R.A.C.E - Building Climate Regulation

foreign [Music] excellencies ladies and gentlemen I'm Danny Seabright president of the US UAE Business Council pleased to be joined on stage by a group of very distinguished panelists for a timely and important discussion around the appropriate regulation and supervision of climate Frameworks this this vote this discussion is focused on how regulators and standard Setters uh are approaching key issues including data disclosure taxonomy green washing and avoiding fragmentation as we like to say in the United States uh those who can Walk The Walk In addition to just talking the talk are the true leaders and the and the trendsetters and I'm joined in the stage by folks today who are going to comment on best practices in that regard Adrian rimmer director of sustainable Finance at the London Stock Exchange group a diversified Global Financial markets infrastructure and Data Business Francis McLeod founding partner at forensic risk Alliance a business consultancy that provides forensic accounting data governance and compliance Consulting Services Regional director for the GCC at the World Bank and chargo Basher Chief sustainability officer at first Abu Dhabi bank which is not just the largest bank in the UAE but the First Bank in the Middle East to commit to a Target zero emissions by 2050. as our time is short I'd like to Jump Right In I'm going to let each of the panelists give you a couple minutes of overview of key points that they'd like to make and then we'll launch right into a short discussion so if it could start please with Adrian go ahead thanks very much um I thought I'd start with a bit of context um you know we're talking about the role of Regulation and disclosure um and we've come a long way so far in terms of particularly on climate disclosure with voluntary action voluntary disclosure and the Frameworks that have been built up the standards that have been built up around that process um I think that was very necessary to let leaders show the way um show what was possible and what the benefits of disclosure are and it's also enabled us to to innovate in terms of the development of Standards to get those right but the reality is now that we've reached a point where voluntary disclosure is no longer working and we need to build in greater sense of Regulation so globally now 42 percent of large and mid cap firms disclose their scope one and two emissions and there are big Regional differences in that so in Europe um 89 of large and mid cap companies disclose uh in the US it's 53 and in China 23 so we need a Level Playing Field and we need to make sure that investors who invest globally can get the information that they need right now we've got models estimates that are being used to fill the Gap and they can be wildly inaccurate which means that asset managers asset owners fail to deploy the ask their Assets in the way that they're seeking to and it also is about the transition too in terms of green Revenue so as companies build new products and services we want to see them recognized for that success and and capitals of flow to those companies so we have sort of three perspectives on that we want to see uh you know by 2025 governments introducing domestic disclosure of Frameworks on an economy-wide basis using the tcfd is the kind of framework for that to get consistency worldwide and we want to see policy makers also Drive disclosure around green revenues so we can see companies as they transition their business and be rewarded for that and finally we want to see mandatory transition plans being put in place so that companies are required to explain how they're transitioning their business over time and that I think will sort of lead us into a discussion around the role of regulation in this thank you Adrian thank you so much uh Francis from your perspective please yeah thank you um I'm coming at this from a perspective of of somebody who has witnessed um compliance transformations in a variety of different areas um I recently actually served as a compliance monitor for a company that was caught up in the dieselgate Scandal which was obviously one of the largest environmentally related scandals in the history um of being uncovered and I think one of the things that would be quite useful particularly as corporates come to navigate the challenges around the disclosures that Adrian just mentioned is can we draw parallels between fraud bribery anti-money laundering regulation and enforcement activity trends that we have seen in other areas and particularly I think the key here is going to have some clarity around what data and how that data is actually analyzed and reported out on and I think again because the majority of the the stakeholders that I deal with are in the private sector I think the key is also to get ahead of this and try and have a clear understanding of the current position you have where your risks lie and I think we're going to hear later on about how this sits within the risk management framework and start to try and really understand what data you have available what the veracity what the the richness what the granularity of that data is though that when these Frameworks and Reporting guidelines are established you're in a good position