WEBVTT - EU Dials Down Green Finance Rules as US Wages ESG War 0:00:00.160 --> 0:00:02.480 This is Tom Rowland's Reese and you're listening to Switched 0:00:02.520 --> 0:00:05.000 on the podcast brought to you by BNF, and today 0:00:05.000 --> 0:00:08.119 we're here to talk about sustainable finance policy. Having spent 0:00:08.240 --> 0:00:11.000 years in development. In February of this year, the European 0:00:11.080 --> 0:00:14.040 Union took an act to its sustainable reporting regulations, in 0:00:14.080 --> 0:00:17.599 the process limiting investors access to climate data and potentially 0:00:17.600 --> 0:00:20.560 limiting their ability to push capital towards the energy transition. 0:00:20.960 --> 0:00:24.400 Widely considered the leader for sustainable finance policy, the watering 0:00:24.440 --> 0:00:26.920 down of these key regulations has thrown the EU's position 0:00:27.000 --> 0:00:29.320 into question. Part of the pressure behind the shift has 0:00:29.320 --> 0:00:33.040 been concerned over competitiveness, exacerbated by the new Trump administration 0:00:33.080 --> 0:00:35.280 in the United States, which has continued to take aim 0:00:35.320 --> 0:00:38.360 at climate regulations. But as Europe stumbles, could a new 0:00:38.400 --> 0:00:40.560 leader be found in the form of the Asia Pacific Region, 0:00:40.600 --> 0:00:43.199 which during the second half of twenty twenty four introduced 0:00:43.200 --> 0:00:47.560 twenty one new sustainable finance policies. To discuss this and more, today, 0:00:47.600 --> 0:00:50.440 am joined by b and EF sustainable finance analysts Maya 0:00:50.479 --> 0:00:54.000 Messenger and Jamison McLennan, who share findings from their recently 0:00:54.040 --> 0:00:57.800 released research notes titled EU weaken sustainable leadership with rule 0:00:57.880 --> 0:01:01.880 rollback and Sustainable Finance Marketing Outlook one twenty twenty five, 0:01:01.960 --> 0:01:04.040 which B and EF clients can find. BNF go on 0:01:04.040 --> 0:01:06.800 the Bloomberg terminal or on BNF dot com. All right, 0:01:06.920 --> 0:01:18.120 let's get to talking about sustainable finance policy. 0:01:19.760 --> 0:01:22.160 Welcome to the podcast, Meyer, thank you, thank you Don 0:01:22.240 --> 0:01:22.760 for having. 0:01:22.640 --> 0:01:24.520 Me, and welcome Jameson. 0:01:24.720 --> 0:01:26.039 Yeah, thanks great to be here. 0:01:26.560 --> 0:01:29.640 When we last spoke about sustainable finance policy on the 0:01:29.760 --> 0:01:32.760 Switched On podcast, Europe was leading the way. Can you 0:01:33.120 --> 0:01:36.200 remind everyone why we were saying that and whether the 0:01:36.200 --> 0:01:41.040 policies and frameworks that were behind that are still on course. 0:01:41.120 --> 0:01:46.559 So that you has three significant sustainable of finance reporting policies. 0:01:47.000 --> 0:01:51.240 The Corporate Sustainability Reporting Directive, which requires companies to report 0:01:51.280 --> 0:01:55.800 at a range of environmental social sustainability metrics, The Corporate 0:01:55.800 --> 0:01:59.520 Sustainability Due Diligence Directive, which requires companies to report on 0:01:59.640 --> 0:02:04.000 the sustainability impacts of their value chain. And the EU Taxonomy, 0:02:04.040 --> 0:02:08.120 which works as effectively a classification systems for which economic 0:02:08.120 --> 0:02:10.600 activities are considered green within the European Union. 0:02:11.000 --> 0:02:13.320 So how often do they have to report this and 0:02:13.360 --> 0:02:14.799 who do they have to report it to. 0:02:15.240 --> 0:02:19.880 So the reporting timelines vary between the regulations, but they're 0:02:20.000 --> 0:02:24.720 typically reporting to each of the specific governments within the 0:02:24.720 --> 0:02:28.200 European Union that have transposed these regulations into their national law. 0:02:28.600 --> 0:02:33.800 These three sort of significant sustainability reporting regulations have been 0:02:34.240 --> 0:02:37.280 weakened over the past couple months. So in February February 0:02:37.320 --> 0:02:40.480 twenty six, twenty twenty five, the European Union passed their 0:02:40.480 --> 0:02:45.280 Sustainability onminnion bus which effectively work to limit the scope 0:02:45.280 --> 0:02:49.440 of some of this reporting regulation by reducing the number 0:02:49.480 --> 0:02:52.200 of companies that are required to report. For example, under 0:02:52.240 --> 0:02:55.560 the CSRD, under the original draft, any company with more 0:02:55.560 --> 0:02:57.960 than two hundred and fifty employees within the European Union 0:02:58.000 --> 0:03:00.960 would have to report on a range of sustain nobility metrics. 