WEBVTT - Daniela Gabor on the Critical Case Against Private Sector ESG 0:00:10.600 --> 0:00:14.240 Hello, and welcome to another episode of the All Thoughts podcast. 0:00:14.400 --> 0:00:19.280 I'm Tracy Allaway and I'm Joe. Wisn't thal Joe? How 0:00:19.320 --> 0:00:22.400 many E s G press releases do you get in 0:00:22.400 --> 0:00:26.040 a day? What would you say? All? All half of 0:00:26.079 --> 0:00:29.600 my inbox? I don't like making fun of PR people 0:00:29.640 --> 0:00:32.120 too much because it's sort of cheap. You know, journalists 0:00:32.120 --> 0:00:35.680 always wind about PR people. But half of my inboxes 0:00:35.840 --> 0:00:39.239 cryptocurrencies experts who want to tell me about cryptocurrencies, and 0:00:39.240 --> 0:00:41.320 the other is people who want to tell me about 0:00:41.400 --> 0:00:44.560 some sort of thing with sustainable investing a k A 0:00:44.760 --> 0:00:47.440 E s G. Yeah. I kind of love how it's 0:00:47.479 --> 0:00:51.080 two extremes of the Barbell right. It's cryptocurrencies taking up 0:00:51.120 --> 0:00:53.239 a bunch of electricity and then at the other end, 0:00:53.440 --> 0:00:58.720 sustainable finance. But I wouldn't necessarily blame the PR people 0:00:58.920 --> 0:01:03.240 because there is this huge industry that has cropped up 0:01:03.280 --> 0:01:07.160 and grown around e s G. For those that don't know, 0:01:07.280 --> 0:01:11.640 it stands for Environmental, Social and Corporate governance. And I 0:01:11.680 --> 0:01:15.480 think we've had something like five hundred billion dollars worth 0:01:15.720 --> 0:01:19.320 of money raised by companies and governments for e s 0:01:19.400 --> 0:01:24.040 G projects. We've had more than eight hundred billion flowing 0:01:24.160 --> 0:01:28.560 into e s G funds, and as our inboxes can 0:01:28.600 --> 0:01:31.960 attest to, we've had, you know, hundreds of new e 0:01:32.200 --> 0:01:36.240 s G funds launched recently. There is certainly a lot 0:01:36.280 --> 0:01:38.920 of money in it. And you're right, we can't blame 0:01:38.959 --> 0:01:41.120 the pr people. It's not their fault that there's just 0:01:41.160 --> 0:01:46.600 so much money marketing funds. They're just going where, you know, 0:01:46.680 --> 0:01:49.080 doing what the clients say is really not the people's fault. 0:01:49.200 --> 0:01:51.639 There's a big there is a very big push behind 0:01:51.720 --> 0:01:54.520 all things e s G, both of the private side 0:01:54.680 --> 0:01:58.320 companies wanting to make themselves eligible for E s G investing, 0:01:59.000 --> 0:02:01.680 green bonds, et cetera. Just a huge part of this 0:02:01.800 --> 0:02:05.160 sort of a finance conversation right now. Yeah, but I'm 0:02:05.200 --> 0:02:08.240 kind of glad you brought up the cryptocurrency parallel, because, 0:02:08.480 --> 0:02:12.079 just like the crypto market, e s G is relatively 0:02:12.160 --> 0:02:17.560 new and it's sort of finding its footing, and there's 0:02:17.560 --> 0:02:21.120 been quite a lot of talk about how to align incentives, 0:02:21.160 --> 0:02:26.079 how to get definitions right, what exactly is a green investment, 0:02:26.280 --> 0:02:29.520 and in many ways there's a lot of disagreement, and 0:02:29.600 --> 0:02:33.680 it's still kind of like the wild West totally, and 0:02:33.760 --> 0:02:36.120 you know, there's still like there's a lot of ambiguity. 0:02:36.160 --> 0:02:38.040 It seems like, I mean, part of it is like, well, 0:02:38.040 --> 0:02:40.519 how much you want to invest with your values? How 0:02:40.600 --> 0:02:44.359 much is it that using certain E s G screens 0:02:44.400 --> 0:02:47.600 you can actually do better? Because in theory, the company 0:02:47.680 --> 0:02:52.600 operating with more sustainable practices could or should some according 0:02:52.639 --> 0:02:56.200 to some practitioners, actually deliver better returns. What are the 0:02:56.240 --> 0:02:58.799 trade offs? But I don't think like any of these 0:02:58.840 --> 0:03:03.400 answers are like settled science by any stripe. No. But today, 0:03:03.560 --> 0:03:06.720 in order to offset all the press releases that are 0:03:06.760 --> 0:03:09.400 floating out there, we are going to be