Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside my co host Matt Miller.
Every business day we bring you interviews from CEOs, market pros, and Bloomberg experts, along with essential market moven news.
Find the Bloomberg Markets podcast called Apple Podcasts or wherever you listen to podcasts, and at Bloomberg dot com Slash podcast. Talk about the global energy. We've been calling out the price of WTI crude oil, you know, for the last several months, as it's moved off of it's low, and he's now up another one point four percent today for WTI crude just under ninety three dollars or barrel, and it's getting a lot of people as it does when we see big moves talking about alternatives to oil. One
of those is nuclear. Seth Gray joins us. He's a president and chief executive officer light Bridge Corporation. That's a nastac trade. It's company ltbrs at ticker to put in there. Seth, thanks so much for joining us here in our Bloomberg Interactor Brooker Studio. What is light Bridge Corporation? What do you guys do? What's your strategy?
Look, our main activities are. We are designing advanced fuels that will work in the existing reactors as well as the newcoming small ones that we're talking.
So we're talking nuclear nuclear.
Fuel fuel, so fuel you put inside the reactors. The reactors won't work without it. But this is a reimagined, for the first time, new better fuel for the reactors. We're partnering with Idaho National Laboratory to develop and test it, and this will improve the safety of the reactors and the economics of the reactors dramatically, as well as the non proliferation and can allow reactors to load follow with renewables on a zero carbon grid.
How safe can they be? I just got finished watching Chernobyl, which is terrifying, and I know I'm one of the last people to watch it. But before that, I watched Inside Bill Gates' Brain and I thought it was really a fantastic cell for the nuclear industry. He seems to have found a very safe solution to creating nuclear energy.
Right.
What's happening now is companies like terror Power that Bill Gates is the chairman of and light Bridge, our company, are developing newer, much safer technologies that literally physically cannot have an accident like Chernoybyl. These are very different, extremely safer technologies. The light Bridge fuel runs one thousand degrees celsius cooler in reactors than the current fuel and actually will produce more power while doing it, and just extremely safe.
Set reset kind of the world energy grid for US, where is nuclear power today in the US, and then maybe in other parts of the world. Is it on the ascendency or is it still facing a lot of headwinds.
It's on the ascendancy. The polling in most countries shows nuclear has about two thirds favorable or strongly favorable support, and the people who work in nuclear don't believe that, and that we're seeing new nuclear reactors being finished in Georgia, in the United States, ordered in many countries, we're seeing rapid development of these small reactors and advanced fuel like
what light Bridge is doing. And it's partly for climate reasons, but I think the stronger driver right now is energy security. Countries that either want to get off relying on Putin's fossil fuels, or it turns out whoever supplies them with fossil fuels they tend not to trust, and being able to get off that is a good thing. And you know you just mentioned the one percent you know, increase in oil prices, it will translate to about one percent
price increase in a lot of expenses, including gasoline. That doesn't happen in nuclear it's very level pricing. A one percent increase in uranium price would result in a tiny, tiny fraction of one percent of increase in a nuclear power price.
But it's the startup costs that are what terrifies everyone.
Right, Yes, in in terms of if you're building one or two, Yes, if you're building four, By the time you get to the third one, those issues are done. The United States built over one hundred large reactors, you know, most of them on schedule, on budget. The United Arab Emirates just built four pretty much on schedule on budget. China is, Russia is, France built almost sixty of them on schedule on budget. So yes, it's like building a bridge.
If it's a one of a kind thing, the engineering, the complex construction can go over but you build several of them, that's not the case. And with these small reactors, where much of them will be factory built, you could build them like seven thirty sevens, very large numbers and really know the timeframes and costs.
Talk to us about those smaller reactors. I guess I've heard about them just over the last several years. Tell me what are they, how are they different, and what's kind of their purpose?
Well, right now, the typical nuclear actor is one thousand megawats electric power. Small reactors under the US government definition are three hundred megawats are smaller, and some go way smaller than that, so say less than a third the size of the current reactors to even much smaller than that. So first of all, you could get them small enough that you could have dedicated power to critical facilities like
military bases, data centers, oil refineries, et cetera. So if someone shuts down the electric grid, you don't lose the military base, etc. Another factor is that because so much of them are factory built and shipped to the site, you have very good quality control, can build them much cheaper, much faster, and they're just using more advanced, more modern technology on safety, so that even with situations like you've seen where a reactor will lose water that kind of thing,
these reactors could not harm anybody literally.