0:03:01.040 --> 0:03:04.600 They've now bumped up that requirement so companies with more 0:03:04.639 --> 0:03:07.040 than a thousand employees only have to report, So they've 0:03:07.040 --> 0:03:08.880 limited that scope by around eighty percent. 0:03:09.360 --> 0:03:12.480 There's just a couple of kind of clarification questions I 0:03:12.560 --> 0:03:14.519 have on all of this, because so from what I understand, 0:03:14.560 --> 0:03:16.440 the way it works is the EU has a directive 0:03:16.560 --> 0:03:20.200 and then national governments transposed that directive into their own laws. 0:03:20.480 --> 0:03:23.520 Is there anything to stop national governments from saying, actually, 0:03:23.639 --> 0:03:26.160 we like these rules the way that they were or 0:03:26.200 --> 0:03:28.520 does this change in the directive require them all to 0:03:28.600 --> 0:03:30.519 scale back their requirements? 0:03:30.919 --> 0:03:33.760 It requires them all to scale back their requirements. The 0:03:33.880 --> 0:03:37.440 European Commission has gone in and edited the specific directives 0:03:37.440 --> 0:03:39.680 for the CSOD and the cs Triple D, and so 0:03:40.160 --> 0:03:43.280 member states will have to go back and retranspose the 0:03:43.560 --> 0:03:44.240 new regulation. 0:03:44.440 --> 0:03:47.800 So it's not just it's no longer pushing national governments 0:03:47.840 --> 0:03:50.800 to put in place a law, it's actually preventing them 0:03:50.800 --> 0:03:52.480 from doing so if they wanted to. 0:03:53.160 --> 0:03:56.040 The utexonomy also is a regulation, so it's going to 0:03:56.040 --> 0:03:59.280 be like implemented and supervised at the European level. The 0:03:59.280 --> 0:04:01.840 two others are there, but I think they can still 0:04:01.960 --> 0:04:05.200 like amend. There is a scale back, so it means 0:04:05.240 --> 0:04:08.840 that when a directive is then implemented at national level, 0:04:09.120 --> 0:04:14.160 members that have some flexibility with regards to the implementation. 0:04:14.400 --> 0:04:17.040 But indeed they could strengthen the scope. I don't think 0:04:17.080 --> 0:04:18.760 we're going to see it because a lot of this 0:04:18.839 --> 0:04:21.479 has happened because of a push from member states to 0:04:21.640 --> 0:04:26.720 basically scale back on these directives and regulations. So I 0:04:26.720 --> 0:04:27.800 don't think we're going to say so. 0:04:27.839 --> 0:04:30.200 My question is kind of moot in a way that 0:04:30.240 --> 0:04:32.880 there isn't a government that wants to go further than 0:04:32.960 --> 0:04:34.039 the eregulations. 0:04:34.080 --> 0:04:37.239 I mean, to our knowledge, not really. Actually, just today 0:04:37.760 --> 0:04:42.080 Member states have agreed to stop the clock rule on 0:04:42.160 --> 0:04:45.400 the omnibus, So it means that basically one of the 0:04:45.480 --> 0:04:49.880 amendments on these directives was to delay their implementation for 0:04:50.000 --> 0:04:52.120 the ces or the end of cs repody in particular, 0:04:52.240 --> 0:04:54.359 and members they have just voted on that. So it 0:04:54.480 --> 0:04:57.599 feels that there is still a consensus around this topic. 0:04:57.640 --> 0:05:00.600 There is not like a one key country that is 0:05:00.640 --> 0:05:06.440 being particularly like vocal about not scaling back these policy 0:05:06.720 --> 0:05:08.960 and let's just be clear also about something is that 0:05:09.040 --> 0:05:12.360 the CSRD, the CES reply and the U Taxonomy had 0:05:12.480 --> 0:05:16.480 been passed, and the CSRD and the U Taxonomy they 0:05:16.480 --> 0:05:20.880 were already reporting happening against them. It's been two years. 