1 00:00:05,880 --> 00:00:08,939 Speaker 1: Welcome to Kobe Time, a podcast series on Markets and 2 00:00:08,949 --> 00:00:12,899 Speaker 1: Economies from Devi Group Research. I'm chief economist, welcoming you 3 00:00:12,909 --> 00:00:15,090 Speaker 1: to our 103rd episode 4 00:00:16,209 --> 00:00:18,500 Speaker 1: in the past year or so. I've spent quite a 5 00:00:18,510 --> 00:00:22,430 Speaker 1: bit of time reading up on the signs of climate change, 6 00:00:22,440 --> 00:00:25,159 Speaker 1: the tech to deal with it and the critically important 7 00:00:25,170 --> 00:00:27,950 Speaker 1: issue of climate finance. I've done a bit of writing 8 00:00:27,959 --> 00:00:30,079 Speaker 1: on that as well. And recently, I've done quite a 9 00:00:30,090 --> 00:00:32,528 Speaker 1: bit of collaboration with our guest today, 10 00:00:32,880 --> 00:00:36,529 Speaker 1: Helga Muko is the Chief sustainability Officer at D BS. 11 00:00:36,680 --> 00:00:41,379 Speaker 1: He is responsible for developing the bank's overarching sustainability framework. 12 00:00:41,439 --> 00:00:44,720 Speaker 1: He also chairs the group Sustainability Council which comprises of 13 00:00:44,729 --> 00:00:48,360 Speaker 1: senior D BS leaders across business and support units. Helga 14 00:00:48,369 --> 00:00:51,490 Speaker 1: represents D BS in several global and regional working groups 15 00:00:51,500 --> 00:00:55,200 Speaker 1: such as the World Business Council for sustainable Development, the 16 00:00:55,209 --> 00:00:59,119 Speaker 1: industry advisory panel of the ASEAN S joint sustainable financing 17 00:00:59,139 --> 00:00:59,950 Speaker 1: working group 18 00:01:00,200 --> 00:01:04,360 Speaker 1: and the ma s convened Green Finance Industry task force. 19 00:01:04,459 --> 00:01:07,150 Speaker 1: So quite a few hats you wear Helga. Welcome to 20 00:01:07,160 --> 00:01:08,279 Speaker 1: Cope Time. Thanks 21 00:01:08,290 --> 00:01:10,190 Speaker 2: a lot for having me. I appreciate 22 00:01:10,199 --> 00:01:13,000 Speaker 1: it. I've been looking forward to this conversation and we 23 00:01:13,010 --> 00:01:16,730 Speaker 1: have a lot to cover Helga. Uh let's start by 24 00:01:16,739 --> 00:01:20,279 Speaker 1: setting the basic foundation. Let's talk about the current state 25 00:01:20,449 --> 00:01:24,529 Speaker 1: of climate finance. What kind of money is needed to 26 00:01:24,540 --> 00:01:27,509 Speaker 1: make meaningful change in this green transition? 27 00:01:27,720 --> 00:01:32,209 Speaker 2: Absolutely. Let's do that before I jump into climate finance. 28 00:01:32,220 --> 00:01:35,089 Speaker 2: One setting the scene point around this, what do we 29 00:01:35,099 --> 00:01:38,800 Speaker 2: need it for? So if we just consider that climate 30 00:01:38,809 --> 00:01:42,419 Speaker 2: change is ultimately driven by accumulated greenhouse gas emissions that 31 00:01:42,430 --> 00:01:44,699 Speaker 2: be put up into the atmosphere. And we've done quite 32 00:01:44,709 --> 00:01:47,830 Speaker 2: a lot of that in the past. Looking forward, 33 00:01:48,069 --> 00:01:52,379 Speaker 2: we have another roughly 400 gigatons of greenhouse gas emissions 34 00:01:52,389 --> 00:01:54,669 Speaker 2: that we can put in the atmosphere until we hit 35 00:01:54,680 --> 00:01:59,260 Speaker 2: this famous 1.5 C scenario. So global temperatures will rise 36 00:01:59,269 --> 00:02:02,610 Speaker 2: by 1.5 C as compared to pre industrial levels. And 37 00:02:02,620 --> 00:02:05,349 Speaker 2: that's quite significant. It's not just a technical number, it 38 00:02:05,360 --> 00:02:09,418 Speaker 2: actually has real world impacts. So 400 gigatons roughly we 39 00:02:09,429 --> 00:02:13,380 Speaker 2: have left until we get there. If we don't change 40 00:02:13,389 --> 00:02:16,198 Speaker 2: the way we play live and work today, 41 00:02:17,008 --> 00:02:21,520 Speaker 2: we are roughly emitting 50 gigatons or thereabouts per annum. 42 00:02:21,679 --> 00:02:24,910 Speaker 2: So simple math, we have around eight years or so 43 00:02:24,919 --> 00:02:29,250 Speaker 2: left until we hit that famous 1.5 C limit. And again, 44 00:02:29,258 --> 00:02:32,139 Speaker 2: this 1.5 C, it's not just a technical number, it 45 00:02:32,149 --> 00:02:36,199 Speaker 2: has a real impact on the communities, especially here in Asia. 46 00:02:36,419 --> 00:02:37,820 Speaker 2: So that simply means 47 00:02:38,220 --> 00:02:40,570 Speaker 2: we have a lot to do in a very, very 48 00:02:40,580 --> 00:02:43,289 Speaker 2: short time frame. So ultimately, you can consider this within 49 00:02:43,300 --> 00:02:46,639 Speaker 2: another industrial revolution, only this time at the speed of 50 00:02:46,649 --> 00:02:50,270 Speaker 2: the digital transformation. So we need to completely rewire the 51 00:02:50,279 --> 00:02:53,389 Speaker 2: way we organize our life, rewire, the way we organize 52 00:02:53,399 --> 00:02:57,580 Speaker 2: our economies lightening quickly. So action matters and it matters 53 00:02:57,589 --> 00:02:59,210 Speaker 2: at scale and at speed. 54 00:02:59,720 --> 00:03:02,029 Speaker 2: So what do we now need in order to finance 55 00:03:02,038 --> 00:03:04,000 Speaker 2: that stuff really, really quickly, there are all sorts of 56 00:03:04,008 --> 00:03:07,529 Speaker 2: different studies out there from think tanks, science and industry groups. 57 00:03:07,630 --> 00:03:10,309 Speaker 2: But if I simplify this a little bit, then one 58 00:03:10,320 --> 00:03:14,869 Speaker 2: study tells us we need roughly nine trillion us D 59 00:03:14,880 --> 00:03:15,910 Speaker 2: per annum 60 00:03:16,490 --> 00:03:20,119 Speaker 2: to invest in our energy systems and land use systems 61 00:03:20,399 --> 00:03:25,679 Speaker 2: per annum per year between now and 2050 the nine 62 00:03:25,690 --> 00:03:28,809 Speaker 2: trillion you can break down. So a certain amount of 63 00:03:28,820 --> 00:03:32,008 Speaker 2: money we already spend today, we spend a certain amount 64 00:03:32,020 --> 00:03:35,460 Speaker 2: of money on existing energy infrastructure, which also by the 65 00:03:35,470 --> 00:03:37,960 Speaker 2: way includes fossil fuels because we can't switch them off 66 00:03:37,970 --> 00:03:42,679 Speaker 2: tonight and also already existing investments in clean tech. 67 00:03:42,940 --> 00:03:45,369 Speaker 2: But we need an additional. So out of the total 68 00:03:45,380 --> 00:03:50,440 Speaker 2: of nine, we did an initial 3.5 trillion to invest 69 00:03:50,449 --> 00:03:52,639 Speaker 2: in our energy systems and land use systems. So these 70 00:03:52,649 --> 00:03:53,990 Speaker 2: numbers are quite staggering three 71 00:03:54,000 --> 00:03:55,869 Speaker 1: and a half millions like India's GDP. 72 00:03:55,910 --> 00:03:58,639 Speaker 2: Yeah. Isn't that amazing? If you break it down into 73 00:03:58,649 --> 00:04:02,960 Speaker 2: GDP numbers per annum, then for a country like India, 74 00:04:02,970 --> 00:04:05,669 Speaker 2: we would need roughly a little bit more than 10% 75 00:04:05,679 --> 00:04:07,509 Speaker 2: of GDP per annum 76 00:04:07,830 --> 00:04:11,160 Speaker 2: to invest in the existing energy infrastructure a little bit 77 00:04:11,169 --> 00:04:13,830 Speaker 2: in the old, also fossil fuel infrastructure, but mainly of 78 00:04:13,839 --> 00:04:16,929 Speaker 2: course into the new one in other countries of Asia. 79 00:04:16,940 --> 00:04:18,950 Speaker 2: It might be around 9% of GDP in China. It's 80 00:04:18,959 --> 00:04:21,649 Speaker 2: a bit less, it's only 5%. But the numbers are 81 00:04:21,660 --> 00:04:24,808 Speaker 2: really staggering. So we need a lot of money at 82 00:04:24,820 --> 00:04:28,459 Speaker 2: a very, very short, within a very short period of time. 83 00:04:29,290 --> 00:04:30,980 Speaker 1: Big numbers. So 84 00:04:31,670 --> 00:04:35,720 Speaker 1: are we generating that money is serious money being deployed? 85 00:04:35,730 --> 00:04:38,730 Speaker 1: Where do we see the most momentum? And more importantly, 86 00:04:38,738 --> 00:04:39,829 Speaker 1: where is the money coming from? 87 00:04:39,890 --> 00:04:42,828 Speaker 2: Absolutely. So the answer is yes, but and I'm going 88 00:04:42,839 --> 00:04:44,709 Speaker 2: to give you a very simple number at the end. 89 00:04:44,720 --> 00:04:47,649 Speaker 2: But let me first highlight a couple of challenges. So 90 00:04:47,660 --> 00:04:51,899 Speaker 2: what prevents us from accelerating the allocation of capital to 91 00:04:51,910 --> 00:04:53,659 Speaker 2: the extent we need to? And there are a couple 92 00:04:53,670 --> 00:04:57,179 Speaker 2: of those challenges. Number one is policy certainty. 93 00:04:57,480 --> 00:05:00,289 Speaker 2: So if you want private sector to unlock Capex to 94 00:05:00,299 --> 00:05:02,928 Speaker 2: put money on the table, to build new infrastructure and 95 00:05:02,940 --> 00:05:06,019 Speaker 2: if you want private capital providers to finance that you 96 00:05:06,029 --> 00:05:08,309 Speaker 2: want to know what is the direction of travel. 97 00:05:08,940 --> 00:05:11,929 Speaker 2: So here government can play a really, really critical role, 98 00:05:11,940 --> 00:05:15,609 Speaker 2: not only setting out net 0 2050 targets but going much, 99 00:05:15,619 --> 00:05:19,320 Speaker 2: much deeper. How do we actually want to accomplish this? Singapore? 100 00:05:19,329 --> 00:05:22,579 Speaker 2: Does this actually very, very well. We have created industry 101 00:05:22,589 --> 00:05:24,250 Speaker 2: round tables where we all come together 102 00:05:24,339 --> 00:05:27,959 Speaker 2: in one room and discussing how are we decarbonising Singapore. 103 00:05:27,970 --> 00:05:29,988 Speaker 2: But we need to see much more of that on 104 00:05:30,000 --> 00:05:34,130 Speaker 2: a global scale to create policy certainty. And for example, 105 00:05:34,140 --> 00:05:38,339 Speaker 2: in Europe, they have decided on a stick regulation regulation regulation, 106 00:05:38,350 --> 00:05:39,649 Speaker 2: including a carbon price 107 00:05:40,049 --> 00:05:43,570 Speaker 2: in the US different approach. They use the carrot, one 108 00:05:43,579 --> 00:05:46,660 Speaker 2: of the biggest checks in corporate history where they said 109 00:05:46,670 --> 00:05:49,679 Speaker 2: we have now this inflation reduction Act where they support 110 00:05:49,690 --> 00:05:52,540 Speaker 2: um the investments in clean tech and so on and 111 00:05:52,549 --> 00:05:54,899 Speaker 2: so forth. In Asia. We don't yet have this on 112 00:05:54,910 --> 00:05:57,410 Speaker 2: a micro scale as such. So we need more of that. 113 00:05:57,519 --> 00:06:01,549 Speaker 2: The second key challenge is we actually spoiler alert don't 114 00:06:01,559 --> 00:06:05,368 Speaker 2: have a lack of capital. I actually think we have 115 00:06:05,380 --> 00:06:09,659 Speaker 2: enough capital in the system from private and public sector combined. 