 Good afternoon, everyone. Welcome to this IIEA event. I'd like to thank Deloitte for hosting us today. Our speaker, Kevin McGee, was born, raised and educated in Dublin, left, as many of his generations did, almost immediately after his degree was printed. He worked in a range of financial services, institutions, mixed vision by January at Yen Ambro in London, New York and Tokyo. In 2006, he founded the company that he is now going to talk about the issues related to that. He co-founded it and he's been running it as CEO ever since. He's going to talk for about 20 minutes on the record. We're going to do a standard procedure for our events. We go off the record for the Q&A as much to allow people in the audience to chip in without any sort of concern about it being quoted or anything like that. The Q&A will go on up to no later than two o'clock. We look forward to an active Q&A. Feel free to make points and comment as much as you like. Thank you very much, Dan. Thank you all for coming. In how the financial system reacts to climate change, we are very much benefited by the tremendous increase in public awareness of the issues. Eurobarometer shows us that only 6% of people believe climate change is not a serious issue. Now, 6% of people believe Thierry Henry didn't handle the ball in 2009 in the World Cup qualifier against Ireland. So there's no telling some people. And 1% of people, including myself sometimes, don't know what day it is. So there isn't anybody left to convince in Europe, which is useful when we look at the US data. The US data is very mixed. And I have been following this data for approximately 15 years and it's just as mixed now as it was then. It's called undecided 30% and cool skeptics 20%. If we dig into the cool skeptics, we see that there are certain themes. There's a certain demographic that simply will not accept that climate change is a reality in a large grouping. And they are middle-aged to older, conservative, white men. Hashtag seriously, haven't we heard enough from you people? So we need European leadership on this issue. Without European leadership, it's quite possible there will be no leader. I want to talk today about financial services and climate change, the insurance industry, the investment industry, public sector financing, regulation and accounting. If we look first at insurance, we see global insurance premiums have topped $5 trillion and in scale that's in an $80 trillion global GDP world. We've all benefited greatly from the risk diversification that comes from insurance and the way it allows us as individuals and businesses to progress quicker, to take more personal risk. But what if that was to stop? Now that Florida property insurance becomes more expensive with rising sea levels is intuitive. Similarly for catastrophe risk insurance in Puerto Rico, we understand that. But I believe the former CEO of AXA meant we were moving to a world that was becoming more uninsurable. As an example, Australia is an enormous wheat producer and its 2016-17 harvest was 31.8 million tons. In October, the USDA changed its estimate for the 2019-20 Australian wheat harvest down to 18 million tons, all climate related. On the 4th of November this month, the Australian Department of Agriculture released a report saying that without substantial government involvement, multi-peril crop insurance was no longer viable in Australia. Now that's actually speak for the business of agriculture in Australia is becoming unviable as it ceases to be insurable. In his book Collapse, Jared Diamond urged us to keep looking at Australia as it was the continent with the most fragile environment. We're seeing Australia on the TV. Now if a farming business in Australia is unable to gain insurances, it becomes inherently riskier. The process of risk diversification through insurance twists into becoming a risk concentration back into the business itself. Now what happens to a business like that's ability to raise debt finance? It goes down. Where you can't debt finance, you will need to equity finance. Equity finance needs higher target returns and so you will shrink your business naturally. It will cycle GDP lower, capital creation lower and the velocity of money again will also tip lower. Lack of debt finance availability for farming businesses and other businesses will also increase income inequality. As the only people who can start, grow and fund the business are people who are already rich. The financial crisis brought the term moral hazard into our living rooms. We see climate change losses are getting nationalized. Such as the below market government provided crop insurance already in place in the United States and maybe soon in Australia. This is the beginnings of another but much larger bailout of the haves by the have nots. And while not the subject of my talk, it is urgent that governments and multilaterals draw the lines in the tar sands on what will and what will not be bailed out. Given the data at its disposal, it is not that surprising but it is certainly welcome that the insurance industry was at the forefront of recognizing the impact of climate change. That brings me to the investment sector as a whole. Socially responsible investing, SRI, was originally characterized by negative screening. And that is excluding investments in tobacco, alcohol, fossil fuels, excluding what you did not want. That lowers your investment universe. And mathematically, if all you do is lower the investment universe, you will reduce risk adjusted returns. There's an excellent proof in the Journal of Business Ethics January 17 and there are plenty of other mathematical proofs of it. If all you do is reduce your pool of choice, returns drop. While the sector SRI grew, it remained fringe. ESG investing, environmental, social and governance, is about positive screening. So having the investment manager target the things they want, not merely ignore and avoid the things they do not want. This is impact investing. And ESG investment strategies outperform conventional investments. ESG has better sharp ratios, higher risk adjusted returns. Voluntarily taking into account environmental, social and governance criteria leads to improved performance. Now this is tremendous news. Even at last a tremendous relief for