Surveillance: Net-Zero With UN's Carney

time and can shift. And we've got a fantastic guest coming up now with Bloomberg's Francine Laqua over in Glasgow, Scotland. Hey Francine, Hi John. We're delighted to be joined by Mark Karney here of course, so looking at finance, so looking at COP twenty six in Glasgow. He's also former Bank of England Governor Mark as a voice, Thank you so much for making us smart on what finance can do,

because I mean COMP twenty six starts today. To G twenty was a little bit of the dull drum because we've and get some of the pledges that a lot of people were hoping for. What does it mean for your expectations for COP twenty six. Well, I think a couple of things. I'm going to quote the Secretary General's hopes unfulfilled but not yet buried. The one and a half degrees anchor in the G twenty communicate is significant, some progress, but we've got a lot of work to do.

What we and the big question for this week, at least for this Wednesday, is what can finance and more specifically the private financial sector, what can it do to help solve this problem? So it's going to really have to step up, and there's been a lot of institutions, a lot of people around the world have been working in order to do that. Yeah, we don't even have a price on carbon yet, when will we get that? Well,

we don't have a price on carbon. But what I think our message on Wednesday to world leaders, to policy makers, to business people around the world is finance is going to be there, and finance is going to be there in two respects. One work we've we've retooled the financial system. We've changed the plumbing, if you will, the financial system, a bunch of very worthy reforms that actually, to be honest, only the audience that Bloomberg would fully understand and appreciate

and we can go through them for the next hour. UM. But you know, think mandatory disclosure, think stress testing all that. So part is reallytooling. But then it's also about financial institutions stepping up and say saying that they are going to finance this transition, this enormous hundred trillion dollar transition that needs to happen over the next three decades. They're gonna finance it, and they're gonna mark their own homework. They're gonna show up year and year out say what

their emissions are of their clients. UM, have specific strategies for reducing carbon fair share of fifty down by That's what the Glasgow Financial Alliance is all. But why not stop actually putting money into fossil fuel full stop, instead of talking about the transition. Well, you've got I mean, we're living through problems with the transition right now in terms of we have both far far too many fossil fuels in the world. We're gonna have enormous stranded assets.

Half of gas, three quarters of coal, et cetera, maybe up as much as half of oil reserves. Proven reserves need to stay in the ground if we're gonna get to where we are. But we also have local short term shortages of some of those exact materials were here in the UK. They a shortage of the storage of gas.

So there needs to be some only some limited financing for a transition, but only for a transition, which is why you need things like g fans that are relentlessly, ruthlessly, absolutely focused on that transition to net zero and not just any transition and one and a half degree transition, which sorry if I may, which is what G twenty leaders signed off on yesterday. But the G twenty leaders didn't stop, for example, coal from being used domestically. And

and so we're doing progress, but we're going at it slowly. Well, we're doing progress. We need to accelerate it. We need to recognize there's differences and as as obviously are between advanced economies developing economies, uh, some of those there's a there's a different timeline for fully ending coal. We want to stop coal, not just new coal, but stop use of coal by the advanced economies. That's what powering past coal, which is a big element of of COP is about.

But also by the end of the next decade in the emerging developing world and if I may again to bring it back to fin finance. UM. To give them the confidence to do that, they need to see literally a wall of money that's available for their transition. So when they're building up alternative energy that the money is going to be there. Who could do better in finance? Is it the asset managers or the big banks? Well, what we're gonna reveal on Wednesday is who's doing the

best um and so from asset managers sneak peak. Well, look, the problem is it's a hundred trillion dollar problem. And so the questions who's stepping up for the solution the members of de fans, so those are in net zero Banking Alliance, that zer Asset Managers Alliance, the asset owners, the big pension funds stepping up with these commitments and then we need to channel them to where they're needed

the most. How much stress is there at the moment amongst the asset managers that actually some of the e s G labeled products than if you probe are are not green? Well, well, look there is some stress, and

it's great that there is. That's it's not great that it happens, but it's great that there's that scrutiny, and there's that skepticism or healthy skepticism about E s G labels or sustainable lay goals, and that again is one of the reasons we're having this ruthless, relentless focus on net zero because in the end, look, we can't stabilize the climate unless we get to net zero. And it's a simple These are hard numbers. Your emissions are either

