Welcome to In the City, Bloomberg's podcast, connecting you to the conversations and the stories shaping the world of finance and Francin.
Laqua and I'm David Merritt and this.
Week conversation with Paul Pullman.
Yeah, Paul was chief executive officer of course, of Unilever for ten years from two thousand and nine to twenty nineteen. Before that, he worked for Procter and Gamble and Nessla and he's the author of net Positive, How courageous companies thrive by giving more than they take.
And I have to say, throughout his years in charge of company, he's always cared about sustainability. So, Paul, we've been trying to get you on the podcast for a while and this might be the perfect time, with COP twenty eight in Dubai kicking off. Do you have high expectations or any expectations about what can be achieved at COP?
Yeah, there will certainly be things that can be achieved, but I think we have to manage our expectations. In fact, I've been at about fifteen cops or more, and anytime we have this COP, I issue a little bit of a warning before that we do have to manage our expectations because we think that this will be this magic want that all of a sudden solve solid climate change problems,
our financing problems. That's not going to happen, especially at this COP, which is a very difficult COP in a country that is still heavily dependent on fossil fuel itself, and many people are rightfully so worried about that. But having said that, we made good progress in Paris when we bent the curve from four and a half degrees to below four degrees was the COP twenty one and the Paris Agreement clearly stating that we want to get to about one and a half degrees that we can
afford for a livable planet if you want to. Then Glasgow came it bent the curve a little bit further and now we're still projecting to about two point seven, but coming from about four and a half is a good progress. So what we now need to do is this is the first time since Paris that what you have is what we call a global stock take, which is where all of the countries since Glasgow until now put in their submissions of if they've made progress towards
these targets or not. Then the reality is we're still far off track. Although there is some progress, we're clearly not moving fast enough. And as I've pointed out many times, we are creating the problems at the fastest speed than
we're applying the solutions. So where can we expect progress at the cop The first thing is getting into a greener world will require investments, So that's three to four trillion dollars that will be needed to stay around to one and a half degrees by all means possible still if we decide to do so. So there will be a lot of talk about financing. Can we come up with a fund of loss and damage for especially the
emerging markets. Can we finally agree on the Green Fund, which is this hundred billion that was agreed already fifteen years ago but still not pulled together. Can we get a reform or a further progress on the reforms of the financial institutions, so it's called the Bridgetown Initiative IMF World Bank. Can we free up funds to really accelerate the conversion in emerging markets where now all the new emissions are So that's the financing piece, and then there
are two other pieces. One obviously is the greening of society, which basically means that we need to triple the investments in green energy and solar and winter will on track to do that, but we need to get tripled by twenty thirty, and we need to double the energy efficiency.
So that's a really long list.
For Ryan, you just said it's going to be a difficult cop So that long list of goals is it in any way achievable in Dubai.
I think the most important thing that we need to get out is that the more and a half degrees is still alive, that we're not stan it's I think many well. The International Energy Agency, the UNFCCC, which is responsible for the climate negotiations, have issued various reports. Our own studies would point at by all means it's still possible. If we already see, for example, on electric vehicles, that two thirds of the sales of by twenty thirty could
be electric vehicles. We see wind and solar capacity being online with the trajectory of one and a half degrees, So if we really are serious and unlock those investments at a little bit higher pace, but the technologies are there, the funds are there, and frankly it would cost us less than not doing so, so that is by all means possible. And then methane. If we attack the methane issue, it's obviously a short term far more burning, is one hundred percent more potent in the timeframe that we have,
and that's also possible. We have one hundred countries that have signed up to the methane pledge. So this is one feature I think of the COP twenty eight and many COPS that it's difficult to get all the countries to agree on something nowadays, especially with the geopolitical tension, but you can get these side agreements that are quite significant in moving things forward.
So when you read a lot of the press, they say this is really also the last chance to cut emission significantly for this decade. Right. Does the fact that the US and China, the world's two biggest plut started talking to each other, does that make a big difference in terms of environmental pledges?