0:05:21.000 --> 0:05:23.480 That two years, yeah, two years for the taxonomy, and 0:05:23.720 --> 0:05:26.440 this year is the first reporting. The reporting has been 0:05:26.520 --> 0:05:28.880 phased in depending on the size of the company, so 0:05:28.920 --> 0:05:33.159 the biggest companies have started reporting against the CSRD from 0:05:33.200 --> 0:05:36.040 this year onwards. That being said, while it may change 0:05:36.040 --> 0:05:38.480 for the taxonomy, most of the company that have started 0:05:38.560 --> 0:05:41.120 reporting this year on the CSRD will have to report 0:05:41.120 --> 0:05:43.120 in the future, but it might be a question of 0:05:43.360 --> 0:05:45.440 they might have to report on less indicators. 0:05:45.920 --> 0:05:48.120 So I mean this kind of leads to the next question. 0:05:48.920 --> 0:05:51.040 You know, as you say that, like, the EU was 0:05:51.080 --> 0:05:53.800 one place two years ago and two years later it's 0:05:54.200 --> 0:05:57.040 changed tack and it seems to be a fairly universal 0:05:57.560 --> 0:06:01.120 feeling around it. So what led to this rollback? 0:06:01.320 --> 0:06:05.240 There have been criticisms around sustainable finance regulatory agenda in 0:06:05.279 --> 0:06:09.600 the you being overly burdensome, So that was coming from companies, 0:06:09.760 --> 0:06:14.320 certain companies, but there also has been an important report 0:06:14.600 --> 0:06:17.080 in the in the EU, which is the More Dog 0:06:17.240 --> 0:06:20.760 Drugs Report on competitiveness of companies how to bring back 0:06:20.760 --> 0:06:23.800 competitiveness from companies in the EU, and one of his 0:06:24.080 --> 0:06:28.840 key advice to European regulators was to scale down the 0:06:28.839 --> 0:06:34.240 sustainable finance regulatory agenda. In particular, these regulations were targeting 0:06:34.440 --> 0:06:38.280 for the first time small and medium enterprises, so SMEs 0:06:38.400 --> 0:06:43.000 there were also having a big extra territorial impact, so 0:06:43.040 --> 0:06:46.080 a lot of like non EU companies that were trading 0:06:46.080 --> 0:06:49.320 in the EU or having some operations in you were 0:06:49.360 --> 0:06:53.320 falling in scope for it. So this has all shifted 0:06:53.440 --> 0:06:57.680 the you to rethink this rollback, and it feels like 0:06:57.880 --> 0:07:00.240 it feels like there is a rollback on sustainable both 0:07:00.240 --> 0:07:03.560 finance policy because also this compliance was I always make 0:07:03.640 --> 0:07:05.920 this joke, but it's also a geeky one, but it's 0:07:05.960 --> 0:07:09.440 always like really everything everywhere or at once, because they 0:07:09.440 --> 0:07:13.000 were targeting everyone at the same time, some policies were 0:07:13.080 --> 0:07:15.920 coming into places that were not really finished, which is 0:07:15.920 --> 0:07:19.640 the case of the CSRD. The taxonomy also has been messy, 0:07:19.720 --> 0:07:22.760 so I think it was it was quite expensive for 0:07:22.840 --> 0:07:26.040 companies to implement it, but it's also it feels like 0:07:26.080 --> 0:07:30.200 a shifting strategy. So the same day that the EU 0:07:30.280 --> 0:07:35.400 has published this omnibus regulation, its proposal to scale back everything, 0:07:35.600 --> 0:07:39.760 they've also published a Clean Industrial Deal, which basically brings 0:07:39.800 --> 0:07:44.720 more subsidies to the energy transition, reassert greenhouse gas emission reduction, 0:07:45.280 --> 0:07:47.120 stuff like that. So it feels like it's almost they 0:07:47.200 --> 0:07:51.960 moved away from a stick regulation to introduce carrot regulations 0:07:52.160 --> 0:07:56.360 and move away from reporting compliance to basically creating real 0:07:56.400 --> 0:08:00.760 economy incentives. So it's almost like a change in philosophical approach, 0:08:00.960 --> 0:08:02.000 like political approach. 0:08:02.280 --> 0:08:05.360 Yeah, I mean you could also term it as a 0:08:05.560 --> 0:08:10.280 change from private sector led transition to public sector led transition. 