Transcript
Speaker: This is HSBC Global Viewpoint, your window into the thinking, trends and issues shaping global banking and markets.
Speaker: Join us as we hear from industry leaders and HSBC experts on the latest insights and opportunities for your business.
Speaker: A heads up to our listeners that this episode has been recorded remotely, therefore the sound quality may vary.
Speaker: Thank you for listening.
Speaker: This is the second part of our discussion on this topic.
Speaker: To listen to part one of our conversation, please click on the previous podcast in this feed.
Speaker: Welcome to the Business Plan for the Planet podcast, a series centered around ESG insights.
Speaker: In these episodes, you'll hear from experts whose work is at the heart of sustainability linked trends and opportunities, as well as from businesses that are delivering change for a better future for us all.
Speaker: Join us as we shine a spotlight on their commitment to a sustainable future.
Speaker: Welcome everyone.
Speaker: My name is Emily Farnworth.
Speaker: I'm the deputy director of the Centre of Climate Change Engagement at Hughes Hall at the University of Cambridge.
Speaker: And we're the secretariat for the Climate Governance Initiative.
Speaker: I also had the pleasure of being at the very early stages of setting up the Climate Governance Initiative at the World Economic Forum.
Speaker: And today we've had some fantastic conversations with regards to the sort of engaging with investors and needing to sort of think about how do we work all of these things in
Speaker: across the board.
Speaker: What we've heard a lot is how important it is to collaborate.
Speaker: And I think that's really going to highlight the conversation today, which is the need for collaboration and how essential it is to future proof business to enable delivering net zero emissions by 2050 or sooner.
Speaker: We're going to be hearing from an incredible range of speakers today.
Speaker: And I think really honing in on some of the other themes that have come up during the week, which is the importance of integration.
Speaker: not just integration across the business, but recognizing that existing systems of risk management, of disclosure, of reporting, need to embed climate change directly.
Speaker: This is not a bolt-on activity that happens within the board conversation or within the corporate conversation.
Speaker: There's also been a lot of discussion around the need for long-term vision, recognizing that decisions that are being made today are going to affect how we can tackle climate change in the future and how important it is for leadership in the context of really driving change.
Speaker: I'd like to introduce our speakers for today.
Speaker: We have Claudia Sender-Ramirez, who is a non-exec board member of Telefonica, Lafarge Holsom and Goddard.
Speaker: So a really broad range of different boards that she sits on.
Speaker: Emma Marchigalia, she's the chair of the B20 and was instrumental in setting up the Climate Governance Initiative.
Speaker: Mark Tucker, who's group chairman at HSBC.
Speaker: Nigel Topping, high level champion in climate action,
Speaker: COP26 and Praneet Branjan who's the global chief executive officer for Deloitte.
Speaker: So as you can see an incredible panel of speakers today.
Speaker: We have a lot of non-executives that are new to this topic and are perhaps sitting on boards where even bringing up the conversation of climate change feels like a big challenge.
Speaker: So you know I think we recognize we've still got a long way to go to really making this
Speaker: the norm in businesses.
Speaker: This conversation we're having now feels like this is a leadership group of organizations.
Speaker: But I guess the question, and open to anyone to kind of jump in on this one, what's your sense of what needs to be done to really enable this to be mainstreamed, recognizing that, as I say, there's lots of non-execs that are just learning about this topic and wanting to bring a question to the board.
Speaker: Is there something that you would sort of
Speaker: advise them in terms of that first step to sort of be brave and bring it into the conversation?
Speaker: I think what, you know, we are doing, you are doing with these chapters, it's very important because I remember at the beginning, the idea was
Speaker: Do we have a place where we can share fears, where we can share issues, where we can share good practices?
Speaker: Because as you said, in some industries, in some companies, you have very open CEOs and they also help you to go in that way.
Speaker: And this is easy.
Speaker: In some companies, maybe the management is not so open.
Speaker: Some industries are still on a defensive approach.
