many parts of
Speaker 1: the world at the moment we see it reflected and
Speaker 1: polling and election results.
Speaker 15: Is that playing that's an opportunity for uce Okay, that's
Speaker 15: a serious opportunity. I mean, we are pushing head going
Speaker 15: green as quickly as possible. We've got technology which can
Speaker 15: take the water in here so to steirly water bottle,
Speaker 15: turn it into the most powerful fuel the walls ever had,
Speaker 15: which is hydrogen. When we turn it from gas liquid
Speaker 15: to really serious energy except soft water, and we're working
Speaker 15: out how to produce that. It's not pure we call
Speaker 15: it in dustrial hydgroen, but a fraction of the cost
Speaker 15: where we've worked out already how to charge cars, not
Speaker 15: in twenty two hours or even eight hours, but in
Speaker 15: twenty two seconds, okay, And these are the fastest electric
Speaker 15: cars in the world, like Formula E winners all the time.
Speaker 15: We've worked out how to charge our huge trucks in
Speaker 15: twenty four minutes. And I've had your US generals say
Speaker 15: to me, hey, hey, you understand the US military can
Speaker 15: never go green. I said, why is that. They said, well,
Speaker 15: our tanks they're fifty sixty tons and they've got to
Speaker 15: go fifty mile an out. And I said, well, hang on, mate,
Speaker 15: our trucks are four hundred tons and they got to
Speaker 15: go sixty mile an out.
Speaker 5: They're green.
Speaker 15: And they've said, well, well, you know shipping shipping our warships.
Speaker 15: Our warships are like one hundred meters long, andrey, I said, honestly, mate,
Speaker 15: we could put three of your warships on the back
Speaker 15: of our arnoor carriers. They're three hundred and thirty meters long,
Speaker 15: and we're sending them green so everyone can go green.
Speaker 3: I am curious if you guys are going to be
Speaker 3: also building wind farms solar forums right next farms, excuse me,
Speaker 3: right next to some of your minds to help supply
Speaker 3: green power, Like, what's is that part of the process.
Speaker 5: Yeah, it is.
Speaker 15: It is absolutely and will supply power us and power
Speaker 15: of others. Right now, we're operating a green grid. It's
Speaker 15: the first fully independent green grid in the world. It
Speaker 15: will be the largest, of course, because it'll be producing
Speaker 15: enough power the size of small countries, and it'll be
Speaker 15: a full grid, but it'll be off the standard grid,
Speaker 15: and that means that we can put this all over
Speaker 15: the world.
Speaker 1: I want to come back to hydrogen because it's been
Speaker 1: talked about for many years. There's been a lot of
Speaker 1: money put behind us yet to yield results. Where are
Speaker 1: the obstacles there? How far away is it from being
Speaker 1: something that's going to be widespread, available, and more heavily
Speaker 1: used as an energy forum?
Speaker 15: Okay, the only thing stopping the production of green hydrogen
Speaker 15: North America. I mean, let's just remember that there's more
Speaker 15: people employed in the renewable energy sector in the fossil
Speaker 15: fuel old state of Texas than there are now is
Speaker 15: by fossil fuel. So everything is changing. What we're seeing
Speaker 15: now is the whole growth, this massive growth of green
Speaker 15: heighten and green energy being held up by perfect getting
Speaker 15: in the road of the good and the IRA and
Speaker 15: if we don't fix what a little thing called forty
Speaker 15: five V, which is where the fossil fuel sector's got
Speaker 15: these environmental independent lobbyists to say, hey, look we should
Speaker 15: have things like ALI matching. Well, okay, that's perfect.
Speaker 5: Parts of your own industry are working against this.
Speaker 15: Yeah, I mean, but it's not my industry. It's the
Speaker 15: environmental lobby is paid ball by fossil fuel. It's the
Speaker 15: same same draw cards, same playbook as tobacco used. They
Speaker 15: get so called scientists into say tobacco doesn't kill you, mate.
Speaker 4: So it's money again, it's politics and it's lobby.
Speaker 15: Yeah, and we have to Carol, we have to look
Speaker 15: straight through that and say to your legislators and your legislators,
Speaker 15: we've got to say, actually, we're not going to let
Speaker 15: perfect kill off the good. We know green hydrogen is
Speaker 15: the answer. We will have weekly month matching or monthly matching.
Speaker 15: But hourly matching just means the person who came up
Speaker 15: with that's never driven or operated anything more complex than
Speaker 15: a bloody computer, not these one two three mile long
Speaker 15: plants which I have to operate.
Speaker 3: So thirty seconds left, are you more optimistic after your
Speaker 3: time here in New York and talking with global leaders
Speaker 3: North American leaders, US leaders, Are you more pessimistic?
Speaker 4: Just quickly?
Speaker 5: No, I'm more optimistic.
Speaker 15: I'm more optimist because they trust what someone does more
Speaker 15: than what someone says, and they can see we're doing it.