A or B. They're going up or down. And if they're going down, are they going down consistent with the science we've anchored in the science, the same science the u N and others used for the one a half degree objectives. Compulsory, should you not have regulators coming in and saying, well, this is a new definition, you stick by it and we're gonna measure. So it's a great question. So let's look at what happened with TCFD climate disclosure. Six years ago. You and I were in Paris, we

talked about this, we talked of other things. Now that's moving to become mandatory compulsory after after that period of time. What we're talking about in terms of net zero disclosure, moving that to compulsory absolutely. I think we have a couple of weird year window where best practice is developed by the private sector on what exact informations use, stakeholders make those judgments, and then yes, I think the jurisdictions,

major jurisdiction should make this compulsory. I mean, economically, where the crossroads because of the energy crisis, because of inflationary pressures, does it worry you that actually it puts the transition backwards a little bit? Well, I mean, if I were a policy maker, I'm not one at the moment, but if I were in policy, always in policy maker at heart, and I care about the economy. Um. Look, I think one of the opportunities to turn the easy bit of

the recovery has been reopening our economies. Yes, there's been some frictions, but we've gotten that boost of growth was reopening. Now we need to sustain an expansion. We're only going to do that with investment. Business investment business balance sheets are in pretty good shape. If you have directions such as moving towards a net zero economy, we have huge, huge investment that a hundred trillion figure I mentioned has

huge positive GDP multipliers as it comes forward. So that's the opportunity done leash to turn recovery into an expansion. But so if we get a temper tantrum, I don't know whether we do a tap per testum temper tap per tenttrum. But then what does that mean for E s G. Product appetite? Well, again, what I'm looking for.

So when you look for where to be in financial markets, given a situation which you know, yes, there is an adjustment going on on interest rates, I'd rather have this adjustment going on at interest rates rather than slipping back into a liquidity trap, which is where we were around the customer liquidity trap for many years after the financial crisis.

So now as global interest rates are moving up, ideally what's happening is real interest rates are moving up because we're getting the kind of investment and kind of returns that we need that's sustained recovery. You want me to stop you're having that. We have to stop having it to a time tantrum. But we'll get you back on Mark Arty, thank you for joining us. This is Bloomberg. I have to say, sitting in this sea, there's always been an honor for me to cover up this industry.

Working in this industry, it's really really difficult and We're always very happy when someone way like gets a new seat. Troyes has got a new seat, the chief market strategist f f S Investments. Troy Congratulations, before we start a conversation, just told to me about the new seat you've got. What's going to change for you. Yeah, So I'm incredibly

excited to join FS Investments as their chief market strategists. So, you know, it's a firm that I've known since two thousand fourteen, when I had the pleasure of meeting the founder, Michael Foreman. You know, one of the things that attracted me to them was not only investment excellence, but the fact that they took that investment excellence and found pretty unique ways to package sophisticated strategies so that retail investors

could actually access them. As you remember, in our industry, a lot of the early stage, more sophisticated alternatives were really exclusively for sovereign wealth funds or pensions. So getting to work with a firm whose DNA is tied to finding ways for retail investors to participate very very exciting. UM And you know right now, as you guys know, one of the biggest challenges for all investors is what to do with their fixed incomm allocation, and they've variety

of really exciting solutions there. I will never underestimate anyone's ability in this industry, Troy, to deliver a marketing pitch just like that on a time it's ready to go, doing what I can, Troy, let's start this interview properly. The Federal Reserve, big big build up in the front end of the cup. How much pushback this week? Well, I don't think there'll be a lot of pushback from the Fed. I mean, I think they're going to talk more broadly about the fact that they're going to be patient.

