R.A.C.E - Financing The Transition To Net Zero

foreign [Music] and I'm delighted to be here with you today and with this distinguished panelists to discuss transition to Nets cereal to my left I've got Sonia founding partner Adventures Vice chairwoman of carbon direct and chair of G fund advisory panel and last but not least Toca care of ESD for Europe Middle East and Africa at JB Morgan a warm welcome to all of you now the topic of today's discussion is financing the transition to Net Zero this is quite important for us as a DGM as Abu dhabi's International Financial Center we are the place where the demand and the supply of Finance comes together and where green and sustainable products will need to be a scale up across all different type of sectors whether we talk about fintech asset management banking or insurance as a result we are creating a powerful cluster for change in full alignment with the UAE vision and the net serial commitment now took up let me start with you what is the role of sustainable financing supporting the transition to a Greener economy um well first of all thank you very much for asking us to join this um fantastic sustainable Finance day look we have an enormous job to do to avert a climate catastrophe and we don't have very long to do it and ultimately one of the nice things about this in a way is coming out of the global financial crash financial services and its various different segments were seen to be the problem uh very much when we look to this big climate crisis we are having to deal with the different segments of the financial services sector are absolutely part of the solution why do I say that because in order for us to get to Net Zero a net zero World by 2050 and to hopefully keep the temperature rise to know more than 1.5 degrees above pre-industrial levels the consensus view is that that's going to cost between five and six trillion dollars a year every year between now and 2050 you simply cannot raise that sum of cash through the public sector alone uh and if you look for example just take Europe uh between now and 2030 the European Capital markets Institute is forecasting that it'll cost around 11 trillion Euros to get Europe on the trajectory to a net zero world now if you take the covid relief package that we had during the pandemic you put that together with the new the green deal monies that the European unions put together that takes you to no more than two trillion Euros so there's a massive Gap there and in order to fill it financial markets are going to have a big role to play Banks like JP Morgan will have a big role to play which is why we've made some pretty major commitments the biggest of any Bank in the world arguably in this area because we need to do our part and no this isn't philanthropy this is because we need to do this this is in the interests of our shareholders and of course our clients that are at the center of everything that we do thank you but what exactly or specifically is JP Morgan doing to help the transition well we have committed to finance and facilitate two and a half trillion dollars between where we are now actually started in 2021 going through to 2030 to deliver against the UN sustainable development goals and a trillion of that is reserved for climate um just to give you a sense of our progress towards that goal um we delivered 106 billion dollars worth of Finance to deliver on the climate aspect 284 million dollars worth in total last year uh which means that we're not just in the business of making these commitments we are absolutely determined to deliver against it probably the weather kind of from a financial markets point of view uh it is most deep is around the different ESG labeled debt products one of the interesting things is that in spite of what has happened this year the geopolitical situation the challenges central banks have or controlling inflation the cost of living crisis all the other issues um if you look at ESG labeled bonds as an asset class they have actually proved to be more resilient than the broader market so the the volumes in the broader Market of down about 27 but if you look at the ESG labeled bonds it's down about 17 and I still think we'll probably have by the end of this year just under a trillion dollars worth of issuance there so I think that just shows how much demand there is actually for assets in this space indeed there is a huge demand and I think as mentioned by our CEO um early this afternoon we at adgm have now published a consultation paper on ESG disclosures but also on product requirements to promote the issuance of green bonds and the setup of green funds again there is a it's a need to provide Clarity to the market as well to all of you as to what really constitute a sustainable or green product so we look forward to continue working with JP Moore kennel the other stakeholders to move the agenda forward now nearly let me turn to you now between cop 26 and cop 27 deep and has expanded I believe around from 450 to 550 members now in climate Solutions and clean tech Investments where carbon directly is focused the feel of opportunities is clearly expanding what perspectives can you offer on drivers of growth in Net Zero Finance I also want to add my thanks to adgm for hosting us and to you Mercedes as well as our moderator and hostess when you look at the expansion across the financial services industry in leaning into our transition goals of course Finance understands that we own the systemic risk that is presented by climate change uh it's it's not really possible to head your way out of climate risk um and so we want to be a part of the solution but then of course financial sector leaders are also starting to appreciate the great deal of opportunity that will be presented not only in financing the transition out of the high emitting economy that we have but also in building the new green economy that we want to step into by 2050. so in order to accomplish this our founding Vision at Carbon direct is that it will require a great interdisciplinary effort to be able to achieve our goals Finance sector leaders are stepping up to work with industry companies in the real economy to work with scientists and to work with policy makers to create the ecosystem response and effort that we need to respond to this ecosystem challenge and so when it comes to the very important points that Chuka just made about the scale of private Capital that will be needed to come to the table to be a part of this solution it's very important to note a few key inflection points that are making this space increasingly investable for private