Bloomberg Audio Studios, Podcasts, radio news.
This is Bloomberg business Week Inside from the reporters and editors who bring you America's most trusted business magazine, plus global business, finance and tech news. The Bloomberg Business Week Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Hi, everyone, Welcome to the Bloomberg Business Week Weekend podcast. Tim is out this week with me in from London. Lovely to have Stephen Carroll, He's co host of Bloomberg day Break Europe on Bloomberg Radio. Really nice to have you here in a week having so much.
Was going on.
Gladly and I from important events.
He does, he does, so I hear well our backdrop on this busy past week. Gridlock in New York City, no doubt about that. This as the seventy ninth Annual youn General Assembly was in session, coinciding with New York City's annual Climate Week summit with global leaders in town. Bloomberg and Bloomberg for Lanthropy is both founded by Michael R. Bloomberg hosted the Bloomberg Global Business Form an Earthshot Prize Innovation Summit at the Plaza Hotel, which we did a live broadcast.
Yeah.
Over the next two hours will bring you some of our conversations and highlights from the event. These are discussions focusing on innovation and opportunity in the climate space, as well as tracking where the investment is going and how it all fits into the state of the global economy.
On that, we have an update on Latin America and the Caribbean with Inter American Development Banks Jordan Schwartz, and the latest on the surge in wind power with the CEO of the Global Wind Energy Council Bend Backwell.
And later on the Australian billionaire who is spending billions on EV trucks. First up this hour. As Managing Director of the International Monetary Fund, Kristallina Giorgeva is a leader on the world economy, its growth, it stresses, and its complicated relationships and so coming off of the Federal Reserves halfpoint interest rate cut decision last week, she told us the Fed broadly got it right. Here's more from the Bloomberg Global Business Forum in New York.
Oh The global economy has been remarkably resilient despite the horrendous shocks of the last years, despite of interest rates fighting inflation. For the last more than a year, we have seen global rock growth holding. We project three point two percent this year three point two percent next year. The two engines of this performance US economy and most
of Emerging Asia, especially India. Assian We are now seeing interest rates in most economy is going down, and rightly so, because we also see the price being paid for interest rates being high. It is affecting somewhat prospects for growth in major economies. Two very important points for your audience. Number One, yes, growth is holding, but by historic standards it is not high enough to retain good prospects for
our economies before the pandemic average growth three point eight percent. Two, we also have very high debt levels, and that combination of slow growth and high debt is something that we at the Fund worry about. What we want to see is countries taking seriously the importance.
Of fiscal prudence.
So the center banks have done their job, they fought inflation. Inflation is going down, rates are going down. We need the fiscal site to be equally committed, and of course we want to see more attention as to what drives growth.
I want to go back to inflation now with the Fed finally making that big move last week that have a point card. Inflation defeated, mission accomplished, done or would you say not necessarily yet watch it.
Yes, we are in a very good place. We have been predicting soft lending. We would see inflation down and growth still remaining firmly in positive territory. This is where we are. We know that in the services inflation is still flaring a little bit more so the FAT is going to watch it. But broadly we think that the.
FED got it right.
And we would see how that evolves in the next meeting of the FAT. Not to exclude that could be more cuts. But again, why is the FAT successful Because it is data driven, so they would watch incommun data very carefully.
I take note that you're worried about the fiscal side, though, how big a risk is what you're hearing in the US election campaign that's going to have a huge impact on US RISCO policy.
Look, I mean, let's first give credit where credit is due.
The US has helped.
The world economy to stay afloat in this very difficult time. So when we think about the response to the pandemic, the response to the war in Ukraine, these spike of energy and food prices. Having the US economy to perk in the way it did a very good news for everybody. This being said, we have to all think of the beast that may be around the corner. What we learned in these last years is that we are in a more shock front world and having fiscal space to act
should that become necessary. Is a message we send to all our members is.
That our number one risk the fiscal position of the United States and other well, I.
Mean, the United States has the ability to fund itself in a fairly comfortable manner. What we see in some other countries they don't quite have that privilege. So the pressure for imminent action, of course, differs in different places. We do we have been saying that make sure that you are not pushing prices up by getting more money into the economy. The economy the economy can handle, so be careful.
But you don't worry about the US Federal Bank in particular that by that half a point content there maybe are putting a little bit more stimulus when the economy seems to be doing well.
Right, there's growth, Yeah, the economy is doing well. Haber markets still as.
You actually are reporting in your program that consumers seem to be saying, well, you're not as confident as we were before. Let's remember that when you have interest rates so high, that has impact, and it is the desired impact to bring inflation down, and the accompany not so desired to impact on consumer and business confidence. So my message is the following. We have to all be very watchful of whether there is risk of inflation to flare
up again. What is happening around the world. So we are not I mean, as the movie would go, we are not in Kansas anymore. We're in a different world, more shockpron more unpredictable. Keep your powder dry, don't use all of it at once.
One of the shocks that did open the global economy is Russia has wore in Ukraine and the Fund was criticized recently for planning to restart annual economic consultations with Russia.
Whose idea was that.
Look, I mean, we do have an articles of agreement and they say you have to have regular consultations. The Russian case is a very complex case. This is not your normal article for so as you know, we have said we need to see whether we have all the data we need to see whether we are ready, and at this moment.
We are not.
What does that damage the Fund's reputation having that sort of confusion around starting and then stopping.
I think that the Fund has been incredibly strong over this period of time of shock upon shock upon shock. We have supplied liquidity to countries that need it. We boosted reserves for countries so they can go through these shocks. And I think our reputation speaks for itself by the fact that our membership is increasing. We just got our one hundred ninety first member, the tiny country of Liechtenstein joining us. Why because we are an anchor in a sea of trouble. So I would argue that when you
look at the Fund, you have a credible institution. We have come true. We help the world economy to steer through very difficult times. We will continue to do that.
But is it tricky considering the war and in terms of advising Russia, like how to survive through this when most of the developed world, as you.
Now of course, cities as a horrible war. Heart bleeds for.
The people in Ukraine that have been so harshly hit by Russia's war. I want to see the war ending for the sake of Ukraine and for the sake of the global economy. It was incredibly damaging to the whole world. When we think of this, is it is it possible to do Article four without enhancing Russia's capabilities? We have to sit back and think twice.
And this is what we're.
Doing right now.
How long will you wait before that is.
And why are some of our members, I mean, this is our the levels. Some of our members are saying, please, if you're the only institution, no treasure. Other members they're saying, you're the only institution that can come up with some credible assessment what is happening in Russia. So that is also something that is in the equation. But I'm telling you this is not an adventure we would take ever likely, and I care very deeply for the trust of my membership.
We need to be there as an institution that holds strong in a world that has more trouble.
I want to ask about Argentina because you guys have put in there are some complaints by the Argentinian president about the IMF negotiator. You put in a new negotiator, and we do wonder about, like, what does that signal to other countries when they're maybe not happy with negotiations or policies or the imafs.
So the answer is very simple. It is the negotiator himself who found the situation being propagated. Yeah, how do you negotiate with somebody who does not trust you at all? So it was that negotiator that looked into the situation in Argentina. Does Argentina needs help from the fund?
Yes?
Do they need our advice?
Yes?
Let me send somebody who the president would listen to. And I can tell you that that was a mature judgment, and I stand by this judgment of my staffer, great professional, great professional, Rodrigo Valdez. I admire him for the maturity it has shown in that environment.
And are you hopeful for improved relationships with Argentina as a result of that change? Will things proceed more smoothly with the IMS relationship there Argentina?
Argentina faces very very tough problems to solve, and I know that Argentina would only benefit of having the IMF analytically to stand by Argentina and financially to stand by Argentina.
And I'm justire, I don't know if you realize it, but there's an election going on in the United States.
I am curious.
You've got two candidates with radically different positions on a lot of different issues, whether it's trade, immigration, the US's position on the global stage on economic policy. What's your advice for the next president of the United States.
Look, I mean the elections in the United States. This is the choice of the American people. They make this choice, they have a president, and then this president sets up an agenda for the country. We are always there for our members to give them our best shot advice.
So you remembers worried about the outcome of the US election.
