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: Let's move ahead with more on cities, with more on resilient cities.
Speaker: How do we create green cities?
Speaker: I'm now joined by a panel of experts who can move those issues forward.
Speaker: Welcome.
Speaker: What I'd like you to do, each of you, is actually introduce yourselves because it would be much better than me trying to summarize what you do.
Speaker: Polly, can I just ask you first of all, and if you can, in a minute, just summarize, no more than a minute, just summarize what you do.
Speaker: what your view is about how things are moving on green, resilient cities.
Speaker: Each of you, I'll give you a minute.
Speaker: Polly first.
Speaker: Thanks very much.
Speaker: I think there is a lot of appetite for movement on green cities, but I think the reality is, and we keep saying this to government, we're a network of locally elected leaders who've made a commitment to act on climate.
Speaker: But the reality is we have a really ambitious national target of net zero by 2050 that they simply can't achieve without local leadership.
Speaker: There is literally no way because so much of this stuff actually happens in places.
Speaker: The national government's commitment is commendable, but without working with leaders, not only to deliver, but also to design those net zero solutions, we won't get very far.
Speaker: An understanding of what those powers are is important, and that's why we published our Power Shift report, which is an analysis of what local leaders can do.
Speaker: and the limits put on those powers by national leadership.
Speaker: So I would say you can have all the talk you want, but unless you change the rules to enable local leaders to do more and to take and to be a key partner in designing those solutions,
Speaker: those targets will stay as targets and we'll miss them.
Speaker: Thanks, Polly, for the moment.
Speaker: Let's go to Stefan Hockinson, who's Global Director of City Energy Solutions and CEO of E.ON Business Solutions.
Speaker: Stefan, give me your minute in a moment, just in a moment, but also explain what you do at E.ON.
Speaker: Thank you very much for this.
Speaker: I'm leading the development and the executions of all our solution business in cities and industries.
Speaker: And what we are doing, and the
Speaker: Following up on Polly's comment, it's really about local accountability and local making things happen, coming into practice.
Speaker: What is exciting and really bringing hope is that the solutions are already here.
Speaker: We don't need to invent new solutions.
Speaker: We can really do it.
Speaker: It's about reusing what we already have.
Speaker: We have 53,000 data centers alone in Germany, and they're pumping out residual heat in the air.
Speaker: We're not using the existing energy flows.
Speaker: We can use it to heat the homes.
Speaker: In London alone, the subways are using the same amount of power as a large nuclear reactor, just when the trains are breaking, that is transforming into residual heat going vented out in the air.
Speaker: This we are right now working on using to heat the homes of London on a zero carbon way.
Speaker: This we need to do much more.
Speaker: All right.
Speaker: Well, look, that's clear.
Speaker: Christine Gamboa, chair of the World Green Building Council.
Speaker: Christine, welcome.
Speaker: Again, just give a summary of your view and also exactly what you're doing.
Speaker: Thank you very much.
Speaker: Yes, so where are we?
Speaker: I think I agree.
Speaker: We have solutions and principles.
Speaker: And what I do at the World Green Building Council is drive forward a network that is in 70 countries with 36,000 members and scaling up
Speaker: global principles to be regionally relevant, but also locally that bring around collaboration, urgency and implementation of the solutions that we need to embed climate resilience and resiliency solutions across the decisions, the investments and the quality infrastructure we deserve to meet the climate goals.
Speaker: Thanks, Christina.
Speaker: Professor Greg Clark from HSBC.
Speaker: Greg.
Speaker: Well, good morning everyone.
Speaker: I'm Greg Clark.
Speaker: I'm the group advisor on future cities and new industries at HSBC, which means I work with the bank's client base across 67 countries and 300 cities, essentially working with our clients to help them define
Speaker: their net zero pathway and to apply finance in appropriate ways to it, driving the demand for sustainable finance.
Speaker: And my view is that sector strategies in decarbonisation are really accelerating.
Speaker: I think they need to be complemented by place based strategies.
Speaker: And I think that places, particularly cities, provide an additional dimension
Speaker: to the net zero transition.
Speaker: For example, they set a clear agenda, they can inform and shape citizen opinion, they can optimize the integration and the multipliers that come between sectors, they can reconfigure places to make them more net zero friendly and enabled.
Speaker: They can make investment opportunities more visible to the marketplace.
Speaker: They can scale up through aggregation and they can secure the extra benefits of decarbonization in the forms of jobs and savings and everything else.
Speaker: So place-based strategies are part of the investment platform for net zero transition.
Speaker: Thanks, Greg.
Speaker: Let's go to East London to Philip Granville, who's London Council's Chair of Transport and Environment and Mayor of Hackney.
Speaker: Philip, why don't you go ahead describing what you do?
Speaker: Okay, well that's the best start isn't it too.
Speaker: So you mentioned all my titles, they're not I think why this is so important.
Speaker: You know first and foremost I'm a citizen and resident of Hackney in London and I say this to build on what others have said because citizen, people, community and place
Speaker: are intrinsic to getting to net zero.
Speaker: It's what residents and Londoners are expecting of us.
Speaker: 87% of Londoners are motivated to take action on climate change.
Speaker: And somebody in the last session talked about it's vital around re-election and long-term planning.
Speaker: But actually, it's where this whole agenda is going to succeed or fail.
