1
00:00:00,080 --> 00:00:02,480
Speaker 1: This is Dana Perkins and you're listening to Switched on

2
00:00:02,720 --> 00:00:05,720
Speaker 1: the BNEF podcast. The ESG label is a term you've

3
00:00:05,840 --> 00:00:08,720
Speaker 1: likely heard used before, and it's one that's designed to

4
00:00:08,840 --> 00:00:13,440
Speaker 1: easily identify investments and companies that prioritize good environmental, social,

5
00:00:13,560 --> 00:00:18,040
Speaker 1: and governance practices. However, recently, ESG investment strategies have come

6
00:00:18,120 --> 00:00:20,200
Speaker 1: under fire from the right and the left of the

7
00:00:20,239 --> 00:00:23,680
Speaker 1: political spectrum. On one side, some US states have started

8
00:00:23,720 --> 00:00:28,120
Speaker 1: passing anti ESG legislation citing fudiciary duty is the reason,

9
00:00:28,320 --> 00:00:31,040
Speaker 1: and on the left there have been concerns over greenwashing.

10
00:00:31,280 --> 00:00:34,320
Speaker 1: So do we need to rethink ESG the term because

11
00:00:34,320 --> 00:00:38,479
Speaker 1: it's being used so ubiquitously and perhaps erroneously well. Senior

12
00:00:38,520 --> 00:00:42,600
Speaker 1: associate on BNF's Sustainable Finance Team, Maya Godomer returned to

13
00:00:42,640 --> 00:00:45,800
Speaker 1: the podcast today to dig into the ESG investment space

14
00:00:45,960 --> 00:00:48,880
Speaker 1: and assess the claims levels at it. Together, we discuss

15
00:00:48,880 --> 00:00:51,360
Speaker 1: a range of topics. At the beginning, we go through

16
00:00:51,360 --> 00:00:53,680
Speaker 1: some of the terminology for those new in the space.

17
00:00:53,840 --> 00:00:56,240
Speaker 1: Then we go into the history of ESG, where it's

18
00:00:56,240 --> 00:00:58,840
Speaker 1: come from, and then where it is now. What ESG

19
00:00:58,960 --> 00:01:02,400
Speaker 1: means for different investment strategies and the green washing risks,

20
00:01:02,600 --> 00:01:05,800
Speaker 1: followed by looking at these anti ESG bills and where

21
00:01:05,800 --> 00:01:09,480
Speaker 1: they sit within the turbulent political landscape in the United States.

22
00:01:09,800 --> 00:01:12,080
Speaker 1: As always, if you like this podcast, make sure you

23
00:01:12,120 --> 00:01:15,360
Speaker 1: subscribe to receive updates on future episodes on your device,

24
00:01:15,480 --> 00:01:17,639
Speaker 1: and if you'd like, provide us a review on Apple

25
00:01:17,640 --> 00:01:20,520
Speaker 1: Podcasts or Spotify. If you're on Twitter, subscribe to the

26
00:01:20,520 --> 00:01:23,680
Speaker 1: handle at podcasts to find out about new episodes of

27
00:01:23,720 --> 00:01:26,680
Speaker 1: Switched On and other Bloomberg podcasts. Now note that B

28
00:01:26,840 --> 00:01:29,440
Speaker 1: and EF does not provide investment or strategy advice, and

29
00:01:29,520 --> 00:01:31,600
Speaker 1: we have a more complete disclaimer that can be found

30
00:01:31,600 --> 00:01:33,400
Speaker 1: at the very end of the show. But now let's

31
00:01:33,400 --> 00:01:36,119
Speaker 1: hear from Maya and let's talk about ESG.

32
00:01:47,000 --> 00:01:47,160
Speaker 2: Hi.

33
00:01:47,200 --> 00:01:50,480
Speaker 1: Maya, Hi, Dana, thank you for joining the show again today.

34
00:01:50,760 --> 00:01:53,120
Speaker 1: I'm ready to have you to be back on today's show.

35
00:01:53,120 --> 00:01:55,920
Speaker 1: We're going to get into a bit around greenwashing and

36
00:01:56,240 --> 00:01:58,720
Speaker 1: also a better around policy. So where there has been

37
00:01:58,760 --> 00:02:01,280
Speaker 1: a bit of a backlash in terms of greenwashing, I

38
00:02:01,320 --> 00:02:03,800
Speaker 1: think many of us would often actually associate that term

39
00:02:03,840 --> 00:02:06,080
Speaker 1: with consumer goods, So you think about green washing and

40
00:02:06,120 --> 00:02:08,800
Speaker 1: marketing and things that aren't actually that environmentally friendly. But

41
00:02:08,880 --> 00:02:12,400
Speaker 1: this most certainly applies to the financial services industry, and

42
00:02:12,480 --> 00:02:14,760
Speaker 1: so we have a lot to discuss today. So again,

43
00:02:14,960 --> 00:02:17,320
Speaker 1: maybe not everybody's gone through our back catalog and heard

44
00:02:17,320 --> 00:02:19,760
Speaker 1: every show you've done with me. So let's start on

45
00:02:20,280 --> 00:02:23,880
Speaker 1: ESG and defining really what it is in terms of

46
00:02:24,000 --> 00:02:28,000
Speaker 1: who's actually thinking about it, because ESG can take many

47
00:02:28,040 --> 00:02:31,280
Speaker 1: forms and is being used as a term synonymously in

48
00:02:31,280 --> 00:02:35,200
Speaker 1: some circumstances with corporate sustainability or in other circumstances with

49
00:02:35,240 --> 00:02:38,480
Speaker 1: certain types of funds. So Maya, as the expert, please

50
00:02:38,520 --> 00:02:40,000
Speaker 1: define ESG for us.

51
00:02:40,240 --> 00:02:42,800
Speaker 2: Thanks for this question, because it's a question we don't

52
00:02:42,840 --> 00:02:45,240
Speaker 2: ask anymore. We just take it for granted and it's

53
00:02:45,360 --> 00:02:48,680
Speaker 2: used everywhere. It's used as a word, and that's maybe

54
00:02:48,720 --> 00:02:52,720
Speaker 2: my literature background, but it's three adjectives put together, so

55
00:02:52,840 --> 00:02:55,639
Speaker 2: it's not a word. ESG is not a thing. ESG

56
00:02:55,840 --> 00:02:59,360
Speaker 2: basically means unvironmental, social and governance, as you just said,

57
00:02:59,560 --> 00:03:02,800
Speaker 2: but environmental social and governance what you know, like it

58
00:03:02,840 --> 00:03:07,560
Speaker 2: can be used as ESG investing, ESG factors, ESG strategy

59
00:03:07,800 --> 00:03:10,239
Speaker 2: when we talk about a company. So it's really important

60
00:03:10,240 --> 00:03:12,120
Speaker 2: to take a step back, and I think actually it's

61
00:03:12,160 --> 00:03:15,520
Speaker 2: what the financial community is doing right now. So ESG

62
00:03:16,000 --> 00:03:19,880
Speaker 2: is effectively these three words, and it usually was used

63
00:03:19,919 --> 00:03:24,840
Speaker 2: to say ESG factors, So any kind of indicators that

64
00:03:24,919 --> 00:03:27,400
Speaker 2: would when you look at a company, you're trying to

65
00:03:27,520 --> 00:03:32,280
Speaker 2: assess their environmental, social, and governance practices. And then more recently,

66
00:03:32,320 --> 00:03:35,520
Speaker 2: I would say, I mean it was a longer time ago,

67
00:03:35,680 --> 00:03:40,520
Speaker 2: but when it comes to investment practices, ESG investing really

68
00:03:40,760 --> 00:03:45,160
Speaker 2: dates back from early nineteen hundreds, but it's been really

69
00:03:45,200 --> 00:03:48,520
Speaker 2: booming ESG investing in the second half of the century,

70
00:03:48,680 --> 00:03:51,600
Speaker 2: and more recently we've seen ESG investing really grow. And

71
00:03:51,640 --> 00:03:54,040
Speaker 2: what does it mean. It means for asset managers to

72
00:03:54,200 --> 00:03:58,440
Speaker 2: take into account these environmental, social, and governance factor when

73
00:03:58,480 --> 00:04:03,160
Speaker 2: they assess companies or any financial instrument in their investment process.

74
00:04:03,280 --> 00:04:06,640
Speaker 2: So it means instead of looking just at the financial

75
00:04:06,680 --> 00:04:10,480
Speaker 2: performance of a bond, of a loan, of any kind

76
00:04:10,520 --> 00:04:14,320
Speaker 2: of investment they have, they also take into account environmental, social,

77
00:04:14,360 --> 00:04:18,920
Speaker 2: and governance factors. Then ESG I think took a different

78
00:04:19,160 --> 00:04:21,760
Speaker 2: meaning whether you're a retail investor, So what is a

79
00:04:21,800 --> 00:04:24,400
Speaker 2: retail investor? For my mom in the background, a retail

80
00:04:24,440 --> 00:04:28,000
Speaker 2: investor is just someone that has a part of money

81
00:04:28,279 --> 00:04:30,719
Speaker 2: like you and me, because we're putting money aside for

82
00:04:30,800 --> 00:04:33,960
Speaker 2: our pensions or for our first mortgage and decide to

83
00:04:33,960 --> 00:04:36,400
Speaker 2: put that money into a fund. And I think for

84
00:04:36,560 --> 00:04:39,920
Speaker 2: retail investors, so it means people with that money, ESG

85
00:04:40,080 --> 00:04:42,880
Speaker 2: meant Okay, I'm going to put my money into a

86
00:04:42,960 --> 00:04:46,960
Speaker 2: fund where I'm going to maximize my positive impact on

87
00:04:47,000 --> 00:04:49,760
Speaker 2: the planet, on the society, or on the way a

88
00:04:49,839 --> 00:04:52,320
Speaker 2: company is run, which is the governance issue, like I

89
00:04:52,360 --> 00:04:55,160
Speaker 2: want more women in the company I invest in, like

90
00:04:55,680 --> 00:04:57,479
Speaker 2: on the board of the companies. But I think for

91
00:04:57,560 --> 00:05:00,560
Speaker 2: asset managers it means actually something different. Black Rock is

92
00:05:00,560 --> 00:05:02,800
Speaker 2: one of the largest asset manager in the world, and

93
00:05:02,880 --> 00:05:06,400
Speaker 2: since they've started talking about ESG, it really boomed almost

94
00:05:06,400 --> 00:05:08,880
Speaker 2: because if the first asset manager in the world dedicates

95
00:05:08,920 --> 00:05:11,520
Speaker 2: part of its strategies to ESG, what does it mean. Well,

96
00:05:11,560 --> 00:05:14,760
Speaker 2: for them, it meant Okay, when I'm gonna do ESG investing,

97
00:05:15,080 --> 00:05:18,960
Speaker 2: I'm gonna look on top now of the pure financial

98
00:05:19,080 --> 00:05:22,279
Speaker 2: risk of a company, I'm also gonna look at mitigating

99
00:05:22,600 --> 00:05:26,839
Speaker 2: and reducing my exposure to unvironmental, social, and governance risk.

100
00:05:27,120 --> 00:05:30,039
Speaker 2: That's where the big difference is. It means that I'm

101
00:05:30,040 --> 00:05:33,839
Speaker 2: not trying to maximize my positive impact on the world.

