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On today's Bloomberg Intelligence Show, we dig inside the big business stories impacting Wall Street and the global markets.
Each and every week we provide in depth research and data on some of the two thousand companies and one hundred and thirty industries our analysts cover worldwide.
It is Climate Week, and today we look at how oil and gas are playing into the energy transition.
Plus we'll discuss how the resulting emissions from wildfires are threatening to make global warming worse.
But first we dive into that anti trust space. This week, the US Justice Department suit the world's second largest card payment organization, Visa, over an anti trust matter.
The case was filed in federal court in Manhattan on Tuesday or tild. The US Anti trust enforces have been preparing a case accusing Visa of taking steps to keep rivals from challenging its dominance in the debit card market.
And for more.
Guest host Jess Menton and I were joined by Justin Teresi, Bloomberg Intelligence, Anti trust litigation and policy analysts. We first asked Justin whether this week's news surprised him at all.
The following itself wasn't too surprising. We know that DOJ opened an investigation in twenty twenty one related to Visa and its deepit card practices, so we thought something might be coming. The timing before the election makes sense, we'd see it now rather than later on this year. The complaint itself, it seems fairly strong, as the Attorney General said in his press conference. Basically, they're alleging that after Dodd Frank and rules came into place about being able
to route debit transactions over more than one network. Visa entered a series of contracts with merchants and banks that allowed it to favor its own network over those of its competitors. Seems like some true antitrust activity here that DOJ's alleging.
When you're thinking about and especially when you were talking about the current administration and the election coming up, do you think a new administration would be able to potentially amend a settlement here.
There's a couple of things to consider here, the first being that is that this is not Visa's first time at the antitrust.
Rodeo, if you will.
The company was back in two thousand and one when it was still linked together with MasterCard before I went public, and that case ended in a settlement. In twenty ten, there was a similar anti trust suit related to credit card fees. That case also ed in a settlement. So there is some history here of these cases tending to settle, and while there or not a new administration might be amenable to that, it really remains to be seen. But I think settlement is certainly something that's on the table.
And important to remember in all of this too, is that the DOJ is really after some behavioral changes with regard to these agreements. Right, We're not talking about some kind of a structural change in Visa as a result of this litigation most likely.
Right, So then what does that look like? So they can't pay Apple anymore, et cetera. So Apple loses money, and then what does Visa do?
Yeah, you know, it's it's a really a great question, and I think one that that really goes to the heart of Visa's debit business here. You know, DJ is alleging that as a result of one hundred and eighty of the largest of these contracts that Visa has, they've been able to shield themselves from competition on seventy five percent of the debit volume that's going through its network.
So this is a big money maker for Visa. It's something to really keep our eye on here because it could result in a chalk of its business going away if these contracts were to also go away. So that's really I think what we have to scratch our heads a bad and wonder you know, is that the ultimate remedy that we see from DJ.
But lots of time too, you know.
Give you an example the Google Search case from filing to trial that was a three year time span before we got there, So this is going to be something that's around for quite a while.
Is there any way that Visa could argue that the complaint fails to account for increasing competition from alternative payment methods if you're thinking about account to account transfers.
Yeah, and I think that's exactly where we could see Visa go in its motion to dismiss arguments or later on down the line. You're right, we're seeing this increase in competition from things like Venmo or cash app, right, But the complaint is basically alleging that those forums haven't been able to scale up to be as large as they really could be because of deals.
They have with Visa.
But you know, the reality is, as you and I both know, folks are using those platforms and the marketplace is changing.
So I think that's probably going to.
Be part of parish parcel to what we see VISA saying in its defense here.
How long does something like this take, particularly as Jess was pointing out, we might have a change in administration.
Yeah, yeah, again, you know, really these slow moving cases here, I think we really this is going to be something that's around, I would say, for the next two or three years.
At a minimum, we're going to get through a ton of motion.
To dismiss practice next year likely get over that and find ourselves in a discovery phase.
So, so is this like an overhang on the stock then until then?
I would say so, I mean, you know, how the stock reacts is how the stock reacts, but the overhang is something that it is a long term risk.
I would say that's absolutely accurate.
In what ways do you think it would impact visus earnings and revenue outlook?
