[00:02–00:16] Eszter: Welcome to this podcast. Thank you for tuning in today. I'm very happy to be here with my colleague, Jags. We're going to be speaking about transitions today. Transitions are great global

[00:17–00:32] processes that influence how we function and kind of create the future that we're all building towards. It's about thinking about the energy transition, the food transition, the materials transition. So thinking about how do we use things differently to create a more sustainable society.

[00:34–00:51] One of the big topics is, of course, the energy transition. And before we can look forward about what we're going to do this year on energy transition, we thought, let's look back. And looking back, we're going to discuss COP28 today and what that means in terms of the outcomes

[00:51–01:06] of the meeting, but also going forward, how does it influence the sector, the financial sector, and also Van Lanschot Kempen in particular. My name is Eszter Vitorino. My current role, I'm part of the sustainability and impact investing team at Van Lanschot Kempen.

[01:06–01:21] And with me here today is Jags. 

Jags: Jags Walia. And I'm heading up the Global Listed Infrastructure Fund at VLK.

Eszter: Thank you, Jags, for being here. I really look forward to this conversation with you. And let's dig in right at the beginning at COP28.

[01:22–01:53] Yes. What is that? 

Jags: Well, you know, when we had the, what they call like the Paris Climate Agreement, back in 2015. They set a whole set of milestones which were pretty much for 2030. And I know back in 2015, 2030 felt like somebody else his problem. It felt so far away. The reason we are talking about this today is now 2030 is just around the corner. And everything that just came out of COP28 back in November is going to really directly influence what happens in the coming six

[01:54–02:10] years to everyone. It's going to tell us which way the money is going to flow, how fast the money is going to flow and into which areas. So I think that's why it just becomes such an urgent and relevant topic for investors right now.

Eszter: Exactly. I mean, it is the conference of parties,

[02:11–02:24] so all UN member states come together and they all sign on to the global big agreements. And I think some remarkable ones this year or last year actually that I think marked our thinking

[02:24–02:46] for the way forward is certainly the first ever mentioning of transitioning away from fossil fuels. It's not quite yet phasing out. It's a start though. And the other big milestone, I think, that we can mention is certainly the renewable targets for 2030, which calls for tripling the renewable capacity.

[02:47–03:01] So I think, you know, if you ask me, I would say great progress. But is it too little too late? How did you view the whole conference? 

Jags: Before the whole COP28 leading into it, I had a little bit of like, you know, apathy.

[03:02–03:15] You know, you get a bit bored of these because it's every single year. It's a lot of talk and you don't really expect much really to happen. 

Eszter: I know, it reminds me of the COP 15. I was in Copenhagen, I was still a student. I was

[03:15–03:32] there on the street with a, there's no planet B banner. And here we go, COP 28 is behind us. 

Jags: Yeah. But like, you know, when we're kind of like heading into that, I was like, what are they really going to get done? What are they really going to say? But when they came out with a, you know, the wording around phasing out fossil fuels,

[03:32–03:48] okay, it's not as strict as somebody else might have expected it. I was fine with that, you know, because personally, I just see risks to moving too fast and risks to moving too slow on the energy transition. So it's a tough balance you've got to find. And we can talk more about

[03:49–04:04] that. But then the second part of like, you know, renewables, we're already on track to have two and a half times the renewables capacity by 2030. So when they came out with their ambition to say that's going to be three times, well, mathematically, it's only 20%

[04:04–04:23] more. And I say only, but, you know, it's 20% more effort. But it didn't feel to me like that was so much more required that you might as well give up, we're never going to get it done. It felt like the new renewables goal could be within reach, you know, and I really, I found that quite inspiring, to be honest.

[04:25–04:39] Eszter: Well, yes. And if you think about it, it's a global goal, right? And in Europe, we have the Green Deal and we have our renewables ambitions. And if you take a global scope, yes, it's certainly a step forward. But if you're just zooming on the EU

[04:39–04:53] and our existing commitments and plans, it's not a leap that we're not ready for, I would say. I think on renewables, you know, it would be great

[04:54–05:07] to look into the different opportunities and where you see the possibilities in the market. And then looking at fossil fuels and transitioning away from fossil fuels,

[05:09–05:24] as important and urgent as it is. We're now talking about primary energy sources. But if we tackle the energy sources, but don't tackle the demand side so we don't look at industrial processes, we don't look at real estate, real assets,

[05:25–05:40] automotive sector, a number of very energy intense processes just tackle the supply, you collapse one side of the equation without the other. 