102
00:05:33,960 --> 00:05:38,200
Speaker 2: I'm just gonna try to minimize the potential environmental, social,

103
00:05:38,240 --> 00:05:40,240
Speaker 2: and governance risk of my investments.

104
00:05:40,480 --> 00:05:43,560
Speaker 1: So you brought up some of this history of the

105
00:05:43,760 --> 00:05:45,560
Speaker 1: ESG space and the fact that it's been with us

106
00:05:45,600 --> 00:05:48,159
Speaker 1: for quite some time now. At the turn of the century,

107
00:05:48,200 --> 00:05:51,120
Speaker 1: there was less emphasis on climate change, and so I

108
00:05:51,120 --> 00:05:55,800
Speaker 1: imagined that that wasn't fully integrated into anyone's ESG strategy,

109
00:05:55,800 --> 00:05:58,000
Speaker 1: but actually quite a bit of emphasis on the social part,

110
00:05:58,080 --> 00:06:00,680
Speaker 1: so that the s in ESG, what would you say,

111
00:06:00,680 --> 00:06:05,080
Speaker 1: the focuses now? And does one seem to show up

112
00:06:05,160 --> 00:06:08,960
Speaker 1: more often in an asset manager's investment strategy than some

113
00:06:09,000 --> 00:06:09,600
Speaker 1: of the others.

114
00:06:09,920 --> 00:06:13,039
Speaker 2: So asset managers have customers, so they had to be

115
00:06:13,080 --> 00:06:16,560
Speaker 2: aligned with effectively the customer's demand. At the beginning of

116
00:06:16,600 --> 00:06:19,800
Speaker 2: the twentieth century, the focus was really on the social

117
00:06:19,880 --> 00:06:23,839
Speaker 2: component of ESG when you're talking about customers. It started

118
00:06:23,880 --> 00:06:27,479
Speaker 2: with the religious movement putting money in funds where you

119
00:06:27,560 --> 00:06:30,840
Speaker 2: had no exposure to gambling, no exposure to tobacco. Then

120
00:06:30,880 --> 00:06:33,599
Speaker 2: in the nineteen sixties there was a whole movement about

121
00:06:33,640 --> 00:06:39,320
Speaker 2: having non exposure to companies that were involving the apparthaid

122
00:06:39,520 --> 00:06:42,279
Speaker 2: in South Africa. So there were all this vision that

123
00:06:42,520 --> 00:06:45,640
Speaker 2: stayed in some of the ESG funds today, which is

124
00:06:45,680 --> 00:06:48,520
Speaker 2: like a basic ESG funds will just have an exclusionary

125
00:06:48,600 --> 00:06:54,000
Speaker 2: list of like gambling, tobacco, alcohol. Sometimes another topic that

126
00:06:54,160 --> 00:06:57,520
Speaker 2: came up is also porn, like reducing exposure to these

127
00:06:57,560 --> 00:06:59,880
Speaker 2: kind of companies, So that was the social element to it,

128
00:07:00,040 --> 00:07:04,360
Speaker 2: and then progressively again from their retail investors' communities, so

129
00:07:04,839 --> 00:07:07,599
Speaker 2: us the vision was to be like, okay, actually I

130
00:07:07,760 --> 00:07:11,880
Speaker 2: also don't want to invest in companies that have a

131
00:07:12,040 --> 00:07:15,600
Speaker 2: big role to play in climate change, and that came

132
00:07:15,640 --> 00:07:17,840
Speaker 2: with the two thousands. It was saying I don't want

133
00:07:17,840 --> 00:07:20,160
Speaker 2: to invest in the big island gas companies, or I

134
00:07:20,200 --> 00:07:23,440
Speaker 2: want at least to mitigate my exposures to this company.

135
00:07:23,480 --> 00:07:26,720
Speaker 2: That's from the retail investor side. From the asset manager side,

136
00:07:26,800 --> 00:07:28,760
Speaker 2: they're and good at the end of the day is

137
00:07:28,800 --> 00:07:32,560
Speaker 2: to keep their clients happy, so ensure that these components

138
00:07:32,560 --> 00:07:35,480
Speaker 2: are taken into account, but also maximize the profit for

139
00:07:35,640 --> 00:07:38,960
Speaker 2: their retail investors. And to maximize this profit, they were

140
00:07:38,960 --> 00:07:42,360
Speaker 2: also like, you know what, actually social and environmental and

141
00:07:42,440 --> 00:07:47,000
Speaker 2: governance matters actually represent a risk to our financial performance.

142
00:07:47,280 --> 00:07:51,120
Speaker 2: Some investors are convinced that actually, if they want to

143
00:07:51,440 --> 00:07:54,920
Speaker 2: respect their return duty that we call the fiduciary duty

144
00:07:55,040 --> 00:07:57,600
Speaker 2: towards their end investors, they need to make sure that

145
00:07:57,600 --> 00:08:01,760
Speaker 2: they're not investing in companies or any kind of investments

146
00:08:01,800 --> 00:08:04,400
Speaker 2: that bear too much climate risk. That means that in

147
00:08:04,480 --> 00:08:07,200
Speaker 2: ten years time they won't return as much, or they're

148
00:08:07,240 --> 00:08:09,680
Speaker 2: facing too much physical risk and stuff like that. So

149
00:08:09,880 --> 00:08:14,000
Speaker 2: the social risk is tougher to prove. Governance risk is

150
00:08:14,000 --> 00:08:16,280
Speaker 2: actually not that tough. Like when you hear all the

151
00:08:16,320 --> 00:08:19,520
Speaker 2: story about Tesla or Nissan with Carlos gone, you can

152
00:08:19,600 --> 00:08:23,360
Speaker 2: see that bad governance actually lead to lower profits. But

153
00:08:23,400 --> 00:08:25,720
Speaker 2: for the social side it became more okay, we're going

154
00:08:25,800 --> 00:08:28,600
Speaker 2: to have the gambling aspect, the weapon aspect, you know,

155
00:08:28,640 --> 00:08:30,880
Speaker 2: like all these kinds of things. But effectively it's more

156
00:08:30,920 --> 00:08:34,880
Speaker 2: the environmental side now there is distilled because the demand

157
00:08:34,960 --> 00:08:38,959
Speaker 2: from the retail investor and the driver of investment from

158
00:08:39,000 --> 00:08:42,480
Speaker 2: the investor community are actually like meeting and are becoming

159
00:08:42,520 --> 00:08:48,079
Speaker 2: compatible reducing exposure to environmental risk and lowering the exposure

160
00:08:48,200 --> 00:08:51,960
Speaker 2: to heavier meeting sectors or like companies that have a

161
00:08:51,960 --> 00:08:53,560
Speaker 2: big role to play in climate change.

162
00:08:53,880 --> 00:08:55,880
Speaker 1: Reducing exposure seems to be at the center of it

163
00:08:55,920 --> 00:08:59,560
Speaker 1: because earlier on you made the definition between any SG

164
00:09:00,040 --> 00:09:03,280
Speaker 1: screening process as opposed to impact investing, and one more

165
00:09:03,320 --> 00:09:07,520
Speaker 1: definition really comes down to debt versus equities. So how

166
00:09:07,840 --> 00:09:11,640
Speaker 1: does ESG investing strategies, how do they take different shape

167
00:09:11,679 --> 00:09:14,280
Speaker 1: in both of those and also where is there the

168
00:09:14,280 --> 00:09:16,840
Speaker 1: most tension as we get into the screenwashing part.

169
00:09:17,160 --> 00:09:20,600
Speaker 2: So I think the dead versus equity discussion is really

170
00:09:20,600 --> 00:09:25,080
Speaker 2: interesting because you have two vision. You either have well

171
00:09:25,160 --> 00:09:30,679
Speaker 2: a company that basically is bearing additional environmental risk and

172
00:09:30,880 --> 00:09:35,079
Speaker 2: social risk or has a positive unronmental impact or social

173
00:09:35,120 --> 00:09:38,200
Speaker 2: impact that's going to be analyzed at the equity level

174
00:09:38,240 --> 00:09:41,960
Speaker 2: at the company level. So that's something that's going to

175
00:09:42,000 --> 00:09:44,320
Speaker 2: be done by ESG analysts the same way that we

176
00:09:44,440 --> 00:09:47,320
Speaker 2: used to have like financial analyst. They go instead of

177
00:09:47,320 --> 00:09:50,280
Speaker 2: looking at the cash flow and the debt to equity ratio,

178
00:09:50,280 --> 00:09:53,079
Speaker 2: they're also going to look at like how many environmental

179
00:09:53,120 --> 00:09:56,800
Speaker 2: controversies are they facing, how many of their plants are

180
00:09:57,000 --> 00:10:00,560
Speaker 2: on areas of the world that are of high flood

181
00:10:00,640 --> 00:10:03,920
Speaker 2: risk or extreme weather risk. So that's the company level.

182
00:10:04,080 --> 00:10:07,280
Speaker 2: The equitticide is totally related to the debt side, because

183
00:10:07,320 --> 00:10:09,680
Speaker 2: the same way when you invest in a certain bond,

184
00:10:09,760 --> 00:10:11,960
Speaker 2: you want to look at the debt to equity ratio

185
00:10:12,000 --> 00:10:14,400
Speaker 2: of a company, how much cash flow they have available

186
00:10:14,559 --> 00:10:17,880
Speaker 2: to do their payment. That's going to impact I would

187
00:10:17,920 --> 00:10:21,439
Speaker 2: say the plane venuelea debt market, So any kind of bond,

188
00:10:21,600 --> 00:10:25,199
Speaker 2: any kind of loan will also be in an ideal

189
00:10:25,280 --> 00:10:29,920
Speaker 2: world analyzed through that lens of unvironmental, social, and governance issues.

190
00:10:30,080 --> 00:10:32,439
Speaker 2: Then there is a second part, which is a sustainable

191
00:10:32,480 --> 00:10:34,959
Speaker 2: debt market, which is something we talked about in the

192
00:10:35,000 --> 00:10:37,800
Speaker 2: past podcast, So if anyone wants to listen, there's going

193
00:10:37,840 --> 00:10:40,680
Speaker 2: to be past podcast about that. But it's basically saying, okay,

194
00:10:40,800 --> 00:10:43,840
Speaker 2: what if we were creating a market that signals that

195
00:10:43,960 --> 00:10:46,840
Speaker 2: actually these funds are going to social projects green project

196
00:10:46,920 --> 00:10:49,600
Speaker 2: Like as an investor, I know that my money is

197
00:10:49,640 --> 00:10:54,400
Speaker 2: going to go toward actually financing the solution that's going

198
00:10:54,480 --> 00:10:58,960
Speaker 2: to mitigate climate change or mitigate social inequalities. And that's

199
00:10:59,000 --> 00:11:02,160
Speaker 2: just sustainable debt mark, which we refer to as like

200
00:11:02,360 --> 00:11:05,200
Speaker 2: labeled debt. And that's the second part. You still have

201
00:11:05,280 --> 00:11:09,080
Speaker 2: that company and owsis hovering everything, but you also have

202
00:11:09,160 --> 00:11:11,760
Speaker 2: the vision of what we call green bones social bondes,

203
00:11:11,840 --> 00:11:14,480
Speaker 2: green loans, social loans that are going to go and

204
00:11:14,720 --> 00:11:19,800
Speaker 2: finance specific social or green projects like solar power capacity

205
00:11:20,080 --> 00:11:24,200
Speaker 2: or hydro power capacity for instance. Greenwashing is everywhere there. Like,

206
00:11:24,240 --> 00:11:27,160
Speaker 2: I mean, I've studied in business school not so long ago,

207
00:11:27,240 --> 00:11:30,280
Speaker 2: we're talking seven eight years ago. I was never taught ESG,

208
00:11:30,720 --> 00:11:33,800
Speaker 2: like how do you assess the environmental or social performance

209
00:11:33,880 --> 00:11:36,800
Speaker 2: of an investment of an instrument? Like I wasn't told

210
00:11:36,920 --> 00:11:38,000
Speaker 2: environmental studies.

