Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: This is Bloomberg BusinessWeek with Carol Messer and Tim Steneveek
Speaker 2: on Bloomberg Radio.
Speaker 3: All Right, everybody, well. Our Bloomberg News team reporting that
Speaker 3: the House Judiciary Committee said it's found quote substantial evidence
Speaker 3: of collusion and anti competitive behavior by the financial industry
Speaker 3: to impose radical ESG goals on US companies. An interim
Speaker 3: report published by the Republican Led Committee said quote a
Speaker 3: cartel of financial firms and climate activists soft replace X
Speaker 3: on Mobile board members in twenty twenty one after the
Speaker 3: company declined to make a series of climate pledges.
Speaker 4: Here's what Jonathan Maxwell has to say about this and
Speaker 4: sort of the changing tone of ESG over the last
Speaker 4: few years. He's founder and chief executive officer of FSDCL.
Speaker 4: It's short for Sustainable Development Capital LLP. SDCL has more
Speaker 4: than two billion dollars in assets under management. He's also
Speaker 4: the author of The Edge, How competition for resources is
Speaker 4: pushing the world and its climate to the brink, and
Speaker 4: what we can do about it. Jonathan joins us here
Speaker 4: in the Bloomberg Interactive Brokers studio. Welcome, how are you?
Speaker 2: Thank you so much? For having me.
Speaker 4: I'm great, will you Well, we're going to talk about
Speaker 4: sort of what Competition Resources is doing because it's super interesting.
Speaker 4: But I'm curious about your thoughts on the way that
Speaker 4: ESG has sort of turned into this four letter word
Speaker 4: over the last few years. You see what's happening in
Speaker 4: Texas with the Attorney general there.
Speaker 2: What do you make of it? I mean, the trend's
Speaker 2: been going on since about twenty twenty two. It's actually
Speaker 2: I'll get a whole chapter in my book about greenwash
Speaker 2: and the SG and there was a I mean, this
Speaker 2: was after a very big period of assets being gathered
Speaker 2: in the SG funds, like a huge boom in sustainability SG,
Speaker 2: and then the tide turned. But there is something I mean,
Speaker 2: my company's will Sustainable Development Capitalist DCL, so I'm kind
Speaker 2: of in the business, but there is something there where
Speaker 2: if you're in the business of sacrificing returns on the
Speaker 2: altar of the environment, this is the sort of the
Speaker 2: financial and sort of intellectual side of the story. Then
Speaker 2: you know then that is against the fiduciary duty of
Speaker 2: the fund manager and of the pension scheme manager. And
Speaker 2: you know, I think there's a lot of noise running
Speaker 2: around this sector. But the idea that you should take
Speaker 2: capital from the capital that needs to be invested for
Speaker 2: financial return and sacrifice or compromise the job of investing,
Speaker 2: I think, is a very challenging area. By the way,
Speaker 2: I don't think it's necessary. I don't think not only necessary,
Speaker 2: I don't think it should be done. And I think
Speaker 2: that investors will get sued and companies will get sued
Speaker 2: for doing it. And I think it's when I think.
Speaker 3: As simple as that isn't it?
Speaker 2: It really is? And when I think about sustainable, company
Speaker 2: is called sustainable, but it doesn't they giving money away?
Speaker 2: It says sustainable means for me, commercially sustainable. In fact,
Speaker 2: if it's not commercial, it's not sustainable.
Speaker 3: Didn't we get lost? I keep thinking about this. When
Speaker 3: ESG came out, I think we all thought about was
Speaker 3: about doing good and it really was about environmental sustainability
Speaker 3: and governance issues, right that could financially impact a company.
Speaker 3: And then you have things like impact investing or something
Speaker 3: that's a whole different thing. Right, tell us a little
Speaker 3: bit about how the world is evolving and how we
Speaker 3: look at this, because if we you know, investing to
Speaker 3: do good versus I don't know it help me out
Speaker 3: here to kind of understand where this space goes.