Speaker: We do want more in terms of national strategy, framework, powers, funding and everything else.
Speaker: And obviously the large scale investment that have been talked about is absolutely vital.
Speaker: But if we cannot connect that to people and place and local government and cities, none of it will work.
Speaker: and I'm a huge advocate for the part that local authorities have in delivery.
Speaker: We cannot just see them as enablers.
Speaker: We provide services, we're landlords, we're planners, we shape our local economies.
Speaker: We have the responsibility for ensuring just transition, that businesses can access the EV infrastructure that they need, that houses are retrofitted.
Speaker: All of this is absolutely
Speaker: essential to our journey to tackle climate change.
Speaker: And what we're doing as London councils is recognising that subsidiary that inner and outer London are different places, that the 32 London boroughs in the City of London collectively have to come up with London solutions.
Speaker: We cannot rely just on our regional mayor or national government.
Speaker: And so we're leading seven major climate programmes across the capital.
Speaker: Those big themes, as I've mentioned,
Speaker: energy transition, just economy, retrofitting, and making sure that we're developing those ideas at a local level.
Speaker: And the last bit I'll finish on working with the Connected Places Catapult and Core Cities, because this isn't just a London issue alone, it is looking at the investment we need, bringing that together in the CCIC, which we're launching tomorrow, and creating a fundable proposition for UK cities to ensure that we're harnessing that green finance.
Speaker: I know the City of London wants to be the centre and capital for.
Speaker: So
Speaker: I think it's an extremely exciting time for cities to be showing this level of leadership.
Speaker: Philip, I heard most of that, which is great.
Speaker: Can I just ask you the key question?
Speaker: Are you comfortable with the level of collaboration?
Speaker: Then we'll get into a much bigger debate among the five of you.
Speaker: Are you comfortable as mayor and given the committee you're on, that you're getting enough collaboration with others going through the same experiences?
Speaker: Yeah, I think we're leading that collaboration.
Speaker: I think that's what's really vital.
Speaker: Most of us have declared a climate emergency.
Speaker: We've got climate action plans.
Speaker: We decided rather than a top-down London leadership model that we would create networks led by individual London boroughs around the seven key climate themes and share that peer-to-peer knowledge.
Speaker: That makes us much more credible actors when we're talking to business, when we're talking to regional and national government.
Speaker: I think the disconnect is with national government.
Speaker: And we can't wait for national government.
Speaker: So we're innovating and doing work, as I said.
Speaker: But what we really need to, I think, see is whatever commitments come out of COP, whatever comes out of the spending review, that national government is at the absolute, that local government is at the absolute heart of how we deliver.
Speaker: That's the critical bit of collaboration I sometimes feel is missing.
Speaker: All right.
Speaker: Well, let's get an assessment from all five of you then about where the obstacles are at the moment, what needs to be done.
Speaker: Stefan, quickly come in, can you, on solutions?
Speaker: What kind of obstacles are you seeing?
Speaker: And I'd like to ask each of you to answer that as well.
Speaker: Thank you.
Speaker: Three obstacles.
Speaker: Number one is regulation is from the 19th century.
Speaker: Obviously not correct, but it's too old.
Speaker: You still penalize renewable energy.
Speaker: in favor of all gas solutions and we have legacy structures going into the financial systems in UK and also other countries.
Speaker: You need to change regulation to enable PV and heat pumps and local production to be usable.
Speaker: Second obstacle, the prerequisite when building.
Speaker: You need to build with prerequisites for low temperature and reusing, not the way we built before.
Speaker: And this is meaning very early in the planning.
Speaker: This does not cost much, but it needs to be agreed with all parties around the table.
Speaker: Final obstacle is about the social housing.
Speaker: You need to make that more simple.
Speaker: We don't need more PhD in the SAS system to understand how to make this profitable for companies to work and make money on.
Speaker: You need to make it transparent.
Speaker: The technology is already there.
Speaker: It can be used.
Speaker: So it's simplifying and working addressing these three areas.
Speaker: Thanks.
Speaker: Polly, what's your view?
Speaker: And let me go around all four of you.
Speaker: Polly, next.
Speaker: Well, I would agree with Stefan that the current rules and laws are not fit for purpose.
Speaker: I mean, I can come up with a lot of innovative examples from our network of our members who, but each of those innovations are limited in their ability to be replicated, scaled,
Speaker: or transferred elsewhere because of existing national policies and rules.
Speaker: And I would back up Phil on this.
Speaker: You can have all the collaboration you want across the networks that we've established and many others have established that shares knowledge about what is currently possible, but each one of those things will bounce up against national policy, regulation and legislation.
Speaker: So we actually think there needs to be a net zero local powers bill, which actually transforms
Speaker: the frameworks within which local authorities work, enabling, permitting and obliging local climate action.
Speaker: Because for every place which is like Hackney and Phil, there is somewhere else which is holding back.
Speaker: We need to make sure there is a de minimis action on this that is absolutely obliged in law, because without that, we will not achieve our targets.
Speaker: So the current rules and laws are not fit for purpose.
Speaker: I would also say that political will is still not as
Speaker: universal as it needs to be.
Speaker: And the other thing is making sure that we establish what we really mean by political consensus.
Speaker: We're an all party network.
Speaker: That's really important to us because we understand that to make sure that almost regardless of your other political ambitions and strategies and priorities, you're going to tackle climate, right?