211
00:11:38,360 --> 00:11:39,240
Speaker 1: What are you studying?

212
00:11:39,360 --> 00:11:43,400
Speaker 2: I studied my undergrad in philosophy and my master's in finance.

213
00:11:43,640 --> 00:11:46,200
Speaker 1: So you're studying masters in finance. You would expect that

214
00:11:46,200 --> 00:11:47,520
Speaker 1: it would start coming up now.

215
00:11:47,480 --> 00:11:50,560
Speaker 2: Yeah, exactly. But I think it's just the new generation

216
00:11:50,720 --> 00:11:56,320
Speaker 2: that is effectively educated in understanding those risks, assessing those risks,

217
00:11:56,320 --> 00:11:59,600
Speaker 2: and it's two worlds meeting, right. It's like the science world.

218
00:12:00,000 --> 00:12:01,920
Speaker 2: That's why I work for BNF because I can turn

219
00:12:01,960 --> 00:12:04,760
Speaker 2: around and ask my colleague, what is a fuel cell technology?

220
00:12:04,760 --> 00:12:06,680
Speaker 2: What is the added value in the transition? You know,

221
00:12:06,720 --> 00:12:08,400
Speaker 2: like these kind of background that you need to have

222
00:12:08,480 --> 00:12:12,080
Speaker 2: from an engineer. But I studied finance. I was never

223
00:12:12,200 --> 00:12:15,400
Speaker 2: taught what a good metals and mining strategy is. So

224
00:12:15,760 --> 00:12:19,000
Speaker 2: when you have an investments product, you now need to

225
00:12:19,120 --> 00:12:23,280
Speaker 2: add this second layer, which is the environmental and social

226
00:12:23,360 --> 00:12:28,480
Speaker 2: and governance analysis of a given company. Governance's taught because

227
00:12:28,480 --> 00:12:31,560
Speaker 2: I think the way a company is led has always

228
00:12:31,600 --> 00:12:34,800
Speaker 2: been a matter for the financial community, but the social

229
00:12:34,880 --> 00:12:38,280
Speaker 2: and environmental aspect, it's really hard to pinpoint what is

230
00:12:38,320 --> 00:12:41,160
Speaker 2: actually material to the risk of a certain company.

231
00:12:41,440 --> 00:12:44,280
Speaker 1: Well, so then let's get into this definition of greenwashing.

232
00:12:44,400 --> 00:12:47,840
Speaker 1: You've written a research note that's titled to stop greenwashing.

233
00:12:47,880 --> 00:12:49,959
Speaker 1: We first need to agree on what it is and

234
00:12:50,080 --> 00:12:53,120
Speaker 1: spoiler alert everyone, we don't end up defining it by

235
00:12:53,160 --> 00:12:55,840
Speaker 1: the end of the research note because there isn't a

236
00:12:55,880 --> 00:12:58,560
Speaker 1: definition right now, but you do highlight a number of

237
00:12:58,559 --> 00:13:02,080
Speaker 1: the different areas where this friction does exist and where

238
00:13:02,120 --> 00:13:05,040
Speaker 1: there are attempts to make definitions. So let's say the

239
00:13:05,200 --> 00:13:08,199
Speaker 1: taxonomy here in the you where they're actually trying to

240
00:13:08,200 --> 00:13:09,920
Speaker 1: figure out, you know, what is in, what is out,

241
00:13:10,040 --> 00:13:12,760
Speaker 1: and give it some borders. Let's start with what is

242
00:13:12,800 --> 00:13:16,000
Speaker 1: your definition of greenwashing, and then let's go into what

243
00:13:16,280 --> 00:13:20,240
Speaker 1: different organizations, multinational organizations and countries are looking at in

244
00:13:20,320 --> 00:13:21,000
Speaker 1: their definition.

245
00:13:21,240 --> 00:13:24,640
Speaker 2: So basically, you're telling me that I didn't define grain

246
00:13:24,840 --> 00:13:27,240
Speaker 2: washing in the note and you're now forcing me, putting

247
00:13:27,240 --> 00:13:29,559
Speaker 2: me on the spot in a podcast to give a definition.

248
00:13:29,840 --> 00:13:32,280
Speaker 1: Okay, maybe that's not fair, so it's.

249
00:13:32,160 --> 00:13:34,480
Speaker 2: Okay, I can I can give it a temp. I

250
00:13:34,520 --> 00:13:39,720
Speaker 2: think the definition around grainwashing is like polymorphic, it has

251
00:13:39,760 --> 00:13:43,880
Speaker 2: like multifaceted. I think it can be. Also, the very

252
00:13:43,920 --> 00:13:47,560
Speaker 2: important thing is that some companies and some asset managers

253
00:13:47,559 --> 00:13:52,680
Speaker 2: and bank can actively greenwash, so pretend that something has

254
00:13:52,920 --> 00:13:58,200
Speaker 2: like better environmental and social attribute than what they actually have,

255
00:13:58,440 --> 00:14:01,040
Speaker 2: but they can also have like is it green washing.

256
00:14:01,160 --> 00:14:05,120
Speaker 2: There can also be something where there is a miscommunication

257
00:14:05,600 --> 00:14:08,839
Speaker 2: about what are the actual attribute of a certain instruments,

258
00:14:09,120 --> 00:14:12,439
Speaker 2: so we actually need to build that definition of green washing.

259
00:14:12,520 --> 00:14:16,600
Speaker 2: There is the mislabeling of certain instruments pretending that a

260
00:14:16,640 --> 00:14:19,400
Speaker 2: bond is green while actually it's going to find like

261
00:14:19,600 --> 00:14:22,960
Speaker 2: natural gas, but effectively, depending on the region you're in,

262
00:14:23,200 --> 00:14:28,560
Speaker 2: natural gas is actually a green alternative to heavy emitting.

263
00:14:28,200 --> 00:14:31,960
Speaker 1: Power and facilitates the transition to clean energy or maybe

264
00:14:31,960 --> 00:14:34,520
Speaker 1: considered more of a transition bond. So there's a degree

265
00:14:34,560 --> 00:14:38,680
Speaker 1: of perhaps that language around this space hasn't caught up

266
00:14:38,720 --> 00:14:41,760
Speaker 1: to how many different layers of nuance that we ultimately

267
00:14:41,800 --> 00:14:43,960
Speaker 1: really need and that we need more terms. And I

268
00:14:44,000 --> 00:14:47,240
Speaker 1: know that complexity is something we are not lacking within

269
00:14:47,440 --> 00:14:50,520
Speaker 1: financial services or an ESG. So I am not suggesting that,

270
00:14:50,560 --> 00:14:53,200
Speaker 1: but I am suggesting perhaps that putting the name on

271
00:14:53,240 --> 00:14:55,720
Speaker 1: the tin as the term would say maybe is where

272
00:14:55,720 --> 00:14:56,640
Speaker 1: we're falling down here.

273
00:14:56,920 --> 00:14:58,880
Speaker 2: I think so, and I think there is a problem

274
00:14:58,880 --> 00:15:02,400
Speaker 2: of education. I think there is mislabeling and misleading around

275
00:15:02,480 --> 00:15:08,120
Speaker 2: sustainability claims and sustainability risk. There is misunderstanding about Okay,

276
00:15:08,160 --> 00:15:10,640
Speaker 2: if you invest in natural gas, these are the pros

277
00:15:10,680 --> 00:15:13,640
Speaker 2: and cons of it. This is what your investment has

278
00:15:13,680 --> 00:15:16,800
Speaker 2: in terms of environmental attribute. It allowed to move away

279
00:15:16,800 --> 00:15:20,240
Speaker 2: from cold, but it's still not renewable, but it's also okay.

280
00:15:20,240 --> 00:15:22,480
Speaker 2: There is then the risk of maybe your stranded assets,

281
00:15:22,520 --> 00:15:25,960
Speaker 2: like the financial community has not been completely transparent. I

282
00:15:26,040 --> 00:15:28,000
Speaker 2: think there are two needs. There is a need for

283
00:15:28,120 --> 00:15:32,200
Speaker 2: education both at the institutional investor level, the bank level

284
00:15:32,400 --> 00:15:35,120
Speaker 2: as well so the fincial community level, but also the

285
00:15:35,160 --> 00:15:38,360
Speaker 2: retail investor level. It means that when we're choosing our pension,

286
00:15:38,520 --> 00:15:41,400
Speaker 2: we should get access to all that data, all that

287
00:15:41,480 --> 00:15:44,480
Speaker 2: information the same way we get access to the level

288
00:15:44,560 --> 00:15:48,680
Speaker 2: of risk that we are exposing ourselves to when we're

289
00:15:48,760 --> 00:15:51,920
Speaker 2: choosing one investment over another, we should have that level

290
00:15:51,960 --> 00:15:56,480
Speaker 2: of transparency when it comes to the environmental attributes and

291
00:15:56,560 --> 00:15:59,080
Speaker 2: social attributes of a given investment. So it means when

292
00:15:59,120 --> 00:16:01,800
Speaker 2: I choose my pension, I need to know, okay, what

293
00:16:01,960 --> 00:16:05,840
Speaker 2: level of greenness is effectively my asset manager choosing for me.

294
00:16:06,000 --> 00:16:08,880
Speaker 2: Are we going for dark green funds where we invest

295
00:16:09,000 --> 00:16:11,960
Speaker 2: only in renewable energy projects or are we going to

296
00:16:12,480 --> 00:16:15,320
Speaker 2: a fund that is actually betting on the transition? And

297
00:16:15,360 --> 00:16:18,320
Speaker 2: it's up to then the final investor to get access

298
00:16:18,320 --> 00:16:20,480
Speaker 2: to that transparency which we didn't have in the past.

299
00:16:20,800 --> 00:16:23,520
Speaker 2: It's getting there now, but for a very long time

300
00:16:23,640 --> 00:16:26,360
Speaker 2: investors because there is also that mismatch that we talked

301
00:16:26,400 --> 00:16:29,280
Speaker 2: at the beginning, you know about what the retail investor

302
00:16:29,400 --> 00:16:32,560
Speaker 2: is expecting and what their institutional investor are giving them

303
00:16:32,680 --> 00:16:35,480
Speaker 2: or asset manager or giving them. There was no transparency,

304
00:16:35,520 --> 00:16:36,480
Speaker 2: But we're getting there.

