Our Planet: Too Big To Fail

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September 18, 2020

Watch at: 00:00 / 00:00:20Our economic system is underpinned by the natural world,and the stability and resilience it provides.But we've taken it for granted.Ecosystems are assets. We are really talking about an asset management problem.Watch at: 00:20 / 00:40Our finance sector has unwittingly bankrolled the destructionof the very natural systems it relies upon.The problem with climate change is that it's not a quarterly issue, it's a quarter century issue.We will have to understand what the impact of our investment decisons are.Watch at: 00:40 / 01:00The financial system is not doing a great job of distinguishing between good and bad growth.Putting ourselves on a trajectory to devastate the natural world and our way of life, forever.The impact of climate change and nature loss can no longer be ignored,Watch at: 01:00 / 01:20this becomes increasingly difficult to predict into the future and even more complex to insure.Humanity now stands at an unprecedented crossroads.If we don't improve our relationship with nature,Watch at: 01:20 / 01:40it's not just the financial system that's in jeopardy,but every other system to which we belong, including life itself.This film will reveal that as we rebuild our economies in the shadow of a devastating global pandemic,the finance sector has a crucial role to play,in creating a thriving and resilient economyWatch at: 01:40 / 02:00that moves away from funding the things that are destroying our world...Finance is the function to put the money behind the people who deliver change....to funding those that will and ensure a stable future for humanity,and all life on our planet.The financial sector is in an enormously powerful Watch at: 02:00 / 02:20and effective force, and it can be a force for good.The extraordinary natural world we see todayWatch at: 02:20 / 02:40is very different from the one inhabited by our early ancestors.Human beings first appeared around 200,000 years ago.They had no need for money or complex trade.Watch at: 02:40 / 03:00The natural world then was unstable.Living conditions fluctuated dramatically over short periods of time...But then approximately 10,000 years agosomething truly remarkable happened.Watch at: 03:00 / 03:20The climate stabilized.The natural system that we were living in,filled with billions of individuals, of millions of different plants and animals,had evolved into something extraordinarily complex and interconnected.Watch at: 03:20 / 03:40Able to supply us with fresh water,abundant fish and meat,timber to build our homes and to keep us warm,fertile land, pollinators for our crops,Watch at: 03:40 / 04:00even able to regulate the seasons, and bring dependable rains.By working so efficiently absorbing carbon from the atmosphere, recycling nutrients and waterWatch at: 04:00 / 04:20the bewildering variety of life helped to bring stability to our restless planet.It was this that made the ecosystems resilient,and gave us the services of nature that we rely upon.Everything that happens to us, everything we experience,Watch at: 04:20 / 04:40is built on the processes that nature offers.Its nutrient cycling, filtering of water, I can't think of anythingthat we do which is not founded on nature's processes.Watch at: 04:40 / 05:00All of these processes and services that nature provides for free have allowed us to thrive.On nature's shoulderswe build our civilisationsand thought it could replenish everything we extracted.Watch at: 05:00 / 05:20Right up until the middle of the last century we lived within the limits of our planet.Although wealth was unequally shared, our collective impact was at a sustainable level.Then, post World War II, the modern world really got underway.Watch at: 05:20 / 05:40This was the start of great acceleration.Our pressure on the natural world changed from being linearto becoming exponential.Humanity's progress gave billions of people around the worldWatch at: 05:40 / 06:00access to healthcare and higher standards of living.Many of us have never had it so good, but at the same time the planet has never had it so bad.During my lifetime the human population has more than trebled.Watch at: 06:00 / 06:20Our use of energy, globally, has increased 8 fold.And the global wilderness has been almost halved.We have moved from a small species on a big planet,Watch at: 06:20 / 06:40to a species so dominant that our impacts rival the forces of nature.As we have taken control of the planet and started to over consume,the systems we have builtWatch at: 06:40 / 07:00drain the oceans of so many fish that fish stocks are collapsing,strip mangroves away leaving coastlines exposed to erosion and flooding,continue to clear the most biodiverse habitats for timber, soy and food production,Watch at: 07:00 / 07:20replace wild herds and healthy soils, with industrial scale farms and intensive agriculture,impede the world's largest rivers.Systems which burn greenhouse gases in such quantities,Watch at: 07:20 / 07:40that they pollute the