1 00:00:07,090 --> 00:00:10,680 Speaker 1: Hello. You're listening to Kobie time, a podcast series on 2 00:00:10,680 --> 00:00:13,850 Speaker 1: markets and economies from DBS group research. I'm camera big 3 00:00:13,860 --> 00:00:17,650 Speaker 1: chief economist. Welcome to our 83rd episode. 4 00:00:18,000 --> 00:00:21,320 Speaker 1: Today's guest or I should say return guest is winning 5 00:00:21,320 --> 00:00:25,070 Speaker 1: money ceo of Singapore based Pan are key partners. A 6 00:00:25,070 --> 00:00:28,000 Speaker 1: few years ago, money transition from a career in traditional 7 00:00:28,000 --> 00:00:30,590 Speaker 1: by side fund management to setting up a firm that 8 00:00:30,590 --> 00:00:33,430 Speaker 1: seeks to redefine the notion of wealth and its creation. 9 00:00:33,460 --> 00:00:36,220 Speaker 1: We talked about all this and more in Kobe time 10 00:00:36,220 --> 00:00:40,390 Speaker 1: back in 2020 and episode 16. I think both panicky 11 00:00:40,390 --> 00:00:42,930 Speaker 1: partners and Kobe time have come a long way since then. 12 00:00:43,159 --> 00:00:46,070 Speaker 1: In preparation for this podcast, I went back and listened 13 00:00:46,070 --> 00:00:48,570 Speaker 1: to that episode to those of you who haven't please 14 00:00:48,570 --> 00:00:51,570 Speaker 1: do by all means. It's a terrific primer on a 15 00:00:51,570 --> 00:00:54,950 Speaker 1: company's purpose and when it really draws from history as 16 00:00:54,950 --> 00:00:58,480 Speaker 1: well as economic and finance theory to underscore that point. 17 00:00:58,490 --> 00:01:01,560 Speaker 1: And also in that podcast you will hear money delving 18 00:01:01,560 --> 00:01:05,500 Speaker 1: into sustainability driven fund management, focusing on returns and progress 19 00:01:05,500 --> 00:01:09,980 Speaker 1: on four forms of capital, human, social, environmental and financial. 20 00:01:10,170 --> 00:01:13,890 Speaker 1: In today's podcast we will focus on the third capital, 21 00:01:13,900 --> 00:01:18,760 Speaker 1: environmental and the investment side. Guys around that. With that 22 00:01:18,760 --> 00:01:22,190 Speaker 1: context in place me welcome back to Covid time. 23 00:01:22,200 --> 00:01:25,000 Speaker 2: Uh We're good to be back. It was like a 24 00:01:25,000 --> 00:01:26,220 Speaker 2: long time ago. 25 00:01:26,230 --> 00:01:31,190 Speaker 1: It was early days of Covid. Yeah, indeed. Um we 26 00:01:31,190 --> 00:01:34,800 Speaker 1: had you in the show I think just a little 27 00:01:34,800 --> 00:01:37,419 Speaker 1: more than two years ago. So what have you and 28 00:01:37,420 --> 00:01:39,740 Speaker 1: Panicky partner has been up to during that time. 29 00:01:40,260 --> 00:01:43,010 Speaker 2: Yeah, the last two years, uh as you know, it 30 00:01:43,010 --> 00:01:47,370 Speaker 2: seems like uh during Covid, uh you know, everything kind 31 00:01:47,370 --> 00:01:51,550 Speaker 2: of went silent and went very quiet, but I've got 32 00:01:51,550 --> 00:01:55,010 Speaker 2: to say that while, you know, while the humanity humanitarian 33 00:01:55,010 --> 00:01:58,830 Speaker 2: crisis that was happening unfolding both on a first one, 34 00:01:58,830 --> 00:02:01,520 Speaker 2: on a professional level, it impacted many, many people. And 35 00:02:01,520 --> 00:02:01,980 Speaker 2: and 36 00:02:02,210 --> 00:02:05,410 Speaker 2: you know, even at hockey partners, sadly we had our 37 00:02:05,410 --> 00:02:09,630 Speaker 2: own losses. Uh we had our co founder, christian droll 38 00:02:09,630 --> 00:02:11,690 Speaker 2: passed away in a tragic incident. 39 00:02:11,880 --> 00:02:15,460 Speaker 2: Um but you know, the team has come out of Covid, 40 00:02:15,470 --> 00:02:19,060 Speaker 2: you know, stronger. I'm proud that we've kind of delivered 41 00:02:19,060 --> 00:02:24,150 Speaker 2: on the the purpose that for which partners was built, 42 00:02:24,160 --> 00:02:29,900 Speaker 2: we've been sort of diligently executing on our purpose of 43 00:02:29,910 --> 00:02:34,550 Speaker 2: having a couple owners and users come together um to 44 00:02:34,550 --> 00:02:35,540 Speaker 2: make a better place a better 45 00:02:35,556 --> 00:02:39,895 Speaker 2: world. And then our own investing process has evolved since 46 00:02:39,895 --> 00:02:44,326 Speaker 2: the last time we spoke and we've incorporated purpose into 47 00:02:44,336 --> 00:02:48,196 Speaker 2: how our portfolio companies are judged. And I'm glad to 48 00:02:48,196 --> 00:02:50,365 Speaker 2: say that, you know, that that's been a sort of 49 00:02:50,366 --> 00:02:57,066 Speaker 2: a positive sort of, you could say progress for anarchy 50 00:02:57,076 --> 00:02:59,220 Speaker 2: since we last met as a b corp 51 00:02:59,232 --> 00:03:03,392 Speaker 2: We've been playing a very important role. We believe in 52 00:03:03,392 --> 00:03:08,942 Speaker 2: building a sustainable investing ecosystem in Singapore. We've had almost 53 00:03:08,942 --> 00:03:11,502 Speaker 2: 30 interns now with us over the last four years 54 00:03:11,502 --> 00:03:14,612 Speaker 2: since we started, uh and and we were having our 55 00:03:14,612 --> 00:03:19,172 Speaker 2: second Global Pandas Forum, so building and shaping the sustainable 56 00:03:19,172 --> 00:03:22,902 Speaker 2: investing ecosystem not only in Singapore, and Asia is very important. 57 00:03:23,200 --> 00:03:25,750 Speaker 2: And I think, you know, the last thing is and 58 00:03:25,750 --> 00:03:28,100 Speaker 2: where we are right now is that that the team 59 00:03:28,100 --> 00:03:33,060 Speaker 2: has actually broadened its investment focus from sustainable investing. And 60 00:03:33,060 --> 00:03:37,990 Speaker 2: now we're focusing and moving towards investing with environmental impact. 61 00:03:38,000 --> 00:03:41,700 Speaker 2: If you recall my team and myself have, 62 00:03:41,710 --> 00:03:44,070 Speaker 2: I've got and and spend a lot of time on 63 00:03:44,070 --> 00:03:48,350 Speaker 2: environmental capital, injustice call. And the team is now ready 64 00:03:48,360 --> 00:03:51,470 Speaker 2: to help our clients deliver on some of the environmental 65 00:03:51,470 --> 00:03:54,800 Speaker 2: ambitions that they have through their investments. So we're we're 66 00:03:54,800 --> 00:03:58,650 Speaker 2: we're nicely placed in a world that most probably is 67 00:03:58,650 --> 00:04:00,280 Speaker 2: not that nicely placed at the market. 68 00:04:01,120 --> 00:04:04,220 Speaker 1: Indeed, uh I I would like to devote today's podcast 69 00:04:04,220 --> 00:04:07,520 Speaker 1: instead in that context. And getting deep into the issue 70 00:04:07,520 --> 00:04:10,670 Speaker 1: of climate investing. So, let's start by you helping us 71 00:04:10,670 --> 00:04:14,390 Speaker 1: understand what is climate change in the context of markets 72 00:04:14,400 --> 00:04:16,300 Speaker 1: and what is climate investing? 73 00:04:16,940 --> 00:04:20,540 Speaker 2: Yeah. So, first climate change, in terms of the markets, 74 00:04:20,550 --> 00:04:23,540 Speaker 2: if you recall last time when we spoke to me, 75 00:04:23,610 --> 00:04:27,239 Speaker 2: we talked about externalities, you know, that was a big 76 00:04:27,240 --> 00:04:29,510 Speaker 2: part of the conversation we had was that many of 77 00:04:29,510 --> 00:04:33,890 Speaker 2: the externalities, human social environmental that were outsourced by companies. 78 00:04:33,890 --> 00:04:36,650 Speaker 2: And uh and investors just took it as it was 79 00:04:36,660 --> 00:04:40,320 Speaker 2: they were being internalized. One of the biggest externalities. The 80 00:04:40,320 --> 00:04:43,720 Speaker 2: mother of all negative environmental externalities is climate change. 81 00:04:43,730 --> 00:04:46,349 Speaker 2: Uh and I think that's where in the context of 82 00:04:46,350 --> 00:04:49,700 Speaker 2: the markets, climate changes could be seen as a failure 83 00:04:49,710 --> 00:04:55,230 Speaker 2: a failure of markets to incorporate internalize this very expensive 84 00:04:55,230 --> 00:04:59,380 Speaker 2: cost that is now not only cost for the current generation, 85 00:04:59,380 --> 00:05:01,860 Speaker 2: but for the future generations as well. And and I 86 00:05:01,860 --> 00:05:05,610 Speaker 2: think that's an important sort of uh you know, uh 87 00:05:05,620 --> 00:05:10,520 Speaker 2: realization that the world is having on various levels that 88 00:05:10,690 --> 00:05:14,460 Speaker 2: Climate change is a market failure and the markets are 89 00:05:14,460 --> 00:05:18,180 Speaker 2: now trying to sort of correct for it. And and listen, 90 00:05:18,180 --> 00:05:19,780 Speaker 2: I don't want to be too hard on the markets. 91 00:05:19,779 --> 00:05:22,210 Speaker 2: You and I have have been market participants for the last, 92 00:05:22,220 --> 00:05:25,380 Speaker 2: you know, almost 30 years now and we do believe 93 00:05:25,380 --> 00:05:26,920 Speaker 2: in the pot 94 00:05:26,960 --> 00:05:29,750 Speaker 2: the value that markets bring. But this whole challenge of 95 00:05:29,750 --> 00:05:34,880 Speaker 2: climate change, it is so broad and global in its nature. 96 00:05:34,890 --> 00:05:38,970 Speaker 2: Most other externalities can be very, let's say localized regionalized 97 00:05:38,970 --> 00:05:41,320 Speaker 2: and therefore the cost can be very focused and that 98 00:05:41,320 --> 00:05:43,680 Speaker 2: the markets can become a lot more effective. But I 99 00:05:43,680 --> 00:05:46,750 Speaker 2: think here the whole challenges that climate change, the costs 100 00:05:46,750 --> 00:05:48,970 Speaker 2: are global and also political in nature. 101 00:05:49,170 --> 00:05:52,790 Speaker 2: And that that is where climate change in in a 102 00:05:52,790 --> 00:05:56,110 Speaker 2: way has been a market failure and for good reasons, 103 00:05:56,110 --> 00:06:00,469 Speaker 2: it's just a very, very, very tough challenge to deal with. 104 00:06:00,650 --> 00:06:06,170 Speaker 2: Um if you now move towards climate investing climate investing, 105 00:06:06,180 --> 00:06:10,920 Speaker 2: it's relatively new. The concept of climate investing, there's no 106 00:06:10,920 --> 00:06:15,820 Speaker 2: clear definition of climate investing if you can in its 107 00:06:15,830 --> 00:06:21,229 Speaker 2: essence is basically investing to help with solutions around climate 108 00:06:21,230 --> 00:06:23,849 Speaker 2: change and if you go a bit deeper into it, 109 00:06:23,860 --> 00:06:24,200 Speaker 2: its base 110 00:06:24,214 --> 00:06:29,974 Speaker 2: basically investing to help decarbonization, you know, removing carbon, uh, 111 00:06:29,985 --> 00:06:33,714 Speaker 2: from the environment or reducing the output of carbon into 112 00:06:33,714 --> 00:06:37,235 Speaker 2: the environment and various other emissions. So that is where 113 00:06:37,235 --> 00:06:41,904 Speaker 2: climate investing has now uh, come to become a topic 114 00:06:41,904 --> 00:06:46,224 Speaker 2: of discussion on various levels, especially within the investing community. 115 00:06:46,235 --> 00:06:47,765 Speaker 2: It is all about 116 00:06:48,150 --> 00:06:51,830 Speaker 2: investors. Also, the good news is the investors are moving 117 00:06:51,830 --> 00:06:55,589 Speaker 2: from again risk and return to risk, return and impact. 118 00:06:55,600 --> 00:06:59,600 Speaker 2: So that way, climate investing is different from traditional investing here. 119 00:06:59,600 --> 00:07:02,669 Speaker 2: Many of the investors who are actually wanting to invest 120 00:07:02,680 --> 00:07:03,720 Speaker 2: for climate change 121 00:07:03,880 --> 00:07:07,600 Speaker 2: are coming with, with a, with a strong focus on 122 00:07:07,610 --> 00:07:14,690 Speaker 2: genuine environmental impact towards climate. If you look at climate investing, 123 00:07:14,700 --> 00:07:19,170 Speaker 2: I would say it's almost at its Gatorade moment, not 124 00:07:19,180 --> 00:07:22,890 Speaker 2: What I, what I, what I mean by that is that, 125 00:07:22,900 --> 00:07:26,040 Speaker 2: you know, if you look at sports drink drinks and 126 00:07:26,040 --> 00:07:29,370 Speaker 2: the phenomenal round sports drinks, right. The first sports drink 127 00:07:29,370 --> 00:07:33,660 Speaker 2: was Lucas aid in 1927 and that was almost athletes 128 00:07:33,660 --> 00:07:34,480 Speaker 2: that were elite 129 00:07:34,650 --> 00:07:38,970 Speaker 2: By 1965. When Gatorade came about, Gatorade was the first 130 00:07:38,980 --> 00:07:44,650 Speaker 2: sports drink that was sort of popularized for average athletes, uh, 131 00:07:44,660 --> 00:07:48,790 Speaker 2: for anyone doing any exercise. Gatorade became the go to 132 00:07:48,790 --> 00:07:52,300 Speaker 2: drink for their sports sort of, uh, sort of needs. 