certainly in the private sector and particularly in in the space of listed companies to be able to report out in a way that is really meaningful that is risk mitigating and that is also going to give investors the transparency that they require Francis thank you um appreciate that is someone uh when the World Bank speaks everyone listens what do you have to say on this topic please thank you thank you Daniel it's great to be with this privilege uh colleagues around around here and also to be in in Abu Dhabi uh I would I want to change a little bit the tone here because we all talk about the cost of how much it's gonna cost us basically to go there and what we launched at the beginning of the months here in Abu Dhabi was our golf economic update and there was a special Focus section in it that showed the green gross opportunities even for the GCC countries UAE and the rest of the GCC where it showed that if the GCC moved into a green growth strategy they will add they will add three to six extra percentage point of growth between now and 2050. just basically by going into green electricity or renewable electricity and working the upstream and the downstream industries that are gross industry and green growth strategy just to give you some numbers there it means basically that today the GCC economy altogether are two trillion dollar this year by 2050 business as usual they will grow to six trillion dollars if they move into a green growth strategy and they apply it basically they will move up to 13 trillion dollar minimum in terms of their combined GDP this means gross jobs green jobs productivity increase and basically cleaning the air around them but also exporting more than oil and gas exporting what is needed actually for the energy transition and the upstream and the downstream basically industry from there which me which takes me to a little bit different and you heard from my colleagues here and you heard from the CEO of adgm about the ecosystem the framework that we need also to look at is that how to get the private sector and the financial industry to support such a thing which means basically encouragement opening up the market and bringing in the private Capital to invest in the gross industry that will allow us to go there and that's basically the framework that will add to what we are looking at because it's not about punishing anymore it's about creating those opportunity and creating the ecosystem for those opportunities to really happen on the ground so this is a little bit where I want to take that conversation Beyond basically the compliance and the Taxation and the cost but to look also at the at the opportunity that comes from the green growth and and very very important points on opportunity uh so thank you very much for that uh Islam charcoal local bank Regional Bank local Regional perspective from your standpoint on this please um thank you very much Denny um just highlighting the importance which my co-pannels have have mentioned here is about the opportunity that that is required from the disclosure perspective I just want to take a slightly different angle in order to succeed with that opportunity two very important parts is human capital and capacity building and as we are developing right now we are basically flying a plane while we are building it right this is the position we are at right now from a disclosure perspective from a climate risk perspective in order to succeed with that it's extremely important that we get the right people we build with capacity and this is not only a regional challenge this is a global challenge so we need to be in Forefront of this we need to invest in in human capital we need to ensure that we are in line we understand the best practices internationally we try to get those kind of resources into the region as well so we can further develop the human capital which is going to be so crucial to utilize the opportunities that sustainability and decarbonization is going to bring with us we know that Investments of more than 5 trillion is required on a yearly basis globally so there's so many opportunities that needs to be utilized and it's only possible by having the human capital and the capacity the building which we need to start focusing on right now or probably yesterday in order to make sure that we can we can optimize and utilize the synergies thank you sargo we're meant to speak a little bit about regulation and Trends in regulation and uh you know building on what under secretary uh Corey said a few minutes ago and what her highness said I want to congratulate the UAE for being such a leader uh in this regard it's very very important maybe uh ladies first will happen as all the panelists to offer a few points but maybe ladies first uh Francis what's your what's your bottom line on Trends and regulation right now in this regard well and despite my accent I'm actually so maybe I can talk and talk address these things um clearly there have been ad hoc signs of a regulatory Crackdown to date with a strong focus on greenwashing and in the U.S the approach seems to be and we've seen this on obviously in the anti-money laundering and the anti-corruption space as well seems to be very focused on providing accurate information to investors so