WEBVTT - DBS Kopi Time E083 - Munib Madni on Climate Investing 0:00:07.090 --> 0:00:10.680 Hello. You're listening to Kobie time, a podcast series on 0:00:10.680 --> 0:00:13.850 markets and economies from DBS group research. I'm camera big 0:00:13.860 --> 0:00:17.650 chief economist. Welcome to our 83rd episode. 0:00:18.000 --> 0:00:21.320 Today's guest or I should say return guest is winning 0:00:21.320 --> 0:00:25.070 money ceo of Singapore based Pan are key partners. A 0:00:25.070 --> 0:00:28.000 few years ago, money transition from a career in traditional 0:00:28.000 --> 0:00:30.590 by side fund management to setting up a firm that 0:00:30.590 --> 0:00:33.430 seeks to redefine the notion of wealth and its creation. 0:00:33.460 --> 0:00:36.220 We talked about all this and more in Kobe time 0:00:36.220 --> 0:00:40.390 back in 2020 and episode 16. I think both panicky 0:00:40.390 --> 0:00:42.930 partners and Kobe time have come a long way since then. 0:00:43.159 --> 0:00:46.070 In preparation for this podcast, I went back and listened 0:00:46.070 --> 0:00:48.570 to that episode to those of you who haven't please 0:00:48.570 --> 0:00:51.570 do by all means. It's a terrific primer on a 0:00:51.570 --> 0:00:54.950 company's purpose and when it really draws from history as 0:00:54.950 --> 0:00:58.480 well as economic and finance theory to underscore that point. 0:00:58.490 --> 0:01:01.560 And also in that podcast you will hear money delving 0:01:01.560 --> 0:01:05.500 into sustainability driven fund management, focusing on returns and progress 0:01:05.500 --> 0:01:09.980 on four forms of capital, human, social, environmental and financial. 0:01:10.170 --> 0:01:13.890 In today's podcast we will focus on the third capital, 0:01:13.900 --> 0:01:18.760 environmental and the investment side. Guys around that. With that 0:01:18.760 --> 0:01:22.190 context in place me welcome back to Covid time. 0:01:22.200 --> 0:01:25.000 Uh We're good to be back. It was like a 0:01:25.000 --> 0:01:26.220 long time ago. 0:01:26.230 --> 0:01:31.190 It was early days of Covid. Yeah, indeed. Um we 0:01:31.190 --> 0:01:34.800 had you in the show I think just a little 0:01:34.800 --> 0:01:37.419 more than two years ago. So what have you and 0:01:37.420 --> 0:01:39.740 Panicky partner has been up to during that time. 0:01:40.260 --> 0:01:43.010 Yeah, the last two years, uh as you know, it 0:01:43.010 --> 0:01:47.370 seems like uh during Covid, uh you know, everything kind 0:01:47.370 --> 0:01:51.550 of went silent and went very quiet, but I've got 0:01:51.550 --> 0:01:55.010 to say that while, you know, while the humanity humanitarian 0:01:55.010 --> 0:01:58.830 crisis that was happening unfolding both on a first one, 0:01:58.830 --> 0:02:01.520 on a professional level, it impacted many, many people. And 0:02:01.520 --> 0:02:01.980 and 0:02:02.210 --> 0:02:05.410 you know, even at hockey partners, sadly we had our 0:02:05.410 --> 0:02:09.630 own losses. Uh we had our co founder, christian droll 0:02:09.630 --> 0:02:11.690 passed away in a tragic incident. 0:02:11.880 --> 0:02:15.460 Um but you know, the team has come out of Covid, 0:02:15.470 --> 0:02:19.060 you know, stronger. I'm proud that we've kind of delivered 0:02:19.060 --> 0:02:24.150 on the the purpose that for which partners was built, 0:02:24.160 --> 0:02:29.900 we've been sort of diligently executing on our purpose of 0:02:29.910 --> 0:02:34.550 having a couple owners and users come together um to 0:02:34.550 --> 0:02:35.540 make a better place a better 0:02:35.556 --> 0:02:39.895 world. And then our own investing process has evolved since 0:02:39.895 --> 0:02:44.326 the last time we spoke and we've incorporated purpose into 0:02:44.336 --> 0:02:48.196 how our portfolio companies are judged. And I'm glad to 0:02:48.196 --> 0:02:50.365 say that, you know, that that's been a sort of 0:02:50.366 --> 0:02:57.066 a positive sort of, you could say progress for anarchy 0:02:57.076 --> 0:02:59.220 since we last met as a b corp 0:02:59.232 --> 0:03:03.392 We've been playing a very important role. We believe in 0:03:03.392 --> 0:03:08.942 building a sustainable investing ecosystem in Singapore. We've had almost 0:03:08.942 --> 0:03:11.502 30 interns now with us over the last four years 0:03:11.502 --> 0:03:14.612 since we started, uh and and we were having our 0:03:14.612 --> 0:03:19.172 second Global Pandas Forum, so building and shaping the sustainable 0:03:19.172 --> 0:03:22.902 investing ecosystem not only in Singapore, and Asia is very important. 