Speaker 1: Welcome to Copy Time, a podcast series on Markets and
Speaker 1: Economies from D BS Group Research. I'm Pareek, chief economist,
Speaker 1: welcoming you to our 117th episode. Today. We welcome back
Speaker 1: an old friend Mori Mai Ceo of Singapore based penalty partners,
Speaker 1: a fund management company with responsible investing at its core.
Speaker 1: Patchy is also a certified B corporation meeting the high
Speaker 1: standards of verified social and environmental performance, public transparency and
Speaker 1: legal accountability to balance profit and purpose. We last spoke
Speaker 1: with Munib in the
Speaker 1: middle of 2022. Let's get a sense of what pa
Speaker 1: partner has been up to since then. And I want
Speaker 1: to ask you a couple of questions in general in
Speaker 1: the world of eg type investing based on some recent
Speaker 1: headlines that I've been coming across. So Mudi Mali, great
Speaker 1: to have you back on Kobe type. Uh
Speaker 2: Great to be here, Tamur. It's every 18 months or
Speaker 2: two years we catch up, which is fantastic.
Speaker 1: I think there is so much going on with your
Speaker 1: firm and the work that you do. I think that's
Speaker 1: a maximum uh period and we need to probably do
Speaker 1: them more frequently. Um
Speaker 1: will you give us a highlight reel if you will
Speaker 1: of Paar Park's achievements since we last talked?
Speaker 2: Yeah. So um last time we met, uh I think
Speaker 2: I was already sort of sharing with you how my,
Speaker 2: my team and myself, we were helping our institutional clients,
Speaker 2: uh you know, with their portfolios uh moving from a
Speaker 2: risk return outcome to a risk return, sustainability outcome. Uh
Speaker 2: Now since, and even when we last spoke, we talked
Speaker 2: a lot about climate investing at a very high level,
Speaker 2: at a let's say, 30,000 ft level and a helicopter level.
Speaker 2: Um Since then, um my team have obviously other than
Speaker 2: managing our global equity strategy, which is a strategy of
Speaker 2: purposeful companies. We've fine tuned and sort of strengthened our
Speaker 2: environmental capital sort of focus within the portfolios within our
Speaker 2: own portfolios. We've put in place certain climate goals and
Speaker 2: guardrails uh which is a must have nowadays for most
Speaker 2: global equity strategies. Uh And, and, and we've also sort
Speaker 2: of now been engaging
Speaker 2: with our portfolio companies and also our investors, mostly most
Speaker 2: of whom are institutional investors on how they can do
Speaker 2: climate investing in the listed equity space, but with an
Speaker 2: impact focus as opposed to having just very climate conscious strategies.
Speaker 2: And again, later on, we can discuss the difference between
Speaker 2: a climate conscious strategy and let's say climate impact strategy.
Speaker 2: So the focus over the last 18 months has very
Speaker 2: well been
Speaker 2: on how we can share our learnings and also help
Speaker 2: our clients move their portfolios towards a climate impact strategy
Speaker 2: within the listed equity space. And that's been taking a
Speaker 2: lot of time as well.
Speaker 1: I can imagine just off the cuff
Speaker 1: a company, let's say a big fossil fuel producing company,
Speaker 1: it emits 100 tons of carbon a year. Uh Of course,
Speaker 1: that's a very big polluting entity in this world, but
Speaker 1: it is on a credible path to reduce that emission
Speaker 1: by 10% in the next two years. Would that make
Speaker 1: you interested in investing in that company?
Speaker 2: Hm. Uh So last time when we spoke uh TII
Speaker 2: I said to you, my, my personal uh philosophy is
Speaker 2: that incremental, positive change uh is a good move and
Speaker 2: absolute big numbers follow. So for me, I'm, I'm always
Speaker 2: uh you know, an investor who is looking at uh
Speaker 2: the incremental pace of change as opposed to big law,
Speaker 2: a big
Speaker 2: uh sort of commitments that are made, you know, with
Speaker 2: zero plans and there's plenty of that, especially when we
Speaker 2: come to climate and this, we will discuss that in
Speaker 2: a bit more detail later. So when I and my team,
Speaker 2: when we look at a company, uh we definitely want
Speaker 2: to see some movement in the right direction we want
Speaker 2: to see. Are they genuinely doing it and have they
Speaker 2: got in place plans and
Speaker 2: to achieve that as opposed to someone who just goes
Speaker 2: and makes a blind uh sort of without no plans commitment,
Speaker 2: uh which is not genuine. So I think to answer
Speaker 2: your question, you need to sort of open the hood
Speaker 2: and look under the hood to see what truly is
Speaker 2: that company, uh uh you know, doing delivering uh and
Speaker 2: not just go with headline numbers,
Speaker 1: ok, without mentioning any company's name. But if uh I
Speaker 1: see an ad by a global energy giant and usually
Speaker 1: see many ads about how they are, you know, focusing
Speaker 1: on decarbonization and including the world. Um And if you do,
Speaker 1: I mean, do your due diligence and you find that
Speaker 1: that energy giant is sort of, you know,
Speaker 1: speaking the talk and but also doing the job, uh
Speaker 1: would you then consider investing in a fossil fuel company?
Speaker 1: So
Speaker 2: for us in our portfolio, we
Speaker 2: only invest in fossil fuel companies if there's a clear
Speaker 2: line of sight to removal of fossil fuels over an
Speaker 2: extended period of time, right, a realistic period of time.
