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Oil Infrastructure, Space and Climate Change · Bloomberg Intelligence

0:02
Speaker 1: Welcome to the Bloomberg Penel podcast. I'm Paul swing you
0:05
Speaker 1: along with my co host Lisa Brahma Waits. Each day
0:07
Speaker 1: we bring you the most noteworthy and useful interviews for
0:10
Speaker 1: you and your money. Whether at the grocery store or
0:12
Speaker 1: the trading floor. Find a Bloomberg penl podcast on Apple
0:15
Speaker 1: podcast or wherever you listen to podcasts, as well as
0:17
Speaker 1: at Bloomberg dot com. Well, the energy infrastructure in the
0:23
Speaker 1: Middle East is certainly getting a lot of attention. There's
0:26
Speaker 1: been a lot of attacks over the last several months
0:28
Speaker 1: on oil fields, on tankers, just raising the question of
0:32
Speaker 1: the vulnerability of that infrastructure and very important source of
0:37
Speaker 1: energy in the world. To get a sense of what's
0:39
Speaker 1: going on, Welcome Seth Gray. Seth as a president CEO
0:42
Speaker 1: of light Bridge Corporation located in Reston, Virginia, joining us
0:45
Speaker 1: on the phone. So, Seth, again, we've had a series
0:48
Speaker 1: of attacks uh in the Middle East on some of
0:51
Speaker 1: the oil infrastructure. How vulnerable do you consider that part
0:56
Speaker 1: of the world to be in terms of oil infrastructure. Well,
1:00
Speaker 1: really it's vulnerable, which is very sad and very dangerous
1:04
Speaker 1: as we see from the drone attacks on the Saudi
1:07
Speaker 1: oil fields, as we see on the attacks on the
1:10
Speaker 1: Iranian oil tanker. One of the programs we have going
1:15
Speaker 1: under the Department of Energy here in this country is
1:18
Speaker 1: to improve our grid resiliency so that we have power
1:22
Speaker 1: plants that have can have fuel on site and if
1:26
Speaker 1: the supply is cut off, they can run for months
1:29
Speaker 1: or even years, the greatest of which are the nuclear
1:33
Speaker 1: power plants, which have several years of fuel on site.
1:36
Speaker 1: So we have supplies are cut off, they could run
1:39
Speaker 1: for years. And in particular, as the US is producing
1:43
Speaker 1: more oil domestically, the potential cutoffs and supply of oil
1:48
Speaker 1: really threatened our allies, including Japan and many others that
1:52
Speaker 1: are very dependent on Middle East oil. So you know,
1:57
Speaker 1: it's an issue for US and it's an issue for
1:58
Speaker 1: our allies. So Seth, considering the fact that your company
2:03
Speaker 1: is a nuclear fuel technology company, it's not surprising that
2:06
Speaker 1: you'd say, look, it's so important to build that grid.
2:08
Speaker 1: But I'm wondering how secure the nuclear grid would be
2:13
Speaker 1: or could be, given the fact that clearly energy infrastructure
2:18
Speaker 1: is a very very uh big target right now. Yeah, yeah, Well,
2:24
Speaker 1: the reactor sites themselves are are very robust, very protected sites.
2:29
Speaker 1: With many feet of concrete and steel protecting the facilities.
2:34
Speaker 1: And we are moving toward more local grids over time
2:37
Speaker 1: in this country too, with small reactors advanced technologies coming out,
2:42
Speaker 1: so that rather than just the giant, interconnected electric grids
2:46
Speaker 1: that could be attacked, there could be smaller grids which
2:49
Speaker 1: provide a level of protection onto themselves. We're also starting
2:54
Speaker 1: to electrify the transportation sector with electric cars, with electric buses.
3:00
Speaker 1: There are a lot of projections that will increase the
3:02
Speaker 1: use of electricity by fifty in the United States in
3:06
Speaker 1: the next couple of decades and similarly around the world,
3:10
Speaker 1: which puts even more pressure on the electric grid and
3:14
Speaker 1: not having the source of energy cut off. So what
3:19
Speaker 1: we're seeing there is an opportunity for American innovation, not
3:24
Speaker 1: just for domestic markets, but for exports for this advanced
3:28
Speaker 1: technology that will produce no carbon as we do move
3:33
Speaker 1: to electrify the transportation sector in addition to the traditional
3:38
Speaker 1: electricity sectors. SETH just give us a sense of kind
3:41
Speaker 1: of the state of nuclear energy in the United States.