Speaker 15: They can see Australia's high sharehold return company ever is
Speaker 15: going fully green and there's got to be a reason
Speaker 15: for that. And they're making huge sales and they're profitable.
Speaker 4: So we wanted to be smart and fun when you
Speaker 4: came in. Did we do it?
Speaker 5: Yeah? You're smart and fun here.
Speaker 4: I love such pressure. Andrew Forrest, thank you so much.
Speaker 3: Executive Chair of course, a Ford Sku joining us right
Speaker 3: here on Bloomberg Business Week.
Speaker 2: You're listening to the bloom Burg Business Week podcast. Listen
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Speaker 3: All right by now you know we are all in
Speaker 3: about global climate challenges this week. Adding to that task,
Speaker 3: crypto mining, a recent IMF working paper found that crypto
Speaker 3: mining could generate seven tenths of a percent of global
Speaker 3: carbon dioxide emissions by twenty twenty seven.
Speaker 1: Look, the IMF noted that because of the electricity used
Speaker 1: by high powered equipment to mine crypto assets, one bitcoin
Speaker 1: transaction requires roughly the same amount of electricity as the
Speaker 1: average person in Ghana or Pakistan consumes in three years,
Speaker 1: something that's captured the attention of both US presidential candidates.
Speaker 3: It certainly has, so crypto mining's energy usage was where
Speaker 3: we wanted to start with. Rustine Benham. He is Chairman
Speaker 3: of the US Commodity Futures Trading Commission, the CFTC. He
Speaker 3: joined us from the Bloomberg Global Business Forum in New
Speaker 3: York City this past week.
Speaker 1: Look, we're talking about climate issues for US, and this
Speaker 1: is why we're thinking about the impact of crypto, but
Speaker 1: also more broadly, this is an area that you have
Speaker 1: lots of tentacles in your regulatory position. Talk to us
Speaker 1: about the question of environmental impact when it comes to crypto.
Speaker 1: Where are we thinking about regulation around that, What sort
Speaker 1: of rules are needed, What does the FTC have power over?
Speaker 14: Well, before we even get to the climate impact of
Speaker 14: crypto and crypto mining. I think the larger question in
Speaker 14: the US is the regulatory structure, or really the lack
Speaker 14: of one. I've advocated for almost three years now that
Speaker 14: there's a gap in regulation, and this is just a
Speaker 14: product of the way the US regulatory system is set up,
Speaker 14: multiple agencies, couple market regulators, banking regulators, and for better
Speaker 14: or for worse, we've seen a sustainability in the marketplace,
Speaker 14: sustained demand by customers, both retail and institutional, and really
Speaker 14: what we have to do is make sure that we
Speaker 14: regulate it properly so that customers are protected. Market stability
Speaker 14: is their market resiliency. If we can get there, and
Speaker 14: I think that would be my priority. Then I think
Speaker 14: the conversations about climate impact energy usage for mining are
Speaker 14: important to ask an answer, and I think those have
Speaker 14: been actually within the domain of questions asked over the
Speaker 14: past couple of years. A couple efforts by some of
Speaker 14: the miners to co locate near power sources that are
Speaker 14: renewable or even nuclear, some other efforts to change the
Speaker 14: way mining is done to reduce the carbon footprint. But
Speaker 14: as we worked with Congress over the past couple of
Speaker 14: years to think about legislative efforts. I know this issue
Speaker 14: specifically was on their mind and they wanted to think
Speaker 14: about disclosures, transparency, information to get to the market so
Speaker 14: that those economic incentives and preferences can essentially be manifest
Speaker 14: through decisions about what tokens to buy or not buy.
Speaker 3: Well on the energy component so much an important aspect
Speaker 3: of the reliability right, making sure that it continues to work.
Speaker 3: I want to go back to the regulatory side. And
Speaker 3: Donald Trump has kind of come out and said he's
Speaker 3: a friend of crypto. It seems like Kamala Harris's campaign
Speaker 3: is increasingly embracing.
Speaker 4: Towards the crypto world.
Speaker 3: In terms of your push for more oversight of the
Speaker 3: crypto world, would you continue to do so under a
Speaker 3: Harris administration.
Speaker 8: Yeah, and I just to be no matter.
Speaker 4: Who and as friendly as they might be.
Speaker 14: Yeah, to be clear, it's oversight driven by regulatory protection
Speaker 14: and customer protections. This is not me, as chair of
Speaker 14: the CFTC advocating for the industry saying that crypto is
Speaker 14: going to be the next great thing. This is about
Speaker 14: my observation as the head of a market regulator, saying
Speaker 14: there is a giant gap in regulation. There are a
Speaker 14: lot of customers who are either uninformed or don't really
Speaker 14: know the associated risks with crypto, and we have to
Speaker 14: put the guardrails around this industry. And those guardrails are
Speaker 14: the same guardrails that we put around equity markets, derivatives markets,
Speaker 14: fixed income markets, et cetera.
