 Good afternoon everyone and welcome to the financing the net-zero future We've got a terrific panel for you today to discuss the challenges and opportunities To unlock the 50 trillion of financing that we'll need over the coming decades to accelerate into a net-zero future Before introducing our Outstanding panelists, I'd first like to share with you a video pre-recorded by John Wharton Climate counselor to the secretary of the US Department of Treasury who was unable to join us But wanted to share with us this short message Thank you very much for the opportunity to speak with you today And thanks to the World Economic Forum for inviting me to say a few opening words at the top of this panel on Financing the net-zero future as the climate counselor to US Treasury Secretary Janet Yellen I spend each day working with experts from across the department to leverage Treasury's tools and Authorities to affect and enable the transition to this administration's goal of a net-zero emissions economy The challenges posed by climate change are daunting But as this audience knows very well, there are extraordinary economic opportunities Embedded in the transition to a lower carbon and ultimately net-zero economy and The question is not whether this transition will occur But rather how quickly who will lead and who will be left behind and these are questions not just of tremendous environmental consequence, but tremendous economic consequence Fortunately the trends in both public and private markets are clear and positive countries representing now Three-quarters nearly three-quarters of global emissions have made net-zero commitments by mid-century and many are backing those up with strong 2030 targets along the way and Nearly half of global assets under management are now attached to mid-century net-zero commitments as well These commitments are meaningful, but must be followed by concrete measurable actions and today We know that market participants are contending with significant data and information gaps and would benefit from more clarity on What sorts of investment opportunities are consistent with low greenhouse gas emissions and climate resilient pathways? Supporting the flow of capital towards activities that are consistent with these pathways Requires building an ecosystem of data information practices and procedures that enable financial markets Market actors to fully integrate climate consideration into their decisions This information is critical for pension fund managers as well as pensioners who want their investments to align with their values The public sector plays a pivotal role in helping to inform guide and D-risk private capital flows for alignment with climate goals and to ultimately unlock trillions of dollars of climate finance I'd like to briefly highlight three treasury-led initiatives that are seeking to do just that first Secretary Yellen chairs the Financial Stability Oversight Council or EFSOC a grouping of the US 15 independent financial regulators As specified in President Biden's May executive order on climate-related financial risk Treasury is leading an EFSOC process to issue a report to the president on Member agency efforts to integrate consideration of climate-related risk in their policies and programs This assessment will include reporting on any actions the council recommends to mitigate risks to financial stability and Enhanced climate-related disclosures and you should expect to see this report and assessment in the weeks ahead Second treasury is co-chairing with China the G20 sustainable finance working group where we are working with our G20 counterparts To improve information on climate-related financial risks and opportunities to enhance the interoperability of tools and approaches To align investments to climate goals and to encourage the multilateral development banks to align their operations with the goals of the Paris Agreement And finally treasury is working with the leadership of the multilateral development banks directly to raise the ambition of their private climate finance mobilization targets to increase MDB support to address technology risk in developing countries to enhance developing country domestic green bond markets and to increase support for climate adaptation work among other issues Strategic de-risking of private capital for climate purposes must become a bigger part of the MDB agenda More generally of course the Biden administration has proposed an historic climate investment agenda Represented most immediately in the bipartisan infrastructure deal and current reconciliation proposals Both packages would lead to historic amounts of public capital for mitigation and adaptation in adaptation Through for example increasing the resiliency of our infrastructure to a change in climate Constructing thousands of miles of new transmission transmission lines to accommodate the addition of more renewable energy And investing in a nationwide electric vehicle charging network These investments represent the best chance we have to turbocharge the US economy towards a low carbon future and to position our industry and job base For strong and sustained growth for the decades ahead and we call upon Congress to pass the bipartisan infrastructure deal and the president's FY 22 budget as soon as possible But ultimately our success in confronting in both confronting the climate challenge and in harnessing the economic Opportunities embedded in the net zero transition will be about how fast private markets move and adjust We know that and we applaud the leadership of those firms that are leading the charge and we encourage those Who are still sitting on the fence to recognize the pace and Inevitability of the transition of folding it unfolding around us and to take quick and decisive action Thanks very much again for the opportunity to speak with you today Well, that was a terrific introduction by John. So it's false to me to introduce our terrific panel today Celine Herber the group chief sustainable officer for HSBC Torben Morgan Peterson the