But you know, at the end of the day, and Lisa was bringing this up before, markets are getting more and more comfortable with the probability of them hiking at least twice next year. And that's certainly good news from a standpoint of market stability. But other than that, I mean, remember what, we'll stop this rally. And I disagree with Mike Wilson with all due respect, it's probably gonna go into January at least, is when liquidity finally starts to

wane meaningfully. We've seen a meaningful drop over the past five months but M two is still growing faster the nominal GDP and giving the seasonality, right now, we do expect the green light to stay go. But as we get into next year, that lights darting flash yellow, right because you know, as the FED tapers, you're gonna have slore and two growth. As markets start to focus more and more on the potential hikes, you'll see that flat line. And so that's when you start to get into period

where could have multiple corrections. There's another way of saying this, another way of tracking this, and that perhaps is the real yield. And I was looking at a Lori Calvacino note of RBC Capital and she was saying, really, what's behind the rally is the fact that yields have remained so negative on a real basis in the ten year space, in the five year space, etcetera. Meaning basically, inflation expectations are rising much faster phenomenal yields. At what point do

you expect that to reverse, if at all? In other words, is this unsustainable where we are right now? Yes, So go back to the last cycle, right, Remember we only got two real yields in the front end. Towards the end of the Powell hiking regime, and markets didn't take that too well. Right, So as we look into next year, remember there's a couple of accidents that could happen. One is the Fed is forced to tighten faster. Even if

they should, they probably won't. The other is that the bond market starts to actually price in meaningfully higher UH inflation like we're living in right now. And as you get that big back end of the curve move, you start to price in closer to flat. Did you hear me, John, I just said closer to flats, and that leads to some type of dislocation. But the bottom line is at multiples at these levels, you know, when you think about where yields are are rising, you think about liquidity is

going to slow down, you know. Now it is really one of those times where you want to start to diversify into alternatives. Troy I often say you that it's just trying to just job to read bedtime stories to people nervous about the market and to help them sleep at night and to stay invested. It's not job asier

or hard to right now. Yeah, you know, I think right now it's easier, right because it's a risk on environment for markets right, and there's a lot more FOAMO now than there was stay you know, during the Eurozone

crisis or fifteen sixteen. So I think the challenge for a strategist now is to get people to focus on other assets where they can potentially not have as much upside as equities in the short term, but have a much less downside, you know, particularly in things like senior secured commercial real estate, floating rate debt, other more hybrid strategies in corporate fixed income, things that can hit that mid to high schinnole digit return with far less downside

when the inevitable occurs next year in multiple corrections. I'm always listening, Troy, you know that, always listening. That's good. That's good. I've always listened to you too, John held from your buddy of FS Investments on this market, joining us on this market. Lisa Hornby had a US multisector fixed income as sad as Lasa. We heard from Tiny to Iron in the past week, and he talks about credit holding gum. So long as credit holds up, equities

will be okay. Have you been surprised by how well insulated credit has been despite everything going on around US? Yeah? Actually, I have been a little bit you know, you would think that some of this rates volatility would have filtered into UM equity and credit and risk markets more broadly, but so far it's it's been pretty resilient, you know. I guess for us, the thing that we're looking at the most closely is, at least for US fixed income markets,

the UH the impact on foreign and overseas demand. I mean, that's something that we've become very reliant on over the past years. There's been a tremendous amount of of yield buying just by European, Japanese, Asian based investors UM and to the extent we start to see front end yields move higher, which impacts the cost of their hedging their currencies UM, that could eventually have some impact on their

demand for US credit product. So far, we're not seeing much of a change in that front UM and and and so we've seen really credit spreads be quite resilient. UM. You know, our expectation is that we will get a little bit more volatility in the coming months, particularly as we get some of these central bank moves UM out of the way and we see UM you know, how markets can actually stand on their own without the huge liquidity uh that we've had provided to us over the

last speak teen months or so. Lisa, I'm gonna live up to my reputation as Dr Gloom because I keep thinking about what happens when the FED starts hiking, what happens when we get to the end of this cycle? What does the end of this credit cycle look like? I think the end of this credit cycle probably looks like the end of most credit cycles. Right, you start to see leverage increase, um, you know, you start to

see some of the same phenomenon we've seen in the past. UM. For us, we tend to use spreads as our guide. Right when spreads get almost insanely tight, and I could I could almost say we're we're close at that point. Well, but forgive me, Lisa, I'm sorry of a breaking in here. But it's not just what do you look for, but what's the nature of default at a time when the Federal Reserve has gotten a reputation of stepping in? Well, that's a good question. I guess your question is is

the FED allowing a credit cycle to exist anymore? Um? And I don't know, you know, frankly, we don't know the answer to that, I think you think markets are still going to the hape like it will exist. But what you saw this past crisis and probably what's to come in the future is that those bounces low to the to the absolutely you know low and credit spreads to the peak and then back become shorter in nature because the markets start to discount a very quick and

rapids central bank response. Yeah, I was. I was speaking with Steen Jakobson over at Central Saxo Bank earlier today and he he basically said that he said central banks are so far behind the curve on inflation that they are going to have to act more quickly. The cycle hiking cycle is going to be shorter, and it actually might result in them having to loosen policy again earlier because of a kind of overreaction. What's your reaction to that.