3:44
Speaker 1: Are we adding plants, are we taking plants offline? What's
3:48
Speaker 1: kind of the trend here and how do you think
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Speaker 1: that's going to play out well. We're pretty level at
3:53
Speaker 1: about one ent of our electricity from nuclear power, and
4:00
Speaker 1: we've closed some plants. We have two plants under construction
4:03
Speaker 1: in Georgia now, but mostly as the demand for electricity
4:07
Speaker 1: has been rising, we've been improving the efficiency of the
4:10
Speaker 1: existing plants to stay level at that. Now we're in
4:15
Speaker 1: danger of that falling down a bit and losing that
4:19
Speaker 1: zero carbon energy from the grid. So we have companies
4:22
Speaker 1: like light Bridge bringing new technologies that can better justify
4:27
Speaker 1: the economic case of keeping those plants open and building
4:31
Speaker 1: new plants. But part of the state domestically is where
4:36
Speaker 1: our nuclear companies are and the companies and the supply
4:39
Speaker 1: chain for exports, because the international market is bigger than
4:42
Speaker 1: the domestic market, and the greatest threats are from Russia
4:46
Speaker 1: and China, which together are taking about six of the
4:51
Speaker 1: global market and new reactors, and they are doing that
4:54
Speaker 1: partly for strategic reasons, for their national security reasons. Setting
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Speaker 1: hundred our supply relationships with countries like Turkey where Russia
5:03
Speaker 1: is selling reactors too, and that does not necessarily lead
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Speaker 1: to good things in Turkey and other places where they're
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Speaker 1: selling reactors, So there are national security implications as well
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Speaker 1: for Americans competing and winning against Russia and China overseas.
5:19
Speaker 1: How expensive or or cheap is what's the relative cost
5:22
Speaker 1: of nuclear energy versus say crude. Well, when when you
5:28
Speaker 1: levelize the cost of electricity, nuclear power is cheaper. It's
5:32
Speaker 1: it's quite a bit cheaper overall from these reactors that
5:36
Speaker 1: are already built and are operating. It's the new reactors
5:40
Speaker 1: that are being built. They're having problems with the cost
5:43
Speaker 1: overruns that are making those expensive. But as we design
5:47
Speaker 1: the new advanced reactors and build more of them, and
5:51
Speaker 1: we stop building a first of a kind plant, the
5:53
Speaker 1: new reactors will also produce cheaper electricity. How much is
5:58
Speaker 1: the lack of adoption of nuclear energy in the United
6:01
Speaker 1: States relative to some of its competitors competing nations. How
6:05
Speaker 1: much does this do just because there's a diversion to
6:08
Speaker 1: the word nuclear and the fear that if something happens
6:12
Speaker 1: that it could be catastrophic. Well, look, obviously that's part
6:17
Speaker 1: of it. In the United States, nuclear is the safest
6:20
Speaker 1: industry we have. Nobody has ever died from radiation in
6:24
Speaker 1: the history of the industry. Here, even at the only
6:27
Speaker 1: accident we ever had at three Mile Island, nobody died,
6:30
Speaker 1: nobody was hurt, and in fact, the twin plant on
6:33
Speaker 1: the same site kept operating for decades until just a
6:37
Speaker 1: few weeks ago when it was closed down. So we
6:40
Speaker 1: know how to build and operate these reactors very safely
6:44
Speaker 1: so that no one can can be hurt, and with
6:47
Speaker 1: the new advanced technologies that are coming, they'll be even
6:51
Speaker 1: safer with small underground plants uh where there will be
6:56
Speaker 1: no danger to the public. Seth countries are deploying nuclear
7:02
Speaker 1: most aggressively. Well right now we're seeing the United Arab
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Speaker 1: Emirates about to start opening four nuclear power plants that
7:11
Speaker 1: they've been building littill supply about a quarter of their country.
