Mark Carney, Former Bank of England Governor: How Banks are Better Positioned to Deal with Downturn This Time; Why China Has ...
02 Junho 2020 - 4:00AM
Business Wire
Carney speaks with IHS Markit chairman and CEO Lance Uggla for
the latest CERAWeek Conversations – available at
www.ceraweek.com/conversations
Former Governor of the Bank of England and current UN Special
Envoy for Climate Action and Finance Mark Carney says governments
acted early “with real force and determination” providing effective
stimulus in response to COVID-19; that you cannot “wish away
systemic risks” like a pandemic—or climate change; and why energy
transition is not as simple as a “flip the switch from A to B” in
the latest edition of the CERAWeek Conversations series.
In a conversation with Lance Uggla, chairman and CEO, IHS Markit
(NYSE: INFO), Carney talks about maintaining “ambition” for the
Paris Climate Agreement amid U.S. withdrawal from the process and
pandemic-induced lockdowns; how the private sector has “done a
great job” moving towards a global standard for climate
related-financial disclosure but now “it's time for the public
sector to bring it in” and more.
The complete video is available at:
www.ceraweek.com/conversations
Selected excerpts:
Interview Recorded Thursday, May 28, 2020
(Edited slightly for brevity only)
- On governments’ response to the
financial shock of COVID-19:“We weren't in the situation
that we were in 2008 where really keeping the system together was
the first priority in order to then figure out what to do about it.
It didn't have to be nailed that way. “I certainly think
[governments] acted with real force and determination early that
very much helped market function. Markets were able to find the
price. In terms of the financial channels it has been very
effective, and the direction of stimulus has been very
effective.”
- Parallels with the 2008 financial
crisis and China’s role in stimulating the global
economy: “In 2008 the financial sector itself was the
core of the problem. So part of the challenge was just actually
getting stimulus through that sector. You can put liquidity into
it. You can cut rates. But actually, that didn't flow through to
the real economy and support. The fiscal side was quite important.
“China had less policy room coming into this both on the fiscal and
on the monetary financial side. Part of the challenge of success
quite often is the degree of financial innovation you get on top of
that, and the so-called “shadow banking” sector in China had grown
quite substantially over the last several years. They've been
taking steps to manage that down, but then that meant a certain
stance of policy. “It’s still very early days in this because still
most economies [are] suspended effectively. It's such an unusual
situation and it's only when those physical controls start to come
off that we will see how much scarring has been done to the labor
market and to business, and then calibrating policy from
there.”
- On the financial strength of banks to
weather prolonged economic slowdowns: “The absolute
requirements of the banks went up almost 10 times in terms of their
capital, and for U.K. banks the actual capital has gone up four
times. Liquidity is up one trillion [pounds] in the U.K. for the
major banks—so a much, much stronger position. We like to say
that's ‘prudence with a purpose.’ It's ‘resilience with a reason.’
It's not there just to allow me to sleep at night. It's there for
times like this. “One of the things that we did before I left, as
the financial policy committee we loosened the capital requirements
of the banks so that they could put some of those excess buffers to
work so they'd be able to lend into the economy. That has been
taken off—it’s there. When you have the restart you'd have an
expectation that would be used. “Eventually as government starts to
pull back, you have fewer of these guarantees, and the banks have
the capital. “They're definitely part of this solution, but the
flip side, whether it's in energy or industrial or services, is
everyone at the moment—bar tech—is sitting there saying ‘how am I
going to invest? What's the demand outlook going to be?’ You need
that to actually do more than just draw down on your working
capital line.”
- COVID-19’s impact on the energy
transition: “The phrase that gets used by some of them
is, “let's build back better.” So what is better? As you restart
your economy where do you want to go? Where do you want to go as a
society? That question is being asked everywhere around the world
in all the senses. “You start with what are the lessons from the
COVID crisis. One of them is: the first job of the government is
protection—you’ve got to have a resilient economy. You can't wish
away systemic risks like a pandemic and it would be nice to wish
away climate change, but you can't just put your head in the sand
and pretend it's going to go away. “You've got 125 and counting
countries that have net zero as a legislative requirement. The U.K.
and Canada are prominent examples, but many, many more. In that
environment—and you're re-setting your medium-term economic
strategy—it's pretty likely that's the orientation, and the policy
is set in that way. The conversations with companies, particularly
in the financial sector, is that they expect that orientation
towards net zero. “What's crucial here is this is a whole economy
transition; it's every sector in the economy—that's the right way
to go from where we are to get to net zero. What you don't want to
do is try to jam everything into [groups of] deep green activities
and everything else is brown and bad. It's different industries
moving at their pace towards that transition. It would have been
better to start a decade ago a little more assiduously, but you
don't want to delay it. “When you sit down and fundamentally
reassess your strategy as a company, I think the question is going
to be asked in a lot of jurisdictions: What's your strategy for net
zero? How does that play in? And as a provider of capital, you're
looking at where's the opportunity for that? What can I fund? And
what risks do I need to manage? I think that's where it's going to
land.”
