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This is Bloomberg BusinessWeek with Carol Messer and Tim Steneveek on Bloomberg Radio.
All Right, everybody, well. Our Bloomberg News team reporting that the House Judiciary Committee said it's found quote substantial evidence of collusion and anti competitive behavior by the financial industry to impose radical ESG goals on US companies. An interim report published by the Republican Led Committee said quote a cartel of financial firms and climate activists soft replace X on Mobile board members in twenty twenty one after the company declined to make a series of climate pledges.
Here's what Jonathan Maxwell has to say about this and sort of the changing tone of ESG over the last few years. He's founder and chief executive officer of FSDCL. It's short for Sustainable Development Capital LLP. SDCL has more than two billion dollars in assets under management. He's also the author of The Edge, How competition for resources is pushing the world and its climate to the brink, and what we can do about it. Jonathan joins us here
in the Bloomberg Interactive Brokers studio. Welcome, how are you?
Thank you so much? For having me.
I'm great, will you Well, we're going to talk about sort of what Competition Resources is doing because it's super interesting. But I'm curious about your thoughts on the way that ESG has sort of turned into this four letter word over the last few years. You see what's happening in Texas with the Attorney general there.
What do you make of it? I mean, the trend's been going on since about twenty twenty two. It's actually I'll get a whole chapter in my book about greenwash and the SG and there was a I mean, this was after a very big period of assets being gathered in the SG funds, like a huge boom in sustainability SG,
and then the tide turned. But there is something I mean, my company's will Sustainable Development Capitalist DCL, so I'm kind of in the business, but there is something there where if you're in the business of sacrificing returns on the altar of the environment, this is the sort of the financial and sort of intellectual side of the story. Then you know then that is against the fiduciary duty of
the fund manager and of the pension scheme manager. And you know, I think there's a lot of noise running around this sector. But the idea that you should take capital from the capital that needs to be invested for financial return and sacrifice or compromise the job of investing, I think, is a very challenging area. By the way, I don't think it's necessary. I don't think not only necessary, I don't think it should be done. And I think that investors will get sued and companies will get sued
for doing it. And I think it's when I think.
As simple as that isn't it?
It really is? And when I think about sustainable, company is called sustainable, but it doesn't they giving money away? It says sustainable means for me, commercially sustainable. In fact, if it's not commercial, it's not sustainable.
Didn't we get lost? I keep thinking about this. When ESG came out, I think we all thought about was about doing good and it really was about environmental sustainability and governance issues, right that could financially impact a company. And then you have things like impact investing or something
that's a whole different thing. Right, tell us a little bit about how the world is evolving and how we look at this, because if we you know, investing to do good versus I don't know it help me out here to kind of understand where this space goes.
I think that I'll give you something that's not a bit optimistic because we talked about resources and the rest of it. So, you know, I think we're currently in a very hardline environment, right. What do I mean by that? The political headwinds are against it. You've got let's say, a pushback against climate or woke capitalism, You've got regulators, and you've got local.
While the world is kind of burning around us.
Right. Yeah, but I'm just giving you the headwork to start with. I'm not going to give you a taelond pretty substantial one.
Sorry.
Right, but we're also under a serious economic pressure, right, you know, and we've got inflation. We were talking just before the show started about how inflation is partly driven by any prices. So you know, it's a difficult environment that we're working in. Okay, So what do we do about it? Right? You look at the problem, and here's the thing, and this is why I think that this is what I focus my investments on. When I look
at what's wrong with the energy system. One of the things that stands out to me, it's the same in food and water, is that most of it's wasted. I mean, it's very, very very infrequent people actually talk about this.
Actually we talk about it's a lot about food waste. And here you have people who like have no food, and then the amount of food waste, and then the impact that has in the environment.