Speaker 2: Um So I would say if someone is increasing their carbon, sorry,
Speaker 2: uh let's say renewable portfolio, but at the same time,
Speaker 2: they're going and exploring for more oil and gas, it
Speaker 2: will be fine. It would be hard for us to
Speaker 2: justify having that in our portfolio. Now,
Speaker 2: that is our approach, there are fund managers and in
Speaker 2: strategies that do you know, invest in companies in transition.
Speaker 2: And we again, we spoke about that in a bit
Speaker 2: more detail last time we spoke. So I think the
Speaker 2: definition that and that's, I think that's where when I
Speaker 2: originally said that we've spent a lot of time putting
Speaker 2: in place in our global equity strategy, climate goals and
Speaker 2: guardrails and
Speaker 2: every investor who comes into our portfolio is, comes in
Speaker 2: knowing exactly what kind of climate goals we expect our
Speaker 2: global equity strategy to have and what guard rails and
Speaker 2: one of the guard rails is that there has to be,
Speaker 2: if we are going to invest in a fossil fuel company,
Speaker 2: there has to be a clear line of sight of
Speaker 2: removal of fossil fuels over a reasonable and feasible period.
Speaker 2: It has to be almost in line with what IPCC
Speaker 2: or the S BT I folks are prescribing um for,
Speaker 2: for a fossil fuel company.
Speaker 2: Great. Again, that is our, our mandate, other people can
Speaker 2: have different mandates.
Speaker 1: Sure. Sure. Um Well, I on my day to day work,
Speaker 1: spend a lot of time looking at the US economy
Speaker 1: and I see that, you know, we're stepping into 2024
Speaker 1: with the US still looking very, very strong economy wise.
Speaker 1: It's got a very tight labor market and the Ira
Speaker 1: Act that inflation Russian act that President Biden passed a
Speaker 1: couple of years ago is turbo charging a lot of
Speaker 1: investment in the, in the green area. And yet M
Speaker 1: I recently read that last year esg job departures outpaced
Speaker 1: arrivals in the US and it marked a reversal of
Speaker 1: a multiyear trend. So just give me a sense whether
Speaker 1: you have been sort of following this and if there
Speaker 1: is anything to read from that, and also is there
Speaker 1: some counterpart of that observation with respect to Asia?
Speaker 2: Yeah, now you're asking me to comment on the US
Speaker 2: uh as an economist. Now, that's dangerous, right? And I,
Speaker 2: I'm so scared of answering that because, you know, the
Speaker 2: US economy much better than I do. And, and you
Speaker 2: also know the jobs break down in the US, much
Speaker 2: better than I do. Um So it's, it's going to
Speaker 2: be hard for me to do,
Speaker 2: say how much of uh the ESG, let's say uh
Speaker 2: uh exits versus applications or let's say new job entries
Speaker 2: is because of uh a step away from uh Ira
Speaker 2: or Ira not being delivered. And there's
Speaker 2: at least on the ground when I speak to a
Speaker 2: lot of portfolio companies in the US who are considered
Speaker 2: beneficiaries of Ira, they would openly say that they're not
Speaker 2: seeing the money hit their accounts yet, right? And there's
Speaker 2: still bureaucracy, there's still a lot of sort of uh
Speaker 2: uh pent up potential. But whether they're seeing it actually
Speaker 2: manifest itself in
Speaker 2: more sales and therefore more employees and more production that
Speaker 2: is not happened yet. So whether there is a little
Speaker 2: bit of, there was a little bit of excitement when
Speaker 2: it all happened two years ago and people hide people
Speaker 2: thinking OK, we, there's a tsunami of sort of environmental
Speaker 2: deals coming through and not showing up and then they're
Speaker 2: having to cut those people that could very well be
Speaker 2: happening on the ground in the US.
Speaker 2: If I take a sort of a global sort of
Speaker 2: approach to sustainability esg roles, uh I think there is
Speaker 2: no doubt uh even in Asia, for example, uh there's,
Speaker 2: there is a, there's plenty of demand for folks who
Speaker 2: uh are either upgrading their own experiences and skill sets
Speaker 2: to include sustainability. And I think especially if you look
Speaker 2: at environmental capital focused roles, especially in Asia, this I
Speaker 2: would say this there, there will be demand for a
Speaker 2: long time to come still because we are starting from
Speaker 2: a very low base as we will speak
Speaker 2: later on. The actions taken by companies, regulators organizations in
Speaker 2: Asia is still at a very low base. So then,
Speaker 2: and it's a part of it is the chicken and
Speaker 2: the egg. Many of them don't have the actual employee
Speaker 2: capacity and the knowledge and know how. So I think
Speaker 2: that in Asia, I think there's still going to be
Speaker 2: plenty of demand for people who are, you know, who
Speaker 2: are skilled in sustainability and especially in the environmental space.
Speaker 1: Yeah, some of if you want to wish that there
Speaker 1: was an entity out there that provided the no house
Speaker 1: to companies. That's just a teaser. We'll come to that
Speaker 1: a little later. Um We need uh one more uh
Speaker 1: news uh headline related question. So I read last week
Speaker 1: that um JP Morgan Asset Management, Blackrock and State Street
Speaker 1: Global Advisors. They have all retweeted from the Climate Action
Speaker 1: 100 plus Investor Compact.
Speaker 1: Uh And the interpretation in the press was that they
Speaker 1: don't want to deal with the political and legal liability
Speaker 1: uh that the compact would have sort of, you know,
Speaker 1: push on them. Uh Can you unpack this development for us?
Speaker 2: Uh Yeah, it's hard for me to say why they left.
Speaker 2: Uh But I can sort of maybe for uh share
Speaker 2: some observations which might be helpful to, to your listeners.