0:08:10.440 --> 0:08:10.680 True. 0:08:10.880 --> 0:08:13.000 I'd also just add that this is all happening in 0:08:13.040 --> 0:08:17.840 the context of the pushback against sustainability reporting in the 0:08:17.960 --> 0:08:20.720 US as well. And so we've seen the Securities and 0:08:20.760 --> 0:08:24.760 Exchange Commissions sustainability of reporting regulation get rolled back. You've 0:08:24.760 --> 0:08:28.200 seen the Trump administration take a pretty aggressive stance actually 0:08:28.240 --> 0:08:32.400 against CSRD and cs triple D, and so this this 0:08:32.480 --> 0:08:36.000 rollback is kind of happening in context of that as well. 0:08:36.559 --> 0:08:40.040 And it also brings into a question about European companies 0:08:40.160 --> 0:08:43.000 competing against maybe American companies that aren't held to the 0:08:43.040 --> 0:08:44.480 same reporting standard as well. 0:08:44.679 --> 0:08:46.160 I mean, I mean, this was kind of going to 0:08:46.160 --> 0:08:48.880 be my next question, and you've kind of already answered 0:08:48.880 --> 0:08:50.880 it to some extent. But apart from it, you know, 0:08:50.920 --> 0:08:52.760 the sort of the optics of it. The US has 0:08:52.800 --> 0:08:55.240 a new administration, it's a lot less friendly towards things 0:08:55.280 --> 0:08:57.719 we would broadly term ESG. You kind of mentioned what 0:08:57.840 --> 0:09:01.400 sound like they actually have leverage on what the EU does. 0:09:02.360 --> 0:09:05.000 What can you just explain a little bit more what 0:09:05.040 --> 0:09:05.680 you mean there. 0:09:06.000 --> 0:09:09.000 I don't know if it's specifically leverage, but more a 0:09:09.840 --> 0:09:14.760 relative competitive advantage potentially if the American companies aren't required 0:09:14.800 --> 0:09:18.720 to report this range of sustainability metrics, whereas European companies 0:09:18.760 --> 0:09:21.800 maybe are, and so European companies may be undercut by 0:09:22.040 --> 0:09:23.959 by businesses not just in the US as well. I 0:09:23.960 --> 0:09:26.800 think that's part of goes back to the original competitiveness 0:09:26.840 --> 0:09:29.400 concerns that stems from the DRAG Report. 0:09:29.679 --> 0:09:32.840 A question I have around this competitiveness concern is because 0:09:33.400 --> 0:09:36.480 you know, we hear it BNF, we look at the 0:09:36.559 --> 0:09:39.240 energy transition and in most areas we say it's a 0:09:39.240 --> 0:09:42.360 competitive advantage to be more sustainable in various ways, you know, 0:09:42.440 --> 0:09:44.920 in mitigating risk for the future. Is it that that 0:09:45.120 --> 0:09:47.800 is just simply wrong at this moment in time or 0:09:47.920 --> 0:09:51.960 is it literally the regulatory burden that was on these 0:09:51.960 --> 0:09:54.640 companies was the issue, Like just the amount they had 0:09:54.679 --> 0:09:57.840 to invest in doing the paperwork, Like what is the 0:09:57.920 --> 0:10:01.560 thinking behind it being less competitive having this requirement on you? 0:10:01.720 --> 0:10:05.160 Yeah, so we definitely it's definitely more of a regulatory 0:10:05.200 --> 0:10:09.440 burden rather than sustainability being uncompetitive. In some cases, these 0:10:09.440 --> 0:10:12.720 companies under the CSRD would be required to report over 0:10:12.720 --> 0:10:16.400 one thousand data points, which for smaller medium enterprise can 0:10:16.440 --> 0:10:20.600 be incredibly overwhelming. And our view on the Sustainable Finance 0:10:20.640 --> 0:10:23.679 team at PNF is that rather than potentially limiting the 0:10:23.720 --> 0:10:26.800 scope of companies that are required to report under these regulations, 0:10:26.920 --> 0:10:29.840 which is what has happened, the change in regulations could 0:10:29.840 --> 0:10:32.679 have focused on limiting the number of metrics that are 0:10:32.720 --> 0:10:35.920 required to report to just the key ones that investors. 0:10:35.480 --> 0:10:37.679 Are much so it is like maybe over complex. 0:10:38.160 --> 0:10:41.600 Yeah, yes, and I think like the backlash we're seeing 0:10:41.960 --> 0:10:45.440 this regulatory push and everything. I completely agree with everything 0:10:45.559 --> 0:10:47.760 Jameson is saying. But on top of this, and I 0:10:47.760 --> 0:10:50.080 think we agree with Jameson on that is like there 0:10:50.160 --> 0:10:53.600 is going to be, in any case, a heightened urge 0:10:53.920 --> 0:10:58.120 from companies to prove that the sustainability choices that they 0:10:58.160 --> 0:11:02.439 make companies and financial institutions are being financially profitable, that 0:11:02.520 --> 0:11:06.280 they are being made for the competitiveness of the business. 