- His outlook for policy signals to
support sustainable energy: “Most people know well that
these energy transitions tend to take a long time. You've got
installed base and it's marginal costs not average cost that's
driving it. Hydrocarbons will be here for some time, without
question, and that's why it's important to have a transition as
opposed to as flip the switch from A to B—and we spent a lot of
time emphasizing that. “One issue that a number of governments are
facing, or will face very soon, is if they bailed out a
heavy-emitting industry like an airline, for example: what's the
quid pro quo in terms of the speed with which that entity when it
gets relaunched moves on a path? So around air transport and marine
transport questions come up—and you see it in some of the bailout
packages in Europe—around fuel mandates: a blended renewable fuel
by a certain date, a certain proportion will be there and that's
the type of policy we may see. “Certainly the low-emission vehicle
versus internal combustion engine—on the margin those economics
have just changed with the petrol price. If there’s “cash for
clunkers” it's more likely to have a green tint to it than it did
in 2008, in part because the economics are there and the installed
capacity is there “This in the jargon is called “transition risk:”
Where’s regulation? Where's it headed and what signal does that
send to the market? As it comes into the investing consciousness
and the lending consciousness that we actually are headed towards
something like net zero, you ask yourself the question for a
specific industry and company: what logically is going to have to
happen in that industry? If I'm an automaker and I look at no more
internal conduct combustion engine cars in the in the U.K. by 2035,
that tells me something about where the system's going. Then the
question becomes: is it possible that's going to get pulled forward
or other economic levers are going to be tweaked in that
direction?”
- On data-driven approaches to assess
corporate ESG commitments and energy transition
“readiness”: “We think about it a couple ways. One of
them is the Task Force on Climate-related Financial Disclosures
(TCFD) and just trying to get as global as possible a standard for
climate related-financial disclosure and flipping that from what is
a private sector initiative which has got $140 trillion of balance
sheet behind it now between the asset managers and banks. That
needs to be put into disclosure regulation or listing regulation or
accounting standards. The private sector has done a great job. Now
it's time for the public sector to bring it in. It gets to the
heart of ESG and the components of what drives it and how different
institutions will want to use data. “If you're an investor or bank
you’re going to want to drill down on the components, at least to
have the option of doing that. Or if you're an index provider, is
there a better way to really home in on transition and transition
readiness of a company? These types of issues will just move more
and more center stage.”
- The current state of international
cooperation to address global climate issues: “People
recall that in the run up to Paris, there was an agreement between
the U.S. and China in September which helped unlock the ambition
for a bunch of other countries. The U.S is leaving the COP process.
So that dynamic is not there and it really is the China-E.U.
dynamic. The question is: will there be similar levels of ambition?
“The E.U. released their latest variants on the Green Deal, which
is more ambitious than it was coming in; a long process still to
come but some of the elements are being put in place there. “The
E.U.-China process is still on track. There's a meeting in
September in Leipzig, which is a key summit. What we're doing on
the private finance side is putting in place interim milestones.
But in the end, it's a negotiation. Many aspects of COP are
negotiations so you do need that deadline for the negotiation to
get closed and when we have a new date that will mean certain
things only get gripped at the end.”
Watch the complete video at: www.ceraweek.com/conversations
About CERAWeek Conversations:
CERAWeek Conversations features original interviews and
discussion with energy industry leaders, government officials and
policymakers, leaders from the technology, financial and industrial
communities—and energy technology innovators.
The series is produced by the team responsible for the world’s
preeminent energy conference, CERAWeek by IHS Markit.
New installments will be added weekly at
www.ceraweek.com/conversations.
Recent segments also include:
- Leadership Dialogue with David Solomon – Chairman and CEO of
Goldman Sachs interviewed by IHS Markit chairman and CEO Lance
Uggla
- Global Gas: What Lies Ahead – Hendrik Gordenker, director and
senior advisor, JERA and Laurent Vivier, president, gas, Total
interviewed by Michael Stoppard, chief strategist, global gas, IHS
Markit
- Oil & globalization: Impacts from COVID-19 and Future
Possibilities – Spencer Dale, chief economist, BP and Saad Rahim,
chief economist, Trafigura interviewed by Jim Burkhard, vice
president and head of oil markets, IHS Markit
- Leadership Dialogue with Dr. Fatih Birol – Executive director
of the IEA interviewed by IHS Markit vice chairman Daniel
Yergin
- Leadership Dialogue with Sec. Dan Brouillette – U.S. Secretary
of Energy interviewed by IHS Markit vice chairman Daniel
Yergin
- Leadership Dialogue with Mike Wirth – Chevron chairman and CEO
interviewed by IHS Markit vice chairman Daniel Yergin
A complete video library is available at
www.ceraweek.com/conversations.
About IHS Markit
(www.ihsmarkit.com)
IHS Markit (NYSE: INFO) is a world leader in critical
information, analytics and solutions for the major industries and
markets that drive economies worldwide. The company delivers
next-generation information, analytics and solutions to customers
in business, finance and government, improving their operational
efficiency and providing deep insights that lead to well-informed,
confident decisions. IHS Markit has more than 50,000 business and
government customers, including 80 percent of the Fortune Global
500 and the world’s leading financial institutions. Headquartered
in London, IHS Markit is committed to sustainable, profitable
growth.
IHS Markit is a registered trademark of IHS Markit Ltd. and/or
its affiliates. All other company and product names may be
trademarks of their respective owners © 2020 IHS Markit Ltd. All
rights reserved.
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Jeff Marn IHS Markit +1 202 463 8213 Jeff.marn@ihsmarkit.com
Press Team +1 303 858 6417 press@ihsmarkit.com
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