that seems to be the driver there whereas I'd say in Europe uh the focus seems to be on General sustainability effects with the European Securities and markets Authority announcing they would be tackling brainwashing and promoting transparency as a priority we saw the SEC leverage its first fine in the middle of this year around disclosures that were inaccurate and I suspect we're going to continue to see that in the states would tend to be more stick than carrot but I agree very much with the comments on on opportunity being enhanced and the needs to be some carrot along with stick and you're also seeing a little bit of a trend towards greenwashing litigation um being driven by various active groups for example in the aviation industry around packaging and also in clothing as well and some consumer protection groups as well quite focused on that area so there's a whole gamut of um Regulatory and litigation impact starting to manifest and I think we'll see more of that going forward so the U.S perspective uh Adrian what about the British or the UK or the European perspective please sure I think it's and it's that was interesting to see the difference in approach between the US and and the Europe in terms of you know regulatory versus enforcement and the what we see very much is in the UK I think a quite Progressive approach in terms of mandating transition plans so requirements to publish transition plans and and also I think very importantly a a road map that says this is not just for the largest companies but this is for all companies and and clearly a significant decision by the the FCA in the UK to say um actually we're going to regulate the private private companies through the asset management community so actually giving a clear sense that you know all companies are going to have to disclose this information so creating that Level Playing Field I think is important across public and private assets um in Europe I think you know with the the real focus on double materiality is really interesting so not just the risks of climate change to companies but the risk that they pose and how they're mitigating that so again what we're seeing more and more is is standardized approaches to disclosing data that investors can use and investors really want it you know I was part to a consultation process with the with the FCA and I was really surprised in a positive way but but genuinely surprised how much the the asset management owners on that call were demanding regulation as soon as possible it would really show me where the direction of travel is coming from thank you uh charcoal why don't you say a few words about the local perspective here in the UAE on regulation Trends and then I'll come to esum and ask him to give a regional perspective from the world bank's perspective go ahead so from a UE perspective we have seen um we're in a transition right now and I think Mr Emmanuel made a very good point that the sustainable Finance working group has been looking into that what is the direction that needs to be set working from that perspective we also heard her highness mentioning the importance of disclosure and ESG reporting we recently saw eska the local regulator adx coming out and putting requirements to to listed companies to have ESG reporting in place and and disclose their scope one and two so we are going to definitely see more and more requirements coming into the region which are also necessary in order to unlock the potential of green financing in the region because until you have a starting point and a baseline is difficult to understand how your decarbonization journey will look like so we are starting to see that happening in the region we are seeing some of the best practices being adopted as well and and we expect that that will continue which is extremely important and it's a very assuring to hear that we can expect much more happen over the next 12 to 18 months so Isam from the uae's perspective I know well that there's always a a First Step at looking at Best Practices from around the world from your standpoint looking at the region what are the trend lines in this regard uh thank you um first let me say that cop 27 is happening in this region and cop 28 is going to happen actually in one of the major oil exporting country in the world which is the UAE so this is this is a change in Dynamics when it comes to where things are going and how basically the UAE and also the rest of the GCC are starting to take advantage of this transition and UAE probably among the GCC and in in the Mana region where among the first basically to create you know the master and trying to uh to see how you can create a city of zero emission but what we have seen also is that their companies are starting to invest worldwide I mean you've seen masdar here you have Aqua power on the on on the other side of the Border in Saudi Arabia and they're becoming a multinational investing only in renewable and green hydrogen so they are actually looking at those opportunities from a different perspective even in countries like the UAE as major oil exporter what I mentioned earlier was a transition only here but when we look at it globally this transition just in in the energy side is 27 trillion dollars between now and 2050.