You know.
It looks like even if they lived across the street from the plant.
Are they are we building them in the US now we are.
Going too soon. New Scale is working with Idaho National Laboratory to deploy one at Idaho National Laboratory. The company you mentioned, Terror Power with Bill Gates is looking at deploying at least one in Wyoming. X Energy is looking at deploying in Texas to power down chemical plants, and there are several others that are looking at near term and probably the first will actually be nearby. G Hitachi deploying one at Ontario Power Generation in Canada.
Okay, so I know the nuclear energy policy. Someone is in New York this week. What's the number one issue?
Yeah, yeah, and I was pleased to speak there yesterday, and the number one is shoe there, I'd say, ostensibly is climate change, and that's what John Kerry spoke about in his keynote yesterday as part of Climate Week. But with President Zelenski about to arrive here in New York and speak at some events here too, I think energy security is really dominating and we're hearing more and more about that at the conference too, not just climate.
I wonder when everybody started adding a second you to the word nuclear. Have you noticed that even George Bush says nuclear?
Yeah?
Yeah, where's that come from?
Well?
I think it came from George Bush originally, but it kind of stuck. So it's an American thing. I don't hear that in other countries.
All right, Seth, thanks so much for joining us. Seth Gray, President and chief executive officer of light Bridge Corporation lt BR is a ticker to load into your Bloomberg terminal.
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There's just a lot of folks out there doing some really good work about just alternative energies in general. One of them is Jonathan Maxwell. He's the CEO and co founder of Sustainable Development Capital, and he has also has got a new book out scene right here, got a new book out the Edge, How competition for resources is pushing the world and it's climate to the brink and what we can do about it. Jonathan, thanks so much for joining us here on our Bloomberg Interactive Broker's studio.
What's the big message for you when you're getting you know you here. It's Climate Week in New York, it's United Nations General Assembly. I gotta think energy, Given what's happening in the world is front and center. What's what's the message you bring to your clients.
So some people might say the clean energy transitional sustainability isn't going so well, okay, by most eighty two percent of the world is gas and coal in terms of its energy. So the message I bring is that not only do we need to figure out, which is the mainstream piece, how to get more clean energy into the system, but we've got to figure out how we can start wasting two thirds to three quarters of the energy in the system in the first place. So much of the gas and the oil is love.
Before, right, Yeah, because the inefficiencies is your thing, right, This is exactly.
Inefficience is my thing. Because the world weighs seventy five percent of its energy, half of the food, and the third of the water.
Is there a cool scientific term for energy that's wasted and used.
Its energy losses, losses of primary energy, energy waste. Some of the best work in the world has done here in the United States by the Lawrence Livermore National Laboratory. They run an energy flow chart. You show how much energy comes into the US economy, how much survives. On the other side, you lose about two thirds of the energy and it's mostly heat. So you talked about nuclear
power stations. It's great producing power from a nuke plant, but if you're dumping the heat, then it's only operating at thirty eight percent efficiency. If you've got a gas turbine which is driving electricity onto the grid and it's dumping the heat, it's delivering forty to fifty percent efficiency.
But at least the nuclear isn't creating a carbon footprint, right.
But yes, but you're wasting the heat, and so yeah.
I understand. But the thing is other energy sources create carbon dioxide, which contributes to global warming, right as we are told. I don't care if nuclear dumps ninety five percent of its energy as long as it doesn't contribute to global warming.
Right.
Yeah.
So there are three things and one dimension and that they're deditional to think about. So the first is carbon. That's a really important thing to solve for. The second is cost. How much does it actually cost? Total life cycle and actually saving energy is the cheapest possible way, especially if you're dumping two thirds of it. The third is resilience and availability, and that brings us into the last point, like how reliable. Clear is very reliable when you put it on the grid. It can run what
they call baseload, But the problem is how long. So here's the last point. Time. So we all talk about transitioning the energy system, but it's going to take decades and trillions of dollars and we're going to do it. And that's what Janet Yellen is talking about tomorrow in General Assembly, and we celebrate that. What I'm saying is in the meantime it's just as important and it can be done if not to waste the energy in the meantime.