Again, you know, I think we really have to go to the heart of the question here with you know, the actual percentage of debit transactions that Visa has been able to shield itself from competition on. Again, the complaint if it's correct, and again you know, the government's best day is always the day they file their complaint because
no one's really responded to it yet. But if the government's correct that Visas shield itself from competition on seventy five percent of its transactions from these largest contracts, that's a significant part of visas actual debit revenue. So that I think is where the concern is coming in. You know, it really goes the heart of Visa's debit business, and we'll have to see what plays out over the next couple of years here with regard to possible remedies or a settlement.
Our thanks to Justin Teresi, Bloomberg Intelligence, Anti trust, litigation and policy analyst.
One story from the Bloomberg terminal this week that caught our eye was about.
Colleges skyrocketing tuition costs. COVID and fewer high school graduates have been straining the survival of smaller American colleges, leading many to shut down. Now some are joining a surprising path mergers and acquisitions.
Northeastern University, once known as a Boston commuter school, has even formed a dedicated mergers and acquisitions team with the mission of getting big in a hurry.
It's the subject of a Bloomberg Big Take story titled a college taps Wall Street playbook to rival Ivy's on admissions.
Guests host Jess Menton and I were joined by one of the authors, Francesca Maglioni, Bloomberg Personal Finance and Higher education reporter and mean first asked Francesca to walk us through the legs of the story.
Northeastern University has been known for years as a commuter school mostly attended by low students, and since twenty eleven they've kind of been expanding their brand. They now have
fourteen campuses across the world, with three campuses abroad. What we thought was interesting is that since twenty nineteen they've been buying up other struggling schools, kind of tapping in that private equity playbook and get M and A. Yeah, like they've been merging with They've merged with three different schools so far and kind of embedded the North Eastern brand on these schools and now can offer to students like, hey, you can study for a semester in California, you can
do a semester in New York. And this is very different from those schools like Princeton and Harvard, which just want to stay small and delete. They want to expand their brand as much as they can.
Because there's a lot of schools, especially in the South where I'm from, where you had a lot of magnet schools and then satellite schools, whether it was like the University of Texas or Texas A and M, so you'd have not just the main campuses, say in Austin, Texas, you had ones in say Dallas and outside of that.
So I'm wondering is this is there a particular playbook when it comes to kind of like the M and a type of feel it comes to something like this, or is there different not apples and apples.
I guess yeah, I guess.
What's interesting with the Northeastern is that High D is going through a very hard time. There's a lot of smaller schools that are closing all over the US, and so Northeastern is growing at a time when all these other colleges are shrinking. Colleges are competing for students. The number of students across the US is going to drop by ten percent, the number of students going to college.
So why what's the driver there?
It's just a demographic cliff and.
The costs and it's.
Extremely expensive as well.
COVID was really bad for the college enrollment numbers as well. And so Northeastern is kind of growing at a time when all these other schools are shrinking. And when looking for schools, they want valuable real estate. The latest acquisition that they have is in New York. Now they have three buildings in Manhattan.
Do they buy Marymount or was this part of yes, they don't call it buying because still has its own brand.
They just like swallow their liabilities and their assets. There's no exchange of money that changes hands.
Interesting, is it working?
Like yeah, is this playbook actually helping Northeastern?
Yeah, it's working.
Northeastern last year had almost one hundred thousand students apply to their university. They've seen their enrollment increase by fifteen percent since twenty nineteen, and they've gone from being just a local, little known brand to being known worldwide.
But part of the college thing is like the experience, right, Like you go there and you live there, like maybe you take a semester abroad or something, but like you stay there and it feels a little weird and disjointed, and then all of a sudden be like you're here, and then you're there, and then you're there.
Yeah, for sure.
That's one of the things that Northeastern will say is changing within higher ed and that's why they've been successful in this moment. They think that students no longer or some students no longer want to, you know, spend four years in one place with a small community, and they're looking to get new experiences and be more practical in terms of their four years. How can this translate into career after college and things like that.
So that's another way that they're different from other colleges.
Are there other potential universities or colleges that are eyeing this type of model and they may try to do and replicate something similar.
Yeah, for sure.
Northeastern's told us that they've heard from almost fifty schools that have reached out, kind of interested and either merging with them or learning about their business model. We saw that Vanderbilt has now a campus in Florida that's kind of a school that's trying to do something a little similar, not at the scale that Northeastern is doing it, but there's a lot of schools watching what they're doing right now.