133 00:07:52,310 --> 00:07:55,320 Speaker 2: And I think where, that's where we are at now 134 00:07:55,320 --> 00:07:58,520 Speaker 2: with even climate investing. Gatorade at that time, when it 135 00:07:58,520 --> 00:08:01,770 Speaker 2: started in 1965, it actually was just sugar, salt 136 00:08:01,950 --> 00:08:04,770 Speaker 2: and lemon juice to make it taste a bit better. 137 00:08:04,780 --> 00:08:08,810 Speaker 2: But it's since then, you could say, as sport springs 138 00:08:08,810 --> 00:08:12,380 Speaker 2: have evolved and become isotonic and also very customized. We 139 00:08:12,380 --> 00:08:14,710 Speaker 2: are going to see that happen with climate investing as well, 140 00:08:14,710 --> 00:08:16,850 Speaker 2: but at this point in time, it's still very early 141 00:08:16,850 --> 00:08:19,880 Speaker 2: days when we're having this conversation in two years time, 142 00:08:19,880 --> 00:08:24,920 Speaker 2: when you're doing your 150th copy time, uh, some of 143 00:08:24,920 --> 00:08:26,860 Speaker 2: the questions you'll ask me, maybe my answers will be 144 00:08:26,860 --> 00:08:29,059 Speaker 2: slightly different because it is evolving very quickly, 145 00:08:29,790 --> 00:08:32,600 Speaker 1: so many as, you know, this is not necessarily a 146 00:08:32,600 --> 00:08:35,000 Speaker 1: problem in the circle that you and I live in. 147 00:08:35,000 --> 00:08:39,270 Speaker 1: But there is a huge community of climate skeptics out 148 00:08:39,270 --> 00:08:42,800 Speaker 1: there who will challenge the first notion that there's a 149 00:08:42,809 --> 00:08:47,150 Speaker 1: negative externality that manmade activities are causing the bulk of 150 00:08:47,150 --> 00:08:49,120 Speaker 1: climate change, that some of it is, you know, something 151 00:08:49,120 --> 00:08:52,470 Speaker 1: that's a constant through the history of this planet 152 00:08:52,640 --> 00:08:56,370 Speaker 1: now, to those skeptics, I mean, do we just ignore 153 00:08:56,370 --> 00:09:00,180 Speaker 1: them or there is a rational for even those people 154 00:09:00,190 --> 00:09:01,660 Speaker 1: to be part of climate investing? 155 00:09:02,309 --> 00:09:04,849 Speaker 2: Yeah, I think 156 00:09:05,770 --> 00:09:09,689 Speaker 2: if you want to sort of bring them on board, 157 00:09:09,700 --> 00:09:12,400 Speaker 2: you cannot ignore them. And I think what you need 158 00:09:12,400 --> 00:09:16,270 Speaker 2: to do is need to understand where that is coming from, right? 159 00:09:16,280 --> 00:09:18,929 Speaker 2: And I think that is one of the reasons why 160 00:09:18,929 --> 00:09:22,640 Speaker 2: climate change, climate investing is very politicized this whole issue 161 00:09:22,640 --> 00:09:26,500 Speaker 2: of carbon is very political, is exactly that, that a 162 00:09:26,500 --> 00:09:29,160 Speaker 2: lot of people who are skeptics are coming from either 163 00:09:29,160 --> 00:09:31,829 Speaker 2: a fear of this transition of 164 00:09:32,059 --> 00:09:37,449 Speaker 2: decarbonization, impacting and let's face it, decarbonization is gonna be 165 00:09:37,460 --> 00:09:43,160 Speaker 2: challenging and expensive from on an economy on companies and individuals. 166 00:09:43,170 --> 00:09:46,510 Speaker 2: And that's why we often talk about just transition. So, 167 00:09:46,510 --> 00:09:50,050 Speaker 2: you know, the word just transition is also become very topical, 168 00:09:50,059 --> 00:09:53,280 Speaker 2: especially in making sure that as we transition away from 169 00:09:53,280 --> 00:09:57,100 Speaker 2: fossil fuels and let's say, other agricultural practices that are 170 00:09:57,110 --> 00:09:58,150 Speaker 2: maybe not that 171 00:09:58,300 --> 00:10:01,390 Speaker 2: positive for the overall environment, that we do it in 172 00:10:01,390 --> 00:10:04,449 Speaker 2: a way that is just and fair for everyone, not 173 00:10:04,450 --> 00:10:08,130 Speaker 2: just the global south, but also for the developed countries 174 00:10:08,130 --> 00:10:10,710 Speaker 2: and the various industry that they're operating. And I think 175 00:10:10,710 --> 00:10:15,190 Speaker 2: the skeptics either coming from a lack of, let's say, 176 00:10:15,200 --> 00:10:17,560 Speaker 2: the knowledge around the science behind it, 177 00:10:17,580 --> 00:10:21,319 Speaker 2: Which I think now the skepticism is especially around climate 178 00:10:21,320 --> 00:10:25,390 Speaker 2: change is definitely a lot more reduced than it was, 179 00:10:25,400 --> 00:10:28,490 Speaker 2: let's say five years ago, 10 years ago. It's pretty 180 00:10:28,490 --> 00:10:31,860 Speaker 2: much an accepted fact. Now, the size and scale of 181 00:10:31,860 --> 00:10:34,189 Speaker 2: it can be questioned. The timing of it can be 182 00:10:34,190 --> 00:10:36,860 Speaker 2: questioned and the solutions are definitely going to be questioned 183 00:10:37,000 --> 00:10:41,170 Speaker 2: but I think it's the few that are left the 184 00:10:41,170 --> 00:10:45,290 Speaker 2: skeptics engaging with them, understanding what is their fear or 185 00:10:45,290 --> 00:10:47,829 Speaker 2: the concern that is the one way to deal with this. 186 00:10:48,970 --> 00:10:52,720 Speaker 1: So I think the two facts. money, what is number one, 187 00:10:52,730 --> 00:10:55,980 Speaker 1: the earth is warming and number two, there is a 188 00:10:55,980 --> 00:10:59,950 Speaker 1: linkage between human activities and global warming. Your point is 189 00:10:59,950 --> 00:11:02,410 Speaker 1: that I think there's not that much room for debate 190 00:11:02,410 --> 00:11:05,100 Speaker 1: on those who think the science is pretty solid in 191 00:11:05,100 --> 00:11:05,969 Speaker 1: these areas. 192 00:11:06,390 --> 00:11:09,540 Speaker 2: And even if let's say we are 193 00:11:10,179 --> 00:11:15,699 Speaker 2: exaggerating it by 50% this whole idea that temperatures going 194 00:11:15,700 --> 00:11:19,630 Speaker 2: to 2.5% is going to lead to serious, serious and 195 00:11:19,640 --> 00:11:22,510 Speaker 2: and you know, there's been some studies done that done 196 00:11:22,520 --> 00:11:25,069 Speaker 2: that if we don't, let's say no action is taken 197 00:11:25,080 --> 00:11:28,230 Speaker 2: by the end of the century, the global economy is 198 00:11:28,230 --> 00:11:31,770 Speaker 2: going to be lower than 18% and where it is now, 199 00:11:31,780 --> 00:11:35,170 Speaker 2: just the economic damage that can be done is massive 200 00:11:35,179 --> 00:11:37,469 Speaker 2: for those who want to put it in financial terms, 201 00:11:37,480 --> 00:11:38,500 Speaker 2: for those who do 202 00:11:38,510 --> 00:11:40,699 Speaker 2: I want to put, you know, the risk of climate 203 00:11:40,700 --> 00:11:43,420 Speaker 2: change into financial terms, They just need to see what's 204 00:11:43,420 --> 00:11:45,950 Speaker 2: happening around the world in terms of temperatures and climates 205 00:11:45,950 --> 00:11:48,240 Speaker 2: and all the rest. And let's say, even if what 206 00:11:48,240 --> 00:11:51,450 Speaker 2: we are doing now helps that incrementally, that should be 207 00:11:51,450 --> 00:11:55,010 Speaker 2: a positive for everyone. So I think making it a 208 00:11:55,010 --> 00:11:59,020 Speaker 2: binary event is gone. It's more, you know, it's it's 209 00:11:59,020 --> 00:12:02,090 Speaker 2: a scaling issue now for many people in terms of 210 00:12:02,090 --> 00:12:07,040 Speaker 2: time size effort, fear everything right there's a whole spectrum, 211 00:12:08,040 --> 00:12:11,550 Speaker 1: how big is climate investing now? And even before you 212 00:12:11,550 --> 00:12:13,490 Speaker 1: answer that question might follow up to the question is 213 00:12:13,490 --> 00:12:14,670 Speaker 1: why isn't it bigger? 214 00:12:14,679 --> 00:12:20,040 Speaker 2: Yeah. So climate investing, as I said, if you incorporate 215 00:12:20,050 --> 00:12:24,089 Speaker 2: in the broader context, it is about decarbonization all the efforts, right? 216 00:12:24,100 --> 00:12:27,810 Speaker 2: So if you add in all the government aspirations and 217 00:12:27,809 --> 00:12:31,310 Speaker 2: ambitions and promises, then already we were talking in the 218 00:12:31,309 --> 00:12:34,050 Speaker 2: trillions of dollars and even going forward, it's going to 219 00:12:34,050 --> 00:12:36,480 Speaker 2: be trillions of dollars of investments. 220 00:12:36,890 --> 00:12:41,440 Speaker 2: I think there was a Bloomberg uh article last year 221 00:12:41,440 --> 00:12:44,380 Speaker 2: that said that for us to get to net zero 222 00:12:44,390 --> 00:12:49,589 Speaker 2: by 2050 100 and $73 trillion have to be spent uh, 223 00:12:49,600 --> 00:12:50,810 Speaker 2: in climate investing. 224 00:12:50,960 --> 00:12:53,720 Speaker 2: Um, in the same vein, there was another research done 225 00:12:53,720 --> 00:12:57,790 Speaker 2: by another research house and, and they had just china 226 00:12:57,800 --> 00:13:01,050 Speaker 2: alone needs to spend 100 and $65 billion per annum 227 00:13:01,059 --> 00:13:05,810 Speaker 2: to get to their carbon neutral 2060 target. So the numeric, 228 00:13:05,809 --> 00:13:08,710 Speaker 2: from the government's perspective, a massive, even if you look 229 00:13:08,710 --> 00:13:11,939 Speaker 2: at the Eu green deal, that the latest, uh, you know, 230 00:13:11,940 --> 00:13:15,940 Speaker 2: the inflation reduction act of us, 231 00:13:15,955 --> 00:13:18,525 Speaker 2: there's big chunks of these that I have got climate 232 00:13:18,535 --> 00:13:21,475 Speaker 2: in it from the government's perspective. So if you look 233 00:13:21,475 --> 00:13:24,495 Speaker 2: at governments and even companies that are transitioning their own 234 00:13:24,495 --> 00:13:28,645 Speaker 2: models business models and the Capex that they're spending internally. 235 00:13:28,655 --> 00:13:32,095 Speaker 2: That's fairly big already. Now, that is one form of investing. 236 00:13:32,095 --> 00:13:34,525 Speaker 2: But for the purposes of today, let's say, what we're 237 00:13:34,525 --> 00:13:38,835 Speaker 2: talking about is private individuals, institutions investing in, let's say 238 00:13:38,845 --> 00:13:40,945 Speaker 2: carbon and, and, and, and climate 239 00:13:41,110 --> 00:13:47,420 Speaker 2: here. The dollar values are still very relatively low. Morningstar 240 00:13:47,420 --> 00:13:49,809 Speaker 2: had a number in april this year that there's roughly 241 00:13:49,809 --> 00:13:54,300 Speaker 2: 860 funds or E. T. S. That are out there 242 00:13:54,300 --> 00:13:58,100 Speaker 2: in the market that are climate, or probably called climate related, right? 243 00:13:58,110 --> 00:14:01,550 Speaker 2: And the total value in that is about $408 billion 244 00:14:01,559 --> 00:14:04,290 Speaker 2: according to Morningstar. And that number has doubled in the 245 00:14:04,300 --> 00:14:07,240 Speaker 2: in 2021. And it's about 7 to 8 times what 246 00:14:07,240 --> 00:14:08,890 Speaker 2: it was in 2017. 247 00:14:09,190 --> 00:14:12,059 Speaker 2: But 408 billion is not very big. It's still very small. 248 00:14:12,059 --> 00:14:15,920 Speaker 2: It's still very early days. And, and, and, you know, 249 00:14:15,929 --> 00:14:20,440 Speaker 2: you ask also, what is the reason it's being held back? 250 00:14:20,450 --> 00:14:23,660 Speaker 2: I think there's two bottlenecks here. One is, the first 251 00:14:23,660 --> 00:14:27,360 Speaker 2: is that, as I mentioned for climate investing, investors are 252 00:14:27,360 --> 00:14:30,890 Speaker 2: looking for environmental impact as much as they're looking for 253 00:14:30,900 --> 00:14:31,900 Speaker 2: risk adjusted returns, 254 00:14:31,915 --> 00:14:39,265 Speaker 2: the impact, environmental impact data that people, institutional investors, even 255 00:14:39,265 --> 00:14:44,795 Speaker 2: individual investors are having at this point in time is, uh, 256 00:14:44,805 --> 00:14:47,755 Speaker 2: still coming slowly. It's not 257 00:14:48,230 --> 00:14:53,260 Speaker 2: well identified and structured enough for these institutional investors who 258 00:14:53,260 --> 00:14:57,900 Speaker 2: are so used to their risk return frameworks to incorporate 259 00:14:57,900 --> 00:15:00,700 Speaker 2: that into it. So, I think the impact, the more 260 00:15:00,710 --> 00:15:03,670 Speaker 2: over time as we get more and more environmental data 261 00:15:03,680 --> 00:15:08,119 Speaker 2: that can support the impact that investments are making, the 262 00:15:08,130 --> 00:15:10,800 Speaker 2: more money we're going to see in into this space, Right? 