0:03:23.200 --> 0:03:25.750 And I think, you know, the last thing is and 0:03:25.750 --> 0:03:28.100 where we are right now is that that the team 0:03:28.100 --> 0:03:33.060 has actually broadened its investment focus from sustainable investing. And 0:03:33.060 --> 0:03:37.990 now we're focusing and moving towards investing with environmental impact. 0:03:38.000 --> 0:03:41.700 If you recall my team and myself have, 0:03:41.710 --> 0:03:44.070 I've got and and spend a lot of time on 0:03:44.070 --> 0:03:48.350 environmental capital, injustice call. And the team is now ready 0:03:48.360 --> 0:03:51.470 to help our clients deliver on some of the environmental 0:03:51.470 --> 0:03:54.800 ambitions that they have through their investments. So we're we're 0:03:54.800 --> 0:03:58.650 we're nicely placed in a world that most probably is 0:03:58.650 --> 0:04:00.280 not that nicely placed at the market. 0:04:01.120 --> 0:04:04.220 Indeed, uh I I would like to devote today's podcast 0:04:04.220 --> 0:04:07.520 instead in that context. And getting deep into the issue 0:04:07.520 --> 0:04:10.670 of climate investing. So, let's start by you helping us 0:04:10.670 --> 0:04:14.390 understand what is climate change in the context of markets 0:04:14.400 --> 0:04:16.300 and what is climate investing? 0:04:16.940 --> 0:04:20.540 Yeah. So, first climate change, in terms of the markets, 0:04:20.550 --> 0:04:23.540 if you recall last time when we spoke to me, 0:04:23.610 --> 0:04:27.239 we talked about externalities, you know, that was a big 0:04:27.240 --> 0:04:29.510 part of the conversation we had was that many of 0:04:29.510 --> 0:04:33.890 the externalities, human social environmental that were outsourced by companies. 0:04:33.890 --> 0:04:36.650 And uh and investors just took it as it was 0:04:36.660 --> 0:04:40.320 they were being internalized. One of the biggest externalities. The 0:04:40.320 --> 0:04:43.720 mother of all negative environmental externalities is climate change. 0:04:43.730 --> 0:04:46.349 Uh and I think that's where in the context of 0:04:46.350 --> 0:04:49.700 the markets, climate changes could be seen as a failure 0:04:49.710 --> 0:04:55.230 a failure of markets to incorporate internalize this very expensive 0:04:55.230 --> 0:04:59.380 cost that is now not only cost for the current generation, 0:04:59.380 --> 0:05:01.860 but for the future generations as well. And and I 0:05:01.860 --> 0:05:05.610 think that's an important sort of uh you know, uh 0:05:05.620 --> 0:05:10.520 realization that the world is having on various levels that 0:05:10.690 --> 0:05:14.460 Climate change is a market failure and the markets are 0:05:14.460 --> 0:05:18.180 now trying to sort of correct for it. And and listen, 0:05:18.180 --> 0:05:19.780 I don't want to be too hard on the markets. 0:05:19.779 --> 0:05:22.210 You and I have have been market participants for the last, 0:05:22.220 --> 0:05:25.380 you know, almost 30 years now and we do believe 0:05:25.380 --> 0:05:26.920 in the pot 0:05:26.960 --> 0:05:29.750 the value that markets bring. But this whole challenge of 0:05:29.750 --> 0:05:34.880 climate change, it is so broad and global in its nature. 0:05:34.890 --> 0:05:38.970 Most other externalities can be very, let's say localized regionalized 0:05:38.970 --> 0:05:41.320 and therefore the cost can be very focused and that 0:05:41.320 --> 0:05:43.680 the markets can become a lot more effective. But I 0:05:43.680 --> 0:05:46.750 think here the whole challenges that climate change, the costs 0:05:46.750 --> 0:05:48.970 are global and also political in nature. 