I mean, look, I think central banks are always behind markets. You're seeing that today, right, It's the central banks that are catching up to what the market has done in terms of pricing, at least in the US. UM So, I think I think that's probably spot on. Central banks are going to respond. They're they're trying to respond on a number of fronts. I mean, Powell has a very

difficult cult message to walk ahead of himself this week. Right, he can't be too benign on inflation, otherwise you're gonna have the bottom market vigilanty sort of pushing that narrative. At the same time, Um, the market has undergone quite a significant front end repricing. You cannot you don't want to see a situation where the market start to kind of go crazy on that front, and and Powell endorses it.

So I think all of these central bankers are kind of in for a difficult a difficult messaging over the next couple of years, really, as this inflation narrative is, in our view not quite as transitorious people have made it out to be. And that's probably a more structural trend rather than a very short term one. Lasa, just quickly, there must be some weakness somewhere that you're just nibbling at thinking about buying. I'm looking at Italian tends right now,

up ten eleven basis points over in Italy too. This is a world, whether it's a struggle to get yield, a world where central banks will have some limitations on how far they can push the policy. Right, there's one seven in Italy, get it down to you, sit out and wait for more. What is it, Lisa, We're not quite there yet on Italy. I know you love to ask me about that one, UM, but I will say that emerging markets are starting to open up as an

opportunity for us. I mean, we have seen pretty dramatic underperformance in some of the e M names UM, and there are in our view there are some opportunities there. We'd like to get a little bit of stability and the dollar UM to give us a bit more confidence in taking some of that trade. But certainly there are emerging market issuers that have underperformed and those that are are geared to the US economic recovery. We're a bit more favorable on those UM. We are starting to take

advantage of some of the opportunities. They're interesting. Come on when you bind a little bit more and we can talk more about at LESA thank you at Lisa Homebias Shrouders takes us immediately to the China conversation. It's all about one thing. This wait for the Federal Reserve, give us your right guidance. Joining us now is Andrew Holland Horst,

Chief US Economists at City global market. Now, Mr Holland Host, you had some forecast out of the standard this yef for right hikes from the FETE to stop next year in December. As you've indicated, people thought you were whole kish and now accusing you of being a dove. That's right, Yeah, that's definitely been the evolution. When we came into the year with that forecast, people actually asked us, did you put the wrong year behind December? December three should have

been December four, but no, it was two. And we're still in December twenty two, even as we see the market is starting to move ahead of us here. So this is the ultimate win for a strategist, right. This means that you are early and potentially late, but probably dead on what gave you conviction before and what gives you conviction now that they're not going to hike more

than just once next year. You know, I don't know if conviction is really the word that I can use, but the single thing that we were looking at was the rapid recovery and demand and what that would mean for inflation. And really it's the inflation story that matters. And that's why I say it's hard to say conviction because inflation has been a difficult variable for any macro economists to get right, for any policymaker to get right.

But when we came into the year looking at the numbers, it looked like that strong demand was going to be there that could drive some stronger inflation. I think that's what we're seeing coming through in the data now, and when we see the market moving these rate hikes earlier, when we see some calls that are thinking about the FED hiking earlier, I think it's really about that inflation story. What we're seeing in shelter prices, what we're seeing in services.