focusing on 0:03:09.720 --> 0:03:12.280 I don't want to say the downsides of e s G, 0:03:12.680 --> 0:03:16.760 but maybe areas of potential improvement. Um, that's probably a 0:03:16.760 --> 0:03:18.800 good way of putting it. And we are going to 0:03:18.880 --> 0:03:22.520 be speaking to Danielle good Boor. She's a professor of 0:03:22.560 --> 0:03:27.440 economics and macro finance at UE Bristol and also a 0:03:27.520 --> 0:03:31.119 very vocal critic of E s G on Twitter. Daniella, 0:03:31.160 --> 0:03:34.000 thanks so much for coming on, Thank you for inviting me. 0:03:35.320 --> 0:03:39.880 So I guess my first question is what's the purpose 0:03:40.280 --> 0:03:43.360 of E s G Because it sounds kind of obvious 0:03:43.400 --> 0:03:45.840 like we're going to pour a bunch of money into 0:03:46.440 --> 0:03:50.200 good or green projects that are going to change the world. 0:03:50.960 --> 0:03:54.720 But is it that you're supposed to be investing in 0:03:55.160 --> 0:03:58.400 good companies or is it that you're investing in companies 0:03:58.440 --> 0:04:02.640 and then trying to engage with them to change their behavior. 0:04:03.640 --> 0:04:06.440 So I would say that my interest in E s 0:04:06.520 --> 0:04:11.640 G comes from observing the broader political context in which 0:04:12.160 --> 0:04:15.160 E s G investment as a reason in which this 0:04:15.320 --> 0:04:18.840 wall of the s G funds. To just describe a 0:04:18.960 --> 0:04:23.520 sort of come about. To describe the political context, I 0:04:23.760 --> 0:04:26.359 would like to start with a quote from a private 0:04:26.400 --> 0:04:30.960 equity lobbyist that was discussing the Biden infrastructure plan, and 0:04:31.040 --> 0:04:33.400 he said something along the lines of this is a 0:04:33.480 --> 0:04:37.600 very traditional government in spending on infrastructure plan. It's like 0:04:37.640 --> 0:04:40.920 an old funded through the government approach. And what we 0:04:40.920 --> 0:04:44.719 were expecting was Biden to put private finance in the 0:04:45.000 --> 0:04:48.200 in the driving seat, to partner with private finance through 0:04:48.640 --> 0:04:51.719 public private partnerships, and to tap into the huge pools 0:04:51.760 --> 0:04:56.080 of capital, particularly s G capital, standing by and looking 0:04:56.279 --> 0:05:01.240 for sort of sustainable investments and sustainable projects. And the 0:05:01.279 --> 0:05:04.480 way in which this complaint was framed that Biden shows 0:05:04.560 --> 0:05:07.839 old style government investment instead of a partnership with private 0:05:07.960 --> 0:05:11.400 finance signals to me the importance of thinking about the 0:05:11.480 --> 0:05:13.600 rise of E S G and what is the purpose 0:05:13.920 --> 0:05:17.640 how should we think about its limitations through the lengths 0:05:17.720 --> 0:05:20.520 of what I call macro finance regimes, that is, the 0:05:20.560 --> 0:05:25.679 configuration of policies and institutions used by governments, central banks 0:05:25.839 --> 0:05:29.680 and private finance to design the low carbon transition, that is, 0:05:29.680 --> 0:05:34.039 a transition towards a low carbon economy. And I would 0:05:34.200 --> 0:05:37.400 guess since two thousand and fifteen, the year of the 0:05:37.400 --> 0:05:40.279 Paris Agreement, and also the year of the Addis Ababa 0:05:40.360 --> 0:05:44.000 Financing for Development Conference, we have seen what I would 0:05:44.040 --> 0:05:48.480 describe as two broadly distinctive macro financial regimes that promise 0:05:48.600 --> 0:05:52.920 to generate investments in the order of about USD five 0:05:52.960 --> 0:05:56.480 to seven trillion annually that are necessary for the low 0:05:56.560 --> 0:06:00.360 carbon future. And there is a big finance regime team 0:06:00.400 --> 0:06:04.920 and a big green state regime that we often discussed 0:06:05.040 --> 0:06:08.360 as a green New Deal kind of arrangement. So when 0:06:08.680 --> 0:06:12.880 private equity companies and asset managers were complaining that Biden 0:06:12.920 --> 0:06:16.279 had abandoned about the Biden Plan, they were complaining to 0:06:16.320 --> 0:06:19.480 me that they had abandoned this big finance regime that 0:06:19.560 --> 0:06:22.520 was dominant until then in global policy forums like the 0:06:22.560 --> 0:06:26.880 G twenty, the United Nations, in multilateral development banks, the 0:06:26.960 --> 0:06:32.760 Conference on Climate Change, the Global Investor for Sustainable Development Alliance, 0:06:33.640 --> 0:06:37.400 which was a consensus that private finance needs to needs 0:06:37.400 --> 0:06:39.960 to be in the driving seat for us to achieve 0:06:40.000 --> 0:06:44.680 the SDG and the organization commitments by by twenty thirty. 