Speaker: And so sometimes it's not so easy.
Speaker: So the idea to have a place where you can share ideas, benchmarking, and maybe I can help another non-executive director of another company to say, well, this is my experience maybe two years ago.
Speaker: Why don't you do that?
Speaker: So as you said, collaboration in this moment
Speaker: is very important.
Speaker: So I think you should, I tell you, go on with this because probably this is the best way to help each other, you know, as non-executive directors to do our job, even in, you know, boards where maybe it's not so easy to do it.
Speaker: Yeah, I think you've raised an important point there.
Speaker: That peer group is so, so important.
Speaker: Maybe next, Mark, to you.
Speaker: Thank you.
Speaker: And just building on what Emma said, boards are
Speaker: are fundamentally responsible for promoting the long-term success of the organization and clearly about delivering sustainable value, establishing improving strategy, setting monitoring risk appetite and holding management to account.
Speaker: And therefore, it fundamentally stands to reason that we have a fiduciary duty to prepare businesses to meet the climate challenge and to capture the opportunities that are emerging.
Speaker: We took a view a number of years ago that
Speaker: rather than wait for all of this to become mandatory, that we take this action ourselves.
Speaker: And if whichever industry, whichever sector doesn't do that, then clearly the governments will.
Speaker: And we've seen already...
Speaker: in the EU and the UK, clear mandatory responsibilities.
Speaker: I think this will continue to increase, to multiply, and therefore sort of learning from the experiences of those that have gone through the process.
Speaker: And I think there's enormous openness, as Emma said, to listen and share, but to help those countries particularly that are
Speaker: that haven't had that mandatory approach, I think is essential.
Speaker: But I think this is fundamental to the job of a board.
Speaker: Yeah, it really is.
Speaker: And Finit, did you want to come in on this question too?
Speaker: Yeah.
Speaker: I think Emma's point that the sharing is important so that other non-executive directors can see that this is an important topic, but I want to share a statistic with you.
Speaker: 85% of the 300,000 professionals that comprise Deloitte are millennials or Gen Zs.
Speaker: Overwhelmingly, when you poll them, their topic of interest is climate.
Speaker: and ESGs.
Speaker: I go and recruit 50,000 individuals every year at Deloitte.
Speaker: And if I go to top campuses, I'm asked invariably, whether it is the United States, India, Europe, what does Deloitte do beyond its for-profit motive?
Speaker: So this topic is the topic of import for an entity like Deloitte.
Speaker: If I want to be able to be the number one professional services firm, hire the very best people, I must have a credible response
Speaker: for the people that work at Deloitte and the people that I covet.
Speaker: So this should not be one where boards are hesitant.
Speaker: The time is now.
Speaker: The second point I want to make is increasingly, as I speak with clients, as we make bids, we are asked, what is our climate footprint?
Speaker: What is it that we're doing in terms of ESGs?
Speaker: So this is important from a business standpoint.
Speaker: And Mark is right.
Speaker: Regulators now are stepping up.
Speaker: We will see that in the EU, in the United States, there will be mandates that will come up.
Speaker: And that's why the point that I made early on where we need to converge to a global set of standards is so critically important so that we can have a comparability.
Speaker: But this is a topic of great interest.
Speaker: And I'd be interested to hear from Mark, Claudia, Emma and others, whether they're finding it in their organizations as well, from their people, from the clients and the ecosystem that they work with.
Speaker: I don't know what you all think.
Speaker: Claudia, do you want to come in?
Speaker: Yes, very interesting discussion.
Speaker: I think, you know, let me start a little one step back, which is if you want to make a difference as a board member coming into a company that doesn't necessarily talk that much about climate change, you must first educate yourself.
Speaker: Issues are different depending on the company or on the industry that you act.
Speaker: So it's not always going to be about greenhouse gas emissions.
Speaker: It may be freshwater removal or it may even be societal impact in the communities.
Speaker: that neighbor your factories or sites.