And that's what is the most efficient source of energy for running our homes and businesses and cars.
So the most efficient source of energy for running cars is electricity. It's about seventy five percent efficient compared to about fifteen to thirty.
Well, but that electricity comes from many different sources of energy. Read it could come from nuclear, come from dirty core.
So most efficient way of generating energy for electricity it is if you can use the heat as well as producing the electricity. So cogeneration using wastegot is natural gas even but as long as you're using their heat, nuclear as long as you're using their.
Heat, So nuclear with a turbocharger.
Essentially nuclear with a heat recovery system, and then using that heat and then in an industry needs a tremendous amount of heat as well as power. And the last point I'd make is we always talk about energy as if it's electricity. Do you know how much of the world's energy is electricity?
Wow?
Wow, Well the rest it's heat and transport fuel. So here we are in the United States. The United States loses seventy eight percent of the primary energy and other way to the oil that goes into transport.
That's the number one told us yesterday, Paul that the growth in demand for electricity over the last twenty years, or the growth in production, has been zero, which I thought was fascinated. I would have imagined it's exponentially larger.
Well, actually, you know Whatentially, if you look at where electricity ends up, it ends up in the home largely, so domestic our homes are very significant uses of energy. Business and industry to something almost nothing in transport yet, right, So if you then put everything into the energy system, the big piece is we've got a big problem with heat and transport. That's the piece that needs to be solved.
Seventy five percent of all of this energy solution is addressable through making more efficient solutions for buildings, industry, and transport generate energy where you need it.
So you say heat, are you talking about hvactis in general.
I'm talking about h fact high temperature process heat. I'm talking about cooling steel mill, cement plants and very high temperature heat cooling. There's more growth in demand for cooling by twenty thirteen, then the whole demand for energy and India put together. You know, data Center's massive public buildings in the country. I come from from my funny accent for UK. Fourteen percent of the UK's energy goes used
by the public sector. The biggest part of it's the hospitals and they use again as much heating and cooling as they do electricity, and they waste most of it.
What are some of the technologies that you've seen or that you're funding that go this energy waste issue recovery?
Yeah, So recovering things that would otherwise be wasted, so you can you can generate a natural gas even you use it in natural gas on site, but use if you're on site. You can use the heat for power, sorry, heat for heating. If you're taking a blast furnace, you can take which we do. We take the waste gases from the blast furnace and recycle them into power and steam.
For steel mills.
You can put solar on your rooftop, not just at home, but a massive scale in commercial industrial applications, and there's almost no transmission and distribution loss, and you can match your loads well. If you pair it up with batteries. You can do heat efficiently by putting heat pumps in industrial applications. I've been doing this job for fifteen sixteen years of on site energy generation. The biggest innovation I was dealing with eleven twelve years ago was the LED
light barb. All of a sudden, you could save ninety percent of the energy with an asset that worked twenty percent sorry, twenty times longer. But on site energy generation is a massive part of the solution. By the way, if you don't stop wasting all of this energy, I'm afraid there's no point making all the new stuff, however green it is, if we're just dumping the existing energy networked out.
Well, don't tell anybody that.
We have to do both. We have to go as fast as possible in generating clean energy and at the same time, but to the same level of effort and the same level of investment, we have to invest in efficiencies and improvement is happening, it's just starting. I have to celebrate the United States on this one, compared to my country. At the moment, the United States, about twenty percent of the Inflation Production Act is designated for things I would broadly define as on site generation or efficiency.
The European Commission has a massive policy called energy efficiency first.
That's because if you.
Remember when Russia last invaded Ukraine, when the annexed Crimea, the Europeans came out and said, well, for every unit of ass we don't use is too and half we don't need to buy from Russia. So Ever, since then, although they mumbled it, until last year, the European Commission had been quite serious about energy efficiency. It's now in the number one policy the UK needs to get serious today. There is actually finally a message from the Chancellor looking
at ways of addressing this. But this is the largest, fastest, cheapest source of greenhouse gas emissions, the biggest way of cutting costs in the economy, and a huge The great news is I'm not here talking about becking for subsidies. I'm talking about getting something done that's good for business, good for the economy. Actually, I think it's the greatest economic opportunity that I know.