263 00:15:10,810 --> 00:15:13,270 Speaker 2: And so that's the first bottle, like it's just not 264 00:15:13,270 --> 00:15:14,800 Speaker 2: enough data to prove that they 265 00:15:14,810 --> 00:15:19,240 Speaker 2: impact and investment is having, is there? That's one. The 266 00:15:19,250 --> 00:15:21,550 Speaker 2: second one, I would say, is also a lack of 267 00:15:21,550 --> 00:15:28,110 Speaker 2: genuine climate funds and investment vehicles, even though there were 268 00:15:28,120 --> 00:15:33,800 Speaker 2: 860 climate or climate related funds. And E. T. F. 269 00:15:33,810 --> 00:15:39,010 Speaker 2: As I mentioned very the whole spectrum, if you look 270 00:15:39,010 --> 00:15:41,390 Speaker 2: at the if you break them down and look at 271 00:15:41,830 --> 00:15:44,160 Speaker 2: the kind of climate of actions they were taking, 272 00:15:45,400 --> 00:15:49,100 Speaker 2: some could argue they were not impactful enough and therefore, 273 00:15:49,110 --> 00:15:51,940 Speaker 2: the investors were not sort of enamored with them. So 274 00:15:51,940 --> 00:15:56,290 Speaker 2: I think over time, as more and more genuine climate 275 00:15:56,290 --> 00:15:59,239 Speaker 2: funds come through people like myself and my team can 276 00:15:59,240 --> 00:16:04,979 Speaker 2: deliver environmental impact data points that are supportive of investing 277 00:16:04,980 --> 00:16:05,440 Speaker 2: in climate, 278 00:16:05,710 --> 00:16:08,360 Speaker 2: you will find that there's gonna be more, As I said, 279 00:16:08,370 --> 00:16:11,910 Speaker 2: we're at the Gatorade moment of climate investing, we need 280 00:16:11,910 --> 00:16:14,130 Speaker 2: to get to the isotonic very quickly and that will 281 00:16:14,130 --> 00:16:17,540 Speaker 2: happen in the coming years, so that they're the two 282 00:16:17,540 --> 00:16:21,190 Speaker 2: bottlenecks why climate investing, I think has still been a bit, uh, 283 00:16:21,200 --> 00:16:24,190 Speaker 2: you know, it's growing, but from a very low base 284 00:16:24,200 --> 00:16:25,600 Speaker 2: and will continue to grow. 285 00:16:26,300 --> 00:16:30,420 Speaker 1: So I'm sure you're aware that this whole E. S. G. 286 00:16:30,420 --> 00:16:33,900 Speaker 1: Complex and climate is of course the integral part of 287 00:16:33,900 --> 00:16:37,490 Speaker 1: that has received criticism over recent years. You know, the 288 00:16:37,490 --> 00:16:40,359 Speaker 1: greenwashing aspect, to your point that there are lots of 289 00:16:40,370 --> 00:16:45,070 Speaker 1: funds out there that are preferably investing in green activities, 290 00:16:45,080 --> 00:16:48,110 Speaker 1: but when one looks at the stocks that they hold, 291 00:16:48,120 --> 00:16:51,450 Speaker 1: it doesn't look that impressive. And then we have famously 292 00:16:51,450 --> 00:16:55,220 Speaker 1: had Elon musk of Tesla come out and criticized 293 00:16:55,900 --> 00:17:00,340 Speaker 1: because in certain perspective his companies are are not as 294 00:17:00,340 --> 00:17:02,550 Speaker 1: climate friendly as one would think, given that they make 295 00:17:02,550 --> 00:17:06,719 Speaker 1: electric cars and other you know, climate friendly products. So 296 00:17:06,730 --> 00:17:09,200 Speaker 1: gives a sense of where you stand on this issue 297 00:17:09,200 --> 00:17:12,470 Speaker 1: that some backlash about the E. S. G. Ratings, the 298 00:17:12,470 --> 00:17:16,270 Speaker 1: backlash around um you know, which companies should be, you 299 00:17:16,270 --> 00:17:18,409 Speaker 1: know rated highly or low and so on. 300 00:17:18,750 --> 00:17:23,590 Speaker 2: Yeah, it's interesting you say that Tamil because again, if 301 00:17:23,600 --> 00:17:26,500 Speaker 2: you know, listening back to our conversation two years ago, 302 00:17:26,510 --> 00:17:28,910 Speaker 2: one of the things that I predicted then was the 303 00:17:28,910 --> 00:17:33,660 Speaker 2: term E. S. G. May not even exist in 5 304 00:17:33,660 --> 00:17:37,270 Speaker 2: to 10 years time, Right? And more recently we saw some, 305 00:17:37,280 --> 00:17:40,879 Speaker 2: you know, articles on E. S. G. Being cut into 306 00:17:40,880 --> 00:17:43,790 Speaker 2: pieces and then this is what's happening now, right? So 307 00:17:43,790 --> 00:17:45,750 Speaker 2: it's actually I got it wrong, it's it was much 308 00:17:45,750 --> 00:17:47,159 Speaker 2: faster than I thought. 309 00:17:47,400 --> 00:17:51,130 Speaker 2: So, so the E. Part is being now separated, The 310 00:17:51,130 --> 00:17:53,910 Speaker 2: s the social side is being separated. G. Has always 311 00:17:53,910 --> 00:17:58,050 Speaker 2: been there. So I'm not surprised that there's been uh 312 00:17:58,060 --> 00:18:01,150 Speaker 2: you know, uh breakdown of E. S. G. Into its 313 00:18:01,150 --> 00:18:04,730 Speaker 2: components and rightly so, so 314 00:18:05,030 --> 00:18:08,610 Speaker 2: anything that is new and evolving is gonna get flak 315 00:18:08,609 --> 00:18:12,620 Speaker 2: is gonna get questioned. And and E. S. G. And E. S. 316 00:18:12,619 --> 00:18:16,780 Speaker 2: G funds and E. S. G. Investment strategies are rightly 317 00:18:16,780 --> 00:18:19,369 Speaker 2: being questioned, you know, and and and but only to 318 00:18:19,369 --> 00:18:21,760 Speaker 2: make them better. So, you know, if you look at 319 00:18:21,770 --> 00:18:26,220 Speaker 2: various regulators globally, again, just focusing on the E. S. G. 320 00:18:26,220 --> 00:18:28,520 Speaker 2: As an investment class, if you want to call it, 321 00:18:28,530 --> 00:18:30,200 Speaker 2: if you look at all 322 00:18:30,210 --> 00:18:33,730 Speaker 2: the regulators globally from europe with S. F. D. R. 323 00:18:33,730 --> 00:18:37,920 Speaker 2: Article 89 rules that have come in to even M. A. S. 324 00:18:37,930 --> 00:18:39,660 Speaker 2: I think a week and a half ago, two weeks 325 00:18:39,660 --> 00:18:44,330 Speaker 2: ago came out with new E. S. G. Fund disclosure requirements. H. K. M. A. 326 00:18:44,330 --> 00:18:47,690 Speaker 2: Had theirs last year Australia as it came up with 327 00:18:47,690 --> 00:18:52,720 Speaker 2: this last month as well. We are finding that investors 328 00:18:52,720 --> 00:18:55,370 Speaker 2: and invest in E. S. G. Strata, 329 00:18:55,380 --> 00:19:00,180 Speaker 2: even climate strategies are being monitored now as an investment 330 00:19:00,180 --> 00:19:04,780 Speaker 2: class and therefore being required to step up and no 331 00:19:04,780 --> 00:19:08,690 Speaker 2: longer can be sort of green washed and and you know, 332 00:19:08,700 --> 00:19:12,790 Speaker 2: rainbow wash as people often say. So, so this is 333 00:19:12,790 --> 00:19:14,830 Speaker 2: this is part and parcel of an evolution of an 334 00:19:14,840 --> 00:19:19,950 Speaker 2: investment class as a class that is required. I've been 335 00:19:19,960 --> 00:19:23,300 Speaker 2: uh you know, I welcome it. I think it's great, 336 00:19:23,310 --> 00:19:24,750 Speaker 2: it's making sure that 337 00:19:25,250 --> 00:19:29,020 Speaker 2: fund managers who are claiming that they are spending time 338 00:19:29,020 --> 00:19:32,670 Speaker 2: and effort like we are at an occupied doing and 339 00:19:32,670 --> 00:19:34,310 Speaker 2: spending time on uh 340 00:19:34,470 --> 00:19:38,230 Speaker 2: the environment side, social human capital side that that they 341 00:19:38,240 --> 00:19:41,810 Speaker 2: can prove it and and people who are not, or 342 00:19:41,810 --> 00:19:44,780 Speaker 2: have no intentions of that, they don't then participate in 343 00:19:44,780 --> 00:19:48,420 Speaker 2: the space. So it's a welcome space. I'm not fearful. 344 00:19:48,430 --> 00:19:52,070 Speaker 2: Most genuine E S. G, or e investors are not 345 00:19:52,070 --> 00:19:56,730 Speaker 2: fearful if anything welcome this. Um, so, yeah, it makes 346 00:19:56,730 --> 00:20:00,110 Speaker 2: us makes the whole process a lot more christmas and 347 00:20:00,109 --> 00:20:01,620 Speaker 2: correct and accurate. 348 00:20:01,960 --> 00:20:05,540 Speaker 1: Yeah, I mean, the part of the data that you 349 00:20:05,540 --> 00:20:09,790 Speaker 1: talk about, I think it is useful and and relevant 350 00:20:09,790 --> 00:20:11,379 Speaker 1: to measure companies 351 00:20:11,869 --> 00:20:15,919 Speaker 1: carbon footprint and the steps it's taking to ameliorate that 352 00:20:15,930 --> 00:20:20,390 Speaker 1: mixing that up with its human resource practices or diversity. Um, 353 00:20:20,400 --> 00:20:22,689 Speaker 1: I think, you know, we would all like every company 354 00:20:22,690 --> 00:20:25,060 Speaker 1: to be noble and do the right thing. But as 355 00:20:25,060 --> 00:20:27,470 Speaker 1: far as climate change is concerned that the environment doesn't 356 00:20:27,470 --> 00:20:30,690 Speaker 1: really care about your human resource practice or the diversity 357 00:20:30,690 --> 00:20:33,250 Speaker 1: for staff. So I think that, you know, as you said, 358 00:20:33,250 --> 00:20:35,720 Speaker 1: that it's getting sliced up in a way, it's probably 359 00:20:35,720 --> 00:20:37,400 Speaker 1: the right thing to do that. You know, if you 360 00:20:37,400 --> 00:20:39,730 Speaker 1: are an activist investor who really cares about 361 00:20:39,880 --> 00:20:42,050 Speaker 1: the s and the g part, it doesn't have to 362 00:20:42,050 --> 00:20:44,540 Speaker 1: be attached to E and he should not be like 363 00:20:44,540 --> 00:20:46,990 Speaker 1: a company like Tesla, which arguably is doing a lot 364 00:20:46,990 --> 00:20:50,810 Speaker 1: for reducing our carbon footprint should not be mixed up 365 00:20:50,810 --> 00:20:54,429 Speaker 1: with it. Again, you know, workplace environment and so on. Um, 366 00:20:54,440 --> 00:21:01,020 Speaker 1: so if I'm an investor, where should I focus on 367 00:21:01,020 --> 00:21:03,430 Speaker 1: as a climate or a carbon investor. 368 00:21:03,920 --> 00:21:06,950 Speaker 2: Yeah, so it's it's, uh, as I said, the whole 369 00:21:06,950 --> 00:21:12,220 Speaker 2: idea of climate investing is about decarbonization. Right? So, and 370 00:21:12,220 --> 00:21:16,840 Speaker 2: when people think of decarbonization, the go to, uh, let's 371 00:21:16,840 --> 00:21:19,730 Speaker 2: say focus areas for investors tends to be 372 00:21:19,880 --> 00:21:24,390 Speaker 2: the cost of carbon, uh, or the price of carbon itself. 373 00:21:24,400 --> 00:21:27,310 Speaker 2: And the second area that people go to its technology. 