Investing in the Transition Era

[Music] great to see you all here and what a panel we have to discuss the transition era I'm a historian by training and for historians transition era is really that time going from the med Medieval Age into the modern era and with the transition that we're hoping to create with the energy transition it really does feel that we will enter a whole new historical era so with top 28 days away and with all of us geared up to think about how we can solve the climate crisis Miss Johnson I want to start with you and I want to ask you how you see the transition era what challenges it poses but also what opportunities for investors well first of all I'd like to thank your excellencies for the invitation here and uh uh to uh you know this successful conference and for first one having so many people so it's fantastic to be here um look I don't know that I can Define the transition area I guess I would Define it as when we finally get to Net Zero carbon emissions right so there you go now the challenge is uh the opportunities well the opportunity if 90% of the world's governments say they're committed to Net Zero by 2050 uh and right now we're spending $ 1.1 trillion dollar a year and people estimate that we need to increase that by three times to meet that number as an asset manager that feels like that's an opportunity um the I would say that the challenges are the reality and I was speaking with somebody today who said they they're earning six and a half percent on solar projects well if I can earn 5% on cash that doesn't seem like a great investment to me and as an asset manager and a fiduciary we've got a away investment returns with also the ability to invest and and and to um help with the the uh climate transition so you know what do we need to do we need to get really serious about Blended Finance where you have governments working with those both private and public Capital to come together uh to be able to support reasonable returns and clear policy around it and then have incentives so government policies that have incentives for companies to actually make the investment as well as it's the carrot and the stick um you know things like a global uh you you know Carbon exchange where you one companies are having to pay for carbon emissions and that there are ways to buy that and so it gets built into the whole business model so I I and then the final thing is just there's really bad data around this if you're investing and you can't get clear data you're always going to look for a premium so those are the some of the challenges Blended fi Blended Finance uh clear data and as you said reasonable returns which is um it's a challenge because businesses are really set for making sure that they are meeting the needs of their shareholders so um Sir Christopher I want to turn to you um often it's been said that the private sector hasn't been involved enough in trying to create this transition um energy transition transition era but also for wider climate action can business and investors solve the climate crisis absolutely absolutely not without regulation and Taxation from governments we've got 40% of direct emissions coming from companies and those emissions keep Rising every year because to decarbonize Industry transport energy every sector of the economy it costs money and uh and companies um this is the so-called green premium and these um investments will put a company at a competitive disadvantage without regulation and Taxation and that's why the Solar projects Jenny mentioned aren't economic because the polluting Industries aren't being taxed and so we will uh this this there's a myth that somehow industry will will solve the problem and that voluntary actions will will solve the problem but it's but it's a complete myth and it's imperative that companies and investors push for regulation and Taxation in their own long-term self-interest and governments wake up everywhere wake up and realize that without Taxation and regulation there will be no transition it'll be a a myth and the acid test is emissions keep Rising so I want to turn to you Mr Javid because what we're hearing here from Mr Sir Christopher is you need regulation and Taxation your former position you had to look at these details very carefully and today as you're advising as you're looking at risks and what needs to happen how do you respond to that do we need to have regulation andx ation as a solution no I think uh first of thank you for having me I think Sir Christopher is absolutely right in in in in what he said the way he's put it in that to have that transition particularly if we're talk about the you know climate change and fighting that that it does uh require the world over governments uh to be very very involved and to drive that change right so whether it's Sir Christopher said with through taxation its subsidies it's it's uh through you know regulation and and all the sort of uh the weapons a government would have to try and get that changed but I perhaps it might be useful if I just sort of you know give my sort of sense on why it's so hard for governments uh particularly in developed economies in then you know if I look back the UK government I think it was the first or the second maybe to vote for net zero right to pass a net zero legislation in its Parliament I was there you know it went through Parliament 95% of MPS voted for it right and um and and the problem with you know this is that MPS legislators politicians around the world sort of saying I support metet zero and I want to see this change they're not this generation are not the ones that exactly that have to deliver it or necessarily they feel sometimes wrongly they don't have to make the hard decisions so they sort of get the credit for the vote but they don't actually have to have the challenge of delivery and or they see it's in 2050 20 obviously it's not but they sort of see that's a long way away and and and also what's happening is that you know if you go back to we an energy transition right so if you go back to the the original sort of if we can call it that energy sort of a revolution you know when we were around the world we start to get you electricity being generated whether it's Coal Fired gas fired nuclear civil power and the networks that were created governments financed that there was a lot of government involvement in that of course um and Regulation and stuff but people could see the benefit right you could you know you're sitting at home you suddenly move from Gas Light candle light to you flick a switch and the light comes on and people could feel the benefit the challenge for government is that there's trillions and trillions that are required to for this transition but for a lot of governments it's really hard to to sort of get the voters get the electorate focused on the benefits because whether your electric electricity is generated by solar power or you know gas fired Power Station you click the Switch and the same thing happens you don't feel