7:14
Speaker 1: In terms of exports, Russia is the largest in the
7:18
Speaker 1: world right now, followed by China. The UK is making
7:22
Speaker 1: a big push to build new reactors, including one potentially
7:27
Speaker 1: from China, which shows how China is really impact then
7:30
Speaker 1: even our closest allies and UM generally, France has always
7:36
Speaker 1: been very strong and nuclear power, and they're they're deploying
7:40
Speaker 1: some in their own country as well as in neighboring
7:42
Speaker 1: European countries, and actually even two in China. So those
7:46
Speaker 1: are the major markets right now, and for US companies
7:52
Speaker 1: throughout the supply chains, lots of manufacturing companies, it's important
7:56
Speaker 1: that we keep pace and compete with them. Seth Great,
7:59
Speaker 1: thank you so much for being with as Seth Gray
8:01
Speaker 1: as president, chief executive officer of light Bridge Corporation, There's
8:18
Speaker 1: been a feeling that the bigger risk right now to
8:21
Speaker 1: markets at any time of central bank support and slowing
8:25
Speaker 1: but still positive growth is a trade deal that actually
8:31
Speaker 1: encourages people to rush into markets. Morgan Stanley today saying
8:35
Speaker 1: don't do it. It hasn't worked before, it won't work
8:38
Speaker 1: this time. Let's find out if Steve dou Dash agrees.
8:41
Speaker 1: He's president of i HT Wealth Management based in Chicago. Steve,
8:46
Speaker 1: do you agree that if there is some sort of
8:48
Speaker 1: trade deal that isn't necessarily a signal to just go
8:52
Speaker 1: dive back into risk your stocks? Does anyone? Has anyone
8:58
Speaker 1: seen the same cycle over and over and over again,
8:59
Speaker 1: or it last year or so. They come out and
9:01
Speaker 1: they say we got a trade deal or a partial deal,
9:03
Speaker 1: we're gonna work out something, and the markets go up
9:06
Speaker 1: upper cent or two, and then two weeks later they
9:08
Speaker 1: turned around and like, oh no, we're not gonna get
9:10
Speaker 1: a trade deal. No one wants to work this out,
9:12
Speaker 1: and then the cycle repeats itself over and over. So yes,
9:15
Speaker 1: I know they came out with some partial potential plan,
9:18
Speaker 1: and then today they didn't surprise anyone, come out and
9:21
Speaker 1: say no, maybe we don't have a plan. No one.
9:25
Speaker 1: I do not believe right now that we're going to
9:26
Speaker 1: see some magical, huge deal worked out overnight or at
9:30
Speaker 1: least in the short order, um that answers all those
9:33
Speaker 1: questions and gives the market true clarity anytime soon. It's
9:36
Speaker 1: too massive of a deal and there's too much political
9:39
Speaker 1: drama around it for it to happen in such a
9:41
Speaker 1: short period of time. Steve, to what extent, if any,
9:44
Speaker 1: do you think that this trade uncertainty is weighing on
9:47
Speaker 1: global economic growth? I think it's it's completely been weighing
9:52
Speaker 1: on it. If you if you strip out the tax
9:54
Speaker 1: break that took place a couple of years ago and
9:56
Speaker 1: the market snapping up because of that, you strip that out,
10:00
Speaker 1: we've been basically range bound for years now, Over and
10:03
Speaker 1: over again, we've not seen any substantial growth. Now that's
10:06
Speaker 1: a good thing too. To the extent that you know,
10:09
Speaker 1: I know a lot of people are worried about inversion
10:11
Speaker 1: right now. I am not buying into that to the
10:12
Speaker 1: same extreme extreme, and they're worried about recession that could
10:16
Speaker 1: be meant from that, which again I do not believe
10:18
Speaker 1: in um. But if things do level off sideways, it's
10:22
Speaker 1: not like we have this euphoric high stock market price
10:25
Speaker 1: that's built on just you know, emotion. It's been flat
10:29
Speaker 1: for years with the exception of that trade tax deal,
10:33
Speaker 1: and therefore it's not like we have a huge downside
10:35
Speaker 1: risk um posed to it. So what are you buying
10:40
Speaker 1: I'm by I personally do believe that they'll eventually get
10:43
Speaker 1: some sort of trade deal done over the next few
10:45
Speaker 1: six months. Let's just say, because the politics involved, the
10:48
Speaker 1: Trump organization does need to win. This is the one
10:50
Speaker 1: area that they can control a great deal of it.