clean air,melt ice capsand over-heat an entire planet.The financial sector has been too slow to recognise the negative impactsit has on our society and our environment.Watch at: 07:40 / 08:00Since the Paris accord was signed in 2015, banks globallyhave continued to invest $1.9tn into the fossil fuel industryand that's despite knowing where that's leading and what the consequences are.Watch at: 08:00 / 08:20Where the natural system brought stability,the human systems we have built and financed are creating instability.During the space of a single human lifetime, my lifetime,Watch at: 08:20 / 08:40we have changed the planet so muchthat the benign stable conditions that underpinned both the growth of our civilisationsand the trade and financial systems that you preside over, have ended.Flaws in the finance system have helped tarnish our natural world.Watch at: 08:40 / 09:00Our financial system has been oriented to focus on very short term profit,on tracking and index, more passive investment,all at the expense of our long term future.Watch at: 09:00 / 09:20Our economic and financial systems prioritises GDPand ignores, to a large degree, environmental and social externalities,causing huge damage to our planet and to wider society.Watch at: 09:20 / 09:40Since nature is bounded, it's finite, it must be that the pictureof unlimited growth possibilities is wholly flawed.It's not just it's unreal,it is bizarre.Watch at: 09:40 / 10:00If we continue to ignore the physical limitations of the resources and services we depend on,we will push the planet to catastrophic points of no return.Economists are no strangers to tipping points,as those who have studied the 2008 crash know all too well.Watch at: 10:00 / 10:20What essentially happened in 2008, was that belief and trust that suddenly evaporated.Investors almost overnight woke up and realised that all these flashy Watch at: 10:20 / 10:40subprime mortgages in America,and thought were worth something, suddenly weren'tand that created a panic which fed on itself.The result was a global shock, followed by economic collapse,Watch at: 10:40 / 11:00Yet the flaws in the finance systems which led to this, continue today.We didn't learn all that we could have from the 2008 financial crisis.In fact our finance system is still largely incentivising behaviours and normswhich are causing destruction to our natural world and our planet.Watch at: 11:00 / 11:20But recent experience has shown us that global shocks caused by externalities,such as pandemics, can be even more devastating.If the global pandemic teaches us only one thing,it's that we certainly cannot ignore the signs from science when they start flashing red.Some knew about the potential risks of a global health pandemic,Watch at: 11:20 / 11:40but we didn't do enough as a global community to prepare for it in advance.The results of ignoring the warnings have been huge.Many lives have been lost.Most of the world, stopped.Watch at: 11:40 / 12:00And it has cost the global economy trillions of dollars pushing it into a world wide recession.Both the 2008 crash and the global pandemic painfully demonstrate our vulnerabilityWatch at: 12:00 / 12:20to global shocks.But there is a difference between these crisesand what's coming.The threat from climate change and biodiversity loss, is existential.Watch at: 12:20 / 12:40Unlike the pandemic, we can't self isolate from their effects.After the 2008 financial crisis and COVID 19 as we see it right now,our financial system could, ultimately be rebuilt.But when nature starts to fall apart it's a completely different situation,we go through a series of one-way doors and through irreversible tipping points.Watch at: 12:40 / 13:00What is dawning on all of us is that the economic numbers are telling usthat climate change is happening now, in our lifetime,the devastating effects of climate change cannot be ignored.Watch at: 13:00 / 13:20As we push our planet to irreversible ecological tipping points,global shocks could become more regular and much, much worse.And the tipping points are looming.Factory farming is the biggest driver of global deforestation.Watch at: 13:20 / 13:4091 percent of Amazonian deforestation is a result of livestock production.Scientists tell us that the Amazon rainforest is approaching an unstoppable transformationWatch at: 13:40 / 14:00into a drier savannah which will be catastrophic, turning it from a carbon sink to a carbon emitter.This will ultimately disrupt the flow of rain to South America's valuable agricultural areasWatch at: 14:00 / 14:20devastating economies, investments and people's lives.The soils of the frozen north are already starting to thaw,if this continues they will release their locked-up methane,any chance of controlling the climate will be lost.Watch at: 14:20 / 14:40Huge cities such as Cape Town and Chennai have already come close running out of waterOcean acidification and heating will decimate even more coral reefs around the globe,closely followed by the collapse of many fishing industries and coastal tourism.Watch at: 14:40 / 15:00Continuing