That's all right, Jonathan, great stuff. I knew once you start talking. I know this guy, Jonathan Maxwell, CEO and co founder of Sustainable Development Capital.
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Not surprisingly, climate change and natural disasters are at the forefront of concerns among corporate executives, and we want to get a handle on that, so we check in with Pat Gallagher. He's the CEO of Gallagher Insurance. It is on the New York Stock Exchange listed company a JG is the ticker. It is a fifty billion dollar market cap company. It's starts up twenty four and a half percent year to date. It's a fifty two week high and it's up seven tens to one percent today. Pat,
thanks so much for joining us here. I know you guys recently conducted a survey of one thousand US business owners to understand kind of how they're thinking about risk. What are some of the key takeaways you found.
Well, first of all, it is no surprise that the business owners are incredibly concerned about climate change and weather related issues. And so when you think about what's happened just in the past week or two with Lee coming up these coasts, we kind of escaped a major hit, but those things continue to rack the business community. In fact, I think we estimate the first half natural causes first half of the year caused about one hundred and thirty
eight billion dollars of losses. And if you're a business person, you know that's a lot of businesses being impact that's a lot of homes being impacted by natural disasters. So that really is one of the main concerns of business people We interviewed about a thousand clients, all of them privately owned. So this is not the professional risk management community.
These are the people day in and day out that make a living by running businesses, and they are concerned about their risk management needs, which they should be.
I wonder, sorry, I wonder if there's a difference. Well, they're concerned, but are they doing anything about it? Is there anything they can do about it?
Yes, there is, and that's I think a really good point. The fact is that there's a lot they can do about it, and risk management and the ability to counsel with them and to give them some advice is a huge part of what we're all about out Insurance is just really one piece of what we do for a client, and in fact, we start with that premise that insurance plays a role in your risk management. But your risk management is not just we buy insurance, and it should
be what can we do? Where do we locate plants, where do we move trucks? How do we react when a storm is coming? What is our disaster recovery planning? We help on all of that. So when something happens that's really a major disaster, how do we get you back up in business as quickly as possible. Insurance plays a role in all of that, but it's.
Not the be all and end all, right, So from the insurance perspective, I mean, you know, it's interesting, Pat, I see a lot of companies relocating to It seems like everybody and the Brothers going down to Florida. But boy, it'd be a tough place to base a business given all the challenges they're facing from you know, all the
weather issues down there. What do you see when you talk to some of these smaller mid sized businesses about kind of how they really try to incorporate that into kind of their future.
Well, first of all, I think it's really important enough that not all the midsized businesses across America are moving to Florida, and they're not moving to Texas. They're in business because the communities they're in need them. Whether they're construction companies or real estate owners, or whether they're food companies, whatever it is, they're in locations because there's business opportunities there.
So first of all, you've got to start with the premise that not all companies either have the same exposures are the same. Way to mitigate those exposures. You have to really personalize this and you have to sit down with a client and understand where are they operating, what business is it in. We happen to be privileged to be very very expert at about thirty to fifty areas of business. So take hotels, or take real estate, or religious or not for profit or construction. In these areas,
we really know that business. So we can sit down and it's a different set of exposures for the person that has to be a contractor in Naples versus the person who's as a contractor or real estate owner in Chicago. And these businesses are literally global, but they're across the interviewed businesses were across the United States, and you start with saying, okay, what are your exposures your No, two businesses are exactly the same, and no two business owners
have the exact same appetite for risk. I'll give you an example. I can take a large auto dealer in the town that I live in, Glenview, Illinois, on one side of town and have a large auto dealer on the other side of town owned by different families. Those families will have a different appetite for risk. How much of the lot exposure for Hale, does one want to take versus the other? And you have to sit down with the owner and say, all right, you know, what
is your personal balance sheet, what is your appetite? How do we mitigate that? What do you do when you see a storm coming? What is the coverage that you need to take care of that open lot? How much are you going to have out there, how much are you going to be able to move indoors, et cetera. And that varies across industries, and it varies across geographies. And that's the starting point for someone like Gallagher, who then says at the end point, now let's buy this
insurance to cover the things that you can't mitigate. And I think that's a really important function that a lot of people don't understand about the responsibility that the brokers have for their commercial clients.