chief executive of pension Denmark and Leslie Mazgolf vice president the CFO of the New Development Bank in China So before getting into the meat of this, I really want to ask you or question about this sort of motivation Could you briefly share with us? What motivates you to work to accelerate climate adaptation within finance? Maybe silly if I start with you at first And hi view great to join for the panel today and I think what motivates me I mean, I've actually recently switched from you know a decade of working one of the big four and in a similar kind of Sustainability leadership role into the group chief sustainability officer role at HSBC And and for me it was a no-brainer because finance is really what shapes the future You we've got the biggest industrial transformation ahead in the next decade across every sector Where finance goes where money goes and HSBC is a bank, you know We have such a big footprint in emerging markets where the challenge Is going to be the greatest in terms of the decarbonisation pathway ahead and if you look at future emissions growth 90% of that is an emerging market. So You know a very exciting opportunity to get a systemic shift in finance, obviously Torben Thank you both to you and also to General motion for this very inspiring introduction and Seline pointed out the To achieve the business goals from the Paris Accord We have to mobilize private capital and large scale which fits actually very well into the purposes and Goals for a long term investor like a pension fund like like ours and to make a little that should give you more less a philosophical Example, I mean a young member entering into Denmark's pension scheme this year Maybe a 20 year old the female carpenter and she will retire in 50th time that means Something about 27 27 July and as she has a female she probably will have a Life expectancy for a further 30 years. So she will be around in my patient scheme to the To the other end of this Sensory so we are actually visiting on a very long term basis and we now I want to provide her with a Nice good patient with she retires but also to Make my contribution to make sure that she can retire in and in a world Which is worth living in so to say so for a long term a business like us. I think we have an extra level of Obligations to a focus on the the impact of what we're doing and the lovely But not surprisingly the green decision is not only a challenge for mankind is also as you mentioned in your introduction you and Very attractive opportunity for long-term a business like us especially in an environment where we are confronted with zero or minus interest rates level and and stock markets Getting quite expensive during the last Few years. So actually looking for attorneys the green decision opens up a very attractive investment universe also for those of For those in in my industry, we may be not that convinced of the necessity of taking Taking on the climate situation, but from a purely as an investment perspective If you ask the CIOs you will also get a strong support to our engagement in this area That's terrific. Well, that's a really inspiring way to start by thinking about the next the rest of this century Leslie if I just pick up with you about some motivation and your own contribution Thank you very much you for this opportunity every day When I wake up and we deal here as a new development bank with the large emerging markets of Brazil Russia India China and South Africa. I am from South Africa as you might know and these issue issues are deeply Personally if you like, you know in South Africa, we still have a energy grid system. That's 90% dependent on coal If I look at all of these provinces where the coal mines where the the coal fire power stations are located I mean, I can just see the dislocation and the immense social and economic and employment impacts that the climate transition Will have in the country where I'm from we already have North of 30% official unemployment in South Africa So the potential of further dislocation and potential massive even social and other Instability arising from a transition that is not potentially just so that's one of the key issues I would like to flag in our conversation today the need to ensure that the principle of what is called the just transition in the Paris Agreement on Climate change that the frameworks in that the detail is is ironed out because I would argue you that as much as the Investor community have now Incorporated climate risk into their investment decision-making. I think social inequality is not really seen also as as important a systemic risk going forward That's super. Well, it may be just reflecting on John's comments I mean, I think John held out of three challenges The first was to reform and evolve the development banks Role to do more in emerging markets was to mobilise capsule on a global scale to it for investment and third to enhance the data and Disclosures so maybe let's say if I can turn to you first as you think about the role the development banks can play How can you know how how are you thinking about John's rallying call for and you know developments to do more? I Think John will be spot-on that we have to go back to the drawing boards you to a to Evaluate how effective our existing institutions are and whether the design of the entire business model in the development Finance world ought to be re-looked at As you know, there's a very high degree of consensus that the focus of multilateral banks ought to shift away from direct lending and more to be de-risking machines to be To use our high credit worthiness if you like to improve the risk return profile in Sustainable infrastructure projects so that we can crowd in the large pools of institutional investor money We have battled for years though to resolve this conundrum you there's been this such a high degree of consensus that Mobilisation of our private sector capital has to be at the centre of this agenda We just have not been successful yet in designing new financial instruments in coming up