0:11:06.320 --> 0:11:08.520 And in particular in the US, I think there's going 0:11:08.600 --> 0:11:11.160 to be more and more of an urge to prove 0:11:11.200 --> 0:11:17.439 that sustainability is actually the good financial decision for companies. 0:11:17.559 --> 0:11:20.880 And that's probably also why we're seeing this situation where 0:11:20.920 --> 0:11:23.720 the US saying, Okay, you know what, we're moving away 0:11:23.720 --> 0:11:27.680 from reporting, and we were talking to corporations that hired 0:11:27.920 --> 0:11:33.040 or now use dozens and dozens of people just to 0:11:33.080 --> 0:11:35.960 do a CSRD report, for instance, and to say, Okay, 0:11:36.160 --> 0:11:39.480 maybe this is money that could go to actually investing 0:11:39.520 --> 0:11:42.320 in the energy transition or developing the technology we need 0:11:42.320 --> 0:11:44.320 for it. And so I think that's why we're seeing 0:11:44.320 --> 0:11:47.080 this shift on the U side. On the US side, 0:11:47.120 --> 0:11:48.960 there is still a lot to be discussed. We're probably 0:11:48.960 --> 0:11:51.040 not the best ones to answer the question around like 0:11:51.200 --> 0:11:54.640 subsidies to clean energy and the rest of these technologies. 0:11:54.640 --> 0:11:57.520 But on the sustainable finance front, I think also one 0:11:57.520 --> 0:12:00.840 of the things is that this necessity to prove profitability 0:12:00.880 --> 0:12:04.520 and competitiveness is going to become extremely serious in the 0:12:04.559 --> 0:12:05.200 coming years. 0:12:05.480 --> 0:12:07.240 So I want to move on to talking about what 0:12:07.320 --> 0:12:10.320 impact this might have on investment. And I'm going to 0:12:10.400 --> 0:12:14.199 use an analogy here. So I'm vegan, and so when 0:12:14.200 --> 0:12:18.040 you're vegan, you sometimes go into a restaurant or into 0:12:18.440 --> 0:12:21.680 the grocery store and there's little v signs that tell 0:12:21.720 --> 0:12:23.560 you that there are things that are good for you, 0:12:23.600 --> 0:12:26.120 and you don't have to do the work to figure 0:12:26.160 --> 0:12:29.240 out whether something is you know, legit for you to 0:12:29.280 --> 0:12:32.680 invest your veganism in and sometimes that isn't there, and 0:12:32.720 --> 0:12:35.040 then you have to, like if you're in the grocery store, 0:12:35.080 --> 0:12:37.120 like read the list of ingredients, or if you're in 0:12:37.160 --> 0:12:39.480 a restaurant, you have to ask lots of annoying questions. 0:12:39.600 --> 0:12:42.439 So the existence of the little green VS. The impact 0:12:42.440 --> 0:12:44.880 of it is it shifts the emphasis on you having 0:12:44.920 --> 0:12:49.520 to do the homework to the providers of the food 0:12:49.679 --> 0:12:52.839 to do the homework. Now, there isn't a government requirement 0:12:53.120 --> 0:12:55.960 for little vs. Everywhere, and there are actually third party 0:12:56.040 --> 0:12:58.680 organizations that have created these frameworks. The reason't they use 0:12:58.720 --> 0:13:01.200 this analogy is this, This hasn't changed whether or not 0:13:01.200 --> 0:13:04.679 I'm going to be vegan, but it certainly streamlines my veganism. 0:13:05.160 --> 0:13:07.920 So I hope the analogy where I'm going with this 0:13:08.000 --> 0:13:10.560 is clear is some of these requirements is like a 0:13:10.600 --> 0:13:13.080 requirement for the equivalent of a little V next to 0:13:13.120 --> 0:13:16.560 certain companies, to certain investments, for investors that have an 0:13:16.600 --> 0:13:19.480 appetite to put money into green causes. So I guess 0:13:19.480 --> 0:13:21.920 a couple of questions, is it going to actually change 0:13:21.960 --> 0:13:23.920 the appetite for this investment or is it just going 0:13:24.000 --> 0:13:26.040 to make it a little bit harder and put the 0:13:26.080 --> 0:13:28.720 onus onto the burden of the work on the investors. 