But forgive me go ahead, no, I mean, it's incredibly, incredibly important. About half of the world's food is wasted, About a third of the world's water is wasted. So it wouldn't necessarily surprise you. I said that a roughly three quarters of the world's energy gets wasted. You break it down extraction, ten percent generation, because it most of half of the world's energy gets lost as heat in the generation process you put gas or uranium into a
power How can we're not better with that? Why? Why? Because we've built a centralized energy se in America and Europe over the last forty to fifty years, we've vented heat and then we build what's now old transmission and distribution lines and you put it all together, it just doesn't make the sense that it did over the last fifty sixty years. We also now, and this is the exciting part, we also have solutions to this problem. It's astonishing,
but we actually have solutions to this problem. Part of the problem is you generate energy in one place and then you use it in another, and then we talk about good grid transmission lines and the rest of it. What about you could actually generate the energy close to where you need it.
Or because you don't want a power plan next to your house, you don't need.
I'm put a solar panel though, right, tap the earth right.
So you've got solar panels, You've got ground and assholes heat, you've got heat capture, you've got underground energy plant. You actually you say you don't want one, You've got one under this building, you know, So the geothermal I'm talking
about cogeneration. Actually, so you know, the first asset that Michael Bloomberg put in your new office when you opened it in London was a co generation system because he knows that you combined electrical thermal efficiency standards means you can operate buildings much more efficiently if you generate the energy where you need it. So the short answer is the world's biggest problem is that most of it's wasted. The world's biggest solution to climate change to economic performance
and competitiveness. And the cheapest is by decentralizing the energy network, bring the energy generation to the point of views. And the other thing that Michael Bloomberg did for Bloomberg was actually change the infrastructure inside the buildings so it doesn't waste. Until about thirty percent of America's buildings leak energy out of the windows through lighting, heating ventilation. Change the lights, change the heating, ventilation, air conditioning, and it transforms the
energy system. So to come back to the ESG. Yeah, ESG is well meaning. Impact investment is well meaning. But what if you can start to make investments that are not only more competitive, cheaper, cleaner, more reliable, but actually drive the economy. And that is what we fine.
Isn't it from a building perspective, isn't it more expensive to do those things?
No? I give you very very quick example. The classic one is taking led lights, and it sounds a bit like everybody's done it. They haven't take a sixty What lamp you replace it with a six? What lamp? You can do the math? It's ninety percent less energy to do the same job, even if the light bulb costs you two or three times more money, and the bobs don't get hurt, the bubbles don't get hot, and therefore you don't need the cooling to cool the room down. Again,
the payback periods two or three years. So the cost is what am I paying for what period of Jonathan?
Why does it not happen.
Quicker? So I write a lot about this subject that I wrote a book about it. I'd write a sub stack.
The establishment doesn't want it to go fast.
It's my answer to the question is it's actually the perfect problem. What I mean by that, and the energy system is a fill of brilliant companies. Everybody in the supply chain is brilliant at what they do. You have an extraction firm, they do a great job. They vent gas and flare it. It gets complained about, but it's economically they figure it's the best thing that they can do. You build a power plant, a newcore, a gas power plant.
They're operating as economically efficiently as they could and should do. Right. But you have a transmission distribution line. It's economically it's perfected to its particularly the distribution line.
People don't want it to go away.
But you put it all together as a system and it doesn't make any sense at all. So each component of the supply chain for value chain for energy is This is why I call it the perfect problem, perfected for its shareholders. But you knit it together and it doesn't make any system sense. And that's why decentralizing energy, bringing it to the point of view is a fundamental different approach to making energy.
As we've learned here in the US with the problems that the Texas power grid faced a couple of years ago. We're on an aging infrastructure here and it's sort of this patchwork where things are different in each state and when you cross state lines things change. How do you make it work in a place like the US?
So I have We've invested well over a billion dollars here in the US. I'm excited. Donald Trump says, if you invest in more than a billion dollars in the US, so you can have all sorts of good things. And I'm looking forward to that.
We till January twenty that but.
To our billion dollars has gone into exactly this. Right. So we built, we own a very large energy system in upstate New York in Rochester. When it gets very cold, and it will over the next couple of months the grid struggles to provide energy. We don't because we generate the energy on site for our customers. So you know, state by state we build resilient on site energy generation solutions. We own it through a public company that we manage. In London, we have other systems here that do rooftop
solar nationwide. We own a company called Onyx which does nationwide solar and storage. Again, resilient on site clean power that's cheaper than the grid.