with new finance solutions to be able to do that For example multilateral banks because we are all either double a plus or triple a rated We can do considerably more credit enhancement where instead of us financing project directly We take the first loss guarantee piece if you like in the capital stack and then enable Institutional investors to come in and take the senior debt piece Which then will be priced lower because of the lower risk and in that way We can improve a lot more funding to developing countries in short What I'm saying is that we need to go back to first principles to ask some of the basic questions whether the way We are structured at the moment is optimal whether there isn't scope for us to redesign our existing Institutions so the couple of days ago I heard in one of the webinars that Kenneth Rogoff for example argues that need a dedicated world Carbon Bank because he's arguing with many others that the existing institutions are not suitably Sort of organized to take on this new global Challenge to lead the world towards a lot of carbon future because we have so many other mandates as part of our overall ambition So that would be my my first comment That's very helpful. Leslie, but it's the lean Maybe if I could ask you to respond to John's second challenge, which was around data and disclosure clearly It's improving but as you sit, you know leading a bank's effort What where do you think it needs to go next and what are you looking for? Yeah, well, I'm let's start with where banks are in terms of their headline commitments right now because there's been a huge kind of Shift recently we've got I think if we look at the Glasgow financial alliance for net zero Which is kind of ahead of the COP meeting and something like five weeks time now I think we have something like 53 banks now who've committed to net zero as part of that group, right? And so what does it mean as a bank when you commit to net zero again? We all know really the fundamental thing is around finance emissions, right? And so we're actually committing that our finance emissions are going to reach net zero before 2050, which is massive That's a transformation right of any single bank in terms of the way it does financing and investment You know, so when I look at the bank that I'm in that means, you know, what does that mean for global banking? What does it mean for global markets for commercial banking where we kind of bank the kind of bid market? clients for wealth, you know for mass affluent wealth for kind of ultra high net worth for asset management Thinking about the implications of transitioning that portfolio are huge and the starting point for us And this probably builds on where Leslie was going in terms of, you know The inclusive transition that the starting point for us has to be on working in partnership with our clients on that massive industrial Transformation ahead, right? It's it's investment to finance that transition with divestment as a very last resort And so to be able to do that Well, what does that mean? We've made the commitment but it now means we need to start engaging with all of our, you know Big institutional clients on their climate transition plans, right? So we need to be able to judge the validity of those plans to advise them on the validity to offer financing instruments to incentivize performance around KPIs that showcase decarbonization to help them finance You know interesting new climate tech M&A projects for example or sustainable infrastructure investments So it's really a whole set of new capability We need to build into the bank and on the data side that's key because you know to be able to assess where clients are in terms of the transition plans We need good data. We're probably getting that quite well for some of the kind of largest clients within global banking But when we start to kind of go down the level at HSBC if I think about oil and gas sector clients We've got 25% of state owned public sector owned You know and private and the data challenge is much harder there And then you go all the way down into the SMEs and MSMEs as well So I think data is going to be key not just in terms of what you know The kind of what the emissions are but also client transition what their plans are how they're integrating it into business models And then being able to aggregate that all up at a portfolio level So we can look at over the years are we meeting our targets across sectors in terms of our decarbonization pathways? So huge help needed there and also in terms of standardization on what data because we have to be asking for the same requests as all of our peers and All of the asset managers as well Super and then talk about John also alluded to a point you made about The investment opportunities and risk and mobilizing on a global playbook The interested in your perspectives on that and in particular as one of the leading European firms You know, are you holding emerging market investments to the same standards as the ones in Europe? Or how are you thinking through the global dimension to your portfolio? Well, I certainly agree with with with your motion and I can also unless it's a point on the Need to let's say develop the concept in the development banks to be become extracted for partners and risk sharing partners When we are talking about the business in the image markets, I think that the the all I think the way forward in this area is to further develop the concept of the blended finance vehicles which have been in use up for a few years in number of countries in Denmark we have established a Blender finance doctor where we are working together with the the Danish Ministers of Foreign Affairs They're a DFI Provides 50% of capital to a doctor where we provide a Rich share program very similar to what the less dimension where the government Part of the structure has some kind of first-law position But at the end of the day they might end up with a larger return actually on the investment and then we have because we have traded away some of the risk The hate