By the way, in terms of Gallagher, can you keep premium increases across coverage across geography in line with inflation? I know we've been doing some stories about, for example, automotive insurance rising double digits every month for the past twelve so the inflation is there, but everywhere else, I mean, you know, your cost to repair or replace is going to be higher with inflation. So do you do you see the increases in premiums as well? Do you have that pricing power?
Well, no, we don't have pricing power because recall we are brokers. We take no risk. So our job is to help that insured figure out number one, how to mitigate their own risk and then number two, how to properly buy insurance. And that means that in order to keep that pricing or to keep that cost at the level that it should how much should they retain? How much of a deductible so they should have So let
me put it in personal line standards. Do you want to take a five hundred dollars deductible on your personal lines or a five thousand dollars deductible? Well, different people will take different amounts, and that has a direct impact on the cost of your personal lines, whether it's your
auto insurance, your homeowners same is true in business. So if you have the personal balance sheet to be able to take more risk, you can mitigate the cost to the premium that you're going to pay to a third party. And we're very very good at that, whether it be putting together group captives, whether it be putting together self insurance programs, or whether it simply be saying, look, the best place for you to get your insurance is this
first dollar policy written by XYZ Insurance Company. But we don't actually have pricing power. Our job is to help that person who doesn't live day in and day out in the market get the best deal. And right now, you're absolutely right. The cost of ensuring people is terrifically impacted by inflation.
And so for it I mean is inflation, is the rates insurance companies can charge. Is that relegated by the state. Is that regulated by the state, and so therefore you have to work with the state.
So it depends on the line of coverage, and it depends on the state. So in most states personal lines, in particular automobile rates are regulated. Okay, and you see a conflict going on right now that I think most of your listeners will be aware of. In the state of California, a lot of companies have said, look enough,
we're not going to write here. And part of that is the loss picture the wildfires and the hurt that the the threats that they have just in terms of those, but a lot of it also is simply saying, look, we have inflation, the cost to repair is significant. We need to file for rate increases, we need to base rate change in order to cover these costs, where you have a political system that makes that difficult to do.
You finally have a break point in California where some carriers have said I just can't write anymore here, and that's a real problem politically, and it is on those lines of coverage that everybody has to buy. Now, when you leave that and you go to a commercial concern, then you do have some lines of coverage that are regulated. But you also have a pressure release valve we refer to as the excess and surplus market, and that allows insurance to be quoted on a free form, free to rate.
So that allows me to sit for the commercial client and say, don't buy that from the regulate identity. Let me structure this for you differently.
Got it.
So the answer your question is, yes, there's a heavy dose of regulation. It varies by geography, it varies by line of coverage.
All right, Pat, great stuff has always Pat Gallagher, he's the CEO of Gallagher Insurance. But that's a tough business for me to really understand it always has been. But fortunately there are people out there who kind of get it. Gallagher Insurance, it's a New York stock change list of company A jay G is the ticker. Some wee can load that in the Bloomberg terminal.
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All right, we got Joe Mysek in studio, but it's not Friday. So why is Joe Mysek, who covers all the municipal bond stuff for Bloomberg News. Why is he in there? Because he wrote a BusinessWeek column, a story that went back to his work on a little book, this little edition he had to this book called The Bonfire of the Vanities, and if you haven't read it, go back. It is the definitive Wall Street book of
the great decade that was the nineteen eighties. Absolutely that came after, that came after, and Liarys Poker is very good because and that's also a great one.
Barbarians at the Gate.
Also a great one. That came after Tom Wolf, author of Bonfire of the Vanities, and Joe actually kind of was part of that. Joe mysec tell us about kind of how you what small part you played in working or kind of working with or helping Tom Wolf, the author of Bonfire the Vanities.
Oh, that was a that was a pricing pricing business. At one point, Sherman McCoy, the Star Bond salesman, is working on a transaction and I was looking at the galleys and you know, there was a reference there and instead of referring to the coupon and maturity, there was a reference to maturity, and it's like, what about those thirteens?