305
00:16:36,800 --> 00:16:39,240
Speaker 1: This is ultimately a way of assessing companies. So how

306
00:16:39,280 --> 00:16:42,320
Speaker 1: about the communication with the companies themselves who are ultimately

307
00:16:42,440 --> 00:16:45,360
Speaker 1: putting together the reporting and trying to represent a lot

308
00:16:45,400 --> 00:16:47,440
Speaker 1: of the things that they're doing in the best possible

309
00:16:47,520 --> 00:16:50,720
Speaker 1: light as you would and the activities that they are

310
00:16:50,720 --> 00:16:53,960
Speaker 1: involved in that are involved in the energy transition, let's say,

311
00:16:54,080 --> 00:16:57,640
Speaker 1: or any sort of decarbonization or sustainability focused measure. Is

312
00:16:57,680 --> 00:17:01,120
Speaker 1: that communication between the finance communit and how they are

313
00:17:01,160 --> 00:17:05,600
Speaker 1: assessing these companies really translating into how the companies themselves

314
00:17:05,640 --> 00:17:08,240
Speaker 1: are thinking about their strategy or is it really just

315
00:17:08,320 --> 00:17:10,840
Speaker 1: their way of assessing. But it's not impacting business in

316
00:17:10,880 --> 00:17:11,840
Speaker 1: a direct way.

317
00:17:11,880 --> 00:17:14,360
Speaker 2: No, I think it's definitely having an impact on companies.

318
00:17:14,440 --> 00:17:17,320
Speaker 2: I think that companies are much more aware that they

319
00:17:17,440 --> 00:17:23,199
Speaker 2: need to communicate about their unvironmental and social performance on

320
00:17:23,280 --> 00:17:27,760
Speaker 2: top of their financial performance. So through framework like TCFD,

321
00:17:27,960 --> 00:17:31,400
Speaker 2: the Task Force on Climate Related Financial Disclosure or ISSB,

322
00:17:31,560 --> 00:17:35,680
Speaker 2: the newly born ISSB which is the International Sustainability Standard Board,

323
00:17:35,760 --> 00:17:39,520
Speaker 2: which comes from the IFORS Foundation. Like, it's really interesting

324
00:17:39,560 --> 00:17:43,200
Speaker 2: to see that relationship. We go from an accounting standard,

325
00:17:43,560 --> 00:17:49,040
Speaker 2: pure financial accounting standard, to then thinking should actually sustainability

326
00:17:49,160 --> 00:17:52,679
Speaker 2: also should have its own framework and reporting framework that

327
00:17:52,760 --> 00:17:55,479
Speaker 2: is global. So the companies are now driven by that

328
00:17:55,560 --> 00:17:58,720
Speaker 2: and also regulations. So I have a good story actually

329
00:17:58,720 --> 00:18:02,959
Speaker 2: of a company in France that the taxonomy, the green taxonomy,

330
00:18:03,080 --> 00:18:05,520
Speaker 2: even before it was born. I reached out to that

331
00:18:05,600 --> 00:18:08,040
Speaker 2: company that had done reporting and I was like, why

332
00:18:08,040 --> 00:18:11,880
Speaker 2: are you doing a taxonomy reporting while it's not compulsory yet,

333
00:18:11,920 --> 00:18:14,439
Speaker 2: And they were like, well, we think that actually the

334
00:18:14,520 --> 00:18:18,840
Speaker 2: investor community and the financial community doesn't really understand our

335
00:18:18,920 --> 00:18:22,119
Speaker 2: business model and they don't understand how green we are

336
00:18:22,400 --> 00:18:25,880
Speaker 2: and actually what we do and our sustainability a tribute.

337
00:18:25,920 --> 00:18:28,480
Speaker 2: So we were discussing with them and engaging with them

338
00:18:28,480 --> 00:18:30,479
Speaker 2: about how we could report on that, how we can

339
00:18:30,640 --> 00:18:34,080
Speaker 2: report on our sustainability performance. And then when they reach

340
00:18:34,160 --> 00:18:37,119
Speaker 2: out to their investors in particular sort of impact investors,

341
00:18:37,160 --> 00:18:39,240
Speaker 2: they were like, well, you could use your own but

342
00:18:39,320 --> 00:18:41,199
Speaker 2: the problem is that then it's not going to be

343
00:18:41,240 --> 00:18:43,800
Speaker 2: comparable with other companies. So the best way for you

344
00:18:43,880 --> 00:18:46,080
Speaker 2: to do this is why don't you use that standard

345
00:18:46,320 --> 00:18:48,919
Speaker 2: that's going to be used by thousands of company in

346
00:18:49,040 --> 00:18:51,919
Speaker 2: Europe and potentially across the globe. And then for the

347
00:18:51,960 --> 00:18:54,840
Speaker 2: investor community, it's going to be so much more transparent

348
00:18:54,960 --> 00:18:57,960
Speaker 2: to see through your business model and to compare you

349
00:18:58,240 --> 00:19:01,800
Speaker 2: against your peers. And even at the beginning, your taxonomy

350
00:19:01,800 --> 00:19:04,560
Speaker 2: alignment is going to be quite poor, or it's not

351
00:19:04,600 --> 00:19:06,760
Speaker 2: going to be as high as you imagined what you

352
00:19:06,800 --> 00:19:10,440
Speaker 2: will have made that step. You know, taxonomy forces you

353
00:19:10,760 --> 00:19:15,439
Speaker 2: in basically splitting your revenue generation, your capex and up

354
00:19:15,520 --> 00:19:19,560
Speaker 2: expending by business activities. So it allows you to go

355
00:19:19,640 --> 00:19:23,280
Speaker 2: through your business and took the same language as your investors,

356
00:19:23,480 --> 00:19:26,440
Speaker 2: the bank that are lending to you, the wider community,

357
00:19:26,560 --> 00:19:30,240
Speaker 2: and it really helped them clarify what their business model

358
00:19:30,320 --> 00:19:34,000
Speaker 2: is about, clarify what is their environmental value. You could

359
00:19:34,000 --> 00:19:35,720
Speaker 2: do the same on the social side. It's a bit

360
00:19:35,760 --> 00:19:38,520
Speaker 2: more complicated. We don't have as strong of a framework

361
00:19:38,720 --> 00:19:41,760
Speaker 2: to talk about that. But I think companies are realizing

362
00:19:41,840 --> 00:19:45,399
Speaker 2: that actually they need to communicate on that they need

363
00:19:45,440 --> 00:19:49,040
Speaker 2: to communicate on a standardized manner because otherwise they won't

364
00:19:49,080 --> 00:19:52,359
Speaker 2: be understood. I think we're pasted, at least in Europe

365
00:19:52,600 --> 00:19:56,680
Speaker 2: and probably in Asia. We're past this decade or two

366
00:19:56,760 --> 00:20:03,040
Speaker 2: decades of like this super fluffy dr corporate sustainability reporting

367
00:20:03,160 --> 00:20:06,199
Speaker 2: framework is g reporting, you know, where you have like

368
00:20:06,200 --> 00:20:09,720
Speaker 2: a thousand pictures and not much data and not much content.

369
00:20:10,000 --> 00:20:12,640
Speaker 2: I think companies are really wanting to get it right.

370
00:20:12,720 --> 00:20:14,879
Speaker 2: And I read a lot of reporting from companies and

371
00:20:14,920 --> 00:20:18,439
Speaker 2: it's much more quantifiable. It's like, okay, maybe we're not

372
00:20:18,560 --> 00:20:21,760
Speaker 2: doing this so right, but this is what we're doing,

373
00:20:22,000 --> 00:20:24,359
Speaker 2: and these are the quantities about it, and this is

374
00:20:24,400 --> 00:20:26,720
Speaker 2: how you can assess us. And that's actually really good

375
00:20:26,720 --> 00:20:30,080
Speaker 2: to see because that's the beginning of then a trickle

376
00:20:30,160 --> 00:20:35,000
Speaker 2: down effect to actually have more transparency when we invest,

377
00:20:35,320 --> 00:20:36,520
Speaker 2: when we put our money.

378
00:20:36,880 --> 00:20:39,840
Speaker 1: So of the players that are actually trying to create

379
00:20:39,880 --> 00:20:43,280
Speaker 1: definitions and give companies and those in the financial community

380
00:20:43,480 --> 00:20:46,000
Speaker 1: rules by which to play, what would you say are

381
00:20:46,359 --> 00:20:49,280
Speaker 1: the largest ones? We've already referenced the EU taxonomy. You

382
00:20:49,359 --> 00:20:51,200
Speaker 1: also referenced ISSB.

383
00:20:51,920 --> 00:20:56,000
Speaker 2: Also can you taxonomy ISSBN, TCD Are there others? At

384
00:20:56,000 --> 00:20:59,439
Speaker 2: the moment, we have so many frameworks it's almost complicated.

385
00:20:59,520 --> 00:21:02,480
Speaker 2: We start like at the beginning with like there is TCFD,

386
00:21:02,760 --> 00:21:05,639
Speaker 2: you have GRI, you have sas B, and bear with

387
00:21:05,680 --> 00:21:08,520
Speaker 2: me because these are all abbreviation and I don't always

388
00:21:08,560 --> 00:21:12,920
Speaker 2: remember what they mean, but these are all different reporting framework.

389
00:21:13,240 --> 00:21:18,520
Speaker 2: You also have CDP the Climate Disclosure Program, So there

390
00:21:18,560 --> 00:21:22,720
Speaker 2: are many reporting framework. I think what the market needs

391
00:21:22,800 --> 00:21:27,480
Speaker 2: right now is consensus. We need overarching frameworks. So the

392
00:21:27,480 --> 00:21:31,359
Speaker 2: EU Taxonomy was the first green taxonomy that was really

393
00:21:31,480 --> 00:21:36,240
Speaker 2: launched and became a mandatory reporting framework. Right now, it's

394
00:21:36,359 --> 00:21:41,040
Speaker 2: impacting about five thousand companies or ten thousand companies. It's

395
00:21:41,200 --> 00:21:44,680
Speaker 2: quite small, and it's restrained to European companies. But there

396
00:21:44,760 --> 00:21:48,320
Speaker 2: is a new regulation that we're awaiting called the Corporate

397
00:21:48,359 --> 00:21:52,679
Speaker 2: Sustainability Reporting Directive in Europe, and that one will basically

398
00:21:52,720 --> 00:21:58,080
Speaker 2: impact any company that has any listing in the European Union,

399
00:21:58,240 --> 00:22:01,119
Speaker 2: whether you list a bond on a European exchange or

400
00:22:01,160 --> 00:22:04,160
Speaker 2: in equity on the European Exchange, whether it's a primary

401
00:22:04,280 --> 00:22:07,080
Speaker 2: or secondary listing you're in school. The figure that is

402
00:22:07,119 --> 00:22:10,080
Speaker 2: given by the European Union is to be about fifty

403
00:22:10,119 --> 00:22:12,719
Speaker 2: thousand companies. Honestly, I don't know how they came up

404
00:22:12,760 --> 00:22:14,760
Speaker 2: with this number, but we know it's going to be

405
00:22:14,840 --> 00:22:18,760
Speaker 2: much larger. They are big unknown in the implementation of

406
00:22:18,840 --> 00:22:22,640
Speaker 2: that directive because effectively there is a bit of questions

407
00:22:22,680 --> 00:22:26,199
Speaker 2: around how the European Union can actually regulate companies that

408
00:22:26,240 --> 00:22:29,040
Speaker 2: are not European, but if it happens, it's going to

409
00:22:29,240 --> 00:22:31,920
Speaker 2: have a big impact. The other framework that I think

410
00:22:32,040 --> 00:22:35,639
Speaker 2: is everyone is waiting for is the ISSB Framework, the

411
00:22:35,680 --> 00:22:40,200
Speaker 2: one we've mentioned before. The ISSB Framework is effectively supposed

412
00:22:40,240 --> 00:22:45,159
Speaker 2: to become the International gold standard for sustainability reporting. And

413
00:22:45,240 --> 00:22:48,400
Speaker 2: I think the CSRD, the framework we've just talked about

414
00:22:48,440 --> 00:22:50,960
Speaker 2: in the European Union, has been put a bit on pose.