Yeah, so is what they're doing also, though different from that Marymount thing, Like I can still go to Marymount here, say in New York City versus Northeastern, and then I go spend a semester in California.
Yes, so Marymount is part of their whole plan. Okay, so that is part Right now.
They're still Marymount because the merger was just announced, but eventually it'll be Marymount at Northeastern or whatever brand they decide to go with ye.
So then I can go to Northeastern and then be like I'm gonna spend a year in New York going in to Marymount, yes Hice, Okay, yeah, yeah, that's just so interesting. It's just a different college experience when like I would think that you go to college, you learn how to like be by yourself, do launder by yourself, get your debt by yourself, beer by yourself, and then like that's it, not like jet setting off to different locations. You know.
Our thanks to Francesca Maglioni, Bloomberg Personal Finance and Higher Education reporter.
Coming up a conversation with Robbie men In, Singapore's Climate Action Ambassador on sustainable financing in Southeast Asia.
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I'm Alex Steele, and this is Bloomberg.
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Each week we look at research from Bloomberg BNEF previously known as New Energy Finance. They're the team at Bloomberg that tracks and analyzes the energy transition from commodities to power, transport, industries, buildings, and agricultural sectors.
This week, we looked at how oil and gas play into the energy transition.
Guest host Normal Linda and I were joined by David Doherty, head of Oil and Renewables Fuels Research, and we first asked him to discuss some of the trends that he's noticed over the past year.
Yeah.
I mean, if you think of the players in the oil market, they're the energy pros in the world, right. They've got the balance sheet, they've got the skills, they've got the technology, and they're already established, right, so they've got interest in seeing how this develops, how fast it goes, how it impacts their bottom line.
Basically, what are the main hold ups in terms of the transition, What are some of the headwinds.
I mean, capital is obviously raising capital smarts people in the right jobs in the right place, push back both political and from people.
Right.
People love the idea, but as soon as it costs money, that's quite a difficult to swallow, especially now in like inflationary times.
Right, is the conversation that evs will eventually supplant internal combustion engines and get rid of gas demand. Is that still something that you guys are working with in modeling or has that conversation evolved?
It's evolved, I mean that is kind of the trend though. Yeah, when you look at things when they're cheaper upfront, right, consumers tend to shift towards that. If it's cheaper day one for buying an EV versus an internal combustion engine car, and all else is equally, you're probably going to see a shift towards that.
Right.
So we're really though US centric here and we don't see that in the same way.
But elsewhere, is that truly what's happening?
Yeah, you are.
You're seeing a big uptick in Europe and in China for example, and even here in the US California for example, behave it's much more like a European economy. When we think about the transition to evs, we've seen really high rates of penetration there.
What are some of the main themes in market dynamics that your team is focused on right now?
Yeah, Like, the rate of this change is interesting. What's happening in different markets? What responses. If you take the US for example, it's a it's a mature market. So when these evs come into the market, you're seeing a decline in gasoline sales versus saying in China where it's like what could have been doesn't necessarily manifest, right, So that turns into then power in your pocket. Right, You're seeing the cost of gasoline isn't coming down even though
you're expecting it to a less gasoline being consumed. There's so many more dynamics in just a four wheels on the road situation, right, And.
How are all these things impacting the consumer?
Yeah, I mean, if you think about costs in your pocket when it comes to driving your card, that's a big thing, particularly here in the US, particularly in an
election year. You know, it trickles down into inflation. You get something delivered to your house, the cost of diesel impacts all of these things, so your consumers are super sensitive of anything to do a cost at the moment, and probably the biggest development here in the US it's been interesting is less consumptional gasoline hasn't turned into less prices at it. You know, a lower price at the pump.
Why do you think that.
Is Well, this is key. This is something we have to think about as you go towards transition. If you pull supply in any scenario, you're going to see a price spike. In the US, we're seeing less refinery production then we have a few years ago. So you're seeing over a million baros per day cut in the last two three years alone. And when you have a less supply of something, even if you have less demand, it really depends on which one goes first and HASP deduct changes.
And so what are people thinking when will this all shake out?