The whole of the membership is now facing a work in which sixty percent of people are going to the polls. Yeah, you ask different countries. They have different worries. But I also very amazing stories that I hope you would tell. I was with Professor use of Bangladesh. Here is a country in which the youth of the country said, no more corruption, We want to turn a page. And for us supporting this country to turn that page to get a good growth and good prospects for their people amazing.
So listening to the younger population always important. Chris allnigior Gava, thank you so much. We so appreciate your time here. Managing director of course at the International Monetary Thought, thank you so much.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from two to five pm Eastern Listen on Apple car Play and and Brote Auto with a Bloomberg Business app, or want us live on YouTube.
We are very global all this week here on Bloomberg Business Week, and we've had this week the opportunity to focus on economic issues in different regions of the world
and how the changing climate is altering many country these trajectories. Well, the African Development Bank finances projects across the continent in areas including agriculture, energy, also the private sector development, and we know those African countries, something we talk about a lot here at Bloomberg, are among those most affected by climate change. So that is some of what we wanted to talk about here on Business Week.
Yeah, indeed, to discuss that. We're joined in the Interactive Broker studio by doctor a Can wimen at Asena, who is the President of the African Development Bank. Thank you very much to see We've also got Blomberg Chief Africa correspondent Jennifer Sabasagie with us in Studio two to join the conversation. Doctor Absina, Welcome to New York.
Great to have here.
You're here having conversations with global leaders for Climate Week and you and General Assembly. What are you trying to get out of this week?
Well, first and foremost is just for bakeshore.
Africa's is used on at the top of the agenda because when you talk about climate change, Africa only Accouncil no more.
Than three percent of emissions.
But actually so for us to proportionately from a negative consequences, it loses fight seven to fifteen billion dollars a year, and the current trend continues, that's going to rise to fifty billion dollars a year. But it's not getting the amount of financing that it needs. You know, Africa needs roughly about two seventy seven billion dollars a year to tackle climate change, but it gets to know what a thirty billion dollars.
It's a big gap there.
So, but most of what is needed there it's really to adapt to climate change. It's not so much of mitigation, but it's adapting to climate change. Other things that I wanted to get out of. Most of this is actually how we tackle Africa's debt issues, because at the end of the day, you know, you can run up a heel if you're carrying a back back of sand, and so you can have development in which you have highly
in deatd countries. And so we have to make sure that African countries facing a lot of challenges in terms of climate, in terms of also conflict, also in terms of high inflation, and strength in fiscal space, that they have the space they need to be able to invest in education, health, water, sanitation, gals, education and all of those things. So dead climate for me a very very important part of my conversation here this.
Week, and doctor Orgerstina, I mean part of that. I want to start with climate change, maybe because you have talked a lot about in particular the IMS special drawing rights and channeling more of those towards addressing climate change on the continent. Where is the progress on that? Did you make any progress this week while here in New York?
Well, actually, just to think about the speciat of doing rights at the IMF. You know, when we started, everybody for well, sers were things you put on the balance sheets essentially as reserve assets of central banks. But we felt that actually these assets were actually simply latent assets that I was convinced that we can actually do better in terms of seeing how we can turn those into assets that can lock a lot of capital through the
most lateral development banks. And the model that we develop basically was, you know, to see, okay, if you actually reachannel the SDRs to us as strip or air rated financial institutions, that's actually a hybrid capital that we can use and say perpetual in that stage on a balance sheet. So we can actually leverage now four times, it can even go to photo eight times. And so we're very delighted,
myself and the president of Inter American Development Bank. We walk together very collaboratively to solve some of the technical So there are some technical issues about whether what's the reserve assets status of it and if you want to collect it back, how can you get it back?
So we had to deal with some technical issues.
We solve all those technical issues, and I was delighted that the IMA board actually approved twenty billion dollars of SEIS to be do channel through the most lateral development banks as hybrid capital. Now, now the issue is now, how do we get that money? To get all that money out, yeah, exactly. You know, we had to actually put together a group of five We need five SDI rich countries that will agree to rechannel that through the
African Development Bank and the Inter American Development Bank. But also we have to make sure we have a group of others that are in Europe. For example, European countries can't do it because of restrictions by the European Central Bank on monetary policy outside of the EU and so, but we set up a very nifty structure which is called Liquidity Support Agreement, which they can just essentially guarantee those that have given it to you. Okay, that's still allowed.
So that's where we are. We're making progress in terms of the countries. We're talking to them, and I'm hoping that you know, by the time we do G twenty, we'll have gone along way in making sure that way or.
Will you actually have access to the funds?
Well, actually, you know the long ways to get access to the funds, so which means there has to be agreement that that thing. It's not just easy just like give it to you. The legal things they have to go through in their countries to make sure that that gets done.
So we we know.
That President Lula as the presidency of the G twenty, as I spoke at the event just yesterday, that the stars US Okay for hybrid capital and getting it out to US is top on the agenda for G twenty.
This is something that's I mean, we're deep in the weeds.
Of international financial machinery here and had the money we like to do public This is something you know, I was at the EU African sulmost two and a half years ago when this idea was sort of advanced to a level where the reallocation would be able to happen. Political will was there from under a manual macro all the time. Is the political will still there to action this and to make sure that that transmission happens as quickly as possible.
And remember there are two things we're talking about here.
That is the one in which you you know, there was a request to make sure that some amount of money actually given okay through the IMF. You know three is property reduction and growth trust and residence and so salability trust. So that's that's money that's been given to IMF that's that's a different thing the one that I'm talking about, and that's going very well. I think they have probably one hundred billion dollars they're looking for of SDR.
The one we're looking for is how the seas gets re channeled through the multilateral development so we can actually leverage that. You know, the thing is that you know when you when the money goes to im F. IMF is very very great, Crystalionam sister has been mostly helpful. But you know, for us, it's a it's a wonderful thing. You know, every dollar becomes forth, it's good for you as a shareholder, it's good for a tax for us, and you don't lose all the money. And so the
progress has been made is phenomenal. Progress been made. But I think we just have to tie the knots and make sure the money actually comes home and we can continue to do. I just tell you one thing that I can do. I take the case of you know, our Jai Banker, President of the World Bank and I go together during the Spring meeting and we say, look, I said, we still have six hundred million Africans that don't have access to electricity.
That doesn't make any sense.
You can't grow in the dark, you can't industrialize in the dark, and you cannot be competitive without electricity. So I said, we're going to have to deal with it, and so we both agreed and we launched what's called Mission three hundred, which is to connect three hundred million Africans to electricity by twenty thirty. Now, universal access to electricity in Africa is going to require one ninety billion dollars, okay by year. Now here's where the SDR connection comes in.
Because if you actually have fifty billion dollars of SDRs and you can leverage it at four times because they have r capital for you, that means that problem is solved once and for all.
That is two hundred.
Billion dollars at least to solve that problem. So that's the connection that we are trying to make. And President Lula as President of the G twenty it's also we've raised the issue also about he has something called the Global Alliance against Poverty and Hunger, okay, and so it's the same thing. You know, you use this se as well a lot massive amount of capital to deal with all the things. We say we have a part of the future.
So do you hope you think that within six months twelve months you have that capital or that you can move forward.
I believe that we will because I think that the most difficult part we've gone over that. So it's a question now of how we're going to use it and how we can get it at so I think so, yes, absolutely, yeah.
Well, you know, one of the other things, I'm just curious other parts of the world where you you know, look to access you know, partnerships money. You guys have been working with the Arab Bank for Economic Developments on some key projects. What can you tell us about further expansion there. We're also curious about, you know, the relationship with China and money coming in from China. What can you tell us in those those two aspects.
Yeah, you know, they are a bank for ecomic development in Africa. Is a very great partner of the African Development Bank, and we have joint projects that we do together.
We do more, Oh yeah, we will do more.
And we work in education and water, in sanitation, in agriculture and infrastructure and so on, and so they're celebrated at fifture that anniversary. I was one of the keynote
speakers to speak there. They've also invested in one of the things that we put up call it Alliance for Green Infrastructure in Africa, which is a vehicle that we just put together to mobilize ten billion dollars of private capital going into greening the infrastructure space, greening the gribbing, the green transport, green hydrogen, green Amumonia, and also making sure that we can basically have climate resilient infrastructure all
across Africa. So we have a lot together. We've done, you know, together about almost eight hundred and thirty five million dollars of joint projects in the last seven years, and we've putting six hundred million dollars into that. So we have great partners and I look forward to us doing more together.