0:06:44.880 --> 0:06:46.560 So this is I want to stop at this point 0:06:46.600 --> 0:06:48.839 because I just want to really make sure we stress it. 0:06:48.880 --> 0:06:51.240 And this is super interesting. And so what you're describing 0:06:51.320 --> 0:06:55.400 is that for years there's been this consensus among leaders 0:06:55.440 --> 0:06:57.880 that when they set out, say like climate goals or 0:06:57.920 --> 0:07:02.600 other environmental goals, that there's a big role for the 0:07:02.640 --> 0:07:07.240 finance industry for private money to be employed directed in 0:07:07.360 --> 0:07:10.880 such a way that it goes towards investments in all 0:07:10.960 --> 0:07:14.040 these areas, whether it's in technology or something like that. 0:07:14.760 --> 0:07:18.200 And perhaps some of the anxiety now as we think 0:07:18.240 --> 0:07:22.320 about when I guess you could say maybe green New 0:07:22.360 --> 0:07:24.880 Deal thinking, although there is no green New deal, but 0:07:24.960 --> 0:07:28.520 green New Deal thinking is much more about let's just 0:07:28.680 --> 0:07:33.680 have the public fisk, let's just have public spending invest 0:07:33.720 --> 0:07:35.280 in this. And it's sort of like I guess you 0:07:35.280 --> 0:07:37.920 could say it sort of cuts out the opportunities in 0:07:38.040 --> 0:07:42.280 some ways for private financial profit exactly. I mean, it 0:07:42.520 --> 0:07:45.160 doesn't necessarily cut them out, because you could say, well, 0:07:45.360 --> 0:07:48.280 you know, private finance was still by the government, the 0:07:48.360 --> 0:07:52.160 bonds issued by governments to finance the green carbon transition. 0:07:52.400 --> 0:07:55.840 It definitely sort of sort of goes against this idea 0:07:55.920 --> 0:07:58.239 that private finance needs to be in the driving seat, 0:07:58.400 --> 0:08:00.680 an idea that that comes with the E s G 0:08:00.880 --> 0:08:04.559 push over the last five to seven years. So what's 0:08:04.560 --> 0:08:07.760 the implication of that. Are you suggesting that as more 0:08:07.840 --> 0:08:12.360 of these projects are undertaken by governments, does that mean 0:08:12.720 --> 0:08:16.040 that the E s G pool is going to start 0:08:16.080 --> 0:08:19.280 shrinking or there's going to be fewer opportunities or is 0:08:19.320 --> 0:08:22.679 it still just going to keep growing as we described 0:08:22.720 --> 0:08:26.160 in the intro. That's that's a very interesting question in 0:08:26.200 --> 0:08:29.360 the sense that it very much depends which avenue governments 0:08:29.360 --> 0:08:32.240 will decide to take, whether they go for big, big 0:08:32.280 --> 0:08:35.960 public investment, which I I somehow doubt. I think the 0:08:36.040 --> 0:08:39.520 by the Infrastructure plan is is somehow an oddity in 0:08:39.840 --> 0:08:43.240 sort of uh in high income countries, I would guess, 0:08:43.360 --> 0:08:46.840 especially after the COVID nineteen crisis there is because we 0:08:46.880 --> 0:08:50.040 still rely very much on this powerful macro fiction of 0:08:50.080 --> 0:08:53.040 the last fourth years that governments have limited fiscal space 0:08:53.440 --> 0:08:55.960 and that it should not rely on independence cent central 0:08:56.000 --> 0:08:59.440 banks to maintain borrowing costs. Law. Then the idea, the 0:08:59.520 --> 0:09:03.559 question comes, if governments cannot produce the trillions in green investment, 0:09:03.960 --> 0:09:06.000 these have to come from somewhere else, and that will 0:09:06.080 --> 0:09:08.880 be private finance. And that's where you get the sort 0:09:08.920 --> 0:09:12.120 of back of the envelope calculations that you were described earlier, 0:09:12.559 --> 0:09:15.320 and they run something like this. You have thirty three 0:09:15.720 --> 0:09:20.240 and eighty trillions U S dollars in financial assets worldwide. 