Speaker 2: So if you look at the, the whole climate action
Speaker 2: 100 plus, right, it was initially started in 2017 and
Speaker 2: it was meant to be for a +15 year period.
Speaker 2: And the whole purpose of this was that uh quite
Speaker 2: a few big, big investors all got together and
Speaker 2: having a substantial amount of aum under their, you could
Speaker 2: say mandates, they had obviously influence on companies. And the
Speaker 2: view was that let's go and focus on some of
Speaker 2: the biggest emitters and get them to actually commit to
Speaker 2: certain climate targets and goals. And that was the whole
Speaker 2: purpose of ca 100. And it's been relatively successful in
Speaker 2: doing that, you know,
Speaker 2: the all these investors did come out did go. And
Speaker 2: I would say in some cases, name and shame some
Speaker 2: of these companies into putting in climate targets and, and, and, and,
Speaker 2: and the whole approach of C 100 has been very
Speaker 2: target oriented with very clear. If a company does not
Speaker 2: do it, they're going to take action almost in an
Speaker 2: activist way. Uh and, and sort of bring voting action
Speaker 2: against the management and the board. And I think uh
Speaker 2: that worked, it worked for a while getting people to
Speaker 2: come and commit to targets. But once those targets have
Speaker 2: been put in place,
Speaker 2: many investors are like, OK, there's now a next level
Speaker 2: of engagement and that next level of engagement most probably
Speaker 2: cannot be aggressive. It cannot be the name and sort
Speaker 2: of shame approach, maybe. So that's where I think some
Speaker 2: of these investors that you named may be thinking, OK,
Speaker 2: we've we've done what the coalition or this grouping initiative
Speaker 2: wanted to do for the first, let's say five years now,
Speaker 2: it's time for us to revisit how we
Speaker 2: engage with our portfolio companies. That would be my sort
Speaker 2: of observation, I think for me and my team at
Speaker 2: Panahi pans, the one thing that becomes very clear from
Speaker 2: this event is that there's two things that we've believed
Speaker 2: in for a while. Now, the first one is that
Speaker 2: the name and shame approach does not work, you know,
Speaker 2: and this is me speaking for 30 years of doing
Speaker 2: investing and engaging with listed companies globally.
Speaker 2: Uh and especially in Asia, it doesn't work, but even
Speaker 2: globally to get management and boards of companies to act
Speaker 2: and act in areas that are not very, let's say,
Speaker 2: clearly beneficial to the shareholders in a very quick instance.
Speaker 2: Uh the name and shamed approach does not, they might
Speaker 2: commit to targets, but they're not going to act on it.
Speaker 2: So that to me is very clear from uh what
Speaker 2: happened with this, uh you know, coalition is that
Speaker 2: you, you can't, you can't sort of uh force through
Speaker 2: name and shaming companies into acting. Um I think the,
Speaker 2: the second thing that became very clear is that
Speaker 2: investors have plenty of climate
Speaker 2: initiatives
Speaker 2: which they force their investing companies to adhere to, right?
Speaker 2: Uh There's many of them uh I don't have to
Speaker 2: mention them here but they've been around for the last
Speaker 2: 5 to 7 years. Uh What is missing is the, how,
Speaker 2: how are those investing companies going to go and deliver
Speaker 2: on those commitments that these initiatives have forced them to make?
Speaker 2: And we're at that moment now where uh even investors
Speaker 2: when they go and speak to their investing companies are saying,
Speaker 2: thank you for agreeing to the C A platform 100
Speaker 2: plus or let's say uh net zero commitments or S
Speaker 2: BT I, you name it all these initiatives and targets.
Speaker 2: But the how is missing, not many people are telling
Speaker 2: their investing companies this is how maybe you can achieve that.
Speaker 2: Um And, and I think that is also become clear
Speaker 2: from this reversal or let's say of people leaving maybe
Speaker 2: something like the C 100 is that investors know they've
Speaker 2: done their first big move of converting people to putting
Speaker 2: in climate
Speaker 2: ambitions and targets. But now we are in the next phase.
Speaker 2: How do we get these converted to actually act?
Speaker 1: So I'm really curious about that nitty gritty part. Uh
Speaker 1: I think every year when cop happens and you know,
Speaker 1: we hear this sweeping announcement and proclamations by both countries
Speaker 1: and companies, you know, 2050 2016, 90. This that or,
Speaker 1: you know, even China making very
Speaker 1: heroic, you know, claims about how its carbon intensity would
Speaker 1: sort of peak this decade and it will progressively decline.
Speaker 1: But to your point, these are all end points very
Speaker 1: well taken, very well intentioned. But how do we go
Speaker 1: from here to there? Um So you said that, you know,
Speaker 1: there's no shortage of coalitions. Uh let's talk about one
Speaker 1: of those coalitions uh Gigatons coalition. Uh you've been working
Speaker 1: on it. Uh Let's talk about it. What is it?
Speaker 1: And where do you see it becoming over time?
Speaker 2: Yeah, so the gate and coalition is uh uh the
Speaker 2: paky partners team um solution, I would say uh to
Speaker 2: a TRM that we have. The TRM that we have
Speaker 2: is first that globally we know that there's a depleting
Speaker 2: carbon budget.
Speaker 2: Uh If you uh you know, look at the work
Speaker 2: that's being done by the carbon project. Uh They say
Speaker 2: that we've got about 625 billion tons of carbon emissions
Speaker 2: left before we go beyond a 1.7 degrees or higher
Speaker 2: from industrial level. So at current emission levels, that's 12 years.