overuse of fertilizers and pesticides will kill off soil microorganismsand pollinators, destroying farmland and future harvests.Disease outbreaks and pandemics may be more regular and could spread faster.Watch at: 15:00 / 15:20And all of this threatens the services nature provides us for free.The natural services that we take for granted, like clean water, fresh air and healthy soil,Watch at: 15:20 / 15:40provide us a value of more than $125tn per year,that's over one and a half times global annual GDP.These ecosystem services do more than ensure a stable world, and power our industries.Watch at: 15:40 / 16:00They also cushion us against global shocks.The likely scenario we face today, if we breach through these tipping points,is that our financial and economic system, as we know them today will simply cease to exist.Watch at: 16:00 / 16:19But our future doesn't have to be this way.As a family man I do wonder what kind of world we will leave to our children.I do hope that we'll be able to say to them that we did enough when we could.Watch at: 16:19 / 16:40The glimmer of hope right now is that we have just a few yearsto really make impactful change towards a sustainable future.Right now as economies grapple with the impacts of the pandemic,the finance sector is at a pivotal moment.Watch at: 16:40 / 17:00As we re-examine the future of work and the future of travel,we can choose to build an improved financial and economic systemthat works for both people and the planet.So we shouldn't lose this opportunity because Watch at: 17:00 / 17:20now you have the attention of the financial sector.And no sector is better placed to drive the transition to a sustainable economy and a stable future,Watch at: 17:20 / 17:40than the finance sector itself.To achieve this, our finance system needs systemic change.And now is the time to be brave and ambitious.We need to start with a concept of thriving humanity Watch at: 17:40 / 18:00on a thriving planet and then ask what kind offinancial system would actually be in service to that, in service to thriving life?And it's a very very different one from what we have today.Watch at: 18:00 / 18:20There's over $300tr in global capital markets and that money can be harnessed to do a great deal of good.Scientists predict we have just 10 years Watch at: 18:20 / 18:40to make the changes we need to try to ensure a stable future.So building a better system can start today, with 5 key actions.Watch at: 18:40 / 19:00As we move to a sustainable economy all companies, banks, and investorswill need to understand where they are vulnerable.To prevent more global shocks, we need a system that better accounts for all risk.Watch at: 19:00 / 19:20There's the reputational risk of not being seen to act on climate changeor financing things that are creating other environmental or social consequences.There's the physical risks.What will flooding, wildfires and many other major events mean for the portfolios of banks?Watch at: 19:20 / 19:40We are already starting to feel the effects of some of these physical risks.Insured losses from weather related events over the last decade are $63bn annually,what is even more alarming is that uninsured losses are larger than this numberWatch at: 19:40 / 20:00and this is before counting the unquantifiable loss of human life.Currently the brunt is being born by the poorest people in the world.Soon these effects will manifest in every society on the planet.If sea levels rise, the value of propertieson the coastline, in places like Florida, will suddenly decline,Watch at: 20:00 / 20:20that has a lot of implications for anyone lending a mortgage.The economist intelligence unit, estimated that the present valueat risk to a future world that might be 6C warmer, say at the end of the century,$43tn would be wiped off the stock of capital if we hit that scenario.Watch at: 20:20 / 20:40So physical risk is potentially profound.Many governments are attempting to prevent runaway climate change,by creating legally binding net zero carbon targetsto keep the planet ideally within 1.5C degrees of warming.Watch at: 20:40 / 21:00As companies adapt to meet these global targets, they will also face transitional risksMost financial assets are affected by the fact that carbon price is going up in certain jurisdictions,the auto sector has to adjust to new fuel regulations, renewable power is coming on,Watch at: 21:00 / 21:20they need to manage the risks to the transition to the type of the economy that we're headed,which is net zero by 2050.But we will only achieve these longer term targets, for climate and nature,if we take bold and urgent action now.Watch at: 21:20 / 21:40The biggest risk is inaction, inaction today.If we continue to downplay the scale of the transition that needs to happen across the entire economy,across all economies around the world, then the adjustment when it comes will be much more severe.So suddenly businesses have to think, in 10 years time no one is going to want to touch coal,Watch at: 21:40 / 22:00so why am I putting millions and millions of dollars