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: 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: Thank you.
Speaker: So today we explore how the UK believes it can become the leading economy in the race to net zero.
Speaker: Also, how we can generate greater growth through green innovation, through finance and through trade as well, and how we will deliver our clean energy targets.
Speaker: The G7 met two weeks ago.
Speaker: They came out with a communique, paragraph 37.
Speaker: an unprecedented and interdependent crises, an existential threat to people, prosperity, security and nature.
Speaker: They define 2021 as a turning point for our planet.
Speaker: And I'm quoting from the communique.
Speaker: I'd like to ask you both.
Speaker: Mark, I'll come to you first.
Speaker: You weren't in Cornwall, but do you think that this is achievable?
Speaker: This can be a turning point for our planet?
Speaker: Well, we have to make it the turning point for our planet.
Speaker: The G7 has first put down the gauntlet.
Speaker: Secondly, taken some of the steps necessary, including in Cornwall, some of the necessary steps in the financial sector, for example.
Speaker: But there's unfinished business.
Speaker: We've left this late, which is why the urgency of both the presentations and in your voice, quite rightly, and more needs to be done every day, every week.
Speaker: And it's why Climate Action Week is critical.
Speaker: No, you were there in Cornwall.
Speaker: You were there having dinner with Prince Charles.
Speaker: Well, we didn't quite have dinner, but we had a sandwich with him.
Speaker: But 2021 at Turning Point, is there really that mood?
Speaker: Because in the end, there was disappointment.
Speaker: They didn't commit to 100 billion.
Speaker: I think there was a very positive mood.
Speaker: There was strong engagement.
Speaker: And I was encouraged by the dialogue we had in Cornwall and the dialogue we had before the meeting in Cornwall.
Speaker: I'm going to stand back a little bit.
Speaker: Do I think industry, commerce, the financial sector,
Speaker: has woken up to the need, I do believe.
Speaker: But now it's about turning that desire into tangible action.
Speaker: And that's where I think we, the private sector, together with the governments of the world, need to find pragmatic solutions to turn the good intent into action.
Speaker: And I liken the next five years to 10 years to being the next industrial and commercial revolution that's taking place.
Speaker: I think over the last 155 years of HSBC's history, we've seen economies change dramatically.
Speaker: I think we're about to see the exact same thing happen in the next five to 10 years.
Speaker: Industrial revolution.
Speaker: and technologies will change the way industries operate.
Speaker: Ten years, of course, is too long, actually, because of the carbon and everything else.
Speaker: Five to ten years.
Speaker: Five to ten years, but there has to be tangible progress.
Speaker: I mean, let me pick up on what Noel just said, which is that, I mean, there's a fundamental rewiring of the economy that is just begun.
Speaker: And it's that scale of change that is necessary in order to accomplish the climate goals.
Speaker: Now, that does take it has to start now, but it will take the balance of the decade to really break the back of it.
Speaker: I've seen both of you talking about this at various points.
Speaker: Let me put to you, actually, that even if there's disappointment that we're still not going fast enough, there has been remarkable progress in the last few months.
Speaker: There's been remarkable progress.
Speaker: I mean, let me, again, reinforce something Noel said.
Speaker: This is fundamental.
Speaker: This is one of the core, and I would say for most companies, most financial institutions, this is now the top strategic issue.
Speaker: That was not the case.
Speaker: Without doubt.
Speaker: Without doubt.
Speaker: Without doubt.
Speaker: You see it in the conversation.
Speaker: I mean, it is all of my conversations and all of your conversations.
Speaker: These are CEO conversations.
Speaker: They're board conversations.
Speaker: They're informed conversations.
Speaker: And they're conversations that are shifting from commitment to action.
Speaker: So strategy into implementation of strategy.
Speaker: So that is a sea change from where we were even a year ago.
Speaker: Even a year ago.
Speaker: I mean, there were meeting institutions that were there, but the massive financial institutions, the massive companies were not there.
Speaker: Now, that absolutely essential and creative move, execution will be critical.
Speaker: Because both of you, I think, have said, if you're not signed up to net zero, we have to assume you're not going for net zero.
Speaker: Are there any waverers and laggards still are you seeing?
Speaker: I think we're in the process of signing up.