Speaker 2: Uh So a depleting carbon budget, how do we stop
Speaker 2: depleting it, conserve it if not grow. That pie is
Speaker 2: a challenge and that's a global challenge.
Speaker 2: Uh The second dilemma is that many invested companies, as
Speaker 2: I was saying to you who have committed to these initiatives,
Speaker 2: they don't know how to deliver on those. And I'll
Speaker 2: give you some numerics here, right to help you understand
Speaker 2: this problem. Currently, there's only 7411
Speaker 2: companies who have given S BT I, which is the
Speaker 2: science based target initiative, some kind of a climate ambition
Speaker 2: or target with a plan, right? Only 7411 globally, there's
Speaker 2: hundreds and thousands of listed companies let alone unlisted companies.
Speaker 2: And I would say the majority of the people are
Speaker 2: not giving S BT this information is because the majority
Speaker 2: of them don't know how to do it. So why
Speaker 2: would they commit to it?
Speaker 2: So there is a massive massive disconnect between what companies
Speaker 2: know about climate reduction or carbon reduction and climate action
Speaker 2: and therefore the commitments they are willing to make. That's
Speaker 2: the second problem. And the third one is that investors,
Speaker 2: institutional investors, they now want to have climate impact but
Speaker 2: they can't find it at scale and with integrity,
Speaker 2: they can find it in pockets in small private investments
Speaker 2: and technology, hoping that, you know, they will find a
Speaker 2: carbon capture technology over the next 10 years. But hope
Speaker 2: is not a good strategy when you are dealing with
Speaker 2: such a global existential issue.
Speaker 2: So these three problems, my team and I said, ok,
Speaker 2: how do we help solve for this? And we thought
Speaker 2: and having spoken to many investors and investing firms over
Speaker 2: the last seven years and especially the last six years
Speaker 2: at Pak Pans,
Speaker 2: what we needed is uh and what we've created under
Speaker 2: the Gatan coalition is a unique investor invest led
Speaker 2: and this is very important. It's investor invest led
Speaker 2: uh uh grouping of uh
Speaker 2: or you could say investor investigated uh platform uh for
Speaker 2: solutions that are practical,
Speaker 2: financially feasible and tested for decarbonisation
Speaker 2: and the third player in this coalition, other than the
Speaker 2: investor in investing are solution providers for decarbonisation. And just
Speaker 2: like I know for a fact that when I go
Speaker 2: to and speak to many of my portfolio companies in
Speaker 2: my global equity strategy who have a net zero target
Speaker 2: or S BT target.
Speaker 2: I'm very happy that they have it. But when I say,
Speaker 2: show me the plan and show me the suppliers who
Speaker 2: are going to help you get there and those suppliers
Speaker 2: can come in many forms, they can come in the
Speaker 2: form of consultants who are providing them with internal KPs
Speaker 2: and organizational structures to create this change. It can come
Speaker 2: in soft technology, software technology or hardware technology and it
Speaker 2: can also come in the form of policy and research
Speaker 2: support that they might need for lobbying. Right?
Speaker 2: Many of these companies don't have that. And the whole
Speaker 2: gate coalition is about providing a library of solutions
Speaker 2: that help decarbonisation and it helps those companies that have
Speaker 2: already converted by having targets achieve those. And what it,
Speaker 2: I suppose that another way to look at it is
Speaker 2: that the Gin Coalition, what it's not, it's not an
Speaker 2: initiative with plenty of signatories but no solutions. It's not
Speaker 2: a it's not meant to be a consultancy that goes
Speaker 2: into a company investing company and say, oh by the way,
Speaker 2: this is your problem
Speaker 2: because companies who have already got targets in place, they
Speaker 2: already kind of have to know what their problems are.
Speaker 2: This is meant to. And this is not also a
Speaker 2: rating agency that is
Speaker 2: forcing companies to tick the box and get a rating
Speaker 2: and therefore claim to have certain climate and then stop
Speaker 2: there and say, ok, now it's not our problem. So,
Speaker 2: so I think for us this is a very practical,
Speaker 2: it's we envisage this to be a library of climate
Speaker 2: solutions that investors and investors can tap into to get
Speaker 2: practical, financially feasible and tested decarbonisation solution. So we can
Speaker 2: address this problem as soon as possible.
Speaker 1: And how are you building this um solution set if
Speaker 1: you will, is it based on your six years of
Speaker 1: investing where you've seen what works and what doesn't uh
Speaker 1: do you have other, you know, partners who will also
Speaker 1: help you provide solutions? How is that all working?
Speaker 2: Like any coalition, like any group?
Speaker 2: This is, has a snowball effect, right? You need to
Speaker 2: have a few visionary players who come in, they help
Speaker 2: you start the ball rolling. What we we're confident and
Speaker 2: we're comfortable is that over the last six or seven years,
Speaker 2: we have through our global equity strategy engaged with some
Speaker 2: of the I would say best decarbonising companies in the world.
Speaker 2: And from speaking with them, we already have a,
Speaker 2: a list of, let's say solutions that providers that we
Speaker 2: believe that should be able to help the companies and
Speaker 2: the investing companies who want to, who have, who want
Speaker 2: to deliver on their carbon ambitions, if not at a
Speaker 2: faster pace and at a bigger scale as well. So
Speaker 2: this coalition of investors, investors and solution providers is going
Speaker 2: to grow over time. We have intentionally uh
Speaker 2: we intentionally have planned for the Gatan Coalition to go
Speaker 2: grow in three different phases because we want to do
Speaker 2: the test case in phase one, which is a very
Speaker 2: Asia Pacific centric because we are based here with the
Speaker 2: view that in phase two and three
Speaker 2: Giton coalition investor members, investing members and solution that providers
Speaker 2: by the by phase three will be global in nature. Therefore,
Speaker 2: have an impact. I I if I may add one
Speaker 2: more thing that makes this Gigatons coalition different from most
Speaker 2: other dare I say, initiatives or platforms and all the
Speaker 2: rest is that it in itself has put on itself.