116 00:06:10,190 --> 00:06:12,910 Speaker 2: The problem very often is that the risk return profiles 117 00:06:12,920 --> 00:06:15,549 Speaker 2: of these new products or new projects that we need 118 00:06:15,559 --> 00:06:18,670 Speaker 2: to do are a bit challenging for providers of private 119 00:06:18,678 --> 00:06:20,679 Speaker 2: capital like ourselves. We do a lot, but we could 120 00:06:20,690 --> 00:06:23,209 Speaker 2: do even more. And there are some solutions that are 121 00:06:23,220 --> 00:06:25,500 Speaker 2: going to talk about maybe uh in a bit. A 122 00:06:25,549 --> 00:06:30,440 Speaker 2: third challenge is um tradeoff decisions, especially in Asia. 123 00:06:31,049 --> 00:06:33,459 Speaker 2: We need to be mindful that we not only need 124 00:06:33,470 --> 00:06:36,219 Speaker 2: to tackle the climate crisis, but there are billions of 125 00:06:36,230 --> 00:06:38,670 Speaker 2: people we need to take care of as well. We 126 00:06:38,678 --> 00:06:40,980 Speaker 2: need to have socio economic development, we need jobs and 127 00:06:40,988 --> 00:06:43,660 Speaker 2: all these types of things and they are interconnected issues. 128 00:06:43,670 --> 00:06:46,709 Speaker 2: We need to be quite mindful around that agenda and 129 00:06:46,720 --> 00:06:48,720 Speaker 2: then another one is simply capacity building. 130 00:06:49,049 --> 00:06:51,320 Speaker 2: Uh Sometimes we sit in a, in a banking room 131 00:06:51,329 --> 00:06:52,920 Speaker 2: and we look at power point slides and we know 132 00:06:52,928 --> 00:06:56,010 Speaker 2: all the numbers, but we still need people to actually 133 00:06:56,019 --> 00:06:58,700 Speaker 2: do it. We need a plumber, we need an engineer, 134 00:06:58,709 --> 00:07:01,349 Speaker 2: we need a mechanic to repair an ev we need 135 00:07:01,359 --> 00:07:03,929 Speaker 2: bankers and all this. So capacity building is a key 136 00:07:03,940 --> 00:07:06,579 Speaker 2: issue as well. So if I draw a line, there 137 00:07:06,589 --> 00:07:08,630 Speaker 2: are all these challenges and we tackle some of them 138 00:07:08,640 --> 00:07:10,579 Speaker 2: quite well. Some of them maybe not yet. Well, but 139 00:07:10,589 --> 00:07:11,720 Speaker 2: if I look at numbers, 140 00:07:12,170 --> 00:07:15,309 Speaker 2: it was a yes but answer right that I started with. 141 00:07:15,399 --> 00:07:19,239 Speaker 2: So last year, it already was very clear that we 142 00:07:19,250 --> 00:07:22,510 Speaker 2: are investing more and more in renewable energy. For 2023 143 00:07:22,519 --> 00:07:26,049 Speaker 2: the I A the International Energy Agency expects that we 144 00:07:26,059 --> 00:07:30,420 Speaker 2: invest roughly $1.7 trillion in clean tech 145 00:07:31,299 --> 00:07:34,839 Speaker 2: and we invest roughly one trillion in fossil fuels. So 146 00:07:34,850 --> 00:07:39,079 Speaker 2: that's a total of 2.7 trillion. Remember my, my nine trillion, 147 00:07:40,100 --> 00:07:43,630 Speaker 2: the positive news is this number is going up and 148 00:07:43,640 --> 00:07:45,190 Speaker 2: you see a tilt in the ratio. 149 00:07:45,779 --> 00:07:48,190 Speaker 2: So a number of years back for every dollar we 150 00:07:48,200 --> 00:07:50,890 Speaker 2: spend on fossil fuels, we spend roughly a buck on 151 00:07:50,899 --> 00:07:54,420 Speaker 2: clean tech. Now for 2023 the I A expects we 152 00:07:54,429 --> 00:07:58,320 Speaker 2: spend a buck on fossil fuels and 1.7 bucks for 153 00:07:58,329 --> 00:08:01,429 Speaker 2: renewables and clean tech more broadly. That's great news. We 154 00:08:01,440 --> 00:08:03,470 Speaker 2: just need to get this up probably to 1 to 4. 155 00:08:03,660 --> 00:08:05,670 Speaker 2: So for every buck on fossil fuel, we probably need 156 00:08:05,679 --> 00:08:08,369 Speaker 2: four bucks in clean tech. So this is my yes 157 00:08:08,380 --> 00:08:11,260 Speaker 2: but answer. So money is flowing. Not yet at the 158 00:08:11,269 --> 00:08:13,299 Speaker 2: scale we need and not at the ratio we need, 159 00:08:13,309 --> 00:08:14,890 Speaker 2: but we are slowly seeing momentum. 160 00:08:15,220 --> 00:08:17,670 Speaker 1: Would it be safe to say that most of the 161 00:08:17,679 --> 00:08:19,470 Speaker 1: funding has to come from the private sector? 162 00:08:20,440 --> 00:08:22,130 Speaker 2: I think if you look at the numbers that I 163 00:08:22,140 --> 00:08:25,220 Speaker 2: mentioned at the beginning, the the the volumes are staggering. Yeah. Right. 164 00:08:25,230 --> 00:08:28,269 Speaker 2: So in my humble view, the answer is yes also, 165 00:08:28,279 --> 00:08:33,809 Speaker 2: but we need very often public money as a catalyst. 166 00:08:33,849 --> 00:08:36,900 Speaker 2: So we call this, for example, blended finance transactions. So 167 00:08:36,909 --> 00:08:39,989 Speaker 2: let's say there's a renewable energy project in a country 168 00:08:40,000 --> 00:08:42,989 Speaker 2: somewhere in Southeast Asia and maybe the risk return profiles 169 00:08:43,000 --> 00:08:45,739 Speaker 2: for a variety of reasons is not really conducive to us. 170 00:08:45,750 --> 00:08:48,500 Speaker 2: So can we create a blended finance structure where you 171 00:08:48,510 --> 00:08:49,150 Speaker 2: get a bit of 172 00:08:49,700 --> 00:08:53,140 Speaker 2: public money in, for example, as a first loss piece 173 00:08:53,150 --> 00:08:56,598 Speaker 2: or as an equity piece or whatever to ultimately crowd 174 00:08:56,609 --> 00:09:00,299 Speaker 2: in private capital and depending on what leverage ratio. So 175 00:09:00,309 --> 00:09:02,840 Speaker 2: for one buck of public money, how much bucks of 176 00:09:02,849 --> 00:09:05,479 Speaker 2: private capital do you get you then ultimately get to 177 00:09:05,489 --> 00:09:07,468 Speaker 2: the solution? So I think it's a combination 178 00:09:07,729 --> 00:09:10,478 Speaker 2: but the majority will have to come from private sector. Yes, 179 00:09:10,489 --> 00:09:10,809 Speaker 2: I think 180 00:09:10,820 --> 00:09:13,530 Speaker 1: these sort of first loss protections can be very useful. 181 00:09:13,539 --> 00:09:15,608 Speaker 1: Uh I've seen this not just on the E part 182 00:09:15,619 --> 00:09:17,150 Speaker 1: of the ESG side but the S and the G 183 00:09:17,159 --> 00:09:20,260 Speaker 1: side as well. So like gender related funding, a lot 184 00:09:20,270 --> 00:09:23,340 Speaker 1: of times you get an aid agency from Australia or 185 00:09:23,349 --> 00:09:25,718 Speaker 1: Europe or the US come up with the first trench 186 00:09:25,729 --> 00:09:28,989 Speaker 1: protection and that sort of galvanizes other investors to come in. So, 187 00:09:29,000 --> 00:09:30,820 Speaker 1: of course, it makes total sense that it will happen 188 00:09:30,830 --> 00:09:33,750 Speaker 1: on the climate change side as well. Um You mentioned 189 00:09:33,760 --> 00:09:36,940 Speaker 1: the phrase uh blended finance. So let's break that down 190 00:09:36,950 --> 00:09:37,479 Speaker 1: a little bit. 191 00:09:37,690 --> 00:09:41,020 Speaker 1: Uh There are all sorts of ways to fund a project. 192 00:09:41,030 --> 00:09:42,330 Speaker 1: So I'm sure there are all sorts of ways to 193 00:09:42,340 --> 00:09:44,919 Speaker 1: fund the climate uh transition project as well. So we've 194 00:09:44,929 --> 00:09:48,760 Speaker 1: got bonds and blended finance and grants, carbon credits. Give 195 00:09:48,770 --> 00:09:51,599 Speaker 1: us a sense of, you know, which one is big 196 00:09:51,609 --> 00:09:53,880 Speaker 1: these days, which one is cashing momentum and what they 197 00:09:53,890 --> 00:09:54,500 Speaker 1: are actually. 198 00:09:54,510 --> 00:09:58,218 Speaker 2: Absolutely. Let me maybe describe two broad categories here. One 199 00:09:58,229 --> 00:10:01,189 Speaker 2: category is what are the activities and assets we are 200 00:10:01,200 --> 00:10:03,510 Speaker 2: financing and the second one is what are the instruments 201 00:10:03,520 --> 00:10:04,598 Speaker 2: we're using to do? So. 202 00:10:04,900 --> 00:10:07,669 Speaker 2: So on the first one, what are the assets and activities? 203 00:10:07,679 --> 00:10:10,260 Speaker 2: Let me be a bit simplistic. So if you look 204 00:10:10,270 --> 00:10:12,380 Speaker 2: at everything that needs to be financed, it's almost like 205 00:10:12,390 --> 00:10:13,429 Speaker 2: a traffic light system 206 00:10:14,049 --> 00:10:18,559 Speaker 2: So there's the dark green stuff, think of electricity generation 207 00:10:18,570 --> 00:10:20,710 Speaker 2: by renewable energy. We all know it's clean. We all 208 00:10:20,719 --> 00:10:22,239 Speaker 2: know we need to do much, much more of that. 209 00:10:22,510 --> 00:10:25,700 Speaker 2: On the other side, the red traffic light, let's call 210 00:10:25,710 --> 00:10:29,849 Speaker 2: it dark, dark brown, think of electric electricity generation by power. 211 00:10:29,859 --> 00:10:32,710 Speaker 2: It's really, really dirty and no matter how much effort 212 00:10:32,719 --> 00:10:34,359 Speaker 2: you put in, there's never going to be a commercial 213 00:10:34,369 --> 00:10:38,020 Speaker 2: viable solution to make it clean or cleaner. So we 214 00:10:38,030 --> 00:10:39,840 Speaker 2: don't want to do it. So the only question is 215 00:10:39,849 --> 00:10:41,039 Speaker 2: when do we stop doing it? 216 00:10:41,710 --> 00:10:45,189 Speaker 2: But there's this gigantic pile in the middle, the ember 217 00:10:45,200 --> 00:10:47,830 Speaker 2: power of the traffic light which we call transition. So 218 00:10:47,840 --> 00:10:51,289 Speaker 2: it's stuff that is potentially brown light brown or whatever 219 00:10:51,299 --> 00:10:53,419 Speaker 2: the shade of brown might be. But with the right 220 00:10:53,429 --> 00:10:58,439 Speaker 2: efforts and the right technology, you can make it ultimately clean. Now, 221 00:10:59,260 --> 00:11:02,459 Speaker 2: having this traffic light on our minds, the world has 222 00:11:02,469 --> 00:11:06,400 Speaker 2: come together and we have broadly agreed on what is 223 00:11:06,409 --> 00:11:09,299 Speaker 2: this dark green stuff and what is this brown, dark 224 00:11:09,309 --> 00:11:11,719 Speaker 2: brown stuff? So we're good on that. So money is 225 00:11:11,729 --> 00:11:14,718 Speaker 2: flowing there and we're flowing into the green stuff and 226 00:11:14,729 --> 00:11:16,690 Speaker 2: we see money flowing out of the dark brown. 