- 3 months ago
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00:00Sustainability has been one of our priorities for decades, and we're really looking at it in two ways.
00:06On behalf of our clients, first is as investors, from a bottom-up perspective,
00:11how can sustainability risks and opportunities impact the companies we're investing in,
00:16the countries that we're investing in?
00:18So we spend a lot of time and effort working across our investment teams
00:22to make sure we have the right information, the right insights to bring that into how we're allocating capital.
00:27But to take a step back, most of our clients are long-term investors, insurance companies, pension funds, sovereign wealth funds,
00:35and they're looking at market performance for the coming decades.
00:39And from this perspective, the energy transition, biodiversity loss, social inequality,
00:44these can introduce systemic risks that they're worried about
00:48and that they want their partners and their asset managers to be tackling.
00:51So are you saying that despite the negative headlines we're getting,
00:55there's actually greater momentum, there's greater commitment from your clients, from governments?
01:02I mean, I'm not sure I would phrase it that strongly.
01:05Certainly we see the energy transition is inevitable.
01:09It's happening.
01:10What's that question is really the pace and some of the regional dynamics around the transition.
01:15So we see huge interest from a number of our clients.
01:18Some have specific targets around sustainability.
01:22Others are less focused on meeting specific sustainability objectives,
01:26but they want to make sure they have the best outcomes from a portfolio perspective.
01:31And they expect us to understand and integrate relevant financial risks.
01:36How is that playing out?
01:37Talk to us about the investment flows, both in terms of the retail investors and institutional as well.
01:43Yeah, so it's been up and down, but this year in Asia-Pacific, for example,
01:48we're seeing increased interest and allocation to fund flows from a sustainability perspective
01:53across a number of different countries in Asia-Pacific.
01:57In April, we also had the Asian Investor Group on Climate Change release their annual updates
02:02around the number of Asian investors that have specific commitments around either tracking
02:07or having targeted allocations to climate thematic investments or a specific focus on nature and tracking deforestation.
02:17Across the board, the number had increased in terms of the number of investors that were focused on these areas.
02:23But it might not always be a huge headline.
02:26It might not be something that they're leading with necessarily,
02:28but it's something that I think quietly we're seeing more and more investors really become more sophisticated
02:34in terms of how they're tackling some of these topics.
02:36So that's in Asia. Compare that to, you know, investors in the U.S. and Europe. How is that looking?
02:41Yeah, well, if we start with Europe, we definitely see a huge portion of investors
02:47that have pretty specific sustainability policies or objectives
02:51and have very clear expectations in terms of their asset managers,
02:55in terms of both the products and services that we're able to provide them with,
02:59but also how we're using our influence in terms of our own proxy voting policies
03:03or our corporate engagement commitments around sustainability.
03:07So that's something where we've seen some more recent headlines in Europe in terms of asset owners
03:12articulating their expectations for their asset manager partners.
03:16Of course, in the U.S., we've seen a slightly different dynamic unfold over the last year
03:21with the political context around sustainability.
03:24So we've seen, you know, a bit of the opposite in the U.S.,
03:28where asset owners and managers have been less quiet around some of their sustainability commitments.
03:35But what's interesting, if you look at Climate Week in New York, for example, a few weeks ago,
03:39was actually the biggest ever in its 16-year history with over 1,000 side events.
03:45A surprise given the headlines that we're seeing.
03:47Right. So it was a surprise.
03:49And I think that there is still a lot of kind of work going on across a range of sustainability topics.
03:55And what we're seeing is a bit of a transition in terms of Asia-Pacific, of course,
03:59really emerging from a really strong leadership perspective on a lot of different areas.
04:06Continued strong leadership in Europe and articulation of expectations with some simplifications along the way.
04:12And then in the United States, of course, we have a more fragmented landscape,
04:16but still a huge number of corporate and financial institutions that are doing important work on sustainability
04:23because it makes business sense for them to do so.
04:25When we talk about sustainability, we also have to talk about sustainability in power, in energy,
04:31with a lot of talk to do with AI and data centers.
04:34How should we be looking at, you know, powering these data centers with clean energy, green energy?
04:41Where are we with that?
04:42I mean, of course, it's a huge challenge and a huge opportunity and something that, you know,
04:48everybody's watching and we will see continued progress.
04:51And I think it's a big, both a technology and a policy related opportunity.
04:55And I think financial institutions need to play a role there as well in terms of having a seat at the table
05:01and looking for solutions and opportunities from a financing perspective.
05:05I think what we talk about less, perhaps, is also the opportunities that AI present in terms of tackling some of the climate and nature challenges.
05:15And that's another area where we're putting a lot of focus across the BNP group.
05:20What's exciting?
05:21I mean, how can AI help?
05:22I mean, what are you excited about when you speak to investors and take a look at technology out there?
05:28Yeah, there's a whole range of topics.
05:32On the one hand, there's a company we're involved with called Kairos, which are looking at methane emissions,
05:37of course, the most potent greenhouse gas.
05:39And they've created a large language model really focused on satellite imagery,
05:43looking at how do you track methane emissions, which is being applied as a regulatory tool, but also as an investment tool.
05:51Another really cool company that we're involved with is called Nature Metrics.
05:56It's based in the UK and it's environmental DNA.
06:00So basically you can sample water or soil and put it through the lab and basically look at the genetic sequencing.
06:09And understand all of the species which have been active in that ecosystem in the last week.
06:15And I actually did a tour of one of their labs and learned how to sequence the DNA of an onion with my kids.
06:22But I was talking to one of the scientists there and she was in her 30s.