What about China, You know, over the years we've talked about the investments China has done some of it. You know, they're concerned about their access certainly to raw materials, basic minerals and so on to what can you tell us on that f.
Well, I think, you know, China invests quite a lot in infrastructure in Africa, and people get to ask me a lot of questions about that, you know, but the question really is that you know, Africa Africa's infrastructure gap is so massive. You know, Africa needs at least sixty two one of an eight billion dollars a year. You know, not to talk of different now, not to talk of even the challenges you have.
You know, you're doing.
The infrastructure and all of a suddenly you have all these cyclones and hurricanes and all these things that are happening. That's actually setting you back, right and so, but I think that what has happened is on the infrastructure space. What I just know more generally is a lot being done is by governments. And I don't think that infrastructures will always be carried by governments. I think you need to have a lot more private capital moving into infrastructure.
I think you have to make sure that the debt bodings from infrastructure are reduced. I also think is very very important to make sure that the infrastructure being done in any case should be infrastructure that you can recycle. In other words, governments, if you've actually taken a lot of loans to do infrastructure, why not does do as said recycling basically just recycle that into private cycle and then free of more capital to be able to do more.
And so that's how I look at it, and I think for US as African Development Bank, in the last seven years or so, we've put in more than fifty five fifty five billion dollars into Africa. We are the largest by far. What's large roo financial institution investing in infrastructure?
Right?
When you talk to international investors, doctor Odisinea, I know you were meeting with a few of them while you were here this week.
I mean, is what is their concern?
Because we hear a lot about risk in investing potentially in a lot of these infrastructure projects that you're talking about. I mean, what is it that international investors are hoping to see in order to penetrate more into more of these markets.
Yeah, you know, if you take a look at it, we don't get that much of private capital moving into infrastructure right in Africa.
But the issue is people.
Talk about risk, well, life is about risk returns. People forget about a return part of that, and so it's a risk return world. And I take a look at Africa and I don't think Africa is risk here than any other part of the world. Don't believe me, just believe the data. There was an assessment that was done by Moodist analytics who looked at the cumulative losses on
infrastructure financing globally, not just in Africa. Well, they find they look at fourteen years of non performing loans and debt and they found that in Africa the non performing.
Loans was one point nine percent, In.
North America it was six point six percent, in Latin America it was about ten percent, and you know, Eastern Europe about twelve point four percent, and Western Asia mo Albost four point five percent. So Africa is not as risky as people say. Perception is not reality.
How do we change that perception?
Because I think you've got this really smart global audience right now, and I think we think of emerging world and we think, oh yeah, Africa, what what is what's the message you would like to get out to the audience who's listening right now.
Well, first informost is that you know the fact that I said, you know it's about risk return, Well doesn't mean they're no risk, you know. So first infemost is that we have the vehicles to do risk those things. So we have project risk, market risk, and whether there are also political risk insurance that we can actually provide the fact that the African.
Development and say we have a little political rest.
Yeah, yeah, but we can we can do risk there, so I'll stay with within my lane.
But but but but.
We're trying to put all of our instruments, so partial risk guarantee instruments, partial credit guarantee instruments that we do for counterparties with that government private sector. We're trying to put all that together into what we call an African Insurance and Guarantee Agency, so so so private sector needing those risk instruments don't have to run every everywhere to lower their transaction costs to do it. And that would be a game changer because we also provide insurance against
equity investments. If we provide insurance for you when you actually also have political insurance and ensure you against climate climate sharks. And the last thing I'll say about this particulating is just that when investors are looking to invest, they're asking the question where are the bankable projects?
Right?
You have to be able to have a whole series of bankable projects, and we're doing very well on that. We have, for example, an institution that I actually share is board. It's called Africa fifty is a private equity vehicle that has about now one point one billion dollars and portfolios of eight billion dollars on infrastructure assets. And basically what it does, it's a part of a company is to it's called project development company and so you develop bankableley.
Projects that it can sell. Right, it doesn't matter what it is.
So we're trying to make project development a business issue, not just the development.
Issue, the financial the private sector involvement.
Right, that's right, that's right.
And the last and now I just say about investing in infrastructure, it's important of local currency financing. You know, we talk about debt just now, but if you actually look at the assets that people are investing in, the revenue streams are going to becoming in local currencies and the currencies are actually depreciating very much. So look at currency bunds are very going to be very important for
financing that. And also synthetic lookout currency instruments are going to be there and as well as you know, we at the Bank, we support financial institutions in Africa that actually lend in local currency, but we take the we actually ensure you, we give you the risk you'll lend it, and we pay we be at the risk ourselves.
Right, we're seeing a lot of that volatility with currencies all over the continent. Doctor Artistina, we were just talking briefly about how this is potentially this is your last UNNGA as President of the African Development Bank. I wonder how you think about your time in office over the past decade or so. You talked about how the bank looks a lot differently than how you inherited it. I mean, how would you assess it well?
First and foremus is the greater honer of my life to be asked by shareholders. You know, we've got any one shareholders to go and actually you have the resources, you have the confidence, you have the support, and guess what go change it continent of my birth. And that's not for me a job, that is a mission. I take it as a mission and so that's how I look at it every single day. Now, look at what
has happened to the bank since we actually started. You know, for example, you know when we started, I said that we have to have a clarity about how the bank tackles issues day to day issues of people. People shouldn't really looking at you know, you have Africa and Development Bank. The issue for me is not just the bank. We don't how to run a bank is the issue is the development part, right, And so we actually set out
to actually say five priorities for Africa. Light of empower Africa, universal access to electricity, feed Africa, integreat Africa, infrastructure wise, industrialized Africa, so Africa can be competitive with global value chains, okay, and increase the share of global manufacturing. And then of course improve the quality of life of the people of Africa the things that we all care about, water, sanitation, education, skills,
job for young people and all of that. So we in the last time, since the last seven years, that work has impacted on more than one hundred million people. The second is what we've done in times of raising more capital for the bank. When I was elected president first of the bank quite first time, the capital of the bank was ninety three billion dollars. Today the capital of the bank is nine three hundred and eighteen billion.
Big difference.
And last year last year just one point. Last year, the Afghan Development Bank was ranked as the best multilateral financiale institution in the world. And last year and this year we were ranked also as the most transparent financiale institution in the world. So I was thinking that, you know, we've done pretty well. I think my staff I've been fantastic,
but most importantly, my shareholders have just been phenomenal. When I was re elected, I was re elected with one hundred percent of the votes, so which was fantastic.
Well, it's certainly a part of the world that we focus on so much.
Genders this as she spent so much time on it as well, Doctor Adisina, thank you so much.
Thank you for finding time for us.
Jens Abazagia, thank you as well for joining us and on this conversation. That's going to do it of course, the president of the Africa Development Bank. If you missed any of the conversation, be sure to head to Bloomberg dot com to hear it.
You're listening to the Bloomberg Business Week podcast. Listen live each weekday starting at two pm Eastern on applecar Play and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station, Just Say Alexa Play Bloomberg eleven thirty.
This past weeks, Bloomberg Global Business Form gave us an opportunity to hear about what is going on in the global economy, both the developed and developing worlds. Last segment, we talked about Africa. We shift now to another emerging part of the world, Latin America and the Caribbean. The World Bank forecast that regional GDP in those countries will expand by one point six percent this year and two point seven percent in twenty twenty five.
Look, these rates are.
The lowest compared to all other regions in the world, and they're not high enough to drive prosperity. According to the United Nations Development Program Report, the economies of Latin America and the Caribbeane are more susceptible to external shocks, with this volatility affecting this region more than other developing economies, and this.
Is why this next conversation was so important. Jordan Schwartz is Executive vice President of the Inter American Development Bank and knows about the challenges of these regions. He's also Chief Operations Officer of IDB, oversees the quality control and risk management of all bank operations of financing for Latin America and the Caribbean. Once again from the Bloomberg Global Business Form in New York City, here's idb's Jordan Schwartz.
Where are the economies that you're focused on now in terms of a post COVID recovery, what's the outlook?