the benefit and that is why I think governments are going to have to be much more uh you know involved in this uh than than any other transition we've seen in history and the issue of course is also about price so where the ordinary citizen feels a difference is when prices go up and down so at a time when people are feeling the pain especially in um more of the developed economies of inflation it's really hard to tell them yes but pay more now because it will be good in the future that's right and and and the reality is whether it's sort of financed by the private sector or it's financed by government at the end of the day consumers will have to pay and those prices certainly to begin with overall will be higher than otherwise and over time your prices can come down as as as you have the the the huge stock built and and you built the distribution networks but initially there is a price to be paid but the the point I think politicians just need to get much better at is that if we don't do this the price that will be paid by all of the society is a lot bigger than that Mr if I can turn to you when we look at this issue of the transition era in Frontier markets in places that could LeapFrog some of those steps that we're talking about in terms of energy development how do you see it uh first uh it's interesting you talk about this will cost trillions this this really you know rings in my ears and I just it's really interesting that if we need trillions I think about 3.2 trillion spent on the war in Afghanistan God knows how much money spent somewhere else how much money can we save to save the world by destroying the world this is really crazy no and we're asking these governments to put the regulation right something is not right anyway how do we make it right let me tell you I first of all I think the responsibility is ours all including the audience because we're real consumers we just take advantage of this poor environment you name it but for me as a person from the uaee it's it's a little different you see we are tribal Society we are completely different I would say that other countries are similar to us few because the way we live what we believe in We Believe F in country we believe in our leadership andlike many of you who believe in family these are very deep principles that stay with us and I'm sure few other countries are also and that alters the way we think that alters How We Do business how much we care about the environment we're in even though you know for the past 29 years I run a public company and I'm being slaughtered for my quarterly result and I've been taking it for the past 29 years I hope it doesn't show on my face right so still the responsibility as we spoke earlier I think together is that you need to sort out the world but we are also responsible financially to deliver certain returns and I do agree that regulation have to come in at in a in a in a systematic way so we all can can behave and and look after the environment and think we as new countries we are new we are 40 plus years old I think we have a much better chance at fixing this and if you look at the UAE and if you look at how old Mazda is and it's one of the largest you know clean energy producers actually the UAE didn't have to do this because we are really sitting on the other side of the coin but that shows you the tribal thinking that we are responsible for this world that we live in and I feel the same way and and we are taking the subject seriously so I hope uh my uh my other organization in abudhabi Eagle Hills that during cop will announce probably an incredible U starting of first time changing the construction industry forever where actually there is no Concrete in what we are going to do might be totally recyclable and it's doable and this is we're doing it there's no regulation there's no tax but again this is the tribal part of us that they're responsible for the country we're responsible for our society we're responsible for our neighbors and we'll try to do uh what's right and generational thinking and so that motivator exactly being intergenerational thinking but also that Collective action so um Miss Johnson I want to turn to you because you know the Net Zero asset managers initiative um which you have been very active in help how has it helped Propel some of that thinking of saying okay we need to voluntarily come in Step Up and how can asset managers play that influential role well I mean so what it did is it I think it focused asset managers and and um and there was a lot of peer pressure in it I also think that's why you saw some asset manager sign and then back away from it um as asset managers we manage our clients money so we can commit to educating and bringing our clients along but in the end it's our client's decision as to whether or not they support how we're thinking about investing it which is why and and our clients I mean if you're a pension fund it's pretty tough to say listen I I invest in these things that were not returning the same amount as I could have returned with something else but good news is you help the environment bad news is you don't have enough money to retire right I mean you know that you have to balance these things this is the reality of it and so I think what the Net Zero initiative did is it said um you know asset managers you got to be educated around it you're going to be committed to working with clients to try to get there and it created a focus but it doesn't solve some of the issues that we've talked about Sir Christopher I want to turn to you what Mr spoke about this idea of having that moral imperative and we are just having a conversation at the back where you know we can put in regulation we can make the business case for this but at the end of the day if you if you're not too bothered about what's going to happen in 50 to 100 years it's really hard to move the needle that's right ultimately climate change is a spiritual problem if we don't care about poor people in poor countries who are suffering by not being able to grow food or dying in heat waves or if we don't care about our children and their children then we'll burn down the planet and we don't have till 2050 or 2040 before we change the next 10 years will be our last chance and so the um this is a moral problem a spiritual problem it's actually not an economic or technological problem we know we have the money to fix it you know we spend more on Wars than we need to fix it y we have the Technologies but we don't have political will is what sajiv said and that's because there's a selfishness in society where rich countries are polluting and letting poor countries and rich rich countries and rich people are polluting and poor countries and poor people are suffering and the rich countries won't allow a billion climate migrants to come in and so in my opinion this really is the heart of the matter that it that before focusing on technological and and and um and financial analysis and regulation we have to start with why do we care