0:09:20.679 --> 0:09:25.320 Around the hundred trillion belong to institutional investors and asset managers, 0:09:25.360 --> 0:09:28.400 and probably thirty trillion more or less have already a 0:09:28.440 --> 0:09:32.199 sustainability level label attached to them. So five to seven 0:09:32.240 --> 0:09:36.160 trillions annually. It's not at large, but what it requires, 0:09:36.200 --> 0:09:38.360 and I think this is very important to bear in mind. 0:09:38.840 --> 0:09:41.679 What it requires is for private private public finance to 0:09:41.840 --> 0:09:45.440 crowding private finance. In other words, for the state to 0:09:45.559 --> 0:09:50.480 help private finance invest in infrastructure projects. And this is 0:09:50.600 --> 0:09:54.040 I think an important political project that goes hand in 0:09:54.080 --> 0:09:56.000 hand with the rise of V s G S because 0:09:56.640 --> 0:10:00.760 it says that when the state has to de risk investments, 0:10:01.240 --> 0:10:05.760 particularly infrastructure investments for private finance, and that goes into 0:10:05.800 --> 0:10:09.440 steps one is to allow private finance to identify sustainable 0:10:09.440 --> 0:10:12.679 asset classes via E s G metrics and then to 0:10:12.800 --> 0:10:15.920 de risk private flows into the E s G sort 0:10:15.960 --> 0:10:19.080 of sustainable assets. Right, and to give you the example 0:10:19.160 --> 0:10:22.240 of the G twenty infrastructure as an asset class, which 0:10:22.360 --> 0:10:27.160 the Biden administration is already supporting through its International Climate 0:10:27.240 --> 0:10:30.480 Finance Plan, the idea and the G twent infrastructure as 0:10:30.480 --> 0:10:32.880 an asset class is that the private sector does not 0:10:33.040 --> 0:10:36.280 build ports or high speed trains, or renewable energy plans 0:10:36.360 --> 0:10:40.439 or hospitals because there are very important risks to projects 0:10:40.440 --> 0:10:43.600 cash flows. There might be sufficient demand, there might be 0:10:43.640 --> 0:10:47.760 currency depreciation, climate risks, fossil fuere subsidies for the poor. 0:10:48.200 --> 0:10:50.280 To what the state needs to do is to step 0:10:50.360 --> 0:10:53.960 in and to de risk the public private partnerships or 0:10:53.960 --> 0:10:57.320 these partnerships between the state and private finance. By assuming 0:10:57.480 --> 0:11:00.959 risk the demand falls or the few your governments might 0:11:01.040 --> 0:11:05.559 increase policies like minimal minimum wages or new climate regulations 0:11:05.559 --> 0:11:08.800 such as an increase in carbon price, and I think 0:11:08.880 --> 0:11:12.040 this to me, this turn towards the state as an 0:11:12.040 --> 0:11:15.840 instrument of the risking for private finance explains to a 0:11:15.880 --> 0:11:19.040 significant extent that dramatic growth that we have seen in 0:11:19.280 --> 0:11:22.719 sustainable finance products in the last years. It's a it's 0:11:22.960 --> 0:11:26.160 a global political appetite for a market driven approach to 0:11:26.200 --> 0:11:46.040 development and to climate. This is this is super fascinating already. 0:11:46.080 --> 0:11:47.920 I mean, I'm thinking, you know, like one of the 0:11:47.920 --> 0:11:52.280 themes that we talked about on this podcast a lot 0:11:52.640 --> 0:11:55.040 is like, are we sort of like entering a I 0:11:55.080 --> 0:11:59.280 guess post neoliberal period and thinking about the economy. And 0:11:59.320 --> 0:12:02.720 we've talked about it a lot with monetary and fiscal 0:12:02.760 --> 0:12:05.520 policy and this idea of handing off control of the 0:12:05.559 --> 0:12:09.120 economy from the technocrats at the central banks to the politicians, 0:12:09.720 --> 0:12:12.960 uh and the government, but we haven't really explored it 0:12:13.080 --> 0:12:16.120 from like the climate angle. But it really is the 0:12:16.160 --> 0:12:19.400 same conversation. It really dovetails with this very nicely, this 0:12:19.520 --> 0:12:24.559 idea that yes, there were these climate priorities that many 0:12:25.360 --> 0:12:28.600 governments and large companies had set out, but it was 0:12:28.760 --> 0:12:32.840 very much done within this framework of yes, but it's 0:12:33.160 --> 0:12:35.600 we're gonna it's we're gonna turn it into a market opportunity. 