What is twenty twenty four looking like for them?
It's a great set of questions.
The Latin American Caribbean region is very heterogeneous, not surprising, right. We have the Caribbean Islands, relatively small economies, generally single commodity dependent.
In this case, of commodities often are tourism, if you will.
And we have big, complex economies like Mexico, Brazil, Columbia, Argentina.
So it's a heterogeneous region.
But it's a region that has been i think struggling to maintain and to increase its level of economic.
Growth of GDP growth over the years.
To provide the kind of opportunities and services that the population has grown to expect. It's a middle income region overall, but it still has vulnerability, important vulnerability. It has a few low income countries Haiti for example, Honduddhas and others, but it's generally a middle income country. And I would say a theme of the day for us, a theme of the multilaterals that work in the region, particularly the Inter American Development Bank intermeding on the intermediating on the
capital markets. Trying to bring long term financing for development, both public and private, into the region. Is how to help the region take advantage of its comparatives. It's comparative advantages, to leverage its comparative advantages. It's food production. For example, the region already produces probably three times as much of as a food at it consumes itself. It produces energy,
It has a very green matrix. It has a large hydrobase, it has geothermal, it has all kinds of renewable resources.
It can be.
Part of the solution to the global energy transition, part of the solution to global food security.
And to be able to see investment into those areas.
And the growth of those areas I think will be part of helping the region return to higher level of growth in the years ahead.
Jordan.
What holds it back?
Then?
Is it the case that over the years, over the decades, because I feel like we've been talking about let's take Latin America in particular, or even a nation like Haiti gets caught in the policies of other countries.
What is it that holds it back? I would say, and I hate to love them all in one back.
Yeah, that's a negative question.
I find a way to make this positive.
No, no, no, I'm not trying to be negative. I'm trying to be smarter. How do we find a smarter way forward?
I think part of it is regional integration, so the economies of scale and scope that come with greater interregional trade, with the trade of energy, with the trade of goods, so that you can tease out the productivity, the competitive potential of the economies. It has overall been a region that has been somewhat atomized and hasn't brought it together its own trading systems.
That's probably part of it. I would say it's a vulnerable region. It's vulnerable to.
Climate, to whether it affects in general, particularly the Caribbean, Central America, but also increasingly, as we know, those commodity exporting countries that are suffering from drought, suffering from flooding, often suffering from flood.
And drought increasingly at the same time in large weather events.
So it's a vulnerable region. It has more to do in terms of bringing itself together.
And I think.
Probably there's a whole theme we could get into if we had another six minutes sometime to talk about competitiveness and the way in which the economies could encourage greater competitiveness comparative.
We're very focused on climate here today obviously to have the art shop innovation, some of it earlier on the globe of business form happening as we speak. When you're looking at projects to supports across the various countries that you work with climate resilience, what are you looking to ask? What sort of projects that you involved in, where are you seeing success?
It's a brilliant question. Listen. For us, we look sort of at two sets.
Of challenges at the same time. One is the box the asset, the investment. What can be done in order to better manage the.
Risk associated with investors?
What role can the financial intermediates, the multi level development banks with long term finance, with guarantees, with our own.
Sort of toolbox for investment. What more can we do in that space?
But then we also look at the systems and the utilities, the policies, the pricing, the quality of regulation.
The ability of the utilities.
To off take that investment.
What needs to be done in order to make prices more self sustaining financial the financial sustainability of the utilities, the capacity of the transmission systems to off take to absorb all of this energy that's coming, and to deal with the intermittency of renewables. We are both a policy institution and investment institution, and we're helping our client countries when we're deal link with both things at the same time.
What goes into that investment and the environment in which the investment is being made.
Do you have all the financial instruments that you would like to be able to tackle some of the issues, especially when they're cross border issues and you're dealing maybe with a couple of different countries.
It's the cross border issues oftentimes are not solely.
Financial.
It's about the integrity of contracts, about regulatory integrity and the ability to trust and maintain the purchase back and forth or the trade back and forth ad energy as an example. The question about financial instruments is really interesting to me because we have been focused on financial innovation even as we are trying to assure the impact of the investments that we make. Right, because there's sort of two things. So is the instrumentalization How do I spread
out risk and manage risk better? What are the tools that I can I can use to do that. When do I deploy credit enhancements, guarantees off take are strengthening of all the agreements, termination payments for power. But at the same time, what do I need to do to protect the consumer? What do I need to do protect the natural capital of the investment, in the environment of the investments. What role does multilatterle have to make sure that whatever money we've mobilized can actually be paid back
over time? It's actually driving economic growth, the capacity consumers and taxpayers to pay back all that fine and.
To encourage more investment.
And to encourage more I think that's important.
I'm not sure you're working with private investors to crid funding for projects as well. I'm wondering if we can engage investor appetite in some of the projects that you've been support.
The IDB has a private sector wing called the IDB Invest, and it has an early equity and venture capital branch called IDB LAB IDB invest, which is the only multi latter with that kind of of of risk appetite sort
of derived from an early an early investment withek. On the IDB invest side, it has recently been recapitalized, which means that the governments that contribute to it, from Latin America, the United States, Japan, Europe have agreed to functionally double the size of the capital available in this world in which the whole concept of multilateralism is sort of being challenged. Yeah, we see a recognition that actually the private sector's got to be a major part of So we have this vehicle,
we have this institution. It's going to be doubling in size, and the balance of the IDB group is basically going to change so that it will be even slightly more than half private finance and the public sector side, the sovereign guaranteed side growing as well.
I wonder as well in the MDB space competition, right, you have the Asian Infrastructure and Investment Bank among others, who were also looking to invest in the same region as you as well. Is it a competitive environment? Are you all competent to kind of fund the same set of projects.
It's interesting we've seen this year a concerted effort and a lot of pressure from our own shareholders to bring the multi lateral development banks closer together, to function as more.
As a group as a unit, come out with platforms for investment.
We are we're not competitive the way commercial banks to compete.
With each other. Do you have a shared.
Finance A large part of our financing co finance, particularly with the World Bank, which is very active in Latin, Latin American and the Cribean, has sort of a similar set of protocols around environmental and social safeguards, transparency, procurement, competition, and the focus on rule of law.
It's a somewhat similar culture, though.
We are unique in that fifty point zero one percent are owned by the borrowing countries Latin American and Cribean.
The United States has thirty percent ownership.
This is how in the eisenhowerd administration, this this institution was designed with this unique balance, and so we bring that to the table when we bring in other multi level development banks and of course presence in every country. We're very decentralized, very client focused institution.
You talk about, you know, certainly the global country involvement and the the collaboration if you will, geopolitics or upcoming elections like I mean, we've seen them all around the world, but certainly here in the United States as well, with someone who's very involved, How does that complicate what you guys are doing.
It's really interesting.
We see ourselves not as a government but as a stabilizing force. Right, so when we're engaged, we're talking about the energy sector, but the same is true for the social sectors, for health education. We spend decades working with these countries to develop their social protection systems, right, their health and education systems, their power systems, and we bridge governments even when there's dramatic change in policies. We tend
to help smooth the volatility of policy over time. Interesting that should be a function of a multilateral where they're as partners for the growth. And even though the governments are our intermediaries, it's really the people of the country. It's the consumers and the taxpayers that we work for. And so I think we're used to seeing changes in political parties. We're meant to survive through those changes, and so hopefully we'll play that role going forward.
Can I ask you briefly about the US election and what risk DOP could put presides given that the US is such a big contrivers to your fund, dignis and.
Just have about twenty seconds.
No, it's good, it's a question.
I mean, we get on with our business, and we know and trust that consecutive.
Administrations, as has happened in the past.
Support what we do and understand roughly what we do, and we hope to work with whoever comes in.
Jorn Schwartz, thank you so much, Executive VP Inter American Development Bank, Thank you.
So much for general's pleasure. Thank you.
It's ours. This is Bloomberg.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from two to five pm Eastern Listen on Apple car Play and then Bright Auto with a Bloomberg Business ad or wan't just live on YouTube Tube.
All right. We are so looking forward to our next guest.
He's got a great vantage point on the global economy, global mining, climate change. Just this past week for Toscu, the world's fourth biggest iron ore miner, saying it will pay two point eight billion to replace two thirds of its fleet of houlage trucks and equipment in Western Australia with EV versions as it seeks to cut diesel consumption and meet ambitious emissions reduction targets.