Jags: And that's never going to work. You know, that's when you can really destabilize

[05:40–05:55] everything you're going for by saying we need the urgency the energy transition has happened fast if you only dealt with like supply without looking at demand and you know the efficiency goals that cop 28 basically is asking for if you don't tackle both you're not going to, 

[05:55–06:09] the change isn't going to come, you know. So that's why I just think if you were just doing one side you're going to destabilize it you're going to get like you know if you just get rid of fossil fuels today 80% of all of our power generation capacity then just like,

[06:11–06:25] you know, goes away. Then we got huge problems, like, you know, probably more urgent than the climate change problems, which is why you need that demand efficiency to happen as well as the kind of, you know, the moving away from like the fossil fuels on the supply side.

[06:25–06:42] Eszter: It needs to be a just transition after all, right? So, it would have to all come out on top in the end. And certainly the other thing when you speak of the efficiency, another big theme that I think dominates all global debates these days is AI. So how can we harness

[06:42–07:07] and harvest the help of AI to make things more efficient, plan better, and also how will that help us with improving technologies going forward? So again, back to this 2030 goal, it's a great goal. And I'm kind of feeling confident that we'll get there and hopefully even surpass it, because in the end, 2030 is around the corner, 2050 targets as well.

[07:09–07:22] And we need to get there in a livable environment for our generation and the generations to come. 

Jags: Yeah. Also, I'm just thinking on the supply side of, you know, getting the energy mix more towards renewables.

[07:22–07:36] One bit that, I wasn't disappointed, but I didn't hear as much out of COP28 as much as I wanted to, was on the grid infrastructure. We can put down all these wind and solar farms.

[07:36–07:55] if they're not connected to anything, which 30% of them today are not, of the new projects that we kind of put through. You're not getting an energy transition. So the grid investments, that really is another opportunity that we have for the coming actually 15 years, because I think together today

[07:56–08:08] grid capacity is something like 65 million kilometers of transmission lines is what we have. And by 2040, that needs to double. That wasn't being talked about as urgently as COP28 as I

[08:08–08:26] would have liked to have, but if we've got the renewables coming on, you better connect them to something. 

Eszter: When you say that, I actually see you on the panel, on the podium for next year in Kazakhstan. So get ready for COP 29 and certainly for COP 30 in Brazil that will probably be a big

[08:26–08:38] milestone as well. In terms of what we are going to do as a company, is there anything? 

Jags: Yeah, because you know, and the closing statement and I wrote it down and their closing

[08:38–09:03] statement they said governments and businesses need to turn pledges into real world outcomes. And that was basically the kind of the call to action for everyone listening. And so from the government side, I really saw, you know, what needs to be done there is the regulation around, you know, setting up new renewables projects, getting the incentives in place to make sure that new renewables projects are actually profitable.

[09:05–09:22] Because if they're loss making, the money's not going to come. You know, so there was a real message to governments to say, OK, get your regulators to basically create the framework we need to get triple the renewables by 2030, which means they have to start right now in changing the regulation,

[09:22–09:37] you know, to basically put the incentives in place, remove any red tape in terms of like, you know, permitting approvals. And then on the flip side for businesses, you know, asset managers like ours, I found that like a really quite inspiring. I was like, OK,

[09:37–09:50] I know there's going to be a massive opportunity on the grid investment side. We know there's going to be much more urgency in the renewables deployment. You've just got to make sure you've got the right assets in the right place. But that's always a challenge to basically

[09:51–10:02] get that right. So for us, I really thought, OK, we have two massive pockets of investment opportunity on the renewable side, on the grid side.

[10:03–10:22] So let's start finding the right companies in that area that can enable what we need out of coal. 

Eszter: That's very concrete. And indeed, as you say, there's an opportunity for us as an industry, as the financial industry, to come together and engage sector-wide, engage with the supply side and with the demand

[10:22–10:40] side, work together, vote. I think voting is an often underrated stewardship tool. We have our voting power at the annual general meetings of our holdings companies. But also we have the opportunity to collectively also engage the regulators and lawmakers where

[10:41–10:55] we feel that the incentives are not yet in place. There is a gap for us. So hopefully, that's also something we can lean in on for 2024.

Jags: Cool. We should send them a copy of this podcast, get the regulators on board with this as well.

[10:56–11:05] Eszter: That's a great start. And that, I think, aligns with our overall ambition. Let's just be intentional about where we can get this year. Thank you. 

Jags: Thanks, Eszter.