0:12:35.640 --> 0:12:38.320 And so this choice, as you as you put it, 0:12:38.760 --> 0:12:42.439 this choice to de risk the projects of sustainable finance 0:12:42.480 --> 0:12:45.400 for the private sector is what is this sort of 0:12:45.480 --> 0:12:48.400 like seed or the kernel for what is this omnipresent 0:12:48.480 --> 0:12:53.400 boom in I guess s G investment vehicles? Yes, I 0:12:53.480 --> 0:12:56.600 would very much agree in the sense that I think 0:12:56.640 --> 0:12:59.520 if you, if you trace the importance of h G 0:12:59.640 --> 0:13:02.480 in general is that it is a private taxonomy for 0:13:02.559 --> 0:13:06.520 identifying green or sustainable assets and in a sense distinguishing 0:13:06.600 --> 0:13:09.959 them from from dirty assets. Right. There are a couple 0:13:10.000 --> 0:13:12.440 of issues to consider there. I think one is that, 0:13:12.640 --> 0:13:15.960 although we tend to applaud in some ways, the fact 0:13:16.000 --> 0:13:18.960 that technocratic central banks or at least working closer with 0:13:19.480 --> 0:13:22.840 governments in order to design, say the green transition or 0:13:22.880 --> 0:13:26.640 to to respond to the COVID nitey in pandemic. To me, 0:13:26.760 --> 0:13:30.640 the question is when government technocrats to sort of take over. 0:13:30.760 --> 0:13:34.680 Do they take over to design public investment in green 0:13:34.720 --> 0:13:37.959 infrastructure and green industries, or do they take over to 0:13:38.640 --> 0:13:44.440 design and to negotiate the risking in public private partnership contracts. 0:13:44.480 --> 0:13:47.640 And there are very different physical implications for both, and 0:13:47.679 --> 0:13:49.680 In this one of the papers that I've written on 0:13:49.720 --> 0:13:52.280 what I call this Worlds three consensus, I look at 0:13:52.280 --> 0:13:55.040 the hidden physical costs of the riskings and they can 0:13:55.120 --> 0:13:58.079 be quite significant. We have examples in the European Union, 0:13:58.400 --> 0:14:01.080 we have examples in because trees in the Global South, 0:14:01.200 --> 0:14:05.440 like like Nigeria Orghana, where we can see that it 0:14:05.520 --> 0:14:09.800 doesn't sort of relying on the private sector to drive 0:14:09.920 --> 0:14:13.120 the sustainable agenda doesn't mean that the state is not 0:14:13.240 --> 0:14:15.600 putting fiscal resources on the line. It is in a 0:14:15.640 --> 0:14:18.120 sense and the risk to me there is that it's 0:14:18.120 --> 0:14:22.360 sort of privatizes profits and its socializes laws. Daniel, can 0:14:22.400 --> 0:14:24.840 you explain that a little bit more? How does the 0:14:24.880 --> 0:14:30.120 government de risking the space actually results in fiscal expenditure. 0:14:30.440 --> 0:14:33.600 So let me give you, for example, the example of 0:14:34.000 --> 0:14:39.720 ghanas some COFA offshore gas project where the state signed 0:14:39.720 --> 0:14:44.080 a public private partnership contract with a couple of French companies. 0:14:44.440 --> 0:14:48.160 And in that in PPP contract there is a very 0:14:48.160 --> 0:14:53.000 clear specification of who assumes what risks and the state assumes. 0:14:53.040 --> 0:14:55.800 For example, in this contract Demander skin that says that 0:14:55.840 --> 0:14:59.200 it car is a level of cash flows for the 0:14:59.240 --> 0:15:03.120 private investor Stern for the private operator in the case 0:15:03.200 --> 0:15:06.560 of this Ghanian project, because the state agreed to do 0:15:06.720 --> 0:15:12.120 risk and demand or in other words, to provide a guarantee, 0:15:12.560 --> 0:15:15.640 then according to the i m F, it now pays 0:15:15.680 --> 0:15:19.880 about five hundred million annually for power power generation capacity 0:15:19.920 --> 0:15:23.800 that it cannot use because the infrastructure the greed is 0:15:23.840 --> 0:15:27.600 