into this plantwhen it's going to be stranded in let's say a decade.Watch at: 22:00 / 22:20Almost a trillion dollars of turnover in publicly listed companiesis dependent on commodities linked to deforestation.So investors should be worried about those companies that do rely on deforestationbecause those companies are going to become a stranded asset.Watch at: 22:20 / 22:40In the terminology it would be a climate minsky moment,a sudden realisation that enormous change needs to happen in a very short period of time.And that's what we need to avoid, which is why we need to start moving today.Watch at: 22:40 / 23:00The real question is how do you make the transition happen?How can we be stewards of the transition to a low carbon economy?Watch at: 23:00 / 23:20Failing to act on these risks now, could leave institutions open to a further risk.Businesses that have significant causation for climate change,and other environmental issues may face litigation.And banks that don't react and take responsibility, may also face litigation themselves.Watch at: 23:20 / 23:40As companies better account for risks from climate change and biodiversity lossand work to mitigate these risks, we will be protecting our investments,and our businesses, as well as reducing pressure on the planet.Watch at: 23:40 / 24:00If we wait it will be too late.The best way to avoid these risks, is to halt the negative impacts of our investments and lending.Watch at: 24:00 / 24:20Science tells us that over the next decade we need to halve our greenhouse gas emissions,halt the destruction of nature, and invest in restoring the natural capital that drives our economies.So every decision made in the finance industry Watch at: 24:20 / 24:40results in real world impact of some nature in nature.The finance system has the ability to dial up the positiveand drastically dial down the negative impacts of every decision made.Watch at: 24:40 / 25:00Sustainable banking partly means not financing the things that are causing environmental harmand will not serve us in the long term.But it also means doing the more progressive stuff and investing your time and energy and resourcesinto things that if we continue to finance those, will serve us forever.Watch at: 25:00 / 25:20To achieve this we need transparency and understanding of our impacts.ESG, or Environmental, Social and Governance reportingshould be the bare minimum for all companies.Watch at: 25:20 / 25:40ESG captures the idea that we really think about the risks, the financial risks, arising from neglectingto look at the impact we make on the environment and society when we make financial decisions.So it's great, ESG is great. But it's quite narrowly conceived at the moment.Watch at: 25:40 / 26:00We need to go much further.ESG is a good first step, but we need to ensure that impact from all lending andinvestment is positive for people and positive for planet.When the finance sector requires that companies demonstrate sustainabilityWatch at: 26:00 / 26:20it will be using its power to drive change.What we need is for financial institutions to demonstrate and report on howthey are reducing their impact on the natural world otherwise the principles risk being meaningless.Watch at: 26:20 / 26:40Those responsible companies that start accurately reporting and reducingtheir impact and risks, will thrive.Those that don't, will be left behind.Watch at: 26:40 / 27:00The reason sustainable companies will benefit is simple.Humanity en masse is starting to care deeply about the planet.We need to recognise that investors, customers, employees - all stakeholders - are changing.This is a real generational shift that my children are actually sayingWatch at: 27:00 / 27:20what can I actually do in order to make a difference?And they're finding their answer in what they wear, they're finding it in what they eatthey're finding it in how they travel.Watch at: 27:20 / 27:40And I think the big new revelation is they're going to find it in where theyput and where they invest their money.There will be a time when we will look back and ask ourselves what we did right now.How do we want to be remembered?Watch at: 27:40 / 28:00A recent study found that 8 in10 US individual investorsand 9 in10 millennial investors expressed an interest in sustainable investing.Amazingly by 2030 millennial investors will hold five times more wealth than they do todayand they're looking at investments that align to their values,Watch at: 28:00 / 28:20that align to the climate and nature emergency.But if enough people are pushing for change, then change will come.And we are those people and every single person counts.So there's a really interesting shift and I hear this from people who work in finance,Watch at: 28:20 / 28:40they say we've got new clients.It's either Grandpa who's thinking about his legacy,or it's his granddaughter who's saying Grandpa what the heck have you been doing?And that sandwich of moral pressure is actually opening new demandin the financial sector to come up with financial portfolios that don't just extract revenue,Watch