Speaker: So I think the first thing is make sure that you educate yourself.
Speaker: And the second is find supporters and other members within the board who are willing to take on this discussion with you.
Speaker: It's very hard to do it alone, especially if you have a management that is not that open as Emma mentioned before.
Speaker: The second thing, and I agree 100% with what Panit was saying before regarding his workforce, I would talk about the consumers, right?
Speaker: As board members, our fiduciary responsibility is to protect the long-term sustainability and survival of the company.
Speaker: And every day, a less conscious consumer leaves the market and a new, more conscious consumer enters the market.
Speaker: So this shift is happening.
Speaker: And if we want to be responsible, it's not only that we cannot wait for regulation or governments to come and decide for us,
Speaker: customers will.
Speaker: And if we want to take a stance and be one step ahead, I think, and again, guarantee the sustainability and the longevity of our companies, we must take this into account because customers, as your potential recruits beneath, are becoming more and more conscious.
Speaker: I want to say, you know, I'm an interpreter myself.
Speaker: I'm in the steel transformation.
Speaker: I have good experience in E&I and oil and gas.
Speaker: In my opinion, if we want to get to win the race, let's say,
Speaker: We have also to be, as Mark said before, and the other said, we have also to be very pragmatic because we have to be very ambitious, very long-term view, but also very pragmatic.
Speaker: So sometimes we also to recognize that in this transition, in this race, there will be losers, there will be costs, there will be
Speaker: deep transformation and painful transformation to be done.
Speaker: And so I think if we want to have more companies on board, it's also important to say the truth.
Speaker: When we started this conversation maybe two years ago,
Speaker: The idea was, okay, either you do that or you're out.
Speaker: Either you do that or we will never finance you anymore.
Speaker: People will not come.
Speaker: You know, it was like, oh my God.
Speaker: So I think now the conversation is much more pragmatic and constructive.
Speaker: The idea is that we all have to get there because this is imperative.
Speaker: It's ethically great.
Speaker: But it's also, as you said, it's a way to create more shareholders' values, to get the best people to work in your company.
Speaker: to have your customers to believe in your.
Speaker: So it's very clear that we have to go there.
Speaker: But it's also important to say that there will be a transition.
Speaker: Investors, banks, Deloitte, or all the other, we all have to collaborate to get there.
Speaker: Because otherwise, if it is either you're like this or you're out, a lot of companies will say, well, probably I'm out.
Speaker: I don't know what to do.
Speaker: So I like this pragmatic approach.
Speaker: Yeah, yeah.
Speaker: Maybe Nigel, I'll ask you to respond just knowing what you've seen about this sort of race.
Speaker: Well, I want to sort of invoke two qualities of mind or two sources of insight that we haven't heard about.
Speaker: One is imagination and the other is history.
Speaker: And I don't mean imagination in a flighty way.
Speaker: I mean in a rigorous, pragmatic way, because one of the problems we all suffer from is we are hardwired for cognitive dissonance in times of disruption.
Speaker: We have recency biases.
Speaker: We have familiarity biases.
Speaker: So I know, you know, in my time in India, I worked mostly in the automotive sector.
Speaker: So I've been particularly obsessed with the transition to electric vehicles.
Speaker: People my age who are now running car companies until the last 12 months could not let go of their love of combustion engines and could not believe the pace of change that is now overtaking them.
Speaker: And because of that, they didn't start investing in
Speaker: in product strategies early enough because these changes this is where the history comes in these changes happen exponentially always and you can't chase an exponential curve and if you've got a seven-year product cycle right and you still haven't got a competitor to the tesla model s then you're just losing market share every day and if you're saying you're going to launch that product in 2023 then you've given up market share because you didn't see the change coming because you weren't paying enough attention because you didn't have the imagination
Speaker: to think about possible disruptive changes.
Speaker: So I think one of the key things that boards can do is embrace non-linear change, bring in disruptive voices, bring in people who have familiarity from sectors that maybe have much faster innovation cycles like tech than cement or steel or automotive or most sectors actually.