Speaker: So I don't think it's a case of those that are signed up are on board and those that haven't yet signed up aren't on board.
Speaker: I think...
Speaker: A number of companies and financial institutions are still going through that transition from, yes, we've got to do something, into what exactly does net zero mean?
Speaker: How do we make that become a reality?
Speaker: Because boards don't want to sign up for something, but they can't see the execution path.
Speaker: And therefore, I do think even now there is a period of learning that's going through for the industry over the next six to 12 months.
Speaker: And I think more institutions will sign up for net zero.
Speaker: What's the option?
Speaker: The option as a financial institution, you only have to sign up for helping your clients transition their business models to the new technologies and the new approaches, and you bank them on that journey or you withdraw from them.
Speaker: If your investors are putting you under pressure to make your balance sheet net zero,
Speaker: then your second option is just to withdraw from fossil fuels.
Speaker: But that doesn't change the world.
Speaker: But let me put to you what Jane Fraser of Citibank said, the new chief executive there.
Speaker: She said at the Biden summit on the 20th of April, she said convincing customers is still really, really hard, to quote her.
Speaker: Are you finding that?
Speaker: Let me say two things.
Speaker: One is that this is a net zero cop.
Speaker: By November, it's a net zero cop.
Speaker: We've gone from 30% of the world's emissions covered by net zero commitments of countries to 73% of the world's emissions today, looking to continue to grow that.
Speaker: If you're a company operating in those jurisdictions, the question is, are you running off your business or are you managing your business to net zero?
Speaker: So,
Speaker: I think the question is asked in the run-up to COP.
Speaker: The second point is, what does that mean?
Speaker: What does the transition mean?
Speaker: Who can you finance?
Speaker: And it's critical that we build the understanding and the tools and the clarity that in order to get to net zero, there are some big heavy emitting industries, think steel, think cement, think manufacturing, that need capital in order to get emissions down.
Speaker: And so net zero isn't about withdrawing from the economy, but it's actually more engaging with the economy.
Speaker: We're not going to shrink ourselves to net zero.
Speaker: We need to invest and grow ourselves to net zero.
Speaker: So both of those are essential.
Speaker: And for clients, and Noel, better place to speak to this, but with clients, it is engagement for the types of investments that we're doing.
Speaker: And I think this is a little underappreciated, the sort of retooling of business, the business process reengineering.
Speaker: Think distributed generation in electricity.
Speaker: That's where the electricity sector is.
Speaker: That is a fundamental change to how we manage electricity.
Speaker: It's very exciting.
Speaker: It's much more efficient.
Speaker: It's much greener.
Speaker: But clients need to understand that in some, some are slower.
Speaker: So, no, what's it like convincing your clients?
Speaker: You're operating in 60 countries.
Speaker: I'm finding over the past 12, 18 months that clients are actually coming for that dialogue proactively rather than us having to go to them.
Speaker: In every country?
Speaker: Yes, I am.
Speaker: In any countries that I'm operating in, I'm finding that commitment from our clients to want to get on this journey.
Speaker: They realize their business models and technologies will need to change.
Speaker: If you're in the automotive sector, your technology base will change over the next five to 10 years.
Speaker: You're in the energy sector.
Speaker: Your technology base will change.
Speaker: They accept that.
Speaker: The CEOs understand it.
Speaker: They need support in making that change become a reality.
Speaker: And that's where the finance sector actually should be on the front foot, financing that transition that needs to take place.
Speaker: And that's exactly what I'm hearing.
Speaker: Now, I think COVID has helped in that regard because I think everybody in the world has had a wake-up call on how fragile the global economy is.
Speaker: And even your bank has learned, you've said that publicly.
Speaker: Yeah, we've learned.
Speaker: And I think with that wake up call, I think the pace of change has accelerated over the past 12 months.
Speaker: Mark?
Speaker: So let me give an example.
Speaker: You're in the auto sector and you know you need to change.
Speaker: You can't sell internal combustion engines after 2030 in the UK and Europe and basically around the world.
Speaker: So what do you need to change?
Speaker: You need to re-change your models, your fleets, but all of a sudden you need charging infrastructure, you need reliable charging infrastructure.