0:05:49.170 --> 0:05:52.790 And that that is where climate change in in a 0:05:52.790 --> 0:05:56.110 way has been a market failure and for good reasons, 0:05:56.110 --> 0:06:00.469 it's just a very, very, very tough challenge to deal with. 0:06:00.650 --> 0:06:06.170 Um if you now move towards climate investing climate investing, 0:06:06.180 --> 0:06:10.920 it's relatively new. The concept of climate investing, there's no 0:06:10.920 --> 0:06:15.820 clear definition of climate investing if you can in its 0:06:15.830 --> 0:06:21.229 essence is basically investing to help with solutions around climate 0:06:21.230 --> 0:06:23.849 change and if you go a bit deeper into it, 0:06:23.860 --> 0:06:24.200 its base 0:06:24.214 --> 0:06:29.974 basically investing to help decarbonization, you know, removing carbon, uh, 0:06:29.985 --> 0:06:33.714 from the environment or reducing the output of carbon into 0:06:33.714 --> 0:06:37.235 the environment and various other emissions. So that is where 0:06:37.235 --> 0:06:41.904 climate investing has now uh, come to become a topic 0:06:41.904 --> 0:06:46.224 of discussion on various levels, especially within the investing community. 0:06:46.235 --> 0:06:47.765 It is all about 0:06:48.150 --> 0:06:51.830 investors. Also, the good news is the investors are moving 0:06:51.830 --> 0:06:55.589 from again risk and return to risk, return and impact. 0:06:55.600 --> 0:06:59.600 So that way, climate investing is different from traditional investing here. 0:06:59.600 --> 0:07:02.669 Many of the investors who are actually wanting to invest 0:07:02.680 --> 0:07:03.720 for climate change 0:07:03.880 --> 0:07:07.600 are coming with, with a, with a strong focus on 0:07:07.610 --> 0:07:14.690 genuine environmental impact towards climate. If you look at climate investing, 0:07:14.700 --> 0:07:19.170 I would say it's almost at its Gatorade moment, not 0:07:19.180 --> 0:07:22.890 What I, what I, what I mean by that is that, 0:07:22.900 --> 0:07:26.040 you know, if you look at sports drink drinks and 0:07:26.040 --> 0:07:29.370 the phenomenal round sports drinks, right. The first sports drink 0:07:29.370 --> 0:07:33.660 was Lucas aid in 1927 and that was almost athletes 0:07:33.660 --> 0:07:34.480 that were elite 0:07:34.650 --> 0:07:38.970 By 1965. When Gatorade came about, Gatorade was the first 0:07:38.980 --> 0:07:44.650 sports drink that was sort of popularized for average athletes, uh, 0:07:44.660 --> 0:07:48.790 for anyone doing any exercise. Gatorade became the go to 0:07:48.790 --> 0:07:52.300 drink for their sports sort of, uh, sort of needs. 0:07:52.310 --> 0:07:55.320 And I think where, that's where we are at now 0:07:55.320 --> 0:07:58.520 with even climate investing. Gatorade at that time, when it 0:07:58.520 --> 0:08:01.770 started in 1965, it actually was just sugar, salt 0:08:01.950 --> 0:08:04.770 and lemon juice to make it taste a bit better. 0:08:04.780 --> 0:08:08.810 But it's since then, you could say, as sport springs 0:08:08.810 --> 0:08:12.380 have evolved and become isotonic and also very customized. We 0:08:12.380 --> 0:08:14.710 are going to see that happen with climate investing as well, 0:08:14.710 --> 0:08:16.850 but at this point in time, it's still very early 0:08:16.850 --> 0:08:19.880 days when we're having this conversation in two years time, 0:08:19.880 --> 0:08:24.920 when you're doing your 150th copy time, uh, some of 0:08:24.920 --> 0:08:26.860 the questions you'll ask me, maybe my answers will be 0:08:26.860 --> 0:08:29.059 slightly different because it is evolving very quickly, 0:08:29.790 --> 0:08:32.600 so many as, you know, this is not necessarily a 0:08:32.600 --> 0:08:35.000 problem in the circle that you and I live in. 0:08:35.000 --> 0:08:39.270 But there is a huge community of climate skeptics out 0:08:39.270 --> 0:08:42.800 there who will challenge the first notion that there's a 0:08:42.809 --> 0:08:47.150 negative externality that manmade activities are causing the bulk of 0:08:47.150 --> 0:08:49.120 climate change, that some of it is, you know, something 0:08:49.120 --> 0:08:52.470 that's a constant through the history of this planet 0:08:52.640 --> 0:08:56.370 now, to those skeptics, I mean, do we just ignore 0:08:56.370 --> 0:09:00.180 them or there is a rational for even those people 0:09:00.190 --> 0:09:01.660 to be part of climate investing? 