374 00:21:27,320 --> 00:21:30,200 Speaker 2: There are two things people think, okay, I can either 375 00:21:30,200 --> 00:21:33,350 Speaker 2: invest in carbon itself, the cost of carbon or I 376 00:21:33,350 --> 00:21:36,500 Speaker 2: can invest in technology that helps reduce the carbon 377 00:21:36,520 --> 00:21:39,450 Speaker 2: footprint and the carbon. But I think there's a third 378 00:21:39,450 --> 00:21:44,139 Speaker 2: element to that, which is maybe less talked about, and 379 00:21:44,140 --> 00:21:47,990 Speaker 2: I think very, very important without it, you cannot as 380 00:21:47,990 --> 00:21:50,930 Speaker 2: an investor make money on technology or on just pure 381 00:21:50,940 --> 00:21:55,350 Speaker 2: following carbon prices. And that is policy, uh, carbon policy 382 00:21:55,359 --> 00:21:58,260 Speaker 2: that countries have, as I said, and these carbon policies 383 00:21:58,260 --> 00:22:02,410 Speaker 2: of countries are still very national, uh, nationally focused 384 00:22:02,740 --> 00:22:05,679 Speaker 2: at best, regionally focused in the case of Eu, but 385 00:22:05,690 --> 00:22:09,879 Speaker 2: most of it is uh, nationally focused. Now, if I 386 00:22:09,890 --> 00:22:12,230 Speaker 2: to show you what I mean by this first, if 387 00:22:12,230 --> 00:22:14,960 Speaker 2: you look at carbon price. Uh, and, and the cost 388 00:22:14,960 --> 00:22:18,480 Speaker 2: of carbon. People often look at the carbon cost of 389 00:22:18,480 --> 00:22:22,040 Speaker 2: an industry as a proxy for the investment opportunity. And 390 00:22:22,040 --> 00:22:26,280 Speaker 2: that is mathematically, carbon price, times volume, volume is 391 00:22:26,530 --> 00:22:31,470 Speaker 2: for carbon is now identified underscore 123, you can do 392 00:22:31,470 --> 00:22:33,350 Speaker 2: it for a country, you can do it for a company, 393 00:22:33,350 --> 00:22:35,070 Speaker 2: you can do it for sector, you can even do 394 00:22:35,070 --> 00:22:37,960 Speaker 2: it for you? And I write carbon volumes is fine, 395 00:22:37,970 --> 00:22:42,020 Speaker 2: It's a carbon price. That is very broad spectrum. So 396 00:22:42,020 --> 00:22:45,840 Speaker 2: you have anywhere from carbon taxes of $2.50 in Mexico, 397 00:22:45,850 --> 00:22:48,890 Speaker 2: 230 in Sweden. You know, you can have carbon prices 398 00:22:48,890 --> 00:22:52,080 Speaker 2: that are under the compliance markets at 80 399 00:22:52,090 --> 00:22:55,640 Speaker 2: euros in europe where you can have under the East 400 00:22:55,640 --> 00:22:59,449 Speaker 2: Coast R. G. D. I initiative at 6 to $12. 401 00:22:59,460 --> 00:23:02,740 Speaker 2: So you have carbon prices that are very broad range 402 00:23:02,750 --> 00:23:05,220 Speaker 2: even though we know the volume. So people who are 403 00:23:05,220 --> 00:23:08,640 Speaker 2: looking at carbon cost in totality as an investment opportunity 404 00:23:08,640 --> 00:23:11,510 Speaker 2: or focus area, I think what they need to do 405 00:23:11,510 --> 00:23:14,420 Speaker 2: is they need to move it around and say, who 406 00:23:14,420 --> 00:23:17,490 Speaker 2: is willing to pay for the cost of the carbon, 407 00:23:17,490 --> 00:23:17,650 Speaker 2: is 408 00:23:18,140 --> 00:23:20,070 Speaker 2: what I mean by here is the people who are 409 00:23:20,070 --> 00:23:25,879 Speaker 2: paying for decarbonization are again, either the governments through their, 410 00:23:25,890 --> 00:23:31,389 Speaker 2: let's say, the eu, uh, carbon border adjustment mechanism for example, 411 00:23:31,390 --> 00:23:36,520 Speaker 2: or tax, uh, government taxes or even, let's say regulators 412 00:23:36,520 --> 00:23:40,149 Speaker 2: like the California Air Board, Air Resources Board, they're paying 413 00:23:40,150 --> 00:23:43,220 Speaker 2: for carbon decarbonization with their credit systems. 414 00:23:43,480 --> 00:23:49,080 Speaker 2: Even let's say, companies who have regulated carbon taxes, they 415 00:23:49,080 --> 00:23:51,530 Speaker 2: would be willing to pay for carbon offsets because they 416 00:23:51,530 --> 00:23:54,420 Speaker 2: know they've got taxes to pay for. So for for 417 00:23:54,420 --> 00:23:57,840 Speaker 2: for for most investors, I think one needs to look at, 418 00:23:57,850 --> 00:24:01,600 Speaker 2: who are the decarbonization payers, what is their size? What 419 00:24:01,600 --> 00:24:04,000 Speaker 2: is their ambition and what is their ability to pay? 420 00:24:04,270 --> 00:24:07,190 Speaker 2: Because you as a carbon investor don't want to be 421 00:24:07,190 --> 00:24:11,640 Speaker 2: relying on someone who is promising you a price for carbon, 422 00:24:11,640 --> 00:24:14,930 Speaker 2: who then disappears in six months time. And I'll give 423 00:24:14,930 --> 00:24:18,150 Speaker 2: you a live example of that. Is that if you 424 00:24:18,160 --> 00:24:22,639 Speaker 2: have a look just last week, uh, India decided that 425 00:24:22,640 --> 00:24:25,740 Speaker 2: they're not going to allow for any carbon offsets to 426 00:24:25,740 --> 00:24:26,580 Speaker 2: be exported 427 00:24:26,869 --> 00:24:27,500 Speaker 1: right. 428 00:24:27,510 --> 00:24:29,990 Speaker 2: That means all carbon offices in India are to be 429 00:24:29,990 --> 00:24:32,260 Speaker 2: kept in India. So anyone who is relying on the 430 00:24:32,260 --> 00:24:34,760 Speaker 2: carbon offsets or investing in carbon offsets from India to 431 00:24:34,760 --> 00:24:38,290 Speaker 2: be exported to the rest of the world. Now that's gone. 432 00:24:38,300 --> 00:24:41,920 Speaker 2: That opportunity is gone because guess what it was? The 433 00:24:41,920 --> 00:24:46,100 Speaker 2: policy around carbon dictated what the carbon market was doing 434 00:24:46,109 --> 00:24:47,290 Speaker 2: in India. 435 00:24:47,410 --> 00:24:50,470 Speaker 2: So that, that, that sort of reminded me. And by 436 00:24:50,470 --> 00:24:52,689 Speaker 2: the way, India was one of four countries that in 437 00:24:52,690 --> 00:24:56,580 Speaker 2: the last few months have decided to stop their allowing 438 00:24:56,580 --> 00:24:59,710 Speaker 2: their offsets to be exported. Indonesia being 11 of them 439 00:24:59,710 --> 00:25:04,800 Speaker 2: papa new guinea, another Uruguay another. So, so again, carbon 440 00:25:04,800 --> 00:25:08,040 Speaker 2: policies superseded any kind of carbon pricing that you could 441 00:25:08,040 --> 00:25:10,230 Speaker 2: get from a carbon market. Now, if you look at 442 00:25:10,230 --> 00:25:14,470 Speaker 2: technology again, technology in a 443 00:25:14,670 --> 00:25:19,450 Speaker 2: carbon policy vacuum does not work. Um, but where there's 444 00:25:19,450 --> 00:25:21,740 Speaker 2: a carbon policy or let's say carbon related or climate 445 00:25:21,740 --> 00:25:26,740 Speaker 2: related policy is to encourage technology. It can, it can flourish. 446 00:25:26,740 --> 00:25:29,910 Speaker 2: And a prime example of that is hydrogen electrolyzers. 447 00:25:30,060 --> 00:25:34,050 Speaker 2: We know hydrogen electrolyzers, whether it be from fossil fuels 448 00:25:34,060 --> 00:25:37,670 Speaker 2: or renewables have been working perfectly fine for the last 449 00:25:37,670 --> 00:25:40,920 Speaker 2: 100 years. But guess what? Green hydrogen now is considered 450 00:25:40,920 --> 00:25:45,119 Speaker 2: as one of the energy and sort of transition for 451 00:25:45,130 --> 00:25:48,709 Speaker 2: for for energy. And that is purely because of the 452 00:25:48,710 --> 00:25:51,369 Speaker 2: last decade and a half, we had some serious policy 453 00:25:51,369 --> 00:25:53,060 Speaker 2: incentives given to so 454 00:25:53,690 --> 00:25:56,119 Speaker 2: and to wind and other renewables that brought down the 455 00:25:56,119 --> 00:25:59,379 Speaker 2: prices of renewables, which then can be deployed into green 456 00:25:59,380 --> 00:26:03,900 Speaker 2: hydrogen or to create green hydrogen. So technology was there 457 00:26:03,900 --> 00:26:08,560 Speaker 2: for 100 years, we needed industrial policies to be ramped 458 00:26:08,560 --> 00:26:11,670 Speaker 2: up to bring the input price cost down. And now 459 00:26:11,680 --> 00:26:14,320 Speaker 2: there's plenty of also if you go to Korea who 460 00:26:14,320 --> 00:26:16,070 Speaker 2: wants to become the hydrogen hub of 461 00:26:16,080 --> 00:26:21,160 Speaker 2: the region, is industrial policy that is incentivizing technology to 462 00:26:21,160 --> 00:26:25,330 Speaker 2: be deployed. So to answer your question, when people are 463 00:26:25,330 --> 00:26:29,899 Speaker 2: looking to focus their investments, climate investing, just focusing on 464 00:26:29,910 --> 00:26:33,120 Speaker 2: carbon prices or focusing on technology by itself is not 465 00:26:33,119 --> 00:26:37,240 Speaker 2: good enough. One needs to focus on who are the 466 00:26:37,240 --> 00:26:39,090 Speaker 2: decarbonization payers 467 00:26:39,300 --> 00:26:42,990 Speaker 2: and who are reliable, what is their size and ability 468 00:26:42,990 --> 00:26:46,619 Speaker 2: to pay and then also what is the carbon policy 469 00:26:46,630 --> 00:26:49,300 Speaker 2: that is being deployed in different areas and different regions 470 00:26:49,300 --> 00:26:52,260 Speaker 2: and different sectors. That to me is another to go 471 00:26:52,260 --> 00:26:55,080 Speaker 2: to place for focus for carbon investors. 472 00:26:56,030 --> 00:26:58,630 Speaker 1: So it is very important given that, you know, we 473 00:26:58,630 --> 00:27:01,659 Speaker 1: are in this nation world, the gatorade moment, if you will, 474 00:27:01,670 --> 00:27:05,810 Speaker 1: that the policy environment is something that investors should keep 475 00:27:05,810 --> 00:27:08,420 Speaker 1: an eye on. So let's say, you know, go around 476 00:27:08,420 --> 00:27:10,240 Speaker 1: the world a little bit and talk a bit more 477 00:27:10,240 --> 00:27:13,460 Speaker 1: about the policy environment. So, you mentioned some degree of 478 00:27:13,470 --> 00:27:16,040 Speaker 1: climate nationalism out of India. 479 00:27:16,260 --> 00:27:19,750 Speaker 1: Um, I have seen the chinese do a lot of 480 00:27:19,750 --> 00:27:22,090 Speaker 1: work with the Europeans in recent years, whether it is 481 00:27:22,090 --> 00:27:27,220 Speaker 1: taxonomy or getting their emission trading system going by looking 482 00:27:27,220 --> 00:27:30,100 Speaker 1: at the experience, the Europeans and so on. And to 483 00:27:30,100 --> 00:27:33,639 Speaker 1: your point about the recent bill passed in the US 484 00:27:33,650 --> 00:27:37,280 Speaker 1: ostensibly called inflation reduction act, but really the focus there 485 00:27:37,280 --> 00:27:39,990 Speaker 1: seems to be used on climate change. So, are we 486 00:27:39,990 --> 00:27:43,930 Speaker 1: seeing a lot of tailwind with respect to climate regulation? 487 00:27:43,930 --> 00:27:45,959 Speaker 1: And are the regulations going in the right direction? 488 00:27:47,420 --> 00:27:48,410 Speaker 2: Um, 489 00:27:49,000 --> 00:27:52,420 Speaker 2: it's interesting Climate regulations have been going back and forth, 490 00:27:52,420 --> 00:27:56,230 Speaker 2: back and forth, back and forth in most countries, in europe, 491 00:27:56,230 --> 00:28:01,689 Speaker 2: europe has been in fairly much consistently in one direction. Yes, 492 00:28:01,690 --> 00:28:03,679 Speaker 2: the back and forth is much smaller, but if you 493 00:28:03,680 --> 00:28:06,880 Speaker 2: go to places like Australia or places like America, you've 494 00:28:06,880 --> 00:28:10,390 Speaker 2: seen big back and forth, right? And that will continue. Uh, 495 00:28:10,400 --> 00:28:12,820 Speaker 2: but if you look at somewhere like europe, I think 496 00:28:12,820 --> 00:28:14,890 Speaker 2: the consistency and the momentum has been made 497 00:28:15,150 --> 00:28:19,340 Speaker 2: and even with eu taxonomy and the green deal and 498 00:28:19,340 --> 00:28:21,250 Speaker 2: even some of the laws now that I mentioned in 499 00:28:21,430 --> 00:28:26,909 Speaker 2: the article 89 for investment vehicles, this consistency for climate investing, 500 00:28:26,910 --> 00:28:33,000 Speaker 2: climate change uh policy making carbon pricing the C. B. A. M. 501 00:28:33,000 --> 00:28:35,570 Speaker 2: That was brought into place. All of these things seem 502 00:28:35,570 --> 00:28:37,520 Speaker 2: to be inconsistent. But I think one thing people need 503 00:28:37,520 --> 00:28:40,400 Speaker 2: to keep in mind that europe is only 8 to 504 00:28:40,400 --> 00:28:40,800 Speaker 2: 9 per se 505 00:28:40,810 --> 00:28:45,140 Speaker 2: total carbon footprint so they can get to net zero 506 00:28:45,150 --> 00:28:50,489 Speaker 2: for themselves. That's only 9% of our problem. There's another 91% 507 00:28:50,490 --> 00:28:52,230 Speaker 2: that and a big part of that which is coming 508 00:28:52,230 --> 00:28:56,880 Speaker 2: out of Asia is still growing is still growing. Even 509 00:28:56,890 --> 00:29:01,170 Speaker 2: if some of the climate ambitions that were announced by 510 00:29:01,180 --> 00:29:05,230 Speaker 2: Asian countries through their nationally determined contributions. NBC's last year 511 00:29:05,230 --> 00:29:06,720 Speaker 2: in Glasgow cop 26 512 00:29:06,870 --> 00:29:10,970 Speaker 2: incrementally they were good incrementally they were positive even though 513 00:29:10,970 --> 00:29:15,120 Speaker 2: the let's say the more ambitious environmentalists would say was 514 00:29:15,120 --> 00:29:18,060 Speaker 2: not good enough but incrementally India saying they're going to 515 00:29:18,060 --> 00:29:22,430 Speaker 2: be net zero by 27 70 china saying they're gonna 516 00:29:22,430 --> 00:29:27,670 Speaker 2: be carbon neutral by let's say uh 2060 even Australia 517 00:29:27,680 --> 00:29:30,240 Speaker 2: coming back into the into the game and saying that 518 00:29:30,240 --> 00:29:32,780 Speaker 2: they're going to reduce under the new Labor Party they're 519 00:29:32,780 --> 00:29:33,920 Speaker 2: gonna they're going to reduce 520 00:29:33,930 --> 00:29:38,140 Speaker 2: their carbon emissions by 40% relative to 2005. These are 521 00:29:38,140 --> 00:29:42,880 Speaker 2: all positive incremental steps. So I think the the ambitions 522 00:29:42,890 --> 00:29:47,760 Speaker 2: for most countries have definitely gotten stronger where I think 523 00:29:47,760 --> 00:29:50,650 Speaker 2: there's a disconnect still especially in asia if we and 524 00:29:50,650 --> 00:29:53,610 Speaker 2: I'm going to just maybe focus on Asia where the 525 00:29:53,610 --> 00:29:57,340 Speaker 2: disconnect is is the policies that are gonna be there 526 00:29:57,340 --> 00:30:00,250 Speaker 2: to support and deliver some of these N. D. C. 527 00:30:00,250 --> 00:30:00,990 Speaker 2: S are not there. 