We know it's there in goods. The question is does it broad in now, does it become more persistent, does it stay with us? And does that cause it fed the hike. Let's look past Wednesday to Friday to the payrolls report that we're going to get. If we get a low surprise and negative surprise downside surprise, what does that mean in terms of tightness for this labor market. It's so interesting because we were so focused on the headline jobs number because the Fed told us substantial further

progress in the labor market. That's what we needed to see to get to the taper. Well, we're to the taper now. We think that at the FOC meeting this EEK will have an announcement of the tapering of a D and twenty billion a month of assive purchases. So the focus is no longer so much on that headline jobs number. Now the focus is is there a shortage of workers in the labor market? So you can have a week reading and the jobs report because there's no

demand for jobs. If we get a week reading, I think it's going to be driven by the fact that there's not the supply of workers there behind it. So we're really looking at data on wages, We're looking at data on participation. It's that shortage story that matters more than the particular headline jobs number. Okay, so let's focus in on participation, which has stayed stubbornly low around that level.

Is that structural now it looks like at least a piece of instructural I think where we can most clearly say there's probably a structural element is with those fifty five and over, somewhere between five hundred thousand and a million workers we think have dropped out of the labor force.

Which are really early retirements. Right, This was you had excess savings during the pandemic period, maybe lost some attachment to a job, and now that retirement which was five years ten years off, it came early, and so those workers are probably permanently out. We're watching on a month a month basis is the prime age workers. Are you seeing those prime maje workers coming back in or staying out? And I think that's where the surprise has been, especially

relative to policymaker expectations. There was a view at the FED that enhanced unemployment benefits were going to expire, schools are going to reopen, and you'd have really a surge of workers coming back into the labor force. And I think it's clear now in the data that we're not

seeing that surge of workers. The question now is is there going to be a trickle of workers that's slowly coming in and relieving some of the worker shortage that we're seeing, or is this really structural People people have just re examined their lives, made a different life plan,

and working for some people is not part of that. Now. Well, Andrew, you mentioned excess savings during the course of the pandemic and That brings me back to the note out of Mike Wilson and the team at Morgan Stanley this morning. His whole thesis is that the bowl run in equities can't last for much longer. But what's interesting is he points to a payback and demand early next year, and that a lot of that excess saves is now back

to pre pandemic levels. Inflation is starting to bite for some of those lower end consumers, and you're going to see a year over your decline in personal disposable income. At what point are you worried about the consumer's proposant propensity and willingness to spend and to be tolerant of the higher prices that companies are trying to pass through. Yeah, great question, and I think I get worried about it

when I think about late two. If I look at at early two, then the story that you mentioned, the pent up demand supply that just hasn't satisfied that demand. If you look at autos, for instance, running twelve million thirteen million annualized auto sales a month, that numbers should be sixteen or seventeen million, those people still want to buy cars, and as soon as that production ramps up, we're gonna see those auto sales. So it's hard to

get too negative on the first half of two. When you look at the second half of two, that's when you think about have we worked through some of those savings that have been pent up that are ready to come out and become demand. Are we seeing higher prices? Is that are now outstripping the rises that we're seeing in wages. So wages are accelerating, but prices, of course are also rising rapidly. That means real incomes are actually declining um. So that's, you know, as part of the

demand story, it's also part of the inflation story. Does that become a little bit of a spiral where we see prices and wages rising together or does this actually become something that's negative for demand where prices are moving too much ahead of wages. And this really goes to the idea that people in the market tend to be impatient, which is probably why I enjoy covering them because I relate deeply. But this idea that once we get a sense of when the FED will hike, we look to

what's next? How many more times? What's the pace of rate hikes going to look like? What is the end of the cycle going to look like and you take it on from there. Andrew holl And Harts, chief at US economist of City Group, what is your view here about the path of this rate hiking cycle? The idea that if the Fed hikes sooner, they cannot go for that long and it will be a shorter cycle I think in terms of where they get to in terms of eternal rate. Right now, it looks like maybe that

terminal rate is not going to be that high. If you look at the last hiking cycle, you only really got real rates up to about a hundred basis points, which means that nominal rates really shouldn't be going much past two to three percent. And then you think about where rates came back down to. Real rates ended up around zero basis points, which would be nominal rates around two percent. So the destination I think is not too high, or at least will be viewed as not too high.

On the other hand, remember we're in a flexible average inflation targeting regime. What does that mean? It means that you allow inflation to overshoot before you start raising rates. It means that when you start raising rates, you should have a lot of confidence about proceeding with rate hikes. So even though the destination is not too far away, I think the Fed will be relatively deliberate about raising rates.