0:09:02.309 --> 0:09:04.849 Yeah, I think 0:09:05.770 --> 0:09:09.689 if you want to sort of bring them on board, 0:09:09.700 --> 0:09:12.400 you cannot ignore them. And I think what you need 0:09:12.400 --> 0:09:16.270 to do is need to understand where that is coming from, right? 0:09:16.280 --> 0:09:18.929 And I think that is one of the reasons why 0:09:18.929 --> 0:09:22.640 climate change, climate investing is very politicized this whole issue 0:09:22.640 --> 0:09:26.500 of carbon is very political, is exactly that, that a 0:09:26.500 --> 0:09:29.160 lot of people who are skeptics are coming from either 0:09:29.160 --> 0:09:31.829 a fear of this transition of 0:09:32.059 --> 0:09:37.449 decarbonization, impacting and let's face it, decarbonization is gonna be 0:09:37.460 --> 0:09:43.160 challenging and expensive from on an economy on companies and individuals. 0:09:43.170 --> 0:09:46.510 And that's why we often talk about just transition. So, 0:09:46.510 --> 0:09:50.050 you know, the word just transition is also become very topical, 0:09:50.059 --> 0:09:53.280 especially in making sure that as we transition away from 0:09:53.280 --> 0:09:57.100 fossil fuels and let's say, other agricultural practices that are 0:09:57.110 --> 0:09:58.150 maybe not that 0:09:58.300 --> 0:10:01.390 positive for the overall environment, that we do it in 0:10:01.390 --> 0:10:04.449 a way that is just and fair for everyone, not 0:10:04.450 --> 0:10:08.130 just the global south, but also for the developed countries 0:10:08.130 --> 0:10:10.710 and the various industry that they're operating. And I think 0:10:10.710 --> 0:10:15.190 the skeptics either coming from a lack of, let's say, 0:10:15.200 --> 0:10:17.560 the knowledge around the science behind it, 0:10:17.580 --> 0:10:21.319 Which I think now the skepticism is especially around climate 0:10:21.320 --> 0:10:25.390 change is definitely a lot more reduced than it was, 0:10:25.400 --> 0:10:28.490 let's say five years ago, 10 years ago. It's pretty 0:10:28.490 --> 0:10:31.860 much an accepted fact. Now, the size and scale of 0:10:31.860 --> 0:10:34.189 it can be questioned. The timing of it can be 0:10:34.190 --> 0:10:36.860 questioned and the solutions are definitely going to be questioned 0:10:37.000 --> 0:10:41.170 but I think it's the few that are left the 0:10:41.170 --> 0:10:45.290 skeptics engaging with them, understanding what is their fear or 0:10:45.290 --> 0:10:47.829 the concern that is the one way to deal with this. 0:10:48.970 --> 0:10:52.720 So I think the two facts. money, what is number one, 0:10:52.730 --> 0:10:55.980 the earth is warming and number two, there is a 0:10:55.980 --> 0:10:59.950 linkage between human activities and global warming. Your point is 0:10:59.950 --> 0:11:02.410 that I think there's not that much room for debate 0:11:02.410 --> 0:11:05.100 on those who think the science is pretty solid in 0:11:05.100 --> 0:11:05.969 these areas. 