227 00:11:17,210 --> 00:11:19,348 Speaker 2: The issue in the middle is that we have not 228 00:11:19,359 --> 00:11:22,739 Speaker 2: yet come together as a global planet and agreed upon 229 00:11:22,789 --> 00:11:25,619 Speaker 2: what is a credible transition. What is a credible transition 230 00:11:25,630 --> 00:11:27,858 Speaker 2: activity and so on and so forth, work is being done. 231 00:11:27,869 --> 00:11:29,429 Speaker 2: So it's not that nothing has been done, but there's 232 00:11:29,440 --> 00:11:32,289 Speaker 2: no global agreement and we really need to unlock this 233 00:11:32,299 --> 00:11:35,859 Speaker 2: because more than 90% of our economic activities today are 234 00:11:35,869 --> 00:11:38,000 Speaker 2: in this orange bucket. So we don't tackle this. 235 00:11:38,440 --> 00:11:41,179 Speaker 2: We're not gonna save us on this planet. So that's 236 00:11:41,190 --> 00:11:43,949 Speaker 2: one area of looking at it. This transition is really 237 00:11:43,960 --> 00:11:47,049 Speaker 2: a key focus area and then looking at the various instruments, 238 00:11:47,059 --> 00:11:50,010 Speaker 2: I mean, there are use of proceeds instruments where I 239 00:11:50,020 --> 00:11:52,590 Speaker 2: give you money and you can only use that money 240 00:11:52,599 --> 00:11:55,299 Speaker 2: for a specific purpose, like you're financing a green building 241 00:11:55,309 --> 00:11:58,189 Speaker 2: or you're financing uh an electric vehicle and so on 242 00:11:58,200 --> 00:12:00,330 Speaker 2: and so forth. There are other instruments which we call 243 00:12:00,340 --> 00:12:01,510 Speaker 2: sustainability late, 244 00:12:01,710 --> 00:12:03,380 Speaker 2: I give you money and you can use it for 245 00:12:03,390 --> 00:12:06,289 Speaker 2: whatever you want to do. It's a general corporate purposes facility, 246 00:12:06,299 --> 00:12:09,760 Speaker 2: for example. However, the interest rate on this financing is 247 00:12:09,770 --> 00:12:14,439 Speaker 2: not fixed. So depending on your performance versus pre agreed 248 00:12:14,450 --> 00:12:17,780 Speaker 2: uh sustainability KPIS, the interest rate might go up and down. 249 00:12:18,210 --> 00:12:21,179 Speaker 2: Um And there are many, many other types of financing. 250 00:12:21,190 --> 00:12:22,919 Speaker 2: There are of course loans, there are bonds, there are 251 00:12:22,929 --> 00:12:26,940 Speaker 2: trade facilities. Um There are carbon credits which we also 252 00:12:26,950 --> 00:12:28,900 Speaker 2: think is a very important tool in the toolkit to 253 00:12:28,909 --> 00:12:31,210 Speaker 2: unlock capital, uh and so on and so forth. So 254 00:12:31,219 --> 00:12:34,880 Speaker 2: they're actually a wide variety of instruments that we can deploy. 255 00:12:34,950 --> 00:12:37,659 Speaker 2: You mentioned, blended finance and why is blended finance so 256 00:12:37,669 --> 00:12:40,400 Speaker 2: important I mentioned at the start. One of the key 257 00:12:40,409 --> 00:12:44,599 Speaker 2: challenges we have is the risk return profile of certain projects. 258 00:12:45,039 --> 00:12:47,530 Speaker 2: So we are a fairly sizable bank here in the 259 00:12:47,539 --> 00:12:50,020 Speaker 2: Asia Pacific region. And we are financing a lot more 260 00:12:50,030 --> 00:12:53,489 Speaker 2: than half or around half of our power portfolio is 261 00:12:53,500 --> 00:12:56,809 Speaker 2: already in renewable energy. But also we sometimes face situations 262 00:12:56,820 --> 00:12:59,689 Speaker 2: where we struggle with a risk return. So blended finance 263 00:12:59,700 --> 00:13:01,150 Speaker 2: is in simple terms, 264 00:13:01,539 --> 00:13:03,619 Speaker 2: you have a bucket of public money and you have 265 00:13:03,630 --> 00:13:07,250 Speaker 2: a bucket of private money, put it together. And ultimately, 266 00:13:07,260 --> 00:13:10,429 Speaker 2: by combining it the way that Everest cost of capital 267 00:13:10,440 --> 00:13:13,789 Speaker 2: comes down and you attract private capital by virtue of 268 00:13:13,799 --> 00:13:16,169 Speaker 2: having the public money in there. It's a very, very 269 00:13:16,179 --> 00:13:20,349 Speaker 2: important way of unlocking more capital flows. Uh It's by 270 00:13:20,359 --> 00:13:22,289 Speaker 2: the way, a product that we've known for decades, 271 00:13:22,710 --> 00:13:25,939 Speaker 2: so many of these instruments actually are not new, blended 272 00:13:25,950 --> 00:13:28,960 Speaker 2: finance for sure, not right. So the only question is 273 00:13:28,969 --> 00:13:31,390 Speaker 2: if you go back to the very start of our conversation, 274 00:13:31,500 --> 00:13:34,760 Speaker 2: eight years left until we hit the 1.5 C, how 275 00:13:34,770 --> 00:13:38,840 Speaker 2: can we scale it at speed? That is really the 276 00:13:38,849 --> 00:13:41,619 Speaker 2: key question. So we have all of those. So for example, 277 00:13:41,630 --> 00:13:44,599 Speaker 2: in blended finance, it's really all about can we agree 278 00:13:44,609 --> 00:13:45,780 Speaker 2: on a certain template 279 00:13:46,380 --> 00:13:48,809 Speaker 2: and then we do it again and again and again, 280 00:13:48,820 --> 00:13:52,108 Speaker 2: we're not renegotiating and starting with Adam and Eve, but 281 00:13:52,119 --> 00:13:54,469 Speaker 2: really doing it on the base of a template. I 282 00:13:54,479 --> 00:13:56,659 Speaker 2: know it's a bit simplistic because every country is different, 283 00:13:56,669 --> 00:13:59,130 Speaker 2: every asset is different, but we need to really scale 284 00:13:59,140 --> 00:14:01,369 Speaker 2: blended finance to unlock the capital. We need 285 00:14:02,059 --> 00:14:04,500 Speaker 1: Hilda. If I think about this issue from the private 286 00:14:04,510 --> 00:14:07,950 Speaker 1: sector's perspective, of course, the fact that whether it is 287 00:14:07,960 --> 00:14:12,348 Speaker 1: measurement of KPIS or even the measurement of the environmental 288 00:14:12,359 --> 00:14:16,190 Speaker 1: degradation that are happening, private sector is still not fully 289 00:14:16,200 --> 00:14:22,469 Speaker 1: on board with it, taxonomy and uh uh metrics, different jurisdictions, 290 00:14:22,479 --> 00:14:25,340 Speaker 1: different things. So they want some degree of hand holding 291 00:14:25,349 --> 00:14:27,510 Speaker 1: from the public sector to your point, you can lower 292 00:14:27,520 --> 00:14:29,909 Speaker 1: the cost of funding of a project by putting some 293 00:14:29,919 --> 00:14:30,929 Speaker 1: public money in the bucket. 294 00:14:31,380 --> 00:14:33,830 Speaker 1: But if I look at it from the public sector's perspective, 295 00:14:33,979 --> 00:14:36,750 Speaker 1: it would be like, well, econ 101 tells me that 296 00:14:36,760 --> 00:14:38,510 Speaker 1: I just need to get the pricing right. So I 297 00:14:38,520 --> 00:14:41,239 Speaker 1: will just do heavy carbon taxing and the private sector 298 00:14:41,250 --> 00:14:42,530 Speaker 1: can figure things out. 299 00:14:42,929 --> 00:14:46,369 Speaker 1: Why hasn't that approach worked? Is it because we don't 300 00:14:46,380 --> 00:14:49,380 Speaker 1: have a very good way to trade carbon yet? Or 301 00:14:49,390 --> 00:14:51,460 Speaker 1: there are other rigidities that I have not thought through, 302 00:14:51,469 --> 00:14:53,210 Speaker 1: but maybe you can help us understand. 303 00:14:53,219 --> 00:14:56,159 Speaker 2: Yeah, absolutely. So if we look at the entire world 304 00:14:56,169 --> 00:14:59,619 Speaker 2: a bit more than 20% of global greenhouse gas emissions 305 00:14:59,630 --> 00:15:02,809 Speaker 2: are now subjected to a carbon price that can be 306 00:15:02,820 --> 00:15:04,840 Speaker 2: either in the form of a tax. Like here in Singapore, 307 00:15:04,849 --> 00:15:05,020 Speaker 2: we have 308 00:15:05,125 --> 00:15:07,776 Speaker 2: carbon tax or a what we call a cap and 309 00:15:07,786 --> 00:15:10,546 Speaker 2: trade scheme like we have in the European Union, we 310 00:15:10,556 --> 00:15:13,565 Speaker 2: have these instruments in China, we have it in certain 311 00:15:13,575 --> 00:15:16,546 Speaker 2: states in the US, for example, in California, but we 312 00:15:16,556 --> 00:15:19,325 Speaker 2: don't have it on federal level in the US. So 313 00:15:19,385 --> 00:15:23,565 Speaker 2: around 80% plus or miners are not covered by a 314 00:15:23,575 --> 00:15:26,195 Speaker 2: carbon tax. So the question is very valid and a 315 00:15:26,205 --> 00:15:27,236 Speaker 2: really good one. The only 316 00:15:27,322 --> 00:15:31,242 Speaker 2: answer I have is it's probably a political will situation 317 00:15:31,372 --> 00:15:35,021 Speaker 2: because coming back, especially in Asia Pacific, talking about the 318 00:15:35,031 --> 00:15:41,441 Speaker 2: just transition, the interconnectedness of issues, how hostile situations can become, 319 00:15:41,452 --> 00:15:44,872 Speaker 2: I can only assume it's politically sometimes really, really difficult 320 00:15:44,882 --> 00:15:49,481 Speaker 2: to implement these measures given the implications it has, right? 321 00:15:49,762 --> 00:15:50,970 Speaker 1: And I think, you know, 322 00:15:52,080 --> 00:15:54,530 Speaker 1: not necessarily, you know, I'm keen on defending the profession 323 00:15:54,539 --> 00:15:57,960 Speaker 1: of economics too much. So ideally, yes, a price on 324 00:15:57,969 --> 00:16:01,469 Speaker 1: carbon should be able to internalize a lot of externalities. 325 00:16:01,520 --> 00:16:03,700 Speaker 1: But in real life, whether it is a political issue 326 00:16:03,710 --> 00:16:06,469 Speaker 1: that you talk about or just a matter of, you know, 327 00:16:06,479 --> 00:16:09,429 Speaker 1: sort of measuring the impact and putting the right price, 328 00:16:09,570 --> 00:16:12,250 Speaker 1: not that straightforward as we have seen with carbon exchanges 329 00:16:12,260 --> 00:16:16,049 Speaker 1: around the world, including Europeans Union's experience and China's experience 330 00:16:16,059 --> 00:16:17,789 Speaker 1: with putting a tax on carbon. 