You cannot get there without the US and China cooperating, There's no question about it. Eighty percent of the emissions are in the G twenty countries and the biggest ones are China. In the US, so the fact that we had the meeting in California between them that lasted four hours, where they were.
Clear agreements to move forward.
We had yesterday a meeting with negotiate a WTO and talked about that again. It is encouraging is that the only solution no China actually is moving very fast in many areas in the US. The IRA Inflation Reduction Act has really changed the environment there. But you know, we have to be very mindful. But you do have these two on board is absolutely key.
I'm interested by by saying nothing will really shift, I mean, everyone still feels the need to convene this time in Dubai. You've been to many, many of these conferences. What's it like on the.
Ground, you know, And what will you be doing?
Will you be personally lobbying representatives for these countries, for these companies to try try to change people's mind, to try to reach some agreement and maybe get some rabbits out of hats that the world isn't quite expecting.
Yeah, So these meetings are difficult, and the mechanism that has been put in place is difficult, but we haven't found a better one. But having agreements nowadays unanimously between all the countries in the world when you have this enormous geopolitical tension, it's just not going to happen. We see countries like countries like Saudi or Russia outright boycotting these processes and trying to slow you down. And we might see other countries, like especially the seventy Island states
which are drowning literally being far more aggressive. So this has always been a process of finding compromise. But this is just one meeting that people work to. Most of the activity happens during the year. But it's important on anything to have a deadline so that some of these agreements are being worked.
And come together.
What you will see in the COP and coming to the areas that I'm focused on, you will see in the COP quite a big representation of the private sector. Obviously you'll have the fossil fuel sector and we'll take that. Hopefully they'll get an agreement on.
I mean, they have to be part of the seduction.
Well, they now have to show their cards, and I think they will be saying ultimately, they will be saying, if we're sitting here in two weeks time, that we will be net zero in the fossil industry. But they will only be talking Scope one and two, which is what is under their own control, whilst we all know that all their emissions are in Scope three. But where we will see progresses in companies showing governments that they
have set higher ambitions than the governments themselves. So we have fifty percent of the major companies in the world now have set net zero commitments. But they're also which is not bad. Actually it's about thirty seven tillion in value. But they also have said very clearly we're at the point now that we cannot get there unless the governments
start moving in different directions. We still have seven tillion dollars of perfers, policies and government subsidies that push us in the wrong direction.
So we do need governments.
Ultimately, But how do governments change? And this is something that Dave and I speak about quite often, is that you need to I guess, galvin, I yes, And I don't know whether it's galvanizing, you know, you talk about the climate change horrors and so galvanized public opinion, or you galvanize you know, by protesting something I think probably needs to happen to put climate change talks about it at the forefront. Given all the other crises.
Absolutely and you see now Jeremy Hunt put the report to the Bank of England for example, on what there is four risks and all of a sudden climate change has disappeared when it was last year on the list as one of the four biggest priorities. So we do have some countries and you know we have to watch what happens in the US was the next election.
But that's the thing, I know, it's the backsliding, right. We have these risks, but on the government side.
But then you cannot stop. You see where we are.
You cannot get discouraged because then you know the alternative is just not there. The costs that we are now incurring, the human suffering that we are encouraging. So whilst we at times might be discouraged by some short term political action, we actually need to go in overdrive. And what you now see is civil society is speak louder. Employees and companies are willing to walk away from companies not making commitments that all commitments that they are not living up to.
You see companies themselves getting together at the increased pace to form these alliances to put pressure on governments.
Does climate change have a pr problem. If you speak about air quality control, then maybe galvanizes people more than climate change because it also feels very far away when you have two wars, when you have inflation, cost of thin crisis.
Yeah, I couldn't agree with you more that the way the narrative has been constructed clearly hasn't gotten through to the extent that we need.
So we do need to look at a different narrative. What I like is, and I.