0:11:06.390 --> 0:11:09.540 And even if let's say we are 0:11:10.179 --> 0:11:15.699 exaggerating it by 50% this whole idea that temperatures going 0:11:15.700 --> 0:11:19.630 to 2.5% is going to lead to serious, serious and 0:11:19.640 --> 0:11:22.510 and you know, there's been some studies done that done 0:11:22.520 --> 0:11:25.069 that if we don't, let's say no action is taken 0:11:25.080 --> 0:11:28.230 by the end of the century, the global economy is 0:11:28.230 --> 0:11:31.770 going to be lower than 18% and where it is now, 0:11:31.780 --> 0:11:35.170 just the economic damage that can be done is massive 0:11:35.179 --> 0:11:37.469 for those who want to put it in financial terms, 0:11:37.480 --> 0:11:38.500 for those who do 0:11:38.510 --> 0:11:40.699 I want to put, you know, the risk of climate 0:11:40.700 --> 0:11:43.420 change into financial terms, They just need to see what's 0:11:43.420 --> 0:11:45.950 happening around the world in terms of temperatures and climates 0:11:45.950 --> 0:11:48.240 and all the rest. And let's say, even if what 0:11:48.240 --> 0:11:51.450 we are doing now helps that incrementally, that should be 0:11:51.450 --> 0:11:55.010 a positive for everyone. So I think making it a 0:11:55.010 --> 0:11:59.020 binary event is gone. It's more, you know, it's it's 0:11:59.020 --> 0:12:02.090 a scaling issue now for many people in terms of 0:12:02.090 --> 0:12:07.040 time size effort, fear everything right there's a whole spectrum, 0:12:08.040 --> 0:12:11.550 how big is climate investing now? And even before you 0:12:11.550 --> 0:12:13.490 answer that question might follow up to the question is 0:12:13.490 --> 0:12:14.670 why isn't it bigger? 0:12:14.679 --> 0:12:20.040 Yeah. So climate investing, as I said, if you incorporate 0:12:20.050 --> 0:12:24.089 in the broader context, it is about decarbonization all the efforts, right? 0:12:24.100 --> 0:12:27.810 So if you add in all the government aspirations and 0:12:27.809 --> 0:12:31.310 ambitions and promises, then already we were talking in the 0:12:31.309 --> 0:12:34.050 trillions of dollars and even going forward, it's going to 0:12:34.050 --> 0:12:36.480 be trillions of dollars of investments. 0:12:36.890 --> 0:12:41.440 I think there was a Bloomberg uh article last year 0:12:41.440 --> 0:12:44.380 that said that for us to get to net zero 0:12:44.390 --> 0:12:49.589 by 2050 100 and $73 trillion have to be spent uh, 0:12:49.600 --> 0:12:50.810 in climate investing. 0:12:50.960 --> 0:12:53.720 Um, in the same vein, there was another research done 0:12:53.720 --> 0:12:57.790 by another research house and, and they had just china 0:12:57.800 --> 0:13:01.050 alone needs to spend 100 and $65 billion per annum 0:13:01.059 --> 0:13:05.810 to get to their carbon neutral 2060 target. So the numeric, 0:13:05.809 --> 0:13:08.710 from the government's perspective, a massive, even if you look 0:13:08.710 --> 0:13:11.939 at the Eu green deal, that the latest, uh, you know, 0:13:11.940 --> 0:13:15.940 the inflation reduction act of us, 0:13:15.955 --> 0:13:18.525 there's big chunks of these that I have got climate 0:13:18.535 --> 0:13:21.475 in it from the government's perspective. So if you look 0:13:21.475 --> 0:13:24.495 at governments and even companies that are transitioning their own 0:13:24.495 --> 0:13:28.645 models business models and the Capex that they're spending internally. 0:13:28.655 --> 0:13:32.095 That's fairly big already. Now, that is one form of investing. 0:13:32.095 --> 0:13:34.525 But for the purposes of today, let's say, what we're 0:13:34.525 --> 0:13:38.835 talking about is private individuals, institutions investing in, let's say 0:13:38.845 --> 0:13:40.945 carbon and, and, and, and climate 0:13:41.110 --> 0:13:47.420 here. The dollar values are still very relatively low. Morningstar 0:13:47.420 --> 0:13:49.809 had a number in april this year that there's roughly 0:13:49.809 --> 0:13:54.300 860 funds or E. T. S. That are out there 0:13:54.300 --> 0:13:58.100 in the market that are climate, or probably called climate related, right? 0:13:58.110 --> 0:14:01.550 And the total value in that is about $408 billion 0:14:01.559 --> 0:14:04.290 according to Morningstar. And that number has doubled in the 0:14:04.300 --> 0:14:07.240 in 2021. And it's about 7 to 8 times what 0:14:07.240 --> 0:14:08.890 it was in 2017. 0:14:09.190 --> 0:14:12.059 But 408 billion is not very big. It's still very small. 