What about those thirteen years? And I said, you know, I called Tom up and I said, you know, I think what they do is really talk about the coupon and the maturity here, you know, like the tens of thirty six or something like that. And he said, okay, what would it be? I said, all right, smart guy. I had to go get the Monroe calculator out and we kind of backed into it and it's the ten tens of whatever.
So you're helping Tom Wolf with a little boy way those rates.
That's him throwback already ten percent, Yes.
Exactly, united fragrance. So again, big big book there on Wall Street in the eighties, Tom woff is there's a film coming out about him, isn't there?
Yes, there is Radical Wolf by Richard Dewey, And it is a documentary about Tom Wolf.
And it's funny, Michael.
It's based on a Michael Lewis article in Vanity Fair back in two twenty fifteen, and Michael Lewis went to the New York Public Library where Tom Wolf has sold his papers and kind of dove in and look around a little bit and and wrote about it, and then wrote about going out and seeing Tom Wolf in Southampton.
Uh.
And it's it's just a it's a fascinating piece of work. And Dewey points out, well, actually Lewis points out that that Wolf really became quite a performer. And Dewey points out that that he he accumulated one hundred and fifty hours of a film, not including interviews he performed, and more than three thousand still photos, so you could see Tom loved the camera.
Yeah, and he became I mean Tom Wolf became a player himself. I mean, you know, just all around the Hampton, New York City, all that, all that kind of stuff.
Yes, indeed, Well, I will never forget reading The Electric kool Aid Acid Tests.
Yep.
That was like my first foray into the world of the Grateful Dead and kind of the Hell's Angels. And I think that's probably the book that made him initially famous, right, But then he had so many hits after that. He wrote The Right Stuff, which became a movie. Obviously Bonfire the Vanities became a movie as well. He must be one of the biggest, most successful American authors.
Well, I would say though he was certainly the most probably the most interviewed and photographed of American writers, and that includes Hemingway and Mark Twain.
Gorvadal So you actually went to this vault right in then your public library? Oh oh, and what were you looking for?
You know? I was looking for this for the the origin of the quote. There's a there's a quote in The Bonfire of the Vanities and Sherman McCoy's little daughter Campbell. Yeah, bon Bond salesman h Campbell McCoy says, Daddy, what do you do? She's like six, I think or seven? Uh, And I got daddy, willly what do you do? And he's fumbling around, and all of a sudden, his wife, Judy says, no, no, I got this uh. And and she says, well, well, Daddy.
What daddy does is, uh, he slices the cake and he hands it out and to different people, and Daddy gets to keep the crumbs.
So Sherman is humiliated. Uh. And you know, later on like crumbs, well, because.
He thinks he's the master of the universe.
So I was in search of this of this quote, and I remember Tom Wolf told me over dinner at Ben Benson's. I asked Hi about his who came up with that? It was a very felicitous way of describing what bond salesman do. Uh, And he said Desmond Fitzgerald. And I, you know, I kind of I wanted, you know, I tucked that away. And then last year I was searching around to write a column and I said, gee, I wonder if I could find this that's home Wolf papers.
And you know I didn't find that, but I found something else.
What was it?
Well, you know, Sherman McCoy begins as a writer. The role this series in Rolling Stone, you know, goes on for like twenty seven episodes or twenty four episodes, and Sherman requires a writer of and his famous book is called A Man in Slices, And of course later on he writes a novel. Tom wolf writes a novel called A Man in Full anyway, a Man in Slices. So I'm looking through Tom Wolfe's papers, and in February of nineteen eighty four, the headmaster of his school, and Christopher is and.
Rich Richmond know it well, writes a letter and.
Says, hey, you know the Tom Wolfe had been, as you pointed out, or a successful author. He uh, he had been a trustee for Saint Christoph of Saint Christo's for about ten years.
So get in touch with a certain.
So he wants it.
So, so George McVay, who's the headmaster, says, could you get in touch with this guy, Kirk Maturne, who is then Atlizard freyer Uh, because he just gave us a very nice contribution and we're ramping up our endowment fundraising. Okay, great Tom does. Now Tom is already writing Bonfire the Vanities, but he writes a very nice letter to Kirk maturn Kirk maturn sends back a letter on the Blizard stationary saying, wow, so nice of you to write.
