We're joined by Greg and Rich.
Welcome, Greg.
Tell us about the work that HSBC is doing on climate and
sustainability.
Well, look, the biggest opportunity we've got is
infrastructure financing in the middle income countries.
That's our footprint, Southeast Asia, South Asia, North Africa,
the Middle East and there are trillions of dollars needed to
finance the transition to a low carbon economy.
That's the biggest focus that we've got, trying to deploy
crowd in other partners, governments, MDBS, industrial
companies to finance this substantial infrastructure
investment as needed.
And Rich, how should financial institutions be thinking about
their role as Greg was just saying, in effectively leading
the change that's needed?
A couple points I'd add.
You know the 1st is that we have a massage financing shortfall
right now.
Probably we're financing about half of what we need to finance
to drive the decarbonization at the speed we need and that's
going to create several elements.
First, banks play an enormously important role in educating
their customers about the kind of requirements that they're
going to be facing in the future.
Many smaller and mid sized companies don't really
understand the magnitude of the decarbonization challenge and
what their customers are going to expect from them.
So it's an opportunity to really be not just providing finance,
but education.
Second, banks are incredibly creative about putting financial
packages together.
And in many cases, we're going to need multiple layers to the
capital stack, Some more tolerant of risk, some may be
related to the private sector, others more classic debt
instruments and, and banks can can really help with that.
And then third, I think banks have this incredibly important
role to be managing not just the green build of the new economy,
but the grade A green transition, though some of the
most important progress we need to make is with companies that
emit a lot of carbon today and just need to get better when
they're under a lot of pressure from society to not put money
into those sectors.
Those sectors need a lot of money and that's a very
difficult tightrope to walk.
But we're really depending on banks sort of working through
how to do that.
Why I was just a rich makes a great point, which is, you know,
these middle sized and SME companies, which are really the
drivers of the economy and lots of the parts of the world,
particularly middle income countries, they don't have the
resources of the Fortune 100 of the biggest companies in the
world to invest in decarbonization skill set.
And so I think consulting firms like BCG, banks like HSBC, we've
got a, you know, an obligation to educate these companies and
then help them with the techniques and the, and the
initiatives that allow them to decarbonize.
And what are the financing challenges, but also the
opportunities over the next five years?
We've touched on one of the big ones, which is there's this gap
between equity risk capital and commercial capital that will
flood into projects that are clearly have off take agreements
and have good political support.
And so this gap is something that we're working very hard to
try to fill.
And there are a number of different ways we go about that.
One is catalytic capital.
We do that in the expectation that ultimately the projects are
going to be commercial and provide high returns
governments, multilateral development banks and then
industrial companies that get the need for the transition and
make investments in order to get the ultimate off take from the
projects.
I mean that's one of the big challenges that we've got.
The second one, Rich touched on this, which is talent to to
bring the intellectual capital to find those pathways to
decarbonization.
And again, it's not just in the OECD countries.
We've got to do it in the countries around the world that
need more energy, that are deploying more cement, that are
deploying more steel.
And I would just add, it's the intellectual capital to
understand how to do the transitions in those sectors.
It's also the sophistication to know how to build lower risk
requests that can attract more capital with lower return
expectations.
And so how to build first of a kind projects.
That's one of the things we're working on together as a part of
Breakthrough Energy Catalyst is really getting smaller companies
more sophisticated on first of a kind kind of projects, not
because it it's easy, but because it's hard.
But if you do it well, then you make it much easier for
infrastructure funds, others to want to provide financing at
lower returns, make it easier for banks to provide capital.
So I think both the elements of the sector requirements and the
elements of the finance stack requirements, young companies
have a lot of knowledge of their technologies, but they're often
missing the knowledge of all these other elements that are
required to really build scalable successful projects and
businesses.
Greg Rich, thanks so much for joining us today.
Well, thank you very much.
It's a pleasure.