0:14:12.059 --> 0:14:15.920 It's still very early days. And, and, and, you know, 0:14:15.929 --> 0:14:20.440 you ask also, what is the reason it's being held back? 0:14:20.450 --> 0:14:23.660 I think there's two bottlenecks here. One is, the first 0:14:23.660 --> 0:14:27.360 is that, as I mentioned for climate investing, investors are 0:14:27.360 --> 0:14:30.890 looking for environmental impact as much as they're looking for 0:14:30.900 --> 0:14:31.900 risk adjusted returns, 0:14:31.915 --> 0:14:39.265 the impact, environmental impact data that people, institutional investors, even 0:14:39.265 --> 0:14:44.795 individual investors are having at this point in time is, uh, 0:14:44.805 --> 0:14:47.755 still coming slowly. It's not 0:14:48.230 --> 0:14:53.260 well identified and structured enough for these institutional investors who 0:14:53.260 --> 0:14:57.900 are so used to their risk return frameworks to incorporate 0:14:57.900 --> 0:15:00.700 that into it. So, I think the impact, the more 0:15:00.710 --> 0:15:03.670 over time as we get more and more environmental data 0:15:03.680 --> 0:15:08.119 that can support the impact that investments are making, the 0:15:08.130 --> 0:15:10.800 more money we're going to see in into this space, Right? 0:15:10.810 --> 0:15:13.270 And so that's the first bottle, like it's just not 0:15:13.270 --> 0:15:14.800 enough data to prove that they 0:15:14.810 --> 0:15:19.240 impact and investment is having, is there? That's one. The 0:15:19.250 --> 0:15:21.550 second one, I would say, is also a lack of 0:15:21.550 --> 0:15:28.110 genuine climate funds and investment vehicles, even though there were 0:15:28.120 --> 0:15:33.800 860 climate or climate related funds. And E. T. F. 0:15:33.810 --> 0:15:39.010 As I mentioned very the whole spectrum, if you look 0:15:39.010 --> 0:15:41.390 at the if you break them down and look at 0:15:41.830 --> 0:15:44.160 the kind of climate of actions they were taking, 0:15:45.400 --> 0:15:49.100 some could argue they were not impactful enough and therefore, 0:15:49.110 --> 0:15:51.940 the investors were not sort of enamored with them. So 0:15:51.940 --> 0:15:56.290 I think over time, as more and more genuine climate 0:15:56.290 --> 0:15:59.239 funds come through people like myself and my team can 0:15:59.240 --> 0:16:04.979 deliver environmental impact data points that are supportive of investing 0:16:04.980 --> 0:16:05.440 in climate, 0:16:05.710 --> 0:16:08.360 you will find that there's gonna be more, As I said, 0:16:08.370 --> 0:16:11.910 we're at the Gatorade moment of climate investing, we need 0:16:11.910 --> 0:16:14.130 to get to the isotonic very quickly and that will 0:16:14.130 --> 0:16:17.540 happen in the coming years, so that they're the two 0:16:17.540 --> 0:16:21.190 bottlenecks why climate investing, I think has still been a bit, uh, 0:16:21.200 --> 0:16:24.190 you know, it's growing, but from a very low base 0:16:24.200 --> 0:16:25.600 and will continue to grow. 0:16:26.300 --> 0:16:30.420 So I'm sure you're aware that this whole E. S. G. 0:16:30.420 --> 0:16:33.900 Complex and climate is of course the integral part of 0:16:33.900 --> 0:16:37.490 that has received criticism over recent years. You know, the 0:16:37.490 --> 0:16:40.359 greenwashing aspect, to your point that there are lots of 0:16:40.370 --> 0:16:45.070 funds out there that are preferably investing in green activities, 0:16:45.080 --> 0:16:48.110 but when one looks at the stocks that they hold, 0:16:48.120 --> 0:16:51.450 it doesn't look that impressive. And then we have famously 0:16:51.450 --> 0:16:55.220 had Elon musk of Tesla come out and criticized 0:16:55.900 --> 0:17:00.340 because in certain perspective his companies are are not as 0:17:00.340 --> 0:17:02.550 climate friendly as one would think, given that they make 0:17:02.550 --> 0:17:06.719 electric cars and other you know, climate friendly products. So 0:17:06.730 --> 0:17:09.200 gives a sense of where you stand on this issue 0:17:09.200 --> 0:17:12.470 that some backlash about the E. S. G. Ratings, the 0:17:12.470 --> 0:17:16.270 