Speaker 2: I think that I'll give you something that's not a
Speaker 2: bit optimistic because we talked about resources and the rest
Speaker 2: of it. So, you know, I think we're currently in
Speaker 2: a very hardline environment, right. What do I mean by that?
Speaker 2: The political headwinds are against it. You've got let's say,
Speaker 2: a pushback against climate or woke capitalism, You've got regulators,
Speaker 2: and you've got local.
Speaker 3: While the world is kind of burning around us.
Speaker 2: Right. Yeah, but I'm just giving you the headwork to
Speaker 2: start with. I'm not going to give you a taelond
Speaker 2: pretty substantial one.
Speaker 1: Sorry.
Speaker 2: Right, but we're also under a serious economic pressure, right,
Speaker 2: you know, and we've got inflation. We were talking just
Speaker 2: before the show started about how inflation is partly driven
Speaker 2: by any prices. So you know, it's a difficult environment
Speaker 2: that we're working in. Okay, So what do we do
Speaker 2: about it? Right? You look at the problem, and here's
Speaker 2: the thing, and this is why I think that this
Speaker 2: is what I focus my investments on. When I look
Speaker 2: at what's wrong with the energy system. One of the
Speaker 2: things that stands out to me, it's the same in
Speaker 2: food and water, is that most of it's wasted. I mean,
Speaker 2: it's very, very very infrequent people actually talk about this.
Speaker 3: Actually we talk about it's a lot about food waste.
Speaker 3: And here you have people who like have no food,
Speaker 3: and then the amount of food waste, and then the
Speaker 3: impact that has in the environment.
Speaker 2: But forgive me go ahead, no, I mean, it's incredibly,
Speaker 2: incredibly important. About half of the world's food is wasted,
Speaker 2: About a third of the world's water is wasted. So
Speaker 2: it wouldn't necessarily surprise you. I said that a roughly
Speaker 2: three quarters of the world's energy gets wasted. You break
Speaker 2: it down extraction, ten percent generation, because it most of
Speaker 2: half of the world's energy gets lost as heat in
Speaker 2: the generation process you put gas or uranium into a
Speaker 2: power How can we're not better with that? Why? Why?
Speaker 2: Because we've built a centralized energy se in America and
Speaker 2: Europe over the last forty to fifty years, we've vented
Speaker 2: heat and then we build what's now old transmission and
Speaker 2: distribution lines and you put it all together, it just
Speaker 2: doesn't make the sense that it did over the last
Speaker 2: fifty sixty years. We also now, and this is the
Speaker 2: exciting part, we also have solutions to this problem. It's astonishing,
Speaker 2: but we actually have solutions to this problem. Part of
Speaker 2: the problem is you generate energy in one place and
Speaker 2: then you use it in another, and then we talk
Speaker 2: about good grid transmission lines and the rest of it.
Speaker 2: What about you could actually generate the energy close to
Speaker 2: where you need it.
Speaker 4: Or because you don't want a power plan next to
Speaker 4: your house, you don't need.
Speaker 3: I'm put a solar panel though, right, tap the earth right.
Speaker 2: So you've got solar panels, You've got ground and assholes heat,
Speaker 2: you've got heat capture, you've got underground energy plant. You
Speaker 2: actually you say you don't want one, You've got one
Speaker 2: under this building, you know, So the geothermal I'm talking
Speaker 2: about cogeneration. Actually, so you know, the first asset that
Speaker 2: Michael Bloomberg put in your new office when you opened
Speaker 2: it in London was a co generation system because he
Speaker 2: knows that you combined electrical thermal efficiency standards means you
Speaker 2: can operate buildings much more efficiently if you generate the
Speaker 2: energy where you need it. So the short answer is
Speaker 2: the world's biggest problem is that most of it's wasted.
Speaker 2: The world's biggest solution to climate change to economic performance
Speaker 2: and competitiveness. And the cheapest is by decentralizing the energy network,
Speaker 2: bring the energy generation to the point of views. And
Speaker 2: the other thing that Michael Bloomberg did for Bloomberg was
Speaker 2: actually change the infrastructure inside the buildings so it doesn't waste.