415
00:22:51,560 --> 00:22:53,840
Speaker 2: We haven't heard too much about it, and maybe the

416
00:22:53,960 --> 00:22:56,320
Speaker 2: reason we haven't heard too much about it is that

417
00:22:56,400 --> 00:22:59,040
Speaker 2: they are waiting for the development of ISSB so that

418
00:22:59,080 --> 00:23:01,920
Speaker 2: they can put the two and two together. So I

419
00:23:01,920 --> 00:23:04,200
Speaker 2: think these are going to be the main global standard.

420
00:23:04,240 --> 00:23:07,879
Speaker 2: And then you have all a plectora of corporate sustainability

421
00:23:07,960 --> 00:23:11,560
Speaker 2: reporting coming across the globe. India came up with one,

422
00:23:11,920 --> 00:23:14,879
Speaker 2: Japan came up with one. TCFD has been one that

423
00:23:15,200 --> 00:23:18,639
Speaker 2: has really been imposing itself globally, even if it's been

424
00:23:18,680 --> 00:23:21,639
Speaker 2: mostly voluntary at the beginning, but now it's becoming mondatory

425
00:23:21,800 --> 00:23:24,760
Speaker 2: in certain jurisdiction. So I think these are the different

426
00:23:24,960 --> 00:23:29,159
Speaker 2: grainwashing like I would say tools, perhaps, yeah, there are

427
00:23:29,200 --> 00:23:33,359
Speaker 2: being counter tools, yeah, to to really like mitigate that

428
00:23:33,520 --> 00:23:37,600
Speaker 2: risk at least when it comes to corporate sustainability reporting.

429
00:23:37,880 --> 00:23:40,600
Speaker 1: And you reference this very much as something that's globally

430
00:23:40,920 --> 00:23:43,640
Speaker 1: being looked at, and you know, I think about Church

431
00:23:43,640 --> 00:23:45,800
Speaker 1: Commissioners of England and I think about some of the

432
00:23:45,840 --> 00:23:48,200
Speaker 1: different funds that you end up seeing being very early

433
00:23:48,240 --> 00:23:50,160
Speaker 1: to the game here in Europe, and we had talked

434
00:23:50,160 --> 00:23:53,960
Speaker 1: about the EU taxonomy, but increasingly this is a global discussion.

435
00:23:54,160 --> 00:23:59,040
Speaker 1: Are you seeing this focus on ESG strategies and investing

436
00:23:59,040 --> 00:24:02,439
Speaker 1: strategies on ASAMA management side, but also on being more

437
00:24:02,480 --> 00:24:06,640
Speaker 1: critical from a green washing standpoint really happening in Asia?

438
00:24:06,720 --> 00:24:09,600
Speaker 1: Is it the same or significantly advanced in the last

439
00:24:09,600 --> 00:24:12,400
Speaker 1: five years, last ten years? Has there been a tipping point?

440
00:24:12,680 --> 00:24:16,880
Speaker 2: Yes, totally. I think ESMA has made the tackling green

441
00:24:17,040 --> 00:24:20,840
Speaker 2: washing one of their priorities of their upcoming regulatory developments,

442
00:24:20,960 --> 00:24:24,159
Speaker 2: which is crazy. Like ESMA is a financial regulator, so

443
00:24:24,560 --> 00:24:27,639
Speaker 2: that that means a lot, so we can brush the EU.

444
00:24:27,760 --> 00:24:30,920
Speaker 2: You know, it's the UK is the same, Like there

445
00:24:30,920 --> 00:24:33,960
Speaker 2: has been like a big development of ESG regulation in

446
00:24:34,000 --> 00:24:36,840
Speaker 2: the UK through the FCN and the Central Bank, but

447
00:24:36,880 --> 00:24:40,959
Speaker 2: it's spread across the globe Asia. Secondly, like so many

448
00:24:41,000 --> 00:24:44,800
Speaker 2: different countries are actively trying to tackle green washing. India

449
00:24:44,880 --> 00:24:48,600
Speaker 2: has been really at the forefront of that, Japan, the

450
00:24:48,640 --> 00:24:52,280
Speaker 2: Singapore Authority, Hong Kong Minitary Authority. There has been a

451
00:24:52,320 --> 00:24:56,480
Speaker 2: development of numerous taxonomies, some of them really using what

452
00:24:56,560 --> 00:24:59,919
Speaker 2: the EU has been developing. We've seen an Asian taxonomy

453
00:25:00,080 --> 00:25:03,320
Speaker 2: being developed as well and pushed out. For now, the

454
00:25:03,320 --> 00:25:05,880
Speaker 2: only taxonomy that is mondatory is the EU one. All

455
00:25:05,920 --> 00:25:09,680
Speaker 2: the others are a voluntary framework that you can abide with.

456
00:25:10,119 --> 00:25:13,280
Speaker 2: China has developed their own. China even went to step further,

457
00:25:13,520 --> 00:25:16,040
Speaker 2: which was like they developed the taxonomy and then after

458
00:25:16,119 --> 00:25:18,960
Speaker 2: they worked with the EU to create what we call

459
00:25:18,960 --> 00:25:22,639
Speaker 2: a common ground taxonomy, which is effectively a piece of

460
00:25:22,760 --> 00:25:26,160
Speaker 2: work that shows what are the similarities and discrepancies between

461
00:25:26,200 --> 00:25:29,359
Speaker 2: the EU and China taxonomies, which allow investors to really

462
00:25:29,480 --> 00:25:34,000
Speaker 2: navigate these two. Yeah, Americas are behind. Actually Asia follows

463
00:25:34,160 --> 00:25:38,159
Speaker 2: the EU differently. I discovered while covering I cover a

464
00:25:38,240 --> 00:25:42,240
Speaker 2: lot policy for BNEF sustainable finance regulations, and actually Asia

465
00:25:42,280 --> 00:25:45,360
Speaker 2: has a way to do which is like a lot voluntary,

466
00:25:45,640 --> 00:25:48,280
Speaker 2: but that is very followed by the market, which is

467
00:25:48,480 --> 00:25:51,520
Speaker 2: very different from the European way of doing things, which

468
00:25:51,560 --> 00:25:55,080
Speaker 2: is like regulation, regulation regulations. Asia is like, you know what,

469
00:25:55,119 --> 00:25:59,880
Speaker 2: We're gonna put all these guidances and voluntary framework out there,

470
00:26:00,000 --> 00:26:02,000
Speaker 2: and then the market is like, hmm. If actually the

471
00:26:02,000 --> 00:26:04,480
Speaker 2: government has put that guidance out there, it means they

472
00:26:04,480 --> 00:26:06,440
Speaker 2: want us to follow it. So we're going to try

473
00:26:06,440 --> 00:26:09,720
Speaker 2: to follow it. Japan has never made TCFD mondatory, yet

474
00:26:09,760 --> 00:26:13,159
Speaker 2: it has the largest number of TCFD supporter in the

475
00:26:13,240 --> 00:26:17,560
Speaker 2: world by far, like far, far far, we're taking hundreds

476
00:26:17,880 --> 00:26:19,200
Speaker 2: of TCFD followers.

477
00:26:19,359 --> 00:26:21,720
Speaker 1: So high degrees of voluntary adoption.

478
00:26:21,520 --> 00:26:25,680
Speaker 2: Exactly and voluntary guidances coming from the government actually mean

479
00:26:25,800 --> 00:26:30,400
Speaker 2: a lot for the region the Americas South America. Quite interestingly,

480
00:26:30,640 --> 00:26:34,080
Speaker 2: a lot has happened, in particular in Brazil because actually

481
00:26:34,119 --> 00:26:37,359
Speaker 2: under the Bols in our government, the central bank has

482
00:26:37,640 --> 00:26:41,359
Speaker 2: got its independence back, and therefore the Central Bank of

483
00:26:41,359 --> 00:26:44,720
Speaker 2: Brazil has pushed a lot of mandatory disclosure. But the

484
00:26:44,880 --> 00:26:47,600
Speaker 2: North America everything is still on the pipeline. When it

485
00:26:47,640 --> 00:26:51,960
Speaker 2: comes to ESGG disclosure, bring clarity about what is an

486
00:26:52,160 --> 00:26:55,840
Speaker 2: ESG fund. We're waiting for the sec proposals, which are

487
00:26:56,080 --> 00:26:59,560
Speaker 2: both on the corporate sustainability side, but also on defining

488
00:26:59,680 --> 00:27:01,920
Speaker 2: what is an impact phone, what is an ESG phone,

489
00:27:02,000 --> 00:27:05,280
Speaker 2: what are the different shades of grain when it comes

490
00:27:05,320 --> 00:27:09,240
Speaker 2: to funds and investment strategies. By still in the pipeline

491
00:27:09,280 --> 00:27:11,640
Speaker 2: and its future is very uncertain actually, So.

492
00:27:11,640 --> 00:27:14,440
Speaker 1: You reference that there is a lower degree of compliance

493
00:27:14,440 --> 00:27:17,760
Speaker 1: with frameworks in the United States. But let's go there

494
00:27:17,760 --> 00:27:20,840
Speaker 1: in our conversation right now. When thinking about the United

495
00:27:20,880 --> 00:27:24,720
Speaker 1: States and adoption at VSG, it has certainly been something

496
00:27:24,760 --> 00:27:27,760
Speaker 1: that's been talked about in the policy sphere more recently,

497
00:27:27,960 --> 00:27:31,000
Speaker 1: and that low level of adoption doesn't seem like it's

498
00:27:31,040 --> 00:27:33,840
Speaker 1: going to be ending anytime soon, because there appears to

499
00:27:33,880 --> 00:27:37,160
Speaker 1: have been number of different states who have pushed back

500
00:27:37,359 --> 00:27:41,480
Speaker 1: on ESG frameworks. What seemed to be the reasons and

501
00:27:41,720 --> 00:27:44,359
Speaker 1: what would you say the future of ESG investing really

502
00:27:44,400 --> 00:27:46,800
Speaker 1: looks like in the US in the near term.