Speaker 8: No different, no different, but.
Speaker 14: We have to think about Look, there are going to
Speaker 14: be differences on custody, cybersecurity. There are components of the
Speaker 14: financial asset digital assets themselves that are very unique from
Speaker 14: securities or derivatives.
Speaker 8: There's no doubt about that.
Speaker 14: But if we think broadly from a principles based standpoint,
Speaker 14: the market structure components that have been put in place
Speaker 14: for decades and have worked quite well for US markets
Speaker 14: are the same ones we need to think about for
Speaker 14: digital assets because there's a lot of questions about the
Speaker 14: sustainability of digital assets. But here we are twenty twenty four,
Speaker 14: moving into twenty twenty five POSTFTX, other crises, finance a
Speaker 14: lot that we have brought on the enforcement side, and
Speaker 14: there is still I don't know about insatiable demand, but
Speaker 14: there is still demand from retail and institutional and they're
Speaker 14: looking for regulatory structure so that they can increase those flows.
Speaker 1: How open is the industry to regulation. I mean, it's
Speaker 1: obviously a conversation that's ongoing, and you've outlined the complexity
Speaker 1: of how the different agencies work in this front as well.
Speaker 5: Are they engaging?
Speaker 1: Is the something that you're actually able to see productive
Speaker 1: results that won't tend open a risk of overregulation?
Speaker 14: Yeah, So this is really the tricky part of this
Speaker 14: because I think I argue this often, the US capital
Speaker 14: markets are the best in the world because of the
Speaker 14: regulatory structure we have, because of the legal structure we have,
Speaker 14: because of the accountability there is for bad actors and
Speaker 14: those who violate the law.
Speaker 8: So there are many actors.
Speaker 14: I can't speak for the entire crypto community, but there
Speaker 14: are many who have been very engaged with Washington, both
Speaker 14: in Congress and the executive branch to see what kind
Speaker 14: of regulatory structure could work around digital assets. Will this
Speaker 14: benefit them most likely? I've said this publicly in the past. Again,
Speaker 14: to my point, US regulation is the reason in part
Speaker 14: why US capital markets are the strongest, deepest, and most
Speaker 14: liquid in the world, So they see a benefit to regulation.
Speaker 14: The word often thrown around is legitimacy, but again I
Speaker 14: want to pull back to what my responsibilities are, Protecting customers,
Speaker 14: protecting market resiliency and in essence sometimes financial stability.
Speaker 8: And as I.
Speaker 14: Continue to see this market ebb and flow and go
Speaker 14: through it's sort of organic growth, I can't help but
Speaker 14: raise a red flag and say, look, we're seeing this
Speaker 14: market grow.
Speaker 8: We need to protect customers.
Speaker 3: That's what would you say in terms of the powers
Speaker 3: that are necessary in order for any kind of regulation
Speaker 3: over crypto by the CFTC to really work.
Speaker 14: Yeah, this is a unique part, like we have two
Speaker 14: market regulators CFTC SEC. There is a question about around
Speaker 14: some tokens. I've articulated and advocated that bigcoin and ether
Speaker 14: are commodities under existing law.
Speaker 8: Congress wants to change existing law.
Speaker 14: That's we still debate, sure, But look, we've brought a
Speaker 14: lot of enforcement cases and we bring them through the
Speaker 14: authority we have over commodity assets, which in many cases
Speaker 14: is bitcoin and ethereum. But ultimately it's registration of exchanges,
Speaker 14: it's registration of broker dealers, it's registration of custodians, clearing houses,
Speaker 14: data repositories, the same again, and core components and core
Speaker 14: regulatory tools that we use, and with those registration requirements
Speaker 14: come ability to surveil markets, ability to collect data, and
Speaker 14: ability to examine market participants.
Speaker 1: What is from what you're hearing from the election campaign
Speaker 1: because we ask about it, because it's coming up with
Speaker 1: alarming regularity, Someone would say, in how often it's mentioned,
Speaker 1: what are you hearing that sounds like a good idea
Speaker 1: or that sounds like a bad idea in terms of
Speaker 1: where regulator regulation should be going from here.
Speaker 14: So, look, we don't want to undermine existing law. We
Speaker 14: don't want to change existing protections that exist for markets
Speaker 14: like derivatives like stocks and bonds.
Speaker 8: We want to apply what.
Speaker 14: We've learned and what we have in terms of authority
Speaker 14: to regulate markets to crypto. And it's about engagement. It's
Speaker 14: about understanding what the technology is. It's understanding what new
Speaker 14: risks or new variations on existing regulatory tools we would
Speaker 14: have to apply. But I often go and I've had
Speaker 14: conversations with lawmakers in both the Senate the House. There
Speaker 14: have been a lot of really interesting efforts, and credit
Speaker 14: to those who have led the way in both the
Speaker 14: House and the Senate to draft bills to contemplate giving
Speaker 14: the CFDC the authority. It's a unique circumstance where the
Speaker 14: CFTC regulates commodity derivatives markets but not the underlying markets.
