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ESG Investing & Sustainable Finance
Explore bi-monthly episodes where we feature the key industry leaders sharing insights about sustainable business, responsible finance, and green economy. Available in audio, text, and video formats.
Guests Speakers: Andre Chanavat - Head of Product Management at Refinitiv, Third Party Risk and Antonio Zapulla - CEO Designate of the Thomson Reuters Foundation"
|What you need to know about WEF 2020: From Davos with Andre Chanavat|
Episode 9 | Duration: 17 minutes
Learn about the latest news from the 2020 World Economic Forum Meeting in Davos: what’s happening, what are the key themes, and which companies came up with the most impressive statements? How does the financial community approach “Carbon Correction” and how institutional investors respond to the rise of ESG? And what are the key trends dominating the topic of Green Crime? Discover the answers in our special episode from within Davos.
Keesa Schreane [00:00:36] Thanks for joining this special World Economic Forum Davos podcast. This is Keesa Schreane and we have Andre Chanavat, Refinitiv's Director of Product Management who is live in Davos at the World Economic Forum. Andre, thank you for joining.
Andre Chanavat [00:00:53] Thank you.
Keesa Schreane [00:00:53] So, Andre, take us behind the scenes at Davos. Lots of discussion around climate urgency. And then you have Gretta Thunberg's passionate words. What are some of the climate change themes and which voices are emerging?
Andre Chanavat [00:01:07] Yes. Good question. So obviously with the WEF this year, I don't know if some of the listeners have read the World Economic Forum report on what were some of the top risks perceived by some of the business leaders and politicians alike. But actually, in the top ten risks, I think most, if not all of them were about climate change and how companies are going about addressing that. Every company that's here is pretty much delivering some sort of a positive environmental message. So, for example, I think Zurich Insurance, they give away these blue bubble hats. And to everyone that takes it, they plant a tree. Sustainability is just such a key, key theme here in Davos this year. Everyone's talking about it.
Keesa Schreane [00:02:39] So great - it's about sustainability, ESG, even green crime. All of those themes are really emerging. One of the themes that is pretty important at this point is " Carbon Correction". Could you tell us what you're hearing about in terms of carbon correction and how that's resonating with the attendees?
Andre Chanavat [00:02:57] So it's actually resonating really well. And what David's blog really opened the lead really on putting numbers, you know, based on information that we have on exactly what that potential global cost of carbon could look like, saying it's very significant. So, you know, we're really talking about, somewhere between 1 and 4 trillion dollars worth of cost that is not being priced in by the markets today. And we also know, having done other research around the carbon question, we've got our own database and we look at internal carbon pricing, for example. And there aren't that many companies that publicly state that they have an internal carbon price. So we identified around 80 companies that have publicly stated what their internal carbon price is. And that's important because it means that the companies are doing an assessment about whether they're going to open or kickstart a new project, and they're going to incorporate an internal carbon price in this analysis.
Andre Chanavat [00:04:43] But there are many, many, many companies. We've got seven thousand one hundred companies in this database. And if you see that, there's only about 80 that actually report on the internal carbon price. There's obviously, there's a question mark. And here are companies really breaking. And even the European Union's emissions trading scheme, which is the most mature globally, and that's around, a 24, 25 dollar per ton. You know, companies are really thinking about what the potential price of carbon movie if you had a carbon tax, even. So a lot of the discussions that go on today is around shifting and then engagement and banks helping companies through that potential transition risk and doing it in an orderly way. So what we want is an orderly transition. A low carbon economy, but what we don't want to risk is where governments have to, you know, enforce very strict policies. This is not functioning now. We can't really wait in order to implement this.
Keesa Schreane [00:06:26] Okay, great. Sounds good. So you are mentioning the blog by David Craig, CEO of Refinitiv on this topic. Thanks for sharing that. We're talking a bit about corporations as well. And I know that a couple of corporations have made waves, great statements and really making bold statements around commitment. I'm thinking about Black Rock, Microsoft, for example. Could you give us a bit more insight into what's happening with the statements that these large companies are making and the examples that they're setting?
Andre Chanavat [00:06:59] So I'll start off with Microsoft, because it was a very bold statement, obviously, of all the companies, including ourselves, you know, going all carbon-neutral or aiming to go carbon neutral. But What Microsoft has announced and going carbon negative. I mean, even taking away emissions that they've even produced in the past goes above and beyond. And obviously, this is impressive. It's a time-based goal as well. So, you know, I think it's around by 2030 that they aim to implement Microsoft's going to carbon negative. And we know this the scale of the carbon challenge in front of us. And I think maybe, you know, carbon-neutral is great, but there's obviously a need to do even more.
Andre Chanavat [00:07:59] So you're seeing other initiatives like the Trillion Trees initiative that was kicked off by the World Economic Forum, which even Donald Trump in his speech now supports for that initiative. But there are many other companies that are getting behind this as well. So that's interesting. But yeah, we're seeing a lot of companies going for it. It's as positive. And I think there is this general feeling of this momentum around this topic that it's impossible for, I think, boards and C-level members to not address this issue, regardless of which sector they are in. You know, that's it's something that they're definitely looking to incorporate and as part of their strategy.