at: 28:40 / 29:00but that invest in the future.Very soon pensions worth trillions of dollars could become the front line of sustainable investing.Most people don't even know where their pensions or investment products are invested in.Often these are invested in fossil fuel companies or companies causing deforestation.Watch at: 29:00 / 29:20It's quite a tragic irony because these are very things destroyingthe future that people are ultimately saving for.Some of the world's leading asset owners have spotted the risks of business as usualand are demanding that their fund managers invest more sustainably.Nobody told me how to hedge the risk like climate change.Watch at: 29:20 / 29:40So I thought that we have to take a totally different approach to manage that risk.And then we came up with several new concepts.The philosophy behind everything we do is the long term investment and the universal ownership.Watch at: 29:40 / 30:00And we thought, for the capital market to be sustainable, the environment must be sustainable.So everything related to the environment or like society,all of a sudden became our portfolio management issue.Watch at: 30:00 / 30:20Capitalism will become sustainable when the individual who has the money exercises their rightto ensure that that money is invested in the way that they are perfectly comfortable with.And it's not just investors who are demanding change,it is employees too.Watch at: 30:20 / 30:40Every day I get questions from my colleagues across the bankin different pockets of activity, everywhere they are,asking how can they be helpful, how can they be part of this, this movement?How can they help the bank be more sustainable?Ultimately we will be able to attract and keep the best talentWatch at: 30:40 / 31:00only if we are showing up in a way that is purposeful and sustainable as a business.We're seeing a shift in attitudes. People care about climate change.Our people want to work for a company that has a purpose, that is clear on sustainability.I think this gives us a competitive advantage in attracting and retaining people.Watch at: 31:00 / 31:20As more people realise they have choices over where to put their savings,and to pressure the companies they choose to work for,demand for sustainable investments and sustainable businesses will grow.Watch at: 31:20 / 31:40This changing financial landscape heralds the end of business as usual,but brings with it an exciting world of new opportunities.Whenever a tree dies in a forestWatch at: 31:40 / 32:00new opportunities arise, for those that are ready to take them.In the same way, opportunities are now arising in the global economy,as more and more countries are committing to a net zero future.Achieving net zero requires a whole economy transition, every company, every bank,Watch at: 32:00 / 32:20insurer, investor will have to adjust their business models.But doing so could turn an existential risk into the greatest commercial opportunity of our time.This dilemma people think that environmental responsibility Watch at: 32:20 / 32:39is at the cost of profit is a false one.And what you'll see emerging over time is that the more profitable banksand financial institutions will be the ones thathave the highest levels of environmental and social consciousness.Environmentally responsible opportunities are everywhere.Watch at: 32:39 / 33:00The clean energy sector is already exploding.We've seen disruptive technologies in the auto industry creating a huge amount of value,there are potentially disruptive technologies for shipping or air transport,Watch at: 33:00 / 33:20whether that's hydrogen in those cases.There's disruptive technologies actually to help moderate the amount of greenhouse gassesin the environment, such as direct air carbon capture.Over the next decade approximately $95tn is needed for global infrastructure.Watch at: 33:20 / 33:39Done right, investment could improve the health of our planet, and the health of our citizens.Such as building cities of the future that work with nature, not against it.The idea of a spongy city is to allow the natural flow to come back.Watch at: 33:39 / 34:00Use a wetland system, use a sponge system to retain the water, that keeps water, instead of draining away.Watch at: 34:00 / 34:20I want to show people that green solutions work, from that one city 20 years agonow we have 250 Chinese cities having us doing projects.Watch at: 34:20 / 34:40Investments in re-insurance and insurance number in the trillions of dollarsthese investments can be transitioned to support sustainable businessin addition insurance companies can move to manage risks that are not detrimental to our planet.Watch at: 34:40 / 35:00The entire food sector is also transforming,in what people are choosing to eat...For the first time since the green revolution happened 60 years ago,there is another revolution happening in protein production.Within a decade, alternative meat proteins are expected to grabWatch at: 35:00 / 35:20over 10 percent of the $1.4tn meat market....and in how we grow food sustainably for expanding urban