Speaker 14: So we have this gap in commodity cash markets or
Speaker 14: spot markets, and this is where we find ourselves with
Speaker 14: digital assets.
Speaker 4: All right, So we're still trying to figure out digital assets.
Speaker 3: We throw artificial intelligence into the mix, right increasingly. Not
Speaker 3: new finance community has been using it for a long time.
Speaker 3: I do wonder if you guys are planning what tools
Speaker 3: you need to have in place to kind of oversee
Speaker 3: that aspect.
Speaker 8: So, yeah, it's important question.
Speaker 14: And at this point, almost nine or ten months ago,
Speaker 14: we put out an advisory, a request for comment, a
Speaker 14: consultation document, and in my mind, the steps we needed
Speaker 14: to take as an agency was one information gathering, engagement,
Speaker 14: getting better smarter ourselves so that we can think about
Speaker 14: what existing rules apply to AI and where there may
Speaker 14: be gaps in the space. So we're working through some
Speaker 14: of those comments. I'm hopefully going to come out with
Speaker 14: some form of advisory guidance in the near future, but
Speaker 14: it really is contingent on us being thoughtful about how
Speaker 14: AI has been used thus far and how it may
Speaker 14: be used.
Speaker 8: In the future.
Speaker 4: Are you talking to big tech about this?
Speaker 14: We look, when we consult, we are as we cast
Speaker 14: a very wide net. We want to learn from everyone,
Speaker 14: and that not only includes the individuals who are directly
Speaker 14: registered or participate in our markets, but it certainly is
Speaker 14: the tech companies who are building these AI platforms and
Speaker 14: models that are essentially being used by the financial institutions.
Speaker 1: The CFTC recently product guidance on voluntary carbon credits. I'm
Speaker 1: curious about the voluntary nature of that and whether that's
Speaker 1: something that's going to be relevant and enforceable given that
Speaker 1: that's the framing that we're given on this area.
Speaker 8: Yeah, so not unlike crypto in some respects.
Speaker 14: We've seen voluntary carbon credit futures contracts listed over the
Speaker 14: past couple of year, derivatives and once we have futures
Speaker 14: and derivatives listed on our registered exchanges.
Speaker 8: I use this phrase a lot.
Speaker 14: We have as an agency of vested interest in the
Speaker 14: health of the underlying market, and in this case it's
Speaker 14: a voluntary carbon market. We want to make sure there's
Speaker 14: resilience in health and high integrity in that cash market,
Speaker 14: so it's reflected in the markets we regulate. Ultimately, from
Speaker 14: a broad perspective, if we're going to transition and hit
Speaker 14: our twenty fifty targets, our one point five target, we're
Speaker 14: going to need voluntary carbon markets. We're not going to
Speaker 14: be able to wean ourselves off of coal and some
Speaker 14: fossil based carbon based energy sources.
Speaker 8: So we're going to need a way.
Speaker 14: To allocate capital transition to the Global South and other
Speaker 14: nations that need to transition to low carbon intensive energy sources.
Speaker 3: Twenty seconds Election betting. I know you guys don't like it.
Speaker 3: You've recently lost a court.
Speaker 4: Case very quickly. Nothing you'll warm up to.
Speaker 14: It's not about what I like or don't like. It's
Speaker 14: not about what the agency likes or doesn't like. It's
Speaker 14: about what the law says, and the law, in our view,
Speaker 14: says that election betting is against the law.
Speaker 5: That's Manam, Thanks very much for joining us the FTC chair.
Speaker 2: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 2: live weekday afternoon on a car play with the Bloomberg
Speaker 2: Business app on YouTube.
Speaker 16: Are just announced lawn Interest Train, I predict the I'll
Speaker 16: go further. Now we should give business even more confidence
Speaker 16: to invest trillions of dollars that are on the sidelines
Speaker 16: the clean energy industries of the future.
Speaker 3: That is President Biden at this past week's Bloomberg Global
Speaker 3: Business Form in New York City, shortly after he gave
Speaker 3: his final speech as President of the United States to
Speaker 3: the UN General Assembly. President Biden was among the world
Speaker 3: leaders that were in New York City this past week
Speaker 3: for Climate Week and the UN General Assembly. Top of
Speaker 3: mind for many actions and investments in renewable sources of
Speaker 3: energy and ways to tackle the climate crisis.
Speaker 1: The banking sector was in attendance as well, concentrating on
Speaker 1: financing climate solutions and more of those same solutions. The
Speaker 1: sentiment voiced by Standard Charted CEO Bill Winters, speaking from
Speaker 1: the Earthstop Prize Innovation Summit, the only.