503
00:27:47,359 --> 00:27:50,040
Speaker 2: That's almost the main question we're wondering ourselves. I just

504
00:27:50,080 --> 00:27:52,320
Speaker 2: come back from the beneficumit in New York, and that

505
00:27:52,520 --> 00:27:56,240
Speaker 2: was the question about the future of ESG there whatever

506
00:27:56,320 --> 00:27:58,639
Speaker 2: the type of passage class we're talking about, and so

507
00:27:59,200 --> 00:28:02,440
Speaker 2: where did it stay? There is this big like we're

508
00:28:02,480 --> 00:28:05,919
Speaker 2: talking decades of discussion in the US about what is

509
00:28:05,960 --> 00:28:08,440
Speaker 2: the role of an asset manager? And we're going back

510
00:28:08,480 --> 00:28:12,680
Speaker 2: to Milton Friedman's theory of shareholder capitalism, right It's going

511
00:28:12,720 --> 00:28:14,480
Speaker 2: back to this, which is like the role of a

512
00:28:14,520 --> 00:28:18,239
Speaker 2: company is to maximize their return for shareholders. It's not

513
00:28:18,359 --> 00:28:20,879
Speaker 2: to have an environmental impact. It's not to have a

514
00:28:20,920 --> 00:28:24,120
Speaker 2: social impact. That's the role of government. Moving on from there,

515
00:28:24,240 --> 00:28:27,840
Speaker 2: we have this whole concept of what we call fiduciary duty,

516
00:28:27,920 --> 00:28:32,800
Speaker 2: which is the duty of asset manager towards their customer,

517
00:28:33,000 --> 00:28:36,280
Speaker 2: which is us putting our money into a fund, and

518
00:28:36,320 --> 00:28:39,400
Speaker 2: their duty is to maximize the profit that we're making

519
00:28:39,600 --> 00:28:44,240
Speaker 2: through our investment. This being said, then when policymakers are

520
00:28:44,280 --> 00:28:47,920
Speaker 2: looking at ESG, they're thinking, okay, it actually is ESG

521
00:28:48,240 --> 00:28:54,160
Speaker 2: derailing asset managers from their fiduciary duty, from their main role,

522
00:28:54,280 --> 00:28:58,640
Speaker 2: which is to maximize return for customers. So during the

523
00:28:58,680 --> 00:29:02,800
Speaker 2: Trump administration, there has been this big bill that he

524
00:29:02,920 --> 00:29:06,280
Speaker 2: wanted to pass which through the Department of Labor, where

525
00:29:06,360 --> 00:29:11,800
Speaker 2: he wanted to basically prevents pension fund from taking into

526
00:29:11,800 --> 00:29:16,840
Speaker 2: consideration non pecuniary factors in their investment strategies. What are

527
00:29:16,880 --> 00:29:20,320
Speaker 2: non pecuniary factors? And that was like, that's the legal term,

528
00:29:20,360 --> 00:29:22,400
Speaker 2: but eff actually what he said out loud is like,

529
00:29:22,640 --> 00:29:25,960
Speaker 2: I don't want pension fund to take into consideration ESG

530
00:29:26,080 --> 00:29:29,720
Speaker 2: factors when they're having an investment strategy. The main goal

531
00:29:29,920 --> 00:29:32,840
Speaker 2: should be financial return. And it was even if it

532
00:29:33,000 --> 00:29:37,160
Speaker 2: looked like a financial legislation because also Let's not forget

533
00:29:37,160 --> 00:29:40,920
Speaker 2: that the SEC their main role is to protect the

534
00:29:40,960 --> 00:29:44,920
Speaker 2: fiduciary duty of asset managers and regulate it. Even if

535
00:29:44,960 --> 00:29:48,680
Speaker 2: it looked like a political and financial regulation, it was

536
00:29:48,720 --> 00:29:54,440
Speaker 2: a Trump regulation and anti regulation antiesg regulation. It's not

537
00:29:54,560 --> 00:29:57,880
Speaker 2: me saying it. We now have statement from Ron des

538
00:29:57,960 --> 00:30:00,959
Speaker 2: centers from Donald Trump saying that actually they want to

539
00:30:01,080 --> 00:30:04,760
Speaker 2: stop this ESD trend. So that was the Trump situation

540
00:30:04,920 --> 00:30:08,800
Speaker 2: that happened right before he lost his power. Biden came back,

541
00:30:09,480 --> 00:30:14,200
Speaker 2: that law was overturned, it got overturned again, so came back,

542
00:30:14,600 --> 00:30:18,720
Speaker 2: and then the first veto of the whole Biden presidency

543
00:30:19,000 --> 00:30:23,640
Speaker 2: was to overturn again that bill and to allow pension

544
00:30:23,680 --> 00:30:27,080
Speaker 2: funds to take into account non picking your refactor under

545
00:30:27,160 --> 00:30:30,320
Speaker 2: the fiduciary duty because a retail investors can decide that

546
00:30:30,360 --> 00:30:33,840
Speaker 2: actually unfru mental and social and governance factors are important

547
00:30:33,840 --> 00:30:34,160
Speaker 2: for them.

548
00:30:34,400 --> 00:30:39,320
Speaker 1: So this is definitely drawing upon presidential powers. But at

549
00:30:39,320 --> 00:30:42,240
Speaker 1: this point we've not seen anything really substantial come through

550
00:30:42,280 --> 00:30:44,880
Speaker 1: and actually be ratified into law. That's why there's been

551
00:30:44,920 --> 00:30:47,960
Speaker 1: so much discussion lately around the Inflation Reduction Act because

552
00:30:47,960 --> 00:30:50,720
Speaker 1: it does have this kind of lasting asurety to it.

553
00:30:50,960 --> 00:30:53,880
Speaker 1: One might think, so there is the presidential and then

554
00:30:54,120 --> 00:30:56,760
Speaker 1: the federal rules, but then there's the state level. What

555
00:30:56,800 --> 00:30:59,320
Speaker 1: are we seeing in NSG space on a state by

556
00:30:59,360 --> 00:31:02,720
Speaker 1: state basis, given that states can differ quite dramatically in

557
00:31:02,800 --> 00:31:05,400
Speaker 1: terms of how they're viewing not only for the shary

558
00:31:05,480 --> 00:31:09,320
Speaker 1: duty but also the role of importance of different environmental, social,

559
00:31:09,440 --> 00:31:10,320
Speaker 1: or governance factors.

560
00:31:10,480 --> 00:31:13,960
Speaker 2: Yeah, like that's exactly what's at stake at the moment. Effectively,

561
00:31:14,200 --> 00:31:17,720
Speaker 2: stuff is opening at the state level. We're seeing when

562
00:31:17,760 --> 00:31:19,760
Speaker 2: we looked at it at the end of March twenty

563
00:31:20,000 --> 00:31:22,640
Speaker 2: twenty three, and we're going to do this analysis again.

564
00:31:22,720 --> 00:31:25,000
Speaker 2: At the end of March twenty twenty three, more than

565
00:31:25,120 --> 00:31:30,280
Speaker 2: half of all US state had either passed or proposed

566
00:31:30,320 --> 00:31:33,520
Speaker 2: an anti ESG bill at the state level. What is

567
00:31:33,560 --> 00:31:36,120
Speaker 2: an anti ESG bill? So there are two types of

568
00:31:36,160 --> 00:31:40,160
Speaker 2: anti ESG bills. It's either a bill that prevents the

569
00:31:40,280 --> 00:31:44,600
Speaker 2: state pension funds to be invested in funds that take

570
00:31:44,640 --> 00:31:48,440
Speaker 2: into account non pecuniary factor so ESG factors. So that's

571
00:31:48,520 --> 00:31:51,320
Speaker 2: the same as the doll attempt. That's what we're seeing

572
00:31:51,320 --> 00:31:53,880
Speaker 2: for instance in Florida, And you have a second type

573
00:31:53,880 --> 00:31:56,920
Speaker 2: of anti ESG bill, which is a boycott bill which

574
00:31:57,160 --> 00:32:01,920
Speaker 2: effectively blacklists the local government from working with any bank

575
00:32:02,080 --> 00:32:05,520
Speaker 2: or asset manager that has been supporting the ESG movement.

576
00:32:05,800 --> 00:32:07,440
Speaker 2: So that's what we've seen in Texas.

577
00:32:07,640 --> 00:32:10,640
Speaker 1: So what if you are a retail investor actively looking

578
00:32:10,720 --> 00:32:13,000
Speaker 1: for these sorts of funds, are they not going to

579
00:32:13,000 --> 00:32:15,800
Speaker 1: be allowed to be invested in in these specific states.

580
00:32:15,960 --> 00:32:18,800
Speaker 2: If they work for the state and their pension fund

581
00:32:19,080 --> 00:32:21,680
Speaker 2: is managed by the state, they won't be able to

582
00:32:21,720 --> 00:32:24,400
Speaker 2: have access to ESG funds. However, if they go on

583
00:32:24,440 --> 00:32:27,760
Speaker 2: their own and they go with their own pot of money,

584
00:32:27,800 --> 00:32:30,760
Speaker 2: and I don't know, they work for a private company,

585
00:32:30,840 --> 00:32:32,959
Speaker 2: then they'll be able to have access to these funds.

586
00:32:33,400 --> 00:32:36,280
Speaker 1: So it's essentially reducing choice from those who are working

587
00:32:36,440 --> 00:32:39,880
Speaker 1: in the public sector. Yes, you mentioned one more thing

588
00:32:39,960 --> 00:32:42,680
Speaker 1: that's kind of this overarching space, which it has to

589
00:32:42,680 --> 00:32:45,320
Speaker 1: do with regulation and the role of regulatory bodies. So

590
00:32:45,360 --> 00:32:49,960
Speaker 1: the SEC had previously proposed some different things associated with

591
00:32:50,000 --> 00:32:52,640
Speaker 1: climate that have the potential to really change the way

592
00:32:52,760 --> 00:32:55,600
Speaker 1: that ESG is employed in the United States. But that's

593
00:32:55,680 --> 00:32:57,520
Speaker 1: kind of sitting in a holding pattern at the moment.

594
00:32:57,720 --> 00:33:00,520
Speaker 1: Where would you say that currently sits and what's the

595
00:33:00,560 --> 00:33:02,120
Speaker 1: future of the SEC proposals.

596
00:33:02,360 --> 00:33:04,880
Speaker 2: So yes, indeed the SEC proposal could be a really

597
00:33:04,920 --> 00:33:09,160
Speaker 2: good framework. There was a consultation period and we were

598
00:33:09,240 --> 00:33:13,000
Speaker 2: awaiting the comeback of the SEC in April twenty twenty

599
00:33:13,040 --> 00:33:16,040
Speaker 2: three with a final proposal that would go through vote.

600
00:33:16,040 --> 00:33:19,240
Speaker 2: But actually it seems that they've been postponing the publication

601
00:33:19,360 --> 00:33:22,600
Speaker 2: of the proposal to this autumn. That's what we're hearing,

602
00:33:22,720 --> 00:33:24,560
Speaker 2: and the main reason is that there are a big

603
00:33:24,600 --> 00:33:26,959
Speaker 2: disagreement about what should be in that proposal. So there

604
00:33:26,960 --> 00:33:29,760
Speaker 2: are two side. There is the Corporate Sustainability Reporting site

605
00:33:29,800 --> 00:33:33,520
Speaker 2: that would include also Scope three reporting emission, so indirect

606
00:33:33,520 --> 00:33:37,240
Speaker 2: emission reporting, which is the source of a lot of pushback.