Speaker 2: Until about thirty percent of America's buildings leak energy out
Speaker 2: of the windows through lighting, heating ventilation. Change the lights,
Speaker 2: change the heating, ventilation, air conditioning, and it transforms the
Speaker 2: energy system. So to come back to the ESG. Yeah,
Speaker 2: ESG is well meaning. Impact investment is well meaning. But
Speaker 2: what if you can start to make investments that are
Speaker 2: not only more competitive, cheaper, cleaner, more reliable, but actually
Speaker 2: drive the economy. And that is what we fine.
Speaker 4: Isn't it from a building perspective, isn't it more expensive
Speaker 4: to do those things?
Speaker 2: No? I give you very very quick example. The classic
Speaker 2: one is taking led lights, and it sounds a bit
Speaker 2: like everybody's done it. They haven't take a sixty What
Speaker 2: lamp you replace it with a six? What lamp? You
Speaker 2: can do the math? It's ninety percent less energy to
Speaker 2: do the same job, even if the light bulb costs
Speaker 2: you two or three times more money, and the bobs
Speaker 2: don't get hurt, the bubbles don't get hot, and therefore
Speaker 2: you don't need the cooling to cool the room down. Again,
Speaker 2: the payback periods two or three years. So the cost
Speaker 2: is what am I paying for what period of Jonathan?
Speaker 3: Why does it not happen.
Speaker 2: Quicker? So I write a lot about this subject that
Speaker 2: I wrote a book about it. I'd write a sub stack.
Speaker 3: The establishment doesn't want it to go fast.
Speaker 2: It's my answer to the question is it's actually the
Speaker 2: perfect problem. What I mean by that, and the energy
Speaker 2: system is a fill of brilliant companies. Everybody in the
Speaker 2: supply chain is brilliant at what they do. You have
Speaker 2: an extraction firm, they do a great job. They vent
Speaker 2: gas and flare it. It gets complained about, but it's
Speaker 2: economically they figure it's the best thing that they can do.
Speaker 2: You build a power plant, a newcore, a gas power plant.
Speaker 2: They're operating as economically efficiently as they could and should do. Right.
Speaker 2: But you have a transmission distribution line. It's economically it's
Speaker 2: perfected to its particularly the distribution line.
Speaker 3: People don't want it to go away.
Speaker 2: But you put it all together as a system and
Speaker 2: it doesn't make any sense at all. So each component
Speaker 2: of the supply chain for value chain for energy is
Speaker 2: This is why I call it the perfect problem, perfected
Speaker 2: for its shareholders. But you knit it together and it
Speaker 2: doesn't make any system sense. And that's why decentralizing energy,
Speaker 2: bringing it to the point of view is a fundamental
Speaker 2: different approach to making energy.
Speaker 4: As we've learned here in the US with the problems
Speaker 4: that the Texas power grid faced a couple of years ago.
Speaker 4: We're on an aging infrastructure here and it's sort of
Speaker 4: this patchwork where things are different in each state and
Speaker 4: when you cross state lines things change. How do you
Speaker 4: make it work in a place like the US?
Speaker 2: So I have We've invested well over a billion dollars
Speaker 2: here in the US. I'm excited. Donald Trump says, if
Speaker 2: you invest in more than a billion dollars in the US,
Speaker 2: so you can have all sorts of good things. And
Speaker 2: I'm looking forward to that.
Speaker 4: We till January twenty that but.
Speaker 2: To our billion dollars has gone into exactly this. Right.
Speaker 2: So we built, we own a very large energy system
Speaker 2: in upstate New York in Rochester. When it gets very cold,
Speaker 2: and it will over the next couple of months the
Speaker 2: grid struggles to provide energy. We don't because we generate
Speaker 2: the energy on site for our customers. So you know,
Speaker 2: state by state we build resilient on site energy generation solutions.