Speaker: You're just going to do that.
Speaker: But making sure that that political consensus is not undermined at election time, that instead you have
Speaker: a race to the top rather than a race to the bottom is really important.
Speaker: And there are lots and lots of temptations that we see elected politicians or politicians with ambitions to get elected using, which can undermine what is currently a pretty good direction of travel.
Speaker: So I would say the current rules, the lack of real understanding of what that political consensus is,
Speaker: might be and ultimately making sure that national government understands the power of local government and demonstrates that with political will.
Speaker: Christina.
Speaker: Thank you.
Speaker: Yes, I'm going to build on what has been said and I would say first in that conversation of national regulation, local regulation, there is not enough clarity on the national vision of
Speaker: for the city systems to be aligned, for example, with the commitments of the nationally determined contributions that go into the COP26 process, for example.
Speaker: And so the NDCs may not be enablers for what cities want to do.
Speaker: And so we've been hearing cities move further faster.
Speaker: And in that dialogue, we have an obstacle, but it's an opportunity.
Speaker: And it's the huge amount of leverage that public procurement can bring as a strategic lever.
Speaker: And also, for example, to incentivize low carbon energy systems and providing financing models that can really upscale the renovation in partnership, of course, with the private sector and communities.
Speaker: And with this, I guess the last one would be
Speaker: that we have to go back to enforcing energy efficiency codes and resiliency standards because we have to work with asset owners, designers, developers, and the construction sector to really empower local authorities to make decisions having climate at the center.
Speaker: It's still in the fringes.
Speaker: Thanks, Prisina.
Speaker: Now, Greg, I've left you to this point because you have many other affiliations apart from HSBC in planning, etc.
Speaker: And I'm asking you for your reflection, particularly on this pretty brutal contention.
Speaker: Certainly, we heard from Stefan and also from Polly that really regulation and relationships are simply not fit for purpose.
Speaker: We heard from Stefan it's actually 19th century.
Speaker: Is that your view as well?
Speaker: Well, I might put it another way, but I think it amounts to the same thing.
Speaker: I would say, Nigel, that we have an incredibly compelling imperative here.
Speaker: We have a market that wants to respond, a massive investment opportunity, but we can easily become trapped in a kind of paradox, which is that on the one hand, the UK is a global leader
Speaker: in financial innovation.
Speaker: And yet at the same time, the UK is one of the most financially centralised countries in the world, which means that local governments in the United Kingdom don't enjoy the same financial freedoms and powers as the average of the OECD countries, for example.
Speaker: So this leads to a kind of absolute innovation and inventiveness requirement.
Speaker: We have to work a bit harder to make financial tools work in the UK.
Speaker: So that means on the one hand,
Speaker: The big barrier we have to overcome is the transition itself.
Speaker: Many of our cities, but also our sectors, are deeply embedded in old business models, old infrastructure platforms, old ways of doing business.
Speaker: And as we change, it produces a new financial model, which is hard to accommodate if you don't have much freedom of operation.
Speaker: The second thing then, of course, is a confidence gap.
Speaker: We have to be much more confident on the financial side about the financial tools we can bring to this.
Speaker: And we have to be confident that the transformation is going to work.
Speaker: And that comes back to the planning, the regulation and everything else.
Speaker: And then the third thing that's really important here is aggregation, because
Speaker: Every place is different, as Phil and others on this panel will know.
Speaker: But on the other hand, every place has some assets that are somewhat similar to many other places.
Speaker: So we have to be very good at recognising the individuality of UK cities, but at the same time recognising what they have in common.
Speaker: that might be put together in aggregated platforms to attract larger amounts of capital.
Speaker: So we have an aggregation challenge, we have a confidence challenge, and we have an inventiveness challenge around transition pathways.
Speaker: But all of those challenges, I would say, are the things that get us out of bed in the morning and make living life at the moment a highly motivated thing.
Speaker: Well, let's see if we have consensus on that.
Speaker: I saw Polly nodding agreement quite violently.
Speaker: Phil, do you see this as the way ahead?
Speaker: I'd like to get your comments from what you've just heard of Greg, the four points you put on the agenda there.
Speaker: Phil?
Speaker: Yeah, I think there is a degree of consensus, and I think you'd expect it on this panel.
Speaker: And I reflect on what Stefan was saying and Greg's support in terms of regulation and how we need to unlock these models.
Speaker: I think that the challenge will be...
Speaker: We have some really good examples of, I think, private sector, national government, mayoral government in London and boroughs working together around some of the EV infrastructure.
Speaker: We've got, I think, nearly over a third of the EV charging points in London.
Speaker: That has been a really great example of everybody working together and delivering for Londoners.
Speaker: I think it's more examples like that where we can take action together
Speaker: and citizens can see the impact, businesses can see the impact, it's value for money for central and local government.
Speaker: I think my biggest fear around delivery and some of the points that Stefan made, if I can just finish on this,
Speaker: is that we're signed up collectively as London to a Green New Deal mission which sees the growing of London's green economy.
Speaker: And that is really important in terms of just transition point and Londoners getting the green jobs, both white collar and green collar and blue collar in our communities and seeing and touching and getting the opportunities to deliver this stuff off on the ground.
Speaker: If we don't create the local supply chains, the certainty around funding and regulation, those jobs won't be embedded in our communities.