There's a lot going on.
Yeah, they're sure is.
And look we've got luck to talk to Andrew Farrest about it joins us in studio, executive chairman and billionaire of Perth, Australia based Fordescu in ten this week during the UN General Assembly.
And Climate Week as well. Welcome to Bloomberg Business Week.
How are you?
I'm on fire?
Thank you.
I'm just an exciting place right now. It certainly is.
And look at a time that we're going to talk about your climate transition plan in a moment, because that's a really interesting conversation. We spent all week talking about China and the stimulus efforts being made there, and this is a story that's very central to your business as well. Imported iron or used in roughly of eighty percent of Chinese steel production. Talk to us about the picture that you're seeing the Chinese economy from your side of the business and the demand.
How bad is it? Oh?
Oh?
How good is I mean?
Basically, you've had mining companies being fat, dumb and happy for a very long time because the anal price has been so good, so we're all heroes. But now, oh my god, the annual price is fallen, which means it's a lot better value, by the way for the customer. And we have to work a lot harder as mine is. We have to work harder to actually make a margin. And that's a good thing. And when people think that
one throe, they think, well, how do I lower my margins? Well, one third of my cost is diesel fuel one third, right.
One third.
Imagine if we get rid of that.
Oh, by the way, we'd also.
Be going zero missions if we did that. So we've been working on this for years and years and years, and to give you an idea of how strong that demand is because people are looking hard at their operating costs. Now, we took years and years to get up at three hundred and sixty truck order. Now these are big trucks, right, You've got the hub caps starting at the roof here. And we signed another hundred and got walk ins for
another four hundred in our day. So from three or four years for three sixty for a day for another five hundred. So this is showing you that the mining industry is saying, hey, we've got to really look at operating costs and forscu A middlea is driven because it wanted to go zero missions because we bloody will have to as a human race. But then we also have to prove that it's highly commercial. And what you're seeing happen yesterday and today is that going zero missions is
highly commercial. To just say you're not worried about China, I mean, I've just come from China, and I've just I mean, I get accused when I'm in Chinese, when I'm a China being very pro North American. When I'm in North America, I get accused of being v being very pro China.
So no, but this is interesting, and love you both. The narrative is so negative and has been for so long.
The problem, I'm afraid you're wrong.
You are wrong.
I mean, here in North America you have a completely different system. You get lag effects and lowering interest rates and things like that, and it's macroeconomic policy and it works really well over a long time. If they want to hit the accelerator, hit the brakes, you know, you see the impact straight away. So they did a little bit of priming, not much. I going to say as a percentage of GDP, you'd be hard to measure it.
But that is kicked investments straight away. It's kicked the iron or price's kicked iron or demand.
It's a five percent growth nart a concern. It's going to happen.
Look, I'm completely not worried about it. And by the way, if it's four or six, I know big countries who'd love to get two or three. So you know, for our demand, I'm seeing the iore price come down and I'm saying good.
So Andrew, Basically what you're saying is China's like, Okay, if it still isn't enough, we're.
Going to do more.
Yeah.
And also, you know, I love North America because we're aligned with North America. I love China because they're actually leading the world on going green. I mean, they are way ahead of their own plan. And everyone I'm in North America and China kicking the hell out of each other is really bad for the overall human race. This geostrategic war between North America precipitate, I want to put
it bluntly by North America. And look, China does all these things wrong too, And you can jump on their toes, but you jump on their toes in private. You don't do it by shouting at them from New York or Washington, d C.
Well, does that then worry you about who's in the White House?
Come November Fortescue has a policy that we deal with any elected leadership that usackers want to put up. Right, So you know, if you want to put up Trump, I've got to say this Ukraine badge. If there's a deal cut which rewards an invader for invading a country which you've had as an enemy for eighty years, and you go cut a deal and reward a bad guy for being bad, We're down in the Pacific and we're
going to say hold the phone. If you're going to trade Ukraine against Russia, where do we sit with North America? I mean, where do we sit? I mean who do we now call a friend? If you're going to turn around and do that to you Europe.
Right, I mean, you're obviously very plugged into geopolitical tensions because it's part of what affects your business as well. When you're thinking about global climate solutions and you gave us some of the outlines of your plan there as well. There's some people that are going to think it's highly ironic that a mining company would be looking at a green transition. Agree with them, what you know, green iron
or what is that is that? Do these things really make a difference when it comes to the bottom line of limiting climate change.
Let's start with three million tons of carbon docks, so I'm not going out in the atmosphere. I mean, let's just start there. And then let's realize that no one say ever going to make green iron or green steel, which is ten percent of the carbon budget. Now we're talking huge, and let's just start with green iron or So the fact we're going to green iron or within a few years means that we can then go to green iron or green steel. Now that's starting to have
a massive impact because we do that economically. Then the pollution which is currently suffered all over the world, particularly in China, where they put their steel mills on the outskirts to their city's central plan, but their cities grew so much bigger. So now the steel was inside the city, we send them totally pollution free metal. Their pollution problem
goes out the window. So that there is a really big impact on this slow lethargic backward industry called mining, ironically leading the world to go green, and it's hitting where the pollution is worse, and it's not saying, oh, well, we've got to continue burning all in gas because there's such lovely people and we have to look after them. We're saying, actually, oil and gas has got us into this manure. We've got to stop doing what we've always done.
If we want a different result, and switch off the oil and gas, and then we'll get a different result. And that's like green steel, that's like green shipping exactly.
Though, is green iron ore? And what does it cost versus other iron ore? And is it cost competitive?
Yeah?
No, it's going to cost less, man, because we can make it for less because we're not chopping through a billion a billion leaders of digey like nearly five million gallons of diesel. We're not going to buy anymore, you know, because we're making it ourselves.
So is it cost competitive already?
Yeah, yeah, yeah, yeah, that's the beauty of it, which is why I'm saying, listen, stop looking at going green, stop looking.
At zero missions.
Is Oh, you're a really nice guy, What a lovely chief executive, what a lovely politician thinking of the kids not himself. Actually, get out of your whole This is a great investment. You should be doing this for your shareholders. And if you say you can't go green, well you're right. Get off the stage. And let on someone smarter who can.
But why isn't everyone doing it? If the case is that simple and done it sooner?
Because everything starts somewhere, right, everything starts somewhere. I'm in the suit. You're you're getting started with a thread, mate, It turned out to be a suit. So we're the thready.
Talking about the conversations you're having here in New York as well. Are people getting the message?
People are getting the message?
Yeah?
I mean, you know, we look at we look at the pullback on green agenda and so many parts of the world at the moment we see it reflected and polling and election results.
Is that playing that's an opportunity for uce Okay, that's a serious opportunity. I mean, we are pushing head going green as quickly as possible. We've got technology which can take the water in here so to steirly water bottle, turn it into the most powerful fuel the walls ever had, which is hydrogen. When we turn it from gas liquid to really serious energy except soft water, and we're working
out how to produce that. It's not pure we call it in dustrial hydgroen, but a fraction of the cost where we've worked out already how to charge cars, not in twenty two hours or even eight hours, but in twenty two seconds, okay, And these are the fastest electric cars in the world, like Formula E winners all the time. We've worked out how to charge our huge trucks in twenty four minutes. And I've had your US generals say to me, hey, hey, you understand the US military can
never go green. I said, why is that. They said, well, our tanks they're fifty sixty tons and they've got to go fifty mile an out. And I said, well, hang on, mate, our trucks are four hundred tons and they got to go sixty mile an out.
They're green.
And they've said, well, well, you know shipping shipping our warships. Our warships are like one hundred meters long, andrey, I said, honestly, mate, we could put three of your warships on the back of our arnoor carriers. They're three hundred and thirty meters long, and we're sending them green so everyone can go green.
I am curious if you guys are going to be also building wind farms solar forums right next farms, excuse me, right next to some of your minds to help supply green power, Like, what's is that part of the process.
Yeah, it is.
It is absolutely and will supply power us and power of others. Right now, we're operating a green grid. It's the first fully independent green grid in the world. It will be the largest, of course, because it'll be producing enough power the size of small countries, and it'll be a full grid, but it'll be off the standard grid, and that means that we can put this all over the world.