Speaker 2: I gat to 1 billion ton carbon emissions saving uh
Speaker 2: target for the next decade in phase one. because to us,
Speaker 2: uh we want to put the onus on the secretariat
Speaker 2: of the Gatan Coalition that are you truly delivering, helping
Speaker 2: invest investors who bring their investing companies to find solutions?
Speaker 2: Are you truly contributing to that
Speaker 2: and contributing in an impact sense? Are you helping bend
Speaker 2: the curve for them? Because if you're not helping them
Speaker 2: bend the curve and then you're not really adding any value, right?
Speaker 2: So that's another place where the Gatan Coalition in our
Speaker 2: view is very unique. It helps bend the curve and
Speaker 2: it has to prove its own utility.
Speaker 1: When you earlier said that you don't see the coalition
Speaker 1: as like a meta consultant who goes inside a company
Speaker 1: identifies its problem and then uh work with them to
Speaker 1: solve the problem. You are looking at companies that already
Speaker 1: have targets, they have already identified their problems. So shouldn't
Speaker 1: you work with companies that have no targets and try
Speaker 1: to make a difference as to those who already have targets?
Speaker 2: Yeah. Well,
Speaker 2: uh C A 100 is doing that already in some ways. Right.
Speaker 2: C A 100 has been sort of uh through,
Speaker 2: you know, uh uh through their approach, telling companies you
Speaker 2: better put in place targets. And I think there's plenty
Speaker 2: of other organizations that are helping to convert the, let's
Speaker 2: say unbelievers or the unconverted
Speaker 2: for sitting here practically on the ground, dealing with companies
Speaker 2: for myself and my team, the priority became, how do we,
Speaker 2: and it's an urgency thing as well. You know, if
Speaker 2: we spend a lot of time and energy just trying
Speaker 2: to convert the unconverted, what about the converted, being able
Speaker 2: to deliver that to us is,
Speaker 2: is a bigger opportunity and a challenge. It's easy to
Speaker 2: get someone to say, ok, I will commit to a
Speaker 2: 2050 target. Thank you. Now leave me alone and I
Speaker 2: come back in 30 in 20 years time, right?
Speaker 2: But it's harder to actually say to someone you've converted,
Speaker 2: you've given these targets. Now let's have a discussion and
Speaker 2: then see how we can help you. So we are
Speaker 2: not going to force or judge people for their targets. Yes,
Speaker 2: the companies that we have selected are pretty ambitious in
Speaker 2: what they want to do, but we want to make
Speaker 2: sure they actually deliver on that and if not deliver
Speaker 2: at a faster and bigger pace. So I think uh
Speaker 2: you know,
Speaker 2: impact, I always say impact is in the eye of
Speaker 2: the beholder for some people very much. So what you're
Speaker 2: saying there's more impact in converting someone who doesn't believe
Speaker 2: in this, to believing in it. The others like myself
Speaker 2: is like, I'm very much a practical person, I'm saying, OK,
Speaker 2: you know what? Even though if, if the metric of
Speaker 2: believers is that they are BT let's say, approved with
Speaker 2: their targets.
Speaker 2: Our global equity strategy portfolio has 78% of our portfolio
Speaker 2: has S BT I approved or committed targets. When I
Speaker 2: go and speak to all those portfolio companies, I would
Speaker 2: say only a handful of them actually have a legitimate
Speaker 2: plan on getting there. And this is a reality on
Speaker 2: the ground which any investor or any investing will tell
Speaker 2: you that having a target. It doesn't mean that the
Speaker 2: game is over. It's how do you get there
Speaker 1: almost at the starting point? Um I wanted to ask
Speaker 1: you a high level question earlier. I forgot, I'm just
Speaker 1: going to ask you this now and then we'll go
Speaker 1: back to talking about the uh G and coalition um
Speaker 1: in the US. We're going through this big hype cycle
Speaker 1: on A I related investment. A lot of money is
Speaker 1: going in that sector. Uh Do you worry that these
Speaker 1: sort of uh mans sort of crowd out investment away
Speaker 1: from uh climate related investment or the stock market is
Speaker 1: still being um
Speaker 1: sort of justifiably sort of, or rather it is so
Speaker 1: rewarding companies that are doing adjustment to their climate goals
Speaker 1: or is the focus all on who's got a I
Speaker 1: in their name? And should we just put money in them?
Speaker 2: Yeah. Well, it's an interesting, it's a very interesting question
Speaker 2: because I think even last time when we spoke, uh,
Speaker 2: at that time there was some policy flip flopping and
Speaker 2: there's always policy flip flopping. Investors interest waning and, like,
Speaker 2: increase
Speaker 2: as well. Right. Um, so I'm not going to deny
Speaker 2: over the last, let's say, 18 months since we last spoke, right?
Speaker 2: Uh Investors interest in some of the hot environmental sectors
Speaker 2: that uh everyone thought was going to be the next,
Speaker 2: you know, big thing has, has decreased, right? Uh Prime
Speaker 2: example is look at evs, right? Uh EVs have taken
Speaker 2: a massive hit at the same time
Speaker 2: 1218 months ago, hydrogen lost its uh you know, can
Speaker 2: I say the word sexiness? Uh uh you know, it did, right?