331 00:16:19,010 --> 00:16:23,010 Speaker 1: You just mentioned the phrase just transition to unpack that 332 00:16:23,020 --> 00:16:25,500 Speaker 1: because we got a bit of a loaded phrase during 333 00:16:25,510 --> 00:16:28,210 Speaker 1: the cop meetings. We hear a lot about it, particularly 334 00:16:28,219 --> 00:16:31,729 Speaker 1: from developing countries. There's some degree of impatience. I'll give 335 00:16:31,739 --> 00:16:35,059 Speaker 1: you one example, I was in Indonesia recently and it 336 00:16:35,070 --> 00:16:36,979 Speaker 1: seemed to me it was very clear that the government 337 00:16:36,989 --> 00:16:39,210 Speaker 1: or the government officials there who were at that meeting 338 00:16:39,270 --> 00:16:42,099 Speaker 1: basically expected a lot of grant money from the West 339 00:16:42,109 --> 00:16:43,969 Speaker 1: because they feel that's the best thing for the West 340 00:16:43,979 --> 00:16:46,460 Speaker 1: to do, having polluted the world. Now, they're putting all 341 00:16:46,469 --> 00:16:48,460 Speaker 1: this pressure on developing countries. So 342 00:16:48,989 --> 00:16:51,950 Speaker 1: break down the just transition concept for us a bit. 343 00:16:52,200 --> 00:16:53,479 Speaker 2: So in simple terms, 344 00:16:54,119 --> 00:16:55,710 Speaker 2: it's not only about climate, 345 00:16:56,479 --> 00:17:01,200 Speaker 2: we have 17 United Nations Sustainability Development Goals. That's a 346 00:17:01,210 --> 00:17:04,829 Speaker 2: bit the north star of how we look at sustainability. 347 00:17:04,839 --> 00:17:07,719 Speaker 2: So what does it mean? It means we probably have 348 00:17:07,729 --> 00:17:12,810 Speaker 2: around 9 billion people by 2050 thereabouts. So sustainability would 349 00:17:12,819 --> 00:17:15,688 Speaker 2: mean that these 9 billion people can live well. 350 00:17:16,160 --> 00:17:18,510 Speaker 2: Now what does live well mean it means you have 351 00:17:18,520 --> 00:17:21,639 Speaker 2: food on the plate, it means you have access to 352 00:17:21,650 --> 00:17:24,630 Speaker 2: fresh water and fresh air. It means you have access 353 00:17:24,640 --> 00:17:28,339 Speaker 2: to medical services, you have shelter and all these types 354 00:17:28,349 --> 00:17:32,369 Speaker 2: of things. But secondly, we also need to assure that 355 00:17:32,380 --> 00:17:33,670 Speaker 2: the way we do this 356 00:17:34,199 --> 00:17:37,149 Speaker 2: is within planetary boundaries so that the people that are 357 00:17:37,160 --> 00:17:40,170 Speaker 2: very young today or not even yet born can also 358 00:17:40,180 --> 00:17:44,050 Speaker 2: live well. So this is this intergenerational fairness which humans 359 00:17:44,060 --> 00:17:47,170 Speaker 2: in my humble view have always struggled with it in history. 360 00:17:47,180 --> 00:17:50,000 Speaker 2: So humans have been extraordinary in the things we have done, 361 00:17:50,170 --> 00:17:54,780 Speaker 2: but very often intergenerational unfair. So sustainability bringing it back 362 00:17:54,939 --> 00:17:59,010 Speaker 2: means that 9 billion people plus live well 363 00:17:59,770 --> 00:18:01,139 Speaker 2: with all the things I mentioned. 364 00:18:01,790 --> 00:18:03,760 Speaker 2: But we also do it in a way that future 365 00:18:03,770 --> 00:18:06,439 Speaker 2: generations can live well. That to me is a simple 366 00:18:06,449 --> 00:18:11,599 Speaker 2: concept of sustainability. So if you take an action, for example, 367 00:18:11,609 --> 00:18:12,540 Speaker 2: on climate, 368 00:18:12,829 --> 00:18:15,530 Speaker 2: you need to be mindful of the implications it might 369 00:18:15,540 --> 00:18:19,760 Speaker 2: have on the other sustainability goals. So that's a simple 370 00:18:19,770 --> 00:18:22,609 Speaker 2: fact around the just transition. And I think one thing 371 00:18:22,619 --> 00:18:26,060 Speaker 2: that's not often talked about is this intergenerational fairness thing. 372 00:18:26,069 --> 00:18:28,169 Speaker 2: So you're not only doing it today, but you're actually 373 00:18:28,180 --> 00:18:31,319 Speaker 2: doing it for good. So that's to me the simple 374 00:18:31,329 --> 00:18:32,890 Speaker 2: way of looking at it. Sure. 375 00:18:32,900 --> 00:18:36,030 Speaker 1: So this thing that we see all these activists basically 376 00:18:36,040 --> 00:18:38,300 Speaker 1: saying that, you know, the US and Europe have polled 377 00:18:38,310 --> 00:18:40,020 Speaker 1: the world for a century. 378 00:18:40,430 --> 00:18:43,609 Speaker 1: China began only 2030 years ago. India is about to 379 00:18:43,619 --> 00:18:46,639 Speaker 1: join the party. How can we tell these countries to 380 00:18:46,650 --> 00:18:50,709 Speaker 1: stop following the growth paradigm that their Western counterparts did? 381 00:18:50,890 --> 00:18:53,119 Speaker 1: Where is the justice in that? Because we also want 382 00:18:53,130 --> 00:18:56,099 Speaker 1: to live well to your point that within 10, 2030 years, 383 00:18:56,109 --> 00:19:00,260 Speaker 1: we want to achieve all the SDGS. So from your perspective, 384 00:19:00,270 --> 00:19:04,540 Speaker 1: this this ethical question that what is the burden for 385 00:19:04,550 --> 00:19:07,180 Speaker 1: a developing country which is not responsible for pollution 386 00:19:07,439 --> 00:19:11,170 Speaker 1: but still needs to do its share of adjustment. 387 00:19:11,540 --> 00:19:14,430 Speaker 2: Let me put first some facts around your statement around 388 00:19:14,439 --> 00:19:18,729 Speaker 2: historical contributions because there are numbers to this. So science 389 00:19:19,380 --> 00:19:22,000 Speaker 2: tells us. And when I say science, I refer to 390 00:19:22,010 --> 00:19:25,530 Speaker 2: the IPCC report. So every seven or so years, a 391 00:19:25,550 --> 00:19:30,229 Speaker 2: huge number of scientists comes together and writes, ultimately reports 392 00:19:30,239 --> 00:19:31,449 Speaker 2: on the state of climate. 393 00:19:32,040 --> 00:19:36,589 Speaker 2: And in the most recent iteration in 2022 there was 394 00:19:36,599 --> 00:19:41,569 Speaker 2: a report again being published and on page two or sorry, 395 00:19:41,579 --> 00:19:45,180 Speaker 2: on page 10 of the third working paper, you will 396 00:19:45,189 --> 00:19:49,619 Speaker 2: find a graph that tells you that globally historically accumulated 397 00:19:49,630 --> 00:19:54,239 Speaker 2: greenhouse gas emissions, 39% of these arose from Europe and 398 00:19:54,250 --> 00:19:58,189 Speaker 2: North America. So roughly 40% of all the greenhouse gas 399 00:19:58,199 --> 00:19:59,629 Speaker 2: emissions that are already up there 400 00:20:00,030 --> 00:20:05,040 Speaker 2: originate from these two regions. That is the historical responsibility 401 00:20:05,050 --> 00:20:08,569 Speaker 2: that we are always talking about. And actually even still today, 402 00:20:08,689 --> 00:20:12,439 Speaker 2: if you calculate greenhouse gas emissions on a per capita basis, 403 00:20:12,949 --> 00:20:16,949 Speaker 2: then still Europe today is much dirtier than various parts 404 00:20:16,959 --> 00:20:19,239 Speaker 2: of Asia, which by the way is not too surprising 405 00:20:19,250 --> 00:20:22,969 Speaker 2: because of course, you see that more developed nations typically 406 00:20:22,979 --> 00:20:27,030 Speaker 2: have higher greenhouse gas emissions, economic 407 00:20:27,040 --> 00:20:27,750 Speaker 1: activity, more 408 00:20:27,760 --> 00:20:30,448 Speaker 2: emissions. Exactly. Right. So that's just I wanted just to 409 00:20:30,459 --> 00:20:33,729 Speaker 2: give you a fact around these historical obligations. Now, looking 410 00:20:33,739 --> 00:20:36,139 Speaker 2: forward ultimately doesn't matter, right. A ton of carbon is 411 00:20:36,239 --> 00:20:38,239 Speaker 2: a ton of carbon is a ton of carbon. We 412 00:20:38,250 --> 00:20:41,939 Speaker 2: have 400 gigatons left. So finger pointing doesn't really help 413 00:20:41,949 --> 00:20:43,770 Speaker 2: us anyhow. So we need to really come to a 414 00:20:43,780 --> 00:20:47,709 Speaker 2: solution together. But I think what it means is that 415 00:20:47,719 --> 00:20:50,149 Speaker 2: of course, in Asia, you see a lot of population growth, 416 00:20:50,160 --> 00:20:53,550 Speaker 2: you see an amazing GDP growth. So in terms of 417 00:20:53,560 --> 00:20:56,439 Speaker 2: future sources of emissions, it's very clear we probably gonna 418 00:20:56,449 --> 00:20:58,920 Speaker 2: account for more than half global greenhouse gas emissions very 419 00:20:58,930 --> 00:20:59,468 Speaker 2: very soon. 420 00:20:59,739 --> 00:21:03,319 Speaker 2: So taking these two things into account historical responsibility, but 421 00:21:03,329 --> 00:21:05,949 Speaker 2: also how the future will look like. I think we 422 00:21:05,959 --> 00:21:11,129 Speaker 2: simply need some help from developed nations. Acknowledging the fact 423 00:21:11,140 --> 00:21:13,910 Speaker 2: of what happened in the past, which science tells us, 424 00:21:13,920 --> 00:21:15,839 Speaker 2: you know, is a matter of fact. So what I 425 00:21:15,849 --> 00:21:16,728 Speaker 2: would see is 426 00:21:17,369 --> 00:21:21,640 Speaker 2: the developed nations providing know how and capital for developing 427 00:21:21,650 --> 00:21:25,619 Speaker 2: nations to accomplish this trust, just transition one template that 428 00:21:25,630 --> 00:21:30,800 Speaker 2: I really like is this just energy transition partnership, Jack. 429 00:21:31,380 --> 00:21:34,479 Speaker 2: So it arose at COP 26 in Scotland. And the 430 00:21:34,489 --> 00:21:37,579 Speaker 2: basic idea is that G7 countries provide money to a 431 00:21:37,589 --> 00:21:41,910 Speaker 2: developing nation for empowering that developing nation to transition to 432 00:21:41,920 --> 00:21:44,560 Speaker 2: a lower carbon society. It started with South Africa. Now 433 00:21:44,569 --> 00:21:46,719 Speaker 2: we are discussing it with Indonesia and Vietnam, both of 434 00:21:46,729 --> 00:21:49,270 Speaker 2: which is in our backyard and maybe India is the 435 00:21:49,280 --> 00:21:51,170 Speaker 2: next one. So again, the basic idea 436 00:21:51,239 --> 00:21:55,020 Speaker 2: is G7 provides capital and hopefully know how and these 437 00:21:55,030 --> 00:21:59,069 Speaker 2: countries are better equipped to transition, giving them also some 438 00:21:59,079 --> 00:22:03,250 Speaker 2: breathing space to buffer the implications on for example, certain 439 00:22:03,260 --> 00:22:06,459 Speaker 2: social dimensions that we discussed, right, for example, certain jobs 440 00:22:06,469 --> 00:22:09,050 Speaker 2: because let's not forget in this transition to a low 441 00:22:09,060 --> 00:22:11,030 Speaker 2: carbon society, they are going to be winners and losers. 