10:52
Speaker 1: I think the tech sector has been hit the hardest
10:55
Speaker 1: due to the trade deal, certainly the semi connector semiconductor
10:59
Speaker 1: set or if you want to go high risk, high return,
11:02
Speaker 1: I think that's an area where you can overload right
11:04
Speaker 1: now with the assumption that something works out, with the
11:07
Speaker 1: assumption that we are not sitting in the right before
11:10
Speaker 1: recession just because of the inversion that's going on, and
11:14
Speaker 1: question cutting into it, yes, and looking at Micron shares
11:18
Speaker 1: they're up this year, how do you how do you
11:21
Speaker 1: say that they've gotten hit pretty hard from the trade
11:25
Speaker 1: wars because, frankly, because they probably should be higher right now,
11:30
Speaker 1: and you're in the sample size, just the here to
11:32
Speaker 1: day doesn't show how you're looking in the year's past
11:35
Speaker 1: when it got hit a lot harder. I think there's
11:38
Speaker 1: so much uncertainty in the semiconductor sector right now because
11:41
Speaker 1: of the trade war and because of the unknown of
11:43
Speaker 1: how that's going to affect a political piece that is
11:46
Speaker 1: a part of the day of that deal right now
11:48
Speaker 1: that you're seeing restrictions on what the actual return should be.
11:52
Speaker 1: We are in the middle of the Internet of everything,
11:55
Speaker 1: right Everything is getting computerized. There's only going to be
11:58
Speaker 1: needing more and more chips to integrate everything that we
12:02
Speaker 1: do in the future. And so you remove that politically
12:07
Speaker 1: induced unknown to it, and you have a very strong
12:12
Speaker 1: sector in moving forward. So, Steve, how do you feel,
12:16
Speaker 1: I guess within the tech sector about the Fang stocks.
12:18
Speaker 1: They've been such a big, big driver really over the
12:20
Speaker 1: last decade, both on the upside and on the downside.
12:23
Speaker 1: I think about the fourth quarter of the fourth quarter
12:25
Speaker 1: of last year. Where are you on those names? I
12:29
Speaker 1: don't personally, I don't believe in Facebook. I think that
12:31
Speaker 1: the business model has been dying and that they're getting
12:34
Speaker 1: eaten up by their competition, including themselves in Instagram, and
12:38
Speaker 1: therefore generating less revenue UM per click because of it.
12:42
Speaker 1: Um the Amazons of the world. I've been on Amazon's
12:47
Speaker 1: bandwagon for a decade now. A decade ago people were
12:49
Speaker 1: talking about how was overpriced. Everyone uses it more and
12:54
Speaker 1: more and it's easier and easier to buy anything at
12:56
Speaker 1: any given time. So I know people like the lump
12:58
Speaker 1: thing in together as one big thing. It's just not
13:01
Speaker 1: Netflix is not the same as Facebook. Uh. Amazon is
13:05
Speaker 1: not the same as Google. It was a cute little
13:08
Speaker 1: term that people could use for a couple of years there,
13:10
Speaker 1: but I think you've got to be a little more
13:11
Speaker 1: selective on what you're buying. I believe Facebook is a
13:14
Speaker 1: dying business model right now. So am I going to
13:17
Speaker 1: look at that It's the same as Amazon, which I
13:19
Speaker 1: think is a high growth business model. No very interesting Facebook.
13:23
Speaker 1: Just looking at the stock up about this year, um.
13:26
Speaker 1: But you know a lot of those tech stocks to
13:28
Speaker 1: continue to perform well. Steve Doodash, thanks so much for
13:31
Speaker 1: joining us. Steve as a president of I h T
13:33
Speaker 1: Wealth Management based in Chicago, giving us his thoughts on
13:35
Speaker 1: the market. He does not see a recession. Um, it
13:39
Speaker 1: does not. He's not worried about the when we had
13:42
Speaker 1: that inverted yield curve several weeks ago. Uh and UH
13:46
Speaker 1: I think probably believes on some light deal in the
13:48
Speaker 1: next six months. Might all that might be enough with
13:51
Speaker 1: a accommodator fed four equities. Well, space is a growth
14:11
Speaker 1: of business and it's no longer the sole purview of NASA.
14:14
Speaker 1: Investors can actually play it via the E t F market.
14:17
Speaker 1: To give us a sense of what's going on in
14:19
Speaker 1: the space investing race, we welcome Andrew Shannon, chief executive
14:23
Speaker 1: officer of procure a M, joins us here in our
14:25
Speaker 1: Bloomberg Interactive Broker studio. Andrew, thanks so much for joining us.