Me, Thank you so much, and you know.
Discusses their various lives and how they've what they do, and invites Tom to lunch at twenty one. Yea he now shuddered. Twenty one He and about five other guys, well, he says, Wall Street guy says, I'm not gonna put you on a podium.
It's just an informal watch.
So Tom goes has this fabulous time, writes some return like, wow, your friends were terrific and they introduced me to this place that you know, I couldn't imagine this whole.
World of Wall Street and so therefore I'm going to change Sherman McCoy from a writer to a.
Banker and a bond salesman. And just and I saw this, it was taking place, and you know, the papers themselves are they're organized, but not tremendously so, so you really have to you know what's going on here. Oh, here's another letter from Kirk mcturn and it's setting up and appointments for Tom, including.
The UH Treasury auction at I want to say.
Solon Brothers sure the biggest bond desk on the four and as his side. I worked for Kirk Return at Paine Webber my first job part of rotation, so it all comes full circle and he had me. I did my first bond trade at the behest of me.
Do you think your kids are going to appreciate I mean the historical stuff that like people that you rubbed elbows.
They have a couple they will Now they're creating their own history. They could care less about what I did.
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I am excited to talk to Berner Hoyer, who's just come into the studio here. He is the president of the European Investment Bank, which is one of the biggest extra national supernational lenders in the world. They are the development arm of the European Union and so Wierner, thanks so much for joining us. You invest I mean, for example, I imagine you financed the eused green transition as well as I wonder do you have an interest in financing the defense industry of the European Union.
Not really, we do quite a bit and when it comes to dual use activities and technology promotion. But we are not indirectly involved into arms of ammunition.
I'm just because of the Russian invasion of Ukraine and we have Zelenski here.
We are very highly engaged in Ukraine. There's two reasons. Number one, we of course active in Ukraine since the independence of Ukraine. But in twenty fourteen we did a step change because I said at that time, guys, this guy is not going to stop in Crimea, so this will go on. And then we stopped our business in Russia and diverted the funds who are available for Russia to the neighboring countries, to Moldova, Georgia, in particular to Ukraine.
So when the war started, we were already there and we could beef up our activities there.
So what kind of activities are those? I mean, what are you investing in there? And I guess you take equity stakes, you lend money, You have a number of different transmission maas you.
Are a project finance here, so we invest into concrete projects and sometimes we are a little bit diverted because we see the military needs and all these things. But it's also an absolute necessity to keep the economy running, and the Ukrainians are doing a fantastic job under the circumstances under which they live, and that means the infrastrcture must work if you want to keep the economy rolling. Your bridges, your railroads, public transportation systems must work, and
this is the key area of our activities. Also the health sector, which is vital in the best sense of the world, so we are very active in this field as well. Just restored the finance the restoration of the destroyed hospital in Odessa, So these are very important projects.
The reconstruction eventual reconstruction in Ukraine. How do you envision the role of the European Investment Bank.
Well, I think as far as the European Union will be involved, we will have to be involved quite a bit as well, and probably we are in a certain way
in the lead. On the other hand, what I insist on now is there is no possibility, no responsible possibility, to wait for the end of the military confrontation before you begin with your reconstruction, because what is needed now is keep the economy rolling, keep the tax revenues coming in, keep the agricultural sector being able to export, and not overlooking the fact that Ukraine is also a very interesting
partner country for industry. So these support for these support measures for Ukraine must take place now and not once one day. Hopefully the ink under a peace treaty is dry.
How is the EIB financed?
Do you sell bonds or.
We sell bonds. We are selling between seventy and one hundred billion euros IIB bonds per year, considered part of them, by the way, green bonds nowadays. We were the pioneers and the issuings of green bonds, and so this is the basis of what we are doing. The capital endowment of the bank is big, but in comparison to our lending ridiculous. We have never seen more than twenty five billion euros in cash from our she elders, but we
have a portfolio of almost six hundred billion euros. So the leverage effect is enormous, and that is due to the trust of the private the capital markets in the bank. And it's a technical experience. We are an engineering bank, bank that is endowed with fantastic people from science and technology, and this makes sure for the investors who give us their money that we invest into bankable but also technologically doable projects.