Keesa Schreane [00:08:52] Yes. ESG is crossing sectors, crossing industries and having an impact on the market in general. One of the things that we really wanted to point out to as well is how institutional investors are responding to these themes. So the themes that you mentioning that companies and organizations are really setting out agendas, how are institutional investors responding? What tends to be the conversation around ESG and the commitment that these firms have taken?
Andre Chanavat [00:09:23] Right. There's a lot of different approaches that institutional investors are taking, but I think what we're hearing loud and clear is investors. Basically ESG is just seen as a way of, you know, reducing your risk and also enhancing your returns. We've moved on from the era where ESG was a means of just excluding or divesting from particular stocks. But it is actually a tool to engage with companies, change corporate behavior for the better in the long term. And ultimately, those institutional investors care about long term value creation. And and these are obviously not just long term issues. These are issues, ESG issues that address the now, which is critical.
Andre Chanavat [00:10:50] Other interesting insights I've been hearing from other institutional investors, some are saying that with all the focus being on climate change and climate-related data, we shouldn't be blindsided by just focusing too much on that. We should never lose sight of both social and corporate governance data as well. So we've heard various banks, that are cognizant of the fact that, yes, customers are demanding, investments that are going to be positive from a climate change point of view. But in the S as the social and the G as the governance, you know, these are important quality factors to look at in terms of how a company is run, what how is it retaining its talent. ESG gives you that window into that culture, which few of the data sets can provide.
Keesa Schreane [00:11:54] So reducing risk and improving return obviously key for investors, but also really looking at social impact in governance is something that can move the needle. In terms of just wrapping up, what do you think will be the key achievements of Davos 2020 that will impact the markets moving forward?
Andre Chanavat [00:12:14] I think Davos 2020 really again this year with the focus really being around climate change, the Sustainable Development Goals, the UN Sustainable Development Goals. A lot of discussion around the consolidation, standardization, and harmonization of standards. That's quite a mouthful. But there are, as many listeners may be aware, there are many different reporting standards for ESG. And today, I think Davos 2020 has brought a spotlight on how can we consolidate these, standardize them and harmonize them over time. So there's a lot of conversation around what are the key factors that we need to focus on and the future of Sustainable Data Alliance, where we partner with the World Economic Forum, amongst other partners like the U.N. It's key to support the investment community, to really focus on what are the primary criteria that we need to help the investment industry to measure against. Because there are many, many different factors out there. But which ones are the ones that really matter that will support SDGs and the transitions to a low carbon economy and a more equitable, fairer system? I think Davos 2020 will definitely put a stamp on that.
Andre Chanavat [00:14:06] I think also just on the climate change pace, we're really getting into the detail now about quantifying what is the carbon risk is, was that transition risk is. And obviously, David Craig's blog sheds light on that. There's obviously a lot more work going on behind the scenes and how we're partnering with various companies in order to get a better handle on what that it is and how investors can help guide their customers to hopefully an orderly transition.
Keesa Schreane [00:14:43] Great. So from bold statements by individuals and companies to quantifying carbon risk, climate change in green crime to investor values and really harmonizing reporting standards, lots of great information and direction coming from you, Andre, live at the World Economic Forum for Davos 2020. Andre, thank you so much for joining us.
Andre Chanavat [00:15:05] Thank you. Thank you very much.
Kesa Schreane [00:15:08] Andre shared his views on Davos 2020, and now Antonio Zappula, CEO of Thompson Reuters Foundation, details another important issue impacting the market and discussions at the World Economic Forum. Green Crime.
Antonio Zapulla [00:15:24] What we're really seeing is that there is definitely a spike and an increase in green crime. And I'll give you perhaps two examples. One is Brazil. We've seen a huge increase in illegal logging and deforestation in Brazil. There's a number of reasons. One, it's very difficult, for example, to patrol the Amazon, which is effectively where this is taking place. And also the government has cut back policing in the region. So we've seen drug cartels actually moving from drug trafficking to illegal deforestation because it's much more profitable and it's less risky. So we've seen this trend happening in Brazil right now.
Antonio Zapulla [00:16:04] Another trend that we're picking up through our reporting is palm oil. Malaysia and Indonesia are the biggest producers of palm oil around the world. And the demand is mostly coming from China and it's coming from India. And what we are actually noticing is two things. One, China effectively is outsourcing deforestation. And then the demand for palm oil permits to effectively, you know, introduce the plantations. And it is driven by corruption in both countries. So we're talking about illegal plantation of palm oil. It actually leads to fires. Fires is a huge issue in Indonesia right now. So what I'm trying to say is that there is a human cost which is very tangible and is very present, yet difficult to quantify. But the trends are all there and they are pointing in one direction, which is corruption.
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