Speaker 2: We own it through a public company that we manage.
Speaker 2: In London, we have other systems here that do rooftop
Speaker 2: solar nationwide. We own a company called Onyx which does
Speaker 2: nationwide solar and storage. Again, resilient on site clean power
Speaker 2: that's cheaper than the grid.
Speaker 3: So I mean again the big step of how we
Speaker 3: get there, Because I always talk about the establishment, the
Speaker 3: old systems that are in place. It's really hard to
Speaker 3: break them up. And there's also a lot of money
Speaker 3: involved that people will lose if those are broken up.
Speaker 3: So how do we get there? Is a government policy
Speaker 3: that incens people once again, our companies or how can
Speaker 3: we get there?
Speaker 2: It does?
Speaker 3: It just evolve?
Speaker 2: I think, I think I think this is an evolution
Speaker 2: rather than a revolution. It sounds a bit trite, but
Speaker 2: it's because the systems that we build, for example, that
Speaker 2: are on site are of benefit to the utility. I'll
Speaker 2: give you a great example something we were talking about
Speaker 2: earlier as well. Take data centers, data centers are a
Speaker 2: tremendous user of energy all day, all night, in all year,
Speaker 2: hundreds of metal arts of power demand. Where do you
Speaker 2: get it from? You normally get it from the grid,
Speaker 2: but the grid struggles to provide the power that you
Speaker 2: need for new data centers. So we have a business
Speaker 2: which focuses on building power for data centers, but it's
Speaker 2: also providing services to the grid. So you know, we
Speaker 2: have that we're providing a solution to both the local
Speaker 2: grid so that we can provide firm grid capacity and
Speaker 2: picking up the juice requirements.
Speaker 4: From the data has that power being generated for So we.
Speaker 2: Generate power twenty four to seven using natural gas cogeneration,
Speaker 2: but we into great renewables and storage to make sure
Speaker 2: that we can get the lowest carbon footprint, the highest
Speaker 2: level of reliability in the lowest cost.
Speaker 3: You know, I do wonder in terms of oil and renewables.
Speaker 3: We just got twenty seconds renewable. I mean, do we
Speaker 3: continue to move towards renewables?
Speaker 2: Yeah, you know, but again why build them in the
Speaker 2: middle of nowhere when you can build them on site?
Speaker 2: Do both at least, you know, and I think this
Speaker 2: is the point I make. Let's be efficient at the same.
Speaker 3: Time, like near shoring and unshoring for everything.
Speaker 2: Like in our backyard. Right, you have the Department of
Speaker 2: Government Efficiency of the US. If it looked at how
Speaker 2: much energy is wasted. Do you know how much the
Speaker 2: cost of energy is in the America four and a
Speaker 2: half trillion dollars. Two thirds of that's wasted. You could
Speaker 2: save two trillion dollars a year. That's what Elin Josh.
Speaker 3: Maxwell Venetta time come back soon though. We want to
Speaker 3: continue this, this is Bloomberg. We want to talk about
Speaker 3: the global perfume market. Size was valued around forty billion
Speaker 3: in twenty twenty two, projected to reach more than sixty
Speaker 3: four billion by twenty thirty and the market is expected
Speaker 3: to grow at a significant rate due to the growing
Speaker 3: demand for chemical free perfumes, which is kind of interesting.
Speaker 3: We're so curious what our next guest has to say.
Speaker 3: This is from Zion Market Research. She knows a lot
Speaker 3: about the fragrance world. Great to have back with us,
Speaker 3: Linda Levy, she's president of the Fragrance Foundation. Here in
Speaker 3: our Bloomberg Interactive Broke studio. Happy holidays, how are you.
Speaker 1: I'm good, Carol and Tim. It is great to be
Speaker 1: back with you.
Speaker 3: Aw So tell us about your world and what is.
Speaker 1: My world really smells good these days?
Speaker 2: Let me tell you.