06:26And she said when she was studying biology, they went out into a boat in Lake Ontario in Canada,
06:32would dip the nets in the water and basically have clipboards and catalog all of the species that they were finding.
06:40And now they just scoop up some water, sequence it in the lab.
06:44And I mean, it's transformative in terms of how efficient they can be.
06:47So if you think about the fact that more than half of GDP is linked to ecosystems and nature, reliant on nature.
06:57And if we think about the role for investors, companies and policymakers, then to track the health of ecosystem services,
07:04to be able to have this kind of technology is incredible in terms of increasing the efficiency to be able to set targets and track them.
07:11Are you concerned, though, that we'll be unable to power, you know, these data centers that enable AI to be used to solve some of these problems?
07:21We're talking about insatiable appetite.
07:24We're talking about a doubling of, you know, energy demand by 2030.
07:29That's a huge amount.
07:30It is a huge amount.
07:32And if you look at China's recent NDC and commitment going into COP30, for example,
07:36it included a 30 percent commitment to have clean energy sources in the power by 2035.
07:43So, I mean, it's progress.
07:44It's movement in the right direction.
07:46But you're right.
07:47We're not there yet.
07:47And I think we have to deal with these competing challenges around increased demand for energy and how we supply it in a sustainable way.
07:56And we haven't figured it all out yet.
07:57And what's the biggest concern for you when it comes to that?
08:00Yeah.
08:00Not there yet?
08:01I mean.
08:01Yeah.
08:02It's around the locking in of high carbon sources.
08:05And some of the tradeoffs that we need to make in the short term.
08:08And I think that's why some of these policy discussions are so critical now in the coming kind of short term years,
08:14because we're locking in power sources for decades.
08:16Earlier, we talked about continued commitment in sustainability.
08:21We're certainly seeing that in terms of sustainability debt issuances.
08:26The numbers have been quite staggering and quite surprising.
08:29What are your own expectations?
08:31And would Asia be driving that as well?
08:34Yeah.
08:34I mean, this is perhaps another area where we don't see as many of the positive headlines.
08:39But in fact, sustainable debt issuance in Asia this year, in 2025, has already exceeded 2024 issuance.
08:47So we're definitely seeing a trend in the positive direction.
08:50I think one of the additional interesting things is the ongoing kind of expansion of the different sustainable taxonomies.
08:58So as we look at the fact that we've got more than 30 or even 50 sustainable taxonomies around the world,
09:06we're seeing in Hong Kong, for example, we have the first taxonomy to specifically introduce elements of physical risk.
09:12So looking at adaptation, resilience are different areas where we haven't seen a lot of debt issuance yet,
09:19but I think that will be a growing area.
09:21And of course, transition is another area where we're having a lot of discussions around how do you measure that?
09:26How do you make sure that some of the commitments are transparent, trackable, measurable, et cetera?
09:33So I think definitely we're going to see more on that front and that Asia Pacific will lead the way.
09:39And speaking of commitment, COP30, I mean, how optimistic are you that we'll see some tangible results?
09:46Yeah, I think we have measured expectations going into COP30.
09:51Of course, you know, the majority of countries have not yet submitted their NDCs,
09:56their nationally determined contributions, which is unfortunate.
10:00I mentioned, you know, China, of course, has and has an absolute emission reduction target out to 2035.
10:07So a reduction of 7 to 10 percent from a peak, which should be around now.
10:11So, I mean, that's very, very clear.
10:14And I think setting a good example in terms of having accountability and transparency in the right direction.
10:20But as I mentioned, look, things are moving in the right direction, but not at the right pace.
10:24And so I think that's something that we'll be looking for coming out of COP.
10:28Some of the specifics around carbon trading mechanisms, around progress on Article 6,
10:34clearly linked to nature-based investing, which is a theme that we're very focused on,
10:38many in the region are very focused on, around how do we create the right incentives.
10:43So I think that is a tangible area where I think we'll see some progress coming out of COP.
10:48I think it's important to note as well that the UN Principles for Responsible Investment
10:52are hosting their annual meeting the week before COP in Brazil.
10:57And you've got over 5,000 signatories, $125 trillion in assets signed onto the PRI.
11:04And so I think that's a strong signal as well, the fact that that's taking place in the region the week before COP.
11:10So I think that should help to create some momentum in terms of the financing challenges.
11:14You talked about how it's not moving at the right pace.
11:18Can you accelerate that pace without the leadership of the U.S.?
11:23I mean, that's what we're working on and looking to figure out as a community.
11:27And I think it's, you know, coming back to the fundamentals of why are we working on this, right?
11:32There's environmental and social crises we're looking to avert, as well as economic resilience, right?
11:38It is in our interest as a global financial community to mitigate the worst impacts of climate, biodiversity loss, and systemic inequality.
11:46And we're here to create value for our clients at the end of the day.
11:49And those are priorities that are set.
11:51And so I think, you know, the political environment evolves over time.
11:56But as long-term investors, we need to really stay focused on those fundamentals.
12:00So what is the right environment to bring together capital allocators, public, you know, policymakers, regulators, companies together in this forum?
12:10And so COP30 is one of them.
12:12This week in Singapore, we have the Sustainable Finance Advisory Panel for MAS, which is why I'm here in the region.
12:19Of course, MAS has shown a ton of leadership in terms of bringing together different stakeholders to tackle these challenges.
12:25So I think as others step back, others need to step in.
12:28And that's really the exciting part of what's going on right now, to see how do we kind of how do we shift some of those dynamics to continue to to improve and address the challenges at the right pace.
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