Speaker 17: Way that we're going to be successful in the fight
Speaker 17: against climate change is to offer people an acceptable return.
Speaker 17: It doesn't have to be a protest return, just acceptable.
Speaker 17: That's the only way to move trillions and trillions.
Speaker 3: One of those sources of clean energy that countries are
Speaker 3: continuing to invest in and the finance community is certainly
Speaker 3: looking at, is win The World Economic Forum says that
Speaker 3: in twenty twenty three, last year, the global wind industry
Speaker 3: installed a record one hundred and seventeen gigawatts of new capacity,
Speaker 3: a fifty percent increase from the previous year, and that
Speaker 3: countries across the globe are investing in both onshore and
Speaker 3: offshore wind capacities. China leads the pack, adding to substantial
Speaker 3: new capacity annually, supported by ambitious governmental renewable energy targets
Speaker 3: under its five year plans.
Speaker 1: Ben Backwells the CEO of the Global Wind Energy Cancel,
Speaker 1: an international organization dedicated to promoting wind power as a
Speaker 1: key solution for the global energy transition and to combat
Speaker 1: climate change. He's also a journalist. He's written books, including
Speaker 1: one entitled win Power, The Struggle for Control of a
Speaker 1: new Global Industry, and another on offshore wind. Ben joined
Speaker 1: us from the Bloomberg Global Business Forum in New York City.
Speaker 18: The good news is that we're going quite fast in
Speaker 18: terms of expanding. As you said, a record year, and
Speaker 18: we expect to break those records every single year going forward.
Speaker 18: The bad news is that we're not on a tradictory
Speaker 18: to triple renewables. We're probably on a kind of doubling
Speaker 18: tradictory by twenty thirty, so we go one hundred and
Speaker 18: seventeen last year. We think we're going to be one
Speaker 18: hundred and thirty this year, one hundred and forty eight
Speaker 18: next year. So it's building, but we probably need to
Speaker 18: be growing about maybe twice as fast to be on
Speaker 18: a net zero.
Speaker 4: Why aren't we.
Speaker 18: Well, there's a number of reasons. I think the main
Speaker 18: reason is that everything is just too slow. So planning
Speaker 18: around the world continues to be a barrier. I mean
Speaker 18: takes twice or three times as long to plan and
Speaker 18: permit and offshore wind farm that it doest actually build one.
Speaker 18: So in terms of the technology, the capacity to build,
Speaker 18: it's there. In terms of red tape and deureocracy, we've
Speaker 18: got a long way to go. So that's fully number one.
Speaker 18: And then secondly, we're facing some market imbalances as well.
Speaker 18: I mean there's being kind of race to the bottom
Speaker 18: pricing in some areas, which has then led to the
Speaker 18: projects not being profitable. We've we've had about of inflation.
Speaker 18: You've seen in you know, the impact a couple of
Speaker 18: you know, a year ago in the US some of
Speaker 18: the projects had to go back and renegotiate because of inflation.
Speaker 18: So there's some there's some new kind of head winds.
Speaker 18: But we're we're we're speeding up and we're we're going
Speaker 18: where we.
Speaker 1: Need to quite about public money incentives and all of
Speaker 1: this as well. I mean it's something that you know,
Speaker 1: we think about the Green Deal in the U Inflation
Speaker 1: Production Act Here in the US, are the public incentives
Speaker 1: actually doing the job they're supposed to in boasting expansion
Speaker 1: or is it being undone by the obstacles that you're
Speaker 1: talking abouts.
Speaker 18: So generally we don't need subsidy financing for the projects,
Speaker 18: right because our levelized cost of energy is competitive with
Speaker 18: pretty much anything out there, especially vis a vis oil
Speaker 18: and gas fired projects and nuclear. So generally we don't
Speaker 18: need subsidy. Having said that, there's places, especially in the
Speaker 18: Global South and the emerging world, where they're just getting
Speaker 18: started and where the initial projects will be more expensive
Speaker 18: than the projects in the mature markets.
Speaker 5: Right.
Speaker 18: So if you think of somewhere like the Philippines and
Speaker 18: Southeast Asia, I mean, they're starting from a virtual standing start.
Speaker 18: They've got to build the infrastructure, they've got to build
Speaker 18: the grid, they've got to build the ports, and so
Speaker 18: there's a kind of gap I think in financing for
Speaker 18: some of those emerging markets countries where's the growth offshore.
Speaker 18: So on shore is still the biggest part of the market,
Speaker 18: but offshore is growing faster, so the compound growth rate
Speaker 18: for offshore is faster. On Shore is still, you know,
Speaker 18: eighty five percent of the market. And what's interesting is
Speaker 18: that the on shore market is really picking up again
Speaker 18: with new countries, So Germany's really speed up. The US
Speaker 18: we're expecting to really speed up from this year onwards. Right,
Speaker 18: So the IRA has had the transformative effect on the
Speaker 18: on shore market. It's taken a little bit longer than
Speaker 18: we thought, but we can really see now the construction starting,
Speaker 18: a huge amount of projects in construction. So from next
Speaker 18: year we'll really start see the US on shore market
Speaker 18: really take off. And then there's India speeding up as well.