not performed enough to sort of absorb this. And there 0:15:27.600 --> 0:15:32.400 are many other examples in PPP contracts everywhere, because the 0:15:32.760 --> 0:15:36.120 logic is, if you want to direct or to escort 0:15:36.200 --> 0:15:39.520 private finance into sustainable assets, you need to change the 0:15:39.640 --> 0:15:43.080 risk reworld profile right to align it better with their 0:15:43.360 --> 0:15:47.760 preferred the risk reward profile. Then the state says, okay, 0:15:47.800 --> 0:15:50.800 I will guarantee a certain level of demand I will pay, 0:15:51.320 --> 0:15:55.240 or if a future government decides to, for example, increased 0:15:55.280 --> 0:15:58.600 minimum wages, or if it decides to put a carbon price, 0:15:59.000 --> 0:16:02.480 the state absorb some of the risks of the private 0:16:02.520 --> 0:16:08.800 investment in order to guarantee a constant stream of cash flow. Well, 0:16:08.800 --> 0:16:12.880 why is this not just a problem of making these 0:16:12.920 --> 0:16:17.800 guarantees better, demanding more demanding, you know, setting the standards 0:16:17.840 --> 0:16:20.880 for what the projects need to accomplish. I mean, it 0:16:20.960 --> 0:16:24.760 seems like it's it's easy to imagine bad projects where 0:16:24.800 --> 0:16:28.000 the state comes in and create some buffer de risks 0:16:28.160 --> 0:16:30.800 for the private sector, and then the private sector doesn't deliver. 0:16:31.400 --> 0:16:34.760 Why not just get better at making sure the private 0:16:34.800 --> 0:16:38.040 sector delivers better if it's going to be eligible for 0:16:38.120 --> 0:16:41.080 these sort of guarantee the backstops of the state. I 0:16:41.120 --> 0:16:44.560 think that's a that's a very legitimate question, and historically 0:16:44.640 --> 0:16:48.800 the critic towards these the risking PPPs has come from 0:16:48.800 --> 0:16:51.720 from the empirical reality in the European Union and in 0:16:52.000 --> 0:16:55.040 countries around the world that have been used p pps 0:16:55.040 --> 0:16:58.160 for infrastructure investorment. Remind us what p P stand for, 0:16:58.160 --> 0:17:01.560 a public private partnership, right, it is the kind of 0:17:01.840 --> 0:17:04.920 it is the kind of arrangement that black Rock, for example, 0:17:05.200 --> 0:17:08.280 uh called for the Biden administration to use in order 0:17:08.320 --> 0:17:12.040 to involve the private sector in infrastructure investment. And the 0:17:12.080 --> 0:17:14.720 experience with p pps in Europe and elsewhere is in 0:17:14.760 --> 0:17:18.480 general an experience of a lot of very high costs 0:17:18.560 --> 0:17:20.840 for the state that would have in other words, that 0:17:20.840 --> 0:17:22.800 it would have been cheap or if the state did 0:17:22.840 --> 0:17:27.399 it by basically spending directly, as the Biden administration plans 0:17:27.440 --> 0:17:31.200 to do with its infrastructure plan. So that's one issue 0:17:31.640 --> 0:17:35.440 us it has been very costly for for the public purse, 0:17:35.920 --> 0:17:40.880 and I guess the second issue is, as you describe it, Joe, well, 0:17:40.920 --> 0:17:44.240 maybe we can find a better way of governing these 0:17:44.240 --> 0:17:47.200 projects to make sure that the distributions of risk works better, 0:17:47.200 --> 0:17:49.720 and the World Bank has done a lot of sort 0:17:49.760 --> 0:17:54.159 of efforts into that direction, but to my mind, we 0:17:54.200 --> 0:17:59.520 haven't had yet a successful or many successful examples where, 0:18:00.000 --> 0:18:03.160 particularly in the Global South, but also in Europe where 0:18:03.240 --> 0:18:06.680 these distribution of risks work works better for the public person. 