doing the right thing is good, gives better returns. So let's look at the themes. Complicated slide and I'm just going to deal with slithers of it. Let's talk about governance first. At 2017 Bank of America Merrill Lynch report showed that investors who factored ESG into their investment criteria since 2008 avoided 90% of corporate bankruptcies. A 2018 report analyzed stock bubbles and saw that between 1999 and 2017 the S&P 500 experienced eight stock bubbles. In the same time period the Dow Jones Sustainability Index USA experienced one. Taking governance into account lowers investment volatility and reduces tail risks. Let's move to social and take another slither. Multiple reports highlight the gender diversity within organizations shows higher returns. Now most of these reports don't go into the cause effect of it, just the fact of it and that's enough. The Parks Women's Global Leadership Index shows less volatility and higher returns than the MSCI World Index. A January 2008 Journal of Corporate Finance paper analyzed 2006 to 2015 data and found that firms with a female CFO suffered less dramatic drops in equity price. Now again it just doesn't go into the cause effect of it. It may well be that firms that have a female CFO are also firms that do other things, but as a potential investor I don't care. I'll have more of that. If that's the flag then it's handy there is a flag. Turning back to climate change and the environment, the Sabine Center for Climate Change Law at Columbia Law School has analyzed a growing number of climate-related litigation. 1,023 cases up to May 2019. Climate cases are also an increasing body of law outside the United States. Summer reports showing 304 cases in Europe and around the world outside the USA between 1994 and May 2018. That study included incidentally the Friends of the Irish Environment versus the Government of Ireland court case which was a loss for the environment. Evidence of the impact of climate litigation is still mostly anecdotal. However from an investor standpoint you simply don't want your investee companies getting involved in that type of unproductive legal tussle at all. In addition there is a pivot going on in what type of climate litigation is taking place. In October a case was heard in the New York State Supreme Court. It was the State of New York versus Exxon. The State of New York was sued Exxon for deceiving investors as to its financial stability and outlook by withholding financial information relating to the prospects for climate change and carbon pricing. The judges expected to rule on that one before the end of the year. The State of Massachusetts has now launched a similar case. These cases mark a change in direction for climate litigation. The target is the vulnerabilities the appellants see in the high carbon businesses as it relates to investor protection legislation. So it appears to me the regulator high carbon businesses need to most fear is not the environmental protection agencies. It's the financial service regulators. Now I think win or lose after the New York and Massachusetts case come in we're going to see a whole series of new litigation against high carbon emitters based on financial legislation looking to write down assets and increase disclosures from those firms. Climate action 100 is a group of 373 investors representing 35 trillion dollars of investment capital. They are targeting 161 corporations that are responsible for over 80% of private corporate emissions. And they are looking to arc these companies to the targets of the Paris Accords through governance action and disclosure. Private sector investment universe is moving to become the main driver of change in high carbon businesses. We talked about insurance, talked about private sector capital. Let's move on to public sector and regulation and accounting. Christine Lagarde lost no time in flagging her intention to bring climate change issues into the consideration of the ECB under her presidency. ECB's balance sheet is 2.6 trillion euros and now growing again so it's a tremendous pool of capital. And it does take some intellectual gymnastics to try and work this into a price stability mandate. But I do believe that Ms. Lagarde is the right person at the right time for Europe. The regulations brought in by the Bank of England will compel banks to analyze the climate impact of their activities, clients and investments. That's not all good news. Two reports from in the last few weeks. One from Rainforest Alliance, the other from Boston Common Asset Management reported that just since the Paris Accords were signed, 33 banks facilitated $1.9 trillion of loans to high carbon fossil businesses. So there's plenty of work to be done. Estimates range from $6 trillion to $20 trillion, the total value of assets that may become trapped as a result of changes or different interpretations of financial and environmental regulations and laws. These assets may become prohibitively expensive to exploit due to lack of debt financing. Or if you could exploit them, it may be that there is no market for the products. How the accounting profession deals with reporting on climate change is a evolving space. I certainly don't feel comfortable coming before this audience and starting to tell people how to carry the one. In 2015, the Financial Stability Board established the Task Force on Climate-related Financial Disclosures, CFTCFD. Its goal is to develop voluntary, consistent, climate-related financial risk disclosures for use by companies in providing information to investors, lenders, issuers and other stakeholders. The TCFD has a tremendous following and comes just at the right time for the growth of ESG investment. Without comparable statistics, it would not have been possible for the ESG community to reallocate capital. Another example and regulation, the UK's Financial Reporting Council has written to audit chairs and financial directors in an open letter saying that they are going to, in this audit season, introduce ESG criteria under Section 172 of the UK Companies Act, law already in place, being reinterpreted. So there in insurance, investment, government agencies, regulation and accounting, we see a lot of change. The IEA in their annual energy report released last week