by giving away some of the the upside in the structure and by this Approach we can mobilize very large pools of private capital because just We end up with a risk control profile, which is very similar to what you Perceived is possible in in Europe US and we've actually been able to invest in a number of very and I say promising projects in Immersive markets just to mention one of them the Lake Turkana with park in Kenya, which is now the largest Offshore wind park in Africa riding in Kenya with I think 20% of Guinness power Demand is Financed in this structure. So we as a Data space because we actually now a co-owner of a large wind farm in In Kenya because the overall restructure has been designed in a say I think quite an upturned way and I think that's the way going forward and I don't give a small mark to to less this intervention. Well, I certainly agree that we have to find ways to get Developer banks involved and even a large scale, but I think I will be a little bit skeptical on your idea of Let's say a total redesign of the solution structure. I mean, they are so free. We have short time. I mean 2030 is eight nine years down the road. I don't think we should waste our time with complicated the redesign of its usual Institutions that takes tons of time. I think we should use the existing structure and Find ways although they may not be on the long-term optimal, but although Ritual to to to get To three seven structures we can find as necessary the viscous in especially real better see and an adaption Interstruct say both emerging markets, but also in Europe US and I think in this perspective We should be as investors be very optimistic on all the co-investment Abusages created by both the the Biden administration's infrastructure plan As mentioned by John one also By the even Even as as ambitious a European plan by the European Commission Where you have put up 750 billion euros to invest in Among other things the the green transition in Europe and for the first time This this program is financed by issuing European bonds It's backed up by EU not by the individual message. We see a very bold step in making a transforming the European Union to be a active player in Providing a let's say fiscal stimulus is also providing a finance to To infrastructure program. So I think that we have actually we have a quite soft spot now We have plenty of funding from public sources available in us in europe We have the developer banks Being ready to step in at the last scale in the markets and we have options like mine Seeing very effective opportunities in this area. So I think the The final message is so we should now move from all these nice talks In the web and other places and make some concrete actions. I mean, we are in a position now We have to be doers not talkers Super well, I've talked and I think that's a very good challenge. So let's move to sort of doing rather than talking here But can I just give a note to everyone listening in today? If there's any questions you would like me to ask the panelists feel free to sort of pop in your questions into the link So maybe Selina fighting come on to this sort of you know doing So one topic we were debating is Um, what are the key friction points? Which are slowing down or impeding capital flowing to transition finance? Which you know, you know, what if like so if I may turn to you If you had one idea or or maybe two ideas of of areas of friction Which you think we can address to speed up or expand the pace of capital flowing to transition from that So maybe Selina if I start to you and then I'll come to you Leslie I mean, I probably would I think so it's a good question But I probably would kind of first start by building on what both what leslie and torban said Which is you know public especially when we're looking at emerging market finance You know, we would love to invest more in sustainable infrastructure You know the challenge the long challenge has been around for a long time has been Again the lack of a bankable big enough pipeline of sustainable infrastructure projects, right? And so that comes into the role of the mdbs again And it's what leslie touched upon in the beginning because actually, you know, mdbs have limited balance sheets So rather than focusing on kind of direct kind of lending Right, the more that we can think about public finance mechanisms to mitigate risks and to help develop the pipeline itself in terms of technical assistance And type, you know project facilities and things like that that can help In a way kind of open the pipeline and structure the right kind of deals We're working With a number of different actors including the i of c o e c d climate policy institute and others on a new Label that's going to be launched called fast in from which is all about coming up with a labeling for the sustainable infrastructure Types of investments to create a more liquid asset class there with bankable projects And a kind of tech platform Which number of tech partners are helping with as well to to then kind of almost get all the project financiers together in this Particular space and and the idea really is we want to get to a point where any You know any sustainable infrastructure asset who's got that kind of common label which builds on the eu taxonomy There's just a bit more clarity of investments And then we have pfms coming in to kind of back that as well I mean for me the other side is you know, there's also a big technology play We've got if you think about technologies 2030 up to 2030 we've kind of sold for those technologies is about kind of scaling what we kind of have From 2030 to 2040 to 2050 by 2050 half of those technologies aren't yet kind of In development or a protest type stage. So there's another big You know role here for financiers to think about those deep decarbonization technologies and how can we bring them from Kind of venture stage through growth stage and upwards so that they can actually be deployed in terms of Transition and that's a completely different type of finance. So the kind