about our fellow human being even if they're poor and live in a poor country if we don't then we'll continue to burn down the planet because those are the people who are suffering today in Africa they they're struggling to even eat one meal a day because climate change is drying out the soils and so we really have to go inward all of us and ask you know can each of us do our part because it's it's there is no one else who's going to save the planet except each of us and care about our fellow human being Mr jvid I want to turn this conversation to you because again having that political will what's the political challenge but also The Economic Consequences and if we if we look at the title of our session is about investing in the transition era so when we look at those Investments for politicians um and The Economic Consequences in developed countries but particularly the UK example yeah look as we've heard the the political challenges for governments across the world are huge in delivering on climate change not least it's happen you know this transition you know that we need to turbocharge now it's happening in a backdrop when governments have relatively high debt because of previous crisis they obviously interest rates are a lot higher than what we've been used to recently inflation is higher um and also for all governments but particularly in developed countries they're facing some massive demands for spending outside of this such as demographic change you know in for health system social Care Systems uh the defense you know the we're in the post post Cold War era you know conflict is back unfortunately and so there's cost there and also we've seen a rise in populism the the world over and that is leading to you know spending Promises by Government after government so when you put all that together it just feel there's not that much money around as certainly as as as governments would see it uh and and I think that taken is probably the biggest set of uh challenges because whether it's government spending or subsidy or regulation it might it would lead to extra cost for the customer and that that is that is what I think holds uh government's uh back uh in terms of the you know on on the counter side of that I think it's worth sort of governments doing more to illustrate the benefits that come from this beyond the obvious which is uh you basically obviously the most important thing is saving our planet uh but the more immediate benefits of that huge investment once it's uh it materialized in our country can lead to a lot of jobs not just in those Industries but in related Industries it can spur Innovation that can lead to you know efficiencies and and uh creation of new technologies and uh new ways of doing things Beyond just trying to deal with the with with the climate challenge uh and also economic resilience you know firstly all countries will be more economic resilient if they have mitigated some of the aspects of climate change but also if your energ is no longer dependent only on effectively fossil fuels you know you can in the long term your country will be much more resilient not having to perhaps importing uh a lot less and building a new skill base so I think there are a lot of economic benefits that governments can do a lot better at articulating and taking advantage of Mr I you know these big powerful countries the trouble also is that one political party in the next political party out so I don't know if the world can actually organize itself because you know that's the other challenges that are these governments stable but then again we can't say anything because we have to believe in the democratic system but then you know one day in one day out and and and you know you play with the world that way so that's a that's that's a global challenge therefore I really believe in what you said we all have to be responsible to the world deep inside us now how many people think this way how many people think that way but at the end I think everybody should do his part but but your point about short-termism when it comes to certain political uh structures and long-termism and long-term planning that also applies to the private sector where you have companies that are really thinking about what's my next quter result look going to look like and where can I actually think well I have to tell you on the private sector we are not doing enough I'll be honest with you we are not doing enough Sir Christopher can I ask you because there's there's another element to this we've spoken about government we've spoken about private sector there's philanthropy also and of course with um you know the children investment fund Foundation hugely important in the projects you've done can you give us some of the Lessons Learned on the role of philanthropy sure so i' I've been doing climate philanthropy for 20 years my Foundation has given away over a billion dollars in climate philanthropy created many institutions around the world um we work globally uh philanthropy has a role to play in uh technical assistance to governments but also political economy to make the political case because as Sajid said we see a rise not just in populism but in in in in the far right who don't uh want to um do do anything to save the planet okay Trump has said if he gets into Power he'll eliminate all the green policies burn as much fossil fuels as possible they completely irresponsible and we philanthropy has a role in communication the media okay to and I would also say um um you know also to to raise ambition to governments you know one of the things we we we do as it conferences you know try and create make sure there's accountability network uh uh Frameworks so that countries actually follow through um but I would say there's another role for philanthropy which is to make the moral and and spiritual case you know I'm funding spiritual education because as um the case has been made here if we don't get to the why we're we're um we're not going to solve it and philanthropy can do things others can't for example we started a a litigation Hub where we fund half of all the environmental litigation in the world with a 65% success rate um and that's not something the business is going to do that's not something the government's going to fund and so we need more climate philanthropy so if there's anybody here in the audience or listening who wants to do climate philanthropy we'd love to hear from you okay on that note I'm afraid our time on this panel has come to a close um so I will take this moment to thank our panelists uh clear call to action as we go into cop 28 we all have uh a role to play in our different in our different pattern Le and in our different roles I'd say also it was important to hear about Blended Finance because I think that's one of the opportunities that's there when we're thinking about investing mbds we'll see a lot of that conversation happening in only a few days time in duway so for now I'd like to thank the panel and thank you all for being here