finance and in the in the climate solution space in particular which you mentioned Mercedes at Carbon direct where growth Equity investors in private technology companies that are creating the solutions to build the green economy that we want so three key inflections that are important first of all demand with all of the corporations that have made Net Zero pledges sent but before cop 26 and after these companies are now procuring the Technologies and solutions that they need to deliver against their interim decarbonization targets and as that demand Rises economies of scale are tipping which is bringing down costs and improving unit economics the second is Supply technology itself is continuing to advance which is also bringing costs down and bringing more solutions into the field of investable opportunities that private investors private Capital will be able to consider that's very important and hear the role of scientific and Technical expertise partnering with capital is particularly important in identifying the most viable Solutions so at Carbon direct we're employing over 30 carbon scientists who help to evaluate the types of Technologies and projects that we support and then last but certainly not least policy we now have about 50 carbon pricing regimes around the world greater convergence and collaboration will be important in organizing that but policy is stepping up in terms of carbon pricing in the U.S we just passed a huge package almost 380 billion dollars of tax incentives in the inflation reduction act to create to break down the green premium that exists for scaling up Solutions like green hydrogen carbon capture carbon dioxide removal and things like this and so all of these things are working together to create an increasingly favorable environment to crowd in the private investment Capital just as Juco was describing that we need to continue to see indeed and one of the issues we're looking at here as well at adjm is how we can bring Innovation with sustainability to scale up the agenda but very briefly nearly just of curiosity are there any specific technologies that you are most excited about so probably like many people in this room very excited about green hydrogen of course green hydrogen is a cross-cutting solution that can be a transition asset for many high emitting Industries the iea estimates that it will cost 1.2 trillion dollars in investment in green hydrogen by 2030 to be able to achieve our long-term Pathways and that money is starting to step forward in the U.

S we now have the 45v provision in the inflation reduction act that provides a tax incentive of about three dollars a kilogram four green hydrogen production that is bringing this online at scale we're also really excited about carbon utilization I like to call it the circular economy of carbon we have so much carbon we're going to need to be capturing and managing that if we can actually do something with it has that really adds to the economic incentive for capture for managing it in the first place one technology that we just invested in is with a company called Airco that takes carbon dioxide with green hydrogen to be able to produce sustainable aviation fuel these are the types of innovations that are investable and out there working in the world right now and we need to continue to see these scaling up over time travelers thank you and in fact we have a session coming up that will cover cover markets here in the UAE and globally now Sonia let me turn to you now from an early stage BC investing into climate Tech what use your perspective in building a new investment playbook for the climate space out of Mina so um hello everyone we're going to inject a little bit of energy because I know it's the middle of the afternoon so for those who aren't familiar with Venture silk we've been around for nine years born in Dubai raised in Dubai we have offices all over the region now A couple of years ago we decided to take a more thematic approach with our investment Theses and we chose two themes one is fintech off the first fintech Focus fund and we launched and we're I probably shouldn't say it's not official yet but we're launching the first climate fund I guess big announcements a week um so yeah we're launching the first climate-focused fund with the global mandate out of the UAE and its early stage so I think it's great here actually because you have a variety of perspectives and we kind of all sit at different parts of this value chain we're there the early part so we're there to invest in early stage Founders we're focused on seed and series a we're looking at food and act Tech Supply Chain transparency carbon economy of course and climate fintech we believe there's a lot of intertwining as nearly just said between these sub-sectors as well um and so we want to capture that kind of those cross-pollination opportunities Within These sub-sectors across these sub-sectors and help these companies grow um of course climate is front of mind with the UAE hosting uh cop 28 next year but it's nothing new right um as you've probably noticed um it's getting a lot toastier it's definitely a lot warmer right now this uh this month for for the UAE and Neely will jump in with some data points after me on that um but we do believe believe that what the UAE is good at is actually acceleration and so even if the UE may have been a little behind with regards to focusing on the climate space it's very much in acceleration mode and I think you're seeing that already with a bunch of announcements made Antonio what about the application of ESG more specifically at an earliest stage tell us a bit more about it yeah so um for us and I think you guys will agree um you have to walk the talk right yes be very hypocritical for me to expect my portfolio companies to to adhere to ESG if we're not doing it ourselves so what we decided to do Adventure soup is actually we have an ESG Committee in place it's made up of one GP per fund one senior associate for fund and one non-investment team member we have quarterly kpis uh that we need to adhere to we're 60 female so I guess from A diversity standpoint that's good um but there's still a lot of work to do on the E and the g um which uh which some people uh tend to forget about it's not just about the east as well and so um so we're focused on that meanwhile we also want to make sure that we have kind of consistency across our funds in terms of the types of questions and the types of expectations we have of the companies we choose to invest into because we believe that if you can kind of help and support companies to start adjuring