populations.The role of finance is to provide capital to the people who have great ideasWatch at: 35:20 / 35:40or the people who try to build the future and so we are kind of the accelerator for those change makers.Over the next decade an estimated $68tn will be passed in the Great Wealth Transfer,Watch at: 35:40 / 36:00from baby boomers to millenials, who value the impact of their investmentsas much as the financial returns from them.This is an extraordinary opportunity to align with the aspirations of the new generation.Watch at: 36:00 / 36:20Taking society and the environment into account in all our financial decisions will soon be business critical.Fortunately for the finance sector, the opportunities and benefits are endless.Watch at: 36:20 / 36:40We know that the financial and economic system must change to reach a sustainable future,we just need the collective will to do it.Watch at: 36:40 / 37:00The value we place on a stable natural world will ultimately determine its future.Do we invest money into the practices that will take us deeper into this crisisor in the solutions that could get us out of it?Watch at: 37:00 / 37:20With trillions of dollars in assets, there is an unmissable opportunityfor the finance sector to not only ride the wave of change,but to direct and accelerate it.The public needs you to take the lead, and needs you to be brave.Watch at: 37:20 / 37:40Other CIOs told me our job is to save money not to save the planetbut I counter-argued, saying like what's the point of receiving a pensionwhen our children cannot even play outside.Revolutions happen when the majority of people think that it's a mistake to try and block change.Watch at: 37:40 / 38:00And I think we are almost at that tipping point right now.We need to get together and bring the experts in banking, in insurance,in securities investment, in central banking,we need to bring them all together and ensure that each of their expertiseWatch at: 38:00 / 38:20is deployed collectively in a way that re-thinks and re-engineers capital markets.And as with the pandemic, building a sustainable finance sectorand healthy planet, will need a global response.The finance sector plays a crucial role Watch at: 38:20 / 38:40in the fight against climate change but it cannot do it alone.We need a coordinated response across many sectors, government, energy, technology,the legislative and regulatory environment,bringing all these together to make a meaningful impact against climate change.Watch at: 38:40 / 39:00So what might the future finance sector look like?I think that ultimately to bring about the kind of transformation we need,for a finance system that truly serves society,we will need a finance industry that is conscious of its impact, tracking its impactWatch at: 39:00 / 39:20and has actually got a mandate to invest and finance activity that's regenerative rather than disruptive.How can money work for us instead of us working for money?Watch at: 39:20 / 39:40How can money help us get more of the thing we wanted to begin with,which wasn't money, it was value.The new finance system will direct capital with a different set of goals.Watch at: 39:40 / 40:00It will be recalibrated to creating long term value,which is based on transparency, so all investors can see what their money is funding.It will integrate climate, nature, and social responsibility into all financial decisions.Watch at: 40:00 / 40:20It will stop funding businesses that destroy rather than restore nature,come to value biodiversity, and invest in nature's services,to help build the resilience that our economy and humanity wants and needs.Watch at: 40:20 / 40:40The thing that gives me hope is that people are re-thinking how capitalismshould be structured at the top table.It's huge.And if they are successful, then we will live in a much more sustainable future.If they do not succeed, then the economies will collapse and civilisation itself is at risk.Watch at: 40:40 / 41:00At this moment, as we navigate our way through the biggest economic crisis since the second world war,we are still facing the existential threats of biodiversity loss and climate change.When you pull the bottom out of an economy, when you take away the resourcesWatch at: 41:00 / 41:20that are fuelling not only every bit of commerce and every bit of economic activity we havebut our livelihoods and our basic human needsit really brings it in stark contrast to everything that we have faced to dateand that is why this is so important, Watch at: 41:20 / 41:40that is why banks need to care, that's why all of us need to care.This is the moment to build a new and fair system,reframe our idea of value,and better safeguard ourselves from future global shocks.If we do this, we'll be leaving a proud legacy.Watch at: 41:40 / 42:00A healthy planet.One that our children can rely on.Which side of history will you be on?I am tired of hearing excuses.This is the most well educated and the most well paid industry,and I'll be disappointed if we cannot change ourselves.

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