showed underwhelming news for the fight against climate change. And while the percentage of renewables in the growth of energy continues to do very well, oil and coal use itself continues to grow. The wedge between current practice, stated policy and sustainable development goal continues to widen. In a quite horrible feedback loop, the IEA reported that a fifth of all of the increase in energy use last year was due to people adjusting their behavior as a result of a climatic event. IEA, a hotter summer requiring more energy for cooling. So that will continue to get worse. In the period 2000-2015, I would say issues of climate change were on balance addressed by society through environmental regulations. The US introduced the Energy, Security and Independence Bill in 2005 to mandate the renewable fuel standard in road transport as an example. In the European Union, the fuel quality directive and the renewable energy directive were mandated to decarbonize road transport in Europe. These regulations have been running for or are about to have run for approximately 15 years, and they either have or they are about to have achieved their stated goal. And their stated goal was to decarbonize road transport by 7%. Why so meager over 15 years? To give you an example as a way of explaining, let's look at one of my favorite things, waste vegetable oil. And the waste vegetable oil in the production of renewable diesel in Europe. Now this has an uneaten happy meal to the wheel of the car CO2 reduction of approximately 100%. So it's a great thing. In the early 2000s, restaurants would have to pay someone to take waste oil away. And this is after the introduction of environmental regulations preventing them from throwing it in the toilet. The collection firms developed taking the waste oils from restaurants to depots, aggregating it, sifting it, cleaning it, and then ultimately delivering it to someone who could turn it into a renewable diesel. The EU introduced an incentive scheme. And the incentive scheme, as is appropriate, tagged on a traceability and audit requirement. A good thing. So then every party that was involved in the collection, storage, distribution and manufacturing of biofuels from waste oils. And every location that the waste oil of the biofuel moved through or was stored at had to be registered and audited by an appropriate authority. The largest of which in the space is the Cologne Germany based ISCC. It's a non-electronic blockchain, a paper chain, a massive amount of administration and work. The UK annually consumes 1 million tons of used cooking oil going into renewable diesel. And that 1 million tons requires 22,400 individual chains of documentation. Now when change is coming through industry, whether people see it as an opportunity for them or a threat to them, it's natural that they group together in lobbying organizations to fight their corner, to project their cause. And in road transport in Europe, you have the oil companies deriding the whole idea, talking about how it could damage the oil pipelines, that the traceability system was going to be too hard, too difficult. Car companies were worried about their engines and how many cars they were going to sell and were they going to be sued for broken engines. The NGOs were forthright in their opposition of biofuels. Renewable energy producers couldn't agree on a single messaging and so the whole thing was tremendously confused. In my observation of how Brussels dealt with it and how the US Congress dealt with it, the least worst option was to slow pedal. In how I regard those individuals in Brussels and in Congress, in the US, all I saw was extremely efficient, well-meaning individuals looking to bring society forward. They didn't create the confusion in this. All of that is why after 15 years we're looking at the decarbonization of road transport in two jurisdictions by 7%. We haven't started marine and that's just as big for decarbonization. And we're only just getting started on aviation. Changing anything in the industrial world takes a tremendous amount of time when one is doing it under compulsion. And I have no reason to believe that the decarbonization of any other industry would be quicker where it is similarly being done under compulsion. To achieve the Paris Accord goals by environmental legislative compulsion against the will of industry, I would say from my experience is now impossible. We have already run out of time. And that sounds extremely bleak, but I am the most optimistic I have been since I entered the world of renewable energy 13 years ago. We've all been amazed by the pace of scaling by well-funded private companies such as Amazon Web Services, Netflix, Uber, even WeWork. They may make no money, but they scaled incredibly well. That pace is down to motivation and that motivation is investor-led. In the period 2016 to 2030, I believe issues of climate change may be driven more by voluntary investor demand assisted by regulations. We see that the insurance and investment industry is quickly moving to an ESG environment. The informational requirements for climate-related financial disclosures are being met by the TCFD. And I feel comfortable that once the investor base and the financial sector demands it, corporates can adjust incredibly quickly when they want to. So I often get asked at schools and universities and otherwise, what could a private individual do for the climate? What's the best thing? The potential answer is, number one, vote for environmentally-minded folk. Number one. Number two, eat little beef. Number three, never be in a car on your own. I am now minded to change that and say, number one, vote for environmentally-minded folk. Number two, contact your pension manager or contact your company's pension manager or your union's pension manager. Investigate the possibilities of switching the funds to ESG. And if you're comfortable and satisfied, do it. That will be enough for an individual to make a difference. And so to try to end on a little bit of humor, if you do manage to do that, I would suggest you get yourself to a burger drive-through alone and gorge yourself. Like, add the nuggets. A dessert burger. Like, is that a thing? Let's make it a thing. Thank you very much and I'm happy to take questions.