528 00:30:01,160 --> 00:30:07,160 Speaker 2: There's a massive disconnect massive gap in industrial policy design tools, 529 00:30:07,170 --> 00:30:13,440 Speaker 2: frameworks that need to be created within Asia. Uh, and 530 00:30:13,450 --> 00:30:16,200 Speaker 2: my team and I, we believe in one of our 531 00:30:16,210 --> 00:30:19,459 Speaker 2: area focuses exactly on that is that we believe that 532 00:30:19,460 --> 00:30:22,390 Speaker 2: there's gonna be a tsunami of policies, tool 533 00:30:22,400 --> 00:30:26,830 Speaker 2: frameworks created in Asia to help them deliver on the NBC. 534 00:30:26,840 --> 00:30:30,510 Speaker 2: And they will take guidance and and let's say lessons 535 00:30:30,510 --> 00:30:36,160 Speaker 2: learnt from places like europe. Uh, and we already know 536 00:30:36,160 --> 00:30:38,750 Speaker 2: that the european, let's say carbon markets, the E. T. S. 537 00:30:38,750 --> 00:30:41,240 Speaker 2: Carbon markets have been around for a while now and 538 00:30:41,240 --> 00:30:43,640 Speaker 2: they're in their 3rd 4th version 539 00:30:43,650 --> 00:30:47,620 Speaker 2: And now they're finally, I think getting to a workable 540 00:30:47,620 --> 00:30:51,970 Speaker 2: model on 34 sectors. So I think the lessons learned 541 00:30:51,970 --> 00:30:54,840 Speaker 2: from Europe will be deployed in Asia that need to 542 00:30:54,840 --> 00:30:59,260 Speaker 2: be deployed fairly quickly this decade. If we won't have 543 00:30:59,260 --> 00:31:03,750 Speaker 2: any chance of getting to our climate change ambitions or 544 00:31:03,760 --> 00:31:04,890 Speaker 2: prevention of that. 545 00:31:05,480 --> 00:31:08,050 Speaker 1: So let's talk about that E. T. S. Issue a 546 00:31:08,050 --> 00:31:10,700 Speaker 1: little more because the chinese have also taken cues from 547 00:31:10,700 --> 00:31:14,380 Speaker 1: the Europeans and the various, you know, setbacks they had 548 00:31:14,390 --> 00:31:16,260 Speaker 1: in terms of getting the market to come up with 549 00:31:16,270 --> 00:31:20,300 Speaker 1: a useful set of information on carbon pricing to a 550 00:31:20,300 --> 00:31:22,820 Speaker 1: sort of top down the regulator sort of setting the 551 00:31:22,820 --> 00:31:26,110 Speaker 1: price and allowing the market to clear around that through volumes. Um, 552 00:31:26,120 --> 00:31:29,470 Speaker 1: so carbon markets, I mean, which has been around for 553 00:31:29,470 --> 00:31:34,580 Speaker 1: a while, Ikan 11 suggests that's the way to internalize externalities. 554 00:31:34,580 --> 00:31:35,390 Speaker 1: What's your view? 555 00:31:35,560 --> 00:31:41,240 Speaker 2: Yeah. So, again, instinctively you and I we've been trained 556 00:31:41,250 --> 00:31:44,810 Speaker 2: that let the let the markets do their job right? 557 00:31:44,820 --> 00:31:47,810 Speaker 2: And theoretically, a carbon market, what is its job, its 558 00:31:47,820 --> 00:31:51,030 Speaker 2: carbon market, by the way, let's take a step back for, 559 00:31:51,030 --> 00:31:51,730 Speaker 2: for our listeners, 560 00:31:51,740 --> 00:31:55,410 Speaker 2: there's two types of carbon markets. There's one the compliance market, 561 00:31:55,410 --> 00:31:58,230 Speaker 2: the regulated market that is controlled or regulated by either 562 00:31:58,230 --> 00:32:00,880 Speaker 2: a regulator, such as the, as I said, the California 563 00:32:00,880 --> 00:32:04,550 Speaker 2: Air Resource Board or by government such as the EU 564 00:32:04,560 --> 00:32:06,820 Speaker 2: doing the E U E T s. Right? That's the 565 00:32:06,820 --> 00:32:10,340 Speaker 2: compliance market, then there's the voluntary market and hear what 566 00:32:10,340 --> 00:32:12,440 Speaker 2: I will be talking about is more the compliance market 567 00:32:12,440 --> 00:32:15,410 Speaker 2: because the voluntary market is still very small, even though 568 00:32:15,410 --> 00:32:16,930 Speaker 2: it's growing, but it's still very small. 569 00:32:16,940 --> 00:32:17,780 Speaker 1: So 570 00:32:17,950 --> 00:32:18,320 Speaker 1: if 571 00:32:18,320 --> 00:32:21,590 Speaker 2: you look at the compliance market for carbon, its job 572 00:32:21,590 --> 00:32:26,250 Speaker 2: is to theoretically is to make sure that the price 573 00:32:26,250 --> 00:32:30,560 Speaker 2: of carbon is stable and slowly gradually increasing so that 574 00:32:30,560 --> 00:32:35,200 Speaker 2: it puts pressures on the polluters of carbon to incentivize 575 00:32:35,200 --> 00:32:38,190 Speaker 2: them to find ways to either reduce 576 00:32:38,470 --> 00:32:41,740 Speaker 2: their carbon footprint or to just get out of that 577 00:32:41,740 --> 00:32:44,450 Speaker 2: whole game altogether because it's going to become too costly 578 00:32:44,450 --> 00:32:47,260 Speaker 2: if carbon prices continue to go up. That's that's the 579 00:32:47,260 --> 00:32:49,110 Speaker 2: theoretical and that kind of makes sense. 580 00:32:49,460 --> 00:32:52,950 Speaker 2: The problem. And this is my again, my humble view 581 00:32:52,950 --> 00:32:56,160 Speaker 2: is that over the last 20 or so years that 582 00:32:56,160 --> 00:32:59,000 Speaker 2: we've had various forms of in europe E T. S 583 00:32:59,000 --> 00:33:03,480 Speaker 2: being the most the oldest form of carbon compliance market. 584 00:33:03,490 --> 00:33:08,390 Speaker 2: The problem is that we have not seen a stable rising, uh, 585 00:33:08,400 --> 00:33:13,230 Speaker 2: carbon price, let alone a reduction in carbon emissions by 586 00:33:13,230 --> 00:33:16,640 Speaker 2: the participants of those markets. So 587 00:33:17,600 --> 00:33:21,280 Speaker 2: That leads me to believe that there is some inherent problem. 588 00:33:21,290 --> 00:33:24,100 Speaker 2: We haven't sorted it out for 20 years. There's some 589 00:33:24,100 --> 00:33:28,340 Speaker 2: underlying challenges to the structure of those compliance markets that 590 00:33:28,340 --> 00:33:30,960 Speaker 2: need to be addressed. And and what are the challenges? 591 00:33:30,970 --> 00:33:34,200 Speaker 2: The challenges are that most compliance markets, when they get 592 00:33:34,200 --> 00:33:37,900 Speaker 2: set and put in place there and their prices have 593 00:33:37,900 --> 00:33:40,950 Speaker 2: not gone up. It is because the government or the 594 00:33:40,950 --> 00:33:42,100 Speaker 2: regulator has 595 00:33:42,520 --> 00:33:47,709 Speaker 2: given out free allowances, free credits to certain industries or 596 00:33:47,710 --> 00:33:51,550 Speaker 2: sectors who are participating in that market because their political, 597 00:33:51,830 --> 00:33:57,910 Speaker 2: because the voter bank, if if they didn't get those allowances, 598 00:33:57,920 --> 00:34:00,680 Speaker 2: the price or the carbon impact of that industry would 599 00:34:00,680 --> 00:34:04,680 Speaker 2: be so tremendous that the political parties bringing it on 600 00:34:04,680 --> 00:34:08,830 Speaker 2: to be out the next voting session. Right, So the 601 00:34:08,840 --> 00:34:13,339 Speaker 2: allowance is one of the problems, secondly, you also have 602 00:34:13,340 --> 00:34:15,540 Speaker 2: a lot of these allowances being allowed to be carried 603 00:34:15,540 --> 00:34:17,650 Speaker 2: forward for much longer than they should have. 604 00:34:17,660 --> 00:34:20,520 Speaker 2: So they kept the prices down. And that was another problem. 605 00:34:20,530 --> 00:34:22,830 Speaker 2: And then there was a little bit of, let's say, 606 00:34:22,840 --> 00:34:26,730 Speaker 2: voluntary carbon offsets. And again, I think what you were 607 00:34:26,730 --> 00:34:30,570 Speaker 2: referring to Tamar was that the E. U. E. T. S. 608 00:34:30,580 --> 00:34:32,710 Speaker 2: And one of the one of the reasons people blame 609 00:34:32,719 --> 00:34:35,640 Speaker 2: for its initial failure was there there was a significant 610 00:34:35,640 --> 00:34:38,470 Speaker 2: amount of carbon offsets that were being exported from china 611 00:34:38,469 --> 00:34:41,940 Speaker 2: into the EU. And and that was a problem that 612 00:34:41,940 --> 00:34:43,460 Speaker 2: is being rectified. And 613 00:34:43,480 --> 00:34:46,290 Speaker 2: that's why you are finding that the EU after 20 614 00:34:46,290 --> 00:34:49,790 Speaker 2: years of version three or four has finally got its E. U. E. T. 615 00:34:49,790 --> 00:34:52,580 Speaker 2: S kind of stable and they've got their own reserve 616 00:34:52,580 --> 00:34:56,410 Speaker 2: management system that is excluded all these offsets. So there 617 00:34:56,410 --> 00:34:59,840 Speaker 2: are three reasons why prices have not been stable and 618 00:34:59,840 --> 00:35:04,660 Speaker 2: not been good enough incentives for polluters to feel uncomfortable 619 00:35:04,670 --> 00:35:07,259 Speaker 2: because they've been able to get away either through free 620 00:35:07,260 --> 00:35:08,870 Speaker 2: allowances or prices staying. 621 00:35:09,469 --> 00:35:13,330 Speaker 2: The other problem with these markets, carbon markets or I 622 00:35:13,330 --> 00:35:17,680 Speaker 2: should say challenge uh structural challenges that the money that 623 00:35:17,680 --> 00:35:20,600 Speaker 2: the government's generate from these, right? Because every time the 624 00:35:20,600 --> 00:35:24,200 Speaker 2: government issues some of these credits for people, they supposed 625 00:35:24,200 --> 00:35:24,759 Speaker 2: to get 626 00:35:25,310 --> 00:35:30,650 Speaker 2: money that can be deployed in climate action. Right, uh europe, 627 00:35:30,650 --> 00:35:34,819 Speaker 2: for example, had $14 billion worth of credits issued in 628 00:35:34,820 --> 00:35:35,660 Speaker 2: the last round 629 00:35:36,210 --> 00:35:40,110 Speaker 2: that money doesn't and has not been fairly deployed uh 630 00:35:40,120 --> 00:35:45,029 Speaker 2: into pure climate action. Right? Even the allocation of these 631 00:35:45,040 --> 00:35:48,340 Speaker 2: monies in europe from the E. U. E. T. S. System. 632 00:35:48,350 --> 00:35:50,489 Speaker 2: If you look at the breakdown of the percentages that 633 00:35:50,489 --> 00:35:54,250 Speaker 2: went to countries within the EU that actually had no 634 00:35:54,250 --> 00:35:57,710 Speaker 2: climate ambitions versus those that were actually deploying climate ambitions. 