So I mean again the big step of how we get there, Because I always talk about the establishment, the old systems that are in place. It's really hard to break them up. And there's also a lot of money involved that people will lose if those are broken up. So how do we get there? Is a government policy that incens people once again, our companies or how can we get there?
It does?
It just evolve?
I think, I think I think this is an evolution rather than a revolution. It sounds a bit trite, but it's because the systems that we build, for example, that are on site are of benefit to the utility. I'll give you a great example something we were talking about earlier as well. Take data centers, data centers are a tremendous user of energy all day, all night, in all year, hundreds of metal arts of power demand. Where do you
get it from? You normally get it from the grid, but the grid struggles to provide the power that you need for new data centers. So we have a business which focuses on building power for data centers, but it's also providing services to the grid. So you know, we have that we're providing a solution to both the local grid so that we can provide firm grid capacity and picking up the juice requirements.
From the data has that power being generated for So we.
Generate power twenty four to seven using natural gas cogeneration, but we into great renewables and storage to make sure that we can get the lowest carbon footprint, the highest level of reliability in the lowest cost.
You know, I do wonder in terms of oil and renewables. We just got twenty seconds renewable. I mean, do we continue to move towards renewables?
Yeah, you know, but again why build them in the middle of nowhere when you can build them on site? Do both at least, you know, and I think this is the point I make. Let's be efficient at the same.
Time, like near shoring and unshoring for everything.
Like in our backyard. Right, you have the Department of Government Efficiency of the US. If it looked at how much energy is wasted. Do you know how much the cost of energy is in the America four and a half trillion dollars. Two thirds of that's wasted. You could save two trillion dollars a year. That's what Elin Josh.
Maxwell Venetta time come back soon though. We want to continue this, this is Bloomberg. We want to talk about the global perfume market. Size was valued around forty billion in twenty twenty two, projected to reach more than sixty four billion by twenty thirty and the market is expected to grow at a significant rate due to the growing demand for chemical free perfumes, which is kind of interesting. We're so curious what our next guest has to say.
This is from Zion Market Research. She knows a lot about the fragrance world. Great to have back with us, Linda Levy, she's president of the Fragrance Foundation. Here in our Bloomberg Interactive Broke studio. Happy holidays, how are you.
I'm good, Carol and Tim. It is great to be back with you.
Aw So tell us about your world and what is.
My world really smells good these days?
Let me tell you.
Since I saw you last, yeah, something has significant. A few things significantly changed, and that's why I asked about your son. One of the biggest things. And we are having terrific growth. We think in the US it's going to be about We predicted about nine and a half million, and according to whoever you read, Black Friday was up about eleven percent, Cyber Monday was up seven. But in the world, and I have retail in my background, it could just be a shift. You don't know till it's
all over, so we shall see. But we're very optimistic. The reason I brought up your son is that the biggest change is young people have joined the fragrance consumer population. But it's two different types. The young girls who are dragging their parents into Sephora and otherwise are very interested in body miss or hair miss brands that did not even exist, possibly to the extent they do now when I saw you last, Solda Gennaro, there's an endurable one
love check fancy ness. New York is doing it their body sprays. Most of these are less than fifty dollars. So they're coming in with a lighter version of Fragrances new format and they're very attracted to it as well as hair miss for the girls. For the guys, I am not exaggerating. At about twelve years old, the teenagers and so on, they have joined Fragrance users. They however, have a different approach. They want the brands that have the real designer names, so from Chanelle door Armani, Ralph
Lauren tom Ford. They're really status seeking. So these young people joining very big change. And the other thing I was thinking about sharing with you is it used to be everyone had a signature fragrance, fragrance that you're aunt, your grandmother or your father or whomever really was identified.
My mom had a signature of fragrance.
Do you remember what it is?