0:18:06.760 --> 0:18:10.119 That's one thing. And the second one, which for the 0:18:10.119 --> 0:18:13.919 europe euro European audience perhaps it resonates better, is that 0:18:14.040 --> 0:18:19.080 once you organize public services through p pps, then basically 0:18:19.200 --> 0:18:22.200 you're saying that the users have to pay a fee 0:18:22.200 --> 0:18:24.800 in order to access them. And that is the case 0:18:24.880 --> 0:18:27.760 for highways, that is the case for trains where it's 0:18:27.760 --> 0:18:31.000 but it's also the case for health services, for education, 0:18:31.520 --> 0:18:33.600 for nature as an asset class. The idea is to 0:18:33.680 --> 0:18:36.439 use these PPPs everywhere. So in a sense there is 0:18:36.440 --> 0:18:39.639 also a question of the public good here, whether the 0:18:39.720 --> 0:18:43.320 government governments around the world are not equipped to provide 0:18:43.400 --> 0:18:45.760 or to meet at a social contract with its citizens 0:18:46.520 --> 0:18:51.000 by providing good quality public services through public investment as 0:18:51.000 --> 0:18:54.880 opposed to imposing user fees and UH and the risking 0:18:55.119 --> 0:18:59.560 typically investments there the more important sort of the bigger 0:18:59.560 --> 0:19:02.840 issue and brings ads back to the way the topic 0:19:02.880 --> 0:19:04.800 of the S G S. I think there is also 0:19:04.800 --> 0:19:08.560 a question of systemic greenwashing that that the rises with 0:19:08.680 --> 0:19:12.320 this kind of the risking parodigm. I wanted to I 0:19:12.359 --> 0:19:15.080 wanted to pick up on exactly this point because you 0:19:15.160 --> 0:19:19.320 mentioned this idea of the technocrats stepping in and de 0:19:19.520 --> 0:19:22.280 risking E. S G. And Joe described how one of 0:19:22.280 --> 0:19:25.479 our big themes for the year is this idea of 0:19:25.520 --> 0:19:28.800 a bigger role for the government um in terms of 0:19:28.800 --> 0:19:32.480 fiscal stimulus and everything else. But another theme, or a 0:19:32.520 --> 0:19:34.920 sub theme of that, I should say, is that the 0:19:34.960 --> 0:19:37.679 devil is in the details, right, And even if you 0:19:37.760 --> 0:19:41.959 agree that the government should actually do more designing, that 0:19:42.080 --> 0:19:45.919 policy can be fraught with loads of disagreements, and it 0:19:46.040 --> 0:19:49.160 can be very difficult and maybe even not as efficient 0:19:49.320 --> 0:19:52.359 or productive as it should have been. So how is 0:19:52.400 --> 0:19:55.959 that playing out in the E S G space? So 0:19:56.119 --> 0:19:59.000 I would say, in the space it plays out, and 0:19:59.040 --> 0:20:02.360 I think that they in the technocratic detail is very important. 0:20:02.400 --> 0:20:07.320 It's it's crucial is who decides or according to what 0:20:07.560 --> 0:20:09.919 rules or taxonomy is we call them taxonomy is in 0:20:09.920 --> 0:20:12.800 this space, according to what taxonomy is do we decide 0:20:12.920 --> 0:20:18.159 whether investments and products or green or or dirty. And 0:20:18.320 --> 0:20:22.320 there is a broad agreement in regulatory circles that industry 0:20:22.440 --> 0:20:27.080 led s G approaches open the door too systemic green waship. 0:20:27.440 --> 0:20:30.159 That is, in a sense, maybe if I give you 0:20:30.160 --> 0:20:32.960 the example of Total, the French oil and gas company, 0:20:33.119 --> 0:20:36.800 because I think it's a powerful example. If you take 0:20:36.880 --> 0:20:39.560 sustain Analytics, which is one of the s G which 0:20:39.600 --> 0:20:44.119 is one provider of e s G ratings, Analytics rates 0:20:44.119 --> 0:20:48.320 Total as having e s G risks at a medium level. 0:20:49.040 --> 0:20:54.240 It rates Exton high and Chevron as having severe e 0:20:54.400 --> 0:20:57.080 s G risks. And if you look at Total, well 0:20:57.160 --> 0:21:00.520 you'd say it has a nature based solution unit that 0:21:00.560 --> 0:21:04.280 promises to invest in natural carbon scenes in order to 0:21:04.320 --> 0:21:08.640 sequesters or two from its operations. Right. However, if one 0:21:08.720 --> 0:21:11.199 looks closer at what Hotel has been doing over the 0:21:11.240 --> 0:21:16.320 last few years, then this rate ranking of medium e 0:21:16.440 --> 0:21:19.160 s G risks looks to me a lot like green washing. 