14:28
Speaker 1: Real quickly, just tell us what procure a M is
14:31
Speaker 1: and how you kind of interact with the space business. So,
14:35
Speaker 1: procure a M is a registered investment advisor where we
14:38
Speaker 1: launched both our proprietary own ideas for e t s
14:41
Speaker 1: as well as help third parties launch their products, and
14:43
Speaker 1: UFO is the first product that we've brought to market
14:45
Speaker 1: listed on the New York Stock Exchange, launched in April
14:48
Speaker 1: of this year. So I'm looking right now at UFO,
14:53
Speaker 1: which is obviously a really catchy ticker. And there's obviously
14:57
Speaker 1: a lot of intrigue around space exploration in what exactly
15:02
Speaker 1: do you invest in? So I think a lot of
15:05
Speaker 1: people have wanted to invest in space for a long time,
15:08
Speaker 1: and until launching this fund and very recently, it's been
15:10
Speaker 1: a fairly difficult space to actually get exposure too. And
15:14
Speaker 1: so unless you're an institution making a private uh, you know,
15:17
Speaker 1: a private company type of purchase, that there weren't too
15:20
Speaker 1: many pure play space companies. But right now this market
15:23
Speaker 1: has really expanded and has brought new entrance into the market.
15:26
Speaker 1: And what we've seen is that satellite companies are a
15:29
Speaker 1: very big driver of this industry, as well as some
15:32
Speaker 1: of the traditional aerospace and defense companies, but those aren't
15:35
Speaker 1: typically as pure play. So when you're looking at our fund,
15:38
Speaker 1: what you're actually getting exposure to is satellite operators and manufacturers,
15:43
Speaker 1: launch equipment company, ground station company, as well as other
15:46
Speaker 1: companies that are completely reliant upon UM space based systems
15:49
Speaker 1: in order to get their services or products to market.
15:52
Speaker 1: Space and exploration has changed a lot in my lifetime.
15:54
Speaker 1: Remember being a little kid watching the moon landings. Um,
15:57
Speaker 1: now it seems like, you know, rockets going up left, right,
16:00
Speaker 1: and center, and I don't know who's sending them up there.
16:02
Speaker 1: So but give us a sense of how space has
16:04
Speaker 1: kind of changed. And it was the purview of kind
16:07
Speaker 1: of the US government, maybe the Russian government, NASA, but
16:10
Speaker 1: now there's mostly private right right. So in the early
16:13
Speaker 1: days you have the the EESA and ROSS, Cosmos and NASA,
16:16
Speaker 1: and those government agencies were really the driving force for
16:19
Speaker 1: the space economy. And this year, actually the just a
16:22
Speaker 1: couple of weeks ago, the numbers came out for the
16:25
Speaker 1: two thousand eighteen space industry and it's set a new
16:28
Speaker 1: record for itself. Roughly four hundred fourteen billion plus dollars
16:33
Speaker 1: um spent on space was and so going over four
16:36
Speaker 1: hundred billion for the first time ever. And then you
16:38
Speaker 1: look at Morgan Stanley that's been building up research groups
16:41
Speaker 1: as well as Bank of America. Morgan Stanley's predicting over
16:44
Speaker 1: a trillion dollars by twenty forty. Bank of America sees
16:46
Speaker 1: up to two point seven trillion dollar industry by so
16:51
Speaker 1: you're looking at a lot of UM analysts out there
16:53
Speaker 1: looking to see this this be a continuum trender of
16:56
Speaker 1: growth for the broader space industry. So I'm looking right
16:58
Speaker 1: now at the assets in UF It's a twelve million
17:01
Speaker 1: dollars and I'm wondering what you needed to get up
17:03
Speaker 1: to an order for this to be sort of a
17:05
Speaker 1: sustainable investment vehicle in itself. So break even for for
17:10
Speaker 1: products such as this is in the several tens of
17:12
Speaker 1: millions typically UM. But you know right now, we just
17:15
Speaker 1: launched this product in April, so to be at twelve million,
17:17
Speaker 1: we're pretty happy, given that the summer is typically a
17:19
Speaker 1: pretty dead season for growth. How much is the construction
17:24
Speaker 1: of an index guided by what investors are asking for
17:29
Speaker 1: versus what registered investment advisors are looking to be able
17:33
Speaker 1: to provide in terms of, you know, a pitch. That's
17:36
Speaker 1: a really good question because I think a lot of
17:39
Speaker 1: times you'll see a thematic fund and maybe the name
17:42
Speaker 1: is really catchy, and so someone says, oh, it invests
17:45
Speaker 1: in this you know, thematic area. I want to own it.