if we add to it the other sector from Energy Efficiency to like the transport to Agriculture and so on we're looking above 100 trillion dollar of investment opportunities between now and 2050. so this region is starting to harvest the Sun and that sun they're gonna export it and we have seen already preliminary feasibility study going from North Africa to Europe feasibility study going from Saudi Arabia to Ethiopia even feasibility study going from here to India and linking basically through the caucus probably in the future going also into Europe so what we have we are seeing we are seeing basically that what used to be a sector that they are fearing from it on their industry which is basically oil they are looking now at it from a different perspective and they are actually adjusting their policies and regulation to encourage this type of exporting things other than oil and and gas and just let me say one thing it's in all their Vision they won't actually diversify that economy to a certain extent they've been successful in the GCC where they have been less successful is diversifying of their export and that's basically where the green gross agenda could help this part of the world diversifying their exports so by the time oil and gas are not needed as we have it today they have actually Diversified export that can help them move forward into the future thank you so very much uh time's a little short for the panel we've talked about opportunities we talked about Trends I'm going to press the panelists to give me two or three uh bullets from each of them on challenges uh that Regulators are facing with regard to data disclosure the taxonomy the green washing and avoiding fragmentation sure go why don't we start with you just what what challenges that we all should be watching out for I think some of the challenges the biggest challenges is that we have still not aligned Global regulation right now we are seeing regulation coming through in the UK we are seeing EU we are seeing U.S we are seeing Regional regulation and if you're working as a global institution there's multiple regulation you need to look into um there's a big unalignment right now I think there's more than 50 taxonomies around the world which one to follow which one not to follow which one is going to be the definition for the future and I think the biggest challenge is that we now need to say that okay we need to start aligning the regulations because we all end of the day want the same thing we want to have a strong framework globally around sustainability around disclosures around data which then should have Regional contact and say the European market is different to the Middle East we need to have a middle eastern context we need to have a North American context but we need to align the regulation on disclosures on climate risk we need to do it on tax taxonomies I think that's extremely important otherwise we were still sitting in a couple of years and have not gone that much further let me go to Francis and and and and then Adrian uh and then we'll come back at the end here to Isam but but Francis from a forensics perspective what are the biggest challenges from a risk forensic risk perspective I think it's back to the data point um and and the proliferation of data and having some clarity around best practices in what to focus on how to gather it and how to report out and as you say but without the consistency in Frameworks and taxonomy is that in itself becomes challenging so I think the faster we can converge to get some of those best practices around what to track how to retract and how to report it and as you say some of that will be regionally specific it will be industry specific and the risks will diverge but I think you know we've done it in other areas we see you know consistency in reporting in other areas which are compliance driven as well as um you know ethically and morally so compelling that has to be the key to get that framework in place with the reporting and the data management can then flow out to reflect what is required and agreed upon to be required because ultimately we're gonna have to Benchmark and measure so data is so critical in so many areas and not surprising that from your perspective it's uh it's a really big challenge yes as well here yep thank you Adrian uh you know of course I certainly agree on this and I think it's it's important and it's gratifying to see a lot of those of the industry working together to help solve that um you know we led a piece of work with the UN sustainable Stock Exchange initiative to create model guidance for tcfd disclosure that can be used by all stock exchanges um to again to sort of Drive consistency um and a number of you know the financial sector is working with the international sustainability Standards Board to try and create standardized Frameworks for that so I think that's absolutely key and that's what investors need consistent comparable data in order to be able to allocate Capital efficiently so I think that's that's that's vital I think the other key thing is is definitions you know what do people mean by ESG in the broader sense I think part of the challenge with green washing you know is that it means lots of different things to different people so I think we have to start separating some of these things out in a much more explicit way in the climate is it easier way to do that because emissions driven um but I think by having common a common perspective on what we mean by environmental and climate related issues what we mean by social issues we'll be able to then drive better disclosure and a better understanding of what companies are doing where they are on the journey I mean I I want to add I agree actually was what has been said I just want to add one thing I mean when we talk about what is needed and the challenge one big challenge is that there isn't enough equity today in the private sector to drive the uh the green agenda around I'm talking globally here I mean I mentioned the number which is more than 100 trillion all of these are estimate Way Beyond 100 trillion most of it has to come from the private sector the public sector around the world don't have this type of money they have other bigger issue also to deal with so there's a