442 00:22:11,430 --> 00:22:14,180 Speaker 2: Yeah, if I break it down, if you are a 443 00:22:14,189 --> 00:22:18,160 Speaker 2: 50 year old engineer at a coal power plant, it 444 00:22:18,170 --> 00:22:22,520 Speaker 2: is very unlikely that you overnight become a solar PV 445 00:22:22,530 --> 00:22:26,329 Speaker 2: engineer or a mechanic that can repair electric vehicles. So 446 00:22:26,339 --> 00:22:28,760 Speaker 2: it is simply a fact. So we need to make 447 00:22:28,770 --> 00:22:31,139 Speaker 2: conscious choices. How can we support them? How can we 448 00:22:31,150 --> 00:22:34,290 Speaker 2: take them along? So by way of having these templates, 449 00:22:34,319 --> 00:22:36,939 Speaker 2: the just energy transition partnerships, jet P, I think I 450 00:22:36,949 --> 00:22:38,379 Speaker 2: got the name wrong at the start. 451 00:22:38,689 --> 00:22:41,639 Speaker 2: Um We actually have a nice template on how we 452 00:22:41,650 --> 00:22:44,420 Speaker 2: could actually move forward to accomplish this. Maybe just 453 00:22:44,430 --> 00:22:48,030 Speaker 1: transition. One clarification on TP is uh we're talking about 454 00:22:48,040 --> 00:22:49,930 Speaker 1: debt capital or grants. 455 00:22:50,510 --> 00:22:54,189 Speaker 2: Uh it can take different forms, but ultimately, it's a 456 00:22:54,199 --> 00:22:57,920 Speaker 2: certain pool of capital that is provided uh to really 457 00:22:57,930 --> 00:23:01,160 Speaker 2: uh facilitate the transition. It's not really defining the instrument 458 00:23:01,390 --> 00:23:02,449 Speaker 2: uh as such, right, 459 00:23:02,459 --> 00:23:05,260 Speaker 1: I've seen, for example, the IMF now has a climate 460 00:23:05,270 --> 00:23:07,979 Speaker 1: change Trust fund and a few countries around the world 461 00:23:07,989 --> 00:23:11,140 Speaker 1: have taken in that money. It's, it's still debt capital, 462 00:23:11,150 --> 00:23:14,560 Speaker 1: that extremely low interest rate with a very long advert period. 463 00:23:14,569 --> 00:23:17,719 Speaker 1: So almost free money if you will. Um 464 00:23:19,040 --> 00:23:22,770 Speaker 1: So the key question around climate finance is the biggest 465 00:23:22,780 --> 00:23:25,209 Speaker 1: source of finance in the world which are banks. And 466 00:23:25,219 --> 00:23:27,619 Speaker 1: you and I work in one of those uh tell 467 00:23:27,630 --> 00:23:31,010 Speaker 1: us about what banks have been doing the last decade 468 00:23:31,020 --> 00:23:34,790 Speaker 1: or so and how optimistic or energized. You are by 469 00:23:34,800 --> 00:23:37,849 Speaker 1: banks role in transition and climate transition. 470 00:23:38,079 --> 00:23:43,650 Speaker 2: Absolutely. Let's first maybe establish that we really need ecosystem change. 471 00:23:43,660 --> 00:23:45,458 Speaker 2: And what I mean by that is that all of 472 00:23:45,469 --> 00:23:47,188 Speaker 2: us need to come together. It's government, 473 00:23:47,479 --> 00:23:51,290 Speaker 2: it's regulators, it's the real world uh players like the 474 00:23:51,300 --> 00:23:54,319 Speaker 2: private sector, companies, the finance sector and all of us 475 00:23:54,329 --> 00:23:56,750 Speaker 2: embedded in the community at large, we really all need 476 00:23:56,760 --> 00:23:59,869 Speaker 2: to come together. Why we have these eight years left, right? 477 00:23:59,880 --> 00:24:02,910 Speaker 2: So no one of us in this ecosystem can do 478 00:24:02,920 --> 00:24:06,250 Speaker 2: it alone. So everyone has a distinct role to play 479 00:24:06,560 --> 00:24:09,589 Speaker 2: and banks, I would say have at least two critical roles. 480 00:24:09,599 --> 00:24:13,150 Speaker 2: One is simple, the simple in in in theory is 481 00:24:13,160 --> 00:24:16,459 Speaker 2: the reallocation of capital. So you reallocate capital away from 482 00:24:16,469 --> 00:24:18,310 Speaker 2: polluting activities towards low carbon 483 00:24:18,959 --> 00:24:21,949 Speaker 2: activities. That's one thing. The other one is really innovation. 484 00:24:22,560 --> 00:24:26,880 Speaker 2: We can also foster innovation. It's not only uh technological 485 00:24:26,890 --> 00:24:30,589 Speaker 2: innovation in the field of renewable energy or energy efficiency 486 00:24:30,599 --> 00:24:32,910 Speaker 2: or the production of steel or the production of cement, 487 00:24:32,939 --> 00:24:36,569 Speaker 2: we can also be innovative. How can we be innovative? 488 00:24:36,579 --> 00:24:40,569 Speaker 2: For example, with regards to financing structures, we mentioned blended 489 00:24:40,579 --> 00:24:42,979 Speaker 2: finance where we can actually really tweak it here and 490 00:24:42,989 --> 00:24:45,469 Speaker 2: there to make it work to really scale it at speed. 491 00:24:45,770 --> 00:24:49,659 Speaker 2: Uh We can be innovative in finding digital solutions to 492 00:24:49,670 --> 00:24:53,540 Speaker 2: empower our retail customers to be more aware around sustainability 493 00:24:53,550 --> 00:24:57,489 Speaker 2: and to also take conscious choices which in aggregate can 494 00:24:57,500 --> 00:25:02,099 Speaker 2: have an impact. We also always think beyond our client base. 495 00:25:02,109 --> 00:25:04,229 Speaker 2: So for example, we are a proud founding shareholder of 496 00:25:04,239 --> 00:25:07,829 Speaker 2: Climate Impact Xcix, which is a Singapore headquartered but global 497 00:25:07,839 --> 00:25:11,369 Speaker 2: carbon market and exchange, which has set up platforms that 498 00:25:11,380 --> 00:25:13,520 Speaker 2: facilitate the buying and selling of high 499 00:25:13,609 --> 00:25:17,979 Speaker 2: equality integrity are carbon credits. So there are a lot 500 00:25:17,989 --> 00:25:20,770 Speaker 2: of things we can do in the field of innovation ourselves. 501 00:25:20,780 --> 00:25:24,689 Speaker 2: So capital, innovation both very, very critical and it needs 502 00:25:24,699 --> 00:25:27,589 Speaker 2: to work in tandem with the other ecosystem partners. And 503 00:25:27,599 --> 00:25:31,139 Speaker 2: I very loosely mentioned earlier that Singapore is doing this 504 00:25:31,150 --> 00:25:34,000 Speaker 2: very well. So if I double click on that in Singapore, 505 00:25:34,069 --> 00:25:38,560 Speaker 2: the Prime Minister's office in Singapore in coordination with other regulators. 506 00:25:38,569 --> 00:25:41,359 Speaker 2: For example, the MA S which is our financial regulator 507 00:25:41,699 --> 00:25:46,688 Speaker 2: convenes and brings people together in a room, government regulator, 508 00:25:46,699 --> 00:25:50,380 Speaker 2: private sector, finance sector to really discuss how are we 509 00:25:50,390 --> 00:25:53,420 Speaker 2: gonna do this because this interplay of these players is 510 00:25:53,430 --> 00:25:56,290 Speaker 2: really very important now ground that Singapore is a bit smaller. 511 00:25:56,530 --> 00:25:59,229 Speaker 2: Uh and maybe the political situation in Europe and in 512 00:25:59,239 --> 00:26:01,550 Speaker 2: the US is a little bit more complex, I understand, 513 00:26:01,560 --> 00:26:04,270 Speaker 2: but it's actually a really interesting template on how you 514 00:26:04,280 --> 00:26:07,079 Speaker 2: could do it. Just get everyone in the ecosystem into 515 00:26:07,089 --> 00:26:07,409 Speaker 2: a room, 516 00:26:08,000 --> 00:26:12,180 Speaker 1: putting politics aside. I mean, I'm being told by my 517 00:26:12,290 --> 00:26:15,239 Speaker 1: colleagues in the US that regardless of what happens in 518 00:26:15,250 --> 00:26:19,839 Speaker 1: Washington DC by and large US, banks, us, corporate sectors 519 00:26:19,930 --> 00:26:23,510 Speaker 1: are moving in a single direction toward green transition toward 520 00:26:23,520 --> 00:26:26,448 Speaker 1: climate finance and that is not going to change regardless 521 00:26:26,459 --> 00:26:29,390 Speaker 1: of the political cycle. Are they being too optimistic? 522 00:26:30,109 --> 00:26:33,649 Speaker 2: I hope not is the answer. So I think, I 523 00:26:33,660 --> 00:26:35,760 Speaker 2: hope the train left the station 524 00:26:36,420 --> 00:26:38,989 Speaker 2: and why do I think the train has left the station? 525 00:26:39,000 --> 00:26:40,969 Speaker 2: Let's first look at a couple of numbers 526 00:26:41,750 --> 00:26:45,300 Speaker 2: right now. We have more than 90% of global greenhouse 527 00:26:45,310 --> 00:26:48,698 Speaker 2: gas emissions covered by nation states as net zero pledges. 528 00:26:48,709 --> 00:26:51,670 Speaker 2: So we now have 140 plus countries that have net 529 00:26:51,680 --> 00:26:54,979 Speaker 2: zero pledges by a certain time frame. Are they perfect? No, 530 00:26:54,989 --> 00:26:56,180 Speaker 2: but we are really getting there. 531 00:26:56,459 --> 00:26:59,909 Speaker 2: We have in the private sector now, more than 5000 532 00:26:59,920 --> 00:27:04,339 Speaker 2: Corporates that have either already implemented or committed to implement 533 00:27:04,390 --> 00:27:08,239 Speaker 2: science based decarbonisation targets around 25% of that by the 534 00:27:08,250 --> 00:27:10,839 Speaker 2: way is, sits, sits in Asia and then if you 535 00:27:10,849 --> 00:27:13,660 Speaker 2: look at the finance sector, we have for example G 536 00:27:13,869 --> 00:27:14,609 Speaker 2: fans which is a 537 00:27:14,680 --> 00:27:18,649 Speaker 2: of financial institutions from different areas. So insurance companies, pension funds, banks, 538 00:27:18,660 --> 00:27:23,129 Speaker 2: asset managers, asset owners, etcetera that in totality right now 539 00:27:23,140 --> 00:27:28,250 Speaker 2: have an A am of around $150 trillion. So government, 540 00:27:28,260 --> 00:27:31,659 Speaker 2: private sector, finance sector, everything is moving. Look at the 541 00:27:31,670 --> 00:27:34,250 Speaker 2: community at large when I was very young, 542 00:27:34,540 --> 00:27:36,859 Speaker 2: I didn't have gray hair back then. In Germany. We 543 00:27:36,869 --> 00:27:38,599 Speaker 2: were all, you know, huddling in the lower ground. We 544 00:27:38,609 --> 00:27:41,550 Speaker 2: were all like lower, we were young teenagers and we 545 00:27:41,560 --> 00:27:44,750 Speaker 2: discussed this book. The Limits of Growth was actually written 546 00:27:44,760 --> 00:27:46,750 Speaker 2: in the seventies sponsored by the Club of Rome. 547 00:27:46,989 --> 00:27:50,839 Speaker 2: But the eighties were a bad time to discuss sustainability. 