Speaker: They'll be delivered by national players that arrive, do something and leave again and don't leave behind the jobs or the skills to maintain those assets into the future.
Speaker: And Susan, I think, from Glasgow said in the last session something really powerful.
Speaker: We can't
Speaker: leave the financial burden on our citizens of all of this transition.
Speaker: And that can be, you know, legacy tech, it can be tariffs for energy that aren't affordable, it can be things that your landlord can't maintain.
Speaker: Those are all vital if we're to take forward this agenda and really unlock our local supply chains and skills and technologies.
Speaker: Stefan, is that a driver for the way forward?
Speaker: Is that in line with the kind of ways that you believe that the three points you made can be overcome?
Speaker: Partly.
Speaker: First, it's too slow.
Speaker: We need to speed up.
Speaker: Right now, we are inside London in Citigen, decarbonizing from old coal and oil power station into gas and then renewable power heat pump.
Speaker: But the prerequisites to be able to do that on a financial grounds is not working because the systems are subsidizing the oil gas solutions and penalizing the heat pumps.
Speaker: And on top of that, adding new PV and getting the permit to put up PV panels is very challenging.
Speaker: In the end, you also need some kind of a PhD to understand the system.
Speaker: Biogas, for instance, is not seen as renewable or a vehicle to go from natural gas to hydrogen.
Speaker: We cannot use that in the UK.
Speaker: We are not adopting the structures of what we know.
Speaker: So we need to change it and it needs to be much faster.
Speaker: But I need to keep pressing you.
Speaker: Do you think there's a recognition of that?
Speaker: Because all of you in your own way have been pretty critical of central government, not really understanding and gripping the enormity of the challenge and the enormity of the opportunity.
Speaker: Absolutely.
Speaker: I agree on that.
Speaker: And there's a tremendous change over the last 18 months.
Speaker: So we are definitely going in the right direction, but we cannot release the pressure for a second because then it's not going to happen.
Speaker: I'm certainly left with an impression, and I quoted this at the beginning of today's sessions, that really in government they realize there's a lot to be done, but they're still, they all say they're working incredibly hard, but can't actually deliver the kind of policies and the kind of clarity that everyone, people like you are looking for.
Speaker: Polly?
Speaker: Yeah, I was going to say a really good example of the homes and heating strategy, which is due in spring.
Speaker: Now, I've worked in government.
Speaker: Spring lasts until the end of August in government.
Speaker: Right.
Speaker: So we shouldn't be too surprised that we haven't got it yet.
Speaker: But now they're reassuring us that we'll see it before COP26.
Speaker: Right.
Speaker: Which is in November.
Speaker: What's really making a lot of people anxious about the homes and heat strategy is that it hasn't been gripped politically.
Speaker: It might be gripped technically, but it's not been gripped politically.
Speaker: So all the anxieties that Susan and Phil and other elected leaders might have about the burdens being placed on residents have not been ironed out in that strategy.
Speaker: It's all about sticks, targets, banning, blah, blah, blah, and not about carrot.
Speaker: Now, the reason I'm talking about that in relation to cities is that
Speaker: quite often what is quite striking about the conversations that we have, not only with national government, but sometimes with the private sector, within the energy sector, but also more widely, is that people are still thinking about this as sort of individual consumer choices, right, when we're talking about decarbonising heat.
Speaker: rather than understanding that this is something that is going to happen in places and that the heat solution is going to be different in different places and that the people who know their communities best are the ones who've got a granular knowledge, not only of the housing stock, but also of the people which live in that housing stock.
Speaker: I can imagine that Phil is thinking about this a lot in terms of the experience that he's had in designing and delivering solutions on COVID.
Speaker: So when, for example, Stefan is talking about biogas, there will be some places where that might be a solution.
Speaker: Indeed, hydrogen may well be a solution.
Speaker: But this isn't a decision that individual households will be making.
Speaker: They need to be made collectively.
Speaker: We did a rollout of turning to natural gas,
Speaker: as well, I remember that as a child, I'm probably sort of dating myself a little bit much there.
Speaker: But that transformation in this country means that mentally, the UK thinks that everything has to roll out from the centre, that it's all one thing for everybody.
Speaker: And, and all regulation has been, it's been predicated on those assumptions.
Speaker: If we're going to do this properly, we need to understand what makes places unique.
Speaker: And this goes to Greg's point about where we are unique and where we have things in common.
Speaker: of where we can understand how we can do things at scale.
Speaker: And that is where this is really important.
Speaker: This goes as well to Greg's point, is that we run an all party parliamentary group on sustainable finance, actually supported by HSBC.
Speaker: One of the key things that keeps happening is we keep thinking this is about making finance flow.
Speaker: What is stopping the finance flow?
Speaker: It's a policy and regulatory framework.
Speaker: All that money is stacking up, ready to invest in investable projects.
Speaker: If the projects were investable, they're not investable because the regulation and the laws make them too expensive.
Speaker: Well, then let's go UK infrastructure bank that should be helping solve these problems.
Speaker: But they need to make sure there's development capital available to make those projects investable to.
Speaker: Greg, let's do a reality check.
Speaker: You actually have to serve your customers, your clients.
Speaker: What are you saying there?
Speaker: Because you just heard Polly say, and I think Phil was saying it as well, the issues are not really being gripped politically, even if the way ahead is pretty clear.