Speaker 2: So there, there are pockets of environmental investing that will
Speaker 2: become relevant, irrelevant for investors. Uh And that, that happens
Speaker 2: over time. I mean, I've seen this over 30 years
Speaker 2: of investing. Uh I don't think the environmental genie can
Speaker 2: be put back in the bottle that's not going away.
Speaker 2: Uh Now, yes, there's going to be sectors within the
Speaker 2: environment where for a while they might become the hot
Speaker 2: topic and everyone sort of gravitates to that and the
Speaker 2: money just flows and the media forces that sort of
Speaker 2: money towards that. But I think uh on the ground
Speaker 2: industrial policies are moving in the right direction whereby companies
Speaker 2: who are delivering decarbonisation solutions.
Speaker 2: And as we spoke last time, as and when carbon
Speaker 2: pricing becomes also a lot more firmer and impactful for
Speaker 2: companies and their profitability, investors will see through that. So
Speaker 2: I think I'm not worried that A I is taking
Speaker 2: away all the money from environment. I think the hot
Speaker 2: money will always flow from one place to another. Then
Speaker 2: the kind of money that my team and I are
Speaker 2: focused on is not your hot money. That is just
Speaker 2: looking for a quick buck. We are looking for investors
Speaker 2: impact investors, climate, impact investors who want impact at scale
Speaker 2: and with integrity and our focus on listed equity space.
Speaker 2: And I think that that is still at a very early, early,
Speaker 2: early stage,
Speaker 1: right? Uh So coming back to the giggles and coalition,
Speaker 1: I think it's related to what you just said that
Speaker 1: when you're making your pitch, if I may use that
Speaker 1: term to uh companies, both investors and investors to join
Speaker 1: this coalition, um How are you trying to motivate them
Speaker 1: that why this coalition and not some other initiative?
Speaker 2: Yeah. So uh it goes back to what I was
Speaker 2: saying earlier on most investors and I'm talking institutional investors here.
Speaker 2: If I'm the ceo of let's say a big endowment
Speaker 2: or a big sovereign wealth fund or a big foundation,
Speaker 2: I'm over the last 5 to 7 years. My organization
Speaker 2: has committed to some kind of top down macro climate goal, right?
Speaker 2: It could be net zero, it could be committing to
Speaker 2: S BT or going carbon neutral or carbon positive, you
Speaker 2: name it right. There's all these things and then I'm
Speaker 2: the CIO and I've been given the mandate now you
Speaker 2: convert your portfolio. Now, my portfolio is very broad wide
Speaker 2: and for me to achieve that,
Speaker 2: I need to start moving as many levers as I can, right?
Speaker 2: Uh and one of the biggest levers and one of
Speaker 2: the biggest asset classes for any institutional investor or CIO
Speaker 2: is their listed equity space. And up until now, most
Speaker 2: people have just ignored the
Speaker 2: potential for decarbonisation in their listed equity space. And this
Speaker 2: is where the Paki team has it as their mission
Speaker 2: is to show and, and bring to uh the CIO
Speaker 2: s of this world that listed equities. You can have
Speaker 2: climate impact with integrity there. Our new strategy which is
Speaker 2: 2.5 years in the making and third iteration of the
Speaker 2: Asian Environmental Action Fund that I first sort of spoke
Speaker 2: to you about uh in 2022.
Speaker 2: It in our, in our view and our belief is
Speaker 2: that it comes as close to being a genuine impact
Speaker 2: investment in the climate space with all the credentials that
Speaker 2: is needed for an impact investment. And the gatun coalition,
Speaker 2: by the way, is a big part of that. It's
Speaker 2: the Gig Aon coalition and the strategy is very much
Speaker 2: in line and it goes back to sorry, why would
Speaker 2: an investor want to do that is because an investor
Speaker 2: wants to decarbonize their portfolio companies and the biggest part
Speaker 2: of their portfolio companies uh sorry of their portfolio is
Speaker 2: listed equities, a fairly big part.
Speaker 2: But within that the scope of decarbonising and therefore moving
Speaker 2: the needle of your oil portfolio is massive. And as
Speaker 2: I shared with you last time we spoke one company
Speaker 2: in Japan has scope three of about 400 million tons,
Speaker 2: two companies. And to put it in perspective, Australia's carbon
Speaker 2: emission as a country is about 550 million tons per year, right?
Speaker 2: So one Japanese company almost makes that
Speaker 2: two companies put together in Japan have scope 123 greater
Speaker 2: than all of Australia, right? For one year. So if
Speaker 2: if these companies are in your portfolio and you help
Speaker 2: them decarbonize and your whole portfolios, uh sort of carbon
Speaker 2: emission numbers become better, the chances are you're going to
Speaker 2: achieve your
Speaker 2: overall portfolio goals. So that's for why investors would join,
Speaker 2: why would invests join, right? These are companies, right? And
Speaker 2: and this is a very, very important topic. Many people
Speaker 2: have said, why would a big listed company talk to
Speaker 2: a gig to coalition? First and foremost, we're not an
Speaker 2: initiative which is forcing a carbon or a climate target
Speaker 2: down their throat. We're saying to them, you already have
Speaker 2: a carbon target. We are here, you are, your investor
Speaker 2: has brought you to the Gigatons Coalition
Speaker 2: and we are here to help you solve for the
Speaker 2: challenges that you have. You tell us what your challenges
Speaker 2: are right? We are going to provide you various options
Speaker 2: solutions for that decarbonisation challenge. And from a management perspective,
Speaker 2: if the management of the board of a company know
Speaker 2: that an investor has brought a few climate solutions to them,
Speaker 2: I think they will listen to that climate solution a lot,
Speaker 2: a lot more proactively than uh you know, if it
Speaker 2: was just coming from the sustainability team, that's, that's the
Speaker 2: first thing internally, an investor bringing a solution has a
Speaker 2: lot more impact than if the sustainability internally is telling
Speaker 2: them to do that. I think it's also the name
Speaker 2: and fame part of it being part of a coalition
Speaker 2: and being supported by other investors becomes a sort of
Speaker 2: almost like a badge of honor for some people as well.