of things that we're getting involved in there include project finance public private partnerships In the spaces like, you know, green hydrogen long-term battery storage green system aviation fuels But also we're looking at the venture ecosystem And actually setting up there's a lot of interest now in climate tech Which is the kind of the 2020s reinvention of the 20 2000s, you know clean tech Which was a very monolithic area around energy climate tech cuts across all of the different sectors. It's the fastest growing Investment theme within the venture capital community. It's about scaling these types of Companies it's 16 billion. I think in the first half of this year of investment in that climate tech space So we're starting to look at we're launching a new Venture growth around how we help those climate tech companies grow and a number of different funds In our asset management group for that space as well. So there are many different areas But I just focus on sustainable infrastructure and climate tech to give a starter That's right. Fantastic. So Leslie biggest source of friction and opportunities to solve it The first one Selina's already covered which is the need for a standardized harmonized Approach to what is sustainable infrastructure so that investors Institutional investors and so on can have confidence and comfort that if something is labeled Sustainable that it is indeed sustainable and that it meets their ESG criteria so the creation of a A distinct asset class as Selin mentioned is one of the key friction points And industry as she mentioned to be already working on that the second key point as I mentioned earlier on is that most investment So when you look at the emerging markets rather many of them suffer from the fact that they are lower down on the Credit spectrum and they do not meet the regulatory requirements of large institutional Investors so playing this this role this credit enhancement role of multilateral banks is a very very Peace we need to increasingly as I said move away from our focus on direct lending to use our balance sheet much more through Credit enhancement the third one is as you know Institutional investors would not invest in one single project in one country like in a solar project in Egypt or in South Africa It would be much more efficient to do those investment on a portfolio basis and again There's successful experiments It's successful investment platforms in this regard the IFC for example have a particular platform called mcpp The European Bank for reconstruction development have similar type of approaches The it will be much more effective for us to find the necessary investment platforms to crowd in investments on a portfolio basis and also I would argue Thirdly you that the insurance and the reinsurance industry also offers great Potential there's risk by bearing capacity the insurance industry in particular their business model is about understanding risk We need to make greater use as a development finance industry to work closely with the The insurance and and reinsurance industry and in that regard we have the political risk coverage Vehicle called mega for example, which sits in the world bank, but it only serves the world bank If you like we could use a political risk coverage mechanism more broadly for the mdb system So taking a view about the multilateral banks as a system and how we can nurture The complementarities and the comparative advantages of each of the individual institutions And putting that to more effective for use and maybe just finally I agree fully with torban before we create new institutions. We should make our existing institutions more Effective the question though is are they all still fit for purpose? And is there a need for some re-engineering was more the question I was posing Super well, that's really helpful. That's a great touch of ideas I mean torban maybe came back to the because so the question was sort of biggest frictions and ways to to try and smooth them out in your view Well, I think that the Leslie Potter that report the element to to also reach out to the insurance industry to Use use their capacities to mitigate the certain risks where we are investing with markets. We in general are a big use of We got for the world bank, and it's I think it's a relatively effective also Host effective way to get rid of some of the risk which we can't handle. I mean the political risk type of Issues, and I think I agree with Leslie. Maybe we should make the insurance element in the investing in those long term infrastructure projects more visible and the more Easy accessible for investors. So we will be presented project Our group of measures we are already at from the very beginning and included the design of proper insurance elements In the structure that could be a mitigator I also think that it's important to think of As the public private partnership dimension My our experience investing in which markets that when we are investing together with Governments as from as I said the Danish government or other European governments We have a very strong Maybe someone out there would not be that frightened to to to to To to to make sense to to have a relationship to have a Conflict with a small Danish business fund, but if they also have at the same time a conflict with the government Which is a big supplier of of aid the picture is somewhat different So investing as a privacy together with the government is also and it's not that easy to quantify But it's a very I think important risk mitigator Parameter and maybe it should be used in the even the larger scale because Not just because of To support us but because this is a way to get leverage to the the public funding available for For eight eight program in the emerging market, so in general think that which is fully in line with the let's say the values of world government forum. We should Maybe explore Make a deep dive into the perspective of even more comprehensive public-private approach to Generate the capital for relevant interest of the policy in