Speaker: Well, one of the things that the financial sector can help with is, well, do you actually need to own that charging infrastructure at the same time, or you need to do a lot of R&D over here?
Speaker: Well, the answer is no, you don't.
Speaker: And the capital that's coming in can help disaggregate and leave for the
Speaker: you know, the core competency of the business.
Speaker: What do you need to focus?
Speaker: You need to focus on powertrains, drive chains, the computing technologies.
Speaker: That's part of the audits.
Speaker: That's part of the conversation that's happening.
Speaker: And that's why it's, that's one example of why it doesn't happen overnight, but why it's so fundamentally strategic for business.
Speaker: No, what about SMEs?
Speaker: Because SMEs make up the majority of most economies, not the big well-known names, the supply lines and so on.
Speaker: What are the conversations like with them?
Speaker: Because they have to be convinced as well.
Speaker: I think it's less about convincing.
Speaker: I think they're, in essence, the supply chains are the major producers.
Speaker: So as the major producers and the manufacturers are changing their business models, it's going to change the SMEs.
Speaker: Do they realize that?
Speaker: Yes, they do.
Speaker: Now, they need help because they don't have the internal research and development departments that maybe a major corporate will have.
Speaker: So they need help from the larger organizations to understand the way industries are changing.
Speaker: They need help from banks to help them understand what's coming down the path for some of the industries they operate in.
Speaker: And they're going to need finance because they're going to have to invest as well.
Speaker: So I think the SMEs...
Speaker: to be honest, are going to be following very quickly after the major producers.
Speaker: They feel encouraged, do they?
Speaker: Even if they've got liquidity problems and cash problems?
Speaker: At the moment, their primary focus, to be honest, at the moment is COVID and recovery post-COVID.
Speaker: So I wouldn't say number one on their list is sustainability.
Speaker: Number one on their list is survival post-COVID.
Speaker: And that's understandable.
Speaker: And I think it's a challenge, but the governments have done a great job.
Speaker: To be fair, the governments around the world, every single government has stepped up and provided great support programmes.
Speaker: The regulators, the Bank of England here in the UK, the Fed in the US, the Hong Kong authorities, they provided great support in this crisis to help companies survive.
Speaker: The next six to 12 months will be the big test.
Speaker: Thereafter, sustainability will be the number one priority.
Speaker: What are you seeing?
Speaker: You've had great success already on TCFD.
Speaker: What are you seeing, Mark, in terms of the kind of galvanizing you've had to do?
Speaker: It's very encouraging.
Speaker: So TCFD, which for those who don't follow it, is consistent climate disclosure, not just carbon footprints today.
Speaker: You want to explain what TCFD is?
Speaker: That's what I'm explaining.
Speaker: I'm explaining it quickly and where it's going tomorrow.
Speaker: We will get a common standard across the major jurisdictions.
Speaker: That, by the way, one of the things coming out of Cardiff's Bay G7 Summit.
Speaker: Second thing, we've gone from eight in Paris to 90 of the world's central banks.
Speaker: Together, it covers 85% of global emissions.
Speaker: Same approach to look at banks, working with banks in terms of them managing their climate risks and others.
Speaker: And then we've been able to put together, and Noel's very instrumental in this, a coalition of major financial institutions, all the way from banks to big pension funds, insurers and others, $70 trillion of balance sheet, which sounds like a lot of money.
Speaker: It's even more money than it sounds.
Speaker: I can assure you, that's committed to net zero, not in some distant future, but with tangible plans, short term decarbonization plans, five year objectives, annual reporting.
Speaker: That's the type of lining up of the core of the system.
Speaker: And that's that's on a global basis.
Speaker: Now, there's more to be done.
Speaker: There's more to crowd into that coalition and we'll work to do that.
Speaker: But you're really squeezing a lot into a short time at the moment.
Speaker: Yes.
Speaker: Yeah.
Speaker: And both of you are nodding in agreement there.
Speaker: So what we're trying to do as a subset of that is take TCFD down to the next level for banks.
Speaker: So we're working as a subgroup of banks on a practitioner's guide for banks that when you use that phrase, net zero, you have to put in place the following framework so that there is credibility in your subsequent reporting, your target setting, your disclosures in your reporting accounts,
Speaker: And that practitioner's guide, we're trying to bring together the first cut of that for September, pre-COP26.
