Subscribe
Share
Share
Embed
Tim Hames, former Director-General of the British Private Equity and Venture Capital Association, BVCA, discusses the implications of COP26 for the private equity industry and how to balance policy and innovation in the sustainability sector.
Welcome to the Sustainable Finance Guernsey podcast page.
Guernsey Finance is a joint government and industry initiative tasked with promoting and connecting Guernsey as a leading international finance centre.
Named as one of the Green Finance Guide's top 10 must-listen sustainable finance podcasts, our broadcasts feature news, insights and discussion about green and sustainable finance, and the contribution which Guernsey, as a global leader in green finance, is making in this space.
Rosie 0:04
Hello and welcome to the latest Guernsey Green Ginance podcast which is rated one of the top 10 most useful, sustainable finance podcasts by the green finance guide. Guernsey is one of the jurisdictions leading the way in green and sustainable finance. And as part of this podcast series, where we'll be speaking to and learning from some of the leading global figures in the field. My name is Rosie Allsopp, I am Communications Director at We Are Guernsey, where the promotional agency for Guernsey's finance industry. And today, I am delighted to be speaking to Tim Hames. He's a writer, a consultant, senior adviser and former Director General of the British private equity and venture capital Association,BVCA. Welcome, Tim.
Tim 0:55
Thank you very much.
Rosie 0:56
So here at Guernsey Finance. We've spoken with you many times now. But for listeners who may not know about you, could you introduce yourself and tell us a little bit of your backstory, and where your interests in sustainable finance lie?
Tim 1:11
Certainly, I'm afraid I can't say that I'm while these people with a sort of 30 year history of concern and campaigning in this space, I'm a, I suppose a relatively recent converts. My first career was I was an academic at Oxford University, I used to teach politics American and British in particular, I then moved to the times where I was the Chief Chief Leader, writer, columnist, and Assistant Editor. But back then I think, I don't think this these sorts of issues were high on my personal radar. And if anything, I was probably on the more skeptical edge of the debate as the Times newspaper itself tended to be it really took off in my life, when I became director general of the British private equity and venture capital Association, BVCA, 2013, having worked at the organization for two or four years before then, in the Communications and Public Affairs realm, and it really was just a process of observing how interest in this area moved from being fairly marginal, if I'm going to be honest, in 2013, to pretty, pretty comprehensive. By the time I stood down late 2019. And I think in the after, after further two years, is now going to be the dominant theme for money for many people in the private equity space for the next decades to come.
Rosie 2:32
I think that's absolutely true. I've just returned from SuperReturn in Berlin and it was very much on the agenda there. Now, when we spoke with you last at our sustainable finance week event in June, pretty much all of our panelists agreed that a successful COP needs engagement, not just from countries, but also from non state actors, such as financial institutions. Tim, can you talk us through how the investment fund industry is responding to cop and those calls for net zero?
Tim 3:07
Well, I think there's been a transformation in attitudes over the past few years, and I'm sure super return echoed that. Well just give you one example, on the first day of COP November 1, it was announced that a group of eight institutions foreign equity institutions, including the likes of intermediate Capital Group, HG capital, and invest industrial will forming a sort of collective called the next zero asset managers initiative, and Zed AM. And that's a relatively small number of institutions. But together, they the funds under management collectively constitute more than $57 trillion. And that's the rough equivalent of the combined GDPs of the United States, the European Union, China, Japan and the UK. So that's the sort of scale we're discussing here. And that's also one of the reasons why this can't just be an area which governments deal with because governments don't kind of control our lives to such an extent that their actions alone will make the difference between success and failure here, it really has to be a whole sale communal efforts, of which capital is absolutely vital.
Rosie 4:21
Did you say 57 trillion?
Tim 4:23
Yes, 57.4 trillion
Rosie 4:26
That's absolutely staggering. Wow. So our panelists also called out for more consolidation around reporting standards. We had the announcement on the finance specific day that the IFRS (International Financial Reporting Standards) are creating a new international sustainability standards board. Do you think that's what the finance industry was looking for when it was calling for consolidation? And do you think it will change how the finance industry Sustainability, Tim?
Tim 5:02
Well, I think it will depend how quickly they can get it up and running. And whether it is seen as a sort of comprehensive overview for the system, or one of a number of different means of of measuring this thing, which in this case would be far less useful. I think there, there is a bit of frustration out there about the the absence of a few like, one, one guidebook. And there's clearly the need and the role for that it will make things easier, because for a lot of institutions, you know, this, if they don't have a long history, in this space, they're having to learn quite quickly. And a degree of clarity and certainty will make that process much more efficient.
Rosie 5:44
I think you're absolutely right. So and there's a huge need for innovation in the financial sector, and also the need to regulate climate change. And how can we balance policymaking and the rise in the number of policies versus supporting market innovation.
Tim 6:02
It's not an easy balance. And there's no sort of single solution. But I suspect what there's going to be is enormous amount of pressure from those who invest in areas such as private equity, to see evidence of serious serious commitments towards net zero and over a measurable set of timetables, making, making some grand pronouncements about the year 2050. And not sort of checking in on progress the year 2049 Isn't the runner. So I think we're going to have to take this can beat this, it's become part of almost the annual reporting process, and people will look at it with a great deal of intensity. And although many private equity funds are not at the moments of the sort of size, where, for example, the UK government is going to oblige them to report annually, I think we can anticipate that process coming and it will be smarter to move in advance of it, rather than have to wait for it to come along.