which markets Thank you. Torben. That's very helpful So one question I get asked a lot is that you know finance as the three of you have argued today is pivoting And and I think in particular the last 12 months and starting to see the opportunities Not just the risks of climate finance climate change, but public policy is still Um, not pivoting as fast and in particular, I think we can all agree that many democracy struggle between Solving today's problems and tomorrow's carbon taxes is a good example where very few democracies have have gotten in place If you had one big idea of where of public policy, which would help the flow of private capital Uh, or would help the flow of capital. What what might that be? Maybe torben if I can start with you as you're on camera So so it's asking what were Where the challenge is a public policy is not always consistent with the flow of capital to net zero What would more would you like to see from the european government for instance to get to help capital to flow? From from my point of view, I think that we have strong issues in europe I mean the european investment bank And also the european bank for reconstruction development based in in russia are very strong and It's usually a long track record and a strong legacy and they have A strong and I say engagement and commitments to facilitate the same private investments in this area So I don't think as much before we we we're not in a lack of institutions But maybe we should uh, let's say Make A little bit more Clear and and if from a european perspective, you might have the point that There have been in the recent less than two years We have really too much focus on Restarting the european economy and the usually The big recovery plan for this purpose and maybe too little How the european investment bank and other institutions can Increase their support for all the necessary listeners in in the Emergency market. So yeah, I think you have a point there. Yeah Okay Seeing any policy risks, which you think has slowing down the flow of capital to transition I mean, I think those of us working on climate policy know It's like a whole landscape of policy levers we need to be using right and You know starting with the macro one, which is actually does the government, you know You know, does it have a net zero by 2050 target in line with science? And how does that flow down towards sectoral level strategies and policies, right? And how robust does that flow down in terms of a roadmap? So I think, you know, we've kind of There's a lot there. I think in terms of doing the day job It's helpful, you know Obviously for banks and those that need to manage this transition to have a disclosure mandate So we get the data we need from our clients In a clearer way to be able to kind of engage with them And track how that's happening and really kind of make some judgments around the transition And the validity of the transition I mean, the other thing also we're talking about a lot about emerging countries And I think, you know, in terms of moving the energy mix We're going to see some interesting conversations happening at Cop and five weeks But you know, there's some some more movement around now around the support that can be provided between east west and north and south around Early coal retirement, right? Because there's a move towards the phase updates of 2030 OECD 2040 non OECD But actually do need an element of Of evaded coal in the mix after 2040 But actually how do you retire effectively all of those young coal assets and many Asian economies, right? You know, in many cases it's only 10 years old And actually what support can be provided so that we we actually get a kind of managed transition in that respect And there's some really interesting kind of public private financing mechanisms that are coming through there. So Yeah, a variety of answers. I can't give you the one silver bullet. I'm afraid High carbon price would be nice, but we know that You know, there is no silver bullet And so maybe turning to uh lesbians, you know, what are the most You know critical issues in public policy that you would you would see would help the flow of capital in in your area I think firstly, um, as you know, uh, many governments now in half of the world's gdp Produced in countries that have net zero Targets a net zero commitment is clearly a very important one and as we go towards cop26 we end to see that number of countries Increasing, however, what is required as you know, you is for that to be codified in transition plans There are for example focused on 2030 and even earlier So much more detailed level granular plans are required at the public policy level Which will inspire the change that needs to happen in the rest of the economy The second biggest gap I would argue you is in the space of regulation and supervision I mean, as you know, there's already a discussion among central banks that came out recently with the Book on green swan where they effectively argued that the role and mandate of central banks have to be reconfigured Monetary policy and the way interest rates are set have to be geared towards the net zero World in a similar way these rules of the game will help the private sector to be To act within the newly defined rules and then finally, I mean I would also Again want to reemphasize the point I made around the just Transition I think that we are potentially going to have significant Transitional challenges if you like when we look at the impact on emerging markets I mean as you know and and Tobin already highlighted about the Europe I'm not say Europe is probably the leader out there undisputed climate leader with respect to the sophistication of the policy that have been developed already have for example a transition fund I don't know of many other or any other sort of continents or regions where there are such detailed plans in place And the reason why emphasize this is because whilst you can retire coal plants in Europe in many parts of Africa. We are still so dependent on those coal fire jobs