Bloomberg Sustainable Business Summit Advisory Board Panel: The Role of Business in Climate Action
Good morning, everyone. Good to see all of you. We are going to be talking this morning about the role of business in driving climate action. So I have to ask Abbott, after just have you heard someone here up on a stage? I know John and Karim, you were both at COP just a few weeks, guys, was I? And probably a lot of other people here as well. So I'm curious to get your thoughts on the business value of COP for you. How are you thinking about the roles of business at COP? Is it is it valuable to be there and what are your responsibilities when you are there? John, I'll go to you first. Well, thank you. Thank you for having me. Look, I think business has a role to be
at COP. I mean, the private sector needs to be represented at COP for two reasons. One, a part of the problem we created, part of the problem that we're seeking to address and cop. And more importantly, you know, governments can talk about different things that they can instigate. But without the private sector to come
up with the solutions, to come up with the technologies, to address the very severe challenges that we're facing. You know, you need to be there and in the same room and in the same dialogue with with governments to help guide them and also to sell to them. You know, the partnership that is necessary if we're to avert disaster in the coming decade. I mean, I think the previous speaker said, well, you know, this is by far the most decisive decade almost in human history. And unless we act now, you know, the future doesn't look terribly, terribly bright. Do you agree? Yeah, no. Build on what John said.
I think at the end of the day, it's a collaborative effort between private and public sector in many a way, I think, to really make real impact in the private sector. We have to integrate all thoughts of sustainability into our everyday business operations. And so by being at COP you, they're engaged in the conversation. You're in the venue, right? You're there in the room where it all matters. And I think that's just critical to building those collaborative relationships. Were there any learnings from you that you're going to take to cop 28 next year? I think for me, the biggest learning really was the scale of the conversation, to be honest with you.
You know, when you're there, a cop with so many diverse points of view and angles on all these problems that need to be addressed. It really was kind of like man mind expanding. I would say that was the biggest thing that for me, it was just like a big opening up of how to begin to engage. Fantastic.
What about you? Well, look, I think my my my takeaway was whether, you know, Moore's sobering. I think the problem with cop can be so bold is, you know, there's too many. Interests that are competing to try to protect their respective positions. And all of this is at the expense of our goal of reducing reducing carbon emissions, greenhouse gas emissions. And so, you know, my take away from COP is the private sector has to take the lead. They need to act now and show governments that with the right will. Technology exists today.
I think we heard that again from the previous speaker. We should be acting today, not talking about it anymore. Acting today. And that's that's my takeaway. I I still think there's too much talking taking place at COP.
And I suspect 28 is going to be similar to 27. We'll be talking about the things that we missed rather than here are the successes that we've achieved. And the only way that we're going to change that narrative is if bold private sector companies. And we'll talk about that later. But the actions are we at Red Sea Global
are taking, I think, unless and until we do that. I think the future doesn't look that promising in terms of cop and that that whole conversation. So a little less talk, more action. By far. Yes.
So, Jonathan, I want to bring you in to talk about another. We've talked about I think about three key stakeholders. We're gonna we're going to cover here. First one, we've already talked about policy and governments. The next, I want to talk about customers
and consumers, which is a huge driver for four companies. And so I know at BMO you're focusing on helping clients with the energy transition. So what are you thinking about? Is your responsibility to your clients? Yes.
So I think about it really is rooted in what we do as a bank. So, you know, when we work with clients, we're not just providing money in exchange for money. You know, banking has to go up beyond that to really help clients understand, manage risk and seize opportunities. You know, are view of most role really is as an enabler in supporting people and meeting those challenges. And to do that. We have to bring in a set of solutions that allow them to do that.