17:47
Speaker 1: But when you actually look at the index, and boil
17:49
Speaker 1: it down, you're actually getting the exposure that you actually
17:51
Speaker 1: wanted to when you invested in that product. So for me,
17:53
Speaker 1: looking at the index is one of the first most
17:55
Speaker 1: important aspects of building a truly representative thematic product. And
17:59
Speaker 1: for this, we actually have a partner who's a former
18:01
Speaker 1: director of the Space Foundation. UM has been studying space policy,
18:06
Speaker 1: space business, all these various areas as well as the technologies,
18:09
Speaker 1: and he actually built this index. So I think what
18:12
Speaker 1: he was able to do is get a pretty strong
18:14
Speaker 1: representation of what the global publicly traded space industry looks like.
18:18
Speaker 1: So you're not going to get every single company because
18:20
Speaker 1: some of them are private and some of them are
18:21
Speaker 1: maybe smaller or less liquid companies. But when you actually
18:24
Speaker 1: look at the breakdown as far as what's driving the
18:26
Speaker 1: space economy, a lot of these names are represented in
18:28
Speaker 1: the fund today. So the space business is growing, it's
18:31
Speaker 1: becoming more and more private. Are you expecting more publicly
18:34
Speaker 1: traded companies to come into the marketplace, UM, I would
18:37
Speaker 1: certainly like to see that. I think, you know, the
18:38
Speaker 1: one getting the most buzz recently on that front is
18:41
Speaker 1: Virgin Galactic, which did this, uh this spack kind of
18:44
Speaker 1: merger that can bring it out to market, hopefully within
18:46
Speaker 1: the next couple of weeks or months um which could
18:49
Speaker 1: be a new way for investors to get exposure to
18:51
Speaker 1: the space industry. Um. You know, I love to see
18:54
Speaker 1: a strong industry that you're constantly seeing acquisitions and I
18:57
Speaker 1: p o s and things like that, and you know,
18:59
Speaker 1: I hope we're getting closer to that stage. But right now,
19:02
Speaker 1: you know, thirty one companies from around the world is
19:04
Speaker 1: a pretty um my view, an interesting way to get
19:07
Speaker 1: exposure to this industry. Andrew Shannon, thank you so much
19:10
Speaker 1: for being with us. Andrew Shannon, the CEO of Procure
19:13
Speaker 1: a M and I gotta say UFO brings me back
19:17
Speaker 1: to watching Doctor Who, growing up with the tartists and
19:22
Speaker 1: with you know, the different the seven different doctors. I
19:26
Speaker 1: could geek out. I'm pretty much anything but definitely science
19:30
Speaker 1: fiction and face exploration. If we appreciate you being with us.
19:49
Speaker 1: There's a lot of back and forth in the political
19:51
Speaker 1: sphere when it comes to global warming, climate change and
19:55
Speaker 1: some of the steps being taken, but the trend is
19:57
Speaker 1: clear when you take a look at business and joining
20:00
Speaker 1: us now to discuss that we are very pleased to
20:02
Speaker 1: say is Rich Lesser, who is the chief executive officer
20:05
Speaker 1: of Boston Consulting Group, which is based in New York.
20:08
Speaker 1: But Rich right now is in Munich, Germany. And before
20:11
Speaker 1: we talk about climate change, what are you doing in Munich.
20:15
Speaker 1: I'm in the middle of hell. It's nice to be
20:17
Speaker 1: here with you. I'm in the middle of an around
20:19
Speaker 1: the world trip, just visiting clients, doing some meetings around
20:22
Speaker 1: the world. So I was in Boston, then Abu Dhabi,
20:25
Speaker 1: now here, then off the Asia, then Seattle, then dot Home.