I mean it's shaking out already. It's already checking out in the fore court when people are buying the car. You're seeing the response some refiners, for example, some big refineries like P sixty six are switching some of their facilities to make things like renewable diesel or sustainable aviation fuel. So people are posturing. Companies are posting for the next five, six, seven years, right, which.
Is such a great point because I guess the question then becomes, if we're posturing for the seven or eight years, what does the landscape in your world look like then? I mean everyone seems to say it's a yes, and we need everything above all, And is that how you model it?
That is how we model it. In our sort of standard outlook twenty twenty nine, we see peak oil consumption globally, so that's still pretty far out. There's still a lot of growth left.
Also, peak doesn't mean the then it goes to zero. I feel like that's something we need to also wraprimind around, like just because it's not increasing, it doesn't mean it's rapidly decreasing.
Yeah, you're totally right.
Even in like a net zero world, in our modeling, you get about twenty five million boos per day of oil, So you know net zero doesn't mean zero oil.
So what does the growth outlook here?
You're looking at about four or five million boos per day upside in our inner base case scenario. But lots of things can change that, right. Policies are the main thing to look at, particularly in big markets like the US. Right, the US consumers is about one in every five bowels globally, so if something changes here, the whole market can change. The dynamic is really upended.
When we take a look at say China and India, large consumers of energy, obviously, are they jumping from coal to what.
You know, gases of transition fuel? We're see seeing them shift towards I was just in Beijing last week, and there's a very different way of looking at the oil market versus if you're down in Texas, Right, it's what's the displacement? Because they need more and more energy, right, they don't want to import that energy, So what can you do domestically In the case of power, that's coal. But we're also seeing in the case of evs, right, LNG trucks, even electric trucks. So we have a lot
we can learn from them. But they're just different, very different markets.
And how did they get there? Is it because of subsidies? Is it because they were so dependent on coal? Like what leads that transition there differently than say in the US.
Yeah, I mean, I think it's dependency on imports. For one example, they've got a lot of national champions, and to be honest, when they say they're going to do something, they do it in Europe and in the US you got to get it through parliament, you got to get it through votes. It's a lot slow over process, and there's less domestic manufacturers like Tesla's a big, big player here,
but it's kind of it in China. You've got a lot of big producers, a lot of big industrial champions, right, and they're encouraged by the States and by the city and by incentives.
So how do we fit into the bigger international ecosystem.
Well, for the US, one of the most important things is it's sort of gasoline production. Machines send a lot of gasoline abroad South America, Europe. Even so there's a change coming along for US refiners basically, and you're starting to see how they just their positioning in a sort of a market leading way.
I think our Thanks to David Doherty, head of Oil and Renewable Fuels Research, this.
Week, Bloomberg Intelligence broadcasted live from the earth Shot Summit at the Plaza Hotel in New York City.
The summit celebrated innovators who are trailblazing solutions to repair our Planet and the event was co hosted by Bloomberg Philanthropies.
Guest host Damien Sassaur and I were joined by Robi Menon, Singapore's Ambassador for climate Change.
He discussed the global impact of central bank policies and also sustainable finance in Southeast Asia.
I first asked Rabbi to reflect on his former role as Managing Director of the Monetary Authority of Singapore.
Well, I've been a bit removed from that scene for quite a while now, so, but if I were to reflect back two years ago when we were all facing a surge in inflation globally, and the conventional view at that time, which I subscribed to also was that given how low interest rates were and how easy and accommodative monetary policies have been for ten years, the catch up to tie rates to bring down this inflation is going
to be unprecedented. And indeed there are heights in rates and the tightening of monetary policy, including in Singapore through the exchange rate, was quite significant, and I thought this was going to come at the cost of a severe slowdown in economic growth and rise in unemployment. I'm talking globally right, and this has been the case in all previous instances. I think looking back, we've done not too badly.
We've avoided major recession in the major economies. There hasn't been any sizeable increase in unemployment, the labor market has been quite resilient, and surely, but surely, you know, we've been bringing down inflation. I think this is a credit to many of my ex colleagues in the central banking world. I will not comment on specific policy moves such as the one they made recently, but I think we should step back and see we actually did not do badly.
It could have been much worse to be able to ease this early, but that itself is the right move. I would not come in, but the fact that we were even having this conversation about easing about stimulus, when not too long ago we were fighting inflation. It has come down, so I think this has been quite remarkable.