548 00:27:50,849 --> 00:27:53,609 Speaker 2: The Soviet Union just collapsed and everybody looked at the 549 00:27:53,619 --> 00:27:57,390 Speaker 2: US and that was kind of the role model, profit maximization. 550 00:27:57,420 --> 00:28:00,469 Speaker 2: Uh growth, growth, growth was key and sustainability was a 551 00:28:00,479 --> 00:28:04,849 Speaker 2: bit brushed to the side. Fast forward, 35 plus years, 552 00:28:04,989 --> 00:28:08,619 Speaker 2: the awareness in the community at large is quite staggering 553 00:28:09,010 --> 00:28:11,280 Speaker 2: and you can slice and dice the community. Of course, 554 00:28:11,290 --> 00:28:14,959 Speaker 2: in different areas, the younger people for sure are very, 555 00:28:14,969 --> 00:28:17,569 Speaker 2: very much aware of what's going on and also more 556 00:28:17,579 --> 00:28:20,339 Speaker 2: and more willing to do something about it. Of course, 557 00:28:20,349 --> 00:28:24,030 Speaker 2: I know it's different between developed countries and developing countries 558 00:28:24,199 --> 00:28:25,750 Speaker 2: uh and so on and so forth because there are 559 00:28:25,760 --> 00:28:29,089 Speaker 2: different considerations and constraints. But I think the awareness in 560 00:28:29,099 --> 00:28:32,750 Speaker 2: the community large also rising. So I think the train 561 00:28:32,760 --> 00:28:35,169 Speaker 2: has left the station and what I really like about 562 00:28:35,180 --> 00:28:37,739 Speaker 2: the Inflation Reduction Act, I think it's actually a genius 563 00:28:37,750 --> 00:28:38,560 Speaker 2: piece of work 564 00:28:39,130 --> 00:28:41,010 Speaker 2: and it's a genius piece of work because it got 565 00:28:41,020 --> 00:28:44,119 Speaker 2: support from a vast amount of Republicans, right? 566 00:28:44,400 --> 00:28:48,390 Speaker 2: Because ultimately, firstly, the name is quite amazing Inflation reduction Act, 567 00:28:48,400 --> 00:28:51,420 Speaker 2: which of course is, is a good sell, right. But secondly, 568 00:28:51,430 --> 00:28:55,770 Speaker 2: it actually creates job jobs in the US on the ground. 569 00:28:55,780 --> 00:28:58,099 Speaker 2: You can criticize this if you zoom out and you 570 00:28:58,109 --> 00:29:01,459 Speaker 2: have a super national view, that's a fairly heavy industrial 571 00:29:01,469 --> 00:29:03,969 Speaker 2: policy piece that they have implemented. So you can be 572 00:29:03,979 --> 00:29:06,660 Speaker 2: very critical about this from outside of the US. But 573 00:29:06,670 --> 00:29:10,959 Speaker 2: within the US, it will probably generate jobs. And I 574 00:29:10,969 --> 00:29:12,729 Speaker 2: find it hard to believe 575 00:29:13,170 --> 00:29:15,859 Speaker 2: that if there was a Republican president, that they would 576 00:29:15,869 --> 00:29:19,410 Speaker 2: pull it back if there are actually jobs being created 577 00:29:19,550 --> 00:29:24,560 Speaker 1: 100% been sort of looking at the implementation of this 578 00:29:24,569 --> 00:29:28,800 Speaker 1: uh Ira. So Washington DC is basically making states compete 579 00:29:28,810 --> 00:29:33,030 Speaker 1: states that have easier regulation hurdles for implementing some of 580 00:29:33,040 --> 00:29:36,349 Speaker 1: these green projects, get the contract. And right now it's 581 00:29:36,359 --> 00:29:38,439 Speaker 1: the red states that are actually winning more of the 582 00:29:38,449 --> 00:29:40,500 Speaker 1: contracts because the blue states tend to be a little 583 00:29:40,510 --> 00:29:42,219 Speaker 1: more regulation heavy and a little more, 584 00:29:42,780 --> 00:29:44,699 Speaker 1: you know, thoughtful into whether they want to take this 585 00:29:44,709 --> 00:29:46,660 Speaker 1: money and the permits and that sort of stuff. So 586 00:29:46,829 --> 00:29:48,979 Speaker 1: I was reading an interview about of the Governor of 587 00:29:48,989 --> 00:29:51,900 Speaker 1: California and Gavin Newsom. He's expressing frustration that some of 588 00:29:51,910 --> 00:29:54,420 Speaker 1: the money that should be. California is going to Texas 589 00:29:54,430 --> 00:29:56,619 Speaker 1: and other places. Here we go to that competition and 590 00:29:56,630 --> 00:29:59,540 Speaker 1: surely that would not change if Washington DC scene were 591 00:29:59,550 --> 00:30:01,390 Speaker 1: to change. Uh Absolutely, 592 00:30:01,939 --> 00:30:04,989 Speaker 1: I want to talk about coal momentarily, but before I 593 00:30:05,000 --> 00:30:08,520 Speaker 1: go there, um you talked about the role of banks 594 00:30:08,530 --> 00:30:11,130 Speaker 1: in general. Can you use a little flavor about the 595 00:30:11,140 --> 00:30:14,050 Speaker 1: banks in China? Because you know, without China's progress, 596 00:30:14,969 --> 00:30:16,380 Speaker 1: we're not going to be able to make any meaningful 597 00:30:16,390 --> 00:30:18,800 Speaker 1: change on green transition, given their size and scale and 598 00:30:18,810 --> 00:30:23,739 Speaker 1: industrial footprint. How is Blender finance, climate change, finance and banks, 599 00:30:23,750 --> 00:30:25,459 Speaker 1: you know, all working out in China? 600 00:30:26,180 --> 00:30:28,819 Speaker 2: I think when we talk about the banks in China, 601 00:30:28,829 --> 00:30:30,760 Speaker 2: they are, of course, the big ones are all state owned. 602 00:30:30,770 --> 00:30:33,130 Speaker 2: I think we actually need to talk about what's happening 603 00:30:33,140 --> 00:30:37,520 Speaker 2: on government level because this is really definitely very interconnected. 604 00:30:37,859 --> 00:30:38,319 Speaker 2: And 605 00:30:38,989 --> 00:30:42,420 Speaker 2: when I talk to people outside of Asia, my maybe 606 00:30:42,430 --> 00:30:46,400 Speaker 2: slightly naive or superficial commenters don't worry too much about China. 607 00:30:47,199 --> 00:30:50,390 Speaker 2: I actually believe if you look back at history, if 608 00:30:50,400 --> 00:30:53,050 Speaker 2: the Communist Party says they will deliver something, 609 00:30:53,989 --> 00:30:57,739 Speaker 2: they typically deliver it. So my feeling actually is that 610 00:30:57,750 --> 00:31:02,050 Speaker 2: China is very strategic in the way it approaches sustainability. Yes, 611 00:31:02,060 --> 00:31:04,910 Speaker 2: there's a lot of coal. Yes, they might even add 612 00:31:04,920 --> 00:31:07,770 Speaker 2: a few coal power plants but they are investing so 613 00:31:07,780 --> 00:31:09,479 Speaker 2: heavily in renewable energy. 614 00:31:09,719 --> 00:31:15,180 Speaker 2: Last year, they increased renewable energy generation by 26%. And 615 00:31:15,189 --> 00:31:20,410 Speaker 2: this additional generation was roughly half of the world's edition 616 00:31:20,420 --> 00:31:25,390 Speaker 2: in that area. The Chinese are very smart around electric vehicles, 617 00:31:25,400 --> 00:31:28,510 Speaker 2: the entire value chain around this and I could go 618 00:31:28,520 --> 00:31:30,500 Speaker 2: on and could go on. So I think they are 619 00:31:30,510 --> 00:31:33,770 Speaker 2: very strategic. I think they also see it as a 620 00:31:33,885 --> 00:31:38,084 Speaker 2: important domestic policy tool. So I wouldn't be too concerned 621 00:31:38,094 --> 00:31:41,564 Speaker 2: about China as superficial as this might sound and the 622 00:31:41,574 --> 00:31:44,805 Speaker 2: banks will simply be there also to facilitate that. Do 623 00:31:44,814 --> 00:31:48,415 Speaker 2: we see Chinese banks as vocal as maybe European banks 624 00:31:48,425 --> 00:31:51,964 Speaker 2: or also ourselves. For example D BS, we have one 625 00:31:51,974 --> 00:31:55,824 Speaker 2: of the most comprehensive and ambitious decarbonization targets for our 626 00:31:55,834 --> 00:31:57,994 Speaker 2: lending and financing activities. 627 00:31:58,250 --> 00:32:01,599 Speaker 2: Yeah, we have those targets by 2030 all of which 628 00:32:01,609 --> 00:32:04,709 Speaker 2: are science based, very, very detailed. How are we going 629 00:32:04,719 --> 00:32:08,469 Speaker 2: to do this? Um Not many banks in China are 630 00:32:08,479 --> 00:32:11,280 Speaker 2: even remotely on these types of levels, but I would 631 00:32:11,290 --> 00:32:14,750 Speaker 2: still claim it's all interconnected and ultimately they will deliver 632 00:32:14,760 --> 00:32:17,380 Speaker 2: what the government is saying they're going to do. And 633 00:32:17,390 --> 00:32:19,829 Speaker 2: I have great confidence actually that they're going to deliver. 