One rate hike every quarter, so about four rate hikes a year, maybe only getting up to around two percent nominal rates, but still I wouldn't expect that this is kind of you know, one or two rate hikes and you're done, all right. So that's all on the monetary policy side, Andrew on the fiscal policy side, maybe we could actually see some action down on Capitol Hill this week as it relates to the infrastructure package and the social spending package. But both of those are a lot

smaller in size and scope than originally intended. Net net, when you look at a package that is smaller, but also maybe you know the revenue the pay for kind of side that is also more moderate than expected, how does that inform your thesis for what the economy is going to look like over the next five ten years. Yeah, I think it's a really difficult question over five or ten years. And remember that some of the elements of this fiscal package, even if they're initially legislated for one

or two years. Take the enhanced child tax credit as an example. For instance, if that becomes popular, then it may stay part of legislation even beyond the period when it's meant to expire according to this particular fiscal package. So when we actually project these things out, we don't just take current law as what will happen. We actually make assumptions about things like a child tax credit being continued. So I think what you're likely to see here is

spending that exceeds revenue. There's still a lot of questions about the revenue side. In any case, it will be spending that's pre front loaded relative to revenue. So we'll have things like a corporate tax, maybe a fift minimum corporate tax that's gonna extend out for ten years, whereas the spending hands child tax credit, for instance, that's gonna be front loaded in the first couple of years. So

I think we're looking at larger deficits. I think we're looking at net positive physical impulse, but relative to a hugely positive physical impulse over the last couple of years. So that's really what the economy has to navigate here. Is coming from direct transfers on the order of trillions of dollars to individuals, and now we're talking about hundreds of billions going forward and going to see potential bank

decisions out the only thing taking place this week. We now have to head to Glasgow, Scotland to catch up with Blimberg's France st Laqua as the COP twenty six summit kicks off. Good morning Francine, Good morning John. I'm delighted to be here at COPY six. We're not sure whether a lot will be agreed given the downpour of negativity. I would say from a lot of chief executive about what was achieved at G twenty, which was meant to be the preparatory work for them the two hundred countries

and their delegates arriving here in Glasgow. But I am delighted to be speaking to Jacob stoles Holm, the chief executive officer of Rio Tinto, who's here in the Glasgow trying to achieve well, it's trying to actually get some of the targets that you laid out. So thank you so much for joining us. Thank you for giving us, I think your first interview as chief executive of Rio Tinto with very ambitious plans. You're one of, you know, the biggest producers of iron ore that Houston steel making,

steelmaking extremely polluting. What do you now need to achieve to make sure that your goals are stuck took? Fighting machines isn't challenge for us. We have a big carbon foot print. Also, it's a huge opportunity for us because fundamentally it's a very physical transition of the society we live in an energy transition. You need more solar selves, wind turbines, transmission lines, electrical vehicles, all requiring the materials

that we are producing. But the problem we have right now is we first have to de carbonize our change, which is expensive and difficult, very expensive. And we just laid our plans where we will in this directly seven and a half billion, but initiate much more investments in this decade in order to a cheap production of our carbon foot plant by by the end of the decade. It's an ambusiness plan, but it's doable. But it's our part in order to also benefit from the growth circoms

from seen transition. So when will we be able to know a lot more about Scope three? This is a hard part because it's basically you give the iron or the steelmakers. It's how they decarbonize, So what's the plan there. Well, first of all, the challenge for steammakers is even bigger than it is far US as minors. But I see them doing a lot. A lot is happening in China right now. We do research and development with them, with Japan and in Europe, etcetera. It has to be a corporation.

The major part of the solution is with the steam makeup, but part of it is with us as minors in terms of the quality of products we're delivering, etcetera, etcetera. And we are exploring various options. And one of the options that we are exploring is, for example, is that an opportunity for the first part of the steam making, the iron making, the production, should that be done green Iroland? Is that something that we could participate or activity. So

we're actually doing an awful lot in that. From spect it's China very committed. So we were disappointed by what came out of the G twenty. So we don't really have an agreement on you know, for example, domestic coal plans. We don't really have an agreement on this Global methane Um summit. So what can we achieve from now fifty is very far. I think people has to focus a little bit on the short term what is actually really happening. And the reality is China is hit when it comes

to installing renewable innity. Their their their program is incredible, ambitious, they are hit when it comes to a penetration of maketure vehicle. So we just see a lot going on on the ground in China. In terms of timeline, when will you be able to set out your emissions for scope to just go three? We have our action plans now. We we released that on our Capital Markets Day last week.