Rosie 6:56
Now, that's a good point. Now, when we last spoke, we were celebrating that this cop would be held and a Biden administration as opposed to the Trump administration. What's your view? Tim, do you think that the US has shown leadership at this cop and also checking whether you think that the UK and EU have shown leadership?
Tim 7:21
I think we should be broadly charitable in our assessment. I mean, clearly, if the President had been President Trump had been re-elected, it's very doubtful whether there would have been an American delegation of any particular weight to there. So you have to you have to concede that point alone. And I also suspect the behind the scenes, John Kerry was in fact, a very, very influential actor. Joe Biden, Pat's more symbolically so. So I think the Americans did do heavy lifting. I think the UK Government has a reasonable claim that this is on balance more of a success than not, and that's its own active role as chair and holding the presidency is consequential. I mean, there were difficult decisions even on basic questions like whether or not it should go ahead at all as an in person format, which I think on balance, although it obviously led to sort of eyebrows raised as private jets screeched in and out of Glasgow, I think it was more likely that you are going to get some consensus in an in person formats fashion. So we've all taken a step forward. I mean, I'm not I'm not one of these people who believes in chucking rocks and things. But they're an awful lot more steps forward needs to be taken to get to a world in which we think we can credibly claim by 2013, that we're on route to success by 2050.
Rosie 8:40
I think that's absolutely right. And I think yeah, you're absolutely right about the private jets, and that, you know, the multiple vehicle motorcades going screeching through the streets of Glasgow as well, I didn't really see much in the way of electric vehicles there. Anyway, much in the news has been around the gross of green bonds. How important do you think they are in encouraging and financing sustainability projects?
Tim 9:06
I think they will be absolutely critical. And I think those jurisdictions, which moved early into this area, such as Guernsey will see significant first mover advantage as a consequence of being pioneers. I just can't I can't see how we can credibly build a financial structure around this efforts. If green bonds are not absolutely at the heart of it. I think the UK government recognises that. And I think it's only a matter of time before other leading institutions sort of wake up and smell the coffee on that one as well.
Rosie 9:38
That's very nice of you to say that we're a pioneer in that space. And what should the relationship be between public and private capital when funding climate mitigation and adaption?
Tim 9:51
Well, I think we have to accept that there's there needs to be a mixture of carrot and stick. That mean there needs to be strong incentives for investors. To invest in institutions, which themselves are interested in pushing the boundaries of technology and pushing the boundaries of social change in this space. I'm a relative optimist about technology, I don't think you can just sort of assume that technology will solve all your problems. But if you create enough incentives to take on a particularly big challenge, or mobilize resources you can make considerable progress means to take a different example, the fact that we were able to find not not merely one, but their array of vaccines to COVID-19, within a year of it first emerging, when historically, it's often taken decades, for vaccines to be developed, if at all against serious disease, shows what you can do if something is a big enough priority, and people are willing to sort of bend normal rules in order to pursue that goal. And I think we probably need some of that mindset over the next few years. Because I see the great problem with having a long term target is the temptation to sort of say, well, I don't need to do I think now do I 2050 is an awfully long way away, is is unacceptably high.
Rosie 11:14
Yeah, I think you're right. I couldn't agree more. They're now going back to COP, Mark Carney said that private sorry, it's said that firms that ignore the climate crisis will go bankrupt. Do you think that's a reasonable risk for the private equity industry? And I'd also like you to tell me, Tim, what you think the key risks are to business?
Tim 11:39
Well, I think I think that's a broad statement Mark Carney's in the right place. And it's not the case that every single business that somehow doesn't behave properly or ignores the single automatically go under. But I think the broad argument that people, the businesses, such as private equity, in the end require other people's money to come into them, have got to be behaving and acting in a manner which is enticing for those institutions, and not off putting, because they have a choice. I mean, it's not it's not the case of private, but it's the only place that they can place their money or that an individual property fund is the only fund in which they can place their resorts. So I think the real risk here is in not being adept enough and agile enough to recognize that, you know, net zero is not some sort of vague, vague slogan, it's so nice to SAP on a brochure that you're going to have to explain in every instance, to investors, why a particular deal or a particular strategy for business that you have acquired, is going to be consistent with those ambitions. And if you can't demonstrate that, then I think the sort of reputational pollution will be very considerable and potentially very, very damaging. And so I think people really have just got to accept that this is just as 10 years ago or so ESG was started to move from being a hub nice to have to becoming a must have, because of investor pressure, at a far greater pace. The whole net zero concept, I think, is going to be an accelerated version of that same process.
Rosie 13:13
That's really interesting. And I like what you said there about reputation pollution. That's a really great phrase. Thank you, Tim, for your time and insights today. I think it's been very illuminating to speak to you and one of the things I will take out of that as a headline but we've taken a step forward, but many, many more need to be taken. I'd also like to thank you for tuning into the podcast today. We have quite a back catalogue of interviews and panel discussions on the Guernsey Green Finance podcast. You can check those out by searching for Guernsey Green Finance wherever you get your podcasts. And if you enjoyed today's episode, please leave a review or a comment. It's always great to get your feedback. You can also find us at guernseygreenfinance.org and weareguernsey.com and you can interact with us on Twitter, at Guernsey green finance and at we are Guernsey we've also got links to Tim's social media in our show notes so please check those out to hear more from him. And we'll be back soon with another edition of the Guernsey Green Finance podcast.
Transcribed by https://otter.ai