20:29
Speaker 1: Sounds pretty exciting. So I want to talk a little
20:31
Speaker 1: bit about climate change and what your research has shown
20:35
Speaker 1: in terms of the shift that you've been seeing among
20:39
Speaker 1: the c suite offices. Sure so, um so so, First
20:45
Speaker 1: just the facts and then what we're observing in terms
20:48
Speaker 1: of the dialogue. The facts are really clear. The economic
20:53
Speaker 1: downside from not addressing climate change is enormous, and we're
20:57
Speaker 1: right now not on a one and a half degree path,
20:59
Speaker 1: or at two degree path, or on a much higher path,
21:02
Speaker 1: depending on who you talked to, three and a half
21:04
Speaker 1: or even four degrees. The economic consequences of that are enormous.
21:08
Speaker 1: What was fascinating to us starting with what we just
21:11
Speaker 1: happened to do in Germany coincidentally and have now expended
21:14
Speaker 1: around the world is when you model through the macroeconomic
21:18
Speaker 1: impacts of addressing climate change at a macroeconomic level, that actually,
21:23
Speaker 1: even if a country does it alone, of course it
21:25
Speaker 1: gets better if all of us do it together. The
21:29
Speaker 1: macroeconomic case is quite strong. So to take Germany in
21:33
Speaker 1: the US, for example, if you were to you could
21:36
Speaker 1: improve eight percent of carbon emissions, take down carbon emissions
21:40
Speaker 1: in Germany and in the seventies in the US with
21:45
Speaker 1: no net negative economic impact um. And that's true in
21:49
Speaker 1: many other countries around the world. The last twenty or
21:52
Speaker 1: thirty percent to get to net zero by that will
21:55
Speaker 1: require technological innovation or have some economic consequence. If we
21:59
Speaker 1: can't find that innovation, So then the question is, if
22:03
Speaker 1: that's so good, why don't companies just go do this.
22:06
Speaker 1: It's because while it may be true at a macro
22:08
Speaker 1: economic level that the net impact is slightly positive or
22:12
Speaker 1: neutral macro economically for individual sectors, it will clearly be
22:17
Speaker 1: very hard in many sectors of the economy. So we
22:19
Speaker 1: need governments to set good policy, to create the right incentives,
22:23
Speaker 1: ideality to create a market for carbon That will encourage
22:27
Speaker 1: companies to take the right action, because sector by sector
22:30
Speaker 1: it won't always make sense to do it on their own.
22:33
Speaker 1: So the suite executives now realize how much the public cares,
22:37
Speaker 1: and I think many companies are getting their arms around
22:41
Speaker 1: being much more aggressive on this. So Rich, how difficult
22:44
Speaker 1: is it for you and for your clients to push
22:47
Speaker 1: through meaningful sustainability issues when President Trump and the U.
22:51
Speaker 1: S administration does not appear to be supporting that at all.
22:56
Speaker 1: I think most companies are realizing the there's more opportunity
23:01
Speaker 1: to make progress than they realize, and more of a
23:03
Speaker 1: sense of urgency from many of the customers than might
23:06
Speaker 1: have been in place a couple of years ago, and
23:09
Speaker 1: that will lead to real progress. I think we're also
23:13
Speaker 1: seeing more integration across the public, private, and social sector
23:17
Speaker 1: than we had before. But let's be clear and certain
23:19
Speaker 1: sectors of the economy. Absent effective government action, it will
23:24
Speaker 1: not go as far as it needs to go. And
23:26
Speaker 1: so the lack of the lack of engagement, support and
23:31
Speaker 1: acknowledgement of the magnitude of the issue from the US
23:33
Speaker 1: government and other governments. It's not the only one, but
23:37
Speaker 1: but certainly, the US, given the size of its economy,
23:41
Speaker 1: has a meaningful impact on how far we're going to get,
23:43
Speaker 1: even if companies are serious, and even if companies genuinely
23:46
Speaker 1: try to make progress. Can you give us an example
23:49
Speaker 1: of a concrete measure that an industry has been taking
23:53
Speaker 1: that actually costs them quite a bit of money that
23:56
Speaker 1: moves them towards being more sustainable. I think that's not
24:00
Speaker 1: where most companies are right now. I don't think most
24:02
Speaker 1: companies feel like they either have a defense from their
24:06
Speaker 1: investor base or from others to be able to do
24:09
Speaker 1: things that have purely negative economic consequences. I think the
24:12
Speaker 1: focus right now is that there are a lot of
24:14
Speaker 1: ways you can get better. We see the banks pushing
24:19
Speaker 1: much more investment towards sustainable and renewable industry plays. You
24:23
Speaker 1: see the auto industry pushing towards electric vehicles. You've see
24:26
Speaker 1: the industrial sectors focus on waste and water. But but
24:30
Speaker 1: part of the challenge we've got is it's very hard
24:32
Speaker 1: for one company to take the risk of very negative
24:36
Speaker 1: economic consequences when you've got activist investors and you've got
24:40
Speaker 1: how they'll be portrayed in the financial market. If there
24:42
Speaker 1: was a price on carbon or some other way to
24:45
Speaker 1: have everybody bear a cost. Then I think you could
24:47
Speaker 1: see much more aggressive action and would have negative consequences
24:51
Speaker 1: for one, but collectively will have marginal impact if it's
24:55
Speaker 1: if it's shared burden Without that kind of measure, though,
24:59
Speaker 1: are any of these companies taking real measures towards becoming
25:03
Speaker 1: more sustainable or is it more of a PR push.