Am especially focused on the food system transformation. We've pulled a lot of big companies in the food system together at thirty percent of the problem, as I said, but also thirty percent of the solution. And by all means, it's possible to go to fifty percent regenerative agriculture by twenty thirty, which basically means capturing carbon in the soil
and creating soil health. It's by all means possible to protect biodiversity or restore biodiversity by twenty thirty, and that alone is probably the biggest opportunity that we have right now to thirty percent. So governments are frankly not well equipped, not well organized, not well aware of these possibilities, and incur quite often significantly different costs somewhere else. Take the UK, for example, a broken food and land use system, it's
the lower stone biodiversity of all OECD countries. A broken food and lent us system which results in people not eating the healthy food they could be eating and actually paying more for food than they should be paying ultimately results in fifty five to seventy billion extra costs for the NHS. So increasingly we're able to explain those things to governments.
But are they listening? I mean the UK.
Let's talk about the UK government. We've just had the autumn statement from the Chancellor. Are you in any way optimistic that this current government and we're going into a big election year here, obviously politically they're going to make this a priority.
Well, clearly they've decided not to, although they put different voices behind that and try to position it differently. But what we've clearly seen is, you know, one year ago, it's let's get to the electric vehicles by twenty thirty because it stimulates innovation and it makes economic sense, and that's indeed true. Now all of a sudden it's no, we don't want.
To do it.
But why because it's not popular it's not popular voter voters.
I mean, they're desperately trying to see if they can get re elected in next year, earlier next year.
That's not mince words around that.
So that's why you see the Butchhet cuts now, which our disguised increases actually for consumers. The men of England again and the Butterchet Office clearly stating that it's not making a big difference. But these are all attempts and that you see in every country where you have short term attempts too over the electorate to either limit the damages or you know, get elected again. And you know, we have to speak out when these things happen to make clear that there was never a meat text plan
in the UK. There was never a plan to pull out the gas boilers in people's arms and have them incur extra expenses. There was never a plan to force them into not flying and all these things. But these governments are now become so populist in some extent that I think they're increasingly losing the elector. This is not a good move for the government. It is unwise, it
is ignorant, it's actually more expensive. And if you see the UK, the majority of people like in the US, by the way, the majority of people expect governments and business increasingly to attack these.
Issues, but not the majority of people. Still, if you have to change your stance on climate change or greening the economy to get voters, then there's again there's a problem of communication.
It is very easy to take a populist view and say we want to protect you from becoming an any state to tell.
You what to do, or it's rising prices. You know, it's cost to avoid.
You paying more because it is a higher cost, and increasingly, study after study points out because also of the advances in technology, because of the cost that you would incur if you don't move that it's actually economically more attractive. But you know, you have to explain that to your electorate, and there are very few politicians that clearly are first to do that properly. But that's the reality. I'm not denying that. But it means that we have to organize
ourselves better around that. When Suona came as its proposals the other day, I think it was not well received. It was not well received by the left to right, it was not well received by the majority of business people, and that message hopefully resonates mister Photers as well when it comes to making a choice.
I mean, the world does feel very different from the cop that was held in Britain, right in Glasgow. Since then, we've had the rampant inflation, We've got two wars raging now in the European time zone, and so with that has come this. I suppose you could call it a backlash right against ESG because it's gone down the priority list of companies of people of households and people are worried about the cost of things and adding to their bills.
Do you think that that sort of back quard step in terms of a backlash if you want to call it like that against ESG. Is that just a blip in terms of the progress of greening the economy heading to net zero? Or is it something more fundamental?
Well, I think we need to separate two things that you put in one sentence. There is obviously other short term priorities that have come to the foreground. TREATCHIC as they may be, But I wouldn't immediately because that is being prioritized, that there is a backlash against the ESG. In fact, the world is moving quite fast. It's just not moving fast enough. But what we see this year, for example, is the doubling of the capacity of green energy.