607
00:33:37,320 --> 00:33:39,280
Speaker 2: And then there is the part that is really on

608
00:33:39,360 --> 00:33:44,080
Speaker 2: the investment management clarification and what is an ESD fund

609
00:33:44,200 --> 00:33:47,280
Speaker 2: and a bit similar to the Sustainable Finance Disclosure regulation

610
00:33:47,640 --> 00:33:51,240
Speaker 2: in Europe and the Sustainable Disclosure Regulation in the UK,

611
00:33:51,480 --> 00:33:54,520
Speaker 2: trying to recreate that in the US. So we're waiting

612
00:33:54,560 --> 00:33:57,920
Speaker 2: for that if it comes in autumn, if the Scope

613
00:33:57,920 --> 00:34:02,719
Speaker 2: three are included in the mondatory reporting. There's already several

614
00:34:02,760 --> 00:34:06,840
Speaker 2: companies and Republican lawmakers that have announced that they would

615
00:34:06,840 --> 00:34:09,600
Speaker 2: sue the SEC over the inclusion of Scope three emission.

616
00:34:09,760 --> 00:34:13,320
Speaker 2: But then a month ago, then a bunch of NGOs,

617
00:34:13,400 --> 00:34:16,719
Speaker 2: including WWF or the Sierra Club, I said, okay, if

618
00:34:16,760 --> 00:34:19,839
Speaker 2: actually Scope three emissions are not included, we're also going

619
00:34:19,880 --> 00:34:25,400
Speaker 2: to sue the SEC, so that in the year. I

620
00:34:25,400 --> 00:34:28,320
Speaker 2: think all of this just brings uncertainty to the market.

621
00:34:28,600 --> 00:34:31,440
Speaker 2: I think that's the main problem. I think this polarization

622
00:34:31,520 --> 00:34:35,600
Speaker 2: of the debate is really not moving the agenda forward.

623
00:34:35,760 --> 00:34:39,759
Speaker 2: And I think what investors, companies and lenders currently need

624
00:34:39,960 --> 00:34:43,280
Speaker 2: is clarity. So actually that's the problem wor.

625
00:34:43,160 --> 00:34:45,640
Speaker 1: Seeing staying in the United States and some of the

626
00:34:45,680 --> 00:34:48,080
Speaker 1: trends are observing, because I think it's important to call

627
00:34:48,120 --> 00:34:51,960
Speaker 1: out trends. There are these specific areas where there's butting

628
00:34:52,000 --> 00:34:56,279
Speaker 1: of heads and different philosophical views on how one should

629
00:34:56,280 --> 00:34:58,759
Speaker 1: be approaching these issues. But then there are things that

630
00:34:58,800 --> 00:35:01,279
Speaker 1: we observe happening in the market, and so one is

631
00:35:01,320 --> 00:35:05,040
Speaker 1: around sustainable debt. There's been a decrease in the amount

632
00:35:05,080 --> 00:35:08,960
Speaker 1: of investment actually going into sustainable debt, and in particular

633
00:35:09,040 --> 00:35:12,120
Speaker 1: in the US. And my question actually really comes down

634
00:35:12,160 --> 00:35:14,759
Speaker 1: to why do you think that there has been a

635
00:35:14,800 --> 00:35:18,719
Speaker 1: decrease given that the number of green bonds coming out

636
00:35:18,719 --> 00:35:22,640
Speaker 1: there typically are over subscribed, and you would think that

637
00:35:22,640 --> 00:35:25,080
Speaker 1: that would then lead to more supply. These supply and

638
00:35:25,120 --> 00:35:29,080
Speaker 1: demand dynamics seem to hold true across many parts of economics.

639
00:35:29,280 --> 00:35:32,759
Speaker 1: So if they're oversubscribed yet there's less sustainable debt out

640
00:35:32,760 --> 00:35:35,960
Speaker 1: there actually happening right now? Why is that happening in

641
00:35:36,040 --> 00:35:37,640
Speaker 1: let's use the US as the case study.

642
00:35:37,719 --> 00:35:40,000
Speaker 2: Yeah, the US is a very interesting case study because

643
00:35:40,040 --> 00:35:42,719
Speaker 2: they needed a lot of financing for the decarbonization. And

644
00:35:42,760 --> 00:35:45,759
Speaker 2: it's true, sustainable debt issuance has been down as year

645
00:35:45,800 --> 00:35:49,000
Speaker 2: across the board, apart from APEC, which is another good

646
00:35:49,120 --> 00:35:51,799
Speaker 2: story about the trends that are happening across the globe.

647
00:35:51,840 --> 00:35:54,560
Speaker 2: And that's the APACK issues were mostly driven by China.

648
00:35:54,719 --> 00:35:56,680
Speaker 2: The reason why it's happening like that, and in the

649
00:35:56,760 --> 00:36:00,560
Speaker 2: US in particular, let's not forget high interest rate fertility

650
00:36:00,880 --> 00:36:05,959
Speaker 2: bump into the FED rates. This has been making all

651
00:36:06,120 --> 00:36:10,720
Speaker 2: financial markets, all capital markets postponing their issuance too. Later,

652
00:36:11,080 --> 00:36:14,200
Speaker 2: we saw also like okay, sustainable that issues have been

653
00:36:14,239 --> 00:36:16,879
Speaker 2: down in twenty twenty two compared to twenty twenty one,

654
00:36:16,960 --> 00:36:20,560
Speaker 2: But twenty twenty one was a massive record here that

655
00:36:20,840 --> 00:36:23,840
Speaker 2: was actually the outlier. And the reason why twenty twenty

656
00:36:23,880 --> 00:36:26,040
Speaker 2: one was so high is because in twenty twenty, I

657
00:36:26,040 --> 00:36:28,000
Speaker 2: don't know if you remember, there is something that happened.

658
00:36:28,080 --> 00:36:29,120
Speaker 2: It's called the pandemic.

659
00:36:29,200 --> 00:36:32,080
Speaker 1: Yeah, maybe I was around for it, and we tend

660
00:36:32,120 --> 00:36:32,560
Speaker 1: to forget.

661
00:36:32,600 --> 00:36:35,680
Speaker 2: But a lot of issues have postponed their sustainable that

662
00:36:35,719 --> 00:36:38,960
Speaker 2: issues for any issuance from twenty twenty to twenty twenty

663
00:36:39,000 --> 00:36:42,000
Speaker 2: one because we weren't too much uncertainty and therefore twenty

664
00:36:42,000 --> 00:36:45,480
Speaker 2: twenty one was super high. Twenty twenty two massive decrease.

665
00:36:45,960 --> 00:36:49,160
Speaker 2: So these are the main macroeconomic reason. But the other

666
00:36:49,239 --> 00:36:52,000
Speaker 2: reason is that in the US in particular, and the

667
00:36:52,040 --> 00:36:54,760
Speaker 2: reason why I'm not so sure it's gonna go back

668
00:36:54,800 --> 00:36:57,279
Speaker 2: to the twenty twenty levels and the growth that we

669
00:36:57,320 --> 00:37:00,879
Speaker 2: saw in the past, is that anti ESG movement is

670
00:37:01,080 --> 00:37:06,000
Speaker 2: really making companies fearful to be vocal about their commitment

671
00:37:06,200 --> 00:37:09,719
Speaker 2: to the carbonization, to their commitments of the transition, at

672
00:37:09,800 --> 00:37:11,719
Speaker 2: least on my part of the market. I know that

673
00:37:11,800 --> 00:37:14,360
Speaker 2: some of my colleagues covering the power market or power

674
00:37:14,400 --> 00:37:17,440
Speaker 2: sector may have a different vision because and thanks to

675
00:37:17,560 --> 00:37:20,840
Speaker 2: the IRA. But in the sustainable debt market, it's a

676
00:37:20,840 --> 00:37:22,839
Speaker 2: bit more complicated. You don't want to end up on

677
00:37:22,880 --> 00:37:25,600
Speaker 2: this blacklist, you know, like you don't want to be

678
00:37:26,120 --> 00:37:30,520
Speaker 2: scrutinized by investors and other policy maker, So I think

679
00:37:30,520 --> 00:37:34,400
Speaker 2: that's the reason. However, that was an optimistic view that

680
00:37:34,480 --> 00:37:36,680
Speaker 2: I had from the New York summit, and that panel

681
00:37:37,080 --> 00:37:39,719
Speaker 2: people can rewatch if they want on demand. But some

682
00:37:39,800 --> 00:37:43,680
Speaker 2: of the capital market participants at my panels mentioned that

683
00:37:44,000 --> 00:37:48,680
Speaker 2: while they think that labeled debts, so these green social

684
00:37:49,040 --> 00:37:52,920
Speaker 2: sustainability bonds and loans, may decrease in the future in

685
00:37:52,960 --> 00:37:56,040
Speaker 2: the Americas and in the US in particular, they actually

686
00:37:56,160 --> 00:38:00,200
Speaker 2: think that finance will become more sustainable, meaning that or

687
00:38:00,239 --> 00:38:04,359
Speaker 2: any lending decision that is made, any bone that is

688
00:38:04,440 --> 00:38:08,920
Speaker 2: underwritten environmental, social, and governance factor will be embedded in

689
00:38:08,960 --> 00:38:11,520
Speaker 2: the decision making process, and that for me would be

690
00:38:11,560 --> 00:38:13,880
Speaker 2: a win. It means that, yeah, okay, we may not

691
00:38:14,000 --> 00:38:16,160
Speaker 2: have as many green bones in the US as we

692
00:38:16,320 --> 00:38:19,240
Speaker 2: had in the past. So it means that labeled market,

693
00:38:19,440 --> 00:38:21,960
Speaker 2: where you know exactly where your funds are going, it

694
00:38:22,000 --> 00:38:24,360
Speaker 2: may die, it may decrease, it may be only for

695
00:38:24,520 --> 00:38:28,320
Speaker 2: a specific part of the market. However, when any company

696
00:38:28,360 --> 00:38:30,160
Speaker 2: will come to the market and be like, I want

697
00:38:30,200 --> 00:38:32,960
Speaker 2: to raise that. Then on top of looking at its

698
00:38:33,000 --> 00:38:35,200
Speaker 2: cash flow statement, on top of looking up if dead

699
00:38:35,239 --> 00:38:39,920
Speaker 2: to equity ratio, environmental, social and governance factors will be

700
00:38:40,160 --> 00:38:44,040
Speaker 2: enquired and there will be assessed. Okay, what are your

701
00:38:44,239 --> 00:38:47,960
Speaker 2: like wate to water ratio, like how many environmental controversy

702
00:38:48,000 --> 00:38:50,400
Speaker 2: are you into or did you face and how did

703
00:38:50,440 --> 00:38:54,040
Speaker 2: you resolve them? You know, like, then maybe the paradigm

704
00:38:54,080 --> 00:38:57,200
Speaker 2: will change. That's the optimistic vision that I want to

705
00:38:57,520 --> 00:39:01,400
Speaker 2: hold on to, because effectively, the labeled is just like

706
00:39:01,560 --> 00:39:05,160
Speaker 2: signaling debt instrument ensuring that all your pot of money

707
00:39:05,160 --> 00:39:07,520
Speaker 2: are going to something. But we may instead of having

708
00:39:07,560 --> 00:39:10,560
Speaker 2: sustainable finance, we may have finance becoming more sustainable.