backlash around um you know, which companies should be, you 0:17:16.270 --> 0:17:18.409 know rated highly or low and so on. 0:17:18.750 --> 0:17:23.590 Yeah, it's interesting you say that Tamil because again, if 0:17:23.600 --> 0:17:26.500 you know, listening back to our conversation two years ago, 0:17:26.510 --> 0:17:28.910 one of the things that I predicted then was the 0:17:28.910 --> 0:17:33.660 term E. S. G. May not even exist in 5 0:17:33.660 --> 0:17:37.270 to 10 years time, Right? And more recently we saw some, 0:17:37.280 --> 0:17:40.879 you know, articles on E. S. G. Being cut into 0:17:40.880 --> 0:17:43.790 pieces and then this is what's happening now, right? So 0:17:43.790 --> 0:17:45.750 it's actually I got it wrong, it's it was much 0:17:45.750 --> 0:17:47.159 faster than I thought. 0:17:47.400 --> 0:17:51.130 So, so the E. Part is being now separated, The 0:17:51.130 --> 0:17:53.910 s the social side is being separated. G. Has always 0:17:53.910 --> 0:17:58.050 been there. So I'm not surprised that there's been uh 0:17:58.060 --> 0:18:01.150 you know, uh breakdown of E. S. G. Into its 0:18:01.150 --> 0:18:04.730 components and rightly so, so 0:18:05.030 --> 0:18:08.610 anything that is new and evolving is gonna get flak 0:18:08.609 --> 0:18:12.620 is gonna get questioned. And and E. S. G. And E. S. 0:18:12.619 --> 0:18:16.780 G funds and E. S. G. Investment strategies are rightly 0:18:16.780 --> 0:18:19.369 being questioned, you know, and and and but only to 0:18:19.369 --> 0:18:21.760 make them better. So, you know, if you look at 0:18:21.770 --> 0:18:26.220 various regulators globally, again, just focusing on the E. S. G. 0:18:26.220 --> 0:18:28.520 As an investment class, if you want to call it, 0:18:28.530 --> 0:18:30.200 if you look at all 0:18:30.210 --> 0:18:33.730 the regulators globally from europe with S. F. D. R. 0:18:33.730 --> 0:18:37.920 Article 89 rules that have come in to even M. A. S. 0:18:37.930 --> 0:18:39.660 I think a week and a half ago, two weeks 0:18:39.660 --> 0:18:44.330 ago came out with new E. S. G. Fund disclosure requirements. H. K. M. A. 0:18:44.330 --> 0:18:47.690 Had theirs last year Australia as it came up with 0:18:47.690 --> 0:18:52.720 this last month as well. We are finding that investors 0:18:52.720 --> 0:18:55.370 and invest in E. S. G. Strata, 0:18:55.380 --> 0:19:00.180 even climate strategies are being monitored now as an investment 0:19:00.180 --> 0:19:04.780 class and therefore being required to step up and no 0:19:04.780 --> 0:19:08.690 longer can be sort of green washed and and you know, 0:19:08.700 --> 0:19:12.790 rainbow wash as people often say. So, so this is 0:19:12.790 --> 0:19:14.830 this is part and parcel of an evolution of an 0:19:14.840 --> 0:19:19.950 investment class as a class that is required. I've been 0:19:19.960 --> 0:19:23.300 uh you know, I welcome it. I think it's great, 0:19:23.310 --> 0:19:24.750 it's making sure that 0:19:25.250 --> 0:19:29.020 fund managers who are claiming that they are spending time 0:19:29.020 --> 0:19:32.670 and effort like we are at an occupied doing and 0:19:32.670 --> 0:19:34.310 spending time on uh 0:19:34.470 --> 0:19:38.230 the environment side, social human capital side that that they 0:19:38.240 --> 0:19:41.810 can prove it and and people who are not, or 0:19:41.810 --> 0:19:44.780 have no intentions of that, they don't then participate in 0:19:44.780 --> 0:19:48.420 the space. So it's a welcome space. I'm not fearful. 0:19:48.430 --> 0:19:52.070 Most genuine E S. G, or e investors are not 0:19:52.070 --> 0:19:56.730 fearful if anything welcome this. Um, so, yeah, it makes 0:19:56.730 --> 0:20:00.110 us makes the whole process a lot more christmas and 0:20:00.109 --> 0:20:01.620 correct and accurate. 