635 00:35:57,719 --> 00:36:00,840 Speaker 2: It was disproportionate again, political 636 00:36:00,850 --> 00:36:05,589 Speaker 2: structures of Eu, same way in California, how the money 637 00:36:05,590 --> 00:36:10,120 Speaker 2: gets sort of what they call green pork, pork barrelling 638 00:36:10,130 --> 00:36:13,150 Speaker 2: is happening at the moment. So a lot of the 639 00:36:13,150 --> 00:36:17,790 Speaker 2: deployment is just out of whack from a revenue from 640 00:36:17,790 --> 00:36:21,180 Speaker 2: a revenue allocation perspective. So they're some of the challenges, 641 00:36:21,180 --> 00:36:24,730 Speaker 2: inherent challenges that you can find that in my view 642 00:36:24,730 --> 00:36:25,480 Speaker 2: of sort of 643 00:36:25,860 --> 00:36:29,430 Speaker 2: keeping carbon markets from delivering what you and I would 644 00:36:29,430 --> 00:36:34,319 Speaker 2: otherwise expect and and they're not going away, sadly, the 645 00:36:34,330 --> 00:36:37,330 Speaker 2: last reason why this doesn't work is that when you 646 00:36:37,330 --> 00:36:42,210 Speaker 2: put four or 56 sectors in to be covered by one, 647 00:36:42,210 --> 00:36:45,160 Speaker 2: let's say carbon market, let's say, you put transport, you 648 00:36:45,160 --> 00:36:47,219 Speaker 2: put uh 649 00:36:47,239 --> 00:36:52,469 Speaker 2: metals and mining, you poured aviation, you put industrial production, 650 00:36:52,480 --> 00:36:57,330 Speaker 2: all of these under a carbon electricity generation, all under 651 00:36:57,340 --> 00:37:00,210 Speaker 2: let's say one carbon market and say, okay, all you 652 00:37:00,210 --> 00:37:03,810 Speaker 2: for emitters in Country X, you're gonna be participating in 653 00:37:03,810 --> 00:37:07,410 Speaker 2: this carbon market, buy sell credits and your cap and 654 00:37:07,410 --> 00:37:11,840 Speaker 2: trade schemes. What ends up happening is that the sector 655 00:37:11,840 --> 00:37:17,180 Speaker 2: with the lowest carbon ambition becomes, if it's big enough 656 00:37:17,730 --> 00:37:20,710 Speaker 2: and can vote out the next government, they bring the 657 00:37:20,710 --> 00:37:24,010 Speaker 2: whole structure of the carbon market down. And that is again, 658 00:37:24,010 --> 00:37:28,719 Speaker 2: where the politics of carbon and its impact just make 659 00:37:28,719 --> 00:37:31,460 Speaker 2: for carbon markets to become less effective. 660 00:37:31,739 --> 00:37:36,810 Speaker 2: And that's why again, my humble opinion is that carbon 661 00:37:36,810 --> 00:37:38,900 Speaker 2: markets will be there, they will take longer than we 662 00:37:38,900 --> 00:37:42,220 Speaker 2: think to come up with a fair stable carbon price, 663 00:37:42,230 --> 00:37:45,350 Speaker 2: we should not completely discount them, they let them operate. 664 00:37:45,360 --> 00:37:49,000 Speaker 2: But in the in the meantime industrial policy and carbon 665 00:37:49,000 --> 00:37:54,950 Speaker 2: policies from governments targeted uh focused uh so that they 666 00:37:54,950 --> 00:37:57,890 Speaker 2: can deliver their NDC need to come into place. We 667 00:37:57,890 --> 00:37:59,989 Speaker 2: can't just wait for carbon markets to sort themselves 668 00:37:59,989 --> 00:38:00,290 Speaker 1: out 669 00:38:00,810 --> 00:38:05,080 Speaker 1: very very well taken. I think the you know, similar 670 00:38:05,090 --> 00:38:07,739 Speaker 1: sort of, you know, one step forward, one step backward 671 00:38:07,739 --> 00:38:11,150 Speaker 1: has been also characteristic of china's emissions trading system. They're 672 00:38:11,150 --> 00:38:13,719 Speaker 1: also trying to get it right, but it's pretty hard 673 00:38:13,719 --> 00:38:15,160 Speaker 1: to get it right at the first go. It seems 674 00:38:15,160 --> 00:38:15,540 Speaker 1: like 675 00:38:15,739 --> 00:38:19,850 Speaker 1: when I look at this inflation reduction act that the U. S. 676 00:38:19,860 --> 00:38:24,469 Speaker 1: Has now put in action and I compared with large 677 00:38:24,480 --> 00:38:27,810 Speaker 1: legislation of the past, whether it's the U. S. Or elsewhere, 678 00:38:27,820 --> 00:38:29,980 Speaker 1: I see a switching tactic and I want to hear 679 00:38:29,980 --> 00:38:31,800 Speaker 1: your view on this issue. It seems to me that 680 00:38:31,800 --> 00:38:34,750 Speaker 1: now for the reason that you mentioned that if you 681 00:38:34,760 --> 00:38:38,200 Speaker 1: do something very draconian, you're vulnerable in the next election cycle. 682 00:38:38,210 --> 00:38:41,770 Speaker 1: So the thinking behind the latest package out of the U. S. 683 00:38:41,770 --> 00:38:44,720 Speaker 1: Seems to be more carrot than six, 684 00:38:45,200 --> 00:38:49,060 Speaker 1: I give you incentives and tax credit to embrace climate 685 00:38:49,060 --> 00:38:52,340 Speaker 1: action as opposed to I penalize you for being a 686 00:38:52,340 --> 00:38:56,200 Speaker 1: large immature uh Do you think this is a student 687 00:38:56,200 --> 00:38:58,700 Speaker 1: has a greater chance of success in the previous regimes, 688 00:38:58,700 --> 00:39:01,530 Speaker 1: which seem to be more about, I'll tax you, penalize 689 00:39:01,530 --> 00:39:02,850 Speaker 1: you output quotas on you. 690 00:39:02,860 --> 00:39:07,700 Speaker 2: Yeah, so this is in the carbon policy, climate policy world, 691 00:39:07,700 --> 00:39:10,430 Speaker 2: there is no doubt a debate around this, that is 692 00:39:10,440 --> 00:39:13,900 Speaker 2: carrots better than sticks, right? Uh, 693 00:39:14,739 --> 00:39:17,230 Speaker 2: and, and you know, for everything I would say, there'll 694 00:39:17,230 --> 00:39:20,379 Speaker 2: be many people will say I'm wrong and they're right 695 00:39:20,380 --> 00:39:23,560 Speaker 2: on this. So take it for what it's worth from me. Uh, 696 00:39:23,570 --> 00:39:24,839 Speaker 2: carbon sticks have not 697 00:39:24,840 --> 00:39:25,580 Speaker 1: worked, 698 00:39:25,590 --> 00:39:29,819 Speaker 2: sorry, penalties have not worked, and they've not worked because 699 00:39:29,820 --> 00:39:31,750 Speaker 2: people have gotten away with it and then they've gotten 700 00:39:31,750 --> 00:39:34,750 Speaker 2: away with it for various reasons. Uh, 701 00:39:35,370 --> 00:39:38,200 Speaker 2: and again, I don't need to go into company country 702 00:39:38,200 --> 00:39:40,440 Speaker 2: regional reasons for them, but they haven't gone away from 703 00:39:40,450 --> 00:39:46,650 Speaker 2: carbon taxes or carbon rebates car, sorry, car 704 00:39:47,350 --> 00:39:51,300 Speaker 2: tax rebates because of carbon reduction. You know, that seems 705 00:39:51,300 --> 00:39:56,940 Speaker 2: to have been, have had a much better uh, and focused, uh, 706 00:39:56,950 --> 00:40:02,050 Speaker 2: result from my reading and therefore I think deploying that 707 00:40:02,060 --> 00:40:05,410 Speaker 2: rather than having to penalize people, but then also let 708 00:40:05,410 --> 00:40:08,790 Speaker 2: them have out through, let's say going and buying carbon 709 00:40:08,790 --> 00:40:11,540 Speaker 2: offsets from here there and everywhere, which people have been 710 00:40:11,540 --> 00:40:14,589 Speaker 2: doing that's one way to sort of sort of neutralize 711 00:40:14,590 --> 00:40:15,280 Speaker 2: your penalties 712 00:40:15,300 --> 00:40:19,109 Speaker 2: is going by. Again, one of my fears is that 713 00:40:19,120 --> 00:40:23,210 Speaker 2: if you keep on pushing the penalties, it incentivizes people 714 00:40:23,210 --> 00:40:25,230 Speaker 2: to go and find solutions to get out of it 715 00:40:25,230 --> 00:40:29,650 Speaker 2: and the voluntary carbon market, if left unchecked could easily 716 00:40:29,650 --> 00:40:35,340 Speaker 2: provide that out, You know, because regulators, regulators, but voluntary, uh, 717 00:40:35,350 --> 00:40:40,370 Speaker 2: and finance the finance sector is very good at securitizing things. So, 718 00:40:40,380 --> 00:40:43,169 Speaker 2: you know, give finance folks, you know, 719 00:40:43,250 --> 00:40:47,840 Speaker 2: opportunities, securitize the carbon offset and sell it to someone 720 00:40:47,840 --> 00:40:52,339 Speaker 2: who otherwise would be penalized, You're, you're playing into that space, 721 00:40:52,340 --> 00:40:56,090 Speaker 2: which I think can lead us to a fake transition 722 00:40:56,090 --> 00:41:00,880 Speaker 2: as opposed to transition. So I think having actually, incentives 723 00:41:00,880 --> 00:41:04,750 Speaker 2: and carrots is a much better approach then if you 724 00:41:04,750 --> 00:41:07,800 Speaker 2: just keep on penalizing, it's gonna be, it's gonna work 725 00:41:07,800 --> 00:41:10,230 Speaker 2: both ways. And some of the best policies are where 726 00:41:10,230 --> 00:41:11,130 Speaker 2: you do 727 00:41:11,210 --> 00:41:14,520 Speaker 2: say to people to industries that if you do x, y, z, 728 00:41:14,530 --> 00:41:17,690 Speaker 2: you will get priority when you're bidding or when you're 729 00:41:17,690 --> 00:41:21,900 Speaker 2: tendering in government projects and all the rest and those 730 00:41:21,900 --> 00:41:24,260 Speaker 2: folks who are not, by the way, you'll be excluded. 731 00:41:24,270 --> 00:41:26,710 Speaker 2: That's a penalty, Right? And that's a penalty where they 732 00:41:26,710 --> 00:41:28,470 Speaker 2: don't have to go and cheat too much for them 733 00:41:28,469 --> 00:41:30,319 Speaker 2: to sort of step up. They need to step up. 734 00:41:30,330 --> 00:41:33,490 Speaker 2: So there are ways to penalize people other than just throwing, 735 00:41:33,500 --> 00:41:39,160 Speaker 2: you know, penalties, taxes, sorry, uh, taxes and penalties on them. 736 00:41:39,790 --> 00:41:40,180 Speaker 2: Right. 737 00:41:40,180 --> 00:41:43,820 Speaker 1: I think, Yeah, absolutely. I mean, I think the tobacco 738 00:41:43,820 --> 00:41:48,000 Speaker 1: industry is a great cautionary tale about the limits of 739 00:41:48,010 --> 00:41:52,530 Speaker 1: penalties and taxes that can, you know, achieve the desired 740 00:41:52,530 --> 00:41:55,650 Speaker 1: goal versus, you know, maybe mass education and incentives and 741 00:41:55,650 --> 00:42:00,420 Speaker 1: so on. Um, so, okay, uh, beyond this issue of 742 00:42:00,430 --> 00:42:03,750 Speaker 1: the market failure and regulatory capture 743 00:42:04,200 --> 00:42:08,380 Speaker 1: and the carrot stick strategy, is there any major risk 744 00:42:08,380 --> 00:42:10,830 Speaker 1: in the area of climate investing that we haven't touched 745 00:42:10,840 --> 00:42:11,460 Speaker 1: on yet? 746 00:42:11,680 --> 00:42:16,460 Speaker 2: Yeah, I mean, climate investing is, again, as we've said, is, 747 00:42:16,469 --> 00:42:18,370 Speaker 2: is early days, so we're gonna see more and more 748 00:42:18,370 --> 00:42:21,860 Speaker 2: risks emerge as we go through. I think the very, 749 00:42:21,870 --> 00:42:26,110 Speaker 2: the first risk as climate investors do, we have enough time. 750 00:42:26,120 --> 00:42:29,080 Speaker 2: I think time is a big issue. Have, have we 751 00:42:29,080 --> 00:42:32,810 Speaker 2: left it too late? Right. And that is a discussion 752 00:42:32,820 --> 00:42:35,040 Speaker 2: to be had on a different sort of 753 00:42:35,200 --> 00:42:39,180 Speaker 2: podcast with much more well informed people on whether or 754 00:42:39,180 --> 00:42:42,490 Speaker 2: not we have left it too late because as I said, 755 00:42:42,500 --> 00:42:45,890 Speaker 2: climate investing is about risk return and impact. Will we 756 00:42:45,890 --> 00:42:48,770 Speaker 2: be able to deliver the impact that we're investing for 757 00:42:48,780 --> 00:42:49,870 Speaker 2: fast enough 758 00:42:50,200 --> 00:42:54,450 Speaker 2: is a big risk that anyone going into this space. 