Speaker 2: So that's where
Speaker 2: the investing companies should come on board and take these
Speaker 2: solutions in a proactive way. And, and the last one
Speaker 2: is why would solution members come to it? It's a
Speaker 2: commercial arrangement. The Gatton coalition is only a matchmaker at
Speaker 2: the end of the day. The companies are going to
Speaker 2: have to say, OK, is this consult
Speaker 2: going to help me I'm going to pay for it.
Speaker 2: Is this solution software gonna help me I'll pay for it.
Speaker 2: Is this hardware going to help me I'll pay for it.
Speaker 2: Is this research going to help me I'll pay for it.
Speaker 2: So it's, we're not, it's not meant to be for free. The, the, the,
Speaker 2: the solution providers they are going to have
Speaker 2: at their disposal companies that are converted companies that have investors,
Speaker 2: taking them to them. And they will also have investors
Speaker 2: who potentially could be investing in some of these solution
Speaker 2: providers because they see that they're growing in size and scale.
Speaker 2: So I think it's a win, win, win for all
Speaker 2: members of the coalition.
Speaker 1: So it is going to be an ecosystem of sorts.
Speaker 1: If you will, there are solution providers, there are people
Speaker 1: who need solutions and then there are people who want
Speaker 1: to make money investing in companies who are solving for
Speaker 1: climate change. And, and so you're trying to create a
Speaker 1: bit of an umbrella for that. I understand that in
Speaker 1: addition to the Gigatons coalition, there's also this thing called
Speaker 1: the Asia Gigatons Fund. Uh Can we talk about that?
Speaker 2: Yeah. So the Asian Gigatons Fund, as I mentioned was,
Speaker 2: is the third iteration of the Asian Environmental Action Fund
Speaker 2: that we started talking about in 2022 the team has
Speaker 2: gone to the drawing back to the drawing board again
Speaker 2: and again to fine tune um um fine tune our
Speaker 2: original version into what is now the Asian Gigatons Fund.
Speaker 2: And as the name suggests, first of all, it's Asia
Speaker 2: Pacific focused. Secondly, the Gig Aon, meaning that it is
Speaker 2: going to invest in companies with a view and with
Speaker 2: an ambition that it will deliver at least at least
Speaker 2: 1 billion tons of cumulative savings over the next decade.
Speaker 2: That's at least if not higher. And that is the
Speaker 2: focus of this impact fund. Now, this is where I
Speaker 2: think I need to be also for the viewers.
Speaker 2: One thing that we have been sharing with our uh investor,
Speaker 2: institutional investor partners is that there is a thing called
Speaker 2: climate conscious strategies, which is majority of the strategies currently.
Speaker 2: And then there's a climate impact strategy and and the
Speaker 2: difference being climate conscious strategy are strategies where risk return
Speaker 2: are still the number one priority. Uh And but the
Speaker 2: portfolio is creating
Speaker 2: in a way where it has certain climate goals, Guard rails.
Speaker 2: As you asked me a question, would you buy in
Speaker 2: a company that is a fossil fuel but is expanding
Speaker 2: but not doing this or doing that? Those guard rails
Speaker 2: as long as their climate, everyone will have their own climate,
Speaker 2: guard rails and therefore climate goals that becomes a climate
Speaker 2: conscious strategy. And even some of the very thematic climate
Speaker 2: strategies out there come within that because they still focus
Speaker 2: on risk of return.
Speaker 2: But then you have a smaller but growing focus on
Speaker 2: what we call pure climate impact, right? This is where
Speaker 2: these are, you could say concessionary strategies where
Speaker 2: financial returns are expected. But the first priority is can
Speaker 2: they deliver carbon outcomes that the investor wants? And as
Speaker 2: I said to you in the listed equity space, many
Speaker 2: people have not been able to create this because the
Speaker 2: rules around impact investing that have been now
Speaker 2: put in place by developmental financial institutions over the last
Speaker 2: four decades, even, you know, uh uh uh uh various
Speaker 2: foundations like the Bill and Melinda Gates Foundation Ford Foundation,
Speaker 2: all these folks who have been doing impact investing for
Speaker 2: decades now, they have very, they are very well established now,
Speaker 2: rules on what is impact investing and not many people
Speaker 2: have been able to put the put those, let's say
Speaker 2: uh rules and frameworks in place and deploy them in
Speaker 2: the
Speaker 2: listen equity space.
Speaker 2: And when we embarked on this ambition to bring to
Speaker 2: our institutional investors, a climate impact strategy as genuine as
Speaker 2: you can get to impact investors requirements. Gigatons Coalition was
Speaker 2: the missing element that we had to create because the
Speaker 2: Gigatons Coalition, what it does, it proves to investors that
Speaker 2: what
Speaker 2: they brought to the table was not just financial capital,
Speaker 2: but some kind of add on contribution that helped their
Speaker 2: investing companies bend the curve which I talked about earlier.