0:13:28.880 --> 0:13:31.560 And then second question is their scope for as is 0:13:31.600 --> 0:13:34.959 the case with vegan and vegetarian labels, that actually there's 0:13:35.040 --> 0:13:38.600 third parties that might come in and have their own assessments, 0:13:38.840 --> 0:13:40.720 you know, whether it's NGOs or someone else. 0:13:41.040 --> 0:13:44.640 I think the goal with these sustainability reporting policies kind 0:13:44.679 --> 0:13:47.120 of what you're kind of saying. I think it helps 0:13:47.160 --> 0:13:51.400 to investors streamline their decisions. It provides a raft of 0:13:51.520 --> 0:13:54.920 standardized data points that they can specifically point to and 0:13:55.559 --> 0:13:59.960 evaluate for their sustainability and climate performance. I do think 0:14:00.000 --> 0:14:04.600 think the reporting does lower barriers to entry for investors 0:14:04.679 --> 0:14:09.240 that may have interesting sustainability or some sort of sustainability 0:14:09.280 --> 0:14:12.760 concerns without having the resources to actually go through and 0:14:12.920 --> 0:14:16.880 perform this due diligence themselves. There's forms of voluntary reporting 0:14:16.920 --> 0:14:19.840 and third party reporting, but the fact that it's coming 0:14:19.880 --> 0:14:23.760 from sort of government regulation side, I think ensures that 0:14:24.000 --> 0:14:26.000 kind of the universe is as standardized as possible. 0:14:26.000 --> 0:14:28.800 As well, I agree with jameson there is that angle 0:14:28.960 --> 0:14:33.840 the standardized way, the fact is like government stabled and 0:14:33.920 --> 0:14:35.680 all of that. But I would want to add on 0:14:35.800 --> 0:14:40.720 two points. Indeed, We don't think that slashing down reporting 0:14:40.960 --> 0:14:44.360 will re question the whole investment in clean energy and 0:14:44.440 --> 0:14:47.200 in the transition. I agree with everything Jameson has said, 0:14:47.240 --> 0:14:50.480 but indeed remove the barrier to entry to have these 0:14:50.520 --> 0:14:53.280 regulations and not having them might make it more difficult. 0:14:53.360 --> 0:14:56.720 That being said, I think that there are some indicators 0:14:56.760 --> 0:15:00.840 that are becoming increasingly necessary to make the right decision. 0:15:00.840 --> 0:15:04.680 And in particular, the taxonomy was answering the question of, Okay, 0:15:04.760 --> 0:15:07.240 how much a company is investing in the transition by 0:15:07.280 --> 0:15:12.040 reporting green capex, how much the company has already transitioned 0:15:12.040 --> 0:15:15.120 to low carbon economy by looking at the percentage of 0:15:15.160 --> 0:15:19.360 green revenues. These are key indicators that also force companies 0:15:19.400 --> 0:15:23.920 to disclose revenue segmentation, that are key to any decision maker, 0:15:24.080 --> 0:15:27.760 whether you are an impact investment fund, an ESG fund, 0:15:28.000 --> 0:15:30.520 which is a fund that takes into account environmental, social 0:15:30.520 --> 0:15:33.840 and governance factors, or just a random fund that tries 0:15:33.880 --> 0:15:37.200 to mitigate their explosure to climate risk. And instead of 0:15:37.320 --> 0:15:41.240 reworking the taxonomy, which is heavily flowed because it's a 0:15:41.400 --> 0:15:45.600 massive it's a massive piece of work and I know 0:15:45.640 --> 0:15:48.760 because I've worked on it in the past, instead of 0:15:48.800 --> 0:15:52.160 reworking it, aligning it with accounting standard. The EU has 0:15:52.200 --> 0:15:54.960 decided to just cut down the number of companies that 0:15:55.000 --> 0:15:57.760 are reporting against it and make it voluntary, and we 0:15:57.800 --> 0:16:00.920 know that voluntary taxonomy most companies don't report against them, 0:16:00.960 --> 0:16:05.440 so that could actually impact beyond the investment to clean energy, 0:16:05.560 --> 0:16:09.520 at least the capacity from investors and lenders to mitigate 0:16:09.560 --> 0:16:12.200 their exposure to climate risk. And the second thing is 0:16:12.400 --> 0:16:15.480 Jamison has talked about the anti ESG backlash we're seeing 0:16:15.520 --> 0:16:18.760 in the US through the lens of regulation, and amongst 0:16:18.800 --> 0:16:23.120 all the anti ESG lows we're seeing at US state level, 0:16:23.160 --> 0:16:26.240 we are seeing a