Speaker 18: There's Australia's doing really well, and there's a bunch of
Speaker 18: new markets that are growing as well.
Speaker 1: The red tape issues that you talk about, what is
Speaker 1: the message you're getting from policymakers on that. I'm sure
Speaker 1: this is something that you're engaging with them regularly.
Speaker 12: Hones.
Speaker 1: You were speaking to leaders here at your event here too.
Speaker 1: I'm keen to know how exactly that conversation is going
Speaker 1: are people Is it coming back to people don't want
Speaker 1: wind farms near their homes? Is it much more complex?
Speaker 1: And now this is a systems problem? Where's the roadblock?
Speaker 18: I'd say it's it's mainly a systems probably problem. And
Speaker 18: there's been quite a lot of recognition around this problem
Speaker 18: for the last few years. I mean, we startied Cop
Speaker 18: twenty six in Glasgow three four years ago. We started
Speaker 18: really trying to put this on the gender. It's kind
Speaker 18: of sounds like a bit of a boring issue and
Speaker 18: so it's kind of hard to get people's attention around it.
Speaker 18: You know, it's about permitting after all, but it's pretty important.
Speaker 18: And what's happened since then is a number of countries
Speaker 18: are passing new regulations and new laws. For instance Germany,
Speaker 18: I mean they've now made permitting offshore wind farms what
Speaker 18: they call overriding national interest, So that means that in
Speaker 18: the legal system, unless there's a very good reason to object,
Speaker 18: the project will be approved.
Speaker 2: Right.
Speaker 18: Changes like that are good.
Speaker 1: I wanted to ask you about a particularation that came
Speaker 1: up in Europe this summer when we had such production
Speaker 1: coming out of particularly Spain and Norway that the price
Speaker 1: of power dropped below zero, which.
Speaker 5: Kind of sounds in some ways like a huge triumph.
Speaker 5: It doesn't make for a great business case. How do
Speaker 5: you sort of address that problem, which is down to storage?
Speaker 6: Really?
Speaker 18: Yeah, I mean I think it's a real problem and
Speaker 18: I'm seeing it, you know, as you are in more
Speaker 18: and more markets at at different times. And it's partly
Speaker 18: a function of having just a lot more variable power
Speaker 18: on the system, so a lot of solar and a
Speaker 18: lot of wind, which means that at certain times a
Speaker 18: day you've got a real abundance of power on the system.
Speaker 18: But it's ultimately down to two things. What is the
Speaker 18: market design to make sure that the market design is
Speaker 18: kind of built around those new sources of energy. And secondly,
Speaker 18: it's about interconnectivity. So obviously, the more connected you are,
Speaker 18: and this goes to Iberia right in Spain and Portugal,
Speaker 18: the more connected you are to the rest of Europe,
Speaker 18: the more you're the more the market will work in
Speaker 18: a balanced way. Right, So we've got to work more
Speaker 18: on grid connectivity and connectivity generally around.
Speaker 5: The system, right.
Speaker 3: You know, in the United States in particular, I spent
Speaker 3: a lot of time in the water and for the
Speaker 3: first time. So you know, the turn warns off of
Speaker 3: some of the islands in the United States. But I
Speaker 3: just do wonder there is a pushback.
Speaker 4: It feels like whether.
Speaker 3: It's you know, Nantucket or a Black Island or something
Speaker 3: where people are pushing back on some of these How
Speaker 3: does that perception change in the United States?
Speaker 4: How do we get there?
Speaker 18: Yeah, I mean i'd separate two things maybe. So the
Speaker 18: first thing is people's genuine concern over the impact and
Speaker 18: the impact on nature, environmental which has an industry we're
Speaker 18: very attuned too. And after all, we know most of
Speaker 18: us it here because we care about climate change and
Speaker 18: the environment, and so we want to do things in
Speaker 18: a way that's the best possible way possible. That off,
Speaker 18: your wind farms are nature positive and so on. So
Speaker 18: that's genuine, and I think the way to do that
Speaker 18: is to ensure the highest quality, the best standards of consultation, working.
Speaker 5: With communities and so on.
Speaker 18: Now, the other issue is disinformation and organize disinformation, I
Speaker 18: think is something that the renewables industry as a whole
Speaker 18: should be paying a lot more attention to, and civil
Speaker 18: society journalists editors should be paying a lot more attention
Speaker 18: to it. I mean, we've seen organize this information around
Speaker 18: off your Wind, So the idea that off your Wind
Speaker 18: is somehow killing whales even when there is no construction
Speaker 18: going on at that time, and aized disinformation with AI
Speaker 18: generates images sporting the show marine wildlife has been harmed
Speaker 18: by off the winds. That has then copied and paste
Speaker 18: to places like Australia. It's been copied and pasted into
Speaker 18: places like Europe. Right, that is that's disinformation.