Speaker: Yes, well, I'm not here particularly to criticise any current government, but I think that... I hope you will analyse it, though.
Speaker: Yes, but it is important to recognize the system that we work in in the UK, which is different to the other markets where HSBC works.
Speaker: And of course, in these markets, there is a transition going on.
Speaker: The speed is picking up, but we're coming from a relatively low base in terms of transition in energy and transport in the built environment and everything else.
Speaker: So Polly's right that there is in principle capital available to lend, to invest, to partner with, but we don't always find the conditions in which that capital can be applied.
Speaker: She's absolutely right.
Speaker: It's not a supply side problem on the capital side.
Speaker: It's an effective demand side problem on the need for capital and the regulatory environment that follows that.
Speaker: The solution to this is a blended finance approach where you're using public finance to do the things that public finance can do, de-risking particular projects, accelerating perhaps very long-term outcomes.
Speaker: And you're using commercial finance to secure short and medium term gains, both for business and for investors and for citizens.
Speaker: And so this is what I mean by inventiveness.
Speaker: We have to be inventive on the financial models that we put together and the cocktails, as well as working on those regulatory reforms that Polly and Stefan referred to.
Speaker: So there are two sides to the innovation required here.
Speaker: But let me just be clear, you have to serve your clients wherever they are in the 67 countries, I think it is.
Speaker: And you say they've got to be inventive.
Speaker: But actually, is there a degree of constraint about how inventive they can be, even if there is all that money, simply because the flexibility in the system?
Speaker: What do you say to them if they want to invest in a city?
Speaker: Every single system is different, Nigel.
Speaker: So, for example, when we invest in cities in Latin America, it's often through a nationally generated sustainable bond.
Speaker: When we invest in cities in East Asia, it might be investing directly in the city itself because they have
Speaker: the fiscal and financial powers, or it might be investing through a national utility or a state-owned enterprise.
Speaker: In the UK, the specifics of the system here mean that we have to invest primarily with corporate partners, sometimes with national entities.
Speaker: But I agree that
Speaker: The more platforms that are created, a UK national infrastructure bank, for example, is a very important additional platform to multiply the mechanisms through which we can invest in a UK city.
Speaker: Some UK cities are big enough to borrow and to benefit from green bonds, sustainable loans, ESG linked loans as well.
Speaker: But many of them don't have the scale to be able to command an instrument like that.
Speaker: And that's where the aggregation
Speaker: point comes in.
Speaker: So there are multiple routes.
Speaker: This is where we have to be inventive.
Speaker: But the UK's system has particular constraints that we have to overcome.
Speaker: Yes, and we were talking with the NIB and NIC yesterday.
Speaker: Christina, your reflections on where this discussion we've been having is going?
Speaker: Yes, well, I see the opportunity to unlock a positive feedback loop, right?
Speaker: Because, of course, there's difficulties, but there's the realization that the bottom-up approach will unlock the solutions in a proactive dialogue of finding the pinch points for the low-carbon energy systems to move forward.
Speaker: And by that, I'm referring also to the philosophy of what Nigel Topping in the previous session was saying on the Race to Zero principles, right?
Speaker: There is a campaign called Cities Race to Zero, right?
Speaker: And they are committing to enabling and unlocking, and there are several UK cities committed also in that journey, on unlocking those difficulties.
Speaker: And I would say also that as industry has stepped up in climate action, this will enable
Speaker: more bolder policies like the ones that Stefan was describing to accelerate.
Speaker: and that the climate regulations are synced.
Speaker: So industry pushes to step up again in the future.
Speaker: And then we now have a scale up of systemic solutions because cities can do that.
Speaker: Cities can scale up the integration of net zero buildings, of EV solutions, of cleaning up the grid, of transport that doesn't lock in carbon.
Speaker: And I guess, of course, bridging the communications gap we have with citizens for them to care that this is the way forward.
Speaker: bringing them into the Just Transition solution and getting communities to be engaged.
Speaker: How can we ensure to make cities net zero?
Speaker: Passive infrastructure needs to be developed so it is also net zero.
Speaker: Are we channeling enough to avoid biodiversity loss in planning?
Speaker: In other words, how can biodiversity, nature, contribute to resilience when it comes to collaboration and making the kind of leaps forward that all of you are talking about?
Speaker: But can I come back to, if you want to pick up those, please do.
Speaker: But can I also ask you about the big ideas that you feel we should be putting on the table?
Speaker: Who would like to come in on that?
Speaker: Stefan?
Speaker: Yeah, please.
Speaker: Thank you.
Speaker: First, I will reflect on the passive infrastructure topic.
Speaker: This is really great.
Speaker: We need to go away from a production mindset and go into a recycle mindset.
Speaker: And there's a little bit gray box I hold up here.
Speaker: What does that do?
Speaker: It actually transmits...
Speaker: district heating, piping to become a storage.
Speaker: We can share energy between buildings, between players in a city, and we can reuse energy a lot more.
Speaker: Sounds like Greek or science, scientific things for many people, but it's not.
Speaker: It's already happening in many places in the world.
Speaker: How do we then speed this up?
Speaker: So
Speaker: In a large British city today, we have been engaged with them for three and a half years.
Speaker: They were one of the early cities in the hundred that wants to go climate neutral, climate zero.