759 00:42:54,460 --> 00:42:56,359 Speaker 2: Will they come out of this in five years, 10 760 00:42:56,360 --> 00:43:00,020 Speaker 2: years time and say, but the impact happened, but it 761 00:43:00,020 --> 00:43:02,820 Speaker 2: was too late. So that's, that's a risk. And I 762 00:43:02,820 --> 00:43:07,060 Speaker 2: think that will take its time. Uh, the second risk 763 00:43:07,060 --> 00:43:09,480 Speaker 2: I think in climate investing. Okay, and this is not 764 00:43:09,480 --> 00:43:13,070 Speaker 2: a climate change mitigation adaptation that companies are doing this 765 00:43:13,070 --> 00:43:14,950 Speaker 2: is for investors, uh, 766 00:43:15,469 --> 00:43:21,450 Speaker 2: is the funds management industry or the providers of uh, 767 00:43:21,460 --> 00:43:27,210 Speaker 2: investment vehicles. My peers uh, that the whole greenwashing concept 768 00:43:27,210 --> 00:43:32,660 Speaker 2: and idea that you brought up providing genuine, uh, climate 769 00:43:32,660 --> 00:43:38,489 Speaker 2: investing vehicles, uh, with impact that is going to, that 770 00:43:38,489 --> 00:43:40,819 Speaker 2: is a big risk as well, that we don't do that, 771 00:43:40,830 --> 00:43:42,820 Speaker 2: we don't do it well enough, and people 772 00:43:43,140 --> 00:43:47,299 Speaker 2: kind of lose interest, or, as you rightly said earlier on, 773 00:43:47,310 --> 00:43:50,989 Speaker 2: you know, people start questioning it and therefore give up 774 00:43:50,989 --> 00:43:55,110 Speaker 2: on it. And I think the, the, the genuine climate 775 00:43:55,120 --> 00:44:01,550 Speaker 2: products investment vehicles with no greenwashing, giving confidence to investors 776 00:44:01,560 --> 00:44:04,760 Speaker 2: is the second biggest risk. And, and I'm glad that 777 00:44:04,760 --> 00:44:08,360 Speaker 2: that's being tackled on by various fronts, one with data 778 00:44:08,360 --> 00:44:10,480 Speaker 2: coming in much more so that me and my team 779 00:44:10,489 --> 00:44:12,379 Speaker 2: can come up and deliver, 780 00:44:12,550 --> 00:44:17,170 Speaker 2: uh, you know, impact numeric, but also the regulators making 781 00:44:17,170 --> 00:44:20,870 Speaker 2: sure that myself and my peers are kept held accountable 782 00:44:20,870 --> 00:44:25,030 Speaker 2: to what claims were making. So that's the second risk. 783 00:44:25,040 --> 00:44:27,530 Speaker 2: I think the third risk and that we touched upon 784 00:44:27,530 --> 00:44:32,580 Speaker 2: briefly was this, you know, for me, is again, the 785 00:44:32,580 --> 00:44:39,129 Speaker 2: ability of financial markets to securitize intangibles, you know, 786 00:44:39,160 --> 00:44:43,910 Speaker 2: especially when you have something that is hard to monitor, 787 00:44:43,910 --> 00:44:46,690 Speaker 2: as it is, which is carbon, whether carbon is being 788 00:44:46,700 --> 00:44:49,779 Speaker 2: admitted or not admitted, it's a sign that it's a science, 789 00:44:49,780 --> 00:44:53,690 Speaker 2: but it's not, it cannot sort of prove it in 790 00:44:53,690 --> 00:44:56,830 Speaker 2: some ways, uh, if something cannot be sort of, let's 791 00:44:56,830 --> 00:45:00,930 Speaker 2: say monitored, uh, that easily, and only a few people 792 00:45:00,930 --> 00:45:04,560 Speaker 2: are measuring it, and no one's regulating it, but someone's 793 00:45:04,570 --> 00:45:05,759 Speaker 2: securitizing it, 794 00:45:06,140 --> 00:45:11,360 Speaker 2: you're leading to potentially a challenge for climate investing and 795 00:45:11,360 --> 00:45:15,950 Speaker 2: the financial securitization of carbon. And again, we go back 796 00:45:15,950 --> 00:45:18,760 Speaker 2: to the whole climate investing is, what is the price 797 00:45:18,760 --> 00:45:21,520 Speaker 2: of carbon? How do we incorporate it into our systems 798 00:45:21,530 --> 00:45:26,970 Speaker 2: if we financially securitized carbon in a way, which is 799 00:45:26,969 --> 00:45:29,810 Speaker 2: done with the view that this is for just transition, 800 00:45:30,180 --> 00:45:33,880 Speaker 2: but it ends up being a fake transition because one 801 00:45:33,880 --> 00:45:38,280 Speaker 2: we didn't deliver on those, you know, carbon reduction targets 802 00:45:38,280 --> 00:45:41,530 Speaker 2: that this was supposed to do. And also we took 803 00:45:41,530 --> 00:45:44,980 Speaker 2: many people down the, you know, the wrong path, show 804 00:45:44,980 --> 00:45:50,129 Speaker 2: them ways to sort of claim offsets when they weren't there. 805 00:45:50,140 --> 00:45:50,600 Speaker 2: That is 806 00:45:50,610 --> 00:45:54,110 Speaker 2: something that can be damaging not only to the investing, 807 00:45:54,110 --> 00:45:58,440 Speaker 2: climate investing, uh, universe, but also to the, you know, 808 00:45:58,450 --> 00:46:01,320 Speaker 2: let's say to the to those people who for whom 809 00:46:01,320 --> 00:46:05,080 Speaker 2: we're trying to get just transition right, whether that be 810 00:46:05,080 --> 00:46:07,710 Speaker 2: the indigenous people who are living off the land and 811 00:46:07,710 --> 00:46:11,040 Speaker 2: and trying to sort of benefit from that, 812 00:46:11,050 --> 00:46:16,049 Speaker 2: and also support with legitimate carbon offsets. If we, for example, 813 00:46:16,050 --> 00:46:18,800 Speaker 2: tell them that the price of carbon offset is X, Y, Z. 814 00:46:18,800 --> 00:46:21,180 Speaker 2: And then it turns out that five years later, they've 815 00:46:21,180 --> 00:46:23,810 Speaker 2: given up all their other activities and focused on this, 816 00:46:23,820 --> 00:46:26,540 Speaker 2: only to find out that that those offsets are not 817 00:46:26,540 --> 00:46:30,280 Speaker 2: being internationally accepted and that the price is not 100 bucks, 818 00:46:30,280 --> 00:46:31,480 Speaker 2: it's like not even a buck 819 00:46:31,840 --> 00:46:34,660 Speaker 2: that's going to become not a just transition for them, 820 00:46:34,670 --> 00:46:36,969 Speaker 2: it's gonna be a costly transition for them. So I 821 00:46:36,969 --> 00:46:39,980 Speaker 2: think that's my third and last sort of risk is 822 00:46:39,980 --> 00:46:42,830 Speaker 2: that how do we do, how do we make sure 823 00:46:42,840 --> 00:46:45,469 Speaker 2: that in, you know, as we move towards a just 824 00:46:45,469 --> 00:46:47,589 Speaker 2: transition and create these carbon 825 00:46:47,719 --> 00:46:50,739 Speaker 2: markets, especially the voluntary ones that we do it in 826 00:46:50,739 --> 00:46:54,490 Speaker 2: a way that does not need to affect transition for ourselves. 827 00:46:54,489 --> 00:46:58,900 Speaker 2: And even for, let's say the people who really we 828 00:46:58,900 --> 00:47:02,550 Speaker 2: should be benefiting in the process. So that's the risk 829 00:47:02,550 --> 00:47:03,590 Speaker 2: to climate investing 830 00:47:04,140 --> 00:47:09,100 Speaker 1: right now. There are sobering ones, no doubt about it. Um, 831 00:47:09,110 --> 00:47:13,339 Speaker 1: now your mandate is global, you look at sectors and 832 00:47:13,340 --> 00:47:15,960 Speaker 1: companies all over the world, but you're based in Asia, 833 00:47:15,960 --> 00:47:19,900 Speaker 1: your investor base I think is largely asian. And you 834 00:47:19,900 --> 00:47:23,050 Speaker 1: do look at a lot of asian companies. Um, so 835 00:47:23,060 --> 00:47:26,189 Speaker 1: give us a sense of the state of the war 836 00:47:26,190 --> 00:47:27,899 Speaker 1: against climate change in Asia. 837 00:47:28,100 --> 00:47:33,560 Speaker 2: Mm. So if you look at climate change in Asia again, uh, 838 00:47:33,570 --> 00:47:37,279 Speaker 2: the approach we've taken at porcupine is there's there's a two, 839 00:47:37,290 --> 00:47:40,830 Speaker 2: it's a two pronged approach, a bottom up approach of 840 00:47:40,830 --> 00:47:42,520 Speaker 2: looking at companies and that the other one is a 841 00:47:42,520 --> 00:47:45,140 Speaker 2: top down approach. If I start with the top down approach, 842 00:47:45,140 --> 00:47:47,080 Speaker 2: as I mentioned earlier on, as we, as we were 843 00:47:47,080 --> 00:47:54,890 Speaker 2: discussing that asian countries, climate ambitions becoming better and better, uh, 844 00:47:54,900 --> 00:47:59,160 Speaker 2: Incrementally with most companies having in cop 26 come out 845 00:47:59,160 --> 00:48:05,610 Speaker 2: with incrementally better targets related to climate and also separately 846 00:48:05,610 --> 00:48:08,450 Speaker 2: on some environmental issues as well, but climate definitely they've 847 00:48:08,450 --> 00:48:12,370 Speaker 2: gotten better isn't good enough. Many people would argue not 848 00:48:12,370 --> 00:48:14,250 Speaker 2: good enough. But to me I'm one of those, I 849 00:48:14,250 --> 00:48:18,120 Speaker 2: take the incremental change as a positive start, the absolute 850 00:48:18,130 --> 00:48:21,690 Speaker 2: will will catch up hopefully over time. But 851 00:48:21,980 --> 00:48:24,770 Speaker 2: when we look at it from the policy perspective to 852 00:48:24,770 --> 00:48:28,230 Speaker 2: support those NBCS, then there's a massive gap as I said, 853 00:48:28,239 --> 00:48:30,820 Speaker 2: you know, in what they're trying to achieve under the N. D. C. 854 00:48:30,820 --> 00:48:33,489 Speaker 2: S and what their policies are in place. So I 855 00:48:33,489 --> 00:48:39,470 Speaker 2: think ASIA's impact in terms of helping the global climate 856 00:48:39,469 --> 00:48:43,050 Speaker 2: change challenge is very much from a top down perspective 857 00:48:43,050 --> 00:48:45,940 Speaker 2: going to be driven by whether or not the countries 858 00:48:45,940 --> 00:48:46,509 Speaker 2: whether be India 859 00:48:46,520 --> 00:48:51,890 Speaker 2: china Australia and Singapore. Everyone in in Asia are actually 860 00:48:51,890 --> 00:48:57,200 Speaker 2: delivering the policies to support uh their specific NDC s. 861 00:48:57,210 --> 00:48:59,880 Speaker 2: So that's one way that one needs to map out 862 00:48:59,890 --> 00:49:02,700 Speaker 2: ASia to see what's happening at the margin. Are they 863 00:49:02,700 --> 00:49:06,339 Speaker 2: doing the right thing? Just looking at targets by themselves? 864 00:49:06,350 --> 00:49:09,250 Speaker 2: Maybe not good enough. You've got to follow the follow 865 00:49:09,250 --> 00:49:11,060 Speaker 2: follow down to the policies 866 00:49:11,500 --> 00:49:13,690 Speaker 2: if you look at it from a bottom up perspective. 867 00:49:13,700 --> 00:49:17,770 Speaker 2: Uh my team and I over the last uh you know, 868 00:49:17,770 --> 00:49:20,660 Speaker 2: a couple of years since we last we last spoke 869 00:49:20,670 --> 00:49:25,300 Speaker 2: we've spent time creating our own climate and environmental frameworks 870 00:49:25,300 --> 00:49:27,509 Speaker 2: and one of them is our climate mapping framework and 871 00:49:27,510 --> 00:49:31,090 Speaker 2: we've also got a database of about 450 asian companies 872 00:49:31,100 --> 00:49:34,399 Speaker 2: that either have have a C. D. P. Or S. B. T. I. 873 00:49:34,400 --> 00:49:35,750 Speaker 2: Or transition pathway in it 874 00:49:35,840 --> 00:49:41,089 Speaker 2: based data that we have focused on and with the 875 00:49:41,090 --> 00:49:44,990 Speaker 2: aim that we want to see companies and their industries 876 00:49:45,000 --> 00:49:49,330 Speaker 2: and what is their actual climate footprint or environmental footprint? 877 00:49:49,340 --> 00:49:51,360 Speaker 2: Is that high or low? And then we want to 878 00:49:51,360 --> 00:49:55,730 Speaker 2: map it against. Are these companies actually making an effort 879 00:49:55,739 --> 00:49:59,030 Speaker 2: to reduce the climate or the carbon footprint or the 880 00:49:59,030 --> 00:50:05,569 Speaker 2: environmental footprint? And when we overlay the company country policy, 881 00:50:05,950 --> 00:50:11,190 Speaker 2: let's say initiatives onto our mapping of the company and 882 00:50:11,190 --> 00:50:16,219 Speaker 2: sector plans, it gives us some very interesting sort of 883 00:50:16,230 --> 00:50:19,700 Speaker 2: picture of on the ground what is happening from a 884 00:50:19,700 --> 00:50:23,549 Speaker 2: company and an investor's perspective. There are and and you know, 885 00:50:23,550 --> 00:50:26,290 Speaker 2: some of this is going to be a bit of 886 00:50:26,290 --> 00:50:30,130 Speaker 2: a going to be sort of hashed out in our 887 00:50:30,140 --> 00:50:32,080 Speaker 2: we have a asian environmental 888 00:50:32,090 --> 00:50:36,779 Speaker 2: Action fund planned in the coming months, many of the 889 00:50:36,780 --> 00:50:40,320 Speaker 2: companies in there will be a result of this analysis 890 00:50:40,320 --> 00:50:43,390 Speaker 2: that we're doing to show what kind of environmental impact 891 00:50:43,400 --> 00:50:45,410 Speaker 2: that they can make. An Asian companies can have a 892 00:50:45,410 --> 00:50:47,920 Speaker 2: massive environmental impact. I'll just give you an example of 893 00:50:47,920 --> 00:50:52,300 Speaker 2: one asian company, one company in Japan won't name the 894 00:50:52,300 --> 00:50:58,219 Speaker 2: company but its scope three carbon emission is 435 million tons, 895 00:50:58,440 --> 00:50:59,010 Speaker 1: four 896 00:50:59,010 --> 00:51:01,839 Speaker 2: 135 million tons. Right? And by the way the second 897 00:51:01,840 --> 00:51:06,620 Speaker 2: and that's scope three there are we have other asian 898 00:51:06,620 --> 00:51:09,410 Speaker 2: companies who scope one and two 899 00:51:09,790 --> 00:51:13,680 Speaker 2: Are about 250 million