developmental agenda there so the equity part is a big challenge the other challenge globally is that we don't have an enabling environment for the private sector everywhere to come in and do the job and and that takes a lot of legal reform regulatory reform but also a how to do this in a very transparent way especially when you have a partnership between the public and the private so those challenges are extremely important to move this agenda forward and to take advantage of the opportunity that I mentioned in my first answer thank you um I often throw out the question to to panelists at the end of a discussion about what keeps you up at night uh what what do you worry about in this Regard in getting to Net Zero in 2050 what do we worry about what are going to be we talked about challenges but what are the big black are there any black swans out there that you that you think could derail this or are we on are We Are we positive and on track and just this is a chance for you to Crystal Ball just a little bit Francis you first that's a very difficult question as black swans are always you know by definition kind of the the unknown I mean look I I think we're sitting here because there is a global commitment um I think there is recognition in the public and in the private sector for the need to move this forward we've seen it done in other areas right we've seen massive change driven around governance with a big G as well as governments with a little G so I think the willingness is there I think the the key is to keep the momentum keep the pressure find incentives as necessary also disincentives I think you know as the the Frameworks are defined as best practices are set as that transparency comes out as the definitions are made then it's this idea of then beginning to have that accountability piece in there and so if there are missteps there clearly there's always room for calibration and Improvement but that there is also a punitive element there to ensure that the correct behaviors are driven not just by Goodwill but also by you know potentially enforcement fines Etc so you see the the regulatory framework as basically being on track and and for the future and evolving to meet the needs as we go forward but not to trivialize quite heavy the lifters say that again not to trivialize about quite how heavy and the you know the investment required the commitment the training the capacity building all the points we've touched on great Adrian you know I think the biggest risk is sort of fragmentation of of where the countries engage and work together um and actually that's one of the reasons that the UNF Triple C process and cot 28 next year is going to be really important what we you know that what that provides is a a unifying sort of sense of purpose for for countries around the world and that enables the private sector to get behind that we know we need as has been said the the private sector to be applying and leveraging the what the public sector is doing but bringing the majority of the finance so to get a consistent sense that all countries want to move forward they may do so in slightly different ways but that are working in the same direction I think is vital um if we're to see success in this endeavor charcoal what keeps you up at night I actually sleep very well Danny but but my concern one of my concerns is that um that a lot of entities still don't know what their Baseline is how big is their challenge so in order to support uae's ambition of becoming Net Zero by 2050 everybody knows needs to know how they will contribute in order to do so you need to understand what is your starting point that is that's a big concern we saw at cop 27 last week UAE um sharing their Pathway to Nigeria by 2050. so we do know how the journey looks like for UAE we now to get an understanding for each corporate and entity within UAE that how does your journey look like and how we can support on on that Journey basically that's extremely important Islam I'm going to let you sort of Bring It All home here and bring it together here and what keeps us all up at night in this regard and meeting these commitments going forward yeah look I mean having grown up in a war there are very few things that keep me awake at night but uh but from a Global Perspective I think the importance of having a common framework how to deal with with the climate issue and how to move into this transition will be where we have to spend some times and we have seen a vertical division today three ways in a way you know you have the the developing country you have the industrialized world or like you know uh the Western World if you want to say it in in the geopolitical and then you have the Eastern world that and all basically are not working together and this is something that is for every single individual living in on this Earth so if we don't take care of this Earth all together we are not going to be able to achieve the 1.5 already is an elusive Target how close we are going to be to the 1.

5 is going to be determined by how our Collective uh work as countries and and politicians around the world because it's first a political issue that is driving today what type of solution and how the work uh the world is going to come together to solve it and I hope that it will not keep us awake at night and the next probably two three years will be able to come to that framework well in that regard uh just a shout out and a note of congratulations to what the UAE is doing uh with regard to hosting cop 28 coming up here in November next year uh I mean I I talked with the leadership I understand I believe what the goals and objectives are for this cop 28 and they're nothing short of incredibly uh significant and and and Earth changing uh for the future and I think cop 28 next year in in Dubai at Expo 2020 is going to be one of the most significant cops ever and a lot of High Hopes a lot of high expectations and all of us and all of you in the room are here to work with the UAE and with the Global Partners to make it a success so again hats off to the UAE thank you to my panelists for this important session and good luck to The Regulators that have to come up with the policy and the law and the regulation to make this all thank you so much [Applause]