That can be the advice around how to understand policy risk that is driving exposure. It can be about introduction to the right technologies and it can be fundamentally about creating new products that allow them to access parts of the market. That's where our recent acquisition of Radical really gives us a toolset to say how do we as a company help our clients drive that transition? How do we help them monetize and identify carbon generation opportunities in their own businesses where they have made those changes and have driven down their footprint as much as possible, potentially access offsetting? But how do we do that in a way that enhances their credibility? Because so much of when clients are looking at the space right now, they see uncertainty, they see risk, they see a changing policy environment and say, how do I participate in something where I know it's important to do something now? But the benefit of waiting, if I don't know and I don't feel comfortable, seems higher than the benefit of action. Are your clients me too, with a very
targeted set of questions? Are they coming to you? Totally overwhelmed. I think I've not yet met somebody that is not in some way overwhelmed. And I think that's fair. It's I I lament sometimes that my inbox and my opening and newspaper mean that I never escape. Right. There is no way if you're working in energy transition, in climate and sustainability, that you get a day off without seeing things around you that remind you of the challenge, that reminds you of the uncertainty, that remind you of this kind of dichotomy of people having fear of greenwashing. But also, if you don't have glass bottles at your event, do you look out of touch, even if that's not the most impactful question about, you know, how we all got here today, what fuels we use in the vehicles or modes of transport, whether or not people bought, you know, sustainable aviation fuel credits or, you know, things, we're using drop ins, all of that might be more impactful than, you know, boxed water versus bottled water versus canned water.
But everyone's still doing those other things because the fear of being called out wrong is absolutely massive. And so I think overwhelmed is absolutely the answer at all times. Kareem, I'm sure you're getting a lot of go around people as well. And I think one of the biggest reasons people get overwhelmed is around data and just the the manual need that in this space. There's still so much spreadsheet crunching and manual data accounting and accrual.
So how are you thinking about how you're helping customers with with feeling overwhelmed around their data? Luke, as you expressed it, I think the if you could distill a problem down to a single word or phrase that say we've got a major data problem, really. And what we've been doing is thinking about how to marshal technology. The technology exists. Right. Which how to marshal it in context to
really address that. So you begin to think about how you capture the information and whether you think about it in terms of utility bills, in terms of waste bills, in terms of actual smart meters and buildings. You've got all these myriad forms of information you need to bring together. You're thinking about how you synthesize in that, right? How are you creating the right analytics that can drive the right insights and therefore link it to the most importantly, the actions that you take? So everything that we've been doing has been all around establishing clarity around data models. Solving the problem of easy data capture, verifiable data analytics against that, and then ultimately reporting an action thereof. And most of your customers coming to you with all the sources in place and they just need you to help you condense them.
Or are you helping them actually really set it up from scratch? Often star studded up from scratch is the truth of it. Dates back to the point Jonathan was making around. There's nobody who isn't overwhelmed. I think we've established there's some easy ways to get started. You know, you can always think about things in terms of your facilities and real estate and give us a clear block. What's going on with your 80 compute rates? If you think about most enterprises and then obviously supply chain and depending on who you're dealing with, one of those three, they probably got a two plus one. Right.
Real estate with a or supply chain with ideal supply to add real estate. But generally speaking, we try and take a data driven approach to get them going. And I want to ask this to you. To Jonathan, are you advising people to start here, then move here, then move here? Are you saying can tackle a bunch of these things at once? Oh, definitely. I actually believe the number one place to start is getting a handle on ESG data. That's where we just started.
Get a handle on it years to get it because then you can baseline. Where am I? You can therefore set goals where you want to go and then you can begin to measure your progress towards those goals. So not contrary to that, but I would say, you know, a lot of what we do talking to corporates in the spaces help them understand what's important. What are your shareholders? What are your stakeholders actually concerned about and how do we prioritize those things? Because the data problem, it's an infinite list are not infinite, but very long and well beyond, you know, a return on investment curve on things that are not core to your business.