25:06
Speaker 1: I don't think it's PR. I don't I so, And
25:11
Speaker 1: to be direct, I don't think it's PR. I think
25:13
Speaker 1: it's a genuine desire to make progress. But I think
25:17
Speaker 1: a genuine desire to make progress within the constraint of
25:20
Speaker 1: having real financial pressures on them. And I don't think
25:24
Speaker 1: we're yet at the stage because because the financial markets,
25:28
Speaker 1: as you know where then most you know, can be
25:31
Speaker 1: pretty unrelenting and and it's hard to do that. But
25:34
Speaker 1: but what I think companies are discovering, so that makes
25:36
Speaker 1: it sound like nothing's happening, I don't feel that way.
25:39
Speaker 1: I think what we see in many sectors as people
25:42
Speaker 1: looking in ways to find win wins, to find wins
25:45
Speaker 1: to to drive carbon out of their footprints, to encourage
25:49
Speaker 1: investments in their industry or in other industries to encourage
25:53
Speaker 1: their suppliers to be bolder in improving their operations because
25:57
Speaker 1: they're the customers for those suppliers. So it's genuine action,
26:01
Speaker 1: but it's not sufficient action. So rich do we need
26:05
Speaker 1: an international framework to really push this forward? So that
26:11
Speaker 1: was the interesting thing. We will be so much better
26:14
Speaker 1: off with an international framework. But look around the world
26:16
Speaker 1: right now, we're not finding international frameworks on many topics
26:19
Speaker 1: right now, trade, you know, many issues, so so we
26:24
Speaker 1: it's it's unfortunate because there would be so much easier
26:27
Speaker 1: for the world to move if we moved together. But
26:29
Speaker 1: what was interesting about our researches that countries can take
26:33
Speaker 1: big actions on their own that are do not bear
26:37
Speaker 1: the negative economic consequences that are sometimes portrayed to make
26:41
Speaker 1: major progress. Again, I don't want to overstate it's not
26:43
Speaker 1: to get net zero carbon by on their own, but
26:47
Speaker 1: to get seventy or eighty percent of the way they
26:50
Speaker 1: are is still a huge step that could be done
26:53
Speaker 1: without negative economic consequences at a country level, but it
26:57
Speaker 1: has to deal with the consequences set or bisector and
27:00
Speaker 1: steal and cement in the energy industries in other places
27:05
Speaker 1: in order to be able to make that viable for
27:08
Speaker 1: individual companies to drip the kind of actions that we
27:11
Speaker 1: need to have them take. Ye. This may be an
27:13
Speaker 1: issue of I think globally and act locally. Rich Lesser,
27:16
Speaker 1: thanks so much for joining us. Rich as the chief
27:18
Speaker 1: executive officer of Boston Consulting Group, joining us on the
27:21
Speaker 1: phone from Munich, Germany, as he does, is around the
27:23
Speaker 1: world trip visiting clients, talking about climate change and how
27:27
Speaker 1: these companies should be dealing with it, a very compelling topic.
27:32
Speaker 1: Thanks for listening to the Bloomberg P and L podcast.
27:34
Speaker 1: You can subscribe and listen to interviews at Apple Podcasts
27:37
Speaker 1: or whatever podcast platform you prefer. Paul Sweeney, I'm on
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Speaker 1: Twitter at pt Sweeney. And Lisa bram Woyds I'm on
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Speaker 1: Twitter at Lisa bram Woyds. One before the podcast, you
27:45
Speaker 1: can always catch us worldwide on Bloomberg Radio