0:20:01.960 --> 0:20:05.540 Yeah, I mean, the part of the data that you 0:20:05.540 --> 0:20:09.790 talk about, I think it is useful and and relevant 0:20:09.790 --> 0:20:11.379 to measure companies 0:20:11.869 --> 0:20:15.919 carbon footprint and the steps it's taking to ameliorate that 0:20:15.930 --> 0:20:20.390 mixing that up with its human resource practices or diversity. Um, 0:20:20.400 --> 0:20:22.689 I think, you know, we would all like every company 0:20:22.690 --> 0:20:25.060 to be noble and do the right thing. But as 0:20:25.060 --> 0:20:27.470 far as climate change is concerned that the environment doesn't 0:20:27.470 --> 0:20:30.690 really care about your human resource practice or the diversity 0:20:30.690 --> 0:20:33.250 for staff. So I think that, you know, as you said, 0:20:33.250 --> 0:20:35.720 that it's getting sliced up in a way, it's probably 0:20:35.720 --> 0:20:37.400 the right thing to do that. You know, if you 0:20:37.400 --> 0:20:39.730 are an activist investor who really cares about 0:20:39.880 --> 0:20:42.050 the s and the g part, it doesn't have to 0:20:42.050 --> 0:20:44.540 be attached to E and he should not be like 0:20:44.540 --> 0:20:46.990 a company like Tesla, which arguably is doing a lot 0:20:46.990 --> 0:20:50.810 for reducing our carbon footprint should not be mixed up 0:20:50.810 --> 0:20:54.429 with it. Again, you know, workplace environment and so on. Um, 0:20:54.440 --> 0:21:01.020 so if I'm an investor, where should I focus on 0:21:01.020 --> 0:21:03.430 as a climate or a carbon investor. 0:21:03.920 --> 0:21:06.950 Yeah, so it's it's, uh, as I said, the whole 0:21:06.950 --> 0:21:12.220 idea of climate investing is about decarbonization. Right? So, and 0:21:12.220 --> 0:21:16.840 when people think of decarbonization, the go to, uh, let's 0:21:16.840 --> 0:21:19.730 say focus areas for investors tends to be 0:21:19.880 --> 0:21:24.390 the cost of carbon, uh, or the price of carbon itself. 0:21:24.400 --> 0:21:27.310 And the second area that people go to its technology. 0:21:27.320 --> 0:21:30.200 There are two things people think, okay, I can either 0:21:30.200 --> 0:21:33.350 invest in carbon itself, the cost of carbon or I 0:21:33.350 --> 0:21:36.500 can invest in technology that helps reduce the carbon 0:21:36.520 --> 0:21:39.450 footprint and the carbon. But I think there's a third 0:21:39.450 --> 0:21:44.139 element to that, which is maybe less talked about, and 0:21:44.140 --> 0:21:47.990 I think very, very important without it, you cannot as 0:21:47.990 --> 0:21:50.930 an investor make money on technology or on just pure 0:21:50.940 --> 0:21:55.350 following carbon prices. And that is policy, uh, carbon policy 0:21:55.359 --> 0:21:58.260 that countries have, as I said, and these carbon policies 0:21:58.260 --> 0:22:02.410 of countries are still very national, uh, nationally focused 0:22:02.740 --> 0:22:05.679 at best, regionally focused in the case of Eu, but 0:22:05.690 --> 0:22:09.879 most of it is uh, nationally focused. Now, if I 0:22:09.890 --> 0:22:12.230 to show you what I mean by this first, if 0:22:12.230 --> 0:22:14.960 you look at carbon price. Uh, and, and the cost 0:22:14.960 --> 0:22:18.480 of carbon. People often look at the carbon cost of 0:22:18.480 --> 0:22:22.040 an industry as a proxy for the investment opportunity. And 0:22:22.040 --> 0:22:26.280 that is mathematically, carbon price, times volume, volume is 0:22:26.530 --> 0:22:31.470 for carbon is now identified underscore 123, you can do 0:22:31.470 --> 0:22:33.350 it for a country, you can do it for a company, 0:22:33.350 --> 0:22:35.070 you can do it for sector, you can even do 0:22:35.070 --> 0:22:37.960 it for you? And I write carbon volumes is fine, 0:22:37.970 --> 0:22:42.020 It's a carbon price. That is very broad spectrum. So 0:22:42.020 --> 0:22:45.840 you have anywhere from carbon taxes of $2.50 in Mexico, 0:22:45.850 --> 0:22:48.890 230 in Sweden. You know, you can have carbon prices 0:22:48.890 --> 0:22:52.080 that are under the compliance markets at 80 0:22:52.090 --> 0:22:55.640 euros in europe where you can have under the East 0:22:55.640 --> 0:22:59.449 Coast R. G. D. I initiative at 6 to $12. 0:22:59.460 --> 0:23:02.740