If you say I'm going to measure every type of emissions, every type of water use, every type of waste within my operations, within my headquarters, within everything I do. If that's not what drives your risk from an ESG point of view, if it's not, what drives materiality and your sustainability. If we get into that, is this to check a box or is this actually to give people insight that allows them to understand if they're going to work with you, if they're going to invest with you, they want to work for you? Do they have the right information to make that choice, understanding what you actually do, that your impact in the world and how that drives your positive outcomes in terms of opportunity you're going to have and the negative outcomes in terms of the risks that you take on when operating in the world. So, John, we're talking with cream and driving are kind of about business retrofitting.
Right now they're going into these companies and helping them with retrofitting new models onto their older systems. You have the benefit of doing the total opposite of this. Right. What you're building with Red Sea, a
global you've been able to to take sustainability, any risk you take out from day one. So maybe just tell everybody very quickly what you're doing. So anybody who doesn't now and then, how is that changing your perspective, getting to build this from scratch versus having to to take this and retrofit it into it and older existing business? Right. Look, we started with a clean sheet of clean slate paper. And and, you know, we're in a very fortunate position to think about sustainability very differently because we don't have the legacy issues that, you know, many of the companies that you guys advise are grappling with.
I mean, we're in a very, very interesting place in Saudi Arabia. For those that don't own written Red Sea global and you know, when I was presented with the opportunity to develop a tourism destination in a pristine environment. You know, it caused us to think, how do we how do we do this differently, how do we take a different approach and not follow the business as usual model? And so right from the very beginning, we set ourselves the goal of setting new standards and sustainable development. And, you know, that sounded and it may have been a little bit of, you know, soundbites that were current at the time.
But as we got deeper into it, actually, we thought, hang on, sustainability actually is no longer enough. If you think about just doing the same thing and not, you know, maintaining the status quo, it never gets us close, anywhere close to achieving the objectives that we need to set for ourselves in order to do to cap the rise in temperature. So we took a a an approach where, you know, and I often say we're inspired by nature, but led by science. And so we we studied our site, you know,
in finite detail. And instead of simply saying let's maintain it and keep it at the same level, we actually set ourselves a goal of increasing the conservation value of the destination by 30 percent. And we do that through a whole multitude of different things. But to the point about, you know, building a sustainable business from scratch, everybody buys into it from top to bottom.
And we address all of the issues. I know you made the point about, you know, glass bottles versus plastic. I mean, we wanted to not only talk the talk, but actually walk the walk. And we live by it and everybody buys into it because it was built into the organization's DNA right from the very beginning. We're five years into this.
And, you know, we've been able to achieve a large part of what we'd set out to achieve. And it's because we were able to start from scratch and learn from the mistakes of the past. I mean, we know we're not smarter than everybody else. We just happen to, you know, pay attention to what others have done and say, OK, that didn't work. Let's let's try something different for those who don't have the benefit of starting everything from scratch, which I think is unfortunately the case for a lot of people. What learnings have you had, especially around getting everybody involved in this challenge? Anything that you could could suggest to people who are already in these companies? Yeah, well, I think it's it's lead by example, you know, from the top down through throughout the entire organization.
You know, pay attention to the little things. And it's an incremental process. You start with the low hanging fruit. If everybody starts taking responsibility for plastic bottles, you eliminate plastic bottles, tech and you move on and you work on that basis. It soon permeates the entire organization. So, I mean, to my mind, because quite frankly, when I first got there, you know, we were saying sustainability and we had plastic bottles everywhere. Said, OK. You know, there's a contradiction here.
And I said, we we slowly but surely change that narrative. And, you know, people now buy into it from the very top of the company all the way down to the people that are, you know, the people that serve the tea or whatever. It's inbuilt in everything that we do. I have to imagine one of the biggest motivators for your clients is around their own business imperatives, like how are they operate operationalizing to save costs, for example? Is that a big selling point as you're as you're talking about this? Honestly, I think it's actually essential for making progress, right? I think we do our best when we're actually focused on known goals, you know, and then enhancing with sustainability. So what I mean by that is I think clients really are beginning to fixate on how they optimize their operations and cost while reducing their emissions and waste. And so if you're really going to operationalize sustainability, you have to think about how you link in those goals to everyday actions.