Speaker: And what we're saying is, if you as an institution, as a financial institution, believe in net zero, then you should turn that commitment into the following architecture.
Speaker: You're chairing the task force, Noel, Glasgow Financial Alliance for Net Zero, GFANS.
Speaker: Well, I'm chairing an SMI task force, which is part of GFANS.
Speaker: But how is that going?
Speaker: What are you seeing in terms of the coming together, both of you?
Speaker: So on that task force, we have 11 of the largest, some of the largest banks in the world.
Speaker: And we're bringing definition to net zero.
Speaker: We will be publishing that practitioner's guide that says, this is how you set near-term and medium-term targets, how you use science-based, sector-based targets,
Speaker: how you disclose your current carbon footprint and how you disclose progress against that current carbon footprint over time and how you transition.
Speaker: And bringing definition to what is sustainable infrastructure investment.
Speaker: So when you're financing infrastructure for sustainability,
Speaker: making sure that there is credibility in that definition.
Speaker: And that's what we're working on at the moment.
Speaker: And then what we're doing at GFANS is we're taking that work, we're spreading it across, out from the banks, across to the pension funds, the insurers and others, so across the financial sector.
Speaker: And then in addition, saying to businesses, this is the type of information, the specific type of net zero information,
Speaker: that we need across the financial sector to make the capital allocation decision to invest and to lend.
Speaker: So that is as consistent, efficient decision useful as possible.
Speaker: And on top of that, then working with the World Bank and others and governments to say, this is what you need to do.
Speaker: Don't do all this other stuff.
Speaker: Focus on these things, because that's what will really unlock private capital for the emerging and developing world.
Speaker: So let me put this to you.
Speaker: What does delivering a net zero investment portfolio actually entail?
Speaker: How do you scale up financing adaptation, adaption in developed and developing countries?
Speaker: So which one do you want?
Speaker: Well, let me start on the first, which and Noel touched on a bit of this, which is my portfolio.
Speaker: Let's say I'm lending to energy companies, utility companies, energy infrastructure companies for all of those.
Speaker: I need to have a perspective and I can get that perspective on what is the science-based target?
Speaker: What is the pathway for each of those subsectors to get emissions down given technologies today?
Speaker: How much of that is absolute emission reductions?
Speaker: The vast, vast majority.
Speaker: Is there any role for offsets to offset what I can't get done in the initial element?
Speaker: And then when I have my portfolio, I'm
Speaker: I'm thinking about each asset, each company relative to that pathway.
Speaker: And the big judgment I want to make and the thing that's going to really move the needle is who can I put money behind, lend or invest to that I can move from up here to down there?
Speaker: In other words, and all of that is savings on emissions.
Speaker: Or who should I divest from or not invest in because they're not moving fast enough?
Speaker: Those are the types of judgments I'm making in my portfolio.
Speaker: So let me give you a tangible example on one industry, long haul flights.
Speaker: The most likely technological solution for long-haul flights carbon footprint is sustainable aviation fuel.
Speaker: The technology has been proven.
Speaker: It has around about an 80% reduction in the carbon footprint.
Speaker: But there aren't enough plants
Speaker: to refine the sustainable aviation fuel at the moment.
Speaker: So there's investment needed in that refinery infrastructure by the oil companies.
Speaker: They need to see a strong demand signal from the airline industry that sustainable aviation fuel will be part of their fuel mix going forward.
Speaker: I think if that demand signal comes in a strong enough form, then the oil companies will invest in the refinery plants and the finance sector will provide the equity and the debt to fund the build of those plants.
Speaker: And that has the ability to change the carbon footprint of low-haul flights.
Speaker: Now, a lot of people say, well, is hydrogen a solution for that?
Speaker: The reality of life is if we're working on a five to 10-year time frame, you can't get a re-engineering of plane technology.
Speaker: but you can get a re-engineering of fuel technology.
Speaker: And that's a very classic business case that we need the demand signals to create the revenue to build the plants.
Speaker: And then that can be financed.
Speaker: And that's the sort of thing we're working on, industry by industry, sector by sector.
Speaker: And that will be a huge investment curve that needs to be funded.
Speaker: As you've raised aviation, I have to ask you, do you worry that investment in aviation is going to be a stranded asset at some point?
Speaker: I think it will become more difficult if there aren't technological solutions found.
Speaker: Yes, I do.
Speaker: I think any industry that in 10 years' time has the same carbon footprint as today is going to have challenges and therefore has the risk of being a stranded asset.
Speaker: All right, let me move on.
Speaker: How can we expect governments to act in the public interest, in the interests of the planet, when doing so goes against their political interests?
Speaker: I've heard politicians privately say very explicitly, we've got to think of the next electoral cycle and worry about that rather than the future of the planet.
Speaker: Well, I think the first thing, I mean, this has been part of the tragedy of the horizon is the political cycle is shorter than the cycle of the physical, the largest physical manifestations of climate change.
Speaker: Now, I would submit to Kevin and to you, Nick, that what we have started to see is that is changing.
Speaker: Why is that changing?
Speaker: Because of the weight of public opinion.
Speaker: has shifted.
Speaker: I'll go back to my native Canada.
Speaker: In the last two elections, three quarters of voters voted for parties who supported a carbon tax.
Speaker: Guess what?
Speaker: Canada has not just a carbon tax today, but a legislated carbon tax out to 2030, rising to $170.
Speaker: So these things can shift.
Speaker: People's opinions do matter.
Speaker: And our job, to some extent, is certainly for the financial sector,
Speaker: is to create the conditions so you get that virtuous cycle.
Speaker: So we've got governments shifting.
Speaker: And if you have the types of policies that Noel just mentioned on sustainable aviation fuel or on autos in 2030 or on a carbon tax, you have financial sector that's oriented to net zero as it is today.
Speaker: then it becomes profitable to invest in those solutions.
Speaker: And you pull forward the adjustment and you get into that virtuous cycle.
Speaker: Now, that's the tipping.
Speaker: I mean, I'll give you a good, we've got lots of bad tipping points on climate.
Speaker: That's the good tipping point that's happening right now.
Speaker: And I sense we're progressing towards that tipping point.
Speaker: We're not yet there.
Speaker: But I do sense the momentum in public and private sector and the financial services sector is moving towards that tipping point.
Speaker: How can we educate consumers better on the impacts of their purchases without implementing polluter pays laws or adding pressure to extraction based businesses through government policy.
Speaker: But I was very struck by Sir David King, who you both know, former chief scientific advisor to the UK government, the climate change advisory group, I think it was, where he said very clearly, governments are not being clear enough about what the public has got to do in order to support what you're doing.
Speaker: Do you agree with that?
Speaker: I'm seeing some innovation in that regard.
Speaker: The private sector are actually providing more, starting to provide more information to their consumers.
Speaker: So the credit card industry is doing that.
Speaker: So that when you spend on your credit card or you go shopping, that you're seeing a report back to you on what your carbon footprint is from that purchase.
Speaker: So I think private innovation will close some of that gap.
Speaker: It doesn't always have to be government policy.
Speaker: But should governments be more upfront, more clear, more directive about what people have got to do?
Speaker: In the UK, it's about 26 million gas boilers, for example, and people saying, so what do I do?
Speaker: Yeah, well, exactly.
Speaker: I mean, and, you know, the objective is going to be 600,000 heat pumps on an annual basis.
Speaker: And the government's building that out, the financing coming behind that.
Speaker: So that is an example of what's going to change.
Speaker: I mean, the government's also... You feel confident about that, Mark, do you?
Speaker: Well, I feel confident about the need to do that, the fact that it's part of the government's plan.
Speaker: Of course, it's got to be executed.
Speaker: But the components are coming in.
Speaker: Look, the challenge is a welcome challenge because the focus is mine.
Speaker: Let me make one other point, though, which is...
Speaker: Noel rightly mentions the credit card companies.
Speaker: One of the other things that's changing is actually the ability to track carbon all the way through the supply chain.
Speaker: It's getting ready to be at scale.
Speaker: I mean, this is one of the applications of distributed ledger technology is to track carbon all the way through.
Speaker: And so you know exactly what you're using and you can hit.
Speaker: This helps with the SMEs and it helps with consumers in terms of focusing in on where we can make a difference.
Speaker: But do you believe that the government should be far more assertive and on the front foot in the 60 countries where you're operating, including the United Kingdom?
Speaker: Because after all, the UK government on a Saturday withdrew a particular support for a government grant for trying to reduce carbon emissions.
Speaker: Suddenly it was withdrawn with four days notice.
Speaker: I think there's a combination of real high level macro policy statements and then there's some more micro or sector based policy statements that governments can and should consider.
Speaker: And for example, the sustainability aviation fuel, in my mind, is not a big macro policy.
Speaker: It's a sector-based policy where they could say that we want airlines to purchase at least 10% sustainable aviation fuel.
Speaker: by 2030 as a step towards a transition for that industry.
Speaker: They could make similar statements for other industry sub-segments that can create the market conditions that will then encourage investment and investors to fund that transition.
Speaker: So I think it's at both levels.
Speaker: And I do sense governments are more and more having that appetite to be quite micro in their intervention in policy.
Speaker: Do you have to push them?
Speaker: No, the UK has already gone there in the auto sector with the 30% commitment, sorry, the 2030 commitment on the combustion engine.
Speaker: I think there are other examples like that that will come down the path.
Speaker: I think what they're looking for is suggestions from private sector on what signals the government should be sending at quite a specific level.
Speaker: And I think we all have a responsibility to help them form those signals.
Speaker: Would the financial institutions and banks take risks to finance green projects, even if the rate on the line are a bit risky?
Speaker: Well, I think, let me start on that.
Speaker: And the first is, which of those risks can we socialize?
Speaker: Can we bring into the multilateral institutions?
Speaker: Which can we bring into, can we pool and bring into the insurance sector?
Speaker: Let me give two tangible examples around that.
Speaker: On insurance, one of the things we're building out for COP, or rather the insurance industry is building out for COP,
Speaker: is something called a global risk index.
Speaker: Now, it's much more than that, but it is a mapping of climate risk around the world, which allows insurance industry to do what they do best, which is to pool risk much more effectively, which takes some of those risks off the table, which will help the private sector.
Speaker: The second thing is how do we work in a so-called blended finance world?
Speaker: So we use some of the resources of the World Bank,
Speaker: other multilateral institutions, again, to take off some of the risks so that the return and the scale of the investment, the return to the private sector and scale of private sector investment can match the challenge.
Speaker: The solution is blended finance, and that is there are certain types of risks the likes of NDBs are a better place to take, and there are other types of risks that the private sector is a better place to take.
Speaker: And the trick is to leverage both risk pools and to have a blended finance solution.
Speaker: If you put all of the responsibility on the private sector, it's going to be difficult to get some projects funded, and it should be a combination of public and private sector funding.
Speaker: If I may, Nick, so translating G7 discussions into broader G20 and global action, this is one of the key areas.
Speaker: How can we collaboratively establish public-private partnerships to achieve this mandated goal?
Speaker: I mean, that works already today.
Speaker: Public-private partnerships has been in existence for a long, long time, and the UK has been a market leader in that.
Speaker: I think what we've now got to do is apply that to infrastructure investment in sustainable interclimate.
Speaker: So it's learning about... It's about...
Speaker: the new technologies that few will have experienced before, and that brings a new level of risk.
Speaker: So, you know, financing an existing railway line with existing technology is easy to do on a public-private partnership.
Speaker: Financing the investment into a brand new technology with an unproven business case and an unproven technology
Speaker: is where you get a new set of risks that are harder to understand for the private sector.
Speaker: And that's where I do think there's a combination of public and private sector financing will be the solution.
Speaker: So very often, it's not about can you get the public and private sector to work?
Speaker: You can, but it's getting it to work on new technologies and new business cases.
Speaker: That's the challenge.
Speaker: And new mindsets as well.
Speaker: And new mindsets.
Speaker: Let me give you a question which I think brings together a lot of what you've been talking about, about how you incentivize.
Speaker: Do you think that regulations and targets will be the key driver for the necessary change in the necessary period of time?
Speaker: Or is it possible that a greater moral human motivation from leaders to take their organizations beyond the targets is on its way, knowing the rewards will come?
Speaker: even if there's a political prize.
Speaker: I'm not dodging it by saying both.
Speaker: No, but in the following respect, which is first, what we've been talking about is a series of examples of regulations, forward dated regulations that then pull forward action today, change the economics, get investment at scale.
Speaker: But one of the questions that companies have to ask themselves and financial institutions that lend or invest in those companies have to ask themselves is, well, what's necessary?
Speaker: what is the regulation or the consumer behavior that's necessary ultimately for us to get to net zero?
Speaker: And if I think there's the commitment to be there, well, then how do I adjust today before the regulation comes into place?
Speaker: And that's why we put a lot of emphasis on net zero plans.
Speaker: That's why we put a lot of emphasis on forward looking, on scenario analysis and the pathways.
Speaker: And the question for every board and every senior management team is,
Speaker: What does your strategy look like?
Speaker: What does your business look like if we collectively, for moral and intergenerational fairness and other reasons, if we do what we need to do in order to get to one and a half degrees?
Speaker: That's a basic question for every company.
Speaker: I'm a strong believer in hope and passion.
Speaker: But hope and passion without an action plan normally doesn't materialize into an outcome.
Speaker: It's not much of a policy, is it hope and passion?
Speaker: He could write a chapter in his book about hope and passion.
Speaker: So it's written about humility.
Speaker: So I'm a strong believer in turning hope, passion into an action plan.
Speaker: And you need an action plan at a granular level.
Speaker: And that's why I do think you need both the belief and the passion in doing something for the future.
Speaker: but then you've got to put in place tangible actions, and that's both government and private sector.
Speaker: I hate to put this in right at the end, but it broadens the question even further.
Speaker: Taking it beyond just carbon to biodiversity and sustainability in nature, which is more than we can talk about in the next two minutes, how would you balance carbon reduction and biodiversity when you make an investment decision?
Speaker: Do you have the data to be able to make that, Noam?
Speaker: We don't have the full data that we need at the moment on biodiversity.
Speaker: And in fact, we don't have the full database of information we need for carbon at the moment.
Speaker: There is a huge amount of investment that's got to go in, in all companies everywhere in the world to provide that data source.
Speaker: Do they realize that?
Speaker: I think they realize it because investors are asking more and more questions, and quite rightly so, and they can't answer all those questions because they don't have the data flow of their own supply chain, their own customers, their own carbon footprint.
Speaker: And that, therefore, is part of the journey that we have to go on over the next five years.
Speaker: Mark, it brings us back finally to that one word, existential threat.
Speaker: It's more than just the climate emergency.
Speaker: Are you motivated, both of you, by the idea that this is about essentially saving human survival on the planet?
Speaker: Is that really the bottom line?
Speaker: It is an existential threat.
Speaker: So yes, by definition, that's right.
Speaker: Including nature biodiversity.
Speaker: Including nature biodiversity.
Speaker: Addressing climate is a necessary but not sufficient condition for addressing biodiversity.
Speaker: So it requires more above and beyond in order to address biodiversity.
Speaker: And, you know, as Noel just said, if we don't have the full data on carbon, we are far from it on biodiversity, except to know that the trend is deeply, deeply disturbing.
Speaker: 30 seconds each.
Speaker: Any particular message you'd like to leave for all the people out there?
Speaker: I do believe there's been a fundamental change in the last 12, 18 months.
Speaker: And now we've got to turn that passion, that hope, into tangible action.
Speaker: Mark?
Speaker: I think that's exactly right.
Speaker: And we've made tremendous progress, but we've left it very late.
Speaker: So we have a huge amount yet to do.
Speaker: Is it too late?
Speaker: It's not too late yet.
Speaker: When is yet?
Speaker: Well, let's not find out.
Speaker: LAUGHTER
Speaker: You encourage us to find out, but you're both smiling.
Speaker: Let's not find out.
Speaker: No, let's not find out.
Speaker: Let's keep pushing.
Speaker: Look, the momentum is there and you've got the attention of people.
Speaker: So let's execute.
Speaker: This has been a tremendous half hour.
Speaker: Thank you both.
Speaker: This has been a special podcast in the Business Plan for the Planet series.
Speaker: More episodes will follow shortly.
Speaker: So please do keep an eye out for those.
Speaker: For more information on the program, 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.