Speaker 1: Since I saw you last, yeah, something has significant. A
Speaker 1: few things significantly changed, and that's why I asked about
Speaker 1: your son. One of the biggest things. And we are
Speaker 1: having terrific growth. We think in the US it's going
Speaker 1: to be about We predicted about nine and a half million,
Speaker 1: and according to whoever you read, Black Friday was up
Speaker 1: about eleven percent, Cyber Monday was up seven. But in
Speaker 1: the world, and I have retail in my background, it
Speaker 1: could just be a shift. You don't know till it's
Speaker 1: all over, so we shall see. But we're very optimistic.
Speaker 1: The reason I brought up your son is that the
Speaker 1: biggest change is young people have joined the fragrance consumer population.
Speaker 1: But it's two different types. The young girls who are
Speaker 1: dragging their parents into Sephora and otherwise are very interested
Speaker 1: in body miss or hair miss brands that did not
Speaker 1: even exist, possibly to the extent they do now when
Speaker 1: I saw you last, Solda Gennaro, there's an endurable one
Speaker 1: love check fancy ness. New York is doing it their
Speaker 1: body sprays. Most of these are less than fifty dollars.
Speaker 1: So they're coming in with a lighter version of Fragrances
Speaker 1: new format and they're very attracted to it as well
Speaker 1: as hair miss for the girls. For the guys, I
Speaker 1: am not exaggerating. At about twelve years old, the teenagers
Speaker 1: and so on, they have joined Fragrance users. They however,
Speaker 1: have a different approach. They want the brands that have
Speaker 1: the real designer names, so from Chanelle door Armani, Ralph
Speaker 1: Lauren tom Ford. They're really status seeking. So these young
Speaker 1: people joining very big change. And the other thing I
Speaker 1: was thinking about sharing with you is it used to
Speaker 1: be everyone had a signature fragrance, fragrance that you're aunt,
Speaker 1: your grandmother or your father or whomever really was identified.
Speaker 3: My mom had a signature of fragrance.
Speaker 1: Do you remember what it is?
Speaker 3: Yeah, it was ESD Latter and it was you Do.
Speaker 1: Okay one, No, that's a classic.
Speaker 3: It is a classic. And I actually have a bottle
Speaker 3: of it that my daughter bought me before.
Speaker 1: Yeah, okay, that one's true to my heart, and that's
Speaker 1: a great example. Youth Do, in fact, invented by the
Speaker 1: Estay Latter. Yeah, started out as an oil and became
Speaker 1: a fragrance and estay laughter herself was revolutionary, so we're
Speaker 1: perhaps your mother or grandmother wore that. They now instead
Speaker 1: of one signature, have collections. So this is another big
Speaker 1: change that's fueling. So for a different occasion, you wear
Speaker 1: a different outfit. If you're going into Bloomberg's studio or
Speaker 1: you're going out to a nightclub. You want a different mood,
Speaker 1: a different feeling. So we do still call it the
Speaker 1: invisible accessory. No fashionista is you know their outfit is
Speaker 1: not complete without it. But the difference from one signature
Speaker 1: to a collecttion has really changed things up.
Speaker 3: I have to tell you. I think about listen, I'm
Speaker 3: a net case with hand cream and like I'll put
Speaker 3: this on, and people are like, what's your fragrance? But
Speaker 3: it's amazing the importance and value of fragrance in so
Speaker 3: many different products, like something like a hand cream.
Speaker 1: No, but hand cream, shampoo, deodorant, so many lotions, oils.
Speaker 1: Is Another thing is a lot of different formats are
Speaker 1: out just like you're saying, the smell of that on
Speaker 1: your hands is your signature perhaps today, Carol.
Speaker 2: Yeah.
Speaker 4: One thing one thing that I did want to ask
Speaker 4: you about is we're seeing increased reports about concerns over
Speaker 4: ingredients in certain fragrances. I saw recently in the Washington
Speaker 4: Posts a piece by a doctor who talked about thalates
Speaker 4: that are found in popular perfumes, nail polishes, hair care products.