Speaker: So I think there's now some very rigorous non-linear work that
Speaker: inevitable policy response work that's been put out by the principles of responsible investment, which models disruptive change in a way which incumbent data providers like Bloomberg New Energy Finance and the IEA fail to do.
Speaker: So they're always wrong on the slow side in their predictions.
Speaker: So I think a more rigorous use of the imaginations in terms of some of the techniques of futures thinking and a recognition that history shows us that
Speaker: industrial disruption follows a familiar pattern and it won't be well to expect that and recognise it.
Speaker: But it's a cognitive dissonance that our journalists have as well.
Speaker: You'll see in the FT things like we're only at 5% electric vehicles, missing the fact that it might be trebled in the last 18 months.
Speaker: And it's that pace of change rather than the milestone that is more relevant in disruptive times.
Speaker: Yeah, yeah, it's a super interesting point.
Speaker: We actually heard it in the context of the resilience conversation too, in that
Speaker: we're now in a modelled world or a modelling world.
Speaker: We're not in a sort of looking at what has happened and predicting it based on history.
Speaker: Mark, I'll go to you and then Phineet.
Speaker: Yeah, just sort of very quickly.
Speaker: I think we, all of this sounds, and I think Emma and Claudia have said, but all of this sounds like hard work.
Speaker: And again,
Speaker: I don't see it as that.
Speaker: I mean, I think the moral rationale for net zero needs no explanation.
Speaker: None of us need convincing.
Speaker: it's the right thing to do.
Speaker: But I think there's tremendous opportunity and upside here.
Speaker: And I think to Nigel's last point, I mean, there is a commercial reality.
Speaker: There's significant business opportunities from the transition from different, again, going through new models, growing the industries of the future.
Speaker: And I think a sustainable business
Speaker: must be well positioned, must be durable, must be successful for many decades to come.
Speaker: And I think all of us are striving to do that.
Speaker: So while it is no question, it is hard work for a board to come to an understanding or a basic understanding which we need to build on.
Speaker: Certainly we as a board have three sessions, separate half day sessions a year on this, as well as other sessions.
Speaker: specifically on these subjects and we again as well as others that are sort of as we go through a process the commitment here is immense but again I it's a journey that is an essential journey a journey we're all going on and the journey that I think will bring again so many positives that we mustn't just think of it as hard work.
Speaker: Thanks for that Mark and Pini too.
Speaker: You know, Mark made my point, actually made it more eloquently than I was going to make.
Speaker: I was going to highlight what Claudia said and what Emma said, and from my own context.
Speaker: The first is Mark said this, it's no longer the right thing to do.
Speaker: It is the right business thing to do.
Speaker: And that was a real mind shift for us.
Speaker: I mean, it's not like we're doing evangelical work.
Speaker: This is something that we need to do to be a viable entity in the future.
Speaker: It's the right business thing to do.
Speaker: And that's the point that Claudia made using customers and consumers.
Speaker: I like the way that she said it.
Speaker: And Emma made a really important point around pragmatism.
Speaker: This can be overwhelming.
Speaker: And particularly when you see everybody making commitments and when you realize that you have to do your part and you have to do it in your own way, in a pragmatic way, and you have to start.
Speaker: And I think that's really important.
Speaker: Everybody needs to start and everybody needs to do their little bit.
Speaker: And it's only then will we be able to lick the problem.
Speaker: Yeah, it's so true.
Speaker: And I think, I guess the one advantage, perhaps, if you needed to look at the positives in companies that are just starting on this journey, is at least they've got a lot of peers that have kind of gone through some of the more difficult challenges before them.
Speaker: So at least they can start to leapfrog a little into this new world and sort of fast track on this journey.
Speaker: I do want to give us enough time to have some really reasonable sort of responses from you all as your last kind of closing remarks.