634 00:32:20,150 --> 00:32:22,920 Speaker 1: So I also think that in the case of China, 635 00:32:23,130 --> 00:32:26,800 Speaker 1: they are so pragmatic in terms of what is needed 636 00:32:26,810 --> 00:32:27,459 Speaker 1: to grow. 637 00:32:27,869 --> 00:32:30,430 Speaker 1: Uh and the fact that they have a huge debt burden, 638 00:32:30,439 --> 00:32:32,859 Speaker 1: they have a dysfunctional property sector and the banking system 639 00:32:32,869 --> 00:32:35,930 Speaker 1: is not the sound is either that a ready made 640 00:32:35,939 --> 00:32:39,319 Speaker 1: engine of growth is climate transition. So whether it is, 641 00:32:39,329 --> 00:32:42,670 Speaker 1: you know, redoing their urban grid or the ev uh 642 00:32:42,680 --> 00:32:46,800 Speaker 1: ecosystem that you talked about or renewable energy generation, whether 643 00:32:46,810 --> 00:32:49,880 Speaker 1: it's wind or nuclear or solar, 644 00:32:50,479 --> 00:32:52,890 Speaker 1: it's like if they want to grow at four or 5% 645 00:32:53,040 --> 00:32:55,900 Speaker 1: that's the only viable area that they have left. So 646 00:32:55,910 --> 00:32:58,420 Speaker 1: there's a convergence of interest and what is right for 647 00:32:58,430 --> 00:33:00,550 Speaker 1: the world. So, yeah, I think I I share your 648 00:33:00,560 --> 00:33:05,410 Speaker 1: perspective on China very much um recently, uh the last 649 00:33:05,420 --> 00:33:07,510 Speaker 1: two months to be precise every Friday, you and I 650 00:33:07,520 --> 00:33:12,170 Speaker 1: met virtually sometimes in person and we talked about coal 651 00:33:12,180 --> 00:33:15,430 Speaker 1: and banks roles in it and we wrote a paper 652 00:33:15,680 --> 00:33:18,709 Speaker 1: so share with our audience what we wrote about and 653 00:33:18,719 --> 00:33:20,739 Speaker 1: what are the bottom lines in that paper? First 654 00:33:20,750 --> 00:33:23,430 Speaker 2: and foremost, I am so happy that you now know 655 00:33:23,439 --> 00:33:25,689 Speaker 2: how a sustainability professional feels 656 00:33:26,069 --> 00:33:30,540 Speaker 2: because you have ups and you have downs. Sometimes you 657 00:33:30,550 --> 00:33:32,930 Speaker 2: read about hard facts and data and you really get 658 00:33:32,939 --> 00:33:35,439 Speaker 2: a bit down and think I get God, is this 659 00:33:35,449 --> 00:33:38,410 Speaker 2: even possible? But then you also look at acceleration of 660 00:33:38,420 --> 00:33:41,280 Speaker 2: efforts or some positive news and it lifts you up again. 661 00:33:41,290 --> 00:33:43,800 Speaker 2: But it's literally a cycle, isn't it that we had 662 00:33:43,810 --> 00:33:47,800 Speaker 2: in those couple of weeks? So why did we write 663 00:33:47,810 --> 00:33:48,859 Speaker 2: about coal 664 00:33:49,280 --> 00:33:51,709 Speaker 2: at the very start of our conversation, I talked about 665 00:33:51,719 --> 00:33:54,949 Speaker 2: the 400 gigatons of greenhouse gas emissions. We have left 666 00:33:54,959 --> 00:33:59,300 Speaker 2: until we hit the 1.5 C uh temperature limit. Now, 667 00:33:59,449 --> 00:34:03,300 Speaker 2: if we leave coal untouched and right now, we have 668 00:34:03,310 --> 00:34:08,409 Speaker 2: around 5000 operational coal power plants in Asia Pacific, 86% 669 00:34:08,419 --> 00:34:11,510 Speaker 2: of which measured by our capacity are in China and 670 00:34:11,520 --> 00:34:13,909 Speaker 2: in India. And then we have other countries like Indonesia 671 00:34:13,919 --> 00:34:17,399 Speaker 2: also fairly, fairly significant. So if we leave them untouched, 672 00:34:17,810 --> 00:34:19,010 Speaker 2: then two thirds 673 00:34:19,459 --> 00:34:22,189 Speaker 2: of our carbon budget will be exhausted just by the 674 00:34:22,199 --> 00:34:24,879 Speaker 2: coal power plants. So we haven't yet talked about the 675 00:34:24,889 --> 00:34:28,969 Speaker 2: mobility sector. We haven't yet talked about production of steel 676 00:34:28,979 --> 00:34:30,979 Speaker 2: and cement and all those types of things, two thirds 677 00:34:30,989 --> 00:34:34,870 Speaker 2: gone just because of the coal power plants. So that's 678 00:34:34,879 --> 00:34:37,629 Speaker 2: not even your entire energy system. It's one portion within 679 00:34:37,639 --> 00:34:41,589 Speaker 2: the energy system. So if you invest a lot in 680 00:34:41,600 --> 00:34:45,250 Speaker 2: clean tech and we have to do this, it's mission critical, 681 00:34:45,429 --> 00:34:47,169 Speaker 2: you're not gonna meet the schools 682 00:34:47,530 --> 00:34:50,050 Speaker 2: and the Paris goals are just as a reminder to 683 00:34:50,060 --> 00:34:54,520 Speaker 2: keep temperature rises to well below two degrees Celsius. 684 00:34:55,280 --> 00:34:59,419 Speaker 2: So what we wrote about ultimately is a bit, why 685 00:34:59,429 --> 00:35:01,800 Speaker 2: do we have to do this and how are we 686 00:35:01,810 --> 00:35:07,360 Speaker 2: gonna do this? And phasing out coal is unbelievably complex 687 00:35:07,370 --> 00:35:11,030 Speaker 2: on at least three levels. The first one is how 688 00:35:11,040 --> 00:35:11,949 Speaker 2: do we assess 689 00:35:12,790 --> 00:35:17,030 Speaker 2: a certain opportunity? For example, there are risks like leakage. 690 00:35:17,050 --> 00:35:20,520 Speaker 2: If we phase out a coal power plant in Northern Sumatra, 691 00:35:20,530 --> 00:35:23,120 Speaker 2: what prevents the government from building a new one in 692 00:35:23,129 --> 00:35:25,959 Speaker 2: East Java or I could name any other country for 693 00:35:25,969 --> 00:35:29,799 Speaker 2: that matter? Or a company that operates a coal power 694 00:35:29,810 --> 00:35:32,330 Speaker 2: plant agrees to phasing out a coal power plant in 695 00:35:32,340 --> 00:35:33,290 Speaker 2: one country but 696 00:35:33,399 --> 00:35:35,540 Speaker 2: build a new one in another country. So there are 697 00:35:35,550 --> 00:35:38,658 Speaker 2: all sorts of what we call leakage risks. So how 698 00:35:38,669 --> 00:35:41,790 Speaker 2: do we assess a certain opportunity? What are the commitments 699 00:35:41,800 --> 00:35:45,638 Speaker 2: on country level on company level? How do we assess 700 00:35:45,649 --> 00:35:47,770 Speaker 2: a specific asset, the specific coal power plant? Is it 701 00:35:47,780 --> 00:35:49,739 Speaker 2: worth a while? How can we really do it? So 702 00:35:49,750 --> 00:35:52,350 Speaker 2: it's really, really, really complex. So let's assume we've done 703 00:35:52,360 --> 00:35:54,850 Speaker 2: all of this. We have a great project. Then the 704 00:35:54,860 --> 00:35:57,409 Speaker 2: next one is, well, we can't just shut down coal, 705 00:35:57,419 --> 00:35:57,989 Speaker 2: can we? 706 00:35:58,879 --> 00:36:01,129 Speaker 2: So if we are really, really successful in phasing out 707 00:36:01,139 --> 00:36:03,889 Speaker 2: fossil fuels, but at the same time, we're not rebuilding 708 00:36:03,899 --> 00:36:07,489 Speaker 2: renewable energy, then people don't have access to affordable energy. 709 00:36:08,080 --> 00:36:12,550 Speaker 2: And earlier I talked about 17 UN SDGS. One is 710 00:36:12,560 --> 00:36:15,719 Speaker 2: we need to have access to affordable clean energy. So 711 00:36:15,729 --> 00:36:17,899 Speaker 2: you need to do this right away, but that's not 712 00:36:17,909 --> 00:36:20,610 Speaker 2: always easy. So a coal power plant might be in 713 00:36:20,620 --> 00:36:23,889 Speaker 2: a geographical location where there is no wind or solar potential. 714 00:36:23,899 --> 00:36:25,699 Speaker 2: So how do you deal with these situations? There are 715 00:36:25,709 --> 00:36:27,989 Speaker 2: solutions but I'm just saying it is something to need 716 00:36:28,000 --> 00:36:30,810 Speaker 2: to be looked after. And the third one is there 717 00:36:30,820 --> 00:36:34,149 Speaker 2: are also other social dimensions, right? I think you very 718 00:36:34,159 --> 00:36:37,229 Speaker 2: nicely wrote about the implications on jobs 719 00:36:37,719 --> 00:36:41,569 Speaker 2: and the entire ecosystem that is built around coal power 720 00:36:41,580 --> 00:36:45,560 Speaker 2: plants in various countries. Entire communities depend on that coal 721 00:36:45,570 --> 00:36:48,689 Speaker 2: power plant. So if you shut it down, many, many 722 00:36:48,699 --> 00:36:50,979 Speaker 2: people will lose the jobs, kids might not be able 723 00:36:50,989 --> 00:36:53,330 Speaker 2: to go to school anymore because the parents lost the job. 724 00:36:53,340 --> 00:36:55,370 Speaker 2: So how do we deal with that? So all of 725 00:36:55,379 --> 00:36:58,750 Speaker 2: this I think can be solved, but it's really, really complex. 726 00:36:58,760 --> 00:37:00,388 Speaker 2: And that's ultimately what we wrote about. 727 00:37:00,899 --> 00:37:04,290 Speaker 1: You also were adamant that we include something that you 728 00:37:04,300 --> 00:37:08,149 Speaker 1: alluded to earlier. The intergenerational aspect. Why is it that 729 00:37:08,159 --> 00:37:10,939 Speaker 1: critical in the context of coal? Is it because we 730 00:37:10,949 --> 00:37:13,000 Speaker 1: are sort of fixated on the potential job losses? And 731 00:37:13,010 --> 00:37:15,729 Speaker 1: we're not thinking about the dividend that can come from many, 732 00:37:15,739 --> 00:37:16,909 Speaker 1: many generations of clean air. 733 00:37:16,919 --> 00:37:19,040 Speaker 2: Yeah, I think that's exactly it. I think very often 734 00:37:19,050 --> 00:37:21,639 Speaker 2: when we talk about interconnectedness or dilemmas, we have a 735 00:37:21,649 --> 00:37:25,060 Speaker 2: very static approach. So you take action a let's say 736 00:37:25,070 --> 00:37:27,489 Speaker 2: you shut down a coal power plant. And the implication 737 00:37:27,500 --> 00:37:30,389 Speaker 2: is b for example, certain people lose the job. 738 00:37:30,760 --> 00:37:33,589 Speaker 2: But if you think about dynamically over a longer period 739 00:37:33,600 --> 00:37:38,889 Speaker 2: of time, the implications on health by air pollution, water stress, 740 00:37:38,899 --> 00:37:41,169 Speaker 2: the carbon emissions and so on and so forth on 741 00:37:41,179 --> 00:37:45,408 Speaker 2: future generations, the costs are immense. So if you were 742 00:37:45,419 --> 00:37:49,529 Speaker 2: to take them into account and ultimately calculate the NPV today, 743 00:37:49,540 --> 00:37:52,330 Speaker 2: then actually you see that taking action today 744 00:37:52,620 --> 00:37:56,100 Speaker 2: um is becoming ever more convincing. So we talked a 745 00:37:56,110 --> 00:37:59,139 Speaker 2: little bit about this intergenerational fairness, which as I mentioned 746 00:37:59,149 --> 00:38:02,589 Speaker 2: earlier is not a stronghold for human beings. Generally, we've 747 00:38:02,600 --> 00:38:04,320 Speaker 2: always struggled a little bit with that. 748 00:38:04,639 --> 00:38:06,709 Speaker 1: Let me ask you one technical question. 749 00:38:07,340 --> 00:38:11,030 Speaker 1: A bank has given loans to a coal company. The 750 00:38:11,040 --> 00:38:13,360 Speaker 1: coal company's plant is actually not that old. It's only 751 00:38:13,370 --> 00:38:15,600 Speaker 1: four or five years old and it has like a 752 00:38:15,610 --> 00:38:20,350 Speaker 1: 10 year amortization depreciation schedule for that asset. So now 753 00:38:20,360 --> 00:38:23,109 Speaker 1: if we want to target some sort of a 2030 754 00:38:23,120 --> 00:38:26,439 Speaker 1: net zero emer, we probably need to phase that coal 755 00:38:26,449 --> 00:38:27,509 Speaker 1: plant out earlier. 