Speaker: It's just not getting the butt out of the wagon when it comes to coming to conclusion because it's so complicated.
Speaker: impossible and so difficult to get this public tendering of going forward.
Speaker: What we should do and what I think is a brilliant idea, why don't we embark on something called reverse tendering?
Speaker: Why don't we put instead a large pile of money next to a set of actions and we have the cities applying for it.
Speaker: So instead of cities asking for us coming in with tenders, the players, the cities can go for it.
Speaker: You don't have
Speaker: the public tendering perspective in the same route.
Speaker: You don't really dare to.
Speaker: You don't really would like to lose track of every sense of control.
Speaker: How can we be more aggressive?
Speaker: How can we try out new things?
Speaker: And how can we truly, as you said initially, make UK cities the leader?
Speaker: Because we're not today.
Speaker: Definitely not very far away.
Speaker: Phil, that's a big, big challenge.
Speaker: And I was immediately going to come to you in Polly as well.
Speaker: Reverse tendering.
Speaker: You don't really dare be more aggressive.
Speaker: Phil, at the other end of the chain here, how would you view that?
Speaker: I think there is a lot around biodiversity and green infrastructure that we should be asking of our cities, of local government, of places.
Speaker: The best way to make a climate resilient city is looking at natural infrastructure.
Speaker: It is planting trees.
Speaker: It is creating the sud systems.
Speaker: It is making sure...
Speaker: that new buildings are carbon neutral and resilient to climate change without the need to draw down energy.
Speaker: So I think there's a huge amount we can do there before we even move to retrofit.
Speaker: I think on Stefan's challenge, that sort of competition I think will be really exciting and really useful.
Speaker: What I want out of the finance discussion is where we're truly sharing risk and return.
Speaker: We cannot have a system where this money is there
Speaker: and the risk is held by the citizen, the landlord and the municipality to underpin and de-risk that investment.
Speaker: We need to truly share that risk in a really transparent way over the long haul, especially if we're talking about energy assets, if we're talking about retrofitting, if we're talking about smart city infrastructure.
Speaker: That has to be the prerequisite.
Speaker: And I think on aggregation, I hope I'm setting up Greg for this.
Speaker: We're part of a project that combines the expertise of London Councils, the City of London, the Connected Places Catapult and Core Cities to get that aggregation so that when we're in COP, we're really clear this is the need that we have.
Speaker: We're ready to start talking to international finance and domestic finance and we want to see it delivered.
Speaker: The phase one report is launching tomorrow, and I'm hopefully setting up Greg to expand on that and how we're ready to deal.
Speaker: Whether that truly meets Stefan's reverse procurement type practice, I don't know.
Speaker: I think we should put that in there because traditional ways of procurement aren't going to work.
Speaker: But it has to be that shared risk to leap into that new form of procurement, I think.
Speaker: And just to add two words there, he said you've got to be more aggressive and you've got to dare.
Speaker: His words, not mine.
Speaker: Is that doable in cities, in local government?
Speaker: Yeah, I think you're seeing political leadership from Mayor Kahn, from Andy Burnham, from Marvin in Bristol, from leaders in London.
Speaker: They are daring and they're willing to take these long-term decisions.
Speaker: And citizens are backing them when they do.
Speaker: All right.
Speaker: That moment, I think, then needs to lead to things that citizens can touch and feel in their communities that see that transition taking place.
Speaker: So I think we're in a golden moment with COP and national government, regional metro mayor government and obviously local government.
Speaker: And I include obviously the Scottish and Welsh governments in that discussion as well.
Speaker: All right.
Speaker: You all want to say something.
Speaker: Polly first and then Greg.
Speaker: Polly.
Speaker: Yeah, I was going to say in terms of de-risking, I totally agree with Phil.
Speaker: And that's one of the reasons why we need to be asking the UK Infrastructure Bank to play a role in doing that de-risking.
Speaker: We understand that attitudes towards risk, the political leadership that Phil is talking about notwithstanding, is very different in local authorities.
Speaker: You're a different kind of person who deals with money if you're a director of finance in a local authority, as distinct from being an investor.
Speaker: You take money from council tax and from parking levies and from national government and you deliver services.
Speaker: Right.
Speaker: That's what you do to become an entrepreneur, which thinks about rate of return and risk and so forth.
Speaker: Basically, especially since your boss is Phil or somebody like that, who says, well, I don't want to end up on the front of the Gazette because I've spent money in the wrong way.
Speaker: That is a reality.
Speaker: So the dialogue of the death between investors and local authorities is really profound.
Speaker: We need to be able to improve that.
Speaker: And that's what the UK infrastructure bank needs to do, as well as providing the development capital that will significantly de-risk the kind of things that the politically ambitious want to achieve and access the investment kind of capital that should be available swilling around.
Speaker: If the UK infrastructure bank does not do those two things, it will be massively missing a trick of harnessing that political will and harnessing that finance.
Speaker: At the moment, local authorities bid for small amounts of money for grants.
Speaker: they then get that they do something with that and they therefore have an innovative project which they cannot scale, replicate or transfer because entirely the business model was predicated on the on the small amount of grant that they got and nothing was was designed in for people to learn and to do it in a bigger way.
Speaker: Again if the bank doesn't do that they've got something wrong and procurement is basically where we need to be finding ways of changing the rules around how local government delivers its own services.