Speaker: And in particular, you know, an action, I guess, that you would want to put out to this group of non-exec directors in thinking about this journey tackling climate change.
Speaker: So I'm going to go around in the order.
Speaker: In fact, maybe I'll go the other way around, actually.
Speaker: So sort of starting with the last speaker first, if you like, I'm just going to ask you,
Speaker: just to give some closing remarks on sort of what you've taken away from this conversation and what action you would put out to these non-exec directors who are looking at the next stage in their journey on their boards.
Speaker: So starting with you, Puneet, just some last reflections.
Speaker: Well, I think it's been a really good panel, Emily.
Speaker: Thank you.
Speaker: One, time to act is now.
Speaker: Second, we need to do it in a very measurable way and hold ourselves to account.
Speaker: And the boards play a very important role in holding management to account.
Speaker: And then this is a shameless plug.
Speaker: The IBC WEF work where we've got 21 metrics is a great way to start.
Speaker: They are measurable.
Speaker: They address not only climate, but the other SGs.
Speaker: And so I would encourage you to adopt those.
Speaker: Thank you.
Speaker: We'll make sure that members of all the chapters are aware of those, because I think it is a useful starting place, particularly, as you say, there's just so many different metrics and standards out there.
Speaker: So super helpful.
Speaker: Nigel.
Speaker: Simple, I think, and echoing to others, if you haven't already done so, make sure your company has joined the race to zero by
Speaker: setting a net zero date and then a science-based target and a clear plan which you're prepared to share with investors for the short term to make sure that it's operational and if you've already done that then really start looking at the kind of sectoral collaborations in many cases they already exist but if not then start one and finally learn your re-learn your exponential maths so that you can spot non-linear change coming better than your competitors and make sure that your board are aware of it as it happens
Speaker: Thank you so much, Nigel.
Speaker: And Mark, over to you.
Speaker: Emily, thank you.
Speaker: I mean, just maybe just a few observations.
Speaker: I think, again, a valuable discussion.
Speaker: And I think these types of discussions and board level discussions do provide an important opportunity for collaboration, accountability, learning and sort of non-competitive information sharing.
Speaker: I think we all believe that climate change is the most urgent and serious threat that we face.
Speaker: And there are many challenges that are interconnected.
Speaker: The extent of the collaboration we're now seeing between businesses and with governments and regulators does make me more optimistic that we can build sort of a more prosperous and sustainable world.
Speaker: And seeing the same type, same kind of collaboration at board level.
Speaker: I mean, the fact that many NEDs, and again, Claudia is a good example, occupy positions in different industries, different geographies.
Speaker: provide a different perspective and create real opportunities.
Speaker: And I'd like to see more of that happening in boardrooms in the future.
Speaker: And I think that's the value of initiatives like this.
Speaker: Thank you.
Speaker: I think we're sort of learning more and more about how important that is.
Speaker: And also a lot of the non-exec directors that are sitting on corporate boards are also sitting on public sector boards too.
Speaker: And I think that kind of cross-fertilization of understanding can also be super helpful.
Speaker: Emma, over to you.
Speaker: Well, thank you.
Speaker: I think it was really a very interesting conversation.
Speaker: Let me say this year, I think it's a very important year.
Speaker: I think maybe we didn't talk about that because with the pandemic has not stopped
Speaker: the race towards zero carbon neutral.
Speaker: But on the other hand, it has made this race even more important and stronger, which is very, very important.
Speaker: I think we have...
Speaker: some very important opportunity, you know, the COP26, the G7 in UK, the G20 and the B20 in Italy.
Speaker: And really, I think, and I see this also from my perspective, having, you know, 1000 people working in corporates in the B20, the commitment on, you know, on doing something concrete on climate change is very clear also from the corporates point of view.
Speaker: So let's take all together, you know, through a collaboration between different corporates, different industries, government, academia, you know, business.
Speaker: Let's take this very important opportunity to really make this year, you know, a memorable year where we really go strong process towards, you know, the carbon neutrality, which is key for our planet, for the people, but also I would say for our corporates.