Speaker 4: They've been linked to some adverse health outcomes, insulin resistance,
Speaker 4: cardiovascular disease, impaired neurow development. How is that taking shape
Speaker 4: in the industry right now?
Speaker 1: I would say the ingredients are heavily regulated, and anytime
Speaker 1: something is identified as medically unsound, it goes off the market.
Speaker 1: That's why sometimes it is not known when it was
Speaker 1: originally formulated and when it's identified. I think the industry
Speaker 1: is extremely dedicated to keeping the consumers very healthy and
Speaker 1: feeling okay. That also connects to some people think naturals
Speaker 1: are better than synthetics, but think about poison ivy if
Speaker 1: I may, naturals are not necessarily more safe, and in
Speaker 1: fact the fragrance that most fragrances from the days of
Speaker 1: Chanel number five were created with synthetics. So I do
Speaker 1: think it is safe out there, and there are a
Speaker 1: lot of different ways that people talk about ingredients, but
Speaker 1: I don't think the US consumers should have a concern.
Speaker 3: You know, I was using a wash it was like
Speaker 3: for handwashing different things, and it was supposed to be
Speaker 3: natural ingredients, and they did a major recall because they
Speaker 3: had problems because of some of the natural ingredients maybe
Speaker 3: don't have the same kind of keeping out dangerous things. Yeah.
Speaker 3: I won't even say what it was, but it's a
Speaker 3: many major it was like and it was like fabric
Speaker 3: spray and so on and things like that. It wasn't carrecs.
Speaker 3: They got me called to you know, you mentioned st.
Speaker 3: Latter and I think about you know, brands and companies,
Speaker 3: iconic brand. They're going through some difficulties and fragrance was
Speaker 3: such a big part of their world. When you look
Speaker 3: at companies, there's so many upstarts, new companies. What do
Speaker 3: you I don't know, tell us about the industry and
Speaker 3: where it goes. And the companies you've been watching are
Speaker 3: thinking about a lot.
Speaker 1: Certainly, Estay Latter is very close to my heart because
Speaker 1: I was there for ten years. The family. I would say,
Speaker 1: the changes there are going through have affected others and
Speaker 1: most of them have right sided themselves by now. So
Speaker 1: before the pandemic, there was a great opportunity there was
Speaker 1: great new territory to sell fragrance and that was in Asia,
Speaker 1: so between China and what goes on with the United States,
Speaker 1: and it was the next place to go in the
Speaker 1: Asian populations. For centuries, fragrance was not a big piece
Speaker 1: and that was really changing. So for a lot of
Speaker 1: companies the beauty business, skincare, etc. Have been affected by Asia.
Speaker 1: The big companies that are really doing fragrance continue to
Speaker 1: be stay Lauder besides Esta, Lauter and Clinic which has Happy,
Speaker 1: they do own tom Ford and they do sell a
Speaker 1: labo Frederick Mall, etc. Prestige is doing well. Loreal is
Speaker 1: really killing it these days. They have reinvigorated brands like
Speaker 1: Valentino and Prada, so they are going strong. LVMH. I
Speaker 1: need not tell you mister Arnold is very aggressive about
Speaker 1: his president cover story.
Speaker 2: Yeah.
Speaker 1: Well, we love him and what we really know is
Speaker 1: he believes in brand identity, quality and he is big
Speaker 1: in the luxury space.
Speaker 3: Do you have a favorite fragrance or can I not
Speaker 3: even ask you five seconds?
Speaker 1: Okay, I have at least found the garline is really
Speaker 1: one of my faves. The Esday Lord of tom Ford
Speaker 1: is absolutely my favor Prada Valentino from Laurel, I've got
Speaker 1: a Carol. I have a very big collection.
Speaker 3: Linda Levy of the Fragrance Foundation, she is president. Thank
Speaker 3: you so much, Happy holidays.
Speaker 1: Happy holidays to you too,