I'll give you a few quick examples. You want to reduce your energy consumption and your real estate. Well, do you actually understand how you're using that energy and are you modifying your use of those facilities over the course of the year as you track to your point of the current state of the art where everything is manually collected, batch processed at the end of the at the end of the year, you're not able to make active decisions on how that facility is being used, on how equipment is being operated or maintained, on how your data center is operating in a rinse and repeat. What's going on in your supply chain? So what we've really been fixating on is coming back to the basics. What are those core business operations that are being driven around facilities, maintainance, asset operations, supply chain sourcing, I.T. data, center optimizations, link those
two goals, create those data streams and begin to inform those business processes based upon actual insights in airports in real time. Same for you, Jonathan. So I think for us, a lot of the imperative is around how do we help our clients grow. I think in the way we've reflected on this opportunity for us, this is the largest commercial opportunity we're going to have. Funds in motion are really where we see an opportunity. Trillions of dollars of year financing needed in order to achieve the energy transition means that people need advice.
People need financing. People need to catalyze capital into the right businesses. And I think more and more we're seeing people approach this and say this is going to go from a procurement department saying, where's my solution? How do I get the lowest price for it to a corporate development department and saying, well, look, if I am a mature material consumer of a solution, do I have a right to be at the table, not just as a buyer, but as part of somebody that benefits in the success of that company? Should I be choosing winners? Should I be, you know, throwing my weight as a company behind that and as I look at what I can do already in my business? Is that something that has a role in driving the energy transition? And do I have the right team behind that in order to capitalize on that opportunity? And so a lot of what we are trying to do with clients is say, yes, absolutely. Where your liabilities. How do you address your liabilities? How do you invest in the solutions that you need in order to decarbonise the right parts of your business? But also as you look at, you know, a rapidly changing environment, something is being driven by policy. How are you going to capitalize on that
set of opportunities and where do you play to to drive shareholder return through a top line as well as a bottom line? And John, you're at the phase where you guys are moving from being a developer into a destination and starting to actually have those customers and gas with you. So how are you thinking about how you're going to use them in communicating with them and bringing them along and making them, you know, customers and advocates in the same way that these guys are? Well, look, I think we look for step. Take a step back. Consumers, consumers are changing, right? I mean, banks are changing as well. The financial and financial institutions are changing so far as how they how they see sustainability. And so, you know, for us, what we're trying to do with our guests is actually give them something, give them a choice. So we've done things that, you know,
from a financial point of view cost us more money. But we didn't prioritize profit. We prioritized our commitment to achieving the objectives of sustainable development and regenerative development. We're 100 percent renewable energy 24
hours a day in a country where oil is very abundant, available and power is extraordinarily cheap. Yet we chose to burden ourselves with a higher cost so that we could deliver on our commitment to not generate any greenhouse gases from the production of our own electricity. And so that mindset feels all the way through. Will it does it hurt our bottom line? Yes, unless consumers ultimately will pay an incremental dollar on a room night, which I think they will. I think increasingly they're going to demand that they have those sustainable choices. So we've committed ourselves to being net zero. Hundred percent green mobility, electric
and hydrogen vehicles. The difference, the electrical vehicles are not fed from dirty power, they're fed from clean renewable energy. So I think that we'll get the message across to our consumers, our guests or visitors that are going to come to the destination and really showcase all of the extra effort that we've taken to protect and preserve this precious environment that we have and also fulfill the bigger agenda of reducing greenhouse gases. And I think they'll vote with their feet. Karim, I think we're kind of taking for granted a little bit here that businesses are willing to resort to the way that John is talking about, and that's true in some cases. But in a lot of places, that's not. So where where are you seeing this
pressures to resource more unsustainability? Is it around the coming regulations? Is it around customer pressures? I think it's a little bit of all of the above. Right. There's definitely an element of. You would call it the precious. Right. Whether it's regulation or consumers or indeed financing.
I think more and more, though, I'm beginning to see waking up to this notion of it's actually advantageous as in how do I drive new business value? How do I take more innovative, develop more innovative processes or innovative operations? Right. That changed the game dramatically. I have a client who works in operating civil infrastructure bridges and they think about extending the lifetime of physical of physical assets like bridges eliminates you know, avoids major amount of carbon and they're aiming to double. So take a bridge from 100 years to 200 years. That's the kind of ambition. What kind of processes do you need to run operations and maintenance to extend a bridge a hundred years more? Right. That's what I'm talking about. And I think about driving for new value.
So I think we're seeing that a lot more. There is definitely the risk or fear side, but I think more and more we're seeing people step out to the I can drive differentiation from my business for myself, for my employees by really looking at this as a core part of operate. Jonathan, do you think that that the type of time horizons that Kareem is talking about, is it hard to get people to invest in the future? They're saying, well, you want to spend more today and I'm going to see those returns. One hundred and fifty years when I was
low. So lots of damage, if you will, be there to see those returns. Is that a harder sell or are people willing to do that? So I've heard people basically throw out the argument that 20 50 commitments are trivial because, you know, no one in senior management at a company is going to be there in 2050 to, you know, have the checkmark or the X next to their name of did you achieve those goals? But I think, you know, we've seen a rapid pull over the last few years from a 2050 commitment can be vague to now there's expectations of what that means in terms of near-term actions. And I think it's really hard to say what at one hundred and fifty year impact is. But the direction that you need to steer
your business to credibly say where you're going to see those impacts becomes apparent immediately. And I think that people can then get their head around the idea of transformation and that investing in the right things now can lead to the right outcomes. I do think that the real fundamental challenge that we have is that I know we talk about the technologies being there, but this isn't something where the winning technology based on, you know, a market ideal that we have constructed wins because externalities are not effectively priced in.
You don't actually have a connection. And so you need that policy regime to be there. And I think what makes it really hard to steer a ship on a long term basis is that policy uncertainty is all around us all the time. And the ability to lock things in with, you know, investment tax credits or production tax credits that create an obligation is very powerful. But navigating that as a corporation that might not fundamentally have tax optimization is part of your normal day to day. How you drive value, I think can create
new needs and new demands on a leadership team in order to say how am I going to steer through not just honoring 50 years of waters, but choppy waters that are going to still like have waves pushing in different directions at different times? John, we're kind of dancing around this challenge of marketing, which I think is a little bit of what's coming up in each of our conversations as we're talking about how do we we we push for the business value of this. We sell around the savings in the long term and all that. How do you how do you tackle that challenge of marketing, what you're doing and talking about your sustainability efforts and talking about, you know, that long term, without getting all of this greenwashing challenges that we don't none of us want to hear, none of us want to get to want to get to know.
We obviously want to hear them when they need to copy. And that's a risk. Obviously, the more you talk about it, the more vulnerable you become. I think the approach that we've taken is one whereby we don't say anything unless we can back it with evidence. So, you know, being transparent in everything that we do is hugely important and that will insulate us to to it. I think to a great extent from, you know, accusations of greenwashing.
So, for example, you know, we've we've published sustainability reports this week just about to publish our second sustainability report, where we've set ourselves some fairly lofty ambitions in terms of the things that we want to accomplish in terms of sustainability and the commitment that we making to us ourselves and to our, you know, our stakeholders and anybody else who's interested in what we're doing is we. Honestly, we don't succeed in everything that we do because I think it's it's right and appropriate that we show that we tried this. It didn't quite achieve what we wanted cheap, but we're going to alter course and we're gonna do something different. But if you say, aren't we wonderful, we're doing all the sustainable stuff. And there's no negative, no downsides, nothing.
Everything is going swimmingly. Then I think you're you are vulnerable to being accused of of just painting a very green picture where in reality it's not. It's anything like that. And I think that's that's hugely important. The more transparent the organizations are, the more credible, you know, the information that you put out there is going to be. And the more confidence your stakeholders, consumers, financers, everybody will have in what it is you're doing. I think that's hugely important. Do you agree with that?