Speaker 4: That's another conference.
Speaker 3: The misinformation that's out there like pick your industry right,
Speaker 3: it's really it makes it much more difficult.
Speaker 4: Ben, thank you though for finding time for us.
Speaker 18: Thanks very much for having me.
Speaker 3: Yeah, we appreciate Ben bake Well, the CEO of the
Speaker 3: Global Wind Energy Council.
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Speaker 3: All right, So, before Stephen and I wrap up this week,
Speaker 3: we wanted to remind everyone about the mission the world
Speaker 3: is on to combat climate change toward that renewable energy
Speaker 3: goals were set at last year's U and Climate Summit
Speaker 3: in Dubai to triple global renewable energy capacity by twenty thirty.
Speaker 1: Look, the INTASH Energy Agency is warned that it's unlikely
Speaker 1: to be mess without major policy actions sporting wind and
Speaker 1: solar energy. We heard that from Ben Backwell, wind energy
Speaker 1: capacity has been doubling, not tripling, as many hoped it would.
Speaker 1: So for more on whether it's twenty thirty goal for
Speaker 1: renewables is at all achievable, we spoke with David Cherney,
Speaker 1: clean energy policy leader at the global consultancy firm PA Consulting.
Speaker 9: It is going to be quite challenging to triple renewable
Speaker 9: coke capacity globally, certainly. I think everyone's going to give
Speaker 9: it their best shot. You know, here in the United States,
Speaker 9: we've had a tremendous amount of new clean energy come
Speaker 9: on to the grid over the last decade, you know,
Speaker 9: nearly over one hundred gigawatts of wind, solar and other
Speaker 9: clean energy technologies. So the balls moving in the right direction.
Speaker 9: The question is is how rapidly is it going to
Speaker 9: move down the field?
Speaker 3: All right, So talk to us little bit about initiatives
Speaker 3: in the United States I've been.
Speaker 4: Out in the water seeing the windmills. I feel like
Speaker 4: wind energy.
Speaker 3: That we continue to see some pushback, and it is
Speaker 3: curious to see, you know, what the elections bring in
Speaker 3: terms of the White House come November, and what that
Speaker 3: means for alternative energy policy. Let's maybe start there in
Speaker 3: terms of the political environment. Are you nervous about investments
Speaker 3: even in the US slowing down specifically because of what
Speaker 3: might happen come November.
Speaker 9: Certainly what comes November is going to have an impact
Speaker 9: on specific investments, right, so there will be winners and
Speaker 9: losers whenever we have had policy change. And it's a
Speaker 9: really important point, but I think we need to think
Speaker 9: about the big arcas as well. So if we look
Speaker 9: back over about the last twenty years, and we sort
Speaker 9: of use two thousand and five as the marker, so
Speaker 9: for the United States, that's when.
Speaker 6: We had the.
Speaker 9: Largest amount of carbon emissions from fossil fuels across our economy.
Speaker 9: We've been declining on average about one percent a year
Speaker 9: across the economy pretty consistently from the Bush administration through
Speaker 9: to the Buying and administration, so we've had pretty consistent declinents.
Speaker 9: A big part of that has been the deployment of
Speaker 9: renewable energy. It's also been the downfall a bit of
Speaker 9: coal generations that has retired from the system. And so
Speaker 9: as we think about November and what's going to happen
Speaker 9: in the near term, so thinking about the next four years,
Speaker 9: really we're probably headed on the you know, the same
Speaker 9: trajectory one percent decline per year. It's pretty hard for
Speaker 9: presidential administration to cause a shift in what we see
Speaker 9: on a dime. It'll it'll take some time for policies
Speaker 9: to play out.
Speaker 1: But one of the big policies under this administration was
Speaker 1: the Inflation Reduction Act. Amount of money never seen before
Speaker 1: being pumped into clean technology.
Speaker 5: Has that just not been effective enough?
Speaker 9: Well, it's it's a good question, Stephen, and I do
Speaker 9: think it's actually been been pretty effective. And the question
Speaker 9: is sort of again, what are our expectations in the
Speaker 9: short term, And certainly extending tax credits for for wind solar,
Speaker 9: adding in storage to those types of tax credits, so
Speaker 9: production tax credits, investment tax credits is really helpful at
Speaker 9: moving the ball forward with wind solar storage and technologies
Speaker 9: of the of the Like the Inflation Reduction Act, while
Speaker 9: it's named the Inflation Reduction Act. It certainly is one
Speaker 9: of the most important, if not the largest piece of
Speaker 9: energy in climate policy that the US has seen in decades.
Speaker 9: And really, when I think about that policy, it's not
Speaker 9: just thinking about the near term sort of changing things
Speaker 9: on the dime.