to ESG at an earlier on stage in their in their trajectories then they don't have to do the backtracking that we're seeing some of the later stage companies have to do now and so it's kind of a two-pronged approach for us it's looking at ourselves first kind of introspective and then how do we help our portfolio companies as well fabulous now we well still cop 27 is still going on coming to an end now in shape my shack and we have cop 28 inshallah very soon Happening Here in the UAE a question for all of you um perhaps let me start with Chuka how does it influence the sustainable Finance agenda in the Middle East and what does it really really says about the leadership role taken by the region particularly ahead of cop 28. so two things I will be mightily surprised if at the end of this week there is a resolution to this issue about the extent to which the developed World pays for the developing world to the transition both in terms of the cost of mitigation but the cost of adaptation to change that's already happened so I I think that's highly likely to still be quite a bigger gender item and I think that does put the UAE in a position to resolve an unresolved issue and a strong position given the strength of the economy but also it is part of the developing World some would say but secondly um I think one of the great shames particularly of cop 26 is that the oil and gas industry and heavy emitting Industries who some have pointed the finger at and said are the problem but to my mind are a massive part of this solution need to be more front and Central in this agenda not least because I mean if you look at the you know that we're not calling them integrated oil Majors anymore they're integrated energy Majors they are amongst a few companies that cannot actually have the scale of capex required to fund the new technologies and the rest so I think given where industry is centered in the UAE and oil and gas has been a particular part of the economy here um I think cot 28 provides a great opportunity to make sure that they are properly at the table and part of the discussion instead of being painted as pariahs by one part of the environmental debate um and to my mind actually I mean the UAE has been ahead of this agenda relative to other economies not least because it has fitted with the vision of diversifying the economy away from oil and gas in any event so I think it puts in a particularly strong position I mean it's fair to say I mean I've just come back from 27. there is huge expectation of the UAE uh cop 28 everybody thinks is going to be the best run cop that has ever been and of course I have no doubt that should be the case inshallah very good no I really like what you just said um working with the pollutum uh is not transitioning is about helping the polluter transition away right I'm not punishing the pollutant really your views our refrain from adding comments about the difference in logistics I also just got back from charmel Sheikh and one thing I can tell you that it is that it was hot when the data is coming now both cup and cup 28 will take place in the Mina region where it's actually in a business as usual scenario which is the one that we're in right now warming four times as fast as North America and Europe and so this really shines a spotlight in an important way on the human realities and urgencies of the work that we're trying to do yeah it's really interesting also to think about the march across the cops and the ways in which different presidencies set the agenda at cup 26 I said in the leadership of G fans the Glasgow Financial Alliance for Net Zero people call this the finance cop because the city of London is proud of the role that it played in financing the first Industrial Revolution it wants to be Central in being a part of thinking about how we Finance the green Industrial Revolution cop 27 is presented as an African cop in many ways topics like loss and damage a focus on the just transition are Central to the agenda and they need to remain Central to the agenda because we won't be able to have any transition at all if it's not a just transition and then when we fast forward to cop28 I hope that there will be a continued focus on the serious practical realities of the transition that we have ahead in the energy sector how do we manage an orderly transition that winds down traditional energy but pushes into the future of energy and power in a serious way it's written all over the walls how are we transforming the future and I think that this futuristic vision and energy that comes from the UAE will be a big part of what is essential in the next round not to mention speed I'm so impressed with how quickly this country has built its industrial economy in just over 50 years people say when it comes to the Net Zero transition we now have less than 30 years to complete uh industrial transformation greater than the first Industrial Revolution which took 80 years and so the speed the race which is the name of today's event that we have ahead can really benefit also from the cultural attributes of the community and Leadership here in Abu Dhabi and the UAE Sonia for that um no eloquently put nearly obviously agreed but I guess I'll keep it short I mean I think you know obviously the UE sits within a wider region and I really think that the uae's ideally positioned to act as a unifier within that idiosyncratic region and really kind of head on look to to tackle some of the the climate change challenges that we Face especially harnessing technology and creating that Nexus between technology and and addressing climate change and so that's what I personally am looking forward to because that's what we invest in but I think that in general the UAE is ideally positioned to do that indeed and I think building on all of your comments the UAE is definitely not starting from scratch I mean we are the home of Irina the international renewable energy agency we have invested over 17 billion in energy projects around across six continents in the world um we're working on carbon capture Technologies hydrogen so I think definitely the UAE will play a key role in collaborating and bringing together very important the public and the private side to move forward the agenda ladies and gentlemen I think um this is a great place and to end our discussion remains only to thank all of my colleagues from adgm for making this wonderful week and especially the ray Summit up a possibility a big shout out to Chris in particular and of course let me thank our panelists for your leadership vision and insight it's been a great pleasure thank you very much