I want to come back to hydrogen because it's been talked about for many years. There's been a lot of money put behind us yet to yield results. Where are the obstacles there? How far away is it from being something that's going to be widespread, available, and more heavily used as an energy forum?
Okay, the only thing stopping the production of green hydrogen North America. I mean, let's just remember that there's more people employed in the renewable energy sector in the fossil fuel old state of Texas than there are now is
by fossil fuel. So everything is changing. What we're seeing now is the whole growth, this massive growth of green heighten and green energy being held up by perfect getting in the road of the good and the IRA and if we don't fix what a little thing called forty five V, which is where the fossil fuel sector's got these environmental independent lobbyists to say, hey, look we should have things like ALI matching. Well, okay, that's perfect.
Parts of your own industry are working against this.
Yeah, I mean, but it's not my industry. It's the environmental lobby is paid ball by fossil fuel. It's the same same draw cards, same playbook as tobacco used. They get so called scientists into say tobacco doesn't kill you, mate.
So it's money again, it's politics and it's lobby.
Yeah, and we have to Carol, we have to look straight through that and say to your legislators and your legislators, we've got to say, actually, we're not going to let perfect kill off the good. We know green hydrogen is the answer. We will have weekly month matching or monthly matching. But hourly matching just means the person who came up with that's never driven or operated anything more complex than a bloody computer, not these one two three mile long plants which I have to operate.
So thirty seconds left, are you more optimistic after your time here in New York and talking with global leaders North American leaders, US leaders, Are you more pessimistic?
Just quickly?
No, I'm more optimistic.
I'm more optimist because they trust what someone does more than what someone says, and they can see we're doing it. They can see Australia's high sharehold return company ever is going fully green and there's got to be a reason for that. And they're making huge sales and they're profitable.
So we wanted to be smart and fun when you came in. Did we do it?
Yeah? You're smart and fun here.
I love such pressure. Andrew Forrest, thank you so much.
Executive Chair of course, a Ford Sku joining us right here on Bloomberg Business Week.
You're listening to the bloom Burg Business Week podcast. Listen live each weekday starting at two pm Eastern on Applecarplay and Android Auto with the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa play Bloomberg eleven thirty.
All right by now you know we are all in about global climate challenges this week. Adding to that task, crypto mining, a recent IMF working paper found that crypto mining could generate seven tenths of a percent of global carbon dioxide emissions by twenty twenty seven.
Look, the IMF noted that because of the electricity used by high powered equipment to mine crypto assets, one bitcoin transaction requires roughly the same amount of electricity as the average person in Ghana or Pakistan consumes in three years, something that's captured the attention of both US presidential candidates.
It certainly has, so crypto mining's energy usage was where we wanted to start with. Rustine Benham. He is Chairman of the US Commodity Futures Trading Commission, the CFTC. He joined us from the Bloomberg Global Business Forum in New York City this past week.
Look, we're talking about climate issues for US, and this is why we're thinking about the impact of crypto, but also more broadly, this is an area that you have lots of tentacles in your regulatory position. Talk to us about the question of environmental impact when it comes to crypto. Where are we thinking about regulation around that, What sort of rules are needed, What does the FTC have power over?
Well, before we even get to the climate impact of crypto and crypto mining. I think the larger question in the US is the regulatory structure, or really the lack
of one. I've advocated for almost three years now that there's a gap in regulation, and this is just a product of the way the US regulatory system is set up, multiple agencies, couple market regulators, banking regulators, and for better or for worse, we've seen a sustainability in the marketplace, sustained demand by customers, both retail and institutional, and really what we have to do is make sure that we regulate it properly so that customers are protected. Market stability
is their market resiliency. If we can get there, and I think that would be my priority. Then I think the conversations about climate impact energy usage for mining are important to ask an answer, and I think those have been actually within the domain of questions asked over the past couple of years. A couple efforts by some of the miners to co locate near power sources that are renewable or even nuclear, some other efforts to change the
way mining is done to reduce the carbon footprint. But as we worked with Congress over the past couple of years to think about legislative efforts. I know this issue specifically was on their mind and they wanted to think about disclosures, transparency, information to get to the market so that those economic incentives and preferences can essentially be manifest through decisions about what tokens to buy or not buy.
Well on the energy component so much an important aspect of the reliability right, making sure that it continues to work. I want to go back to the regulatory side. And Donald Trump has kind of come out and said he's a friend of crypto. It seems like Kamala Harris's campaign is increasingly embracing.
Towards the crypto world.
In terms of your push for more oversight of the crypto world, would you continue to do so under a Harris administration.
Yeah, and I just to be no matter.
Who and as friendly as they might be.
Yeah, to be clear, it's oversight driven by regulatory protection and customer protections. This is not me, as chair of the CFTC advocating for the industry saying that crypto is going to be the next great thing. This is about my observation as the head of a market regulator, saying there is a giant gap in regulation. There are a lot of customers who are either uninformed or don't really know the associated risks with crypto, and we have to
put the guardrails around this industry. And those guardrails are the same guardrails that we put around equity markets, derivatives markets, fixed income markets, et cetera.
No different, no different, but.
We have to think about Look, there are going to be differences on custody, cybersecurity. There are components of the financial asset digital assets themselves that are very unique from securities or derivatives.
There's no doubt about that.
But if we think broadly from a principles based standpoint, the market structure components that have been put in place for decades and have worked quite well for US markets are the same ones we need to think about for digital assets because there's a lot of questions about the
sustainability of digital assets. But here we are twenty twenty four, moving into twenty twenty five POSTFTX, other crises, finance a lot that we have brought on the enforcement side, and there is still I don't know about insatiable demand, but there is still demand from retail and institutional and they're looking for regulatory structure so that they can increase those flows.
How open is the industry to regulation. I mean, it's obviously a conversation that's ongoing, and you've outlined the complexity of how the different agencies work in this front as well.
Are they engaging?
Is the something that you're actually able to see productive results that won't tend open a risk of overregulation?
Yeah, So this is really the tricky part of this because I think I argue this often, the US capital markets are the best in the world because of the regulatory structure we have, because of the legal structure we have, because of the accountability there is for bad actors and those who violate the law.
So there are many actors.
I can't speak for the entire crypto community, but there are many who have been very engaged with Washington, both in Congress and the executive branch to see what kind of regulatory structure could work around digital assets. Will this benefit them most likely? I've said this publicly in the past. Again, to my point, US regulation is the reason in part why US capital markets are the strongest, deepest, and most liquid in the world, So they see a benefit to regulation.
The word often thrown around is legitimacy, but again I want to pull back to what my responsibilities are, Protecting customers, protecting market resiliency and in essence sometimes financial stability.
And as I.
Continue to see this market ebb and flow and go through it's sort of organic growth, I can't help but raise a red flag and say, look, we're seeing this market grow.
We need to protect customers.
That's what would you say in terms of the powers that are necessary in order for any kind of regulation over crypto by the CFTC to really work.
Yeah, this is a unique part, like we have two market regulators CFTC SEC. There is a question about around some tokens. I've articulated and advocated that bigcoin and ether are commodities under existing law.
Congress wants to change existing law.
That's we still debate, sure, But look, we've brought a lot of enforcement cases and we bring them through the authority we have over commodity assets, which in many cases
is bitcoin and ethereum. But ultimately it's registration of exchanges, it's registration of broker dealers, it's registration of custodians, clearing houses, data repositories, the same again, and core components and core regulatory tools that we use, and with those registration requirements come ability to surveil markets, ability to collect data, and ability to examine market participants.
What is from what you're hearing from the election campaign because we ask about it, because it's coming up with alarming regularity, Someone would say, in how often it's mentioned, what are you hearing that sounds like a good idea or that sounds like a bad idea in terms of where regulator regulation should be going from here.
So, look, we don't want to undermine existing law. We don't want to change existing protections that exist for markets like derivatives like stocks and bonds.
We want to apply what.