And this also brings sort of the question of climate action and financing that part of the market as well, because part of the conversation here in the US with the Inflation Reduction Act is that that in essence is inflationary, and that the more money that every country spends on greeting stuff, the more you're going to create sort of an inflation bubble.
Is that true?
From where you sit, I think that that is going to be at best quite short term. Some stimulus through any new investments going into an area of scarcity will create some price pressures and demand pressures against limited supply. But the objective of the Inflation Reduction Act as it is, as is the objective of similar packages in every other country, is to expand the supply capacity. Is to expand the supply capacity for renewables, for cleaner technologies and so on.
So yes, in the short term that capacity has not increased, you will get momentary increase in inflation and price pressures as you put in demand. But when the supply capacity increases, that stabilized. So as with any industrial transformation or restructuring, there will be short term price effects, but that should even out once a supply and.
Demanded back in.
So I don't think there's anything inherently inflationary in these packages.
In Singapore's key position along the Malacostrait, it sits between two of the largest polluting countries on the planet, that being China and India. Talk to us about your location in the world, your geostrategic location. How are you addressing those two nations their capability to enact climate change.
I think both China and India have huge potential to address a climate challenge, particularly with respect to mitigation and renewable energy. The countries are large. We often forget that China is installing more renewable capacity each year than the rest of the world put together. India is a close second. So these two countries, in terms of their geography, are well endowed to deploy clean energy, but they're going to take time because what we forget is that energy demand
in these countries is also increasing rapidly. The energy consumption per capita in China and India is a fraction of that in the West, and there are still many villages without access to electricity. So even as they install solar capacity, they're having to build cold plants and keep their fossil fuel plants running to meet that, which is why they're going to take longer. But surely they will get there
because of the inherent capacity for renewable energy. Actually, where more is Southeast Asia because similar situation, rapid growth and energy demand, rise of middle class urbanization, people having access to electricity.
You mean Indonesia, Philippines, Vietnam.
Yes, all the countries around US, including US, we are in many ways alternative energy disadvantaged single pore, particularly so because we're a small island city state. Imagine New York, you know, deploys clean energy entirely within the city. But even in the countries that are relatively well endowed, they do have challenges with great for instance, is forested mountainous.
Laying those transmission lines is not easy, not straightforward, and the distribution of renewable energy capacity is very uneven geographically across Southeast Asia. So I think that's a very bigger challenge.
Might be what about financing? We have like thirty seconds left. What's the biggest hurdle to financing all of this?
Right now?
There is enough private capital in the world to solve the climate crisis. There is enough financing if you look at the annual flows of financial assets well in excess of the funding gap. The problem is you need to find bankable projects at appropriate risk return metrics. And this is why you need blended finance with public capital coming in to catalyze private capital. That synergistic combination is what we need and that will be enough to solve this all right.
Thanks to Ravi men On, Singapore's Ambassador for Climate Change.
Coming up on the program, a look at policies in the European Green Deal that look to make the European Union climate neutral by twenty fifty.
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We continue with conversations from our broadcast at the earth Shot Summit at the Plaza Hotel in New York City.
The summit celebrated innovators who are trailblazing solutions to repair our planet, and the event was co hosted by Bloomberg Philanthropies.
At the event, we looked at the European Green Deal. In the Deal, there is a set of policies that look to make the European Union climate neutral by twenty fifty.
To achieve this, the European Commission has pledged to mobilize at least one trillion euros in sustainable finance Investing.
Guest host Damien Sassaur and I were joined by Nania Calvino, president of the European Investment Bank, and she talked about the bank's role in the European Green Deal. We first asked Nadia whether the bank is meeting its targets.
Yes, well, it's going well, it's going well. We are on track to meet the target of one trillion euros in investment green finance. More than fifty percent of our annual investments go to the climate transition to the green finance, so as to make it a success, a European success, a global success for all of us.
But why do I keep hearing then that Europe has more at the stick approach and the US has the carrot approach with the IRA, How did they differ.
Well, I think that we have a shared endeavor, you know, which is to ensure that we do this green transition, that we move to a net zero economy, and that this is profitable.
Well, my side of things is the carrots.