We're spending one point eight trillion to two trillion dollars this year on green energy. That's twice as much as what we're spending on fossil fuel. So it is moving, and it is actually moving quite fast, but we continue. You know, the things like the wars themselves don't help either. They're carbon emitting. The fact that we're getting close to negative tipping points. The forest fires in Canada alone had emissions that were, you know, quite a significant part of
annual emissions. We're getting into a deeper understanding of climate science where the world's capacity to absorb our shortcomings if you want to, is far less now than what we thought. So that sense of urgency has come up. And at the same time you have distractions. Many people are moving, actually many countries are moving, but we're just not.
Moving at the speed.
And I always say, going back to the old vehicles, if you want to, it's easier if you're in second gear to move to third or fourth gear.
Then if you would be in reverse. We're not in reverse. But we just need to accelerate.
People don't like talking about it. So I remember doing an interview with Larry Think in Dubos at the year head launch. He was quite emotional for the first time. He said some of the attacks he got in the US were very personal. And he also said, recently than actually stopping to use the word ESG because it's become too politicized. Is that the right thing to do, to continue maybe with an ESG agenda without talking about it.
No, I don't think it is. I think the Wolke attacks that you see in the US are real. We should not underestimate that. But they're not making ground. There's very few legislation that has been passed, the very food proposals in the proxy seasons in companies that have been accepted, and frankly, it has been presented in a way that
hasn't caught the interest of American people. Even seventy percent of the Republicans think that whatever investment decisions you make, you should have the freedom to make the choices and the factors you want to take into consideration. So, which are often ESG factors. We know that companies that are
more diverse have a higher likelihood of performing better. Companies that are more aggressively attacking issues of climate chains are better presented, better prepared for the future, and the market actually felues on better right now.
And explain to people why we target companies to come on this program and others to talk about ESG and they're at the forefront of the leader board of people that are doing good and we'll talk about everything except that.
Yeah, because well, ESG first and foremost. The ESD term is only ten years old. And certainly the attacks by certain parts of the political parties mainly in the US but also coming increasingly to Europe and heavily sponsored by the fossil industry have an agenda, and that agenda we should not be naive about that. The agenda will become more offerred and more vicious as the conversion is happening. That's because then the veested order will push back harder.
We shouldn't be naive about that. What is said about it is that you mentioned Larry Fink that he has to put personal guards by his house, that he gets people to you know, threats that are you know, to his family and to his life. And that's all sponsored by you know, think tanks that are on the extreme right by some politicians like our FEEFAC guy from Cincinnati who wants to be elected, and the money traces back
to the fossil industry. But what we are saying is, you know, fine, that is the reality of it, but it is so economically more attractive to move forward. That's why you see states like Wyoming or Texas, which a red states, actually moving very fast. Those are leading states in solar and in wind for example, the investments are going.
The three hundred and eighty nine billion that has been made available with the Inflation Reduction Act in the US is matched by the private sector up to about one trillion right now.
So fundamental shift is it enough?
No, the US definitely is in a catch up mode. Did they have to make some compromises given the political situation and also leave some subsidies on the plate for the fossil sector. Yes, but you see a fundamental shift happening there. And that shift is not you cannot stop where we are losing out is and Frantiinore totally right. Terra Is because business is silent, or many of them have decided to become silent. We don't see the partnerships,
the new partnerships emerging. We don't see the ambitions going up versus where they are moving. We do, so it's in that gap of ambition, and of course there are shortcomings. ESD has grown so fast that we don't have all the standards yet, but they're coming in the Sustainable Standard Board, the European legislation, the SEC in the US. Of course there are companies that make noise that they do things and not deliver on that, but these are increasingly being called out.
So the shortcomings of ESG. If you want to need to be attacked.
We shouldn't. We shouldn't be too simple about that. But I would not say that the woke capitalist attacks are having the effect that the fast that order was thinking. So this is not an issue of voke capitalism, to be honest, this is an issue of broke capitalism.
Paul, thank you so much.
Thanks for listening to this week's in the City. We will be back.
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Episode was hosted by me David.
Merritt and Me franc and Blackquad was produced by Somasadi.
Additional editing by Blake Maples,