We've learned and what we have in terms of authority to regulate markets to crypto. And it's about engagement. It's about understanding what the technology is. It's understanding what new risks or new variations on existing regulatory tools we would have to apply. But I often go and I've had
conversations with lawmakers in both the Senate the House. There have been a lot of really interesting efforts, and credit to those who have led the way in both the House and the Senate to draft bills to contemplate giving the CFDC the authority. It's a unique circumstance where the CFTC regulates commodity derivatives markets but not the underlying markets. So we have this gap in commodity cash markets or spot markets, and this is where we find ourselves with digital assets.
All right, So we're still trying to figure out digital assets.
We throw artificial intelligence into the mix, right increasingly. Not new finance community has been using it for a long time. I do wonder if you guys are planning what tools you need to have in place to kind of oversee that aspect.
So, yeah, it's important question.
And at this point, almost nine or ten months ago, we put out an advisory, a request for comment, a consultation document, and in my mind, the steps we needed to take as an agency was one information gathering, engagement, getting better smarter ourselves so that we can think about what existing rules apply to AI and where there may be gaps in the space. So we're working through some
of those comments. I'm hopefully going to come out with some form of advisory guidance in the near future, but it really is contingent on us being thoughtful about how AI has been used thus far and how it may be used.
In the future.
Are you talking to big tech about this?
We look, when we consult, we are as we cast a very wide net. We want to learn from everyone, and that not only includes the individuals who are directly registered or participate in our markets, but it certainly is the tech companies who are building these AI platforms and models that are essentially being used by the financial institutions.
The CFTC recently product guidance on voluntary carbon credits. I'm curious about the voluntary nature of that and whether that's something that's going to be relevant and enforceable given that that's the framing that we're given on this area.
Yeah, so not unlike crypto in some respects.
We've seen voluntary carbon credit futures contracts listed over the past couple of year, derivatives and once we have futures and derivatives listed on our registered exchanges.
I use this phrase a lot.
We have as an agency of vested interest in the health of the underlying market, and in this case it's a voluntary carbon market. We want to make sure there's resilience in health and high integrity in that cash market, so it's reflected in the markets we regulate. Ultimately, from a broad perspective, if we're going to transition and hit our twenty fifty targets, our one point five target, we're
going to need voluntary carbon markets. We're not going to be able to wean ourselves off of coal and some fossil based carbon based energy sources.
So we're going to need a way.
To allocate capital transition to the Global South and other nations that need to transition to low carbon intensive energy sources.
Twenty seconds Election betting. I know you guys don't like it. You've recently lost a court.
Case very quickly. Nothing you'll warm up to.
It's not about what I like or don't like. It's not about what the agency likes or doesn't like. It's about what the law says, and the law, in our view, says that election betting is against the law.
That's Manam, Thanks very much for joining us the FTC chair.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoon on a car play with the Bloomberg Business app on YouTube.
Are just announced lawn Interest Train, I predict the I'll go further. Now we should give business even more confidence to invest trillions of dollars that are on the sidelines the clean energy industries of the future.
That is President Biden at this past week's Bloomberg Global Business Form in New York City, shortly after he gave his final speech as President of the United States to the UN General Assembly. President Biden was among the world leaders that were in New York City this past week for Climate Week and the UN General Assembly. Top of mind for many actions and investments in renewable sources of energy and ways to tackle the climate crisis.
The banking sector was in attendance as well, concentrating on financing climate solutions and more of those same solutions. The sentiment voiced by Standard Charted CEO Bill Winters, speaking from the Earthstop Prize Innovation Summit, the only.
Way that we're going to be successful in the fight against climate change is to offer people an acceptable return. It doesn't have to be a protest return, just acceptable. That's the only way to move trillions and trillions.
One of those sources of clean energy that countries are continuing to invest in and the finance community is certainly looking at, is win The World Economic Forum says that in twenty twenty three, last year, the global wind industry installed a record one hundred and seventeen gigawatts of new capacity, a fifty percent increase from the previous year, and that countries across the globe are investing in both onshore and
offshore wind capacities. China leads the pack, adding to substantial new capacity annually, supported by ambitious governmental renewable energy targets under its five year plans.
Ben Backwells the CEO of the Global Wind Energy Cancel, an international organization dedicated to promoting wind power as a key solution for the global energy transition and to combat climate change. He's also a journalist. He's written books, including one entitled win Power, The Struggle for Control of a new Global Industry, and another on offshore wind. Ben joined us from the Bloomberg Global Business Forum in New York City.
The good news is that we're going quite fast in terms of expanding. As you said, a record year, and we expect to break those records every single year going forward. The bad news is that we're not on a tradictory to triple renewables. We're probably on a kind of doubling tradictory by twenty thirty, so we go one hundred and seventeen last year. We think we're going to be one hundred and thirty this year, one hundred and forty eight
next year. So it's building, but we probably need to be growing about maybe twice as fast to be on a net zero.
Why aren't we.
Well, there's a number of reasons. I think the main reason is that everything is just too slow. So planning around the world continues to be a barrier. I mean takes twice or three times as long to plan and permit and offshore wind farm that it doest actually build one. So in terms of the technology, the capacity to build, it's there. In terms of red tape and deureocracy, we've got a long way to go. So that's fully number one. And then secondly, we're facing some market imbalances as well.
I mean there's being kind of race to the bottom pricing in some areas, which has then led to the projects not being profitable. We've we've had about of inflation. You've seen in you know, the impact a couple of you know, a year ago in the US some of the projects had to go back and renegotiate because of inflation. So there's some there's some new kind of head winds. But we're we're we're speeding up and we're we're going where we.
Need to quite about public money incentives and all of this as well. I mean it's something that you know, we think about the Green Deal in the U Inflation Production Act Here in the US, are the public incentives actually doing the job they're supposed to in boasting expansion or is it being undone by the obstacles that you're talking abouts.
So generally we don't need subsidy financing for the projects, right because our levelized cost of energy is competitive with pretty much anything out there, especially vis a vis oil and gas fired projects and nuclear. So generally we don't need subsidy. Having said that, there's places, especially in the Global South and the emerging world, where they're just getting started and where the initial projects will be more expensive than the projects in the mature markets.
Right.
So if you think of somewhere like the Philippines and Southeast Asia, I mean, they're starting from a virtual standing start. They've got to build the infrastructure, they've got to build the grid, they've got to build the ports, and so there's a kind of gap I think in financing for some of those emerging markets countries where's the growth offshore. So on shore is still the biggest part of the market, but offshore is growing faster, so the compound growth rate
for offshore is faster. On Shore is still, you know, eighty five percent of the market. And what's interesting is that the on shore market is really picking up again with new countries, So Germany's really speed up. The US we're expecting to really speed up from this year onwards. Right, So the IRA has had the transformative effect on the on shore market. It's taken a little bit longer than we thought, but we can really see now the construction starting,
a huge amount of projects in construction. So from next year we'll really start see the US on shore market really take off. And then there's India speeding up as well. There's Australia's doing really well, and there's a bunch of new markets that are growing as well.
The red tape issues that you talk about, what is the message you're getting from policymakers on that. I'm sure this is something that you're engaging with them regularly.
Hones.
You were speaking to leaders here at your event here too. I'm keen to know how exactly that conversation is going are people Is it coming back to people don't want wind farms near their homes? Is it much more complex? And now this is a systems problem? Where's the roadblock?
I'd say it's it's mainly a systems probably problem. And there's been quite a lot of recognition around this problem for the last few years. I mean, we startied Cop twenty six in Glasgow three four years ago. We started really trying to put this on the gender. It's kind of sounds like a bit of a boring issue and so it's kind of hard to get people's attention around it. You know, it's about permitting after all, but it's pretty important. And what's happened since then is a number of countries
are passing new regulations and new laws. For instance Germany, I mean they've now made permitting offshore wind farms what they call overriding national interest, So that means that in the legal system, unless there's a very good reason to object, the project will be approved.
Right.
Changes like that are good.
I wanted to ask you about a particularation that came up in Europe this summer when we had such production coming out of particularly Spain and Norway that the price of power dropped below zero, which.
Kind of sounds in some ways like a huge triumph. It doesn't make for a great business case. How do you sort of address that problem, which is down to storage?
Really?