Speaker 6: It's a long term.
Speaker 9: It's going to be really challenging for us to meet
Speaker 9: the climate aspirations that we have said as a nation
Speaker 9: and frankly globally without innovation. So we're going to need
Speaker 9: new technologies besides wind and solar to get to where
Speaker 9: we want to go. And so the Inflation Reduction Act
Speaker 9: has created incentives for things like green hydrogen, carbon captures,
Speaker 9: storage technologies, offshore wind, advanced manufacturing electric vehicles in the like.
Speaker 9: And certainly we can't predict today, ten, fifteen, twenty years
Speaker 9: from now what is going to be the technologies that
Speaker 9: are the winners, but we're planning a lot of seeds,
Speaker 9: both in terms of R and D. Is also incentives
Speaker 9: to try to commercialize new technologies that can help us
Speaker 9: get to that that last mile. And so really both
Speaker 9: in terms of our power sector as well as thinking
Speaker 9: about transportation, commercial, residential, it's innovations to come that the
Speaker 9: Inflation Reduction Act is really going to push forward.
Speaker 5: Certainly the near term.
Speaker 9: Pushes is helpful, but anyone who had expectations will be
Speaker 9: that we were going to see a massive shift in
Speaker 9: you know, a year, a year and a half since
Speaker 9: the passage of that act. I think was misguided a
Speaker 9: bit from the start.
Speaker 3: Hey, David, I do wonder you know what moves the
Speaker 3: needle most when it comes to renewables and green energy.
Speaker 3: Is it the economic environment? Is it the cost of energy?
Speaker 3: Is it the cost of capital? Is it politics? What
Speaker 3: is it in your consultation and what you folks do
Speaker 3: in the United States and around the world. What really
Speaker 3: moves the needle in making changes towards renewable.
Speaker 9: Yeah, yeah, it's a fantastic question. The answer has changed
Speaker 9: over time. Right, So if we were to go back
Speaker 9: ten fifteen years ago with renewables thinking about wind in solars,
Speaker 9: certainly state level of mandates, targets, renewable portfolio standards for
Speaker 9: these technologies were really.
Speaker 6: Helpful in getting the ball rolling.
Speaker 9: Similarly, R and D dollars put forth, both in private
Speaker 9: industry and by the federal government have helped innovation, bringing
Speaker 9: costs down. And I had to argue today, it's about
Speaker 9: the economics at the end.
Speaker 8: Of the day.
Speaker 9: So while we've seen some increase in the near term
Speaker 9: in the installed capital costs of these technologies due to
Speaker 9: global challenges with supply chain that we've seen across industries,
Speaker 9: and you know, on the whole, we've had massive declines
Speaker 9: in the cost of modules, on the cost cost declients
Speaker 9: in turbines and the like, we've essentially been able to
Speaker 9: deploy more and more of these technologies as they become
Speaker 9: more and more.
Speaker 5: On cost competitive.
Speaker 9: And I think a good example, right is to look
Speaker 9: at Texas, which has a renewable portfolio standard for more
Speaker 9: than a decade ago. That was surpassed more than a
Speaker 9: decade to go, and we keep plowing in more and more,
Speaker 9: sold in more and more win into that that market.
Speaker 9: And it's not driven by policy goals specific amounts of
Speaker 9: these types of technologies.
Speaker 5: It's the economics.
Speaker 9: It's a cost effective place to build those technologies and
Speaker 9: the demand.
Speaker 1: Is there, right, But which direction does the economics need
Speaker 1: to move in to make that to make that process
Speaker 1: speed up? Is it that everything else has to get
Speaker 1: much more expensive so that people go to renewables, or
Speaker 1: is it that the cost of production for these technologies
Speaker 1: needs to come down.
Speaker 5: So it's a mix.
Speaker 9: We are going to continue to see the growth of
Speaker 9: renewable so wind and in solar, but I think we
Speaker 9: all recognize that wind in solar only produce electrostricity of
Speaker 9: the winds blowing or the sunshining, right, So it's a
Speaker 9: bit of a tutology in that. And what we really
Speaker 9: need to maintain reliability in the cost effective matter is
Speaker 9: dispatchable technologies that allow the system to balance itself. And
Speaker 9: so really this is where a lot of the innovation
Speaker 9: is needed is clean technologies similar to nuclear that can
Speaker 9: provide baseload clean energy or cleaner dispatchable resources that help
Speaker 9: can help balance the system. And so in the near term,
Speaker 9: a big part of that has been cultural gas and
Speaker 9: can I continue to be you know, continue to be
Speaker 9: natural gas.
Speaker 3: All right, we're going to leave it on that note.
Speaker 3: David Churney, thank you so much, Clean energy policy leader
Speaker 3: at PA Consulting. They are a global consultancy firm joining
Speaker 3: us from Colorado.
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