lot of boycott laws or laws 0:16:26.280 --> 0:16:31.560 and anti esglows that boycott prevents certain financial transitions from 0:16:31.600 --> 0:16:33.800 making business in a certain state because they are too 0:16:33.840 --> 0:16:37.720 heavily involved in sustainability. And antire ESG to take into 0:16:37.760 --> 0:16:41.520 account any factor that is not pecuniary, so it needs 0:16:41.520 --> 0:16:44.520 a factor that is not financially material in their decision 0:16:44.760 --> 0:16:49.240 making process. This can affect not the energy transition that 0:16:49.360 --> 0:16:52.760 is already profitable, not the wind, the solar, the evs. 0:16:52.840 --> 0:16:56.480 It's going to affect the clean technology that are not 0:16:56.520 --> 0:17:00.000 necessarily financially profitable, but that still people want to see 0:17:00.120 --> 0:17:03.240 in their investment fund if they are interested in sustainability, 0:17:03.720 --> 0:17:09.680 so carbon capture and storage, hydrogen investment, these emerging technologies. 0:17:09.720 --> 0:17:11.760 So in this sense, I think we really need to 0:17:11.840 --> 0:17:14.920 nuance this. In this sense, I completely agree with Jameson's point, 0:17:15.080 --> 0:17:17.320 and I would add on top of this, So revamping 0:17:17.440 --> 0:17:22.320 the EU taxonomy was a necessity because it was burdensome, 0:17:22.440 --> 0:17:24.480 but it could have been done differently to drive a 0:17:24.480 --> 0:17:29.479 better impact. Second one is the nuance that we need 0:17:29.520 --> 0:17:32.880 to see in the US because it might dempen a 0:17:32.920 --> 0:17:35.320 certain sort of investment, but not all of them, and 0:17:35.400 --> 0:17:38.359 also not the whole energy transition investment is at stake 0:17:38.560 --> 0:17:40.560 just because of this backlash, I. 0:17:40.520 --> 0:17:42.680 Really want to understand, you know, because I just want 0:17:42.680 --> 0:17:44.159 to pick up on one thing you said, which was 0:17:44.200 --> 0:17:48.119 that now companies aren't getting the information they actually need, 0:17:48.240 --> 0:17:51.800 which going back to my metaphor about veganism, it's not 0:17:51.880 --> 0:17:53.639 just that the little v's are being taken away. Are 0:17:53.640 --> 0:17:56.160 you saying that actually the ingredient list on the back 0:17:56.160 --> 0:17:58.120 of the packet is getting taken away? Is that even 0:17:58.119 --> 0:18:00.720 if companies want to invest the effort to up they 0:18:00.760 --> 0:18:02.959 actually don't have the information they need. 0:18:03.080 --> 0:18:05.399 Well in the EU right now, there's going to be so, 0:18:05.480 --> 0:18:08.560 as I said today, one of the amendment has gone 0:18:08.600 --> 0:18:11.520 through the Council because you know, like the EU legislative 0:18:11.520 --> 0:18:14.640 process is very complicated. Even after like five or six 0:18:14.720 --> 0:18:17.720 years in this just doing research about it, it's still 0:18:17.800 --> 0:18:22.200 quite complicated to me. But basically all these amendments so 0:18:22.240 --> 0:18:26.520 that omnibus package will have to go through Council and Parliament. 0:18:26.760 --> 0:18:30.080 One of the amendment, which was to delay reporting, has 0:18:30.119 --> 0:18:32.600 gone through Council already today, so it has to go 0:18:32.600 --> 0:18:34.520 through Parliament. Is going to go through Parliament on the 0:18:34.600 --> 0:18:38.600 first of April. There has been like urge to get 0:18:38.640 --> 0:18:42.520 this through the delay bit because otherwise some companies were 0:18:42.560 --> 0:18:45.240 well in scope as early as next year for reporting, 0:18:45.280 --> 0:18:48.400 and you know you don't prepare reporting on in December 0:18:48.640 --> 0:18:51.640 or April. So that's the first thing. The other thing 0:18:51.800 --> 0:18:56.520 is there is intense consultation with a lot of like 0:18:56.600 --> 0:19:01.920 industrial societies representing civilians, companies and stuff like that, which 0:19:02.000 --> 0:19:04.400 is one of the big criticism that has been made 0:19:04.400 --> 0:19:07.040 to the EU, which is the fact that it built 0:19:07.280 --> 0:19:10.320 all these regulation a bit too much behind closed doors 