Speaker 2: So the Gig Aon Fund and the Asian Gigatons Fund
Speaker 2: and the Asian and the sorry, the Gigatons coalition
Speaker 2: have a symbiotic relationship. They sort of kind of help
Speaker 2: each other support each other and especially in phase one,
Speaker 2: the Asian Gigatons Fund is the sponsor of the Gigatons Coalition.
Speaker 2: In phase two, we expect other investors to come in
Speaker 2: and use the Gigatons Coalition. And in phase three of
Speaker 2: the Gigatons Coalition, we expect Panahi partners and the Asian
Speaker 2: Gigatons Fund to be just another
Speaker 2: investor utilizing the Library of Solutions because we want the
Speaker 2: Gigatons Coalition to become an open source solutions platform. But
Speaker 2: phase one, the Asian Gigatons Fund is basically uh the,
Speaker 2: you know, supporting and growing the Gigatons coalition
Speaker 2: if I may now for the gat to fund the
Speaker 2: Asian one. And these are some interesting numbers. Again,
Speaker 2: the the Panache team has identified 585 listed companies
Speaker 2: in Asia Pacific. Their total scope 123 is about 18
Speaker 2: billion tons per annum. That is 35 to 40% of
Speaker 2: global emissions. 585 companies, these 585 companies have given us
Speaker 2: targets of reducing about 4.5 billion tons of that 18
Speaker 2: over the next decade or so. So for us
Speaker 2: as an investor in listed equity space, uh now having
Speaker 2: the Gatan Coalition in place, we can go and identify
Speaker 2: a smaller subset of these companies and say, OK, we're
Speaker 2: going to invest in you. The Gatan Coalition is going
Speaker 2: to provide a whole uh solution set of options for
Speaker 2: you to choose from to help you uh expand your
Speaker 2: uh decarbonisation plans. And that's how the gigatons Coalition and
Speaker 2: the Gigatons Fund
Speaker 2: operates and works. So that's the, that's the relationship, that's
Speaker 2: the size and scale of what we think. Both the
Speaker 2: Gigatons Fund, Asian Gigatons Fund and the Gigatons Coalition can
Speaker 2: have a climate impact. And that's why I get so
Speaker 2: excited uh because this is sitting right underneath uh under
Speaker 2: our noses and, and, and we just need to have
Speaker 2: a solution and a platform to sort of catalyze all
Speaker 2: these sort of impacts
Speaker 1: that sounds very promising. So when at the beginning of
Speaker 1: this podcast, you sort of pointed out that you've had
Speaker 1: a around 18 month period city between podcasts at, at
Speaker 1: copy time. So let's say we meet again in 18
Speaker 1: months time, hopefully over a couple of copy for real.
Speaker 1: Uh And as it's late 2025 what would you sort of,
Speaker 1: you know, talk about in terms of the successful path
Speaker 1: between early 24 and late 25?
Speaker 2: So I, um by then, I hope we'll be sitting
Speaker 2: here and I'll be telling you that our biggest challenge
Speaker 2: is not finding people to be part of the Gatan Coalition,
Speaker 2: but uh how to manage uh the number of,
Speaker 2: you know, how many people want to become a member
Speaker 2: and how to manage that, right? How to manage that.
Speaker 2: Uh That's first and foremost. So I do hope that,
Speaker 2: you know, in 18 months time, the the challenge is
Speaker 2: not getting people in the coalition is more like who
Speaker 2: should be in the coalition. Secondly, that the Asian Gigatons
Speaker 2: Fund is up and running and we have deployed a
Speaker 2: lot of the capital in companies and we're engaging with
Speaker 2: them and on track to start contributing to what their
Speaker 2: impact is.
Speaker 2: And I would say we are in talks to expand
Speaker 2: the Gatan Coalition into phase two, which is where
Speaker 2: investors who are our founding investors in the Gigatons Fund,
Speaker 2: Asian Gigatons Fund, they can bring their portfolio companies from
Speaker 2: outside of the Gigatons Fund into the coalition because the
Speaker 2: solution sets that we have provided and shown are actually working.
Speaker 2: They are practical, they're financially feasible and they are tested.
Speaker 2: And so
Speaker 2: so therefore we get a broader, we, we, we, we
Speaker 2: can give an ambition for a greater than multi gat
Speaker 2: to of uh contribution from the Gigatons Coalition. So that's
Speaker 2: my sort of ambition uh for uh and, and you know,
Speaker 2: I'd be very happy if in 18 months time, uh
Speaker 2: I was ticking those three boxes.
Speaker 1: Well, here's to tick those boxes in 18 months time.
Speaker 1: This has been fascinating. Wish you the very best of
Speaker 1: luck both with the gig on Coalition as well as
Speaker 1: the fund. Thank you so much for your time and insights.
Speaker 2: Thank you, Temor and I do look forward to our
Speaker 2: next chat in 18 months and then, and once again,
Speaker 2: thanks for taking this message and sharing it with all
Speaker 2: your readers. Thank you so much. It is
Speaker 1: super, super important.
Speaker 1: Uh Kobe Time was produced by Ken Delbridge at supply studios,
Speaker 1: Violet Lee and Daisy Sherman provided additional assistance. It is
Speaker 1: for information only and does not represent any trade recommendations.
Speaker 1: All 117 episodes of the podcast are available on youtube
Speaker 1: and all all major podcast platforms including Apple Google and Spotify.
Speaker 1: As for our research publications, webinars and live streams, you
Speaker 1: can find them all by Googling D BS research Library.
Speaker 1: Have a great day.