Yeah, I mean I think it's a real problem and I'm seeing it, you know, as you are in more and more markets at at different times. And it's partly a function of having just a lot more variable power on the system, so a lot of solar and a lot of wind, which means that at certain times a day you've got a real abundance of power on the system. But it's ultimately down to two things. What is the market design to make sure that the market design is
kind of built around those new sources of energy. And secondly, it's about interconnectivity. So obviously, the more connected you are, and this goes to Iberia right in Spain and Portugal, the more connected you are to the rest of Europe, the more you're the more the market will work in a balanced way. Right, So we've got to work more on grid connectivity and connectivity generally around.
The system, right.
You know, in the United States in particular, I spent a lot of time in the water and for the first time. So you know, the turn warns off of some of the islands in the United States. But I just do wonder there is a pushback.
It feels like whether.
It's you know, Nantucket or a Black Island or something where people are pushing back on some of these How does that perception change in the United States?
How do we get there?
Yeah, I mean i'd separate two things maybe. So the first thing is people's genuine concern over the impact and the impact on nature, environmental which has an industry we're very attuned too. And after all, we know most of us it here because we care about climate change and the environment, and so we want to do things in a way that's the best possible way possible. That off,
your wind farms are nature positive and so on. So that's genuine, and I think the way to do that is to ensure the highest quality, the best standards of consultation, working.
With communities and so on.
Now, the other issue is disinformation and organize disinformation, I think is something that the renewables industry as a whole should be paying a lot more attention to, and civil society journalists editors should be paying a lot more attention
to it. I mean, we've seen organize this information around off your Wind, So the idea that off your Wind is somehow killing whales even when there is no construction going on at that time, and aized disinformation with AI generates images sporting the show marine wildlife has been harmed by off the winds. That has then copied and paste to places like Australia. It's been copied and pasted into places like Europe. Right, that is that's disinformation.
That's another conference.
The misinformation that's out there like pick your industry right, it's really it makes it much more difficult.
Ben, thank you though for finding time for us.
Thanks very much for having me.
Yeah, we appreciate Ben bake Well, the CEO of the Global Wind Energy Council.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from two to five pm Eastern. Listen on Apple car Play and then brod Auto with a Bloomberg Business act or watch us live on YouTube.
All right, So, before Stephen and I wrap up this week, we wanted to remind everyone about the mission the world is on to combat climate change toward that renewable energy goals were set at last year's U and Climate Summit in Dubai to triple global renewable energy capacity by twenty thirty.
Look, the INTASH Energy Agency is warned that it's unlikely to be mess without major policy actions sporting wind and solar energy. We heard that from Ben Backwell, wind energy capacity has been doubling, not tripling, as many hoped it would. So for more on whether it's twenty thirty goal for renewables is at all achievable, we spoke with David Cherney, clean energy policy leader at the global consultancy firm PA Consulting.
It is going to be quite challenging to triple renewable coke capacity globally, certainly. I think everyone's going to give it their best shot. You know, here in the United States, we've had a tremendous amount of new clean energy come on to the grid over the last decade, you know, nearly over one hundred gigawatts of wind, solar and other clean energy technologies. So the balls moving in the right direction. The question is is how rapidly is it going to move down the field?
All right, So talk to us little bit about initiatives in the United States I've been.
Out in the water seeing the windmills. I feel like wind energy.
That we continue to see some pushback, and it is curious to see, you know, what the elections bring in terms of the White House come November, and what that means for alternative energy policy. Let's maybe start there in terms of the political environment. Are you nervous about investments even in the US slowing down specifically because of what might happen come November.
Certainly what comes November is going to have an impact on specific investments, right, so there will be winners and losers whenever we have had policy change. And it's a really important point, but I think we need to think about the big arcas as well. So if we look back over about the last twenty years, and we sort of use two thousand and five as the marker, so for the United States, that's when.
We had the.
Largest amount of carbon emissions from fossil fuels across our economy. We've been declining on average about one percent a year across the economy pretty consistently from the Bush administration through to the Buying and administration, so we've had pretty consistent declinents. A big part of that has been the deployment of renewable energy. It's also been the downfall a bit of
coal generations that has retired from the system. And so as we think about November and what's going to happen in the near term, so thinking about the next four years, really we're probably headed on the you know, the same trajectory one percent decline per year. It's pretty hard for presidential administration to cause a shift in what we see on a dime. It'll it'll take some time for policies to play out.
But one of the big policies under this administration was the Inflation Reduction Act. Amount of money never seen before being pumped into clean technology.
Has that just not been effective enough?
Well, it's it's a good question, Stephen, and I do think it's actually been been pretty effective. And the question is sort of again, what are our expectations in the short term, And certainly extending tax credits for for wind solar, adding in storage to those types of tax credits, so production tax credits, investment tax credits is really helpful at moving the ball forward with wind solar storage and technologies of the of the Like the Inflation Reduction Act, while
it's named the Inflation Reduction Act. It certainly is one of the most important, if not the largest piece of energy in climate policy that the US has seen in decades. And really, when I think about that policy, it's not just thinking about the near term sort of changing things on the dime.
It's a long term.
It's going to be really challenging for us to meet the climate aspirations that we have said as a nation and frankly globally without innovation. So we're going to need new technologies besides wind and solar to get to where we want to go. And so the Inflation Reduction Act has created incentives for things like green hydrogen, carbon captures, storage technologies, offshore wind, advanced manufacturing electric vehicles in the like.
And certainly we can't predict today, ten, fifteen, twenty years from now what is going to be the technologies that are the winners, but we're planning a lot of seeds, both in terms of R and D. Is also incentives to try to commercialize new technologies that can help us
get to that that last mile. And so really both in terms of our power sector as well as thinking about transportation, commercial, residential, it's innovations to come that the Inflation Reduction Act is really going to push forward.
Certainly the near term.
Pushes is helpful, but anyone who had expectations will be that we were going to see a massive shift in you know, a year, a year and a half since the passage of that act. I think was misguided a bit from the start.
Hey, David, I do wonder you know what moves the needle most when it comes to renewables and green energy. Is it the economic environment? Is it the cost of energy? Is it the cost of capital? Is it politics? What is it in your consultation and what you folks do in the United States and around the world. What really moves the needle in making changes towards renewable.
Yeah, yeah, it's a fantastic question. The answer has changed over time. Right, So if we were to go back ten fifteen years ago with renewables thinking about wind in solars, certainly state level of mandates, targets, renewable portfolio standards for these technologies were really.
Helpful in getting the ball rolling.
Similarly, R and D dollars put forth, both in private industry and by the federal government have helped innovation, bringing costs down. And I had to argue today, it's about the economics at the end.
Of the day.
So while we've seen some increase in the near term in the installed capital costs of these technologies due to global challenges with supply chain that we've seen across industries, and you know, on the whole, we've had massive declines in the cost of modules, on the cost cost declients in turbines and the like, we've essentially been able to deploy more and more of these technologies as they become more and more.
On cost competitive.
And I think a good example, right is to look at Texas, which has a renewable portfolio standard for more than a decade ago. That was surpassed more than a decade to go, and we keep plowing in more and more, sold in more and more win into that that market. And it's not driven by policy goals specific amounts of these types of technologies.
It's the economics.
It's a cost effective place to build those technologies and the demand.
Is there, right, But which direction does the economics need to move in to make that to make that process speed up? Is it that everything else has to get much more expensive so that people go to renewables, or is it that the cost of production for these technologies needs to come down.
So it's a mix.
We are going to continue to see the growth of renewable so wind and in solar, but I think we all recognize that wind in solar only produce electrostricity of the winds blowing or the sunshining, right, So it's a bit of a tutology in that. And what we really need to maintain reliability in the cost effective matter is
dispatchable technologies that allow the system to balance itself. And so really this is where a lot of the innovation is needed is clean technologies similar to nuclear that can provide baseload clean energy or cleaner dispatchable resources that help can help balance the system. And so in the near term, a big part of that has been cultural gas and can I continue to be you know, continue to be natural gas.
All right, we're going to leave it on that note. David Churney, thank you so much, Clean energy policy leader at PA Consulting. They are a global consultancy firm joining us from Colorado.
This is the Bloomberg Business Week podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live weekday afternoons from two to five pm Eastern on Bloomberg dot Com, the iHeartRadio app tune In, and the Bloomberg Business App. You can also watch us live every weekday on YouTube and always on the Bloomberg Jermale