Speaker: because that's where it creates supply chains, that's where it creates skilled workforces, and that's how it can transform a whole place into someone which thinks in a different way about the kind of economy it has.
Speaker: There are a lot of nodding heads there.
Speaker: Greg next, and then Christina, please.
Speaker: Well, thank you.
Speaker: I don't want to be complacent in this conversation about how the financial sector and the financial markets are ready, but I think you've heard enough over the last two days to know that many financial institutions, not just banks, but also pension funds, insurance companies, sovereign wealth funds, fund managers, and many others are really up for this and the pressure is on them.
Speaker: So I think that a lot of the work needs to be done on the demand side of this equation.
Speaker: And I'm going to agree with
Speaker: with what both Phil and Polly just said, and I'm going to say three things.
Speaker: So thing number one is that I do think this aggregation imperative is very important.
Speaker: So Phil and I and the leaders of Glasgow and Bristol, the core cities and the London councils are working together with the Connected Places catapult of which I'm the chair.
Speaker: to try to develop a national commission on investing in UK cities and their net zero pathway.
Speaker: The focus on this is going to be practical.
Speaker: We're looking at what the cities are trying to do, what the investment requirement is, and we're going to problem solve the route for capital into those projects through aggregation, through innovation and everything else.
Speaker: In other words, the time is right to really do that.
Speaker: I think there are two big implications for this.
Speaker: The first one is the blended finance implication and Polly just said this very clearly.
Speaker: We will need a national infrastructure investment bank that is prepared to create a new cycle of blended finance in the UK.
Speaker: using guarantees where appropriate, using subordinated funds, creating special investment funds.
Speaker: This is exactly what a national infrastructure investment bank is for.
Speaker: And it can be a brilliant partner for private sector investors, institutional investors,
Speaker: that want to be part of that.
Speaker: So that's the big new opportunity, it seems to me.
Speaker: The second big implication of this is about city finances.
Speaker: It's going to be very important to unlock the investment potential of every city, their asset base, their infrastructure, their amenities and others.
Speaker: And the sooner we can move towards cities having their own holding companies,
Speaker: their own portfolio funds, their own proper asset management systems, the more it will open up the potential for that blended finance to make a big difference to it.
Speaker: So there are two big reforms that we need there.
Speaker: One is about the role of the Infrastructure Investment Bank.
Speaker: The other is about how we treat city finances and treaties, city assets and make them investable again.
Speaker: Well, those are two significant initiatives we can take away, as well as other things you all said.
Speaker: Now, Stefan, I'll come back to you in a moment, but, Christina, your view of what you've been hearing.
Speaker: Yes, thank you.
Speaker: To add to the conversation,
Speaker: I heard biodiversity in the questions.
Speaker: We haven't talked a lot about that, but adding to this conversation, I would say that cities also in this space through the assets the city owns can commit today to start understanding how to measure and report on full life carbon emissions.
Speaker: And that will unlock also the conversation with the finance sector, because then the benchmarks, the reduction targets towards net zero are clear.
Speaker: And that will pave the way for those financial institutions to have more demand for the development banks to be giving a premium to loans that go into energy efficient solutions.
Speaker: And beyond that, of course, it is promoting nature based solutions.
Speaker: We were talking about in that biodiversity question from the audience.
Speaker: That infrastructure, of course, we have to prioritize energy efficiency as a passive solution, if you like, the highest energy efficiency, but also nature-based solutions that promote the green, blue infrastructure.
Speaker: We go away from the lineal systems in the...
Speaker: government procurement and we promote a new way of thinking of total whole life costing and that is a big challenge for cities because the timing of a city official is different from the implications of all this infrastructure through its life cycle.
Speaker: And going into Stefan, of course, the circular economy principles are going to be a huge, let's say, answer in this conversation and that is something that is growing as an unlocker of this finance
Speaker: procurement, policy signals, businesses, conversation.
Speaker: Thanks, Fisina.
Speaker: Have we risen to the challenge you put and are you comfortable?
Speaker: Do you feel the other voices we've heard are responding positively to what you were suggesting, being aggressive and daring?
Speaker: I would say partly, only partly.
Speaker: Our latest analysis shows that heat pumps might fly in the UK market 2025.
Speaker: And it's like, come on, guys.
Speaker: It's 2025.
Speaker: Who can wait four years?
Speaker: It's going to put UK another century behind.
Speaker: So look to what we have on other places.
Speaker: We don't need to invent the wheel.
Speaker: You can go to a city quarter in Munich called Werksvitter, talking biodiversity.
Speaker: We can go to how the Tegel Airport in Berlin is being built by reusing the energy.
Speaker: Or you can go to
Speaker: Stockholm, where we are really putting a place, a circular economy where we are recycling gas, resources that was looked as being waste.
Speaker: And, you know, a plastic bag of food waste actually carries a car 2.5 kilometers on biomethane.
Speaker: There's not one single silver bullet.
Speaker: I really like what we heard earlier today.
Speaker: You need to look to the local prerequisites on each local place.
Speaker: You need to liberate yourself.
Speaker: You need to go.
Speaker: The words are saying the right thing.
Speaker: We need to give the mandate locally.
Speaker: We cannot wait for national governments.
Speaker: The cities need to take the pin, the challenge and really go.
Speaker: What kind of financial structures can support?