756 00:38:27,770 --> 00:38:30,620 Speaker 1: So who's gonna be left catching that bill? The bank 757 00:38:30,629 --> 00:38:33,020 Speaker 1: doesn't want to lose its investment and the asset owner 758 00:38:33,030 --> 00:38:34,560 Speaker 1: doesn't want to lose their investment 759 00:38:34,570 --> 00:38:38,169 Speaker 2: either. That's a very important question, of course, because the 760 00:38:38,179 --> 00:38:41,679 Speaker 2: way we approached it in this paper that we recently 761 00:38:41,689 --> 00:38:44,199 Speaker 2: published under the umbrella of G. So again, GF is 762 00:38:44,209 --> 00:38:49,000 Speaker 2: this collection of financial institutions globally and together with HS BC, 763 00:38:49,010 --> 00:38:52,620 Speaker 2: we led a work stream on how should we do this? 764 00:38:52,629 --> 00:38:55,739 Speaker 2: And our paper was complimentary to, to that consultation paper 765 00:38:55,750 --> 00:38:56,679 Speaker 2: that we published, right. 766 00:38:56,879 --> 00:39:00,219 Speaker 2: And one key consideration was financial viability, like how do 767 00:39:00,229 --> 00:39:03,299 Speaker 2: we structure this in a way that we incentivize everyone 768 00:39:03,310 --> 00:39:06,850 Speaker 2: to do the right thing because it's really hard to negotiate, 769 00:39:06,860 --> 00:39:09,929 Speaker 2: for example, hair cuts or, or things like this. But 770 00:39:09,939 --> 00:39:13,589 Speaker 2: here one critical element indeed is this blended finance structure. 771 00:39:13,600 --> 00:39:17,060 Speaker 2: So if I simplify this a little bit, we need 772 00:39:17,070 --> 00:39:19,669 Speaker 2: a new pool of capital and this new pool of 773 00:39:19,679 --> 00:39:23,489 Speaker 2: capital has a lower return requirement than the existing pool 774 00:39:23,500 --> 00:39:26,469 Speaker 2: of capital that finance the existing core power plant. 775 00:39:26,729 --> 00:39:30,279 Speaker 2: So this differential in these two allows you to actually 776 00:39:30,290 --> 00:39:33,239 Speaker 2: shut it down earlier, you are satisfied with less future 777 00:39:33,250 --> 00:39:37,370 Speaker 2: cash flows arising out of power purchase agreements. Um But 778 00:39:37,379 --> 00:39:40,219 Speaker 2: in order to do this new package, you then need 779 00:39:40,229 --> 00:39:42,739 Speaker 2: different layers of capital, you need 780 00:39:43,209 --> 00:39:47,860 Speaker 2: public potentially public money or multilateral development banks. Like for example, 781 00:39:47,870 --> 00:39:50,739 Speaker 2: the Asian Development bank is very, very active in the Spain. 782 00:39:50,909 --> 00:39:54,939 Speaker 2: And then one really interesting lay of capitalist philanthropic capital. 783 00:39:54,949 --> 00:39:59,299 Speaker 2: So they are actually big global philanthropies foundations in the 784 00:39:59,310 --> 00:40:00,409 Speaker 2: world that actually 785 00:40:00,544 --> 00:40:03,294 Speaker 2: support these types of financing. And then if you merge 786 00:40:03,304 --> 00:40:06,314 Speaker 2: it all together, you can create these lower return requirements 787 00:40:06,324 --> 00:40:09,044 Speaker 2: and actually make it work. One other option is a 788 00:40:09,054 --> 00:40:12,125 Speaker 2: highly contentious topic, but we think worthwhile looking at the 789 00:40:12,135 --> 00:40:16,094 Speaker 2: generation of carbon credits that might arise out of this action, 790 00:40:16,104 --> 00:40:19,114 Speaker 2: the action is a phase out core. Yeah, so there's 791 00:40:19,125 --> 00:40:20,074 Speaker 2: not gonna be 792 00:40:20,500 --> 00:40:23,350 Speaker 2: more greenhouse gas emissions because I shut the coal power 793 00:40:23,360 --> 00:40:26,820 Speaker 2: plant actually down. We can translate this and it needs 794 00:40:26,830 --> 00:40:29,069 Speaker 2: to be transparent, it needs to be credible and all 795 00:40:29,080 --> 00:40:32,070 Speaker 2: these types of things. But we can create a methodology 796 00:40:32,080 --> 00:40:35,750 Speaker 2: based on which we say, OK, we saved quotation mark 797 00:40:35,760 --> 00:40:39,020 Speaker 2: this volume of greenhouse gas emissions because we shut down early. 798 00:40:39,100 --> 00:40:42,620 Speaker 2: We allow carbon credits to be generated. You can sell 799 00:40:42,629 --> 00:40:43,569 Speaker 2: them in the market 800 00:40:43,830 --> 00:40:46,439 Speaker 2: and actually generate additional revenue. So that could be a 801 00:40:46,449 --> 00:40:50,219 Speaker 2: very interesting construct as well. And given the contentious nature 802 00:40:50,229 --> 00:40:52,819 Speaker 2: of carbon credits, uh we just need to make sure 803 00:40:52,830 --> 00:40:55,320 Speaker 2: it's the right methodology, it's credible and everyone really is 804 00:40:55,330 --> 00:40:56,949 Speaker 2: very clear on how we can do this, but that's 805 00:40:56,959 --> 00:40:59,120 Speaker 2: roughly the the idea. Absolutely 806 00:40:59,129 --> 00:41:02,280 Speaker 1: fasting. That sounds really, really cool. Um Finally, Hilda, I 807 00:41:02,290 --> 00:41:04,860 Speaker 1: want to talk a little bit about our backyard, Singapore. 808 00:41:05,370 --> 00:41:08,120 Speaker 1: You talk to government officials you talk to your peers 809 00:41:08,129 --> 00:41:10,600 Speaker 1: in the banking and financial industry. And also I believe 810 00:41:10,610 --> 00:41:14,250 Speaker 1: sometimes you meet with uh students and young Singaporeans and 811 00:41:14,260 --> 00:41:18,330 Speaker 1: hear about their vision for uh Green Singapore. What's your 812 00:41:18,340 --> 00:41:21,689 Speaker 1: sense of this society and this government's journey toward the 813 00:41:21,699 --> 00:41:22,020 Speaker 1: green 814 00:41:22,030 --> 00:41:26,659 Speaker 2: transition? Yeah, absolutely. So Singapore has actually been on a 815 00:41:26,669 --> 00:41:27,199 Speaker 2: very 816 00:41:27,500 --> 00:41:30,159 Speaker 2: nice journey when it comes to sustainability. If we go 817 00:41:30,169 --> 00:41:32,860 Speaker 2: a little bit back in time, the government just a 818 00:41:32,870 --> 00:41:35,229 Speaker 2: little while ago said we want to be net zero 819 00:41:35,239 --> 00:41:39,100 Speaker 2: sometime in the second half of the century, then they 820 00:41:39,110 --> 00:41:41,290 Speaker 2: accelerated it and said we want to be net zero 821 00:41:41,300 --> 00:41:46,350 Speaker 2: by or around 2050 then they accelerated further and say 822 00:41:46,360 --> 00:41:49,310 Speaker 2: no 2050 we're gonna be uh net zero. So from 823 00:41:49,320 --> 00:41:51,889 Speaker 2: government point of view, there's a huge focus 824 00:41:52,540 --> 00:41:55,189 Speaker 2: and an acceleration of targets and so on and so forth. 825 00:41:55,199 --> 00:41:57,959 Speaker 2: So that's actually very, very promising. We are also blessed 826 00:41:57,969 --> 00:42:01,989 Speaker 2: in Singapore by having extremely smart regulators. I think the 827 00:42:02,000 --> 00:42:05,229 Speaker 2: MA S hands down is probably the best financial regulator 828 00:42:05,239 --> 00:42:08,489 Speaker 2: I could think of very strategic always thinking in ecosystems. 829 00:42:08,500 --> 00:42:10,949 Speaker 2: How can we bring everybody together? What are the future? 830 00:42:10,959 --> 00:42:13,780 Speaker 2: So solutions, how we address our problem statements. That is 831 00:42:13,790 --> 00:42:14,530 Speaker 2: quite amazing. 832 00:42:14,939 --> 00:42:18,209 Speaker 2: Also in the society at large, I mentioned before I 833 00:42:18,219 --> 00:42:20,669 Speaker 2: stepped in here that I had the honor and pleasure 834 00:42:20,679 --> 00:42:23,530 Speaker 2: um recently with the minister to be on stage and 835 00:42:23,540 --> 00:42:26,429 Speaker 2: we were grilled by a couple of 100 of young 836 00:42:26,439 --> 00:42:29,300 Speaker 2: people that ultimately questioned. Are we doing enough? And they 837 00:42:29,310 --> 00:42:31,629 Speaker 2: were really pushing very, very hard. So I can see, 838 00:42:31,639 --> 00:42:35,810 Speaker 2: especially in the younger part of society, there's definitely growing awareness. 839 00:42:35,820 --> 00:42:39,080 Speaker 2: So it's all sounds very positive, right? But let's be 840 00:42:39,090 --> 00:42:41,840 Speaker 2: also honest, we don't really have an excuse. Singapore is 841 00:42:41,850 --> 00:42:43,089 Speaker 2: a very rich country 842 00:42:43,419 --> 00:42:46,860 Speaker 2: because of an amazing, amazing economic success story ever since 843 00:42:46,870 --> 00:42:50,389 Speaker 2: it was founded in 1965 probably an economic success story 844 00:42:50,399 --> 00:42:52,830 Speaker 2: that is unmatched in the world to be very honest, 845 00:42:53,010 --> 00:42:56,379 Speaker 2: build on extremely smart people doing this extremely well and 846 00:42:56,389 --> 00:42:58,388 Speaker 2: we have very good education, right? 847 00:42:58,510 --> 00:43:00,870 Speaker 2: So we have a lot of capital. We have really 848 00:43:00,879 --> 00:43:03,209 Speaker 2: a lot of smart people, so we really got to 849 00:43:03,219 --> 00:43:05,760 Speaker 2: do it. If Singapore can't accomplish that, then I would 850 00:43:05,770 --> 00:43:09,009 Speaker 2: be very pessimistic about the world. But I'm optimistic that 851 00:43:09,020 --> 00:43:13,540 Speaker 2: Singapore will actually further advance and also act upon its targets. 852 00:43:14,199 --> 00:43:18,270 Speaker 1: Well, on that somewhat optimistic note, he weel thank you 853 00:43:18,280 --> 00:43:20,239 Speaker 1: so much for your time and insights. Thanks 854 00:43:20,250 --> 00:43:20,530 Speaker 2: a lot. 855 00:43:21,510 --> 00:43:23,350 Speaker 1: So grabbing me, great, great chat. 856 00:43:23,649 --> 00:43:26,589 Speaker 1: Um Thanks to our listeners as well. Koby Time was 857 00:43:26,600 --> 00:43:30,149 Speaker 1: produced by Ken Delbridge at spy studios, Daisy Sharma and 858 00:43:30,159 --> 00:43:34,469 Speaker 1: Violet Lee provided additional assistance. All 103 episodes of Coby 859 00:43:34,479 --> 00:43:37,759 Speaker 1: Time are available on youtube as well as on all 860 00:43:37,770 --> 00:43:42,580 Speaker 1: major podcast platforms including Apple Google and Spotify. As for 861 00:43:42,590 --> 00:43:45,800 Speaker 1: our all research publications and webinars are concerned, you can 862 00:43:45,810 --> 00:43:49,699 Speaker 1: find them by Googling Devis research library. Have a great day.