No. Totally. Literally. Today, we're putting out a story on what we've been doing with real estate. Right. Our real estate is about 40 percent depending upon which day you count it.
60 percent of emissions that we care about. And we want your point on energy transition move to more renewable, all of that. So documenting what actual steps that we've been taking over the last year. What technologies have we deployed to,
what benefit or as you say, downside? And what do we want to do next? I think becomes critical. This is a narrative of making sure folks understand tangibly. What are you doing today? What are you doing tomorrow? And then we'll begin to get this step by step. So, yes, I totally agree. And Jonathan, how do you think about helping people with that narrative? So it's challenging. I think one of the things that we've learned as we've dealt with our own sustainability is that, you know, we have to not just have a view of our operations, but how we fit into the world. What are expectations across, you know, as a bank decarbonising the banks not hard in terms of core operations similar to a professional services company. But we're accountable for the emissions,
the environmental footprint of all of our clients, whether they be retail, whether they be corporates, because we enable what they do. And in order to get our minds around that, we had to really build the Climate Institute. We had to hire climate scientists, hire people that were able to look at this, say and say, what does it mean to participate in the decarbonisation of the economy? What does it mean to do your fair share? And a lot of that is translate into how we then work with our clients to say actually had to do this work. We can share it with you, but it's a delicate balance because, you know, our brains as humans are not very good at understanding scenarios and not understanding, you know, stochastic processes. And to say you are doing enough when the world changes around you, when somebody might have a different baseline scenario that they're looking at takes a different kind of communication. It's not just checking a box, it's laying out here and the things that we're using to hold ourselves accountable. Here are the baseline scenarios we're
taking. Here's the target that we're talking about. So often we take for granted that everyone believes in the same number of degrees being the outcome that we're working towards. And sometimes people are fundamentally setting a different fire for themselves. And you need to communicate all that
before you can even say. And this is what we're doing. John, we started talking about one cop, cop 27, and I want to end by asking you at the conference, I now have 15 in Montreal, which is around biodiversity. So how are you thinking about biodiversity as you guys are building out at Red Sea? How is that something that you're doing your business? Well, again, I come back to what I swear I started by set it off by saying sustainability is no longer enough. And, you know, we need to think about regeneration. The biggest area of focus for us in terms of regeneration is biodiversity.
You know, so too often development, you know, is undertaken at the expense of the natural environment, whereas we valued our natural and environment from day one and often said that it's our most valuable asset on our balance sheet. And I firmly believe that. So, you know, our goal is to increase biodiversity through a whole multitude of different things from, you know, growing mangroves. I mean, mangroves are amazing plants. They sequester carbon at a rate far greater than than terrestrial trees. We're blessed with thriving coral reefs,
yet we're not complacent. And so not simply relying on what we've got. We're seeking to build abundance through technology, working with our scientific partners to to grow coral in the labs, to working with NGOs that will help us achieve better success in the normal reproductive cycle of corals, because we want to they're under threat and we need to do whatever we can to protect ourselves. We're also studying the unique DNA of our corals because for whatever reason they are they're more tolerant to the stressors that have damaged coral reefs around the world. And one of our commitments is anything that we learn through this process we're going to share with the rest of the world, because maybe we can offer a ray of hope to the Great Barrier Reef, the Great Barrier Reef or the reefs in the Caribbean or the Indian Ocean. So, you know, a big part of what we're doing in achieving our 30 percent increase in conservation value is to increase the biodiversity, because for too long we've been exploiting wetlands, you know, rainforests to the detriment of, you know, life as it does as we know it.
I love that idea of keeping biodiversity on your balance sheet. I think that's a that's a good takeaway for all of us. Thank you so much. Thank you, Karim. Thank you, John. And thank you, Jonathan. Thank you.
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