0:21:19.560 --> 0:21:23.560 For example, in Congo, Total wants to exploit oil there, 0:21:23.800 --> 0:21:26.480 and it says well, in order to compensate, we will 0:21:26.560 --> 0:21:30.520 create a natural carbon sing of forty thousand hectors. But 0:21:30.720 --> 0:21:35.360 this involves first destroying a local natural savanna ecosystem and 0:21:35.440 --> 0:21:40.040 replacing it with what non native trees I think acacia 0:21:40.119 --> 0:21:43.919 trees that can be commercially exploited. So if you're an 0:21:43.920 --> 0:21:47.680 institutional investor, right then you hold Total shares or bonds, 0:21:47.720 --> 0:21:50.119 you can say, well, this is a company that is 0:21:50.160 --> 0:21:54.480 carefully planning its transitional to fossil fuels because of stain analytics, 0:21:54.640 --> 0:21:57.640 s G ratings tells me so. But what I see 0:21:57.800 --> 0:22:02.159 is that Total probably use is it's green finance ratings 0:22:02.200 --> 0:22:05.199 in order to as a cover to burn more fossil 0:22:05.280 --> 0:22:09.560 viewers while destroying local forests for commercial exploitation. And I 0:22:09.600 --> 0:22:11.760 think that brings me to the idea of this double 0:22:11.840 --> 0:22:16.119 materiality that we that not we, but regulators discuss when 0:22:16.160 --> 0:22:20.879 they talk about taxonomys of green and dirty finance. And 0:22:20.960 --> 0:22:25.000 the idea of double materiality is that the climate crisis 0:22:25.080 --> 0:22:28.440 poses risks for institutional investors, right and in this case, 0:22:28.480 --> 0:22:32.359 Total looks looks looks less risky for the institutional investor 0:22:32.480 --> 0:22:36.800 because of its sustain analytics s G rating. But when 0:22:36.800 --> 0:22:41.200 that investor decides to include totally its portfolio, what it does, 0:22:41.240 --> 0:22:43.720 in fact is it lends to a fossil fuel company 0:22:43.800 --> 0:22:47.040 that is worsen in the climate crisis. So totals actions 0:22:47.040 --> 0:22:50.040 in Congo are making the climate crisis words. And that 0:22:50.240 --> 0:22:52.960 is the the idea of double materiality that has been 0:22:52.960 --> 0:22:55.840 at the core of regulatory debates. And I think I 0:22:55.840 --> 0:22:58.280 don't think it can be solved by relying on private 0:22:58.280 --> 0:23:00.640 metrics like s G. It needs a ablic that son 0:23:00.680 --> 0:23:04.760 on me. It needs the technocrats to say this is 0:23:04.880 --> 0:23:09.520 green or this is sustainable, and this is not. I 0:23:09.600 --> 0:23:12.320 just want to very briefly, this is so weird because 0:23:12.359 --> 0:23:14.679 I have like this very brief story, which is like 0:23:15.320 --> 0:23:19.560 I studied abroad in a spring of two thousand in Geneva, 0:23:20.400 --> 0:23:24.320 and that was like the peak of like neoliberal optimism 0:23:24.359 --> 0:23:26.440 in the world is all gonna be great and and 0:23:26.600 --> 0:23:29.639 geos and stuff. And I actually, uh did a like 0:23:29.680 --> 0:23:33.680 little paper for like my semester on tensions that were 0:23:33.680 --> 0:23:37.439 emerged would emerge between at the time the Kyoto Protocol 0:23:37.520 --> 0:23:41.679 about climate change and the Convention on Biological Diversity and 0:23:41.800 --> 0:23:44.080 exactly what you described, and I never thought I would 0:23:44.080 --> 0:23:46.720 think about that, like little like paper that I wrote 0:23:46.720 --> 0:23:49.480 at the end of my semester of my sophomore year 0:23:49.520 --> 0:23:52.680 in college about that. But I'm glad to see that 0:23:52.880 --> 0:23:56.720 actually twenty one yeah, twenty one years later, that that 0:23:56.880 --> 0:23:59.960 is actually relevant and I kind of understand that tension 0:24:00.480 --> 0:24:06.760 between decarbonization and damaging sort of natural ecosystems. I guess 0:24:06.760 --> 0:24:08.639 that's just a comment, but I'm not thank you for 0:24:08.680 --> 0:24:10.919 bringing that up. I never thought I would think about that. Again, 0:24:10.960 --> 0:24:16.000 Thank you, Joe. Yes, I guess regulatives think think about 0:24:16.040 --> 0:24:18.440 this another sort of more sustained basis, but maybe you 0:24:18.440 --> 0:24:21.280 should send them your age. I'm going to come in 0:24:21.400 --> 0:24:26.800 with a question now, which is which? Actually I'm just 0:24:26.840 --> 0:24:29.040 going to repeat my first question because I think this 0:24:29.160 --> 0:24:33.080 gets to the point Danielle is making about, you know, 0:24:33.160 --> 0:24:37.040