But what we now need to monitor is what will the industry, the steammakers do and therefore we plan as part of our annual report to be more numerical about it. But what it's important right now is to tell what are we doing. But at the end of the day, school three, we can never be under percent and control of when you look at what else not in control

of is of course the energy crisis. It's a freight around the world and the fact that the economy seems to be stalling once again, does it make it harder for you to achieve your climate goals because of the difficult environment we see. No, I wouldn't say so. I mean, obviously we were very lucky at the beginning of the year and we had our best half year about the

first half way the economy was growing a lot. Right now the economy is slown down, and that probably makes sense because, as you say, we're strucking to move things around in the world, and there's a looming energy crisis, and ultimately it will have an impact. But I think it's as your auditorm impact. It's a matter of the world to solid supplying issues. How many how much inflationary

pressure are you seeing across your products? Well, for sure there was a lot of inflation induced in the first half where the world was growing at a high pace. But yes, it's one of the challenges. What does that mean? I mean, do you hedge, do your clients ask for a little bit of time? It must be actually, you know how of something to deal with. It hasn't been that bad for us, and quite frankly, we have also benefited from from part of the infacing comes from higher

commodity advices. What does it mean for China? Where are we in China right now? If there if there continues to be that zero COVID tolerance policy. Is it difficult for you to ship things on from China? The whole logistics works extremely well personally as the CEO, and they said, but I still haven't been able to travel to China. We have my biggest customers are but it's it's a difficult world for all of us from COVID. What's your

relationship with stillmakers right now? Is there some kind of agreements that you would give them, for example, you know, monetize or to try and help fund some of their efforts to become more green? YEA. Ultimately, first of all, we have very good, very long term relationships with our customers that we have worked with for decades and and that's where we will tend to on China. Are any aligned, We always think in a very long term horizon and the air fars natural for us to form research and

development corporations, including we have the Chinese universities, etcetera. And so the problem with A and D is as a businessman, I like to see we solve very quickly, but at the unfortunately often takes a little longer. You're pushing me as well, when can you come with the scope three resolve? But but very often it takes a long time. Little give you an example, we're trying to decobonize completely aluminium with our Illicits project. This project has been going on

for twenty years and now it's us. We've been promising and we might be able to change the hundred year old manufacturing method, but it just takes time. And therefore what you need now the world in order to achieve twenty fifty, the world needs to put in a lot of seats of research and development in order to have the brake roots necessarily, are you frustrated by the lack of time or by you know, by the speed at which progress is being made. So you're a new chief executive,

what's the thing that's most frustrating in your job? I don't look at it like that, because there's so much we can do with existing technology and we haven't done enough. And what I said when we were announcing our targets at the Capital market states, we are now starting an internal race because there's much much more we can do, and we will do. Our thousands of engineers who are used to classical energy solutions now have to think about

renewable energy solutions. That's for us to do. But you can't solve of the see you two without some breaks through in technology. And there I think the world will have to be patient because Auntie just takes longer, I mean patients. How so when will we see green steel? Well, but look the way we look at it thirty we want to have half our carbon foot traunt and I want by twenty thirty to have a very clear passway

without a lot of uncertainty towards zero. Okay, thanks so much for joining us as a mute in to chief executive. Junco steals home his first interview actually as a chief executive with that John, and will send it back to you in New York, France saying thank you so much. Looking forward to a waste conference with you on the ground in Glasgow, Scotland. This is the Bloomberg Surveillance Podcast.

Thanks for listening. Join us live weekdays from seven to ten am Eastern on Bloomberg Radio and on Bloomberg Television each day from six to nine am for insight from the best in economics, finance, investment, and international relations. And subscribe to the Surveillance podcast on Apple podcast, SoundCloud, Bloomberg dot com, and of course on the terminal. I'm Tom Keene, and this is Bloomberg