Speaker: All right, you've all got to be bolder.
Speaker: Yeah, we need to really go.
Speaker: And so partly is my answer.
Speaker: Right, Greg, I've got to just pick you up.
Speaker: Do you reckon you can give me, you can generate this kind of urgency at being braver, being bolder, being less conformist?
Speaker: Yes, and I think we have to.
Speaker: And I think we are.
Speaker: I mean, I think it's important to say back to Stefan that the UK cities are in the lead on congestion charging, on low emission zones, on low traffic neighbourhoods.
Speaker: There are things that UK cities are in a global lead on.
Speaker: On the issue of heat pumps, yes, we're further back, but we've got to be proud of what we're good at, too.
Speaker: And we've got to be able to promote that.
Speaker: And I see in all of this, and this is the catapult role, that we're generating innovations, technologies and platforms that we will be able to export and we will be able to generate green jobs from these.
Speaker: So it's not just that we're doing the right thing for the planet, but there's a major enterprise opportunity in all of this for us as well.
Speaker: We're good at some things, we're less good at others, but we need to get good at all of them.
Speaker: One of the issues the private sector has raised in working with local government on carbon reduction projects is the quantity and quality of data around buildings and their use of energy.
Speaker: How has Hackney been looking to resolve this?
Speaker: But you've also got another point.
Speaker: Data is so fundamental in everything we're discussing here.
Speaker: Shortage of data, shortage of good data, reliable data.
Speaker: Your view there from Hackney, but also the other point you want to make.
Speaker: I think there has been historic challenges with data.
Speaker: I think that is common to big landlords, it's common to people in big organisations.
Speaker: I think a huge amount of work is now going into at a borough level fixing that.
Speaker: The work that's happening, I mentioned the seven climate change programmes that London councils are running.
Speaker: The work that Enfield and Waltham Forest are leading on Retrofit London is providing a really interesting data set that we're going to then be able to aggregate up through that network and then feed into the work of the Commission.
Speaker: So what we have though, I think is historically, and it's the challenge of this funding dilemma,
Speaker: is very short-term national funding and bidding rounds where you suddenly have to have shovel-ready projects, which you then submit into a competitive process, and you're either successful or you're not, and then you're waiting for the next one.
Speaker: What we're engaged in here is making sure that we've got those long-term data sets.
Speaker: We know where we're moving our buildings in terms of EPC efficiency and energy use beyond that as well, and making sure that we've got that platform.
Speaker: I'm also a big fan, as I mentioned, the EV work.
Speaker: We have a London Office of Technology and Innovation, which is also part of London Councils and connected to the GLA, is creating open data platforms.
Speaker: We need the sort of data platforms that citizens can hold us to account, that businesses can see where they can invest and challenge locally, and that sort of city leaders, whether they're planners, asset managers,
Speaker: energy procurers can see what is happening out there on the ground.
Speaker: And if we don't have that, I think the days where somebody sat in a town hall holding and hugging all of this information and they wouldn't share it have to be gone.
Speaker: Otherwise, we won't have credibility on what we're doing.
Speaker: Can I just say why I think this is hard very briefly?
Speaker: If you are a stock holding authority, so if you're a council that owns its own council housing,
Speaker: You had a decade of austerity, welfare reform, four years of compulsory rent cuts, Grenfell, all of the fire safety and building standards challenges that are going forward, and now this agenda.
Speaker: And all you have to fall back on are your assets and rents.
Speaker: And I think that is a really difficult set of dilemmas and challenges.
Speaker: And if I step back five years, we thought that communal heating fired by CHP gas boilers, perhaps feeding in energy to the grid was the answer to new build and the degree of retrofit.
Speaker: And now we're moving to individual heat pumps, ground source air pump, depending on the location, and then aggregating those up into energy centres.
Speaker: That is a great speed that we are moving at.
Speaker: And then we are
Speaker: sitting on a fantastically technical skilled workforce in our direct labour organisations.
Speaker: But that is a workforce based around gas, water and electricity at the moment, not these new technologies.
Speaker: And to get all of this right, we cannot have a situation where we're bold and daring and say it's heat pumps now, tomorrow and for the rest of this decade, and we don't have a workforce that can maintain them.
Speaker: It isn't acceptable to just sign up to a, I want 30,000 heat pumps.
Speaker: I'm going to outsource that to a private contractor and they're going to maintain it.
Speaker: And then I'm going to sack all my gas fitters.
Speaker: That will not work.
Speaker: It will not fly.
Speaker: And we won't be able to maintain that infrastructure when our residents come to us and say, why isn't it working?
Speaker: We must have credibility in that space as well.
Speaker: All right, Phil, well, thank you very much indeed.
Speaker: Great speed, I've written it down, the great speed that you believe you're all moving at, even though Stefan says you've got to be more daring and you've got to be more aggressive.
Speaker: I think there are takeaways there.
Speaker: There's a consensus at least that things are moving in the right direction, but it underscores much of what we've been discussing in these first 24 hours of this forum, the urgency that is needed, but there's even greater need to be more urgent.
Speaker: So look, thank you very much indeed to all of you, to Polly, to Stefan, to Christina, to Greg and Phil.
Speaker: Thank you very much indeed for sparing time to join us, to discuss cities.
Speaker: Thanks very much indeed for joining us.
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.