Yeah, it was ESD Latter and it was you Do.
Okay one, No, that's a classic.
It is a classic. And I actually have a bottle of it that my daughter bought me before.
Yeah, okay, that one's true to my heart, and that's a great example. Youth Do, in fact, invented by the Estay Latter. Yeah, started out as an oil and became a fragrance and estay laughter herself was revolutionary, so we're perhaps your mother or grandmother wore that. They now instead of one signature, have collections. So this is another big change that's fueling. So for a different occasion, you wear a different outfit. If you're going into Bloomberg's studio or
you're going out to a nightclub. You want a different mood, a different feeling. So we do still call it the invisible accessory. No fashionista is you know their outfit is not complete without it. But the difference from one signature to a collecttion has really changed things up.
I have to tell you. I think about listen, I'm a net case with hand cream and like I'll put this on, and people are like, what's your fragrance? But it's amazing the importance and value of fragrance in so many different products, like something like a hand cream.
No, but hand cream, shampoo, deodorant, so many lotions, oils. Is Another thing is a lot of different formats are out just like you're saying, the smell of that on your hands is your signature perhaps today, Carol.
Yeah.
One thing one thing that I did want to ask you about is we're seeing increased reports about concerns over ingredients in certain fragrances. I saw recently in the Washington Posts a piece by a doctor who talked about thalates that are found in popular perfumes, nail polishes, hair care products. They've been linked to some adverse health outcomes, insulin resistance, cardiovascular disease, impaired neurow development. How is that taking shape in the industry right now?
I would say the ingredients are heavily regulated, and anytime something is identified as medically unsound, it goes off the market. That's why sometimes it is not known when it was originally formulated and when it's identified. I think the industry is extremely dedicated to keeping the consumers very healthy and
feeling okay. That also connects to some people think naturals are better than synthetics, but think about poison ivy if I may, naturals are not necessarily more safe, and in fact the fragrance that most fragrances from the days of Chanel number five were created with synthetics. So I do think it is safe out there, and there are a lot of different ways that people talk about ingredients, but I don't think the US consumers should have a concern.
You know, I was using a wash it was like for handwashing different things, and it was supposed to be natural ingredients, and they did a major recall because they had problems because of some of the natural ingredients maybe don't have the same kind of keeping out dangerous things. Yeah. I won't even say what it was, but it's a many major it was like and it was like fabric spray and so on and things like that. It wasn't carrecs. They got me called to you know, you mentioned st.
Latter and I think about you know, brands and companies, iconic brand. They're going through some difficulties and fragrance was such a big part of their world. When you look at companies, there's so many upstarts, new companies. What do you I don't know, tell us about the industry and where it goes. And the companies you've been watching are thinking about a lot.
Certainly, Estay Latter is very close to my heart because I was there for ten years. The family. I would say, the changes there are going through have affected others and most of them have right sided themselves by now. So before the pandemic, there was a great opportunity there was great new territory to sell fragrance and that was in Asia, so between China and what goes on with the United States, and it was the next place to go in the
Asian populations. For centuries, fragrance was not a big piece and that was really changing. So for a lot of companies the beauty business, skincare, etc. Have been affected by Asia. The big companies that are really doing fragrance continue to be stay Lauder besides Esta, Lauter and Clinic which has Happy, they do own tom Ford and they do sell a labo Frederick Mall, etc. Prestige is doing well. Loreal is really killing it these days. They have reinvigorated brands like
Valentino and Prada, so they are going strong. LVMH. I need not tell you mister Arnold is very aggressive about his president cover story.
Yeah.
Well, we love him and what we really know is he believes in brand identity, quality and he is big in the luxury space.
Do you have a favorite fragrance or can I not even ask you five seconds?
Okay, I have at least found the garline is really one of my faves. The Esday Lord of tom Ford is absolutely my favor Prada Valentino from Laurel, I've got a Carol. I have a very big collection.
Linda Levy of the Fragrance Foundation, she is president. Thank you so much, Happy holidays.
Happy holidays to you too,