0:19:10.400 --> 0:19:14.040 rather than involving everyone. So that might help as well. 0:19:14.119 --> 0:19:17.320 And then I think Tom, there could be questions around 0:19:17.480 --> 0:19:20.560 will this shift and strategy continue, you know, like maybe 0:19:20.600 --> 0:19:24.480 we'll see a scale back on regulatory front around disclosure, 0:19:24.720 --> 0:19:30.000 but we might see more incentives around real economy incentives 0:19:30.080 --> 0:19:33.359 and investing in all of that and strengthening being more 0:19:33.440 --> 0:19:36.320 like a closer to the economy rather than just around 0:19:36.320 --> 0:19:36.880 the reporting. 0:19:37.119 --> 0:19:39.280 Got it. So, if the EU isn't going to be 0:19:39.280 --> 0:19:41.359 taking the same leadership role on this front that it 0:19:41.400 --> 0:19:44.600 has done in the past, does that create an opportunity 0:19:44.880 --> 0:19:48.560 for another region of the world or another country to 0:19:48.600 --> 0:19:50.600 step up and seize the initiative. 0:19:51.119 --> 0:19:53.840 The EU putting the brakes on some of it sustainability 0:19:53.920 --> 0:19:57.840 reporting regulation. There's a concern here that it pulls momentum 0:19:57.840 --> 0:20:02.560 from sustainability reporting regular globally. CS Triple D is still 0:20:02.560 --> 0:20:05.479 the first of its kind in terms of regulation, and 0:20:05.520 --> 0:20:09.720 we don't really see a comparable version globally yet. However, 0:20:10.040 --> 0:20:13.240 as they potentially step back, we start to see regulation 0:20:13.560 --> 0:20:17.040 in Asia Pacific region, specifically in China as well, start 0:20:17.080 --> 0:20:21.360 to become closer to comparable to the EU's regulatory framework. 0:20:21.520 --> 0:20:25.000 With twenty one sustainable finance policy developments in the second 0:20:25.000 --> 0:20:27.359 half of twenty twenty four, and it was definitely the 0:20:27.520 --> 0:20:30.200 busiest region globally, so we're starting to see some strong 0:20:30.240 --> 0:20:33.639 policy growth there as well. I'd also point to Brazil 0:20:33.680 --> 0:20:36.639 and the UK are both looking to potentially develop a 0:20:37.200 --> 0:20:41.119 mandatory taxonomy after the EU's mandatory taxonomy, and if the 0:20:41.119 --> 0:20:45.440 EU continues to weaken or weakens there reporting against their taxonomy, 0:20:45.480 --> 0:20:48.119 either of these markets might end up leading in that sense. 0:20:48.640 --> 0:20:51.560 What is the outlook overall? I mean, we've seen scaling 0:20:51.640 --> 0:20:55.000 back in the EU, We've seen progress maybe happening in Asia, 0:20:55.280 --> 0:20:58.359 the UK and Brazil, as you've just mentioned, maybe moving 0:20:58.400 --> 0:21:00.560 forward with certain things as a bit of a question 0:21:00.560 --> 0:21:03.280 of where leadership will come from. But what is the 0:21:03.320 --> 0:21:06.359 future in your view and say the next five years 0:21:06.440 --> 0:21:11.160 or so of this type of framework for supporting investment 0:21:11.240 --> 0:21:12.200 in the energy transition. 0:21:12.480 --> 0:21:14.280 Well, I mean the first thing to say is that 0:21:14.560 --> 0:21:17.920 if we had been asked this question just six months ago, 0:21:18.119 --> 0:21:22.360 we would have never predicted the omnibus. The EU had 0:21:22.400 --> 0:21:28.280 spent so much money, effort time into developing the Sustainable 0:21:28.320 --> 0:21:31.439 Finance Agenda, and it feels that they were convinced they 0:21:31.440 --> 0:21:34.200 were fighting the right fight. So I think it's that's 0:21:34.280 --> 0:21:38.800 one of the things that financial institutions and companies are 0:21:38.920 --> 0:21:43.760 effectively criticizing and being vocal about is to say, unfortunately, 0:21:43.800 --> 0:21:47.840 the policy agenda is too uncertain, too inconsistent. They need 0:21:48.000 --> 0:21:51.760 clearer guidance, clearer roadmaps about what's going to happen in 0:21:51.800 --> 0:21:56.080 the coming years. Because companies hire sustainability teams to do 0:21:56.119 --> 0:21:59.360 the reporting and then get told that actually they might 0:21:59.400 --> 0:22:01.200 not even have to do it in the future. They 0:22:01.200 --> 0:22:03.800