Actually I am the investor, so we are probably we are the largest multilateral development bank in the world. Maybe people don't know. With a six hundred billion balance sheet. Ninety percent of the investments are done in the EU, where we are the largest investor in renewables. We're probably one of the largest investors in renewables in the in the whole world.
Well not yet.
I mean renewables is a very broad topic, solar, wind, water, nuclear, Talk to us about where you're deploying your balance sheet.
I mean, six hundred billions, a lot of money, well.
More than fifty percent, as I said, is going to climate finance, and this is sustainable infrastructures, This is sustainable transport. This is also renewables, wind energy, greeds, solar, and also new fuels, the fuels of the future, for example green hydrogen. We're supporting very innovative, large projects, also large traditional infrastructures, and dynamic startups that are really going to be the ones finding the technologies, the breakthrough technologies for all of us.
I mean we've seen with hydrogen though that it's hard. That green hydrogen particular is quite hard. I mean Germany had a sort of backtrack from that in particular with the war in Ukraine. In addition, like Oorsid dropped and had to ditch out on a hydrogen project. Can you do hydrogen profitably?
And how do you do that?
But we have to, we have to because it is can right now, well we are right now. We're investing in a number of projects in Europe which are more having to do with industry hubs. So we are greening industry highly polluting, highly energy intensive, so like a cement industry that yes, still you know, all these large industry so we are.
We're seeing, for example, close to port to Report in the south of Portugal, we're going to have a green hydrogen hub, so that's very close to traditional industries and we're helping them become green and also profitable.
Likewise in other parts of Europe.
You know, we are at the early stages of these new technologies and it is only normal you know that some projects fail, that some projects are succeeding, and that's that's why we are the European Investment Bank is a public investment bank to take the risk, to make sure that patient capital, long term investors are taking those risks, so that also we mobilize private capital and we make this a success.
Well, you know, other multi level finance institutions, I mean development banks out for example China, Korea, et cetera, have had a very poor track record of deploying capital profitably. And you know, I know the IIB is different. I know the World Bank Group is very very different. And I know we're talking about perpetual capital, perpetual investments.
But the end of the day, you do have to get a return on your investment.
So talk to us about which set within the broader renewable space, within the border climate space carry the highest return on investment from your perspective.
Well, actually, we are very profitable. Let me be very clear.
The fact that we're a public bank doesn't mean that I don't have to deliver for ashholders.
So around two billion euros we had in profit last year. We've been profitable since the bank, since its inception.
We have a very low return very low level of non performing assets. When I say very low, I mean like zero point four percent.
Of our assets.
Huh.
So it is a very profitable bank.
And what we have is a very large balance sheet and very balanced portfolio with large infrastructures, traditional infrastructures which are very profitable, lower risk and also highly risky endeavors like innovative startups or large investments into new green technologies. And that's what's allowing us, I think, to make a difference in making projects bankable at the end of the day.
So what have you noticed in terms of if you support a project, does it bring in private investors and private capital at.
The end of the day, it does?
You know, the European Investment Bank is considered to be a reference in terms of technical expertise in some areas for example green for example health. So once the EiV says yes, I'm going to invest in this project, immediately a number of investors say I.
Join, naddie. I'd love to ask you a question.
I mean, in my world, the emerging market space, there has been an absolute explosion of sustainable finance vehicles and mechanisms, you know, green bonds, clean bonds, you name it.
I'm curious to hear your thoughts about a lot of that.
I mean a lot of sovereign nations, a lot of countries are issuing that under this green bond umbrella.
You know, do you believe in that?
Do you think they're just green washing or are they really deploying that capital in a clean and efficient way.
We have to ensure, indeed that the green bond standards around the world are not green washing, and that that should be a top priority. Otherwise, you know, once you lose the credibility, then you lose everything in capital markets.
I don't have to explain it to you.
So that's why I think we have a very important shared interest in having global standards, you know, the taxonomies that are being developed in different parts of the world. Europe has been a pioneer in that area. Also, the European Investment Bank, by the way, has pioneered green bonds, and we have to make sure that those standards are met and that green investments are really green, so that we make sure that this is providing sufficient finance to close the investment gap.
How do you offset your risk? Sorry, how do you offset risk when you're taking on riskier projects?