709
00:39:10,719 --> 00:39:14,479
Speaker 1: So you essentially are on a personal level very much

710
00:39:14,719 --> 00:39:19,239
Speaker 1: rooting for finance becoming more sustainable, but finding its feet

711
00:39:19,360 --> 00:39:23,320
Speaker 1: in this and trying to read greenwashing from the process,

712
00:39:23,560 --> 00:39:28,480
Speaker 1: create transparency, provide education both to retail investors and to

713
00:39:28,840 --> 00:39:32,000
Speaker 1: the asset management community and to the companies themselves that

714
00:39:32,040 --> 00:39:34,319
Speaker 1: are actually putting out all of these different pieces of

715
00:39:34,360 --> 00:39:38,399
Speaker 1: information regarding their activities. So my question then comes back

716
00:39:38,440 --> 00:39:41,359
Speaker 1: to the role of politics in all of this, And

717
00:39:41,400 --> 00:39:43,880
Speaker 1: you brought this up very early on in the podcast

718
00:39:43,920 --> 00:39:48,000
Speaker 1: around risk. Is risk being considered in these anti ESG

719
00:39:48,400 --> 00:39:51,399
Speaker 1: bills that are going through different states, and the fact

720
00:39:51,400 --> 00:39:55,520
Speaker 1: that the fudiciary duty in some respects actually does involve

721
00:39:55,600 --> 00:39:59,680
Speaker 1: the integration of ESG factors because there are credible risks

722
00:39:59,760 --> 00:40:02,160
Speaker 1: for the future of some of these investments.

723
00:40:02,440 --> 00:40:05,360
Speaker 2: That's a great question. The role of politician is central.

724
00:40:05,640 --> 00:40:09,319
Speaker 2: Like I'm often asked why HESG has grown so much

725
00:40:09,360 --> 00:40:11,279
Speaker 2: in a recent year in Europe, Why have we seen

726
00:40:11,280 --> 00:40:15,600
Speaker 2: all these regulations. I mean, it never boils down to individuals, right,

727
00:40:15,719 --> 00:40:18,600
Speaker 2: but I think there were some very strong signals sent

728
00:40:18,719 --> 00:40:22,280
Speaker 2: by the central bankers in Europe. People like Mark Carney

729
00:40:22,360 --> 00:40:25,160
Speaker 2: at the Bank of England and Christine Lagarde at the

730
00:40:25,360 --> 00:40:29,959
Speaker 2: European Central Bank have made it clear that actually environmental

731
00:40:30,160 --> 00:40:34,919
Speaker 2: risk pose a question and they put economic stability at

732
00:40:35,040 --> 00:40:38,640
Speaker 2: risk and that link was made very early on, and

733
00:40:39,280 --> 00:40:43,960
Speaker 2: effectively that empowered them to then create some policy climate

734
00:40:44,000 --> 00:40:48,080
Speaker 2: regulation at the central bank level. So because here they're

735
00:40:48,120 --> 00:40:52,239
Speaker 2: convinced that environmental risk are real, then there is this

736
00:40:52,440 --> 00:40:55,239
Speaker 2: trickle down effect on the mandate of central banks, and

737
00:40:55,280 --> 00:40:57,200
Speaker 2: then there is a trickle down effect on how much

738
00:40:57,239 --> 00:41:00,319
Speaker 2: they can force the market to take into consideration these risk.

739
00:41:00,600 --> 00:41:03,680
Speaker 2: In other part of the world, in Asia, some central

740
00:41:03,719 --> 00:41:06,480
Speaker 2: bankers are convinced about that. We talked about Brazil, the

741
00:41:06,520 --> 00:41:11,080
Speaker 2: central Bank also has made actions to basically take into

742
00:41:11,080 --> 00:41:14,520
Speaker 2: consideration on environmental risk and climate risk into their mandate.

743
00:41:14,640 --> 00:41:17,760
Speaker 2: In the US, this is still being debated. It's still

744
00:41:17,800 --> 00:41:22,920
Speaker 2: being debated if actually environmental factors are financially material, and

745
00:41:23,000 --> 00:41:26,560
Speaker 2: when you look in between states, even at the proposal

746
00:41:26,640 --> 00:41:30,120
Speaker 2: of that these anti ESG low When you look at Florida,

747
00:41:30,239 --> 00:41:34,080
Speaker 2: Florida cannot say that environmental risk are not real. They

748
00:41:34,080 --> 00:41:37,640
Speaker 2: are facing floods, they are facing extreme weather, and actually,

749
00:41:37,680 --> 00:41:41,239
Speaker 2: in the way the anti ESG bill is written, it

750
00:41:41,280 --> 00:41:45,560
Speaker 2: doesn't prevent a set manager from taking into account financial

751
00:41:46,160 --> 00:41:49,720
Speaker 2: environmental risk because they can't afford to. They have to

752
00:41:49,800 --> 00:41:52,799
Speaker 2: mitigate these risks. However, if you if you look at

753
00:41:52,840 --> 00:41:56,560
Speaker 2: another state like Alaska that proposed an anti ESG bill,

754
00:41:56,800 --> 00:42:01,000
Speaker 2: they consider any factors that is related to greenhouse gas

755
00:42:01,000 --> 00:42:04,400
Speaker 2: emission to be a political or social factor, not a

756
00:42:04,400 --> 00:42:08,160
Speaker 2: pecuniary factor. So there is this discrepancy even in between

757
00:42:08,320 --> 00:42:11,400
Speaker 2: states that are not resolved at the government level, the

758
00:42:11,400 --> 00:42:12,080
Speaker 2: federal level.

759
00:42:12,400 --> 00:42:15,400
Speaker 1: So clearly there's a lot of complexity here and friction

760
00:42:15,560 --> 00:42:20,719
Speaker 1: within the SG space and how states, countries, companies, financial

761
00:42:20,760 --> 00:42:23,520
Speaker 1: services players, investors are all thinking about this. So the

762
00:42:23,600 --> 00:42:26,880
Speaker 1: question is do you think and surely sherely your opinion.

763
00:42:27,200 --> 00:42:29,640
Speaker 1: Do you think that ultimately there's going to be a

764
00:42:29,719 --> 00:42:33,000
Speaker 1: radical rethink in this space and that the future of

765
00:42:33,520 --> 00:42:37,040
Speaker 1: investing in ESG factors is going to look fundamentally different

766
00:42:37,080 --> 00:42:39,400
Speaker 1: in let's say ten years, or are we going to

767
00:42:39,440 --> 00:42:43,480
Speaker 1: continue to hobble along with different tweaks and tension.

768
00:42:43,840 --> 00:42:46,760
Speaker 2: So yes, I think ESG investing is really going to change.

769
00:42:46,800 --> 00:42:48,960
Speaker 2: I think for now it was just adding a layer

770
00:42:49,120 --> 00:42:53,560
Speaker 2: of unvironmental, social, and governance analysis on top of the

771
00:42:53,600 --> 00:42:56,520
Speaker 2: real analysis. But I think the key component will be

772
00:42:56,520 --> 00:42:59,440
Speaker 2: to find what we call the financial materiality, meaning a

773
00:42:59,560 --> 00:43:03,040
Speaker 2: company that has lower climate risk will have a better

774
00:43:03,200 --> 00:43:07,440
Speaker 2: financial performance. And if this doesn't come from free markets,

775
00:43:07,520 --> 00:43:09,920
Speaker 2: which is what the US and Canada and Northern America

776
00:43:10,000 --> 00:43:12,520
Speaker 2: is convinced of, which is like, there's going to be

777
00:43:12,520 --> 00:43:16,840
Speaker 2: a market based incentive, I think different actors will loby

778
00:43:16,920 --> 00:43:20,080
Speaker 2: government to create that incentives. The IRA is a great

779
00:43:20,080 --> 00:43:24,200
Speaker 2: example of a North American way of creating that incentives. Okay,

780
00:43:24,239 --> 00:43:27,759
Speaker 2: we're going to incentivize certain sectors that we think are

781
00:43:27,840 --> 00:43:31,440
Speaker 2: key for the transition, and by incentivizing them through an

782
00:43:31,480 --> 00:43:36,759
Speaker 2: industrial policy development, that's going to trickle down onto the

783
00:43:36,760 --> 00:43:39,680
Speaker 2: financial performance. The other way to do that is to

784
00:43:39,760 --> 00:43:44,120
Speaker 2: have financial regulation or like carbon regulation, finding other ways

785
00:43:44,120 --> 00:43:47,400
Speaker 2: to incentivize, either at the central bank level or the

786
00:43:47,400 --> 00:43:52,360
Speaker 2: carbon level, to incentivize and create a financial materiality to

787
00:43:52,800 --> 00:43:58,040
Speaker 2: a good environmental performance. Saying if you put a price

788
00:43:58,160 --> 00:44:00,560
Speaker 2: on pollution, put a price on carbon, put a price

789
00:44:00,560 --> 00:44:03,560
Speaker 2: on biodiversity loss. If we put a price on these things,

790
00:44:03,680 --> 00:44:07,120
Speaker 2: then companies that are doing better or are doing good

791
00:44:07,200 --> 00:44:10,400
Speaker 2: for the environment will also do better financially. But these

792
00:44:10,480 --> 00:44:13,280
Speaker 2: incentives need to be created from one way or another,

793
00:44:13,360 --> 00:44:14,840
Speaker 2: and that's going to be the main task in the

794
00:44:14,880 --> 00:44:15,480
Speaker 2: coming years.

795
00:44:15,800 --> 00:44:18,040
Speaker 1: Well, maya thank you very much for joining and explaining

796
00:44:18,040 --> 00:44:20,440
Speaker 1: all of this complexity to us. Will certainly have you

797
00:44:20,520 --> 00:44:23,000
Speaker 1: back to actually see the different things that are coming

798
00:44:23,040 --> 00:44:25,279
Speaker 1: to pass and the changes that are impacting the way

799
00:44:25,280 --> 00:44:27,480
Speaker 1: this market functions. Thank you for joining today.

800
00:44:27,600 --> 00:44:34,920
Speaker 2: Thank you so much, Dana.

801
00:44:37,360 --> 00:44:40,400
Speaker 1: Bloomberg n EF is a service provided by Bloomberg Finance

802
00:44:40,520 --> 00:44:44,000
Speaker 1: LP and its affiliates. This recording does not constitute, nor

803
00:44:44,040 --> 00:44:48,239
Speaker 1: should it be construed as investment advice, investment recommendations, or

804
00:44:48,280 --> 00:44:51,800
Speaker 1: a recommendation as to an investment or other strategy. Bloomberg

805
00:44:51,880 --> 00:44:55,200
Speaker 1: n EF should not be considered as information sufficient upon

806
00:44:55,239 --> 00:44:58,839
Speaker 1: which to base an investment decision. Neither Bloomberg Finance LP

807
00:44:59,040 --> 00:45:01,960
Speaker 1: nor any of its affiliate it makes any representation or

808
00:45:02,000 --> 00:45:05,040
Speaker 1: warranty as to the accuracy or completeness of the information

809
00:45:05,120 --> 00:45:08,480
Speaker 1: contained in this recording, and any liability as a result

810
00:45:08,520 --> 00:45:10,520
Speaker 1: of this recording is expressly disclaimed.