tons. Right? So we're talking massive 900 00:51:13,680 --> 00:51:16,160 Speaker 2: and to put it in perspective the whole of Japan's 901 00:51:16,160 --> 00:51:19,529 Speaker 2: carbon emissions is about one billion tons. So 435 million 902 00:51:19,530 --> 00:51:22,859 Speaker 2: tons from one company, that's this code three. So if 903 00:51:22,860 --> 00:51:26,540 Speaker 2: you can get companies like that on your radar but 904 00:51:26,550 --> 00:51:31,040 Speaker 2: also with very strong, let's say environmental actions in place 905 00:51:31,050 --> 00:51:33,250 Speaker 2: as an investor that impact 906 00:51:33,530 --> 00:51:37,840 Speaker 2: becomes easier to achieve because the size and scale in 907 00:51:37,840 --> 00:51:41,989 Speaker 2: Asia of the carbon footprint or the climate footprint is 908 00:51:41,989 --> 00:51:45,750 Speaker 2: massive compared to some of the developed market companies that 909 00:51:45,760 --> 00:51:47,840 Speaker 2: most people are used to investing in. So I think 910 00:51:47,840 --> 00:51:52,140 Speaker 2: ASia presents some great opportunities to help the fine on 911 00:51:52,140 --> 00:51:56,140 Speaker 2: climate change but how you go about doing it, you've 912 00:51:56,140 --> 00:51:59,140 Speaker 2: got to be very, very careful and sensible about it, 913 00:52:00,239 --> 00:52:03,610 Speaker 1: wow. Yeah, so those numbers are kind of in a 914 00:52:03,610 --> 00:52:06,430 Speaker 1: way exciting because then you sort of understood the point 915 00:52:06,430 --> 00:52:07,560 Speaker 1: that how much 916 00:52:07,570 --> 00:52:08,490 Speaker 2: potential 917 00:52:08,489 --> 00:52:13,230 Speaker 1: AsIA has in contributing to the global aim towards, you know, 918 00:52:13,230 --> 00:52:14,129 Speaker 1: net zero. 919 00:52:14,430 --> 00:52:21,029 Speaker 1: Um, what about financial returns back on episode 16 when you, 920 00:52:21,040 --> 00:52:23,760 Speaker 1: you have visits that the companies you select for your 921 00:52:23,760 --> 00:52:27,440 Speaker 1: investment criteria will prosper over companies that are not prepared 922 00:52:27,450 --> 00:52:30,630 Speaker 1: for climate change because of the regulation and the taxes 923 00:52:30,630 --> 00:52:31,320 Speaker 1: that were coming? 924 00:52:31,590 --> 00:52:33,420 Speaker 1: Well the last two years as we have discussed, we 925 00:52:33,420 --> 00:52:36,690 Speaker 1: have seen numerous announcements on carbon taxes and border adjustment 926 00:52:36,690 --> 00:52:41,400 Speaker 1: tax emission targets, etcetera. So the thesis that companies that 927 00:52:41,400 --> 00:52:44,950 Speaker 1: are ahead of the game will prosper more and provide 928 00:52:44,960 --> 00:52:47,160 Speaker 1: better returns. Has it panned out? 929 00:52:47,480 --> 00:52:51,320 Speaker 2: Yeah, it's a good question. So in the same uh, 930 00:52:51,330 --> 00:52:54,460 Speaker 2: call back in 2020, 1 thing I did say is 931 00:52:54,460 --> 00:53:00,450 Speaker 2: that for companies that incorporating human social environmental capital into 932 00:53:00,450 --> 00:53:05,419 Speaker 2: their business models right ahead of their peers, the financial 933 00:53:05,430 --> 00:53:09,550 Speaker 2: results or even the impact results should be a 3-5 934 00:53:09,550 --> 00:53:13,259 Speaker 2: year game. And so from that perspective, I think for 935 00:53:13,270 --> 00:53:16,150 Speaker 2: many of our companies, the jury is still out, both 936 00:53:16,670 --> 00:53:19,480 Speaker 2: actually on the impact side were convinced that they've been 937 00:53:19,480 --> 00:53:22,860 Speaker 2: delivering on their human social environmental capital progress on the 938 00:53:22,860 --> 00:53:25,710 Speaker 2: financial side, the jury's still out for for many of 939 00:53:25,710 --> 00:53:27,830 Speaker 2: the companies in our portfolio. 940 00:53:28,310 --> 00:53:31,040 Speaker 2: If I was to break down our portfolio companies into 941 00:53:31,040 --> 00:53:35,790 Speaker 2: the e part, the part there is definitely our companies 942 00:53:35,800 --> 00:53:39,399 Speaker 2: who have climate or environment as a tailwind in their 943 00:53:39,400 --> 00:53:44,259 Speaker 2: business models. Examples being in the space of legislature, back systems, 944 00:53:44,270 --> 00:53:47,739 Speaker 2: the heating, ventilation, air conditioning, uh, 945 00:53:48,170 --> 00:53:52,870 Speaker 2: uh, sector or whether it be the electric electric electrification industry. 946 00:53:52,880 --> 00:53:55,270 Speaker 2: They definitely in the last two or three years since 947 00:53:55,270 --> 00:53:59,090 Speaker 2: we've spoken have delivered better than their own past performance 948 00:53:59,100 --> 00:54:00,650 Speaker 2: and also against their peers. 949 00:54:00,820 --> 00:54:05,590 Speaker 2: Uh, it's interesting says even in this, even in this, 950 00:54:05,600 --> 00:54:08,380 Speaker 2: let's say downturn that we've had the global recession fears 951 00:54:08,380 --> 00:54:10,390 Speaker 2: that have been created in the last let's say six 952 00:54:10,390 --> 00:54:14,320 Speaker 2: months time. The cyclicality and the nature of these companies 953 00:54:14,320 --> 00:54:16,420 Speaker 2: being part of the global cycle has come through, they 954 00:54:16,420 --> 00:54:19,860 Speaker 2: have they have suffered as well. But the there when 955 00:54:19,860 --> 00:54:23,370 Speaker 2: you listen to them and speak to them, they're there, 956 00:54:23,370 --> 00:54:28,980 Speaker 2: you could say, uh, outlook is better than most. Don't 957 00:54:28,980 --> 00:54:30,410 Speaker 2: have the tail winds of 958 00:54:30,690 --> 00:54:33,890 Speaker 2: environment behind them. So it gives us conviction and strength 959 00:54:33,900 --> 00:54:37,910 Speaker 2: in our view that having tail winds of climate solutions 960 00:54:37,910 --> 00:54:41,160 Speaker 2: and environmental is a good tailwind to have. So, I 961 00:54:41,160 --> 00:54:45,800 Speaker 2: think the financial return from that perspective, we are confident of. 962 00:54:45,810 --> 00:54:48,140 Speaker 2: One of the things that again I would like to 963 00:54:48,140 --> 00:54:51,360 Speaker 2: mention is that when we started this conversation is that 964 00:54:51,380 --> 00:54:55,400 Speaker 2: anyone who's coming coming into climate investing right, they're already 965 00:54:55,400 --> 00:54:59,290 Speaker 2: coming in with with this new mindset that they're looking 966 00:54:59,290 --> 00:55:00,270 Speaker 2: for impact 967 00:55:00,570 --> 00:55:05,100 Speaker 2: and they're looking for risk adjusted returns with impact. So 968 00:55:05,110 --> 00:55:07,930 Speaker 2: the impact part is very much going to be the 969 00:55:07,930 --> 00:55:12,160 Speaker 2: driver of anyone coming into this investment space. If you 970 00:55:12,160 --> 00:55:16,190 Speaker 2: look at us, us and our portfolio that we're planning, 971 00:55:16,200 --> 00:55:20,320 Speaker 2: it is going to be based on an absolute return 972 00:55:20,330 --> 00:55:24,109 Speaker 2: approach where we're going to share with our investors that 973 00:55:24,110 --> 00:55:26,850 Speaker 2: there's a certain percentage return, uh, 974 00:55:26,870 --> 00:55:30,330 Speaker 2: we aim to deliver, but more importantly, it's going to 975 00:55:30,330 --> 00:55:33,160 Speaker 2: be returns with impact. So the impact part of that, 976 00:55:33,170 --> 00:55:35,760 Speaker 2: we're going to have to really identify what that impact 977 00:55:35,760 --> 00:55:38,360 Speaker 2: is going to be in terms of carbon emission reductions 978 00:55:38,360 --> 00:55:42,560 Speaker 2: intensity reductions in terms of peak carbon, especially if we're 979 00:55:42,560 --> 00:55:45,690 Speaker 2: looking at climate but we're looking also at other environmental issues. 980 00:55:45,700 --> 00:55:49,370 Speaker 2: So I think the definition of returns especially for climate 981 00:55:49,390 --> 00:55:52,969 Speaker 2: investors is going to be and is already the conversation 982 00:55:52,969 --> 00:55:56,069 Speaker 2: is a very different conversation to when we last spoke, 983 00:55:56,080 --> 00:55:59,210 Speaker 2: where a lot of people looked at E. S. G. 984 00:55:59,210 --> 00:56:03,340 Speaker 2: Investing and still compared it to some index returns, bench 985 00:56:03,340 --> 00:56:07,489 Speaker 2: microtones here. The conversation on climate investing starts with show 986 00:56:07,489 --> 00:56:10,570 Speaker 2: me the climate impact first and then tell me to 987 00:56:10,570 --> 00:56:11,910 Speaker 2: get that climate impact. 988 00:56:12,190 --> 00:56:17,580 Speaker 2: What is the financial let's say makeup or or expected 989 00:56:17,580 --> 00:56:19,560 Speaker 2: return that you think you can get out of it? 990 00:56:19,570 --> 00:56:22,920 Speaker 2: So it's it's for for climate investing. 991 00:56:23,150 --> 00:56:25,550 Speaker 2: I think people are going into it should be and 992 00:56:25,560 --> 00:56:28,280 Speaker 2: are focused on the climate impact. And then what kind 993 00:56:28,280 --> 00:56:31,220 Speaker 2: of financial returns one could expect from that universe of 994 00:56:31,219 --> 00:56:33,660 Speaker 2: companies because let's face it, that universe of companies is 995 00:56:33,660 --> 00:56:36,089 Speaker 2: going to be a very different universe of companies then 996 00:56:36,090 --> 00:56:41,320 Speaker 2: you broader index that most people compare their financial returns to. 997 00:56:41,330 --> 00:56:46,310 Speaker 2: So it's it's a conversation that we're having with our 998 00:56:46,320 --> 00:56:52,040 Speaker 2: parliaments on the expected returns. But but first glance of 999 00:56:52,230 --> 00:56:57,650 Speaker 2: Our sort of model portfolio a 5-7% per annum return 1000 00:56:57,660 --> 00:57:02,040 Speaker 2: should be deliverable in an Asia pack context. 1001 00:57:02,620 --> 00:57:05,500 Speaker 1: Also, I'd like to think that as more and more 1002 00:57:05,500 --> 00:57:10,940 Speaker 1: countries and companies come under the the umbrella of focusing 1003 00:57:10,940 --> 00:57:15,480 Speaker 1: on that zero that the investment base will become broader 1004 00:57:15,480 --> 00:57:18,260 Speaker 1: and broader. At one point you might have to start 1005 00:57:18,260 --> 00:57:20,460 Speaker 1: benchmark indices because every company will be an E S 1006 00:57:20,460 --> 00:57:21,300 Speaker 1: G company 1007 00:57:21,460 --> 00:57:24,000 Speaker 2: I look forward to that day, 1008 00:57:24,420 --> 00:57:29,600 Speaker 1: probably not two years from now. It's been great having 1009 00:57:29,600 --> 00:57:31,570 Speaker 1: you back on the show. So I really, really want 1010 00:57:31,570 --> 00:57:34,160 Speaker 1: to thank you very much for your time and insights. 1011 00:57:34,170 --> 00:57:37,420 Speaker 2: No thank you so much and I do look forward 1012 00:57:37,420 --> 00:57:40,460 Speaker 2: to copy time 1 50 when you and I will 1013 00:57:40,460 --> 00:57:44,190 Speaker 2: be having another chat and you know, 1014 00:57:44,430 --> 00:57:49,090 Speaker 2: talking about something new, something different, an evolution of E S. 1015 00:57:49,090 --> 00:57:50,710 Speaker 2: G to something new 1016 00:57:50,720 --> 00:57:53,330 Speaker 1: and something very, very positive for the earth and for 1017 00:57:53,330 --> 00:57:56,870 Speaker 1: our portfolios. I want to thank you and thank our 1018 00:57:56,870 --> 00:57:59,740 Speaker 1: listeners as well. Kobe time was produced by ken Del 1019 00:57:59,740 --> 00:58:03,730 Speaker 1: Bridge from Spice Studios, Gezi Sharma and violently provided additional 1020 00:58:03,730 --> 00:58:05,000 Speaker 1: production assistance. 1021 00:58:05,270 --> 00:58:08,170 Speaker 1: This podcast is for information only and does not represent 1022 00:58:08,180 --> 00:58:11,720 Speaker 1: any trade recommendations. All 83 episodes of copy time are 1023 00:58:11,720 --> 00:58:15,820 Speaker 1: available on youtube and on all major podcast platforms including apple, 1024 00:58:15,820 --> 00:58:19,670 Speaker 1: google and Spotify. As for our research publications, webinars and 1025 00:58:19,670 --> 00:58:22,610 Speaker 1: live streams. You can find them all by googling DBS 1026 00:58:22,610 --> 00:58:25,090 Speaker 1: Research Library. Have a great day