Well, we have a capital base. But generally what we do is that we have riskier and less risky projects, and we mobilize our capital in a very wise manner. You know, sometimes our shareholders and say you should take on more risk because that's what your.
Capital is for.
But I think that we have a relatively good balance in terms of can you give me.
A balance on that, Like what would be considered a low risk project, what we considered a high risk For example, well.
An infrastructure in a European country, that is a low risk project. When we're building trains or rolling stock or or a metro or port. I mean this is a I mean we are lending to a sovereign state which has a very high rating, and this is our shareholders. So investments within the EU are considered to be generally lower risk. Or for example, we do also through the financial sector, we do lending to SMEs in.
Europe that is very profitable, lower risk.
Then if we are investing in a very large project one billion, two billion project in green hydrogen, as you were single, you know.
I'd like to take a variation on that question.
That's important because you're right, it's a lot of these small, medium enterprises. They're the ones who are actually proactively, you know, taking risk in the market. What sort of risk hedges, transmission vehicles, carbon credits, offsets can they take advantage of, I mean, what's available to them to help offset their risk in the space.
But what we do is we provide guarantees and portfolio guarantees or other sort of financial support to the banks so that they can lend to SMEs with lower interest rates.
That's basically what we do and.
Again that allows us to reach a large share of Europeans means and there, for example now investing in green technologies, energy efficiency thanks to the support of the European Investment Bank. I don't know if many of them know it, you know, because they go to a bank, a commercial.
Bank, but you know, although they are.
They have to signal in their loans that this is supported by.
The European Investment Bank. I don't know if they always do.
But the fact of the matter is the EiV is one of the key elements that he's driving the European economy.
Our thanks to Nadia Calvino, President of the European Investment Bank.
Staying on climate, we also focus on a Bloomberg big take story this week titled climate change is so bad even the Arctic is on fire. Guest host Damien Sassara and I were joined by one of the reporters on the story, Kyle Kim Bloomberg, data visualization reporter. We first asked Kyle to walk us through the story and what he learned.
Climate change, you know, is making wildfire is more common and intense, and that may not be the new part, because that's, you know, been in the news for a while, but it's also causing fires and places that a lot of people normally wouldn't expect, like the Arctic and the wetlands in Brazil and Indonesia. And what's really unique about these fires is that they tend to move underground and smolder below the surface, and it could be for months
that this is happening. And these underground fires are basically burning through prehistoric vegetation called peat and just releasing enormous amounts of carbon. And these peak materials they only cover about three to four percent of the Earth's surface, but they hold up to a third of the world's soil carbon. So it means that these fires are having an outsized impact on climate change and causing a lot of negative feedback.
We're saying that carbon from the burning peat is causing emissions from the Arctic Circle to skyrocket, and it's accelerating the thawing of permafrost there, which is this always frozen layer in the ground, and when it melts, it releases things like carbon and methane, and it's making the architect even hotter.
How do you prevent that? Like I appreciate that we all need to tackle climate change, et cetera, but this specifically, because it's even hard to see, how do you manage it?
Yeah, well, even the professionals, you know, it's it's fighting fire in general is a hard task, right, but fighting them underground it's very difficult because it is not visible. So they you know, look for smoke coming from the ground. And for example, in places in Indonesia, firefighters are using fire suppression holes. They're basically injecting water into the ground and it's hard to tell really if it's fully extinguished
or not. And it's you know, this is a very understudied and not well understood yet, and so there's still a lot to learn and how to combat these kinds of fires. And for now, you know better monitoring for carbon emissions, but at least help to understand the scope of the problem.
Well, Kyle, here's the interesting thing about it. You make a great point. You know, the permafrost cover. I mean, this is a real risk black carbon.
We know what the risk is. But isn't a lot of that taking place in Russia? I mean, is Russia even aware of this? And do they even care?
Yes, they definitely are aware. You know, scientists project as much as a third of the permafrost in the northern Hemisphere is gonna receive by the end of the century, and a lot of that is in Russia. A lot of the permafrost now that's going to be gone by then, and the climate experts are already identifying the eastern region of Russia has seen the largest growth amongst Arctic wildfires since the early two thousands, So they're aware that it's, you know, going to be more and more of a problem.
All right.
Thanks to Kyle can Bloomberg Data Visualization Recorder.
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