By the way, the EIB was one of the first I guess supernational organizations to I'm pretty sure and correct me if I'm wrong Werner to issue a bond on the blockchain or to use issue a digital bond.
In essence, yes, we are always trying to pioneer in these fields. And it's fascinating. When we issued the first green bonds and made sure that what labeled green is green and there is no green cheating or something like this, I think we were considered lunatic. And now this, this market is a trillion dollars heavy.
Well what is I know, you guys refirst with the green bonds, what is that market conditions like today?
Well, it is the market. The market's partners are very, very interested in this because it serves their own sustainability, not only image but reality. And nowadays everybody who invests in anything, into anything in Europe must be in line with these principles.
In terms of the IR, I mean a lot of Europeans were unhappy about the kind of subsidizing and almost protectionist. I guess you could use that word bent of this legislation. Do you have an answer to that?
In Europe?
Well, the mixed feelings. Number one, I'm happy that under President Biden, the US has three detected climate change and sustainability, so this is very positive andredent. Biden takes the entire economy along. On the other hand, I'm not naive, and it comes to the sortion of competition then is something that affects US seriously. So we need to come to common terms for the United States of America. But I don't believe that trade war is the brightest thing to
do now. It's more about finding synergies and taking all the challenges together.
In fact, I was talking to Ola Collenius yesterday who was saying we was making similar statements saying that we really need to support global trade as well in order to kind of lift all of the boats right or to grow the pie.
I completely agree.
But right now the EU is looking into I guess ways if I'm going to say it without kind of camouflaging it, to block the import of Chinese electric vehicles to Europe, does that concern.
You, Well, it would concern me if it would be so simple. I mean, Vice President Dombroskis of the European Commission is right now on his way to China to come to a reasonable terms with the Chinese. And I think there is between Europe and the United States, but also between Europe and China, some commonality of interests, and we should go for that.
Because one of the things I know about, obviously the economies of Germany and other large European economies is perhaps a very strong trade relationship with China. Where do you guys fit into that? How do you think about that?
Well, what we have learned from the terrible experience with the Ukraine War is that you better stay away from being too dependent on somebody, whether it's in security from one partner, whether it's from trade from one partner, or when it's from the provision of critical raw materials from another one. So we have to diversify in every aspect, and that's the lesson we have learned.
I wonder about the green investment here in this country. ESG has become a negative term attached to any investment vehicle, but that's not the case in the rest of the world and do you expect to make real returns on these investments, I guess is the most important question outside of the climate issue.
Well, for us, that's key. I mean, we are dependent totally on the financial markets which give us their resources.
They trust us, They trust us because they know we are engineers and scientists driven bank So we make sure that a project that goes through our due diligence is bankable, is technologically feasible, and then at the end of the day it brings returns lucrative and I think we should always I mean in view of the time times where we talk about dooms scenarios from morning tonight, we tend more to the can do approach and say yes, if we develop the right technologies and yes we can do that,
then we should be able to meet these challenges.
We were just talking about sustainable energy with somebody who runs a nuclear fuel company, and I know a lot of people consider nuclear power to be safe and clean. Now that isn't really the view from Germany.
Well from Germany it's a different view. I mean the politically it is also divided issue and the same goes for the European Union. So as a bank that is dependent upon the support of its shoulders, which are totally split on this issue. I don't take my head out. The statutes of the Bank do not keep us from the financing these things. In reality, we have never done it. What we have done is said a lot is investing into safety, security and into dual use opportunities.
Just real quick, your successor what can you tell us about a potential successor?
Well, I can only say one thing. I leave the bank with a very very good feeling. After twelve years, my mende is running out. The Member States have proposed five outstanding candidates. I'm very proud that we've brought the bank to a place where people of this caliber are interested in taking the lead.
Do you think there needs to be a woman president?
That would be wonderful, But of course we have beautiful, not beautiful, but perfectly excellent gentlemen in the race as well. So I don't take anything.
About a liberal in the European sense. I know Lindner said he wants continuity, and you're an FTP.
Liberals are always good people, all.
Right, Erner Hoyer, thanks so much. Erner Hoyer, President European Investment Bank, Thanks.
For listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller nineteen seventy three.
Fall Sweeney I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio