Become a Creator today!Start creating today - Share your story with the world!
Start for free
00:00:00
00:00:01
How do we accelerate the pace for net zero success? - Climate Leaders Live
17 Plays4 years ago
Listen to Mark Carney, the UN Special Envoy on Climate Action and Specialist Finance Advisor for COP26 and Noel Quinn, CEO, HSBC, discuss how we can accelerate the pace towards net zero and how to translate ambition into action. This clip was recorded at the Climate Innovation Forum. organised by Climate Action in June 2021.
This episode is part of HSBC’s Business Plan for the Planet podcast mini-series, which focuses on ESG insights. 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.
To find out more about HSBC’s Business Plan for the Planet programme, click here
Hosted on Acast. See acast.com/privacy for more information.
Recommended
Transcript
Introduction to HSBC Global Viewpoint and ESG Focus
00:00:01
Speaker
This is HSBC Global Viewpoint, your window into the thinking, trends and issues shaping global banking and markets.
00:00:10
Speaker
Join us as we hear from industry leaders and HSBC experts on the latest insights and opportunities for your business.
00:00:18
Speaker
A heads up to our listeners that this episode has been recorded remotely, therefore the sound quality may vary.
00:00:25
Speaker
Thank you for listening.
00:00:32
Speaker
Welcome to the Business Plan for the Planet podcast, a series centered around ESG insights.
00:00:37
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.
00:00:47
Speaker
Join us as we shine a spotlight on their commitment to a sustainable future.
00:00:54
Speaker
Thank you.
How Can the UK Lead in the Net Zero Race?
00:01:15
Speaker
So today we explore how the UK believes it can become the leading economy in the race to net zero.
00:01:20
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.
00:01:30
Speaker
The G7 met two weeks ago.
00:01:31
Speaker
They came out with a communique, paragraph 37.
00:01:35
Speaker
an unprecedented and interdependent crises, an existential threat to people, prosperity, security and nature.
00:01:43
Speaker
They define 2021 as a turning point for our planet.
00:01:48
Speaker
And I'm quoting from the communique.
00:01:49
Speaker
I'd like to ask you both.
00:01:51
Speaker
Mark, I'll come to you first.
00:01:52
Speaker
You weren't in Cornwall, but do you think that this is achievable?
00:01:56
Speaker
This can be a turning point for our planet?
What Were the Key Outcomes of the G7 Meeting on Climate?
00:01:59
Speaker
Well, we have to make it the turning point for our planet.
00:02:02
Speaker
The G7 has first put down the gauntlet.
00:02:04
Speaker
Secondly, taken some of the steps necessary, including in Cornwall, some of the necessary steps in the financial sector, for example.
00:02:13
Speaker
But there's unfinished business.
00:02:15
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.
00:02:24
Speaker
And it's why Climate Action Week is critical.
00:02:26
Speaker
No, you were there in Cornwall.
00:02:28
Speaker
You were there having dinner with Prince Charles.
00:02:31
Speaker
Well, we didn't quite have dinner, but we had a sandwich with him.
00:02:33
Speaker
But 2021 at Turning Point, is there really that mood?
00:02:34
Speaker
Because in the end, there was disappointment.
00:02:35
Speaker
They didn't commit to 100 billion.
00:02:44
Speaker
I think there was a very positive mood.
00:02:46
Speaker
There was strong engagement.
00:02:48
Speaker
And I was encouraged by the dialogue we had in Cornwall and the dialogue we had before the meeting in Cornwall.
The New Industrial Revolution and Climate Action
00:02:55
Speaker
I'm going to stand back a little bit.
00:02:57
Speaker
Do I think industry, commerce, the financial sector,
00:03:01
Speaker
has woken up to the need, I do believe.
00:03:03
Speaker
But now it's about turning that desire into tangible action.
00:03:06
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.
00:03:17
Speaker
And I liken the next five years to 10 years to being the next industrial and commercial revolution that's taking place.
00:03:24
Speaker
I think over the last 155 years of HSBC's history, we've seen economies change dramatically.
00:03:30
Speaker
I think we're about to see the exact same thing happen in the next five to 10 years.
00:03:34
Speaker
Industrial revolution.
00:03:36
Speaker
and technologies will change the way industries operate.
00:03:40
Speaker
Ten years, of course, is too long, actually, because of the carbon and everything else.
00:03:44
Speaker
Five to ten years.
00:03:45
Speaker
Five to ten years, but there has to be tangible progress.
00:03:49
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.
00:03:56
Speaker
And it's that scale of change that is necessary in order to accomplish the climate goals.
00:04:02
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.
00:04:08
Speaker
I've seen both of you talking about this at various points.
00:04:11
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.
00:04:18
Speaker
There's been remarkable progress.
00:04:20
Speaker
I mean, let me, again, reinforce something Noel said.
00:04:22
Speaker
This is fundamental.
00:04:23
Speaker
This is one of the core, and I would say for most companies, most financial institutions, this is now the top strategic issue.
00:04:31
Speaker
That was not the case.
00:04:31
Speaker
Without doubt.
00:04:32
Speaker
Without doubt.
00:04:32
Speaker
Without doubt.
00:04:33
Speaker
You see it in the conversation.
00:04:34
Speaker
I mean, it is all of my conversations and all
Challenges in Achieving Net Zero Commitments
00:04:38
Speaker
of your conversations.
00:04:38
Speaker
These are CEO conversations.
00:04:40
Speaker
They're board conversations.
00:04:41
Speaker
They're informed conversations.
00:04:43
Speaker
And they're conversations that are shifting from commitment to action.
00:04:47
Speaker
So strategy into implementation of strategy.
00:04:49
Speaker
So that is a sea change from where we were even a year ago.
00:04:53
Speaker
Even a year ago.
00:04:53
Speaker
I mean, there were meeting institutions that were there, but the massive financial institutions, the massive companies were not there.
00:04:59
Speaker
Now, that absolutely essential and creative move, execution will be critical.
00:05:05
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.
00:05:11
Speaker
Are there any waverers and laggards still are you seeing?
00:05:13
Speaker
I think we're in the process of signing up.
00:05:15
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.
00:05:20
Speaker
I think...
00:05:21
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?
00:05:31
Speaker
How do we make that become a reality?
00:05:33
Speaker
Because boards don't want to sign up for something, but they can't see the execution path.
00:05:39
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.
00:05:46
Speaker
And I think more institutions will sign up for net zero.
00:05:49
Speaker
What's the option?
00:05:50
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.
00:06:03
Speaker
If your investors are putting you under pressure to make your balance sheet net zero,
00:06:08
Speaker
then your second option is just to withdraw from fossil fuels.
00:06:11
Speaker
But that doesn't change the world.
00:06:13
Speaker
But let me put to you what Jane Fraser of Citibank said, the new chief executive there.
00:06:17
Speaker
She said at the Biden summit on the 20th of April, she said convincing customers is still really, really hard, to quote her.
00:06:25
Speaker
Are you finding that?
00:06:26
Speaker
Let me say two things.
Should We Finance Heavy-Emitting Industries to Achieve Net Zero?
00:06:27
Speaker
One is that this is a net zero cop.
00:06:30
Speaker
By November, it's a net zero cop.
00:06:31
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.
00:06:39
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?
00:06:46
Speaker
So,
00:06:47
Speaker
I think the question is asked in the run-up to COP.
00:06:50
Speaker
The second point is, what does that mean?
00:06:53
Speaker
What does the transition mean?
00:06:55
Speaker
Who can you finance?
00:06:56
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.
00:07:12
Speaker
And so net zero isn't about withdrawing from the economy, but it's actually more engaging with the economy.
00:07:18
Speaker
We're not going to shrink ourselves to net zero.
00:07:19
Speaker
We need to invest and grow ourselves to net zero.
00:07:22
Speaker
So both of those are essential.
00:07:24
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.
00:07:33
Speaker
And I think this is a little underappreciated, the sort of retooling of business, the business process reengineering.
00:07:39
Speaker
Think distributed generation in electricity.
00:07:42
Speaker
That's where the electricity sector is.
00:07:44
Speaker
That is a fundamental change to how we manage electricity.
00:07:47
Speaker
It's very exciting.
00:07:48
Speaker
It's much more efficient.
00:07:49
Speaker
It's much greener.
00:07:50
Speaker
But clients need to understand that in some, some are slower.
00:07:53
Speaker
So, no, what's it like convincing your clients?
00:07:56
Speaker
You're operating in 60 countries.
00:07:57
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.
00:08:04
Speaker
In every country?
00:08:05
Speaker
Yes, I am.
00:08:06
Speaker
In any countries that I'm operating in, I'm finding that commitment from our clients to want to get on this journey.
00:08:12
Speaker
They realize their business models and technologies will need to change.
00:08:16
Speaker
If you're in the automotive sector, your technology base will change over the next five to 10 years.
00:08:21
Speaker
You're in the energy sector.
00:08:22
Speaker
Your technology base will change.
00:08:24
Speaker
They accept that.
00:08:25
Speaker
The CEOs understand it.
00:08:27
Speaker
They need support in making that change become a reality.
00:08:31
Speaker
And that's where the finance sector actually should be on the front foot, financing that transition that needs to take place.
00:08:37
Speaker
And that's exactly what I'm hearing.
00:08:39
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.
00:08:46
Speaker
And even your bank has learned, you've said that publicly.
00:08:49
Speaker
Yeah, we've learned.
00:08:50
Speaker
And I think with that wake up call,
Auto Sector's Path to Net Zero
00:08:52
Speaker
I think the pace of change has accelerated over the past 12 months.
00:08:55
Speaker
Mark?
00:08:55
Speaker
So let me give an example.
00:08:57
Speaker
You're in the auto sector and you know you need to change.
00:09:00
Speaker
You can't sell internal combustion engines after 2030 in the UK and Europe and basically around the world.
00:09:06
Speaker
So what do you need to change?
00:09:07
Speaker
You need to re-change your models, your fleets, but all of a sudden you need charging infrastructure, you need reliable charging infrastructure.
00:09:13
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?
00:09:21
Speaker
Well, the answer is no, you don't.
00:09:23
Speaker
And the capital that's coming in can help disaggregate and leave for the
00:09:30
Speaker
you know, the core competency of the business.
00:09:32
Speaker
What do you need to focus?
00:09:33
Speaker
You need to focus on powertrains, drive chains, the computing technologies.
00:09:36
Speaker
That's part of the audits.
00:09:37
Speaker
That's part of the conversation that's happening.
00:09:39
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.
00:09:48
Speaker
No, what about SMEs?
00:09:49
Speaker
Because SMEs make up the majority of most economies, not the big well-known names, the supply lines and so on.
00:09:56
Speaker
What are the conversations like with them?
00:09:58
Speaker
Because they have to be convinced as well.
00:10:01
Speaker
I think it's less about convincing.
00:10:03
Speaker
I think they're, in essence, the supply chains are the major producers.
00:10:07
Speaker
So as the major producers and the manufacturers are changing their business models, it's going to change the SMEs.
00:10:12
Speaker
Do they realize that?
00:10:13
Speaker
Yes, they do.
00:10:14
Speaker
Now, they need help because they don't have the internal research and development departments that maybe a major corporate will have.
00:10:21
Speaker
So they need help from the larger organizations to understand the way industries are changing.
00:10:27
Speaker
They need help from banks to help them understand what's coming down the path for some of the industries they operate in.
00:10:34
Speaker
And they're going to need finance because they're going to have to invest as well.
00:10:37
Speaker
So I think the SMEs...
00:10:40
Speaker
to be honest, are going to be following very quickly after the major producers.
00:10:43
Speaker
They feel encouraged, do they?
00:10:45
Speaker
Even if they've got liquidity problems and cash problems?
00:10:48
Speaker
At the moment, their primary focus, to be honest, at the moment is COVID and recovery post-COVID.
00:10:52
Speaker
So I wouldn't say number one on their list is sustainability.
00:10:55
Speaker
Number one on their list is survival post-COVID.
00:10:58
Speaker
And that's understandable.
00:10:59
Speaker
And I think it's a challenge, but the governments have done a great job.
00:11:02
Speaker
To be fair, the governments around the world, every single government has stepped up and provided great support programmes.
00:11:08
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.
00:11:19
Speaker
The next six to 12 months will be the big test.
00:11:23
Speaker
Thereafter, sustainability will be the number one priority.
00:11:26
Speaker
What are you seeing?
00:11:27
Speaker
You've had great success already on TCFD.
00:11:30
Speaker
What are you seeing, Mark, in terms of the kind of galvanizing you've had to do?
00:11:35
Speaker
It's very encouraging.
00:11:36
Speaker
So TCFD, which for those who don't follow it, is consistent climate disclosure, not just carbon footprints today.
00:11:42
Speaker
You want to explain what TCFD is?
00:11:43
Speaker
That's what I'm explaining.
00:11:44
Speaker
I'm explaining it quickly and where it's going tomorrow.
00:11:46
Speaker
We will get a common standard across the major jurisdictions.
00:11:49
Speaker
That, by the way, one of the things coming out of Cardiff's Bay G7 Summit.
00:11:53
Speaker
Second thing, we've gone from eight in Paris to 90 of the world's central banks.
00:12:00
Speaker
Together, it covers 85% of global emissions.
00:12:03
Speaker
Same approach to look at banks, working with banks in terms of them managing their climate risks and others.
00:12:09
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.
00:12:22
Speaker
It's even more money than it sounds.
00:12:24
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.
00:12:35
Speaker
That's the type of lining up of the core of the system.
00:12:37
Speaker
And that's that's on a global basis.
00:12:39
Speaker
Now, there's more to be done.
00:12:41
Speaker
There's more to crowd into that coalition and we'll work to do that.
00:12:44
Speaker
But you're really squeezing a lot into a short time at the moment.
00:12:47
Speaker
Yes.
00:12:47
Speaker
Yeah.
00:12:48
Speaker
And both of you are nodding in agreement there.
00:12:49
Speaker
So what we're trying to do as a subset of that is take TCFD down to the next level for banks.
00:12:54
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,
00:13:14
Speaker
And that practitioner's guide, we're trying to bring together the first cut of that for September, pre-COP26.
00:13:19
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.
00:13:29
Speaker
You're chairing the task force, Noel, Glasgow Financial Alliance for Net Zero, GFANS.
00:13:35
Speaker
Well, I'm chairing an SMI task force, which is part of GFANS.
00:13:40
Speaker
But how is that going?
00:13:42
Speaker
What are you seeing in terms of the coming together, both of you?
00:13:44
Speaker
So on that task force, we have 11 of the largest, some of the largest banks in the world.
00:13:50
Speaker
And we're bringing definition to net zero.
00:13:53
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,
00:14:03
Speaker
how you disclose your current carbon footprint and how you disclose progress against that current carbon footprint over time and how you transition.
00:14:12
Speaker
And bringing definition to what is sustainable infrastructure investment.
00:14:16
Speaker
So when you're financing infrastructure for sustainability,
00:14:20
Speaker
making sure that there is credibility in that definition.
00:14:23
Speaker
And that's what we're working on at the moment.
00:14:25
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.
00:14:34
Speaker
And then in addition, saying to businesses, this is the type of information, the specific type of net zero information,
00:14:41
Speaker
that we need across the financial sector to make the capital allocation decision to invest and to lend.
00:14:47
Speaker
So that is as consistent, efficient decision useful as possible.
00:14:51
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.
00:14:59
Speaker
Don't do all this other stuff.
00:15:00
Speaker
Focus on these things, because that's what will really unlock private capital for the emerging and developing world.
00:15:05
Speaker
So let me put this to you.
00:15:07
Speaker
What does delivering a net zero investment portfolio actually entail?
00:15:12
Speaker
How do you scale up financing adaptation, adaption in developed and developing countries?
00:15:17
Speaker
So which one do you want?
00:15:19
Speaker
Well, let me start on the first, which and Noel touched on a bit of this, which is my portfolio.
00:15:23
Speaker
Let's say I'm lending to energy companies, utility companies, energy infrastructure companies for all of those.
00:15:31
Speaker
I need to have a perspective and I can get that perspective on what is the science-based target?
00:15:35
Speaker
What is the pathway for each of those subsectors to get emissions down given technologies today?
00:15:40
Speaker
How much of that is absolute emission reductions?
00:15:43
Speaker
The vast, vast majority.
00:15:44
Speaker
Is there any role for offsets to offset what I can't get done in the initial element?
00:15:49
Speaker
And then when I have my portfolio, I'm
00:15:52
Speaker
I'm thinking about each asset, each company relative to that pathway.
00:15:56
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?
00:16:04
Speaker
In other words, and all of that is savings on emissions.
00:16:08
Speaker
Or who should I divest from or not invest in because they're not moving fast enough?
00:16:13
Speaker
Those are the types of judgments I'm making in my portfolio.
00:16:15
Speaker
So let me give you a tangible example on one industry, long haul flights.
00:16:20
Speaker
The most likely technological solution for long-haul flights carbon footprint is sustainable aviation fuel.
00:16:26
Speaker
The technology has been proven.
00:16:28
Speaker
It has around about an 80% reduction in the carbon footprint.
00:16:32
Speaker
But there aren't enough plants
00:16:35
Speaker
to refine the sustainable aviation fuel at the moment.
00:16:38
Speaker
So there's investment needed in that refinery infrastructure by the oil companies.
00:16:44
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.
00:16:52
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.
00:17:05
Speaker
And that has the ability to change the carbon footprint of low-haul flights.
00:17:10
Speaker
Now, a lot of people say, well, is hydrogen a solution for that?
00:17:13
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.
00:17:21
Speaker
but you can get a re-engineering of fuel technology.
00:17:24
Speaker
And that's a very classic business case that we need the demand signals to create the revenue to build the plants.
00:17:33
Speaker
And then that can be financed.
00:17:34
Speaker
And that's the sort of thing we're working on, industry by industry, sector by sector.
00:17:40
Speaker
And that will be a huge investment curve that needs to be funded.
00:17:43
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?
Role of Government Policy in Climate Action
00:17:50
Speaker
I think it will become more difficult if there aren't technological solutions found.
00:17:56
Speaker
Yes, I do.
00:17:57
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.
00:18:07
Speaker
All right, let me move on.
00:18:08
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?
00:18:15
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.
00:18:24
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.
00:18:36
Speaker
Now, I would submit to Kevin and to you, Nick, that what we have started to see is that is changing.
00:18:41
Speaker
Why is that changing?
00:18:42
Speaker
Because of the weight of public opinion.
00:18:44
Speaker
has shifted.
00:18:44
Speaker
I'll go back to my native Canada.
00:18:46
Speaker
In the last two elections, three quarters of voters voted for parties who supported a carbon tax.
00:18:51
Speaker
Guess what?
00:18:52
Speaker
Canada has not just a carbon tax today, but a legislated carbon tax out to 2030, rising to $170.
00:18:57
Speaker
So these things can shift.
00:19:00
Speaker
People's opinions do matter.
00:19:02
Speaker
And our job, to some extent, is certainly for the financial sector,
00:19:07
Speaker
is to create the conditions so you get that virtuous cycle.
00:19:09
Speaker
So we've got governments shifting.
00:19:12
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.
00:19:24
Speaker
then it becomes profitable to invest in those solutions.
00:19:27
Speaker
And you pull forward the adjustment and you get into that virtuous cycle.
00:19:30
Speaker
Now, that's the tipping.
00:19:32
Speaker
I mean, I'll give you a good, we've got lots of bad tipping points on climate.
00:19:35
Speaker
That's the good tipping point that's happening right now.
00:19:37
Speaker
And I sense we're progressing towards that tipping point.
00:19:39
Speaker
We're not yet there.
00:19:41
Speaker
But I do sense the momentum in public and private sector and the financial services sector is moving towards that tipping point.
00:19:47
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.
00:19:57
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.
00:20:14
Speaker
Do you agree with that?
00:20:16
Speaker
I'm seeing some innovation in that regard.
00:20:18
Speaker
The private sector are actually providing more, starting to provide more information to their consumers.
00:20:22
Speaker
So the credit card industry is doing that.
00:20:24
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.
00:20:33
Speaker
So I think private innovation will close some of that gap.
00:20:36
Speaker
It doesn't always have to be government policy.
00:20:38
Speaker
But should governments be more upfront, more clear, more directive about what people have got to do?
00:20:43
Speaker
In the UK, it's about 26 million gas boilers, for example, and people saying, so what do I do?
00:20:48
Speaker
Yeah, well, exactly.
00:20:49
Speaker
I mean, and, you know, the objective is going to be 600,000 heat pumps on an annual basis.
00:20:54
Speaker
And the government's building that out, the financing coming behind that.
00:20:57
Speaker
So that is an example of what's going to change.
00:20:59
Speaker
I mean, the government's also... You feel confident about that, Mark, do you?
00:21:03
Speaker
Well, I feel confident about the need to do that, the fact that it's part of the government's plan.
00:21:07
Speaker
Of course, it's got to be executed.
00:21:10
Speaker
But the components are coming in.
00:21:12
Speaker
Look, the challenge is a welcome challenge because the focus is mine.
00:21:15
Speaker
Let me make one other point, though, which is...
00:21:18
Speaker
Noel rightly mentions the credit card companies.
00:21:20
Speaker
One of the other things that's changing is actually the ability to track carbon all the way through the supply chain.
00:21:26
Speaker
It's getting ready to be at scale.
00:21:27
Speaker
I mean, this is one of the applications of distributed ledger technology is to track carbon all the way through.
00:21:32
Speaker
And so you know exactly what you're using and you can hit.
00:21:35
Speaker
This helps with the SMEs and it helps with consumers in terms of focusing in on where we can make a difference.
00:21:41
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?
00:21:49
Speaker
Because after all, the UK government on a Saturday withdrew a particular support for a government grant for trying to reduce carbon emissions.
00:21:58
Speaker
Suddenly it was withdrawn with four days notice.
00:22:00
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.
00:22:10
Speaker
And for example, the sustainability aviation fuel, in my mind, is not a big macro policy.
00:22:15
Speaker
It's a sector-based policy where they could say that we want airlines to purchase at least 10% sustainable aviation fuel.
00:22:25
Speaker
by 2030 as a step towards a transition for that industry.
00:22:30
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.
00:22:41
Speaker
So I think it's at both levels.
00:22:43
Speaker
And I do sense governments are more and more having that appetite to be quite micro in their intervention in policy.
00:22:51
Speaker
Do you have to push them?
00:22:52
Speaker
No, the UK has already gone there in the auto sector with the 30% commitment, sorry, the 2030 commitment on the combustion engine.
00:23:00
Speaker
I think there are other examples like that that will come down the path.
00:23:04
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.
00:23:14
Speaker
And I think we all have a responsibility to help them form those signals.
00:23:18
Speaker
Would the financial institutions and banks take risks to finance green projects, even if the rate on the line are a bit risky?
00:23:27
Speaker
Well, I think, let me start on that.
00:23:29
Speaker
And the first is, which of those risks can we socialize?
00:23:33
Speaker
Can we bring into the multilateral institutions?
00:23:37
Speaker
Which can we bring into, can we pool and bring into the insurance sector?
00:23:41
Speaker
Let me give two tangible examples around that.
00:23:44
Speaker
On insurance, one of the things we're building out for COP, or rather the insurance industry is building out for COP,
00:23:48
Speaker
is something called a global risk index.
00:23:51
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.
00:24:05
Speaker
The second thing is how do we work in a so-called blended finance world?
00:24:10
Speaker
So we use some of the resources of the World Bank,
00:24:14
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.
00:24:27
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.
00:24:37
Speaker
And the trick is to leverage both risk pools and to have a blended finance solution.
00:24:42
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.
00:24:50
Speaker
If I may, Nick, so translating G7 discussions into broader G20 and global action, this is one of the key areas.
00:24:57
Speaker
How can we collaboratively establish public-private partnerships to achieve this mandated goal?
00:25:03
Speaker
I mean, that works already today.
00:25:04
Speaker
Public-private partnerships has been in existence for a long, long time, and the UK has been a market leader in that.
00:25:10
Speaker
I think what we've now got to do is apply that to infrastructure investment in sustainable interclimate.
00:25:17
Speaker
So it's learning about... It's about...
00:25:21
Speaker
the new technologies that few will have experienced before, and that brings a new level of risk.
00:25:27
Speaker
So, you know, financing an existing railway line with existing technology is easy to do on a public-private partnership.
00:25:36
Speaker
Financing the investment into a brand new technology with an unproven business case and an unproven technology
00:25:43
Speaker
is where you get a new set of risks that are harder to understand for the private sector.
00:25:49
Speaker
And that's where I do think there's a combination of public and private sector financing will be the solution.
00:25:55
Speaker
So very often, it's not about can you get the public and private sector to work?
00:25:58
Speaker
You can, but it's getting it to work on new technologies and new business cases.
00:26:03
Speaker
That's the challenge.
00:26:04
Speaker
And new mindsets as well.
00:26:05
Speaker
And new mindsets.
00:26:06
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.
00:26:12
Speaker
Do you think that regulations and targets will be the key driver for the necessary change in the necessary period of time?
00:26:19
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?
00:26:29
Speaker
even if there's a political prize.
00:26:30
Speaker
I'm not dodging it by saying both.
00:26:33
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.
00:26:48
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?
00:26:57
Speaker
what is the regulation or the consumer behavior that's necessary ultimately for us to get to net zero?
00:27:03
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?
00:27:10
Speaker
And that's why we put a lot of emphasis on net zero plans.
00:27:13
Speaker
That's why we put a lot of emphasis on forward looking, on scenario analysis and the pathways.
00:27:19
Speaker
And the question for every board and every senior management team is,
00:27:23
Speaker
What does your strategy look like?
00:27:25
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?
00:27:35
Speaker
That's a basic question for every company.
00:27:39
Speaker
I'm a strong believer in hope and passion.
00:27:41
Speaker
But hope and passion without an action plan normally doesn't materialize into an outcome.
00:27:46
Speaker
It's not much of a policy, is it hope and passion?
00:27:48
Speaker
He could write a chapter in his book about hope and passion.
00:27:52
Speaker
So it's written about humility.
00:27:54
Speaker
So I'm a strong believer in turning hope, passion into an action plan.
00:27:57
Speaker
And you need an action plan at a granular level.
00:27:59
Speaker
And that's why I do think you need both the belief and the passion in doing something for the future.
00:28:07
Speaker
but then you've got to put in place tangible actions, and that's both government and private sector.
00:28:12
Speaker
I hate to put this in right at the end, but it broadens the question even further.
00:28:16
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?
00:28:29
Speaker
Do you have the data to be able to make that, Noam?
00:28:32
Speaker
We don't have the full data that we need at the moment on biodiversity.
00:28:35
Speaker
And in fact, we don't have the full database of information we need for carbon at the moment.
00:28:40
Speaker
There is a huge amount of investment that's got to go in, in all companies everywhere in the world to provide
Reflecting on Climate Change as an Existential Threat
00:28:46
Speaker
that data source.
00:28:46
Speaker
Do they realize that?
00:28:48
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.
00:28:59
Speaker
And that, therefore, is part of the journey that we have to go on over the next five years.
00:29:03
Speaker
Mark, it brings us back finally to that one word, existential threat.
00:29:08
Speaker
It's more than just the climate emergency.
00:29:11
Speaker
Are you motivated, both of you, by the idea that this is about essentially saving human survival on the planet?
00:29:17
Speaker
Is that really the bottom line?
00:29:20
Speaker
It is an existential threat.
00:29:21
Speaker
So yes, by definition, that's right.
00:29:23
Speaker
Including nature biodiversity.
00:29:24
Speaker
Including nature biodiversity.
00:29:26
Speaker
Addressing climate is a necessary but not sufficient condition for addressing biodiversity.
00:29:31
Speaker
So it requires more above and beyond in order to address biodiversity.
00:29:35
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.
00:29:47
Speaker
30 seconds each.
00:29:48
Speaker
Any particular message you'd like to leave for all the people out there?
00:29:51
Speaker
I do believe there's been a fundamental change in the last 12, 18 months.
00:29:55
Speaker
And now we've got to turn that passion, that hope, into tangible action.
00:29:59
Speaker
Mark?
00:30:00
Speaker
I think that's exactly right.
00:30:02
Speaker
And we've made tremendous progress, but we've left it very late.
00:30:06
Speaker
So we have a huge amount yet to do.
00:30:08
Speaker
Is it too late?
00:30:09
Speaker
It's not too late yet.
00:30:11
Speaker
When is yet?
00:30:13
Speaker
Well, let's not find out.
00:30:13
Speaker
LAUGHTER
00:30:17
Speaker
You encourage us to find out, but you're both smiling.
00:30:19
Speaker
Let's not find out.
00:30:20
Speaker
No, let's not find out.
00:30:21
Speaker
Let's keep pushing.
00:30:23
Speaker
Look, the momentum is there and you've got the attention of people.
00:30:27
Speaker
So let's execute.
00:30:28
Speaker
This has been a tremendous half hour.
00:30:29
Speaker
Thank you both.
00:30:31
Speaker
This has been a special podcast in the Business Plan for the Planet series.
00:30:35
Speaker
More episodes will follow shortly.
00:30:37
Speaker
So please do keep an eye out for those.
00:30:39
Speaker
For more information on the program, visit business.hsbc.com forward slash sustainability.
00:30:52
Speaker
Thank you for listening today.
00:30:53
Speaker
This has been HSBC Global Viewpoint, Banking and Markets.
00:30:58
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.