Speaker: Yeah, I think you're right to highlight how important this year is, or at least
Speaker: what an important visibility moment it is for this issue, given everything that's going on.
Speaker: And Claudia, some final remarks from you and maybe a sort of call to action to your peers.
Speaker: So to me, it was remarkable how everybody talked about the board responsibility, right?
Speaker: We tend to look at management, but here I think it was absolutely clear how important the board positioning and push is for making sure that this happens from, you know, I liked Emma's point on pragmatism, but my favorite learning today I'll take from Nigel, which is use my imagination rigorously.
Speaker: I think innovation is happening so fast and in so many different places that we,
Speaker: in general, don't see.
Speaker: So I will not only make sure that I do that, that I use my imagination more rigorously, but I incent my peers to do the same.
Speaker: So thank you so much for such an amazing panel.
Speaker: No, thank you.
Speaker: Look, I can't thank you all enough.
Speaker: It's really been incredible to have such a broad range of insights into this topic.
Speaker: And from our side, you know, this is the first year that the Climate Governance Initiative has had this global summit.
Speaker: And the fact that it's been
Speaker: created by all of the different chapters around the world, I think has really added a huge amount of value to the learnings from different parts of the world and different industry sectors that we've had perspective on.
Speaker: I guess just from my side to wrap up, one of the areas that we focus on within with regards to the principles that sort of underpin the Climate Governance Initiative is around exchange and this idea of being able to collaborate, to learn from others, to build coalitions, to get, I mean,
Speaker: a point that Nigel brought up, you know, getting involved in high ambition coalitions, but make sure you're aligned with any other coalition that you might be part of that has a different agenda that isn't moving quite so fast.
Speaker: So I think this idea of exchange and collaboration is just such an important part of the conversation.
Speaker: I began by sort of talking about some of the key themes that have come out from the rest of the week.
Speaker: So collaboration was absolutely at the heart of it.
Speaker: So it's great that we've had so much conversation around it.
Speaker: the integration piece, both within individual businesses, but also thinking about integration within mainstream processes in organisations, really critical.
Speaker: And this long-term vision, and I think, again, to some of the conversation here about not relying on building models that are based on historical trends, but recognising that these new exponential trends that we're seeing are kind of really requiring a different way of approaching the challenge.
Speaker: And maybe to build on that with some of the takeaways from this conversation, I'll pick up on that imagination point.
Speaker: It seems that this come from a few different places, the conversation about millennials and this sort of new generation that we have, that's got a very different way of looking at the world and need to respond to that.
Speaker: The fact that we do need to be pragmatic.
Speaker: This isn't about just simply
Speaker: trying to sort of be in a race on your own.
Speaker: This is about everybody getting on a race together to the same end.
Speaker: And so it will require some difficult partnerships and some difficult decisions in those partnerships.
Speaker: And I think it's this balancing act between when you want to carry somebody because you want to help them over the finish line, if you like, and when you actually need to say, actually, if you're not going to get go fast enough, we are going to have to let this go.
Speaker: So this challenge around that there are going to be winners and losers.
Speaker: And finally, this need to kind of get more clarity around disclosure, this need for kind of standards to help us get better understanding of where we are and just keep track of progress.
Speaker: This is not just about words.
Speaker: This is also about really delivering on the action that we've all been talking about.
Speaker: So thank you all so much for joining us today.
Speaker: Really appreciate your input.
Speaker: Thank you very much.
Speaker: This has been a special podcast in the Business Plan for the Planet series.
Speaker: More episodes will follow shortly, so please do keep an eye out for those.
Speaker: For more information on the programme, visit business.hsbc.com forward slash sustainability.
Speaker: Thank you for listening today.
Speaker: This has been HSBC Global Viewpoint Banking and Markets.
Speaker: For more information about anything you heard in this podcast or to learn about HSBC's global services and offerings, please visit gbm.hsbc.com.
